Commission Decision (EU) 2025/2127of 16 May 2025on the State aid SA.24030 (2016/C) (ex N 512/2007 ex 2015/NN) implemented by Germany for Abalon Hardwood Hessen GmbH(notified under document C(2025) 3022)(Only the German text is authentic)(Text with EEA relevance)

(120) In light of the above, the Commission considers that Abalon DE and Gafluna are linked enterprises within the meaning of Article 3(3) of ASME.

4.1.2.2.

Abalon AT, Gafluna, Valluga and Raetia (the Raetia linked entities) are linked enterprises

(121) In 2006 (at the time of granting), Raetia owned 100 % of Valluga. In turn, Valluga owned 100 % of Gafluna, which itself owned 80 % of Abalon AT. In light of those majority of shareholders’ voting rights, all four entities qualify as linked enterprises within the meaning of Article 3 (3), first subparagraph, point (a), of ASME.

4.1.2.3.

Links between the Raetia linked entities and RZB

4.1.2.3.1.

Direct link between RZB and Raetia

(122) Raetia is a foundation (Privatstiftung) established under Austrian law, namely the Federal Act on Private Foundations

Federal Act on private foundations (the Private Foundation Act) (Bundesgesetz über Privatstiftungen (Privatstiftungsgesetz – PSG).

. RZB founded Raetia with an initial foundation capital of EUR 300000. The relationship between RZB as the founder and Raetia as the foundation is governed by the Federal Act on Private Foundation and the relevant foundation deed

Articles 33 and 34 of the Private Foundation Act.

. According to Article 3(a) of that deed, one of Raetia’s purposes is the promotion of Austria’s economy, in particular by maintaining and supporting Austrian companies’ competitiveness through the acquisition of shares of companies in financial difficulties or the supply of risk capital (recital 84).

(123) The Commission notes that, according to the Csoklich report, under Austrian law, foundations are considered as legal personalities in principle independent from their founder and that the founder has generally no rights vis-à-vis the foundation, its bodies, nor the foundation’s assets (so-called separation principle (Trennungsprinzip), see recitals 67 and 68. However, the Commission assesses the links between the foundation and its founder against the ASME and the related case law of the Union Courts, not against Austrian law.

(124) In accordance with Article 3(3), first subparagraph, point (b), of ASME, the assignment of rights of appointment indicates that two enterprises are linked. Raetia’s foundation deed creates a governing board of the foundation, composed of three members

See Article 7(a) of Raetia’s foundation deed.

. The foundation is legally represented jointly (gemeinsame Vertretung) by two members of this board, whilst only all three board members jointly are entitled to manage the foundation’s business (gemeinschaftliche Geschäftsführung)

See Article 8 of Raetia’s foundation deed.

. In accordance with the foundation deed

See Article 7(d) of Raetia’s foundation deed.

, RZB as founder appointed the first governing board (Ernst Burger, Kurt Engleitner and Karl Pistotnik) for an unlimited period of time. Subsequent members can be appointed by unanimous decision of the foundation’s governing board itself

See Article 7(d) of Raetia’s foundation deed.

. Until at least 2006, the composition of the foundation’s governing board remained unchanged.

(125) Therefore, when the two guarantees were issued in 2006, Raetia’s governing board was composed exclusively of RZB appointees. As RZB was entitled to appoint and did appoint all initial members of Raetia’s governing board responsible for managing its business, the Commission concludes that RZB and Raetia are linked enterprises within the meaning of Article 3(3), first subparagraph, point (b), of ASME.

4.1.2.3.2.

Indirect links between RZB and some of the Raetia linked entities via Kathreinbank (a subsidiary of RZB)

(126) The conclusion that RZB and Raetia are linked enterprises based on their direct links is reinforced by the indirect links between RZB and some of the Raetia linked entities via Kathreinbank.

(127) Kathreinbank is a 100 % subsidiary of RZB and is therefore linked to RZB within the meaning of Article 3(3), first subparagraph, point (a), of ASME. Although there was no shareholding links or voting rights between Kathreinbank and the Raetia linked entities in 2006, there are personal links between them that are relevant for the assessment of the qualification as SME (recital 103).

(128) In particular, RBI, the legal successor of RZB, confirmed that there was a certain overlap of personnel in the management and supervisory bodies of Raetia and Kathreinbank when the two guarantees were issued in 2006. At that time, the governing board of Raetia was composed of Ernst Burger, Kurt Engleitner and Karl Pistotnik. At that time, Ernst Burger and Kurt Engleitner were also members of the supervisory board of Kathreinbank. In addition, Germany submitted comments by RZB acknowledging that the activity as lawyer of the third member of Raetia’s governing board, Karl Pistotnik, may have resulted in connections with RZB.

(129) In addition, at the time when the two guarantees were issued, one of the two managing directors of Valluga and Gafluna, Heinrich Weninger, led the foundation unit of Kathreinbank. Finally, Gafluna, Valluga and Kathreinbank had their place of business at the same address when the guarantees were issued.

(130) In the Commission’s view, which is based on a global assessment of all factual circumstances mentioned above, the overlap in the management between Kathreinbank, on the one hand, and, on the other hand, Raetia, Valluga and Gafluna constitutes links through natural persons within the meaning of Article 3(3) of ASME.

