Brussels, 09/11/2011 (Agence Europe) - The European Commission has doubts over the ability of the restructuring aid plan for Bulgarian state-owned railway company BDZ to restore the company's long-term viability and, on Wednesday 9 November, opened an in-depth investigation.
In May 2011, Bulgaria informed the Commission of a BGN 550 million (approx. €278 million) capital increase for BDZ to be provided in six tranches over the period from 2011 to 2016. This was to help restructure the company - which has been in financial difficulties for several years - by repaying some of its debts. With the capital increase plus cost-reduction measures, the sale or scrapping part of the rolling stock and a reduction in the workforce, the company is expected to return to viability by 2012, according to the plan submitted by Bulgaria.
BDZ operates both freight and international passenger railway services. It carries out 80 % of domestic freight transport and 100 % of passenger transport. At the end of last year, the Commission temporarily approved public financing of BGN 249 million (approximately €128 million) for the company because of the disruption that would have been caused if it had suddenly ceased to exist and to allow time for Bulgaria to submit a restructuring plan ensuring the company's future viability and other key points. The aid has not, however, been paid out.
The Commission has a number of doubts about the restructuring plan submitted in May, including on the viability aspect “since the plan lacks several crucial elements, such as whether the company would still be viable were the revenue forecasts contained therein too optimistic”. The Commission notes, too, that Bulgaria has provided no evidence that the privatisation of the freight subsidiary of BDZ will be sufficient to compensate for the distortions of competition or indeed that it represents an adequate contribution of the company to its restructuring costs since the timetable and outcome are uncertain.
The Commission takes the view that the write off by the state of debts accumulated by BDZ prior to Bulgaria's accession to the EU, in January 2007, might be compatible with EU state aid rules (EU guidelines on rail transport). It says, however, that, to date, Bulgaria has not provided the necessary clarifications for a proper assessment. (OL/transl.rt)