Tennet wants to sell the German subsidiary completely to the federal government

Tennet is facing further major investments, especially for the connection of offshore wind farms to the industrial centers, and has corresponding capital requirements. Tennet said the Dutch government prefers to fund Tennet’s Dutch operations, currently €10 billion. “The Dutch government is looking for a structural solution for the equity requirements for Tennet’s German activities, which are currently estimated at around 15 billion euros,” the company said.

Years of negotiations near breakthrough

Years of negotiations are thus approaching a breakthrough. According to negotiating circles, a deal could be in place by the summer. Habeck’s predecessor Peter Altmaier (CDU) had already entered into talks with the Dutch government, which had come to a standstill. They were resumed last fall.

Various possible structures for a German participation in the investments have been discussed in the past few months, including the direct participation of the federal government with around 25 percent in the Dutch parent company or the participation of the state bank KfW in the German subsidiary.

As a third variant, there was talk of Germany joining a network subsidiary that was yet to be founded, which would build all the connections from wind farms on the high seas to the conurbations in Germany and the Netherlands for the group. Now the takeover of the Germany subsidiary directly by the federal government or by KfW appears to be the most likely option.

Michael Kruse, energy policy spokesman for the FDP parliamentary group, was critical: “A possible takeover of the German Tennet subsidiary should only be an intermediate step. In this case, the federal government would have to work on an award to private companies,” Kruse told the Handelsblatt.

“If no more private investors could be found for energy networks in Germany, then that would be an alarm signal that something is going wrong with the design of the energy transition,” he added.

State monopolies are not in a position to bring about the innovations required for the energy transition. However, it is unclear whether the FDP will be able to assert itself with this position. There are many voices in the SPD and Greens who would prefer to keep Tennet Germany completely.

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Tennet’s most important infrastructure projects include the “Südlink” line, which is a good 700 kilometers long from the Hamburg area to northern Bavaria and Baden-Württemberg, and the “Südostlink” line, which is a good 500 kilometers long from Saxony-Anhalt to Lower Bavaria. Tennet is planning annual investments of at least six billion euros over the next ten years – around 60 percent of them in Germany.

Hope for positive effects for energy transition

The Dutch bought Eon’s transmission network subsidiary in 2010. This created the first cross-border electricity transmission system operator. Tennet has repeatedly emphasized that this is making an important contribution to the integration of the European electricity markets.

Tennet Germany has a regulatory capital base (RAB) of around 16 billion euros. As a rule, nets are sold at a premium to the RAB. However, the expected investment volume is also taken into account in the assessment.

The Dutch had initially misjudged the enormous need for investment. In particular, the costly grid connection of offshore wind farms in the North Sea proved to be a financial challenge.

Electricity consumers had to be asked to pay a special “offshore surcharge”. In the Netherlands there has been criticism for years that a Dutch state-owned company has to handle the expansion of the power grid in Germany.

The Federal Ministry of Economics hopes that a stronger influence on the electricity transmission system operators will have positive effects on the energy transition. In addition to Tennet, there are currently three other electricity transmission system operators in Germany: 50Hertz, Amprion and TransnetBW. This makes Germany the only European country that has four transmission system operators. There is only one transmission system operator in each of the other European countries. The companies are mostly state-controlled.

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For years there has been a debate in Germany about merging the four transmission system operators and increasing state influence. The Federal Ministry of Economics promises synergies, better control and thus an acceleration of the energy transition. However, there are also opponents of such a solution in the traffic light coalition, especially in the FDP.

Good timing

Currently, the opportunity to increase the influence of the state and forge a “Deutsche Netz AG” is favorable. KfW wants to use its right of first refusal for a 24.95 percent stake in the electricity grid operator TransnetBW, people familiar with the matter said. For the other part, the Baden-Württemberg savings banks are the favorites, but a final decision is not expected for a few weeks, possibly after Easter.

TransnetBW belongs to the energy group EnBW. EnBW announced the sale of the packages last year. The Karlsruhe utility is looking for partners for the investments of six billion euros planned by 2025.

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KfW already has a 20 percent stake in 50Hertz. The state bank stepped in on behalf of the federal government in 2018 to prevent the state Chinese network operator SGCC from entering the market. The federal government is only left out at Amprion. The company is mostly owned by financial investors from the insurance industry and pension funds, 25.1 percent are owned by the energy group RWE.

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