The relationship between State aid and infrastructure financing

1
The relationship between State aid and
infrastructure financing

• Some general remarks

2
Structure of this presentation

• The definition of infrastructure
• State aid relevance
• The attitude of the European Commission
• Some relevant fields

3
The term infrastructure

• infrastructure provides organizing structure and
  support for the system or organization it serves,
  whether it is a city, a nation, or a corporation.
  
• Public infrastructure is a structure that is
  deemed to fulfil a public need the State takes
  responsibility towards the public
• Main tools roads, electricity, waste disposal,
  mail service, telecommunication

4
Infrastructure and State aid I

• State aid elements- an intervention by the State
  or through State resources- the intervention
  confers an advantage to the recipient on a
  selective basis, for example to specific
  companies or sectors of the industry, or to
  companies located in specific regions-
  competition has been or may be distorted- the
  intervention is likely to affect trade between
  Member States.

5
Infrastructure and State aid II

• State intervention regularly involved roads,
  nets are financed by State resources mail and
  social services are delivered by public
  authorities
• But normally no special advantage to
  undertakings classic infrastructure may be
  used by everybody on the same conditions
• Sometimes, even if there is a special advantage
  trade between Member States is not affected

6
Infrastructure with State aid elements

• Infrastructure favours a special
  undertakingExample business/development park is
  suited to an undertaking with special needs or in
  fact no one else is interested
• Infrastructure is in the interest of a special
  industrial branch or sector
• The creation and/or operating of infrastructure
  by private companies (public private partnership)
  

7
Infrastructure without State aid

• According to the Non- Paper SGEI-
  infrastructure within the responsibility of the
  State limited to requirements of that
  service- no profitable offer by private
  competitors (Market failure)- not likely to
  favour a particular undertaking

8
Infrastructure favours a a special undertaking

• Development costs within an industrial site must
  be born by the owner if the State pays State
  aid
• Development costs to the industrial site may be
  born by public authorities if there is no
  discriminationno State aid
• Advantages to a lead investor no State aid
• If there is only one investor road access,
  electricity, disposal or waste may be State aid

9
Infrastructure in the interest of a special
branch or sector

• If Infrastructure investments only benefit a
  certain economic sector State aid
• Examples- broadband cable investment for
  business parks they favour only IT related
  companies- pipelines for the transport of gas
  even if open access is guaranteed only
  companies of a special sector (gas
  producers/processors/industrial customers may
  have an advantage

10
Infrastructure and Public Private Partnership

• Basis Infrastructure constructed and/or operated
  by private companies
• Commission approach three different levels- the
  end user of the infrastructure- the company that
  owns or operates the assets- the owners or
  shareholders of the companyInfraLeunaadditiona
  lly the infrastructure itself if there is an
  infrastructure market e.g.airports

11
PPP the end user

• No State aid, if the user pays a market price
• In case of favourable conditions incompatible
  State aid, except- the users are no
  undertakings- no infringement of trade between
  Member States- compensation for a SGEI (Service
  of general economic interest)- obligation

12
PPP the company that constructs and/or operates

• No State aid, if the remuneration does not exceed
  the market value of the offered service and there
  is a factual need for the service
• Methods of assessment- open, transparent and
  non discriminatory tender procedure - expert
  s report
• In other cases State aid except compensation
  for SGEI -obligation

13
PPP the owner/share holder

• Infrastructure is shaped to the needs of the
  owners or shareholders of the operating company
• Advantages achieved by the operating company
  (return on investment is not reasonable) were
  passed on to the owners

14
Some infrastructure cases

• Sports places (football stadiums)
• Industrial/technology centers (problem letting
  of ground to investors must fulfil market
  conditions)
• Technological infrastructure (broadband
  communication, digital TV, logistic measures)
• Cultural and leisure facilities (often no trade
  infringement)
• Industrial infrastructure (pipelines)