Suur-Ameerika 1 / 10122 Tallinn / ESTONIA /+372 611 3558 / [email protected] / www.fin.ee/

Reg no 70000272

European Commission

Directorate-General for Competition

[email protected]

/

Our ref. 10.09.2026 No 12.1-2/3655-1

HT. 4404 Estonia's comments on the

draft of R&R Guidelines

Hereby we submit Estonia's opinion on the draft Communication from the Commission

“Guidelines on State aid for rescuing and restructuring non-financial undertakings in difficulty

(hereinafter referred to as Draftor R&R Guidelines).

Estonia in general supports the amendments proposed by the Commission in the Draft, which

aim to reflect today’s changed economic context. We are in favour of the amendment of the

definition of a firm in difficulty so that certain types of hybrid financial instruments are taken

into account when determining equity when assessing whether a firm is in difficulty. Estonia

considers this to be one of the most positive amendments to the Guidelines.

Estonia proposes further amendments to R&R Guidelines:

1) In the introductory sentence of point 21 and in point 24(b), we suggest extending the period

during which SMEs may benefit from the derogation of being in difficulty from 3 years to

5 years.

The Commission has acknowledged that the business model of undertakings, in particular

SMEs, in the early years may be based on heavy investment and rapid growth, which may result

in them temporarily meeting the criterion for being in difficulty without actually being in

financial distress. The 3-year derogation period is therefore not sufficient and extending it to 5

years would allow for better taking into account the real development cycles and capital needs

of SMEs.

2) In point 24(c) we suggest extending the 5-year period of innovative start-up, for which

the derogation of being in difficulty applies to, to 10 years.

It is not clear why the derogation to grant aid to innovative start-ups, which are considered in

difficulty, applies for 5 years but not for 10 years. The definition of innovative start-up (in

footnote 24) applies to undertakings operating for less than 10 years. We suggest extending the

period from 5 to 10 years for innovative start-ups because the business model of innovative

start-ups differs significantly from that of traditional undertakings. The activities of such

undertakings are often based on long-term research and development, technology validation

and preparation for market entry, during which undertakings can operate for years without

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generating positive cash flow or profit. This is particularly characteristic of undertakings in

deep tech, biotechnology, the defence industry, clean technologies and other knowledge-

intensive sectors, where development cycles are long and capital requirements are significant.

The 5-year exemption no longer corresponds to the actual development cycle of many

innovative undertakings. In practice, many innovative undertakings only reach the phase where

the technologies or products being developed start to generate sales revenue after the 5th year

of operation. Therefore, an undertaking may be formally in difficulty on the basis of its balance

sheet, even though it continues to have strong growth potential, investor support and the ability

to continue its activities. In the case of innovative star-ups, accumulated losses are often not an

indicator of financial difficulties but a natural consequence of the extensive investments made

in research and development. Treating such undertakings as undertakings in difficulty solely on

the basis of a reduction in capital may unduly restrict their access to State aid measures at the

very time when public support can have the greatest impact on the market uptake of innovation.

Extending the period to 10 years would better take into account the specificities of innovative

undertakings, support the innovation and competitiveness objectives of the European Union

and reduce situations where economically viable undertakings with long development cycles

remain not eligible for aid solely on the basis of formal balance sheet indicators.

3) We suggest to develop guidance material to accompany the Guidelines.

The granting of restructuring aid requires the submission to the Commission of a restructuring

plan, a model of which (Indicative model restructuring plan) is set out in Annex II to the Draft.

The content of the model restructuring plan remains unchanged compared to the current

Guidelines. The example shows the 11 points to be included in the restructuring plan, including

a comparison with a credible non-State aid scenario, a description of the beneficiary’s

difficulties and a SWOT analysis. We propose that the Commission compiles guidance

document to accompany the Guidelines, as it is intended to do for the new GBER. In the

guidance, the Commission could provide examples and guidance on how to demonstrate the

plausible alternative scenario for which the SWOT analysis is used and how detailed it needs

to be, etc.

4) We suggest exempting the companies active in food production from the requirement

to reduce production capacity as a condition for granting restructuring aid.

In food production (i.e. both the production and processing of agricultural products), capacity

reductions can only have a limited impact on production costs, and in some cases the cost price

of the unit is very likely to increase. This can happen, for example, in a situation where the

number of animals is reduced, but loan payments, labor costs and other fixed costs remain the

same. Therefore, a reduction in production can lead to the execution of healthy animals without

leading to a significant reduction in costs. In addition, cuts in production output could lead to

redundancies, which is particularly problematic in rural areas, where food production

companies are important employers. It may also be very costly to restore production capacity

at a later stage, for example because of the need to acquire breeding animals or to restart

factories and may cause additional difficulties for the establishment. Together with energy

security, food security constitutes a strategic priority essential for maintaining our resilience

and operational capacity.

5) In point 61 we suggest stipulating more clearly whether the restructuring aid can also

be granted in the form of a grant.

According to the draft (and the current Guidelines), rescue aid or temporary restructuring aid

can only be granted in the form of a loan or loan guarantee but as regards restructuring aid, it is

stated that Member States may choose the form of restructuring aid. Still, it is not clear if grants

are allowed in case of restructuring aid.

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6) We suggest adding a possibility to use grants for giving rescue aid and temporary

restructuring aid in case the aid amounts are small, for example if the amount of aid is

below the de minimis threshold. Alternatively, we suggest adding a possibility for

granting rescue aid to food producers for a period of longer than six months.

The use of loans and guarantees may not be efficient enough for food production, as the

financial burden on the sector has increased significantly. In the agricultural sector in Estonia,

interest expenses increased from EUR 27.0 million in 2021 to EUR 51.6 million in 2024, and

the interest coverage ratio, which shows how many times the company’s operating profit covers

interest expenses, decreased from 6.03 to 3.24 over the same period. At the same time,

investment in fixed assets decreased from EUR 342.0 million to EUR 281.8 million, indicating

a decrease in the corporate financial buffer.

In the food industry, interest expenses increased from EUR 10,1 million in 2021 to EUR 26,8

million in 2024, and the interest coverage ratio decreased from 7,34 to 4,85 over the same

period. This also indicates an increase in the financial burden and a lower buffer to cover interest

costs.

We ask the Commission to include to the R&R Guidelines the document referred to in the point

3 of the Draft, which provides that „These Guidelines are accompanied by a Staff Working

Document, which analyses the effects of the Guidelines, including a cost/benefit analysis,

competitiveness check and an SME check)

Yours sincerely,

(signed digitally)

Karin Madisson

Deputy Secretary-General for Public Governance Policy

Maris Kalda +372 5885 1434

[email protected]