Commission Decision (EU) 2022/459 of 10 September 2021 on the State aid SA.49668 (2019/C) (ex 2017/FC) and SA.53403 (2019/C) (ex 2017/FC) implemented by Denmark and Sweden for PostNord AB and Post Danmark A/S (notified under document C(2021) 6568)Text with EEA relevance.

(197) It follows from the comments on the opening decision from the States that the mandate, while enabling the government to act, does not oblige the government to do so. In this regard, Sweden has provided examples of other situations where mandates were given by the Parliament, but following which the government has not acted (yet) (see recital (99)).

(198) On the basis of recitals (195) to (197), the Commission concludes that it is only once the government decides to act which makes a legally binding decision by which the transfer of funds authorised in the mandate can be considered granted. This decision was taken on 29 November 2018 (see recital (101)).

(199) The Commission therefore corrects its conclusion as expressed in the opening decision as regards the date on which the Swedish capital injection was granted. However, it should be noted that the modification of the granting date of the aid from 28 May 2018 to 29 November 2018 does not have any impact on the market conformity assessment in Section 5.3.3 of this Decision.

5.3.

Existence of aid

(200) Pursuant to Article 107(1) TFEU, a measure qualifies as State aid if the following cumulative conditions are met: (i) the measure is granted by Member States through State resources; (ii) it confers a selective economic advantage to certain undertakings or the production of certain goods; (iii) the advantage distorts or threatens to distort competition; and (iv) the measure affects intra-EU trade.

5.3.1.

Capital injection from PostNord Group into Post Danmark

5.3.1.1.

Economic activity and notion of undertaking

(201) According to settled case law, the Commission must first establish whether the beneficiary is an undertaking within the meaning of Article 107(1) TFEU. The concept of an undertaking covers any entity engaged in an economic activity, regardless of its legal status and the way in which it is financed. Any activity consisting in offering goods and services on a given market is an economic activity

Case 118/85, Commission v Italy, ECLI:EU:C:1987:283 and Case C-35/96 Commission v Italy, ECLI:EU:C:1998:303.

.

(202) The Danish and Swedish authorities acknowledge that Post Danmark carries out activities of an economic nature. Post Danmark offers postal services against remuneration on the Danish postal market and in competition with other providers. Therefore, the provision of postal services on that market constitutes an economic activity. For those reasons, with regard to the activities financed by the capital injection, Post Danmark qualifies as an undertaking in the meaning of Article 107(1) TFEU.

5.3.1.2.

Imputability and State resources

(203) To assess whether a measure granted through public undertakings is imputable to the State, it is necessary to determine whether the public authorities can be regarded as having been involved, in one way or another, in adopting the measure

Case C-482/99, France v Commission, ECLI:EU:C:2002:294, paragraph 52.

.

(204) In addition, State resources include all resources of the public sector

Case T-358/94, Air France v Commission, ECLI:EU:T:1996:194, paragraph 56.

, including resources of public undertakings

Case C-482/99, France v Commission, ECLI:EU:C:2002:294, paragraph 38. See also Case C-278/00, Greece v Commission, ECLI:EU:C:2004:239, paragraphs 53 and 54, and Joined Cases C-328/99 and C-399/00, Italy and SIM 2 Multimedia SpA v Commission, ECLI:EU:C:2003:252, paragraphs 33 and 34.

. It is irrelevant whether an institution within the public sector is autonomous or not

Case T-358/94, Air France v Commission, ECLI:EU:T:1996:194, paragraphs 58-62.

.

(205) The Commission maintains its assessment in the opening decision that the PostNord Group capital injection is imputable to Denmark and Sweden. While the October Agreement cannot be considered a granting act, it is a bilateral agreement between two States in which they agree in principle with the implementation of the transformation plan for Post Danmark. The Group capital injection is part of the October Agreement as follows from paragraph 4 thereof (see recital (22)).

(206) Since the PostNord Group capital injection has been agreed upon in principle by the two States through the October Agreement, and that such agreement has never been put into question by the two States, the Commission considers that the PostNord Group capital injection is a consequence of that agreement and is therefore imputable to the Danish and Swedish States. Moreover, this conclusion is reinforced by the implementing agreement (see recital (25)), in which Denmark and PostNord AB explicitly agree on the granting of the Group capital injection. In addition, as PostNord Group is a public undertaking and State resources include resources of public undertakings, the measure is granted through State resources.

