Europaudvalget 2019-20
EUU Alm.del Bilag 558
Offentligt
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EUROPEAN
COMMISSION
Brussels, 20.3.2020
C(2020) 1683 final
SENSITIVE
*
:
COMP Operations
COMMISSION DECISION
of 20.3.2020
ON THE STATE AID
SA.39078 - 2019/C (ex 2014/N)
which Denmark implemented
for Femern A/S
(Text with EEA relevance)
(Only the English version is authentic)
*
Distribution only on a ‘Need to know” basis
- Do not read or carry openly in public places. Must be
stored securely and encrypted in storage and transmission. Destroy copies by shredding or secure
deletion. Full handling instructions
https://europa.eu/!db43PX
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COMMISSION DECISION
of 20.3.2020
ON THE STATE AID
SA.39078 - 2019/C (ex 2014/N)
which Denmark implemented
for Femern A/S
(Text with EEA relevance)
(Only the English version is authentic)
THE EUROPEAN COMMISSION,
Having regard to the Treaty on the Functioning of the European Union, and in particular the
first subparagraph of Article 108(2) thereof,
Having regard to the Agreement on the European Economic Area, and in particular Article
62(1)(a) thereof,
Having called on interested parties to submit their comments pursuant to the provision cited
1
and having regard to their comments,
Whereas:
1.
(1)
(2)
P
ROCEDURE
On 13 July 2009, the Commission approved aid for the financing of the planning
phase of the Fehmarn Belt Fixed Link project (‘Planning decision’)
2
.
Following a pre-notification phase, the Danish authorities notified, by letter dated 22
December 2014, to the Commission pursuant to Article 108(3) of the Treaty the
financing model of the Fehmarn Belt Fixed Link project.
On 5 June 2014, 5 September 2014, 26 November 2014, 19 January 2015, and 22
April 2015, the Commission received five complaints
3
alleging that Denmark had
granted unlawful and incompatible State aid for the planning, construction and
(3)
1
2
3
State aid
–
Denmark
–
State aid SA.39078 (2019/C) (ex 2014/N)
–
Financing of the Fehmarn Belt Fixed
Link project
–
Invitation to submit comments pursuant to Article 108(2) of the Treaty on the
Functioning of the European Union (Text with EEA relevance), OJ C 226, 5.7.2019, p. 5.
Commission decision of 13.7.2009, State aid N 157/2009
–
Denmark
–
Financing of the planning phase
of the Fehmarn Belt fixed link, OJ C 202, 27.8.2009, p. 1.
By Scandlines Danmark ApS
and Scandlines Deutschland GmbH (‘Scandlines’), 3i Investment Plc, TT
Line, Stena Line Scandinavia AB (‘Stena Line’) and Trelleborgs Hamn AB.
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operation of the Fehmarn Belt Fixed Link project in favour of Femern A/S and A/S
Femern Landanlæg
4
.
(4)
On 23 July 2015, the Commission decided not to raise objections to the measures
granted by Denmark to A/S Femern Landanlæg and Femern
A/S (‘Construction
decision’)
5
. The operative part of that decision is divided into two parts. In the first
part, the Commission concluded that the measures granted to A/S Femern Landanlæg
for the planning, construction and operation of the road and rail hinterland
connections in Denmark do not constitute State aid within the meaning of Article
107(1) of the Treaty. In the second part, the Commission concluded that, even if the
measures granted to Femern A/S for the planning, construction and operation of the
Fixed Link did constitute State aid within the meaning of Article 107(1) of the
Treaty, they are compatible with the internal market pursuant to Article 107(3)(b) of
the Treaty. On 16 September 2015, the Commission sent the Construction decision to
the complainants.
Following actions for annulment by two complainants
6
, the General Court annulled
the Construction decision with its judgments of 13 December 2018
7
in so far as the
Commission decided not to raise any objections to the measures granted by Denmark
to Femern A/S for the planning, construction and operation of the Fixed Link (the
coast-to-coast infrastructure).
The General Court dismissed the action as to the remainder. In particular, it rejected
the arguments of the applicants concerning the Commission’s conclusion that the
measures granted to A/S Femern Landanlæg for the planning, construction and
operation of the road and rail hinterland connections in Denmark do not constitute
State aid within the meaning of Article 107(1) of the Treaty.
The judgments of 13 December 2018 have been appealed by the two complainants
8
.
On 24 January and 22 May 2019, the Commission services had a meeting with the
Danish authorities. The Commission services had telephone conferences with the
Danish authorities on 12 April and 20 June 2019. The Commission services sent
further information requests on 26 March, 18 April and 24 April 2019. The Danish
authorities submitted additional information on 18 January, 4 February, 25 February,
28 March, 5 April, 7 May, 8 May, 16 May, 20 May, 28 May and 10 June 2019.
(5)
(6)
(7)
(8)
4
5
6
7
8
These complaints were registered by the Commission services under the numbers SA.38915 and
SA.41640.
Commission decision of 23.07.2015 in Case SA. 39078 (2014/N)
–
Denmark
–
Financing of the
Fehmarn Belt Fixed Link project, OJ C 325, 2.10.2015, p. 1.
Scandlines Danmark Aps and Scandlines Deutschland GmbH (‘Scandlines’) and Stena Line
Scandinavia AB (‘Stena Line’).
Judgment of the General Court of 13 December 2018,
Stena Line Scandinavia AB and Others
v
Commission,
T-631/15, ECLI:EU:T:2018:944 and Judgment of the General Court of 13 December
2018,
Scandlines Danmark ApS and Scandlines Deutschland GmbH v Commission,
T-630/15,
ECLI:EU:T:2018:942.
Case C-174/19 P
Scandlines Danmark ApS and Scandlines Deutschland GmbH v Commission,
and
Case C-175/19 P
Stena Line Scandinavia v Commission.
Both cases are pending.
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(9)
On 18 and 25 March 2019, the Commission services had a meeting with Stena Line
Scandinavia AB
(‘Stena Line’)
and with Scandlines Danmark ApS and Scandlines
Deutschland GmbH (‘Scandlines’)
respectively. On 4 April and 13 May 2019, the
Commission services had a meeting with the Naturschutzbund Deutschland e.V.
(‘NABU’) and the Association of Swedish Ship-owners
(Föreningen för Svensk
Sjöfart (‘FSS’)
respectively. The Commission received further information from
interested parties on 29 January, 14 February, 18 February, 26 March, 15 April, 16
April, 24 April, 24 May, 29 May, 6 June and 7 June 2019. The Commission received
a letter from Scandlines on 29 January 2019 to which it replied on 8 February 2019.
The Commission received a further letter from Scandlines on 20 February 2019 to
which it replied on 13 March 2019. The Commission received a letter from Stena
Line on 7 February 2019 to which it replied on 28 February 2019. The Commission
received a letter from NABU on 18 February 2019 to which it replied on 18 March
2019. The Commission received a letter from FSS on 19 February 2019 to which it
replied on 8 March 2019. The Commission received a letter from Verband Deutscher
Reeder (‘VDR’)
on 12 March 2019 to which it replied on 21 March 2019. The
Commission received a letter from Grimaldi Group on 28 March 2019 to which it
replied on 16 April 2019. The Commission received a letter from Trelleborg Port on
8 April 2019 to which it replied on 9 April 2019. The Commission received a letter
from Trelleborg Port on 15 April 2019 to which it replied on 2 May 2019. The
Commission received a letter from Aktionsbündnis gegen eine feste
Fehmarnbeltquerung e.V. on 15 April 2019 to which it replied on 2 May 2019.
By letter of 14 June 2019, the Commission informed the Danish authorities that it
had decided to initiate the procedure laid down in Article 108(2) of the Treaty in
respect of the public financing of the Fixed Link (‘Opening decision’).
On 5 July 2019, the Opening decision was published in the
Official Journal of the
European Union
9
. In the Opening decision, the Commission invited interested parties
to submit their comments within one month.
On 12 July 2019, the Commission services forwarded earlier comments from
Scandlines of 7 June 2019 to the Danish authorities. On 23 July 2019, the
Commission services forwarded other previous comments and observations from
Scandlines of 28 January 2019 and 29 May 2019 to the Danish authorities.
Through successive requests, Scandlines asked for an extension of the deadline to
submit comments to the Opening decision until end of August/beginning of
September. On 22 July 2019, the Commission services agreed to a 10 working days
extension of the deadline to 20 August 2019, which the Commission services
subsequently granted also to other interested parties.
On 17 August 2019, Scandlines brought an action for the annulment of the decision
to extend the time-limit for submitting their comments to 20 August 2019, and not
until the end of the month as they had requested. By separate application lodged on
the same day, Scandlines requested the President of the General Court to order, by
way of interim measure, the Commission to suspend the formal investigation and/or
(10)
(11)
(12)
(13)
(14)
9
Cf. footnote 1.
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to prohibit the Commission from adopting a final decision, or grant any other form of
appropriate interim relief.
(15)
The President of the General Court dismissed the application for interim relief by
order of 13 September 2019.
10
Subsequently, Scandlines withdrew the related action
for annulment.
11
Eleven interested parties submitted comments. The Danish Ferry Association
submitted comments on 16 August 2019.
The European Community Shipowners’
Associations (‘ECSA’) submitted comments on 19 August 2019. FSS submitted
comments on 20 August 2019. Scandlines, Aktionsbündnis gegen eine feste
Fehmarnbeltquerung e.V., NABU, Rederi Aktiebolaget Nordö-Link, Stena Line,
Trelleborg Hamn AB, Rostock Port GmbH and VDR all submitted comments on 21
August 2019. The interested parties are involved in the shipping industry (ferry
operators, ports and associations) or non-profit organisations alleging an interest in
the coast-to-coast infrastructure. By letter dated 3 September 2019, the Commission
services forwarded a non-confidential version of the comments of the eleven
interested parties to the Danish authorities, which were given the opportunity to
react. The Danish authorities submitted their observations on those comments on 4
October 2019, complementing their comments on the Opening decision of 26 August
2019.
On 27 June, on 2, 5 and 9 July, on 3 October, on 4, 12, 15, 19, 22 and 25 November
2019 and then on 7 and 14 January and on 6 February 2020 the Commission services
had a telephone conference with the Danish authorities. On 18 December 2019, the
Commission services had a meeting in Brussels with the Danish authorities. The
Commission services sent further information requests on 8, 12 and 17 July, on 3 and
12 September, on 4, 17, 18 and 24 October, on 5, 13, 25 and 27 November 2019
then on 7 and 9 January and on 3, 4, 14, 18, 19 and 28 February 2020. In 2019, the
Danish authorities submitted additional information on 27 June, on 1, 4, 5, 10, 12 and
15 July, on 21 and 27 August, on 13 and 26 September, on 1, 9, 11, 23, 27 and 29
October, on 6, 7, 11, 14, 18, 22 and 25 November, and on 10 and 20 December. In
2020, the Danish authorities submitted additional information on 3, 7, 13, 15, 21
January, on 4, 6, 11, 12, 14, 20 and 21 February and on 3 March 2020. With their
communication of 5 March 2020, the Danish authorities revised the initial
notification.
Furthermore, the Commission received additional comments from Scandlines and
Stena Line which in light of the Mytilinaios Anonymos Etairia - Omilos
Epicheiriseon Judgment
12
the Commission is not required to take into account since
those comments were submitted out of time. The Commission received such
additional comments from Scandlines on 26 October 2019 and again on 20 February
(16)
(17)
(18)
10
11
12
Order of the President of the General Court of 13 September 2019,
Scandlines Danmark ApS and
Scandlines Deutschland GmbH
v
Commission,
T-566/19 R, EU:T:2019:605.
Order of 27 November 2019,
Scandlines Danmark ApS and Scandlines Deutschland GmbH
v
Commission,
T-566/19, EU:T:2019:839.
Judgment of the Court of 11 December 2019,
Mytilinaios Anonymos Etairia - Omilos Epicheiriseon v
Commission,
C-332/18 P, ECLI:EU:C:2019:1065, paragraphs 126-127.
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2020, which were forwarded to the Danish authorities on 4 November 2019 and on
28 February 2020, respectively. The Danish authorities submitted their observations
to those comments on 6 November 2019 and on 3 March 2020, respectively.
Scandlines had a telephone conference with the Commission services on 25 February
2020 and submitted additional information on 5 March 2020. The Commission
received additional comments from Stena Line on 13 December 2019, which were
forwarded to the Danish authorities on 23 December 2019. The Danish authorities
submitted their observations to those comments on 8 January 2020.
(19)
(20)
The Commission received a letter from the Danish authorities on 9 September 2019
to which it replied on 30 September 2019.
By letter of 4 March 2020, the Danish authorities agreed to have the present decision
adopted and notified in the English language.
Clarification as to the scope of this decision
(21)
On 2 August 2016, Scandlines sent a letter of formal notice to the Commission,
asking it to take steps in respect of certain alleged aid measures in favour of
Femern A/S, which, in their view, had not been addressed by the Commission in its
Construction decision, even though those measures had been referred to in their
complaint.
By letter of 30 September 2016, the Commission services replied to that letter. It
indicated that the Construction decision dealt with two alleged aid measures, namely
non-commercial railway fees and the free use of State property during the
construction phase of the project. As to the other alleged aid measures, the
Commission considered, pursuant to Article 24(2) of the Council Regulation (EU)
2015/1589
(‘Procedural Regulation’)
13
, that the facts and points of law put forward
by Scandlines did not provide sufficient grounds to show, on the basis of a
prima
facie
investigation, the existence of unlawful aid. It therefore invited Scandlines to
submit any comments it might have within a period of one month. The Commission
received those comments on 30 October 2016.
On 12 December 2016, Scandlines lodged an action of annulment of the letter of 30
September 2016
14
. On the same day, they also brought an action against the
Commission for failure to act on their complaint
15
.
On 30 July 2018, Scandlines sent a second letter of formal notice
16
, inviting the
Commission to define its position on the other alleged aid measures following its
comments of 30 September 2016. On 28 September 2018, the Commission adopted a
(22)
(23)
(24)
13
14
15
16
Council Regulation (EU) 2015/1589 of 13 July 2015 laying down detailed rules for the application of
Article 108 of the Treaty on the Functioning of the European Union, OJ L 248, 24.9.2015, p.9.
Case T-890/16,
Scandlines Danmark ApS and Scandlines Deutschland GmbH v Commission,
ECLI:EU:T:2018:1004.
Case T-891/16,
Scandlines Danmark ApS and Scandlines Deutschland GmbH v Commission,
ECLI:EU:T:2018:1003.
This letter was registered as SA.51981.
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decision (‘2018 decision’)
17
confirming that the State guarantees in favour of A/S
Femern Landanlæg and the State loans in favour of Femern A/S and A/S Femern
Landanlæg, as well as the alleged unlawful aid granted in excess of the Planning
decision and in the form of tax advantages, did not constitute unlawful State aid. In
the same decision, the Commission concluded that the alleged unlawful aid to
Femern A/S in the form of capital injection is compatible with the internal market
under Article 107(3)(b) of the Treaty, in so far as it constitutes State aid not covered
by the Planning decision. On 4 January 2019, Scandlines brought an action for the
annulment of this decision
18
.
(25)
By orders of 13 December 2018, the General Court declared both the action for the
annulment of the Commission’s letter of 30 September 2016 and the action for
failure to act inadmissible
19
. Scandlines brought an appeal against the order
dismissing its action for annulment
20
.
In the Opening decision, the Commission withdrew the 2018 decision in so far as it
relates to measures granted to Femern A/S for the planning, construction and
operation of the Fixed Link. Those measures are therefore part of the assessment in
this decision.
As noted in the Opening decision, this procedure also covers all measures relevant to
the planning phase of the project that concern the Fixed Link.
This decision does not concern the measures in favour of A/S Femern Landanlæg
relevant to the financing of the hinterland connections, as also clarified in the
Opening decision. In addition, it does not cover other possible measures than the
ones as mentioned in section 2.4 granted or allegedly granted by Denmark to
Femern A/S, A/S Femern Landanlæg, Sund & Bælt Holding A/S or to any other
related company.
On 6 November 2017, Scandlines filed an additional complaint on alleged unlawful
and incompatible aid measures used to finance Femern
A/S’ activities allegedly
related
to
promotion
and
marketing
of
the
Fixed
Link
(‘promotional/marketing/information activities’). The measures referred to in that
letter were included in the scope of the Opening decision and are therefore assessed
in this decision.
(26)
(27)
(28)
(29)
17
18
19
20
Commission decision of 28 September 2018 on State aid SA. 51981 (2018/FC)
–
Denmark
–
Complaint
about alleged unlawful aid to Femern A/S and Femern Landanlæg A/S, OJ C 406, 9.11.2018, p. 1.
Case T-7/19,
Scandlines Danmark ApS and Scandlines Deutschland GmbH v Commission,
pending.
Orders of the General Court of 13 December 2018,
Scandlines Danmark ApS and Scandlines
Deutschland GmbH v Commission,
T-890/16, ECLI:EU:T:2018:1004 and T-891/16,
ECLI:EU:T:2018:1003.
Case C-173/19 P,
Scandlines Danmark ApS and Scandlines Deutschland GmbH v Commission,
pending.
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2.
2.1.
(30)
(31)
D
ETAILED DESCRIPTION OF THE PROJECT AND THE MEASURES
The Fehmarn Belt Fixed Link project
The Fehmarn Belt Fixed Link project consists of a coast-to-coast infrastructure
(‘Fixed Link’) and rail and road hinterland connections.
The Fixed Link will be constructed as an immersed tunnel between Rødby on the
island of Lolland in Denmark and Puttgarden in Germany. It will be approximately
19 kilometres long and will consist of an electrified, double-track railway and a four-
lane motorway with emergency lanes.
The Danish hinterland connections include the existing railway connection between
Ringsted and Rødby of approximately 120 kilometres, which is owned by
Banedanmark (‘Rail Net Denmark’), the State rail infrastructure manager. The whole
railway section from Ringsted to Rødby will be electrified and equipped with new
signalling systems according to ERTMS
21
level 2. The Danish hinterland connections
will also comprise the necessary environmental improvements and upgrading of the
existing motorway infrastructure of Lolland, i.e. the existing E47 motorway between
Rødbyhavn and Sakskøbing. Finally, the existing single-track railway section
between Vordingborg and Rødby will be extended to a double-track railway section.
The objective of the Fehmarn Belt Fixed Link project is to improve the conditions
for transport of passengers and goods between the Nordic countries and Central
Europe. The Fehmarn Belt Fixed Link project will lead to a number of other positive
impacts in terms of environmental impact, employment, regional development,
improvement of trading conditions and a general strengthening of the transport
sector. In combination with the Øresund Fixed Link between Denmark and Sweden,
which has been in operation since July 2000, the Fehmarn Belt Fixed Link project
will thus bring about a considerable improvement on one of the most important land
based transport corridors connecting Scandinavia with Central Europe. The Fehmarn
Belt Fixed Link project was also recognised by the Commission as a priority project
within the TEN-T
framework. In addition, it is a “pre-identified project” mentioned
as such in Annex I, part I, point 2 of Regulation (EU) No 1316/2013 of the European
Parliament and of the Council of 11 December 2013 establishing the Connecting
Europe Facility, amending Regulation (EU) No 913/2010 and repealing Regulations
(EC) No 680/2007 and (EC) No 67/2010
22
.
In their reply to the Opening decision, the Danish authorities added that the formal
planning of the Fehmarn Belt Fixed Link project began already in 1991 when the
Danish Government entered into the Treaty with the Swedish Government about the
establishment of a fixed link across Øresund (‘the Øresund Fixed Link’)
23
.
According to Article 21 of the Danish-Swedish treaty on the Øresund Fixed Link, the
Danish Government declared to be ready to work on carrying out a fixed link across
the Fehmarn Belt provided that environmental and financial considerations are taken
into account. In the period between 1991 and the signature between Denmark and
(32)
(33)
(34)
21
22
23
European Rail Traffic Management System.
OJ L 348, 20.12.2013, p. 129.
Intergovernmental agreement of 23 March 1991 between the Danish and the Swedish governments.
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Germany in 2008, the Danish and the German Governments carried out a number of
preparatory assessments regarding a Fehmarn Belt Fixed Link project.
(35)
According to Article 1 of the ‘Treaty between the Kingdom of Denmark and the
Federal Republic of Germany on the Fixed Link across the Fehmarn Belt’ (‘the
Fehmarn Belt Treaty’)
24
, Denmark has the sole responsibility and bears the full risk
for the financing of the Fixed Link across the Fehmarn Belt strait, as well as for the
upgrading of the Danish hinterland connections. Germany is responsible for the
financing and upgrading of the German hinterland connections.
At the time of the 2014 notification, the Danish authorities estimated that the total
costs for the planning and construction of the Fixed Link would correspond to
DKK 54.9 billion in 2014 prices (EUR 7.4 billion
25
). The costs related to the
planning and construction of the upgrading of the Danish hinterland connections
corresponded to DKK 9.5 billion in 2014 prices (EUR 1.3 billion). In total this
amounted to DKK 64.4 billion (EUR 8.6 billion) for the entire project (planning
activities, construction costs, reserves and other works of both the Fixed Link and the
hinterland connections). As a reply to the doubts raised in the Opening decision, the
Danish authorities revised their notification and updated those estimated planning
and construction costs of the Fixed Link. Section 5 of this decision elaborates on this
update.
The Commission has awarded total co-funding grants of EUR 205 million from 2007
to 2013 for the planning activities of the Fehmarn Belt Fixed Link project. The
period was later extended to 2015. The project had also been included in the list of
proposals selected for receiving EU financial assistance in the field of Connecting
Europe Facility (‘CEF’) –
Transport sector
26
. The Danish authorities specified that in
the 2007-2015 period, the project has actually received EUR 181 million for the
Fixed Link. Femern A/S has received commitments for CEF support in 2017-2020
for an amount of EUR 589 million. The Danish authorities clarified that Femern A/S
has currently utilized amounts of approximately EUR 7 million.
In September 2005, the State-owned company Sund & Bælt Holding A/S established
the company Femern A/S as a wholly owned subsidiary. Femern A/S subsequently
became a subsidiary of A/S Femern Landanlæg
27
, which is also a subsidiary of Sund
& Bælt Holding A/S.
(36)
(37)
(38)
24
25
26
27
The Treaty was signed on 3 September 2008 and ratified by Denmark and Germany in 2009.
Denmark conducts a fixed exchange rate policy against the euro at a central rate of DKK 746.038 per
100 EUR. This exchange rate is applied throughout the decision when calculating the approximate
EUR equivalent of DKK.
See Commission Implementing Decisions C(2015) 5274 of 31 July 2015 establishing a list of proposals
selected for receiving EU financial assistance in the field of Connecting Europe Facility (CEF)-
Transport sector following the calls for proposals launched on 11 September 2014 based on the Multi-
Annual work Programme; and C(2017)8803 of 5 January 2018 establishing the list of proposals
selected for receiving EU financial assistance under the Connecting Europe Facility (CEF)
–
Transport
sector following a call for proposals launched on 8 February 2017 based on the Multi-Annual Work
Programme.
A/S Femern Landanlæg was established on 16 November 2009.
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(39)
Based on the Planning Act
28
, the Danish Minister for Transport appointed
Femern A/S as responsible for the planning of the Fehmarn Belt Fixed Link project.
Consequently, Femern A/S has carried out various studies and preparations for its
construction, in particular analyses and evaluations regarding environmental,
technical and safety aspects and preparations for the tender processes for the
completion of the project. Femern A/S also carried out the necessary investigations
and preparatory activities regarding the establishment of the future construction site
in Rødbyhavn. Finally, Femern A/S is responsible for information activities, which it
should conduct in cooperation with the local municipalities
29
.
The financing of the planning phase was notified to the Commission pursuant to
Article 108(3) of the Treaty on 16 March 2009 for reasons of legal certainty. On 13
July 2009 the Commission decided not to raise objections to the financing of the
planning phase
30
, concluding that in the planning phase Femern A/S acted as a public
authority and that any support therefore fell outside the scope of Article 107(1) of the
Treaty. Nevertheless, as the Commission could not exclude that the public support
for the planning phase might include State aid in favour of the future operator of the
Fixed Link, it also assessed the compatibility of the notified measures and concluded
that they could be considered compatible.
On 28 April 2015, the Danish Parliament passed the bill on the construction of the
Fixed Link and the hinterland connections in Denmark (‘Construction Act’)
31
. The
Construction Act also contains the legal basis for the future operation of the Fixed
Link. The Construction Act entered into force on 6 May 2015.
On 6 February 2019, Femern A/S received the signed administrative German Plan
Approval of the Fixed Link from the German authorities. Following the
administrative German Plan Approval, on 26 March 2019 the Danish Parliament
authorised Femern A/S to start the first and specified construction works for the
Fixed Link on the Danish side. More specifically, Femern A/S has been asked to
negotiate the necessary agreements with the contractors in order to initiate the
following activities: constructing the tunnel element factory, establishing a working
harbour, establishing the tunnel portal on the Danish side, establishing the camp and
administration facilities, ensuring that the relevant contractor initiates the
procurement of special marine equipment and minor preparatory activities.
(40)
(41)
(42)
28
29
30
31
The Danish Act on the planning of a Fixed Link across the Fehmarn Belt and the Danish hinterland
connections (Act no. 285 of 15 April 2009).
Explanatory notes to the Planning Act, 17 December 2008.
Cf. footnote 2.
Act no. 575 of 4 May 2015.
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2.2.
(43)
The Fixed Link
With the Construction Act, Femern A/S was appointed as the owner of the Fixed
Link
32
, with sole purpose to manage its construction, operation and financing
33
. In
this capacity, it will also be the infrastructure manager of the rail link in the Fixed
Link. The Construction Act allows Femern A/S to obtain loans and to use other
financial instruments for purposes related to the planning, construction and operation
of the Fixed Link.
Femern A/S may finance the Fixed Link with loans obtained on the international
financial market. The Danish Government may provide a State guarantee for those
loans. Alternatively, Femern A/S may finance the project through State loans.
Femern A/S will be entitled to collect toll charges from users of the Fixed Link road
infrastructure. The Minister for Transport will determine the level of those fees and
the principles for adjustment of those fees
34
. Femern A/S may change existing
general discount schemes and introduce new discount schemes only to the extent that
this does not affect materially the level of payment determined by the Minister for
Transport. It will also be entitled to railway fees for the use of the rail link in the
Fixed Link. The Minister for Transport will also set those fees
35
. The setup chosen
entails that the toll charges and railway fees will both cover the operating and
maintenance costs of the Fixed Link and the Danish rail hinterland connections and
the costs related to interest payments and loan instalments relevant to the debt
created from the planning and construction of the Fehmarn Belt Fixed Link project.
The conduct of the construction works of the Fixed Link are open to all potential
undertakings on equal and non-discriminatory terms since Femern A/S has applied
public procurement procedures in accordance with public procurement law for the
attribution of all construction contracts.
The Danish
36
road and rail hinterland connections
A/S Femern Landanlæg has been appointed to manage the construction and operation
of the Danish hinterland connections
37
. The construction and operation of the railway
hinterland connections will be undertaken by Rail Net Denmark on behalf of the
Danish State and financed by A/S Femern Landanlæg. Rail Net Denmark, as the
Danish rail infrastructure manager, is responsible for all costs related to the operation
of the Danish railway infrastructure, including the hinterland rail connections. The
construction of the necessary upgrading of the road hinterland connections will be
undertaken by the Danish Road Directorate on behalf of the Danish State and
financed by A/S Femern Landanlæg. The hinterland road connections will be part of
(44)
(45)
(46)
2.3.
(47)
32
33
34
35
36
37
See Section 38 of the Construction Act.
See Section 1 and 5 of the Construction Act.
See section 42 of the Construction Act.
See Section 41 of the Construction Act.
The German hinterland connections have not been the subject of this case.
See section 2 of the Construction Act. See also recital (32) above for a description of the hinterland
connections.
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the general Danish road infrastructure network, which is financed, operated and
maintained by the Danish Road Directorate.
(48)
The existing double tracked railway from Ringsted to Vordingborg and the existing
single-track railway from Vordingborg to Rødby, including the new signalling
system installed on this section, are owned by Rail Net Denmark.
A/S Femern Landanlæg will own the new track section from Vordingborg to Rødby,
including the new signalling system installed on the new track, and the installations
for electrification of the whole section from Ringsted to Rødby.
A/S Femern Landanlæg and Rail Net Denmark share the ownership of the Danish
rail hinterland connections
38
. Once the construction is completed, and owing to the
fact that it will be technically difficult to separate the ownership of the rail
installations on the Danish hinterland connections, an exchange of property will take
place between Rail Net Denmark and A/S Femern Landanlæg
39
.
