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7.9.2011 Official
Journal
of
the
European
Union L
230/69
DECISIONS
COMMISSION DECISION
of 20 April 2011
on measure C 37/04 (ex NN 51/04), implemented by Finland for Componenta Oyj
(notified under document C(2011) 2559)
(Only the Finnish and Swedish texts are authentic)
(Text with EEA relevance)
(2011/529/EU)
THE EUROPEAN COMMISSION,
from Componenta (‘the 2005 Decision’). The 2005
Decision closing the formal investigation procedure was
published in the Official Journal of the European Union ( 3 ).
Componenta launched an appeal against the Decision,
Having regard to the Treaty on the Functioning of the European
which was annulled by judgment of 18 December
Union, and in particular the first subparagraph of Article 108(2)
2008 (‘the judgment’) for failure to provide adequate
thereof,
grounds ( 4 ).
Having regard to the Agreement on the European Economic
Area, and in particular Article 62(1)(a) thereof,
(3)
Finland submitted observations by letters dated 5 January
and 10 January 2010, which also included two studies
on the valuation of the real estate concerned. The
Having called on interested parties to submit their comments
Commission sent three further requests for information
pursuant to the provision(s) cited above (
dated 9 January 2009, 23 July 2009 and 8 January

1 ),
2010, which were answered by letters registered on
9 March 2009, 15 October 2009 and 5 March 2010
respectively. A meeting between the Commission, and
Whereas:
representatives of the Finnish government and the bene
ficiary was held in Brussels on 23 November 2009.
I. PROCEDURE
(1) On
10
March
2004,
the
Commission
received
a
II. DESCRIPTION OF THE FACTS
complaint from Metalls Verkstadsklubb vid Componenta
Alvesta AB in which the complainant informed the
1. Transaction
Commission of an alleged aid measure implemented by
the city of Karkkila (hereinafter ‘Karkkila’) for
(4) Componenta
is
a
metal
manufacturing
company
based
in
Componenta Corporation Oyj (hereinafter
Karkkila, Finland. It has production plants in Finland, the
‘Componenta’). By letter dated 19 November 2004, the
Netherlands and Sweden. Most of the company’s
Commission informed Finland that it had decided to
EUR 316 million turnover in 2004 was generated in
initiate the procedure laid down in Article 88(2) of the
the Nordic countries and central Europe. The group
EC Treaty (now Article 108(2) of the Treaty on the
employed some 2 200 people in 2004.
Functioning of the European Union) in respect of the
aid. The Commission decision to initiate the
procedure was published in the Official Journal of the
European Union ( 2 ). The Commission invited interested
parties to submit their comments on the measure but
(5) The
transaction
under
assessment
concerns
the
real
estate
did not receive any such comments.
company, Karkkilan Keskustakiinteistt Oy (hereinafter
‘KK’), which owned real estate in Karkkila, located some
65 km north west of Helsinki. KK was jointly owned
(50/50) by Componenta and Karkkila. In 1996 each
(2) On
20
October
2005,
the
Commission
adopted
a
final
joint venture partner had granted KK an interest-free
negative decision and ordered Finland to recover the aid
shareholder loan of EUR 1 670 184.
( 1 ) OJ C 49, 25.2.2005, p. 11.
( 3 ) OJ L 353, 13.12.2006, p. 36.
( 2 ) See footnote 1.
( 4 ) Case T-455/05, Componenta Oyj v Commission [2008] ECR II-336.

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L 230/70
EN
Official Journal of the European Union
7.9.2011
(6) Under
the
sales
contract
signed
on
16
December
2003,
it
the city of Karkkila as specified in Annex 1 to this
was agreed that the city would acquire full ownership of
contract. It is estimated that the investment will
KK by acquiring the shares held by Componenta for a
create 50–70 new full-time jobs in Karkkila in
total price of EUR 2 383 276,50 million. The transaction
2004 (in 2003 the number of jobs was 130);
comprised two parts:
(b) if the extension of the seller’s facilities is not
— Componenta received EUR 713 092,50 as payment
commenced in 2004 as specified in the above
for the 50 % of shares sold to Karkkila,
paragraph, the buyer has the right to cancel the
transaction at its own discretion.
— KK paid back to Componenta the EUR 1 670 184
shareholder loan which Componenta had granted it
in 1996. For that purpose, Karkkila granted KK a
(11) Annex
1
to
the
sales
contract
stated
that
Componenta
further interest-free loan for the same amount. This
would merge the operations of two of the Group’s
resulted in a change of creditor from Componenta to
production sites, namely the Alvesta (located in
the city of Karkkila.
Sweden) and Karkkila foundries, and that the decision
on the future location of the foundry would depend on
the outcome of an analysis. In 2005, the Alvesta foundry
(7) Karkkila therefore mobilised the sum of
was closed and production was transferred to Karkkila.
EUR 2 383 276,50
for
the
above
transaction:
EUR 713 092,50 as payment for KK’s shares and
EUR 1 670 184 as an interest-free loan granted to KK.
(12) After
having
taken
over
Componenta’s
shares
in
KK,
Karkkila decided to terminate KK’s activities and
transfer the land to the city.
(8)
The purchase price for the shares was calculated by
reference to the standard prices at which Karkkila sold
real estate in 2003.
2. KK’s assets
(13) Karkkila
is
located
some
65
kilometres
north-west
of
Table 1
Helsinki along highway No 2, in the north-eastern part
Sales prices per m
of Uusimaa Province. Karkkila had some 8
500

