State aid: Commission finds contracts between Bizkaia and Habidite for construction modules factory in Alonsotegi (Spain) contain state aid

European Commission

Press release

Brussels, 27 June 2012

State aid: Commission finds contracts between Bizkaia and Habidite for construction modules factory in Alonsotegi (Spain) contain state aid

After an in-depth investigation (see IP/09/1862), the European Commission concluded that two contracts signed in December 2006 between the Diputación Foral de Bizkaia and Habidite Technologies País Vasco SA for the set-up of a construction module factory in Alonsotegi and the delivery of 1500 modular homes contained illegal state aid. The measures had not been notified to the Commission before they were granted and were therefore unlawful. However, as the project was suspended during the investigation, no aid has been disbursed and no recovery is necessary.

Based on information it obtained through a Spanish notification of 2009, the Commission opened an in-depth investigation into two contracts signed in December 2006 between the Diputación Foral de Bizkaia and Habidite Technologies País Vasco SA for the set-up of a new module construction factory in Alonsotegi, Bizkaia, Spain (see IP/09/1862).

According to the first contract, the public authorities of Bizkaia and Bizkailur, a publicly owned company with the objective of developing social housing projects, would purchase a land plot and adapt it for industrial use to prepare the setting up of a Habidite factory in Alonsotegi. Under the second contract, the public authorities committed to purchase from Habidite a total of 1 500 homes constructed with modules produced in Alonsotegi in order to sell them as viviendas tasadas – a category of social housing.

The Commission's investigation found that both contracts involved state aid to Habidite, because no private player would have accepted to contract on such terms. The aid foreseen in these contracts was unlawful because it was not notified to the Commission.

The Commission then examined whether such aid could be found compatible with the EU state aid rules applicable at the time when the contracts were signed. At that time, Bizkaia was an area entitled to assistance under the EU regional aid guidelines, which allow Member State to support investments in disadvantaged regions under certain conditions. Based on these criteria, the Commission concluded that public support of up to €10.5 million could be granted for the project.

Background

The EU guidelines for regional aid allow Member States to support investments in disadvantaged regions that facilitate the development of certain economic activities or areas under certain conditions and up to certain thresholds. In order to avoid free riding and the crowding out of private investment and to maintain a level playing field in the internal market, aid can only be granted for investment projects that would not have been carried out in the assisted region without the aid. In addition, the public subsidy needs to be limited to the minimum necessary to implement the project. The regional aid guidelines set out the thresholds below which the positive effects of public funding on regional development are deemed to outweigh the potential distortions of competition created by the subsidies.

The non-confidential version of the decision will be made available under the case number SA.28356 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.