Romania guilty of breaching EU state aid rules

The European Commission has found that Romanian energy producer Complexul Energetic Hunedoara (CE Hunedoara) received tens of millions of euros of incompatible state aid through four publicly-financed loans. Romania now needs to recover the illegal aid plus interest.

Commissioner Margrethe Vestager, in charge of competition policy, said: “A government can support a company in financial difficulty if the company has a sound restructuring plan, contributes to the cost of its restructuring and competition distortions are limited. In the case of CE Hunedoara these conditions were not met – we found that the public loans granted by Romania to CE Hunedoara gave the company an unfair economic advantage. This means that the state aid was illegal. Now Romania needs to recover the illegal aid that was granted to the company.”

In April 2015, the commission approved under EU State aid rules temporary rescue aid of 37.7 million euros to CE Hunedoara, a Romanian State-owned electricity and heat producer. The company had been in financial difficulty since 2013. In the context of this decision, Romania committed to submit a restructuring plan aimed at ensuring the future viability of CE Hunedoara, should the company be unable to pay back the rescue aid in six months’ time.

Following the non-repayment of the rescue aid by CE Hunedoara and in the absence of a credible restructuring plan or any real steps towards the liquidation of the company, in March 2018, the commission opened an in-depth investigation.

During the investigation, the commission assessed whether five publicly financed or supported loans granted to CE Hunedoara were in line with EU state aid rules. Together, the loans amounted to approximately 73 million euros.

Under EU State aid rules, public interventions in companies are considered free of state aid when they are carried out on terms that a private investor operating under market conditions would have accepted in a similar situation (the market economy investor principle).

The commission found that, in the present case, no private market economy operator would have granted, guaranteed or prolonged any of the five loans to CE Hunedoara, given the company’s deteriorating financial situation. As a result, the Romanian public support measures gave CE Hunedoara an unfair economic advantage over its competitors.

Four of the five loans, totalling around 60 million euros plus interest, are incompatible with EU state aid rules and need to be recovered by Romania. The fifth loan constitutes existing aid granted before Romania’s accession to the EU and therefore does not need to be recovered.

CE Hunedoara currently owes 547 million euros to various Romanian state bodies, including the five loans subject to the state aid investigation. The company, which employs around 6,500 people, has been loss-making since 2013.