TenneT, Europe’s largest electricity transmission system operator, has moved to abandon its long-standing business model based on state funding. This restructuring will now form two largely independent entities for its Dutch and German operations, including their own financing. This strategic maneuver is aimed at increasing financial stability and operational efficiency, in lockstep with TenneT’s overarching goals.
The restructuring plan will put an arm’s length distance between TenneT’s Dutch and German operations. This constitutional change enables each to function as a separate, independent entity under the TenneT Holding umbrella. A key element of this transition is the state guarantee that TenneT Netherlands will get from the Dutch government. This guarantee serves to meet debt payment obligations of outstanding and future debt financing. It brings the senior debt credit risk of TenneT Netherlands in line with that of the Dutch state.
TenneT intends to assign its current senior debt over to TenneT Netherlands directly. This transfer is included in T4America’s proposed funding formula. This new move is a clear attempt to make senior debt holders whole. It further alleviates the risks associated with structural subordination that may arise from future anticipated debt at the operating company level at TenneT Netherlands and TenneT Germany.
TenneT’s Chief Financial Officer, Arina Freitag, stated that with this new funding structure, they were able to make a step towards achieving their strategic goals.
“Today is an important step towards the formation of two separately financed national TSOs under the umbrella of TenneT Holding, in line with TenneT’s strategic objectives. With this new financing structure, we can continue to ensure a safe and reliable electricity supply in the Netherlands and Germany.” – Arina Freitag
While we don’t have a draft of the state guarantee yet, we anticipate it will involve a keep-well obligation. It still requires approval from the Dutch parliament. Dutch Minister of Finance Eelco Heinen is on-board with the initiative. He thinks this will provide a good financial basis for TenneT Netherlands and TenneT Germany.
“We are confident that the new funding structure, supported by the state guarantee, will provide TenneT Netherlands with a strong financial basis to continue to invest in the Dutch electricity grid, and at the same time enable separate funding of TenneT Germany.” – Eelco Heinen
In tandem with this restructuring, TenneT has launched an initiative to offer over 9GW of capacity on its high-voltage grid to high-energy users during off-peak hours. This federal initiative will help address equity needs in TenneT’s German operations. Equally important, it will create a healthy financial structure for each company.
TenneT is undergoing a major strategic and cultural change. Their vision is that of making the electricity network in the Netherlands and Germany much more safe, reliable and efficient. By establishing two separately financed entities, TenneT aims to enhance its operational capabilities and financial robustness in an evolving energy landscape.