State aid: Commission approves restructuring aid for Polish Regional Railways, as Poland commits to an accelerated opening to competition of regional passenger rail transport

State aid: Commission approves restructuring aid for Polish Regional Railways, as Poland commits to an accelerated opening to competition of regional passenger rail transport

The European Commission has concluded that Polish measures to support the restructuring of Polish Regional Railways, the nationwide operator of regional passenger rail transport in Poland, are in line with EU state aid rules.

Executive Vice-President Margrethe Vestager, in charge of competition policy, said: “Our investigation showed that the Polish restructuring aid measures in favour of Polish Regional Railways were necessary and proportionate to ensure that the company could continue operating. This avoided serious disruptions in the provision of regional passenger rail transport and ensured connectivity in Poland. At the same time, the possible negative effects on competition brought about by the public intervention will be limited by Poland’s commitment to accelerate the opening of the Polish regional passenger rail transport sector to competition.

Polish Regional Railways (Przewozy Regionalne) is the largest passenger regional rail operator in Poland and the sole provider of public passenger rail transport in 7 out of 16 regions. The company, which is majority owned by the State-owned Industrial Development Agency, has been experiencing financial difficulties.

In January 2018, the Commission opened a formal investigation to assess whether certain aid measures in favor of Polish Regional Railways were in line with EU State aid rules.

The Commission’s investigation covered a restructuring aid measure for an amount of PLN 770 million (around €181 million), notified by Poland to the Commission in 2015, as well as other State aid measures granted to the company in the context of the same overall restructuring prior to 2015, namely:

  • Aid to cover past losses for an overall amount of PLN 2,403 million (around €565 million);
  • A debt restructuring agreement between the company and the Polish rail infrastructure manager, PKP PLK, providing for the restructuring of liabilities towards the State-owned PKP Group companies, in the amount of PLN 1,902 million (around €448 million);
  • 25 agreements between Polish Regional Railways and State-owned creditors providing for deferral of the company’s liabilities towards those creditors for the total amount of PLN 1,106.4 million (around €260 million);
  • Support in the form of training aid and recruitment aid granted in connection and for the same purpose (i.e. ensuring the continuous provision of regional passenger rail services) de minimis aid, overall exceeding the threshold for de minimis aid under EU rules.

The Commission assessed the restructuring measures under Article 107(3)(c) of the Treaty on the Functioning of the European Union (TFEU), which enables Member States to grant State aid to facilitate the development of certain economic activities or of certain economic areas, subject to certain conditions.

The Commission found that the measures were both proportionate and necessary to ensure the viability of Polish Regional Railways, and thus avoid the serious disturbance in the provision of an important service in Poland that the insolvency of the sole nationwide provider of regional passenger rail services would have caused.

In its assessment, the Commission took particularly into account the importance of a well-functioning regional railway service for the Polish population. In this respect, railway services are essential to ensure connectivity (such as enabling commuting). It also considered that the Polish regional passenger rail transport sector is, in certain respects, different from other economic sectors, in particular because it provides an important public service on a market that is generally underfinanced and not yet fully open to competition in Poland and at EU level.

Furthermore, the Fourth Railway Package establishes that Member States will have to terminate the practice of directly and unconditionally awarding public service contracts in the regional passenger rail transport sector by 25 December 2023. In addition, such directly awarded contracts may, in principle, have a length of maximum 10 years.

In order to limit the possible negative effects of the aid on competition, Poland committed to accelerate the shift away from this practice and to complete this process earlier than required by the Railway Package. Furthermore, Poland has committed to already start gradually opening the market via public tendering. In practice this is possible by not renewing certain existing contracts or by not making use of the maximum possible contract length, before the end date for directly awarding public service contracts.

On this basis, the Commission considered that the positive effects of the measure outweigh its possible negative effects on competition and approved the measures under EU State aid rules.

Background

Given the specificities of the Polish regional passenger rail transport sector, which is generally and structurally underfinanced, the Commission assessed the aid measures directly under Article 107 (3)(c) of the Treaty on the Functioning of the EU (TFEU), rather than under the Commission’s State aid Guidelines on rescuing and restructuring.

The non-confidential version of the decision will be made available under the case numbers SA.43127 in the State aid register on the Commission’s  competition website once any confidentiality issues have been resolved. New publications of State aid decisions on the internet and in the Official Journal are listed in the Competition Weekly e-news.

Source: https://ec.europa.eu/commission/presscorner/detail/en/ip_21_1842

Photo Credit : https://pixabay.com/photos/train-poland-railway-railroad-1381354/

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