Commission approves Greek funding for the construction of part of Cretan motorway

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The European Commission has approved, under EU State aid rules, a Greek support measure for the construction of two motorway sections of the northern road axis of the island of Crete, called BOAK. The aid will allow the completion of this part of the Trans-European Road Network and promote Crete’s economic development without unduly distorting competition. Part of the funding comes from the Recovery and Resilience Facility (‘RRF’).

Greece notified the Commission of its plans to grant aid to help financing the construction of the Chania-Hersonissos section of the motorway, which is 106 km long. The project also includes a possibility for the construction of the Kissamos-Chania section, which is 30 km long. The project forms part of a wider plan to upgrade BOAK, which is the main road infrastructure of Crete, with a total length of about 300 km.

The Greek authorities conducted a tender process for the award of a 35-year concession of the toll motorway. The Greek authorities selected GEK TERNA S.A. for the project. GEK TERNA has set up a special purpose vehicle (‘SPV’), for the implementation of the project. The SPV will act as concessionaire and will design, construct, finance, operate and maintain the motorway sections.

The SPV will receive from the Greek State: i) a cash grant estimated at €792 million, and ii) a surplus of about 65% on top of the tolls charged to motorway users (‘shadow toll’ surplus’).

The public funding will be partly provided through the RRF following the Commission’s positive assessment of the Greek Recovery and Resilience Plan, and its adoption by the Council.

The Commission assessed the measure under Article 107(3)(c) of the Treaty on the Functioning of the European Union (‘TFEU’), which enables Member States to support the development of certain economic activities or of certain economic areas subject to certain conditions.

The Commission found that:

• the aid incentivises the concessionaire to undertake the project, which will contribute to the economic development of Crete. The project will support investment and job creation, optimise traffic conditions and significantly increase the safety of the road network;
• the aid is necessary and proportionate for the implementation of the project. In particular, Greece showed that the public financing does not exceed the funding gap between the investment and the future financial gains, and is therefore limited to the minimum necessary to allow the completion of the project. The measure’s contribution to the development of economic areas and activities outweighs its limited negative effects in terms of distortions of competition and impact on trade between Member States.

On this basis, the Commission concluded that the public funding granted for the construction of the Chania-Hersonissos and the Kissamos-Chania sections of BOAK is in line with EU State aid rules.

Background

All investments and reforms that entail State aid included in the national recovery plans presented in the context of the RRF must be notified to the Commission for prior approval, unless covered by one of the State aid block exemption rules.

The Commission assesses such measures as a matter of priority and has provided guidance and support to Member States in the preparatory phases of the national plans to facilitate the rapid deployment of the RRF. At the same time, the Commission ensures that the applicable State aid rules are complied with in order to preserve the level playing field in the Single Market, and that the RRF funds are used in a way that minimises competition distortions and do not crowd out private investment.

For More Information

The non-confidential version of the decision will be made available under the case number SA.107691 in the State aid register on the Commission’s competition website once any confidentiality issues have been resolved. New publications of State aid decisions on the internet and in the Official Journal are listed in the Competition Weekly e-News.