Co-published project finance guide: Germany


at assets like real estate, but also renewables. That is definitely a trend. As they are not in the business of taking project risk, they are buying into existing projects that they can run for 10 years or so. Sometimes, but to a lesser extent, you see


pension funds thinking about direct investments too. You see domestic and foreign fund management companies looking at the German real-estate and energy market for targets. They are also looking at spinoffs from the large German utilities like RWE or E.ON. Not every project has actually happened yet, but there is a lot of talk about it. PM: I agree, we see more and more


institutional investors looking for projects that are up and running. So while the big focus now is offshore wind farms developing new projects, for existing onshore projects we see institutional investors getting involved.


IFLR: That’s on the equity side, but are any of these funds interested in the debt side? BG: We’ve seen that in the real-estate sector,


and the question is whether we will see it with renewables too. Will they also provide debt, meaning replace banks that have left the market? We know some of these funds are actively thinking of doing that. Again they won’t be taking development risk, but once things are in place, they will probably refinance or participate as a consortium member.


IFLR: Staying with finance, how would you describe the banking sector’s appetite for projects? BG: The trend for the last two years, at


least, is certain international lenders have left the German market, now focussing on their home markets. Also, a number of the Landesbanks – Germany’s traditional lenders which have previously taken certain risks in infrastructure renewables that purely commercial banks have been hesitant to take on – have had problems from the crisis. WestLB, for example, has disappeared and that has led to a shrinking in the number of lenders. So with international banks leaving and Germany’s banks being restricted, the bank debt market is smaller now. And those that are lending are choosier and more risk averse.


IFLR: Are project bonds being explored as a possible alternative to bank finance – and how has EU initiative been embraced? BG: I’m not aware of any project bonds


being issued in Germany so far, but there is a lot of political will to make this work. Generally the capital markets were reluctant to take some of the risks involved in these infrastructure projects. The EIB programme is


76 IFLR/December/January 2013 Author biographies


Bernhard Gemmel Salans


Bernhard Gemmel, Maître en Droit, is a partner in Salans’ Frankfurt office. He specialises in banking and financing transactions – in particular project finance, export/trade finance and real-estate finance. His sector expertise covers a wide range of asset classes, with a strong focus on infrastructure, energy and real estate. Before joining Salans, Bernhard was a partner at Shearman &


Sterling and Beiten Burkhardt. He is recommended by Chambers Global 2012, Chambers Europe 2012, and Euromoney Expert


Guide for Project Finance Lawyers 2012 as a leading practitioner in banking and finance plus project finance in Germany. He is a German and French qualified lawyer, and speaks German, French, English and Spanish.


Dr Peter Mayer Salans


Peter is a counsel at Salans’ Berlin office who specialises in corporate law, M&A and real estate with an industry focus on energy and chemistry. Before joining Salans, Peter worked with Hammonds and Stairs Dillenbeck & Finley. He speaks German and English.


just one way of it providing support, other than by granting direct loans. I think it’s a very good initiative, as of course


the bank market is not big enough to finance the levels of infrastructure required across Europe. So of course the capital markets would be very welcomed to be tapped. In terms of how and when it will start


working in Germany, I don’t know. But it will no doubt first be used for conservative projects with well-established structures and assessable risks. Everyone has welcomed it, though. At a conference I attended a few weeks ago, a panel of bankers said they hoped it would succeed, but no one could say it was definitely going to work.


IFLR: Compared to other countries, Germany’s PPP schemes are relatively new, and have no single body of laws and regulations. Do you see PPP projects expanding in the country? PM: Yes, compared to the likes of the UK,


Germany’s PPP framework is still at a relatively early stage. And as you say, there is no single body of laws to which it relates. However PPPs are increasingly on the agenda in Germany, and they are starting to generate some interesting models. One advantage of Germany’s scheme is that it’s not as regulated as other jurisdictions; it gives the parties a lot of freedom in terms of what they want to put in the agreement. So it might not be as developed as other jurisdictions, but it provides lots of flexibility to the parties.


BG: Something that has also held back


PPPs’ development in Germany is that cheap credit money was always available to the public sector through specific German law schemes. These schemes basically created an economic result whereby the public sector received cheap money from the banks. But that is not guaranteed to continue forever, and if the pressure grows, we should see more PPPs.


IFLR: Which recent and upcoming legislative and regulatory changes should foreign sponsors and financiers be aware of? PM: Hypovereinsbank together with the


Hamburg Institute of International Economics prepared a report this summer about the economic consequences of Germany’s shift in energy politics. One conclusion that came out of this study is that the new energy policy has created a huge lack of regulatory reliability. Feed-in tariffs and grid connection are just some of the moving targets here in Germany. And I think foreign investors feel there is a lack of regulatory reliability. That is probably the industry’s biggest challenge at the moment; it means it’s very difficult to say where we will stand a year from today in terms of laws and regulations. BG: It’s work in progress. Everyone agreed


with the government’s decision to shift from nuclear to renewables, but now there are the technical and logistical issues of how to do it. Certainly, all the regulations aren’t in place, and next year’s elections will prove a decisive time.


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