Tennet's purchase of German high-voltage netwerk
The Netherlands Court of Audit audited the purchase of Transpower, the German high-voltage network, by TenneT, the Dutch public-sector network operator. The main audit questions were: did the Minister of Economic Affairs and the Minister of Finance ensure that the acquisition, which cost €885 million, was in the Dutch public interest? And did they do enough to prevent the Dutch State from running any financial risks as a result of the transaction?
Conclusions
From the very outset, the Minister of Economic Affairs supported TenneT’s plans for acquiring Transpower (the German electricity network) in 2009. The Minister was also closely involved in the transaction. She did not demonstrably assess whether it was in the public interest of guaranteeing a reliable, affordable and sustainable power supply in the Netherlands.
The Minister of Finance pointed out that the acquisition came with certain financial risks and tried to mitigate these. Nonetheless, the State faces a risk that Dutch public finances may have to be used in order to fund TenneT’s investments in Germany.
Both ministers could have given the Dutch House of Representatives more information on the financial risks to which the State is exposed as TenneT’s sole shareholder.
The above gives rise to the question of whether the purchase of a privately owned foreign electricity network like Transpower is consistent with an activity which Parliament has stipulated should remain in public hands.
Recommendations
We urge the Minister of Economic Affairs to inform the Dutch House of Representatives as to whether the benefits that his predecessor and the Minister of Finance believed in 2009 would accrue from the acquisition of Transpower have indeed materialised in practice.
We recommend that the Minister of Finance provide the House of Representatives with complete and accurate information on the scale of the State’s involvement in Transpower and TenneT’s investments in Germany. The Minister should also inform the House about the costs, benefits and risks associated with this involvement. To what risks is TenneT exposed? What risks are posed to the electricity bills paid by households, businesses and non-commercial organisations? And what risks are posed to public finances? The Minister of Finance should make clear which risks have been mitigated and which have not and, in the latter case, why not.
Finally, we recommend that, when state-owned corporations undertake large-scale investments, the Minister of Finance make an arrangement with the House of Representatives about the information that is to be provided to the House.
Official responses
The Minister of Economic Affairs and the Minister of Finance responded to our report on 23 January 2015, emphasising that they had acted in accordance with the government policy on State shareholdings. The ministers believe that the risks associated with TenneT’s activities in the Netherlands and Germany are separate. The ministers claim that these risks are borne by the shareholder, i.e. the State, and not by electricity consumers. While they agree with us that the Dutch high-voltage network should not be exposed to an unacceptable level of risk, they do not see any conflict between TenneT’s activities as a public-sector network operator and as the manager of part of the German electricity network.
Writing in our afterword, we argue that such a conflict does indeed exist. It is up to the government and Parliament to decide whether a state-owned corporation should engage in foreign activities in relation to which it is unclear whether the purported benefits for Dutch electricity consumers will outweigh the disadvantages and risks. In our view, the minister does not take account of the fact that Dutch taxpayers may ultimately bear the risk to which the shareholder is exposed if Dutch public finances have to be used.