Note 3 Property, plant and equipment

Capital expenditure

Capital expenditure on property, plant and equipment totalled €731 million (2017: €666 million).

Divestments

Divestment in 2017 and 2018 related to decommissioning of network and other assets. In 2017, this included the sale of the high voltage network in the central Netherlands (€6 million).

Discontinued consolidations

The discontinued consolidations relate to the property, plant and equipment of Allego.

Cross-border lease transactions

In the period 1998 to 2000, subsidiaries of Alliander N.V. entered into US cross-border leases for networks, in the form of LILO (lease-in lease-out) and SILO (sale-in lease-out) structures.

There were no changes in the existing CBL portfolio in 2018. The three transactions currently remaining relate to gas networks in Friesland, Gelderland, Flevoland, Noord-Holland and Utrecht, district heating networks in Almere and Duiven/Westervoort and the electricity network in the Randmeren region. The networks have been leased for a long period to US parties (head lease), which have in turn subleased the assets to the various Alliander subsidiaries (sublease). At the end of the sublease there is the option of purchasing the rights of the American counterparty under the head lease, thus ending the transaction. The terms agreed for the subleases expire between 2022 and 2028. The fees earned on the cross-border leases were recognised in the year in which the transaction in question was concluded. There are conditional and unconditional contractual rights and obligations relating to the cross-border leases.

The total net carrying amount of the networks covered by cross-border leases at year-end 2018 was approximately €650 million (year-end 2017: €600 million). At the end of 2018, a total of $ 2,786 million (2017: $ 2,781 million) was held on deposit with several financial institutions or invested in securities in connection with these transactions.

Since no powers of disposal exist over the majority of the assets concerned and associated liabilities, these are not regarded as assets and liabilities of Alliander and the respective amounts are not recognised in the consolidated financial statements of Alliander. The investments in securities over which Alliander does have powers of disposal are recognised as financial assets. The associated lease obligations are recognised in finance lease liabilities.

At the end of 2018, the ‘strip risk’ (the portion of the ‘termination value’– the possible compensation payable to the American counterparty in the event of premature termination of the transaction– which cannot be settled from the deposits and investments held for this purpose) for all transactions together was $ 200 million (2017: $ 186 million). The strip risk is affected to a large extent by market developments.

In connection with the implementation of the Independent Network Operation Act, the heating networks belonging to Liander Infra N.V. that had been covered by a cross-border lease were subleased in mid-2008 to N.V. Nuon Warmte, part of N.V. Nuon Energy. These operating leases have a term of 12.5 years (term runs to 31 December 2020). The total carrying amount of the subleased heating networks and associated meters as at 31 December 2018 was €90 million (2017: €93 million).