Thursday, March 27, 2014

State aid: Commission finds that Greek mining company Larco received incompatible state aid; opens way to sale of some assets

European Commission, 27/3/14
The European Commission has concluded that Greek public support measures granted to Larco General Mining and Metallurgical Company S.A. (Larco) gave the company an undue advantage over its competitors, in breach of EU state aid rules. In total, the capital injections and public guarantees were worth €136 million. The Commission has decided that Larco must pay back the amount with interest to mitigate the distortions of competition resulting from the incompatible aid.

Certain assets of Larco, a State-owned company, are currently being privatised. The Commission has in a separate decision concluded that the repayment obligation will not be passed on to the buyers of these assets.
In March 2013, the Commission opened an in-depth investigation into a number of support measures by the Greek State to Larco, including a capital increase in 2009 of €45 million, and several State guarantees in the period 2008-2010 (see IP/13/195). The measures were not notified to the Commission for prior approval as required under EU rules. The investigation has shown that no private player would have invested in Larco under similar terms and that the measures therefore constitute state aid within the meaning of the EU rules.
Larco has been in difficulties at least since 2008. Under EU rules such companies can receive state aid either within the framework of a restructuring plan that ensures the company's long-term viability or a resolution plan for its orderly winding-down. This is to ensure that the amount of public money spent is kept to the necessary minimum and not wasted to artificially keep failing companies in the market. However, Greece did not provide a restructuring or resolution plan for Larco. The aid measures therefore cannot be justified under EU rules.
In December 2013, as part of its privatisation programme, Greece notified the Commission of its intention to sell through open tenders certain assets operated by or belonging to Larco: the Larymna smelter, part of the Agios Ioannis mines, part of the Evia mines and the Kastoria mines. The Commission examined, in a separate investigation, if the sale would lead to the company continuing its activity under a new name. However, because the sale is conducted through open tenders and concerns only part of Larco's business, the Commission has concluded that there is no economic continuity, and the sale is not an attempt to avoid repayment of incompatible state aid. This obligation will therefore not be passed on to the buyers of the assets but remain with Larco.
Larco specialises in the extraction and processing of laterite ore, the extraction of lignite and the production of ferronickel and by-products. Its activities include the exploration, development, mining, smelting and trading of its products worldwide. Larco is one of the largest ferronickel producers in the world. 55.2% of Larco's shares are owned by the Greek State through the Hellenic Republic Asset Development Fund, 33.4% by the National Bank of Greece S.A. and 11.4% by Public Power Corporation S.A.
Public interventions in companies that carry out economic activities can be considered free of state aid within the meaning of the EU rules when they are made on terms that a private player operating under market conditions would have accepted (the so-called "market economy investor principle" – MEIP). If the MEIP is not respected, the public intervention constitutes state aid within the meaning of the EU rules (Article 107 of the Treaty on the Functioning of the European Union – TFEU), because it gives an economic advantage to the beneficiary that its competitors do not have. The Commission then assesses, whether such aid can be found compatible with the common EU rules that allow certain categories of aid, such as the 2004 Guidelines on state aid for the rescue and restructuring of companies in difficulty (see MEMO/04/172).
The Commission assesses potential economic continuity of companies through the sale of their assets using a set of indicators, such as the scope of the assets sold (assets and liabilities, maintenance of workforce, bundle of assets), the sale price, the identity of the buyer(s), the moment of the sale and the economic logic of the operation........[]

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