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Tuesday, June 25, 2024 | Back issues
Courthouse News Service Courthouse News Service

Italy, Slovenia & Latvia Face Bailout Questions

(CN) - The European Commission announced Tuesday that it is investigating three member states for improper bailouts and other finagling in the private sector.

A number of airline bailouts by Slovenia and Latvia may have given an unfair market advantage to the recipients, regulators said. Meanwhile, tinkering in the Sardinian energy market by Italy raised the eyebrows of commission investigators.

The commission said in a statement that Slovenia's four capital infusions into the largely state-owned Adria Airlines between 2007 and 2011 may have procured an economic advantage for the airline, which has not turned a profit since at least 2008.

Adria has received $103 million so far, either directly from the Slovenian government or through state-owned holding PDP and its predecessor KAD, regulators said.

Investigators also found that PDP and the majority state-owned Ljubljana Airport acquired 52.3 percent and 47.7 percent of Adria subsidiary Adria Airways Tehnika, respectively.

Latvia's bailouts of the equally troubled airBaltic - including $98 million in reduced-interest loans and the government's acquisition of zero-percent coupon bonds - may constitute illegal state aid, regulators said in a second statement.

A nationalized bank made several transfers and payments to airBaltic, according to the commission. And in one case, Latvia shifted a claim it held against airBaltic back to the beleaguered airline for one Latvian lat - the equivalent of $1.84.

EU regulators plan to conduct two separate investigations into Italy's dealings in Sardinia's coal energy sector.

Since 1998, Italy has given Carbosulcis SpA $486 million, consisting of investment, operating aid and support aimed at research and development and environmental purposes, the commission said. Carbosulcis currently exploits the Nuraxi-Figus coal mine in Sardinia.

Italy allegedly failed to notify the commission of its plans to finance Carbosulcis, a violation of EU law in itself.

The Italian government's planned subsidy of a coal-fired electricity plant fitted with a Carbon Capture and Storage (CCS) device may unfairly burden competitors operating without government help, the commission, noting that it opened its investigation of the project in 2008.

Since then, the Italian government dropped plans to charge local energy-intensive users a preferential tariff, which would have violated EU law.

It still intends, however, to subsidize the plant in the form of off-take tariffs for 20 years after operation begins - an amount corresponding to the difference between guaranteed tariffs and market prices over the lifetime of the power plant, regulators said.

Italy claims its support of the project is critical to the electricity supply, and its development of the carbon capture technology supports industrial research and development in the economically depressed region of Sardinia. For its part, the commission questions both need and the project's possible ties to the Carbosulcis mine.

"While the commission acknowledges the importance of developing carbon capture technology, it will investigate whether the planned coal-fired power plant is best suited to address the alleged objective of security of supply in Sardinia at the lowest cost for the ctate and whether the envisaged aid is kept to the minimum necessary to achieve this objective," regulators said in a statement. "Moreover, the commission will check whether the project may indirectly subsidize the operation of the local coal mine, which is in principle prohibited under current EU rules."

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