2 for the plots sold by KK
inhabitants in 2003. The city developed around the
(in EUR)
Hgfors blast furnace founded in the 19th century and
its northern area extends along the shores of a lake.
Zone 1
Detached houses 11,11
(14) The
real
estate
owned
by
KK
covered
730
000
m 2 of
Terraced houses 88,81
land in Karkkila and its immediate surroundings, no
more than 2,5 km from the town centre. In December
Tower blocks 79,56
2003, the situation was as follows:
Zone 2
— the highest value land is located in the Asemanranta
Detached houses 10,19
area (zone 1) and earmarked for tower blocks. This
Terraced houses 74,02
area accounts for roughly half the value of KK’s
portfolio,
Tower blocks 64,76
Other
— most of the land is located in the Haapala/Uusitalo
area (zone 2). It is earmarked for detached family
Raw land outside town planning 1,18
houses and represents about a quarter of the total
value of the portfolio,
Land earmarked for public parks 1,18
(9) These
standard
prices
were
applied
to
the
real
estate
in
— the portfolio also contains a few plots for detached
KK’s land portfolio at the time of the transaction and
houses in other residential areas, some land
divided by two, which resulted in the share purchase
earmarked for tower blocks in the Takko I area and
price of EUR 713 092,50.
a few terraced houses,
(10) The
sales
contract
between
Karkkila
and
Componenta
furthermore stated the following:
— part of the land is earmarked for public park areas,
(a) the seller agrees to invest in the extension of
— the portfolio also includes some raw land outside
Componenta Karkkila Oy’s production facilities in
town planning.

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EN
7.9.2011 Official
Journal
of
the
European
Union L
230/71
(15) In
total,
the
real
estate
comprises
about
160
plots
of
III. COMMENTS FROM FINLAND
land. Karkkila intended, however, to reshape some of
the land and subdivide it into smaller plots. KK was by
(21) Finland
submitted
three ex-post expert studies on valuing
far the biggest real estate owner in Karkkila at the time of
the land. They concluded that the price paid corre
the transaction.
sponded to the market price. The Commission broadly
rejected the study (Study A) submitted during the first
investigation procedure in its initial 2005 Decision ( 5 ).
After the adoption of the 2005 Decision, Finland
(16) After
acquiring
full
ownership,
Karkkila
intended
to
lease
commissioned two further expert studies. The first of
out some of the land to cover operating expenses. KK’s
these (Study B) contains only a general statement that
operating expenses (salary, rent, interests on loans) in
the valuation of the land was correct without entering
2000-2003 were at most EUR 40 000.
into details. The second study, the KP & P report,
(Study C) analyses the real estate situation in Karkkila
and the surrounding municipalities in more detail.
3. Further relevant information
(17) Karkkila is located within commuting distance of
(22) Finland
argues
that
Karkkila
acquired
full
ownership
of
Helsinki. Real estate in Helsinki and the surrounding
the shares because it was a medium- to long-term, low-
areas has become very expensive and prices are still
risk investment. Considering the constant rise in real
rising. This price pressure has led people to settle in
estate prices in the neighbouring municipalities,
municipalities surrounding the capital, which has had a
Karkkila’s forecast population increase, saturation of
knock-on effect on real estate prices there. Karkkila can
existing neighbourhoods and the need for expansion,
be considered a possible alternative location, together
Karkkila City Council considered that purchasing full
with three other towns: Vihti, Lohja and Hyvink.
ownership of KK would be profitable.
Distances from Helsinki are as follows:
(23) Finland
also
explained
that
the
possibility
of
speeding
up
Table 2
procedures was another practical reason for obtaining
sole ownership. Finland hinted on several occasions
Distances from Helsinki
that cooperation between Karkkila and Componenta
was not ideal because of their diverging commercial
Lohja 52
km 38
min
interests. Both partners agreed to terminate the joint
venture in order to avoid deadlock on many decisions.
Hyvink 56
km 45
min
In particular, a large number of decisions had to be taken
in the Haapala/Uusitalo area on re-splitting plots to
Vihti 58
km 42
min
facilitate development of the area. Since real estate
activities were not Componenta’s core business, it was
Karkkila 68
km 50
min
in its interests to cease this branch of activity, whereas
it was in Karkkila’s interests to be able to steer land
development completely independently.
(18) These
municipalities
have
attracted
considerable
numbers
of new residents. As a consequence, real estate prices
(24) Finland
explained
why
a
comparison
with
Vihti,
Lohja
rose significantly before (and after) the transaction, with
and Hyvink was pertinent. Finland underlined, inter
prices doubling in Karkkila, and in some instances
alia, that there was no passenger rail link to Vihti and
increasing sixfold.
Lohja, which would allow commuters to travel easily
between these municipalities and Helsinki.
(19) According
to
official
forecasts
published
in
2000,
the
population of Karkkila was expected to rise to 9 600
(25) Finland
contends
that
the
Commission’s
calculation
of
inhabitants by 2025, which would mean housing needs
the amount of aid in the 2005 decision was distorted
of 600 new homes. These forecasts were soon seen to
because the shareholder loan was taken into account
lag far behind the actual population increase. Three years
twice. The loan was deducted from the value of the
later, at the time of the transaction, Karkkila’s expected
company for the calculation of the value of 50 % of
housing needs were about 70 new homes per year,
the shares and taken into account as repayment to
which was confirmed in a study by the Uusimaa
Componenta. Finland therefore argues that the price of
Regional Council shortly afterwards, covering the
the shares (EUR 713 092,50) already includes the loan
period up to 2025. (In practice, 63 new homes were
because that amount was calculated on the basis of
built in 2005, 137 in 2006 and 95 in 2007).
KK’s net worth.
( 5 ) The Commission noted firstly that the study did not clearly indicate
that it concerned the valuation of land owned by KK and secondly
(20) During the five years preceding the transaction, real
that the valuation did not indicate what price a market investor
estate prices in Karkkila had increased on average by
selling all the land at once would have received at the time of the
30 %.
transaction.

