COMMISSION FINDS THAT RESTRUCTURING OF BULGARIAN STEELMAKER KREMIKOVTZI FAILED
The European Commission has found that the Bulgarian steel producer Kremikovtzi did not implement the business plan established for its restructuring, which had been agreed by the Commission in 2006 on the basis of a special steel protocol to the Europe Agreement applicable to EU/Bulgaria relations prior to the 2007 accession. Between 1998 and 2005, the company received about €222 million restructuring aid, but failed to modernise its infrastructure and to reduce its production costs. The company went bankrupt in August 2008 and Bulgaria initiated the recovery of the aid plus interest in the context of the ongoing liquidation proceedings.
Restructuring aid for ailing steel producers is strictly prohibited within the EU. However, in the context of pre-accession, candidate countries may be given the opportunity to grant aid in order to restructure their steel industries once, before having to comply with the EU's regime for state aid to steelmakers.
Bulgaria made use of this opportunity and decided in 2004 to support the country's biggest steel company Kremikovtzi with restructuring aid totalling about €222 to help it becoming competitive in the long term and to be able to survive on the market without further state support.
The conditions for granting this aid were set out in a special steel protocol (Protocol 2) to the Europe Agreement. In particular, Kremikovtzi was due to set up a business plan which would bring the company back to viability by 2006. However, at the end of 2006, the company had implemented only part of the plan and was still in a poor condition.
The Commission accepted to prolong the restructuring period until 2008. To ensure that the Protocol 2 to the Europe Agreement is respected, the EU and Bulgaria agreed at the EU-Bulgaria Association Council of 29 December 2006 on specific rules for the monitoring of the implementation progress. In this context, Bulgaria committed to recover the aid from Kremikovtzi if needed.
In line with its monitoring obligations under this agreement, the Commission has now concluded that Kremikovtzi failed to implement the business plan in a satisfactory way. Indeed, essential modernisation and environmental investments originally foreseen were not carried out. In addition, the company failed to reduce production costs and continuously suffered from a lack of working capital for endogenous reasons that heavily affected its operational business. As a result, the company went bankrupt in August 2008.
Bulgaria has already initiated the recovery of the aid of €222 million plus interests, in the context of the current liquidation proceedings.
