EUROPEAN COMMISSION

Brussels, 18.01.2021 C(2021) 170 final

In the published version of this decision, PUBLIC VERSION some information has been omitted, pursuant to articles 30 and 31 of Council This document is made available for Regulation (EU) 2015/1589 of 13 July 2015 information purposes only. laying down detailed rules for the application of Article 108 of the Treaty on the Functioning of the European Union, concerning non-disclosure of information covered by professional secrecy. The omissions are shown thus […]

Subject: State Aid SA.54273 (2019/N) and SA.58386 (2020/FC) – Greece E65 Motorway concession – Trikala-Egnatia (North section)

Excellency,

1. PROCEDURE

(1) On 6 February 2019, Greece pre-notified to the Commission investment aid, for the construction of the North section of the E65 Motorway, and operating aid, for the operation and maintenance of the same motorway section. The Commission registered this pre-notification under the case number SA.53438 (2019/PN). On 12 February 2019, a meeting took place between the Commission services and the Greek authorities.

(2) On 2 May 2019, the Greek authorities notified to the Commission aid in favour of Odos Kentrikis Elladas S.A. (“Kentriki Odos S.A.” or “the concessionaire”) for the construction, operation and maintenance of the Trikala-Egnatia section (“the North section”) of the E65 Motorway.

(3) On 26 June 2019, after an initial examination, the Commission services sent a first request for information, to which the Greek authorities replied, after obtaining an extension of the deadline, with letters of 27 August 2019 and 13 September 2019. As the reply was incomplete, the Commission services asked for the remainder of the requested information by letter of 25 September 2019. The Greek authorities replied, partly on 7 October 2019, and, after another extension of the deadline, partly by letter of 29 November 2019.

Mr. Nikos Dendias Minister of Foreign Affairs 1st Vas. Sofias Av. 106 71 Athens, Greece

Commission européenne/Europese Commissie, 1049 Bruxelles/Brussel, BELGIQUE/BELGIË - Tel. +32 22991111 (4) On 28 January 2020, the Commission services sent a second request for information. The Greek authorities replied to the request, after obtaining an extension of the deadline, on 31 March 2020, 2 April 2020 and 3 April 2020 and provided an updated and consolidated version of the notification.

(5) By letter of 2 April 2020, the Greek authorities agreed to have the present Decision adopted and notified in the English language.

(6) On 13 May 2020, following a technical teleconference on 5 May 2020 with the Greek authorities, the Commission sent a third request for additional information, to which the Greek authorities replied on 18 June 2020. On 26 June 2020, the Greek authorities provided an additional clarification. On 24 July 2020, the Commission sent a fourth request for information, to which the Greek authorities replied on 1 September 2020.

(7) On 12 August 2020, the privately-owned, Greece-based construction company Proodeftiki S.A. (“the complainant”), lodged a complaint with the Commission alleging that the concessionaire would be granted incompatible State aid through the notified aid for the construction, operation and maintenance of the North section of the E65 Motorway. The complaint was registered under the case number SA.58386 (2020/FC). On 30 September 2020, the Commission forwarded the complaint to the Greek authorities along with a request for information regarding the aspects of the notification in the light of the complainant’s allegations, to which the Greek authorities replied, after obtaining an extension of the deadline, on 17 November 2020.

2. DETAILED DESCRIPTION

2.1. The E65 Motorway project and the beneficiary

(8) The Greek section of the pan-European motorway is built and managed by way of a concession for 30 years ("E65 Motorway project"). It concerns: a) the design, construction, operation, maintenance and commercial exploitation of a 181.5 km motorway linking the existing Athens-Thessaloniki motorway (PATHE) with Egnatia Odos in the north of Greece. This motorway is divided in the following sections: (i) section from Lamia (PATHE semi-interchange) to Xyniada I/C, of a length of 32.5 km (“South section”), (ii) section from Xyniada I/C to Trikala I/C, of a total length of 78.5 km (“Middle section”), (iii) section from Trikala I/C to Egnatia I/C, of a total length of 70.5 km, the North section. b) the operation, maintenance and commercial exploitation of a section of the Athens–Thessaloniki motorway, between Skarfia and Raches (57 km), that had already been constructed by the Greek State.

(9) The E65 Motorway is included in the Trans-European Transport Network (TEN-T)1. The works on the E65 Motorway are to improve traffic speed,

1 Regulation (EU) No 1315/2013 of the European Parliament and of the Council of 11 December 2013 on Union guidelines for the development of the trans-European transport network and repealing Decision No 661/2010/EU, OJ L 348, 20.12.2013, p. 1.

2 capacity, safety, as well as interconnection with other modes of transport and other EU Member States, both for passengers and cargo. In particular, the E65 Motorway will connect parts of the Greek Thessalia (“Thessaly”) region with the two main motorway axes in Greece, and subsequently with Athens (the capital and major hub for sea, air and railway transport) and Thessaloniki (regional capital and sea, air and railway transport hub).

(10) The E65 Motorway project is carried out by a special purpose vehicle company, Kentriki Odos S.A. whose shareholding structure has changed2 since the start of the concession as follows. a) Initial shareholders of the concessionaire (2007 to 7 February 2017): • 33.34% Cintra Concesiones de Infraestructuras de Transporte S.A. (subsequently Ferrovial S.A. following a corporate group restructuring) • 33.33% GEK Holding Real Estate, Construction S.A. (subsequently GEK TERNA Holding Real Estate, Construction S.A. following a corporate group restructuring (“GEK TERNA S.A.”) • 32% Dragados S.A. • 1.33% Iridium Concesiones de Infraestructuras S.A. b) On 7 February 2017, Iridium Concesiones de Infraestructuras S.A. acquired all the shares previously owned by Dragados S.A. Consequently, the structure from 7 February 2017 to 23 October 2017 was: • 33.34% Ferrovial S.A. • 33.33% GEK TERNA S.A. • 33.33% Iridium Concesiones de Infraestructuras S.A. c) On 23 October 2017, GEK TERNA S.A. acquired all the shares previously owned by Iridium Concesiones de Infraestructuras S.A. Consequently, the structure from 23 October 2017 to 11 December 2018 was: • 33.34% Ferrovial S.A. • 66.66% GEK TERNA S.A. d) On 11 December 2018, GEK TERNA S.A. acquired all the shares previously owned by Ferrovial S.A. Consequently, the structure from 11 December 2018 to 20 October 2020 was: • 100% GEK TERNA S.A. e) On 20 October 2020, GEK TERNA S.A. transferred all its shares of the concessionaire, to its wholly owned subsidiary GEK TERNA MOTORWAYS SINGLE MEMBER S.A. Consequently, the sole shareholder of the concessionaire is: • 100% GEK TERNA MOTORWAYS SINGLE MEMBER S.A.

2.2. The 2007 concession agreement

(11) In 2007, following a competitive tender (“2007 tender”), the Greek State and the concessionaire signed a concession agreement for the construction, operation and maintenance of the entire E65 Motorway (the “CA”). Under the CA, the concessionaire would construct, operate and maintain the motorway, while the ownership of the motorway would lie with the Greek State. The concession

2 Following transfer of shares, permitted under the concession agreement and approved by Greece.

3 commenced on 31 March 2008, and was initially envisaged to have a duration of 30 years, thus ending on 31 March 2038.

(12) The construction of the E65 Motorway was envisaged to be financed partly by private sources and partly by public sources. This was based on the premise that, in view of the negative financial net present value (“NPV”), the E65 Motorway could not be constructed unless financed, in part, with public funds. The public sources envisaged at the time were as follows: a) a grant of EUR 518 million from the State, which included national and EU funding and b) toll revenues from the existing motorway section (i.e. the Skarfia-Raches section), constructed by the State.

(13) The private sources were envisaged to be: a) EUR 155 million from the concessionaire in the form of equity, including shareholders’ loans and b) EUR 1 190 million from commercial loans, issued by a group of Greek and international financial institutions. The commercial loans would be progressively drawn down during the construction period (T1), and would be repaid during the operation period (T2).

(14) As regards its operation and maintenance, the E65 Motorway was considered from conception as requiring an ongoing State subsidy throughout its term. This subsidy was intended to cover the difference between the anticipated traffic revenues, and the actual costs of the operation, maintenance and financing of the motorway, including a return to the investors. Therefore, the E65 Motorway concession was tendered on the basis of the availability of a subsidy payment, the maximum amount of which was determined on the basis of the first tenderers’ offer.

(15) The State support in favour of the E65 Motorway was the subject of a Commission decision, which found that there was no State aid in favour of the concessionaire3.

2.3. The 2013 Reset agreement and the 2013 Commission no objection Decision

(16) In the years that followed the conclusion of the CA, due to the economic crisis, there was a steep decline in traffic throughout Greece, and therefore also in the expected toll income for the concessionaire (at least 60% lower than predicted). This resulted in a serious disturbance of the financial balance of the CA and consequently in the withdrawal of support from the banking sector. The works on the E65 Motorway project, therefore, were suspended in 2011. In order to unblock the situation, and given that a termination of the CA would not be an economically sound option, the Greek State renegotiated the CA with the concessionaire. This resulted, in 2013, in the amendment of the CA (“Reset agreement”), which involved:

3 Commission decision of 30.01.2008 in case N 565/2007 (OJ C 70, 15.03.2008, p.4) (“2008 Decision”).

4 a) the deferral of the construction of the North and South sections (“deferred sections”) to a later stage, as Kentriki Odos S.A.’s financing resources would not be sufficient for the completion of the entire E65 Motorway project; b) EUR 231.4 million4 in additional State support for the construction of the Middle section of the E65 Motorway, in order to bridge the financing gap created due to the crisis and c) the replacement of the operating subsidy with a so called “Recycling Mechanism”, which would cover the operating costs, loan servicing and internal rate of return (“IRR”) of the concessionaire through the State’s share of the toll revenues arising from the operation of the E65 and of the Ionia Odos motorway5. The total potential amount in favour of the E65 Motorway project resulting from these toll revenues was estimated at EUR 1 199 million.

(17) In exchange, the concessionaire accepted a capped IRR of 7.49%6 for the operation of the Middle section throughout the whole period of the concession7. Moreover, if in 2037, i.e. one year before the end of the concession, the concessionaire has not achieved this base IRR over the whole concession period, the concession period could be extended for three years after 2038.

(18) In addition, annual caps applied to the operating and maintenance costs (“O&M costs”) of the Middle section for the entire duration of the concession period.

(19) Given the guarantees provided by the Reset agreement, the lending financial institutions agreed to commit commercial loans to the project. These loans nevertheless had significantly lower principal amounts and higher interest margins, than the previously committed loans8.

