50Hertz quintuples 5-year investment plan to €23bn
Marco Nix (50Hertz Managing Director Grid Expansion Projects and Finance), Bernard Gustin (CEO Elia Group), Stefan Kapferer (Chairman of the 50Hertz Management Board). (from left to right). Image courtesy 50Hertz.
German transmission system operator 50Hertz has announced that by 2028, nearly €23 billion ($25.1 billion) will be invested in grid infrastructure, five times more than during the previous five-year regulatory period.
50Hertz, owned by Elia Group, stated in a release the investment plan will be divvied up across overhead lines, submarine and land cables, substations, digitalisation and other technologies during the fourth regulatory period, from 2024 to 2028.
The investment comprises 60% in debt financing, 20% from shareholders’ equity and 20% from cash flow from operating activities.
Commenting in a release was Marco Nix, the company’s chief financial and investment officer: “We keep pursuing our growth course on the healthy economic foundation of 50Hertz as well as the entire Elia Group. Solid credit and sustainability ratings emphasise our attractiveness to investors and demonstrate that we are following the right path.”
The grid developments come as secure and cost-efficient integration of renewable energy in the power grids continue to be a pain point for the operator.
In the eastern German states as well as in the federal city states of Berlin and Hamburg – the control area of transmission system operator 50Hertz says 73% of electricity consumed was generated by wind, solar and biomass installations.
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Said Stefan Kapferer, CEO of 50Hertz, at the company’s annual press conference: “This is very good news. Meanwhile, there is a growing number of difficulties in terms of affordability and system stability.
“That is why the further growth in the photovoltaic segment in particular should be guided by more realistic assumptions about the expected electricity consumption, by the development of the grid infrastructure and by increased storage capacities to support the grid.”
Falling energy prices
Kapfer warned that large upward and downward price fluctuations are “a clear warning signal from the electricity market.
“The framework conditions for the feed-in of renewable energy and adjustable power plant capacities need to be adjusted quickly. New power plants need to be built at locations in support of the grid throughout the country, including eastern Germany.”
50Hertz is the latest to warn of price fluctuations.
TenneT, which has operations in the Netherlands and Germany, reported a fall in revenue, courtesy decreasing energy prices.
A week prior, the country’s largest DSO, E.ON, announced a decrease in their EBITDA, saying they would not raise investments in their next plan due to a lack of visibility on Germany’s future regulatory framework.
Added Kapferer: “In the next legislative period, we furthermore require a paradigm shift if the share of renewable energy keeps growing: the principle of ‘as much as possible, as quickly as possible and completely uncontrolled’ needs to be replaced by the principle of grid support.
“The current approach to promote renewable energy rewards the highest possible electricity feed-in. In the future, targeted incentives should be established for development as well as scheduling in support of the grid.”
Tailwind support from Elia Group
Days prior to the investment plan from 50Hertz, parent company Elia announced plans to strengthen their equity base.
This will be done in two steps.
First, by raising €850 million ($927.3 million), to be subscribed to by the company’s main shareholder Publi-T/Next Grid Holding, ATLAS Infrastructures (together with The Future Fund), BlackRock Inc., and CCP Investments.
Second, immediately after closing this private placement, the new partners committed to participating in a €1.35 billion ($1.47 billion) rights issue, pro-rata to their stake following the private placement.
The comprehensive package will strengthen the Group’s equity base of €2.2 billion ($2.4 billion) for the year.
50Hertz is calling the package a tailwind for their growth course.
Said Bernard Gustin, CEO of Elia Group: “This transaction will support the future growth of the Group in Belgium, Germany and international markets. It will enable us to implement our investment plan for the next few years.
“50Hertz is and will remain an important pillar in our multinational group of companies, and we as the Elia Group are also a factor of stability for the German energy transition. We are very happy that we have a strong partner at our side in Germany in KfW Bankengruppe for the challenging years ahead.”
The 50Hertz control area covers Brandenburg, Mecklenburg-Western Pomerania, Saxony, Saxony-Anhalt, and Thuringia, as well as the city states of Berlin and Hamburg. Within these regions, 50Hertz serves approximately 18 million people with electricity.
The company aims to integrate 100% renewable energies securely into the grid and system by 2032.
The company currently has 900km of power lines under construction.