5.3.1.3.

Selectivity

(207) In order to fall within the scope of Article 107(1) TFEU, a State measure must favour certain undertakings or the production of certain goods. Therefore, only those measures which grant an advantage in a selective way to certain undertakings fall under the notion of aid.

(208) The capital injection carried out by PostNord Group is an individual measure specifically targeting Post Danmark. The Commission therefore considers that the measure is selective.

5.3.1.4.

Advantage

(209) An advantage for the purposes of Article 107(1) TFEU is any economic benefit that an undertaking would not have obtained under normal market conditions, that is, in the absence of State intervention

Case C-39/94, Syndicat français de l’Express international (SFEI) and others v La Poste and others, EU:C:1996:285, paragraph 60 and Case C-342/96, Kingdom of Spain v Commission of the European Communities, EU:C:1999:210, paragraph 41.

. Only the effect of the measure on the undertaking is relevant, not the cause or the objective of the State intervention

Case C-173/73, Italian Republic v Commission of the European Communities, EU:C:1974:71, paragraph 13.

. Whenever the financial situation of the undertaking is improved as a result of State intervention, on terms differing from normal market conditions, an advantage is present.

(210) Economic transactions carried out by public bodies do not confer an advantage, and therefore do not constitute aid, if they are carried out in line with normal market conditions

Case C-39/94, SFEI and others, ECLI:EU:C:1996:285, paragraphs 60-61.

. To that effect, the behaviour of public bodies should be compared to that of similar private economic operators under normal market conditions. Whether a State intervention is in line with market conditions is to be examined on an ex-ante basis, having regard to the information available at the time the intervention was decided upon

Case C 124/10 P, Commission v EDF, ECLI:EU:C:2012:318, paragraphs 83-85 and 105; case C-482/99, France v Commission, ECLI:EU:C:2002:294, paragraphs 71-72; case T-16/96, Cityflyer Express v Commission, ECLI:EU:T:1998:78, paragraph 76.

.

(211) The Commission considers that the two DCF models presented by the Danish and Swedish authorities are well in line, from a methodological viewpoint, with acceptable practice for assessing the market conformity of an investment. The NPV of the future cash flows of a company (adjusted for debt) is a commonly used way to evaluate equity investment decisions. The models provided consider two cash flows, one resulting from the bankruptcy of Post Danmark (negative cash flows, which would be avoided), and the other from Post Danmark’s future operational profits (positive cash flows).

(212) As regards the doubts expressed in the opening decision, based on the further information obtained, the Commission considers that the profitability forecasts used in the DCF models are reasonable and justified by market studies (see recital (122)). In particular, the assumptions on the growth rates of revenues and the profitability of Post Danmark were benchmarked against a sample of Post Danmark’s peers (see recital (122)). That sample included a number of publicly listed companies in the postal services and logistics sectors. For each of Post Danmark’s peer companies, the market analyst forecasts of revenues and profits were retrieved. Overall, that benchmarking exercise revealed that, in comparison to the market analyst forecasts, the forecasts underpinning Post Danmark’s business plan appeared conservative.

(213) According to the business plan, the profitability of Post Danmark in the initial years following the PostNord Group injection would be negative. This is one of the arguments that ITD has raised concerning the alleged economic advantage granted to Post Danmark. While the substantial restructuring costs incurred in the years immediately after the Post Nord Group injection do lead to losses, the expected profitability after the turnaround of Post Danmark would be sufficient, from an ex-ante perspective, to consider that PostNord Group injection is in line with the market conditions.

(214) The profitability analysis, using the free cash flow to equity approach, demonstrated that the ex-ante expected profitability of the PostNord Group injection would still be sufficient in market terms, even if the losses that would occur in case Post Danmark would go bankrupt were excluded from the calculations. That analysis revealed that, as a shareholder of Post Danmark, PostNord Group expected a return higher than the cost of the equity injection.

(215) Furthermore, the ex-ante expected profitability of the Post Nord Group injection derived from the accurate determination and justification of the WACC and cost of equity, which were used to discount the free cash flows to the firm and to shareholders, respectively. In contrast to what ITD argued, those discount rates adequately reflected the risk level of Post Danmark’s cash flows. The WACC notably took account relevant risk premiums (see recital (148)).

(216) With regard to ITD’s argument that the DCF analysis report has been conducted by PostNord itself and not by an independent expert, the Commission notes that State aid rules do not require that the assessment reports is to be conducted by an expert that is independent from the beneficiary entities. State aid rules only require that the market conformity analysis itself is to be established on the basis of a generally accepted, standard assessment methodology, based on available objective, verifiable and reliable data

Case T-274/01, Valmont Nederland BV v Commission, ECLI:EU:T:2004:266, paragraph 71.

, which should be sufficiently detailed and should reflect the economic situation at the time at which the transaction was decided, taking into account the level of risk and future expectations

Case T-366/00, Scott v Commission, ECLI:EU:T:2007:99, paragraph 158.

.

(217) With regard to ITD’s argument that the DCF analysis report should have taken into account all three capital injections, the Commission notes that the capital injection from PostNord Group to Post Danmark is a separate measure that has a different purpose than the capital injections from Denmark and Sweden into PostNord AB. Therefore, the DCF analysis correctly factors in only the capital injection from PostNord Group to Post Danmark.

(218) With regard to ITD’s argument that the DCF analysis took into account ineligible costs related to the real estate mortgage debt and loans that Post Danmark would not be able to repay in case of liquidation, Sweden and Denmark have informed the Commission that the cross-default clauses in Post Nord Group’s credit facility are such that in the event that Post Danmark goes bankrupt, PostNord Group is legally bound to pay back those loans. Therefore, the DCF analysis correctly factors in those costs. By acting as a […] in the context of a credit facility agreement, PostNord Group does not act as a public authority but as a market economy operator fulfilling its obligations in the context of a commercial debt agreement. Therefore, the Commission notes that Post Danmark costs related to real estate mortgage debt and loans occurred in case of bankruptcy are eligible to the DCF analysis.

(219) With regard to ITD’s argument that the DCF analysis took into account ineligible costs related to the indirect bankruptcy costs, namely the alleged higher borrowing costs of PostNord Group and PostNord Group’s loss of not being able to offer comprehensive Nordic logistics solutions as well as the loss of synergies and scale to its Nordic operations, the Commission notes that those costs are indeed indirect costs to be borne by PostNord Group, as any prudent market operator would do so, in case of Post Danmark’s bankruptcy. Therefore, those costs are eligible to the DCF analysis.

(220) With regard to ITD’s argument that the DCF analysis includes ineligible cash flows, such as the USO compensation, the Commission notes that since the USO compensation is regarded as a compatible aid, it is eligible to the DCF analysis. Indeed, a prudent investor would factor in compatible aid in its assessment of the relevance of an investment.

(221) With regard to ITD’s claim that even if direct and indirect costs of Post Danmark’s bankruptcy scenario were to be included in the DCF analysis, only a part of those costs and not the entire amount should have been included, since Post Danmark’s bankruptcy would not necessarily be avoided through the grant of PostNord Group’s capital injection, the Commission notes on the contrary that the calculations submitted by Denmark and Sweden demonstrated that the group’s capital injection would prevent Post Danmark’s bankruptcy, which was also actually prevented.

(222) With regard to ITD’s claim that the revenues in the DCF are too high and do not account for the risk that the USO entrustment would not be extended beyond 2019, the Commission notes that such a risk is merely hypothetical. The USO has always lied with Post Danmark and PostNord Group had no reason to expect a change in this respect. In this regard, it can be noted that the USO is generally delivered by the historic national postal operator in the vast majority of Union Member States.

(223) With regard to ITD’s claim that in view of the 10 % decrease in Post Danmark’s net sales in 2017, the estimates in the DCF of the growth rates in the letter and logistics market are too optimistic and thus questionable, the Commission reiterates its assessment in recital (212) and considers that the market analyst forecasts underpinning Post Danmark’s business plan can be considered conservative.

(224) With regard to ITDs’ claim that WACC in the DCF is too low, since it took into account PostNord Group’s peers, rather than Post Danmark’s peers, it did not consider the risk for bankruptcy due to the ambitious Post Danmark’s plan and it did not factor in the model highly sensitivity to arbitrary assumptions regarding future market conditions, the Commission reiterates its assessment in recital (215) and notes that the DCF analysis took into account Post Danmark’s peers benchmarks while the top up premiums reflected appropriately the relevant risks for the calculation of the WACC.

