Abstract
State equity in German Transmission System Operators does not lower the true cost of capital but shifts risk to taxpayers. Drawing on corporate‑finance principles (CAPM, Modigliani–Miller), required returns are determined by the risk of investments, not the source of funds. Government financing below market terms constitutes a subsidy rather than an efficiency gain. Reviewing recent pro‑ posals (DZ, Agora, IMK), we show that “cheap public capital” and recycling of a regulatory – sovereign spread conflate risk transfer with cost reduction. Where market failures exist, targeted subsidies may be justified – but only with a clear economic rationale, full account‑ ing of fiscal distortions, and EU state‑aid compliance.