European Commission decides that Oltchim should repay EUR 355 million to Romanian govt as illegal state aid

The European Commission (EC) found that Oltchim petrochemical plant benefited from incompatible state aid of EUR 335 million since the failed privatization in 2012 and decided that Romania should recover the entire amount from Oltchim.

The Commission concluded that, since they acquired the assets under market conditions, the companies that bought them did not benefit from the aid previously granted to Oltchim. This means that Oltchim is responsible for the reimbursement of the aid.

“Over the years, Oltchim benefited from the cancellation of significant public debt as a value. Following the investigation, we found that these measures gave the company an unfair economic advantage, violating EU state aid rules, an advantage that Romania must At the same time, the sale of most of Oltchim’s assets under market conditions can ensure a sustainable future for the company’s economic activities without the need for additional public support,” said Margrethe Vestager, commissioner for Competition Policy.

In April 2016, the Commission initiated an investigation to determine whether certain measures taken by Romania in support of Oltchim complied with EU state aid rules, in particular: forced debt non-enforcement and further accumulation of Oltchim owed to the Authority for Administration State Assets (AAAS) in Romania after the failed privatization of Oltchim in September 2012; debt cancellation in excess of EUR 300 million by AAAS and various state-owned enterprises and the continuation of supplies by the Romanian State and state-owned enterprises (CET Govora and Salrom) to Oltchim without payment despite the deterioration the financial situation of the company.

“The Commission found that, in the present case, no market economy creditor would have agreed to cancel Oltchim’s existing debts or to continue supplying it to the company, provided that AAAS and other state-owned creditors done in 2015. Therefore, public support measures constitute State aid within the meaning of EU rules,” EU’s executive branch points out.

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Subsequently, the Commission assessed these measures in accordance with the applicable EU State aid rules, namely the 2014 State Aid Guidelines on State aid for rescue and restructuring.

The Guidelines allow the State to intervene in support of an undertaking in financial difficulty only under specific conditions and require, in particular, that the undertaking concerned be subject to a sound restructuring plan, contribute to the costs of its restructuring and that any distortions of competition be limited.

In the present case, no such restructuring plan has been notified to the Commission. In addition, the Commission found that there was no visible contribution from investors to the restructuring costs of the company.

“The Commission concluded that the public funding granted by Romania to Oltchim, amounting to approximately EUR 335 million plus interest, is incompatible with EU state aid rules and has to be recovered by Romania,” informs the European Commission.

As regards the sale of Oltchim’s assets, in order to determine whether the aid was transferred to the new owners as a result of the sale of assets, the Commission assessed whether there was economic continuity between the new owner and the former owner.

The Commission uses a number of indicators, such as the subject of the transaction (assets, liabilities and human resources transferred, sale of asset packages), the time of sale, the sale price and the sale process, as well as the buyer’s identity.

Following the initiation of the formal procedure by the Commission, the Romanian authorities changed the conditions for the sale of Oltchim’s assets. In particular, interested investors were allowed to bid for one or more of the nine asset packages, thus increasing the probability of the sale and the revenue thus obtained.

Throughout the procedure, various investors in the market have shown interest and acquired most of Oltchim’s assets.

“In view of the changed conditions of the sale of Oltchim’s assets and its outcome, the Commission concluded that the companies that bought the assets did not benefit from the previous aid granted to Oltchim and are therefore not required to repay them,” stresses the European Commission.

Oltchim Râmnicu Valcea has recently announced that it has finalized the sale contract concluded with Chimcomplex Borzesti, when it fully charged the transaction price, and the transfer of the ownership right to the new owner was made on Saturday.

Chimcomplex bought EUR 127 million in asset packages 1-5 and part 7 of the nine where the Oltchim was split for sale: Chlorosodice package, Oxoalcooli package, PO / Polioli package, Services package on Land, wagon package and partly the VCM / PVC package.

Assets include: land, buildings, investments in progress, intellectual property rights and other movable assets mainly representing machinery, equipment, technologies and any other similar goods required for the production process.