The ownership of the Danish road hinterland connections will remain with the State.
A/S Femern Landanlæg may finance the hinterland connections with loans obtained
on the international financial market. The Danish Government may provide a State
guarantee for these loans. Alternatively, A/S Femern Landanlæg may finance the
hinterland connections using State loans.
Femern A/S will pay dividends to A/S Femern Landanlæg. With those dividends,
A/S Femern Landanlæg will repay its debt related to the loans necessary to fund the
costs of the planning, construction, maintenance and reinvestments related to the
hinterland rail connections and the costs related to the construction of the hinterland
road connection.
In accordance with general principles in Denmark, there will be no user fees for the
use of the Danish road hinterland connections.
The measures granted or allegedly granted to Femern A/S
The Opening decision raised doubts on the State aid character and compatibility of
several notified and alleged aid measures as described below.
Capital injections
The Danish authorities notified capital injections amounting to DKK 500 million
(EUR 67.0 million) by the State-owned Sund & Bælt Holding A/S into Femern A/S
that took place in 2005 and 2009. The purpose of those capital injections was to set
up Femern A/S to carry out the Danish part of the preparatory work and studies
related to the Fehmarn Belt Fixed Link project
40
. As mentioned in the Opening
decision, Scandlines is of the view that Sund & Bælt Holding A/S proceeded to
additional capital injections for the same period, possibly exceeding the amount
authorised by the Construction decision with at least DKK 10 million
(EUR 1.3 million).
(49)
(50)
(51)
(52)
(53)
2.4.
(54)
2.4.1.
(55)
38
39
40
See Section 39 of the Construction Act.
Based on the value of Rail Net Denmark’s assets and A/S Femern Landanlæg’s assets.
According to Section 6 of the Sund & Bælt Act.
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2.4.2.
(56)
State guarantees
The Opening decision also covered the State guarantee model as notified by the
Danish authorities. It covers State guarantees for loans or other financial instruments
raised by Femern A/S on the international financial markets for the financing of the
planning, construction and operation of the Fixed Link
41
.
According to Section 7(3) and (5) of the Planning Act, Femern A/S benefits from a
State guarantee covering the obligations of Femern A/S in relation to loans and other
financial instruments used to finance the preparation, investigation, planning and
other necessary measures concerning the Fixed Link.
According to Section 4(2) of the Construction Act, Femern A/S benefits from a State
guarantee covering the obligations of Femern A/S in relation to loans and other
financial instruments used to finance and refinance the planning, construction,
operation and other necessary arrangements for the purpose of construction and
operation of the Fixed Link.
Femern A/S, similar to other public undertakings that obtain loans covered by a State
guarantee, will be required to pay a guarantee premium to the Danish State, as
notified in 2014 amounting to 0.15% per annum on the outstanding debt covered by
the guarantee.
The State guarantee covers the obligations of Femern A/S in relation to loans and
other financial instruments used to finance and refinance the planning, construction,
operation and other necessary arrangements for the purpose of planning, construction
and operation of the Fixed Link.
The State can also decide to guarantee other financial contracts of Femern A/S used
in connection with the project financing (such as swaps)
42
. The Danish authorities
explained that the Danish state might provide guarantees for derivative transactions.
Those guarantees enable Femern A/S to obtain cheaper rates for its derivatives since
the counterparty does not face the risk that Femern A/S will default on its obligations
stemming from the derivatives contract. Similarly, if Femern A/S is required posting
collateral for those derivatives it can also draw on those guarantees.
Finally, the guarantee covers other financial obligations assumed by Femern A/S in
connection with the construction phase
43
.
The State guarantee can only be used to cover loans that Femern A/S obtains in order
to finance the Fixed Link. As a special purpose company, Femern A/S cannot obtain
loans for or engage in any other activity than the financing, planning, construction
and operation of the Fixed Link.
(57)
(58)
(59)
(60)
(61)
(62)
(63)
41
42
43
See Section 7(3)(5) of the Planning Act and Section 4(2) of the Construction Act.
Section 4(2) in combination with Section 1 of the Construction Act.
Section 4(4) in combination with Section 1 of the Construction Act.
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(64)
As mentioned in the Opening decision, the complainants argued that due to the State
guarantee, Femern A/S enjoys the same credit rating as the Danish State (AAA),
which allows it to obtain financial terms for its loans that are significantly better than
otherwise available on the financial market. In addition, they argue that it appears
from the Planning and Construction Acts that the State guarantees are unlimited in
time and amount and in effect prevent the possibility of Femern A/S going bankrupt.
Moreover, they fulfil none of the conditions mentioned in the Guarantee Notice
44
that
could exclude the existence of State aid.
The complainants also argued that every time Femern A/S enters into a new financial
agreement, a new guarantee is granted, involving a new
ad hoc
aid measure.
State loans
As to the notified financing model, Femern A/S is also entitled to obtain State loans
as an alternative way of raising funds
45
. The Danish authorities indicated that the
interest rate on State loans corresponds to the State’s own loan terms
46
with an
additional loan margin of, as notified in 2014, 0.15%.
As mentioned in the Opening decision, the complainants argued that the Planning
decision did not authorise State aid in the form of State loans. According to them, the
Minister of Finance proceeded to the grant of State loans and granted this form of aid
for a much higher amount than authorised by the Planning decision. According to the
complainants, during the planning phase of the project, the State granted loans to
Femern A/S and A/S Femern Landanlæg, which in total would amount to
EUR 533 million
47
. The Danish authorities submitted that the initial planning budget
of EUR 194 million was increased in 2010, 2011 and 2013 to a total budget of
EUR 684 million (2008 prices), out of which EUR 534 million concerned the
planning phase of the Fixed Link (the rest concerned the hinterland connections).
Femern A/S contracted State loans to cover those expenses. Those budget
adjustments were approved by the Danish Parliament’s Finance Committee.
The complainants further argued that the State loans as intended have no fixed
repayment period and are, therefore, unlimited in time. In the absence of such a
period, Femern A/S can continuously delay the repayment of the initial loans by
successively obtaining new loans to refinance the initial ones.
In November and December 2018, when the Construction decision was still valid,
Femern A/S obtained State loans for a nominal value of DKK 7.4 billion
(EUR 1.0 billion) in order to ensure the necessary funding for initiating the
construction phase. Those loans have been disbursed in the period November 2018
–
April 2019.
(65)
2.4.3.
(66)
(67)
(68)
(69)
44
45
46
47
Commission Notice on the application of Articles 87 and 88 of the EC Treaty to State aid in the form of
guarantees, OJ C 155, 20.6.2008, p. 10.
See Section 7(4) of the Planning Act and Section 4(3) of the Construction Act.
Fixed on the day when the loans are obtained and fixed by the market conditions applicable on that
moment.
According to Scandlines, the initial amount of EUR 187 million was increased four times up to 2013.
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(70)
The complainants also argued that every time Femern A/S raises a new State loan, a
new measure is granted, involving a new
ad hoc
aid measure.
Loans for promotional/marketing/information activities
As mentioned in the Opening decision, Scandlines argued that Femern A/S had
undertaken a wide range of promotional and marketing activities
48
either by itself, or
through the use of contractors, consultants
49
and direct suppliers. Scandlines also
indicated that, as Femern A/S for the time being has no source of income beyond EU
funding, the financing of this type of activities constituted State aid, which would be
unlawful and incompatible. Alternatively, the alleged aid in question should be
considered as misuse of the aid authorised under the Planning decision.
In this respect, the Danish authorities had, in the context of the preliminary
investigation procedure, submitted that Femern
A/S’s information activities fall
within the scope of its tasks as defined in the legal framework regulating its activities
as a publicly owned company, on behalf of the Ministry of Transport. When the State
implements such big infrastructure projects, the relevant public entities have the
obligation to inform the public in the broadest manner, so that the citizens know what
the infrastructure project is about, how long the construction phase will last, as well
as the benefits that will derive from the State’s decision to construct this
infrastructure. Thus, in their view, those activities form part of the public task of the
State to inform its citizens and do not constitute promotional and marketing
activities, as at this stage the operation of the Fixed Link lies in a distant future.
Therefore, their financing would not constitute State aid. The Danish authorities
further detailed that for the years 2014 and 2015, the information activities were
financed partly by EU funding through the Commission’s TEN-T
program and partly
through State loans. In 2014, the activities received full EU funding (50% of the
costs) and in 2015, the activities received a limited amount of EU funding.
Femern A/S has not received EU funding for the information activities in 2016.
Hence, in 2016, those activities
–
like the other activities of Femern A/S
–
have been
financed by obtaining State loans. In 2017, Femern A/S has received EU funding
from the CEF program and hence information activities were partly funded by EU
and partly by State loans.
(71)
(72)
48
49
Such as operation of a press department and 2 information centers (in Rødbyhavn and in Burg on the
German island of Fehmarn) and a video channel, organisation and participation in competition events,
information actions, publications in media and websites, preparation and dissemination of scientific
information to producers, processors and marketers, consumer targeted advertising campaigns,
sponsorship of marathons and football tournaments.
Eg. contract concerning “monitoring of media coverage” (2014), marketing management and
consultancy services contract (2017).
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2.4.4.
(73)
Special tax measures
The Opening decision further noted
Scandlines’ concern that Femern
A/S is subject
to a special tax regime under the Danish tax law, which was originally introduced by
the Planning Act.
Section 9 of the Planning Act allowed Femern A/S to carry forward losses year on
year without any restrictions. At the outset, this was consistent with the rules that
apply to undertakings in general in Denmark. However, on 1 January 2013, Danish
tax law introduced
50
a limitation on the amounts of historical losses
51
carried forward
that can be deducted in a single year. According to this provision, although the right
to carry forward losses was not limited in time, the amount of losses that may be
carried forward and deducted from profits of subsequent years is limited annually to
DKK 7.5 million
52
(EUR 1.0 million). If a loss remains, this can only be deducted up
to 60% of the positive taxable income in excess of DKK 7.5 million. However, by
virtue of the special provisions of the Planning Act, this limitation did not apply to
Femern A/S, which retained the right to unlimited carry-forward of historical losses.
This right was abolished at the end of 2015
53
.
The Danish authorities submitted, in the context of the preliminary investigation
procedure, that during the period 2013-2015, Femern A/S had no actual financial
advantage, as in practice such measure could only be used in later phases of the
project, i.e. when the project would generate taxable profit. The Danish authorities
further clarified that in this period, Femern A/S used all losses incurred to reduce
taxable income at group level in the same financial year. Other Danish companies
within a group could have done the same according to the general tax rules.
Pursuant to sections 12 and 13 of the Sund & Bælt Act
54
, the annual depreciation rate
for the assets of the companies belonging to Sund & Bælt, such as Femern A/S, was
set at 6% of the initial acquisition costs. The total construction costs of the Fixed
Link could be considered as initial acquisition costs. This means that a single general
rule on depreciation would be applied to all assets of Femern A/S. The 6%
depreciation rate for Femern A/S would apply until the income year in which the
total sum of the depreciation exceeds 60% of the initial acquisition costs (i.e. a 10-
year period), as from which point the annual depreciation rate would be reduced to
2%.
2.4.4.1. Loss carry forward
(74)
(75)
2.4.4.2. Depreciation of assets
(76)
50
51
52
53
54
See section 12, subsection 2 of Act No 591 of 18 June 2012 amending Danish act on Corporation tax.
Losses incurred in previous financial years.
2010 values
–
the amount is indexed on an annual basis (with an exception for the period 2010-2013).
Section 9 of the Planning act was abolished by Act no 581 of 4 May 2015, which entered into force on
1 January 2016 concerning the taxation rules.
See Sections 13 and 14 of Act n° 588 of 24 June 2005, Lov om Sund og Bælt Holding A/S (Lov nr. 588
af 24/06/2005)
(‘Sund & Bælt Act’).
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(77)
According to the Danish authorities, the special depreciation rules have also been
repealed since 1 January 2016 through an amendment of the Sund & Bælt Act
55
.
Femern A/S is subject to mandatory joint taxation with Sund & Bælt Holding, in
accordance with the general joint taxation regime applicable to all Danish
undertakings within a group. According to article 31 of the Danish Act on
Corporation Tax a ‘group’, all companies of which are established in Denmark, must
be taxed in accordance with the provisions on mandatory group taxation. No specific
rules apply to Femern A/S in that respect.
The complainants argued that the above tax measures in favour of Femern A/S
constitute incompatible State aid, which, up to the point the relevant provisions were
repealed, was designed to be unlimited in time and amount, and which provided an
advantage to the company separate from the other State measures, which has to be
assessed on its own merits.
Free use of state property
According to Section 8 of the Fehmarn Belt Treaty, Germany and Denmark shall
make available the necessary areas of land for the construction and operation of the
Fehmarn Belt Fixed Link project (Section 8, subsection 1), including the necessary
water areas and seabed, free of charge (Section 8, sub-section 2).
The Danish State will make available to Femern A/S free of charge the water areas
and the seabed, which are necessary for the preparation, examination and planning
56
,
as well as the construction and operation
57
of the Fixed Link.
As mentioned in the Opening decision, Scandlines argued that through those
provisions, Femern A/S benefits from a financial advantage as, in their absence, it
should normally pay a market fee for the use of the water areas and the seabed.
However, the Danish authorities submitted that there is no general rule or principle in
Danish law requiring companies in a similar factual and legal situation as
Femern A/S to pay fees to the State for making use of seabed and water areas.
Hence, the same free access principle applies to other toll funded transport
infrastructures in Denmark (such as the Øresund Fixed Link and the Great Belt Fixed
Link). Similarly, though not in a directly comparable situation, no fees are paid to the
Danish State by ferry operators or other ship freight companies for crossing any sea
areas under Danish jurisdiction. In addition, the harbours pay no fees for using the
seabed.
2.4.4.3. Joint taxation regime
(78)
(79)
2.4.5.
(80)
(81)
(82)
(83)
55
56
57
Amendment introduced in Act no 581 of 4 May 2015.
See Section 16 of the Planning Act.
See Section 45 of the Construction Act.
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2.4.6.
(84)
Railway fees
Femern A/S is authorised to charge the railway operators for use of the railway
connection on the Fixed Link. The Ministry of Transport will set the level and
principles for the regulation of railway companies’ payment to Femern
A/S for the
use of the rail line of the Fixed Link
58
.
The Opening decision noted the concern of Scandlines that the State, via its own
railway operator, Danske Statsbaner
(‘DSB’)
59
, will annually pay Femern A/S a
share of the overall fees of DKK 350 million (EUR 46.9 million) for an undefined
period of time. As it would seem that this fee would apply irrespective of the number
of trains using the Fixed Link, without an adjustment mechanism and for an
undefined period, the complainant indicated that this would involve an economic
advantage to Femern A/S.
The Danish authorities submitted that the preparatory notes to the Construction Act
60
(‘preparatory notes to the Construction Act’) provide that the level of the railway
fees will also reflect a part of the construction costs of the Fixed Link on a long term
basis and not only costs directly incurred by the operation of the rail link. Moreover,
they will be determined in accordance with Directive 2012/34/EU of the European
Parliament and of the Council
(‘Directive 2012/34/EU’)
61
ensuring that
overcompensation is avoided.
Further, the Danish authorities expect that revenues from the railway use will
account for about 15% of the total operating income, while the construction costs for
the railway part of the Fixed Link account for 51%, which means that the users of the
road connection will ultimately pay for a part of the railway connection.
Since all railway operators using the Fixed Link are supposed to pay the railway fees,
the Danish authorities indicated that the charging of railway fees would not
constitute use of State resources granted to Femern A/S, as the transfer of funds from
railway operators to Femern A/S would have no impact on the State budget.
G
ROUNDS FOR INITIATING THE PROCEDURE
The Commission initiated the formal investigation procedure on 14 June 2019. In the
Opening decision adopted on that date, it provided its preliminary assessment of the
measures and raised doubts as to their compatibility with the internal market.
The Commission could not, at that stage, conclude whether Femern A/S could be
considered as an undertaking. More specifically, given the particular situation in
which Femern A/S operates, the argumentation submitted by the Danish authorities
and the complainants and the case law mentioned, the Commission had doubts, as to
(85)
(86)
(87)
(88)
3.
(89)
(90)
58
59
60
61
See Section 41 of the Construction Act.
Danish State Railways.
Lov om anlæg og drift af en fast forbindelse over Femern Bælt med tilhørende landanlæg i Danmark
(Lov nr. 575 af 4. maj 2015).
Directive 2012/34/EU of the European Parliament and of the Council of 21 November 2012
establishing a single European railway area, OJ L 343, 14.12.2012, p. 32.
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whether Femern A/S could be considered as being engaged in an economic activity
(during the planning, construction and operational phase of the project) and thus
qualify as an undertaking. The Commission also had doubts on whether the
promotional/marketing/information activities should be considered as a public task or
as an economic activity. Furthermore, it was not in a position to conclude definitely
on the existence of a selective advantage for some of the aid measures.
(91)
The Commission could not conclude on whether the State guarantees and State loans
should be considered as an aid scheme or whether they should be considered as
individual aids, granted when the Planning and the Construction Acts entered into
force, or as individual aid granted each time a financial transaction of Femern A/S is
implemented by the national authorities.
As to the compatibility assessment and in light of the Court judgments, the
Commission took the preliminary position that the Fixed Link project constituted an
important project of common European interest. However, the Commission raised
questions as to whether the aid should be partly considered as operating aid. The
Commission also had difficulties in establishing the necessity of the aid. Given the
uncertainties around the appropriate period for the calculation of the internal rate of
return (‘IRR’) of the project and the time that had elapsed since the 2014 notification,
the Commission considered that it would need to assess in detail the benchmark
weighted average cost of capital (‘WACC’) and project’s IRR level proposed by the
Danish authorities on the basis of updated and appropriate assumptions. In addition,
the Commission had questions as regards the proportionality of the measures under
examination given the complexity to establish the funding gap and the absence of the
elements that would allow a proper quantification method of the aid involved or at
least an appropriate methodology and relevant limitations. Although the Commission
was not in a position to conclude on the effect on competition of the additional aid
measures, it tentatively concluded that the notified aid measures should only have
limited negative effect on competition and trade that cannot outweigh the obvious
positive effects of the project for the Union as a whole. Finally, the Commission
considered it was not in a position to decide on the specific compatibility condition
relating to the conditions for the mobilisation of the State guarantees and could not
conclude that Denmark complied with the transparency condition provided for in
paragraph 45 of the Communication from the Commission - Criteria for the analysis
of the compatibility with the internal market of State aid to promote the execution of
important projects of common European interest (‘IPCEI Communication’)
62
.
C
OMMENTS FROM INTERESTED PARTIES
All of the interested parties that have submitted comments to the Opening decision
expressed concern over the alleged State aid to Femern A/S. The comments received
from Danish Ferry Association and ECSA are general in nature.
(92)
4.
(93)
62
OJ C 188, 20.6.2014, p. 4.
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(94)
VDR stressed in particular that Femern A/S should be considered as an undertaking,
engaged in an economic activity. As Femern A/S was tasked with the construction
and operation of the Fixed Link in the absence of a public procurement procedure, it
receives an advantage. Furthermore, VDR doubts the existence of an incentive effect,
considers that there were other less costly alternatives available, requests the
Commission to limit the aid and considers that there is a high risk that the Fixed Link
project will unfairly distort competition.
Rostock Port first argues that all the conditions for State aid under Article 107(1) of
the Treaty are met. Rostock Port further considers that the effects and impact of the
project were not properly assessed and that the impact on their own activities was
underestimated. The traffic forecast, in particular concerning the German hinterland
connections, would be incomplete, not plausible and contradictory. In addition, the
effects of border control and relocations (to the benefit of the Great Belt or Øresund
links) would be ignored. Therefore, for all ports next to the Fehmarn Belt Fixed Link,
on both sides of the Baltic Sea, negative effects of the project would not be valued
properly.
The comments from Aktionsbündnis gegen eine feste Fehmarnbeltquerung e.V.,
Rederi Aktiebolaget Nordö-Link, Stena Line, Trelleborg Hamn AB, FSS and
Scandlines are similar to each other and they broadly reflect the overall arguments
raised by Scandlines. For the ease of reading, those comments will therefore by
referred to below as comments from ‘Scandlines et al.’. The reply from NABU
focuses on the compatibility analysis, and it is to a large extent in line with the
comments from Scandlines, complemented by an environmental point of view.
Comments on the existence of aid
Notion of undertaking
Scandlines et al. state that Femern A/S should be considered as an undertaking in the
sense of Article 107(1) of the Treaty, since Femern A/S is engaged in an economic
activity by offering transport services in return for remuneration. To this end,
Scandlines et al. refer to the 2014 decision of the Commission as regards the
financing of the construction of the Øresund Bridge (‘2014 Øresund decision’)
63
,
where the Commission found the very same activities carried out by the Øresund
Bridge Consortium to constitute economic activities.
Furthermore, Scandlines et al. argue that Femern A/S does not provide services
connected to the exercise of public powers. According to settled case law, an activity
is connected to the exercise of public powers only when the activity serves a public
interest objective, which is
typically
that of a public authority
64
. This is not the case
for any of the activities carried out by Femern A/S.
(95)
(96)
4.1.
4.1.1.
(97)
(98)
63
64
Commission decision of 15.10.2014 in case SA. 36558 (2014/NN) and SA. 38371 (2014/NN)
–
Denmark, SA. 36662 (2014/NN)
–
Sweden, Aid granted to Øresundsbro Konsortiet, OJ C 437,
5.12.2014, p. 1.
To this end, reference is made to the Judgment of the Court of Justice of 19 January 1994,
SAT
Fluggelsellschaft mbH v Eurocontrol,
C-364/92, ECLI:EU:C:1994:7, paragraph 17.
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(99)
Moreover, Scandlines et al. refer to the case law of the European Courts and the
Commission decision-making practice, arguing that it is irrelevant whether
Femern A/S can determine its own prices or is subject to state-regulated prices.
Furthermore, Femern A/S retains a wide discretion to grant steep discounts with the
effect that the Minister for Transport does not determine the exact consideration but
only sets maximum prices.
As the activities of Femern A/S are considered economic in nature, Scandlines et al.
consider that in addition to the funding for planning, constructing and operating, also
the funding for promotional/marketing/information activities constitutes State aid.
Scandlines et al. further emphasize that Femern A/S has performed clear marketing
activities, which go well beyond informing the general public about an infrastructure
project.
Selective advantage
Scandlines et al. note that according to the Commission’s decision-making
practice,
the direct appointment of Femern A/S as the sole constructor and operator of the
Fixed Link, without a tender, in itself involves an economic advantage. Scandlines et
al. argue that each aid measure listed in section 2.4. of the Opening decision provides
a selective advantage to Femern A/S.
As regards the capital injections, State guarantees and State loans, Scandlines et al.
argue that the aid element consists of the entire amount guaranteed or lent by the
State, rather than the difference between the premium or interest rate paid by
Femern A/S and the market conform premium or interest rate. This argument is
based on the reasoning that Femern A/S would be in such a weak financial position,
that no private lender of guarantor would offer any loans or guarantees. Scandlines et
al. deduce this weak financial position from their interpretation of the Enquiry of
commercial interest in that no market operator would grant guarantees or loans to
Femern A/S. On this basis, Scandlines et al. conclude that no market rate exists and
the aid element is therefore the entire guarantee and the entire loan amount.
As regards the railway fees, Scandlines et al. argue that the only relevant parameter
for price setting is costs, as no competitor is offering a similar service after the
removal of railway tracks to the Scandlines’
ferries. Since the Danish State will pay
Femern A/S an annual railway fee of DKK 350 million (EUR 46.9 million) through
the State-owned railway operator DSB, without any downward adjustment
mechanism regarding the number of trains actually using the Fixed Link, the price is
not cost based. FSS adds that the amount of DKK 350 million constitutes a specific
share of the overall annual revenue generated from rail fees and that the application
of this fee is not limited in time.
As regards the tax measures, Scandlines et al. maintain that all measures involve an
advantage. They further note that the tax measures have been applied both to
planning activities and to construction works.
As regards the free use of State property, Scandlines et al. argue that Femern A/S
benefits from free use of water areas and part of the seabed, as explicitly provided for
in the Planning and Construction Acts. They consider the claim of Denmark that in
general no fees are to be paid to the Danish State by ferry operators or other ship
freight companies for crossing any sea areas, as contradictory to the inclusion of the
said provision in the Acts. FSS considers the fact that companies are actually not
paying charges for the transit through national sea areas as irrelevant.
(100)
4.1.2.
(101)
(102)
(103)
(104)
(105)
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4.2.
(106)
Comments on the classification of aid
Scandlines et al. disagree with the reasoning in the Opening decision, which
mentions three possible classifications of the aid related to state guarantees and
loans: namely (i) an aid scheme, (ii) individual aids, granted when the Planning and
Construction Acts entered into force, or (iii) individual aid granted each time a
financial transaction of Femern A/S is implemented by the national authorities.
Scandlines et al. argue that the aid is granted exclusively to Femern A/S for a
specific project and therefore cannot be considered as a scheme but should be
considered as individual aid (i.e.
ad hoc
aid).
In the interpretation of Scandlines et al., the argument the Commission made in
recital (132) of the Opening decision concerning the State’s obligation to ensure the
funding of the project was an argument in favour of the classification as an aid
scheme. Scandlines et al. consider that this would contradict the Procedural
Regulation and the Øresund judgment
65
.
Scandlines et al. conclude that, since the aid cannot be classified as an aid scheme, it
must necessarily constitute a series of
ad hoc
aid, granted each time Femern A/S
concludes a financial transaction for the financing of the project (i.e. option (iii)).
Scandlines et al. did not put forward further arguments or evidence as to why the ad
hoc aid is granted each time an individual transaction is concluded, and not at the
time when the Planning or Construction Acts entered into force (i.e. option (ii)).
FSS considers that the aid cannot be considered as an aid scheme but does not
comment on the aid granting moment(s).
Comments on the compatibility assessment
Qualification of the project in the light of IPCEI rules
Scandlines et al. argue that the Commission wrongly accepted that the Fehmarn Belt
Fixed Link project is a project of common European interest. NABU argues that the
fact that the project is designated as a TEN-T Network project (for the rail part) and
is entitled to EU funding is not sufficient to demonstrate common European interest.
Scandlines et al. consider that the positive socio-economic return of the Fixed Link
relied upon in the Opening decision is based on inconsistent and outdated studies
from 2015
66
. In particular, Scandlines et al. emphasise that the analysis relied upon in
the Opening decision does not adequately take into consideration the impact of ferry
competition, and consider that the traffic forecasts underlying the calculated socio-
economic return are outdated. To this end, Scandlines et al. refer to new studies by
PWC
67
(‘PWC report’) and Knud Erik Andersen (‘Knud Erik Andersen study’)
68
of
(107)
(108)
(109)
(110)
4.3.
4.3.1.
(111)
65
66
67
Judgment of the General Court of 19 September 2018,
HH Ferries and Others v Commission,
Case T-
68/15, ECLI:EU:T:2018:563.
Scandlines et al. refer to the “Original study” of 5 January 2015 and the “Updated study” of 27 March
2015 which are the cost-benefit analyses prepared by Incentive and commissioned by the Danish
Ministry of Transport.
Scandlines et al. refer to a PWC report, dated 29 January 2019.
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resp. January and August 2019. The PWC report was prepared for the German
authorities in the context of issuing a German plan approval for the Fehmarn Belt
Fixed Link project. It focused on the ferries’ competitiveness after the opening of the
Fixed Link. On the basis of the Knud Erik Andersen study, Scandlines and Stena
Line argue that the costs of Scandlines are significantly overestimated in the studies
from 2015 as they imply that Scandlines would have been operating at a massive
loss. If the costs were properly determined, the socio-economic return of the
Fehmarn Belt Fixed Link project would be negative. Additionally, Scandlines and
Stena Line consider that the studies from 2015 are flawed due to increased costs of
the German hinterland which further reduces the socio-economic return. NABU
added that the studies do not take proper account of the impact on the environment.
(112)
Scandlines et al. further argue that the actual European net benefit of the Fehmarn
Belt Fixed Link is negative and that the rate of return of the Fehmarn Belt Fixed Link
is clearly well below 4%, which they consider as the established minimum return for
an infrastructure project to be undertaken in Denmark.
FSS did not comment on this element.
NABU considers that the Fehmarn Belt Fixed Link project does not deliver the
benefits claimed by the Danish authorities as it does not improve traffic conditions or
lead to the claimed timesavings and thus does not contribute positively to the
transportation between Germany and Scandinavia.
The grant of operating aid
In the view of Scandlines et al., operating aid is prohibited and cannot be authorised.
