Germany's new government - What to expect for the transport sector?

Germany has a new federal government formed by the centre-right CDU/CSU and centre-left SPD. In the Coalition Agreement the modernisation of Germany's transport infrastructure, across all sectors, is one of the top priorities. This briefing highlights key policy elements and their implications for the transport sector.

More funding for infrastructure

A prevailing theme is the availability of increased funding for infrastructure. The prerequisites for a EUR 500 billion special infrastructure fund (Sondervermögen für Infrastruktur) are already in place, with funding intended to go, inter alia, towards construction and maintenance of the road and rail network, as well as the electrification and digitalisation of public and private transport. However, specific legislation to implement the special infrastructure fund has yet to be passed. The Coalition Agreement mentions other funding mechanisms as well – a specific rail infrastructure fund (Eisenbahninfrastrukturfonds) will support investments in rail infrastructure, and the National Harbour Strategy will be backed by funding to secure the expansion of Germany's port infrastructure. Furthermore, Germany is committed to relaxing the current Solvency II framework to lower capital requirements for institutional investors when investing in infrastructure.

Generally, the Coalition Agreement is vague on details as to how funds will operate, how government funding will actually be made available, and under what conditions. However, leveraging private capital alongside public spending is central to the new government's infrastructure investment strategy.

• Increasing investment opportunities – In addition to classic government spending on construction projects, investors can expect opportunities for co-investments, we generally expect a possible increase in PPP activities, and the availability of government guarantees to help secure funding for privately financed projects.

Less bureaucracy

The Coalition Agreement outlines various initiatives to streamline planning, procurement, and permitting processes, and to generally reduce the administrative overhead for infrastructure projects, to be detailed in an Infrastructure Future Act (Infrastruktur-Zukunftsgesetz). Planning and permitting procedures are to follow a "one for many" process, with a reduced number of procedural steps.

Third-party participation will be limited, and relevant projects will be given priority ("overriding public interest") if conflicting interests need to be balanced. Procurement procedures will be simplified by raising thresholds, introducing additional exemptions from tender requirements, and further digitalising public procurement processes.

• Reduction of PTAs unlikely – One issue the Coalition Agreement does not comprehensively address is the administrative complexity and additional burden resulting from multiple authorities being involved in public planning and procurement processes. We expect the regional rail transport still to be supervised by 27 different public transport authorities.

A new role for Autobahn GmbH

Autobahn GmbH, Germany's state-owned entity in charge of the country's highways, will have a more comprehensive role. Autobahn GmbH will be allowed to raise debt and, in turn, will receive a portion of the revenues generated from Germany's truck tolling system. Together with public funding, this is expected to provide the necessary funds to address the backlog in maintenance and renovation of the German highway system. The Coalition Agreement also recognises Public Private Partnerships as a means to leverage private funding and expertise, particularly with regard to investments in road infrastructure.

• Increasing PPP activity – This would mark a notable shift in policy from the previous government, which had essentially shelved road PPPs and will probably increase PPP activity.

Improving the rail network and unbundling Deutsche Bahn

The Infraplan, Germany's planning instrument for the rail network, will be backed by firm financial commitments in the rail infrastructure fund (Eisenbahninfrastrukturfonds). And the ongoing nationwide renovation of high-performance rail corridors (Hochleistungskorridore) will be funded separately. The Coalition Agreement also proposes a reform of track access charges levied on train operators. However, it does not detail how this will impact rail network funding, which relies on the proceeds generated from track access charges.

The new government also has plans to further unbundle Deutsche Bahn from its subsidiary in charge of the rail network, DB InfraGO. This includes changes in personnel as well as reviewing the existing domination and profit and loss transfer agreement.

• Unbundling DB? From a competition perspective, a stricter separation will help ensure equal treatment between Deutsche Bahn group companies and competitors. However, the Coalition Agreement is still vague on details.

Better regional rail transport

The federal government, together with the sixteen federal states, aims to establish a new legal basis for public transport financing. Existing federal regionalisation funds (Regionalisierungsmittel), which currently provide the bulk of regional transport financing in Germany, shall be used primarily for financing rail services.

• Increasing investment at a regional and municipal level – Together with the proposed adjustment of the dynamisation of regionalisation funds and the proposed increased funding under the municipal transport financing act, a new basis for funding could increase investments in the procurement of rail services and rolling stock at a regional and municipal level.

Sustainable transport

While the new German government is committed to technology neutrality, the Coalition Agreement places a strong emphasis on electromobility and, to a lesser extent, hydrogen when it comes to decarbonising the transport sector. The nationwide roll-out of a demand-driven EV charging infrastructure for cars and trucks will be accelerated. This will also require further investments in the transmission grids to accommodate additional charging points and demand. In parallel, a hydrogen refuelling infrastructure for utility vehicles will also be developed, alongside Germany's growing Hydrogen Core Network and its hydrogen strategy.

• New EV charging tenders? It is yet to be seen if this leads to new roll-out tender for EV Charging, but there may be new opportunities regarding a hydrogen infrastructure and companies continuing to decarbonise their fleets.