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In setting our financial policy, we strive for an adequate return on capital and an affordable cost of electricity supply for society. In managing our business, we pursue operational excellence. To keep pace with rising demand and the need for more capacity as we switch to renewable energy sources, we are investing substantially in upgrading and expanding our high-voltage grid. This requires ongoing access to funding. Thanks to our solid financial position, we enjoy good access to the financial markets. To maintain this, we need to keep our credit rating at least in the 'A' category. This requires that we generate acceptable returns in line with our risk profile and that financial leverage is at a level commensurate with our credit rating.

InputStrategic prioritiesChallengesOutput
EUR 12.1 billion invested capitalMaintain access to capital markets and equity capitalFinancing our investments effectively and maintaining our creditworthinessUnderlying EBIT of EUR 834 million
Regulatory regimePursue operational excellenceBalancing between applying latest technology and achieving capex efficiencyROIC of 7.7%
Maximising opex efficiency during the rapid growth of our organisation

Monitoring and managing the performance of our business is based on underlying financial information and not on IFRS-reported financials. Underlying financial information involves the recognition of regulatory receivables and payables, which – based on the current regulatory framework – can be recouped or are required to be returned through future grid tariffs (see section 2 of our consolidated financial statements). The main requirement for the recognition of regulatory receivables and payables is the applicable regulations in the Netherlands and Germany, which includes the future reimbursement/settlement through grid tariffs (click here). Under IFRS, reimbursement/settlements through future grid tariffs are not taken into account. Consequently the balance of any expense or income is not recognised as a regulatory asset or a liability under IFRS.

Underlying results

(EUR million)201620152014
Operating expenses2,4712,3001,623
Profit for the year523681418


Underlying revenues decreased by EUR 63 million to EUR 3,227 million for 2016, mainly because of the decrease in system service revenue. A substantial part of the system service revenue is related to the reimbursement of energy feed-in expenses and congestion management measures in Germany (2016: revenue of EUR 773 million). Overall these pass-through expenses significantly decreased in 2016, resulting in less regulatory reimbursement and, therefore, lower revenues for Germany (see paragraph on grid expenses of this chapter). Since TSOs cannot directly influence these kinds of expenses, we are allowed to pass these expenses to society via future tariffs and as such these expenses do not affect our underlying EBIT.

The decrease in our revenues is partly offset by the additional revenue generated by our growing asset base and by our investments in Germany and the Netherlands. Furthermore, a change in the Dutch regulatory framework (effective as of 1 April 2016) resulted in immediate compensation of financing expenses from the start of large projects falling under the Dutch national coordination regulation for energy infrastructure  'Rijkscoördinatieregeling', which positively affected our revenue in the Netherlands. Also revenue was positively affected by a favourable outcome of legal proceedings for the reimbursement of certain transmission costs over the period 2009-2011, resulting in a one-off positive impact of EUR 21 million. Moreover, the final court ruling in TenneT's appeal against the efficiency benchmark score for the regulatory period 2014-2016 positively affected our revenue by EUR 14 million. These effects were partly offset by the decline in allowed regulatory return on capital from 6.0% in the previous regulatory period (2011 – 2013) to 3.6% in this regulatory period (2014 – 2016).

Operating expenses

Besides depreciation and amortisation expenses, our operating expenses mainly consist of grid expenses, of which the majority are reimbursed in future tariffs and therefore do not affect our underlying EBIT. Grid expenses consist of expenses for measures taken to ensure the security of supply and costs for servicing and maintaining the systems used for the primary operating processes.

Generally, ensuring the security of supply at all times is becoming more complex due to the integration of the European electricity market and the energy transition. Over the years, electricity has been increasingly traded across national borders following primarily the different price levels in Europe, but resulting in congestions due to the capacity restrictions. Also energy feed-in from renewables especially in Germany has increased significantly and led to congestions in our grid that we have to solve.

Furthermore, costs for servicing and maintaining the systems used for the primary operating processes have increased because we have more assets, especially offshore connections, in operation since 2014.

Grid expenses in Germany in 2016 decreased compared to 2015 due to lower energy feed-in. This resulted in fewer redispatch measures, and therefore expenses, in Germany to resolve the congestions and ensure security of supply. Furthermore the expansion of our grid (for example with the 'Frankenleitung' power line in Franconia) led to a noticeable relief of the German grid and therefore fewer redispatch measures.

Grid expenses in the Netherlands increased mainly due to transmission restrictions in the northern part of the Dutch grid. Basically, we were unable to transmit all energy flows through this part of the grid and more grid measures had to be taken to resolve the restrictions in 2016. For 2017, a package of measures has been taken to relieve the pressure on this grid and reduce these expenses.

Furthermore, energy has to travel longer distances due to the geographical spread of renewable energy sources and there is increased energy transmission between European countries, all of which is increasing grid losses. In 2016, expenses for grid losses amounted to EUR 161 million (2015: EUR 148 million).


Underlying EBIT decreased from EUR 1,075 million in 2015 to EUR 834 million in 2016. As the chart shows, special items did not affect 2016 EBIT as much as they did in 2015 (see separate paragraph). EBIT excluding special items is in line with the previous year, i.e. EUR 701 million in 2016 compared to EUR 704 million in 2015.

