Subject: N 117/2007, - Germany Decontamination of the site "Neue Maxhütte Stahlwerke GmbH" by "57 Profi-Start GmbH 2003"

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1 EUROPEAN COMMISSION Brussels, C(2007) 4163 In the published version of this decision, some information has been omitted, pursuant to articles 24 and 25 of Council Regulation (EC) No 659/1999 of 22 March 1999 laying down detailed rules for the application of Article 93 of the EC Treaty, concerning non-disclosure of information covered by professional secrecy. The omissions are shown thus [ ]. PUBLIC VERSION WORKING LANGUAGE This document is made available for information purposes only. Subject: N 117/2007, - Germany Decontamination of the site "Neue Maxhütte Stahlwerke GmbH" by "57 Profi-Start GmbH 2003" Dear Sir, I. PROCEDURE 1. By letter of 7 March 2007, for legal certainty Germany notified a measure concerning the funding of the decontamination of an industrial site, which it considered as no aid. Following questions of the Commission, Germany submitted additional information of the project on 20 June 2007, 9 August 2007 and 22 August II. DESCRIPTION OF THE MEASURE 2. By order of the Amtsgericht Amberg (Konkursgericht) of 31. December 1998 the bankruptcy proceedings on the assets of Neue Maxhütte Stahlwerke GmbH, a steel producer in Bavaria (hereafter: NMH), were opened. On 19. July 2004, taking into account the lack of assets (Massearmut) the bankruptcy proceedings were closed with the conclusion that NMH was not able to carry out the decontamination of its site. NMH was deleted in the register of companies and subsequently did legally not anymore exist. Due to the polluted ground and water on the site of NMH any further use of the site appeared problematic. If the site was not transferred to a new owner the public authorities would have to rehabilitate the site. Seiner Exzellenz Herrn Frank-Walter STEINMEIER Bundesminister des Auswärtigen Werderscher Markt 1 D Berlin Commission européenne, B-1049 Bruxelles / Europese Commissie, B-1049 Brussel België Telefon: (32-2)

2 3. The same day, on 19 July 2004, the liquidator of NMH achieved a settlement with 57 Profi-Start GmbH (hereafter: 57 P-S) by transferring certain parts of the property from NMH to 57 P-S. According to this agreement 2, the liquidator sold the site for the price of [ ] * to 57 P-S; the purchase price was paid by taking over the remaining property's encumbrances by 57 P-S With reference to the Court settlement of 19 July 2004, in the same month 57 P-S and the Land Bayern agreed on sharing out the cost of decontamination 4. According to this agreement Bayern commits itself to carry 50 % of the verified costs of decontamination for the site (including both the ground and the water); this provision is called "Freistellungsanspruch" and covers the costs of decontamination arising from the public-legal obligation to decontaminate. 5. On basis of the above described agreement 57 P-S will receive a maximal contribution to the costs of the rehabilitation of the site of EUR 11,6 mio plus VAT 5 payable during a period of 10 years from the signature of the agreement between Bayern and 57 P-S. If 57 P-S was not able to bear its share of the costs of decontamination Bayern has the right to withdraw from the agreement. 6. In February 2007 the Land Bayern and 57 P-S signed a supplement 6 to the afore mentioned agreement, by which both parties agreed that co-financing of the decontamination costs by Bavaria is subject to the Commission's approval to the project. It was further agreed that for Bavaria the contribution to the cost of decontamination is limited to the amount of EUR 11,6 mio (+ VAT) including a supplement of 15 %. Finally the supplement to the agreement provides the provision that the increase of value of the site following the decontamination will be deducted from the amount, which Bavaria will have to bear for the decontamination (the "Freistellungsanspruch"). 7. To summarize, 57 P-S and the Land Bayern agreed on sharing the costs for the decontamination. The maximum proportion of the costs that the Land Bayern will pay is 50%, with the amount 11,6 mio (+ VAT) including a supplement of 15% as an absolute limitation. Finally the increase of value of the site following the decontamination will be deducted from the amount, which Bavaria will have to bear for the decontamination (the "Freistellungsanpruch"). 8. Germany submitted an expert report on the increase of value due to the decontamination providing a value of the site of [ ] after a thorough decontamination. The expert committee based its assessment on guiding private values ("Bodenrichtwerte") for industrial and commercial areas. Future increases of the value may result from subsequent investments. 9. A separate expert report from PROTEC assesses the costs of such decontamination at a maximum amount of [ ] (+ VAT). 1 At a certain stage of the procedure 57 Profi-Start GmbH 2003 changed the name into Maxhütte Verwertungs- und Verwaltungs GmbH. However, this decision will continue to use the name 57 Profi- Start GmbH 2003 as being the beneficiary. 2 The Protocol of the "Amtsgericht Amberg" of 19 July 2004 (the "Vergleich"). 3 The purchase price was to pay a debt from NMH where the money was borrowed on security of the site and as a result of this payment 57 P-S obtained full ownership of the site. 4 Agreement signed on 19 and 26 July Taking into account the current rate of VAT (19 %) this leads to a total amount of [ ] 6 Agreement signed on 5 and 15 February 2007 * business secret

