EC approves Eur½ billion state aid to express operator
The European Commission has decided to authorise a subsidy of €503m by the French government to state owned express parcels company Sernam despite non-adherence to many of the original conditions. The money will be provided to allow the loss making subsidiary of SNCF, the French Railways, to re-structure. However the Commission also decided that a later unlawful subsidy of €41m will have to be repaid.
The authorisation of state aid comes with a number of conditions. The money must be used to re-focus the company’s business model on the rail freight sector, a mode which is being promoted by the Commission due to its environmental benefits. The Commission believes that Sernam has already gone a long way towards reducing its reliance on road, a market which it sees as being characterised by over supply. From 2005 the equivalent of 120 trucks a day will be moved from road to rail.
The Commission also decided that should Sernam be acquired by another company, the acquirer would not be liable to pay back the unlawful €41m subsidy.
When the initial award of a subsidy worth €448m was approved by the European Commission in 2001 it was on the understanding that Geodis, which is also partly owned by SNCF, would be acquiring a majority of shares in the company. This would allow the transfer of intellectual capital to the private sector and result in a restructuring of the company. However the Commission had reason to believe that the conditions which it imposed on the original deal were not met and in addition to this an unauthorized subsidy worth an additional €41m has been transferred. This, and complaints from other operators in the French market, prompted an investigation.
One of the main reasons for the problems facing Sernam is that Geodis did not acquire the 60% of the shares to which it had originally committed. Geodis originally bought 15% of the company in 2002 as part of the government’s plans to privatize it. However following the European Commission investigation into illegal subsidy received from Sernam’s parent, French railway SNCF, Geodis sold its stake back.
The decision to allow the state aid will no doubt come as a blow to many of the private operators in the French market. The industry has struggled over the past few years due to the harsh economic environment and many will see the existence of state owned and subsidised operators as an unfair anachronism. However this is not a new phenomenon in the French market as another major player, ABX Logistics, has also received subsidy in the past, this time from the Belgian state railways.
