September 9, 2019 / 11:16 AM / 10 days ago

Dutch government to decide on new capital for TenneT: sources

AMSTERDAM (Reuters) - The Dutch government is preparing a decision on how to raise fresh capital for TenneT IPO-TTH.AS, the German-Dutch electric high voltage grid operating company it owns, banking and industry sources told Reuters.

FILE PHOTO: An aerial view of tulip fields near the city of Creil, Netherlands April 18, 2019. REUTERS/Yves Herman/File Photo

Choices range from a cash injection funded by Dutch taxpayers to bringing in long-term infrastructure investors such as pension funds to buy a stake in TenneT, the largest grid operator in Germany and the Netherlands.

Sources said it was unlikely a canceled 2013 plan would be revived to privatize it via an initial public offering.

TenneT, based in Arnhem, Netherlands, said in July it needed 2-3 billion euros (up to $3.3 billion) in new equity as it embarks on a decade-long, 35 billion euro spending program on infrastructure needed to handle electricity from renewable sources, especially offshore wind.

Around 25 billion euros of TenneT’s proposed spending is earmarked for electrical grid improvements in Germany alone, a reality that makes Dutch state ownership uncomfortable, an analyst said. 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.

TenneT spokesman Jeroen Brouwers said that given overlapping German and Dutch energy interests “it is good to have multiple sources of capital available.”

“Financial involvement of a German party could be an option, but only at TenneT holding level”, he said.

A finance ministry spokesman said the government planned to update parliament by the summer. A decision was expected in the run up to the Dutch 2020 budget on Sept. 17.

Several banking sources told Reuters one plan under consideration is selling a minority stake in TenneT Holding. “A slew of infrastructure investors, pension funds, insurers and so on would love to buy this,” one utility banker said.

Other possibilities include selling stakes in TenneT’s German activities, or getting the German government to take a stake. The Dutch state is due to appoint an advisor this autumn with the capital raise taking place next year, they said.

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.

Most but not all of TenneT’s peers are listed, like Elia (ELI.BR), Britain’s National Grid (NG.L), Spain’s Red Electrica (REE.MC) and Italy’s Terna (TENr.AT).

“Of course it doesn’t make any sense for the Dutch government to be owning TenneT in the first place,” said Michael Pollitt, a business economics professor at Cambridge University.

As plans for a large scale rollout of wind turbines in the North Sea have accelerated, he said, it becomes less logical for Dutch taxpayers to bear increasing engineering, environmental, cost overruns and regulatory risks.

Reporting by Toby Sterling and Arno Scheutze. Additional reporting by Geert De Clerq, Vera Eckert, Michael Nienaber and Christian Kraemer. Editing by David Evans

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