13. Intangible fixed assets

Intangible assets consist of goodwill, acquired or internally generated application software and capitalised leases. Intangible assets, other than goodwill, are stated at cost less accumulated amortisation and impairment losses. Cost is capitalised only when it is probable that future economic benefits will result from the use of a specific asset.

Changes in intangible fixed assets in 2024 were as follows:

Assets classified as software consist mainly of the grid registration system, various operating systems, connection registrations, customer information systems, job order management systems, and other support systems. The capitalised software consists mainly of purchased and externally developed software for which no statutory reserve was formed.

The comparative overview for 2023 is as follows:

Impairments of intangible fixed assets

The recoverable value of intangible fixed assets is calculated if events or changes in circumstances give cause to do so ‘triggering event’ analysis). The results of this calculation are used to determine if any impairment exists. An assessment is performed annually and in the event of interim publications to ascertain whether such events or changes have occurred. As a result, there were no impairments in 2024.

In these triggering event analyses, Enexis Groep also took into account the developments in connection with the energy transition. These developments do not form a trigger to calculate the recoverable value for the assets of the gas grid. For more information about this topic, see the ‘Future outlook for the gas grid’ section. 

Goodwill impairment test

Goodwill relates to the acquisitions of Intergas Energie B.V. in 2011, Endinet Groep B.V. in 2016 and N.V. Stedin Netten Weert in 2017 and is the result of the difference between the cost of the acquisition and the fair value of the net assets at the time of the acquisition. Enexis Groep performed a goodwill impairment test at year-end 2024 for the segments in which goodwill is included.

Goodwill resulting from acquisitions has been allocated to the segments as follows:

Outcomes

The calculated indirect realisable value of the regulated assets is significantly higher than the carrying value of the corresponding assets plus the goodwill allocated to them. Therefore, no impairment of goodwill is required.

Assumptions

The indirect realisable value of the regulated assets is determined based on the most recent Long-Term Financial Calculation. This calculation covers a forecast period of fifteen years. The forecast period is 15 years to match the investments required for the energy transition and the income generated by these investments. The main assumptions included in the Long-Term Financial Calculation are an estimate of the discount rate based on the Weighted Average Cost of Capital (WACC) rates used by ACM, regulated tariffs, and changes in the number of connections and services, as well as operating and other costs. The chosen assumptions concern estimates, mainly based on the most recent information regarding tariff regulation (Method Decision 2022-2026), the investment programme (quality and capacity document, and strategic asset management plan) and Enexis Groep’s efficiency objectives.

ACM has set tariffs for 2025 based on the amended 2022-2026 Method Decisions. This means that revenues from 2025 onwards have been set based on the revised initial revenues and revised discounts to promote efficient operations (the x-factors). In addition, the tariffs for 2025 have been corrected for the underestimated revenues in 2022, 2023 and 2024. For gas, this correction has been fully included in the 2025 tariffs and for electricity, due to its magnitude, it has been decided to spread the correction over the 2025 and 2026 tariffs.

Together with inflation, adjustments to TenneT’s procurement costs and post-calculations relating to the year 2023 in connection with increased feed-in volumes and interest costs in the WACC, the incorporation of the amended Method Decision has led to a tariff increase of approximately 17% for the connection and transmission service electricity in 2025. For gas, the increase is around 14%.

Enexis Groep devotes a great deal of attention to efficient operations, initiating programmes designed to achieve a level of efficiency that is at least equal to the increase in costs due to inflation. Despite these efforts, operating cost levels are expected to increase, mainly due to extra work as a result of the energy transition.

The regulation further stipulates that the efficient (average) costs will be remunerated in the tariffs to be determined by ACM. It is assumed that Enexis Netbeheer B.V. will perform at the same level as other grid operators in terms of investments, as the networks of all grid operators in the sector are comparable.

To determine the end value, a growth rate of 0% is assumed for the regulated activities, as the entire sector is assumed to operate with the same efficiency at that time. The end value is, therefore, assumed to be equal to the efficient book value (Standardised Asset Value) at that time. This assumes that the regional grid operator will continue to be compensated for its efficient costs and investments, including a reasonable return, in accordance with the current method of tariff regulation. For a further explanation of Enexis Groep’s future vision of the gas grid and the consequences of this for the valuation of gas assets, please refer to the ‘Future vision of the gas network’ section at the end of this note.

The impairment test is based on the following variables:

Sensitivity analysis

The calculated indirect realisable value of the regulated assets in the operational segment Enexis regulated is considerably higher than the carrying values of the corresponding assets, plus the goodwill allocated to them. Even though the indirect realisable value is significantly higher than the carrying value of the regulated assets and the goodwill allocated to these assets, Enexis Groep performed a sensitivity analysis on the most important criteria that were used to determine the indirect realisable value of the regulated assets to provide insight into the estimated uncertainty. Based on this, Enexis Groep concluded that a reasonable change in the criteria, as shown in the sensitivity analysis below, will not lead to an impairment of goodwill. The sensitivity analysis has the following outcomes:

• A decrease in the expected market share, expressed in Compound Output, of Enexis Netbeheer B.V. by 0.1% leads to a decrease in the realisable value by €36 million.

• A delay of the convergence assumption, the year in which all regional grid operators operate equally efficiently, by one year leads to an increase in the realisable value by €47 million.

• An increase in the discounting rate after tax by 0.1% leads to a decrease in the realisable value of €232 million. 