(225) With regard to ITD’s claim that the likely downgrading of PostNord Group considered by the States would confirm that the PostNord Group capital injection would be financially unsound and would not meet the private market investor test, the Commission reiterates the assessment in recitals (211) to (215) concerning the market conformity of the Group’s capital injection and considers on that basis that a downgrading of PostNord Group due to PostNord Group’s capital injection to Post Danmark, does not appear particularly likely (see recital (240)). Notwithstanding that, a very temporary adjustment of PostNord AB’s shadow rating would not necessarily be contradictory with a sound investment.

(226) With regard to UPS’ claim that the realism of the assumed growth rate in the DCF calculations may be validated by comparing the growth rate of the overall segment (see recital (81)) as reported in a number of research papers and other sources in conjunction to PostNord’s ability to accurately forecast expected results on specific targets, the Commission re-iterates its comments in recital (212) that growth rates assumed in the DCF analysis appeared conservative and adds that PostNord Group’s ability to accurately forecast expected results on specific target cannot be factored in a State aid assessment by the Commission.

(227) With regard to UPS’ claim that additional borrowing costs should be included in the DCF analysis, not only in Post Danmark’s bankruptcy scenario in the absence of the PostNord Group’s capital injection, but also in the PostNord Group’s capital injection scenario in line with the Danish authorities statement that PostNord AB’s shadow credit rating could also deteriorate as a consequence of the capital injection in Post Danmark, the Commission notes that since the capital injection from PostNord Group to Post Danmark is sufficiently profitable in the medium term, a downgrading of PostNord Group does not seem particularly likely, and therefore, no additional borrowing costs should be added in PostNord Group’s capital injection scenario.

(228) In conclusion, based on the two quantitative profitability analyses that Denmark and Sweden have submitted, the Commission concludes that the PostNord Group capital injection is in line with market conditions, as those analyses demonstrated that a private investor in the position of PostNord Group would also have injected capital into Post Danmark.

5.3.1.5.

Distortion of competition and effect on trade

(229) In order to be qualified as State aid, a measure must distort or threaten to distort competition and affect trade between Member States.

(230) A measure granted by a State is considered to distort or to threaten to distort competition when it is liable to improve the competitive position of the recipient compared to other undertakings with which it competes

Case 730/79 Philip Morris Holland BV v Commission of the European Communities EU:C:1980:209, paragraph 11; and 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 of the European Communities EU:T:2000:151, paragraph 80.

. A distortion of competition is thus assumed as soon as a State grants a financial advantage to an undertaking in a liberalised sector where there is, or could be, competition.

(231) As regards the measure’s effect on trade, it is not necessary to establish that the aid has an actual effect on trade between Member States

Case C-518/13, Eventech Ltd v The Parking Adjudicator (Eventech), EU:C:2015:9, paragraph 65 and Joined cases C 197/11 and C 203/11, Eric Libert and Others v Gouvernement flamand and All Projects & Developments NV and Others v Vlaamse Regering (Libert and others), EU:C:2013:288, paragraph 76.

. In particular, the Union courts have ruled that where State financial aid strengthens the position of an undertaking as compared with other undertakings competing in intra-[Union] trade, the latter must be regarded as affected by the aid.

Case C 518/13, Eventech Ltd v The Parking Adjudicator (Eventech), EU:C:2015:9, paragraph 66; Joined cases C 197/11 and C 203/11, Eric Libert and Others v Gouvernement flamand and All Projects & Developments NV and Others v Vlaamse Regering (Libert and others), EU:C:2013:288, paragraph 77; and Case T-288/97, Regione Friuli Venezia Giulia v Commission of the European Communities, EU:T:2001:115, paragraph 41.

.

(232) Post Danmark provides postal services in the Danish territory as well as abroad. The Danish postal services market has been liberalised as of 1 January 2011. According to the Danish authorities, in 2016 Post Danmark had a market share of approximately […] % in the distribution of letters, […] % in the distribution of business-to-business and business-to-consumer parcels, and […] % in the distribution of newspapers and magazine mail.

(233) There are several undertakings that provide postal services on the territory of Denmark. Those undertakings are in direct competition with Post Danmark, and several of them, such as UPS and GLS, are also active in other Member States.

(234) Therefore, the Commission considers that the capital injection from the PostNord Group into Post Danmark is liable to affect trade and distort competition.

5.3.1.6.

