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DB sale weathers more storms

19 Oct 2007

THE GERMAN government's bill to privatise Deutsche Bahn AG was presented to the Bundestag for its first reading on September 21. Transport Minister Wolfgang Tiefensee had to defend the bill against forceful opposition that had been building up during the preceding weeks.

Leading the charge against the legislation were the Länder, which had voiced numerous concerns over the future of regional services. A special conference of Land transport ministers on August 2 had commissioned a report from Prof Dr Dirk Ehlers of the Institute for Business Law at the University of Münster which concluded that Tiefensee's proposals ran counter to the German constitution and would have a negative effect on the national budget. The cost of regional services would rise, and DB would secure further advantages against competitors, the report found.

More weight was added to opponents' arguments when the government's CDU coalition partners set out their requirements for backing the bill. The party wanted the government to have much greater control over the network – Tiefensee's proposal envisages that legal ownership is conferred on the state while DB is granted management rights for 15 or 18 years. The CDU wants a much shorter period and demanded that access fees should be regulated by the Federal Network Agency. It also called for a one-year trial before privatisation to test the financial and performance mechanisms.

During the debate Tiefensee repeated his assurances that the network would remain in state hands, but opposition members warned of line closures and the nation being robbed of its own property. Reports surfaced in mid-September of a confidential 2004 study by Morgan Stanley which suggested up to 14?000 of DB's 34?000 route-km could be closed to avoid the cost of infrastructure renewals. This issue is rapidly coming to a head, as Mehdorn warned that reducing the asset base would impact on the flotation. He called for the government to meet any closure costs before privatisation starts.

The government wants to see the bill complete its passage through the Bundestag in November so that the sale of a 25% stake can go ahead before the end of 2008.