1.6.2013

EN

Official Journal of the European Union

L 148/33

(1)

On 17 July 2009 Romania notified two support measures (hereinafter: ‘the notification‘� in favour of Oltchim SA R芒mnicu V芒lcea (hereinafter: ‘極ltchim‘�or ‘the company‘�: (i) the conversion of debt towards the public authorities amounting to RON 538 million (approximately EUR 128 million (3)) into equity and (ii) a state guarantee covering 80 % of a commercial loan amounting to EUR 424 million. Romania notified these state support measures for reasons of legal certainty, arguing that they did not involve state aid within the meaning of Article 107(1) TFEU.

(2)

Prior to this notification, on 10 April 2008, PCC SE (hereinafter: ‘PCC‘�, a company based in Duisburg, Germany, which currently owns a minority stake of 18,31 % in Oltchim, submitted a formal complaint, alleging that the planned debt-to-equity conversion involved incompatible state aid.

(3)

Following the registration of the complaint, the Commission exchanged correspondence and information with the Romanian authorities, Oltchim and the complainant, and met on several occasions with the Romanian authorities and representatives of Oltchim, on the one hand, and with representatives of the complainant, on the other hand.

(4)

On 15 September 2009 the Commission opened a formal investigation procedure pursuant to Article 108(2) TFEU with regard to the notified measures (hereinafter: ‘the opening decision‘�. Romania submitted comments on the opening decision on 3 November 2009.

(5)

The opening decision was published in the Official Journal of the European Union on 29 December 2009 (4). By letters of 21 December 2009, the Commission invited eight companies potentially interested in the proceedings as competitors of Oltchim to submit comments on the opening decision.

(6)

The Commission received comments from five third parties: by letter of 26 January 2010, from Vestolit GmbH & Co. KG (hereinafter: ‘榁estolit‘�; by letter of 26 January 2010 from Ineos ChlorVinyls (hereinafter: ‘業neos‘�; by letters of 27 January 2010 and 28 January 2010, from two companies which requested confidentiality as regards their identity (hereinafter: ‘楢nonymous parties I and II‘�; and by letter of 29 January 2010, from Mr Virgil Bestea, a private individual.

(7)

These comments were transmitted to Romania by letter of 2 March 2010. Romania replied to the above-mentioned third party observations by letter of 8 April 2010.

(8)

A sixth third party, Firebird Management LLC (hereinafter: ‘楩irebird‘� ‘�an investment fund holding at the time 1,328 % of Oltchim's shares ‘�submitted information and comments by letters of 27 May 2010 and 8 July 2010. Firebird's comments were transmitted to Romania by letters of 25 June 2010 and 27 July 2010 respectively.

(9)

PCC, the complainant, submitted information on the case by letters of 6 May 2010, 18 May 2010, 19 May 2010, 28 May 2010, 13 June 2010, 18 June 2010, 22 July 2010, 6 August 2010, 2 September 2010, 18 October 2010, 9 April 2011 and 14 April 2011. Besides these submissions, PCC sent numerous pieces of information related to the case, principally including various newspaper articles and other information, mostly publicly available.

(10)

Furthermore, Anonymous parties I and II (which also commented on the opening decision and which requested confidentiality as regards their identity) submitted further information on 21 September 2010, 22 February 2011, 28 February 2011, 26 July 2011 and 28 October 2011.

(11)

The Commission transmitted the comments referred to above in recitals (9) and (10) to Romania, when they contained new information and arguments and were relevant to the current procedure, by letters of 25 June 2010, 2 August 2010, 9 September 2010, 22 September 2010, 20 October 2010 and 23 November 2011.

(12)

Romania replied to the additional comments submitted by letters of 30 July 2010, 2 September 2010, 12 October 2010, 26 October 2010, 23 November 2010 and 7 December 2011. It also submitted additional information on the case by letters of 29 March 2011, 14 April 2011, 27 July 2011, 9 September 2011 and 21 September 2011.

(13)

Following the opening decision, several meetings took place in Brussels between the Commission's departments and the Romanian authorities: on 30 June 2010, 15 July 2010, 19 May 2011 and 12 September 2011. The Commission's departments also met on several occasions with representatives of the complainant PCC.

