Evonik owner RAG welcomes key EU move on German coal subsidies

09 December 2010 19:42  [Source: ICIS news]

TORONTO (ICIS)--RAG-Stiftung, the majority owner of Germany-based specialty chemicals major Evonik, on Thursday welcomed a key European Commission move to allow the country to continue subsidising its hard coal industry through 2018.

“We welcome this move to phase out hard coal production in a socially acceptable manner, and we are confident that the Council will give its agreement,” RAG CEO Wilhelm Bonse-Geuking said in a short statement to ICIS.

The Commission’s decision is still subject to approval by the Council of Ministers, expected on Friday.

Under earlier proposals, the Commission had insisted on a phase-out of the subsidies four years earlier by 2014, which would have put pressure on RAG to sell off its main asset, Evonik, much faster than planned. Union officials had warned that a 2014 phase-out could hit jobs at Evonik.

Under German legislation from 2007, RAG-Stiftung was set up as a coal foundation to oversee the phase-out, to be completed by 2018. Proceeds from the eventual sale of Evonik are meant to cover billions of euros in environmental costs related to the closure of the coal mines.

Bonse-Geuking said RAG was confident it would be able to comply with the Commission’s terms and condition for a 2018 phase-out, without cutting job cuts.

Evonik media officials did not respond to a request for additional comment.

Commentators said Germany’s hard coal industry, which employs some 23,000 miners, was not commercially viable without subsidies.

While RAG is Evonik's majority owner, private equity firm CVC owns a 25.01% minority stake in Evonik which it bought in 2008 for €2.4bn ($3.2bn).

($1 = €0.75)

For more on Evonik and other producers visit ICIS company intelligence
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By: Stefan Baumgarten
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