The European Commission has opened an in-depth investigation into the finances surrounding Korean lithium-ion battery maker LG Chem’s gigafactory in Poland.
An investigation has been launched to assess if €95 million ($112 million) of public support granted by Poland to the Korean company is in line with EU rules on regional State aid.
The cash was earmarked for investing in the expansion of a battery cell production facility for electric vehicles in Biskupice Podgórne in the Dolnoślaskie region, Poland.
The measures needed to fulfil certain EU State aid rules, in particular the Commission’s 2014 Regional State Aid Guidelines, include the support must incentivise private investment, and be kept to the minimum necessary.
At this stage, the Commission has doubts the planned public support to LG Chem for the expansion of the Biskupice Podgórne plant complies with all relevant criteria of the Regional Aid Guidelines.
The Commission— an executive branch of the European Union— will now investigate whether the initial concerns are confirmed.
Commissioner Margrethe Vestager, in charge of competition policy, said: “EU State aid rules enable Member States to foster economic growth in disadvantaged regions in Europe.
“At the same time, we need to ensure that the aid is really needed to attract private investments to the region concerned, and avoid that the recipient of the aid gains an unfair advantage over its competitors at the expense of taxpayers.
“We will carefully investigate whether Poland’s support was necessary to trigger LG Chem’s decision to expand its existing cell production facility in Poland, is kept to the minimum necessary and does not distort competition or harm cohesion in the EU.”
In 2019, the Commission approved a €36 million ($42 million) investment aid granted by Poland to support LG Chem’s €325 million ($382 million) investment to build the Biskupice Podgórne plant.
The Commission assessed and approved the measure under the 2014 Regional Aid Guidelines.
Those guidelines allow Member States to support regional investment to support economic development and employment in the EU’s less developed regions and to foster cohesion in the Single Market, if the measure respects a number of conditions:
- 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
- The aid must not divert investment away from another region in the EU, which is at least as economically disadvantaged as the region where the aided investment takes place