The European Commission has found that Hungary’s €209 million measure in favour of SK On Hungary is in line with EU State aid rules. The investment aid will support the construction of a new battery cell manufacturing plant in the Közép-Dunántúl region. The aid will also contribute to the development of the region and job creation, whilst preserving competition.
The Hungarian measure
SK On Hungary (formerly SK Battery Hungary) is part of the SK Group, a global South Korean company active in various industries, including energy, chemicals, semi-conductors, information and communications technology, logistics and services.
In December 2021, Hungary notified the Commission of its plans to grant €209 million to support SK On Hungary in the construction of a new plant for the manufacturing of lithium-ion battery cells and battery modules for electric vehicles.
The plant will have an annual capacity of 30 GWh and is expected to create at least 1,900 direct jobs. SK On Hungary’s total investment into the project, which started in early 2021, will be of €1,623 million.
The production plant is located in Iváncsa, in the Közép-Dunántúl (Central Transdanubia) region – an area eligible for regional aid under Art. 107(3)(a) of the Treaty on the Functioning of the European Union.
The Commission’s assessment
The Commission assessed the aid measure under the applicable Guidelines on Regional State Aid for 2014-2020, which were prolonged until 31 December 2021. The rules on regional State aid enable Member States to support the economic development and employment in the EU’s less developed regions and to foster regional cohesion in the Single Market.
The Commission found that:
- The investment aid will contribute to job creation, as well as to the economic development and to the competitiveness of a disadvantaged region;
- In the absence of the public funding, the project would have been carried out in a more developed European region than Central Transdanubia; and
- The aid is limited to the minimum necessary to trigger the investment in Hungary and complies with all aid intensity requirements.
On this basis, the Commission concluded that the positive effects of the project on regional development clearly outweigh any possible distortion of competition brought about by the State aid. The Commission therefore approved the measure under EU State aid rules
Under the rules on Regional State aid, an aid measure has to meet the following conditions in order to be approved by the Commission:
- The aid must have a real “incentive effect”, in other words, it must effectively encourage the beneficiary to invest in a specific region;
- The aid must be kept to the minimum necessary to attract the investment to the disadvantaged region;
- The aid must not have undue negative effects, such as the creation of excess capacity in a declining market;
- The aid must not exceed the regional aid ceiling applicable to the region in question;
- The aid must not directly cause the relocation of existing or closed down activities from elsewhere in the EU to the aided establishment; and
- The aid must not divert investment away from another region in the EU, which has the same, or lower, level of economic development than the region where the aided investment takes place.
In April 2021, following an evaluation of the Guidelines on Regional State Aid for 2014-2020 conducted in 2019 and an extensive consultation of all stakeholders on the draft text, the Commission adopted revised Regional Aid Guidelines. While the main elements of the rules remained unchanged, the revised Regional Aid Guidelines include a number of targeted adjustments to simplify and reflect experience gained from the application of the previous rules, as well as to reflect new policy priorities related to the European Green Deal and the European Industrial and Digital Strategies. Within the framework of the revised Regional Aid Guidelines, on 16 September 2021, the Commission approved under EU State aid rules, Hungary’s map for granting regional aid from 1 January 2022 to 31 December 2027.
The revised Guidelines started applying as of 1 January 2022. They do not apply to aid granted before 1 January 2022 (as in the case at stake), which is assessed under the Guidelines on Regional State Aid for 2014-2020.
The non-confidential version of the decision will be made available under the case number SA.63328 in the State aid register on the Commission’s competition website once any confidentiality issues have been resolved. New publications of State aid decisions on the internet and in the Official Journal are listed in the Competition Weekly e-News.