Dutch Grid Giant Seeks IPO Amid German Sale Collapse

The Netherlands aims for an IPO for its state-owned grid company TenneT's German arm after a sale to the German government failed due to budget issues. This setback complicates TenneT's 160 billion euro investment plan and highlights challenges in meeting green energy goals. Alternative sales options are being explored.

The Netherlands will try to find another buyer or seek an IPO for the German arm of its state-owned electric grid company, after a sale to the German government foundered on Berlin's budget strains, the Dutch government said on Thursday. The collapse of talks is a headache for grid company TenneT, which is pursuing a 160 billion euro ($171 billion) investment plan - Europe's largest - and puts a spotlight on the two countries' commitment to meeting green energy targets.

In a letter to parliament, Dutch finance minister Steven van Weyenburg said he was informed on Wednesday by German officials that the deal for TenneT's German arm, estimated at 20-25 billion euros, would not go through. He said he was disappointed by the news, given Berlin had requested the deal itself in 2022 because the business was seen as crucial for Germany's energy transition. TenneT is the sole grid operator in the Netherlands and the largest in Germany.

"TenneT is preparing concrete options for a private sale, or partial sale, or initial public offering of TenneT Germany," Van Weyenburg wrote. "The German state has informed me it will support these alternative scenarios."

A German government source told Reuters it was possible Berlin might participate by purchasing a minority stake. "The complete sale is off the table. But state participation is not," the source said.

TenneT said in a separate statement it intended to follow through on its huge investment plan in the coming decade, much of it needed to build the network to support wind farms in the North Sea. Both sides said they were close to a deal in 2023 before Germany's budget crisis struck, leading Dutch Prime Minister Mark Rutte in May 2024 to make a personal plea to German Chancellor Olaf Scholz to make a bid.

TenneT said Germany's budget problems were squarely to blame for the deal's failure. "This announcement comes after the Federal Government of Germany informed the Dutch State that it cannot deliver on the planned transaction due to budgetary challenges," it said.

Germany's Economy Ministry was not immediately available for comment. Van Weyenburg said the Netherlands' own budget for 2024 faced a 1.6 billion euro shortfall as expected proceeds from the sale would not materialize, and the country would have to seek short and long term refinancing for TenneT.

The Dutch government has already given TenneT a 25 billion euro loan for 2024 and 2025. The company has around 20 billion euros in bond debt, and in May the Dutch government estimated it needs 31 billion euros in fresh equity, 13 billion on the Dutch side and 18 billion on the German side.

($1 = 0.9331 euros)

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