GERMANY Law and Practice Contributed by: Michael Josenhans, Anouschka Zagorski and Christina Banz, Freshfields
8.2 Public-Private Partnership Transactions Legal Framework In Germany, public-private partnerships (PPPs) are usually based on a civil agreement between a public partner and a private entity. The public partner can be the Federal Republic, a federal state or one of its authorities, or a local community, while the private partner is a legal entity or a joint venture with several entities as shareholders. No specific laws on PPPs have been enacted, though general rules of corporate and financing laws (and, because of the public aspect of the partnerships, EU and national public procure- ment rules) apply. The PPP Acceleration Act of 2005 ( ÖPP-Beschleunigungsgesetz ) provided for a num- ber of amendments to existing legislation to facilitate PPPs. Identification of Possible Projects At first, the public partner in respect of a project needs to assess the overall justification for a PPP. Federal and state budget laws require the economic efficiency to be substantiated through a detailed economic plan of the project and its comparison with an implemen- tation of the project by way of a “conventional” pro- curement process. In addition, compliance with EU subsidies law must be ensured. Preparation Phase Thereafter, the public partner develops the main pro- ject contracts and specifications of the project, and determines the project’s main aspects, such as: • its term; • its corporate set-up; • its equity and financing; • a suitable contract model; and • the required level of public control. The administrative framework of the PPP can require a certain type of structure to retain certain levels of public control over the project. Award and Negotiations Once the main terms have been prepared, the pub- lic partner finds its private partner through a contract award procedure. According to Section 2 of the Pro- curement Ordinance ( Vergabeverordnung ), the PPP project is subject to a formal award procedure if its
no legal obligation to participate in the restructuring or remediation measures of the company. Nonethe- less, lenders need to carefully consider the legal impli- cations of their actions for the borrower’s directors, given the relatively strict personal/criminal insolvency liability regime. However, liability can, under certain circumstances, be construed on the fact that granting or extending a loan caused or assisted the debtor’s delay in filing for insolvency. When granting new loans or extending maturities of existing loans to borrowers in distress, lenders therefore typically request the issuance of a restructuring opinion pursuant to an industry standard (IDW S6) by independent experts, essentially objec- tively confirming that the borrower can be restruc- tured. Project finance activity in Europe is spread across many sectors but continues to show a clear ten- dency towards infrastructure projects. In the near- to mid-term, a particular focus will be on infrastructure required for the energy transition and transportation. Energy Transition Germany’s energy transition targets include for renew- able energies to make up 60% of the gross final con- sumption of energy and 80% of the gross electricity consumption by 2050. For this purpose, it is estimat- ed that around EUR600 billion of investments will be required in (among others) the areas of energy produc- tion, electricity grid expansion, energy storage and electrification of the transport sector. Transportation In the 2030 Federal Transport Infrastructure Plan, the German government identified the need for EUR270 billion to renew and expand various federal motor- ways, railway infrastructure and waterways until 2030, and the current government is strategising on sub- stantial allocations for the enhancement and expan- sion of the rail network following the “Germany Pulse” ( Deutschlandtakt ) framework. 8. Project Finance 8.1 Recent Project Finance Activity
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