(20) Following notification by Greece, the Commission raised no objections as regards the measures involved in the Reset agreement.9 The Greek authorities committed to notify any additional State aid, if it became necessary for the construction and/or operation of the E65 deferred sections.

4 See recitals 40 and 41, as well as footnote 16 of the Commission decision of 13.12.2013 in case SA. 36893 (2013/N) (OJ C 50, 21.02.2014, p.1), (“2013 Decision”).

5 The Greek State concluded a separate concession agreement for the construction and operation of Ionia Odos motorway with a special purpose company having the same shareholders as the concessionaire of the E65 Motorway project. See recitals 25 and 45 of the 2013 Decision.

6 Under the Reset agreement, the capped IRR corresponded to 8.45%, but it was revised downwards on the basis of an Amendment agreement between the concessionaire and the Greek State, that was ratified by law 4354/2015.

7 Greece had provided at the time a benchmark analysis of market prices related to infrastructure concessions in Greece and in other countries for projects realised in years 1996-2010, which showed that concessionaires of similar projects usually expected an IRR between 11%-13% in nominal terms.

8 See recital 38 of the 2013 Decision.

9 See the 2013 Decision.

5 2.4. The 2018 Commission no objection Decision for the South section

(21) In 2018, the Commission approved10 the financing of construction costs (EUR 305.7 million) for the South section (co-funded by European Structural and Investment Funds (“ESIF”)), which would be constructed and operated by the same concessionaire11. The decision on the proportionality of the aid was based on a series of safeguards: (i) the construction costs were estimated on the basis of the costs in the 2007 tender, updated in line with the Consumer Price Index (“CPI”)12; (ii) the costs and revenues were clearly separated between the different sections13; (iii) the concessionaire assumed the entire operating risk of the South section, so that no operating aid would be provided by the State; in addition, the Greek State put in place a claw-back mechanism of any excess revenues14; (iv) concerning the indirect benefit that the concessionaire might obtain due to additional revenues generated by the Middle section, the 2018 Decision referred to the capped IRR in combination with the claw-back mechanism for the Middle section15.

2.5. Greece’s decision to fund the North section

(22) The decision of the Greek authorities to instruct the concessionaire to construct the North section, and the process that had to be followed in that context, were based solely on the provisions of the CA as amended by the Reset agreement and by the amendment implementing the aid authorised under the 2018 Decision for the South section (“the 2018 amendment”). The CA, as amended by the Reset agreement and the 2018 amendment, provides for the conditions under which the construction of the deferred sections may be instructed by the Greek authorities. Two scenarios could occur, as detailed below.

10 Commission decision of 19.10.2018 in case SA.50233 (2018/N) (OJ C 40, 01.02.2019, p.1), (“2018 Decision”).

11 In particular, the Commission decided: a) to consider as “no aid” the State costs for the works related to expropriations, archaeological findings and relocation of public utility networks, as well as relevant consulting services, under the CA, and, b) not to raise objections to the aid granted for the construction of the South section on the grounds that it is compatible with the internal market pursuant to Article 107(3)(c) TFEU.

12 See recitals 67 to 69 of the 2018 Decision.

13 See recitals 70 to 73 of the 2018 Decision.

14 See recital 30 of the 2018 Decision.

15 See recital 79 of the 2018 Decision.

6 (23) According to Section C of Annex K of the Special Conditions of Contract (“Annex K”)16, the State is entitled, within three years after the completion of the T1 period (construction period of the Middle section), to decide whether it would take the deferred sections out of the concession or whether it would instruct the concessionaire to proceed with the construction works.

(24) Section D of the same Annex K defines the T2 DC17 Construction Activation Factor: for a period of 3 years after the date of the Reset agreement (i.e. 20 December 2013), (i) the average of the actual total revenues is equal to or higher than the total Common Terms Agreement (“CTA”)18 forecast revenues increased by 20%, and (ii) at the end of the same period and for the next 5 years, the forecast of the actual total revenues, for each year, is at least 20% higher than the corresponding total forecast revenues of the financial model as updated upon Reset. In such a case, the concessionaire could take the initiative to partially fund the construction of the deferred sections in accordance with the provisions of Section B of the same Annex K. According to the information and estimates that were submitted by the Greek authorities, the conditions of the T2 DC Construction Activation Factor were not met for the North section.

(25) In 2015, the Greek authorities decided to fully construct the North section of the E65 Motorway project. To this end, on 17 August 2015, they issued a Ministerial decision19 by which they notified to the concessionaire their intention to fully fund the construction works of the deferred North section, and by which they requested the concessionaire to submit updated data (such as updated designs, traffic forecasts, revenue projections, estimated O&M costs, etc.) to the Greek State and undertake the construction, operation and maintenance of the North section.

(26) On 12 January 2016, the concessionaire provided updated data related to the North section. By letter of 28 January 2019, Greece invited the concessionaire to update again the relevant data, which the concessionaire submitted to Greece on 18 February 2019. After analysing this information, Greece, by letter of 3 April 2019, notified the concessionaire of its final position as regards the assessment of costs. On this basis, Greece intends to provide the necessary funding for the construction, operation and maintenance of the North section, subject to the Commission’s approval. The notified measures will be implemented on the basis of the provisions of the CA, as it will be amended in order to reflect the agreed commitments referred to in the present Decision. The measures will take full effect through a decision of the Minister of Infrastructures and Transports.

(27) In the course of the preliminary examination, Greece provided updated traffic forecasts. The notification of May 2019 included traffic data that were based upon a cost benefit analysis performed in 2016. Mid 2019, when the Middle section of

16 This annex complemented the provisions of the CA with regards to the deferred sections, under the 2013 Reset agreement.

17 Design Construction (“DC”).

18 The CTA is a loan agreement approved by the State.

19 Ministerial Decision A/6/00/01/01/oik 4341/17.08.2015.

7 the E65 Motorway and Ionia Odos motorway had been operating for more than 18 months, the E65 traffic forecast was updated, taking account of updated socio- economic data and updated traffic survey data. The updated forecast states that there was a need to update the traffic forecast because of new laws20 governing the passage of trucks on non-tolled routes (increasing the traffic on the concession roads) and because it had become apparent that actual traffic data exceeded the forecasts. The concessionaire collected data during October and November 2018 on travel patterns and conducted a survey on traveller’s willingness to pay tolls. This resulted in a new traffic forecast dated 13 November 2019. The model has been audited and approved by ARUP, the lenders’ technical advisor, in October 2019. Annual average daily traffic for the North section, expressed in vehicles per day, is, based upon the updated forecast, [5 000 - 5 500]∗ for 2025, and [6 500 - 7 000] for 2039.

(28) The Greek authorities further analysed the impact of the COVID-19 pandemic by means of a sensitivity analysis. They explained that the COVID-19 pandemic has resulted in significant restrictions on economic activity and on the movement of persons and goods in 2020. In Greece, restrictions on movement led to a steep decline in motorways’ traffic, compared to 2019, as the figures from March to June 2020 demonstrate21. Traffic seemed however to recover significantly in July. The decline in economic activity is expected to lead to a significant decline in Gross Domestic Product (GDP) in 2020, a significant part of which is expected to be recovered in 2021. For 2022, the Greek authorities estimate a recovery of the economy to 2019 level. Measures taken at European and national level to mitigate the impact of the COVID-19 pandemic over a seven-year period (2020-2026) are expected to boost the economy after 2023 and lead to high growth rates.

(29) The results of the Greek authorities’ updated cost benefit sensitivity analysis lead to the conclusion that the project remains socially viable and the project’s economic analysis results are positive, even after incorporating the effects of the coronavirus pandemic.

2.6. The E65 North section infrastructure project

(30) The infrastructure project of the North section entails the full construction (main road, service roads, connecting roads and supplementary roads) of a total length of 70.5 km, connecting Trikala city with the Egnatia Odos motorway, which crosses Northern Greece from East to West. With this section, the E65 Motorway project will be complete, linking the Egnatia Odos motorway (in the north) with

20 Law 4388/2016 (OGG is A’/93/27.05.2016) and OGG 3769/2017, prohibiting passage of heavy trucks on the side road network.

∗ Confidential information

21 According to the Greek authorities, movements’ restrictions resulted in a steep traffic decrease, compared to 2019, from mid-March to mid-May 2020 in urban and rural areas and especially in Greek motorways. The level of decrease was not the same across Greece. In March the decrease in rural motorways (except Egnatia Odos) varied between 30% and 45%, in April it was almost double, between 70% and 80%, and in May dropped to March levels. In June, traffic decrease was more than half of the corresponding May decrease, between 5% and 15%, depending on the motorway. The decrease in the first three weeks of July was similar.

8 the existing PATHE motorway axis (in the south).22 The North section will be composed of a cross-section of two traffic lanes and an emergency lane, in each direction. The traffic lanes are 3.5m and 3.75m wide. The width of the emergency lane varies between 2m and 2.5m. The width of the central reservation area varies between 2.5m and 3.8m. This results in a total cross-section of between 21m and 23.3m.

(31) The initial 2007 design of the North section has been modified in order to bypass an environmentally sensitive area, hosting certain protected species, like the brown bear and the wolf. In comparison with the initial design of the North section, the design modifications concern, mainly the reduction in the altitude of the motorway23 (from 950m to 650m), the reduction of the length of the bridges and tunnels, and an increase in the total length of the motorway (from 64 km to 70.5 km).24

(32) The Greek authorities performed an analysis to assess whether the proposed measure is appropriate and proportionate to the objective they want to achieve, i.e. the construction of road infrastructure that will complete the E65 Motorway project, linking Egnatia with PATHE motorway and replacing the national road network which at present has several disadvantages: often single carriageways with numerous curves, limited opportunities to overtake slower vehicles and a high number of accident blackspots. Greece provided a cost benefit analysis for three alternatives. In addition to the notified solution, two alternatives were analysed. Alternative 1 is composed of a cross section of two traffic lanes (3.5m and 3.75m) in each direction, without emergency lane, and a central reservation area of 2.5m. This results in a total cross-section of 17m. Alternative 2 is composed of a cross section of, in each direction, one traffic lane (3.75m) and an emergency lane (1.5m). It results in a total width of 11m.

(33) From a financial point of view, alternative 1 would, for the Greek authorities, be preferable to the notified solution (NPV difference of [5-10]%). It would result in a smaller amount investment aid (minus [5-10]%) but a higher operating subsidy (plus [20-25]%). In terms of the overall cost benefit analysis however, the notified solution is the better one. This is based upon differences in vehicle operating cost, travel time, accident costs, user benefits, other external factors and residual value. While the socio-economic NPV of the notified solution is estimated at EUR [40- 60] million (2015 prices), it is only EUR [0-20] million for alternative 1. Alternative 2 resulted in a negative socio-economic NPV of minus EUR [200- 220] million. Greece does not consider that alternative 2 solution as acceptable although alternative 2 is the cheapest one (NPV difference of [25-30]% compared to the notified solution) from a financial point of view. In terms of the overall cost benefit analysis, this advantage is not sufficient to account for the disadvantages mainly in terms of travel time and accident cost.

