The German government's proposed 500 billion euros infrastructure package has put the potential acquisition of the German unit of Dutch state-owned power grid company Tennet back on the agenda.

Tennet aims to find a solution for its German grid business, valued at around 20 billion eruos, by the end of 2025. An IPO or a sale to investors are possible options, CFO Arina Freitag said last week during the annual results presentation. If the German government wishes to participate, the door remains open.

Tennet and German development bank KfW ended their negotiations over a full sale of Tennet Germany without agreement in June 2024. And ruling by the German Constitutional Court had temporarily nullified the government’s financing options. KfW was advised in the talks by Citigroup, while Tennet was advised by Lazard and ABN Amro. The Dutch government had engaged Rothschild. After the failed deal, Morgan Stanley and Goldman Sachs were brought in to explore an IPO.

With the proposed easing of the debt brake, new opportunities have emerged. KfW has previously acquired stakes of 20% in transmission system operator 50Hertz, and 24.95% in Transnet BW, on behalf of the government. In the previous administration, the Greens had pushed for the nationalisation of transmission system operators under the concept of a „Deutsche Netz AG“ to accelerate the multibillion-euro expansion of power highways connecting offshore wind farms in the north to factories in the south.

KfW would have coordinated this effort. However, it remains unclear what the new CDU-SPD government, which is in the process of forming, plans to do. „First, the new government's strategic position on Deutsche Netz AG must be clarified“, a KfW spokesperson said in response to an inquiry.

Since the failed sale in June 2024, Tennet and the Dutch government have been pursuing alternative solutions for the long-term financing of the company’s German operations. To facilitate investor participation, Tennet reorganised itself into two independent national transmission system operators – Tennet Netherlands and Tennet Germany – under a holding structure, as of January 1. At the same time, Tennet Germany appointed Tim Meyerjürgens, previously COO of Tennet Holding, as its CEO. In 2024, Tennet and the Dutch government agreed on two loan facilities totalling 44 billion euros, to finance investments in the Netherlands and Germany through 2026. The loans are on market terms.

Tennet increased its investments by 38% in 2024 to 10.6 billion euros, and carries a heavy debt burden of 28.4 billion euros. Before a sale or IPO, an agreement with bondholders must be reached on how much of this debt will be transferred to Tennet Germany.

Investors are also demanding higher returns on grid investments from the Federal Network Agency. And Eon CEO Leonhard Birnbaum has warned that without an increase, investment plans may be put on hold.