(131) In accordance with Article 3(3), fourth subparagraph, of ASME, enterprises which have links through natural persons are considered linked enterprises if they engage in their activity or in part of their activity in the same relevant market or in adjacent markets. An adjacent market is considered to be the market for a product or service situated directly upstream or downstream of the relevant market. In that regard, the Commission notes that Raetia and Kathreinbank (via its foundation unit) are active in adjacent market (Raetia is a foundation and Kathreinbank provides services to foundations (recital 25, which constitutes an upstream market) and can thus be regarded as linked enterprises. In addition, it is important to point out that linked holding companies, which control (are linked to) a subsidiary that is active in the same relevant market or in adjacent markets as the beneficiary, are themselves in principle to be considered as engaging in their activity or in part of their activity in that market. This is because the notion of links necessarily entails the lack of full autonomy of the subsidiary from the linked holding company, therefore the holding is itself involved in determining, or at least in approving, the strategy and other aspects of the commercial policy of the subsidiary directly present on the market. This is a consequence of the Court’s case law on the notion of a single economic unit

Judgment of the Court of Justice of 27 February 2014, HaTeFo v Finanzamt Haldensleben, C-110/13, ECLI:EU:C:2014:114, paragraph 34.

, which is the predominant logic behind Article 3(3), fourth subparagraph, of ASME. Furthermore, in a group there is generally a distribution of tasks between entities. One entity may only produce the goods, another may sell them, while a third acts as the managerial holding entity. All these have a functional link to the relevant market. All of these entities are hence captured by the phrase if they engage in their activity or part of their activity in the same relevant market or in adjacent markets. On this basis, the Commission concludes that the group of linked enterprises (RZB, Raetia, Valluga, Gafluna, Abalon AT and Abalon DE) engaged in its activity or in part of its activity in the same relevant market or in adjacent markets when the guarantees were issued.

(132) The Commission concludes that, at the time the two guarantees were granted, Raetia, Valluga and Gafluna were linked to Kathreinbank and thus to RZB.

4.1.2.4.

Conclusion

(133) When assessing the SME status of an enterprise, 100 % of the data of any linked enterprise is added to its own data

4.2.

Existence of aid

(138) According to Article 107(1) of the TFEU, [s]ave as otherwise provided in the Treaties, 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 shall, in so far as it affects trade between Member States, be incompatible with the internal market. The qualification of a measure as aid within the meaning of that Article therefore requires that the following cumulative conditions be met: (i) the measure must be imputable to the State and financed through State resources; (ii) it must confer an advantage on its recipient; (iii) that advantage must be selective; and (iv) the measure must distort or threaten to distort competition and affect trade between Member States.

4.2.1.

Financing with State resources and imputability to the State

(139) The two guarantees were issued by the Investitionsbank Hessen on behalf of the Hesse Ministry of Finance. They are thus directly imputable to the State.

(140) They rely on the State budget and thus involve State resources (recital 18).

4.2.2.

Undertaking

(141) Abalon DE qualifies as an undertaking as it is engaged in an economic activity. It processes forestry products and sells the processed products on the relevant product markets against remuneration (recital 23).

4.2.3.

Advantage

(142) An advantage is any economic benefit, which an undertaking could not have obtained under normal market conditions, that is to say in the absence of State intervention. A borrower which subscribes to a loan guaranteed by the public authorities of a Member State normally obtains an advantage inasmuch as the financial cost that it bears is less than that which it would bear if it had to obtain that same financing and that same guarantee at market prices

Judgment of the Court of Justice of 3 April 2014, France v Commission, C-559/12 P, ECLI:EU:C:2014:217, paragraph 96; judgment of the General Court of 12 March 2020, Valencia Club de Fútbol v Commission, T-732/16, ECLI:EU:T:2020:98, paragraph 121.

.

(143) As a matter of principle, the State aid element will be deemed to be the difference between the appropriate market price of the guarantee provided and the actual price paid for that measure

See point 4.1, first paragraph, of the 2008 Guarantee Notice.

.

4.2.3.1.

Principles for calculation of aid equivalent in guarantees

(144) Aid in the form of State guarantees is granted at the moment when a guarantee is given, and not at the point in time at which the guarantee is invoked or the moment at which payments are made under the terms of the guarantee

Point 2.1 of the 2008 Guarantee Notice.

. Therefore, the relevant point in time for the assessment of the measures is the moment the guarantees were granted in December 2006 (recital 18).

(145) In order to determine whether the two guarantees at stake provide an advantage to Abalon DE, the Commission needs to rely on the methods and principles allowing to calculate as accurately as possible the real market value of the guarantees. They are currently laid down in the 2008 Guarantee Notice. Even though the 2000 Guarantee Notice was applicable at the date of granting, it was replaced by the 2008 Guarantee Notice which lays down a more refined policy to calculate the aid element of guarantees in order to reflect more adequately the reality of the market. As the notion of aid is an objective notion to be assessed as accurately as possible, the Commission thus uses the 2008 Guarantee Notice for its assessment of whether the two guarantees at issue provides an advantage to Abalon DE.

(146) According to point 3.2(d) of the 2008 Guarantee Notice, in order to determine the corresponding market price, the characteristics of the guarantee and of the underlying loan should be taken into consideration. This includes: the amount and duration of the transaction; the security given by the borrower and other experience affecting the recovery rate evaluation; the probability of default of the borrower due to its financial position, its sector of activity and prospects; as well as other economic conditions. This analysis should notably allow the borrower to be classified by means of a risk rating. This classification may be provided by an internationally recognised rating agency or, where available, by the internal rating used by the bank providing the underlying loan. … To assess whether the premium is in line with the market prices the Member State can carry out a comparison of prices paid by similarly rated undertakings on the market.

(147) Point 4.2, first paragraph, of the 2008 Guarantee Notice provides three different methodologies to identify the aid element in individual guarantees such as the ones at stake. The first method, which considers that the cash grant equivalent should be calculated as the difference between the market price of the guarantee and the price actually paid (the first method under the 2008 Guarantee Notice) is to be applied in principle.

(148) During the formal investigation procedure, the Commission requested from Germany information related to the calculation of the gross grant equivalent of the aid contained in the guarantees at stake using the first method under the 2008 Guarantee Notice but the German authorities considered that this information was impossible to provide (recitals 16, 91 and 92). The Commission considers however that it is in a position to apply the first method under the 2008 Guarantee Notice because the market provides guarantees for the type of transaction concerned.