3 10. During the project's start up phase the beneficiary's costs for acquisition and decontamination of the site largely exceeds its value after the decontamination. However, Germany explained that the project in its total would become profitable by subsequent investments of the beneficiary, which are estimated at [ ]. According to a preliminary draft land use plan, after additional investments roughly half of the area could serve commercial purposes whereas the other half could become public circulation areas and green space. Whilst the total costs of the project, including the operational costs and capital costs, amount to [ ] annually the future earnings are estimated on [ ] annually. The German authorities submitted detailed calculations of the project's costs and earnings. III. ASSESSMENT 11. Article 87 (1) of the EC Treaty lays down that any aid granted by a Member State or through State resources in any form whatsoever which distorts or threatens to distort competition by favouring certain undertakings or the production of certain goods is, insofar as it affects trade among Member States, incompatible with the common market. 12. The Commission assesses whether the measure involves State aid in the meaning of Article 87(1) EC in favour of 57 P-S and if yes, whether such aid constitutes a compatible aid. 13. The Commission has to take into account that 57 P-S was established with the objective to make use of the polluted site, which requires to carry out the decontamination, and to profit from this operation. 14. The notified measure will be funded through state resources and will favour selectively this enterprise. Further, the financial assistance provided to the recipient firm will strengthen its position, which may possibly lead to a change in market conditions. Such strengthening of the position of the relevant firm as compared with other firms competing with them within the Community must be regarded as affecting trade and potentially distorting competition. Article 87.1 of the EC Treaty and Article 61.1 of the EEA Agreement are therefore applicable. 15. According to point 38 of the Environmental Aid Guidelines 7 (hereafter: EAG) where the person responsible for the pollution is not identified or cannot be made to bear the costs, the person responsible for the work may receive aid. With reference to point 2 of this decision the Commission concludes, that following the bankruptcy of NMH with order of the Amtsgericht Amberg (Konkursgericht) the polluter does legally not exist anymore and therefore cannot bear the cost of decontamination. 16. Following the acquisition of the site, the new owner 57 P-S will carry out the work and may therefore on the basis of point 38 of the Environmental Aid Guidelines receive the aid. 17. According to point 38 of the EAG, aid for the rehabilitation of polluted industrial sites may amount to up to 100 % of the eligible costs, plus 15 % of the costs of the work. The eligible costs are equal to the cost of the work less the increase in the value of the land. For this project, the cost of the work has been estimated by an expert study and include the cost for digging out the contaminated ground, its disposal and the cleaning or disposal of the contaminated water of the site (maximum [ ] + VAT). 7 OJ, C 37 of , p. 3

4 18. According to the agreement between Bavaria and 57 P-S the increase of the value of the land will be fully taken into account for calculating the eligible costs. 19. Calculated on the basis of the maximum estimated, the aid amount allowable under the EAG is: [ ] EUR (cost of work) [ ] EUR (increase in the value of the land) + 15 % EUR [ ] = EUR 24,534 mio. 20. The Commission notes that the maximum aid amount Bavaria will pay, EUR 11,6 mio, is well below this limit. 21. Germany demonstrated that the assessment of the value of the site before and after the decontamination is based on realistic assumptions as on guiding private values ("Bodenrichtwerte") for industrial and commercial areas. Further, the German authorities confirmed that the value of the land adequately reflects its characteristics including the provisions of the preliminary draft development plan for the site. Since the intended aid will largely fall below the maximal aid intensity as set out in the Environmental Aid Guidelines (see point 38 of the EAG) the Commission considers that an overcompensation of the cost for decontamination appears highly unlikely. 22. If the cost of the work turns out to be much lower than the estimated maximum, the allowable aid amount would also become much lower. This could lead to a situation where the aid may exceed the limit provided for in the guidelines. However, according to the supplement of the agreement of February 2007 the contribution by Bavaria is anyway limited by the same rule by which the maximum allowable aid is calculated according to the EAG. Thus the aid is compatible with the EAG. 23. Therefore, the Commission considers that the notified measure is in line with the state aid rules and can therefore be considered to be compatible with article 87.3(c) of the EC Treaty. IV. CONCLUSION 24. On the basis of the foregoing assessment, the Commission finds that the measure constitutes aid, but that the aid does not raise doubts as to the compatibility with the common market and has accordingly decided to consider the aid to be compatible with Article 87(3) EC. 25. If this letter contains confidential information, which should not be disclosed to third parties, please inform the Commission within fifteen working days of the date of receipt. If the Commission does not receive a reasoned request by that deadline, you will be deemed to agree to the disclosure to third parties and to the publication of the full text of the letter in the authentic language on the internet site:

5 Your request should be sent by registered letter or fax to: Yours faithfully, European Commission Directorate-General for Competition State Aid Registry B-1049 Brussels Fax No: For the Commission Neelie Kroes Member of the Commission