GERMANY Law and Practice Contributed by: Udo Olgemoeller, Nicolaus Ascherfeld, Johann von Pachelbel and Janina Müller, A&O Shearman
Ownership Most generation and supply companies are investor- owned, although municipal utilities continue to play a role in that business. TSOs have a mix of private and state ownership, with Germany holding significant minority interests in 50Hertz, TenneT and TransnetBW. 1.3 Foreign Investment Review Process Foreign Investment Restrictions Foreign investment in the power industry is generally permitted, subject to review under the general German foreign direct investment screening regime (including the related EU FDI Regulation). Changes of control may trigger a requirement for the target company to re-apply for a certification confirming compliance with unbundling requirements, whereby ownership by non-EU or non-EFTA investors may result in increased scrutiny from the BNetzA. Non-EU or non-EFTA bid- ders may also be excluded from tender procedures for a permit for the construction and operation of a renewable facility and/or to be entitled to subsidies. Review Process Under the German FDI regime, direct or indirect invest- ments from non-EU or non-EFTA investors exceeding certain thresholds (starting with 10%) require manda- tory notification and clearance by the Federal Ministry for Economic Affairs and Energy ( Bundesministerium für Wirtschaft und Energy – BMWE). Where no manda- tory filing and clearance is required, a voluntary or pre- cautionary filing may be advisable to avoid ex officio call-ins post-signing or even post-closing. The review assesses national security, supply security and market integrity. Clearances may be granted unconditionally or subject to remedies; the BMWE rarely vetoes trans- actions. Protections and Incentives Protections for foreign investors flow from the German Constitution’s property guarantees and from the EU law principles of non‑discrimination and free move- ment of capital, alongside access to independent administrative and civil courts for review of admin- istrative measures. Expropriation is permissible only on a statutory basis, for the public good, and against fair compensation, and international law protections may apply where bilateral investment treaties persist or EU investment protections are engaged. Incentives
for energy investment are policy‑driven rather than nationality‑based and include: • technology‑neutral or technology‑specific support schemes for renewables under the EEG; • support for high‑efficiency CHP under the Com- bined Heat and Power Act ( Kraft - Wärme - Kop- plungsgesetz ); and • a developing framework for hydrogen infrastructure and projects under federal programmes, all acces- sible to qualifying foreign‑owned undertakings on a non‑discriminatory basis. 1.4 Sale of Power Industry Assets Restrictions and Laws Sales, mergers and amalgamations are mainly gov- erned by merger regulations – ie, the German Act Against Restraints of Competition ( Gesetz gegen Wettbewerbsbeschränkungen – GWB) and the EU Merger Regulation. Approval is required from the Federal Cartel Office ( Bundeskartellamt – BKartA) or the EU Commission. Additional clearances may be required – eg, under the German FDI regime or under the EU’s Foreign Subsidies Regulation (FSR). A trans- action may also require a review of the target’s certifi- cation confirming compliance with unbundling rules. The operation of grids is subject to an operational per- mit pursuant to the EnWG, and a change-of-control may trigger the need for a new permit. Regulatory Review The merger clearance review process involves com- petition assessment, security review and regulatory approval. Timelines vary but typically range from two to six months. Conditions may include divestitures, compliance undertakings, and financial requirements. The timeline for the FDI clearance is similar to this, as is the timeline for FSR clearance to be obtained from the EU Commission. Minimum Requirements Whilst merger clearance depends basically on the market power of the merged entities, FDI clearance depends on whether or not the acquisition by the investor implies a national security risk, and FSR clearance focuses on whether the investment is fund- ed with non-EU state funds that imply a risk for fair competition in the EU market.
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