| Operating segment | Cash-Generating Unit or asset | Impairment indicators | WACC after tax | Impairment 2020 (in millions of euros) |
|---|---|---|---|---|
Cash-Generating Unit or asset Nuclear assets* |
Impairment indicators Decrease in market prices and early shutdowns of certainAGR units/lower production forecasts |
WACC after tax 6.0% | Impairment 2020 (in millions of euros) (621) | |
| United Kingdom | United Kingdom Cash-Generating Unit or asset Gas storage assets | United Kingdom Impairment indicators Regulatory investments in certainfully-depreciated plants | United Kingdom WACC after tax 5.4% | United Kingdom Impairment 2020 (in millions of euros)(13) |
Cash-Generating Unit or asset Hydropower assets* |
Impairment indicators Unfavourable change in regulations on hydropower concessions |
WACC after tax 6.5% | Impairment 2020 (in millions of euros) (39) | |
| Italy | Italy Cash-Generating Unit or asset Energy services* | Italy Impairment indicators Lower profitability on certain contracts | Italy WACC after tax 6.5% | Italy Impairment 2020 (in millions of euros)(27) |
| EDF Renewables | EDF Renewables Cash-Generating Unit or asset Some CGUs | EDF Renewables Impairment indicators Unfavourable tariff prospects | EDF Renewables WACC after tax 3.4%-6.6% | EDF Renewables Impairment 2020 (in millions of euros)(36) |
| Other impairment | Other impairment Cash-Generating Unit or asset
| Other impairment Impairment indicators
| Other impairment WACC after tax
| Other impairment Impairment 2020 (in millions of euros)(32) |
| IMPAIRMENT OF OTHER INTANGIBLE ASSETS AND PROPERTY, PLANT AND EQUIPMENT | IMPAIRMENT OF OTHER INTANGIBLE ASSETS AND PROPERTY, PLANT AND EQUIPMENT Cash-Generating Unit or asset
| IMPAIRMENT OF OTHER INTANGIBLE ASSETS AND PROPERTY, PLANT AND EQUIPMENT Impairment indicators
| IMPAIRMENT OF OTHER INTANGIBLE ASSETS AND PROPERTY, PLANT AND EQUIPMENT WACC after tax
| IMPAIRMENT OF OTHER INTANGIBLE ASSETS AND PROPERTY, PLANT AND EQUIPMENT Impairment 2020 (in millions of euros)(768) |
*Impairment mainly booked at 30 June 2020.
In view of the specific context resulting from the Covid-19 pandemic, at the half-year 2020 closing a specific approach was adopted to take account of macro-economic conditions (discount rates), changes in market prices for commodities and electricity, the initial orientations resulting from adjustment of theMedium-Term Plan, and the specific situation of certain Group entities. This led to recognition of a total €738 million of impairment at 30 June 2020.
At 31 December 2020, the Group applied its usual method for impairment testing, updating the annual tests for goodwill and intangible assets, including those tested at 30 June 2020.
Over the market horizon, the forward prices used in the impairment tests are the market prices observed at the year-end, which were substantially lower than at the 2019 year-end.
Over the long-term horizon, these tests consider price curves constructed analytically by assembling blocks of assumptions and fundamental models of the supply-demand balance, in an annually updated scenario-building process.
The long-term price curves in the 2020 scenario are lower at the start of the horizon (2024-2030) than in the 2019 scenario, with a loss of value in non-peak electricity supplies in the four principal countries (France, the UK, Italy and Belgium),as anticipated in the interim tests conducted at 30 June 2020. They are then higher than in the 2019 scenario in most countries over the following period (2030-2040).There are several explanatory factors for this pattern:
As these assumptions are crucial in determining recoverable value, sensitivity analyses are conducted on long-term price curves when impairment tests are carried out. The information disclosed about the sensitivity of recoverable value to electricity prices remains appropriate in the current context: the effects of the Covid-19 pandemic are expected to be limited after 2025, and reference is made to forward prices that capture the effects on short-term growth.
Regarding the assumptions concerning capacity mechanisms, capacity revenue is expected to be slightly higher than in the 2019 scenario in most European countries, due to the downward revision of the return on the most recent generation assets on the electricity sales market, particularly in connection with upward revision of CO2prices. This structural trend also concerns France, but with a time lapse. With the new capacities set to arrive in France between now and 2025 (particularly the Flamanville EPR, the Landivisiau CCG plant, and France’s first offshore wind farm), the French electricity system will regain some room for manoeuvre, and this will bring capacity prices down.
The discount rates used in these tests are higher than at 31 December 2019 for most core European countries, to reflect EDF’s broader financing spread combined with an increase in the market risk premium. However, the increase is more moderate than at 30 June 2020, due to revision of the financing spread and to take account of the lower risk-free rates. In the United Kingdom, the change in the income tax rate leads to a stability of the discount rate compared to 31 December 2019. In Italy, the sovereign risk premium was raised at 30 June 2020 due to the specific national context, and remains higher at the year-end than in 2019 because of volatility, resulting in a more pronounced increase in WACC. The year-on-year increase in the principal WACC rates used in the tests is around 10 to 20bp for France and Belgium and 40bp for Italy. The test results have been subjected to analyses of their sensitivity to the discount rate.
At 31 December 2020, the great majority of the Group’s assets are impacted by the macro-economic context presented earlier. The possible consequences in terms of impairment were already broadly identified for the half-year closing at 30 June 2020.
