Herrentunnel: PPP start or stop?
Construction work on the toll tunnel in Lübeck in northern Germany
is scheduled to start in October. With financing in place, the
project is an important step for the Public Private Partnership
(PPP) concept in Germany.
The tunnel is being built in order to replace the ageing bridge across the River Trave, which flows through the town of Lübeck in the state of Schleswig-Holstein. The fixed Trave crossing project ? more commonly known as the Herrentunnel ? will link the northern suburbs of Lübeck and the federal A1 highway to Travemünde and connect with various feeder roads.
Underpinned by toll income, the project has been structured as one of the first German infrastructure schemes based on a Build Operate Transfer (BOT) model.
The company formed to build and operate the tunnel under a 30-year concession is called Herrentunnel Lübeck GmbH, and is a subsidiary of Essen based Hochtief Projecktentwicklung GmbH, together with Wiesbaden-based Bilfinger + Berger BOT GmbH.
The two shareholders have contributed a total of Eu23 million worth of equity on a 50:50 basis. The tunnel, is being designed and built on a fixed price turnkey construction contract. The general contractor agreement provides that the tunnel be completed and ready for operation no later than July 2005.
The advisor to the project is Landesbank Schleswig-Holstein (commonly known as Landesbank Kiel), which also co-arranged the project loan together with Kreditanstalt für Wiederaufbau (KfW). The Eu116 million loan was underwritten 50:50 by these two institutions, and was signed on 28 June. The loan is now in syndication and is expected to be complete sometime in September. KfW will keep its portion of the loan on its own books.
In addition to the Eu23 million of equity contributed by the sponsors, the project also benefits from Eu88 million of federal infrastructure funding. Thus the total cost of the project is only partially covered by toll payments, while the lending banks also have an equity cushion underneath their senior loan position.
A quirk of the legal system in Germany is that the Federal Government will only approve the toll when the facility has been built. Thus lending banks have to enter into the deal without any written contract on toll levels. The German banks tend to be comfortable with this system, and remain willing to get involved, though for some foreign banks getting a loan signed off by their credit committee without a legally binding agreement on tolls would likely be a problem.
In addition the Fernstrassenprivatfinancierungsgesetz states that private finance can only be done on main highways, and associated bridges and tunnels, which fall under the Federal supervision. This gives little scope for states and cities to put forward their own projects
To date the only other PPP toll project has been the Warnow Tunnel in the north-eastern city of Rostock. French construction group Bouygues is leading this consortium. The Export and Project Finance department at KfW is also involved in the financing for this tunnel, which is scheduled to open in 2003.
But there are two other PPP deals in their early planning stages, the Strelasundquerung and the Hochmoselübergang. The first is on the Baltic Sea coast in northeastern Germany, and will be a bridge connecting the island of Rügen to the mainland. The second is a bridge and motorway segment in the state of Rheinland Pfalz.
Meanwhile the development of PPP structures in other sectors has also been slow. Nonetheless both Hochtief and Bilfiger+Berger have emerged as key players in the handful of PPP deals. One such transaction was actually classified as a British project, since it involved the construction maintenance of the new British Embassy on Wilhemstrasse in Berlin. Bilfinger+Berger led the consortium, and the building is now up and running.
And Hochtief is part of the consortium which is going to build Berlin Brandenburg International (BBI), the new airport for Berlin which is planned to open in 2007 and will be run on a 50 year Build Operate Transfer contract.
The private sector has been calling for more political support for PPP in Germany, both at federal and state level, and the head of the construction industry group Hauptverband der Deutschen Bauindustrie, Michael Knipper, has pointed to the British Embassy as a model that Germany should follow.
In the case of the Lübeck tunnel, the old bridge needed replacing. The city was set to receive a grant of Eu88 million from the Federal government in order to replace the bridge. This was not enough for the tunnel project, so the city elected to bring in the private sector to provide the balance, and receive a return on their investment via collecting tolls. Thus the City of Lübeck is not incurring any costs whatsoever for the Herrentunnel.
Other cities and states are likely to take note, and proponents of PPP hope that seeing a high profile project such as the Herrentunnel reach financial close, and physically begin construction, will provide a spur to the development of PPP. A spokesman for the company in Lübeck said that final preparations are now being made for the contruction start on 15 October.