Scandlines et al. consider that operating aid is not related to a particular project phase
(such as the operating phase) but to the nature of the costs. Any aid covering
operating costs constitutes operating aid. Therefore, all relevant operating costs
should be excluded from the funding gap calculation. FSS adds that, in their
interpretation of the Øresund judgment, any loan taken out to refinance an earlier
loan automatically becomes operating costs and that therefore the aid for such
refinancing is prohibited. The authorization of any aid to Femern A/S can therefore
not cover costs for refinancing loans. In FSS’ view, the toll prices should be cost-
based and price dumping should be excluded. NABU did not comment on the
operating aid element.
Comments about the funding gap
Scandlines et al. claim that the funding gap as described in the Opening decision is
flawed for three reasons: 1) it includes inflated and ineligible costs relating to (i)
dividends paid to A/S Femern Landanlæg for the hinterland connections and (ii)
operating costs; 2) it includes artificially low revenues by (i) excluding the TEN-T
subsidies and (ii) by accepting that Femern A/S sets its tolls below costs; and 3) the
lifetime of the Fixed Link project is too short. Scandlines et al. consider that all those
(113)
(114)
4.3.2.
(115)
4.3.3.
(116)
68
Knud Erik Andersen, “Udfordringer
ved samfundsokonomisk analyse af transportprojekter”,
published
in the electronic journal “Artikler
fra Trafikdage på Aalborg Universitet”
(Proceedings from the Annual
Transport Conference at Aalborg University), ISSN 1603-9696.
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elements lead to an artificially high funding gap and thus to a maximum permissible
aid amount that is also too high.
(117)
As regards the eligible costs, Scandlines et al. recall that the Commission previously
held that, where an aided project involves both economic and non-economic
activities, only costs linked to the economic activity may be included, when
calculating the funding gap
.
On this basis, they argue that the hinterland costs and the
operating costs cannot be included in the funding gap, as those costs do not form part
of the Fixed Link project. Furthermore, as dividend payments are not a cost item but
distribution of profits, they cannot be included in the funding gap analysis. FSS adds
that the preparatory works that started in 2013 are construction costs and therefore
they cannot be authorized as eligible costs for planning purposes. Furthermore, in the
view of FSS, planning costs are not part of the construction costs as laid down in
Table 1 of the Opening decision.
As regards the revenues, Scandlines et al. claim that TEN-T subsidies are not
included in the 2014 analysis of the funding gap. Including those subsidies will result
in a significantly lower funding gap. In addition, revenues are artificially low due to
the fact that Femern
A/S’ toll prices are not cost-based but based on Scandlines’
ferry prices. The Commission must therefore require that during the period that
Femern A/S will benefit from State aid, the prices of the Fixed Link are set at a level
that reflects all its costs including serving its debt. This last element was not brought
forward by FSS. As to the lifetime of the project, Scandlines et al. recall that the
funding gap and IRR analysis should be based upon the lifetime of the investment
and not on the repayment period of 55 years, as also confirmed by the General Court.
It would appear from the website of Femern A/S that the lifetime of the tunnel is 120
years.
Aid amount and duration of the aid
According to Scandlines et al., the amount of aid is underestimated as it only refers
to the difference between the interest/premium rates paid by Femern A/S for the
State loans and State guarantees and the corresponding market rates.
Scandlines et al. further argue that the duration of the aid must be much shorter than
55 years. In addition, each State guarantee and State loan must be time limited. The
aid for Femern A/S must expire when the revenues can cover the costs of operations
and the costs related to the debt on marked-based terms. Scandlines et al. refer to the
annual reports of the Great Belt and the Øresund fixed links to suggest that each
individual State guarantee and State loan should be limited in duration to 4 to 5 years
after the opening of the Fixed Link and that the possibility to obtain the State
guarantees and State loans should also be limited to 4 to 5 years after the opening of
the Fixed Link.
Incentive effect
Scandlines et al. claim that Femern A/S initiated the construction works on the Fixed
Link in 2013 although the Danish authorities committed to grant the aid at the
earliest in 2015 with the adoption of the Construction Act. The aid to Femern A/S
therefore would not have the required incentive effect. Scandlines et al. further
criticise the Commission for finding that publicly owned companies should just be
exempt from the requirement that the aid has an incentive effect and allege that this
approach is an example of discrimination in favour of publicly owned companies,
contrary to Article 345 of the Treaty.
(118)
4.3.4.
(119)
(120)
4.3.5.
(121)
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4.3.6.
(122)
The counterfactual scenario
Scandlines et al. claim that several alternative projects did exist. Therefore, the
counterfactual analysis of the Commission cannot be based on the absence of an
alternative project. The fact that Femern A/S cannot decide itself on alternative
projects is irrelevant. Scandlines et al. consider the reference to the 2001 Enquiry as
wrong as it does not show that there are no alternative projects without aid. In
addition, the study is outdated since it is 17 years old and concerns a different
project. NABU further elaborated on the existence of alternative projects without aid.
NABU referred to a study by Hanseatic Transport Consultancy
(‘HTC Report’)
69
from 2019 and noted that the currently estimated traffic is way below the traffic level
estimated when the Fehmarn Belt Treaty was signed in 2008. Specifically, the HTC
report states that it is not possible to show where the traffic growth can be generated
for an economically viable use of the Fixed Link based on the current market data. In
addition, NABU referred to the HTC Report when stating that the current traffic
level will not even be reached due to structural cross border traffic problems. With
this in mind, NABU claims that the Commission must consider the alternative of
constructing a pure rail link combined with a ferry solution. This would be the least
expensive and best solution from an environmental point of view, in line with the
TEN-T objective of moving traffic from road to rail. Furthermore, NABU considers
that the alternative of a core-bored tunnel should be considered as an alternative for
an immersed tunnel solution. In addition, the environmental impact of the chosen
solution should be part of the cost-benefit calculations and alternative project
analysis by the Commission.
Internal Rate of Return and Weighted Average Cost of Capital
Scandlines et al. consider the IRR and WACC calculations to be wrong. The IRR
should be calculated over the lifetime of the project, not over 55 years, and non-
eligible costs should be excluded. The WACC of 11% is too high. According to
Scandlines et al., the WACC should range between 5.68% and 6.71%. Scandlines et
al. provided two studies further documenting their view on the WACC calculation,
on the one hand a study dating from February 2018 and on the other hand references
from Damodaran from 2014.
Prevention of undue distortion of competition and balancing test
Scandlines et al. claim that the Commission should assess how serious the distortion
of competition is. This analysis should go further than establishing the fact that the
aid distorts competition as this is already inherent in the qualification as State aid.
From the socio-economic report and the 2014 traffic forecast, it appears that
Femern A/S would be likely to hold significant market power and even have a
monopoly. In addition, Femern A/S is likely to abuse its market power. According to
Scandlines, the refusal of the Danish government to support an application for EU
4.3.7.
(123)
4.3.8.
(124)
69
Hanseatic Transport Consultancy (HTC),
“Bedarfsbezogene Verkehrsmarktuntersuchungen im Kontext
der geplanten Festen Fehmarnbeltquerung (FFBQ)”,
17 June 2019. The report is commissioned by
NABU.
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funding by Scandlines
70
and an alleged use of State aid to downgrade the access
roads to the harbour in Puttgarden means that the aid to Femern A/S unduly distorts
competition. Scandlines et al. further claim that there is a risk of overcapacity and
that the socio-economic return when the ferry service continues will be lower than
the Danish threshold of 4%.
(125)
4.3.9.
(126)
NABU added that the impact on the environment should be part of the balancing test.
The negative effects of the aid should not be limited to the distortion of competition.
Mobilisation conditions of the State guarantees
By reference to the Guarantee Notice, Scandlines et al. reminded the Commission
that it is not entitled to authorize aid in the form of State guarantees unless the
Commission knows beforehand what the conditions are for triggering those
guarantees. FSS requires that the Danish authorities make a commitment that the
conditions for the mobilisation of State guarantees will comply with the requirements
of the Guarantee Notice.
C
OMMENTS FROM
D
ENMARK
This section includes the comments of the Danish authorities to the Opening decision
and the comments of the Danish authorities on the submissions of the interested
parties which were submitted to the Danish authorities in a non-confidential format.
Overall, the Danish authorities do not agree with what is argued by the interested
parties. They provided further information and counter-arguments which are
summarized below.
Supplementary comments to the description of the Fehmarn Belt Fixed Link
project and the financing measures
The Danish authorities provided factual clarifications to the descriptive part in the
Opening decision. They also specified that what was labelled as ‘construction costs’
in Table 1 of the Opening decision includes the planning costs.
Furthermore, the Danish authorities provided clarifications on the capital injection
measure. In 2005, Femern A/S was established pursuant to Section 6 of the Sund &
Bælt Act. At the time of incorporation, the registered share capital of Femern Bælt
A/S (now Femern A/S) was DKK 10 million (EUR 1.3 million). The registered share
capital was paid at a premium of DKK 40 million (EUR 5.4 million), totalling
DKK 50 million (EUR 6.7 million). The capital contribution was made by Sund &
Bælt Holding A/S in accordance with Section 6 of the Sund & Bælt Holding A/S
Act. On 24 July 2009, the registered share capital of Femern Bælt A/S was increased
from DKK 10 million to DKK 500 million (EUR 67.0 million) by a cash capital
injection of DKK 460 million (EUR 61.7 million) made by Sund & Bælt Holding
A/S to Femern Bælt A/S and a “scrip issue” (in Danish: “Fondsemission”) of
5.
(127)
(128)
5.1.
(129)
(130)
70
Scandlines refers to its application for CEF funding to support its 2019-2020 technical feasibility
studies on the possibility to enable the harbours in Rødby and Puttgarden to handle ‘zero emission
freight ferries’ (“Capacity
upgrade for Sustainable Traffic Machines
–
Preparing for zero emission
operation”).
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DKK 30 million (EUR 4.0 million). The scrip issue constitutes a conversion of
Femern A/S’s equity reserves into share capital and thus entails
an increase of the
capital but not a capital injection. The cash capital contribution was made pursuant to
Section 7(2) of the Planning Act. Thus, the total amount of capital injected in
Femern A/S is DKK 510 million (EUR 68.4 million), DKK 500 million of which has
been injected (and registered) as share capital. No capital injections have been made
since 2009.
(131)
On the guarantees, the Danish authorities provided further background as to the
meaning of Section 4(4) of the Construction Act. According to this provision, the
State guarantee also covers other financial obligations incurred by Femern A/S in
connection with the construction of the Fixed Link. The Danish authorities explained
that this provision means that for example arbitration cases concerning works in
connection with the construction of the Fixed Link are covered by the government’s
guarantee. This provision does not extend to the operations phase. It functions like a
guarantee that the constructors will be paid in case of a failure by Femern A/S to pay.
Given that the construction costs are already covered by State loans or loans with a
State guarantee, it does not provide an additional advantage to Femern A/S.
The Danish authorities further provided the Commission with an overview of the
financing measures already in place.
On 19 November 2018, the Minister for Transport authorised Femern A/S, for the
first time, to obtain State loans with a view to finance construction costs. Such loans
were subsequently entered into in November and December 2018.
Comments on the existence of aid
The Danish authorities raised two main arguments to support their overall view that
the public financing of the Fixed Link does not fall within the scope of Article 107(1)
of the Treaty.
Specifically, the Danish authorities maintain that 1) the planning, construction and
operation of the Fixed Link are not ‘economic activities’, but an exercise of public
authority; 2) the positive and negative economic effects, which the Fixed Link may
produce on adjacent markets and in the EU in general, are not a ‘distortion of
competition’.
The Danish authorities further consider that, in any event, Femern A/S does not carry
out an economic activity before it starts operating as it does not offer any services on
the market.
Femern A/S exercises public power
In the view of the Danish authorities, the planning, construction and operation of the
Fixed Link are classic examples of an exercise of public planning power, which are
not, and ought not to be, covered by Article 107(1) of the Treaty. Consequently, the
State measures, including notably the State guarantee and State loans granted in
favour of Femern A/S fall outside the scope of EU competition policy.
Contrary to the methodology used by the Commission in the Opening decision, the
Danish authorities submit that an overall assessment
–
in light of the nature, aim and
applicable rules
–
of Femern
A/S’ activities should lead to the conclusion that
Femern A/S exercises public power
–
or at least that Femern A/S exercises public
power until it starts operation.
(132)
(133)
5.2.
(134)
(135)
(136)
5.2.1.
(137)
(138)
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(139)
The Danish authorities argue that the aim of connecting the Danish and German
State-owned road and rail infrastructures is much wider than other public
investments in, for example, the utility sector. Similarly, the nature of Femern A/S
and its activities are also fundamentally different from, for example, ferry operators
and ferry activities, as Femern A/S is created with the sole purpose to implement the
Danish
State’s decisions regarding the construction of a particular infrastructure (the
Fixed Link). Femern
A/S is thus a Special Purpose Vehicle (‘SPV’) which is not
subject to a profit maximisation standard and not allowed to carry out unrelated
activities according the applicable rules.
According to the Danish authorities, an appreciation of those wider policy
considerations underlying the setting up of Femern A/S supports the notion that
Femern A/S does not carry out economic activities but rather exercises public power.
The fact that a user fee is charged does not, in itself, change the nature of that activity
as it must be examined whether the charging of a fee can be separated from the
exercise of public authority. It is only where those two activities can be separated
that the charging of a fee in exchange for a service will be considered an economic
activity
71
.
According to the Danish authorities, it is clear that the collection of charges by
Femern A/S, which according to law are determined by the Minister for Transport,
cannot be separated from the exercise of activities connected to public authority,
such as providing access to and maintaining State owned general road and rail
infrastructure. Thus, all activities by Femern A/S should be seen together as an
exercise of public authority.
The Danish authorities also clarify that the Minister for Transport has not yet decided
how the user fees will be established or what the level of those fees should be. The
fees referred to in the Opening decision and in the comments of the interested parties
is simply a reflection of budgetary assumptions. It is further noted, that the main aim
and function of the user fees is to balance public budgets.
In the event that the Commission cannot accept that all Femern
A/S’ activities should
be considered together as an exercise of public power, the Danish authorities submit
that only the operation can reasonably be considered an economic activity. In the
view of the Danish authorities, the rationale in the Leipzig-Halle Judgment
72
does not
apply in this case, inter alia because it concerned the capacity increase of an already
existing economic activity in a liberalised market.
(140)
(141)
(142)
(143)
(144)
71
72
The Danish authorities refer to the Judgment of 19 January 1994,
SAT Fluggesellschaft v Eurocontrol,
C-364/92, ECLI:EU:C:1994:7, paragraph 28, to the Judgment of 18 March 1997,
Diego Calí and Figli
Srl v. Servizi Ecologici Porto di Genova SpA,
C-343/95, ECLI:EU:C:1997:160, paragraph 24 and more
generally to Commission Notice on the notion of State aid as referred to in Article 107(1) of the Treaty
on the Functioning of the European Union, C/2016/2946, OJ C 262, 19.7.2016, p. 1, paragraph 15.
Judgment of the General Court of 24 March 2011,
Freistaat Sachsen and Land Sachsen-Anhalt and
Others v Commission,
Joined cases T-443/08 and T-455/08, ECLI:EU:T:2011:117; upheld on appeal in
Judgment of the Court of Justice of 19 December 2012,
Mitteldeutsche Flughafen AG and Flughafen
Leipzig-Halle GmbH v Commission,
C-288/11 P, ECLI:EU:C:2012:821.
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(145)
The Danish authorities further request the Commission to carefully assess when the
period of potential economic activities would start and they refer to case law arguing
that whenever it is possible to separate activities, each of those activities should be
subjected to a separate State aid analysis.
In addition, they argue that it makes little sense to assume that when the Construction
Act entered into force and authorised Femern A/S to construct and operate the Fixed
Link, all financing support granted to Femern A/S prior to that date became State aid
retroactively.
The Danish authorities further rejected the argument of Scandlines et al. that the
leeway for Femern A/S to offer certain discounts demonstrates that the Minister does
not fix the exact level of the user fees. The Danish authorities argue that Femern A/S
has no freedom to set the fees as it wishes, but only a limited freedom to adjust
certain fees downwards to the extent that this does not affect the level of the fees
significantly. They further note that Femern
A/S’ freedom to amend and introduce
new discount schemes is also limited by the Eurovignette directive
73
.
Femern A/S' information activities
In the Danish authorities’ view, there is no doubt that Femern A/S’ information
activities are a public task and not an economic activity. One of the tasks imposed on
Femern
A/S in the Planning Act is ‘information activities’ which should be
conducted in cooperation with local municipalities. This is a task that no private
commercial infrastructure operator has. It is an inseparable part of the public tasks
connected with the planning and construction of public infrastructure projects that
affect the local community. Furthermore, the Danish authorities note that if those
information activities are not considered as a public task, they should be considered
as inextricably linked to the realisation of the project and therefore eligible under the
IPCEI Communication.
Femern
A/S’ activities do not distort competition
In the view of the Danish authorities, the Commission must carry out a specific
assessment of whether competition is distorted or not. This assessment should
include a thorough analysis of the organisation of the State road infrastructure in
Denmark to enable a determination of whether State roads are in a real competitive
relationship with other modes of transport such as ferries, airlines, train operators etc.
The Danish authorities do not consider the Fixed Link to be in direct competition
with, for example, ferries, in the same way as railway infrastructure is not in direct
competition with roads, busses or airports. The Danish authorities specifically refer
to paragraph 220 of the Commission Notice on the notion of State aid as referred to
in Article 107(1) of the Treaty on the Functioning of the European
Union (‘Notice on
the notion of State aid’)
74
and the Infrastructure Analytical Grid for Roads, Bridges,
(146)
(147)
5.2.2.
(148)
5.2.3.
(149)
(150)
73
74
Directive 1999/62/EC of the European Parliament and of the Council of 17 June 1999 on the charging
of heavy goods vehicles for the use of certain infrastructures, OJ L 187, 20.7.1999, p. 42, article 7b.
Commission Notice on the notion of State aid as referred to in Article 107(1) of the Treaty on the
Functioning of the European Union, C/2016/2946, OJ C262, 19.7.2016, p. 1.
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Tunnels and Inland Waterways
75
. They further note that the Fixed Link is available
to all users on non-discriminatory terms and that it is not constructed to favour a
specific undertaking or sector.
(151)
On this basis, the Danish authorities submit that any possible economic effects,
which Femern
A/S’ activities may have on other commercial operators cannot be
considered a distortion of competition in the sense of Article 107(1) of the Treaty. It
is especially clear, that Femern A/S does not distort any competition on any market
while it plans and constructs the Fixed Link.
Finally, the Danish authorities note on this point that the case for Femern A/S is very
different from the factual circumstances relating to the construction of an additional
runway in the Leipzig-Halle Airport
76
, as Femern A/S does not supply services on a
market until the infrastructure is open for traffic. Leipzig-Halle Airport competed on
the regional airport market against other airports to attract customers and when a
need to expand arose, it received State aid to construct new infrastructure.
Comments on the classification of aid
The Danish authorities consider that Femern A/S obtained a legal right to finance its
activities by the adoption of the Construction Act on 4 May 2015, as the act clearly
assumes that Femern A/S will finance its debt obligations with State guaranteed
loans and State loans. Therefore, the aid was granted at this point in time. However,
they note that the State guarantees and the State loans could not be used and thus
could not produce any economic advantage for Femern A/S before the Minister for
Transport instructed Femern A/S to do so.
Thus, the Danish authorities disagree with Scandlines et al., who argue that the aid
related to State guarantees and State loans constitute a series of ad hoc grants.
However, the Danish authorities note that, even if the aid were to be considered as a
series of ad hoc grants, nothing prevents the Commission from carrying out a
compatibility assessment and approving all those future grants at once and on an ex-
ante basis. The Danish authorities also submitted more detailed information on the
absence of discretion of the Minister of Finance as to the specific loan agreements.
They further note that the position of Scandlines et al. appears to entail that
Femern A/S should instead at the outset take up one big loan with a State guarantee
up to the maximum permitted limit. According to the Danish authorities, this would
not be a suitable way to minimise the aid and thus would be contrary to the general
requirements of the Commission’s compatibility assessments such as
provided by
paragraph 28 of the IPCEI Communication.
The Danish authorities further consider that the standstill obligation has been
respected. They consider that the legal basis of all activities carried out prior to the
entry into force of the Construction Act has been Section 2 of the Planning Act.
Since the adoption of the Planning Act, the Danish Parliament’s Finance Committee
has subsequently granted its consent to increase the budget for the planning phase
(152)
5.3.
(153)
(154)
(155)
(156)
75
76
https://ec.europa.eu/competition/state_aid/modernisation/grid_roads_en.pdf
Cf. footnote 72.
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three times. Each time, the consent related to specific planning activities covered by
section 2 of the Planning Act (the so-called
‘preparatory works’).
(157)
When the Construction Act was adopted, the Minister for Transport instructed
Femern A/S not to initiate the construction phase and thus not to sign construction
contracts before being authorized to do so by the Minister. In November and
December 2018, Femern A/S raised State loans to ensure the necessary funding for
initiating the construction phase. However the Danish authorities explained that it
was only on 26 March 2019 that Femern A/S was authorized to start the first and
specified construction works concerning the Fixed Link. Femern A/S has not yet
started any of these works.
Comments on the alleged aid measures
Railway fees
The Danish authorities maintain that the railway fees do not entail State aid to
Femern A/S, and thus they reject the arguments put forward by Scandlines et al. The
railway fees constitute a future source of income for Femern A/S, which
–
as the
road tolls
–
will be regulated by the Minister for Transport. Specifically, the Minister
sets out rules regarding the level and principles for the regulation of the fees that
users of the Fixed Link (i.e. railway operators) will be charged. These fees will be
determined in accordance with Directive 2012/34/EU establishing a single European
railway area. The Danish authorities stress that the railway fees for Femern A/S will
be collected on behalf of Femern A/S by Rail Net Denmark
77
and not
–
as assumed
in the Opening Decision
–
by Femern A/S itself. Rail Net Denmark collects those
fees on the entire Danish State-owned railway infrastructure. Therefore, it has been
considered most expedient to ask Rail Net Denmark to do the same on the Fixed
Link. The funds are directly transferred to Femern A/S and Rail Net Denmark cannot
dispose of the funds for its own purposes. The fees collected for using the Fixed Link
and transferred to Femern A/S will be documented in the annual State budgets. The
fees collected by Rail Net Denmark are a payment for a service and not a
levy/charge. Rail Net Denmark is as the Danish Railway infrastructure manager
responsible for all costs related to the operation of the Danish railway infrastructure.
Tax measures
The Danish authorities note that Femern A/S has not at any time used the previously
applicable rules regarding depreciation of assets and carry forward of losses. Thus,
regardless of whether the rules may potentially have granted Femern A/S a selective
advantage, no such advantage actually occurred in the relevant period.
Free use of the seabed
In its remarks to the comments of the interested parties, the Danish authorities
explain that the Construction Act simply clarifies, for the avoidance of doubt, that
5.4.
5.4.1.
(158)
5.4.2.
(159)
5.4.3.
(160)
77
According to Regulation
no 1276 of 20 November 2015 regarding Rail Net Denmark’s tasks and
powers (Bekendtgørelse om Banedanmarks opgaver og beføjelser (BEK nr. 1276 af 20/11/2015)), Rail
Net Denmark is responsible for collecting railway fees from operators on the Danish railway
infrastructure.
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Femern A/S should not pay a fee for its use of the seabed. They reiterate that these
provisions do not treat Femern A/S differently from entities in a comparable legal
and factual situation.
5.5.
5.5.1.
(161)
Comments on the compatibility assessment
Project of common European interest
The Danish authorities consider that the new studies submitted by Scandlines and
Stena Line are irrelevant and, in any event, incorrect. In relation to the Knud Erik
Andersen study, they note that the author is a known opponent to the Fehmarn Belt
Fixed Link project, and that the study is based upon wrong calculation assumptions
in relation to traffic forecast and construction costs. The Danish authorities further
reject the argument put forward by Scandlines and Stena Line that the 2015 studies
have inflated Scandlines’ costs to the extent that it results in an assumption that
Scandlines operates with a massive loss. The Danish authorities consider this an
incorrect and distorted presentation of the calculations in the
‘Original study’ from
2015 because the study is based on the assumption that the revenues of the ferries are
higher than operating costs (the difference between revenues and costs is estimated at
around 15% of the costs). In addition, the Danish authorities argue that the studies do
not become flawed because sub-components or circumstances change, and they note
that new calculations of socio-economic effects are not necessary each time a sub-
component changes. As such, the Danish authorities also reject that the 2015 studies
are flawed due to increased costs of the German hinterland.
The Danish authorities further argue that socio-economic calculations are always
included in the political decision making for large infrastructure projects. However,
there is no requirement of a socio-economic return of 4% as claimed in the report and
by the interested parties. The Danish authorities also indicated that the Fehmarn Belt
Fixed Link project has been considered as a priority cross-border TEN-T project in
its entirety and not only for what concerns the rail part. As to the traffic forecast, the
Danish authorities submitted an additional report by Intraplan / TSS Trimode
commenting on the HTC Report. Overall, the conclusion by Intraplan / TSS Trimode
is that the HTC report is flawed and misleading and does not question the traffic
forecast for the Fehmarn Belt Fixed Link specifically. Furthermore, the Danish
authorities refer to a report published by the Danish Road Directorate
78
which shows
that road traffic to and from Denmark is increasing significantly. Specifically, the
report shows that truck traffic has increased by 38% from 2010 to 2018 across the
borders between Denmark and Germany, on the Øresund Fixed Link and on the ferry
routes across Øresund and Fehmarn Belt, which further contradicts the HTC Report.
No operating aid will be granted
In the Danish authorities view, operating aid is aid relating to the operating of the
infrastructure. All expenses incurred in the construction phase, including expenses
concerning the day-to-day administration of the construction project are considered
as construction costs. Femern A/S will not need to obtain loans from the State or
(162)
5.5.2.
(163)
78
Vejdirektoratet, ”Oversigt
over tilstand og udvikling”,
rapport 597, August 2019.
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loans with a State guarantee to finance its day-to-day operations in the operations
phase.
5.5.3.
(164)
Funding gap
The Danish authorities provided updated assumptions for the calculation of the
funding gap and the aid element (or gross grant equivalent). As a starting point, the
assumptions are based on the latest fully revised financial analysis of the project:
‘Financial analysis of the Fehmarn Belt Fixed Link including Danish landworks’
79
,
of February 2016 (‘2016 financial analysis’).
In the preparatory notes to the Construction Act, it was clearly mentioned that there
would be a fresh assessment of the total finances of the project. A process to reduce
construction costs had to be initiated before the construction contracts could be
signed. On 28 April 2015, the Minister of Finance instructed Femern A/S not to sign
the project’s major construction contracts before a renewed assessment of the overall
finances had been performed. According to the 2016 financial analysis, a major
element contributing to a reduction in the construction costs was the extension of the
construction period from 6.5 years as assumed in the 2014 financial analysis to 8.5
years in the 2016 financial analysis. The 2016 financial analysis states that, as a
result of the tender process, based on this extended construction period of 8.5 years,
Femern
A/S received the contractors’
80
final and binding bids. Femern A/S also
analysed the other parameters of the financial calculations which led to a number of
updated assumptions compared to the analysis that formed the basis for the
Construction Act. The updates relevant to the Fixed Link in the 2016 financial
analysis concern notably: updated construction budget, updated estimate of costs for
operation, maintenance and reinvestment, revision of timetable, adjusted traffic
revenue due to revised timetable, update of EU funding, update of some technical
assumptions. In addition, to ensure that the Commission’s assessment is based on the
most accurate and updated financial assumptions, the Danish authorities did some
further adjustments to the 2016 financial analysis, as detailed below. Where
appropriate, the Danish authorities also included actual figures such as for the loans
already raised or relating to inflation. The below recitals contain further details as to
the assumptions of the funding gap model.
The construction costs in the 2014 notification amounted to DKK 54.9 billion
(EUR 7.4 billion) in fixed 2014 prices. This amount corresponds to the construction
costs mentioned in the 2015 Construction Act: DKK 55.1 billion (EUR 7.4 billion) in
fixed 2015 prices. Femern A/S received bids in September 2015. Consequently,
Femern A/S prepared an update of the construction budget and the forecast of
planning and construction costs for the Fixed Link was reduced to DKK 52.6 billion
(EUR 7.1 billion) in 2015 prices or DKK 62.2 billion (EUR 8.3 billion) in nominal
prices. This includes a reserve requirement of DKK 7.3 billion (EUR 1.0 billion) in
2015 prices. The reserve has been calculated based on Femern
A/S’ risk register and
reflects
costs the project most likely will incur. A ‘P-value’ of P80 was used. As the
(165)
(166)
79
80
Femern A/S - Finansiel analyse af Femern Bælt-forbindelsen inkl. danske landanlæg, februar 2016.
