Volvo Car has secured permission to secure Swedish government loan guarantees covering 90% of the Euro 500 million it plans to borrow from the European Investment Bank to finance for developing new green models.
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The European Commission announced late last week (June 5) that it was authorising the guarantee from Stockholm, under its temporary liberal state aid controls, eased to help European industry cope with the recession.
European Union (EU) competition Commissioner Neelie Kroes said: “The state guarantees would contribute to Volvo’s investment project for environmental-friendly cars without giving rise to any undue distortions of competition” of the EU auto market.
The money will fund a significant tranche of a planned Volvo Euro 1.9 billion-investment project to develop emission reductions and energy efficiency in its cars. The bank is to supply its loan in five instalments this year and next.
Volvo will pay a 12.6% annual premium for the guarantees and provide the Swedish government with collateral covering the full guaranteed amount. Brussels said the premium was a “market price” for the support considering the current economic situation.
The announcement comes days after Volvo announced that it would launch a joint venture with Swedish energy company Vattenfall to develop an electric car powered from a standard wall socket by 2012.
Keith Nuthall
