Brussels, 1 October 2014
State aid: Commission opens in-depth inquiry into measures to aid Kem One SAS in France
The European Commission has opened an in-depth investigation into a loan and other forms of public aid in the form of grants, repayable advances and the like accorded by France to Kem One SAS, a chlorochemicals and PVC producer. The Commission will check whether the loan was awarded on market terms, as claimed by the French authorities, and whether the package of measures is likely to restore the business's long-term viability without causing undue distortion of competition within the single market. The opening of an in-depth investigation gives interested third parties an opportunity to submit their comments. It does not prejudge the final outcome of the investigation.
Kem One SAS, which has been in court-supervised administration since 27 March 2013, has been in receipt of the following measures: a loan from the Economic and Social Development Fund (FDES) of €30 million, a grant of €15 million, repayable advances of €80 million and the opportunity for the buyer to obtain a substantial reduction in the €42 million owed in social contributions and taxes.
Measures granted to enterprises through state resources do not constitute state aid under EU rules if they could have been undertaken on the same terms and in the same circumstances by a private operator according to purely economic considerations and irrespective of political considerations. The state then acts as would a private investor, without giving any special advantage to the enterprises in question. The French authorities consider that this condition is met in the case of the FDES loan. The Commission will therefore closely examine the repayment terms. If this principle were not adhered to, the loan would constitute state aid under the EU rules.
The French authorities consider that the other forms of aid notified constitute restructuring aid. State aid to restructure firms in difficulty is compatible with the EU rules under certain conditions. In particular: it must be accompanied by a credible restructuring plan to restore the viability of the firm concerned, the firm must make a sufficient contribution to the costs of restructuring and the distortions of competition created by the aid must be offset by compensatory measures (2004 EU Guidelines on State aid for rescuing and restructuring firms in difficulty - see MEMO/04/172).
Therefore, the Commission will examine the measures to decide whether they are compatible with the rules on state aid to firms in difficulty. At this stage of the proceedings, the Commission has doubts as to whether the notified restructuring plan is compatible, notably as regards the realism of some aspects concerning the firm's return to long-term viability, the calculation of the own contribution and the compensatory measures.
In November 2013 the French Minister for Economic Regeneration announced the introduction of an exceptional and temporary support package to help viable intermediate‑sized enterprises experiencing economic difficulties that are placed in collective insolvency proceedings. The package is mainly financed under the FDES, which was increased €300 million in 2014. The first two firms to have benefited from the Fund were FagorBrandt and Mory-Ducros. The Commission opened two in-depth investigations into FDES loans and other measures to aid these two firms in September 2014 (see IP/14/1008).
The main activities of Kem One SAS are the production and marketing of chlorochemicals and PVC for use in many economic sectors, such as the car industry, construction, agriculture and health. The adverse impact of the international crisis on demand for PVC together with the firm's own structural problems led to the opening of a court-supervised administration procedure by Lyon Commercial Court on 27 March 2013.
Under the 2004 EU Rescue and Restructuring Guidelines (see MEMO/04/172), firms in difficulty may receive state aid under certain strict conditions. Aid may be granted for a period of six months ('rescue aid'). Beyond this period, the aid must either be reimbursed or a restructuring plan must be notified to the Commission for the aid to be approved ('restructuring aid'). The plan must ensure that the long-term viability of a firm is restored without further state support, that distortions of competition induced by the state support are addressed through compensatory measures and that the company owners contribute sufficiently to the costs of restructuring.
The non-confidential version of the decision will be made available under the case number SA.38544 in the State Aid Register on DG Competition's website once any confidentiality issues have been resolved. New published state aid decisions on the internet and in the Official Journal are listed in the State Aid Weekly e-News.