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Brussels, 27th October 2010

State aid: Commission finds 2009 state measures for Hungarian fertiliser producer Péti Nitrogénművek partly incompatible

The European Commission has concluded that part of the state support granted in 2009 to fertiliser producer Péti Nitrogénművek infringed EU state aid rules. After an in-depth investigation (see IP/09/662), the Commission found that loans amounting to around €88 million granted by the Hungarian Development Bank MFB and covered by state guarantees constitute illegal state aid. The aid, which was not notified by Hungary, was nevertheless found to be compatible with the Commission's temporary rules for the economic crisis but the remuneration of the State was insufficient and the State must recover part of it.

Joaquín Almunia, Commission Vice-President in charge of competition policy, said: “Governments are entitled to help firms affected by the credit crunch in the financial crisis on condition they respect the EU's state aid rules. These rules ensure that firms get the help they need without unduly harming competition."

In January 2009, Hungary issued guarantees in favour of Nitrogénművek covering an investment loan of € 52 million and debt amounting to HUF 10 billion ( around €35 million), both provided by the state-owned Hungarian Development Bank MFB. In October 2008, Nitrogénművek had stopped production and the support package was aimed at relaunching the company's operations. Hungary did not notify these measures to the Commission.

The Commission opened a formal investigation procedure on 29 April 2009 (see IP/09/662), because it had doubts that the measures were in line with EU State aid rules.

As a result of the investigation, the Commission found that the measures confer a selective advantage to Nitrogénművek and therefore constitute state aid. However, as the company's difficulties were caused by the financial and economic downturn, it was entitled to receive aid under the Commission's Temporary Framework for state aid to business during the crisis (see IP/08/1993 and MEMO/08/795).

The Temporary Framework allows Member States, to grant loans and guarantees against adequate remuneration and under certain conditions.

As the remuneration paid by Nitrogénművek for the state financing package is too low, the Commission concluded that the measures comply only partly with the Temporary Framework and, therefore, with EU rules. The difference between the remuneration that Nitrogénművek should have paid according to the Temporary Framework and the remuneration it actually paid to the Hungarian authorities must be repaid by the company. The exact recovery amount has to be calculated by the Hungarian authorities.

The Temporary Framework was introduced after the fall of Lehman Brothers as the ensuing financial crisis rendered companies' access to finance difficult. One of the key conditions of the Temporary Framework state aid rules to the real economy is that the beneficiary must be fundamentally sound.

The non-confidential version of the decision will be made available under the case number C 14/2009 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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