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18 Goodwill

 
 31-Dec-200931-Dec-2008Changes
Goodwill321,838318,1753,663
Goodwill from
consolidation procedure
56,73654,5212,215
Total378,574372,6965,878

Items "Goodwill" and "Goodwill from consolidation procedure", as at 31 December 2009, amounted to Euro 378,574 thousand. The main amounts break down as follows:

  • residual goodwill from the 2002 integration resulting in the creation of Hera SpA of Euro 81,258 thousand;
  • goodwill relating to the integration of Agea SpA in 2004, Euro 41,659 thousand. Said goodwill represents the additional value of the purchase cost compared to the fair value of the assets and liabilities recognised for the Group. In particular, with regard to the fair value of Hera Spa shares issued following the increase in capital for the merger by incorporation of Agea, in accordance with IFRS 3 the share value was calculated as at the effective date control was taken of Agea Spa (1 January 2004);
  • goodwill and goodwill from consolidation procedure, related to the integration operation of the Meta Group, Euro 117,686 thousand. This goodwill, entered in assets and initially measured at cost, represents the additional value of the purchase cost compared to the fair value of the assets and liabilities recognised for the Group. Specifically, with regard to the fair value of Hera Spa shares issued following the increase in capital from the merger by incorporation of Meta Spa, this value was calculated as at the end of 2005, accepted as the effective date that control was taken of Meta Spa;
  • goodwill relating to the merger of Geat Distribuzione Gas Spa into Hera Spa. This goodwill of Euro 11,670 thousand represents the excess purchase cost over and above the fair value of assets and liabilities recognised for the Group as at 1 January 2006 (the date at which effective control was taken by Hera Spa);
  • goodwill relating to the merger of Sat Spa. This goodwill, equal to Euro 54,883 thousand, represents the additional value of the purchase cost compared to the fair value of the assets and liabilities recognised for the Group. Specifically, with regard to the fair value of the Hera Spa shares issued following the increase in capital from the merger of by incorporation Sat Spa, this value was determined referring to 1 January 2008, day in which the transaction was actually concluded.

The increase, compared to the previous year, equal to Euro 3,663 thousand, is mainly due to the share capital increase of the subsidiary Marche Multiservizi Spa, effective as from 1 July 2009, The subsidiary increased its share capital from Euro 13,055,799 to 13,450,012, entirely paid up by the new shareholder Comunità Montana Alta e Medio Merauro, through conferral in kind of the business unit regarding waste disposal and composting plants. The business unit was submitted to special estimate appraisal.

The main "goodwill from consolidation procedure" arise from the following companies consolidated on a line by line basis:

  • Marche Multiservizi Spa, Euro 20,790 thousand;
  • Hera Comm Marche Srl, Euro 4,565 thousand;
  • Medea Spa, Euro 3,069 thousand;
  • Asa Spa, Euro 2,789 thousand;
  • Hera Luce Srl, Euro 2,328 thousand;
  • Gastecnica Galliera Srl, Euro 2,140 thousand;
  • Nuova Geovis Spa, Euro 1,775 thousand.

The increase in goodwill from consolidation procedure, amounting to Euro 2,215 thousand compared to the previous year, is attributable to the enlargement of the scope of consolidation to include the companies Acantho Spa, Euro 1,020 thousand, and Satcom Spa, Euro 1,195 thousand.

The remaining goodwill and consolidation difference items refer to minor operations.

As required by the accounting standards of reference (IAS 36) goodwill - which is no longer amortised - undergoes impairment testing. The following table shows the allocation of this item to the cash generating unit or group of units in accordance with the maximum aggregation limits that may not exceed the business segment identified in accordance with IFRS8.

(mln €) 
Gas107.1
Electricity43.1
Integrated water cycle41.1
Waste management175.6
Other services10.0
Structure 1.5
Total goodwill378.6

Impairment therefore concerned the gas, electricity, integrated water cycle, waste management, and other services business segments. The recoverable value of the cash generating units, to which the separate goodwill was attributed, was reviewed by determining the value in use, meant as the current value of the discounted cash flows taken from the plan prepared for the 2009-2013 period, approved by the Board of Directors of the parent company Hera Spa.

While drawing up the Business Plan, which consolidates the Group perspective activities, assumptions consistent with those used in previous plans were used. These assumptions were defined based on final figures, projections internally processed and compared with external sources.

The development of revenues was processed based on the evolution of tariffs for the businesses governed by business unit regulations and/or agreements with the competent Authorities. In particular, revenues from the gas distribution market are projected based on evidence arising from Resolution no. 159/08 and, as for electricity distribution, based on Resolution no. 348/07 of the Italian Authority for Electricity and Natural Gas. Revenues on the sale of gas and electricity on the non-eligible market were projected to 2013, based on Resolutions no. 64/09 and 156/07, respectively, of the Italian Authority for Electricity and Natural Gas. As for the water cycle, revenues were projected based on both the immobility of volumes distributed and the fees referring to agreements signed, or being signed when the Plan was drawn up, with the single local ATOs. As for urban hygiene, the assumption of full tariff coverage was formulated over the term of the plan on all local areas supplied, pursuant to law.

Changes in the prices of gas and electricity sold and purchased on the free market were processed based on business opinions expressed by internal bodies in charge of analysing these factors, and in compliance with the energy scenario set forth in the business plan. The latter was drawn up by a panel of institutional observers according to the best forecasts.

The development of plants for the disposal and recover activities in the waste management cycle is consistent with estimates made in the plans in the provinces where the Hera Group operates. The scheduling for the realisation of investments and the following start-up of the new plants is the result of the best estimate of technical structures, in compliance with each planning process.

Cost evolution was consistent with the projected inflation considered in the economic and financial Planning Document and, as regards staff, with indications contained in the various work contracts. Effectiveness and synergies were planned in compliance with operations that the Group has carried out over the last few years.

The investment plan is consistent with the maintenance requirements of plant efficiency. This plan is supplemented by investment and development expectations in both initiatives which grant full economic benefit at full production within the term of the Plan, and development initiatives which will grant an economic return after the term of the Plan. The single "relevant" investments were specifically evaluated as for the economic return and strategic importance in the pertaining industrial sector.

The definition process of the Plan underwent, as in past years, a wide involvement process of each single company and a deep sharing with management at various organization levels, over a period of more than 5 months.

According to the aforementioned remarks, the basic assumptions that underlined the development of the impairment test, were formulated by the management, bearing in mind the remaining lifetimes of the reference concessions, on the basis of medium/long term growth rates differentiated by single asset, which take into account the expected growth in the respective generating unit sectors (2% on average).

The rate used to discount back the flows is 6.58% after taxes.

The test results were positive, so it was unnecessary to adjust the recorded values provided above.

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