Germany: TenneT Revenue Reaches EUR 1.5 Billion in 2011

Electricity transmission operator TenneT has maintained a high security of supply in 2011, while transmission rates remained at a low level. TenneT also contributed to making the energy supply in north-west Europe more sustainable.

Major investments have gone into strengthening and expanding the grids in the Dutch and German markets in order to meet increasing reliability and sustainability requirements. TenneT’s revenue in the financial year was over €1.5 billion and its net profit amounted to €200 million. These are some of the highlights of TenneT’s Annual Report for 2011, which was published today.

CEO Mel Kroon: “TenneT’s strategy is focused on integrating the Northwest European electricity market and facilitating a sustainable future. Our objective is to ensure the highest security of supply of electricity at the lowest possible prices for the 36 million consumers in our supply area. With 99.9995 per cent availability, TenneT’s network reliability is very high compared to other European countries. We achieved a sound financial result and are working on our ambitions to expand and strengthen the grid. Our challenges are further market integration and developing the energy supply system of the future. Through such efforts TenneT makes substantial contributions to a more sustainable energy system in north-west Europe. As one of the leading European TSOs, TenneT is on the right track.”

 Investing in maintaining a high security of supply and increasing sustainability

TenneT invested considerable sums in grid expansion in 2011. In the Netherlands more than 300 projects are ongoing, including four long-distance 380kV connections. In the north of the country a new high-voltage substation at Eemshaven was put into operation, which is ready to link new production units, wind farms and cross-border connections in the North to the national grid. In the Randstad conurbation the construction of the new 380kV connection was started. On the innovation front, this project features the debut of our Wintrack pylons, which have less of an impact on their surroundings, and we started the construction of a 10-kilometre stretch of underground 380kV cable. In addition the first section of the Wateringen high-voltage substation, an essential link in the energy supply for The Hague and the surrounding area, has been completed.

 Major contribution to energy transition in Germany

On the road towards a CO2-free energy supply, TenneT is contributing significantly to Germany’s Energiewende, the transition from nuclear power to renewable energy sources. In that context TenneT is working on offshore connections to new wind farms in the German part of the North Sea, whose combined capacity will be equivalent to the energy demand of 5 million households. This makes TenneT a global front-runner in this field. Also in Germany, nine large-scale projects are underway to improve and expand the North-South connection, primarily aimed at transmitting wind power to end users. The planned new sections of the connection total approximately 500 km. The regional planning procedure for the most important German onshore project, the Wahle-Mecklar connection, was completed in late 2011. Strengthening of the German grid will also contribute towards relieving pressure on the Dutch grid.

 Continued Northwest European market integration

With a view to integration of the Northwest European market, TenneT successfully commissioned a cable connection (BritNed) for importing and exporting electricity between the European mainland and Great Britain.. The new connection, which has a capacity equivalent to the power consumption of a city with one million residents, fits in with TenneT’s vision of acting as a European power hub. In 2011, the NorNed cable to Norway was added to the coupled electricity markets of the Benelux countries, Germany, France and the Scandinavian countries. This continued European market integration creates a more stable price development, as well as efficiency benefits for consumers.

In 2011, TenneT started its optimization of reserve capacity sharing between the Netherlands and Germany, and the company joined an initiative for the international exchange of differences between electricity production and consumption. The resulting economic benefits, estimated at €30 million a year, will be passed on directly to consumers and businesses.

 Financial results

TenneT’s revenue rose from €1.3 million to €1.5 million in 2011. Operating profit (EBIT) rose from €159 million to €357 million, with the Netherlands contributing €209 million and Germany €152 million (other sources: €4 million). The Dutch contribution includes a non-recurring profit of €116 million resulting from a retrospective upward adjustment of reimbursement costs over the past years. Of this amount, €82 million is related to the period 2008-2010 and €34 million to 2011. The company’s net profit rose from €77 million to €200 million. In the coming years, TenneT expects further revenue growth on account of the increasing number of activities, especially in the German market.

 Financing

Over the past few years TenneT has taken major steps in the financing of its investment portfolio. At the beginning of 2011, a total of €1 billion in bonds was issued to institutional investors. In this financial year TenneT also arranged for a lower-cost refinancing of its existing revolving credit facility of €1.125 billion. In addition, a €600 million increase in capital provided by the shareholder was an essential condition for carrying out the ambitious investment programme in the Netherlands while at the same time ensuring financial stability. In Germany, we entered into a strategic partnership with Mitsubishi for the development and financing of a number of wind farm connections, resulting in a €240 million capital participation in our offshore business and improving our overall financial position. Standard & Poor’s awarded TenneT a senior unsecured credit rating of ‘A-’, while Moody’s rated TenneT as ‘A3’. Both credit ratings were reconfirmed at the start of 2012.

 Major investment portfolio

TenneT is a healthy company and wants to maintain its solid position on the way to a high-grade future energy supply system. The next few years will see major investments. TenneT’s investment portfolio for the next 10 years amounts to approximately €14 billion, €5.5 billion of which is earmarked for the Dutch market. Through its Energiewende programme the German government is strongly committed to increasing sustainability: by 2020, at least 35 per cent of energy must be produced from renewable sources. Offshore wind power is an important part of the Energiewende programme. To date, TenneT has ordered the construction of 5.3 gigawatts worth of grid connections for offshore production. In addition, the German governments has plans to add another 6 GW worth of offshore connections by 2022. TenneT has proposed to create a collective German direct-current grid operator for that purpose, whose responsibilities should include planning, financing, constructing and operating new offshore connections. TenneT has also made it clear that, to enable the Energiewende programme to be carried out, a binding long-term planning for offshore connections is necessary, as well as a clear legal framework regarding liability. At the moment, a constructive dialogue between regulator, government and relevant parties is taking place in order to reach structural solutions for the future.

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Offshore WIND staff, April 18, 2012; Image: generalcable