(Bloomberg) -- Germany’s government is in talks to pay more than €20 billion ($21 billion) for the local unit of power grid operator TenneT Holding BV in a deal that could mark the starting point for a consolidation of the country’s power grids, people with knowledge of the matter said. 

Officials are hashing out the structure of a potential deal with Dutch state-controlled TenneT, and negotiations could take several months, according to the people, who asked not to be identified because the information is private. The deal would come on top of an equity need of about €15 billion to upgrade the net. 

A wide range of potential valuations are under discussion, from around €20 billion to €25 billion or more, the people said. The German government plans to finance the TenneT deal without additional federal debt, with officials planning instead to borrow the funds via the state-run KfW bank to avoid breaching the constitutional debt brake, according to the people. 

Germany is pushing to secure affordable power and curb its dependency on Russian gas amid the worst energy crisis in decades. It also hopes to wean itself off fossil fuels and reach climate neutrality by 2045. That will require a huge and costly expansion of the nation’s power grid to link industrial heartlands in the south with clean energy sources elsewhere.

TenneT said earlier this month that it’s exploring a sale of its German business to Berlin because its owner, the Dutch government, is looking for alternatives to finance the business. It noted that “both the Dutch and German government prefer to fund, control and own their national electricity grid.”

Spokespeople for TenneT and the German government declined to comment on details of the discussions.

Germany’s multibillion-euro undertaking resembles similar costs to the government’s bailout of Uniper SE last year, which was on the brink of collapse amid surging gas prices. But unlike that rescue deal, officials hope that by taking over a part of the country’s power grid they’ll be able to better coordinate, or even merge, the operations of its four separately run operators, which currently have many inefficiencies. 

Germany has already taken steps to buy a stake in 50Hertz Transmission GmbH, one of the country’s largest electric grid operators. It’s in advanced talks to acquire a minority holding in TransnetBW, a high-voltage power grid owned by EnBW, people with knowledge of the matter said. A representative for the German economy ministry said it supports KfW in considering an acquisition of a 24.95% stake for the federal government, while a spokesperson for EnBW couldn’t immediately comment. 

“A great deal is being invested everywhere, but the backbone of this newly emerging economy is, of course, high-performance electricity grids, which must be massively expanded,” German chancellor Olaf Scholz said at a press conference in Zeebrugge last week. “That’s umpteen billions, hundreds of billions that have to be invested to ensure our security.”

--With assistance from Kamil Kowalcze, Petra Sorge, Aaron Kirchfeld and Josefine Fokuhl.

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