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Flashcards in German Cases Deck (17):

Name the key risks for Stuttgart 21

- Financial risks
• Unpredictable costs (belated launch)
• Default of fancier
• Changes in prices (raw materials)
- Public opposition
- Other risks: Geological risks; Completion risk


Key players Stuttgart 21

o Province Baden-Württemberg
o Capital city Stuttgart
o Region Stuttgart
o “Flughafen” Stuttgart GmbH
o German government


Opponent's arguments Stuttgart 21.

- Ecological issues
- Cost-value-ratio
- Reconstruction of the existing rail station would be more rational & efficient
- Stuttgart is bankrupt – no funds for other projects (e.g. schools)
- Influence on private property and monuments


Issues regarding the costs (Stuttgart 21)

- Official planning costs don’t include several deals with the key players
- If costs continue to rise, most of the involved parties aren’t able/willing to invest further money. Stuttgart and BW (taxpayer) will pay the additional costs.


Key Facts Elbphilharmonie

- Planned construction costs for Elbp. and additional facilities of 77m€: Real total costs of 866m€ (789m€ paid by the City of Hamburg)
- completion delay of 7 years


Key players Elbphilharmonie

- Architects Herzog & de Meuron
- Project Company: Elbphilharmonie Hamburg Bau GmbH & CO. KG
- Hochtief as construction company
- Investors (Investment consortium Adamanta; Private donors; Local government)


Key risks Elbphilharmonie

- Functional and operational risk
- Completion risk
- Transaction risks: Liquidity, Interest Rates


Elbphilharmonie: Why did the project fail?

Poor Planning, Structure of contracts, missing experience, construction planning errors


Elbphilharmonie: Opponent's arguments

- Symbol of elites
- Massive construction costs
- Poor planning in acoustic
- Misleading of publicness
- Economic incompetence of the city of Hamburg


Elbphilharmonie: Why City of Hamburg didn’t cancel the contract in case of increasing costs?

Lock in effect: Hamburgs expanses would be even higher when hiring a new construction company. For that reason Hochtief was able to push higher construction costs through.


Elbphilharmonie as a PPP?

PPP: after renegotiation→ operative risk transfer to Hochtief


Key Facts Berlin Brandenburg Airport (costs, opening)

- Originally planned costs 1,4bn €
- Planned opening date 2011
- Still not opened in 2017
- Initially planed to be built, owned and operated by private sector → but in the end it was built under public sponsorship


Key players: Berlin Brandenburg Airport

- Land Brandenburg
- Bundesrepublik Deutschland
- Land Berlin


Berlin Brandenburg Airport: Reasons for failure

- Poor Management
- Technical issues


Lock in effect BB Airport?

prestigious project (only financed by public parties)


What financial instrument was used for the BB Airport Project?

Financial Instrument: Consortium loan, insufficient amount


Possible recommendations BB Airport:

Transfer to a PPP
- Risk transfer to private companies
- Pooling of know how
- Planning and cost security
- Founding a federal agency to control and plan mega projects