Bidding contractors stipulated in the Construction Act.
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Danish authorities explained, this means that there is an 80% probability that the
reserve budget will be sufficient to cover the identified risks. Ernst & Young has
performed an external quality assurance of reserves and risks associated with the
Fixed Link.
(167)
The financial calculations assume that the Fixed Link will receive EU funding
corresponding to 10% of the construction costs throughout the construction period,
which is the same level as was assumed in the 2016 financial analysis. The funding
relating to the planning phase has also been taken into account in the financial model.
The traffic forecast had been prepared by the German consultancy firms Intraplan
and BVU and crosschecked with other models such as the Trans Tools model of the
European Commission. The traffic forecast was presented in November 2014. As
stated in the 2016 financial analysis, COWI consultancy group performed an external
quality assurance of the forecast and concluded that the assumptions are reasonable
and in line with professional traffic forecasting practice. The basic assumption in the
2014 traffic forecast is that the existing parallel ferry service would not continue
when the Fixed Link opens. At the same time, the 2014 traffic forecast includes a
separate analysis of a scenario, with continued (parallel) 1-hour ferry service. Since
2014, Scandlines repeatedly confirmed its intention to continue operating after the
opening of the Fixed Link. The Danish authorities therefore considered in the
financial funding gap calculation model a 1-hour ferry service between Rødby and
Puttgarden. The Danish authorities explained that this is in line with the PWC study
prepared for the German authorities in the context of the German plan approval
process for the Fixed Link, as provided by Scandlines et al. in an annex to their
comments to the Opening decision. Furthermore, the study “Forretningsanalyse af
færgefarten Rødby-Puttgarden”
of 24 January
2016 prepared by consultants from
KPMG on behalf of the Danish Ministry of Transport confirmed that the ferry
service can continue with a very small marginal return. The effect of the 1-hour
continued ferry service on the traffic volumes, already estimated in the 2014 traffic
forecast, is a reduction of 14% in the volume of cars in the first year after opening of
the Fixed Link, decreasing to a 12% reduction 13 years after the opening. For lorry
traffic, the share using the parallel ferry service was estimated at 15%. A second
update after the 2016 financial analysis concerns the effect of the toll reduction on
the Great Belt Link by 25% with full effect as from 1 January 2023. This slightly
reduces the traffic volumes on the Fixed Link.
As to the rates for the road traffic, the Danish Minister for Transport will determine
the final rates just before opening of the Fixed Link. The Danish authorities
explained that the road traffic prices are an extrapolation of 2007 ferry prices, when
the Rødby-Puttgarden ferry route was still a legal monopoly owned by the Danish
and the German states. The Danish authorities explained that the ferry prices were
considered as a reasonable and transparent benchmark
–
also taking into account
what future users of the Fixed Link would be willing to pay without jeopardizing the
broader aims of the Fixed Link. The assumed and average rate for passenger cars is
DKK 494 (EUR 66.2) and for lorries DKK 2 092 (EUR 280.4) in 2015 prices.
In the funding gap calculation model, railway revenues are estimated at around
DKK 400 million (EUR 53.6 million) per year (2015 prices). The fees will be
determined in accordance with Directive 2012/34/EU. The Danish authorities
provided a report from Consultancy TetraPlan “Analysis of Rail Infrastructure
Payment on the Fehmarn Belt Fixed Link” from March 2003 and its update from
2008. The 2003 document contains a technical analysis on the railway’s ability to
(168)
(169)
(170)
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pay for the using of a Fixed Link. The purpose of the analysis was to substantiate
whether the estimated payment for using the rail track could be expected to
materialise. The TetraPlan analyses assume that the total railway fee for trains going
from/to Hamburg via the Fehmarn Belt Fixed Link should equal the total railway fee
for trains going via the Great Belt fixed link.
(171)
The costs for operation, maintenance and reinvestment of the Fixed Link correspond
to DKK 468 million (EUR 62.7 million) per year (in 2015 prices). This estimation is
in line with the 2016 financial analysis, as the Danish authorities did not consider it
necessary to adjust these figures. The Danish authorities evaluated the effect of the
reduced traffic volume on the costs for operation, maintenance and reinvestment.
They concluded that the reduced traffic volume only has a minor impact on the
operating and maintenance costs and does not have any noticeable effect on the State
aid calculations and the guarantee period.
To compute the funding gap, the different cash flows (for example, construction
costs, operating results) need to be discounted for which the Danish authorities used
the WACC as appropriate discount rate. In reply to the concern expressed by the
Commission in the course of the formal investigation procedure that the nominal
average risk-free interest rate of 5%, as an important component of the WACC,
might be too high under the current market circumstances, the Danish authorities
proposed to use an average risk-free rate of 3.5% per year. This would be based on
the Ministry of Finance’s updated official
projection for 2025 of the Danish
economy, including public finances
81
. In the Danish authorities’ view, the
assumption based on the Ministry of Finance’s projection is the most objective
prediction of future interest rate levels available in Denmark and is therefore a
credible benchmark to use. This also takes into account that Femern A/S cannot in
practice obtain loans covering its entire financing need all at once and thus that the
current market interest rate cannot be used over a long-term period where
Femern A/S takes up debt and refinances frequently.
In reply to the concern expressed by the Commission that also an average risk-free
rate of 3.5 % per year might be too high, the Danish authorities explained that, due to
the urgent need for a State aid decision, the Danish authorities are willing to use a
risk-free rate of 1.5% for the purpose of determining the funding gap if the
Commission were to consider this necessary for the aid to be compatible with the
internal market.
Accordingly, the Danish authorities provided two funding gap calculation models.
One was based on an average risk-free rate of 3.5% (time varying starting from low
levels and increasing over time) (‘first funding gap calculation model’) and another
one assumed, as an alternative model, a risk-free
rate of 1.5% (‘alternative funding
gap calculation model’).
(172)
(173)
(174)
81
https://www.fm.dk/publikationer/2019/opdateret-2025-forloeb-okt-2019.
According to the report, the
interest rate for the 10-year government bond is expected to be -0.1% per year in 2019, 1.6% per year in
2025 and 4.5% per year in 2040. This corresponds to a fixed nominal rate of approximately 3.5% per
year.
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(175)
The resulting WACC figure is therefore dependent upon the applicable model. The
calculations based on the Ministry of Finance’s projection result in
a WACC ranging
between 4.2
–
8.3% in the first funding gap calculation model, while the calculations
based on a risk-free rate of 1.5% (in the alternative funding gap calculation model)
result in a fixed WACC of 5.59%. The Danish authorities explained that the WACC
level was estimated in terms of what a typical investor would require for a project
with comparable risk characteristics. They provided full details on how this WACC
was established.
The Danish authorities calculated the funding gap model on the basis of an
operational period of 40 years. They did not include dividend payments relating to
the hinterland.
Aid amount and duration
In order to address the doubts raised in the Opening decision, the Danish authorities
revised the notification and limited the use of State guarantees and State loans. The
State guarantees and State loans will be limited to the financing needed for the costs
incurred during the planning and construction phase. Femern A/S will terminate all
loans with a State guarantee and repay all State loans at the latest 16 years after start
of operations of the Fixed Link (‘maximum guaranteed period’). Start of operations
of the Fixed Link is the point in time where the Fixed Link opens for road and rail
traffic. Femern A/S will not be able to raise loans with a State guarantee and State
loans, which, together, exceed a maximum amount of DKK 69.3 billion
(EUR 9.3 billion)
(‘maximum guaranteed amount’). The maximum amount is the
expected total net construction debt for Femern A/S, including accrued interest costs
during the planning and construction phase. To this amount, a liquidity reserve of
DKK 2.0 billion (EUR 0.27 billion)
and a “construction cost buffer” of
DKK 2.5 billion (EUR 0.34 billion) has been added (2015 prices). The liquidity
reserve was added to cover the risk of short-term fluctuations in project payments.
The Danish authorities explained that an additional construction cost buffer is needed
because, if construction costs were higher than expected (expected construction costs
were calculated with a risk probability of 80%), Femern A/S would not be able
–
still
in construction phase
–
to obtain loans on the market. The buffer corresponds to an
increase in the risk probability to 99%. The Danish authorities however committed to
a recalculation mechanism which adjusts the maximum guaranteed amount and the
maximum guaranteed period downward if the actual costs incurred in construction
mean that the construction cost buffer is not needed thus ensuring that the total aid
amount does not exceed the funding gap. The Danish authorities committed to
performing this recalculation at the latest five years after start of operations.
Femern A/S is obliged to pay a premium in connection with the State guarantees and
State loans. As stated in the preparatory notes to the Construction Act (section 11.1),
this fee amounts to 0.15%. This corresponds to the premium to be paid by
Femern A/S as to the first funding gap calculation model of the revised notification.
In the alternative funding gap calculation model, this premium is higher and amounts
to 2%.
Furthermore, Femern A/S will not use State loans and loans with a State guarantee to
finance its dividend payment obligation to its owner A/S Femern Landanlæg. Thus, it
is only when Femern
A/S’ debt is fully repaid and its possibility of adopting new
State loans and use State guarantees to finance future debt is terminated, that Femern
A/S may start paying dividends to A/S Femern Landanlæg.
(176)
5.5.4.
(177)
(178)
(179)
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(180)
In addition, the Danish authorities informed the Commission that Femern
A/S’
swap/derivatives contracts will be carried out on market terms. Therefore,
Femern A/S will pay a market premium on the notional of the individual transactions
to the Danish State for the State guarantee and for the collateral Femern A/S may
need to post when entering into swap/derivative transactions.
The Danish authorities further submitted that, as the maximum guaranteed amount is
limited to the planning and construction costs (with related financial costs), they
consider that operating aid is excluded. In order to further demonstrate this, the
Danish authorities will ensure that Femern A/S annually reports an account of its
cash flows.
Incentive effect
In their comments to the arguments of Scandlines et al., the Danish authorities
consider that the Commission’s approach on the formal incentive
effect, which was
accepted by the General Court in the judgments of 13 December 2018, does not
discriminate against private undertakings and does not violate the basic requirement
that State aid should have incentive effect. They further argued that an incentive
effect may be demonstrated in various ways
82
. Requiring a public SPV to apply to
the Member State for aid would be highly artificial. This is because the SPV
necessarily cannot initiate the project without aid as it has no other income. This is
different from the logic requirement for private undertakings to submit an aid
application. Femern A/S would not be in a situation comparable to a private
undertaking applying for aid for a specific infrastructure project. The Commission’s
examination of the incentive effect therefore does not discriminate between public
and private undertakings. In any event, it would follow from settled Commission
practice that aid can have incentive effect if a project cannot be continued/completed
without the aid, irrespective of the application being submitted subsequent to the
initiation of a project
83
.
The counterfactual scenario
In the view of the Danish authorities, it makes little sense to consider a
counterfactual scenario for a general transport infrastructure such as the Fixed Link,
as it is decided by two States for broader public purposes and will be implemented by
a public SPV established by law with no other activities or interests. As such, any
counterfactual scenario for this SPV would be fully speculative. The counterfactual
scenario therefore exists in the absence of an alternative project.
(181)
5.5.5.
(182)
5.5.6.
(183)
82
83
Judgment of the General Court 20 September 2011, T-394/08, T-408/08, T-453/08 og T-454/08,
Regione autonoma della Sardegna and others v Commission,
ECLI:EU:T:2011:493, paragraph 226, as
upheld by Judgment of the Court of Justice of 13 June 2013, C-630/11 P to C-633/11 P,
HGA and
others v Commission,
ECLI:EU:C:2013:387, paragraph 108-109, and Judgment of the Court of Justice
of 5 March 2019,
Eesti Pagar,
C-349/17, ECLI:EU:C:2019:172, paragraph 78.
Commission Decision of 1 April 2009, N 356/2008 State Aid no. N 602/2004
–
Denmark, Support to
environmentally friendly electricity production, and Commission Decisions of 13 December 2013,
SA.36893, Reset of Greek Motorway Concession Projects - Central Motorway (E65), paragraph 99 and
102 and SA.36877, Reset of Greek Motorway Concession Projects - Aegean Motorway, paragraph 74.
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5.5.7.
(184)
Competition will not be unduly distorted
In their comments to the arguments of Scandlines et al., the Danish authorities refer
to the General
Court’s judgments of 13 December 2018. They also argue that the
Fixed Link is liable to create new competition rather than restricting it, that the
potential abuse of market dominance is only hypothetical, that it is the Danish /
German State that decides on removing rail access and on the capacity of the Fixed
Link and that it is the Danish Minister for Transport that decides on the tariffs. On
the refusal of the Danish Government to support an application for CEF support by
Scandlines, the Danish authorities clarified that the Ministry of Transport could not
support a project that aimed to explore the potential for significant new investments
in ferry operations across the Fehmarn Belt since this was not in line with the
transport policy based on annex 1 of the CEF regulation. The Danish authorities
further noted that the rejection of Scandlines’ application by the CEF Committee on
27 September 2019 was also based on reasons unrelated to the Danish authorities’
refusal to co-sign the application. Finally, the Danish authorities reject the allegation
that State aid granted to Femern A/S can be used to finance, and hence downgrade,
the access to Puttgarden, which they consider to be German hinterland connections.
This is because Germany has the sole responsibility for upgrading and financing the
hinterland connections to the Fixed Link.
Conditions for mobilisation of State guarantees
The Danish authorities provided minimum conditions for mobilisation.
Transparency
The Danish authorities committed to comply with the transparency obligation of
paragraph 45 of the IPCEI Communication.
A
SSESSMENT OF THE MEASURE
/
AID
Existence of State aid
By virtue of Article 107(1) of the Treaty, any aid granted by a Member State or
through State resources in any form whatsoever which distorts or threatens to distort
competition by favouring certain undertakings or the production of certain goods
shall, in so far as it affects trade between Member States, be incompatible with the
internal market.
Notion of undertaking
The Commission notes that the State aid rules only apply where the recipient of an
aid is an ‘undertaking’. According to settled case law, an undertaking is an entity
engaging in an economic activity regardless of its legal status and the way in which it
5.5.8.
(185)
5.5.9.
(186)
6.
6.1.
(187)
6.1.1.
(188)
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is financed
84
. Any activity consisting in offering goods and/or services in a given
market is an economic activity
85
.
(189)
In the Aéroports de Paris judgment
86
, the General Court ruled that the operation of an
airport had to be regarded as an economic activity. More recently, the Leipzig/Halle
judgments
87
concluded that if an airport runway will be used for economic activities,
its construction also constitutes an economic activity and thus its funding may fall
within the ambit of State aid rules. While these cases relate specifically to airports,
the principles developed by the Union Courts are also applicable to the construction
of other infrastructures
88,89
as confirmed more recently in the Belgian ports
judgment
90
.
The Commission already stated in the Opening decision that it could be considered
prima facie
that Femern A/S is engaged in an economic activity and should be
considered as an undertaking. The Danish authorities however are of the view that an
overall assessment
–
in light of the nature, aim and applicable rules
–
of Femern
A/S’
activities should lead to the conclusion that Femern A/S exercises public power. It is
true that Article 107(1) of the Treaty does not apply where the State acts ‘by
exercising
public power’
91
or where public entities act in their capacity as public
authorities
92
. An entity may be deemed to act by exercising public power where the
activity in question forms part of the essential functions of the State or is connected
with those functions by its nature, its aim and the rules to which is it subject
93
. The
Danish authorities submitted in this respect that the
aims
of the Fixed Link are much
wider than just providing a public service such as utilities, postal operators and
providers of public transport do. This is because, in the opinion of the Danish
authorities, the Fixed Link would create the necessary conditions for a more
intensive cultural and economic cooperation to the benefit of the European Union,
(190)
84
85
86
87
88
89
90
91
92
93
Judgment of the Court of Justice of 12 September 2000,
Pavlov and Others v Stichting Pensioenfonds
Medische Specialisten,
Joined cases C-180/98 to C-184/98, ECLI:EU:C:2000:428.
Judgment of the Court of Justice of 16 June 1987,
Commission
v
Italy,
118/85, ECLI:EU:C:1987:283,
paragraph 7; Judgment of the Court of Justice of 18 June 1998,
Commission v Italian Republic,
C-35/96
ECLI:EU:C:1998:303, paragraph 36; Judgment of the Court of Justice of 12 September 2000,
Pavlov
and Others v Stichting Pensioenfonds Medische Specialisten,
Joint Cases C-180/98 to C-184/98,
ECLI:EU:C:2000:428.
Judgment of the General Court of 12 December 2000,
Aéroports de Paris v Commission,
T-128/98,
ECLI:EU:T:2000:290, paragraph 125, confirmed by the Court of Justice in its Judgment of 24 October
2002,
Aéroports de Paris v Commission,
C-82/01 P, ECLI:EU:C:2002:617.
Cf. footnote 72.
Judgment of the Court of Justice of 14 January 2015,
Eventech v The Parking Adjudicator,
C-518/13,
ECLI:EU:C:2015:9, paragraph 40; Judgment of the General Court of 15 March 2018,
Naviera Armas
v
Commission,
T-108/16, ECLI:EU:T:2018:145, paragraph 78.
See also paragraph 202 of the Commission Notice on the notion of State aid.
Judgment of the General Court of 20 September 2019,
Havenbedrijf Antwerpen and Maatschappij van
de Brugse Zeehaven v Commission,
T-696/17 ECLI:EU:T:2019:652, paragraph 107.
Judgment of the Court of Justice of 16 June 1987,
Commission v Italy,
118/85, ECLI:EU:C:1987:283,
paragraphs 7 and 8.
Judgment of the Court of Justice of 4 May 1988,
Bodson,
30/87, ECLI:EU:C:1988:225, paragraph 18.
See, in particular, Judgment of the Court of Justice of 19 January 1994,
SAT/Eurocontrol,
C-364/92,
ECLI:EU:C:1994:7, paragraph 30 and Judgment of the Court of Justice of 18 March 1997,
Calì & Figli,
C-343/95, ECLI:EU:C:1997:160, paragraphs 22 and 23.
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the two States and the regions bordering the Fehmarn Belt. The
nature
of the
planning, construction and operation of the Fixed Link is in the Danish authorities’
view also clearly connected to the exercise of public power as it is Denmark’s
implementation of an intergovernmental agreement and of a major public planning
decision taken by the Danish Sate. The nature of the activities is, in the view of the
Danish authorities, more comparable to the activities of international and national
transport authorities (such as Eurocontrol or the Danish road or rail authorities) than
it is to the activities of a private transport operator. The Danish authorities consider
also that Femern A/S is subject to specific
rules,
for example not subject to a profit
maximisation standard. As an SPV, there is also no risk that its financing could be
used to cross-subsidize activities not related to the specific activities Femern A/S is
established to fulfil.
(191)
The Commission considers in this respect that an overall assessment is necessary
and, to qualify as acting by exercising public power, Femern
A/S’ activity should be
connected with the essential functions of the State by its nature, its aim
and
the rules
to which it is subject. The Commission does not agree with the reasoning of the
Danish authorities that its preliminary analysis in recitals (85) to (88) of the Opening
decision is erroneous. The arguments of the Danish authorities concerning the aim,
nature and rules are not sufficient to invalidate that analysis and to conclude that
Femern A/S acts by exercising public power.
According to settled case-law, the qualification of economic activity should be based
upon factual elements, namely the provision of goods or services on a given market.
Femern A/S, as the owner and operator of the Fixed Link, provides a transport
service for remuneration to citizens and undertakings. Femern A/S will charge a fee
(toll) from the users of the road section of the Fixed Link for crossing the Fehmarn
Belt strait. In addition, the railway companies will pay fees for access to the railway
infrastructure on the Fixed Link. Femern
A/S’ revenues from road and rail are meant
to finance the total cost of planning, construction and operation of the Fixed Link,
but also, once the State guaranteed loans and State loans are reimbursed, the costs of
the construction of the hinterland connections, through the distribution of dividends
to the parent company.
There is a market for crossing the Fehmarn Belt strait, in particular because the
service is already provided for remuneration by the existing ferry operator, which is a
private undertaking clearly operating under market conditions. Hence the transport
services provided by Femern A/S will be in competition with the transport services
provided by ferry operators. Moreover, the Fixed Link will also compete with other
transport links that constitute an alternative for crossing the Fehmarn Belt strait.
Consequently, Femern A/S will be providing services on a market.
It should be noted that Femern A/ S has not been granted specific public powers but
will construct and operate the infrastructure as an economic operator. The
construction and commercial exploitation of large infrastructure projects does not, in
itself, constitute an exercise of public powers, and the construction and operation of
the Fixed Link is governed by an economic logic, given that it is financed to a very
(192)
(193)
(194)
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large extent by users’ fees.
94
Indeed, the activities of Femern A/S are very different
from what in the past has been held to be part of public power activities, such as the
army or the police, air navigation safety and control, maritime traffic control and
safety, anti-pollution surveillance, organisation, financing and enforcement of prison
sentences, development and revitalisation of public land by public authorities and the
collection of data to be used for public purposes on the basis of a statutory obligation
imposed on the undertakings concerned to disclose such data
95
.
(195)
The fact that Femern A/S does not pursue profit maximization is not decisive, either.
According to settled case law, the application of the State aid rules does not depend
on whether the entity is set up to generate profits.
96
In any event, as evidenced by the 2014 Øresund decision, where the owner/operator
was found to be engaged in an economic activity, it is clear that the Danish
authorities have decided to introduce a market mechanism. As the Øresund
bridge/tunnel, the Fixed Link will also be operated as a commercially exploited, toll-
funded infrastructure. This goes against the argumentation that the activity would be
an exercise of public power.
It is true that, according to the Construction Act, the fees for the use of the Fixed
Link are not set by Femern A/S but directly by the State through the Minister for
Transport. However, it follows from Section 42(3) of the Construction Act that,
regardless of subsection 2, Femern A/S can, within some limits, amend existing
discount schemes or introduce new discounts. In addition, according to Article 6(2)
of the Fehmarn Belt Treaty, Femern A/S is required to operate according to general
business principles
97
. The Commission consequently finds that Femern A/S has a
certain margin to decide its own pricing. In any event, for the purposes of
(196)
(197)
94
95
96
97
Judgment of the Court of Justice of 29 October 1980,
Van Landewyck,
Joined Cases 209/78 to 215/78
and 218/78, ECLI:EU:C:1980:248, paragraph 88; Judgment of the Court of Justice of 16 November
1995,
FFSA and Others,
C-244/94, ECLI:EU:C:1995:392, paragraph 21; Judgment of the Court of
Justice of 1 July 2008,
MOTOE,
C-49/07, ECLI:EU:C:2008:376, paragraphs 27 and 28.
Commission Decision of 7 December 2011 on State aid SA.32820 (2011/NN)
—
United Kingdom
–
Aid to Forensic Science Services, OJ C 29, 2.2.2012, p. 4, paragraph 8; Judgment of the Court of
Justice of 19 January 1994,
SAT/Eurocontrol,
C-364/92, ECLI:EU:C:1994:7, paragraph 27; Judgment
of the Court of Justice of 26 March 2009,
Selex Sistemi Integrati v Commission,
C-113/07 P,
ECLI:EU:C:2009:191, paragraph 71; Commission Decision of 16 October 2002 on State aid N 438/02
—
Belgium
—
Aid to port authorities, OJ C 284, 21.11.2002, p. 2; Judgment of the Court of Justice of
18 March 1997,
Calì & Figli,
C-343/95, ECLI:EU:C:1997:160, paragraph 22; Commission Decision of
19 July 2006 on State aid N 140/06
—
Lithuania
—
Allotment of subsidies to the State Enterprises at
the Correction Houses, OJ C 244, 11.10.2006, p. 12; Commission Decision of 27 March 2014 on State
aid SA.36346
—
Germany
—
GRW land development scheme for industrial and commercial use, OJ C
141, 9.5.2014, p. 1; Judgment of the Court of Justice of 12 July 2012, Compass-Datenbank GmbH, C-
138/11, ECLI:EU:C:2012:449, paragraph 40.
See, for instance, judgment of the Court of Justice of19 December 2012,
Mitteldeutsche Flughafen and
Flughafen Leipzig-Halle
v
Commission,
C-288/11 P, ECLI:EU:C:2012:821, paragraph 50, and
judgment of the Court of Justice of 10 January 2006,
Cassa di Risparmio di Firenze,
C-222/04,
ECLI:EU:C:2006:8, paragraphs 122 and 123.
Article 6 (2) states the following: “The
company shall be established in accordance with Danish law.
The activities of the company shall be carried out in accordance with general business principles and in
accordance with international obligations including the obligations according to Community law.”
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determining whether an undertaking performs an economic activity, it is not decisive
whether that undertaking determines its prices or is subject to State-regulated
prices
98
. The case law indicates that the ability of an entity to influence the price of
its services is merely one of several aspects that must be considered
99
. Indeed, an
activity is economic if it consists in offering goods or services on a given market
(such as through the commercial exploitation of infrastructure). As the Court has
recently confirmed, the fact that a service may be provided without a view to a profit
(as could be the case, for example, because of its State-defined pricing policies) does
not prevent the entity that carries out those operations from being considered an
undertaking if that offer exists in competition with other undertakings that seek to
make a profit
100
.
(198)
Therefore, the Commission concludes that the operation of the Fixed Link constitutes
an economic activity. It follows from the Leipzig Halle judgment
101
that the
construction of the infrastructure operated by Femern A/S also constitutes an
economic activity, and thus its support measures may involve State aid. Thus,
Femern A/S has to be considered as an undertaking for the purposes of Article
107(1) of the Treaty with respect to those activities.
As the Commission could, in the Opening decision, not establish the nature of the
main activity of Femern A/S, it was not in a position either to come to a final
conclusion on the so-called promotional/marketing/information activities in which
Femern A/S has been engaged.
As the Danish authorities consider the activities of Femern A/S related to the
planning and construction of the Fixed Link as an exercise of public power, they also
consider the promotional/marketing/information activities as an exercise of public
power. Public authorities are often required to communicate and inform about their
activities and projects and such information activities should in their view not be
categorized as marketing as suggested by Scandlines et al. The Danish authorities
also argue that a close dialogue with affected groups in Germany and Denmark and
cooperation with NGOs and local authorities in Denmark and Germany are vital to
the realisation of the Fehmarn Belt Fixed Link project.
The Commission considers that the promotional/marketing/information activities
clearly contributed to the planning, construction and operation of the Fixed Link as
both the activity descriptions by Scandlines et al. and by the Danish authorities seem
(199)
(200)
(201)
98
99
100
101
Judgment of 12 July 2012,
Compass-Datenbank GmbH v Republik Österreich
C-138/11,
ECLI:EU:C:2012:449, paragraph 38, with further references.
Judgment of 19 January 1994,
SAT Fluggesellschaft v Eurocontrol,
C-364/92, EU:C:1994:7; judgment
of 18 March 1997,
Calì & Figli v Servizi Ecologici Porto di Genova,
C-343/95, EU:C:1997:160;
judgment of 12 July 2012,
Compass-Datenbank,
C-138/11, EU:C:2012:449. Judgment of the General
Court of 20 September 2019 -
Havenbedrijf Antwerpen and Maatschappij van de Brugse Zeehaven v
Commission,
T-696/17 ECLI:EU:T:2019:652.
Judgment of the Court of Justice of 6 November 2018 C-622/16 P to C-624/16 P,
Scuola Elementare
Maria Montessori v Commission,
ECLI:EU:C:2018:873, paragraph 104. Judgment of the Court of
Justice of 27 June 2017,
Congregación de Escuelas Pías Provincia Betania,
ECLI:EU:2017:496 ,C-
74/16 paragraph 47 and 48.
Cf. footnote 72.
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to confirm. Marketing activities, as in the interpretation of Scandlines et al., would
clearly contribute to the economic activity of Femern A/S. However, even if the
promotional/marketing/information activities should be considered as information
activities, as in the interpretation of the Danish authorities, those activities would
also contribute to the economic activity of Femern A/S. As Scandlines et al. also
submitted, it is not unusual that companies are required to inform the public about
their activities. Those information obligations are not, in general, considered to
constitute an exercise of public powers. The Commission considers that in this sense
it is not relevant whether the activities are categorized as information, promotion or
marketing activities. What matters for the State aid qualification is that those
activities are contributing to the economic activity. The Commission therefore also
considers the promotional/marketing/information activities as economic activities.
6.1.2.
(202)
State resources and imputability to the State
With regard to the State origin of the advantages resulting from the application of the
measures, the concept of aid is broader than that of subsidy. This is because it
embraces not only positive benefits, such as subsidies and capital injections, but also
measures which, in various forms, mitigate the charges which are normally included
in the budget of an undertaking and which, therefore, without being subsidies in the
strict sense of the word, are similar in character and have the same effect
102
.
