BUCHAREST (Romania), February 24 (SeeNews) - The European Commission (EC) said on Monday it has approved Romania's plans to grant a 251 million euro ($272 million) temporary loan to Romanian state-owned lignite-based electricity producer Complexul Energetic Oltenia (CE Oltenia).
The Commission considered that the loan is limited to meeting the company's well identified liquidity needs and therefore it does not breach EU state aid rules, it said in a press release.
Romania committed to ensure that, after six months, the loan will either be fully repaid, or CE Oltenia will undertake a comprehensive restructuring in order to return to viability in the long term or be liquidated.
The Commission also found that the aid contributes to an objective of common interest. In this respect, the loan will mitigate the risk of an insolvency process which would lead to the potential loss of 13,000 jobs in a region already characterized by relatively high unemployment levels.
The EU's executive body stressed that the state aid decision does not put into question the need for Romania to meet its legal obligations in terms of air quality, nor does it imply that the Commission recommends the use of lignite as a fuel, given its negative impact on air quality and climate.
CE Oltenia has 3.2 gigawatt of capacity and generates close to 25% of electricity in Romania.
Earlier this month, Romania's energy, economy and business environment minister Virgil Popescu said that the government has approved a 1.2 billion lei ($277 million/252 million euro) state aid for Complexul Energetic Oltenia.
The company will use the state aid for the purchase of carbon dioxide emission certificates for 2019, Victor Popescu said at the time.
In April, CE Oltenia said it expects a slim gross profit of 1 million lei in 2019 and plans to lay off 200 employees.
Set up in 2012, CE Oltenia produces electricity and heat mainly for the southern city of Craiova and sells coal to third parties, predominantly power producers.
Romania's economy ministry holds a 77.17% stake in CE Oltenia, blue-chip investment fund Fondul Proprietatea owns 21.54% and Electrocentrale Grup holds the remainder.