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 DB AG 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
