KEMA executes Technical & Environmental Due Diligence for TenneT acquisition of E.On network

Technical & Environmental Advisor in first cross-border transmission network acquisition

November 17, 2009 – KEMA has been commissioned by Dutch Transmission & System Operator (TSO) TenneT to execute a Technical & Environmental Due Diligence, concerning it’s acquisition of Transpower, the German long-distance power grid company from German utility E.On. The transaction, made public last week at a joint press conference in Düsseldorf, was valued at EUR 885 million. With this acquisition, the first cross-border TSO has become a fact. KEMA, that has a broad experience in Due Diligences, acted as Technical & Environmental Advisor to the acquiring party. 

Thorough assessment
Part of a Technical and Environmental Due Diligence is a thorough assessment of the condition of the existing assets and the operation of the TSO. This results in a risk list: overview of risk items, high level description and assessment of likelihood and effect, i.e. the impact on business core values. Also, mitigation measures are defined in order to reduce the effect. To the largest extent possible, the risks are quantified and become part of the expenditure programme. This expenditure programme can comprise of. additional projects as part of capital, replacement and/or operational expenditures.

Scenarios for further analysis
In the past few years, the European energy market has rapidly evolved. Trends, such as deregulation, privatization and development towards one European market have lead to a number of changes for both generation companies and grid operators.In the last decade, only a limited number of players were active on the generation side and developments were stable.Nowadays, the number of generation initiatives has burgeoned, creating a more uncertain environment for grid operators. Given the tasks and responsibilities of a TSO, these developments have a major impact on its operations and investment planning. Crucial part of a Due Diligence nowadays, is a thorough assessment of the expected developments in generation and demand in the control area. KEMA develops scenarios as starting point for the further analysis of the necessity of network investment projects.

Expected investments levels
These external and internal factors are the drivers for potential investments. Final result of a Due Diligence is a report containing the scrutinized risks and the assessment of the necessity of the proposed network investment programme. KEMA, with its worldwide experience, is able to determine the expected investment levels based on the previously determined risks and scenarios. Of course, this expected investment programme is compared to the proposed investment programme of the Seller and differences are explained.