The European Commission said that a bilateral contract between Romania's hydro power generator Hidroelectrica SA and a local unit of ArcelorMittal may have included undue state aid for the steel producer.

According to the statement published in the EU's official journal, a preliminary conclusion of the European Union's competition regulators said that an alleged loss of revenue incurred by Hidroelectrica after signing contracts to sell electricity to ArcelorMittal in 2009 and 2010 is attributable to the Romanian state. The state, as a majority shareholder, was directly involved in the approval of the 2010 contract.

The Commission said in the statement that "It seems that ArcelorMittal Galati and possibly also the other four members of the ArcelorMittal group in Romania, may have derived an undue advantage in the form of being supplied electricity at prices below market levels on the basis of the contracts with Hidroelectrica. All unlawful aid can be subject to recovery from the recipient."

The International Monetary Fund and the EU have asked Romania to renegotiate Hidroelectrica's contracts after the EU competition regulator started its investigation into possible state aid.

The investigation also includes bilateral contracts with Alro SA, a Romanian smelter. Hidroelectrica entered an insolvency procedure last month after the government said it plans to restructure the company and increase its efficiency.

Source - Bloomberg

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