Larco facing sale, for state aid wipeout, or bankruptcy

Larco, Greece’s state-controlled general mining and nickel producer, will need to either be sold and have state aid claims – estimated at 135 million euros – wiped out, or go bankrupt, it has become apparent to the government following a ruling against Greece at a European court yesterday.

The prospect of selling the troubled industrial producer as a condition for the elimination,  by the European Commission’s Directorate-General for Competition, of state aid obligations, or amounts the Greek State would need to retrieve, is based on a formula applied for Trainose, the Greek railway company. Trainose’s sale to Italy’s FSI (Ferrovie dello Stato Italiane Group) was completed in September.

Greece’s new privatization superfund – to which Larco will be transferred from TAIPED, the current state privatization fund – will also be involved in the decision to be taken on the nickel producer.

Last January, a European court heard a case filed by Larco against the European Commission. The case was prompted by a European Commission demand, in 2014, for the Greek State to reclaim 135 million euros from the industrial firm, as the amount was deemed as constituting illegal state aid. A verdict on this case is expected by the end of the year.

If Larco’s legal challenge proves to be unsuccessful, then the Greek State will need to comply, within reasonable time, with yesterday’s European court decision. If the government opts to take no action, then the European Commission is expected to file an additional case at the European court whose outcome would take immediate effect. In this case, Brussels would impose a daily fine on Greece, to be automatically deducted from structural fund amounts received by the country through the bailout agreement.

The succession of Greek governments has taken no action following the European Commission decision in 2014 requesting the return of state aid. This was decisive in yesterday’s European Court decision against Larco.

A loss-incurring enterprise producing nickel at prices that exceed market price levels by 40 percent, Larco has managed to remain afloat for years as it is supplied electricity by the main power utility PPC, despite being owed over 200 million euros by the industrial firm. At present, Larco is incurring losses of 200,000 euros per day.

The energy ministry, seeking to buy time, has argued Larco’s legal case against the European Commission state aid decision in 2014 remains pending.