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L 230/72
EN
Official Journal of the European Union
7.9.2011
IV. ASSESSMENT
compared, need not be the conduct of an ordinary
investor laying out capital with a view to realising a
(26) According
to
Article
87(1)
of
the
EC
Treaty,
any
aid
profit in the relatively short term, it must at least be
granted by a Member State or through state resources
the conduct of a private holding company or a private
in any form whatsoever which distorts or threatens to
group of undertakings pursuing a structural policy,
distort competition by favouring certain undertakings or
whether general or sectoral, and guided by prospects of
the production of certain goods is, in so far as it affects
profitability in the longer term’ ( 8 ).
trade between Member States, incompatible with the
common market. The Court of Justice of the European
Union has consistently held that the criterion of trade
being affected is met if the recipient firm carries out an
1. General considerations concerning the value of
economic activity involving trade between Member
the shares
States.
(31) The
Commission
communication
on
State
aid
elements
in sales of land and buildings by public authorities ( 9 )
(hereinafter ‘the Communication’) does not apply
(27) Other companies in the internal market also manufacture
directly since the case at hand does not actually
the same products as Componenta and they are
concern the sale of land but the purchase of shares in
intensively traded between Member States. For the
a real estate company. However, the principles of this
purposes of Article 107(1) TFEU, state resources
communication can apply since the value of KK’s
include local authority resources (
shares is essentially determined by the market value of

6 ). Thus the transaction
in question, which was financed with Karkkila’s
the land in its portfolio. Therefore the assessment of the
resources, involves state resources within the meaning
value of the land owned by KK is crucial for establishing
of Article 107(1). Therefore, any advantage granted to
the presence of state aid.
Componenta in the context of the transaction which
Componenta would not have received in normal
market conditions would fall within the scope of
(32) In any case, the communication is based on the principle
Article 87(1) of the EC Treaty. It follows that the main
of a private investor operating in a market economy, i.e.
question in the case at hand is whether Componenta
the sale of land by the public authorities does not include
received a level of payment that it would not have
elements of state aid if it is sold at a price which a
obtained under normal market conditions.
private investor would have been able to obtain in
normal market conditions.
(28) The
Commission
notes
that
the
redemption
clause
in
the
sales contract concluded between Componenta and
(33) The
Commission
considers
that
the
appropriate
starting-
Karkkila can be seen as an indication that the purchase
point of the analysis is the price that a market economy
conditions offered by Karkkila were intended to
investor owning 50 % of KK’s shares would have been
encourage Componenta to keep its production site in
prepared to pay for the acquisition of full ownership. A
Karkkila and close the blast furnace in Alvesta.
market economy operator would base the calculation of

