State aids: Commission launches probe into Czech steel company Třinecké železárny
European Commission - IP/04/1475 14/12/2004
Brussels, 14th December 2004
The European Commission has decided to launch an in-depth probe into possible state aid in favour of Třinecké železárny, a.s. (TZ), a steel producer in the Czech Republic. The Commission has reason to believe that certain transactions between the Czech Government and TZ executed in April 2004 could involve state aid which might not be compatible with EU rules. The probe will aim to establish the precise facts of the case. Interested parties are welcome to submit their views.
State aid for restructuring the Czech steel industry may only be granted under the National Restructuring Programme accepted by the EU in Protocol No. 2 of the Accession Treaty and only to the companies included in it. TZ is not one of these companies and so is not eligible for restructuring aid.
The Commission has reason to believe that additional incompatible aid might have been granted outside Protocol No. 2 of the Treaty of Accession to a Czech steel producer. In particular, in November 2003 the Czech government adopted a “Resolution concerning the finalisation of the restructuring of the steel sector and proposing a solution for Trinecke Zelezarny”. This resolution was the basis for several transactions at the end of April 2004:
The Commission considers that the aid granted for environmental and R&D projects is compatible with the relevant EU state aid rules. However, it doubts the compatibility of the aid granted for closure and training projects. Consequently, the Commission is seeking clarification of the conditions under which the aid for these projects was granted so as to establish whether it is compatible with EU State aid rules.
As regards the purchase of shares from TZ, the Commission will investigate whether the price paid by the Czech Government for the shares (CZK 1250) was a market price.
This price was based on two experts’ valuations. However, other information suggests that these two valuations might have overestimated the price. If this would be the case, this transaction would involve State aid, which could not be found compatible.
The current investigation is limited to the potential incompatible aid in favour of TZ and will not call into question restructuring aid received by other Czech steel companies in compliance with Protocol No. 2.
In May 2004 the Commission opened similar proceedings in the case of Polish steel producer Huta Czestochowa. A decision to open a formal investigation is a standard procedural step in state aid cases which allows the Commission to gather all information necessary to arrive at a final assessment; it is, however, in no respect prejudging the final outcome.
TZ was privatised in the mid-1990s and has been fully restructured without state support. The majority owner of the company is Moravia Steel a.s. which holds 69.04% of the shares.
The company has been profit-making since 1997 and so was not included in Protocol No. 2 of the Accession Treaty as a beneficiary of restructuring state aid. The company made profits of CZK 309 million (some €10 million) in 2002 and employs around 6,300 people.
 OJ L 236, 23.09.2003 p. 934
 OJ C 204, 12.08.2004 P. 6