Property, plant and equipment

13 Property, plant and equipment

The net carrying amount of property, plant and equipment increased by €373 million compared with the preceding year. Stedin Group’s investments in property, plant and equipment amounted to €709 million and related mainly to the regulated gas and electricity grids. The disposals related to asset retirements (especially the machinery and equipment in the regulated domain).

Regulated networks also comprise assets under construction. An amount of €6 million in interest was capitalised in 2022 on these assets under construction, applying an interest rate of 1.75% (2021: €5 million, at 2.3%).

Regulated networks (consisting of grids, connections and meters) are measured at the revalued amount, being the fair value at the date of the revaluation, which is equal to the normalised standardised asset value ((N)SAV) set by the ACM, less accumulated depreciation and impairment. Other property, plant and equipment is recognised at cost less accumulated depreciation and impairments.

Stedin applies the income approach in determining the fair value of its regulated networks. The starting point for determining the fair value of the regulated assets is the standardised asset value (SAV) of the grids and connections based on the most recent information available from the ACM (from 2021), which has subsequently been adjusted for realised depreciation and investments. The SAV of Stedin’s grids and connections is normalised for Stedin Group’s market share in the sector (NSAV). In addition, the determination of the fair value of the regulated networks also takes account of the expected future position of Stedin Group in the sector / benchmark and the development of the weighted average cost of capital (WACC). The determination of the fair value of regulated networks has been prepared without involvement of external specialists.

In 2026, the ACM will publish the updated normalised, indexed asset value of the grids and connections, so that the unobservable parameters for fair value measurement in hierarchy level 3 in IFRS 13 will be market data that are objectively observable for Stedin Group at that time.

The metering services are not covered by the measurement regulation of the ACM. For the meters, the standardised asset value (SAV) is the most important parameter for determining the fair value. The standardised asset value is derived from the cumulative investments less depreciation and adjusted for indexation (level 2 input). Other elements are surplus profits and cash flows and these are based on estimates (level 3 input).

The most recent revaluation for the regulated networks took place on 1 January 2021 based on the market data published by the ACM (level 1 input, objectively observable market data under IFRS 13). Until publication of new market data by the ACM in 2026, the first two parameters in the table above are classified as level 3 input (not observable market data). The fair value of the regulated networks (NSAV) is assessed annually based of the above parameters and compared with the carrying amount for the relevant year; in the event of significant deviations, the carrying amount is revalued. The parameter market share of Stedin Group in the Netherlands has the highest sensitivity in the context of the valuation of regulated grids. As at 31 December 2022, the carrying amount does not differ materially from the value that would have been used if the fair value as at 31 December 2022 had been used. The total revaluation, as included in the carrying amount of regulated networks as at 31 December 2022, amounts to €1.0 billion (2021 €1.1 billion). This amount, adjusted for the tax effect, has been included in the revaluation reserve.

As at 31 December 2022, the carrying amount of regulated networks at historical cost was €6.9 million (31 December 2021: €6.5 billion).

Stedin has assessed the useful life of assets in 2022. For a more detailed explanation of the changes in the useful life of the assets, please refer to section 2.2.10 Property, plant and equipment.