GERMANY Trends and Developments Contributed by: Gregor von Bonin, Natascha Doll, Andreas Ruthemeyer, Stefan Schröder and Mirko Masek, Freshfields
(core) network operators alike are seeking capital partners. • Flexibility and Resilience: The rapid expansion of intermittent renewables has exposed the need for flexibility – batteries, demand response, and peaker plants. New regulation establishes a sup- portive framework for investments in battery energy storage systems (BESS). M&A activity increasingly targets these enablers rather than pure generation assets. • Industrial Transformation: The decarbonisa- tion of heavy industry is catalysing new forms of investment. Sectors such as steel, cement and chemicals are securing long-term hydrogen supply through project-level JVs with utilities and mid- stream operators, often backed by EU or national funding. • Digitalisation of Infrastructure: The energy tran- sition is accelerating the digital transition. Data centre, fibre and grid modernisation projects share investors, contractors and risk profiles, driving crossover M&A strategies. Notable Market Trends • Shift From Asset to Platform Transactions: Devel- opers are packaging multi-GW pipelines into plat- forms, and large investors are investing in them. This trend mirrors the UK and Nordic markets a decade ago, signalling maturity. • Hybrid Revenue Models: Merchant risk is being managed through blended structures – fixed-price corporate PPAs, floor-price mechanisms, and hybrid CfD auctions. Storage assets are being linked to PV plants. For storage assets, multi-lay- ered revenues (ancillary services, intraday spreads, capacity payments) are now bankable. • Deleveraging and Recapitalisation: Higher interest rates have triggered recapitalisations of developer balance sheets. Infrastructure funds and strategics have been acquiring equity positions in financially stretched but technically strong platforms, particu- larly in onshore wind and PV. • Sovereign and Pension Capital Re-Entry: Ger- man insurers and Nordic pension funds, KfW, and international sovereign investors are re-entering infrastructure with long-term horizons. The result is a more stable, patient investor mix.
• Cross-Sector Convergence: Investors are connect- ing dots between energy, transport and digital. For instance, EV charging networks often integrate behind-the-meter solar and storage; district heat- ing and data centres are linked through waste-heat reuse; hydrogen import terminals combine port and gas grid infrastructure. ISB and the Fiscal Context No discussion of Germany’s market is complete with- out mentioning the implementation of the EUR500 bil- lion infrastructure special budget (ISB) earlier in 2025. This made headlines around the world. Following dec- ades of neglect, Germany is finally pushing to upgrade its energy and infrastructure capital stock. While the ISB is widely perceived as a foundational step towards a transformative era, with many exciting opportuni- ties for investors, the details and long-term impact of the ISB have largely remained undefined and will take months and years to emerge. Following the European Commission’s approval of Germany’s updated investment framework, albeit conditioned on fiscal restraint after the initial expan- sion phase, the government presented the draft fed- eral budget for 2026 together with the medium-term financial plan for 2027–2029. Both documents will undergo parliamentary debate in the coming months and are widely expected to be adopted before the end of 2025. The 2026 draft budget foresees EUR48.9 billion in investments through the ISB, a significant increase from approximately EUR27 billion in 2025, with spend- ing projected to remain near this elevated level over the following three years. Although the detailed mech- anisms for private-capital participation, co-financing, and the precise mix of budgetary and off-budget instruments have not yet been disclosed, the proposal provides a clear indication of the government’s stra- tegic investment priorities. Evolving Transaction Structures and Regulatory Considerations In Germany’s evolving energy and infrastructure M&A environment, deal structures are increasingly hybrid and bespoke, such as blending equity, mezzanine capital, JV elements and minority stakes, rather
162 CHAMBERS.COM
Powered by FlippingBook