The cabinet wants to sell the German branch of electricity network operator Tennet in its entirety, even though this may entail risks for the continuity of the remaining Dutch part of the state-owned company. Ministers Sigrid Kaag (Finance, D66) and Rob Jetten (Energy and Climate, D66) announced this on Friday afternoon. a letter reported to the House of Representatives. The German state is the intended buyer for the German branch, which is estimated to yield 20 to 25 billion euros.
The cabinet hereby confirms previous reports of NRC, end of January, that a sale is imminent. TenneT itself, which has previously strongly opposed a break-up because it would result in the loss of important financial and strategic advantages, already confirmed at the beginning of this month that it is preparing for a full sale under political pressure.
Several MPs reacted critically to the sales plans. The Dutch-German combination in particular would have been favorable for consumer tariffs, because TenneT could, because of its size, negotiate discounts when purchasing equipment to expand the power grid. TenneT was able to pass these discounts on to customers.
For the state, sales are actually a solution to a growing problem, according to the letter. Huge investments are required to make the power grid in Germany and the Netherlands ‘future-ready’. The government now estimates this at 111 billion euros for the next ten years. Tennet has to borrow that money on the capital markets, but lenders demand in exchange that the company has sufficient equity. And that has to be contributed by the shareholder. If the Netherlands were not to sell the German part, the government would have to inject at least 15 billion euros in fresh capital in the coming years, money that the state would rather invest in the Netherlands itself. 10 billion is also needed for the Dutch branch.
In addition, the German state has indicated that it will acquire “a considerable degree of influence”, according to the ministers. Since the energy crisis, Germany has wanted to regain control of strategic energy infrastructure. Kaag and Jetten write that the cabinet considers it “obvious” to a neighboring country with which it has good relations to see whether that wish “can be facilitated”.
The ministers write that they realize that a split “may have negative implications”. Risks to the continuity of the remaining Dutch part, for example. It can be more difficult for a smaller Tennet to keep its financial house in order. Important synergy benefits that now “contribute to Dutch public interests” may also be lost, the ministers say. That is why the state wants to link a number of hard conditions to the sale in the coming weeks.
A version of this article also appeared in the newspaper of February 25, 2023