14. Intangible assets

Goodwill impairment test

The goodwill relates to the acquisition of DNWG in 2017 (€ 77 million); since the merger of Stedin Netbeheer and Enduris on 1 January 2022, this is being fully allocated to the group of cash-generating units (CGUs) of Stedin Netbeheer.

As at 30 June 2023, Stedin Group carried out the annual goodwill impairment test for the CGU Stedin Netbeheer. The test compares the recoverable amount of the CGU with its book value. The recoverable amount is determined based on the net realisable value. Due to the lack of an active market with observable prices, a present value calculation is made. This is a ‘level 3’ valuation within the fair value hierarchy. In principle, the net realisable value is determined on the basis of post-tax cash flow projections and discounted applying a post-tax weighted average cost of capital (3.7%-4.3%; 2022: 3.0%-3.6%).

The cash flow projections are partly derived from the most recent business plan (Stedin Group’s Financial Strategic Plan (FSP) for the period 2023-2046.

The main factors and assumptions used for the goodwill impairment test are the estimated current value of the regulated assets (normalised standardised asset value, or NSAV); Stedin Netbeheer’s market share for electricity transmission (2023: 25%, 2022: 25%) and for gas distribution (2023: 28%, 2022: 28%); the relative profitability of Stedin Netbeheer; and the real return on investment (regulated pre-tax WACC) for the regulated assets. These factors are primarily based on the latest tariff regulation data, as published and/or adopted by the Netherlands Authority for Consumers and Markets (ACM). With regard to the regulated WACC, a subsequent calculation applies from 2022: the ACM determines the difference between the actual and previously estimated risk-free interest rate and the grid manager is allowed to reflect this difference in its rates. In its projections, Stedin follows the intended pre-tax WACCs communicated by ACM for the current regulatory period (2022-2026). For the regulation periods from 2027 onwards, management has made its own estimate for the regulated WACCs. Recent developments have also been taken into account, including the revised method decisions as a result of the CBb ruling in mid-2023 (see 1.3 Key events in 2023 for more information). The long-term growth rate used to determine the residual value of the CGU has been prudently estimated at 0% (2022: 0%). For the projection period up to and including 2046, a growth rate has been used that is equal to the short-term and long-term expected inflation, namely 2.0% (2022: 2.0%).

Based on the impairment test as at 30 June 2023, the recoverable amount of the CGU Stedin Netbeheer exceeds the book value by a wide margin. In addition, as at 31 December 2023, no indications of impairment have been identified.