(14)

By letter dated 22 June 2011, the Romanian authorities withdrew their notification of 17 July 2009 with regard to the state guarantee for the loan of EUR 424 million. They also informed the Commission that they maintained their notification with regard to the debt-to-equity conversion.

(15)

On 10 August 2011 the Romanian Government approved a Memorandum mandating the representatives of the Ministry of Economy, Trade and the Business Environment, AVAS (5) and Oltchim to adopt a private-law convention between AVAS and Oltchim whereby the company would acknowledge interests accruing on the public debt since 1 January 2007.

(16)

By letter of 9 September 2011, the Romanian authorities announced that Oltchim and AVAS intended to conclude the above-mentioned private-law convention, and that AVAS would also convert the interests thus accrued into equity, together with the principal debt.

(17)

By letter of 21 October 2011, Romanian Prime Minister Emil Boc conveyed the Romanian Government's firm commitment to privatise Oltchim in full, including the whole stake accruing to the public authorities after the debt conversion. The privatisation announcement was to be released at the end of March 2012, and the privatisation was to be concluded by the end of May 2012. By letter of 16 February 2012, the new Romanian Prime Minister Mihai-R膬zvan Ungureanu re-affirmed these commitments.

(18)

Romania submitted additional comments and information by letters of 12 October 2011 and 23 December 2011.

(19)

The letters mentioned in recitals 17 and 18 show that Romania modified the notification of Measure 1 in the sense that the conversion of the debt to the public authorities amounting to RON 538 million was to be followed by the privatisation of the resulting shareholding in Oltchim, and that the conversion has to be assessed in the light of the subsequent privatisation.

(20)

Oltchim is a large Romanian petrochemical manufacturer, producing PVC, caustic soda, chlorine, DOP and polyether polyols. The company's main product is PVC (currently about 37,5 % of its overall production), with an EU market share of 2,1 % in 2008 (6). Oltchim is one of the largest petrochemical companies in Romania and south-east Europe, manufacturing 78 types of 40 base chemical products. The company exports around 80 % of its production inside and outside Europe.

(21)

Oltchim is the main industrial employer in V芒lcea, a Romanian region assisted under Article 107(3)(a) TFEU. On 15 October 2011 the workforce consisted of 3 470 people (7). Owing to the current difficult financial situation, the company temporarily laid off 1 000 employees in December 2011 and a further 993 employees in January 2012 (8).

(22)

The company started business in 1966, was reorganised in 1990 and was listed on the Romanian Stock Exchange in 1997. The Romanian State (currently via the Ministry of Economy) maintains a controlling stake of 54,8 % in the company. The principal minority shareholder is PCC, which is also the complainant in this procedure and also owns Rokita SA, a Polish competitor of Oltchim, with a stake of 18,31 %. The rest of the company shares are held by Nachbar Services Ltd (14,02 %), various individuals (11,04 %) and other legal entities (1,81 %).

(23)

Over the period 1992-2008, Oltchim invested a total of approximately EUR 371 million in the modernisation of its production line (of which EUR 118,8 million was invested in 2007/2008). In relation to certain of these investments, Oltchim contracted over the period 1995-2000 a series of 12 commercial loans, totalling approximately DEM 171 million plus USD 60 million. The loans were backed by state guarantees, issued by the Ministry of Finance.

(24)

Given that Oltchim was not able to repay the loans, the banks called on the state guarantees starting from November 1999.

(25)

From 1999 to 2002, the Ministry of Finance made payments under the called guarantees. It charged substantial interest and penalties on the amounts thus paid on account of the state guarantees triggered between 1999 and 2002, fluctuating between 0,15 % and 0,3 % per day, i.e. 54 %-110 % per year (9).

(26)

By June 2002, Oltchim's accrued debt towards the Ministry of Finance stemming from the state guarantees, plus the interest and penalties applied thereon, amounted to RON 303 million (approximately EUR 72 million). At that date, this amount was transferred from the Ministry of Finance to the Romanian agency entrusted with the recovery of public debt, AVAS (10), and was consolidated in USD so as to preserve the value of the debt in the hyperinflationary environment, the resulting amount being USD 91 million.