Capital injections not in line with market conditions embrace a positive benefit. A
measure by which the public authorities grant certain undertakings favourable tax
treatment, although not involving a positive transfer of funds, places beneficiaries in
a more favourable financial situation than other taxpayers and constitutes a transfer
of State resources
103
. Furthermore, the creation of a risk of imposing an additional
burden on the State in the future, by constituting a guarantee or by granting loans on
terms that do not correspond to the ones of the market, is sufficient to be considered
as transfer of State resources
104
. The same is true, for instance, when guarantees are
granted by a Member State without requiring the payment of a premium on market
terms from the beneficiary of the guarantee. Moreover, a transfer of State resources
may be considered to occur where the State does not charge the amount it would
(203)
102
103
104
See inter alia Judgment of the Court of Justice of 8 November 2001,
Adria-Wien Pipeline GmbH and
Wietersdorfer & Peggauer Zementwerke GmbH v Finanzlandesdirektion für Kärnten,
C-143/99,
ECLI:EU:C:2001:598, paragraph 38; Judgment of the Court of Justice of 15 July 2004,
Spain v
Commission,C-501/00,
ECLI:EU:C:2004:438, paragraph 90, and the case law cited therein; Judgment
of the Court of Justice of 15 December 2005,
Italy v Commission,
C-66/02 ECLI:EU:C:2005:768,
paragraph 77; Judgment of the Court of Justice of 10 January 2006,
Ministero dell'Economia e delle
Finanze v Cassa di Risparmio di Firenze,
C-222/04, ECLI:EU:C:2006:8, paragraph 131, and the case
law cited therein.
See, for example, Judgment of the Court of Justice of 15 March 1994,
Banco Exterior de España,
C-
387/92, ECLI:EU:C:1994:100, paragraph 14. Judgment of the Court of Justice - 9 October 2014,
Ministerio de Defensa and Navantia,
ECLI:EU:C:2014:2262.
Judgment of the Court of Justice of 1 December 1998,
Ecotrade Srl v Altiforni e Ferriere di Servola
SpA (AFS),
C-200/97, ECLI:EU:C:1998:579, paragraph 41; Judgment of the Court of Justice of 19
March 2013,
Bouygues and Bouygues Télécom v Commission and Others,
Joined Cases C-399/10 P and
C-401/10 P, ECLI:EU:C:2013:175, paragraphs 137, 138 and 139.
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normally charge for the granting of access to the public domain or natural resources,
such as the seabed and the water areas.
(204)
As the above measures (capital injection, tax measures, State loans and State
guarantees and free use of seabed) were granted by Denmark, they are by definition
imputable to that State.
As regards the railway fees, they constitute a future source of income for
Femern A/S, which
–
as the road tolls
–
will be determined by the Minister for
Transport. The fees and tolls constitute remuneration for the use of the Fixed Link.
The fact that one of the railway operators is the Danish State owned railway operator,
DSB, is not sufficient to conclude that the railway fees paid to Femern A/S via Rail
Net Denmark by that operator involve State resources, because all railway operators
using the Fixed Link are charged on an objective and non-discriminatory basis
105
.
Furthermore, Rail Net Denmark is not appointed to collect/distribute State aid.
Rather, the funds are directly transferred to Femern A/S. The Commission concludes
on this basis that the railway fees does not constitute an intervention by the State or
through State resources.
Selective advantage
According to case law, in order to determine whether a State measure constitutes
State aid, it is necessary to establish whether the recipient undertaking receives an
economic advantage that it would not have obtained under normal market conditions,
i.e. in the absence of State intervention
106
. It is only the effect of the measure on the
undertaking that is relevant and not the cause or the objective of the State
intervention
107
. To assess this, the financial situation of the undertaking following the
measure should be compared with the financial situation if the measure had not been
introduced.
The capital injections granted by Sund & Bælt Holding A/S can be considered as
entailing an advantage in favour of Femern A/S. Considering the uncertainties
around the profitability and the high risks of the project, it is likely that a private
operator would not have been prompted to inject capital into Femern A/S, in the
absence of some type of State support. Moreover, a public guarantee or a State loan
granted with preferential terms, may grant the borrower an advantage by enabling it
to borrow at an interest rate and cost that would not have been obtainable on the
market without the guarantee
108
, or in the absence of the State loan. In the case at
(205)
6.1.3.
(206)
6.1.3.1. The capital injections, the State guarantees and the State loans
(207)
105
106
107
108
Judgment of the Court of Justice of 13 September 2017,
ENEA,
C-329/15, ECLI:EU:C:2017:671,
paragraphs 23 to 37.
See Judgment of the Court of Justice of 11 July 1996,
Syndicat français de l'Express international
(SFEI) and others v La Poste and others,
C-39/94 ECLI:EU:C:1996:285, paragraph 60; Judgment of
the Court of Justice of 29 April 1999,
Spain v Commission,
C-342/96 ECLI:EU:C:1999:210, paragraph
41.
Judgment of the Court of Justice of 2 July 1974,
Italy v Commission,
173/73, ECLI:EU:C:1974:71,
paragraph 13.
Judgment of the Court of Justice of 8 December 2011,
Residex Capital v Gemeente Rotterdam,
C-
275/10, ECLI:EU:C:2011:814, paragraph 39.
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stake, Femern A/S is required to pay an annual premium on the outstanding debt
covered by a State guarantee and on the outstanding amount of State loans to the
Danish State. This premium, even if it amounted to 2%
109
following the alternative
funding gap calculation model, is not contested to be below market terms, in
particular given the risks of the project. Moreover, a State guarantee covering
Femern
A/S’s liabilities deriving from its contractual relations diminishes
its risks
relevant to normal contractual obligations that any private operator would have under
normal market conditions. In this case, by providing the State guarantees for loans
and State loans without requiring the payment of a premium on market terms or the
payment of the market interest rate, the Danish State conferred an advantage on
Femern A/S. With regard to the promotional/marketing/information activities, the
Commission notes that they are financed with State loans for planning activities and
not by extra State loans dedicated to those activities.
(208)
As said advantages concern specifically Femern A/S, they are de jure selective.
Therefore, the capital injections, the State guarantees for loans and the State loans
constitute selective advantages in favour of Femern A/S within the meaning of
Article 107(1) of the Treaty.
The Planning and Construction Acts also provide for the possibility of State
guarantees for the derivative transactions. Femern A/S has not yet entered into any
such transactions. With regard to the guarantees on future derivative transactions, the
Danish authorities will require the payment of a premium, which they consider to be
on market terms.
Section 3.1 of the Guarantee Notice provides that, if an individual guarantee or a
guarantee scheme entered into by the State does not bring any advantage to an
undertaking, it will not constitute State aid. Points 3.2 to 3.5 of the Guarantee Notice
set out a number of sufficient conditions for the absence of aid. According to point
3.6 of the Guarantee Notice, "a
failure to comply with any one of the conditions set
out in points 3.2 to 3.5 does not mean that the guarantee or guarantee scheme is
automatically regarded as State aid."
It follows from section 1 of the Guarantee
Notice that the provisions are designed to be directly applicable, although not
exclusively, to guarantees linked to a specific transaction such as a loan. The
Commission considers that guarantees on derivative contracts cannot be directly
compared to guarantees on a loan and that a case specific analysis is appropriate for
this type of derivatives guarantees as provided for in section 1.4 of the Guarantee
Notice.
A guarantee for a derivative contract is different from a guarantee for a loan. A
derivative is a two-way obligation that has a market value of zero at the time of
concluding the contract. As time passes, the market value can change in favour of
one party (and to the detriment of the other party), depending on changes in interest
rates for example. Femern A/S’ derivatives trading is governed by a general
6.1.3.2. State guarantees for derivative transactions
(209)
(210)
(211)
109
This premium was initially established at 0.15% and is the premium corresponding to the first funding
gap calculation model. The alternative funding gap calculation model includes a premium of 2%.
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agreement with each financial counterparty (the so-called
‘ISDA’ agreement) which
also includes a Credit Support Annex (‘CSA’). Under the
two-way CSA agreement,
each party is obliged to post collateral equal to the net negative market value of the
total derivative portfolio between the two parties. The liquidity provided by Femern
A/S for posting collateral cannot be used for any other purposes. The administration
of collateral is carried out in a closed system with separate accounts. A State
guarantee on a derivative contract is a guarantee for Femern A/S’ payment
obligations under the derivative agreement and for Femern A/S’ ability to provide
liquidity to be used for posting collateral to the counterparty, covering a potential
negative market value of the transaction.
(212)
The pricing of a derivative transaction is determined by the credit and funding risks
associated with those potential changes in market value. Without a guarantee and a
two-way collateral agreement, the bank as counterparty will add those risk elements
to the price. The Danish authorities explained that those risk add-ons are much lower
than the risk-premium of a loan with the same principal amount.
The Danish authorities informed the Commission that Femern A/S will pay a market-
conform fee for every State guarantee linked to a derivative transaction. The market-
conform fee will be determined as follows. Femern A/S will collect two binding
quotes from at least two different private banks before entering into a new derivative
transaction. The banks will issue a binding quote for two types of transactions: a) the
derivative transaction with the support of a State guarantee and a two-way CSA-
agreement and b) the same transaction without these support elements. The quotes
will be based on the bank’s specific assessment of Femern A/S’ financial position.
Femern A/S can then choose between the two types of transactions. If Femern A/S
chooses transaction a), Femern A/S will pay the difference between the quote for
transaction a) and the quote for transaction b) as a premium to the Danish State. The
premium will be expressed as a percentage of the principal amount of the transaction,
to be paid on a yearly basis during the full lifetime of the transaction.
The Commission considers that, based upon that methodology of comparing two
binding quotes and the payment of the resulting difference as a premium to the
Danish State, the State does not provide any advantage to Femern A/S by
guaranteeing the derivative transactions. This measure consequently does not entail
State aid. It is therefore not necessary to examine the extent to which the measure is
liable to distort competition or to affect trade between Member States.
In the previous section, the Commission concluded that the charging of railway fees
does not constitute use of State resources imputable to the State granted to
Femern A/S. For the sake of completeness and because it was left open in the
Opening decision, the Commission further analysed whether Femern A/S benefits
from a selective advantage regarding the railway fees.
The Danish authorities explained that the infrastructure charges constitute user fees,
i.e. payment for a service and not a levy/charge. The claim of Scandlines that the
(213)
(214)
6.1.3.3. Railway fees
(215)
(216)
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State, via its own railway operator DSB, will annually pay Femern A/S a share of the
overall fees irrespective of the number of trains using the Fixed Link, without an
adjustment mechanism and for an undefined period, is not correct. The Danish
authorities confirmed that the fees will be determined in accordance with Directive
2012/34/EU
110
and will apply to any railway operator using the Fixed Link. The
railway fees are to be paid to Femern A/S via Rail Net Denmark who will collect the
fees.
(217)
The Commission observes that the railway fees constitute consideration for the
services provided by Femern A/S to railway operators. Taking into account the
clarifications as set out in recital (87) of this decision, there is no reason to assume
that railway revenues would be too high.
Therefore, as regards the railway fees, the Commission concludes that Femern A/S
does not benefit from a selective advantage.
For a tax measure to fall within the scope of Article 107(1) of the Treaty, it has to be
established that it favours
certain undertakings or the production of certain goods
over others which are in a legal and factual situation that is comparable, in light of
the objective pursued by the scheme
111
. However, when Member States adopt ad hoc
measures benefiting specific entities, the identification of an advantage in principle
allows presuming its selective nature
112
. This is because it is normally easy to
conclude that such measures have a selective character as they reserve favourable
treatment for one or few undertakings
113
.
In this case, the special tax regime on depreciation and on loss carry forward reduces
Femern
A/S’s tax liability as compared to what it would have been in the absence of
those measures and thereby confers an economic advantage to it. In those
circumstances, Femern A/S should be considered to be the direct beneficiary of the
tax measures.
The Commission has assessed the measures of fiscal loss carry forward and of
specific depreciation rules under the standard three-step analysis established by the
EU Courts
114
. First, the system of reference must be identified. Second, it should be
determined whether a given measure constitutes a derogation from that system
insofar as it differentiates between economic operators who, in light of the objective
intrinsic to the system, are in a comparable factual and legal situation. If the measure
(218)
6.1.3.4. The special tax measures
(219)
(220)
(221)
110
111
112
113
114
Cf. footnote 61.
Judgment of the General Court of 22 January 2013,
Salzgitter v Commission,
T-308/00,
ECLI:EU:T:2004:199, paragraph 79, and the case law cited therein.
Judgment of the General Court of 13 December 2017,
Hellenic Republic v. Commission,
T-314/15,
ECLI:EU:T:2017:903, paragraphs 78 and 79.
Judgment of the Court of Justice of 4 June 2015,
Commission v MOL,
C-15/14 P,
ECLI:EU:C:2015:362, paragraphs 60 et seq.; Opinion of Advocate General Mengozzi of 27 June 2013,
Deutsche Lufthansa,
C-284/12, ECLI:EU:C:2013:442, paragraph 52,
Judgment of the Court of Justice of 8 September 2011,
Commission v Netherlands,
C-279/08 P,
ECLI:EU:C:2011:551, paragraph 62; Judgment of the Court of Justice of 8 November 2001,
Adria-
Wien Pipeline,
C-143/99, ECLI:EU:C:2001:598.
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constitutes a derogation from the system of reference and thus is prima facie
selective, it needs to be established, in the third step of the test, whether the
derogation is justified by the nature or the general scheme of the system. In this
context, it is for the Member State to demonstrate that the differentiated tax treatment
derives directly from the basic or guiding principles of that system
115
.
Fiscal loss carry forward
(222)
The Commission concluded already in the Opening decision that the special rules on
carrying forward the losses that Femern A/S enjoyed in the period 2013 until 2015
differentiated between economic operators that appear
prima facie
to be in a
comparable factual and legal situation in light of the objective pursued by the tax
system concerned. The rules applicable to Femern A/S during this period were thus
prima facie
selective. It is up to the Member State concerned to demonstrate that a
measure, which is at first sight selective, is justified by the nature or general scheme
of its tax system
116
. However, following the Opening decision, the Danish authorities
have not submitted any such justification in light of the objective pursued by the
general system.
The Danish authorities consider that the measure at stake concerns the planning
phase of the project and that in any case the measure never materialised in practice
since Femern A/S did not have any profits during that period. Femern A/S has not
carried forward losses from previous years. No deductions of losses carried forward
from previous years have therefore been made when calculating the taxable income
of the group in 2013-2015 when the special rules were in effect. All losses incurred
by Femern A/S were used to reduce taxable income at group level in the same
financial year. Other Danish companies within a group could have done the same
according to the general rules.
Thus, although Femern A/S was concerned by the special rules in the years 2013-
2015, the company’s financial position in those years was such that these rules never
actually applied to Femern A/S. Consequently, the Commission concludes that, as
the potential loss carry forward never materialised and cannot materialise in the
future, the special rules on the carry forward of losses did not and cannot confer an
economic advantage to Femern A/S
117
.
(223)
(224)
115
116
117
Judgment of the Court of Justice of 8 September 2011,
Paint Graphos and others,
Joined Cases C-
78/08 to C-80/08, ECLI:EU:C:2011:550, paragraph 49 et seq.; Judgment of the Court of Justice of 29
April 2004,
GIL Insurance,
C-308/01, ECLI:EU: C:2004:252.
Judgment of the Court of Justice of 15 November 2011,
Commission and Spain v Government of
Gibraltar and United Kingdom,
Joined Cases C-106/09 P and C-107/09 P, ECLI:EU:C:2011:732,
paragraph 146; Judgment of the Court of Justice of 29 April 2004,
Netherlands v Commission,
C-
159/01, ECLI:EU:C:2004:246, paragraph 43; Judgment of the Court of Justice of 6 September 2006,
Portugal v Commission,
C-88/03, ECLI:EU:C:2006:511.
Judgment of the Court of Justice of 19 September 2018,
Commission v France and IFP Énergies
nouvelles,
C-438/16, ECLI:EU:C: 2018:737, paragraphs 117-118.
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Depreciation of assets
(225)
The Commission already concluded in the Opening decision that the depreciation
rules applicable to Femern A/S were
prima facie
selective. The Danish authorities
have not submitted a justification in light of the objective pursued by the general
system.
The Danish authorities consider that the measure at stake concerns the planning
phase of the project and that, even though the special depreciation rules were in place
between 2009 and 2015, Femern A/S could not benefit from those special rules as the
facilities were not available for use and no depreciation actually occurred.
Femern A/S is from 1 January 2016 subject to ordinary Danish tax law, including the
rules on depreciation of assets applicable to all Danish companies
.
Thus, Femern A/S could have enjoyed a selective advantage for the years 2009-2015.
However, the Commission concludes that, as the advantage never materialised and
cannot materialise in the future, the special depreciation rate applicable to
Femern A/S did not and cannot confer an economic advantage to Femern A/S
118
.
Joint taxation regime
(228)
The system of reference for the joint taxation regime consists in the provisions on
mandatory taxation in the Danish Company Tax Act. Since the joint taxation regime
is applicable to all Danish undertakings within a group and not specifically to
Femern A/S, no selective advantage can be considered to have been conferred to
Femern A/S
119
. Thus, the Commission concludes that Femern A/S does not benefit
from an additional selective advantage through its participation in the joint taxation
regime.
According to the Danish authorities, there is no general rule or principle in Danish
law requiring companies in a similar factual and legal situation as Femern A/S to pay
fees to the State for making use of seabed and water areas. Hence, the same free
access principle would apply to all fixed link infrastructures. Similarly, no fees are
paid by ferry operators or other ship freight companies to the Danish State for
crossing sea areas under Danish jurisdiction. In addition, according to those
authorities, ports do not pay fees for using the seabed.
In their comments to the Opening decision, Scandlines et al. argue that because
Femern
A/S’ free use of the seabed is explicitly provided for in the
Construction Act,
this indicates that Femern A/S would otherwise have had to pay a fee according to
the normal (reference) system.
Article 8(2) of the Fehmarn Belt Treaty and Section 45 of the Construction Act
clarify that Femern A/S should not pay a fee for its use of the seabed. The Danish
authorities explained that the reason for this provision is only for the avoidance of
(226)
(227)
6.1.3.5. Free use of State property
(229)
(230)
(231)
118
119
Ibid.
See also judgment of the General Court of 13 December 2018,
Scandlines Danmark ApS and
Scandlines Deutschland GmbH v Commission,
T-630/15, ECLI:EU:T:2018:942, paragraphs 278 to 282.
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doubt. According to the Danish authorities, the imposition of an obligation to pay a
fee to the Danish authorities in exchange for a certain service requires, under Danish
law, a legal basis. As outlined in recital (229) of this decision, there is no such legal
basis and there is no indication that Denmark charges other infrastructure operators
for the use of the seabed and water areas. Thus, the Commission considers that, even
if Section 45 of the Construction Act had not existed, the Danish authorities could
not charge a fee for Femern
A/S’ use of the seabed in absence of a specific legal
basis. At the same time, the explicit provision by those acts of the free use of the
water areas and seabed does not indicate that Femern A/S would otherwise have had
to pay a fee in the normal (reference) system.
(232)
In these circumstances, and in the absence of a general legal framework providing
for the payment of a fee for the use of seabed and water areas and in the absence of
any factual evidence that such fees would have been paid in the past, the
Commission has no reason to consider that such general system exists. The
Commission therefore concludes that Femern A/S does not benefit from a selective
advantage in this respect.
Distortion of competition and effect on trade between Member States
Aid granted by a Member State that strengthens the position of an undertaking as
compared to other undertakings competing in intra-Union trade must be regarded as
affected by the aid
120
. A measure granted by the State is considered to distort or
threaten to distort competition when it is liable to improve the competitive position
of the recipient compared to its competitors.
The Commission already tentatively concluded in the Opening decision that, to the
extent that Femern A/S has to be considered as an undertaking active on the market
for transport services to cross the Fehmarn Belt strait, the grant of a selective
advantage may strengthen its position as compared to other undertakings active on
that market, such as, in particular, ferry operators and port operators.
However, in their comments to the Opening decision, the Danish authorities consider
that the Fixed Link is not in direct competition with, for example, ferries, in the same
way as railway infrastructure is not in direct competition with roads, busses or
airports. In this respect, they refer to point 220 of the Notice on the notion of State
aid. It is the opinion of the Danish authorities that the public financing of the Fixed
Link project does not distort competition.
The Commission does not agree with the reasoning of the Danish authorities. It
considers that the measures which confer a selective advantage on Femern A/S
strengthen the position of that undertaking compared with other undertakings
competing in trade between Member States. In particular, it cannot be denied that
Femern A/S will compete in trade between Member States with undertakings
providing alternative transport services.
6.1.4.
(233)
(234)
(235)
(236)
120
Judgment of the Court of Justice of 14 January 2015,
Eventech v The Parking Adjudicator,
C-518/13,
ECLI:EU:C:2015:9, paragraph 66; Judgment of the Court of Justice of 8 May 2013,
Libert and others,
Joined Cases C-197/11 and C-203/11, ECLI:EU:C:2013:288, paragraph 77; Judgment of the General
Court of 4 April 2001,
Friulia Venezia Giulia,
T-288/97, ECLI:EU:T:2001:115, paragraph 41.
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(237)
First, the 2016 financial analysis prepared by Femern
A/S acknowledges that “The
Fehmarn Belt Fixed Link is expected to absorb some of the transit traffic between
Scandinavia/eastern Denmark and Germany, which currently transits via the Great
Belt Bridge, together with some of the traffic on the ferries in the western Baltic Sea,
because some of the travellers
will find it more attractive to use the fixed link”. The
General Court, in its judgments of 13 December 2018, also stated that Femern
A/S’
position would be strengthened to the detriment of ferries: “It is reasonable to
conclude that a project involving the construction of infrastructure that will provide
an alternative to existing modes of transport entails the risk that the latter will
disappear and, as that project provides a solution which, on the whole, has positive
results […].”
121
.
Secondly, the Commission remarks that, when quoting paragraph 220 of the Notice
on notion of State aid to support that competition is not distorted by public financing
of roads, even toll-roads, (and bridges by association), such as the Fixed Link under
certain listed conditions, the Danish authorities omitted to mention the linked
footnote 327 which clearly states “An
atypical situation in which State aid cannot be
excluded would, for example, be a bridge or tunnel between two Member States,
offering a largely substitutable service to the service offered by commercial ferry
operators or the construction of a toll-road in direct competition with another toll-
road (for example two toll-roads running in parallel to each other, thereby offering
largely substitutable services).”
Finally, the Commission notes that, regarding Øresund Fixed Link, which is an
infrastructure with very similar activities, objectives and financing to the Fixed Link
in the Fehmarn Belt, the Commission considered in its 2014 Øresund decision that
competition would be distorted on the market for transport services crossing the
Øresund strait as “the
Consortium competes with operators of the other modes of
transport, for example ferry services”
122
.
Therefore, for all the reasons mentioned above, the Commission considers that the
measures entailing a selective advantage may be considered as affecting intra-Union
trade and are liable to distort competition.
Conclusion on the existence of aid
On the basis of this assessment, the Commission concludes that the capital injections,
the State guarantees for loans and the State loans constitute State aid within the
meaning of Article 107(1) of the Treaty. Concerning the alleged measures consisting
of the depreciation of assets, the fiscal loss carry forward, the joint taxation regime,
the railway fees and the use of State property (free of charge), the Commission
concludes that they do not constitute State aid in favour of Femern A/S in the sense
(238)
(239)
(240)
6.1.5.
(241)
121
122
Judgment of the General Court of 13 December 2018,
Stena Line Scandinavia AB and Others
v
Commission,
T-631/15, ECLI:EU:T:2018:944, paragraph 227 and Judgment of the General Court of
13 December 2018,
Scandlines Danmark ApS and Scandlines Deutschland GmbH v Commission,
T-
630/15, ECLI:EU:T:2018:942, paragraph 256.
Commission decision of 15.10.2014
–
State aids SA.36558 (2014/NN) and SA.38371 (2014/NN)
–
Denmark
–
State aid SA.36662 (2014/NN)
–
Sweden
–
Aid granted to Øresundsbro Konsortiet, OJ
C418, 21.11.2014, p.8.
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of Article 107(1) of the Treaty. In addition, the Commission considers that, in view
of the revised notification, the guarantees for the derivatives do not constitute State
aid.
6.2.
(242)
Classification of the measures as individual aid or scheme
In recital (133) of the Opening decision, the Commission raised the question whether
the State guarantees and the State loans should be considered and categorized as an
aid scheme, as individual aid granted when the Planning and the Construction Acts
entered into force, or as individual aid granted each time a financial transaction of
Femern A/S is implemented by the national authorities.
To determine whether the measures qualify as aid schemes or individual aid
measures, the Commission has to examine the nature of the measures in light of the
definitions set out in the Procedural Regulation.
According to Article 1(d) of the Procedural Regulation, “‘aid scheme’ means any act
on the basis of which, without further implementing measures being required,
individual aid awards may be made to undertakings defined within the act in a
general and abstract manner and any act on the basis of which aid which is not linked
to a specific project may be awarded to one or several undertakings for an indefinite
period of time and/or for an indefinite amount”. In contrast,
individual aid is defined
in Article 1(e) of the same Regulation as “aid that is not awarded on the basis of an
aid scheme and notifiable awards of aid on the basis of an aid scheme”.
The Commission considered already in recital (129) of the Opening decision that the
first situation included in the definition of an aid scheme cannot be considered
applicable to the measures under examination as the measures are not aimed at
“undertakings
defined within the act in a general and abstract manner”
but
granted
specifically to Femern A/S.
Both the Danish authorities and Scandlines et al. argued that the second situation
envisaged in the definition is not applicable in this case since the aid granted to
Femern A/S is linked to a specific project, the Fixed Link. Since the aid granted
under the capital injections, the State guarantees and the State loans is exclusively
related to the financing of the planning and construction of the Fixed Link, to the
exclusion of other projects or activities, the Commission finds that the aid is indeed
linked to a specific project. In addition, based upon the revised notification following
the Opening decision (and referred to in recital (177) of this decision), the aid cannot
be considered as awarded for an indefinite period of time and/or for an indefinite
amount.
Consequently, the Commission concludes that the State guarantees and the State
loans cannot be considered as an aid scheme within the meaning of Article 1(d) of
the Procedural Regulation. They must therefore be qualified as individual aid.
It remains to be determined whether the State guarantees and the State loans involve
one or several individual aid measure(s) linked to the Planning and Construction
(243)
(244)
(245)
(246)
(247)
(248)
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Acts or a series of individual aids granted each time a financial transaction of
Femern A/S is implemented by the Danish authorities.
(249)
Based on the case law of the Union courts
123
, as reflected in several Commission
guidelines and regulations
124
, it is well established that the aid granting date refers to
the date when the legal right to receive the aid is conferred on the beneficiary under
the applicable national regime.
The national legal basis for the financing of Femern A/S consists of the Planning Act
of 15 April 2009, which entered into force on 17 April 2009 and the Construction
Act of 4 May 2015, which entered into force on 6 May 2015.
Section 7 of the Planning Act and Section 4 of the Construction Act provide the legal
bases for the financing of the activities covered by those acts. The Danish authorities
explained that both sections are essentially identical. Section 4 of the Construction
Act specifies that Femern A/S may raise loans and use other financial instruments to
finance and refinance planning, construction and operation and other necessary
measures and that those loans are specified by the Minister of Finance (subsection 1);
that the Minister of Finance is authorised to issue a Treasury guarantee for those
obligations (subsection 2); that the Minister of Finance is authorised to meet those
financing needs by granting government relending (i.e. State loans) (subsection 3);
that the Danish central government guarantees the other financial commitments of
Femern A/S related to the construction of the project (subsection 4). Section 7 of the
Planning Act is drafted in a comparable manner.
The Commission notes that the language of those sections 4 and 7 in itself is not
straightforward with regard to Femern
A/S’ legal right to those forms of financing
and the related discretion of the Minister of Finance to approve or refuse providing
State loans or State guarantees to Femern A/S.
The Danish authorities provided further clarifications based on the preparatory notes
to the Construction Act which they consider as authoritative interpretation sources
for Section 4 of the Construction Act. In relation to subsection 1, the preparatory
notes clarify that the loans must be raised as specified by the Minister of Finance in
order to achieve the best possible terms. The Danish authorities further explained
that, according to this provision, the Minister of Finance has the competence to issue
binding guidelines to Femern A/S about how it should obtain loans, which
instruments should be used and which requirements should be imposed. Regarding
subsection 2 and 3, the preparatory notes specify “The
organisational form chosen is
not intended to limit the State’s responsibility for the construction work in question.