22 “PATHE” means Patras – Athens – Thessaloniki – Evzonoi.

23 According to the initial design, the North section would cross a mountainous area at an altitude of 950m, while with the design modifications it will cross an area of 650m altitude.

24 The design modifications concern the following two subsections: (i) section from CH. 148+000 (before the Oxyneia I/C) to CH. 181+467 (Egnatia I/C); and (ii) section from CH. 111+000 (Trikala I/C) to CH. 148+247 (Oxyneia I/C).

9 (34) The works related to the North section have not progressed since their suspension in 2011 (see recital (16)a) of the present Decision). The financial analysis assumes a start of construction end 2020 and a completion of works in 2023. The CA is based upon an operating period for the North section of 14 years (2024- 2037).

(35) The Greek authorities explained that the North section will provide faster and safer road transportation across Sterea Ellada (“Central Greece”) and Dytiki Makedonia (“Western Macedonia”), while boosting the regional and national economy. According to the Greek authorities, the significance of the North section project to the development of the Western Macedonia region is further amplified if account is taken of the transition to the post-lignite era (related to an EU push for a climate-neutral Europe by 2050). As that region is a major coal mining area, it will be negatively impacted by that transition. In this context, the North section – through the enhancement of connectivity of the Western Macedonia region with the Athens metropolitan area and Central Greece – will promote the expansion, rationalisation, modernisation and diversification of the economic activities of enterprises located in the region, and encourage firms to set up new establishments there, thus reducing the major repercussions on employment in these areas.

(36) The Greek authorities explained, more specifically, that the completion of the E65 Motorway will benefit the region in many ways, such as: a. by improving access to the Central Greece region and overcoming the existing traffic isolation, while upgrading the connection to Western Macedonia and serving the international road transport to Albania and North Macedonia; b. upon completion, it will facilitate – via Igoumenitsa Port – the international passenger and freight transport from Greece to Western and Central Europe, providing thus an alternative route, shorter than the existing one, i.e. the PATHE – Kleidi Imathias – Egnatia Motorway – Igoumenitsa route; c. by allowing the optimal use of existing motorway capacities, since the Middle section of the E65 Motorway is already constructed and the South section of the E65 Motorway is currently under construction; d. by improving the quality of the transport system, by increasing the average hourly speed, reducing the overall travel times, and by improving road safety and security, as well as by providing access from peripheral regions to services and to the market; e. by providing cost-saving advantages, such as time and fuel savings, as well as increased road safety; f. by improving the competitiveness of the local economy; g. by improving, not only the regional business environment, but also the rural development potential. The completion of the E65 Motorway is expected to contribute to the development of the Trikala area in Thessaly (local transport, industrial zone, business trips), as well as to the development of the entire region of Western Macedonia; and h. by creating employment, during both the construction phase and the operation period, in Central Greece.

10 2.7. The notified measures

(37) By means of the notification at hand, Greece has notified two measures, set out below.

Measure A: investment grant

(38) Measure A consists of a direct grant of EUR 442 141 643, planned to be funded through the national budget25 (more specifically the Public Investment Budget), for the construction of the North section, which consists of: (i) EUR 5 175 000 (nominal prices), intended to cover the costs related to the rehabilitation of the construction works already executed on the North section prior to the suspension of the project in 201126 and (ii) EUR 436 966 643 (nominal prices) intended to cover the financing of the construction cost of the remaining works that are necessary for the completion of the project.

(39) The Greek authorities note that the amount of EUR 5 175 000 (the “Rehabilitation Costs”) was calculated, according to the provisions of Annex K, on the basis of the Public Works Price List27 (“PWPL”) reduced by 12%28.

(40) The Greek authorities explained that the cost of EUR 436 966 643 for the construction of the North section has been estimated on the basis of the prices submitted in the concessionaire’s offer for the project in 2007, included in Annex K, taking into account the design modifications, and indexed with the official CPI until end of 2018 (when the construction costs were agreed between the Greek authorities and the concessionaire), and taking into account a construction period of 3 years (i.e. 11 months from December 201829, plus 3 years of construction period, until November 2022). The design modifications have led to a reduction of the construction cost, amounting to EUR 35 766 022 (in 2007 prices), from EUR 405 842 337 (in 2007 prices) to EUR 370 076 315 (in 2007 prices), as estimated by an independent engineer.

25 The Greek authorities confirmed that the project is not to be co-financed by ERDF funds (European Regional Development Fund). In this context, the Greek authorities also stated that they are examining the option of funding the project through the EU’s Recovery and Resilience Facility (RRF) under establishment.

26 The Greek authorities explain that, at the time of suspension of works in 2011, the concessionaire had already commenced works on the North section. In particular, apart from having completed the necessary construction designs, the concessionaire had already performed works on-site related to flood protection, storm water drainage, earthworks and small structures. By that time, the overall completion rate of the project was approximately 7%, and, more particularly for the North section, approximately 25%.

27 The PWPL is a reference price list for public works, construed by the Greek government. The Greek State tenders works contracts with budgets as per PWPL. Bidders usually provide their bids in percentage of discount on the PWPL reference price.

28 Article 3.1.121 of the CA concerning the additional works executed by the concessionaire during the concession period.

29 Construction was initially planned to start in November 2019.

11 (41) Greece further explained that the use of the CPI is an appropriate measure to adjust the concessionaire’s offer, as this adjustment factor was already included in the CA, and is a commonly used adjustment factor laid down in general provisions of national law concerning public projects/works30.

(42) Nevertheless, the Greek authorities also made a cost estimation in which the prices submitted in the concessionaire’s offer were adjusted, also until the end of the construction period, in line with the Construction Price Review Index (“CPRI”) for public works/projects, which showed that the adjustment on the basis of the CPI results in lower costs – and, therefore, aid – than adjustment with the CPRI would do. The latter would result in a construction cost estimation of EUR 468 588 222 (in nominal prices), to be compared with EUR 436 966 643 on the basis of the adjustment with the CPI. The CPRI is an official index issued by the Greek State for the purposes of price adjustments in public works in Greece, covering all categories of works (motorways, roads, hydraulics, harbours, electro- mechanical, buildings, etc.). The CPRI is different for each type or category of works and/or projects, and provides for a different index to be used, depending on in which quarter of the year the costs are incurred.

(43) The construction cost of the North Section, as calculated based on the concessionaire’s offer of 2007, amounts to EUR 436 966 643 (including CPI adjustment). Adding to this amount the cost of works already executed on the section prior to the suspension of works, amounting to EUR 29 657 450, and even the costs related to the rehabilitation of existing works, amounting to EUR 5 175 000, the total construction cost of the project equals to EUR 471 799 093. Given that the North Section is 70.5 km long, the average construction cost per km is EUR 6 692 186. The Greek authorities provided further evidence that this unit cost is in line with, or even lower than, the construction costs of other motorways in the domestic and European market.

(44) The Greek authorities provided a study by PwC31 which calculated the average cost of building 1 km of road in Europe to be EUR 9.4 million (study dating from 2013). The Greek authorities referred in particular to Austria (EUR 12.9 million), Hungary (EUR 11.9 million), Ireland (EUR 10.0 million), Poland (EUR 9.6 million), the Czech Republic (EUR 8.9 million) and Germany (EUR 8.2 million). The Greek authorities also provided an OECD study from 2018 “Motorway cost estimation review, the case of Slovakia”, which analysed all 28 motorway projects in Slovakia that commenced construction after the year 2005 and became operational by the end of the year 2016. The average construction price per km as reflected in the winning bids amounts to EUR 11.7 million.

30 In relation to public works, the Greek authorities explained that relevant legislation (law 1418/84, subsequently law 3669/2008) provided that the unit prices of public works would be adjusted as per the date of works execution according to an “adjustment factor” (συντελεστής αναθεώρησης) determined per trimester by ministerial decision (issued until 2012). Article 70 of law 4313/2014 provides that for the period after 1.1.2013 the adjustment for public works unit prices will be calculated according to the CPI index issued by the Hellenic Statistical Authority. The Greek authorities further noted that concession agreements do not fall into this category, but the relevant prices are always adjusted according to the CPI.

31 “Road building in Poland. The facts and the myths, experience and perspectives.”

12 (45) Furthermore, Greece provided a comparison with other Greek motorways. The Paradisia-Tsakona motorway section of Moreas motorway, constructed as a public works project and completed in January 2016 is considered by Greece as the most appropriate benchmark32. The average construction cost per km of that motorway amounted to EUR 10.7 million (not including the Tsakona metal arch bridge). The Greek authorities also considered the construction costs of the Amvrakia – Aktio motorway as relevant, although it concerns also a public works contract, which involves a lower risk allocation to the contractor than a concession agreement. That project is finalizing completion. The full projected construction cost for 40 km is EUR 240 million, which is about EUR 6 million per km. The Greek authorities explained that this price was achieved based upon open market competitive processes. It does not include the cost of design, geotechnical investigations and final environmental permits, which could increase the construction cost by at least 6%. The Greek authorities therefore consider the construction cost of the notified project as reasonable, in particular also considering that the project will be constructed in a more difficult mountainous area, with major structures, important earth movements, important environmental restrictions and constraining weather conditions. At the same time the concessionaire undertakes the design and geotechnical risks and cost.

(46) Moreover, the Greek authorities confirmed that the concessionaire is, on the one hand, not allowed to request additional payments in case the construction cost increases beyond the amount of EUR 442 141 643, and, on the other hand, any savings cannot be claimed by the State. Greece also confirmed that the investment grant for the construction of the North section has crystalized, and, therefore, may not be adjusted in the course of the concession period (e.g. with the CPI, or any other index). It was clarified that no additional investment grant will be awarded in the context of the concession.

Measure B: Financial support for the operation and maintenance of the North section

(47) If, during the operation period, the toll revenues generated by the North Section (once completed) are not sufficient to cover the eligible O&M costs (as defined in the CA) (up to the agreed O&M cap), according to the CA, Greece shall provide the concessionaire with operating financial support, in order to cover the relevant shortfall. According to the CA (as amended in 2013 by the Reset agreement), the financial support of the State shall be provided, primarily indirectly, through the Ionia Odos Recycling Mechanism, and, in case these funds are still not sufficient to cover the gap, directly through the State budget.