Special items

As indicated, our results are affected by special items. In our view, specials items are items that do not arise directly from the ordinary course of our business or items that, due to their size and nature, must be considered separately for a meaningful analysis of our results. In aggregate, these items amounted to a positive EBIT effect of EUR 133 million in 2016. The most significant special items affecting 2016 EBIT are: 

  • Offshore reimbursement in Germany received in excess of costs; we receive a fixed percentage reimbursement over the capital invested in offshore projects for operating and maintenance costs during the investment measure phase of projects. With a significant number of offshore projects going into operation at the end of 2015, the actual spending on operating and maintenance during the year 2016 exceeded the fixed percentage reimbursement for some connections.
  • Reimbursement transmission costs for 2009-2011; as noted above, the court in the Netherlands decided in favour of reimbursing certain past transmission costs resulting in additional revenue.

The special items in 2015 related mainly to the offshore revenues received in excess of costs and the release of offshore provisions, as well as the impairment reversal of regulatory assets in the Netherlands. For information regarding the 2015 special items, see our 2015 annual integrated report.


We continue to invest in our grid in order to maintain a high security of supply and to facilitate the energy transition in the Netherlands and Germany. Capex totalled EUR 1,848 million in 2016 and decreased compared to 2015. The decrease is due to large, mainly German offshore, projects completed in the past years and new large projects being at an early stage with a focus on planning and licensing for which the majority of the capex will come in the upcoming years.

In 2016, DolWin2 became operational, allowing us to transmit almost 5.0 GWH of offshore wind energy to the German grid. As mentioned, the failures we encountered with DolWin2 were resolved at the beginning of 2017. Capex in 2016 relates mainly to the following projects under construction:

  • Netherlands: Randstad 380 kV, South-West 380 kV, North-West 380 kV and Doetinchem-Wesel.
  • Germany: the connection between Brunsbüttel and Denmark (Westküstenleitung), the connection between Dollern and Denmark (sections Hamburg/Nord-Dollern and Audorf-Hamburg/Nord), DolWin3, Borwin3 and Nordergründe.
  • Interconnections: COBRAcable between Denmark and the Netherlands, NordLink between Germany and Norway.

For further information on our projects, click here.

Capital structure and financing

Our financing strategy aims for a solid financial position, with sufficient flexibility and resilience to manage any necessary or enforced changes to our operations or in the regulatory domain, as well as providing adequate funding to carry out our extensive investment programme. Full access to the financial markets against favourable conditions is a prerequisite for this. Senior unsecured credit ratings for TenneT Holding B.V. remained unchanged in 2016 and were reaffirmed by Standard & Poor’s (A- / stable outlook) and Moody’s Investor Service (A3 / stable outlook) in May 2016.

"Green financing instruments are the perfect way to complement the transition to renewable electricity."
Otto Jager, Chief Financial Officer TenneT

"TenneT's green bonds fit perfectly with our corporate philosophy of integrating sustainable developments in our investment management. Therefore, Mirova highly appreciates the initiative of TenneT - as one of the few European corporates - to globally promote sustainable investment with these instruments."
Chris Wigley, Senior Portfolio Manager at Mirova

In addition, Moody's Investors Service awarded our newly-issued green medium-term notes a Green Bond Assessment of GB1 (Excellent). Also, Oekom assessed our social and environmental performance and reaffirmed our overall CSR rating of B- (status Prime). Sustainable rating agency Sustainalytics placed us within the top 5 percentile of the utilities sector and classified us as “outperformer” on the environment in 2016. These ratings and recognition boost our investor appeal from a CSR-perspective.


Underlying equity grew again and amounted to EUR 4,792 million at year-end 2016 (at year-end 2015, EUR 3,803 million). This increase is due to the committed part of the equity contribution from our shareholder (EUR 780 million) and this year's comprehensive income less the dividend paid to our shareholder (EUR 196 million) and to holders of our hybrid securities (EUR 25 million net of tax).

On 12 July 2016, TenneT's shareholder, the Dutch State represented by the Ministry of Finance, announced that it would contribute up to EUR 1,190 million in additional equity over the 2017-2020 period to finance TenneT's Dutch onshore- and offshore investment portfolio. The final tranche of EUR 410 million in 2020 is conditional and will only be granted if the shareholder considers it necessary, taking into account TenneT's financial situation at that time. The process for the Dutch State to make an additional capital injection in TenneT was formally completed in December 2016. TenneT received the first tranche of EUR 150 million early March 2017.

Net debt position

Our net debt position increased from EUR 5,736 million at the end of 2015 to EUR 7,347 million in 2016. This increase reflects the higher funding provided for our capital-investment programme.

Issuance of green loans

We issued our first green Schuldschein of EUR 500 million in 2016. The green Schuldschein secures financing for a portfolio of offshore grid connections.

