20.6.2014   

EN

Official Journal of the European Union

C 188/4

1.

This communication gives guidance on the assessment under State aid rules of public financing of important projects of common European interest (IPCEIs).

2.

IPCEIs may represent a very important contribution to economic growth, jobs and competitiveness for the Union industry and economy in view of their positive spillover effects on the internal market and the Union society.

3.

IPCEIs make it possible to bring together knowledge, expertise, financial resources and economic actors throughout the Union, so as to overcome important market or systemic failures and societal challenges which could not otherwise be addressed. They are designed to bring together public and private sectors to undertake large-scale projects that provide significant benefits to the Union and its citizens.

4.

IPCEIs can be relevant for all policies and actions that fulfil common European objectives, in particular as regards the Europe 2020 (1) objectives, the Union’s flagship initiatives and key areas for economic growth such as the Key Enabling Technologies (2) (KETs).

5.

The State Aid Modernisation initiative (SAM) (3) calls for State aid to be directed towards objectives of common European interests in line with the priorities of the Europe 2020 agenda, so as to address market failures or other important systemic failures that hinder the promotion of growth and jobs and the development of an integrated, dynamic and competitive internal market. The deployment of IPCEIs often requires a significant participation from public authorities since the market would not otherwise finance such projects. In case public financing of such projects constitutes State aid, this communication sets out the applicable rules so as to ensure that the level playing field in the internal market is preserved.

6.

Rules on public financing of IPCEIs are already laid down in the R & D&I Framework (4) and in the Guidelines on State aid for environmental protection (5) which give guidance on the application of Article 107(3)(b) of the Treaty on the Functioning of the European Union (the Treaty). The SAM constitutes a good opportunity to update and consolidate the existing guidance in one single document so as to bring it into line with the Europe 2020 objectives and the SAM goals and to extend it to other fields where it could be of application. This communication therefore replaces any existing provisions on IPCEI. In this way, this communication provides Member States with dedicated and cross-disciplinary guidance aimed at encouraging the development of important collaborative projects that promote the common European interests.

7.

Article 107(3)(b) of the Treaty provides that aid to promote the execution of an important project of common European interest may be considered to be compatible with the internal market. Accordingly, this Communication sets out guidance as to the criteria the Commission will apply for the assessment of State aid to promote the execution of IPCEIs. It first defines its scope and then provides a list of criteria which the Commission will use to assess the nature and the importance of such projects for the purposes of the application of Article 107(3)(b) of the Treaty. It then explains how the Commission will assess the compatibility of public financing of IPCEIs under State aid rules.

8.

This Communication does not exclude the possibility that aid to promote the execution of IPCEIs may also be found compatible with the internal market on the basis of other Treaty provisions, notably Article 107(3)(c) of the Treaty and their implementing rules. The State aid framework is currently being modernised with a view to offering Member States greater possibilities to subsidise important projects which remedy market failures and cohesion challenges in different areas in order to promote sustainable growth and jobs. However, those provisions may not fully address the relevance, specificities and features of IPCEIs, which may require dedicated eligibility, compatibility and procedural provisions, which are set out in the this Communication.

9.

This Communication applies to IPCEIs in all sectors of economic activity.

10.

This Communication shall not apply to:

11.

In determining whether a project falls within Article 107(3)(b) of the Treaty, the following criteria will apply:

12.

The aid proposal concerns 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 (8).

13.

The Commission may also consider eligible an ‘integrated project’, that is to say, a group of single projects inserted in a common structure, roadmap or programme aiming at the same objective and based on a coherent systemic approach. The individual components of the integrated project may relate to separate levels of the supply chain but must be complementary and necessary for the achievement of the important European objective (9).

14.

The project must contribute in a concrete, clear and identifiable manner to one or more Union objectives and must have a significant impact on competitiveness of the Union, sustainable growth, addressing societal challenges or value creation across the Union.

15.

