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Brussels, 22nd March 2007

State aid: Commission opens in-depth investigation into proposed €27 million loan to Spanish company ITP for development of aircraft engine Trent 1000

The European Commission has opened an investigation, under the EC Treaty rules on state aid (Article 88(2)), into public funding that Spain intends to give to Industria de Turbo Propulsores (ITP), a producer of aero engines and gas turbines. The aid would finance ITP's participation in the development of the low-pressure turbine for the Trent 1000 aero engine, currently being developed by Rolls-Royce for the Boeing B787. The investigation will allow the Commission to clarify the loan's impact on competition, in particular if the public intervention creates an incentive for the firm to carry out more Research and Development (R&D). The opening of an in-depth investigation gives interested parties the opportunity to comment on the proposed measures. It does not prejudge the outcome of the procedure.

EU Competition Commissioner Neelie Kroes said: “We need to assess thoroughly whether the positive effects of the aid outweigh its possible negative effects on competition".

The five-year-project (2005-09) is focused on the low-pressure turbine of the Trent 1000 engine, which Rolls-Royce is developing with a number of partners in order to equip the Boeing B787. The engine is expected to be certified in July 2007 and will enter into service in 2008.

The aid would be granted by an agency of the Spanish Ministry of Industry, Commerce and Tourism -the Centro para el Desarrollo Tecnólogico Industrial (CDTI)- through a €27 million loan. The public support is intended to reduce the risk linked to this type of projects, where returns on investment are uncertain and slow. The project is expected to be carried out in Zamudio (Vizcaya, Basque country), Ajalvir and San Fernando de Henares (Region of Madrid), which are assisted areas according to the Spanish regional aid map (see IP/06/1871 and MEMO/06/510).

The measure was notified by Spain in September 2006. It is being assessed on the basis of the the recently adopted Community Framework for State aid for Research and Development and Innovation (see IP/06/1600 and MEMO/06/441).

The investigation will carry out more extensive fact finding and invite comments from interested parties on several aspects, including:

- the potential disadvantage of carrying out the project in an assisted area

- the incentive effect of the aid on ITP's research activities

- the costs of the project eligible for R&D aid and their classification according to the relevant R&D categories and the ensuing different aid intensities

- the conditions for the collaboration with Rolls-Royce, who is also a large shareholder of ITP

- the impact of the aid on competition

- the potential aid character of a loan previously granted to ITP for the same project.

In 2003 and 2004 the Commission approved state aid granted to ITP for its R&D activities into the Trent 500 and Trent 900 engines

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