Consequently, the Act specifies that the State guarantees the companies’
obligations
concerning loans and other financial instruments that are used to finance and
refinance the preparation, construction, operation and implementation of other
(250)
(251)
(252)
(253)
123
124
Judgment of the General Court of 25 January 2018,
BSCA v Commission,
T-818/14,
ECLI:EU:T:2018:33 paragraph 72 and case-law cited therein.
Such as Commission Regulation (EU) No 651/2014 of 17 June 2014 declaring certain categories of aid
compatible with the internal market in application of Articles 107 and 108 of the Treaty, OJ L 187,
26.6.2014, p. 1, Article 2 (28).
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necessary measures in connection with the establishment of the construction project.
The guarantee from the State means that Femern A/S and A/S Femern Landanlæg
will be able to raise loans on terms equivalent to those granted to the State”
(Chapter
10). Chapter 12 of those preparatory notes specifies “In
addition to the part that is
financed by EU subsidies, the construction costs for the construction project will be
financed by raising loans in the international capital markets with guarantees issued
by the Danish State or via State re-lending. The interest and instalments on the loans
will be paid through user charges on the coast-to-coast
project and Banedanmark’s
payment to the companies for use of the railway. The Danish State will guarantee the
loans raised and the other financial obligations of the companies during the
construction phase.”
It follows that the Construction Act contains a clear
commitment by the State to finance the construction costs by State loans (or “State
re-lending”
as referred above) and/or State guarantees. The Minister
of Finance only
has authorisation to decide on the mix of State loans versus State guarantees.
(254)
The Danish authorities provided further clarifications on the implementation of those
State loans and State guarantees pursuant to the Construction Act (and by analogy
the Planning Act). Clarification was also provided on the specific role of the Minister
of Finance who has only limited discretion power in that implementation.
In Denmark, the government debt is managed by the ‘Government Debt
Management
Office’ at Nationalbanken (the Danish Central Bank) on behalf of the
Ministry of Finance. The “Agreement
on the division of work in the area of
government debt between the Danish Central Bank and the Ministry of Finance”
125
specifies the distribution of responsibilities. According to section 6 of this agreement,
Nationalbanken issues State guarantees on behalf of the Minister of Finance and
issues State loans on behalf of the Government to companies that have statutory
access to raise loans with a State guarantee or State loans. The Ministry of Finance
notifies Nationalbanken before the initiation of new legislation or amendments to
existing legislation, etc. regarding companies’ access to State loans and/or State
guarantees that are or will be managed by Nationalbanken. The Ministry of Finance
informs Nationalbanken when this substantive legal basis can be applied.
On 29 May 2017, Femern A/S entered into an agreement with Nationalbanken, the
Ministry of Finance and the Ministry of Transport that specifies the modalities under
which the financing will be granted. The agreement is a standard agreement prepared
by Nationalbanken, similar to the ones entered into as regards other State controlled
companies. It sets out certain high-level terms, including that it is Femern
A/S’
responsibility to ensure that the loans obtained correspond to its financing needs and
that the loans do not exceed any applicable restrictions in terms of loan amount.
Femern A/S should also ensure that transactions under State guarantee are based
upon sufficient legal basis for the government to issue guarantees. It results from this
agreement that Nationalbanken does not monitor this for each request for a new State
loan or State guarantee. Furthermore, Femern A/S is required
–
at the request of
Nationalbanken
–
to submit a plan concerning expected financing needs. It follows
(255)
(256)
125
Danmarks Nationalbank
–
Aftale mellem Finansministeriet og Danmarks Nationalbank om
arbejdsfordelingen på statsgældsområdet.
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from the agreement that any request to obtain a new loan that generally corresponds
to the plan will be accepted by Nationalbanken, unless (1) the loan is considered not
to comply with the monetary policy, (2) it is not possible for Nationalbanken to
obtain satisfactory pricing in the market due to extraordinary financial market
circumstances or illiquidity or (3) the request substantially deviates from the plan
provided. The specific terms and conditions for State loans and State guaranteed
loans are subject to Nationalbanken’s standard Guidelines for Financial Transactions.
Thus, the Minister of Finance does not, either in theory or in practice, approve or
reject individual loans that Femern A/S takes out. However, Nationalbanken
regularly monitors that loans for which Femern A/S requests a State guarantee fall
within the scope of the guidance from the Ministry of Finance and the Guidelines for
Financial Transactions. Neither Nationalbanken nor the Ministry of Finance have
ever rejected any specific loan documents for which for example A/S Storebælt or
A/S Øresund have requested a State guarantee.
(257)
On this basis, the Commission finds that the entry into force of the Construction Act
conferred on Femern A/S the legal right to finance the planning and construction of
the Fixed Link by way of State guaranteed loans or State loans. As such, the entry
into force of the Construction Act involved the grant of individual aid to Femern
A/S.
The Danish authorities also confirmed that subsection 4 of Section 4 of the
Construction Act
126
entails that the Danish central government is providing, without
any further implementing measures, a guarantee that the contractors of Femern A/S
will be paid by the Danish State in the case of failure of Femern A/S to pay
127
.
Therefore, as soon as Femern A/S signs a construction contract with one of the
contractors, the Danish State is liable for the entire financial obligation resulting
from that contract. This guarantee was also effective as from the passing of the
Construction Act, meaning that, from that day, the Danish State was effectively
(258)
126
127
The preparatory notes to the Construction Act specify that “In
pursuance of subsection 4, the central
government guarantees, without any specific notification in each case, Femern A/S' and A/S Femern
Landanlæg's financial obligations that are not guaranteed in subsection 2. In pursuance of this
provision, the government guarantee is limited to obligations that the two specified companies have
assumed in relation to the construction of the construction project, but will also apply to obligations in
connection with the construction of the construction project that the companies have assumed before
the structures are taken into use but where the companies' obligations only cease after the time at which
they are taken into use. The provision means that, for example, arbitration cases concerning works in
connection with the construction project that are carried out up to the time when the fixed link is taken
into use are covered by the central government's liability, even if the arbitration cases are only
concluded or initiated after it has been taken into use. However, obligations for, for example, repair,
operation and maintenance of the fixed link and any new works that are carried out after it has been
taken into use will not be covered by the central government's liability in pursuance of subsection 4.
Equally, financial obligations that the companies have assumed in the construction phase but are not
linked to the actual construction of the construction project will not be covered by the central
government's liability”.
This guarantee does only apply to the construction costs of the project. Any obligations related to
repair, operation and maintenance of the Fixed Link or any new works carried out after the Link has
been taken into use are strictly excluded.
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liable, without any further implementing measures, for any costs resulting from the
activities of Femern A/S under the Construction Act.
(259)
The Commission concludes that the Danish authorities granted several individual
aids to Femern A/S. First, a capital injection was granted in 2005 at the time of
incorporation. Then, an individual aid was granted on the date of entry into force of
the Planning Act on 17 April 2009 for the financing of the preparatory, investigation,
design and other necessary actions concerning the Fixed Link. This aid consisted of a
combination of the following instruments: a capital injection, State guarantees and
State loans. The initial budget was set at DKK 1 210 million (EUR 162.2 million)
(2008 prices). Additional aid was granted resp. on 3 June 2010, 23 June 2011 and in
March 2013 when the initial budget of the Planning Act was increased to resp.
DKK 1 881 million (EUR 252.1 million), DKK 2 812 million (EUR 376.9 million)
and DKK 3 992 million (EUR 535.1 million) (all in 2008 prices). On the date of
entry into force of the Construction Act on 6 May 2015 a further individual aid was
granted for the planning, construction, operation and other necessary measures in
relation to the construction and operation of the Fixed Link, and consisting of a
combination of State loans and State guarantees.
Legality of the aid
Article 108(3) of the Treaty requires Member States to inform the Commission, in
sufficient time to enable it to submit its comments, of any plans to grant aid. In
addition, the standstill obligation in that same Article prevents a Member State from
putting its proposed measure into effect before the Commission has adopted a final
decision.
On 16 March 2009, the Danish authorities notified State aid to finance a budget of
DKK 1 445 million (EUR 193.7 million) for the financing of the planning phase
pursuant to Article 108(3) of the Treaty for reasons of legal certainty.
DKK 1 210 million (EUR 162.2 million) concerned the Fixed Link while
DKK 185 million (EUR 24.8 million) concerned the hinterland connections. On 13
July 2009, in its Planning decision, the Commission decided not to raise objections to
the financing of the planning phase, concluding that in the planning phase
Femern A/S acted as a public authority and that any support therefore fell outside the
scope of Article 107(1) of the Treaty. Nevertheless, as the Commission could not
exclude that the public support for the planning phase might include State aid in
favour of the future operator of the Fixed Link, it also assessed the compatibility of
the notified measures and concluded that they could be considered compatible with
the internal market.
As noted in recital (259) of this decision, the budget for the planning of the Fixed
Link had been adjusted on several occasions, respectively in June 2010, in June 2011
and in March 2013 up to a total of DKK 3 992 million (EUR 535.1 million) (2008
prices).
Those budget adjustments were approved by the Danish Parliament’s
Finance Committee. The consent related each time to specific planning activities
covered by section 2 of the Planning Act. The Commission considers that the Danish
authorities decided on those budget increases in light of the Planning decision and
therefore relying on the presumption that no State aid would be granted to
Femern A/S with those budget increases or in any event if it were aid, it was
compatible. On the basis of those budget approvals, Femern A/S has taken on
specific State loans. The Danish authorities confirmed that each of those State loans
have a maturity date on which the loan is due. The Danish authorities further
6.3.
(260)
(261)
(262)
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specified that the actual planning costs have been financed on an ongoing basis in
light of near term cost projections and granting of EU TEN-T/CEF support.
(263)
The Commission considers that the Danish authorities could reasonably presume that
providing State guarantees and State loans for a planning budget of
DKK 3 992 million was covered by the Planning decision. Indeed, in the Planning
decision, the Commission found that Femern Belt A/S acted as a public authority
insofar as its involvement in the Planning phase was concerned, and that the public
funding granted to it for those purposes does not constitute State aid. If Femern
Belt A/S were to be chosen to be in charge of the subsequent phases of the project
and to carry out the linked commercial activities, the public financing of the planning
phase might be classified as compatible State aid. It is true that the Planning decision
did not specifically consider State loans but only State guarantees and a capital
injection. However, the Planning Act (as notified to the Commission) explicitly
provides for the possibility of State loans and gives the Minister of Finance the
discretion to decide upon the optimal mix to finance the preparation, investigation,
design activities and other necessary actions concerning the Fixed Link. The
Commission further notes that the Planning decision
–
in its complementary
compatibility analysis
–
was not conditional on a maximum aid amount or aid
intensity.
On 28 November 2014, the Danish Minister for Transport sent the “draft
bill on
construction of the Fehmarn Belt fixed link and the hinterland connections in
Denmark”
for public consultation. According to that envisaged Construction Act,
Femern A/S would also be appointed to carry out the construction, operation and
financing of the Fixed Link. The Danish authorities consequently notified the
financing model of the Fehmarn Belt Fixed Link project to the Commission on 22
December 2014. The Commission concludes therefore that the Danish authorities
respected their obligation to inform the Commission, in sufficient time to enable it to
submit its comments, of their plans to grant aid for the planning, construction and
operation of the Fixed Link.
As Femern A/S obtained advance State loans for construction activities on 21
November and 5 December 2018 for a total amount of DKK 7.4 billion
(EUR 1.0 billion), as DKK 1.85 billion (EUR 0.2 billion) of this amount was paid out
in 2018 and the remainder in the period February-April 2019 and as on 26 March
2019, the Minister for Transport instructed Femern A/S to commence a package of
construction works, the Commission concludes that at least part of the aid granted on
the basis of the Construction Act was put into effect illegally.
Compatibility assessment
The Danish authorities argue that if the Commission were to consider the support
measures to constitute State aid, it should assess their compatibility on the basis of
Article 107(3)(b) of the Treaty which allows aid to promote the execution of an
important project of common European interest.
(264)
(265)
6.4.
(266)
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(267)
According to Article 107(3)(b) of the Treaty, aid to promote the execution of an
important project of common European interest may be considered compatible with
the internal market. The Commission sets out the principles under which it will
assess the public financing of such projects in its Communication on Criteria for the
analysis of the compatibility with the internal market of State aid to promote the
execution of important projects of common European interest (‘IPCEI
Communication’)
128
.
According to paragraph 51 of the
IPCEI Communication, “the Commission will
apply the principles set out in this communication to all notified aid projects in
respect of which it is called upon to take a decision after the communication has been
published in the Official Journal of the European Union, even where the projects
were notified prior to its publication”. Consequently, the principles set out in the
IPCEI Communication should be applied in this case.
Important project of common European interest
In order to qualify for aid on the basis of Article 107(3)(b) of the Treaty, an
important project of common European interest should possess the following
features:
it must be a single project which is clearly defined in respect of its objectives
as well as the terms of its implementation, including its participants and its
funding
129
;
it must be of common European interest
130
;
it must be important quantitatively or qualitatively
131
.
(268)
6.4.1.
(269)
6.4.1.1. The project must be clearly defined in respect of its objectives as well as the terms of
its implementation.
(270)
The Commission noted already in the Opening decision that the project in this case
can be defined as the planning, construction and operation of the Fixed Link. Article
2 of the Fehmarn Belt Treaty specifies that the Fixed Link across the Fehmarn Belt
strait shall be constructed between Puttgarden and Rødbyhavn as a combined rail and
road link consisting of an electrified, double-track railway and a four-lane road link
with the technical quality of a motorway. More generally, the Fehmarn Belt Treaty
provides a clear description of the project in respect of its objectives and the terms of
its implementation, including its participants and funding. In addition, the
Construction Act and its annexes provide a detailed technical description of the
project, including geographical location, design, construction, financing and
operation. Therefore, the Commission concludes that the project can be considered as
a clearly defined project.
128
129
130
131
OJ C 188, 20.6.2014, p. 4.
IPCEI Communication, paragraph 12.
IPCEI Communication, paragraph 14.
IPCEI Communication, paragraph 24.
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6.4.1.2. The project must be of common European interest
(271)
The Commission considers that the project is of a common European interest in the
sense of Article 107(3)(b) of the Treaty as it contributes in a concrete, clear and
identifiable manner to one or more Union objectives and has a significant impact on
the competitiveness of the Union as well as on sustainable growth and value creation
in a wide part of the Union. The Commission has also recognised the common
European interest of the project in its Planning decision and more recently in the
Opening decision.
The project represents an important contribution to the Union’s objectives, by being
of major importance for
the Trans-European Transport
(TEN-T)
and Energy
networks
132
.
The project will contribute to the development of the Trans-European
transport network and is considered a priority TEN-T project and is of great
importance for the transport strategy of the Union
133
. It constitutes a missing link on
the Scandinavian-Mediterranean TEN-T core network corridor, identified as such in
the third workplan of the European coordinator
134
. Accordingly, the project will
contribute to an improvement of the connection between the Nordic countries and
Central Europe as well as greater flexibility and time savings for road and railway
traffic. This is a strong indication of the common European interest of the project.
The project involves two Member States, Denmark and Germany. Notwithstanding
this, the benefits go beyond those two Member States as they extend to a wide part of
the Union
135
. Indeed, the objective of the Fehmarn Belt Fixed Link project is to
improve the conditions for transport of passengers and goods between the Nordic
countries and Central Europe. By closing the missing link on the Scandinavian
Mediterranean corridor
136
, the project is expected to bring benefits for all countries
along the corridor from Finland to Malta (in accordance with Article 44(2) of
Regulation EU N° 1315/2013
137
).
Those clearly defined benefits of the Fehmarn Belt Fixed Link project have been
further specified in a cost-benefit analysis prepared for the Danish Ministry of
Transport
138
are not limited to the undertakings or to the sector concerned with the
project
139
. The cost-benefit analysis shows that the Fehmarn Belt Fixed Link project
(272)
(273)
(274)
132
133
134
135
136
137
138
139
IPCEI Communication, paragraph 15.
IPCEI Communication, paragraph 23.
https://ec.europa.eu/transport/sites/transport/files/work_plan_wpiii.pdf,
p. 35.
IPCEI Communication, paragraph 16.
The Scandinavian-Mediterranean Corridor represents a crucial north-south axis for the European
economy. The corridor stretches from Finland and Sweden in the North, to the island of Malta in the
South, taking in Denmark, Northern, Central and Southern Germany, the industrial heartlands of
Northern Italy and the southern Italian ports. The most significant projects on the corridor are the
Fehmarn Belt Fixed Link and Brenner Base tunnel, including their access routes, see
https://ec.europa.eu/transport/themes/infrastructure/scandinavian-mediterranean_en.
Regulation (EU) No 1315/2013 of the European Parliament and of the Council of 11 December 2013 on
Union guidelines for the development of the trans-European transport network and repealing Decision
No 661/2010/EU, OJ L 348 of 20.12.2013, p. 1.
A study prepared for the Danish Ministry of Transport by Incentive of 5 January 2015, as revised and
updated by a study of 27 March 2015.
IPCEI Communication, paragraph 17.
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will have wide benefits for Europe, despite of significant investment costs. The cost-
benefit analysis was prepared by the consultancy
Incentive,
with an original version
of the study dating 5 January 2015 and an updated version dating 27 March 2015.
The original version was updated with new construction estimates. The main benefits
identified in the analysis consist in time savings and increased flexibility when
crossing the Fehmarn Belt, improving the functioning of the internal market and
strengthening the economic and social cohesion between the Nordic countries and
Central Europe.
(275)
Moreover, the cost-benefit analysis also quantifies the net benefits, taking into
account direct and indirect effects. Indirect effects include for example
environmental and climate impact and a correction for the earnings of the ferries.
According to the updated study, the Fehmarn Belt Fixed Link project will return a
net benefit and produce a socio-economic return of 4.7%
140
when the costs and
benefits of all countries are included in the analysis. The original study also
performed a number of sensitivity analyses. It measured, in the interest of prudence,
the impact on competition from ferries operating at reduced frequency. Under that
scenario, the socio-economic return was estimated at 4.1% (compared to an overall
socio-economic return of 5.0% in the original study).
The Commission considers that, even if the updated sensitivity analysis results in a
return of 3.8% in case of continued ferry service, as Scandlines et al. argue, the
positive socio-economic study still confirms the benefits of the project.
The Commission considers that the updated studies of 2019 as provided by
Scandlines and Stena Line do not change its qualification of the project as having
clearly defined benefits. The Incentive studies are based upon plausible assumptions.
The new Knud Erik Andersen study of 2019, provided by Scandlines and Stena Line
does not alter this assessment. In the view of Scandlines and Stena Line, the
Incentive studies would have assumed that Scandlines is operating at a massive loss.
The Commission does not consider this as a credible argument since it is clear that
the socio-economic return was in fact corrected for lost earnings on ferries in the
Incentive studies. Specifically, the original study by Incentive assumed that the
revenues exceeded costs by around 15%. In addition, the study included two
sensitivity analyses with up to a 30% difference between revenues and costs which
still resulted in a positive socio-economic return of 4.6% (compared to a socio-
economic return of 5.0% in base case scenario). Scandlines and Stena Line also
highlight an increase in estimated construction costs for the German hinterland. The
Commission notes that this element can also not undermine the plausibility of the
Incentive studies, which were based upon a reasonable estimate of full construction
costs (the German hinterland only being a minor part of total costs) including a
reasonable reserve amount.
Paragraph 18 of the IPCEI communication requires the project to be co-financed by
the beneficiary. As the project will be funded in large part by Femern A/S, on
(276)
(277)
(278)
140
Recital 144 of the Opening decision erroneously mentioned that the sensitivity analyses were performed
in the context of the updated study.
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account of the fact that tolls and fees will be charged to users of the Fixed Link, the
Commission finds that this criterion is respected.
(279)
The public funding of the Fixed Link does not relate to environmentally harmful
subsidies, therefore it is not in conflict with the principle of phasing out such
subsidies, as required by paragraph 19 of the IPCEI communication.
The project has received EU funding for planning activities, as detailed in recital (37)
of this decision and it has received a commitment for further CEF support. This is as
such recognized by the IPCEI Communication as a positive indicator of the common
European interest.
All those elements contribute to the Commission’s conclusion that the project
represents an important and concrete contribution to the achievement of the Union’s
transport policy objectives and broader Union objectives in particular the
strengthening of economic and social cohesion. As such, the Commission considers
that the project is of common European interest.
The project is a major European transport infrastructure project. Its important
character has already been recognised by the Commission in its Planning decision.
On the basis of the update provided by the Danish authorities, the total costs for
planning and construction costs of the Fixed Link are estimated at DKK 52.6 billion
(EUR 7.1 billion) and the costs related to the planning and construction of the
upgrading of the Danish hinterland connections are estimated at DKK 9.5 billion
(EUR 1.3 billion), i.e. DKK 62.1 billion (EUR 8.3 billion) in fixed 2015 prices for
the entire project. In addition to this, the Fehmarn Belt Fixed Link project also
involves significant costs related to the construction of the German hinterland
connections, which is the responsibility of German authorities
141
.
Moreover, the project is realised as part of the cooperation between Germany and
Denmark and it has already been endorsed at Union level as the Fixed Link forms an
integral part of the Trans-European transport network. Once the Fixed Link is
completed, it will significantly improve the conditions for passenger and freight
traffic between the Nordic countries and Central Europe, helping to relieve
congestion on the Great Belt route across Denmark, in particular on the rail network.
The Commission therefore considers that the project is particularly large in size and
scope. The relatively long construction period and the high investment amount also
imply a very considerable level of financial risk
142
. As such, the Commission
considers that the project is quantitatively and qualitatively important.
(280)
(281)
6.4.1.3. The project must be important quantitatively or qualitatively
(282)
(283)
(284)
(285)
141
142
These costs are not related to the current case.
IPCEI Communication, paragraph 24.
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(286)
6.4.2.
(287)
On this basis, the Commission concludes that the project meets all of the eligibility
criteria set out in Section 3 of the IPCEI Communication
143
.
Nature of the aid under assessment
The measures as notified in 2014 that were assessed in the Construction decision
covered the planning, construction and operation of the Fixed Link, until the full
repayment of the debt. In its judgments of 13 December 2018, the General Court
stated that as the aid at issue covered the operating costs of the Fixed Link, it could
not be ruled out that the aid to some extent might constitute operating aid, which, if
present, should have been specifically assessed by the Commission.
The Commission therefore, in section 5.3.2. of the Opening decision, raised the
question whether the aid measures should be classified as investment aid or operating
aid, or as a combination of both. In particular, it was unclear at that stage to what
extent the measures that would be implemented during the operational phase of the
project would cover financing needs related to (i) the repayment of the debt created
during the planning and construction phase of the project, and/or (ii) the payment of
operating costs during the operational phase of the project, and/or (iii) the payment
of the dividends to the parent company, or (iv) all of the above.
According to Scandlines et al., operating aid is linked to the nature of the costs and is
not linked to a particular phase (such as the operating phase) of the project. Any aid
covering operating costs constitutes operating aid in their view, irrespective of the
phase in which the costs occur. As operating costs are included in the funding gap
analysis, Scandlines at al. consider that by definition operating aid is present.
Furthermore, for Scandlines et al., such operating aid is prohibited.
It is necessary to determine first whether the measures involve operating aid. If they
do, it needs to be analysed whether such potential operating aid can be declared
compatible with the internal market, and on what basis.
According to settled-case law, operating aid is defined as aid that is intended to
release an undertaking from costs that it would normally have had to bear in its day-
to-day management or ordinary activities
144
. The Court of Justice further
distinguished investment aid and operating aid by linking the objective of investment
aid to the existence of a specific investment
145
.
When considering the cited definition of operating aid together with the measures as
notified by the Danish authorities in 2014, it seems that Femern A/S could
potentially benefit from operating aid. Considering the Planning and Construction
Acts, it is clear from resp. sections 7 and 4 that Femern A/S would have the
(288)
(289)
(290)
(291)
(292)
143
144
145
The General Court has also confirmed the analysis of the Commission in this respect; see judgment of
the General Court of 13 December 2018,
Scandlines v European Commission,
T-630/15,
ECLI:EU:T:2018:942, paragraphs 144-181.
See, for instance, judgment of the Court of Justice of 19 September 2000,
Germany v Commission,
C-
156/98, ECLI:EU:C:2000:467, paragraph 30 and case-law cited therein, and judgment of the Court of
Justice of 24 November 2011,
Italy
v
Commission,
C-458/09 P, ECLI:EU:C:2011:769, paragraph 63.
Judgment of the Court of Justice of 24 November 2011,
Italy
v
Commission,
C-458/09 P,
ECLI:EU:C:2011:769, paragraph 64.
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possibility to raise State loans and benefit from State guarantees on its loans to
finance and refinance planning, construction,
operation
and other necessary
measures in relation to the construction and
operation
of the Fixed Link. The
Construction Act did not exclude that Femern A/S would be released from costs it
would normally have to bear in its day-to-day management of the Fixed Link. Since
the above cited definition of operating aid clearly refers to the ‘day-to-day
management’
and ‘ordinary activities’, and implicitly refers to a ‘continuous nature’
(as opposed to ad hoc nature for investment aid), the Commission considers that this
potential operating aid can only be present once the Fixed Link is operational.
(293)
However, as a reply to the doubts raised in the Opening decision and as outlined in
recital (177), the Danish authorities revised the 2014 notification in order to further
limit the State aid and to limit the provision of State guarantees and State loans to the
financing needed for the costs incurred during the planning and construction phase,
and therefore to the planning and construction costs of the Fixed Link. The
maximum amount of debt that can be secured by State guarantees or taken up by
means of State loans has been limited to the planning and construction cost,
including the financial costs related to those planning and construction costs.
On the basis of the revised notification, the Commission concludes that the aid under
consideration concerns investment aid as the objective of the aid is clearly to make
possible the planning and construction of the Fixed Link, and not to release
Femern A/S from costs that it would normally have had to bear in its day-to-day
management or ordinary activities. The fact that Femern A/S refinances frequently
the loans taken up to cover the planning and construction costs, and not through for
instance a single massive loan, is only a matter of the
form and type of
the financial
structure of the project. It does not mean that State guarantees for refinanced loans
relating to planning and construction costs involves operating aid. In addition, as the
Commission demonstrates below in the compatibility analysis and assessment of the
funding gap, the aid amount is substantially lower than the construction costs of the
Fixed Link.
Although the Construction Act seemed to allow for operating aid, the Commission
considers that this could only confer a potential advantage on Femern A/S once
operational. On the basis of the revised notification, the potential for future operating
aid has been removed.
Furthermore, the Danish authorities will ensure that Femern A/S annually reports an
account of its cash flows with the purpose of demonstrating that the operation of the
Fixed Link is not subsidized.
Necessity of the aid
According to paragraph 28 of the IPCEI Communication, “the aid must not subsidise
the costs of a project that an undertaking would anyhow incur and must not
compensate for the normal business risk of an economic activity. Without the aid, the
project’s realisation should be impossible, or it should be realised in a smaller size or
scope or in a different manner that would significantly restrict its expected benefits.”
Footnote 2 of paragraph 28 of the IPCEI Communication also contains a formal
incentive effect requirement providing that “The
aid application must precede the
start of the works, which is either the start of construction works on the investment or
the first firm commitment to order equipment or other commitment that makes the
investment irreversible, whichever is the first in time. Buying of land and
(294)
(295)
(296)
6.4.3.
(297)
(298)
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preparatory works such as obtaining permits and conducting preliminary feasibility
studies are not considered as start of
works.”
(299)
Concerning the formal incentive effect requirement, the Commission already noted
in the Opening decision that it is clear that Femern A/S was established for the sole
purpose of planning, constructing and operating the Fixed Link. It is required by its
articles of association to do so. Moreover, it is clear from the analysis of the
substantive incentive effect (see recital (302) and following) that without aid,
Femern A/S was not in a position to conduct the project. In those circumstances, and
taking into account that the aid in this case relates to a single project decided by
Denmark and Germany that will be implemented by State owned specific purpose
entities, the formal incentive effect requirement as set out in the IPCEI
Communication cannot be considered to be a prerequisite for demonstrating that the
aid had an incentive effect. The Fixed Link project is very different from, for
instance, projects that may be supported under a regional aid scheme, as those
projects are decided upon by the companies themselves and the incentive behind
their investment decision has to be verified by the granting authorities prior to the
granting. The Commission considers that the aid application in this case can be
considered as inherent in the establishment of Femern A/S. The fact that Femern A/S
did not submit a specific aid application to the Danish authorities does therefore not
demonstrate the lack of incentive effect
146
.
