Note 4 Intangible assets

The investment in goodwill in 2016 relates to the acquisitions of AEF B.V. (€9 million) and 450connect (€3 million). For further disclosures, see note [1].

The new consolidations concern the intangible assets acquired, carried on the balance sheets of AEF B.V. (€3 million) and 450connect (€26 million). The intangible assets of AEF B.V. consist of installation leases. The remaining amortisation period is 16 years. In the case of 450connect, the intangible assets are two licences relating to the 450 MHz frequency bands. These licences will be amortised over 20 years. Amortisation amounting to €1 million was recognised on this balance sheet item in 2016.

The impairment loss of €1 million relates to the electricity and gas distribution networks in Heinsberg, following the impairment test at the end of 2016.

There were no investments in 2015. The goodwill allocated to Endinet was classified in assets held for sale in 2015.

Goodwill allocation by segment

Of the total amount of goodwill allocated to Liander as at year-end 2016, €209 million (2015: €209 million) relates to electricity and gas networks and dates from the contribution of the networks when n.v. Nuon was created in 1999. Of the remainder, amounting to €77 million (2015: €68 million), €61 million relates to the purchase of Endinet in 2010, €7 million to Stam and €9 million to the aforementioned purchase of AEF B.V. in 2016.

The goodwill shown in Other in 2016 was up by €2 million. The increase is the net amount of the investment relating to 450connect (€3 million) and the impairment loss on the electricity and gas networks in Heinsberg (€1 million).

At year-end 2016, impairment tests were performed on the carrying amounts of the networks of Liander and the German networks, including the associated goodwill recognised. The value in use was taken as the basis for this calculation. The value in use was measured on the basis of the most recent business plans.

In the 2016 reporting period, Liander used a pre-tax discount rate of 5.6% (2015: 5.6%). From 2017 onwards, the figure will drop to 4.5% up to 2021, these rates being in line with the official regulatory discount rate. The main assumptions on which these business plans are based are the number of connections, the most recent tariff estimates and estimates of operating expenses and other costs. To a large extent, these assumptions are based on past experience, coupled with the latest information on tariff regulation. The business plans cover a period of five years and the terminal value is calculated using the projected cash flows at the end of that period. A zero growth rate has been applied. The terminal value for the regulated activities is based on achieving the 'reasonable return' that a network operator can expect to achieve on its standardised asset value. Where appropriate, account is also taken of temporary or structural synergistic effects or other departures from the reasonable return. There is such a margin between the value in use and the carrying amount of the Liander networks that the sensitivity to changes in the estimates and assumptions used is limited.

As regards the networks in Germany, the discount rate used has been arrived at using the calculation method adopted by the German regulator, which gives a pre-tax discount rate of 7% in 2016 (2015: 7.0%). For 2017, the figure is 7%, for 2018 it is 6.18% and, over the period 2019–2022, the rate is 5.2%. Otherwise the underlying assumptions were the same as for Liander.

A combination of the discontinuation of two concessions and a change in the law regarding the sales value of the networks meant that the value in use as at year-end 2016 was €6 million lower than the carrying amount, €1 million of this impairment being charged to goodwill and €5 million deducted from the carrying amount of the networks in Germany.

There were no impairment losses in 2015.