European Commission approves Bulgaria’s state aid for BDZ railways

Written by on June 16, 2017 in Bulgaria - Comments Off on European Commission approves Bulgaria’s state aid for BDZ railways

The European Commission (EC) said on June 16 2017 that it had decided that Bulgaria’s support measures for state railways BDZ were in line with European Union state aid rules.

The measures will allow BDZ to address its debt level without unduly distorting competition in the single market, the EC said.

Bulgaria gave notice to the EC in 2011 of a restructuring plan for BDZ under EU state aid rules.

The initial plan included several measures that could give an economic advantage to BDZ and therefore could involve state aid within the meaning of the EU rules, the Commission said.

The EC said that in November 2011, it opened an in-depth investigation as it had doubts concerning BDZ’s long-term viability and whether the restructuring plan contained sufficient measures to ensure the company’s own contribution to the restructuring costs and to off-set distortions of competition.

During the investigation, the EC focused on the cancellation by the Bulgarian state of certain debts incurred by BDZ.

The investigation found that the planned cancellation of these debts, amounting to 224 million leva (about 114 million euro), was in line with the Commission’s 2008 Guidelines on state aid for railways.

The EC said that this was because the debts were clearly determined and incurred prior to Bulgaria’s EU accession, the debts are directly linked to BDZ’s transport operations and are hindering the company’s sound financial management, the amount of the debts to be cancelled is proportionate, and the state aid does not prevent effective competition on the market.

“As BDZ is the only provider of railway passenger transport in Bulgaria, it is of crucial importance to the country’s connectivity and economy. The Commission concluded that the debt cancellation is necessary and proportionate to support BDZ’s operation and in line with EU state aid rules.”

The Commission found no concerns under EU state aid rules regarding two measures.

One, the reimbursement of certain amounts of VAT paid by BDZ. The EC found that the reimbursement of VAT unduly paid by BDZ on the compensation received by the company for fulfilling public service obligations involves no state aid within the meaning of the EU rules. As the company was not liable to pay the VAT in the first place, the repayment gives no advantage to the company.

Two, the repayment of BDZ’s debts towards the national railway infrastructure manager.The investigation showed that the repayment of these debts raises no competition concerns, because the extension of and terms for repayment were in line with market conditions, the EC said.

BDZ, the state-owned railway company in Bulgaria and the only provider of passenger railway services in the country, has been in financial difficulties for several years.

In 2011 Bulgaria notified the Commission of a capital increase for BDZ, to be provided over the period 2011-2016 and submitted a restructuring plan for BDZ.

Bulgaria withdrew its plans to recapitalise BDZ during the investigation.

(Photo: Clive Leviev-Sawyer)

/Panorama

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About the Author

Clive Leviev-Sawyer is the Publisher and Editor-in-Chief of The Sofia Globe. He is the author of the book Bulgaria: Politics and Protests in the 21st Century (Riva Publishers, 2015).