(48) Nevertheless, the above arrangement has, meanwhile, changed, such that the above-noted possibility for additional support through the State budget is no longer available. Indeed, following negotiations with the Greek State, the concessionaire has accepted that it will not receive additional financial support for the operation and maintenance of the North section through the State budget, should the support provided through the Ionia Odos Recycling Mechanism not be sufficient to cover the financing gap in relation to the O&M costs of the said

32 In view of similar geomorphological characteristics of the project site, a comparable cross section and similar categorization of scope of works.

13 section. Consequently, the Greek State is relieved from any further obligation to support the project.

(49) The Greek authorities estimated the financial support through the Ionia Odos Recycling Mechanism at EUR 38 336 425 (in nominal values)33 (i.e. the revenues generated by tolls of the Ionia Odos motorway, foregone by the State), as a total amount over the years 2024-2037 (according to the updated traffic forecast, provided by the Greek authorities as referred to in recital (27) of the present Decision). Revenues generated by the Ionia Odos’ tolls must, according to the Reset agreement, first, support a series of other payments34. Only after deduction of those payments, may the remaining positive balance of the Reservoir Account35 be used to provide operating support for the North section.

(50) This financial support is intended to cover the gap between the toll revenues generated by the North section (estimated at EUR 133 787 199 over the full period), and its O&M costs, up to the agreed O&M cap (EUR 172 123 624).

(51) The project shall generate revenue, since tolls will be levied on users at the toll stations of the North section. According to the CA, the concessionaire may impose a maximum toll per kilometre for the whole E65 Motorway, including the deferred sections. The tolls shall be collected by the concessionaire, and shall be accounted for separately, for each of the sections. Moreover, the concessionaire shall create a separate bank account, solely for use in relation to the North section’s activities, which will include only the North section’s cash flows. In addition, the North section project has been explicitly excluded from the lender’s securities, and the concessionaire is obliged to obtain separate insurance covers for the deferred sections.

33 According to the sensitivity analysis assessing the impact of the COVID-19 pandemic, the operating aid might slightly increase to EUR 42.1 million. However the Greek authorities submitted that that sensitivity analysis does not take into account the impact of fiscal and other measures, planned and/or implemented at European and national level to mitigate the effects of the pandemic. It is estimated that those measures will reverse the COVID-19 pandemic effects and that the probability of the sensitivity analysis results to be confirmed in the future is low.

34 According to Greece, these payments are, in order of priority: (a) eligible project costs of both Ionia Odos and the E65 Motorway Middle section (O&M costs, loan servicing, corporate tax, etc.); (b) a base IRR of 7.76% for the concessionaire of Ionia Odos; (c) a base IRR of 7.49% for the concessionaire of E65 Motorway; (d) any accrued and not paid base IRR from previous years, for both concessionaires; (e) additional equity payments, due to inflation surplus; (f) additional loan servicing expenses of the E65 concessionaire, related to the swap crystallisation facility; and (g) accelerated repayment of bank loans, according to a defined method (“cash sweep”).

35 The Reservoir Account is an interest bearing escrow account in the name of the State, opened at a third-party bank.

14 (52) The O&M costs are subject to an O&M cap which amounts, for the full period, to EUR 172 123 624, in nominal prices. It is the sum of: (i) the routine O&M costs, which are EUR [120 000 000-140 000 000] in nominal prices; and (ii) the necessary major maintenance costs, which are EUR [40 000 000- 60 000 000] in nominal prices.

(53) In addition, there is a nominal O&M cap for each and every six-month calculation period.36 Therefore, any expense that exceeds the O&M cap in any calculation period shall be covered by the concessionaire, irrespective of whether there is a positive balance in the Reservoir Account.

(54) Greece clarified that the O&M cap amount was estimated on the basis of the O&M costs as envisaged in the 2007 CA, reviewed to reflect the design modifications, adjusted in line with the actual CPI until 2018, and including a price indexation over the operating period, as provided for in the CA. To support that the estimate of the O&M costs (i.e. EUR 89 488 per km) for the North section is in line with, and is even lower than, those of other comparable motorways, the Greek authorities provided O&M costs per km benchmarks37 from similar concession agreements in the domestic market. Greece also confirmed that the O&M cap has crystalized, and, therefore, may not be adjusted during the course of the concession (e.g. with the CPI, or any other index). It was clarified that no additional operating aid may be granted in the context of this concession.

(55) The operation, maintenance and exploitation of motorway concession projects in Greece is monitored by Directorate D17, which is the directorate for the operation, maintenance and exploitation of infrastructure under concession agreements of the Ministry of Infrastructures and Transports (“D17”). Therefore, following completion of construction, and during the operation period, D17 shall be the competent service for the supervision of the operation of the North section. According to its statutory decree, D17 is, amongst others, responsible for the supervision of the operation of the project, the control of revenues and expenses from the exploitation, and the supervision of the implementation of the maintenance works.

(56) According to the CA, D17 has full authority to monitor the project, request any financial or other type of data and information, and perform audits. In addition, D17 has the authority to engage experts and advisors to assist it in its task.

(57) In this context, the concessionaire will submit periodic reports on revenues and eligible expenses to D17, which will be audited and verified by the concessionaire’s statutory auditor. The concessionaire will also submit to D17 all

36 The O&M cap for each calculation period (i.e. 6-months) is the sum of the routine O&M costs and the heavy maintenance costs of each period.

37 For instance (based on published 2018 financial statements): a) Olympia Odos Motorway, EUR 211 000 per km, b) Moreas Motorway, EUR 103 000 per km, c) Aegean Motorway, EUR 144 000 per km, d) Nea Odos Motorways, EUR 101 000 per km.

15 other reports related to the operation and maintenance of the project, in accordance with the provisions of the CA.

(58) The Greek authorities further note that the CA provides (under Articles 25.1.6, 25.2 and 25.3) for the mechanisms that allow the State to effectively verify the amount of O&M support requested for each calculation period (open book principles, yearly audit of accounts, etc.), and, in case of proven errors in the calculation of the O&M support, make any necessary adjustments to the amount of the O&M support for the next calculation period.

(59) The O&M costs of the North section shall only be supported through the Ionia Odos Recycling Mechanism, and not through other sources (such as revenues generated by other E65 sections, or the State directly). In this regard, it was agreed that the concessionaire is not entitled to receive additional financial support through the State budget, should the support provided through the Ionia Odos Recycling Mechanism not be sufficient to cover such a shortfall. The Greek authorities submitted that the CA will be amended (and the amendment subsequently ratified in law), in order to reflect this commitment.

(60) In addition, Greece states that the North section is financially independent from the Middle and South sections, thus excluding any potential cross-subsidisation risks. In this regard, Greece refers to a series of safeguards, such as creation of a separate account for the North section, its exclusion from the lenders’ loans and securities, and the obligation to obtain a separate insurance for the North section.

(61) In any case, even if the operation of the North section proved to be profitable following its construction, the CA, as amended by the Reset agreement, provides for a claw-back mechanism, pursuant to which the concessionaire shall not retain, and shall reimburse to Greece, any exceeding benefit resulting from such operation.

2.8. The complaint

(62) The complainant considers that the Commission should have doubts as to the compatibility with the internal market of the Greek authorities’ notified State aid to the concessionaire of the North section. It thus requests the Commission to initiate the formal investigation procedure in the meaning of Article 108(2) of the Treaty on the Functioning of the European Union (“TFEU”) and Article 4(4) of the State aid Procedural Regulation38.

(63) Firstly, the complainant takes the view that the notified aid measures do not pursue a genuine objective of common interest. It puts into question that the traffic volume and revenue forecasts for the E65 North section justify a motorway of such a dimension and concludes that the project did not show a “satisfactory medium-term prospect of use”.39 The complainant expects the traffic flow to shrink more due to the COVID-19 pandemic.

38 Council Regulation (EU) 2015/1589 of 13 July 2015 laying down detailed rules for the application of Article 108 of the Treaty on the Functioning of the European Union (OJ L 248, 24.9.2015, p.9).

39 To support his allegations, in particular regarding construction costs and traffic volumes, the complainant refers to the Special Report 09/2018 by the European Court of Auditors (ECA) “Public

16 (64) Secondly, the complainant opposes the necessity of the aid measures. In its view, the Greek authorities could have taken other actions to achieve the objective of common interest (assuming that such common objective exists). They should have considered other alternatives to the planned two-lane motorway, in particular the cheaper one-lane option.

(65) Thirdly, the complainant considers the aid measures disproportionate. In its view, the aid amounts are excessive and it challenges the pricing method of the Greek authorities. The complainant is of the opinion that the Greek authorities cannot rely legitimately on the 2007 competitive tender and an indexation of prices since: (i) during the tender procedure of 2007 there was no other financial offer in addition to the concessionaire’s; (ii) the original concession has been divided into three ring-fenced concessions set in a different macro-economic climate. It also argues that, had the concession for the E65 North section been awarded through a new tender procedure, the Greek authorities would have saved resources, since such procedures regarding other motorways in Greece between 2016 and 2019 allegedly had concluded with an offering discount of about 50% compared to the PWPL.

(66) Fourthly, the complainant brings forward undue negative effects on trade and competition caused by the aid measures. Referring to the above-mentioned ECA report40, it claims that large-scale motorway projects such as the notified one would reduce the level of competition in the Greek motorway construction market. The complainant mentions that the aid intensity is very high and that the concessionaire will allegedly not contribute to the financing of the E65 North section. In its view, competition in the construction market in Greece has been affected by a cartel.

(67) The complainant alleges that the Hellenic Competition Commission (“HCC”) in 2017 found the company TERNA S.A.41 guilty of a construction cartel offence and imposed a fine of EUR 18 million upon it for its participation in the cartel between 2005 and 2012.42 According to the complainant, the parent company of TERNA S.A. is GEK TERNA S.A., which is also the 100% sole owner of the concessionaire. Therefore, and because the cartel would have irreparably affected the construction market in Greece, the complainant considers that alleged cartel relevant to the Commission’s analysis of the notified aid regarding the E65 North section.

(68) Fifthly, the complainant considers the operating aid to be incompatible with the internal market. The complainant notes that operating aid solely intends to maintain the status quo and cover the operating expenditure of the beneficiary’s

Private Partnerships in the EU: Widespread shortcomings and limited benefits”, https://www.eca.europa.eu/Lists/ECADocuments/SR18_09/SR_PPP_EN.pdf

40 See footnote 39.

41 When mentioning “TERNA AE”, the complainant refers to the same entity mentioned by the Greek authorities as “TERNA S.A.”. The entity is the same since “A.E.” is the Greek abbreviation for “S.A.”.

42 The complainant refers to case number 641/2017, however the Greek authorities clarified (see recital (74) of the present Decision) the correct reference being decision 642/2017 of the HCC.

