EUROPEAN COMMISSION

Brussels, 16.2.2018 C (2018) 1001 final

PUBLIC VERSION

This document is made available for information purposes only.

Subject: State Aid SA. 49558 (2018/NN) – Amendment of aid measures for mine closure in Romania

Sir,

1. PROCEDURE

(1) On 22 February 2012 the Commission approved State aid to finance the closure of three mines, i.e. , Paroșeni and (the "2012 Decision")1. On 13 November 2015, the Commission approved the prolongation of the duration and the redistribution of the aid amounts for the same three mines (the "2015 Decision")2. On 24 November 2016, the Commission approved State aid to finance the closure of two mines, i.e. Lonea and (the "2016 Decision")3. The Commission refers to the 2012, 2015 and 2016 Decisions all together as the "Initial Decisions". The Commission found that the above mentioned measures approved in the Initial Decisions constituted aid compatible with the Council Decision 2010/787/EU of 10 December 2010 on State aid to facilitate the closure of uncompetitive coal mines4 ("the Council Decision").

1 Commission Decision C(2012) 1020 final of 22 February 2012 in State aid case SA. 33033 (2011/N) – Romania – National Hard Coal Company Petroşani, OJ C 23, 25.1.2013, p. 3. 2 Commission Decision C(2015) 8066 final of 13 November 2015 in State aid case SA. 42800 (2015/N) – Romania – Prolongation of aid for exceptional costs for mine closure in Romania, OJ C 9, 12.1.2016, p. 4. 3 Commission Decision C(2016) 7719 final of 24 November 2016 in State aid case SA.43414 (2016/N) – Romania – Closure of hard coal mines in Romania, OJ C 127, 21.4.2017, p. 1. 4 OJ L 336, 21.12.2010, p. 24.

Teodor-Viorel MELEŞCANU Ministrul Afacerilor Externe Aleea Alexandru 31, Sector 1 RO-011822-BUCUREŞTI

Commission européenne/Europese Commissie, 1049 Bruxelles/Brussel, BELGIQUE/BELGIË - Tel. +32 22991111 (2) On 14 November 2017, the Romanian authorities notified an amendment to the previously approved aid in the Initial Decisions to finance the closure of five coal mines, i.e. Petrila, Paroșeni, Uricani, Lonea and Lupeni in accordance with Article 7(3) of the Council Decision.

(3) The Commission requested additional information on 5 December 2017 which the Romanian authorities answered on 13 December 2017.

(4) By letter dated 27 September 2017, Romania agreed exceptionally to waive its rights deriving from Article 342 TFEU in conjunction with Article 3 of Regulation No 1/19585 and to have the present decision adopted and notified in English.

2. DESCRIPTION OF THE AID

2.1. The Initial Decisions

2.1.1. State aid granted to finance the closure of Petrila, Paroșeni and Uricani coal mines (the 2012 and 2015 Decisions)

(5) The 2012 Decision approved aid to cover production losses up to the cessation of mining activities in the three coal mines with a value of around 784 million RON in accordance with Article 3 of the Council Decision and aid to cover exceptional costs with a value of around 385 million RON in accordance with Article 4 of the Council Decision.

(6) The 2015 Decision concerned a prolongation of the duration and the redistribution of the aid amounts to cover exceptional costs linked to the closure of the coal mines covered by Article 4 of the Council Decision until, at the latest, 2019. The termination of mining activities of the three coal mines remained unaltered compared to the 2012 Decision, as follows:

i. On 31st of December 2015 for Petrila Coal Mine; ii. On 31st of December 2017 for Paroșeni Coal Mine; iii. On 31st of December 2017 for Uricani Coal Mine.

(7) The State aid for the closure of Petrila, Paroşeni and Uricani coal mines is administered by Societatea Națională de Închideri Mine Valea Jiului S.A. (SNIMVJ-SA). SNIMVJ-SA is a company with a share capital fully owned by the Romanian State and has, as main scope of activity, the exploitation of the opened hard coal reserves, until their depletion and the staggered closure of coal mines.