• A structural increase in the expected operating expenses by €10 million a year leads to an increase in the realisable value by €2 million, due to the difference between the time that costs are incurred and compensation in the future tariffs.

• A structural increase in the expected investments of €50 million a year leads to an increase in the realisable value of €46 million, due to the difference between the time that costs are incurred and compensation in the future tariffs.

The above sensitivity analysis shows that an increase in the discounting rate after tax by 0.1% leads to a decrease in the realisable value of €232 million. However, the discounting rate is based on the regulatory WACC. The reasonable return that Enexis Groep receives on its efficient investments also depends on the regulatory WACC. In the above sensitivity analysis, only an adjustment of the discounting rate is taken into account and not a comparable increase in the reasonable return that Enexis Groep receives on its efficient investments. A reasonable change in the discounting rate due to changes in the regulatory WACC will, therefore, not lead to an impairment of goodwill.

Future outlook of the gas grid

The Netherlands aims to become a low-carbon country by 2050. The Climate Change Act sets a target of at least 55% CO₂ reduction by 2030, with an ambition to reach 60%. To achieve this, the Regional Energy Strategies and the municipal Heat Transition Visions are phasing out reliance on natural gas for existing buildings and eliminating the obligation to connect new buildings. This will impact the gas grid of Enexis Netbeheer B.V., as the number of gas connections will decrease.

Enexis Netbeheer B.V. believes that the gradual phasing out of natural gas will not result in the large-scale decommissioning of gas networks. This is because the highly interconnected main networks serve both a neighbourhood function and a transit function, supplying downstream network sections. In some cases, removing main pipelines in residential areas that are ‘moving away from natural gas’ may even require upgrading and/or extensions elsewhere in the gas network. The high-pressure gas network acts as a ‘stable’ backbone for the low-pressure gas grid and the supply of the industrial sector.

Even in the low-carbon energy system of 2050, Enexis expects the gas grid to continue to play a role in the distribution of green gas and hydrogen. This is already evident in the growing volume of green gas imports, which will enable the gas grid to contribute significantly to CO₂ reduction in the short term. The climate agreement recognises that it is virtually impossible to meet heat demand without a gaseous energy source. Relying on electricity alone is not always a technically or economically viable option, and district heating networks cannot be implemented everywhere. In such cases, the most practical way to achieve sustainability is to use sustainable gaseous energy sources - such as hydrogen produced from renewable electricity or green gas – combined with hybrid heat pumps. Along with network operators within Netbeheer Nederland and the Ministry of Climate and Green Growth, roadmaps have been developed for both green hydrogen and green gas. Therefore, a safe and reliable gas network is expected to remain essential in a more sustainable energy system.

As these developments are ongoing and could significantly impact Enexis, proposed policies, policy ambitions, sector plans, new studies and roadmaps are closely monitored. Every two years, scenarios projecting developments up to 2050 are reassessed to determine whether investment policies need to be adjusted. Enexis is also actively involved in the Regional Energy Strategies, the Heat Transition Vision and the living labs for natural gas-free neighbourhoods.

Enexis expects the gas grid to play a role in the distribution of green gas and hydrogen in the low-carbon energy supply in 2050. Given the through transmission function of the main grid, a decrease in the number of gas connections will not lead directly to a corresponding removal of main grids. Enexis Netbeheer B.V. does not believe that the gradual phasing out of natural gas will also lead to the large-scale decommissioning of gas grids.

Although the number of users of the gas grid is decreasing, this is not expected to lead to large-scale decommissioning of gas assets. Therefore, Enexis switched to the diminishing balance depreciation method as of the financial year 2022. The consumption pattern of the future economic benefits of the assets is reflected in the pattern in which the number of users of the gas grid decreases. For more information, reference is made to note 5 ‘Depreciation and decommissioning’.

Enexis does not see any need at present to shorten the depreciation periods of the existing gas grids or to start impairing the existing gas grids. However, to further limit this risk, Enexis Netbeheer B.V. is highly reluctant to construct new or replace existing gas grids when alternative heating systems, such as heating grids or all-electric solutions, are available. To ensure the reliability and safety of the gas grid, the large-scale multi-year replacement plans that are being carried out due to the obsolescence of grid components will continue. Due to the completion of the first group of programmes, gas replacements will start to decrease slightly from 2025 onwards, but the total volume will remain stable until 2030. After 2030, the major multi-year replacement programmes will be completed, and the level of replacement in the gas networks will continue to decrease.

In the Method Decision Gas for the regulation period 2022-2026, ACM has taken the expected future decrease in the number of users of the gas grid into account. ACM also did this by switching to the nominal method instead of the actual method for calculating the WACC so that inflation compensation is no longer shifted to the future. Another important change concerns the switch to a diminishing balance depreciation method for gas assets as of 2022. ACM has opted for the diminishing balance depreciation method as this method is more suitable given the expected future decrease in the number of users of the gas grid. This way, ACM aims to avoid fewer and fewer users having to bear the annual depreciation charges, which would otherwise be the case if a straight-line depreciation method was used. ACM sees no reason to revise the economic and technical useful lives of the gas assets. These changes in the Method Decision Gas have led to setting the efficient costs, including a reasonable return that the regional grid operators receive, at a higher level.

Enexis Groep has formulated the above assumptions and criteria with great care. However, there is still much uncertainty surrounding the assumptions and criteria regarding the future of the gas grid. The assumptions and criteria are reviewed periodically in principle, unless unexpected significant events require immediate adjustment.