The tunnel is being built in order to replace the ageing bridge across the River Trave, which flows through the town of Lübeck in the state of Schleswig-Holstein. The fixed Trave crossing project ? more commonly known as the Herrentunnel ? will link the northern suburbs of Lübeck and the federal A1 highway to Travemünde and connect with various feeder roads.
Underpinned by toll income, the project has been structured as one of the first German infrastructure schemes based on a Build Operate Transfer (BOT) model.
The company formed to build and operate the tunnel under a 30-year concession is called Herrentunnel Lübeck GmbH, and is a subsidiary of Essen based Hochtief Projecktentwicklung GmbH, together with Wiesbaden-based Bilfinger + Berger BOT GmbH.
The two shareholders have contributed a total of Eu23 million worth of equity on a 50:50 basis. The tunnel, is being designed and built on a fixed price turnkey construction contract. The general contractor agreement provides that the tunnel be completed and ready for operation no later than July 2005.
The advisor to the project is Landesbank Schleswig-Holstein (commonly known as Landesbank Kiel), which also co-arranged the project loan together with Kreditanstalt für Wiederaufbau (KfW). The Eu116 million loan was underwritten 50:50 by these two institutions, and was signed on 28 June. The loan is now in syndication and is expected to be complete sometime in September. KfW will keep its portion of the loan on its own books.
In addition to the Eu23 million of equity contributed by the sponsors, the project also benefits from Eu88 million of federal infrastructure funding. Thus the total cost of the project is only partially covered by toll payments, while the lending banks also have an equity cushion underneath their senior loan position.
A quirk of the legal system in Germany is that the Federal Government will only approve the toll when the facility has been built. Thus lending banks have to enter into the deal without any written contract on toll levels. The German banks tend to be comfortable with this system, and remain willing to get involved, though for some foreign banks getting a loan signed off by their credit committee without a legally binding agreement on tolls would likely be a problem.
In addition the Fernstrassenprivatfinancierungsgesetz states that private finance can only be done on main highways, and associated bridges and tunnels, which fall under the Federal supervision. This gives little scope for states and cities to put forward their own projects
To date the only other PPP toll project has been the Warnow Tunnel in the north-eastern city of Rostock. French construction group Bouygues is leading this consortium. The Export and Project Finance department at KfW is also involved in the financing for this tunnel, which is scheduled to open in 2003.
But there are two other PPP deals in their early planning stages, the Strelasundquerung and the Hochmoselübergang. The first is on the Baltic Sea coast in northeastern Germany, and will be a bridge connecting the island of Rügen to the mainland. The second is a bridge and motorway segment in the state of Rheinland Pfalz.
Meanwhile the development of PPP structures in other sectors has also been slow. Nonetheless both Hochtief and Bilfiger+Berger have emerged as key players in the handful of PPP deals. One such transaction was actually classified as a British project, since it involved the construction maintenance of the new British Embassy on Wilhemstrasse in Berlin. Bilfinger+Berger led the consortium, and the building is now up and running.
And Hochtief is part of the consortium which is going to build Berlin Brandenburg International (BBI), the new airport for Berlin which is planned to open in 2007 and will be run on a 50 year Build Operate Transfer contract.
The private sector has been calling for more political support for PPP in Germany, both at federal and state level, and the head of the construction industry group Hauptverband der Deutschen Bauindustrie, Michael Knipper, has pointed to the British Embassy as a model that Germany should follow.
In the case of the Lübeck tunnel, the old bridge needed replacing. The city was set to receive a grant of Eu88 million from the Federal government in order to replace the bridge. This was not enough for the tunnel project, so the city elected to bring in the private sector to provide the balance, and receive a return on their investment via collecting tolls. Thus the City of Lübeck is not incurring any costs whatsoever for the Herrentunnel.
Other cities and states are likely to take note, and proponents of PPP hope that seeing a high profile project such as the Herrentunnel reach financial close, and physically begin construction, will provide a spur to the development of PPP. A spokesman for the company in Lübeck said that final preparations are now being made for the contruction start on 15 October.
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