17 normal business activity and therefore cannot be considered compatible. The complainant further refers to the absence of operating aid for the South section and to a need to assess operating aid under the Guidelines on regional State aid for 2014-2020.43

2.9. Greece’s comments on the complaint

(69) Firstly, the Greek authorities are of the opinion that the complaint is inadmissible, since the complainant cannot qualify as “interested party”44 in the meaning of Article 1(h) of the State aid Procedural Regulation and since it does not invoke “any alleged unlawful aid or any alleged misuse of aid”45, as required by Article 24(2) of the State aid Procedural Regulation.

(70) Secondly, the Greek authorities argue that the notified project pursues a genuine objective of common interest, referring to arguments from their notification on the importance for people’s mobility and the connectivity of the region.

(71) Thirdly, according to the Greek authorities, the aid is also necessary and proportionate to the aim sought and the socio-economic benefits of the notified project outweigh any potential adverse effect on competition or trade between Member States. They note in this respect that the 2018 ECA report focuses on the Middle section and does not examine the North section of the E65 Motorway. They mention that this performance report was carried out back in 2016, based on available data at that time, whilst the assessment of the E65 North section is based on an ad hoc socio-economic and financial analysis presented by the Greek authorities during the preliminary examination phase. They also highlight the Commission’s replies to the ECA report in the annex of the latter. Furthermore, the Greek authorities re-iterate their earlier argumentation on the cost benefit analysis, based on updated traffic forecasts and in particular the socio-economic comparison of alternative scenarios, taking into account different possible dimensions of the E65 North section.

(72) Fourthly, the Greek authorities underline the proportionality of the aid measures, re-iterating that the construction costs (approximately EUR 6.7 million per kilometre, see recital (43) of the present Decision), are based on reliable data and thus market conform. Therefore aid amounts are not excessive. A comparison between the unit cost of construction per kilometre for the North section of the E65 Motorway and the respective construction costs for similar motorway projects in Greece and other EU countries demonstrates that the construction costs of the project at hand are lower (see recital (44) of the present Decision). According to the Greek authorities, the competitive cost of the notified project is

43 Guidelines on regional State aid for 2014-2020 (OJ C 209, 23.7.2013, p. 1).

44 According to the Greek authorities, the complainant is not engaged in the same economic activity and does not provide any similar services to the ones provided by the concessionaire to the users of the E65 North section. Amongst other arguments, they also mention that the complainant has not participated in any tender procedure for public works contracts since 2007 and has retired not only from the public works market but also from any economic activity, and has been consistently reporting zero turnover the financial years 2014 to 2019.

45 The Greek authorities claim that a formal complaint cannot concern any future/potential aid or aid measure whose notification is under assessment.

18 further corroborated by the findings of the ECA included in its Special Report 5/201346. For the purposes of this report, the Court audited 24 European Regional Development Fund and Cohesion Fund road investment projects in Germany, Greece, Poland and Spain. According to the findings of the said ECA report (paragraph 53), the average total cost per km of the audited projects is around EUR 11 million for motorways and EUR 6.2 million for express roads. In the Greek authorities’ view, the findings of the ECA clearly demonstrate that the cost per kilometre of the notified project (EUR 6.7 million) is much lower than the average unit cost of the audited motorway projects and very close even to the cost per kilometre of express roads.

(73) With respect to the allegations of the complainant regarding the discounts offered in the context of public works tenders during the period 2016-2019, the Greek authorities submit that, apart from the fact that they are not supported by data47, they cannot, in any case, be considered as a reliable benchmark for the assessment of the E65 North section construction costs. They argue that no one can reasonably predict the outcome of a hypothetical tender process with respect to the North section, especially in view of its different characteristics compared to public work projects. In particular, the construction costs of a project implemented under a concession agreement would not comparable to the cost of a project implemented under a public works contract.

(74) Fifthly, regarding the complainant’s cartel allegations, the Greek authorities refer to the decision 642/2017 by the HCC, concerning tendering procedures for public works. According to the Greek authorities, there was no proof of infraction of competition legislation found, concerning the tendering process of the E65 Motorway CA. First, the Greek authorities highlight the fact that TERNA S.A. is not the parent company of the concessionaire but only a member of the same group. They highlight that GEK TERNA S.A. was also investigated in the context of the HCC investigation concerning tendering procedures for public works, and by decision 642/2017 the HCC has found GEK TERNA S.A. not to be guilty of any infractions of the competition legislation. The Greek authorities explain that the specific issue whether GEK TERNA S.A. has been involved or found guilty of any infractions of the competition legislation by the HCC in decision 642/2017 has also been examined by the Greek Council of the State in its judgment 1819/2020 which found that GEK TERNA S.A. has not even indirectly (via its subsidiary TERNA S.A.) participated in a cartel.

3. ADMISSIBILITY OF THE COMPLAINT

(75) The Commission considers that the complaint cannot constitute a formal complaint within the meaning of Article 24(2) of the State aid Procedural Regulation, since such a formal complaint may only concern alleged unlawful aid or alleged misuse of aid. However, in the present case it is clear that the aid has

46 ECA Special Report 5/2013, “Are EU Cohesion Policy funds well spent on roads?” https://www.eca.europa.eu/lists/ecadocuments/sr13_05/sr13_05_en.pdf

47 The Greek authorities also suggest that the 50% discounts mentioned by the complainant are excessive and cannot ensure the smooth and timely implementation of the projects (in some cases even the commencement) or even their completion.

19 not been put into effect in contravention of Article 108(3) TFEU,48 and therefore it cannot constitute “unlawful aid” within the meaning of Article 1(f) of the State aid Procedural Regulation. Moreover, the aid at issue has, of course, not been approved by the Commission prior to the present Decision, and therefore it is logically impossible for the beneficiary to have used that aid in contravention of such approval decision at the time of submission of the complaint. Therefore, the complaint cannot concern “misuse of aid” within the meaning of Article 1(g) of the State aid Procedural Regulation.

(76) In view of the abovementioned ground of inadmissibility of the complaint as “formal complaint” within the meaning of Article 24(2) of the State aid Procedural Regulation, the Commission does not need to conclude whether the complainant qualifies as an “interested party” within the meaning of Article 1(h) of the State aid Procedural Regulation.

(77) In any event, however, the Commission takes into account the complainant’s allegations for the assessment of the notified aid measures. According to Article 12(1) of the State aid Procedural Regulation, the Commission may on its own initiative examine information regarding alleged unlawful aid from whatever source, without prejudice to Article 24 of the State aid Procedural Regulation. Therefore, a fortiori in a case of notified aid as the present one, the preliminary examination of the notification does not have to be limited to the information provided by the notifying Member State, but the Commission may also investigate other information on its own initiative and is therefore not prevented from taking into account information from third parties’ submissions.

4. EXISTENCE OF STATE AID

(78) By virtue of Article 107(1) TFEU, any aid granted by a Member State or through State resources in any form whatsoever, which distorts or threatens to distort competition by favouring certain undertakings or the production of certain goods, shall, in so far as it affects trade between Member States, be incompatible with the internal market.

4.1. Notion of undertaking

(79) State aid rules only apply where the recipient of an aid is an “undertaking”. As mentioned in paragraph 7 of the Commission Notice on the notion of State aid as referred to in Article 107(1) of the Treaty on the Functioning of the European Union (“NoA”)49, according to settled case law, an undertaking is an entity engaging in an economic activity, regardless of its legal status and the way in which it is financed50. Any activity consisting of offering goods and/or services in a given market is an economic activity51. In the Aéroports de Paris judgment52,

48 See recital (87) of the present Decision.

49 OJ C 262, 19.07.2016, p. 1.

50 Joined cases C-180/98 to C-184/98, Pavlov and others, [2000] ECR I-6451.

51 Cases 118/85 Commission v Italy [1987] ECR 2599, paragraph 7, C-35/96 Commission v Italy [1998] ECR I-3851, paragraph 36, joint cases C-180/98 to C-184/98, Rec.2000, p.I-6451.

20 the General Court ruled that the operation of an airport had to be seen as an economic activity. Moreover, the Leipzig/Halle judgment53 confirmed that, if an airport runway will be used for economic activities, its construction also constitutes an economic activity. As mentioned in paragraph 202 of the NoA, while these cases relate specifically to airports, the principles developed by the Union Courts are also applicable to the construction of other infrastructures that are indissociably linked to an economic activity54. In this case, the beneficiary is Kentriki Odos S.A, a special purpose vehicle which will construct and operate the North section of the E65 Motorway against the payment of tolls (see recitals (10) and (51) of the present Decision). Thus, it conducts an economic activity. Therefore, the Commission considers the beneficiary to be an undertaking within the meaning of State aid rules.

4.2. Measure imputable to the State and existence of State resources

(80) To qualify as State aid, the measure in favour of an undertaking has to be granted by a Member State, or through State resources, and it has to be imputable to the State. In this case, all measures involve State funds only, which will be granted by the State to the beneficiary (see recitals (38) et sequitur of the present Decision). Therefore, the Commission concludes that the measures are imputable to the Greek State, and involve State resources.

4.3. Existence of a selective advantage

(81) According to settled case law, in order to determine whether a State measure constitutes State aid, it is necessary to establish whether the recipient undertaking receives an economic advantage that it would not have obtained under normal market conditions, i.e. in the absence of State intervention55. Only the effect of the measure on the undertaking is relevant, whereas the cause or the objective of the State intervention are not relevant56. To assess this, the financial situation of the undertaking following the measure should be compared with what its financial situation would have been had the measure not been taken. Paragraphs 127 et sequitur of the NoA clarify that State aid encompasses not only positive benefits, but also measures, which, in various forms, mitigate the charges which are normally included in the budget of an undertaking, and which, without being

52 Judgment of the General Court of 12 December 2000, Aéroports de Paris v Commission, T-128/98, ECLI:EU:T:2000:290, paragraph 125, confirmed by the Court of Justice in its Judgment of 24 October 2002, Aéroports de Paris v Commission, C-82/01 P, ECLI:EU:C:2002:617.

53 Judgment of the General Court of 24 March 2011, Freistaat Sachsen and Land Sachsen-Anhalt and Others v Commission, Joined Cases T-443/08 and T-455/08, ECLI:EU:T:2011:117; upheld on appeal in Judgment of the Court of Justice of 19 December 2012, Mitteldeutsche Flughafen AG and Flughafen Leipzig-Halle GmbH v Commission, C-288/11 P, ECLI:EU:C:2012:821.

54 Judgment of the Court of Justice of 19 December 2012, Mitteldeutsche Flughafen AG and Flughafen Leipzig-Halle GmbH v Commission, C-288/11 P, ECLI:EU:C:2012:821, paragraphs 43, 44. Judgment of the Court of Justice of 14 January 2015, Eventech v The Parking Adjudicator, C-518/13, ECLI:EU:C:2015:9, paragraph 40.

