Electricity transporter and high-voltage grid operator TenneT has again made huge efforts in 2012 to strengthen and expand its grids in the Netherlands and Germany.
Revenues and profit increased in accordance with this growth. In 2012 TenneT invested EUR 1.6 billion. By doing this TenneT is facilitating the further sustainability of energy supplies and the integration of the Northwest European energy market. The high security of supply (99.99986%) which TenneT was able to offer again in 2012 has the reliable high-voltage network as a solid basis.
Mel Kroon, CEO: “TenneT finds itself in the middle of a rapidly changing energy playing field. The strong rise of shale gas, the German energy transition, inclusion of sustainable energy production, decentralised energy generation, European countries with very different (sustainable) energy strategies and the electrification of society. Such developments have a significant impact on our work as a cross-border transmission system operator and clearly demonstrate that our ambition of a true Northwest European energy market is a must. Investments in the Dutch and German grids are badly needed and we must continue to combine the high security of supply with appropriate prices for the transport of electricity.”
Eelco de Boer, CFO: “We have successfully strengthened our balance sheet with additional equity needed to support our sizable investment portfolio in Germany. Within the next two years further equity from our shareholder or third parties will be required to shoulder our Dutch investments as well.”
Use of underlying financial information compared to IFRS reported figures
Contrary to IFRS ‘underlying’ figures reflect regulatory assets and liabilities in connection with TenneT’s regulated activities whereas IFRS does not permit this. This implies that amounts resulting from past events and which are allowed or required to be settled in future grid tariffs are recorded as an asset or liability respectively.
TenneT’s 2012 Annual Report which is published today shows that underlying EBIT increased by 3% to EUR 362 million (2011: 353 million), while underlying revenues increased by 16% to EUR 1,789 million in 2012 (2011: 1,545 million). A large part of the increased revenues can be attributed to the reimbursement of energy and capacity expenses which are EBIT-neutral.
Underlying revenues further increased as a result of German offshore investments. As a result of a one-off gain in 2011 – following a favourable outcome of legal proceedings – total revenues in the Netherlands in 2012 were lower compared to 2011. On a normalized basis revenues in 2012 did show a growth of 9% in the Netherlands.
Strong growth can be seen in TenneT’s tangible fixed assets, mainly as a result of the investments in offshore projects in Germany.
Proceeds from new borrowings were used to finance the significant capital expenditures. Furthermore, in December 2012 TenneT and Mitsubishi Corporation confirmed their partnership in respect of two German offshore extra high-voltage cable projects (BorWin1 and BorWin2), resulting in a EUR 181 million financing cash inflow in 2012. January 2013 both partners signed a contract for an investment in two more offshore projects named HelWin2 and DolWin2.
Investments in security of supply and sustainability
The total investment portfolio of TenneT for the coming ten years amounts to approximately EUR 13 billion of which approximately EUR 5 billion in the Netherlands and EUR 8 billion in Germany (4.5 billion offshore and 3.5 billion onshore). While raising equity for the German investment portfolio is well on track, the equity required for the investments in the Netherlands still needs to be secured. This can be achieved through a capital contribution by the shareholder or by means of an initial public offering (minority stake). A decision on this is needed in 2013.
In the Netherlands more than 300 projects are either in their preparatory phase or implementation phase, including four large new high-voltage connections. The installation of the so-called ‘Randstad 380 kV’ project in the Randstad conurbation is progressing steadily. This connection will result in a structural improvement of the security of supply in this important economic region. The southern part of this project will be completed this year and in part installed underground.
In the coming years, TenneT will use more than 20 kilometres of cables underground in the Randstad 380kV-connection. This makes the Netherlands the leader in the field of innovative installation of high-voltage cables. Furthermore, TenneT’s work on the extensive Noordoostpolder wind park will contribute significantly to the growth of sustainable energy production in the Netherlands.
Tennet’s investment of approximately EUR 4.5 billion in the German offshore grid is expected to be met by entering into partnerships with investors. The agreements with Mitsubishi Corporation for investments in four offshore grid connections are successful examples of this. Talks are currently being held with other interested investors for the financing of other offshore projects in Germany. In the new German Energy Act important new regulations on liability and a development plan for offshore wind energy have been laid down, clearing the way for the further development of offshore wind energy.
Six huge offshore converter platforms are being constructed in the Netherlands, Germany and Dubai. Such converters are crucial to the success of offshore wind energy. For this, TenneT is using innovative and advanced technologies which have not previously been applied on this scale, a world first. The knowledge and expertise TenneT is currently acquiring in Germany is also invaluable for the Netherlands.
A European energy market
In the year under review, TenneT again took big steps in the role of initiator for the creation of a Northwest European energy market. Together with the Norwegian TSO Statnett and the German lender KfW, a cooperation agreement was signed for the development, construction and exploitation of a new subsea cable connection between Norway and Germany: NORD.LINK. This cable, with a capacity of a staggering 1,400 MW, will cost between EUR 1.5 and 2 billion and is expected to be ready at the end of 2018.
Furthermore, TenneT is preparing a new 380kV interconnector with Germany, which will from Doetinchem to Wesel (2015). The interconnection capacity with Belgium was increased from 1,400 MW to 1,700 MW in the year under review. In 2011, the BritNed cable was successfully brought into service. The NordNed cable between the Netherlands and Norway (2008) has proven to be a great success.
The consolidation of energy exchanges also plays an important role in reinforcing the international markets. In cooperation with other parties, TenneT is an important driver of the international growth of the APX-ENDEX energy exchange. It is essential that APX-ENDEX can continue its growth. For this reason APX-ENDEX has been split (March 2013) into a company for electricity and clearing and a separate company that focuses on gas and derivatives.
Press release, March 13, 2013; Image: tennet