Tennet, the Dutch state-owned electric utility company, has hired investment bankers to investigate an initial public offering (IPO) for its German subsidiary. The Dutch firm is looking to cut its ties with this capital-hungry enterprise after failed talks to sell to Berlin.
Tennet has lined-up bankers from Goldman Sachs Morgan Stanley ABN Amro Deutsche Bank and ABN Amro to plan an eventual listing of the German unit. The German unit could be worth more than €20bn according to sources familiar with the situation.
Dutch taxpayers are reluctant to spend billions on the modernisation and expansion of German infrastructure.
Tennet spent €4.8bn on German infrastructure by 2023 compared to €2.9bn for its own market.
Germany’s grids are key to the government’s goal of increasing the share renewable energy from 52 percent last year to 80 percent by 2030.
Grid operators will need to invest billions of Euros into energy distribution infrastructure in the next few years due to decentralised electricity generation and larger swings in production.
Big Four firm EY puts the investment needs of all German electricity grids at €281bn by 2030.
The German government was not interested in buying the unit at the enterprise value of €22,5bn. This plan fell through early this year.
The people claimed that a Frankfurt stock exchange listing for Tennet’s German operations could happen as early as next year. They cautioned, however, that Tennet is still exploring other options including a stake sales which remained a likely outcome over an IPO.
Insurance companies and infrastructure investors have invested in regulated utilities, such as grid operators. They operate on markets with high entry barriers and provide stable and reliable returns.
Tennet has been weighing options with Lazard to determine the best course of action for its German business.
Tennet declined comment. Goldman Sachs declined to comment. Morgan Stanley and Lazard didn’t immediately respond to requests for comments.
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