(149) In order to identify the market price and calculate the aid amount, the Commission compares the price actually paid with the price paid in comparable market transactions, either by Abalon DE itself or by comparable companies. Since there is no data available as regards Abalon DE, the Commission analyses below (i) which companies are comparable to Abalon DE (section 4.2.3.2.), (ii) the market price of the guarantees at stake (section 4.2.3.3) and (iii) the resulting aid amount (section 4.2.3.4).

4.2.3.2.

Comparison with companies with a similar default rate and rating

(150) The main element to determine which companies are comparable to Abalon DE is their respective probabilities of default. When banks issue a loan to a company, they attribute a default rate (probability of default) to the borrower, reflecting their individual risk assessment. The banks carry out a comprehensive risk assessment taking into account, in line with their internal rating system, specific criteria on the economic viability of the company and an assessment of the product market and sector of activity.

(151) It is therefore necessary to assess Abalon DE’s default rates and their credibility.

(152) Three banks issued the underlying loans and attributed different default rates (probability of default) to Abalon DE, namely KSK (2 % default rate), Helaba (1,32 % default rate) and RZB (0,832 % default rate) (see recital 19).

(153) In general, since the rates are based on an individual risks assessment, it seems appropriate to take into account the different rates granted to a company and average them in order to adequately capture market reality. However, if a rating is not credible, not comparable, or not objective, it should not be considered for averaging.

(154) In the present case, the Commission considers that the different ratings provided by the three banks are all applicable to Abalon DE directly (they were calculated by the banks on the basis of company-specific information provided by Abalon DE and the three banks were involved in the underlying loans provided to Abalon DE). However, the Commission considers that the RZB rating is not sufficiently objective and credible to be relied upon because of the links between RZB and the rated enterprise Abalon DE.

(155) Therefore, the Commission bases its assessment only on the average of the default rates identified by KSK and Helaba, i.e. 1,66 % (average of 2 % and 1,32 %)

Keeping the average of the three default rates (including the 0,832 % provided by RZB) would not change the outcome. The average would be 1,38 %, which is included in the same Ba2/Ba3 range on Moody’s rating scale.

. On the basis of this average default rate, the credit quality (rating) of Abalon DE in 2006 is in the Ba2/Ba3 range on Moody’s rating scale

See the first column (1 year default probabilities) of Exhibit 26 of Moody’s Special Comment Corporate Default and Recovery Rates, 1920-2006, February 2007 (Ba2: 0.856; Ba3: 1.929) (https://www.moodys.com/sites/products/DefaultResearch/2006400000429618.pdf).

, corresponding to the BB/BB- range on S&P’s rating scale

https://www.researchgate.net/figure/Moodys-and-S-P-alphanumeric-ratings-conversion-into-numeric-values_tbl1_23722339.

.

4.2.3.3.

Market price of the guarantees

(156) Guarantee premiums charged to companies with a rating similar to the one of Abalon are not available.

(157) However, the Commission is able to establish the market price by relying on traded credit default swaps (CDS). The Commission considers that CDS are appropriate and relevant proxies, as they provide a market price of the default risk of a company

See Commission Notice on the notion of State aid as referred to in Article 107(1) of the Treaty on the Functioning of the European Union (OJ C 262, 19.7.2016, p. 1, paragraph 111). CDS are financial instruments insuring the lender (or any third party which has bought the protection) against the default risk of a referenced entity (here the borrower), like guarantees on loans. The price paid for the risk protection is called guarantee premium in the case of a loan guarantee and market credit spread in the case of traded CDS. Both prices are mainly determined by the default risk of the referenced entity (borrower) and can thus be considered as proxies of prices for the same type of risks, i.e. default risk.

.

(158) In view of Abalon DE’s rating, the iTraxx Europe Crossover Credit Derivate Index (the iTraxx crossover index) is an appropriate market benchmark: the iTraxx crossover index is indeed composed of up to 75 European companies with an average rating of BB around the relevant date

See Chart 20 of the 2007 Q3’s Quarterly Bulletin of the Bank of England (Volume 47 No. 3, https://www.bankofengland.co.uk/-/media/boe/files/quarterly-bulletin/2007/quarterly-bulletin-2007-q3.pdf).

and a level of collateral corresponding to the one of Abalon DE

The securities given by Abalon DE (collateral provided, recourse to machinery and real estate) is standard in terms of maximum recoverable amounts. This is consistent with using the iTraxx crossover index which assumes a 40 % recovery rate (i.e. 60 % loss given default), which is in line with market observations for loans that have standard collateral.

. The market credit spread (proxy of the market guarantee premium)

See footnote 64.

of the iTraxx Crossover Index on 29 December 2006 is 2,19 % for the working capital loan (weighted average life of the guarantee close to 5 years) and 2,66 % for the investment loan (weighted average life of the guarantee between 5 years and 10 years as a consequence of the linear amortisation).

4.2.3.4.

Resulting aid amounts

(159) Based on the above, the Commission calculates the gross grant equivalent of the aid contained in the guarantees, using the first method under the 2008 Guarantee Notice. It takes into consideration the following conditions, deriving from the guarantee and loan documents:

(a) Investment loan (Investitionskredit):

(i) Loan amount of EUR 19,5 million, 10 years duration;

(ii) Loan repayment in half-yearly instalments as of 2010: in 2010 two half-yearly instalments of EUR 500000, in 2011 and 2012 four half-yearly instalments of EUR 1,25 million, in 2013 two half-yearly instalments of EUR 1,5 million, in 2014, 2015 and 2016 six half-yearly instalments of EUR 1,75 million, including the last instalment of EUR 1,75 million that was due on 31.12.2016;

(iii) 70 % loan amount covered by public guarantee i.e. EUR 13,65 million until 2010;

(iv) Guarantee coverage reduced in half-yearly reductions as from 2010: In 2010 reductions by EUR 350000, in 2011 and 2012 by EUR 875000, in 2013 by EUR 1,05 million, as of 2014 by EUR 1,225 million.

