13 Intangible assets

Intangible assets of €5,076 million (€4,710 million at 31 December 2013) break down as follows:

Service concession agreements (€4,199 million; €3,859 million at 31 December 2013) refer to agreements between the public and private sectors on the development, financing, management and maintenance of infrastructure under concession by a contracting party. The provisions relating to the service concession agreements are applicable for Snam in its role as a public service natural gas distributor, i.e. applicable to the agreements under which the operator is committed to providing the public natural gas distribution service at the tariff established by the AEEGSI, holding the right to use the infrastructure, which is controlled by the grantor, for the purposes of providing the public service.

Tenders for new natural gas distribution service concessions will no longer be issued by each municipality, but by the 177 multi-municipality minimum geographical areas (known as ATEMs) created by a dedicated Ministerial Decree, published in the Official Gazette in 2011. Legislative Decree 164/00 stipulated that the new duration of the concessions, which must be put out to tender, may not exceed 12 years.

Industrial patent rights and intellectual property rights of €159 million (€141 million at 31 December 2013) mainly concern information systems and applications in support of operating activities.

Concessions, licences, trademarks and similar rights (€660 million, compared with €659 million at 31 December 2013) refer essentially to concessions for the natural gas storage business.

The value of the storage concessions (€655 million) is represented by the reserves of natural gas in the fields (“cushion gas”). Cushion gas is not amortised since: (i) the volume of this gas is not altered by storage activities; (ii) the economic value of the gas that can be recovered at the end of the concession, pursuant to the Ministerial Decree “Criteria for determining a suitable fee for the remuneration of assets intended for a natural gas storage concessionaire”, issued by the Ministry for Productive Activities on 3 November 2005, is not lower than the book value.

Intangible assets with an indefinite useful life consist only of the goodwill recognised in 2008 following the acquisition by Italgas of 100% of the shares of Siciliana Gas (€9 million, unchanged from 31 December 2013).

Investments (€400 million) relate to: (i) the construction and upgrading of natural gas distribution infrastructure (€316 million); and (ii) investment projects in progress (€84 million), relating mainly to the development of information systems²¹.

Capital contributions from government authorities and other entities (€364 million and €376 million; €368 million and €365 million respectively at 31 December 2013) are recorded as a deduction in the net value of property, plant and equipment and refer essentially to the natural gas distribution segment.

Amortisation (€267 million) refers to economic and technical amortisation determined on the basis of the finite useful life of the intangible assets or their remaining possible use by the Company.

In the natural gas distribution segment, it should be noted that, as of the start of the fourth regulatory period on 1 January 2014²², the AEEGSI reduced the useful life of some metering equipment from 20 years to 15 years for tariff purposes. Taking into account the mechanisms for recognising tariff components linked to new amortisation and depreciation rules, as well as the service life of the assets, the Company restated the useful life of some assets to bring it into line with the conventional tariff duration. This had a negative impact of around €11 million on the 2014 income statement.

Due to the nature of the activities carried out by the group, i.e. regulated activities in the gas supply chain, the recoverable value of property, plant and equipment and intangible assets was defined in keeping with the estimated value of net invested capital recognised for such assets for tariff purposes (regulatory asset base, or RAB) by the AEEGSI, net of flat-fee components²³, employee severance pay (TFR) and grants received.

For the purposes of identifying Cash-Generating Units (CGUs) and allocating any goodwill, in accordance with the segmentation defined by the AEEGSI for the definition of the return on assets, the CGUs are represented by the business units (BUs) that carry out regulated activities in the natural gas transportation, regasification, storage and distribution sectors. For the distribution sector, in view of the specific applicable regulation, the CGUs are identified with multi-municipality minimum geographical areas (ATEM).

The recoverable value, as defined above, of property, plant and equipment, including compulsory inventories, and intangible assets is around €24.7 billion²⁴.

Changes in the scope of consolidation of €261 million relate to the acquisition by Italgas S.p.A. of control of A.E.S.²⁵

Disposals (€14 million) refer mainly to the sale of gas facilities for the termination of related concession-based relationships and decreases concerning the replacement of networks and meters.

Other changes and reclassifications (−€14 million) relate mainly to grants for the period (−€34 million) and to the acquisition of natural gas distribution concessions (€10 million).

Contractual commitments to purchase intangible assets, and to provide services related to the development thereof, are reported in Note 24 – “Guarantees, commitments and risks”.

Intangible assets by business segment

As required by IFRS 8 – “Operating segments”, a breakdown of intangible assets by business segment is provided below: