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Sell-off squad soldiers on

29 Feb 2008

GERMANY: The coalition government in Berlin appears determined to make one final effort to sell off part of the national railway before the forthcoming 2009 general election.

Previous attempts to privatise Deutsche Bahn AG have collapsed in the face of political opposition focused mainly on the possibility of the national rail infrastructure being taken out of state ownership, which under the German constitution is a legal requirement. Concern has also been expressed among the Länder that regional and rural routes would be closed or run down as private investors sought to gain a return from the most profitable services. Transport Minister Wolfgang Tiefensee sought to mollify criticism by careful wording of the draft legislation, but this only led to further argument and the government has now backed down.

The revised formula would leave track, power supply and stations in state ownership, and DB would be restructured as a holding company from which freight and passenger operating companies would be hived off as subsidiaries that could be offered to the private sector.

A tentative timetable for the sale process was leaked to the German media in mid-February. If this is correct, the DB board would approve changes that would turn it into a holding company by the end of March, with the holding company registered as a new business by the end of May. An extraordinary general meeting would then be held in July to approve the sale of the freight and passenger operating companies - DB Chairman Hartmut Mehdorn has said he would like the sale to go ahead by October. With DB as a whole valued at €20bn to €25bn, sale of a 49·9% stake would raise about half that amount.

Clearly all this would only happen if the government were to agree, and suggestions that DB would go ahead anyway led to strenuous denials from both DB and the government - although the transport ministry has confirmed that the holding model is being examined. In the meantime, the left-wing of the Social Democratic Party and green factions are committed to resist a sell-off, and the government cannot assume it will succeed with any revised draft of its legislation. Formal debate was postponed until after a local election in Hamburg on February 24.