European Commission Approves State Aid for Bulgarian Railway Company BDZ

The European Commission has concluded that Bulgarian support measures in favour of the publicly-owned railway incumbent BDZ are in line with EU state aid rules. The measures will allow the company to address its debt level without unduly distorting competition in the Single Market, EC Press release said on 16th of June.

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, the EC statement said.

The commsions has also noted that 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, the EC added.

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