EU: State-aid Simplification

The European Commission’s formal adoption of the General Block Exemption Regulations (GBER) guidance on state aid has stirred up reaction in the ports sector – not only because it has increased the highest possible state aid threshold to E150m, but also because the GEBR now effectively exempts most subsidised dredging activity – including both capital projects and maintenance – from state aid restrictions.

As would be expected, fully privatised UK ports are not happy about this guidance, but as for the overall picture, Paris Sansoglou, secretary general of the European Dredging Association (EuDA), says that in reality little has changed.

“The only thing that the new GBER has brought is the obligation for transparency,” he says. “If you receive public money for one or another reason, you need to declare or make transparent what you have that money for. For EuDA (and its members), it is business as usual.

“It is very important for the ports to secure financing for maritime access; access channels are part of a public service that governments can provide to ports and other economy players using the river for access. It is essential that this financing continues, because if a port has to pay for it, it isn’t necessarily able to.”

However, he acknowledges, the UK is different: “Nothing is subsidised, it is choice. But the problem is, the consequence is that most UK ports might not be as competitive as others who benefit from this market access outside their balance sheet. Is it unfair competition? It depends a little bit how you view these maritime accesses.”

What might be more controversial, he says, is capital dredging – i.e. deepening and widening a port’s access. “Then the question is – who is going to benefit, is it only the port, only one economic actor? But in reality, you have so many players and industries, importers and exporters depending on the expansion of the port. It is extremely complicated to say that you are subsidising a port – in fact, you are subsidising an entire region and improving the flow of goods.”

Balancing act

The main message, says Mr Sansoglou, is keeping the right balance: “Now with this transparency obligation, we might see a little bit more clearly who is doing what.”

From the point of view of EuDA members, he says, facilitating financing of dredging is always welcome because it means there will be a bigger orderbook. “So, per se, of course we welcome that facilitation, be it national or European.”
From the dredging operators’ point of view, this GBER clarification will neither simplify nor complicate contract negotiations, he believes: “The most complicated element of any contract is usually the permit procedures and the requirements as to how you should dredge or which elements should be monitored to be compliant with the permit.”

However, the ruling could create a more fluid market for certain projects, concedes Mr Sansoglou, and that would be welcome in a difficult market. “Since the 2008 crisis and austerity measures, the actual impact on the dredging market only started last year. Because of the permitting procedures and build-up time to major projects, any project of a certain size will be pursued until it is finished, despite the downturn. But now we are really feeling the austerity, because a lot of projects have been postponed.”
The continuing low oil prices have contributed to that, he adds. “As an industry, we are diversified geographically but the low price of oil has meant that all the oil majors have stopped their expansion projects and are keeping maintenance as low as possible – and there is also the impact on renewables, because where you have cheap oil, it is more difficult to compete via wind energy.”

Meanwhile, Gatis Kristaps, a consultant with Riga-based Ardenis and a specialist in state aid, welcomes the GBER amendment and its impact on the ports sector. “So far, this has been quite a complex issue which has taken a lot of time for applicants for state aid,” he says. “This will substantially reduce the bureaucratic burden, which is very good for port development. According to these new regulations, very few investment projects will have to be notified to the EC, due to the very high threshold.”
He adds that a second benefit is that there is now a defined legal framework for state aid in port infrastructure. And thirdly, the GBER amendment provides particular terminology, meaning that for the first time there is a distinction between port infrastructure and port superstructure in legal documents. “Port superstructure, which includes fixed and mobile equipment, has to be financed by the stevedores, because this is user-specific,” he says.

Dredging within the terminal falls within ‘infrastructure’ and both capital and maintenance dredging here could be considered as an eligible cost, he adds. “In essence, state aid has to benefit the economy in general.”

The rules will be important for countries receiving funding from European financial instruments such as the Cohesion Fund and Regional Development Fund, says Mr Kristaps. “These countries will definitely benefit. According to the EU legal framework, you can’t start any procurement unless there is a positive decision by your national authority regarding state aid rules. That means that the beneficiary can’t start implementation of a project unless state aid has been assessed and the project ruled compatible. Now they can make references to GBER, and show that this new investment project is exempted from notification to the EU.”

Increasing investment

He envisages the amount of investments in port infrastructure could increase in cases where national authorities were afraid of litigation risks, especially where a competitor might put in a challenge to deliberately hold up a project. “Sometimes, these state aid issues could be used as legal weapons. Without this legal framework and certainty, any competitor might submit a complaint to the EC suggesting a port is pursuing illegal state aid activities. Of course, we don’t know what would be the final outcome, but it could take several years to resolve and that would constrain the investment project during that period of uncertainty. If, however, it is very straightforward, it makes no sense to submit complaints.”

Overall, says Mr Kristaps, Europe wants to make its state aid and competition policy more efficient, and reduce the bureaucratic burden of reviewing all state aid cases at EU level, leaving it instead at the discretion of member states.

However, Richard Ballantyne, chief executive of the British Ports Association, has warned that the new rules could lead to distortion of port markets. GBER ‘weakens’ the state aid restrictions that were adopted in 2012 and intended to ensure investments boost competitiveness, says the BPA.

“A number of British ports have voiced concerns about subsidies for both capital projects and maintenance dredging at European ports, potentially disadvantaging the UK’s private sector ports industry,” says Mr Ballantyne.

FRIESLAND SEEKS EUROPEAN FUNDING

The Dutch region of Friesland is seeking European funding for a project that will allow larger vessels to access the shortsea regional ports around Lake Ijsselmeer – including Urk, Harlingen, Lemmer, Makkum, Kampel, Meppel and Zwolle, as well as Lelystad, where a new container terminal is being developed.

These ports, which are all on the TEN-T core network, are reached through the Kornwerderzand sea lock at Harlingen. “However, with dimensions of 135 x 14 x 3.8 metres, this lock has become too small – the entrance to the open sea via the Port of Harlingen doesn’t fit standard commercial vessels anymore,” says Gert Schouwstra, representing the Province of Friesland. “By replacing the lock, we will remove the barrier and there will be no more bottlenecks for trade via the shortsea shipping routes into Lake Ijsselmeer.”

The region also has a high-performance maritime industry working, he says, including shipyards producing and maintaining special vessels and superyachts.

The plan is to widen and deepen the lock to allow access for vessels up to 135 x 24 x 5 metres. The total costs for the lock and deepening/widening the fairways in the lake are put at E145m. Shippers and the maritime industry will pay E26m and another amount will be paid by the regional authorities, says Mr Schouwstra. “Because there is still a small funding gap, we are now applying for a European grant of E26m from the TEN-T CEF programme.”

The ports of Kampen and Lelystad are aiming for new small feeder services including for bulk, which would avoid the ports (and surrounding traffic) of Hamburg, Rotterdam and Antwerp, he says, with direct connections into Europe’s hinterland via the inland waterway system. “The local industries want to export and import their goods form Europe directly, using the business-to-business model. Trade routes will mainly focus on the UK, Scandinavia and the Baltic States.”

Source: portstrategy