55 Case C-39/94 SFEI and Others [1996] ECR I-3547, paragraph 60; Case C-342/96 Spain v Commission [1999] ECR I-2459, paragraph 41.

56 Case 173/73 Italy v Commission [1974] ECR 709, paragraph 13.

21 subsidies in the strict meaning of the word, are similar in character and have the same effect57.

(82) The State will award the concessionaire: a) a EUR 442 million grant, in order to cover its total construction costs for the completion of the North section, and b) financial support for the operation and maintenance of the North section, estimated at approximately EUR 38 million in total over the years 2024-2037 (see recital (49) of the present Decision), in order to cover the gap between the expected toll revenues and total O&M costs. The Commission considers that this financing entails a selective advantage in favour of the beneficiary, as, under normal market conditions, the construction and operation of the North section of the E65 Motorway would either be financed through the concessionaire’s own resources, or the concessionaire would not be in a position to profitably construct and operate such infrastructure. In other words, the public funding of the (otherwise unprofitable) construction and operation of the North section allows the concessionaire to pay for the right to exploit that infrastructure for less than what it would pay for such infrastructure under normal market conditions. This advantage is provided outside the context of a tender process, as this financing was not included in the 2007 tender. Moreover, the financing will subsequently enable the construction and operation of the North section, which will de facto result in additional traffic in the Middle and South sections of the E65 Motorway. Thus, it cannot be excluded that the concessionaire will enjoy an additional indirect advantage due to the increase in revenues it will derive from the Middle and South sections of the E65 Motorway.

4.4. Distortion of competition and effect on trade

(83) A measure that constitutes a selective advantage may constitute State aid if it distorts, or threatens to distort, competition, and in so far as it affects trade between Member States. According to settled case law, a selective advantage granted by the State is considered to distort or threaten to distort competition when it is liable to improve the competitive position of the recipient, compared to other undertakings with which it competes58. A distortion of competition within the meaning of Article 107 TFEU is, thus, assumed insofar as the State grants a financial advantage to an undertaking in a liberalised sector where there is, or could be, competition59.

(84) As explained in the NoA60, in order for the distortion of competition to be excluded, in the particular case of bundled construction and operation of motorway infrastructure, there has to be a natural monopoly and the bundled

57 Cases C-143/99 Adria-Wien Pipeline [2001] ECR I-8365, paragraph 38; C-387/92 Banco Exterior de España [1994] ECR I-877, paragraph 13; and Case C-200/97 Ecotrade [1998] ECR I-7907, paragraph 34.

58 Case 730/79 Philip Morris [1980], ECR 267, paragraph 11, joined cases T-298/97, T-312/97, T- 313/97, T-315/97, T-600/97 to 607/97, T-1/98, T-3/98 to T-6/98 and T-23/98, Alzetta Mauro and others v. Commission, [2000] ECR II-2325, paragraph 80.

59 Joined cases T-298/97, T-312/97 etc. Alzetta [2000] ECR II-2325, paragraphs 141 to 147, case C- 280/00, Altmark Trans [2003] ECR I-7747.

60 See paragraph 220 in combination with paragraphs 211 and 212.

22 construction and operation has to be assigned for a positive price through a competitive, transparent, non-discriminatory and unconditional tender. Moreover, it should be ensured that the funding cannot be used to cross-subsidise or indirectly subsidise other economic activities. In this case, although the concession of the bundled construction and operation of the E65 Motorway was initially (in 2007) agreed following a competitive tender procedure, the features of the concession and the public contribution were modified in 2013, and were approved by the Commission as compatible aid in 2013. These modifications were not the result of a competitive tender. Thus, such advantage in favour of the concessionaire is liable to distort competition and affect trade between Member States.

(85) Moreover, the concessionaire, as an undertaking, is active in infrastructure works and operation in several sectors where international competition is present. Therefore, an indirect advantage to other activities of that undertaking cannot be excluded, either. As a result, the Commission concludes that the notified measures are liable to distort competition. In addition, taking into account the nature and international dimension of the sector concerned, which is the construction, maintenance and operation of motorways against tolls, as well as the number of operators active in the sector, the Commission considers that the measure is liable to affect trade between Member States.

4.5. Conclusion

(86) On the basis of the foregoing assessment, the Commission concludes that the notified measures constitute State aid within the meaning of Article 107(1) TFEU.

5. LAWFULNESS OF THE AID

(87) The Commission notes that Greece has not implemented the aid measure, pending approval by the Commission. Greece has thus fulfilled the obligation under Article 108(3) TFEU, by notifying the measure prior to its implementation and making it subject to Commission approval.

6. COMPATIBILITY OF THE AID

(88) In derogation from the general prohibition of State aid laid down in Article 107(1) TFEU, aid may be declared compatible if it can benefit from one of the derogations enumerated in the TFEU. The Greek authorities invoked Article 107(3)(c) TFEU as the basis for the assessment of the compatibility of the aid measure.

(89) The Commission observes that, according to established case practice, the appropriate legal basis for assessing compatibility of State aid to infrastructure may be Article 107(3)(c) TFEU, which stipulates that “aid to facilitate the development of certain economic activities or of certain economic areas, where such aid does not adversely affect trading conditions to an extent contrary to the common interest” may be found compatible with the internal market.61 Thus, in

61 This applies both to investment and operating aid for the infrastructure, contrary to the suggestion of the complainant (see recital (68) of the present Decision) that such operating aid should be assessed under the Guidelines on regional State aid for 2014-2020. The operating aid is necessary for the

23 order to declare the aid compatible, first, the aid must be intended to facilitate the development of certain economic activities or of certain economic areas and, second, the aid must not adversely affect trading conditions to an extent contrary to the common interest.

(90) Under the first condition, the Commission examines whether the aid is intended to facilitate the development of certain economic activities or of certain economic areas. Under the second condition, the Commission weighs up the positive effects of the planned aid for the development of the activities and areas that the aid is intended to support and the negative effects that the aid may have on the internal market, in terms of distortions of competition and adverse effects on trade caused by the aid.

(91) The Commission assesses the compatibility in the light of its case practice on infrastructure projects, taking into account, in this particular case, its precedent decisions concerning the E65 Motorway, and the exceptional circumstances that led to the Reset agreement in 2013.

6.1. Nature of the aid under assessment

(92) The Greek authorities notified Measure A as investment aid, and Measure B as operating aid. According to settled-case law, operating aid is defined as aid that is intended to release an undertaking from costs that it would normally have had to bear in its day-to-day management or ordinary activities62. The Court of Justice further distinguished investment aid and operating aid, by linking the objective of investment aid to the existence of a specific investment63. In line with this case law, the Commission confirms that Measure A is investment aid and Measure B is operating aid.

6.2. Facilitation of development of certain economic activities or certain economic areas

6.2.1. Aid contributes to development of economic activities and economic areas

(93) The Greek authorities explained that the notified project pursues an objective of common interest due to its importance for EU transport policy and the economic

realisation of the investment project, and therefore the investment aid and the operating aid should be assessed together. It is established case practice to assess the compatibility of infrastructure projects that contribute to the development of certain economic activities or of certain economic areas directly in application of Article 107(3)(c) TFEU. See, for instance, Commission decision of 4.8.2016 in case SA.43575 (2015/N) – Latvia – Aid for the construction of cultural and sport center "Daugavas stadions", OJ C 406, 4.11.2016, p.11, Commission decision of 2.12.2009 in case N 462/09 – Poland – Aid for the construction and operation of the A2 Motorway, Świecko – Nowy Tomyśl section, OJ C 418, 21.11.2014, p.2 and Commission decision of 13.12.2013 in case SA.36893 (2013/N) – Greece – Reset of Greek Motorway concession projects – Central Motorway (E65), OJ C 50, 21.02.2014, p.6.

62 See, for instance, judgment of the Court of Justice of 19 September 2000, Germany v Commission, C- 156/98, ECLI:EU:C:2000:467, paragraph 30 and case-law cited therein, and judgment of the Court of Justice of 24 November 2011, Italy v Commission, C-458/09 P, ECLI:EU:C:2011:769, paragraph 63.

63 Judgment of the Court of Justice of 24 November 2011, Italy v Commission, C-458/09 P, ECLI:EU:C:2011:769, paragraph 64.

24 convergence and cohesion of the areas involved. According to the Greek authorities and as outlined in recitals (35) and (36) of the present Decision, the construction, operation and maintenance of the North section will complete the entire E65 Motorway, assisting the development of the regions which it mainly serves: Central Greece, Thessaly and Western Macedonia. The aid will support investment and job creation in these regions, by improving the interoperability and the accessibility of their road network, as well as the road safety levels. More specifically, the North section will benefit the areas by overcoming their traffic isolation and upgrading also fast, international road connection to Albania and North Macedonia.

(94) The Commission acknowledges that by providing the notified support for the construction, operation and maintenance of the North section of the E65 Motorway, Greece indeed contributes to facilitating the development of these economic areas.

(95) The North section will provide faster and safer road transportation across Central Greece and Western Macedonia. Through the enhancement of connectivity of the Western Macedonia region with the Athens metropolitan area and Central Greece, the North section will promote economic activities of undertakings located in the area, and can encourage firms to set up new establishments there, thus potentially reducing the major repercussions on employment in these areas. In addition, the construction and operation of the North section itself will create jobs.

6.2.2. Aid has incentive effect

(96) The aid granted through the envisaged measure must have an incentive effect. State aid provides an incentive effect if it changes the behaviour of the undertaking concerned in such a way that it engages in additional activity, which it would not carry out without the aid, or which it would carry out in a restricted or different manner.

(97) The Commission considers that the aid does not present an incentive effect for a beneficiary in any case where work on a project had already started prior to the aid application by the beneficiary to the national authorities. The Greek authorities have confirmed that the works on the project have not yet started, pending authorisation from the Commission.

(98) In addition, as explained by the Greek authorities (see recitals (47) et sequitur of the present Decision), given the fact that the construction of the North section of the E65 Motorway is not economically viable, the incentive effect of the measure is already present, because the aid enables the beneficiary (the concessionaire) to implement the project, whereas, in the absence of the public support (investment and operating aid), neither the beneficiary nor any other market investor or financial institution would have financed the project. The Commission agrees that, in the absence of the notified measures (investment and operating aid), the project would not have taken place, and thus the development of the economic areas would not have been facilitated. Therefore, the aid measures have incentive effect.

25 6.2.3. No relevant breach of EU law

(99) The complainant claims a breach of antitrust law relevant to the notified project, referring to cartel investigations by the HCC (see recital (67) of the present Decision).

