Germany bans road privatisations, limits PPPs

Following lengthy coalition battles, the government has agreed to set up a federal road infrastructure company free from private capital and imposed additional limits on PPPs.

The German government has agreed to set up a new transport infrastructure company to plan and administer federal motorways, outlawing the introduction of private sector involvement.

The new body, agreed after much coalition wrangling, will be a company set up under private law but fully owned by the federal government, transferring power away from German states.

Its formation had generated a huge furore in German politics after initial plans unveiled last year by Finance Minister Wolfgang Schäuble involved 49 percent of the company managing Germany’s 13,000km network being owned by private investors. Schäuble, a member of Angela Merkel’s CDU party, drew strong hostility from coalition partners SPD and opposition parties Linke and the Greens for his plans, as well as from wider bodies such as Germany’s Federal Court of Audit. Schäuble was supported by Transport Minister Alexander Dobrindt.

As a result, the new law promoting the formation of the new company from 2021 specifically outlines the exclusion of third parties, either directly or indirectly.

The legislation, part of new reforms on federal-state finances, also includes new restrictions on PPPs for Germany’s motorways. PPP projects more than 100km long have been banned, while ambiguity remains on other large PPPs described as “substantial parts” of the federal road network. The definition is expected to become clearer when the legislation is ratified next month in a country where 14 motorway projects, worth €3 billion, were implemented as PPPs from 2007 to 2016, according to economic research institute IW. There will be no change to existing PPP investments.

“We have found a new infrastructure company, which – like the motorways itself – will remain 100 percent in the hands of the federal government,” said CDU spokesman Ulrich Lange. “For PPPs, we have defined clear limits.”


The SPD hailed its own work in preventing the privatisation of Germany’s roads, despite describing the process as “difficult negotiations”. The Linke and Green parties, though, criticised the legislation for not going far enough.

The PPP reforms provoked a strong reaction from GDV, the German Insurance Association which represents firms such as Allianz, AXA and Swiss Re, although it welcomed the new federal infrastructure company so that roads “in dire need of modernisation” can be managed more effectively.

“It is regrettable that the new law establishes very high barriers for private investors to put money at work,” GDV chief economist Klaus Wiener told Infrastructure Investor. “PPPs will be feasible but only to a very limited extent. Given the sheer size of the problem at hand – many roads are ailing and some key bridges are next to unusable – it would have been desirable to establish easier access for private capital to engage in the planning, construction and maintenance of highways.

“Using a comprehensive cost-benefit analysis rather than simple cash accounting, many studies have shown that PPPs are able to generate benefits for society at large.”

Construction firm Hochtief welcomed the end to the uncertainty surrounding privatisations and PPPs. Allianz declined to comment while the legislative process is still ongoing.

The law is expected to be passed this summer, before German federal elections in September.