The European Commission has approved state aid of 975 million Croatian Kruna (approximately 129.5 million Euros) granted by Croatia to HZ Cargo, a state-owned rail freight operator.

HZ Cargo had been in financial difficulties before the Croatian government decided in May 2015 to cancel the company’s debt held by the state through a conversion to equity. Such debt cancellation constitutes state aid because it relieved HZ Cargo from the repayment obligation, something the company would not have obtained on the market.

cancelled debt

However the Commission found that the aid complies with the EU state aid rules as it fulfils the criteria set out in the Commission’s 2008 Guidelines on state aid for railways. The cancelled debt was incurred prior to Croatia’s accession to the European Union in July 2013 and was directly linked to HZ Cargo’s transport operations.

In addition, the company faced an excessive level of indebtedness which hindered its sound financial management. Finally, the aid was necessary to rectify HZ Cargo’s financial difficulties and did not prevent effective competition on the market.