2.1.2. State aid granted to finance the closure of Lonea and Lupeni coal mines (the 2016 Decision)

(8) The 2016 Decision approved aid to cover production losses up to the cessation of mining activities in the two coal mines with a value of around 214 million RON in accordance with Article 3 of the Council Decision (granted until 31 December 2018) and aid to cover exceptional costs with a value of around 233 million RON in accordance with Article 4 of the Council Decision (granted in the period 2016-

5 Regulation No 1 determining the languages to be used by the European Economic Community (OJ 17, 6.10.1958, p. 385). 2 2024). According to recital (16) of the 2016 Decision, the termination of mining activities of the two coal mines takes place:

i. On 30th of September 2017 for Lupeni Coal Mine; ii. On 31st of December 2018 for Lonea Coal Mine. (9) The State aid for the closure of Lonea and Lupeni coal mines is administered by Complexul Energetic S.A. (CEH SA). CEH SA is a company with a share capital fully owned by the Romanian State and has as main scope of activity the production of electricity and secondary the mining and preparation of superior coal.

2.2. The notified amendments

2.2.1. Amendments to the State aid granted to finance the closure of Petrila, Paroșeni and Uricani coal mines (the 2012 and 2015 Decisions)

(10) The amendments to the 2012 and 2015 Decisions concern the prolongation of the period for granting the aid and the redistribution of the aid amounts to cover exceptional costs linked to the closure of the three coal mines under Article 4 of the Council Decision until, at the latest, 2021.

(11) The amendments concern the redistribution of the amount of aid to cover exceptional costs under Article 4 of the Council Decision from the value of the unused aid already authorised in the 2012 and 2015 Decisions to cover exceptional costs under Article 4 of the Council Decision. The aid granted to cover production costs under Article 3 of the Council Decision is reduced and no redistribution takes place for the years 2018-2021. The termination of mining activities of the three coal mines (recital (6)) remains unaltered.

(12) According to the Romanian authorities, the main reasons for the prolongation of the period for granting the aid and the redistribution of the aid amounts to cover exceptional costs relate to the CEH SA crisis situation. The company CEH SA is the only beneficiary of the thermal coal products produced by SNIMVJ-SA (in the mining units Paroșeni and Uricani). The CEH SA crisis situation requires that the two coal mines, Paroșeni and Uricani, continue delivering steam coal to CEH SA until December 2017 in order to prevent putting the national energy system and the supply of heating in difficulty. Therefore, the closure and underground safety works in the two coal mines, Paroșeni and Uricani would start only in January 2018. Also, Order no. 2823/21.12.2015 of the Minister of Culture classified Petrila coal mine in the List of Historical Monuments. As a result of this obligation, SNIMVJ-SA had to stop the execution of the closure and land reclaiming works in the main precinct of Petrila coal mine. This led to the postponement of the execution of the main closure and land reclaiming works from the surface of Petrila coal mine main precinct. For Uricani coal mine, the local community requested some works related to the main precinct and rehabilitation of certain access roads.

(13) The total amount of aid is slightly lower than the aid amount approved in the 2012 and 2015 Decisions (see Table 1).

3 Table 1: Total amount of aid (in thousands RON)

Type of aid and legal basis Total (Annex to the Provisions 2011-2016 2017 2018 2019 2020 2021 period Council 2011-2021 Decision) Authorized State Aid 739 448 44 646 0 0 0 0 784 094 amount 2012 Decision according to actually Art. 3 of the Proposal for granted/ Council amendment paid Decision 501 184 44 646 0 0 0 0 545 830 Authorized 312 888 13 545 58 712 0 0 0 385 145 State Aid 2012 Decision amount Authorized 200 436 27 405 130 079 12 148 0 0 370 068 according to 2015 Decision Art. 4 of the actually Council Proposal for granted/ Decision amendment paid 162 345 39908 68 260 60 869 29 003 9 230 369 615 Authorized 1 052 336 58 191 58 712 0 0 0 1 169 239 2012 Decision Authorized TOTAL 939 884 72 051 58 712 12 148 0 0 1 082 795 2015 Decision AMOUNT OF AID actually Proposal for granted/ amendment paid 663 529 84 554 68 260 60 869 29 003 9 230 915 445 Source: Reply of the Romanian authorities submitted on 13 December 2017, p. 3. (14) The redistribution of exceptional costs is presented in Table 2.

