10.7 Investments in intangible assets and property, plant and equipment
The table below provides a breakdown of the investments in intangible assets and property, plant and equipment presented in the cash flow statement:
Investments in property, plant and equipment and intangible assets during 2021 mainly concern:
- the France – Generation and Supply segment for €5,327 million, primarily investments made under the “Grand Carénage” programme, investments for Flamanville 3, and investments in hydropower generation;
- the France – Regulated activities segment: €4,784 million, essentially investments related to connections for customers and producers, but also investments for network renewal, quality of service and network modernisation;
- the United Kingdom segment for €4,325 million, where investments principally related to nuclear power generation;
- the EDF Renewables segment for €1,849 million, which saw a significant rise in wind and solar capacities under construction in France, in North America, and in emerging
10.8 Impairment/reversals
Accounting principles and methods
At the year-end and at each interim reporting date, in application of IAS 36, the Group assesses whether there is an indication that an asset could have been significantly impaired. An impairment test is also carried out at least once a year on cash-generating units (CGUs) or groups of CGUs including an intangible asset with an indefinite useful life, or to which goodwill has been partly or totally allocated.
Impairment tests are carried out as follows:
- the Group measures any long-term asset impairment by comparing the carrying value of these assets and goodwill, grouped into CGUs where necessary, and their recoverable amount;
- CGUs are groups of homogeneous assets that generate identifiable independent cash flows. They reflect the way activities are managed in the Group: they may be subgroups when the activity is optimised across the whole subgroup, or CGUs formed by parts of subgroups corresponding to different types of activity that are managed separately (thermal generation, renewable energy production, services), or single assets;
- the recoverable value of these CGUs is the higher of fair value net of disposal costs, and value in use. When this recoverable value is lower than the carrying amount in the balance sheet, an amount equal to the difference is booked under the heading “Impairment”. The loss is allocated first to goodwill, and any surplus to the other assets of the CGU concerned; impairment booked on goodwill is irreversible;
- fair value is the asset’s potential sale price in a normal transaction between economic actors;
- value in use is calculated based on projected future cash flows:
- over a horizon that is coherent with the asset’s useful life and/or operating life,
- for certain intangible assets with an indefinite useful life (such as brands), beyond the horizon that can be observed or modelled, a terminal value is determined by discounting to infinity a normative cash flow,
- excluding development projects other than those that have been decided at the valuation date,
- and discounted at a rate that reflects the risk profile of the asset or CGU;
- the discount rates used are based on the weighted average cost of capital (WACC) for each asset or group of assets concerned, determined by geographical area and by business segment under the CAPM. WACC is calculated after taxes;
- future cash flows are calculated on the basis of the best available information at the closing date:
- for the first few years, the flows correspond to the Medium-Term Plan (MTP). Over the MTP horizon, energy and commodity prices are determined based on available forward prices, taking hedges into consideration,
- beyond the MTP horizon, cash flows are estimated based on long-term assumptions prepared for each country where the Group controls nuclear assets, within the framework of a scriptwriting process updated annually. Long-term electricity prices are constructed analytically by assembling blocks of assumptions, e.g. economic growth, commodity prices (oil, gas, coal) and CO2, demand for electricity, interconnections, and developments in the energy mix (rise of renewable energies, installed nuclear capacity, etc.) with fundamental models of supply-demand balance. The Group refers in particular to external analyses for each assumption object (for example, for commodities and CO2, which are primary factors in electricity prices, the Group compares its own scenarios with scenarios developed by organisations such as the AIE, IHS, Wood Mackenzie or Aurora, bearing in mind that each of these analysts itself proposes a cone of scenarios corresponding to different macro-economic environments);
- income from capacity market mechanisms is also taken into consideration in valuing generation assets, starting from the MTP horizon where relevant, provided the countries concerned have introduced or announced the future introduction of a capacity revenue mechanism.
These calculations may be influenced by several variables:
- changes in discount rates;
- changes in market prices for energy and commodities and tariff regulations;
- changes in demand and Group’s market shares, and the attrition rate on customer portfolios;
- the useful life of facilities, or the duration of concession agreements where relevant;
- the growth rates used beyond the medium-term plans and where relevant the terminal values taken into consideration.
