* Grid regulator to ease planned cuts to returns-source
* Returns will be cut, but less than suggested-source
* Ease applies to long-distance power grids-source
By Peter Dinkloh
FRANKFURT, Oct 25 Power grids in Germany are
set for a smaller hit to their profitability than initially
planned by the grid regulator, said a person with knowledge of
That would make investment in power grids more attractive
as Europe's largest electricity market seeks billions of euros
to make its energy supply greener.
The regulator has to review returns on the country's power
grids at a particularly sensitive time as Germany needs
investments in new power lines to connect windfarms in the
north with industrial consumers in the south.
The country is shutting down all its 17 nuclear power
stations. Large consumers in the south that relied on those
plants need to get access to new power stations.
In September, the Bonn-based regulator, Bundesnetzagentur,
initially proposed to reduce returns on newly-built power grids
by 1.09 percentage points to 8.2 percent for the next
regulatory period from 2014 to 2018 and had sought comments on
the proposal. The returns refer to the grid operators' own
invested capital in new grids as opposed to borrowed capital.
Due to constant demand for power, power grids are
considered a safe investment, comparable to government bonds.
As yields on benchmark 10-year German bonds have fallen to 2
percent, the regulator also proposed to cut returns on energy
Arguments from the four operators of long-distance grids in
Europe swayed the agency to soften their decision, said the
person from within the agency.
The person declined to be identified, as the agency has not
finally decided on how much they will reduce the cut on
"We will accommodate" the demands of the network owners,
said the person. The person said the comments refer only to
The investors will also be allowed to charge their
customers for any investments sooner than under the current
regulation, which foresees a time span of two years between
investment and charging, said the person.
"Investors will possibly be able to charge users of the
grid immediately after they build a power line," said the
The four grid firms are 50Hertz, owned by Belgian Elia and
Australian fund IFM, TenneT, Amprion, 75-owned by a group of
financial industry investors lead by Commerzbank (CBKG.DE), and Energie Baden-Wuerttemberg's (EBKG.DE) grid unit.
(Reporting By Peter Dinkloh; editing by Carol Bishopric)