(27)

In accordance with Romanian law (GEO 51/1998), AVAS did not have a specific mandate to apply interest and penalties on the public debt that it was entrusted with recovering from the debtor companies.

(28)

The first attempt to privatise the company took place in 2001, when AVAS negotiated and signed with Exall Resources a sale agreement for the state's stake in the company. The sale agreement was cancelled owing to the buyer's inability to fulfil its payment obligations and its failure to guarantee the technological/environmental investments for the company.

(29)

The second attempt to privatise Oltchim was made in October 2003, when the Romanian privatisation agency APAPS published an announcement for the sale of the State's stake. Potential investors were informed that the public debt would be converted into equity, with a view to increasing the attractiveness of the company to potential investors.

(30)

However, as a potential investor (Rompetrol) and minority shareholders challenged the 2003 debt conversion in the Romanian courts, the privatisation offer was cancelled in early November 2003. Notwithstanding this, in November 2003 the AVAS debt of USD 95 million (i.e. the transferred USD 91 million plus further payments made by the Ministry of Finance in application of the guarantees and transferred to AVAS since June 2002), equal to RON 322 million, was converted into equity by decision of the Oltchim General Meeting of Shareholders (in which the state representatives had majority votes). The public stake in Oltchim thus increased from 53,26 % to 95,73 %.

(31)

In November 2005, a commercial court in V芒lcea annulled the Oltchim General Meeting's decision on the debt conversion, on the ground that the debt conversion had been carried out without allowing the minority shareholders to also participate in the capital increase.

(32)

In June 2006 the Romanian Government issued an Emergency Ordinance (11) mandating the state representatives in the Oltchim General Meeting of Shareholders to vote not to appeal against the court ruling which had annulled the first debt conversion, and to take the necessary steps to reverse the conversion. The court decision annulling the debt conversion became final in August 2006. The share capital decrease effectively took place in November 2007. The debt resulting from the annulment of the debt conversion was re-entered in the accounts at its historical value of USD 95 million, subsequently equalling RON 317 million.

(33)

After the first transfer of the debt in June 2002 to AVAS, over the period June 2002 to December 2006 the Ministry of Finance continued to make payments on account of the state guarantees which had been triggered in November 1999. Over the period 2003-2006, while the 2003 debt conversion was still in place, the total sum of extra payments made by the Ministry of Finance on account of the triggered guarantees amounted to RON 191 million. In application of the convention concluded in June 2002 between the Ministry of Finance and AVAS for the transfer of the public debt, the Ministry of Finance also transferred to AVAS, in successive instalments following the actual payments made on account of the guarantees, all these receivables. AVAS also consolidated these receivables in USD, which in 2006 totalled USD 60 million.

(34)

Thus on 1 January 2007, the date of Romania's accession to the EU, Oltchim's total debt to AVAS amounted to USD 60 million (12).

(35)

Since 1 January 2007, all payments concerning the external loans have been made by Oltchim. The Ministry of Finance no longer made any additional payment under the state guarantees.

(36)

In November 2007, the amount of the reversal of the debt conversion of USD 95 million was entered into Oltchim's accounts and added to the USD 60 million linked to the further payments, thus resulting in a total public debt of USD 155 million (RON 508 million). This public debt of USD 155 million is indicated in Oltchim's accounts in RON (i.e. RON 508 million). This USD-denominated debt has been reported since then in Oltchim's accounts in RON, and the amount remained unchanged in the Romanian currency because, at every new reporting interval, the company reported in the balance sheet the historical RON value (13), which was always higher than the then-applicable value, as the RON appreciated against the USD over time.

(37)

As an exception to the general rule provided by GEO 51/1998 (see recital (27) above), based on Article 2(2) of Government Emergency Ordinance 45/2006 (hereinafter: ‘楪EO 45/2006‘�, in 2007 AVAS charged interest amounting to RON 29,9 million, at the one-year LIBOR (14) rate for deposits in USD, for the Oltchim receivables transferred to it by the Ministry of Finance that were the subject of the 2003 debt conversion, for the period 2003-2006.