Conclusion

(235) Since the PostNord Group capital injection was found to be in line with market conditions, as the relevant analyses demonstrated that a private investor in the position of PostNord Group would have injected similar equity into Post Danmark, there is no economic advantage for Post Danmark and hence one of the criteria of Article 107(1) TFEU is not fulfilled.

(236) Since those criteria are cumulative, the Commission finds that the capital injection from PostNord Group into Post Danmark does not constitute State aid within the meaning of Article 107(1) TFEU.

5.3.2.

Capital injection from Denmark into PostNord AB

5.3.2.1.

Economic activity and notion of undertaking

(237) The Danish authorities acknowledge that the PostNord Group carries out activities of an economic nature. PostNord Group is the sole owner of Post Danmark, who offers postal services against remuneration on the Danish postal market and in competition with other providers, which is an economic activity. Moreover, other subsidiaries of the group also provide services on several postal services and logistics markets. For those reasons, with regard to the activities financed by Denmark’s capital injection into PostNord Group, Post Nord Group qualifies as an undertaking in the meaning of Article 107(1) TFEU.

5.3.2.2.

Imputability and State resources

(238) Since the Danish authorities grant that measure directly, it is by definition imputable to the State. Moreover, as noted in recital (204), State resources include all resources of the public sector. As the Danish authorities grant the capital injection from their national budget, the Commission considers that this condition is also fulfilled.

5.3.2.3.

Selectivity

(239) The capital injection is an individual measure in favour of PostNord AB. For that reason, it is selective.

5.3.2.4.

Advantage

(240) As also noted by ITD, the Commission considers that the Danish (or Swedish) authorities have still not demonstrated convincingly that PostNord AB’s credit rating would deteriorate in the absence of the capital injections from Denmark and Sweden. As an unlisted company, PostNord AB does not formally have a credit rating, and a financial institution could be expected to take into account more factors than PostNord AB’s net debt/EBITDA ratio to determine PostNord AB’s credit rating. The assumption that a financial institution would necessarily have imposed significantly stricter financing conditions only because that ratio would increase temporarily into undesirable territory in the absence of the capital injections from Denmark and Sweden has not been substantiated sufficiently, which is all the more necessary considering that PostNord Group’s capital injection into Post Danmark is in line with the market conditions (see recital (228)) and therefore, profitable in the medium term.

(241) Moreover, while the analysis presented by, Rothschild, shows that PostNord AB’s credit rating would deteriorate into non-investment grade territory only for 2019 to 2020, the DCF model used to quantify this impact on the enterprise value has incorporated a higher WACC of […] % in perpetuity as confirmed by the Danish state in their response to questions of the Commission. Such approach leads to an impact of the capital injection on the enterprise value (C) greater than SEK 1 billion and, therefore also greater than State’s capital injection (D) of SEK 667 million, as illustrated in Table 6.

Table 6

(amounts in SEK million)

Scenario A: Enterprise value with State injections – WACC = Lower WACC (before PostNord AB’s downgrading)

Year201820192020202120222023202420252026Terminal ValueTotalWACCTerminal growth rateNPV[…][…][…][…][…][…][…][…][…][…][…][…] %[…] %Time factor[…][…][…][…][…][…][…][…][…][…][…]Discount factor[…][…][…][…][…][…][…][…][…][…][…]Free Cash Flow[…][…][…][…][…][…][…][…][…][…][…]

Scenario B: Enterprise value without State injections – WACC = Higher WACC

Year201820192020202120222023202420252026Terminal ValueTotalWACCTerminal growth rateNPV[…][…][…][…][…][…][…][…][…][…][…][…] %[…] %Time factor[…][…][…][…][…][…][…][…][…][…][…]Discount factor[…][…][…][…][…][…][…][…][…][…][…]Free Cash Flow[…][…][…][…][…][…][…][…][…][…][…]

Enterprise value with capital injections (Scenario A)(A)[…]Enterprise value without capital injections (Scenario B)(B)[…]Enterprise value increase due to capital injections(C)=(A)-(B)1096Capital injections from Denmark and Sweden(D)667

(242) However, the Commission considers that, assuming a temporary deterioration of PostNord AB’s shadow credit rating would materialise, at least for the terminal value

Terminal value is the value of an asset, business, or project beyond the forecasted period when future cash flows can be estimated. Terminal value assumes a business will grow at a set growth rate forever after the forecast period.

calculation, which starts in the year 2027, the normal WACC of […] % (pre-PostNord Group’s capital injection) should be used and not a degraded one to reflect the temporary character of any deterioration of PostNord AB’s shadow credit rating. Using the normal WACC of […] % for the terminal value in the calculation submitted by the States would lead to the conclusion that the investment is not compliant with the market economy operator principle contrary to the conclusion of the States, which was reached based on a permanently degraded WACC of […] %.

