EUROPEAN COMMISSION Brussels, 27 June 2007 C(2007) 3049 final In the published version of this decision, some PUBLIC VERSION information has been omitted, pursuant to articles 24 and 25 of Council Regulation (EC) No 659/1999 of WORKING LANGUAGE 22 March 1999 laying down detailed rules for the application of Article 93 of the EC Treaty, This document is made available for concerning non-disclosure of information covered information purposes only. by professional secrecy. The omissions are shown thus […]. Subject: State aid N35/2007 - Germany Peene-Werft Sir/Madam, I. PROCEDURE (1) By letter dated 15 January 2007, Germany notified the Commission that it intended to grant regional investment aid to Peene-Werft GmbH ("Peene- Werft"). A meeting between the Commission and Germany took place on 14 February 2007. By letters dated 22 February 2007, 27 March 2007 and 2 May 2007, the Commission requested further information. The Commission received the information by letters dated 16 March 2007, 18 April 2007 and 4 May 2007. II. DESCRIPTION 1. Recipient undertaking (2) Peene-Werft, the recipient of the aid, is situated in Wolgast, Mecklenburg- Western Pomerania (Germany). The Land of Mecklenburg-Western Pomerania is an assisted area under Article 87(3)(a) of the EC Treaty, both under the regional aid map 2004-2006 and under the regional aid map 2007-2013. (3) Peene-Werft belongs to the Hegemann-Group and is a large undertaking. Prior to the present measures the shipyard was geared to the construction of LPG carriers, tugs and yachts. In order to meet market demand, it increasingly switched to the construction of container ships. Up to 2004, the Peene-Werft shipyard produced vessels of 168-170 metres in length and with a cargo capacity of up to 1 200 TEU, which were usually constructed from five modules. 1 (4) The shipyard currently produces mostly container ships with a length of up to 187 metres and a cargo capacity of up to 1 650 tonnes. According to Germany, the increase in length of the ships has resulted in an increase in the number of modules to six modules, and up to eight modules in the case of special ships. (5) Peene-Werft also carries out ship repairs. The facilities used for this are separate from the facilities used for the building of new ships, and they are not involved in the present investment.1 (6) The bottleneck in the shipyard is the dry dock. Each ship must necessarily be assembled in the dry dock, so that the shipyard's maximum output cannot exceed what can be achieved if the time that ships spend in the dry dock is reduced to the minimum. No changes will be made to the dry dock itself. Ship production will therefore remain unchanged at seven container ships of the currently produced size of 1400 to 1600 TEU a year. 2. The investment measures (7) The application for aid was made by letter dated 30 September 2005. The Regional Development Institute of Mecklenburg-Western Pomerania (Landesförderinstitut Mecklenburg-Vorpommern) confirmed receipt of the application by letter dated 19 October 2005 and authorised Peene-Werft to begin implementing the work under the national aid provisions. The first order for the overall project was made on 3 November 2005. (8) The delay in notifying the project to the Commission, as compared with the date on which the aid application was made, was explained by reference to the fact that Germany wanted to wait and see how the Commission reacted in the Rolandwerft case, in which regional investment aid was also at issue. Rolandweft, like Peene-Werft, belongs to the Hegemann group. Once it became clear that investment designed to bring about the targeted increase in the capacity of a shipyard is not eligible for aid, the investment project relating Peene-Werft was revised and the volume of investment reduced by more than two thirds. On 26 October 2006, an aid application amended along these lines was submitted to the Regional Development Institute. (9) Implementation of the investment project extends over the period 2006-2007. The measures comprise eight different modernisation projects. Six of the projects concern individual sections of the production process, while the other two relate to the acquisition of individual production machines. (10) Introduction of new torch cutting technology In a first stage in the production of sections, steel plates have to be cut to shape using torch cutting machines. This production stage is being modernised through the acquisition of a new dry plasma cutter which will allow extremely precise cutting and consequently reduce cutting costs. The contracting of cutting work to 1 The ship lift used for repairs can lift only smaller ships with a maximum breadth of 15-16 metres. Repairs are carried out mostly for the German navy, and the carrying out of the work in the hall is a precondition for the award of the contract. 2 outside firms will be considerably reduced and transport and storage costs lowered. (11) Profile cutting robot In 2007 it is planned to acquire a new profile cutting robot which will supplement the blow-pipe cutting technology so far used. The robot will increase cutting speed by […]∗% and improve cutting precision. The profile cutting robot will cover the shipyard's entire profile cutting requirements. Supplies from outside firms will no longer be required, and transport and storage costs will be saved. (12) Panel line In 2007, the panel line will also be modernised. In the panel line, profiles are welded to the cut steel plates. Various investments will automate panel production, which has previously been manual. This will allow substantial staff costs to be saved, welding speeds will be increased and welding quality improved. Production times will be reduced by […]%. (13) Fitting out of hall 4/3 as section construction hall Hitherto, sections have been produced at the Peene-Werft shipyard partly in the open air on the outdoor work area situated in front of hall 4/3. The hall was not equipped for the production of sections (e.g. the cranes available did not have sufficient lifting capacity to lift sections) and optimal use was not made of the space. The measure consists in extending the length of the present crane gantry and the acquisition of two 45 tonne cranes, the hall floor was redone and utility lines laid. According to the information provided by Germany, the main purpose of the measure is to allow sections in future to be constructed independently of weather conditions, since snow, rain and wind can delay work considerably and impose extra costs (e.g. through interruptions to work, difficulties in meeting deadlines, increased sick leave). It will no longer be necessary to rent wheel-mounted cranes, the degree of pre-fitting and the vertical range of manufacture will be increased, jobs can be focused on the central technical tasks, and sub-contracting can be reduced. (14) Setting up of a module construction site One of the most urgent investment measures is the setting up of a module construction area on a previously unoccupied part of the site. According to the information provided by Germany, deckhouses in particular are to be constructed in this area; because of their height, they cannot be produced in the module construction hall. Prior to this investment, these modules were produced on a smaller site between the entrance to the section and module construction hall and the dry dock. This blocked the path between the hall and the dock. If necessary, sections or modules had to be brought, with difficulty, through a side door into or out of the hall. The construction of a new module construction area ∗ Business secret 3 will allow the area between the hall and the dock to be kept free, so that modules can be brought without hindrance from the hall to the dock and assembled there. This will reduce the time required for carrying out work in the dock. In addition, the area previously used for module assembly in the hall will become free, allowing cost-intensive external construction areas used for section construction to be transferred into the hall. This will further increase the ability to work independently of weather conditions and will tighten up the organisation. The pre-fitting of the modules will be increased, the dock cranes will be freed up, and the pre-assembly of the modules will relieve pressure on the dry dock. As a result, the time needed for work in the dock will be reduced. (15) Acquisition of new keel blocks Keel blocks are used to transport ships or parts of ships on land. They are used for welding sections to modules and to transport modules from the hall to the dock. The investment costs of the acquisition of six new keel blocks, which will increase the load-carrying capacity of the keel blocks from 200 t to 350 t. According to the information provided by Germany, the acquisition of the new keel blocks was necessary, firstly, in order to bring this transport and alignment system into line with the ever increasing weight of the modules. For example, the weight of the aft modules is increasing as a result of the ever increasing weight of the main machinery (greater customer requirements, for example, as regards speed). Secondly, it is argued that greater load-carrying capacity for the keel blocks is a basic requirement for reducing the number of modules and for further increasing pre-fitting, as a result of which the individual modules also become heavier. A further advantage of the new blocks is reported to be that they are hydraulically adjustable and easier to steer than the old keel blocks.