Scandlines et al. further argued that what matters is whether Femern A/S acted (by
constructing) before the aid was granted or in other words, whether Femern A/S
actually started construction before receiving a commitment to have the aid. In the
opinion of Scandlines et al., “Femern
A/S started construction works in 2013,
although the Danish authorities committed to grant the aid, at the earliest in 2015
with the Construction Act”.
According to Scandlines et al. those works cannot be
considered as planning activities. Moreover, and considering that aid for construction
activities was not granted yet, the formal incentive effect would be violated. In
addition, Scandlines argued in its submission of October 2019 that Femern A/S has
also breached the incentive effect requirement by carrying out construction works
after the annulment of the Construction decision. The Commission notes that the
formal incentive effect requirement, in general, does not compare the date of start of
works to the date of aid granting (as Scandlines et al. seem to argue), but compares
the date of start of works to the date of aid application. In any event, as the Danish
authorities explained, the so-called
preparatory works,
which are part of a program
under which the Danish authorities decided to initiate certain preparations at an
earlier stage than originally envisaged, were based upon several approvals of the
Danish Parliament of an adjustment of the planning budget. The Commission
considers therefore that it cannot be argued that Femern A/S, as a specific purpose
entity and given its articles of association, proceeded to those works without relying
on the fact that those works would be State subsidized.
(300)
146
Judgment of the General Court of 13 December 2018,
Scandlines Danmark ApS and Scandlines
Deutschland GmbH
v
Commission,
T-630/15, ECLI: EU:T:2018:942, paragraph 192.
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(301)
Scandlines et al. further argued that the Commission, in paragraph 163 of the
Opening decision, was wrong in referring to the standstill obligation. The
Commission agrees that the standstill obligation and the formal incentive effect
requirement are two different concepts. Indeed, aid that has been granted in violation
of the standstill obligation may still have an incentive effect.
The Commission’s
position that the absence of an aid application is not decisive for
the assessment of the incentive effect of the aid in this case is without prejudice to
the requirement that the aid must not subsidise the costs that a project would anyhow
incur (the substantive incentive effect, as provided for in paragraph 28 of the IPCEI
Communication). The Commission considers that the reference by Scandlines et al.
to Article 345 of the Treaty in that there would be a discrimination in favour of
publicly owned companies is therefore not relevant. As explained, the Commission
considers that the substantive incentive effect test of paragraph 28 of the IPCEI
Communication is fully applicable but that given the specific circumstances as
referred to in recital (299) of this decision, the aid can be considered as inherent in
the establishment of Femern A/S within the context of the project. It should therefore
be demonstrated that without the aid the Fixed Link would not be realised or at least
not in the same scope.
Paragraph 29 of the IPCEI Communication requires the Member State to provide the
Commission with adequate information concerning the aided project. A
comprehensive description of the counterfactual scenario corresponding to the
situation where no aid is awarded by any Member State is also required.
As already noted in the Opening decision, the Danish authorities submitted that no
credible counterfactual or realistic description of an alternative project exists. The
Danish Parliament has sole decision-making
authority as regards the project’s scope
and its means of financing. Hence, Femern A/S (and A/S Femern Landanlæg) have
no power to decide to carry out an alternative project of a different scale.
Although paragraph 29 of the IPCEI Communication clearly provides that the
counterfactual scenario may consist in the absence of an alternative project,
Scandlines et al. argued that the Commission should verify whether an alternative
project exists without aid. Since the cost-benefit assessment from 2000
147
lists
several alternatives and since the cost-benefit ratio of the immersed tunnel solution
was considerably lower than the other alternatives, the Commission should not, in
the view of Scandlines et al., neglect those alternatives in its assessment of the
necessity of the aid. They further consider the fact that the Danish Parliament has
sole decision-making
as regards the project’s scope as irrelevant and the 2001
Enquiry of Commercial Interest as outdated.
The scope of the 2000 cost-benefit report was the economic and financial evaluation
of a Fixed Link across the Fehmarn Belt comprising the assessment of different
technical solutions for a Fixed Link in comparison with the continued existence of
the current ferry system. The Commission acknowledges that the 2000 cost-benefit
(302)
(303)
(304)
(305)
(306)
147
Economic Evaluation of an improved Ferry System across the Fehmarn Belt,
prepared by PLANCO
Consulting GmbH for the Danish and German Ministries of Transport, dated May 2000.
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report concludes that the relative efficiency of the alternative of an improved ferry
system was considerably higher. However, at the same time, the report concludes
that the absolute magnitude of net benefits gained by the Fixed Link solution cannot
be achieved by an improved ferry system (the highest contribution to those benefits
coming from reduced travel times and savings in transport cost). Consequently, an
improved ferry system was not an alternative with the same scope and achieving
comparable expected benefits as the Fixed Link project that should be considered as
a counterfactual scenario. As to the other scenarios, the 2000 cost-benefit report did
not make a ranking or spell out a clear preference, and it can in any event not be
concluded from the report that alternative scenarios would exist where, without aid, a
Fixed Link solution could be realised with a comparable scope or achieving
comparable expected benefits. The Commission therefore considers that it can rely
on the Enquiry of Commercial Interest, as launched in 2001, to establish the scenario
where the Fixed Link would get no public support.
(307)
As already noted in the Opening decision, the aim of that Enquiry was to investigate:
(i) the private sector's willingness and ability to design, plan, construct, finance and
operate a Fixed Link across the Fehmarn Belt, (ii) the financial and associated
technical solutions for the project, (iii) the organisational framework for private
investors' involvement in the project, and (iv) the distribution of risks involved in the
project between the private sector and the Member States
148
. The Enquiry aroused
substantial interest: approximately 100 individual companies responded of which
31
149
responded to a questionnaire and 20 were invited for interviews. The Enquiry
concluded that the private sector would be interested in participating in the design,
financing, construction and operation of the Fixed Link if the States provided any
type of support, well in excess of the envisaged TEN-support, and/or State
guarantees. Private investors would require a high internal rate of return to
compensate the substantial risks connected with such a project as the Fixed Link.
Likewise, lenders would require a high interest rate and a high debt coverage ratio in
order to overcome the perceived risks. Together, those requirements from the
investors and the lenders would lead to such high costs of capital that the project
would not be feasible without substantial public support. To substantiate that this
conclusion has not changed in the meantime, the Danish authorities submitted an
analysis at the time of the notification
150
showing that the results of the Enquiry were
still valid.
On this basis, the Commission considers that first, no rational private investor would
engage in the financing of such a project under normal market conditions and
second, that the Fixed Link could only be completed with substantial public support.
The fact that the final technical solution has changed since the 2001 Enquiry does not
(308)
148
149
150
The results from the Enquiry of
Commercial Interest were published in the report: “Fehmarnbelt, An
infrastructure Investment, Finance and Organisation, June 2002”.
The participants included consortia consisting of contractors, operators and banks on the one hand and
individual companies, mainly banks, engineering companies and insurers, on the other.
The Danish State Guarantee Model Working Principles and Experience with Largescale Infrastructure
Projects, September 2014 and The Fixed Link’s internal rate of return and intensity of
government
subsidies.
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change this conclusion and nothing suggests that a counterfactual scenario without
aid had become viable in the meantime. In addition, the provision of EU financial
assistance under the CEF would be a complementary strong indication of the
necessity of public funding for the realisation of the project. Hence, without the aid,
the project would not be realised. The counterfactual scenario thus consists in the
absence of an alternative project. In the absence of an alternative project, aid must be
considered as necessary if, for example, it can be demonstrated that the project’s IRR
is below the normal rate of return required by investors engaging in similar
investment projects, or if the IRR is insufficient to cover the cost of capital required
by the market.
(309)
To this end, in the context of the 2014 notification, the Danish authorities already
explained that Femern A/S did not have
investment projects of a similar kind
or
cost
of capital
as a whole that could be used to calculate whether the aid amount exceeds
the level necessary for the project to be sufficiently profitable. Therefore, it was
necessary to compare the project’s IRR with the cost of capital requirements
generally seen in
the industry concerned.
The Danish authorities have provided an
updated analysis reflecting current market conditions and reflecting the project
specific risk.
As outlined in recital (175), the benchmark WACC is dependent upon the risk-free
rate. In the alternative model, the WACC is lower and has been estimated by the
Danish authorities to be 5.59%.
The Danish authorities compared this cost of capital requirement of the industry with
the internal rate of return that would be achieved with the Fixed Link project in the
absence of aid. As the Danish authorities provided updated financial data as a reply
to the doubts raised in the Opening Decision on the proportionality of the aid, the
Commission refers to section 0 of this decision for a detailed assessment of the
assumptions of the models.
The results of those updated calculations show that the project’s IRR, without any
State aid, would amount to 3.9%, considering an economic lifetime of the investment
of 40 years. This IRR is considerably below the cost of capital of 5.59% required by
the market that was calculated in the alternative funding gap model. By consequence,
it is also lower that the cost of capital required by the market established under the
first funding gap calculation model, which assumes a higher average WACC. This
analysis confirms the conclusions of the 2001 Enquiry of Commercial Interest as to
the necessity of State aid. In addition, at the request of the Commission, the Danish
authorities conducted several sensitivity analyses on the basis of the updated
financial model. It appears that the IRR remains below the cost of capital required by
the market even if, as suggested by the complainant, a very long lifetime is
considered (in the simulation, the model extended until year 2100).
On the basis of the above elements, the Commission concludes that the aid does not
subsidise the costs of a project that would, in any case, have been incurred by
Femern A/S on the assumption that the project would have been undertaken in the
absence of the aid in question. The aid is therefore necessary for the construction of
the said infrastructure.
(310)
(311)
(312)
(313)
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6.4.4.
(314)
Proportionality of the aid
The principle of proportionality requires that the aid measures do not exceed what is
appropriate in order to attain their objectives. Thus, if the planning and construction
of the Fixed Link could be achieved with less aid, then the aid would not be
considered proportionate
151
.
According to paragraph 31 of the IPCEI Communication, “[t]he maximum aid
level
will be determined with regard to the identified funding gap in relation to the eligible
costs. If justified by the funding gap analysis, the aid intensity could reach up to 100
% of the eligible costs. The funding gap refers to the difference between the positive
and negative cash flows over the lifetime of the investment, discounted to their
current value on the basis of an appropriate discount factor reflecting the rate of
return necessary for the beneficiary to carry out the project notably in view of the
risks involved. The eligible costs are those laid down in Annex […]”.
In order to address the doubts raised in the Opening decision, the Danish authorities
provided an update of the funding gap analysis and limited the aid so that it does not
exceed the funding gap.
It therefore needs to be assessed whether the underlying assumptions of the Fixed
Link funding gap model submitted by the Danish authorities are appropriate in view
of the nature, scope and risks of the project.
In this context, the Commission notes that the aid amount is directly linked to the
underlying assumptions of the funding gap model, not only as a consequence of the
limitation of the aid amount to the funding gap level but also due to the fact that the
level of the debt, and thus the level of the aid amount, depends on factors such as the
overall construction cost and the interest rate assumed. The Commission therefore
finds it appropriate, given the revised notification including an update of the funding
gap analysis, that the model is also based upon the most recent underlying data. The
Commission accepts in this respect the methodology of the Danish authorities to use
the latest fully revised financial analysis of the project, the 2016 financial analysis, as
a starting point and to update that analysis with further relevant developments.
The Danish authorities restricted the funding gap model to the financing model of the
Fixed Link and excluded all construction costs related to the hinterland connections
from the analysis. As it appears from subsection 2 of section 5 of the Construction
Act that A/S Femern Landanlæg pays all expenses for planning, construction,
operation and other necessary measures related to the construction and operation of
the hinterland connections, the Commission is of the view that the Danish authorities
took a correct approach in excluding those hinterland costs from the funding gap
analysis for Femern A/S. The Danish authorities further proposed not to take into
account the dividend payments Femern A/S might incur in favour of A/S Femern
Landanlæg. Those dividend payments therefore do not appear as a cost item in the
model. The Danish authorities also revised the 2014 notification as they committed
(315)
(316)
(317)
(318)
(319)
151
IPCEI Communication, paragraph 28.
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to ensure that Femern A/S will only start paying dividends to A/S Femern Landanlæg
after Femern
A/S’ State subsidized debt is fully repaid.
(320)
The Danish authorities explained that the eligible costs are restricted to the
construction costs budget. This construction costs budget includes the planning costs
as well as the costs for the promotional/marketing/information activities. The
Commission considers, since the timing of those information/promotional activities
occurred about 10 years before the planned operational date, since there is clearly an
information obligation imposed by the Danish State and since information activities
were part of the Planning Act, that those costs are linked to the realisation of the
project and therefore eligible for aid under the IPCEI Communication. The planning
and construction cost budget amounts to DKK 62.2 billion (EUR 8.3 billion) (in
nominal prices) which the Commission considers as an appropriate estimate. The
budget includes a reserve requirement which is set so that there is a probability of
80% that the budget including the reserve will be sufficient to complete the project
despite any cost overruns. It reflects costs that the project will most likely incur. In
addition, for the purpose of the calculation of the maximum funding gap, the Danish
authorities added a construction buffer of DKK 3 billion (EUR 0.4 billion) (in
nominal prices) to the construction costs. The buffer corresponds to an increase in
the reserve requirement from 80% to 99%. This means that, not only in 80% but in
99% of future cost realisations, the budget including the reserve of DKK 7.3 billion
(EUR 1.0 billion) as well as the buffer of DKK 3 billion (EUR 0.4 billion) will be
sufficient to complete the project. However, this also means that there is a probability
that the actual construction costs will not be that high and that the construction costs
assumed for the purpose of determining the funding gap may therefore be
overestimated by this construction cost buffer.
The Danish authorities updated the initial assumption on EU funding in its 2016
financial analysis to 10%. This assumption is lower than the initial assumption of
18%, which formed the basis of the Construction Act (equivalent to EU support of
about DKK 7.5 billion or EUR 1.0 billion). The Danish authorities explained that in
2015, the EU granted EUR 589 million for the funding period 2016-2019 which is
equivalent to approximately DKK 4.4 billion (in current prices). At the same time,
there were uncertainties regarding the total funding that was to be allocated to
Femern A/S, including uncertainties regarding the timing of commencement of the
construction period. For those reasons, the EU support assumption was changed to
10% in the 2016 financial analysis. However, the Commission notes that the
assumption in the 2016 financial analysis was stated as cautious. The Danish
authorities explained that, due to a delay in the German plan approval of more than
one year and subsequent litigation before the German Federal Administrative Court,
Femern A/S will not be able to use the full amount of EU grants even with a
prolongation of the period of support by two years until the end of 2022 in the most
optimistic scenario. Furthermore, the Danish authorities explained that they expect
the general EU budget to be reduced in the financial perspectives 2021-2027 (due to
Brexit) and at the same time the number of applications for EU support to
infrastructure projects to be increased. Therefore, the assumption of 10% EU funding
should be considered as a realistic assumption. In the funding gap calculations, the
total EU funding amounts to 12% of planning and construction costs (in NPV terms)
which, on the basis of the above explanations, the Commission considers as a
reasonable assumption.
(321)
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(322)
As to the revenues, nothing that has emerged in the formal investigation gives the
Commission reason to put into question the road traffic forecast as it has been
developed in 2014, crosschecked and subjected to external quality assurance. In
addition, the Commission considers it as reasonable that the 2014 road traffic
forecast was updated with the effect of the Great Belt toll reduction. For what
concerns the assumption of the continued ferry service in the traffic figures, the
Commission notes that this assumption is not in accordance with the baseline
scenario of the cost-benefit analysis as developed in 2015. However, as the Danish
authorities submitted, the risk that the ferry service would continue was already
clearly identified at that point in time as the traffic analysis includes a specific
sensitivity analysis on that element. Since then, Scandlines repeatedly confirmed,
including in its reply to the Opening decision, its intention to maintain ferry
operations with a frequency even exceeding a 1-hour service. The studies completed
by consultants of PWC and KPMG referred to by the Danish authorities (see recital
(168) of this decision) also seem to confirm the feasibility of a continued service. In
view of all this, the Commission considers that a reasonable investor would assume a
continued ferry service in its financial analysis and considers the assumption of a 1-
hour ferry service to be appropriate.
As to the assumed prices, the Commission does not share the view of Scandlines et
al. that price setting would be too low
because “Femern
A/S sets its tolls below
costs”.
The Commission observes that the expected operating revenues largely
exceed operating costs over the entire operational period. It cannot be a requirement
that prices are to compensate for the full costs (including construction costs) of the
project. If it were possible to set prices at a level that compensates for all
construction and operating costs, no funding gap would be present and no State aid
would be needed. The Commission, however, considers that prices assumed in the
funding gap model cannot be artificially low with the sole purpose of inflating the
funding gap. The Construction Act refers back to the Planning Act, assuming that the
price level for road traffic was expected to be at the level of the ferry prices for
Rødby-Puttgarden in 2007, adjusted by the general increase in prices up to the time
of opening. This same price level was the basis for the traffic projections and was
considered as a realistic assumption by the respective studies. The traffic forecast
uses a flat, technical average price for both passenger cars and lorries. It further
appears from the 2016 financial analysis that, if a differentiated price structure were
introduced, the effect on the overall revenues would be relatively limited. Based on
the above, the Commission considers the assumed road traffic revenues to be
plausible and appropriate.
The Commission further considers the basis for the calculation of the railway
revenues as explained in recital (170) as reasonable.
The 2016 financial analysis incorporates a thorough review of the costs for operation,
maintenance and reinvestment of the Fixed Link, leading to a serious reduction in
those costs. Those new assumptions have also been included in the updated funding
gap model. In the view of Scandlines et al., operating costs must be excluded from
the funding gap calculation. This is based on their view that all aid covering
operating costs is operating aid, which in their view cannot be allowed. The
Commission already elaborated in part 6.4.2 of this decision on what constitutes
operating aid. The question whether operating costs can be included in a funding gap
calculation is however a different issue.
(323)
(324)
(325)
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(326)
The Commission notes that paragraph 31 of the IPCEI Communication refers to the
difference between positive and negative cash flows when defining the funding gap.
It is in fact inherent in the logic of investment decision-making to compare, ex ante,
investment costs against future operating revenues and costs. Investors typically do
not take a positive investment decision as long as this comparison results in a gap or
a negative net present value. Consequently, the expected operating costs and
revenues are an integral part of the funding gap analysis. This is also confirmed by
the compatibility criteria in the General Block Exemption Regulation
152
. Although
they are not directly applicable to the case at hand, they illustrate how the
Commission applies the funding gap principle in its State aid practice. Article 53,
paragraph 6 and Article 55, paragraph 10 of that Regulation which concerns aid for
culture and heritage conservation and aid for sport and multifunctional recreational
infrastructure respectively state that “for
investment aid
[…],
the aid amount shall
not exceed the difference between the eligible costs and the operating profit of the
investment. The operating profit shall be deducted from the eligible costs ex ante, on
the basis of reasonable projections, or through a claw-back mechanism.”
‘Operating
profit’
is defined in Article 2 paragraph 39 of the General Block Exemption
Regulation as “the
difference between the discounted revenues and the discounted
operating costs over the relevant lifetime of the investment, where this difference is
positive. The operating costs include costs such as personnel costs, materials,
contracted services, communications, energy, maintenance, rent, administration
[…]”.
The Danish authorities used the expected economic lifetime of the Fixed Link in the
funding gap analysis. They considered the expected economic lifetime of the
investment to be 40 years as this is the timespan an investor would normally consider
when deciding on large-scale infrastructure investments like the Fixed Link. The
reference period taken into consideration as from the moment of the Construction
Act is therefore 53 years and 50 years as from the assumed start of the construction
phase. It is true that according to Femern
A/S’s website, the lifetime of the project is
said to be 120 years. However, the more distant the cash flows, the larger the impact
of the discounting will be. The Commission believes that, due to the high degree of
uncertainty surrounding any financial forecast over such a very long period of time,
it is very unlikely that any reasonable investor would have accepted to make an
investment whose profitability prospects can be realised only over such a very long
time period. The Commission considers an operational period of 40 years as a
reasonable assumption for the calculation of the funding gap of the Fixed Link. This
period is substantially longer than the reference periods of 25 to 30 years used in the
Commission’s decisional practice of recent years in for example the ports and the
airports sector. Furthermore, this period is also longer than the standard benchmark
of 25 to 30 years used as a reference period in the roads/railroads sector, proposed in
(327)
152
Commission Regulation (EU) No 651/2014 of 17 June 2014 declaring certain categories of aid
compatible with the internal market in application of Articles 107 and 108 of the Treaty,
OJ L 187,
26.6.2014, p. 1.
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the Annex I to Commission Delegated Regulation (EU) No 480/2014
153
. That
Regulation is not applicable to the case at hand but Annex I provides an indication of
internationally accepted practice. The Commission therefore considers a reference
period of 49 years from the assumed start of the construction phase as reasonable.
(328)
To compute the funding gap, an appropriate discount rate has to be used to discount
the future cash flows. The Danish authorities used the WACC as discount rate. The
WACC is the weighted average of cost of debt (‘Kd’) and cost of equity (‘Ke’) for a
company. The weights used are the proportion of Equity (‘E’) and of Debt (‘D’) in
the capital structure of the company (E+D). The WACC is computed as follows:
WACC=Kd*D/(E+D)(1-t)+Ke*E/(E+D).
The estimates for the cost of debt and
cost of equity are obtained on the basis of standard approaches according to the
following formulas:
Kd = risk-free rate + risk premium on debt, and Ke = risk-free
rate + levered beta * risk premium on equity + project specific risk premium. The tax
rate is denoted by ‘t’.
The Danish authorities have estimated the WACC a typical investor would require
for a project with comparable risk characteristics. The figures used for the risk
premium on equity, risk premium on debt and unlevered beta were updated to the
latest information available.
The risk premium on debt was estimated at 1.5% and is close to the premium a BBB
rated investor would need to pay. Denmark establishes this rating by estimating the
expected interest coverage ratio for Femern A/S as well as by collecting a
representative sample of S&P, Moody’s and Fitch ratings
for toll road and
construction companies. The Commission considers this a reasonable assumption for
the transportation infrastructure business. The risk premium on debt for BBB rated
issuers was estimated using Reuters data on BBB rated EUR denominated bonds as
well as information on US bonds.
154
The estimate is also in the range of the
Damodaran data provided by Scandlines et al. but seems to be lower than the
estimate in the 2018 study provided by Scandlines. However, this study did not
contain further argumentation related to the basis of the estimate.
The risk premium on equity was estimated by the Danish authorities at 6% based
upon an external survey conducted by Pablo Fernandez et al.
155
This estimate is very
(329)
(330)
(331)
153
154
155
Commission Delegated Regulation (EU) No 480/2014 of 3 March 2014 supplementing Regulation (EU)
No 1303/2013 of the European Parliament and of the Council laying down common provisions on the
European Regional Development Fund, the European Social Fund, the Cohesion Fund, the European
Agricultural Fund for Rural Development and the European Maritime and Fisheries Fund and laying
down general provisions on the European Regional Development Fund, the European Social Fund, the
Cohesion Fund and the European Maritime and Fisheries Fund, OJ L 138, 13.5.2014, p.5.
Aswath Damodaran data archive
“Ratings, Spreads and Interest Coverage Ratios” 1/2019.
Pablo Fernandez et al. 2019: “Market Risk Premium and Risk-Free
Rate used for 69 countries in 2019:
a survey”. Between February and March 2019, the researchers conducted a survey in which they
contacted finance and economics professors as well as analysts and managers of companies. Based on
1 836 responses, they provide descriptive statistics of risk-free rates and market risk premiums for 69
countries.
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close (5.8%) to the one suggested by Scandlines et al. and virtually identical (5.96%)
to the one found in the data archive by Damodaran.
156
(332)
Denmark used an asset beta of 0.5 determined using data for companies in the toll
road and construction business collected from Bloomberg. Together with a tax rate of
22% and a capital structure of 50% debt and 50% equity, Denmark determined the
levered beta applying widely accepted standard formulas. The debt to equity ratio has
been determined using the same Bloomberg sample of construction and toll road
companies. The 2018 study submitted by Scandlines et al. relies on an unlevered beta
of between 0.46 and 0.63. When assessing these assumptions, the Commission finds
that the asset beta of 0.5 used by Denmark is in line with industry averages for 40
European transportation companies (unlevered beta 0.52, unlevered beta corrected
for cash 0.6) and more conservative than 147 European engineering/construction
companies (unlevered beta 0.66, unlevered beta corrected for cash 0.78). These
transport companies have debt to equity ratios of 98.00% (transportation) and
92.39% (engineering/construction).
157
A debt to equity ratio of 100% means the
company has as much debt as equity, therefore the portion of debt and equity is 50%.
Thus, the Commission considers that the assumption of 50% debt and 50% equity as
the financing structure of a typical company is reasonable. The tax rate of 22%
corresponds to the corporate tax rate applicable to Denmark (following article 17 of
Danish Corporation Tax Act).
Furthermore, Denmark adds a project specific risk premium of 2%. The project
specific risk premium is justified with reference to the significant uncertainties in the
project, for example uncertainties related to the final German plan approval, which
could cause a significant delay and additional costs, but also other microeconomic
and macroeconomic risks relating to the project and not taken into account in the
budget assumptions. The value of 2% is conservative when compared to what the
2018 study submitted by Scandlines et al. suggested. However the project specific
risk premium should be evaluated together with the construction cost buffer used in
the State aid model which already takes into account the risk of a cost overrun in the
construction phase. On this basis the Commission considers the use of a project
specific risk premium of 2% as reasonable.
The Commission considers that the components of the WACC as outlined in the
above recitals are reasonable in view of the size, the risks, the timing and the type of
activity of the project.
The last component of the WACC that requires consideration is the risk-free rate. In
the 2014 notification, the risk-free rate was set at 5% (in nominal terms). In their
revised notification, the Danish authorities originally proposed to base the risk-free
rate on the Ministry of Finance’s updated official projection for 2025 of the Danish
economy (including public finances)
158
. According to that projection, the interest rate
for the 10-year government bond is expected to be -0.1% per year in 2019, 1.6% in
2025 and 4.5% in 2040. This corresponds to a fixed nominal rate of approximately
(333)
(334)
(335)
156
157
158
Aswath Damodaran data archive
“Risk Premiums for Other Markets” 1/2019.
Aswath Damodaran data archive “Levered and Unlevered Betas by Industry” January 2019.
https://www.fm.dk/publikationer/2019/opdateret-2025-forloeb-okt-2019.
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3.5% over the full period of the financial model. The Danish authorities considered
this assumption as the most objective prediction of future interest rate levels
available in Denmark and therefore consider this as a credible benchmark. They
further argued that Femern A/S can in practice not obtain loans or State loans
covering its entire financing need all at once and therefore the current market interest
rate cannot be used over a long-term period where Femern A/S takes up debt and
refinances frequently.
(336)
The Commission considers, however, that although the level of interest rates is
subject to uncertainty and the project faces a relatively long construction period, this
risk-free rate appears to be high in light of current market conditions. Current market
data show that current yields are very low for Danish government bonds
159
.
To address those concerns, the Danish authorities provided, as part of the revised
notification, an alternative model in which they used an assumption of 1.5% for the
nominal risk-free rate (as average over the full period of the model). The assumption
is based upon the cited research conducted by Pablo Fernandez et al
160
. For Denmark
the survey consists of 135 answers, showing an average risk-free rate of 1.2% per
year in 2019. The results of the previous years were respectively 1.6% for 2018,
1.6% for 2017 and 1.3% for 2015 (2016 not being available in the study). The
Danish authorities further argued that this survey does not specify the investment-
horizon that the respondents should apply in answering the question on the risk-free
rate, only that the survey is focusing on an investment in a well-diversified equity
portfolio. From this, the Danish authorities argued that it is most likely that the
answers are based on a maturity of 5 to 10 years. The Danish authorities therefore
consider an add-on of +0.5% to the rate retrieved from the survey reflecting the
approximate yield difference for long-term (30-year) bonds. The add-on is estimated
on available data from the German government bond. The Danish authorities claim
that the maturity-adjusted average is 1.7% and using 1.5% is therefore a conservative
assumption.
In light of the current market conditions, the relatively long construction period and
in particular the overall time span of the financial model (until 2068 and therefore
more than 30 years), the Commission considers the assumption of 1.5% in the
alternative model as reasonable and justified. In addition, Scandlines et al. provided
two different studies on the estimation of the WACC. The Danish risk-free rate
assumption of 1.5% is in line with the estimation of 1.6% in the most recent study
(February 2018 but based upon 2014 data) and substantially lower than the figure of
3.04% presented in the previous study of early 2014).