The project must represent an important contribution to the Union’s objectives, for instance by being of major importance for the Europe 2020 strategy, the European Research Area, the European strategy for KETs (10), the Energy Strategy for Europe (11), the 2030 framework for climate and energy policies (12), the European Energy Security Strategy (13), the Electronics Strategy for Europe, the Trans-European Transport and Energy networks, the Union’s flagship initiatives such as the Innovation Union (14), Digital Agenda for Europe (15), the Resource Efficient Europe (16), or the Integrated Industrial Policy for the Globalisation Era (17).

16.

The project must normally involve more than one Member State (18) and its benefits must not be confined to the financing Member States, but extend to a wide part of the Union. The benefits of the project must be clearly defined in a concrete and identifiable manner (19).

17.

The benefits of the project must not be limited to the undertakings or to the sector concerned but must be of wider relevance and application to the European economy or society through positive spillover effects (such as having systemic effects on multiple levels of the value chain, or up- or downstream markets, or having alternative uses in other sectors or modal shift) which are clearly defined in a concrete and identifiable manner.

18.

The project must involve co-financing by the beneficiary.

19.

The project must respect the principle of the phasing out of environmental harmful subsidies, recalled by the Resource Efficiency Roadmap (20) as well as several Council conclusions (21).

20.

In addition to the cumulative criteria in Section 3.2.1, the Commission will take a more favourable approach where:

21.

R & D&I projects must be of a major innovative nature or constitute an important added value in terms of R & D&I in the light of the state of the art in the sector concerned.

22.

Projects comprising of industrial deployment must allow for the development of a new product or service with high research and innovation content and/or the deployment of a fundamentally innovative production process. Regular upgrades without an innovative dimension of existing facilities and the development of newer versions of existing products do not qualify as IPCEI.

23.

Environmental, energy or transport projects must either be of great importance for the environmental, energy, including security of energy supply, or transport strategy of the Union or contribute significantly to the internal market, including, but not limited to those specific sectors.

24.

In order to qualify as an IPCEI, a project must be important quantitatively or qualitatively. It should either be particularly large in size or scope and/or imply a very considerable level of technological or financial risk.

25.

When assessing the compatibility with the internal market of aid to promote the execution of an IPCEI on the basis of Article 107(3)(b) of the Treaty, the Commission will take into account the following criteria (23).

26.

The Commission will carry out a balancing test to assess whether the expected positive effects outweigh the possible negative effects as set out below.

27.

In view of the nature of the project, the Commission may consider that the presence of a market failure or other important systemic failures, as well as the contribution to a common European interest, is presumed where the project fulfils the eligibility criteria set out in Section 3 above.

28.

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 (24). Aid will only be considered proportionate if the same result could not be achieved with less aid.

29.

The Member State must provide the Commission with adequate information concerning the aided project as well as a comprehensive description of the counterfactual scenario which corresponds to the situation where no aid is awarded by any Member State. The counterfactual scenario may consist in the absence of an alternative project or in a clearly defined and sufficiently predictable alternative project considered by the beneficiary in its internal decision-making, and may relate to an alternative project that is wholly or partly carried out outside the Union.

30.

In the absence of an alternative project, the Commission will verify that the aid amount does not exceed the minimum necessary for the aided project to be sufficiently profitable, for example by making possible to achieve an IRR corresponding to the sector or firm specific benchmark or hurdle rate. Normal rates of return required by the beneficiary in other investment projects of a similar kind, its cost of capital as a whole or returns commonly observed in the industry concerned may also be used for this purpose. All relevant expected costs and benefits must be considered over the lifetime of the project.

31.

The 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 (25).

32.

Where it is shown, for example by means of internal company documents, that the aid beneficiary faces a clear choice between carrying out either an aided project or an alternative one without aid, the Commission will compare the expected net present values of the investment in the aided project and the counterfactual project, account being taken of the probabilities of the different business scenarios occurring.

33.