(b) Working capital loan (Betriebsmittelkredit):

(i) Loan amount of up to EUR 10 million, no fixed duration (termination by cancellation), loan repayment after termination;

(ii) Up to 50 % of loan amount covered by public guarantee limited in time until 31.12.2012, i.e. EUR 5 million;

(iii) Guarantee coverage reduced in steps over time. On 31.12.2009 reduction by EUR 500000; on 31.12.2010 by EUR 1 million; on 31.12.2011 by EUR 1,5 million, and on 31.12.2012 by EUR 2 million.

(c) In both cases:

(i) Abalon DE pays an annual guarantee premium of 1 % on the outstanding guaranteed amounts;

(ii) For the calculation of the gross grant equivalent of the aid contained in the guarantees, the cash flows must be discounted to the granting date of December 2006. To that purpose, a 5,36 % rate is used on the basis of the reference rate applicable in Germany in December 2006

See Reference/discount rates and recovery rates for the 25 EU Member States from 1.5.2004 to 31.12.2006: 4.36 for Germany from 1.12.2006 to 31.12.2006, https://competition-policy.ec.europa.eu/document/download/ff0d1fd3-2fda-42c1-9980-42501a62c026_en?filename=reference_rates_eu25_en.pdf.

, increased by 100 basis points according to the Communication from the Commission on the revision of the method for setting the reference and discount rates (the reference rate Communication)

Communication from the Commission on the revision of the method for setting the reference and discount rates (OJ C 14, 19.1.2008, p. 6).

.

(160) As noted in recital 158, the market guarantee premium would have been 2,19 % for the working capital loan and 2,66 % for the investment loan. This is to be compared to the annual premium of 1 % on the outstanding guaranteed amounts (see recital 159(c)(i)) actually paid by Abalon DE.

(161) Based on that comparison and using the applicable discount rate (see recital 159(c)(ii)), the gross grant equivalent of the aid contained in the investment credit guarantee is EUR 1380705 and the gross grant equivalent of the aid contained in the working capital credit guarantee is EUR 129134, thus an overall aid amount of EUR 1509839.

4.2.3.5.

Possibility of applying other methods to determine the advantage

4.2.3.5.1.

Using the safe-harbour approach under the 2008 Guarantee Notice

(162) Pollmeier commented that Abalon DE was a newly founded undertaking without a credit history for which the safe harbour approach (3,8 %) under point 3.3 of the 2008 Guarantee Notice applied (recital 43). Under that approach, if the borrower is an SME, the Commission can accept a simple evaluation of whether or not a loan guarantee involves aid.

(163) The Commission however notes that Abalon DE is not an SME so that this method is not applicable.

4.2.3.5.2.

Using any other objectively justifiable and generally accepted method i.e. the third method under the 2000 Guarantee Notice

(164) Point 3.2, first paragraph, of the 2000 Guarantee Notice provides that the cash grant equivalent of a loan guarantee in a given year can be:

(a) calculated in the same way as the grant equivalent of a soft loan, the interest subsidy representing the difference between the market rate and the rate obtained thanks to the State guarantee after any premiums paid have been deducted (the first method under the 2000 Guarantee Notice);

(b) taken to be the difference between (i) the outstanding sum guaranteed, multiplied by the risk factor (the probability of default) and (ii) any premium paid, i.e. (guaranteed sum × risk) – premium (the second method under the 2000 Guarantee Notice);

(c) calculated by any other objectively justifiable and generally accepted method (the third method under the 2000 Guarantee Notice).

(165) Pursuant to point 3.2, second paragraph, of the 2000 Guarantee Notice, for individual guarantees the first method should in principle be the standard form of calculation while for guarantee schemes the second method should be used.

(166) Germany suggested in its comments on the Opening Decision that a 0,5 % flat-rate approach was still applicable (see recitals 58 to 60, as it could be justified under the third method under the 2000 Guarantee Notice.

(167) The Commission however considers that the 2000 Guarantee Notice cannot be applied in the present case as the 2008 Guarantee Notice constitutes a more appropriate and precise guidance to determine the advantage (recital 145).

(168) In any event, taking into account point 3.2, second paragraph, of the 2000 Guarantee Notice, the Commission notes that the third method under the 2000 Guarantee Notice has the character of a catch-all provision (Auffangtatbestand) that would only apply if the other methods of calculation are not justified, feasible and appropriate in the specific case at hand. In this context, the Commission notes that, for the ad hoc guarantees at stake in this case, point 3.2, second paragraph, of the 2000 Guarantee Notice requires that the first method under that Notice is used. That first method, which directly relies on a comparison with market figures, is able to reflect more adequately the market reality than the mere flat-rate approach under the third method under the 2000 Guarantee Notice. It should be noted in that regard that the General Court, in its 2015 judgment

2015 judgment, paragraph 174.

, also noted that the acceptance by the Commission of the practice of using the rate of 0,5 % was of a provisional nature and that a review of the situation was planned following in particular more precise definition of the intensity of aid on the basis of additional studies, which confirms that the latter method was, already at that time, regarded as insufficiently reflecting the reality of the market. Therefore, for that additional reason, the third method under the 2000 Guarantee Notice should not be applied in this case.

4.2.3.5.3.

Using the first method under the 2000 Guarantee Notice

(169) In the Opening Decision

Recital 32 of the Opening Decision.

, the Commission considered the possibility of applying the first method under the 2000 Guarantee Notice. That would e.g. have required data to determine the market interest rate. In recital 32 of that Decision, the Commission invited Germany to provide the information required to apply that method. However, Germany did not submit this information, neither in the preliminary examination phase

In its submission of 28 May 2015, as an alternative to its suggested 0,5 % flat rate-method, Germany explicitly refers to the second method of calculation under the 2000 Guarantee Notice and not to first method of calculation under that Notice.