(100) However, the Commission has found no breach of EU law relevant to the notified project through the cartel alleged by the complainant. The alleged cartel has no relation to the notified project.

(101) Firstly, the E65 Motorway project is not among the projects which were the subject of the cartel. In that regard, the Commission notes the HCC’s conclusion in Decision 642/2017, that it has found no breach either of Greek law or of EU competition law as regards the E65 Motorway, which is described as the “Motorway of Central Greece from Skarfia to the Panagia interchange with Egnatia Odos” («Αυτοκινητόδρομος Κεντρικής Ελλάδας από Σκαρφεία έως Α/Κ Παναγιάς Εγνατίας Οδού»).64 That fact suffices to conclude that the cartel identified in Decision 642/2017 of the HCC does not concern the notified E65 Motorway project of the present case. On the contrary: Decision 642/2017 explicitly concludes that the HCC did not find any breach of EU or Greek competition law with respect to the E65 Motorway project.

(102) Secondly and merely for the sake of completeness, the Commission notes that the entity investigated by the HCC for a cartel participation, is different from the beneficiary of the notified aid, the concessionaire. At the time of the present Decision, the concessionaire is owned by GEK TERNA MOTORWAYS SINGLE MEMBER S.A., a 100% subsidiary of GEK TERNA S.A. (see recital (10) of the present Decision). The Commission notes that the HCC imposed a fine of EUR 18 million on TERNA TOURISTIKI TECHNICAL AND MARITIME SA (TERNA S.A.) for its participation in a cartel (projects other than the E65 Motorway) from 11 May 2005 to 4 January 2007 and from 4 June 2011 to 26 November 2012.65 TERNA S.A. is however not even the mother company of the beneficiary and concessionaire, Kentriki Odos S.A., but merely a sister company, since they are both owned ultimately by the same mother company, GEK TERNA S.A. The Commission notes that the mother company GEK TERNA S.A. was not found as such to be guilty of any breaches of EU competition law in Decision 642/2017, as recently confirmed by the Greek Council of State (highest administrative court) in judgment 1819/2020 (see recital (74) of the present Decision).

(103) Thirdly and merely for the sake of completeness, the Commission notes that the different company TERNA TOURISTIKI TECHNICAL AND MARITIME SA (TERNA S.A.) participated in a cartel not only concerning projects different than the notified project but also in a period that bears no relation to the notified project. Indeed, the notified project concerning the North section of the E65 Motorway will be implemented in the future, whereas the entity TERNA S.A. participated in a cartel (on other projects) in the period from 11 May 2005 to 4

64 See point H.1, sub (xii), [“ιβ” in Greek numbering, which corresponds to point “xii” or “12”] in the operative part of Decision No 642/2017 of the Hellenic Competition Commission.

65 See points A.1 and A.4 of the operative part of Decision No 642/2017 of the HCC.

26 January 2007 and from 4 June 2011 to 26 November 2012. Therefore, the notified project will start in a period that is at least eight years posterior to TERNA S.A.’s participation in a cartel on different projects.

(104) In view of the above, the Commission concludes that the cartel concerned by Decision 642/2017 of the HCC has no relation to the notified project. Therefore, any breach of EU competition law identified in that decision of the HCC does not preclude the compatibility of the State aid at issue in the present case.

6.3. Aid does not adversely affect trading conditions to an extent contrary to the common interest

(105) In order to balance the positive with the negative effects of the notified aid, the Commission identified positive effects of the planned aid for the development of the abovementioned economic activities and economic areas, as well as possible negative effects that it may have on the internal market, in terms of distortions of competition and adverse effects on trade.

6.3.1. Positive effects of the aid

(106) On the positive side, the Commission firstly notes, that the aid contributes to the development of certain economic areas and economic activities (see recitals (93) and (94) of the present Decision). According to the Greek authorities, the project shall also promote Greece’s connectivity with the rest of the European Union, since the international traffic towards other Union countries will be improved, both via the countries of the Western Balkans, and via Italy.

(107) The Commission notes the positive effects that are expected from the Greek authorities’ strategic goal for the North section of the E65 Motorway: to promote and complete infrastructures of a comprehensive road network, which pursues the specific objectives of ensuring the sustainable mobility of persons and goods under the best possible social, environmental and safety conditions.

(108) In addition, the North section is located and will service amongst others the Sterea Ellada (Central Greece) region, which is an Article 107(3)(a) TFEU region of Greece66. The notified project is designed to assist the development of this region by supporting investment and job creation in a sustainable context. It is expected to promote the expansion, rationalisation, modernisation and diversification of the economic activities of companies located in the region, and to encourage firms to set up new establishments there. It will also contribute to the reduction of the level of unemployment in the area.

(109) In this context, the completion of the North section is expected to have a significant socio-economic impact on the areas affected, as it will increase the traffic capacity of the road transport system of Central Greece and Thessaly, in particular. Due to its current weaknesses, this road transport system creates significant disincentives for the development of productive and socio-economic activities, since it gives rise to obstacles in the utilisation of the available growth

66 Since its GDP/CAP is below 75% of the EU-28 average level. See SA.46230 (2016/N) – Greece – Amendment to the regional aid map for Greece (2014-2020) for the period 2017-2020 (OJ C 36, 3.2.2017, p. 1).

27 potential of these two regions, in particular. The Greek authorities provided further details on the socio-economic impact of the construction of the North section, as summarised in recital (36) of the present Decision.

(110) Therefore, the Commission considers that the completion of the North section, which will be enabled through the aid under assessment, will have a positive impact on economic, social and territorial cohesion, which are objectives promoted in Article 174 TFEU.

6.3.2. Limited negative effects of the aid

(111) Article 107(3)(c) TFEU requires the assessment of any negative effects on competition and on trade. The aid measures must not unduly affect trading conditions to an extent contrary to the common interest. The Commission considers that such negative effects could materialise in the sector of infrastructure works (road construction) and operation, in which competition is present (see recital (85) of the present Decision). The aid could therefore be liable to distort competition and affect trade in this sector.

(112) In the way the Greek authorities designed the aid measures, they ensured that their negative effects are as limited as possible. The Commission explains below that the aid is necessary, appropriate and proportionate. The Commission’s assessment in that regard has to be conducted in the context of the conditions accepted by the Commission in its 2013 Decision related to the Reset agreement, which was caused by the exceptional circumstances of the financial crisis in Greece.

6.3.2.1. Necessity of the aid

(113) A State aid measure is necessary if it is targeted towards situations where aid can bring about a material improvement that the market cannot deliver itself.

(114) The Commission notes that, at the time of the Reset agreement, the State agreed with the concessionaire to defer the South and North sections, as, due to the financial crisis, their construction was not feasible, at that moment. The Reset agreement provided for the conditions under which the construction and additional funding of these sections could be feasible at a later stage, with or without the participation of the concessionaire, depending on the future revenues and availability of funding.

(115) The Commission observes that, according to Annex K, the concessionaire would fund the deferred sections, and hence bear further risks, only in case it reached a certain level of revenues (see recitals (22) et sequitur of the present Decision), given that a structurally non-profitable concession was faced with additional financial difficulties due to the financial crisis. Even in case such funding were possible, according to the same Annex K, the concessionaire would have to partially finance these sections and hence bear part of the risk of the project.

(116) On the basis of the estimates submitted initially by the Greek authorities, the traffic forecast threshold that would trigger the concessionaire’s financial contribution to the construction costs was not met. Even on the basis of the updated estimates on forecast traffic and forecast revenues of the concessionaire, submitted by the Greek authorities (see recitals (27) et sequitur of the present

28 Decision), the concessionaire is not in a position to finance, even partially, the construction of the North section. In particular, the estimates demonstrate that the operating revenues of the North section would not even cover the O&M costs of this section. Therefore, the Commission considers that the aid that the Greek State will award to the concessionaire in order to cover both the construction costs and part of the O&M costs of the North section is necessary, as otherwise this section would be neither constructed nor operated.

(117) The State aid of the present case is an appropriate policy instrument to further develop the economic areas at issue or whether there are alternative, better-placed instruments or forms of aid. The Commission considers that reliable and safe road infrastructure, as well as the accompanying accessibility of the area, are location factors to be considered for investments and job creation in a certain area. The State aid in the form of direct pecuniary advantages for the concessionaire will result in the completion of the E65 Motorway and is as such an appropriate policy instrument to facilitate the areas’ development.

6.3.2.2. Proportionality of the aid

(118) A State aid measure is proportionate if the aid amount is limited to the minimum needed to incentivise the additional investment or activity in the area concerned.

(119) The Greek authorities have performed a cost benefit analysis to define the most suitable technical solution for the completion of the E65 Motorway. As summarised in recitals (32) et sequitur of the present Decision, the notified solution has a higher socio-economic NPV than the two alternatives considered. In particular, the second alternative, with only one traffic lane in each direction, appears not to be feasible and presents a negative socio-economic NPV.

(120) Regarding the complainant’s assumption that the COVID-19 pandemic would negatively impact the notified project’s prospect of use (see recital (63) of the present Decision), the Commission notes that according to the Greek authorities’ updated cost benefit sensitivity analysis, the project remains socially viable and the project’s socio-economic analysis results are positive, even after incorporating the effects of the coronavirus pandemic (see recitals (28) and (29) of the present Decision).

(121) Insofar as the complainant questions, based on the 2018 ECA report (see recital (63) of the present Decision), whether the traffic volume and revenue forecasts for the North section of the E65 Motorway justify a motorway of such a dimension, it should be noted that the 2018 ECA report takes the E65 Motorway project in Greece in its entirety as an example and then focuses on the Middle section of the E65 Motorway and does not examine the North section as such.67 For the latter, the Greek authorities have performed a socio-economic analysis, which underlines that the notified project has a higher socio-economic NPV than the two alternatives considered (see recital (119) of the present Decision). The Commission also notes the ECA statement regarding “the deferred northern and southern sections linking to other existing motorways”. According to the ECA,

67 For clarification on the sections not subject to the present notification, the Commission refers to its replies in the annex to the 2018 ECA report, in particular regarding paragraphs 45 and 56.

29 “without these links, future traffic levels are likely to be far lower even than the already low estimated traffic levels”.68 In the Commission’s view, it would thus appear that the construction and operation of the North section, completing the E65 Motorway in Greece in its entirety, could alleviate ECA’s concerns as to the Middle section traffic levels.

(122) Based on the above, the Commission considers that the chosen solution is proportionate to the objectives the Greek authorities aim to achieve.

