After more than two years of negotiations, the talks are now entering the final stretch. The German federal government is set to acquire a 25.1% stake in transmission system operator Tennet Germany, via a multibillion-euro transaction carried out by state-owned development bank KfW.

In a first step, existing shares will be acquired from the Dutch state. A framework agreement to this effect has been reached between the contracting parties, according to people familiar with the negotiations. Tennet Holding declined to comment, as did the German Ministry for Economic Affairs.

The federal government has already earmarked 7.5 billion euros for the Tennet investment in its 2026 budget. In the initial step, around 3.5 billion to 4 billion euros will be spent on the existing shares. It remains unclear whether additional shares from future capital increases or existing shares held by the Dutch will subsequently be acquired to maintain the 25.1% stake. Berlin favours the purchase of newly issued shares, but would require subscription rights and the consent of the institutional investors set to join Tennet Germany’s shareholder base.

In September, it was agreed that the Dutch civil servants’ pension fund ABP, via its asset manager APG (11.5%), Singapore’s sovereign wealth fund GIC (11.5%), and Norway’s sovereign wealth fund Norges Bank Investment Management (23%) would join Tennet Germany as new investors. Over the next four years, the three new shareholders will inject up to 9.5 billion euros in fresh capital in several tranches. These funds are needed to expand the grids that transport electricity from wind farms in the north to factories in the south. In return, the new investors will receive 46% of the shares, while Tennet Holding is set to retain a 54% majority under the current plans.

Tennet Germany is being valued at 40 billion euros including debt, corresponding to 10.4 billion euros in equity prior to the capital increase. This represents 1.1 times the regulated asset base – the total value of the company’s power grids as regulated by Germany’s Federal Network Agency.

Tennet is being advised by investment banks ABN Amro and Lazard, as well as law firms De Brauw Blackstone Westbroek and Hengeler Mueller. The institutional investors are advised by RBC Capital Markets and Clifford Chance. Citigroup is advising the federal government and KfW, while Rothschild is acting for the Dutch government.