The European Commission has authorised, under the EC Treaty’s rules on state aid, plans notified by Sweden to provide guarantees that would enable Volvo Personvagnar to access loans from the European Investment Bank.

The European Commission has authorised, under the EC Treaty’s rules on state aid, plans notified by Sweden to provide guarantees that would enable Volvo Personvagnar (Volvo PV) to access loans from the European Investment Bank (EIB). The loans would co-finance the development of environment-friendly cars. 90% of the guarantees to be provided by Sweden meet the conditions of the Commission’s Temporary Framework for state aid measures, which gives Member States additional scope to facilitate access to financing in the present economic and financial crisis (see IP/08/1993 ). In particular, Volvo would pay an adequate remuneration for the guarantee and provide sufficient securities in case the guarantee would be drawn. It is therefore compatible with Article 87(3)(b) of the EC Treaty, which permits aid to remedy a serious disturbance in the economy of a Member State. The remaining 10% will be provided on market conditions and therefore do not constitute state aid.

“The state guarantees would contribute to Volvo's investment project for environmental-friendly cars without giving rise to any undue distortions of competition”, said Competition Commissioner Neelie Kroes.

Volvo PV is planning to use the loans of €500 million from the EIB for its €1.9 billion-project to develop emission reductions and energy efficiency in cars.

The loans and the corresponding guarantees would be provided in five tranches over the years 2009-2010 with a maturity of seven years. Volvo PV would pay a premium for the guarantees and provide the Swedish Government with high-quality collateral covering the full guaranteed amount. This collateral would be callable by the Swedish state if it had to pay out any money under the guarantee. The level of the premiums paid during the lifetime of the loan is in line with the provisions of the Commission's Temporary Framework. For the market-priced part of the guarantees, the Commission concluded that, in the current market situation and taking into account the other conditions of the transaction, a premium of 12.6 % per annum constitutes the market price for the risk involved in issuing such a guarantee.

The Commission's decision is without prejudice to the ongoing negotiations between Volvo PV and Sweden on the actual issuing of the guarantees.