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Brussels, 4 April 2008

State aid: Commission endorses proposed €83 million aid to Progroup for large investment project in Germany

The European Commission has authorised, under EC Treaty state aid rules, €83 million of aid, which the German authorities intend to grant to Propapier PM 2 belonging to the German Progroup for the construction of a paper mill in Eisenhüttenstadt, in the Brandenburg-Nordost region. The Commission's assessment found the measure to be compatible with the requirements of the Regional Aid Guidelines 2007-2013 (see IP/05/1653). The investment project of €640 million by Progroup will significantly contribute to the diversification of Eisenhüttenstadt's economy, which is currently focused on the metal industry, thus benefiting the further development of the region.

Competition Commissioner Neelie Kroes said: “I am pleased to approve aid for this important investment project which will contribute to regional development and job creation in a disadvantaged region of Germany. The Commission is satisfied that Progroup's market share and the production capacity created by the project are not excessive”.

Progroup's investment project is aimed at setting up a paper mill and a related power plant to produce corrugated case material, a base paper to manufacture corrugated board which is in turn used to produce corrugated packaging. The majority of the production of the new plant will be used within Progroup to produce the downstream product, i.e. corrugated board. The investment project involves eligible costs of €640 million and an aid amount of €83 million.

The project is to be carried out in the region of Brandenburg-Nordost, a disadvantaged area eligible for aid under Article 87(3)(a) of the EC Treaty as a region with an abnormally low standard of living and high unemployment. The project intends to create about 150 direct jobs as well as over 450 indirect jobs.

The aid would be granted under existing aid schemes covered by the regional block exemption regulation (see IP/06/1453). However, due to the large amounts of aid involved, the aid to Progroup had to be notified to the Commission for individual assessment and clearance.

The Commission’s assessment of regional aid to large investment projects aims to verify whether the market share of the beneficiary and the production capacity created by the investment remain below the thresholds set in the Regional Aid Guidelines. In case the thresholds are not exceeded, the effect of the aid on competition is deemed to be outweighed by its positive contribution to regional development.

The Commission found that Progroup's share would remain significantly below the 25% threshold on the relevant markets for corrugated case material and for corrugated board, both before and after the planned investment. The Commission also verified the capacity increase generated by the project. The Commission's thorough market analysis concluded that, despite contrary claims by several complaints, the additional production capacity created through the project would remain below 5% of the apparent consumption of the product concerned in the EEA.

The non-confidential version of the decision will be made available under the case number N 582/2007 in the State Aid Register on the DG Competition website once any confidentiality issues have been resolved. New publications of state aid decisions on the internet and in the Official Journal are listed in the State Aid Weekly e-News.

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