(337)
(338)
159
160
Danmarks Nationalbank provides yields of current and past sales of government bonds.
Pablo Fernandez et al. 2019: “Market Risk Premium and Risk-Free
Rate used for 69 countries in 2019:
a survey”. Between February and March 2019, the researchers
conducted a survey in which they
contacted finance and economics professors as well as analysts and managers of companies. Based on
1 836 responses, they provide descriptive statistics of risk-free rates and market risk premiums for 69
countries.
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(339)
(340)
On this basis, the WACC amounts to 5.59%. That is at the lower end of the range of
5.68% to 6.71% as suggested by Scandlines et al.
161
The Commission is of the view that a proportionality analysis including a funding
gap model and an aid amount, taking a risk-free rate of 3.5% as a basis, is not based
upon reasonable assumptions in light of the current and expected market
circumstances.
162
It is therefore only on the basis of the alternative funding gap
calculation model as provided by the Danish authorities in the updated notification
that the aid can be found to be proportionate.
It results from the alternative funding gap calculation model that the funding gap for
the Fixed Link amounts to DKK 12 046 million (EUR 1 615 million). A comparison
between the funding gap and the eligible costs gives a funding gap ratio of 27.3%.
The gross grant equivalent of the aid includes the aid resulting from the capital
injections, the State guarantees and the State loans. The methodology the Danish
authorities used to calculate the aid element of the guarantees follows a similar
approach as set out in section 4.2 of the Guarantee Notice, which provides that, in
case no market price is available, “the
aid element should be calculated in the same
way as the grant equivalent of a soft loan, namely as the difference between the
specific market interest rate the company would have borne without the guarantee
and the interest rate obtained by means of the State guarantee after any premiums
have been taken into account”.
In their calculation of the aid amount, the Danish
authorities did not make a distinction between the value of State aid associated with
the State loans and the value of State aid associated with the State guarantees. It also
follows from the Construction Act that both are interchangeable and the Minister of
Finance has discretion in deciding on the optimal mix of both instruments. The
annual premium which Femern A/S has to pay to the State on the outstanding
guaranteed debt is equal to the premium on the outstanding State debt. The aid
elements resulting from the State guarantees and the State loans were therefore
calculated in the same manner. The Danish authorities determined the yearly aid
element by taking the difference between the WACC that a market investor would be
expected to require (5.59%) and the risk-free rate (1.5%) adjusted for the premium
that Femern is required to pay to the Danish State, multiplied by the sum of
outstanding guaranteed debt and outstanding State debt.
The Commission considers it appropriate that, in this case, the aid element
corresponds to the difference between the risk-free rate (adjusted for the premium)
and the WACC. Thanks to the State guarantees and State loans, Femern is expected
to pay the same rate as the Danish State, which equals the Danish risk-free rate.
Therefore, Femern A/S' expected actual financing cost is the risk-free rate, adjusted
by the premium. Without any aid, Femern is expected to pay the WACC which
(341)
(342)
(343)
161
162
Applying the formulas above, the cost of equity equals 1.5% + 0.89 * 6% + 2% = 8.84% while the cost
of debt corresponds to 1.5% + 1.5% = 3%. Weighing both components gives the WACC = 50% *
8.84% + 50% * 3% * (1-22%) = 5.59%.
Using the proposed time-varying risk-free rate assumption (with an average of 3.5%) leads to WACC
figures between 4% and 8.3%.
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corresponds to the weighted average between the cost of equity and the cost of debt.
In turn, taking the difference between the two rates captures the overall advantage.
(344)
Typically, the cost of equity is higher than the cost of debt and a project/company is
financed by a mix of debt and equity. It could be considered as an additional
advantage for Femern to be able to finance its project almost entirely with debt
without any substantial need for equity. Relying on the cost of debt only would
underestimate the aid. The Commission thus considers that the benefit of (almost)
only debt financing is taken into account in the aid element on the State loans and
State guarantees by using the WACC as a reference instead of the cost of debt.
Furthermore the Commission considers that subsection 4 of section 4 of the
Construction act, stipulating that the Danish government guarantees the other
financial commitments of Femern A/S related to the construction of the project, does
not involve additional aid since, as the construction costs are already covered by
State loans and loans with State guarantees, it does not provide an additional
advantage to Femern A/S.
Scandlines et al. are of the view that the aid element equals the full amounts
effectively covered by the State loans and loans with State guarantees. The
Commission notes that this determination of the aid element in a guarantee is
provided for in the Guarantee Notice only in exceptional circumstances and where a
guarantee is provided for companies in difficulty where the likelihood that the
borrower will not be able to repay the loan becomes particularly high. The
Commission considers that such exceptional circumstances are not present in this
case.
The net debt is the effective debt of Femern A/S. The effective debt reflects the
accumulated amount of money spent by the company to cover planning,
construction, interest payments, own costs etc. reduced by the paid-in equity and the
received EU support. The net debt builds up during the construction phase is
expected to reach its maximum the first year of operation. In the operational phase,
the net debt will gradually decrease with the free cash flow of the project. This net
debt is covered by State loans and loans with a State guarantee for a certain number
of years.
Since the IPCEI Communication requires that aid in the form of guarantees is limited
in time, and aid in the form of loans is subject to repayment periods, the Danish
authorities ensured, in the alternative model, that Femern A/S will not adopt State
loans and State guarantees, which, together, exceed an amount of DKK 69.3 billion
(EUR 9.3 billion) (nominal). This amount is referred to by the Danish authorities as
the ‘maximum guaranteed amount’. Those State loans and State guarantees are
strictly limited to the financing needed for the costs incurred during the planning and
construction phase. It is the sum of the maximum net debt required to finance the net
construction costs (i.e. net of the EU funding), as described above, and a liquidity
reserve. The liquidity reserve is the short-term liquidity, held by the company
normally as bank deposits or short-term investments. The Danish authorities
explained that the purpose of this liquidity reserve is to have a buffer for unplanned
liquidity needs, such as payment to contractors and to allow borrowing to be
executed well before the actual need for the liquidity. An example is the refinancing
of an existing loan which normally takes place some weeks before the maturity of
that loan in order to reduce the risk of unforeseen adverse market conditions.
(345)
(346)
(347)
(348)
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(349)
In the alternative funding gap calculation model, the Danish authorities will limit the
period within which the Minister of Finance can issue State guarantees and State
loans in favour of Femern A/S. They will also ensure that Femern A/S will have
terminated all loans with a State guarantee and repaid all State loans at the latest 16
years after start of operations. This means that all State guarantees and State loans
are time-limited. The Danish authorities in any event ensure that the guaranteed
period will not exceed the actual debt repayment period. If the actual debt repayment
period is shorter than 16 years, no further guarantees will be provided after the actual
debt is repaid.
The resulting aid, in present value using the WACC as a discount rate
163
, is equal to
the funding gap of DKK 12 046 million (EUR 1 615 million). This includes the
capital injections and the State aid associated with State guaranteed loans and State
loans. The calculation of the aid amount in the alternative model is based upon an
increase of the premium from 0.15% to 2%. For the loans already taken up, the aid
alternative funding gap calculation model takes into account that the premium was
limited to 0.15%.
It could therefore be considered - in principle - that the aid is proportionate.
However, and as already highlighted above, the Commission is concerned that this
funding gap might be overestimated due to the inclusion of a P99 reserve budget in
the eligible cost base (see recital (320)). The Danish authorities therefore, in the
alternative model, combine the ex-ante calculation of the funding gap (with the
related maximum guaranteed amount and maximum guaranteed period) with a
recalculation of this funding gap at the latest five years after start of operations if it
appears that the “construction cost buffer” of DKK
2.5 billion (EUR 0.3 billion) was
not needed. The Danish authorities will recalculate the funding gap, the maximum
guaranteed amount and the maximum guaranteed period. They will then reduce the
maximum guaranteed amount and the maximum guaranteed period if the updated
funding gap is smaller than anticipated thereby ensuring that the net present value of
the total aid amount does not exceed the funding gap. The Danish authorities
provided a simulation in which the construction cost buffer would not be needed at
all. In that case the maximum debt would be reduced to DKK 66.1 billion
(EUR 8.9 billion) and the maximum guarantee period would be limited to 11 years
after start of operations. In any event, the Danish authorities will ensure that the State
guarantees and the State loans are strictly limited to the financing needed for the
actual costs incurred during planning and construction phase. The timing of the
recalculation therefore does not allow for costs related to the operational period to be
(350)
(351)
163
The Guarantee Notice, in section 4.1., provides that the resulting yearly cash grant equivalents should
be discounted to their present value using the reference rate. The Communication from the Commission
on the revision of the method for setting the reference and discount rates, OJ C 14, 19.1.2008, p.6,
specifies that reference and discount rates are applied as a proxy for the market rate. The
Communication uses the 1-year IBOR as a calculation basis and clarifies that the margin depends upon
the rating of the undertaking and the collateral but also upon the credit history. At the same time, the
Communication provides that the Commission can use shorter or longer maturities adapted to certain
cases. Given the long term nature of the project and the fact that the yearly cash grant equivalents
themselves are based upon the difference between the WACC and the risk-free rate, the Commission
considers it appropriate that in this case also the WACC should be used as a discount rate.
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State subsidized. It only grants a temporary time buffer to account for any financing,
still related to the construction phase, but only occurring shortly after the end of the
construction phase. The Danish authorities will submit this updated calculation to the
Commission.
(352)
The maximum guaranteed period and guaranteed amount therefore directly result
from the funding gap calculation. The lower the funding gap, the lower the
guaranteed period and/or guaranteed amount and the sooner Femern A/S will have to
borrow on the open market without the support of State guarantees or State loans.
The Commission considers it more appropriate to link the limitation of guaranteed
period and guaranteed amount to the limits of the funding gap than to an amount of
annual cash flow, as Scandlines et al. suggested. The annual cash flow is in practice
always fluctuating, due to for example replacement investments and cyclical
maintenance, so in any event [a kind of] net present value calculation would be
required. In addition, the aid measure consists of a multitude of loans, all with
individual repayment periods, within the limits of the overall maximum guaranteed
period. It is therefore possible that at a certain point in time State loans and State
guarantees will coexist with market conform borrowing. In any event, the
Commission does not consider aid in excess of the funding gap as proportionate.
Furthermore, the Commission considers that the choice of State guarantees and State
loans as main instruments is a positive indicator as regards both the proportionality
and the appropriateness of the aid and preferred over the granting of a lump sum
amount As pointed out in paragraph 36 of the IPCEI Communication, “where
lack of
finance is the underlying problem, Member States should normally resort to aid in
the form of liquidity support, such as loans or guarantees”.
The Commission
considers that the Danish financing model is in line with this principle. A guarantee
measure is an effective instrument to ensure that Femern A/S is not overcompensated
as it merely enables Femern A/S to keep its capital costs at an appropriate level in
order to make the project feasible by closing the funding gap. The Danish authorities
also revised the 2014 notification and will report annually on the developments in the
repayment of Femern
A/S’ debt.
Based on the above, and taking into account the alternative funding gap calculation
model of the revised notification in addition to the Planning and Construction Acts,
the Commission concludes that the State guarantees and State loans can be
considered to be limited in time and amount. Furthermore, the Commission
concludes, again based upon the alternative funding gap model in the revised
notification, that the aid amount does not exceed the minimum necessary for the
aided project to be sufficiently profitable.
Prevention of undue distortion of competition and balancing test
According to paragraph 40 of the IPCEI Communication, “the Member State should
provide evidence that the proposed aid measure constitutes the appropriate policy
instrument to address the objective of the project. An aid measure will not be
considered appropriate if other less distortive policy instruments or other less
distortive types of aid instruments make it possible to achieve
the same result”.
The Danish authorities submitted that since the underlying problem for the project
was lack of access to finance, aid in the form of liquidity support, such as loans or
guarantees constitutes the appropriate policy instrument. Following the revised
notification, the State guarantees and the State loans are strictly limited to the
financing needed for the costs incurred during planning and construction phase.
(353)
(354)
6.4.5.
(355)
(356)
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There is no risk that the guarantee/loans can be used to subsidise other non-eligible
costs and activities. The Commission therefore considers that the chosen financial
support mechanism is the appropriate policy instrument.
(357)
According to paragraph 41 of the IPCEI Communication, “aid can be declared
compatible if the negative effects of the aid measure in terms of distortions of
competition and impact on trade between Member States are limited and outweighed
by the positive effects in terms of contribution to the objective of the common
European interest”.
Paragraph 42 provides that, in assessing the negative effects of
the aid measure, the Commission will focus its analysis on the foreseeable impact the
aid may have on competition between undertakings in the product markets
concerned, including up- or downstream markets, and on the risk of overcapacity.
Paragraph
43 of the Communication sets out that “the Commission will assess the
risk of market foreclosure and dominance […] projects involving the construction of
an infrastructure must ensure open and non-discriminatory access to the
infrastructure and non-discriminatory
pricing”.
It follows that for the purposes of preventing undue distortion competition and the
balancing test, the Commission should focus its assessment of the negative effects of
the aid on the distortions of competition and impact on trade between Member
States.
The Fixed Link is part of a wider plan to promote mobility, further integration and
cultural exchange of people living on both sides of the Fixed Link, and to improve
the connection between the Nordic countries and central Europe for passengers as
well as road and railway freight. Those expected benefits have been recognised at
European level by including the Fehmarn Belt Fixed Link project in the list of TEN-
T priority projects. In this context, the Fehmarn Belt Fixed Link project will also
generate positive effects on a number of economic sectors in the region, such as gas
stations, retail, restaurants, hotels, amusement parks and rail and bus and transport.
As recognised by the CEF programme, the Fixed Link will enhance the accessibility
to the railway transport leading to a transfer of freight and passengers from road to
rail.
However, the opening of the Fixed Link will have a negative impact on ferry
operators serving the Rødby - Puttgarden route as well as other ferry routes in the
region. Decreased ferry operations may also have a negative impact on the ports used
by those ferries in terms of traffic volumes and revenues. As recognised and taken
into account in the socio-economic studies, the presence of the Fixed Link entails the
risk that the ferry operations on the Rødby
–
Puttgarden route will even disappear
once the Fixed Link is operational. The Commission considers the power of
Femern A/S to influence the operations of the ferry services as rather limited since
the State aid is limited to the financing needed for the costs incurred during planning
and construction phase with the funding gap as upper limit. In addition, it is the
Danish Minister for Transport that will determine the tolls and railway charges to be
collected from the users of the road and the rail connection of the Fixed Link. Even if
Femern A/S has some influence on the price level by applying discount schemes, it is
bound by the need to ensure its revenue level as the State aid has been limited to
finance part of the planning & construction of the Fixed Link, up to the limit of the
funding gap. In other words, Femern A/S will have to ensure that its revenues are
large enough to pay back its loans for the full planning and construction costs and to
pay for its operating costs. The Commission therefore considers that the main impact
on the ferry operations is created by the mere decision to construct the Fixed Link,
(358)
(359)
(360)
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providing an alternative to existing modes of transports. The choice for this
infrastructure and its technical solution is a choice made by the public authorities. It
is therefore also not for the Commission to assess whether the Puttgarden access
plans will, if at all part of the Fixed Link, be “downgraded”, as alleged by
Scandlines. Also the decision of the Danish authorities not to support the Scandlines
project proposal should be considered in the wider mobility plan and mobility
choices and is therefore not relevant in the balancing assessment. The effects on the
ferry operations and related markets are therefore inherent in this type of projects,
through which the States seek to offer a quicker and more convenient alternative to
ferry services. The Commission also refers to the remark of the Danish authorities
that the planning of the rail lines on the Danish side and the prioritising of the road
on the German side are public authority tasks
–
decided by the Danish State and the
German State respectively and not Femern A/S.
(361)
Scandlines et al. further argued that the Fixed Link would develop much additional
capacity to an already saturated market. The Commission observes that the creation
of an alternative to the existing services that is different from and considered superior
by the Danish authorities cannot be equated to adding capacity to a saturated market.
Regarding the risk of dominance and the general impact on competition, it cannot be
excluded that Femern A/S would acquire a dominant position as regards certain
transport services on the Fehmarn Belt. It should be noted, however, that, according
to settled case law
164
, the existence of a dominant position in itself is not contrary to
EU law. In fact, Scandlines currently has a de facto monopoly on the route between
Rødby and Puttgarden. Assuming that, as Scandlines claims, ferries will continue to
operate after the opening of the Fixed Link, the Fixed Link will actually break this
monopoly and create a more competitive market.
The Commission further notes that the Fixed Link will not create any risk of market
foreclosure, including up- or downstream markets, as it will be open to all users on
an equal and non-discriminatory basis. The pricing structure will be non-
discriminatory and transparent and, with regard to heavy goods vehicles, in line with
the applicable rules of the Eurovignette Directive
165
. Moreover, according to
information submitted by the Danish authorities, the railway charges will be
determined in accordance with the applicable EU legislation
166
. It is expected that the
user tolls on the road link will correspond to the price charged by the ferry operator,
as assumed in the 2016 financial model.
Therefore, as also confirmed by the General Court in its judgments of 13 December
2018, while it is reasonable to conclude that a project involving the construction of
infrastructure that will provide an alternative to existing modes of transport entails
the risk that the latter will have to significantly reduce their activities or even
(362)
(363)
(364)
164
165
166
Judgment of the Court of Justice of 9 November 1983,
Michelin v Commission,
Case 322/81,
EU:C:1983:313, paragraph 57; judgment of the Court of Justice of 17 February 2011,
Konkurrensverket
v TeliaSonera Sverige,
C-52/09, EU:C:2011:83, paragraph 24.
Directive 1999/62/EC of the European Parliament and of the Council of 17 June 1999 on the charging
of heavy goods vehicles for the use of certain infrastructures, OJ L 187, 20.7.1999, p. 42.
Directive 2012/34/EU.
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disappear, it is clear that the Fixed Link provides a solution which, on balance, has
positive results. It is not for the Commission to call into question the choice made by
the Danish authorities.
(365)
Taking into account the foregoing, the Commission considers that the aid, as further
limited and reduced in the revised notification in response to the doubts raised in the
Opening decision, only has limited negative effect on competition and trade that are
outweighed by the positive effects in terms of contribution to the objective of
common European interest.
It follows from the wording of the IPCEI Communication that there is no need to
take into account possible negative elements unrelated to distortions of competition
and impact on trade between Member States, or to make a specific environmental
assessment in the context of the balancing test as suggested by NABU. The General
Court confirmed that “although
protection of the environment must be integrated into
the definition and implementation of EU policies, particularly those that have the
aim of establishing the internal market, it does not constitute, per se, one of the
components of that internal market […].
Consequently, when identifying the negative
effects of the measures at issue, the Commission is not obliged to take into account
the extent to which the measures at issue are possibly detrimental to the
implementation of
[the]
principle
[of protection of the environment].
167
In any event, the environmental impact of the project has been duly considered and
mitigated by the national authorities and was found, in accordance with applicable
Union and international law, not to preclude the project. In the decision making
process on the Fixed Link, the Danish authorities duly considered the environmental
impact of the project. The comprehensive and thorough environmental impact
assessment that was carried out on the Danish side is described in detail in the
preparatory notes to the Construction Act. It is clearly specified in those preparatory
notes but also in the Fehmarn Belt Treaty, and therefore applicable both in Denmark
and in Germany, that the requirements under EU and national law must be the basis
for the preparation, construction and operation of the Fixed Link across the Fehmarn
Belt. On the basis of the Planning Act, the Minister for Transport was authorized
after negotiations with the Minister for Environment, to prepare the Environmental
Impact Assessment (‘EIA’) reports for the construction project, including
consultation and other necessary environmental assessment of the construction
project. The Ministry of Environment, relevant authorities, companies and
municipalities were involved and the EIA reports etc. were prepared in compliance
with the EIA Directive.
It follows that the basis for the project has always been that it should be prepared,
constructed and operated so that harmful effects on nature and the environment are
prevented and considerable adverse impacts, especially regarding the European
Natura 2000 Network, are countered adequately. The Commission therefore
(366)
(367)
(368)
167
Judgment of the General Court of 12 July 2018,
Republic of Austria v Commission,
T-356/15,
ECLI:EU:T:2018:439, paragraph 516 and the Castelnou judgment cited therein: Judgment of the
General Court of 3 December 2014,
Castelnou Energía v Commission,
T-57/11,
ECLI:EU:T:2014:1021, paragraphs 189 to 191.
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considers that, even if the environmental aspects had to be taken into account for the
purposes of the balancing test, there is no indication that the alleged negative effects
of the Fixed Link on the environment would be of such a magnitude that they are
liable to change the outcome of the balancing test.
(369)
The Commission concludes that the negative effects of the aid measure in terms of
distortion of competition and impact on trade between Member States are limited and
outweighed by the positive effects in terms of contribution to the objective of the
common European interest.
Specific compatibility condition as regards the State guarantees
–
Mobilisation
conditions
According to section
5.3 of the Guarantee Notice, “The Commission will accept
guarantees only if their mobilisation is contractually linked to specific conditions,
which may go as far as the compulsory declaration of bankruptcy of the beneficiary
undertaking, or any similar procedure. These conditions will have to be agreed
between the parties when the guarantee is initially granted. In the event that a
Member State wants to mobilise the guarantee under conditions other than those
initially agreed to at the granting stage, then the Commission will regard the
mobilisation of the guarantee as creating new aid which has to be notified under
Article 88(3) of the Treaty.”
According to Section 4(2) of the Construction Act, the Minister of Finance is
authorized to provide State guarantees that cover Femern
A/S’ obligations in relation
to loans and other financial instruments for the financing of the Fixed Link. The
conditions for the mobilisation of this type of guarantee are not regulated in the
Construction Act itself. As a response to the doubts raised in the Opening decision,
the Danish authorities revised the 2014 notification in order to ensure that all
168
those
State guarantees in favour of Femern A/S will have the following minimum
conditions for mobilisation:
(a)
(b)
(c)
(d)
(e)
(372)
Femern A/S has failed to duly pay on the ordinary due date a sum payable
under the guaranteed agreement;
the lender must give written notice to the guarantor as set out in the relevant
guarantee;
such notice is not to be given until all applicable remedy periods under the
guaranteed agreement have expired;
the lender is not entitled to grant Femern A/S an extension of time for fulfilling
its obligation under the guaranteed agreement;
the guarantor shall have at least four banking days from receipt of such notice
to pay the amount due under the guaranteed agreement.
6.4.6.
(370)
(371)
As already noted in paragraph 203 of the Opening decision, and with regard to the
State guarantee covering non-financial obligations foreseen in Section 4(4) of the
Construction Act, the Danish authorities submitted that the conditions for mobilising
168
Also the existing guarantees have comparable minimum conditions for mobilisation.
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this type of guarantee are based on an interpretation of the guarantee in light of the
general principles of Danish law. The Danish authorities provided further
clarifications on this issue. The Danish law on guarantees distinguishes between
‘simpel
kaution’
and ‘selvskyldnerkaution’. A ‘simpel
kaution’
means that the
guaranteed party must show to the guarantor that the debtor is unable to pay his
obligations. Normally this requires either (i) that it has been established during an
execution (i.e. an attempt to execute a claim against
the principal’s assets) that the
principal is unable to pay his obligations as they fall due; or (ii) that the principal is
subject to bankruptcy or similar insolvency proceedings. A ‘selvskyldnerkaution’
means that the guaranteed party can ask the guarantor to pay if the principal has
failed to make payment in due time. According to Danish jurisprudence on
guarantees, a guarantee is normally interpreted as a ‘simpel
kaution’
unless there is a
clear basis for interpreting the guarantee as a ‘selvskyldnerkaution’. Thus, unless the
guarantee is clearly described as a ‘selvskyldnerkaution’, the guaranteed party will
have to show to the guarantor that the principal is unable to pay his obligations as
they fall due. As regards the provision in Section 4(4), this entails that, since it is not
provided in the Construction and Operation Act that the conditions for mobilisation
of the guarantee in a specific case will be determined in, for example, ministerial
orders or in specific contracts covering each case, the State guarantee in Section 4(4)
will be considered
–
by default
– to be a “simple
kaution”.
Therefore, the guaranteed
party will have to show that Femern A/S is unable to pay its obligations as they fall
due (as described above) before the guarantee can be mobilised. On this basis, the
Commission considers that the mobilisation of this type of guarantee is contractually
linked to specific conditions.
(373)
Although the Commission was not informed of the exact mobilisation conditions at
the time of granting the aid, it considers that it can accept the guarantees in the light
of section 5.3 of the Guarantee Notice.
Transparency
According to paragraph 45 of the IPCEI Communication Member States shall ensure
the publication, on a comprehensive website, at national or regional level, of at least
the following information: the text of the aid measure and its implementing
provisions, or a link to it; the identity of the granting authority or authorities; the
identity of the individual beneficiary, the form and amount of the aid, the date of
granting, the type of undertaking (SME/large undertaking); the region in which the
beneficiary is located (at NUTS level II); and the principal economic sector in which
the beneficiary undertaking has its activities (at NACE group level). The Danish
authorities have committed to comply with this requirement.
Reporting obligation
According to point 49 of the IPCEI Communication “the
execution of the project
must be subject to regular reporting”.
In this
respect the Danish authorities have
committed to submitting annual reports including figures on the evolution of the
debt. Therefore, the Commission concludes that this condition is complied with.
C
ONCLUSION
The Commission concludes that the capital injections, the State guarantees for the
loans financing the planning and construction costs and the State loans financing the
planning and construction costs constitute State aid within the meaning of Article
107(1) of the Treaty. The Commission concludes that the measures consisting of the
6.4.7.
(374)
6.4.8.
(375)
7.
(376)
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depreciation of assets, the fiscal loss carry forward, the joint taxation regime, the
railway fees and the use of State property free of charge, do not constitute State aid
in favour of Femern A/S in the sense of Article 107(1) of the Treaty. The
Commission concludes that, in view of the revised notification, the guarantees for the
derivatives do not constitute State aid in favour of Femern A/S in the sense of Article
107(1) of the Treaty.
(377)
The Commission concludes that the notified measures in favour of Femern A/S,
consisting of a capital injection of DKK 510 million (EUR 68.4 million) and a
combination of State loans and State guarantees for loans up to an amount of
DKK 69.3 billion (EUR 9.3 billion), to be terminated at the latest 16 years after start
of operations, fulfil the conditions laid down in the IPCEI Communication and can
therefore be considered compatible with the internal market in accordance with
Article 107(3)(b) of the Treaty. The annual premium on the State guaranteed debt
and the State loans that Femern A/S is obliged to pay to the Danish State is increased
from 0.15% to 2%. The Danish authorities have undertaken to submit to the
Commission, at the latest five years after the start of operations of the Fixed Link
(currently expected to start in 2033), an update of the alternative funding gap
calculation model (based on an average risk-free rate assumption of 1.5%). In that
update, the construction cost buffer will be lowered if it appears that the actual
construction costs are lower than estimated. The maximum guaranteed amount and
the maximum guaranteed period will be lowered accordingly, ensuring that the gross
grant equivalent of the aid does not exceed the updated funding gap.
The Danish authorities agreed exceptionally to waive the rights deriving from Article
342 of the Treaty in conjunction with Article 3 of the Council Regulation 1/1958
169
and to have the decision adopted and notified pursuant to Article 297 of the Treaty in
the English language.
(378)
HAS ADOPTED THIS DECISION:
Article 1
The measures consisting of the depreciation of assets, the fiscal loss carry forward, the joint
taxation regime, the railway fees, the use of State property, free of charge, and the State
guarantees for the derivatives do not constitute State aid in favour of Femern A/S in the sense
of Article 107(1) of the Treaty on the Functioning of the European Union.
Article 2
The measures consisting of capital injections and a combination of State loans and State
guarantees in favour of Femern A/S, which Denmark at least partially put into effect
unlawfully, constitute State aid within the meaning of Article 107(1) of the Treaty on the
Functioning of the European Union. Following the modification of those measures as set out
169
EEC Council: Regulation No 1 determining the languages to be used by the European Economic
Community, OJ 17, 06.10.1958 p. 385.
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in the revised notification, they are compatible with the internal market on the basis of Article
107(3)(b) of the Treaty on the Functioning of the European Union.
Article 3
This Decision is addressed to the Kingdom of Denmark.
If the decision contains confidential information that should not be published, please inform the
Commission within fifteen working days of the date of receipt. If the Commission does not receive a
reasoned request by that deadline, you will be deemed to agree to publication of the full text of the
decision. Your request specifying the relevant information should be sent electronically to the
following address:
European Commission
Directorate-General Competition
State Aid Greffe
B-1049 Brussels
[email protected]
Done at Brussels, 20.3.2020
For the Commission
Margrethe VESTAGER
Executive Vice-President
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