(243) The adjusted calculation (using the normal WACC), based on the free cash flow of Denmark and Sweden’s DCF analysis (presented in Table 7) illustrates that the capital injections of Denmark and Sweden (D) of SEK 667 million increase PostNord AB’s enterprise value (C) by only SEK 62 million, which is less than the amount of that capital injections.

Table 7

(amounts in SEK million)

Scenario A: Enterprise value with State injections – WACC = Lower WACC (before PostNord AB’s downgrading)

Year201820192020202120222023202420252026Terminal ValueTotalWACCTerminal growth rateNPV[…][…][…][…][…][…][…][…][…][…][…][…] %[…] %Time factor[…][…][…][…][…][…][…][…][…][…][…]Discount factor[…][…][…][…][…][…][…][…][…][…][…]Free Cash Flow[…][…][…][…][…][…][…][…][…][…][…]

Scenario B: Enterprise value without State injections – WACC = Higher WACC (after PostNord AB’s downgrading) only in 2018-2026 & Lower WACC in perpetuity

Year201820192020202120222023202420252026Terminal ValueTotalWACCTerminal growth rateNPV[…][…][…][…][…][…][…][…][…][…][…][…] % until 2026 & […] % from 2026 onwards[…] %Time factor[…][…][…][…][…][…][…][…][…][…][…]Discount factor[…][…][…][…][…][…][…][…][…][…][…]Free Cash Flow[…][…][…][…][…][…][…][…][…][…][…]

Enterprise value with capital injections (Scenario A)(A)[…]Enterprise value without capital injections (Scenario B)(B)[…]Enterprise value increase due to capital injections(C)=(A)-(B)62Capital injections from Denmark and Sweden(D)667

(244) That adjusted calculation shows that contrary to what is argued by the States, the increase in the enterprise value attributable to capital injections from Denmark and Sweden would not exceed SEK 62 million so much below the SEK 667 million investment. The gain in financing cost is much lower than expected by the States because the deterioration of financing conditions, if it happens, would only have temporary effects.

(245) As to the argument raised by the States that the burden of proof required by the Commission is allegedly excessive, it should be noted that according to State aid rules and Commission’s practice, the burden of proof always lies with the Member State. Pursuant to relevant Union case law, if a Member State argues that it acted as a market economy operator it must, where there is doubt, provide evidence showing that the decision to carry out the transaction was taken on the basis of economic evaluations comparable to those which, in similar circumstances, a rational market economy operator (with characteristics similar to those of the public body concerned) would have had carried out to determine the profitability or economic advantages of the transaction

Case C-124/10 P, Commission v EDF, ECLI:EU:C:2012:318, paragraphs 82 to 85. See also Joined cases C-214/12 P, C-215/12 P and C-223/12 P Land Burgenland v Commission, ECLI:EU:C:2013:682, paragraph 61. The level of sophistication of such an ex-ante assessment may vary depending on the complexity of the transaction concerned and the value of the assets, goods or services involved. Normally, such ex-ante evaluations should be carried out with the support of experts with appropriate skills and experience. Such evaluations should always be based on objective criteria and should not be affected by policy considerations. Evaluations conducted by independent experts may provide an additional corroboration for the credibility of the assessment.

.

(246) The Commission considers that the Danish authorities failed to demonstrate that it is credible that PostNord ABwould have lost shadow investment grade rating in the absence of the capital injections from Denmark and Sweden and would have kept it with the capital injections from Denmark and Sweden. Moreover, the Danish authorities also failed to demonstrate that the financial consequences of that loss of investment grade, assuming it would happen, would exceed the amount of their capital injection. A rational market economy operator would not have carried out the capital injection in the absence of such analysis showing that the operation is profitable or that there are economic advantages of this operation.

(247) The Commission therefore cannot consider that the capital injection from Denmark was in line with the market conditions and therefore, the Commission concludes that the capital injection conferred an advantage to PostNord AB.

5.3.2.5.

