The European Commission has approved Poland’s €95 million ($105million) grant to LG Chem Group in line with EU State aid rules following a two year investigation.
The investment will support the expansion of South Korean battery giant LG Chem’s battery cell production facility in Poland’s Dolnośląskie region, which is expected to supply batteries for more than 295,000 electric vehicles each year in the European Economic Area (EEA).
The Commission concluded the positive effects of the project on regional development outweighed any possible distortion of competition brought about by the State aid.
The investigation confirmed that in 2017— when the plans were first announced— LG Chem had considered a third country outside the EEA, and its existing plant in Biskupice Podgórne (Dolnośląskie region).
The investigation found that, given the subsidies offered by the third country, the investment would have been more economically viable in that country; therefore, without the €95 million Polish support, LG Chem would have opted to invest outside of the EEA.
Executive vice-president Margrethe Vestager, in charge of competition policy, said: “Our in-depth investigation has confirmed that Poland’s €95 million public support to expand the production capacity of an LG Chem’s electric vehicles battery plant is in line with our State aid rules.
“The aid will contribute to job creation and to the economic development of a disadvantaged region, without unduly distorting competition.”
LG Chem’s Polish plans
During its in-depth investigation, the Commission analysed feedback submitted by Poland, LG Chem and interested parties, including other companies active in the value chain, and the Ministry of Trade, Industry and Energy of South Korea.
In 2017 LG Chem, through its subsidiary LG Energy Solution Wrocław, announced it would invest €1 billion ($1.1 billion) to expand production capacity of lithium-ion cells, battery modules and battery packs for electric vehicles in its existing plant in the Dolnośląskie region.
The investment was eligible for regional aid under Article 107(3)(a) of the Treaty on the Functioning of the European Union.
In July 2019, Poland notified the Commission of its plans to grant €95 million to support the expansion of the plant.
In August 2020, the Commission opened an in-depth investigation to assess whether the measure was compatible with the Guidelines on Regional State Aid for 2014-2020.
In particular, the Commission sought to clarify whether the aid would have an “incentive effect”, whether public support would contribute to regional development and whether it is appropriate and proportionate, and if the aid amount exceeded the maximum permissible aid intensity for the project.
The Commission’s investigation also showed that the aid was limited to the minimum necessary to incentivise LG Chem to carry out the investment in Poland, as it did not exceed the amount necessary to increase the profitability of the project in Poland to the same level as the one in the third country.