the price it would be prepared to pay on the return it
could expect from its investment.
(29) The judgment of the Court of First Instance ( 7 ) held that
the deal was conditional but did not specify the conse
(34) In
the
case
at
hand,
Componenta
did
not
try
to
find
quences. In fact, even if the conditionality hints at the
another buyer. It was in its interest to sell its shares to
fact that the transaction might have been concluded on
the other shareholder. Indeed, according to the
favourable terms for Componenta, there is no advantage
Shareholder Agreement
( 10 ) and KK’s Articles of
for Componenta that clearly stems from these clauses.
Association ( 11 ), Karkkila had the right of first refusal
Indeed, on the one hand, as will be seen below, the
on KK’s shares owned by Componenta and it had the
price paid to Componenta for the sale of its stake in
right of redemption, if Componenta tried to sell them to
KK did not exceed the market price and, on the other
a third party. These rules were a disincentive for
hand, the Commission did not find any evidence of other
Componenta to seek other buyers. Moreover, any other
advantages that Componenta might have received from
private buyer would have been deterred from buying
those clauses. The Commission therefore assessed
50 % of the shares in KK, unless by doing so it would
whether a market economy investor already holding
have acquired full control over KK. Indeed, any new
50 % of the shares would have acquired full ownership
partner that did not have full control over KK would
under these conditions.
be bound by KK’s Articles of Association ( 12 ), according
to which the purpose of KK was to slow down the
increase in the price of land and housing in Karkkila to
the benefit of the population.
(30) It
is
established
case
law
that
‘although
the
conduct
of
a
private investor, with which the intervention of a public
investor pursuing economic policy aims must be
( 8 ) Case C-42/93, Spain v Commission [1994] ECR I-4175,
paragraph 14.
( 9 ) OJ C 209, 10.7.1997, p. 3.
( 6 ) Case 248/84, Germany v Commission [1987] ECR 4013,
( 10 ) Article 9.
paragraph 17.
( 11 ) Article 13.
( 7 ) Case T-455/05, Componenta v Commission [2008], ECR II-336.
( 12 ) Article 2.

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EN
7.9.2011 Official
Journal
of
the
European
Union L
230/73
(35) The
Commission also
takes
the
view
that
a
market
until 2025, which, on a conservative estimate, would
economy shareholder acquiring full ownership would
mean that at least 70 new homes would have to be
take into consideration the financing of the overall
built in the city every year ( 13 ).
investment (EUR 2,37 million for the shares and the
loan).
(41) For
these
reasons,
a
private
investor
could
expect
a
significant increase in the value of its stake in KK.
(36) With respect to the reimbursement of the shareholder
loan, the Commission notes that the assets in KK’s
2. Value of the land
portfolio were estimated at a value of EUR 4,9 million.
This value largely covered the outstanding loans of
(42) As a first step, the Commission assessed whether the
EUR 3,34 million, which means that the loan reim
share purchase price paid by Karkkila entailed an
bursement as such did not appear problematic.
advantage for Componenta because the seller would
have obtained a lower price under normal market
conditions.
(37) Finland
also
explained
that
Karkkila
had
planned to
increase rental income after the transaction in order to
(43) Finland
indicated
the
value
of
KK’s
assets
as
follows
( 14 ):
cover KK’s financing and operating costs (less than
EUR 40 000 per year before the transaction). If the city
became the sole shareholder it would be in a position to
Table 4
change KK’s Articles of Association, which limited its
freedom as regards pricing policies. Thus, from a legal
Value of KK’s assets as calculated by Finland
viewpoint, there was nothing to prevent the city from
raising rental income once it had full ownership of KK.
Current value of land 5
067
988
Cash and bank deposits 28
256
(38) The
Commission
notes
that
subsequent
developments
Total assets 5
096
244
confirm that cost coverage through rental income was
a realistic plan. Karkkila concluded 28 long-term rental
Shareholder loan 3
340
368
agreements, which generated the following revenue:
Current liabilities 107
Total debts 3
340
475
Table 3
KK’s net value 1
755
769
Rental income after the transaction
(in EUR)
50 % of KK’s net value 877
885
2004 146
907
2005 152
843
(44) The
value
of
the
land
was
calculated
by
reference
to
the
standard prices charged by Karkkila in 2003. These were
2006 171
238
uniform prices for the whole of the Karkkila area, the
only exceptions being the differences between two zones.
2007 182
525
It became apparent from the data submitted by Finland
that the actual market prices vary significantly between
2008 200
519
different neighbourhoods and residential areas. For that
reason, the Commission focused its assessment more
closely on the areas concerned.
(39) In addition, in return for the free-interest loan, a private
investor would have expected an increase in the value of
(45) The
Commission
notes
that
Karkkila
embarked
on
the
its stake in the company. In the case at hand, the return
acquisition of full ownership with a medium- to long-
on the investment manifested itself through the
term perspective. It is not unusual in the real estate
increasing value of the real estate owned by KK.
business to expect significant medium- to long-term
Finland explained that the value of the land owned by
increases in value, circumstances permitting. Karkkila
KK had risen considerably between 1996 and 2003.
pursued a long-term investment strategy and sought to
During the five years preceding the transaction, real
generate profits from increased future sales.
estate prices in Karkkila had increased on average by
30 % and by some 10 % between 2005 and 2008.
( 13 ) See the 2006 economic policy of the town of Karkkila and the
population and employment survey produced by Uusimaa Regional
Council in the early 2000s.
( 14 ) These values deviate slightly from the data submitted by Finland
(40) At the same time, the population of Karkkila was
during the initial investigation period. Finland corrected the figures
expected to grow by more than 100 people per year
for the purposes of the new investigation procedure.

