TenneT powers into €1.1bn German grid acquisition

The Dutch state-owned electricity network operator has acquired the transmission grid of German power group E.ON. The deal is set to conclude by the end of the year, with a two-bank syndicate providing debt for the deal.

Energy network operator TenneT has agreed to acquire the electricity transmission grid of German power company E.ON for around €1.1 billion ($1.7 billion).

The Dutch state-owned company is set to acquire Transpower Stromübertragungs GmbH (Transpower), the subsidiary which operates E.ON’s high-voltage transmission network, on December 31.

The companies have agreed a price of €1.1 billion for the transaction, which comprises a valuation of the business at €885 million, plus the company’s cash holdings. E.ON said in a statement that the deal, which is still to receive approval from anti-trust authorities, will likely be concluded in early 2010. It added that the final price paid will be determined at this time, based on the company’s net financial position.

The price agreed is some way below the €1.6 billion value which some analysts had placed on the business. E.ON put the grid up for sale last year after coming under pressure from the European Commission to do so.

The grid being sold has an extra high-voltage capacity (220/ 380 kilovolts) and is around 11,000 in length. It employs a staff of 650 located across sites at Bayreuth, Bamberg and Lehrte. TenneT said the combination of Transpower’s 380-kilovolt grid with TenneT’s Dutch grids will create Europe’s first cross-border transmission system operator. TenneT also operates the entire Dutch transmission system.

German transmission grids
Source: TenneT

TenneT is financing the acquisition through a committed loan from ING Bank and Royal Bank of Scotland for the entire amount of the acquisition. E.ON’s German regional distribution grids will remain under E.ON’s control following the transaction.

E.ON’s section of Germany’s transmission infrastructure is the largest of the four in the country. The remaining three are owned by EnBW, RWE and Swedish energy group Vattenfall.

Vattenfall is also thought to be nearing the conclusion of the sale of its German transmission grid in the next few weeks to a consortium of financial investors comprising Allianz, RREEF and Goldman Sachs, for around €500 million.

German grid operators are required to invest heavily in expanding the network over the next few years, including in the development of connections to the country’s offshore wind farms. TenneT said it would invest between €3 billion and €4 billion in upgrading its newly-acquired German grid over the next decade.

In the UK, French energy group EDF announced last month that it plans to sell its UK transmission grid as part of its efforts to reduce its debt level by €5 billion. This sale, which is likely to commence in December, could fetch EDF £4 billion (€4.4 billion; $6.7 billion).