The Dutch want to get rid of the German Tennet subsidiary as quickly as possible
Berlin The Dutch government expects the network operator Tennet to need significantly more capital and urgently advises a complete sale of the German subsidiary to the Federal Republic. This emerges from a joint letter from Dutch Finance Minister Sigrid Kaag and Energy Minister Rob Jetten to the Dutch Parliament.
The Dutch government considers “a complete sale of Tennet Germany to the German state for the preferred scenario”, it says in the letter that is available to the Handelsblatt. The Dutch state is “then no longer exposed to the risks of German business”.
The two ministers are stepping up the pace: it is important that the sale “is completed before 2024”. The reason: In view of the expected need, the capital for the German business “to be paid in by the beginning of 2024 at the latest”. The Dutch want nothing more to do with that.
In their ten-page letter, the ministers point out the rapidly increasing need for capital. In this, the current situation is outlined right at the beginning under the heading “Latest findings on capital requirements”.
It says that according to the latest forecasts from February 2023, “investments totaling 111 billion euros over the next ten years should be taken into account” for the entire Tennet business. 40 percent was accounted for by the Netherlands and 60 percent on Germany.
key role in the energy transition
As recently as November last year, the ten-year investment agenda included only 89 billion euros, the ministers write. In September 2022 it was 70 billion euros and in April 2022 it was 60 billion euros. In 2018 there was talk of 28 billion euros. The upward trend in recent years is mainly due to the tightened climate targets and political ambitions in both countries.
The growing need for capital, which is necessary to finance the investments, is derived from the ever more demanding investment plans. In its letter for the Dutch part of the company, the Dutch government estimates this “at around ten billion euros for the next ten years”.
For Tennet Germany, the capital requirement for the same period is around 15 billion euros. External developments such as price increases, political or other decisions could significantly affect these estimates, the letter said.
In the letter from the two ministers, the entry of private investors is also examined, but ultimately rejected. The disadvantage of private investor participation is that it offers no certainty as to how Tennet’s long-term capital needs will be met.
On the other hand, the German state has signaled its willingness to “take full responsibility for future capital payments and also has an interest in doing so from the perspective of the German energy transition”.
Reaction of traffic light politicians
From the point of view of politicians in the traffic light coalition, the letter from the Dutch ministers should be understood as a warning signal: “If even state network operators want to withdraw from the German network, then the German government must be on the alert,” said Michael Kruse, energy policy spokesman for the FDP parliamentary group, the Handelsblatt.
“The federal government should not tie itself to the operation of the power grids in dynamic times,” he warned. He recommends a non-discriminatory bidding process to find private investors. “If there are no more private companies bidding on natural monopolies in Germany, something will go very wrong with the energy transition,” he said.
The power grids are considered natural monopolies. The Federal Network Agency monitors the network operators and also watches over the returns that the companies are making. You may not exceed certain upper limits. The level of these upper limits results from the Incentive Regulation Ordinance. The upper limits will adjusted regularly.
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Tennet Germany is the wholly owned subsidiary of the Dutch Tennet Holding based in Arnhem, which is fully owned by the Dutch state. Tennet Germany is next to 50Hertz, Amprion and TransnetBW one of the four transmission system operators in Germany.
Transmission system operators play a key role in the energy transition. They have to ensure that the wind power produced in the north and north-east of Germany reaches the consumption centers in the south and west of the country.
This requires massive investments in “electricity highways” that transport electricity across the country. Tennet is also responsible for a large part of the grid connection for the offshore wind farms in the North Sea.
Conditions of Sale
The Dutch had the then transmission network subsidiary of eon bought 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.
>> Read here: Tennet wants to sell the German subsidiary completely to the federal government
The two Dutch ministers emphasize in their letter that the synergy effects must be maintained even if the German subsidiary is sold to the federal government. Appropriate cooperation agreements would have to be concluded for this.
In fact, the transnational structure has made it easier in recent years to better coordinate plans for grid expansion in Germany with corresponding plans in the Netherlands and to avoid duplicate structures.
In addition, the ministers write, the continuity of Tennet’s operational activities in the Netherlands must not be jeopardized in the event of a sale. The third and final condition for a sale is a “fair market price”.
Federal Minister of Economics Robert Habeck (Greens) resumed talks about the federal government joining Tennet at the end of last year. Even his predecessor Peter Altmaier (CDU) had negotiated with the Dutch, but the talks had come to a standstill. But now things are moving forward. Habeck hopes that getting involved will increase the influence on the company and push ahead with the network expansion, which has been sluggish for years.