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State  aid measures No C 35/94  (previously No NN 397/94),  No N 572/94 and
No N 728/94
EKO Stahl GmbH, Eisenhüttenstadt, Brandenburg
Germany
Approval of aid  under Article 95 of the  ECSC Treaty and Article 5  of the
Steel Aid Code

On 25 October 1994  the Commission  asked the  Council to  allow state  aid
towards the restructuring of  the East German steel company EKO Stahl GmbH,
under Article 95 of the  ECSC Treaty (see IP/94/987); the Council  gave its
assent on 8 December 1994.  The Commission had proposed  that aid of up  to
DM 910 million  should be  authorized.  The German  Government subsequently
informed  the  Commission  that  following  further  negotiation  with  the
investor, Cockerill Sambre SA  of Belgium, it  was possible  to reduce  the
planned aid  by  DM 9.38 million,  so  that  the  Commission  has  in  fact
ultimately  approved  only DM 900.62 million.  On  1 January 1995 Cockerill
Sambre is to acquire 60%  of the equity in  EKO Stahl and an option to  buy
the remainder.

The Commission has also approved  regional investment aid for  the company,
amounting to DM 385 million, under Article 5 of the  Steel Aid Code.[1]  It
has  accordingly  terminated   the  proceedings  it  had   initiated  under
Article 6(4) of the Steel Aid Code in July 1994 (see IP(94) 723).

This clears the  way for the privatization and restructuring of the biggest
steel company in  what was the German Democratic Republic. Cockerill Sambre
is to guarantee at least 2 200 permanent jobs in  EKO Stahl and some 200 in
associated firms.  A hot rolling mill is to  be installed, making EKO Stahl
an integrated steelworks.  Total investment in the  restructuring operation
will   amount   to   DM 1300 million.   The   privatization   agency,   the
Treuhandanstalt, is  to write  off DM 362.6 million  in shareholder  loans,
thereby covering  a part of the  company's losses up to  its privatization.
The Treuhandanstalt will  also cover losses  of up  to DM 220 million  over
the first three  years after privatization, but no more than DM 100 million
in any one year.

Alongside the  investment aid to  come out of  regional development schemes
the  Treuhandanstalt  is  to  provide   a  further  DM 275 million  towards
investment  costs,  and DM 39 million  for necessary  repair work.  It will
also guarantee an investment loan  of DM 60 million; this is  equivalent to
DM 4.02 million in aid.

As a  quid pro  quo for the  distortion of competition  caused by  this aid
package, hot  rolling capacity  totalling 361 000 tonnes  a year  is to  be
closed down at Hennigsdorf in Brandenburg and Burg in Saxony-Anhalt.

The  package is  the outcome  of intensive  negotiations; the  Commissioner
responsible for  competition, Mr Karel  Van Miert, is  satisfied that after
the restructuring  operation EKO Stahl  will have built  up an economically
viable  operation,  so  that  the  aid  will  contribute  to  the  economic
rehabilitation of eastern Brandenburg as a whole.
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[1]    Commission    Decision    No 3855/91/ECSC     of    27 November 1991
       establishing  Community  rules  for  aid  to   the  steel  industry:
       OJ No L 362, 31 December 1991, p.57.

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