, nor in the later formal investigation phase

In its submission of 27 March 2017, Germany focusses its argumentation on the suggested 0,5 % flat rate-method, which could in Germany’s view also be applied under the third method of calculation under the 2000 Guarantee Notice. Germany does not provide more information on a possible application of the first method of calculation under that Notice.

following the explicit invitation in the Opening Decision. During the formal investigation, the Commission also requested from Germany information related to the calculation of the gross grant equivalent of the guarantees at stake using the first method under the 2000 Guarantee Notice but the German authorities considered (in essence) that calculating that amount was impossible (recitals 16, 91 and 92).

(170) The Commission however considers that, as a matter of principle, the first method under the 2008 Guarantee Notice should be used (recital 147). In addition, given the lack of the required information on benchmark market interest rates, the Commission notes that a direct application of the first method under the 2000 Guarantee Notice is not possible. An indirect way would be to establish market proxies of the loan interest rates, using the reference rate Communication. However, such an approach would be much less precise and less meaningful due to the application of the broad credit risk categories of the reference rate Communication. The first method under the 2008 Guarantee Notice is therefore economically more meaningful as direct market proxies can be used.

4.2.4.

Selectivity

(171) The two ad hoc guarantees are provided exclusively to Abalon DE and are thus selective. This was not contested by Germany. As the Court of Justice has stated, where individual aid is at issue, the identification of the economic advantage is, in principle, sufficient to support the presumption that a measure is selective

See judgment of the Court of Justice of 4 June 2015, Commission v MOL, C-15/14 P, ECLI:EU:C:2015:362, paragraph 60.

. This is so regardless of whether there are operators on the relevant markets that are in a comparable situation.

4.2.5.

Distortion of competition

(172) The guarantees improve the competitive position of Abalon DE compared to its competitors which do not benefit from those guarantees. Abalon DE is active in a market where there is competition (as evidenced in particular by the complaint filed by Pollmeier). Thus, the guarantees distort or threaten to distort competition.

4.2.6.

Effect on trade between Member States

(173) The Commission rejects Germany’s argument (see recital 41) that the two guarantees are of a purely local nature. Even if, as Germany suggests, the raw material is obtained mainly from local sources, Abalon DE uses the raw material to manufacture beechwood products that it sells and distributes worldwide (see recital 23). Thus, the processed forestry products manufactured by Abalon DE (and those from its competitor Pollmeier) are subject to trade between Member States, and the support for Abalon DE is therefore likely to affect trade between Member States.

(174) As de minimis aid is deemed not to affect trade between Member States

See recital 3 of the 2013 de minimis Regulation, see also recital 5 of the 2001 de minimis Regulation.

, the Commission verified if and to what extent the guarantees could fall under the relevant de minimis provisions.

(175) As the Commission found already in the Opening Decision (see recital 28), the guarantees under scrutiny do not qualify as de minimis aid pursuant to the provisions of the 2013 de minimis Regulation, as its transparency requirements are not met (see recitals 25 et sequitur of the Opening Decision).

(176) The Commission therefore assessed, in line with the applicable transitional rules, whether the guarantees would have qualified as de minimis aid under the 2001 de minimis Regulation, which applied in 2006, and which lays down in its Article 2(2) a de minimis threshold of EUR 100000

(182) The first methodology to calculate the gross grant equivalent of the guarantees notified by Germany was accepted by the Commission in 2007 in Decision C(2007) 4287 final

Commission Decision C(2007) 4287 final of 25.9.2007 in State aid case SA.21945 N 197/2007 — Germany — Method to Calculate the Aid Element in Guarantees, (OJ C 248, 23.10.2007, p. 3).

The non-confidential version of the Decision is publicly available on the following Commission website: https://competition-cases.ec.europa.eu/cases/SA.21945.

, i.e. after the two guarantees were issued on 28 December 2006. Their gross grant equivalent was not calculated based on safe harbour premiums as these exist only for SMEs under the 2008 Guarantee Notice, whereas the 2000 Guarantee Notice does not provide for a safe harbour approach.

(183) Thus, neither the investment loan guarantee nor the working capital loan guarantee meet the transparency criterion. Furthermore, the working capital loan guarantee that qualifies as regional operating aid can only be exempted under the specific circumstances set out in Article 15 of the 2014 GBER

Pursuant to Article 15 of the 2014 GBER, regional operating aid schemes in outermost regions, sparsely populated areas and very sparsely populated areas may be compatible with the internal market within the meaning of Article 107(3) of the TFEU under certain conditions. The two guarantees at stake are not schemes and do not concern outermost regions, sparsely populated areas and very sparsely populated areas.

. These specific circumstances are not present in the case at hand.

(184) The exception to the general transparency requirement for start-ups, which is laid down in Article 5(2), point (g), of the 2014 GBER, applies only if all the conditions laid down in Article 22 of the 2014 GBER are met. Article 22(3), point (b) allows granting to start-ups guarantees with premiums which are not conform with market conditions but Article 22(2) lays down that eligible undertakings are unlisted small enterprise, while Abalon DE does not qualify as an unlisted small enterprise (see section 4.1). As a consequence, none of the two guarantees can be considered exempted by retroactive application of Article 22 of the 2014 GBER.

(185) The Commission thus concludes that none of the two guarantees can be retroactively exempted from the notification requirement under the 2014 GBER.

