Brussels, 22/07/2005 (Agence Europe) - The European Commission decided this week that regional investment aid for Lignit Hodonín, the operator of the last lignite coalmine in the Czech Republic, is compatible with EU state aid rules. The CZK 155.5 million (€5 million) aid covers investment for opening new lignite deposits which will safeguard 350 direct and 150 indirect jobs. After scrutinising the aid, the Commission decided it was compatible with Community rules for regional state aid, given its positive effects on the economic development of the region concerned in terms of safeguarding employment and supporting investment in new mining technology. “Although we do not in general favour lignite mining over renewable energy resources, this particular case will have positive effects on the development of a region with high unemployment. These benefits clearly outweigh any negative effects on competition or trade” commented Competition Commissioner Neelie Kroes.
Due to the depletion of the current lignite deposits Lignit Hodonín was to be closed by the end of 2004, with the loss of all 392 jobs, but the company developed a new business plan based on an investment of CZK 324 million (€10.2 million) to open new deposits of higher quality lignite.
As the company could not raise all of the necessary funds on the financial markets, the Czech Republic agreed to support the investment under the Development Programme of the South-Moravian region and the Hodonín district, which aims to promote employment and improve the economic structure.
The Commission assessed the effects of the aid on the social cohesion and economic development of the region and weighed these against the negative effects of the aid in terms of distortion of competition. Due to the specificities of lignite trading, the situation on European markets for brown coal (a substitute for lignite) the relatively low level of production of Lignit Hodonín, there would be limited distortion of competition and trade between the Member States and anyway, the Commission concluded that the distortion created by the measure was outweighed by its positive effects.