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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 private sector involvement.

The new company will be established from 2021 under private law but fully owned by the federal government, transferring power away from German states. The new law 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.

Fourteen motorway projects, worth €3 billion, were implemented as PPPs from 2007 to 2016 in Germany according to economic research institute IW.

“We have found a new infrastructure company, which – like the motorways themselves – 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.

GDV, the German Insurance Association which represents firms such as Allianz, AXA and Swiss Re, said the new law established high barriers for private investors to put money to work, although it welcomed the new federal infrastructure company so that roads “in dire need of modernisation” can be managed more effectively.

“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,” GDV chief economist Klaus Wiener told sister title Infrastructure Investor.

“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.”

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