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Brussels, 6th December 2006

State aid: Commission approves €4.2 million investment aid to German shipyard Volkswerft Stralsund

The European Commission has approved under EC Treaty state aid rules regional investment aid of €4.2 million to the German shipyard Volkswerft Stralsund. After an in-depth investigation initiated in February 2006 (see IP/06/203), the Commission has concluded that the investment is limited to a modernisation of the yard which will improve its productivity. It will not result in a disproportionate capacity increase.

Competition Commissioner Neelie Kroes commented: "The aid encourages greater efficiency and competitiveness of an EU yard. This is in line with the objective of the State Aid Action Plan of less and better targeted state aid. I am satisfied that the aid is only used to modernise the yard and not to create additional capacity."

In August 2005 Germany notified its intention to grant regional investment aid to Volkswerft Stralsund. Volkswerft Stralsund is a shipyard located in Stralsund, Mecklenburg-Vorpommern, a region where the standard of living is below the EU average and there is serious unemployment. In such regions, state aid may be authorised to promote regional development under Article 87(3)(a) of the EC Treaty. The proposed investment aid would enable the yard to build larger ships (so-called panamax vessels – i.e. of the maximum dimensions that will fit through the locks of the Panama Canal – typically with a displacement of 65000 tonnes) at competitive costs, thereby increasing the productivity of the yard. Investment costs amount to €18.7 million. Germany intends to support the project with €4.2 million, which corresponds to an aid intensity of 22.5%, the maximum aid intensity allowed under the Framework on State aid to Shipbuilding.

The Commission decided in February 2006 to open an in-depth investigation to establish whether the planned aid was compatible with EC Treaty state aid rules. The shipbuilding sector is a very cyclical market which in the past regularly faced periods of over-capacity and depressed prices.

Because of the sector’s high sensitivity, state aid to shipbuilding in the EU is governed by a special set of rules, the Framework on State aid to Shipbuilding (see IP/03/1607 and IP/06/1452). This framework is more restrictive than the general rules on regional investment aid as it allows aid only for investments into upgrading and modernisation of existing yards to improve the productivity of existing installations. The framework’s objective is to ensure that investment for the creation of new capacities is not supported by state aid.

The Commission had initially doubts that the notified investment respected the provisions of the framework and that it was limited to the modernisation of an existing yard to improve the productivity of existing installations. Moreover, the Commission was concerned that the investment might lead to a significant capacity increase of the yard.

However, following an in-depth analysis, the Commission has concluded that the aided investment does aim at improving the productivity of the yard. At the same time the Commission's doubts that the investment would lead to a disproportionate capacity increase were dispelled by Germany’s demonstration that while steel processing capacities will increase slightly the output of the yard as a whole will remain unchanged following the implementation of the investment project.

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