TenneT took further steps during the first six months of 2015 to increase the security of electricity supply and further integrate the European electricity market. These core activities were complemented by a solid financial performance.
Security of supply
On 27 March 2015 the Netherlands experienced the first large power failure in 18 years, interrupting the flow of electricity to approximately one million households for several hours. Including this interruption TenneT maintained the availability of its high-voltage grid at a level of 99.9976% during the first half of 2015.
“When it comes to electricity supply, TenneT remains one of the best-performing European transmission grid companies,” says Mel Kroon, CEO. “We all take the continuous availability of electricity for granted in the Netherlands and Germany. This power failure has demonstrated how dependent we all are on a reliable supply of electricity. We regret the power failure, and will make every effort to prevent recurrence of such an incident in the future. Nevertheless, the risk of an interruption in the electricity supply can never be entirely eliminated.”
During the first six months of 2015, TenneT continued to invest heavily in additional high-voltage grid infrastructure in the Netherlands as well as Germany, both to ensure the continued high reliability of its electricity grids and to accommodate the rapidly rising share of renewable energy sources. Investments in tangible fixed assets rose by 70% from EUR 703 million in the first half of 2014 tot EUR 1,196 million this year.
As a result, both revenue and operating result (EBIT) grew significantly. Underlying revenue increased by 22% from EUR 1,146 million to EUR 1,395 million over the first six months of the year and underlying EBIT increased from EUR 368 million to EUR 490 million during the same period. In addition, EBIT was positively influenced by good performance (EUR 20 million) of the high-voltage cable between the Netherlands and Great-Britain, in which TenneT holds a 50% stake, and by the incidental profit in connection with the merger of APX (EUR 12 million), a Northwest European electricity exchange in which TenneT held an interest.
CFO Otto Jager comments: “Our revenues are keeping pace with our growing asset base. For the moment operating and maintenance costs are lagging however, as many new connections are not up and running yet, resulting in extraordinary short-term EBIT performance.”
2 In contrast to current IFRS, 'underlying' figures reflect regulatory assets and liabilities in connection with TenneT’s regulated activities. This implies that amounts resulting from past events and which are allowed or required to be settled in future grid tariffs are recorded as an asset or liability respectively.
Progress on grid expansion projects
In the Netherlands the construction of a number of large high-voltage infrastructure projects is well underway. In the northern part of the Randstad, TenneT is completing a ring connection to increase the security of supply in that part of the country. A fourth cross-border connection with Germany, running from Doetinchem to the German town of Wesel, is under construction with completion expected in 2017. In the southwest of the Netherlands, there has been intensive dialogue with stakeholders on alternative routes for a new connection linking future Dutch offshore wind farms to the high-voltage grid.
Also in Germany, TenneT made good progress as construction started for several onshore projects across the country as well as for the West Coast line connection between Germany and Denmark. For Suedlink, TenneT's largest onshore project that will connect the north and south of Germany through a direct current link, TenneT works closely with stakeholders to align their needs and requests with respect to the planned trajectory and technical solutions.
In the first six months of 2015, TenneT took into operation four offshore grid connections with a total capacity of 2,930 MW in the German sector of the North Sea. As a result, the total installed capacity for transporting wind energy from offshore wind farms to the onshore grid has now reached 3,500 MW. TenneT is ahead of schedule in realizing the offshore wind energy targets set by the German government. In the Netherlands, TenneT is making the necessary preparations for connecting five offshore wind farms in the North Sea to the onshore grid. These five wind farms shall have a total capacity of 3,450 MW.
Businesses and consumers alike are benefiting from an integrated European electricity market through more competitive electricity prices.
Starting May 2015, TenneT and a number of neighbouring transmission grid companies introduced a mechanism which allows electricity to flow and be traded more effectively across borders, referred to as "Flow-Based Market Coupling". This is expected to lead to electricity prices being more equal across Europe.
In February 2015, TenneT, together with the Norwegian electricity grid company Statnett and German state-sponsored bank KfW, took the decision to invest in NordLink, the first high-capacity power cable between Norway and Germany. The project won a silver medal in the German-Norwegian business award competition, recognising outstanding business opportunities between Germany and Norway. NordLink will complement TenneT's existing subsea power cables between Norway and the Netherlands and Great-Britain and the Netherlands, as well as three existing overland high-voltage connections between the Netherlands and Germany, with a fourth one under construction.
Issue of ‘Green Bonds’
In June 2015, TenneT issued its first two tranches of ‘Green Bonds’ for investments in the transmission of renewable electricity from offshore wind farms to the onshore electricity grid. This inaugural Green Bond issue demonstrates TenneT’s commitment to working with stakeholders and to continually improve and innovate its approach to a more sustainable energy future, while at the same time securing low-cost long-term financing to support its investment in three offshore wind energy transmission projects in Germany.
TenneT's objective to maintain high grid reliability at all times was put to the test by the solar eclipse on 20 March, which had a major impact on the entire European electricity supply system – particularly the German grid – due to strong fluctuations in solar power generation. TenneT and other European TSOs started preparations a year in advance and hence were able to handle the task well. During the first phase of the eclipse, TenneT Germany experienced a drop of 7,000 MW in solar power supply. In the second phase, around 15,000 MW of solar power was fed in. Due to cloudy weather, the Netherlands only experienced a small dip of approximately 100 MW.
Half Year Report
Read more about our Half Year Report 2015.