(186) Pursuant to Article 58(2) of the 2014 GBER, any aid not exempted from the notification requirement by virtue of the 2014 GBER or other regulations adopted pursuant to Article 1 of Council Regulation (EC) No 994/98

Council Regulation (EC) No 994/98 of 7 May 1998 on the application of Articles 107 and 108 of the Treaty on the Functioning of the European Union to certain categories of horizontal State aid (OJ L 142, 14.5.1998, p. 1, ELI: http://data.europa.eu/eli/reg/1998/994/oj).

previously in force is to be assessed by the Commission in accordance with the relevant frameworks, guidelines, communications and notices.

4.3.2.

No retroactive exemption (and compatibility) under Commission Regulation (EC) No 800/2008

Commission Regulation (EC) No 800/2008 of 6 August 2008 declaring certain categories of aid compatible with the common market in application of Articles 87 and 88 of the Treaty (General block exemption Regulation) (OJ L 214, 9.8.2008, p. 3, ELI: http://data.europa.eu/eli/reg/2008/800/oj).

(187) Pursuant to Article 44(1) of Regulation (EC) No 800/2008 (the 2008 GBER), which entered into force on 29 August 2008) the 2008 GBER applies to individual aid granted before its entry into force, if the aid fulfils all its conditions (except those in Article 9 of the 2008 GBER on publication and information).

(188) However, according to Article 5(1) of the 2008 GBER, only transparent aid can be exempted. Transparent aid means aid in respect of which it is possible to calculate precisely the gross grant equivalent ex ante without need to undertake a risk assessment (see Article 2, point 6, of the 2008 GBER). Similar to the 2014 GBER, also Article 5(1), second subparagraph, point (c), of the 2008 GBER provides for transparency requirements, which are met where the methodology to calculate the gross grant equivalent has been accepted following notification of this methodology … or where the beneficiary is a small or medium-sized enterprise and the gross grant equivalent has been calculated on the basis of the safe-harbour premiums … As mentioned in recital 182, the first methodology to calculate the gross grant equivalent of the two guarantees notified by Germany was only accepted after the guarantees were issued on 28 December 2006. Their gross grant equivalent was not calculated based on safe harbour premiums, nor is Abalon DE a small or medium-sized enterprise (see section 4.1).

(189) Thus, neither the investment loan guarantee nor the working capital loan guarantee meet the transparency criterion. Furthermore, the working capital guarantee that qualifies as regional operating aid cannot be exempted under the 2008 GBER.

(190) Therefore, the Commission concludes that none of the guarantees is retroactively exempted under the 2008 GBER.

4.3.3.

No retroactive exemption (and compatibility) under Commission Regulation (EC) No 1628/2006

Commission Regulation (EC) No 1628/2006 of 24 October 2006 on the application of Articles 87 and 88 of the Treaty to national regional investment aid (OJ L 302, 1.11.2006, p. 29, ELI: http://data.europa.eu/eli/reg/2006/1628/oj).

(191) Regulation (EC) No 1628/2006 (the Regional aid BER), is not applicable ratione temporis to ad hoc measures put into effect before it entered into force on 21 November 2006. Article 9 of the Regional aid BER about entry into force and validity merely refers to schemes put into effect before the date of entry into force of that Regulation and aid granted under those schemes, not to ad hoc aid and not to aid awarded (nor schemes put into effect) after 31 December 2006.

(192) In any event, Article 3(3) of the Regional aid BER lays down that ad hoc aid is to be compatible with the common market and exempt from notification provided in particular that it directly fulfils all the conditions of that Regulation. In that regard, Article 4(1), first subparagraph, point (a), of the Regional aid BER lays down that aid for initial investment is to be compatible with the common market and exempt from the notification requirement provided that the aid is granted in regions eligible for regional aid, as determined in the approved regional aid map for the Member State concerned for the period 2007 to 2013, which is not the case of the Schwalm-Eder-Kreis in the applicable regional aid map

Commission Decision C(2006) 4958 final of 8 November 2006 in case State aid N 459/2006 – Germany – Regional aid map 2007-2013 (OJ C 295, 5.12.2006, p. 6).

.

(193) In addition, the Commission recalls that the Regional aid BER only applies to regional investment aid and does not create a basis for exemption for regional operating aid, e.g. the working capital guarantee in the present case. Therefore, the Commission concludes that none of the guarantees is retroactively exempted under the Regional aid BER.

4.3.4.

No retroactive exemption (and compatibility) under the SME block exemption Regulation

(194) The Commission notes that none of the guarantees can be block-exempted under the SME block exemption Regulation, since that Regulation only applies to SMEs (see Article 1(1) of that Regulation). As found in recital 137, Abalon DE did not constitute an SME in 2006.

(195) As the two guarantees were not exempted, even retroactively, from the notification requirement under any block exemption, the two guarantees have to be treated as unlawful aid.

4.4.

Compatibility

(196) As none of the guarantees is retroactively exempted from notification, and thus compatible, under any exemption regulation, in accordance with Article 58(2) of the 2014 GBER (see recital 186), the Commission is to assess their compatibility in application of a relevant framework, guideline, communication or notice, and in direct application of the Treaty. Germany has claimed that the two guarantees were regional aid aiming at regional development (recital 62). In general, the Commission will consider a regional aid measure compatible with Article 107(3) of the TFEU only if the aid contributes to regional development and cohesion. The aim must be either to promote the economic development of a-areas or to facilitate the development of c-areas. The two guarantees in favour of Abalon DE aim at promoting and facilitating regional development of the disadvantaged region of Schwalm-Eder-Kreis as well as territorial cohesion (see recital 17).

(197) Schwalm-Eder-Kreis was at the time of the granting of the two guarantees a c-area eligible for regional investment aid pursuant to the regional aid map for Germany 2004-2006. The two guarantees can thus be assessed under the applicable Regional Aid Guidelines. From paragraph 188 of the Guidelines on regional State aid for 2014-2020

Guidelines on regional State aid for 2014-2020 (OJ C 209, 23.7.2013, p. 1).