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L 230/74
EN
Official Journal of the European Union
7.9.2011
(46) In
the
specific
situation
of
Karkkila,
Finland
demonstrated
per plot can be built on land for terraced housing and
that Karkkila had valid reasons to expect a major popu
even more so on land for tower blocks. The portfolio list
lation increase in the medium- to long-term future that
submitted by Finland gives fewer than 140 sites for
would lead to considerable additional housing needs. The
housing (the remainder were earmarked for parks).
main reason was that the three municipalities to the
With estimated housing needs of 70 new homes per
north and west of Helsinki — Vihti, Lohja and
year at the time of the transaction, the projected needs
Hyvink — had attracted large numbers of residents,
for the next 10 years would be 700 new homes and for
many of them commuters. As a result, real estate
the next 20 years 1 400 new homes. Given that KK had
prices grew rapidly and constantly and were not
no major competitor in Karkkila, the city of Karkkila
expected to slow down in the near future. In 2003,
could reasonably expect to be able to sell most — if
prices in these neighbouring municipalities were on
not all — the property in its portfolio.
average 2,5 times higher than in Karkkila. Karkkila
therefore expected that further price increases would
cause people to move to Karkkila as the next logical
alternative place to live, even if prices in Karkkila also
(52) Finland
explained
that
Karkkila’s
strategy
was
first
to
rose significantly. It did not seem unrealistic to expect
improve the value of the land it owned by reshaping
real estate prices in Karkkila to double.
and developing it, to wait for the knock-on effects of
the general price increase in the area and to sell the
land only at a later stage. In line with this strategy, KK
had already refrained from early sales in previous years,
(47) Although subsequent developments are not directly
relevant for an ex-ante analysis of the transaction, the
which explains the low level of sales in the years
development of real estate prices in the three neigh
preceding the transaction.
bouring municipalities in the years after the transaction
confirmed that the forecast was realistic. In some
instances, real estate prices were over four times higher
than in Karkkila.
(53) The
Commission
notes
that
the
land
owned
by
KK
was
valued differently according to the different types of land,
i.e. land for detached houses, for terraced houses, blocks
of flats, parks and land for public use. The particular
(48) Another
reason
for
expecting
Karkkila’s
population
to
features of each area are described and analysed
rise was the scheduled renovation of the road to
separately below.
Karkkila — it had already been planned at the time of
the transaction and was subsequently carried out.
Asemanranta area
(49) The
acquisition
of
full
ownership
was
also
driven
by
(54) The
land
earmarked
for
tower
blocks
located
in
the
official forecasts of population increases. An initial
Asemanranta area is valued at EUR 2 358 158, i.e.
study had been published in 2000 by the Uusimaa
about half of the value of KK’s assets. For the purposes
Regional Council, which estimated that the population
of the transaction, the land was valued at EUR 79,56/m 2 .
of Karkkila would grow by about 9 600 inhabitants by
2025 (i.e. about 10 %), and that an additional 600 new
homes would be needed. This forecast soon proved to be
too conservative. At the time of the transaction, Karkkila
(55) The
studies
are
not
fully
conclusive
in
this
respect,
the
expected a much higher population increase resulting in
main reason being the lack of reference prices in
additional housing needs of at least 70 new homes per
Karkkila. In fact, no land for tower blocks had been
year.
sold on the market in Karkkila until the transaction.
The expert study submitted by Finland during the first
investigation period (Study A) had indicated a price of
(50) This
positive
forecast
was
later
confirmed
by
a
further
EUR 50/m 2 . Finland has now explained that this figure
study carried out by the Uusimaa Regional Council on
was probably based on the figure used for state-funded
18 August 2009, according to which the population of
social housing in the region and was well below the
Karkkila was expected to grow by 100 inhabitants per
market price. This initial study also estimated the value
year up until 2030, leading to additional housing needs
of land for tower blocks at between EUR 60 and
of 70 new homes per year. In the event, even this second
EUR 75/m 2 . The second study (Study B) explains that
forecast was topped, since 137 new homes were built in
the price paid corresponds to the market price without
2006 and 95 new homes in 2007.
providing any additional information. The KP & P report
(Study C) concludes that the price of EUR 79,56/m 2
corresponds to the market price, since it is far below
the prices paid in the three neighbouring municipalities.
(51) It
should
also
be
noted
that
KK
was
by
far
the
biggest
In the absence of any further benchmarks, these studies
real estate owner in Karkkila. At the time of the trans
provide some guidance on real estate prices in the areas
action, the actual number of real estate plots included in
surrounding Helsinki at the time of the transaction. The
the portfolio was unclear, as Karkkila intended to divide
Commission therefore verified the data contained in
and reshape some of them (in particular in the Haapala/
those studies and supplemented them with its own
Uusitalo area). In addition, a higher number of homes
assessment.

