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European Commission approves restructuring aid of up to 2.7 billion euros for Oltenia Energy Complex
The European Commission (EC) has approved, in accordance with EU state aid rules, Romania's plans to provide a restructuring aid worth up to 2.66 billion euros (13.15 billion lei) to Oltenia Energy Complex, announces the EC Representation in Romania.
According to a release from the EU executive, the measure will allow the company to finance its restructuring plan and restore its long-term viability.
"The restructuring plan presented by Romania and the aid to support it will ensure the restoration of the long-term viability of Oltenia Energy Complex without the need to continue granting state aid. Public support is accompanied by guarantees to ensure that distortions of competition which may occur are kept to a minimum and the measures will support the EU's decarbonisation targets, in line with the European Green Pact," said Executive Vice President Margrethe Vestager, Commissioner for Competition.
Oltenia Energy Complex is a state-owned enterprise operating in mining, electricity production and heat supply. The company is the third-largest producer of electricity in Romania and is important for reasons of safety and adequacy of the national energy system.
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On 5th February 2021, the Commission started a thorough investigation to evaluate if the recovery plan presented by Romania on 4th December 2020 and the measures for restructuring meant to support it is according to the EU norms regarding state aids.
The measure adopted by Romania
During the thorough investigation, Romania presented a revised plan for the restructuring of the society for the period 2021 – 2026 plus significant amendments and improvements.
The plan will be supported with a restructuring aid worth 2.66 billion euro, as grants, state guarantees for a loan, capital injection and conversion of loans into grants.
The restructuring plan relies on Romania’s plan which includes the efforts for decarburization, replacement of the production of electricity from coal by electricity produced from natural gas and renewable sources (solar energy and hydro power), with no CO2 emissions or very few emissions. This is hoped to help the society to improve its foot print on the environment and, at the same time, to reduce the costs of production.
Moreover, the restructuring plan will reduce the costs and will improve the efficiency of the society, among which through organizational and managerial measures (for example, the improvement of the processes) and through financial measures (the optimization of the banking loans or divestiture or sale of shares).
The plan presented by Romania supports, in general, the ecological objectives of decarburization established in the Plan for recovery and resilience of Romania. Even so, the evaluation by the Commission of the state aid offered for the restructuring plan of CE Oltenia, made through the present decision is separated and cannot affect the evaluation by the Commission of the coming into force of the Plan for recovery and resilience of Romania.
The Commission evaluation
The Commission evaluated the restructuring plan the restructuring aid in accordance with the Guidelines regarding aids for rescue and restructuring which allow an intervention of the state in a company in financial distress only under certain conditions, requiring a solid plan for restructuring on the part of the company in order to ensure the recovery of its viability on a long term, so that the company can contribute to its own restructuring, the distortion of the competition to be limited and the measure to contribute to an objective of common interest.
The Commission decided that the aid is adequate, as it approaches both the issues of liquidity of the society and those connected to solvency. Mostly, the Commission evaluated that Romania will be paid adequately for the aid. In this sense, the state remuneration will be made through positive estimated net gains which will increase the value of the public ownership in CE Oltenia, and through divestiture until 2026 of at least 20% of the shares owned by the state, as the restructuring plan includes.
At the same time, the Commission considered that the aid is proportional, the contribution of the society and of the investors on the market to the restructuring costs being over 30% of the total costs (1.24 billion euro), half of the contribution being new financing on the part of private investors and some financial institutions offered under market conditions.
Finally, compensatory measures to limit the possible distortions of the competition generated by the aid. Among these, there is the creation by CE Oltenia, together with other producers of electricity, of vehicles with the special purpose dedicated to co-investments and exploitation of the units on natural gas and photovoltaic units as well as the prohibition of the acquisition of interests in competing operators and invoking state support as a competitive advantage in the company’s communications.
The Commission evaluated that the aid will support the decarburization of the electricity production in Romania and in general, in Europe in accordance with the EU objectives established in the Green European Pact and the environment norms of the EU.
On this basis, the Commission drew the conclusion that the measure applied by Romania observes the EU norms regarding state aid.