Länder beware

As in other European countries, Germany can look back on over 100 years of private financing of public infrastructure as a complementary source to state financing at the federal, provincial (Länder) and municipal levels. However, private-sector financial involvement in public projects did not actually become an established method of financing infrastructure investment until 1991, when the process of rebuilding the infrastructure in the former German Democratic Republic began. To date, public private partnership (PPP) schemes have been realized in the transportation, healthcare, waste and public building sectors.

The developments during the past years have led to virtually all of Germany's large, nationally active banks offering private financing of public infrastructure. Depending on their respective starting positions, they have either set up new specialist departments or expanded the spheres of activity of their existing project finance departments. The margins on public sector transactions are appropriate, and, thanks to the peculiarities of German law, when compared to other...