Introduction
State aid that is granted after the start of works lacks incentive effect and cannot be compatible with the internal market. However, state aid may enable the expansion of a project that has already started. The aid may be compatible if the expansion was not foreseen when the project was launched and if the subsidised costs are different from the costs that were initially foreseen.
Recently Italy notified to the Commission a measure to support the expansion of a multimodal freight terminal near Bologna. The measure provides aid in the form of direct grants totalling EUR 24.5 million, in nominal terms. The Commission approved it on 2 October 2025 in decision SA.118718.[1]
The current terminal which is operated by Interporto Bologna is expected to reach full capacity in about ten years. The state aid will finance the modernisation and expansion of the existing intermodal facility and to facilitate the transfer of freight from road to rail. This transfer of freight will relieve road congestion and reduce air pollution.
The Bologna terminal is the only multimodal terminal in that area linked to three TEN-T core corridors (Baltic-Adriatic, the Mediterranean and Scandinavian-Mediterranean). It carries out land intermodal, maritime intermodal and conventional freight traffic.
Interporto Bologna is a public-private partnership with public entities holding together the majority of shares: Municipality of Bologna (35.10%), the Metropolitan City of Bologna (17.56%) and the Bologna Chamber of Commerce (5.90%). The remaining 41.44% of shares are held by private entities.
Access to and pricing of the infrastructure at Interporto Bologna is regulated by the Italian Transport Regulatory Authority [Autorità di Regolazione dei Trasporti (ART)]. According to ART regulations, access must be granted to all interested users on open, equal and non-discriminatory terms, based on a tariff system that reflects operational costs. In other words, users bear full costs without the operator making excess profits.
Start of works
As explained in the Commission decision, “(9) the investment project was first drawn up in 2020. The project scope was revised in 2022-2023 and consists now of two phases. … The first project phase corresponds in principle to the initial project scope as drawn up in 2020. The second phase consists in building two additional railway tracks, … Each phase will also cover ground works, the installation of a fire protection system and engineering works needed for making the terminal operational.”
“(10) Works on the first project phase started in July 2024 and the new terminal infrastructure is expected to become operational in 2027. Costs incurred since the start of the works in July 2024 (EUR 4.3 million as of May 2025) have been covered by own resources of Interporto Bologna and bank loans. Italy plans to disburse the aid for the investment project in 2025 and 2026, during the years of construction.”
Budget and eligible costs
The total investment costs amount to EUR 33.4 million, in nominal terms and excluding VAT. The investment costs cover the total costs of the investment project in its revised scope, covering the two project phases. The eligible costs consist of investments in tangible assets [i.e. tracks, buildings and movable equipment] and intangible assets [i.e. preparatory studies and design costs] directly linked to the construction of the extra infrastructure and the refurbishment of the existing facility. Notably, investment in equipment and non-transport activities [e.g. for the renting out of commercial spaces located at the terminal] are excluded from the aid measure.
Break-down of investment costs [euro]
- Civil engineering works 9,659,117
- Pavements 6,535,900
- Reinforcements (excluding super-compact reinforcement) 5,082,780
- Electrical installations 3,957,317
- Water disposal system 2,892,544
- Costs for unforeseen events 1,453,788
- Other technical costs 1,257,303
- Project design, construction and security management 726,799
- Fire protection system 495,570
- Health protection and security 325,026
- Other 999,801
- Total investment costs 33,385,945
The Commission noted that “(36) the costs for the acquisition of the two rail mounted gantry cranes (EUR 9.83 million), for which the company has already obtained an aid amount of EUR 4.32 million, are not included in the investment costs of EUR 33.4 million. The remaining costs for the acquisition of these cranes were financed by Interporto Bologna.” The aid of EUR 4.32 million was approved by the Commission in decision SA.101273 concerning an aid scheme to facilitate the purchase of handling equipment used in interports and intermodal terminals.
Funding gap
According to Italy, “(37) the upgrades of multimodal infrastructure have a low profitability and require high initial investments with a long recovery time, which represents a significant barrier for the development of this type of infrastructure. Additionally, without the help of State aid, the operators would need to increase prices in order to cover the investment costs, impacting negatively the demand for rail services, which are already at a disadvantage compared to more polluting transport modes like road.”