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EN
7.9.2011 Official
Journal
of
the
European
Union L
230/75
(56) The
Asemanranta
area
enjoys
a
very
good
location
on
(62) The
Commission
notes
that
this
value
includes
the
8-9
the shores of a lake, 200m away from the city centre.
hectares also belonging to the Asemanranta area, which
According to Finland, the value of the area is excep
will remain as streets, parks, etc. For example, in the
tionally high because it benefits from direct lake view
partial master plan, the shore area is earmarked for
and access. A comparable plot was sold in 2006 for
recreational purposes and as a nature protection area.
EUR 92,35/m 2 . Karkkila actually considered the value
Therefore these 8-9 hectares contribute to the high
of the property high enough to raise the sales price to
price of the residential part of the area but they have
EUR 105/m 2 in January 2008.
not been priced separately.
(57) A second important factor in assessing the value of this
Haapala and Uusitalo area
area is the surface area to which the price is applied. The
sales valuation was conservatively based on the minimum
(63) Most of the land in KK’s real estate portfolio was located
planning permission of 29 640 m 2 , whereas maximum
in the Haapala/Uusitalo area, which is some 2,5 km to
planning permission could go up to 39 590 m 2 . Given
the south-west of the city centre. These two adjacent
the expected population increase, Karkkila counted on a
areas were earmarked for detached residential houses
long-term business case for maximum planning
and terraced houses but had not yet been developed.
permission.
As development had not yet begun, prices were low, as
was the number of sales. KK owned virtually the entire
area.
(58) Despite
the
fact
that
no
land
for
tower
blocks
had
been
sold in Karkkila before the transaction, the city could
reasonably expect that there was an emerging market
(64) For the purposes of the transaction, the land was valued
for this type of building. In 2003, four building
at EUR 1 612 059 for all types of plot, with a price of
permits for tower blocks were granted. Developments
EUR 10,19/m 2 for detached houses and EUR 74,02/m 2
after the transaction confirm that the forecast was not
for terraced houses, in accordance with the city’s
unreasonable, given that six further permits were
standard prices. The total value of the land for
requested and granted up to 2007, and seven tower
detached houses was EUR 973 268 and EUR 811 209
blocks were built between 2007 and mid-2010.
for terraced houses.
(59) Prices
paid
in
the
neighbouring
municipalities
went
up
to
Prices for detached houses
EUR 133,6/m 2 in 2003 in Hyvink and even reached a
peak of EUR 312,6/m 2 for a sale in Vihti in 2004.
(65) All
three
studies
state
that
the
prices
for
detached
houses
corresponded to market prices. The KP & P report (Study
C) explains that market prices were 15-20 % higher than
the prices applied by Karkkila. Finland submitted data
showing that the average price was some EUR 14,4/m 2
(60) The
Commission
considers
that
the
three
studies
provide
in 2003. The initial expert (Study A) had indicated that
values that are broadly comparable and do not appear
the market prices in Karkkila ranged between EUR 9,43
manifestly wrong if compared with the prices paid for
and EUR 14,76.
similar land at the time of the transaction. There is no
need to establish which of the studies is the most reliable,
since the price paid for the shares remains below the
market value even under the most conservative
estimate (see overall market value calculation in
(66) All
three
studies
referred
to
average
sales
prices,
whereas
paragraph 84 et seq.). The lowest possible value has
the data submitted by Finland revealed significant
been estimated by the Commission as follows:
differences between neighbourhoods, with Haapala/
considering the prime location of the land in Asem
Uusitalo apparently situated at the lower end of the
anranta, the market price was at least in the upper
price range. In 2003, two plots were sold in Haapala
segment of the range provided by the most conservative
(private company to private individual): in April 2003,
of the consultants, i.e. EUR 75/m 2 . Working on the
a plot had been sold for EUR 9,25/m 2 , and in August
conservative assumption that the land is sold for the
another one for EUR 10,06/m 2 . This would correspond
minimum planning permission only, the minimum
to a price increase of 8,8
% over four months.
market value would be EUR 2 223 000.
Considering general price developments in Karkkila,
where prices rose by 12,6 % between 2001 and 2002,
and 42,7 % between 2002 and 2003, a 1,3 % price
increase over the last four months of 2003 can be
considered in line with the general trend. In view of
(61) The
maximum
value
in
the
case
of
overestimation
—
if
these circumstances, the Commission sees no reason
any — could thus be considered to be EUR 135 158,4,
why a price of EUR 10,19/m 2 in December 2003
which would correspond to EUR 67 579,2 for 50 %.
could not be accepted as the market price.