Adding the green Schuldschein as a financing instrument, next to the green Bonds, to our capital structure and investing the money raised in offshore grid connections underlines that we are serious about sustainable financing and investing. The success of the green Schuldschein issue also gives us access to a new financing market as a means of financing our investment programme, now and in the future.

In May, we successfully completed our inaugural green Schuldschein issue. The EUR 500 million Schuldschein is a type of privately-placed German debt, with terms similar to an unsecured bond issue. We also successfully issued a total of EUR 1.5 billion in green bonds in 2016, making us the largest corporate issuer of this type of financing in the Netherlands. In addition, we borrowed EUR 125 million from the European Investment Bank (EIB) in the form of a loan, maturing in October 2038, with linear repayments starting in October 2019. This was the last tranche of committed EIB facilities. A total of EUR 1.2 billion is outstanding under EIB facilities at year-end 2016.

Our diversified maturity profile of senior debt helps us minimise our refinancing risk. The chart shows our annual mandatory redemption profile at year-end 2016. The redemptions in 2017 relate entirely to short-term commercial papers. To ensure we have sufficient cash and commercial credit facilities available to meet our actual and expected obligations on a rolling 12-month basis at all times, we have a EUR 2.2 billion revolving credit facility (RCF) in place. At year-end, no amount was outstanding under the RCF. We also increased our uncommitted credit lines up to EUR 450 million in 2016 (2015: EUR 375 million).

The effective interest rate of our entire debt portfolio (excluding hybrid securities) decreased by 0.68% to 2.47% for 2016 (2015: 3.15%) due to new borrowings at favourable market rates.
For more information on our capital management policy and procedures and financial risks, see section ‘Capital structure and financing’ of our consolidated financial statements.

FFO/Net debt

A key measure we use to monitor our financial risk and ability to repay our debt is funds from operations (FFO) divided by net debt. This is a measure of our earnings from net operating income plus depreciation, amortisation and impairments minus gains/losses on the disposal of assets we generate compared with the level of debt we hold.
In line with the requirements of the credit agencies Standard & Poor’s and Moody’s Investor Service, our internal policy is to maintain a FFO to net debt ratio of at least 8%. As our net debt increased and EBIT decreased (see paragraph on financial results), our FFO/net debt ratio decreased from 19.7% in 2015 to 15.5% in 2016.

Our financial challenges

1We have projected 25 billion investment programme for the next 10 years. Our main challenge, from a financial perspective, is to finance our investments as efficiently as possible and to maintain our creditworthiness for (potential) investors.We will continue to finance substantial sums, through issuing green bonds and green Schuldschein. By using different types of financing we achieve a diversified maturity profile for our senior debt, reducing our refinancing risk and supporting our solid financial position. Furthermore, by seeking dialogue with our shareholder, the Dutch State represented by the Ministry of Finance, we obtained an additional equity commitment of EUR 1.2 billion (of which EUR 0.4 billion is conditional) over the 2017-2020 period to finance our Dutch onshore and offshore grid investment portfolio. Thanks to a stable credit rating, we have good access to financial markets to fund the necessary investments in our infrastructure.
2Maintaining a balance between applying the latest technology to our grid investments and achieving sufficient capex efficiency.Through dialogue with the regulator and other stakeholders, we seek to create a regulatory framework that integrates new technology in our transmission grid in a cost-effective way which benefits our customers. We are also further harmonising our project control processes and standards to ensure our projects are executed as efficiently as possible, control project risks and meet the required quality standards.
3The rapid growth of our organisation in terms of our objective to maximise operational expenditure efficiency.We focus continuously on improving internal processes and performance culture (including our feedback culture) through our Power to Perform programme. We are undertaking a company-wide LEAN scan in 2017 to help us to deal with the increasing amount of work in the future without massively increasing our resources and complexity. The efficiency targets set by our regulators are explicitly taken into account in our target-setting in the budget process.

Looking ahead

Our financial result is healthy and our outlook positive. Our growing asset base and investments in recent and upcoming years will lead to a further increase in revenues and EBIT, but also to higher operating expenses. Given that our regulators are placing increased pressure on opex efficiency, these higher operating expenses could pose a challenge.

We expect to invest EUR 25 billion in onshore and offshore grid infrastructure over the next ten years. One development regarding our (future) investments is that we were officially appointed to build the Wolmirstedt–Isar connection, now called SuedOstLink in Germany. This will be TenneT’s second-largest DC project in Germany after SuedLink. In the Netherlands, we launched the first tenders for our Dutch offshore projects. Depending on the speed and magnitude of our investment portfolio, additional equity financing may be required to supplement the Dutch State's commitment to contribute additional equity for financing of our Dutch investments.

In the autumn of 2016, the regulatory framework for the Netherlands was set for the period 2017-2021. During this regulatory period the nominal weighted average cost of capital (WACC) will decrease to 3.2% after tax in 2021. The German regulator has also announced the regulatory return on equity for the period 2019-2023. In Germany, the return on equity was set at 5.6% after tax. Both the post-tax WACC in the Netherlands as well as the post-tax return on equity in Germany are at lower levels than in the current regulatory periods (i.e. Netherlands: 4.2%; Germany: 7.4%). This will also increase our financing needs.