(123) As regards proportionality of the aid to finance to notified solution, the Greek authorities submit that the aid to be granted to the concessionaire for the construction of the North section should be considered proportionate, since the objective of completing the E65 Motorway project could not be achieved with less aid, and the amount of the investment aid is limited to the minimum necessary in order to allow the completion of the project. The Greek authorities justify the investment aid intensity by referring to the public debt crisis in Greece, which led to a sharp decrease of the forecast traffic on the North section of the E65 Motorway. The Greek authorities justify the operating aid intensity by providing actual and forecast traffic data, which demonstrate that the forecast revenues are below the forecast O&M costs (see recitals (27) et sequitur of the present Decision).

(124) The Commission further notes that Greece set out safeguards in order to ensure that the concessionaire’s financial advantages from the public funding of the North section are mitigated, described as follows.

The investment aid amount corresponds to the construction costs determined as in the 2007 tender and CA

(125) According to the data submitted by the Greek authorities, the starting point for the calculation of the envisaged EUR 442 million investment grant was the total design-construction cost of the E65 Motorway, as defined in the CA. The construction cost corresponding to the North section was defined and adjusted for the design modifications. Deducted from this amount were the costs of the works already completed on site until the works were suspended, i.e. in 2011. Finally, the resulting amount was indexed with the actual Greek CPI from 2007 to 2018, which was when the construction costs were agreed upon with the concessionaire.

68 See p. 33 of 2018 ECA report.

30 The amount of EUR 442 million takes into account an initially-planned starting date in November 2019, and a 3-year construction period. There will be no further indexation of this amount. The Greek authorities tested this calculation by comparing it with a calculation using the CPRI index, which is normally used in Greece for public works contracts. The use of the CPI index resulted in a more conservative estimate of construction costs, and, therefore, less investment aid.

(126) The Commission notes that, according to the data submitted by the Greek authorities, the envisaged investment grant was estimated on the basis of the total design-construction costs of the E65 Motorway, as defined in the concessionaire's offer in the context of the 2007 tender, and updated to December 2018 (i.e. the date when the construction costs were agreed with the concessionaire), taking into account a construction period of 3 years. Thus, in view of the fact that the original estimates were the result of a competitive, transparent, non-discriminatory and unconditional tender procedure, as confirmed in the 2008 Decision, it can be concluded that the construction cost was in line with market conditions at the time the CA was concluded. The Commission further notes that the Reset agreement did not change anything on this aspect of the concession, as the same cost estimates were taken also into account in 2013, as regards the Middle section. Moreover, according to the Greek authorities, the unit costs of construction per kilometre are comparable with, or lower than, those of other Greek and European motorway construction projects for similar work categories, as described in recitals (43) et sequitur of the present Decision. In reaction to the complainant’s allegations, the Greek authorities also relied on a 2013 ECA report, see recital (72) of the present Decision. The Commission considers that those benchmarks can serve as an additional safeguard that the construction costs for the North section as submitted by the Greek authorities are not overestimated.

(127) The construction cost estimates were the result of a competitive, transparent and non-discriminatory tender procedure, and thus these prices reflected, in 2007, the actual construction costs, plus a reasonable profit margin for the concessionaire. They were updated to December 201869 on the basis of objective and verifiable parameters. The 2013 Reset agreement did not alter these cost estimates of the CA. Based on those facts, the Commission concludes that these cost estimates appropriately reflect the cost for the construction of the North section, and, therefore, that the State aid limited to those costs is proportionate in that regard.

Clear separation of the North Section from the Middle and South sections

(128) The Commission observes that the Greek authorities have clearly separated the North section’s cash flows from those of the Middle and South sections.

(129) To this end, they introduced separate termination clauses regarding events of default related to the deferred sections, and they excluded the North section from the lender’s financing under the CA and, consequently, from any of the concessionaire’s debt servicing obligations.

69 A construction period of 3 years was taken into account, starting 11 months from December 2018.

31 (130) Finally, in order to safeguard the financial separation of the North section with regard to the Middle and South sections, and to exclude the possibility of any spill-over or cross-subsidisation, the concessionaire shall maintain, within its accounting system, separate accounts for monitoring and reporting the cash flows relating to the different activities (i.e. construction and operation) for each section.

(131) On this basis, the Commission can conclude that the Greek authorities have indeed separated the revenues and expenditure of the three motorway sections, thereby ensuring that there would be no direct advantage passed from the North section to the Middle and/or South section.

Operation and maintenance of the North section

(132) The Commission further notes that the complete E65 Motorway concession was, ab initio, conceived as requiring an ongoing State subsidy to be paid by the State throughout its term, in view of the low traffic volumes forecast that would not allow for the revenues generated to cover O&M costs. Moreover, the Greek authorities indicated that the forecast traffic experienced a sharp decrease, as a result of the financial crisis that Greece went through, with a significant impact on the anticipated revenues, which, according to the submissions of the Greek authorities, have not been reinstated since.

(133) However, as explained by the Greek authorities, following negotiations on the North section, the concessionaire agreed not to receive any direct financial support from the State budget for the operation of the North section, but only through the Recycling mechanism. In addition, according to the updated traffic forecasts submitted by the Greek authorities, the estimated revenues that will be generated from the operation of the North section are not sufficient to cover the estimated O&M costs of that section. The operating aid covers the gap between the O&M costs and the toll revenues. Those O&M costs are limited by an O&M cap for the overall operating period, and also for each and every six month calculation period. The O&M cap has been calculated on the basis of the total estimated O&M cap of the E65 Motorway, as defined in the CA, that corresponds to the North section costs, adjusted for the design modifications. Finally, the resulting amount was adjusted with the actual CPI until 2018. The nominal cap of EUR 172 123 624 (full period) takes account of a price indexation over the operating period, as provided for in the CA. The cost benchmarks from other concession agreements shows that this methodology leads to similar prices as described in recital (54) of the present Decision.

(134) Therefore, in the Commission’s view, the concessionaire will undertake the risk to cover any financing shortfall in case the O&M costs exceed the applicable O&M cap for the relevant period (overall, and for each and every six month period), or in case the support provided through the Ionia Odos Recycling Mechanism is not sufficient to cover the gap between the O&M costs and the toll revenues.

(135) In addition, the Greek authorities have put in place a claw-back mechanism in the event that the operation and maintenance of the North section turns out to be profitable (see recitals (21) and (61) of the present Decision). Finally, as the O&M costs are capped in accordance with the provisions of the CA, an additional

32 safeguard exists, to avoid inflation of the relevant costs and ensure that the claw- back mechanism may indeed generate revenues for the State.

(136) The operating aid, estimated at EUR 38 336 425 (in nominal values) as a total amount over the years 2024-2037 does not exceed the difference between the O&M costs and the toll revenues generated by the North section (estimated at EUR 133 787 199 over the full period), as shown in recitals (50) et sequitur of the present Decision.

(137) On this basis, the Commission considers that the safeguards put in place as regards the operation phase of the North section indeed ensure that the concessionaire will get no undue benefit from the operation of the North section.

(138) Concerning the indirect benefit that the concessionaire may derive due to the increased traffic in the Middle and South sections, induced by the operation of the North section, the Commission notes that the IRR is capped at 7.49%, a level which was considered as appropriate already under the Reset agreement, on the basis of a benchmark analysis presented by the Greek authorities. Any extra profits above this level will flow back to the State through the claw-back mechanism, ensuring that the concessionaire will not benefit from excessive revenues. It is, finally, to be noted, that such indirect advantage would have existed anyhow irrespective of whether the construction of the North section would have been carried out by the State, the current concessionaire or another concessionaire.

(139) In view of the above, the aid for the operation of the North section is proportionate.

Conclusion on the proportionality of the measures

(140) On the basis of the safeguards set out above, the Commission concludes that the aid, concerning both the construction and operation of the North section, is proportionate to the objective pursued and that the safeguards that the Greek authorities have committed to implement mitigate to the maximum extent possible the advantages that the concessionaire may get from the aid under assessment.

6.3.2.3. Conclusion on limited negative effects

(141) In light of the above arguments, the Commission concludes that negative effects of the aid measures on competition and on trade, if any, are limited.

6.3.3. Balancing positive and negative effects of the aid

(142) For the aid to be compatible with the internal market, the limited negative effects of the aid measure in terms of distortions of competition and impact on trade between Member States must be outweighed by positive effects, in terms of contribution to the facilitation of the development of economic areas. It has to be verified that the aid does not adversely affect the internal market to an extent contrary to the common interest.

(143) The Greek authorities demonstrated that the socio-economic benefits of the construction of the project outweigh any potential adverse effect on competition

33 or trade between Member States, given the safeguards in place to minimise the latter.

(144) The Commission considers that the measure under assessment will enable the construction of a motorway section, which, as explained above, will generate important benefits for the economic development of the relevant region, in terms of interconnection, growth and employment. Moreover, it will contribute to the promotion of the EU’s transport policy and social cohesion objectives.

(145) Taking into account the safeguards put in place by the Greek authorities in order to mitigate the advantages the concessionaire may have from the completion of the North section, the distortion of competition induced by the measure can be considered as mitigated accordingly.

(146) In light of the above, the Commission concludes that the positive effects of the measure outweigh possible distortions of competition, since the safeguards in place sufficiently limit the latter without impeding the achievement of facilitating the economic areas’ development. Therefore, the aid measure does not unduly affect trading conditions to an extent contrary to the common interest.

6.4. Transparency of the aid

(147) The Greek authorities confirmed that the full text of the aid granting decision will be available on the following website: • www.diavgeia.gr

(148) The information published will contain the full text of the individual granting decision and its implementing provisions (or a link to it), the identity of the aid granting authority, the identity of the individual beneficiary, the aid instrument and the amount of aid granted, the objective of the aid, the date of granting, the type of undertaking, the Commission's aid measure reference number, the region where the beneficiary is located (at NUTS 2 level) and the principal economic sector of the beneficiary (at NACE group level). The information must be published after the decision to grant the aid has been taken, must be kept for at least ten years and must be available to the general public without restrictions.

7. CONCLUSION

The Commission has accordingly decided:

• not to raise objections to the notified measures on the grounds that they are compatible with the internal market pursuant to Article 107(3)(c) of the Treaty on the Functioning of the European Union.

If this letter contains confidential information which should not be disclosed to third parties, please inform the Commission within fifteen working days of the date of receipt.

34 If the Commission does not receive a reasoned request by that deadline, you will be deemed to agree to the disclosure to third parties and to the publication of the full text of the letter in the authentic language on the Internet site: http://ec.europa.eu/competition/elojade/isef/index.cfm.

Your request should be sent electronically to the following address: European Commission, Directorate-General Competition State Aid Greffe B-1049 Brussels [email protected]

Yours faithfully,

For the Commission

Margrethe VESTAGER Executive Vice-President

35