By Christoph Steitz and Toby Sterling

FRANKFURT/AMSTERDAM (Reuters) – Berlin and The Hague are racing to clinch a sale of the German unit of Dutch grid operator TenneT by mid-October, three people familiar with the matter said, worried that upcoming elections in the Netherlands could cause a substantial delay to the deal.

The planned purchase of TenneT’s German division is a key part of Berlin’s effort to accelerate its energy transition, which has slowed due to red tape and insufficient network expansion.

Berlin is planning to buy the business from Dutch state-owned TenneT to spend more on the build-out of power lines needed to link up thousands of planned wind turbines and solar panels across Europe’s top economy.

TenneT plans to spend 111 billion euros ($119 billion) in the coming decade to improve grid infrastructure on land and in the North Sea – with Germany accounting for 60%.

A deal, which could give TenneT’s German assets an enterprise value of between 20 billion and 25 billion euros would have to be worked out within the next four weeks, before the Dutch parliament enters recess, the people said.

Otherwise, talks would be getting too close to Dutch national elections scheduled for Nov. 22, which could bring about a change in government and potentially make talks more complex and difficult.

There is no guarantee that talks will result in an agreement in time, the people said.

‘MARKET-BASED PRICE’

While agreement has been reached by both sides on a number of issues, valuation remains a sticking point, the people said. Sources told Reuters in May that differing views on the price of TenneT’s German division have been a hurdle in talks.

The equity component of any deal would be around a fifth of enterprise value, one of the people said, meaning the actual paycheck Berlin would hand over via state lender KfW would be just a mid-single-digit billion euro sum.

TenneT’s German division alone has liabilities of 21.5 billion euros, according to TenneT’s latest annual report. In 2022, it had operating profit of 791 million euros and an underlying book value of around 5.5 billion euros.

The Dutch finance ministry and TenneT said talks were still ongoing, without elaborating.

TenneT said any deal needed a “convincing and market-based price that reflects the value of the company”.

Germany’s economy ministry had no immediate comment.

The Dutch government said in June it would work with Berlin towards an agreement on deal conditions, but would not take any irreversible steps without consulting parliament once a draft deal has been reached.

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The Dutch government spent 1.6 billion euros on capital injections for TenneT in 2023, according to the 2024 budget published on Tuesday, but is not budgeting further spending on TenneT in 2024 or the years ahead.

($1 = 0.9330 euros)