The European Commission has approved regional investment aid totalling almost €117million (CZK 3 207 million) to Nexen Tire Corporation Czech s.r.o. (Nexen) for the construction of a tyre production plant in Žatec, Czech Republic. The Commission found that the aid granted by the Czech Republic was compatible with EU state aid rules, and that it promotes regional development without unduly distorting competition in the internal market.
EU Commissioner in charge of competition policy Margrethe Vestager said: "This tyre production plant will create at least 1000 new jobs in Žatec and contribute significantly to the economic development of the region. I am pleased we today approved state aid to make this happen - It is a good use of public money in line with EU state aid rules."
The Czech Republic notified aid measures to support the construction of a new tyre plant totalling €116.8 million (CZK 3 207 million), consisting of a direct grant of €39.7 million, an employment grant of €10.1 million and about €67 million arising from tax relief and from the authorities selling the site for the plant at a reduced price.
The project's total investment costs amount to €769 million and it is expected to create at least 1000 new jobs in Žatec. Žatec is located in the Severozápad region, an area with high unemployment and a standard of living below the EU average, that is eligible for regional aid under EU state aid rules (Article 107(3)(a) of the Treaty on the functioning of the European Union).
The Commission assessed the project under the Regional Aid Guidelines 2007-2013, and in particular its rules on large investment projects. Even after the investment Nexen's market shares (including sales by its parent company) in the relevant tyre markets and the production capacity created remain below certain thresholds. The Commission therefore concluded that the measures' positive contribution to regional development would outweigh any distortion of competition created by the state aid.
The EU Regional Aid Guidelines applicable in this case allow Member States to support investment projects in disadvantaged regions if certain criteria are met. For large investment projects, the Commission can only approve aid without an in-depth formal investigation if the beneficiary's market share and the capacity increase created by the investment do not exceed certain thresholds: the market share must not exceed 25% before or after the investment and the production capacity increase must remain below 5% of the total market in an underperforming market.
This is because such projects might distort competition more than smaller ones and the Commission needs to verify on a case-by-case basis, whether they really need state aid to go ahead.
In the present case of investment aid to Nexen, the Commission verified that the thresholds were not exceeded and all relevant criteria were being complied with, therefore there was no need to carry out such an in-depth investigation.
The non-confidential version of the decision will be made available under the case number SA.39720 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.