ARTICLE · 12 FEBRUARY 2002

The Future of Project Financing in Germany

Pugnatorius Ltd

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GermanyTax

Ulrich Eder

I. Starting point

Germany with regard to project financing is very much like a developing country. This form of the assessment of large-scale projects on the basis of future profit potentials of the investment to be financed is from a German perspective the domain for the extraction of raw materials in developing countries, exotic foreign infrastructures or worldwide telecommunication projects. Therefore, German law firms, advisors and banks are mainly focussed on foreign project financings.

The dividing lines between the various forms of financing are fluid. The more important and significant the project to be financed is in comparison to the size of the company, the more the risks of the project are in the foreground, even without considering project financing. Frequently however with German infrastructure projects there exist (concealed or open) reverting rights (Full Recourse Financing) so that the characteristics of project financing are not being fully realised. As far as the

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