German lender KfW to buy 20% stake in 50Hertz with Elia help

Belgian transmission system operator (TSO) Elia System Operator SA/NV will buy the 20% stake it does not already own in 50Hertz Transmission GmbH just so it could immediately sell the interest to German state-owned bank KfW.

Elia said in a statement on Friday that it has exercised its pre-emption right on the 20% stake in Eurogrid International, which is the holding company of German sector player 50Hertz. Immediately after buying the stake from Australian investment manager IFM Global Infrastructure Fund, Elia will sell it to KfW at the same financial conditions to foster a Belgian-German cooperation regarding critical grid infrastructure, it said.

Separately, the German government explained that KfW will make the investment for security reasons and that it is a temporary measure. The plan is to sell the shares again in the future.

With this move, Germany is blocks the latest effort by China’s State Grid to buy into the TSO.

Elia increased its 50Hertz stake to 80% from 60% in April for about EUR 989 million (USD 1.15bn) in order to realise the complete potential of its growth strategy. However, the Belgian company did not consider buying the remaining 20% of 50Hertz at the same terms to be necessary from a strategic and financial perspective, it noted today.

50Hertz Transmission is a TSO active in the North and the East of Germany, one of four that operates in the country. The company is responsible for the transportation of the wind power generated by plants in the German Baltic Sea to the onshore power grid.

Elia expects all transactions to close in the third quarter of 2018. It confirmed its plan to finance the acquisition of 20% of Eurogrid through the issue of long-term debt instruments, including EUR 700 million of hybrid bonds and EUR 300 million of unsubordinated senior bonds.

(EUR 1.0 = USD 1.166)

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