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Home/News/Serbia to gift EUR 6.25 million worth of land to Germany’s MTU

Serbia to gift EUR 6.25 million worth of land to Germany’s MTU

The state of Serbia will donate EUR 6.25 million worth of land to German investor MTU for the development of a plant in Nova Pazova for the maintenance, repair and overhaul of aircraft engines and related services, Nova ekonomija has learned.

MTU Aero Engines board member Michael Schrage claimed in May this year that the company would buy land at an as-yet-unnamed location near Belgrade, but a document from the State Aid Control Commission shows that the land will be donated.

This will be realized through a contract for the alienation of construction land between the Republic Property Directorate, MTU Maintenance, registered in Serbia, and its parent company, MTU Aero Engines, Germany.

Michael Schrage travelled to Belgrade on 7 May and met with Serbian President Aleksandar Vucic, who said at the time that the MTU investment was “a new industrial and technological life for Serbia”.

Schrage said MTU is among the top five engine manufacturers in the world, that the company is growing and that by summer it will buy land in Serbia and start hiring people, RTS reported at the time.

“We have to work hard until we conclude the contract and make the final selection,” Schrage said.

Five months later, the State Aid Control Commission approved the allocation of land to this company at no charge at its 9 October session.

According to the decision of the Commission, the total value of the donated land is EUR 6,250,683, according to the assessment of the Tax Administration. The total area of the two cadastral parcels is 25 hectares, 68 acres and 72 square meters.

The draft contract commits MTU to build a facility at its own cost, that is, to make an initial investment in fixed assets of at least EUR 100,900,000 by the end of 2025 and to employ at least 440 permanent workers from 2021 to 2027.

MTU Maintenance is also required to provide at least 25 percent of eligible costs from its own sources or other sources that do not contain state aid, whereby only investment in new equipment is considered eligible costs.

The business plan envisages capacity building for an MRO (maintenance, repair and operations), with an area of approximately 22,000 square meters.

The investment project stated an investment of EUR 4.8 million for infrastructure, EUR 45.9 million was earmarked for the design and construction of production facilities, and 50.2 million was the value of the planned investment in new equipment.

In the event that MTU is fails to meet its contractual obligations, the State has the right to claim payment at the level of EUR 6.25 million, which is the market value of the parcels being transferred.

A reminder, in July 2019, the Ministry of Economy refused to submit to Nova ekonomija a memorandum of understanding signed on 7 May with MTU Aero Engines AG, citing data confidentiality.