Table 2: Total amount of aid to cover exceptional costs (in thousands RON)

Type of aid and Total legal basis (Annex 2011-2016 Provisions 2017 2018 2019 2020 2021 period to the Council cumulated 2011-2021 Decision) − Point 1 (b) – Authorized 87 818* 11 583 64 301 1 974 0 0 119 167** compensatory spent Amendment 14 062 2 790 12 574 2 232 1 116 101 830 payments 69 056 − Point 1 (d) – re- Authorized 16 395* 500 1 500 0 0 0 15 395** adaptation of spent Amendment 500 0 1 000 500 0 2 405 workers 405 − Point 1 (e) – Authorized 59 271* 9 425 15 151 2 353 0 0 39 199** free coal spent Amendment 9 425 12 133 4 195 882 294 74 532 allowances 47 603 − Point 1 (g) – Authorized 61 485* 550 16 013 0 0 0 78 048** underground spent Amendment 8 243 50 600 43 100 0 0 131 883 safety works 29 940 − Point 1 (i) – Authorized 56 593* 3 795 26 820 5 270 0 0 79 725** rehabilitation of former Amendment spent 5 248 2 737 0 20 121 5 270 43 546 mining sites 10 170 − Point 1(m) – Authorized 52 904* 1 552 6 295 2 550 0 0 53 706** surface re- spent Amendment 2 430 0 0 5 268 2 550 15 419 cultivation 5 171 Total amounts for Authorized 334 466* 27 405 130 079 12 148 0 0 385 145** which the amendment is requested spent Amendment 39 908 68 260 60 869 29 003 9 230 369 615 according to 162 345 Article 4 of the Council Decision Source: Notification of the Romanian authorities, Annex 1 - Re-updating certain elements within the Closure Plan and the State aid granted to CEH and SNIMVJ SA Petroșani based on Decision 2010/787/EU, p. 17-18. (*) - the authorized value includes the amounts initially authorized for each of the years 2011, 2012, 2013 and 2014 as referred to in the 2012 Decision, as well the re-authorized value for the year 2015, by the 2015 Decision. (**) - the figure corresponds to the total value initially authorized for each subchapter of expenditure and does not result from summarising the values presented in the table on that row since the 2015 Decision approved redistributions of values from the unused ones but within the limit of total aid chapter (Article 4 of the Council Decision).

4 2.2.2. Amendments to the State aid granted to finance the closure of Lonea and Lupeni coal mines (the 2016 Decision)

(15) The amendments to the 2016 Decision concern:

i. the prolongation of the deadline for the termination of mining activities in the Lupeni coal mine from 30 September 2017 to 31 December 2018;

ii. the prolongation of the granting period for Lupeni coal mine until 2018 for aid to cover production losses;

iii. the redistribution of aid to cover production losses for Lupeni and Lonea coal mines for the period 2017-2018 (Article 3 of the Council Decision);

iv. the increase in the budget for the aid to cover exceptional costs (Article 4 of the Council Decision) by around 232 million RON, from around 233 million RON approved in the 2016 Decision and redistribution of costs for the period 2017-2024.

(16) As regards the prolongation of the deadline for the termination of mining activities in the Lupeni coal mine until 31 December 2018, the Romanian authorities submit that the prolongation of the deadline is extremely important for ensuring the fuel necessary for Power Unit no. 3 at Electrocentrale Deva Branch and Power Unit no.4 at Sucursala Electrocentrale Paroşeni Branch, which will operate until 2024. This prolongation of the deadline triggers the prolongation of the granting period for Lupeni coal mine until 2018 for aid to cover production losses. As regards the redistribution of aid to cover production losses for Lupeni and Lonea coal mines for the period 2017-2018 (Article 3 of the Council Decision), the Romanian authorities provide that the mine closure activities for Lupeni and Lonea coal mines started late, due to the fact that State aid was actually granted starting with April 2017, although it was authorized by the Commission at the end of 2016. As regards the increase in the budget for the aid to cover exceptional costs (Article 4 of the Council Decision), the Romanian authorities submit that new elements of the geo-tectonic conditions of the coal deposit have been identified, which require the addition of a number of isolation and closure construction works, of the related air-circuits and other works necessary for the safety of the underground, greening and rehabilitation of the areas affected by the activity of the mines to be closed.