(38)

Consequently, as from November 2007, the total amount owed by Oltchim to AVAS amounted to USD 155 million (RON 508 million) plus RON 29 million, for a total of RON 538 million. In what follows, this Decision will refer to the debt in RON as the notified debt conversion is also denominated in RON.

(39)

In January 2007, the Romanian Parliament validated through Law 30/2007 the GEO 45/2006, which authorised AVAS to reverse the first debt conversion and mandated it to implement a second one, this time also respecting the priority rights of the minority shareholders.

(40)

This second attempt to convert the debt into equity was opposed, however, by the new principal minority shareholder, PCC, which refused to participate in the operation.

(41)

PCC had acquired a 1,2 % stake in Oltchim for EUR 7,5 million in May 2007, i.e. after the date when the national court ruling which annulled the first debt conversion became final because neither Oltchim nor the Romanian authorities appealed. When the debt conversion was reversed on the company's accounts, PCC's share of 1,2 % became a share of 12 % (15).

(42)

In April 2008 PCC lodged a complaint with the Commission, alleging that the debt conversion involved incompatible state aid (see recital 2 above).

(43)

The Romanian authorities decided, in order to ensure compliance with Article 108(3) TFEU, to obtain state aid clearance from the Commission prior to carrying out the second debt conversion, and notified the measure.

(44)

The Romanian authorities argue that after the reversal of the 2003 debt conversion in 2006 they tried again to privatise the company with the debt, in 2006 and 2008 respectively. According to the Romanian authorities, no investor was interested in buying on such terms.

(45)

Moreover, according to the Romanian authorities, the challenges the company has been facing since 2008 are: (i) the stoppage of supplies of key raw materials from the main supplier Arpechim; (ii) the negative impact on the company‘檚 net asset value caused by the reinstatement of a significant debt after the reversal of the 2003 debt conversion in November 2007; (iii) the undercapitalisation of the company, also due to the debt conversion reversal; and, finally (iv) the effects of the global financial and economic crisis.

(46)

For the financial year 2008, Oltchim made an operating loss of RON 71 million (EUR 17 million), a net loss of RON 226 million (EUR 54 million), and the accumulated losses reached RON 1,367 billion (EUR 325 million). After the closure of the main ethylene supplier Arpechim in November 2008, the company functioned at 45 % of capacity and about one third of the staff was temporarily laid off.

(47)

At the end of 2008, Oltchim's shares held until that time by AVAS were transferred to the Ministry of Economy's portfolio.

(48)

In December 2009 Oltchim purchased the assets (ethylene installation) of its previous supplier Arpechim for EUR [0]-[10] (16) and paid for its stocks/inventories EUR [10]-[20] million. According to the Romanian authorities, the acquisition was financed from customer advance payments. Arpechim restarted operations in May 2011.

(49)

On 31 December 2009, Oltchim's financial accounts for 2009 showed an operating loss of EUR 26 million (RON 109 million), a net loss of EUR 52,4 million (RON 220 million), accumulated losses of EUR 377 million (RON 1,584 billion) and negative own funds in the amount of EUR 112 million (RON 469 million).

(50)

On 31 December 2010, Oltchim's financial accounts showed an operating profit of EUR 56 million, a net profit of EUR 32 million (RON 220 million) and accumulated losses of EUR 383 million. The positive operating and net result was due to the fact that the Arpechim assets purchased for EUR [0]-[10] were revalued at EUR [80]-[100] million, and the difference was entered in the books as ‘榞ain from a bargain purchase‘�

(51)

On 30 June 2011, Oltchim's six-months financial accounts (17) showed an operating loss of EUR 7,4 million and a net loss of EUR 17,4 million, accumulated losses of EUR 401 million and negative own funds in the amount of EUR 358 million (without taking into account the debt to AVAS).

(52)

On 15 September 2009, the Commission opened a formal investigation into the two support measures in favour of Oltchim notified by Romania in July 2009:

(53)

The Commission questioned whether, contrary to Romania's arguments, the notified support package conferred an undue advantage on the company and constituted state aid within the meaning of Article 107(1) TFEU.

(54)

Furthermore, the opening decision identified as possible further state aid the fact that, since 1 January 2007, the State had not charged interest and/or penalties on the pending public debt (identified as ‘�span class="underline">Measure 3