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Wed July 15 2020

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EU clears use of public financing of Denmark-Germany tunnel

23 Mar The public financing model being used for the Fehmarn Belt link has been cleared as being in line with European competition rules, despite complaints by Scandlines and Stena Line.

The benefits of the Danish public finance being used for the tunnel that will link Denmark and Germany outweigh any potential distortion of European Union rules for state aid, an investigation has concluded.

The Fehmarn Belt fixed rail-road link includes an undersea tunnel between Rødby on the island of Lolland in Denmark and Puttgarden in Germany. The tunnel will be approximately 19km long and will carry an electrified, double-track railway and a four-lane motorway.

The investigation into the finances followed the launching of a challenge by Scandlines and Stena Line.

European Commission executive vice-president Margrethe Vestager, who is in charge of competition policy, said: “The Fehmarn Belt fixed link will contribute to the cross-border integration of the two regions it will connect. It will be key to complete the main north-south route connecting central Europe and the Nordic countries to the benefit of the European economy.

“Following an in-depth investigation, we concluded that the Danish measures to support this project of common European interest are in line with EU state aid rules, as the positive effects of the project clearly outweigh any potential distortion of competition.”

An intergovernmental agreement between Denmark and Germany has led to Denmark being the sole owner of the project. It will bear the full risk for the financing of this tunnel, as well as for the upgrading of the Danish on-land road and rail connections. In Denmark, two public undertakings have been entrusted with the planning, construction and operation of the project: A/S Femern Landanlæg for the Danish hinterland connections and Femern A/S for the coast-to-coast infrastructure.

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The financing of the Danish hinterland connections had previously been confirmed as involving no state aid and were therefore not part of the investigation. Germany is responsible for the financing and upgrading of its own hinterland connections, and so these too were not part of the investigation.

In July 2015, the Commission approved the public financing model of the Fehmarn Belt fixed rail-road link between Denmark and Germany under EU State aid rules. Following an appeal against the Commission's 2015 decision by Scandlines and Stena Line, in December 2018 the General Court partially annulled the Commission's decision on procedural.

The General Court confirmed the Commission's decision with respect to the financing granted to Femern Landanlæg for the hinterland connections. However, it found that the Commission should have opened a formal investigation under EU state aid rules to assess the measures granted by Denmark to Femern A/S before adopting its decision.

In June 2019, the Commission opened an in-depth investigation into the measures granted by Denmark to Femern A/S in support of the fixed link.

Following discussions with the Commission, the Danish authorities had implemented certain changes to the financing structure of the project. These changes include, among others, limiting the public financing to the minimum necessary to make the investment happen. More specifically, it limited the use of state guarantees and state loans up to a maximum debt amount of €9.3bn and to maximum the first 16 years of operations.

Based on the updated figures submitted by Denmark and the changes to the financing structure, the Commission concluded that the public measures are proportionate, in line with EU state aid rules.The Commission concluded that the measures are necessary and that the positive effects of the project clearly outweigh any potential distortion of competition, in line with the requirements of the Communication on IPCEI.

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