TenneT to boost investment in German offshore grid

Wed Mar 19, 2014 7:46am EDT

* German offshore grid investments to rise 3 bln euros

* One billion euros of equity already committed

* Profit nearly doubles on one-off payment

* TenneT to dispute new Dutch tariffs in court

By Geert De Clercq

AMSTERDAM, March 19 (Reuters) - Dutch state-owned grid operator TenneT said on Wednesday it has increased planned investments in its German grid by about three billion euros, boosting its total investment budget for the next decade to 16 billion euros.

Following its acquisition of E.ON's Transpower grid in 2010, TenneT owns 40 percent of the German electricity grid and plays a key role in Germany's post-Fukushima shift from nuclear to renewable energy.

In a statement on 2013 earnings the firm said that in the coming decade it plans to invest 11 billion euros ($15.30 billion) in the German grid - of which 7.5 billion offshore and 3.5 billion onshore - up from an estimate of 8 billion last year.

It also confirmed it will invest 5 billion in Dutch grids.

"The extra investments will mainly go towards our German offshore grid connections," a TenneT spokesman told Reuters.

TenneT's offshore investments focus on laying a network of subsea cables off Germanys' North Sea coast to connect windmills to shore, as well as convertor stations that convert their direct-current power to the alternate current used in homes.

In 2013 it invested 1.3 billion in the German offshore grid.

TenneT said it is expected to deliver 8 gigawatts of connection capacity for wind farms on the German part of the North Sea this year and the years to come.

It added it had also taken the first steps - with partner TransnetBW - towards the development of the 800 km direct current SuedLink line, which will provide combined capacity of 4 gigawatts to ship power from the windy north to Germany's industrial south.

Like all grid operators, TenneT struggles with getting approvals for new power lines. TenneT said that in the densely populated Dutch "Randstad" conurbation between Amsterdam and Rotterdam it is increasingly putting cables underground.

It is also installing its new 'Wintrack' electricity pylons, which the firm says generate significantly smaller electro-magnetic fields and have less visual impact in the landscape.

The new pylons, made of composite materials, look more like windmill masts than like the traditional steel lattice towers.

FINANCE

Chief Financial Officer Otto Jager said TenneT had already attracted about 1 billion euros of equity commitments for its German offshore activities, which he said has created a solid financial basis for its German investment portfolio.

The firm obtained 336 million euros in equity financing from longtime offshore partner Mitsubishi Corp, the European Investment Bank committed 500 million euros of debt financing and Copenhagen Infrastructure Partners (CIP) contributed 384 million in capital for the offshore project DolWin 3.

Critics say the huge investments are a stretch for the relatively small and unlisted Dutch firm, whose government shareholder does not want to fund German grid investments.

Two years ago, German regulator BNetzA refused TenneT EU-mandated certification, saying TenneT was unable to prove it had the funds to fulfil its obligations as a grid operator. The lack of certification - which TenneT is contesting in court - does not suspend TenneT's German operations.

"Combined with a strong shareholder to support our Dutch activities, we look towards the financial future of the company with confidence," Jager said on Wednesday.

TenneT said that its major investment obligations require "realistic, appropriate tariffs and a sound regulatory regime".

It said that Dutch regulator ACM's late 2013 review of tariffs for 2014-2016 will result in a significant drop in TenneT's regulated income in the years to come, which will have a negative effect on the required investments in the Dutch high-voltage grid and hurt its return on investment.

TenneT said it has filed an appeal against the decision with the Trade and Industry Appeals Tribunal (CBB).

TenneT's 2013 profit nearly doubled to 357 million euros, mainly due to a one-off reimbursement of offshore expenses, as revenue rose 27 percent to 2.2 billion. ($1 = 0.7188 Euros) (Editing by William Hardy)