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L 230/76
EN
Official Journal of the European Union
7.9.2011
Prices for terraced houses
utility networks, which is normally done upon request by
owners intending to build). Karkkila emphasised that
(67) As
regards
the
prices
for
terraced
houses,
there
are
no
operations ran much more smoothly under its sole
reference sales in the area which would provide a direct
ownership and control. A large number of individual
benchmark. The initial expert had estimated a market
decisions had to be adopted for each plot and each
value ranging between EUR 70 and EUR 80/m 2 , the
engineering measure. Since real estate development was
KP & P report (Study C) only refers to the much
not Componenta’s core business (it was a steel producer),
higher prices for plots for terraced houses in the neigh
it had already become clear that these development
bouring municipalities. Since all three studies conclude
activities were harder for it.
that the price paid corresponded to the market price
and since there are no indicators that these conclusions
are not correct for the Haapala/Uusitalo area, the
Commission can accept that the price of EUR 74,2/m 2
(73) Due to its long-term development strategy and its
corresponded to the market price.
intention to carry out all the engineering works at
once, Karkkila had no interest in selling the land before
it was developed. This was why there had been virtually
no sales at all prior to the transaction.
Full ownership of entire area
(68) The
Commission
asked
Finland
to
explain
why
Karkkila
had an interest in acquiring full ownership of this entire
area, considering that past sales figures seemed to
(74) The
Commission
can
accept
that
on
the
basis
of
the
indicate that buyers were not interested in this neigh
long-term strategy followed by Karkkila for the Haapala/
bourhood and obviously preferred other city areas,
Uusitalo area, a market economy investor that already
despite the higher prices. Finland explained that already
owned 50 % of the shares in that area could also have
in previous years, KK had followed a targeted investment
an economic interest in acquiring the remaining 50 % of
strategy, consisting of developing Haapala/Uusitalo as the
the shares. The prospect of owning the whole of the
future residential neighbourhood of Karkkila. Other resi
future new residential area, the low risk in price terms,
dential areas in the city were already starting to be
and good prospects of selling most of the plots over the
saturated and, based on population growth, it was
next 10 years and the remainder over the following 10
expected that new areas would need to be developed.
years, can be considered a business strategy that a market

economy investor would have pursued.
(69) The
Haapala/Uusitalo
area
came
under
the
town
planning
but development had not yet started. This included a new
Other land intended for housing
subdivision of the land into individual and more suitably
shaped plots, the connection of the sites to the utility
(75) A
few
plots
for
detached
houses
are
located
in
other
areas. The valuation (EUR
43
000) was based on
networks and the construction of amenities.
Karkkila’s official unit sales price of EUR 10,19/m 2 for
land of this type. For the reasons given above (recitals
65-66), the Commission considers that the December
(70) Karkkila
had already successfully followed the same
2003 price can be accepted as the market price.
strategy in other neighbourhoods: it had extended
public utilities to the areas of Tuorila, Nikkimki and
Pumminmki. In 2003, the average sales price in
Pumminmki was already EUR 14,28, and Karkkila
(76) KK’s
portfolio
also
includes
two
plots
of
land
for
tower
successfully sold plots at the new standard price of
blocks located in the Takko I area. The total value of this
EUR 14 in 2004, with prices rising further in subsequent
real estate is EUR 110 191. Takko I is also located in the
years (up to EUR 18,5/m
city centre. According to Study A the market price

