The European Commission (EC) has opened an in-depth investigation to assess whether various public support measures from Romania in favour of Hunedoara Energy Complex (EC) are in line with EU rules on state aid to companies in difficulty, a press release informs.
On April 2015, the Commission approved temporary rescue aid of EUR 37.7 million (RON 167 million) to the Romanian energy producer in Hunedoara, which has been in financial difficulty since 2013.
In the context of this decision, Romania committed to submit a restructuring plan aimed at ensuring the future viability of Hunedoara EC, if the company were unable to pay back the rescue aid in six months’ time. In addition, in a separate decision, the Commission concluded that Romanian energy producer had to repay around EUR 6 million of incompatible state aid.
EU state aid rules only allow a state intervention for a company in financial difficulty under specific conditions, requiring in particular that the company is subject to a sound restructuring plan to ensure its return to long-term viability, that the company contributes to the cost of its restructuring and that any competition distortions are limited.
At this stage, EC has doubts whether the proposed restructuring plan could restore the long-term viability of the company without continued state aid:
First, Hunedoara EC entered into insolvency proceedings in 2016 (currently suspended), with more than EUR 500 million debt owed to various State bodies. This includes part of the rescue loan Romania granted CE Hunedoara in 2015, a loan financing the repayment of the incompatible state aid but also additional loans of around EUR 73 million, which Romania has granted to Hunedoara EC since 2015 to keep the company afloat.
Second, the restructuring plan does not foresee a discernible contribution of Hunedoara EC to the costs of restructuring nor measures to limit possible distortions of competition as a result of the significant state support.
”The Commission will now investigate further to find out whether its initial concerns are confirmed. At the same time, the Commission will continue to work closely with Romanian authorities to find a viable solution for CE Hunedoara’s assets that will ensure they continue to supply electricity, reduce costs for consumers and limit the burden on Romanian taxpayers,” the release reads.