Marine Log

December 6, 2006

EC approves state aid for Maersk's German yard

The European Commission has approved regional investment aid of Euros 4.2 million to German shipyard Volkswerft Stralsund, which belongs to A.P. Moller-Maersk and is a unit of its Odense Steel Shipyard Group.

After an in-depth investigation initiated in February 2006, the Commission has concluded that the investment is limited to a modernization of the yard that will improve its productivity. It will not result in a disproportionate capacity increase.

Competition Commissioner Neelie Kroes commented: "The aid encourages greater efficiency and competitiveness of an EU yard. This is in line with the objective of the State Aid Action Plan of less and better targeted state aid. I am satisfied that the aid is only used to modernize the yard and not to create additional capacity."

In August 2005 Germany notifiedthe Commission of its intention to grant regional investment aid to the yard, which located in Stralsund, Mecklenburg-Vorpommern, a region where the standard of living is below the EU average and there is serious unemployment. The proposed investment aid would enable the yard to build larger, panamax-sized vessels at competitive costs, thereby increasing the productivity of the yard. Total modernization costs amount to Euros18.7 million. Germany intends to provide Euros 4.2 million, which corresponds to an aid percentage of 22.5%, the maximum allowed under European Commission rules on state aid to shipbuilding.

The shipyard rules are more restrictive than the general rules on regional investment aid as they only permit investments in upgrading and modernization of existing yards to improve the productivity of existing installations. The objective is to ensure there is no state aid for the creation of new shipbuilding capacity.

The Commission decided in February 2006 to open an in-depth investigation of the Volkswerft case as it was concerned that the investment might lead to a significant capacity increase at the yard.

However, Germany has demonstrated that, while steel processing capacities will increase slightly. the output of the yard as a whole will remain unchanged following the implementation of the investment project.