EU approves 1.9 billion euro state aid for DB Cargo, subject to restructuring plan

BRUSSELS (Reuters) - The European Commission has approved 1.9 billion euros ($2.01 billion) in state aid for German rail freight operator DB Cargo, a subsidiary of Deutsche Bahn, the European Union said on Friday.

The aid is contingent on the implementation of a restructuring plan aimed at ensuring the company’s long-term viability, the EU said in a statement.

The decision follows an in-depth investigation launched in January 2022 after a competitor raised concerns about potential market distortions.

WHY IT'S IMPORTANT

The approval of this aid could ensure the long-term viability of DB Cargo, crucial for sustainable logistics circuits as a lower-emissions alternative to road transport.

CONTEXT

DB Cargo has been under scrutiny since a competitor's complaint sparked an in-depth investigation in 2022. The probe focused on a profit and loss transfer agreement between Deutsche Bahn AG and DB Cargo, intra-group services, group financing conditions of loans, and the partial coverage by the German Federal Railway Fund of remuneration for civil servants.

KEY QUOTE

"The Commission is satisfied that divestitures of activities and assets of DB Cargo, committed by Germany, will mitigate distortions of competition brought about by that state aid," the EU said.

BY THE NUMBERS

The approved German State aid amounts to 1.9 billion euros and is aimed at supporting DB Cargo's ongoing transformation and restructuring plan to ensure its long-term viability by the end of 2026.

WHAT'S NEXT

From Jan. 1, the profit and loss transfer agreement, identified as state aid, will no longer be in place. A restructuring plan, including a package of measures to streamline activities and reduce costs, is set to ensure DB Cargo's long-term survival.

($1 = 0.9472 euros)

(Reporting by Charlotte Van Campenhout)