Select Committee on European Scrutiny Sixth Report


3 Trans-European Networks

(a) (26431) 7280/05 COM(05) 75

(b) (26432) 7281/05 COM(05) 76

(c) (26433) 7282/05 SEC(05) 323

(d) (27581) 10089/06 COM(06) 245

Commission Communication: European Initiative for Growth — Feasibility report on EU loan guarantee instrument for TEN-Transport projects

Commission Communication: European Initiative for Growth — Concept for the design of an EU loan guarantee instrument for TEN-Transport projects

Commission staff working paper: Annex to the Commission Communication: European Initiative for Growth — EU loan guarantee instrument for TEN-Transport projects

Amended Draft Regulation laying down general rules for the granting of Community financial aid in the field of the Trans-European Transport and Energy Networks and amending Council Regulation (EC) No 2236/95

Legal base(a)-(c) —

(d) Article 156 EC; co-decision; QMV

Department(a)-(c) Transport

(d) Trade and Industry

Basis of considerationMinister's letter of 19 December 2006
Previous Committee Report(a)-(c) HC 34-i (2005-06), para 16 (4 July 2005)

(d) HC 34-xxxv (2005-06), para 4 (12 July 2006)

To be discussed in CouncilFebruary 2007
Committee's assessmentPolitically important
Committee's decisionCleared

Background

3.1 Trans-European Networks (TENs) concern three sectors: energy (TEN-E), telecommunications (eTEN) and transport (TEN-T). Development of the TENs is promoted as a key element for the creation of the single market, reinforcement of economic and social cohesion and promotion of the Lisbon Strategy. Such development includes the interconnection and interoperability of national networks as well as access to them. Funding from the TENs budget is intended to be catalytic, with maximum levels for support and the greater part of the funding coming from either the public authorities of the Member States or, especially in the fields of telecommunications and energy, from the private sector.

3.2 In July 2004 the Commission proposed a draft Regulation to:

  • increase the maximum rates of support for TEN-T activities;
  • establish a budget for TEN-T and TEN-E for the period 2007-2013; and
  • widen the forms of support available to include loan guarantees to cover risk for a period after the construction phase.

3.3 The previous Committee kept this draft Regulation under scrutiny pending both the outcome of the negotiations on the Financial Perspectives for 2007-2013 and receipt of further information about the proposals in relation to loan guarantees. However, in May 2006 the Commission proposed an amended draft Regulation, document (d), and so we cleared the original draft from scrutiny.[3] The amended draft Regulation was proposed in the light of the decision on the Financial Perspectives and the European Parliament's first reading of the original proposal in February 2005. The amended proposal would:

  • set an allocation of €8,168 million (£5,811 million) for TENs for the period 2007-2013, that is €8,013 million (£5,701 million) for TEN-T and €155 million (£110 million) for TEN-E. It was expected that the Commission would propose that €500 million (£356 million) of the TEN-T funding would be for a loan guarantee mechanism;
  • incorporate new procedures for the selection of projects, a loan guarantee mechanism, and a contribution to the activities of joint undertakings;
  • clarify how aid is granted and Commission decisions are to be implemented; and define more clearly the types of potential beneficiary;
  • establish a number of principles, such as strict compliance with Community law as a pre-condition for funding;
  • require for TEN-T special attention to cross-border projects, to those implementing traffic management systems for rail, air and maritime projects and to inland waterway projects; and
  • amend the different maximum intervention rates for TEN-T projects as follows:

 
Current
Post-2006

Original Amended

proposal proposal

Studies
50%
 
50%
 
50%
 
Priority projects
10%
30%
20%
Cross-border sections of priority projects

Inland waterways

20%

10%
50%

10%
30%

30%
ERTMS/SESAR[4]
10%
50%
50%
All other projects
10%
15%
10%

When we considered the revised proposal in July 2006 we noted the Government's continuing concerns about the maximum intervention rates for TEN-T, and especially its opposition to 30% rate for inland waterways projects, and decided to keep the document under scrutiny pending information about further developments.[5]

3.4 In March 2005 the Commission published, separately from, but related to, consideration of the original draft Regulation and the amended version in document (d), three documents about a loan guarantee mechanism or instrument for TEN-T to facilitate private sector participation in financing projects through public-private partnerships. The Commission Communication, document (a), reported the outcome of the study of the feasibility of a loan guarantee instrument it had undertaken with the European Investment Bank (EIB). The other Communication, document (b), outlined a proposal for such an instrument. And document (c) was a Commission staff working paper setting out the background to both Communications. When we considered these documents in July 2005 we:

  • noted that progress on the idea was also subject to the final outcome of the negotiations on the Financial Perspectives for 2007-2013;
  • asked for information as to how the Government's reservations about the loan guarantee instrument proposal could be addressed in the draft Regulation; and
  • kept the documents under scrutiny pending developments.[6]

The Minister's letter

3.5 The Minister of State for Industry and the Regions at the Department of Trade and Industry (Margaret Hodge) writes to tell us where matters now stand on negotiations on the amended draft Regulation, document (d), particularly in relation to the maximum intervention rates and to the loan guarantee mechanism. First, the Minister tells us that the Presidency has proposed a compromise text which includes a settlement on the issue of intervention rates. The Government has been unable to retain its blocking minority opposing further increases in the intervention rates. But as a trade-off it has been successful in removing the reference to a 30% intervention rate for inland waterways works-based projects. Such projects would be examined against selection criteria focused on how the project would optimise the capacity usage of the TEN-T network rather than on the mode of transport. So the maximum rates of intervention would now be:
 
Current

2004

draft
 
Compromise

proposal
Studies
50%
50%
50%
Priority projects
10%
30%
20%
Cross-border sections of priority projects
20%

10%
50%

10%
30%
Inland waterways
—[7]
30%
Projects including interoperability, security and safety
10%
50%
50%[8]

20%[9]
All other projects
10%
15%
10%

The Minister comments that although the intervention rates are to increase they are maxima and in practice the Commission rarely hits the higher rates.

3.6 Secondly, the Minister tells us the Presidency text has an annex which:

  • sets out, in general terms, the form that support under the loan guarantee mechanism will take;
  • provides that the Community contribution to the loan guarantee instrument would be committed by 31 December 2013 at the latest, with the approval of guarantees to be finalised by 31 December 2014;
  • provides that guarantees may not be for more than five, or exceptionally seven, years after the date that projects are taken into operation;
  • limits the Community contribution to the mechanism to €500 million, with the EIB contributing an equal amount;
  • limits the Community input to the loan guarantee mechanism to its defined contribution and provides that there would be no further liability on the Community budget;
  • provides that, in the case of termination of the loan guarantee mechanism during the current Financial Perspectives period, any balances, other than funds committed and funds needed to cover other eligible costs and expenses, would be returned to the TEN-T budget line;
  • provides that, if the mechanism were not extended into the next Financial Perspectives period, any remaining funds would be returned to the revenue side of the Community budget;
  • allows funds allocated to the loan guarantee mechanism to be called upon until either the last guarantee has expired or the last subordinated debt has been cleared; and
  • enables, in order to ensure that risk transfer remains a reality within TEN-T public-private projects, such projects to adopt a mechanism whereby payments to the contractor are (in part) dependent on the availability of the infrastructure to a contractually agreed standard.

The Minister adds that, although the draft Regulation sets out the principles of the loan guarantee, much of the operational detail will be covered in a cooperation agreement between the Commission and the EIB.

3.7 The Minister concludes that the compromise presents the best possible outcome for the UK.

Conclusion

3.8 We are grateful to the Minister for this account of developments on the draft Regulation at document (d). We note that the Government has been unable to prevent agreement on increased maximum intervention rates, but has seen off the special rate for inland waterways and secured a useful clarification of the loan guarantee mechanism, and has assessed this as the best possible outcome. In the light of this, and as we have no further questions to raise, we clear this document.

3.9 As the loan guarantee mechanism arising from documents (a)-(c) are now satisfactorily addressed in the compromise text of the draft Regulation we now also clear these documents.




3   (25873) 11740/04: see HC 42-xxxi (2003-04), para 6 (15 September 2004), HC 34-xviii (2005-06), para 9 (8 February 2006), HC 34-xxviii (2005-06), para 5 (10 May 2006) and HC 34-xxxv (2005-06), para 4 (12 July 2006). Back

4   European Rail Traffic Management System/Single European Sky Air traffic management research. Back

5   See headnote. Back

6   Ibid. Back

7   Under the existing rules no special attention is given to inland waterways. Back

8   For projects implementing the European Rail Traffic Management System (ERTMS). Back

9   For projects implementing other traffic management systems. Back


 
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