Withdrawal of state aid granted to Nová Huť

24 Jun 2002

On 24 June 2002, the Office for the Protection of Competition decided on withdrawal of state aid, which had been provided with Nová Huť, a.s.

The Competition Office hereby followed its decision of 17 December 2001, in which it disapproved aid in total amount of CZK 750 million, which had been granted to Nová Huť in form of operational credit by Konsolidační banka Praha. The decision is effective, the party to the proceeding may file an action with the High Court.

The Ministry of Finance as the state aid provider must now ensure immediate termination of the credit relation between Konsolidační banka Praha and Nová Huť. “Nová Huť is also obliged to transfer the state aid in form of monetary means provided by Konsolidační banka Praha by reimbursement of the credit to Česká konsolidační agentura,” commented the Chairman of the Office for the Protection of Competition, Josef Bednář.

The Ministry of Finance shall consequently submit an overview of all the credit tranches, used by the company Nová Huť on the basis of the contract on frame credit, within a period of seven days from the date of reimbursement of the frame credit. With regard to the fact that state aid in this case had been provided in contradiction to the decision of the Competition Office, a decision was issued on the duty of the state aid beneficiary to transfer the aid back to the provider.

“In order to eliminate the possibility that the steps of the state led to provision of state aid, it is necessary to prove that the state acts in harmony with the principle of a market investor. The condition is that the state should on the basis of intended transaction achieve minimum amount identical with an amount achieved by investment of the same means in some other area, or its deposition in regular commercial bank. The hitherto activities of Konsolidační banka Praha, or Česká konsolidační agentura are very loss-making in this case. The provider of the state aid failed to prove that the basic requirement for the application, i.e. reasonable time of return of provided capital, had been fulfilled. Despite the fact that Konsolidační banka Praha provided bank services against payment, the amount of which might have been considered comparable with payments in other banks, its position was different from commercial banks, forasmuch in case of non-observance of the obligations from the contract on credit by Nová Huť the loss will be covered from the means of National property fund, which cannot be expected by other commercial banks”, commented the Chairman of the Office, Josef Bednář and as regards the topic of steel production, he added “It is a sensitive sector. State aid cannot be provided in this sector until the Czech Republic acquires an exemption from prohibition of state aid to the area of steel production from the European Communities”.

That was also the reason why the Office disapproved, by its decision of May of this year, another state aid, which should have been provided to Nová Huť and had been intended to reach the amount of CZK 1550 million. At present, intensive negotiations are held between the representatives of the European Commission and the representatives of the Czech Republic, related to granting general exemption from the prohibition of state aid in the area of steel production.

Press Department of the Office