BUCHAREST (Romania), September 15 (SeeNews) – The European Commission said on Tuesday it launched a formal investigation whether plans for a debt-to-equity swap and a state guarantee for Romanian chemical producer Oltchim comply with the bloc’s state aid rules.
Romania notified the EU executive of its plans to grant a 135 million euro debt-to-equity swap and a 339.2 million euro state guarantee as support measures for 54.8% state-owned Oltchim.
The Commission said it has doubts whether the planned measures are in line with the state aid rules and in particular, whether a private operator would have accepted to make available such measures.
"The Commission must verify whether the measures planned for Oltchim would entail state aid, and if so whether such measures would not give rise to excessive distortions of competition," EU Competition Commissioner Neelie Kroes said in a statement.
Under EU state aid rules, interventions by public authorities in companies carrying out economic activities can be considered free of aid if they are made on terms that a private player operating under market conditions would have accepted. The opening of the in-depth inquiry does not prejudge the outcome of the procedure, the Commission said.
The first measure involves a debt-to-equity swap of public debt stemming from the triggering of state guarantees on non-performed commercial loans contracted before 2000. The Commission questioned why Romania did not impose any interest on the public debt, in particular since its EU accession on 1 January 2007, as Romania should have applied the EC Treaty in its entirety as of that date.
The second measure is a state guarantee covering 80% of a commercial loan of 424 million euro, to be used for investments necessary for the implementation of the company's development plan. Romania considers that the planned measures did not confer an advantage to the beneficiary, because the support given by the state to Oltchim in its quality of main shareholder and main creditor respectively is comparable to what a private market operator would choose to do in similar circumstances.
In November 2008, Romania’s largest oil and gas firm Petrom halted deliveries of ethylene and propylene to Oltchim, disrupting normal operations, and the plant has since been piling up losses.
Oltchim's stock traded 0.71% down at 0.281 lei by 1301 GMT on Tuesday.