2 in 2005).
ranged between EUR 60 to EUR 75/m 2 . The KP & P
report (Study C) came to the same conclusion as
regards the tower block sites, namely that the price corre
(71) The
expectation
was
that
the
value
of
real
estate
in
sponded to the market rate by reference to the sales
Haapala/Uusitalo would reach that of similarly
prices paid in neighbouring municipalities.
developed residential areas and in addition follow the
general price increase trends. A value increase of at
least 40-50 % after development (i.e. within three to
four years) therefore seemed justified, plus additional
(77) In the Commission’s view there is no need to establish
increases in the medium to long term.
which expert study is the most reliable. Even if the lowest
possible market price of EUR 60/m 2 were applied to the
transaction, the corrected total value of the shares would
still exceed the price paid by Karkkila (see calculation of
(72) It
was
in
Karkkila’s
interests
to
develop
the
area
under
minimum share value below). Under this lowest possible
one infrastructure project covering the whole area. A
market value assumption, the land in Takko I would have
single coordinated development approach would be
been overvalued by EUR
19,65/m 2 . This would
much cheaper than development site by site (the munici
correspond to a total of EUR 27 212, i.e. EUR 13 606
pality is obliged by law to connect real estate to the
for 50 % of the shares.

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EN
7.9.2011 Official
Journal
of
the
European
Union L
230/77
Parks
4. Value of the shares
(78) The
value
attributed
to
land
earmarked
for
parks
is
(83) After
deducting
the
amount
of
potential
overvaluation,
EUR 456 601. This was based on the standard price of
the value of 50 % of KK’s shares is as follows:
EUR 1,18/m 2 which Karkkila normally pays for such
land. These are areas which the town has the right to
Table 5
redeem at the going price ( 15 ). As these areas are not
intended to be built on according to the town plan,
Value of KK
they have used the same pricing basis as for unzoned
raw land (see paragraph 79). The Commission therefore
concluded that this part of the land was not overvalued.
Current value of land 4
905
618
Cash and bank deposits 28
256
Land outside the town plan
Total assets 4
933
874
(79) KK’s
portfolio
also
included
some
raw
land
outside
the
Shareholder loan 3
340
368
town plan valued at a total of EUR 49 678, based on a
price of EUR 1,18/m 2 . The studies do not explain why
Current liabilities 107
they consider this land to be correctly valued. The other
data submitted by Finland contain a list of sales of unde
Total debts 3
340
475
veloped land in sparsely populated areas in Karkkila sold
at an average of EUR 1,86/m 2 . On this basis, the
KK’s net value 1
593
399
Commission can accept that EUR 1,18 did not exceed
the market price.
50 % of KK’s net value 796
699,5
(84) Since
Karkkila
paid
a
purchase
price
of
EUR
713
092,50
Conclusion
for 50 % of the shares, the Commission considers that it
did not pay a price that exceeded the market value.
(80) According
to
the
calculations
made
by
Finland
on
the
basis of the standard prices at which KK sold its property,
the value of KK’s real estate amounted to
V. CONCLUSION
EUR 5 067 988. After deducting the amounts in respect
of a potential overvaluation of the land for tower blocks
(85) The Commission considers that the price paid by
Karkkila to Componenta for the acquisition of 50 % of
in Asemanranta (EUR
135
158) and in Takko I
the shares in KK does not exceed the market price and
(EUR 27 212), the minimum value of the land comes
therefore does not qualify as state aid within the meaning
to EUR 4 905 618.
of Article 107(1) TFEU,
HAS ADOPTED THIS DECISION:
3. The loan repayment
(81) In
1996
both
Componenta
and
Karkkila
had
granted,
on
Article 1
equal terms (pari passu), an interest-free shareholder loan
of EUR 1 670 814 to KK. Componenta’s withdrawal
The purchase price paid by the city of Karkkila to Componenta
from KK went ahead with the reimbursement of the
Oyj for shares in Karkkilan Keskustakiinteistt Oy under the
shareholder loan by KK. Since KK would have had to
contract concluded by the parties on 16 December 2003
sell a significant amount of property to generate these
does not constitute state aid for Componenta Corporation
funds, and since, as described above, this would jeop
Oyj within the meaning of Article 107(1) TFEU.
ardise the mid- to long-term business strategy, Karkkila
decided to grant a further interest-free loan to KK for the
Article 2
same amount, which KK used for the reimbursement. As
a result, KK owed Karkkila a total of EUR 3,34 million.
This Decision is addressed to the Republic of Finland.
(82) The
Commission
agrees
with
Finland
that
the
loans
had
Done at Brussels, 20 April 2011.
already been taken into account in the valuation of the
company, i.e. the value of the shares had already been
For the Commission
reduced by the value of the debt. Assessing the loan
reimbursement as a separate measure would therefore
Joaquín ALMUNIA
be tantamount to double counting.
Vice-President
( 15 ) Act 132/1999 on Land Use and Building.

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