Introduction Cross-shareholdings in relation to TSOs EU regulation compliance Timeline

Introduction

On December 9 2016 the minister of economic affairs submitted a bill to Parliament amending the Electricity Act 1998 and the Gas Act. The bill aims to modernise the legislation to enable the Netherlands' transition to a more sustainable and lower-carbon energy supply.

The bill is similar to the earlier proposed 'STROOM Bill', which sought to merge the Electricity and Gas Acts into one piece of legislation. However, political debate regarding the bill's unbundling provisions eventually resulted in its rejection by the Senate in December 2015 (for further details please see "Senate rejects Electricity and Gas Act Bill – offshore transmission system delayed").

This update focuses on the proposed possibility of cross-shareholdings in relation to transmission system operators (TSOs), which may have cross-border consequences.

Cross-shareholdings in relation to TSOs

At present, the government owns 100% of the TSOs for electricity (TenneT) and natural gas (GTS). Under the new bill, it would be possible to transfer a maximum of 25% of the shares in TenneT or GTS to a foreign institution, subject to the following conditions:

  • The foreign institution must be:
    • a national designated independent TSO in accordance with Article 2(4) of both the EU Electricity Directive (2009/72/EC) and the EU Gas Directive (2009/73/EC); or
    • a direct or indirect subsidiary of a transmission system that is inter-connected to the Dutch transmission system (ie, that of Germany, Belgium, Denmark or Norway).
  • The government will continue to hold at least 75% of the shares and a controlling vote in the TSOs (75% is a common ownership percentage to maintain voting rights, under the EU Takeover Directive (2004/25/EC)).
  • The cross-participation must enhance collaboration between the TSO and the foreign institution.
  • The participation must be part of a share swap that will enhance energy reliability, affordability and sustainability.
  • Both houses of Parliament must consent to the government's general intention to engage in a swap. The minister of finance cannot engage in negations for 30 days after submitting written notification to Parliament. Such consent is required only for the general intention and not individual transactions (although some members of parliament have hinted at such an approach).

The minister of economic affairs has emphasised that the cross-participation should not have merely financial objectives, but also a strategic collaborative purpose. Facilitating stable collaboration between Dutch and European TSOs is expected to contribute to, among other things, a more balanced pricing regime between EU member states, which will benefit Dutch energy customers and may also contribute to the development of a more sustainable energy supply.

EU regulation compliance

The minister of economic affairs has argued that the bill complies with EU laws and regulations, particularly:

  • Article 345 of the Treaty on the Functioning of the European Union (ie, the property ownership system); and
  • the exemptions to the restriction of the free movement of capital as per the EU Electricity and Gas Directives.

The emphasis on treaty compliance follows from the ongoing debate on unbundling provisions regarding system operators (for further details please see "Supreme Court: 'unbundling provisions not in conflict with EU law" and "Legislative initiative to abolish unbundling regional network operator").

Timeline

It remains to be seen when Parliament will process this bill in order for the proposed amendments to take effect. Elections to the House of Representatives will be held on March 15 2017, which will be followed by the formation of a new government. From the moment the existing government tenders its resignation, bills that have been declared 'controversial' will have to wait to be considered by the new government. Given the bill's sensitivity, it will likely be declared controversial. As such, its enactment is not expected before Autumn 2017.

For further information please contact Roland De Vlam at Loyens & Loeff NV by telephone (+31 20 578 5785) or email (roland.de.vlam@loyensloeff.com). The Loyens & Loeff website can be accessed at www.loyensloeff.com.

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