September 13, 2019 / 4:10 PM / 8 days ago

Dutch government explores possible sale of TenneT grid company

AMSTERDAM (Reuters) - The Dutch government is exploring options to fund the investment German-Dutch grid company TenneT IPO-TTH.AS needs, including a partial or full sale of the business, it said on Friday.

In a letter to parliament, the government said TenneT needs 4.75 billion euros (4.22 billion) in fresh capital to fund a 35 billion euro investment program through 2028.

Its options include selling part or the whole business to private investors, bringing in the German government as a stakeholder, or the Dutch government injecting the money itself.

Reuters reported on Sept. 9 that the Dutch government was exploring such options to recapitalize TenneT..

“TenneT’s investment agenda has grown strongly in recent years because of the energy transition,” Finance Minister Wopke Hoekstra said in a letter to parliament.

He said that the plan to increase TenneT’s capital would need to ensure that “the Netherlands retains authority over investments in our own country.”

“The Cabinet also wishes ... to reduce the financial risks of the Dutch state to the German activities,” he said.

TenneT owns the entire Dutch high-voltage electricity grid, and around 40 percent of the German grid, making it the largest of four operators there.

Of TenneT’s 35 billion investment program, 23 billion euros is required for German improvements, including additional connection capacity required between north and south Germany. TenneT was recently instructed by the European Commission to increase interconnection between Denmark and Germany.

In both the Netherlands and Germany, TenneT is building substations and sea cables to carry electricity generated by burgeoning wind turbine farms to the mainland.

The company, which has already tripled its asset base since 2011, had 9.49 billion euros of debt on a 22.3 billion euro balance sheet as of June 30.

As a regulated monopoly, TenneT is able to recoup investment costs over a period of years, but fresh capital is needed for the company to maintain its credit rating. Otherwise it “eventually would not be able to finance investments it is legally obliged to make.”

Hoekstra said that in an adverse scenario, TenneT’s capital needs could rise to 6.75 billion euros and it might be forced to cancel dividends.

He said that the Dutch state and German state are in talks about a possible German stakeholding.

However, the German government has been reluctant to own grid companies. A spokeswoman for the German Ministry of Economic Affairs and Energy declined to comment when asked if Berlin would be willing to buy a minority stake of TenneT.

Hoekstra said that it is possible the Dutch government will ultimately have to choose between “the advantages of cross-border activities” and lowering the risks ultimately borne by Dutch taxpayers, by disposing the German activities.

He said he would update Dutch parliament on plans by “mid-2020.”

Reporting by Toby Sterling; Editing by Jan Harvey and Elaine Hardcastle

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