State aid: Romania to recover around €13 million from the National Uranium Company

The European Commission has found that various Romanian public support measures in favour of the Compania Na?ional? a Uraniului SA ('CNU', the National Uranium Company) are not in line with EU rules on State aid to companies in difficulty. As a result, Romania cannot implement the support measures envisaged in the restructuring plan. It must also recover €13 million of incompatible rescue aid that CNU received in 2016, plus interest.

Executive Vice-President Margrethe Vestager, in charge of competition policy, said: "A government can support a company in financial difficulty if the company has a sound restructuring plan which ensures its return to long-term viability, contributes to the cost of its restructuring and competition distortions are limited. In the case of CNU, these conditions were not met. As a result, Romania cannot further support the company. It must also recover the aid already granted. This will restore the competitive situation in the market and ensure that CNU does not compete unfairly with other more efficient operators. It will also prevent CNU from maintaining inefficient loss-making operations, which could eventually lead to higher electricity prices and a higher cost to the Romanian taxpayers.”

On 12 June 2017, Romania notified to the Commission a plan for the restructuring of CNU, which was experiencing financial difficulties. The initial restructuring plan included €93 million (RON 441 million) of public support to the company, in the form of grants, subsidies, debt write-off and debt-to-equity conversion. The restructuring plan followed an urgent rescue aid loan of around €13 million (RON 62 million) granted to keep the company afloat, which the Commission had temporarily approved on 30 September 2016 and which was not repaid within 6 months as required under EU State aid rules.

EU State aid rules only allow a State intervention for a company in financial difficulty under specific conditions, requiring in particular that the company undertakes a sound restructuring plan to ensure its return to long-term viability, that the company contributes to the cost of its restructuring and that competition distortions are limited.

On 8 May 2018, the Commission opened an in-depth investigation to assess whether the initial restructuring plan was in line with these conditions and, hence, with EU State aid rules, in particular the Rescue and Restructuring Guidelines.

In the course of the investigation, in August 2018 and April 2019 respectively, Romania submitted two amended restructuring plans to the Commission.

The last restructuring plan submitted by Romania in April 2019 envisaged an overall public support of around €38 million (RON 178 million). This amount included various State grants as well as the non-reimbursement of the €13 million (RON 62 million) rescue loan granted in 2016.

The Commission's investigation showed that the latest restructuring plan, like the previous ones, does not dispel the concerns that the Commission had when it opened the in-depth investigation in 2018. In particular:

• Romania has not sufficiently demonstrated that the plan would guarantee the restoration of the long-term viability of CNU without continued State aid;

• No private investor (including banks) supports the plan nor contributes to the restructuring costs (neither through equity nor debt investment). This shows a lack of confidence from the market in the future of the CNU and in the restructuring plan.

• The own contribution of CNU to the plan depends on future revenues that the company would generate based on a new monopoly law, which forces its main client, the nuclear energy producer Societatea Na?ional? Nuclearelectrica, to buy uranium from CNU. The resulting revenues would therefore not be obtained at market conditions.

• Finally, contrary to other restructuring cases in the nuclear energy sector (see for instance approval of Restructuring aid to Areva), the Commission concluded that no measures were proposed by Romania to limit possible distortions of competition.

Therefore, the Commission concluded that the restructuring plan submitted by Romania is not in line with EU State aid rules. As a result, Romania cannot implement the aid measures envisaged in the plan, which include the State grants and the non-reimbursement of the 2016 rescue loan.

Furthermore, the Commission concluded that the 2016 rescue loan of around €13 million (RON 62 million) plus interest which was prolonged and not reimbursed after 6 months is incompatible with EU State aid rules and needs to be recovered by Romania.

Recovery

As a matter of principle, EU State aid rules require that incompatible State aid is recovered without delay in order to remove the distortion of competition created by the aid. There are no fines under EU State aid rules and recovery does not penalise the company in question. It simply restores equal treatment with other companies.

Should CNUbe unable to pay back the aid, it should in principle cease economic activities and eventually be liquidated, with its productive assets being acquired by other companies.

CNU operates uranium mines and a processing plant for the supply of nuclear fuel compounds for electricity generation and for the national strategic reserve.

Its activities are therefore governed by the Euratom Treaty, in terms of, among others,safety requirements for the trade and processing of uranium compounds. Therefore, in the process of a possible liquidation of CNU, with a view to ensure that CNU's assets are safely transferred and operated by other companies, Romania may take any appropriate and proportionate measure to guarantee safety of uranium mining, including safe mine closures, and nuclear fuel processing.

Background

CNU is a fully State-owned Romanian company active in the exploitation of Romanian uranium mines and production of raw material transformed into fuel for nuclear power plants. CNU extracts uranium ore, processes it to form uranium octoxide (U3O8) and, after further refinery, transforms it into uranium dioxide (UO2). CNU employs around 770 staff and has two operating sites: an uranium mining site, located in Crucea-Botusana (Suceava County, North-East region) and a processing-refining plant, located in Feldioara (Brasov County, Centre region).

CNU has been in financial difficulty since the loss of its main client, the nuclear energy producer Societatea Nationala Nuclearelectrica. Since CNU met the conditions for insolvency proceedings under Romanian law, it was in principle eligible to rescue and restructuring aid preventing its exit from the market.

Under the Commission's 2014 Guidelines on State aid for rescue and restructuring, companies in financial difficulty may receive State aid provided they meet certain conditions. Aid may be granted for a period of up to six months ("rescue aid"). Beyond this period, the aid must either be reimbursed or a restructuring plan must be notified to the Commission for the aid to be approved ("restructuring aid"). The plan must ensure that the long-term viability of the company is restored without further State support, that the company contributes to an adequate level to the costs of its restructuring and that distortions of competition created by the aid are addressed through compensatory measures.

By ensuring compliance with these conditions, the Commission maintains fair and effective competition between different companies and technologies in the energy market, like in other sectors.

The non-confidential version of the decision will be made available under the case number SA.48394 in the State Aid Register on the Commission's competition website once any confidentiality issues have been resolved. State aid decisions newly published in the Official Journal and on the internet are listed in the State Aid Weekly e-News.

Developed by Codecraftsman