Impairment was also recognised on various CGUs of the Dalkia group. In Poland for example, the recoverable value of Dalkia entities was significantly affected by lower income prospects than forecast in previous years, masking the impact of higher compliance investments. Impairment of €(55) million was therefore recognised in respect of these assets, including €(8) million on goodwill.
Impairment on other CGUs during 2019 resulted from specific situations, for example:
Impairment has also been recognised on other individual assets, for the combined total of €(27) million.
Due to the integrated management and interdependence of the different generation facilities that make up the French fleet (nuclear, thermal and hydropower plants), independently of their maximum technical capacities, the Group considers the entire fleet as a single CGU. This CGU does not include any goodwill.
Even when there is no indication of any loss of value, an impairment test is performed due to the highly significant value of this CGU in the Group’s financial statements and its substantial exposure to market prices since the “yellow” and “green” regulated tariffs were discontinued on 1 January 2016.
The recoverable value of the generation fleet is estimated by discounting future cash flows under the Group’s usual methodology, described in note 1.3.14, over the assets’ useful life, using an after-tax WACC of 5.1% at 31 December 2019. For nuclear assets currently in operation (except for Fessenheim), the Group’s benchmark model assumes that the useful life is extended to 50 years, in line with its industrial strategy. The nuclear capacity remains subject to a ceiling of 63.2GW in the test, consistent with France’s energy transition law.
The capacity revenue assumptions used in the test are higher than the previous year, in line with the system fundamentals analysis in the benchmark scenario. The average auction price achieved in 2019 was €19.5/KW.
The impairment test takes into consideration the latest forecasts concerning Flamanville 3 (see note 3.1.1) which adjusted the schedule, setting the fuel loading date in late 2022, and revised the estimated cost of construction to €12.4 billion in 2015 euros, excluding borrowing costs, an increase of €1.5 billion from the previous estimate. The test takes into consideration the fact that most of these additional costs will be included in other operating income and expenses.
The test results indicated a significant positive difference between the recoverable value and the book value of the generation fleet in France. The margin resulting from the test is higher than at 31 December 2018, as the higher costs and deferred commissioning of Flamanville 3 were outweighed by favourable effects, essentially concerning the lower discount rate and the positive effect of cash outflows in 2019.
The key assumptions used in the test include the useful life of nuclear assets, the long-term price scenario, the discount rate, developments in costs and investments, and the assumed capacity revenue. Each of these assumptions has been subjected to a sensitivity analysis, which does not call into question the existence of a positive difference between the recoverable value and book value. The test conducted at 31 December 2019 also takes into consideration the sensitivity associated with early closure proposals for certain nuclear units, as set out in the proposed multi-year energy programme. This did not affect the conclusions of the test.
The Group also booked €(24) million of impairment in respect of the decision to discontinue two projects, one hydropower project and one IT development project.
The impairment test applied to Luminus did not indicate any risk of impairment. However, the margin resulting from the test is adversely affected by the Tihange 2 and 3 and Doel 3 and 4 nuclear assets, in which Luminus owns a 10.2% share.
Finally, impairment of €(73) million was booked in respect of associates at 31 December 2019. Details are given in note 26.
Other income and expenses amount to €(185) million for 2019. They include the €(30) million cost of the ERO 2019 employee shareholding offer undertaken during the first half of 2019 (see below), restructuring expenses in certain Group entities, and other items which are operating income and expenses by nature but of non-significant amounts individually.
Other income and expenses amounted to €(105) million for 2018, mainly including a gain of €755 million on the sale of Dunkerque LNG and an allocation of €(737) million to provisions for onerous contracts associated with the long-term contract with Dunkerque LNG, giving a net impact of €18 million. Other income and expenses also included €(36) million of exceptional solidarity bonuses in France, and €(15) million resulting from the adjustment of EDF Energy’s guaranteed minimum pension scheme.
The Employee Reserved Offer (ERO) followed a decision by the Board of Directors of EDF on 4 April 2019 concerning the principle of an employee shareholding operation. This was carried out by the sale of 7,704,974 existing shares by the State to EDF which immediately sold them to eligible employees, former employees and retired employees. This operation does not constitute a capital increase for the Group.
The sale price for these shares was fixed on 20 June 2019. It included a discount of 20% on the reference price based on the volume-weighted average price of EDF shares traded on Euronext Paris for the twenty trading days preceding the day when the price was set.
The shares were delivered on 16 July 2019.
