Germany will not buy Tennet grid operator branch in €1.6 billion blow to Dutch treasury

The German government no longer plans to buy the German business activities of electricity grid operator TenneT despite extended talks between the national governments in The Hague and Berlin. The failure to reach an agreement will likely have a negative hit on the Dutch treasury of about 1.6 billion euros.

Such a deal would have provided TenneT with the necessary capital for the expansion of the high-voltage grid in the Netherlands, which will likely cost in the billions. But the German government said it has too many budget problems to fully take over TenneT Germany, TenneT announced on Thursday.

“Discussions between TenneT Holding and Kreditanstalt für Wiederaufbau (KfW), acting on behalf of the German Federal Government, regarding a complete sale of TenneT Germany have ended today,” TenneT said.

Last month, Dutch caretaker Finance Minister Steven van Weyenberg announced that he would be looking at alternatives to the sale of TenneT Germany. For example, the government is investigating whether the Dutch State, as the owner of TenneT, can itself contribute additional capital. But a sale or partial sale to a private party or a spinning off of the German company with an initial public offering is also a possibility.

“The German government has committed to supporting such alternative solutions. In the meantime, TenneT remains fully committed to implementing its major investment plans in both countries,” TenneT wrote. At the beginning of this year, the Dutch government also provided a loan of 25 billion euros with which TenneT can continue its plans in 2024 and 2025.

TenneT purchased a high-voltage network from German energy group E.ON in 2010, giving the operator more than 10,000 kilometers of cables across the border in one fell swoop. But now that companies and households are investing more in greening initiatives, there is more urgency to expand the capabilities of the power grid. TenneT recently said it would invest 160 billion euros in this over the next ten years

The Netherlands no longer wanted to bear the financial risks surrounding investments in Germany. That country’s government initially seemed willing to invest money in the power grid themselves, but the situation became more difficult when a ruling by a constitutional court saddled the coalition with a 60 billion euro hole in the budget.

Earlier this year, TenneT said it expected a deal on the sale of the German portion of the country this year. Such a sale would involve 22 billion euros, Bloomberg previously reported based on conversations with anonymous sources. The Ministry of Finance did not want to say comment about TenneT Germany’s price tag.

Blow for Dutch treasury

The failed sale has resulted in a budget setback of 1.6 billion euros for the Dutch government, outgoing Minister of Finance Steven van Weyenberg wrote in a letter to parliament. It concerns money that the Dutch government has paid into TenneT and was supposed to get back. “This receipt was budgeted for 2024.”

The government planned to invest the money from the sale of the German branch back into TenneT. In anticipation of the sale, the government already lent 25 billion euros to the grid operator. Van Weyenberg wrote that an “additional solution” is needed in the short term to finance TenneT until there is an alternative to the failed sale to Germany.

“I am obviously disappointed that the negotiations, which started at the request of the German State and have been going on for more than a year and a half, have not led to a successful outcome,” the minister wrote.