OREANDA-NEWS. Following an in-depth investigation, the European Commission has taken the view that the public aid measures in support of Kem One SAS, a chlorochemicals and PVC producer, are compatible with the EU’s State aid rules, in particular the rules on State aid for rescuing and restructuring firms in difficulty. The Commission considered that the restructuring plan for Kem One will allow the company to become viable again in the long term without needing further state support, and without unduly distorting competition in the Single Market.

In July 2014, France notified a restructuring plan involving three types of support measure for Kem One: (i) a loan of €30 million from the Economic and Social Development Fund (‘FDES’), (ii) a grant of €15 million and (iii) repayable advances of €80 million. France also referred to a possible write-off of social security and tax debts.

The Commission opened an in-depth investigation in October 2014 in order to determine whether or not the measures constituted State aid. Furthermore, the Commission had concerns about the compatibility of all the public support measures with the requirements of the rules on State aid to firms in difficulty, in particular whether the plan could restore Kem One’s long-term viability and whether the company was making an adequate contribution to the cost of restructuring.

During its in-depth investigation, the Commission confirmed that the notified measures constituted State aid conferring an economic advantage on Kem One because they had not been granted on the same terms as a private lender would have required. However, the Commission found the aid to be compatible with the EU’s State aid rules. On the basis of the information gathered during the in-depth investigation, the Commission’s doubts about the restructuring plan notified by France were dispelled. The Commission therefore concluded that the restructuring plan was an appropriate response to Kem One’s difficulties and provided for a sufficient own contribution by the undertaking. The French authorities are required to regularly submit a monitoring report to the European Commission to ensure that the measures are implemented in full and in line with the decision.

The main activities of Kem One are the production and marketing of chlorochemicals and PVC for use in many economic sectors, such as the car industry, construction, agriculture and health. The adverse impact of the international crisis on demand for PVC, together with the firm’s own structural problems, led to the opening of a court-supervised administration procedure by Lyon Commercial Court on 27 March 2013.

In November 2013 the French Minister for Economic Regeneration announced the introduction of an exceptional and temporary support package to help viable intermediate-sized enterprises experiencing economic difficulties that are placed in collective insolvency proceedings. The package is mainly financed by the FDES, which was increased by €300 million in 2014. The first two firms to have benefited from the Fund were FagorBrandt and Mory-Ducros. The Commission opened two in-depth investigations into the loans by the FDES and into other measures granted to these two undertakings in September 2014.

Under the EU’s 2004 Rescue and Restructuring Guidelines, firms in difficulty may receive State aid under certain strict conditions. Aid may be granted for a period of six months (‘rescue aid’). Beyond this period, either the aid must 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 a firm is restored without further State support, that distortions of competition induced by the State support are addressed through compensatory measures and that the company owners contribute sufficiently to the costs of restructuring.

The non-confidential version of the decision will be made available under the case number SA.38544 in the State Aid Register on DG Competition’s 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.