Bulgaria notified in 2011 a restructuring plan for BDZ to the Commission for assessment 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.
In November 2011, the Commission 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 Commission 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 BGN 224 million (around €114 million), is in line with the Commission's 2008 Guidelines on state aid for railways. This is 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 for the following measures:
- The reimbursement of certain amounts of VAT paid by BDZ: The Commission 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.
- 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.
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 to the Commission 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.
The Commission has also taken today a decision approving restructuring aid to Greek railway companies OSE and TRAINOSE, the incumbent rail infrastructure network and rail transport operators.
Both the decision concerning BDZ and the decisions on the Greek railway companies show that state aid control is able to address the problematic issues around debt levels that some incumbent rail operators are carrying. State aid rules allow Member States to help these companies avoid serious financial difficulties or having to significantly reduce staff, while easing the transition to an open and competitive rail market to the benefit of consumers and taxpayers alike.
The non-confidential version of the decision will be published in the state aid register on the Commission's competition website once any confidentiality issues have been resolved. It will be available under case number SA.31250 The State Aid Weekly e-News lists new publications of state aid decisions on the internet and in the EU Official Journal.