(17) The increase in the budget concerns the following titles of exceptional costs (see Table 3):

i. Additional underground safety works (Point 1, lit (g)): the amendment concerns the increase of costs from 23 136 thousands RON for 2017-2020 to 185 953 thousands RON for 2017-2021;

ii. Rehabilitation of former mining sites (Point 1, lit (i)): the amendment concerns the increase of costs from 77 568 thousands RON for 2017-2020 to 102 492 thousands RON for 2020-2022;

iii. Surface re-cultivation (Point 1, lit (m)): the amendment concerns the increase of costs from 36 662 thousands RON for 2017-2024 to 88 857 thousands RON for 2021-2024.

5 (18) The Romanian authorities confirmed that any increase in the value of the land will be deducted from the eligible costs for the costs Romania intends to cover as "surface rehabilitation" and "soil re-cultivation" following the closures of the Lonea and Lupeni coal mines.

Table 3: State aid payments per year (in thousands RON)

Type of aid and legal basis 2016 (Annex to the Provisions (Nov – 2017 2018 2019 2020 2021 2022 2023 2024 Total Council Dec) Decision) Aid under Authorised 25 000 132 226 56 864 214 090 Article 3 of Council Decision Amendment 97 550 116 537 214 087 Authorised 9 775 57 293 56 864 123 932 • Lonea mine Amendment 37 431 40 848 78 279 Authorised 15 225 74 933 90 158 • Lupeni mine Amendment 60 119 75 689 135 808 Aid under Authorised 0 66 604 69 178 69 387 26 611 591 405 479 517 233 772 Article 4 of Council Decision Amendment 25 010 67 779 69 947 109 172 108 234 48 051 30 269 7 394 465 856 • Lonea Mine − Point 1 (b) – Authorised 4 427 16 703 10 602 1 674 74 112 33 592 compensator y payments Amendment 7 924 14 024 1 488 8 928 0 0 186 744 33 294 − Point 1 (d) – Authorised 2 530 1 370 0 0 0 3 900 re- adaptation of workers Amendment 740 1 600 200 560 60 65 0 0 3 225 − Point 1 (e) – Authorised 226 371 557 0 0 1 154 free coal allowances Amendment 0 0 0 0 0 0 0 0 0 − Point 1 (g) – Authorised 4 438 2 800 4 055 716 0 12 009 underground safety works Amendment 755 6 732 23 554 23 425 0 0 0 0 54 466 − Point 1 (i) – Authorised 2 694 5 524 9 768 4 540 0 22 526 rehabilitatio n of former mining sites Amendment 0 0 0 1 362 25 370 12 957 0 0 39 689 − Point 1(m) – Authorised 1 237 2 206 2 272 638 203 244 244 244 7 288 surface re- cultivation Amendment 0 0 0 0 980 11 752 22 092 1 838 36 662 • Lupeni Mine − Point 1 (b) – Authorised 35 972 13 578 1 674 0 112 74 51 410 compensator y payments Amendment 10 528 20 200 558 1 860 12 350 0 0 1 414 46 910 − Point 1 (d) – Authorised 2 925 1 525 0 0 0 4 450 re- adaptation of workers Amendment 810 2 415 320 960 480 80 60 0 5 125 − Point 1 (e) – Authorised 357 628 915 0 0 1 900 free coal allowances Amendment 0 0 0 0 0 0 0 0 0 − Point 1 (g) – Authorised 2 575 2 877 4 167 1 508 0 11 127 underground safety works Amendment 4 253 22 808 43 827 39 971 20 628 0 0 0 131 487 − Point 1 (i) – Authorised 5 817 15 306 23 899 10 020 0 55 042 rehabilitatio n of former mining sites Amendment 0 0 0 32 106 11 843 18 854 0 0 62 803 − Point 1(m) – Authorised 3 406 6 290 11 478 7 515 202 161 161 161 29 374 surface re- cultivation Amendment 0 0 0 0 36 523 4 343 7 931 3 398 52 195 Total aid Authorised 25 000 198 830 126 042 69 387 26 611 591 405 479 517 447 862 (Article 3 + Article 4) Amendment 122 560 184 316 69 947 109 172 108 234 48 051 30 269 7 394 679 943 Source: Table 3 of the 2016 Decision and updated table submitted by the Romanian authorities in the Reply of 13 December 2017, p. 4.