In its analysis, the Commission will take into consideration the following elements:

(a)    specification of intended change : the change in behaviour which is expected to result from the State aid, that is to say whether a new project is triggered, or the size, scope or speed of a project is enhanced, has to be well specified by the Member State. The change of behaviour has to be identified by comparing what would be the expected outcome and level of intended activity with and without aid. The difference between the two scenarios shows the impact of the aid measure and its incentive effect;

(b)    level of profitability : where a project would not in itself be sufficiently profitable for a private undertaking to undertake, but would generate important benefits for the society, it is more likely that the aid has an incentive effect.

34.

In order to address actual or potential direct or indirect distortions of international trade, the Commission may take account of the fact that, directly or indirectly, competitors located outside the Union have received (in the last three years) or are going to receive, aid of an equivalent intensity for similar projects. However, where distortions of international trade are likely to occur after more than three years, given the particular nature of the sector in question, the reference period may be extended accordingly. If at all possible, the Member State concerned will provide the Commission with sufficient information to enable it to assess the situation, in particular the need to take account of the competitive advantage enjoyed by a third country competitor. If the Commission does not have evidence concerning the awarded or proposed aid, it may also base its decision on circumstantial evidence.

35.

When gathering evidence, the Commission may use its investigative powers (26).

36.

The choice of the aid instrument must be made with a view to the market failure or other important systemic failures which it seeks to address. For instance, where the underlying problem is lack of access to finance, Member States should normally resort to aid in the form of liquidity support, such as a loan or guarantee (27). Where it is also necessary to provide the undertaking with a certain degree of risk-sharing, a repayable advance should normally be the aid instrument of choice. Repayable aid instruments will generally be considered as a positive indicator.

37.

The energy security and energy efficiency objectives must be taken into account in the analysis where relevant.

38.

The Commission will consider more favourably projects that include a significant own contribution by the beneficiaries or by independent private investors. Contribution of tangible and intangible assets, as well as land, shall be accounted at market price.

39.

The selection of beneficiaries through a competitive, transparent and non-discriminatory tender will be considered as a positive indicator.

40.

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.

41.

For the aid to be compatible, the negative effects of the aid measure in terms of distortions of competition and impact on trade between Member States must be limited and outweighed by the positive effects in terms of contribution to the objective of the common European interest.

42.

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.

43.

The Commission will assess the risk of market foreclosure and dominance, in particular in case of absence of, or limited dissemination, of the research results. Projects involving the construction of an infrastructure (28) must ensure open and non-discriminatory access to the infrastructure and non-discriminatory pricing (29).

44.

The Commission will assess the potential negative effects on trade including the risk of a subsidy race between Member States that may arise in particular with respect to the choice of a location.

45.

Member States shall ensure the publication of the following information on a comprehensive State aid website, at national or regional level:

46.

Such requirement can be waived with respect to individual aid awards below EUR 500 000. Such information must be published after the decision to grant the aid has been taken, must be kept for at least 10 years and must be available to the general public without restrictions (31). Member States will not be required to provide the abovementioned information before 1 July 2016.

47.

According to Article 108(3) of the Treaty, Member States must inform the Commission in advance of any plans to grant or alter State aid including aid for an IPCEI.

48.

Member States involved in the same IPCEI are invited, whenever possible, to submit to the Commission a common notification.

49.

The execution of the project must be subject to regular reporting. Where appropriate, the Commission may ask for an ex post evaluation to be conducted.

50.

This communication will be applied from 1 July 2014 until 31 December 2020.

51.

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.

52.

In line with the Notice on the determination of the applicable rules for the assessment of unlawful State aid (32), in the case of non-notified aid, the Commission will apply this communication if the aid was granted after its entry into force, and the rules in force at the time when the aid was granted in all other cases.

53.

The Commission may decide to amend this communication at any time it is necessary for reasons associated with competition policy or to take account of other Union policies, international commitments, developments in the markets, or for any other justified reason.