Poland’s € 95 million measure on behalf of the LG Chem Group is in line with EU state aid rules, head of the European Commission competition on 18 March.
The investment assistance will support the expansion of LG Chem’s battery cell manufacturing facilities for electric vehicles in the Polish Dolsnolaski region, the commission said, adding that the assistance will contribute to the development of the Dolsnolaski region as well as maintaining competition.
“Our in-depth investigation confirms that Poland’s € 95 million assistance to increase the production capacity of an LG Chem’s electric vehicle battery plant is in line with our state aid policy,” said the executive vice-president of the EU Commission for Competitiveness Policy. Margrethe Vestager He added that the aid would contribute to the creation of employment and economic development of the underprivileged without any distorted competition.
LG Chem is a South Korean chemical company operating in Poland through its partner LG Energy Solution Wrocław. In 2017, LG Chem decided to invest 1 billion to expand the production capacity of its lithium-ion cells, battery modules and battery packs (EVs) for electric vehicles. The new plant is expected to supply more than 295,000 EV batteries per year to the European Economic Area (EEA), the commission said.
In July 2019, Poland informed the Commission of plans to provide € 95 million in grants to assist in the expansion of the plant. In August 2020, the Commission launched an in-depth investigation to assess whether the measure was consistent with the Regional State Aid Guidelines for 2014-2020. In particular, the commission sought to clarify whether the aid had a “stimulating effect”, such as whether or not the decision to increase LG Chem’s battery production capacity in Poland was directly triggered by Polish public support. That area even without public support.
The commission further examined whether public support would contribute to regional development and whether it was appropriate and proportionate, and whether the amount of aid exceeded the maximum approved aid intensity for the project.
During its in-depth investigation, the commission received and analyzed responses submitted by several interested parties, including Poland, LG Chem and other companies active in the value chain, and the South Korean Ministry of Commerce, Industry and Energy.
The commission said its investigation confirmed that in 2017, when deciding where to expand its production capacity, LG Chem considered two options: a third country outside the EEA and its existing plant at Biskupis Podgorn in the Dalnolaski region. The commission’s investigation found that investment in third countries would have been more economically viable if subsidies had been provided. So, without the € 95 million Polish support, LG Chem would have preferred to invest outside the EEA.
The commission said its investigation further found that support for encouraging LG Chem to invest in Poland was limited to a minimum requirement, as it did not exceed the amount needed to increase project profits in Poland. One in the third country. In addition, the Commission found that investment assistance would contribute to job creation, as well as economic development and competition in the underprivileged regions of Dolnolasky.
On this basis, the Commission stated that the positive effects of the project on regional development outweighed the potential distortion of competition by state aid. The Commission has therefore approved the measure under the EU State Assistance Rules.