Distortion of competition and effect on trade

(248) To the extent that the measure benefits PostNord AB, it can also distort competition and have an effect on trade, as PostNord ABis present in several internationally competitive markets through Post Danmark and its other subsidiaries such as PostNord Sverige. PostNord Sverige is active on the Swedish postal market, which has been liberalised since 1993. Moreover, it provides logistics services on several markets in the Nordic region and the rest of Europe (see recital (15)).

5.3.2.6.

Conclusion

(249) In light of recitals (240) to (248), the Commission considers that the Capital injection from Denmark into PostNord AB constitutes State aid within the meaning of Article 107(1) TFEU.

5.3.3.

Capital injection from Sweden into PostNord AB

5.3.3.1.

Economic activity and notion of undertaking

(250) The Swedish authorities acknowledge that the PostNord Group carries out activities of an economic nature. PostNord Group is the sole owner of Post Danmark, who offers postal services against remuneration on the Danish postal market and in competition with other providers, which is an economic activity. Moreover, other subsidiaries of the group provide services on several postal services and logistics markets. For those reasons, with regard to the activities financed by Sweden’s capital injection into PostNord AB, PostNord AB qualifies as an undertaking in the meaning of Article 107(1) TFEU.

5.3.3.2.

Imputability and State resources

(251) Since the Swedish authorities grant that measure directly it is by definition imputable to the State. Moreover, as noted in recital (204), State resources include all resources of the public sector. As the Swedish authorities grant the capital injection from their national budget, the Commission considers that this condition is also fulfilled.

5.3.3.3.

Selectivity

(252) The capital injection is an individual measure in favour of PostNord AB. For that reason, it is selective.

5.3.3.4.

Advantage

(253) For the same reasons as those set out in recitals (240) to (247) and in line with ITD’s comments, Denmark and Sweden failed to substantiate or to quantify the risk of PostNord AB losing its shadow investment grade absent the capital injection from Denmark and Sweden before and after the opening decision. The likelihood of losing investment grade is not prima facie obvious and the estimation of the consequences of such loss are problematic both from a theoretical viewpoint (namely permanent degradation of the cost of debt) as well as a quantitative viewpoint (calculation of the enterprise value).

5.3.3.5.

Distortion of competition and effect on trade

(254) To the extent that the measure will benefit PostNord AB by preserving its investment grade credit rating, it can also distort competition and have an effect on trade, as PostNord AB is present in several internationally competitive markets through Post Danmark and its other subsidiaries such as PostNord Sverige. PostNord Sverige is active on the Swedish postal market, which has been liberalised since 1993. Moreover, it provides logistics services on several markets in the Nordic region and the rest of Europe (see recital (15)).

5.3.3.6.

Conclusion

(255) In light of recitals (250) to (254), the Commission considers that the Capital injection from Sweden into PostNord AB constitutes State aid within the meaning of Article 107(1) TFEU.

5.4.

Compatibility

(256) With regard to the measures assessed in the present decision that are found to constitute State aid within the meaning of Article 107(1) TFEU, it is necessary to assess whether those measures can be considered compatible with the internal market.

(257) According to the case law of the Court, it is up to the Member State to invoke possible grounds of compatibility, and to demonstrate that the conditions for such compatibility are met

Case C-364/90, Italian Republic v Commission of the European Communities, ECLI:EU:C:1993:157, paragraph 20.

.

(258) The Danish and Swedish authorities have however not invoked any arguments that would demonstrate the compatibility of the measures in question with the internal market.

(259) In light of recitals (256) to (258), the Commission concludes that the capital injection from Denmark into PostNord AB and the capital injection from Sweden into PostNord AB constitute State aid that is incompatible with the internal market.

1. RECOVERY OF THE CAPITAL INJECTIONS FROM DENMARK AND SWEDEN

(260) According to the Treaty and the established case law of the Union Courts, the Commission is competent to decide that the Member State concerned is to alter or abolish aid when it has found that it is incompatible with the internal market

Case C-70/72, Commission v Germany, ECLI:EU:C:1973:87, paragraph 13.

. The Union Courts have also consistently held that the obligation on a Member State to abolish aid regarded by the Commission as being incompatible with the internal market is designed to re-establish the previously existing situation

Case C-142/87, Belgium v Commission, ECLI:EU:C:1990:125, paragraph 66.

.

