Lecta's Condat plans hit EC snag

By Jo Francis, Thursday 15 August 2019

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Lecta’s conversion plans for its Condat mill have been thrown into question after the European Commission flagged a potential objection to the mill receiving tens of millions of euros in French subsidies.

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Condat mill could receive up to €35m in French energy subsidies

At the end of April Lecta shut down the PM 8 coated woodfree line at Condat, located in south-west France, on a temporary basis while the group evaluated a potential conversion project. The project would involve switching the line to the production of speciality papers for labels and packaging.

This week Lecta issued an update about the conversion, and said it had been “evaluating alternatives with respect to the conversion of the Line 8”.

“The alternatives have included investigating a broad range of possible partnering arrangements with local, regional and national authorities, including among others financial support and workforce training subsidies,” the papermaker stated.

It said that one initiative being explored would involve energy contribution subsidies of up to €35m (£32.3m) over a three-year period. Such an arrangement would require European Commission approval, and the EC had made a preliminary objection during the pre-notification period.

“It should be noted that this decision is not binding and the Lecta Group continues to engage with the relevant French authorities with regards to this initiative as well as other potential arrangements not subject to pre-notification,” the company said.

Lecta is headquartered in Spain and its parent company is owned by funds managed by private equity house CVC Capital Partners. The group had sales of €1,486m last year and operates seven mills in Spain, Italy and France with a manufacturing capacity of nearly 2m tonnes. Condat’s capacity is 414,000 tonnes.

In August 2016 Lecta issued two tranches of fixed and floating rate bonds with a combined value of €600m, due in 2022 and 2023. Lecta’s 6.5% fixed interest bonds have fallen sharply over the past week.

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