, it results that regional aid awarded unlawfully before 1 July 2014 will be assessed in accordance with the Guidelines on national regional aid for 2007-2013

Guidelines on national regional aid for 2007-2013 (OJ C 54, 4.3.2006, p. 13).

(the 2007 RAG). In accordance with paragraph 105 of the 2007 RAG Regional aid awarded … before 2007 will be assessed in accordance with the 1998 guidelines on national regional aid. Since the two guarantees were issued in 2006, the relevant guidelines for their assessment are thus the 1998 RAG, read in combination with the (then applicable) regional aid map for Germany 2004-2006

See footnote 9.

.

4.4.1.

Investment loan guarantee

(198) According to the regional aid map for Germany 2004-2006, the region concerned (Schwalm-Eder-Kreis) is eligible for regional aid pursuant to (now) Article 107(3), point (c), of the TFEU, with a maximum aid intensity of 18 % of the eligible costs for large undertakings.

(199) In accordance with point 4.5 of the 1998 RAG, the maximum aid ceiling applies to eligible expenditure that includes land, buildings and plant/machinery (equipment). In the present case, the total investment amounted to EUR 26 million for modern sawing machines, buildings and the purchase of the land. Of this amount, EUR 21 million was invested in machinery and equipment at the sawmill, EUR 4 million in building works and EUR 1 million in purchasing the site. Applying an 18 % aid intensity, this leads to a maximum allowable aid amount of regional investment aid of EUR 4,68 million.

(200) Aid of EUR 4,5 million, with respect to building and equipment costs of EUR 25 million, was already granted based on the Joint Action Programme improvement of regional economic structures (Gemeinschaftsaufgabe Verbesserung der regionalen Wirtschaftsstruktur, scheme N 642/2002 (see recital 12 of the 2008 Decision). This aid was considered existing aid following its notification in the 2008 Decision

See recitals 44 et sequitur of the 2008 Decision.

, and this part of the 2008 Decision was upheld by the General Court in its 2015 judgment (see recital 4), and thus constitutes existing aid. As the maximum allowable aid amount under the 1998 RAG and the regional aid map for Germany 2004-2006 was not fully used by the existing regional investment aid, by the present Decision, additional investment aid of up to EUR 180000 can be declared compatible if all the applicable 1998 RAG criteria are met.

(201) The Commission assessed whether the 1998 RAG criteria (which do not exclude guarantees as an eligible form of aid) are met. The Commission concludes, that, as already established for the other parts of the regional aid package

The investment loan guarantee being part of a regional aid package (see recital 18 and footnote 10), it is in keeping with the spirit of regional aid policy as such (within the meaning of point 2, third paragraph, of the 1998 RAG), so that the investment loan guarantee can be assessed under the 1998 RAG.

, all the standard compatibility criteria required by the 1998 RAG for aid that is not subject to individual notification under the Multisectoral Framework 2002

Communication from the Commission — Multisectoral framework on regional aid for large investment projects (notified under document No C(2002) 315) (OJ C 70, 19.3.2002, p. 8).

– which is not applicable as the relevant threshold is not exceeded – are fulfilled.

(202) In particular, point 2, paragraph 3, of the 1998 RAG considers that an individual ad hoc aid is in principle not covered by the 1998 RAG

An individual ad hoc aid payment made to a single firm, or aid confined to one area of activity, may have a major impact on competition in the relevant market, and its effects on regional development are likely to be too limited. Such aid generally comes within the ambit of specific or sectoral industrial policies and is often not in keeping with the spirit of regional aid policy as such ….

, as such aid generally comes within the ambit of specific or sectoral industrial policies and is often not in keeping with the spirit of regional aid policy as such. Point 2, paragraph 4, of the 1998 RAG however provides that it can be shown otherwise. The Commission considers that this is so in the present case. First, the investment loan guarantee, together with the other parts of the aid package, was meant to foster employment in an assisted area (creation of 118 jobs), which evidences the contribution of the aid towards regional development. Second, the ad hoc aid was also granted within the framework of the 2006 Hesse Guidelines (recital 21) which are not restricted to a limited number of sectors or undertakings.

(203) The aid concerns an initial investment project (points 4.1 and 4.4 of the 1998 RAG), and concerns neither a sector excluded from the benefit of regional investment aid (see point 2, first paragraph, of the 1998 RAG), nor a firm in difficulty. The required own contribution of the beneficiary exceeds 25 % of the total investment costs

In particular, the 25 % own contribution rule is respected given the equity contribution of EUR 3,5 million and the part of the EUR 19,5 million investment loan that is not covered by the 70 % guarantee (30 % of EUR 19,5 million = EUR 5,85 million).

(point 4.2, first paragraph, of the 1998 RAG) and the investment project will be maintained for a minimum of five years in the region concerned (point 4.10 of the 1998 RAG). Works on the investment started after the guarantees had been applied for, they thus have an incentive effect (point 4.2, third paragraph, of the 1998 RAG). The cumulation rules (point 4.18 of the 1998 RAG) are respected since, in combination with the earlier approved EUR 4,5 million grant (see recital 18), the additional aid amount of EUR 180000 does not exceed the applicable cumulation ceiling of EUR 4,68 million.

(204) Therefore, the Commission considers that an additional aid amount of EUR 180000 (present value in 2006), i.e. a part of the total aid amount of EUR 1380705 (present value in 2006, see recital 161) embedded in the investment loan guarantee, is compatible in accordance with the 1998 RAG.

(205) Germany did not invoke that the investment loan guarantee should be assessed in direct application of the Treaty and did not present any arguments that could justify such an approach. The Commission is unable to identify in the given case any exceptional, well justified reasons that would allow it to deviate from the 1998 RAG. The Commission thus concludes that the aid embedded in the investment loan guarantee is partly in conformity with the 1998 RAG (EUR 180000 out of the total aid amount mentioned in recital 161). For the remainder (EUR 1200705) it constitutes incompatible aid.

