Press release

Stedin Group experiences pressure on the result due to increased costs of investments to facilitate energy transition and economic growth

Rotterdam, 29 July 2021 – Stedin Group invested €304 million in the maintenance and expansion of its gas and electricity grids in the first half of 2021, a year-on-year increase of €36 million (first half of 2020 € 268 million). Partly due to the one-off costs for early refinancing of loans, the net result for the first half of the year comes to a loss of €8 million. 

Due to Stedin’s ever higher investments to facilitate the energy transition and economic growth and meet the ensuing changes in energy demand, its costs and depreciation expenses are increasing. The revenues for these investments are paid to the grid operator over a period of 40 years, which has an adverse effect on the operating result. This effect is well known and the operating result of €65 million is therefore in line with expectations. Furthermore, Stedin incurred a one-off increase in capital expenses this spring due to the refinancing of long-standing loans at a more favourable interest rate, due to which a net loss was recorded.

Economic growth

The Netherlands is working hard to achieve the goals in the government’s Climate Agreement. This involves constructing more solar and wind parks, changing the way homes are heated and switching to electric vehicles. Stedin’s service area is a metropolitan and industrial area with major economic and industrial development that attracts lots of businesses. In addition, the Dutch government has plans for the construction of over 390,000 new homes in this area alone by 2030. Those investments come on top of the current climate targets, which are being raised further by the EU. All this will require a large expansion of our energy grid.

Sharing the costs

Stedin Group reached a major milestone in June. A large majority of Stedin’s shareholders subscribed for additional shares in order to increase the company’s equity by €200 million. However, based on the current climate plans, the grid operator has a capital requirement of approximately €1 billion for the period up to 2030, and that is likely set to increase, as climate targets are being raised further. Stedin has adopted several strategies to meet this challenge. Stedin is implementing a savings programme aimed at cutting €180 million in costs up to 2025. In addition, Stedin will together with other grid managers continue the dialogue with the government and the regulatory authorities on how the energy transition should be financed. We are also looking at options for admitting new shareholders.

Danny Benima, CFO: ‘It is becoming increasingly clear that the overhaul and expansion of our energy system to facilitate the energy transition and economic growth will cost a lot of money. Everyone will have to bear part of the costs of the energy transition. That includes us as the grid manager, as well as the government, our regulators, our new shareholders and our customers. This issue can only be resolved if all parties work together to share the costs.

In the second half of the year, Stedin and its shareholders will again start discussions on how a potential capital requirement for the next period can be met. At that time, we will also know the final details of the ACM’s new method decision, which sets out the basis for the regulation of rates set by regional grid managers.

Major regional differences

Stedin has noticed major regional differences in the implementation of the energy transition. In rural parts of our service area, such as Schouwen-Duiveland, Tholen and Goeree-Overflakkee, it is a major challenge to ensure that our customers can supply electricity generated by solar panels to the grid. By contrast, in other areas demand for electricity may increase significantly. The need to increase the capacity of the grid due to the increasing demand is particularly urgent in the province of South Holland. A study of the energy system published this spring stated that the electricity demand in South Holland is expected to double or even triple by 2050. This means that Stedin will in any case have to expand all current distribution substations and build new ones. In a region experiencing very rapid economic development, it is essential to make efficient use of the available space to enable the construction of distribution substations and laying of cables. Together with a number of partners, Stedin is currently reviewing this spatial issue in order to reserve space for this.

Half year report 2021