(261) In this context, the Union Courts have established that this objective is attained once the recipient has repaid the amounts granted by way of unlawful aid, thus forfeiting the advantage which it had enjoyed over its competitors on the internal market, and the situation prior to the payment of the aid is restored

Case C-75/97, Belgium v Commission, ECLI:EU:C:1999:311, paragraphs 64 and 65.

.

(262) In line with the case law, Article 16(1) of Regulation (EU) 2015/1589 states that where negative decisions are taken in cases of unlawful aid, the Commission shall decide that the Member State concerned shall take all necessary measures to recover the aid from the beneficiary.

(263) Therefore, given that the capital injections from Denmark and Sweden were implemented in breach of Article 108(3) Treaty and are to be considered as unlawful and incompatible aid, those capital investments should be recovered in order to re-establish the situation that existed on the internal market prior to their granting.

(264) The nominal recovery amounts corresponding to the two capital injections granted by Sweden and Denmark to PostNord AB respectively are SEK 400 million, which should be recovered by Sweden, and SEK 267 million, which should be recovered by Denmark.

(265) The recovery amounts should cover the period from the date when the aid was put at the disposal of PostNord AB until effective recovery. The amount to be recovered should bear interest until effective recovery.

1. CONCLUSION

(266) The Commission finds that the capital injection from PostNord Group into Post Danmark does not constitute aid within the meaning of Article 107(1) TFEU.

(267) The Commission finds that the capital injection from Denmark into PostNord AB and the capital injection from Sweden into PostNord AB constitute State aid within the meaning of Article 107(1) TFEU and that Denmark and Sweden have unlawfully implemented them in breach of Article 108(3) TFEU. The Commission also finds that those capital injections are incompatible with the internal market. Denmark and Sweden should therefore recover the unlawful and incompatible aid from PostNord AB,

HAS ADOPTED THIS DECISION:

Article 1

The State aid in the form of a capital injection from Sweden of SEK 400 million into PostNord AB unlawfully put into effect by Sweden in breach of Article 108(3) TFEU is incompatible with the internal market.

Article 2

The State aid in the form of a capital injection from Denmark of SEK 267 million into PostNord AB unlawfully put into effect by Denmark in breach of Article 108(3) TFEU is incompatible with the internal market.

Article 3

The capital injection into Post Danmark by PostNord Group AB does not constitute State aid within the meaning of Article 107(1) TFEU.

Article 4

1. Sweden shall recover the incompatible aid referred to in Article 1 from the beneficiary of that aid.

1. Denmark shall recover the incompatible aid referred to in Article 2 from the beneficiary of that aid.

1. The sums to be recovered shall bear interest from the date on which they were put at the disposal of the beneficiary until their actual recovery.

1. The interest shall be calculated on a compound basis in accordance with Chapter V of Commission Regulation (EC) No 794/2004

Commission Regulation (EC) No 794/2004 of 21 April 2004 implementing Council Regulation (EC) No 659/1999 laying down detailed rules for the application of Article 93 of the EC Treaty (OJ L 140, 30.4.2004, p. 1).

and Commission Regulation (EC) No 271/2008

Commission Regulation (EC) No 271/2008 of 30 January 2008 amending Regulation (EC) No 794/2004 implementing Council Regulation (EC) No 659/1999 laying down detailed rules for the application of Article 93 of the EC Treaty (OJ L 82, 25.3.2008, p. 1).

.

Article 5

1. Recovery of the aid referred to in Articles 1 and 2 shall be immediate and effective.

1. Sweden and Denmark shall ensure that this Decision is implemented within 4 months following the date of notification of this Decision.

Article 6

1. Within 2 months following the date of notification of this Decision, Sweden and Denmark shall submit the following information to the Commission:

(a) the total amount (principal and recovery interest) to be recovered from the beneficiary;

(b) a detailed description of the measures already taken and of those planned to be taken in order to comply with this Decision;

(c) documents demonstrating that the beneficiary has been ordered to repay the aid.

1. Sweden and Denmark shall keep the Commission informed of the progress of the national measures taken to implement this Decision until recovery of the aid in accordance with Article 4 has been completed. On request by the Commission, it shall immediately submit information on the national measures already taken and on those planned to be taken in order to comply with this Decision, including detailed information on the amounts of aid and recovery interest already recovered from the beneficiary.

Article 7

This Decision is addressed to the Kingdom of Sweden and the Kingdom of Denmark.

Done at Brussels, 10 September 2021.

For the Commission

Margrethe Vestager

Member of the Commission