2.2.3. Other conditions for granting the aid

(19) The Romanian authorities confirm that, except for the notified amendments to the Initial Decisions mentioned above, all other provisions of the Initial Decisions remain unchanged.

6 (20) The Romanian authorities confirm that they will suspend the payment of the aid if the beneficiary still has at its disposal an earlier unlawful aid that was declared incompatible by a Commission Decision (either concerning an individual aid or an aid scheme), until that beneficiary has reimbursed or paid into a blocked account the total amount of unlawful aid and incompatible aid and the corresponding recovery interest.

2.3. Total amount of aid

(21) The total amount of aid for the two beneficiaries, SNIMVJ and CEH amounts to 1 595 388 thousands RON, for the period 2011-2024, of which:

i. 759 917 thousands RON of aid to cover production losses (Article 3 of the Council Decision), of which: 545 830 thousands RON for SNIMVJ and 214 087 thousands RON for CEH.

ii. 835 471 thousands RON of aid to cover exceptional costs (Article 4 of the Council Decision), of which: 369 615 thousands RON for SNIMVJ and 465 856 thousands RON for CEH.

2.4. Legal basis and granting authority

(22) The national legal basis is the Government decision no.1069/2007 on the Energy Strategy of Romania for the period 2007-20206 and the Mining Law no.85/2003 with further amendments.

(23) The Ministry of Energy of Romania is the issuer and initiator of the legal documents necessary for the approval and authorization of the State aid necessary for the closure of the five mines belonging to SNIMVJ and CEH.

2.5. Beneficiaries and duration

(24) The beneficiaries of the aid are SNIMVJ and CEH.

(25) Subject to the approval of the Commission, the aid to finance the closure of Petrila, Paroșeni and Uricani coal mines covers costs arising between 2011-2021.

(26) Subject to the approval of the Commission, the aid to finance the closure of Lonea and Lupeni coal mines covers costs arising between 2017-2024.

2.6. Cumulation

(27) The Romanian authorities confirmed that the aid to be granted under the notified amendments will not be cumulated with other types of aid for the same eligible costs.

3. ASSESSMENT OF THE AID

3.1. Existence of aid

(28) The Commission already concluded in recital (54) of the 2012 Decision, recital (14) of the Decision and recital (57) of the 2016 Decision that the measures

6 http://www.minind.ro/anunturi/strategia_energetica_a_romaniei_2007_2020.pdf 7 involve State aid within the meaning of Article 107(1) TFEU. The amendments notified by the Romanian authorities that are subject to this decision do not alter that conclusion.

3.2. Legality of the Aid

(29) By continuing the operation at the Lupeni mining unit beyond 30 September 2017 as set out in recital (15)(i) above and continuing the payment of the aid to cover its production losses, the Romanian authorities have modified the aid measure as approved by the 2016 Decision without prior Commission approval.

(30) Romania has therefore breached the stand-still obligation set out by Article 108(3) TFEU.

3.3. Compatibility

(31) In the Initial Decisions, the Commission came to the conclusion that the measures were compatible with the internal market on the basis of the Council Decision. The Commission notes that the notified amendments do not alter the primary objective of orderly winding down of the mining activities of the five coal mines in the context of a closure plan which provides for the irrevocable closure of Petrila coal mine on 31 December 2015, Paroşeni and Uricani coal mines on 31 December 2017, Lonea coal mine on 31 December 2018 and Lupeni coal mine on 30 September 2017.

(32) As regards the amendments to the closure of Petrila, Paroșeni and Uricani coal mines (the 2012 and 2015 Decisions), the Commission notes that Romania could not meet the timetable set out in the 2015 Decision which set out the end of 2019 for the last payment and request the prolongation of the period for granting the aid until, at the latest, 2021. In light of the reasons brought forward by Romania as regards the CEH SA crisis situation, the delay in the closure and underground safety works and the additional requirements of the local communities, it is reasonable that Romania amends the timetable for granting the aid to cover for exceptional costs by extending the timeline for the last payment until 31 December 2021 which is within the validity period provided in Article 9 of the Council Decision set to expire on 31 December 2027. Given that there was still an amount of unused aid already authorised in the 2012 and 2015 Decisions to cover exceptional costs under Article 4 of the Council Decision, it is also reasonable that the exceptional costs that could not have incurred in earlier years are redistributed to years when the works are envisaged to actually take place.