“(38) The funding gap is estimated at EUR -22.2 million and was determined by discounting the expected operating result of the planned investment project over a 25 year’s horizon (2024-2048) and taking into account the residual value of the investment.”
“(39) The operating result of the planned investment was estimated by subtracting the operating expenses from the revenues related to the additional volumes of freight that the terminal is expected to operate with the investment project, compared to the volumes of freight that would be handled if the terminal continues operating without expansion. The revenues were estimated taking into account the currently applicable rates for handling and shunting services at Interporto Bologna and other public multimodal terminals in Italy. The operating costs include direct personnel costs for the operation of the additional freight volumes, costs for external handlings services, maintenance costs, and other operating costs (e.g. insurance, energy, etc.). Cost estimates are based on historical costs of Interporto Bologna and market benchmarks. The residual value of the investment has been calculated assuming a linear depreciation of 2.9% of the initial book value per year (implying an asset life span of 35 years) over the 25 years’ horizon.”
“(40) The future cash flows estimated for the project were discounted by applying a weighted average cost of capital (‘WACC’) of 7.33%. The WACC has been calculated based on the estimated costs of equity and cost of debt, taking into account the tax shield and target capital structure of the company. The cost of equity (9.83%) has been estimated using the Capital Asset Pricing Model (‘CAPM’). In line with market practice, the risk-free rate has been estimated based on the yield of Italian long-term government bonds. The beta estimate is based on publicly available information for comparable European companies active in the transportation and real estate sectors. The market risk premium is also based on publicly available information, commonly used in valuation analysis. The cost of debt (5.58%) has been estimated taking into account the risk-free rate and a risk-premium in line with Interporto Bologna’s credit rating. The target capital structure assumes a debt-to-equity ratio of 43%. The applied tax rate is 27.9%.”
[Note: When I plug the data above in the WACC formula, I derive a value of 8.1% not 7.33&. WACC = Re(E/(D+E)) + Rd(1-0.28)(D/(D+E)) = (0.0983)(0.7) + (0.0558)(0.72)(0.3) = 0.0688 + 0.0121 = 0.081 or 8.1%]Summary of funding gap assumptions and results
Reference period (years) 25
Discount factor 7.33%
Eligible investment costs (excl. VAT) 33,385,946
Eligible investment costs (discounted, excl. VAT) INV = 30,543,434
Residual value of the investment (discounted) RES = 1,830,398
Operating result (discounted) OPE = 6,497,950
Funding gap FG = (OPE + RES) – INV = – 22,215,086
The nominal amount of aid paid in 2025 and 2026 is EUR 24.5 million. In real terms it is EUR 22.2 million, thus matching the funding gap. In nominal terms, the rate of aid intensity is 73% [= 24.5/33.4].
Curiously, the Commission decision mentions in paragraph 42 that the nominal amount of aid was discounted at the rate of WACC. This is strange because the discounting factor for aid payments is the base rate plus 100 basis points. When the aid was approved, the base rate for the eurozone was 2.21% which implies a discounting factor of 3.21%, not 7.33%.
Clawback
Italy committed to “(44) implement a claw-back mechanism to limit the terminal’s operating profit with reference to the economic and financial plan submitted as part of the present notification. To this end, Italy will put in place a monitoring mechanism that reviews the project’s profitability (based on the projected WACC of 7.33%) after five and ten years respectively. Following the last review, if applicable, the beneficiary should repay the Region any difference between the projected and actual funding gap.”
Legality of the aid
After finding that the measure in question constituted state aid and before proceeding to the formal assessment of its compatibility with the internal market, the Commission considered the legality of the aid, given that a phase of the project had already started and aid had already been granted to the project.
“(68) First, the Commission notes that while the initial project scope was drawn up in 2020, it was revised in 2022-2023. The decisions to provide funding took place within a four-year period: approximately three years between the first two, and around eight months between the latter two decisions. In that context, the works on the project only started in July 2024 once Interporto Bolonga had received reassurance from the Italian authorities to receive the additional funding required to implement the investment project in its revised scope.”
