Note 1 Business combinations
Acquisition of AEF B.V. and 450connect GmbH
Fair value as at 1 January 2016
Fair value as at 31 May 2016
Property, plant and equipment: networks, connections and smart meters
Other property, plant and equipment
Deferred tax liabilities
Net assets acquired
Total purchase price
Less: net assets acquired
Sale of Endinet and purchase of networks in Friesland and the Noordoostpolder (AEF B.V.)
The sale and purchase agreement (SPA) to purchase the Enexis networks in Friesland and the Noordoostpolder (Aktivabedrijf Enexis Friesland B.V., hereafter AEF B.V.) on 1 January 2016 and at the same time sell the networks in the Eindhoven and Zuidoost-Brabant region (Endinet Groep B.V.) was signed on 27 July 2015. The transaction involved Alliander selling the shares of Endinet Groep B.V. to Enexis and buying the shares of AEF B.V. from Enexis with an additional payment by Enexis of €365 million. AEF B.V. has 51,000 electricity and 196,000 gas connections in Friesland and 28,000 electricity and 27,000 gas connections in the Noordoostpolder. The AEF B.V. networks are surrounded by the area serviced by Liander and their acquisition will make for more efficient operations. The acquisition is also entirely in line with the strategy of having a single network operator for both electricity and gas in any one area or region.
Alliander acquired total control of AEF B.V. on 1 January 2016 and has included the company in the Alliander consolidation with effect from that date.
Under IFRS there are two separate transactions, viz.:
the sale of the shares of Endinet Groep B.V., and
the purchase of the shares of AEF B.V.
The net amount received as presented in the cash flow statement is €359 million, made up of €694 million for Endinet and €335 million paid for AEF B.V. Details of the Endinet sale are disclosed in note .
Purchase of shares of AEF B.V.
The final purchase price for AEF B.V. was established at fair value at €335 million based on its figures for 2015 and including settlements. This fair value was established on the basis of cash flows for the medium and long term, regulatory developments, outperformance effects and synergy gains. The allocation of the purchase price is disclosed above.
The networks in Friesland/Noordoostpolder were immediately integrated in Liander by merging Liander and AEF B.V.
Net assets acquired (€326 million)
The property, plant and equipment acquired with AEF B.V. relate to distribution networks, connections, meters and network-related buildings valued at €340 million and other property, plant and equipment amounting to €3 million. The intangible assets of €3 million relate to lease contracts for switching installations, transformers and compact substations. The deferred tax liabilities relate to the difference between the reported carrying amounts of the electricity and gas distribution networks and the corresponding tax bases. The provisions relate mainly to provisions for employee benefits and are directly related to the 125 staff taken over from Enexis.
Goodwill (€9 million)
The goodwill of €9 million is largely related to the provision for deferred tax liabilities. It is not tax-deductible.
The total costs associated with the acquisition of AEF B.V. amounted to €2.7 million. An amount of €0.7 million of these costs was recognised in the income statement for 2015 and the remainder is accounted for in 2016. The estimated revenue of AEF B.V. for 2016 is €64 million and the operating profit over the same period is put at €26 million.
Purchase of 450connect GmbH
On 31 May 2016, Alliander AG purchased the entire share capital of Inquam Deutschland GmbH (name changed to 450connect GmbH). 450connect GmbH is active in leasing communication network bandwidth to third parties, including provision of related services. The purchase of 450connect GmbH will enable Alliander AG to establish a private mobile communication network for critical infrastructure (mainly concerning network operators) for smart meter and smart grid applications among others. Alliander N.V. has been developing a similar communication network in the Netherlands in partnership with Stedin since 2014, owned by the joint operation Utility Connect.
Alliander AG acquired total control of 450connect GmbH on 31 May 2016 and has included the company in the Alliander AG consolidation with effect from that date.
The allocation of the purchase price is disclosed above.
The total purchase price paid on 31 May 2016 amounted to €18 million, made up of a cash payment of €5 million and a contingent consideration valued at €13 million as at 31 May 2016. The allocation of this purchase price is shown in the above statement. The final amount of the contingent consideration, agreed with the former shareholders, will depend on the future number of new connections secured, with a maximum of €30 million. The fair value of this consideration has been measured on the basis of new connection acquisition projections and other factors.
Net assets acquired
The non-current assets acquired largely relate to the licence for the CDMA 450 network. The interest-bearing liabilities concern loans from Inquam's former shareholders. These loans were repaid on 3 June 2016. The deferred tax liability relates to the difference between the reported carrying amount of the licence and the related tax base. The recognised amount includes €2 million in respect of tax loss carryforwards.
The goodwill of €3 million is largely related to the provision for deferred tax liabilities. It is not expected that this goodwill will be deductible for corporate income tax purposes.
The total costs associated with the acquisition of Inquam (€0.5 million) were expensed in the 2016 income statement of Alliander AG. Inquam's revenue over the period 1 June 2016 to 31 December 2016 amounted to €0.3 million, with an operating loss over this period of €2.4 million. If 450connect had been taken over with effect from 1 January 2016, Alliander's revenue would have amounted to €1.6 billion, with a net profit of €282 million.
In December 2014, Alliander Netz Heinsberg GmbH reached agreement with EWV Energie- und Wasserversorgung GmbH on the purchase of the gas distribution network in the municipality of Waldfeucht with effect from 1 January 2015. The relevant concession was won at the beginning of 2014. The purchase price of the gas network amounted to €3 million and was paid at the start of January 2015. The purchase price was allocated in its entirety to the acquired assets. The concession runs for 20 years (up to 8 February 2035).