(33) As regards the prolongation of the deadline for the termination of mining activities in the Lupeni coal mine from 30 September 2017 to 31 December 2018, the Commission notes that the deadline for its closure (30 September 2017), as established in the closure plan approved by the Commission in the 2016 Decision, was not met. However, the Commission notes that the prolongation of the deadline for the termination of mining activities in the Lupeni mining unit (from 30 September 2017 to 31 December 2018), subject of the present notification, will still observe the deadline set up in Article 3(1) a) Council Decision. In addition, the Commission acknowledges that its operation is extremely important for ensuring the fuel necessary for Power Unit no. 3 at Electrocentrale Deva Branch and Power Unit no.4 at Sucursala Electrocentrale Paroşeni Branch.

8 (34) As regards the prolongation of the granting period of the aid to cover production losses for Lupeni coal mine until the end of 2018 and the redistribution of aid to cover production losses for Lupeni and Lonea coal mines for the period 2017- 2018 (Article 3 of the Council Decision), the Commission notes that no aid to cover production losses for Lupeni and Lonea coal mines was paid until April 2017. Therefore, it is reasonable that the granting period of this aid can include the production years 2017 and 2018 provided the degressive trend is maintained.

(35) Except for the closure of the Lupeni mine, the deadline for the termination of mining activities in Petrila, Paroșeni, Uricani and Lonea coal mines has been complied with or remains unaltered.

(36) As it was concluded in recital (75) of the 2016 Decision, the Lupeni and Lonea coal mines became uncompetitive after the approval of the initial closure plan on 22 February 2012 and if the Romanian authorities decide to definitely and irrevocable close the coal mines by the end of 2018 the rationale of Article 3(1)(f) of the Council Decision would not prevent an approval of the closure aid for Lupeni and Lonea mines as set out in recital (73) of the 2016 Decision.

(37) The Commission also concluded in recital (77) of the 2016 Decision that Article 3(1)(f) of the Council Decision should be interpreted as not preventing Member States from closing additional mining units and granting closure aid to these units during a limited period of time if it can show that these additional mining units have become uncompetitive only after the drawing up of the initial closure plan.

(38) In view of the above, the Commission considers that taking into consideration the definitive closure of Lupeni and Lonea mines by 31 December 2018 and the first (base) coal year when closure aid was actually granted to them (2017), Article 3(1)(f) of the Council Decision has been met as the mining units will receive no more aid once the first milestone of degressivity (reduction not less than 25% of the base year 2017) will arrive.

(39) As regards the increase in the budget for the aid to cover exceptional costs, according to Article 4(1) of the Council Decision, State aid granted to coal mines to cover the costs arising from the closure of coal production units and which are not related to current production may be considered compatible with the internal market provided the amount paid does not exceed such costs. The Commission notes that the increase in the budget for the aid to cover exceptional costs by around 232 million RON to an amount of around 465 million RON is due to additional costs related with additional underground safety works (Point 1, lit (g) of the Council Decision), rehabilitation of former mining sites (Point 1, lit (i) of the Council Decision) and surface re-cultivation (Point 1, lit (m) of the Council Decision).

(40) The Commission notes that all categories of production costs and exceptional costs envisaged to be covered are linked to the closure of the five coal mines and fall under the categories listed in the Annex to the Council Decision.

(41) In light of the above, the Commission finds that the amendments notified by the Romanian authorities do not change the positive assessment of the compatibility of the measure with the internal market concluded by the Commission in the Initial Decisions under the rules of the Council Decision.

9 (42) It follows that the amended aid measures remain compliant with the relevant conditions laid down in the Council Decision.

4. CONCLUSION

The Commission regrets that Romania partially put the amendment of the aid into effect in breach of Article 108(3) of the Treaty on the Functioning of the European Union.

However, it has decided that the aid is compatible with the internal market pursuant to Council Decision 2010/787/EU of 10 December 2010 on State aid to facilitate the closure of uncompetitive coal mines, and has therefore decided not to raise objections to the notified amendments.

Yours faithfully,

For the Commission

Margrethe VESTAGER Member of the Commission

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