The European Commission announced on March 12 that it has opened an in-depth investigation to assess whether various public support measures from Romania in favour of energy producer Complexul Energetic Hunedoara (CE Hunedoara) are in line with EU rules on state aid to companies in difficulty.
On April 21, 2015, the Commission approved temporary rescue aid of €37.7mn (RON167mn) for CE Hunedoara, which had been in financial difficulty since 2013. Romania further submitted a restructuring plan aimed at ensuring the future viability of CE Hunedoara, should the company be unable to pay back the aid within six month.
The Commission now says it doubts that the proposed restructuring plan can restore the long-term viability of the company without continued state aid.
A year after the rescue aid was approved, CE Hunedoara entered insolvency proceedings (which are currently suspended), with more than €500mn debt owed to various state bodies, the EC stressed.
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 €73mn, which Romania has granted to CE Hunedoara since 2015 to keep the company afloat.
Secondly, the restructuring plan does not foresee a discernible contribution from CE Hunedoara to the costs of restructuring nor measures to limit possible distortions of competition as a result of the significant state support, the Commission said.
CE Hunedoara will have to demonstrate it has achieved sustainability (and needs no more state aid) and will contribute to the restructuring plan from its own resources.
CE Hunedoara estimated last autumn that it would narrow its loss by 80.3% to RON169.1mn in 2017, according to the company’s budget plan.
“The loss is mainly a result of the economic conditions in which the company operates, through the elimination of the regulated market, electricity being sold at market prices. The natural handicap that CE Hunedoara has due to the fact that it uses the most expensive fuel, is accentuated by the competition on the energy market, where the sale price is lowered by the renewable energy sectors,” the company said.
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