4.4.2.

Working capital loan guarantee

(206) The working capital loan guarantee constitutes regional operating aid (recital 183). Under the 1998 RAG, such operating aid can only be approved in areas eligible for regional aid pursuant to (now) Article 107(3), point (a), of the TFEU, i.e., in outermost regions and in regions of low population density (see population density test in point 3.10.4 of the 1998 RAG). The region of the Schwalm-Eder-Kreis falls under none of these categories. Therefore, the working capital loan guarantee is not in conformity with the 1998 RAG.

(207) Germany did not invoke that the working capital loan guarantee should be assessed in direct application of the Treaty and did not present any arguments that could justify such an approach. The Commission is unable to identify in the given case any exceptional, well justified reasons that would allow it to deviate from the 1998 RAG. The Commission thus concludes that the operating aid embedded in the working capital loan guarantee of EUR 129134 (see recital 161) is incompatible with the internal market.

1. RECOVERY

(208) According to the Treaty on the Functioning of the European Union and the established case law of the Union Courts, the Commission is competent to decide that the Member State concerned shall alter or abolish aid when it has found that it is incompatible with the internal market

Judgment of the Court of Justice of 12 July 1973, Commission v Germany, C-70/72, ECLI:EU:C:1973:87, paragraph 13.

. The Union Courts have also consistently held that the obligation on a Member State to abolish aid regarded by the Commission as being incompatible with the internal market is designed to re-establish the previously existing situation

Judgment of the Court of Justice of 21 March 1990, Belgium v Commission, C-142/87, ECLI:EU:C:1990:125, paragraph 66.

.

(209) In this context, the Union Courts have established that this objective is attained once the recipient has repaid the amounts granted by way of unlawful aid, thus forfeiting the advantage which it had enjoyed over its competitors on the market, and the situation prior to the payment of the aid is restored

Judgment of the Court of Justice of 17 June 1999, Belgium v Commission, C-75/97, ECLI:EU:C:1999:311, paragraphs 64 and 65.

.

(210) Article 16(1) Procedural Regulation states that where negative decisions are taken in cases of unlawful aid, the Commission shall decide that the Member State concerned shall take all necessary measures to recover the aid from the beneficiary ….

(211) Thus, given that the two guarantees implemented in breach of Article 108(3) of the TFEU constitute unlawful, and partly incompatible aid, the incompatible aid needs to be recovered in order to re-establish the situation that existed on the internal market prior to their granting. Recovery shall cover the time from the date when the aid was put at the disposal of the beneficiary until effective recovery. The amount to be recovered shall bear interest until effective recovery. The interest shall be calculated on a compound basis in accordance with Chapter V of Commission Regulation (EC) No 794/2004

Commission Regulation (EC) No 794/2004 of 21 April 2004 implementing Council Regulation (EC) No 659/1999 laying down detailed rules for the application of Article 93 of the EC Treaty (OJ L 140, 30.4.2004, p. 1, ELI: http://data.europa.eu/eli/reg/2004/794/oj).

.

1. CONCLUSION

(212) The Commission finds that Germany has unlawfully implemented the two guarantees in breach of Article 108(3) of the TFEU:

(a) the aid embedded in the investment loan guarantee is compatible with the internal market pursuant to Article 107(3), point (c), of the TFEU up to an amount of EUR 180000;

(b) the exceeding aid amount of EUR 1200705 embedded in the investment loan guarantee is incompatible with the internal market;

(c) the aid amount of EUR 129134 embedded in the working capital loan guarantee is incompatible with the internal market,

HAS ADOPTED THIS DECISION:

Article 1

1. The following measures constitute State aid unlawfully put into effect by Germany in breach of Article 108(3) of the Treaty on the Functioning of the European Union (TFEU):

(a) investment loan guarantee in favour of Abalon Hardwood Hessen GmbH, with an aid amount of EUR 1380705 (present value in 2006);

(b) working capital loan guarantee in favour of Abalon Hardwood Hessen GmbH, with an aid amount of EUR 129134 (present value in 2006).

1. The investment loan guarantee in favour of Abalon Hardwood Hessen GmbH is compatible with the internal market up to an aid amount of EUR 180000, and incompatible with the internal market for the remaining amount of EUR 1200705. The working capital loan guarantee in favour of Abalon Hardwood Hessen GmbH, with an aid amount of EUR 129134, is incompatible with the internal market.

Article 2

1. Germany shall recover the incompatible aid referred to in Article 1 from the beneficiary.

1. The sums to be recovered shall bear interest from the date on which they were put at the disposal of the beneficiary until their actual recovery.

1. The interest shall be calculated on a compound basis in accordance with Chapter V of Regulation (EC) No 794/2004.

1. Germany shall cancel any outstanding payments and other obligations under the guarantees referred to in Article 1 with effect from the date of notification of this Decision.

Article 3

1. Recovery of the amounts of incompatible aid referred to in Article 1 shall be immediate and effective.

1. Germany shall ensure that this Decision is implemented within four months following the date of its notification.

Article 4

1. Within two months following notification of this Decision, Germany shall submit the following information to the Commission:

(a) a detailed description of the measures already taken and planned to comply with this Decision;

(b) documents demonstrating that the beneficiary has been ordered to repay the incompatible aid referred to in Article 1.

1. Germany shall keep the Commission informed of the progress of the national measures taken to implement this Decision until recovery of the incompatible aid referred to in Article 1 has been completed. Upon a simple request by the Commission, Germany shall immediately submit information on the measures already taken and those planned to comply with this Decision. It shall also provide detailed information concerning the amounts of aid and interest already recovered from the beneficiary.

Article 5

This Decision is addressed to the Federal Republic of Germany.

Done at Brussels, 16 May 2025.

For the Commission

Teresa Ribera

Executive Vice-President