TenneT Floats EUR 22 Billion Budget for Future Projects

TenneT, an electricity transmission system operator with activities in the Netherlands and Germany, invested EUR 1,46 billion in grid connections for offshore wind farms in 2015, and announced further EUR 22 billion of investments in onshore and offshore electricity infrastructure in the next ten years.

A part of the investment budget will go towards the realization of an offshore AC grid in the Dutch sector of the North Sea, targeting 3,450 MW of offshore wind capacity to be operational by 2023. The Dutch government intends to appoint TenneT to design, build and manage the offshore grid in the North Sea.

In Germany, TenneT is investing in onshore AC infrastructure and offshore DC grid connections. New or upgraded electricity connections are required to accommodate the strong growth in renewable energy generation, frequently at non-traditional locations. Over twenty large projects are currently in the planning or implementation phase, the company said.

In 2015, TenneT installed five new direct current (DC) offshore connection systems in Germany, bringing available capacity for transporting wind energy generated at sea to 4,300 MW. By 2019, TenneT expects to have completed 7,100 MW of offshore connection capacity, exceeding the German government’s target of 6,500 MW of installed offshore wind energy capacity by 2020.

In addition, during 2015, TenneT was involved in making more cross-border electricity transmission capacity available to the market, using a mechanism called flow-based market coupling, bringing electricity prices across Europe closer together. Two new interconnector-projects started development to connect Germany to Norway (NordLink) and the Netherlands to Denmark (COBRA cable) for greater security of supply and to allow for more distribution of renewable energy in the Northwest European area.

The company’s underlying revenue rose from EUR 2,315 million in 2014 to EUR 3,290 million in 2015, mainly driven by the growing asset base due to investments. Particularly TenneT’s investments in Germany contributed positively to revenue, as the German regulatory framework provides for an immediate return on invested capital during the construction phase.

Underlying EBIT increased by 48% to reach EUR 1,075 million in 2015. Excluding special items, underlying EBIT increased by 18% to EUR 704 million, reflecting the growth in TenneT’s asset base.

Special items for 2015 included the reversal of an earlier impairment due to a favourable decision by the Dutch administrative court related to regulation applicable to TenneT, the release of offshore provisions, as delays and interruptions of offshore connection systems have become less likely, and reimbursement of offshore operating expenses in excess of actual costs incurred, as not all of TenneT’s offshore links were fully operational yet in 2015.

“Our financial performance is in line with the growth in our asset base. We have a stable basis to finance our investment portfolio the coming years, through debt from institutional investors and equity from retained earnings. On the Dutch side, we expect part of the required financing to be provided by a capital contribution from our shareholder within the coming years,” TenneT’s CFO Otto Jager said.