“(69) Second, each of the funding decisions by the Italian authorities concerned the expansion of Interporto Bologna’s multimodal freight terminal.”
“(70) The Commission therefore notes that the aid will be granted for a single, indivisible investment project and to the same beneficiary. Consequently, the Commission considers that the public grants for the investment project at hand should be considered as a single aid measure.”
“(71) Pursuant to Article 108(3) TFEU, Article 2(1) of Regulation (EU) 2015/1589 provides that ‘save as otherwise provided in regulations made pursuant to Article 109 TFEU or to other relevant provisions thereof, any plans to grant new aid shall be notified to the Commission in sufficient time by the Member State concerned.’ Article 3 of that Regulation further provides that ‘aid notifiable pursuant to Article 2(1) shall not be put into effect before the Commission has taken, or is deemed to have taken, a decision authorising such aid.’”
“(72) While the granting of aid under the FSC is subject to the Commission’s approval, the Commission notes that Italy has already granted the aid, which is considered a single, indivisible measure, for the investment project prior to the notification to the Commission, in breach of the standstill obligation laid down in Article 108(3) TFEU. Thus, the Commission concludes that the measure under assessment constitutes unlawful State aid.”
Compatibility assessment
The legal basis of the aid in the TFEU is Article 93 for the coordination of transport and for compensation of providers of public transport services. The Commission explained that “(73) The concept of coordination of transport used in the TFEU has a significance which goes beyond the simple fact of facilitating the development of an economic activity. It implies an intervention by public authorities that is aimed at guiding the development of the transport sector in line with the Union policy priorities.”
“(74) In this regard, the Commission notes that measures to favour coordination of transport may be needed when certain modes of transport produce negative externalities that affect society as a whole. The measure aims at promoting multimodal freight transport and to shift freight off the road to rail, thereby reducing the environmental, health and social impact of road traffic and the congestion of road infrastructure”.
“(76) In line with its practice, the Commission considers that State aid for the construction of dedicated infrastructure meets the needs of coordination of transport pursuant to Article 93 TFEU if (i) it promotes coordination of transport and thus contributes to its development; (ii) is necessary; (iii) has an incentive effect; (iv) is proportionate; (v) access to the related infrastructure is open to all users on a transparent and non-discriminatory basis; and (vi) avoids undue negative effects on competition and trade between Member States.”
Given the substantial funding gap of the project and the fact that the aid did not exceed the funding gap, the Commission considered that the aid was necessary, had an incentive effect and that it was proportionate.
With respect to avoidance of undue distortion of competition, the Commission ascertained whether the expansion of the Bologna terminal would have a significant adverse effect on the activity of five other existing intermodal terminals in the same catchment area of up to 200 km.
Although competition would be affected, at the same time the Commission noted that “(104) there seems to be a relevant latent demand for multimodal freight services, given that the share of rail in the modal mix of freight transport amounts to only 7.23% within the Region and to 12.4% in Italy, which is noticeably below the EU average of 17.1%. In addition, a significant increase in demand for freight transport services in the region is expected with the opening of the Brenner Base Tunnel in 2032. The Commission notes that … after the expansion, Interporto Bologna will account for around 9% of the 2.8 million additional ITU freight volume expected to be generated by the opening of the Brenner Base Tunnel along the Brenner Corridor. Ensuring sufficient transhipment capacity for multimodal freight transport in the region is therefore important to achieve the modal shift.”
In addition, “(106) the project will complement existing terminals and will not lead to the duplication of unused infrastructure but will help to increase the overall multimodal capacity of the Region.”
“(107) The Commission notes that undue distortions of competition will also be avoided through the charging of prices to final users that are transparent, non-discriminatory, based on production costs and encouraging an efficient utilisation of the facilities, which excludes any aid to the them, as well as by a transparent and non-discriminatory access to it.”
On the basis of the above reasoning the Commission considered that the aid was not liable to unduly distort competition and concluded that the aid was compatible with the internal market.
[1] The full text of the Commission decision can be accessed at:
https://ec.europa.eu/competition/state_aid/cases1/202544/SA_118718_48.pdf
