At 31 December 2021, Dalkia’s goodwill amounts to €592 million, principally resulting from acquisition of the Dalkia group in France under the agreement of 25 March 2014 with Veolia Environnement.
The recoverable value of the Dalkia group is based on future cash flows projected over a medium-term horizon, and a terminal value that represents cash flow projections to infinity. The updated test at 31 December 2021 benefited from improvements in certain parameters since 31 December 2020, particularly the discount rate, the growth rate and the favourable effect of Dalkia’s growth prospects under the “France Relance” plan. Applying the updated assumptions, the recoverable value is still well above the book value. The key parameters of the test are the terminal value and the discount rate: sensitivity analyses of those parameters did not call into question the headroom between the recoverable value and the book value.
The Dalkia brand, which was recognised as an asset when the Group took control of Dalkia in 2014 at the value of €130 million, is estimated by the royalty relief method. The updated impairment test at 31 December 2021 supports its current book value.
An impairment test was conducted for the technical service subsidiary Imtech in the United Kingdom, in view of past losses made by this CGU. No risk of impairment was indicated, including for the brand, which is carried in the balance sheet at the value of €86 million. Threshold value analyses were performed to confirm that this result was robust in view of the parameters used.
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 the accounting policies, over the assets’ useful life, using an after-tax WACC of 5.1% at 31 December 2021 (5.2% at 31 December 2020). For nuclear assets, the Group’s benchmark model assumes an operating lifetime of 50 years for currently active plants, as it is the Group’s strategy to keep plants in operation for at least 50 years. This takes account of the proposed early closures of two 900MW nuclear reactors included in France’s multi-year energy programme.
The impairment test incorporates the latest forecasts concerning Flamanville 3 (which has a planned operating lifetime of 60 years) established in January 2022, with an adjusted schedule reflecting the progress on the project and preparation for its start of operation. The fuel loading date has been deferred from late 2022 to the second quarter of 2023, and the estimated completion cost has been raised from €12.4 billion to €12.7 billion in 2015 euros (excluding interim interest).
At 31 December 2021, this impairment test showed that the recoverable value was clearly higher than at 31 December 2020, due to the favourable impact of higher short-term, medium-term and long-term price scenarios, while other changes in assumptions used in the test had moderate or minor impacts.
The sensitivity dimension of the test was updated to incorporate the effect of announcements made by the Group on 13 January 2022 concerning the French government’s decision to attribute an additional 20TWh of volume to the ARENH scheme for 2022 at the price of €46.2/MWh, on 13 January and 7 February about the downward revision of estimated nuclear power output in France for 2022, and on 11 February about the revision of estimated nuclear power output in France for 2023 (see note 23). These factors noticeably reduce the headroom calculated by the test, but it remains very positive.
The key assumptions in the test still concern the useful life of nuclear assets, the long-term market price scenario, the discount rate, changes in costs and investments, and the capacity revenue. Each of these assumptions was subjected to sensitivity analyses and the results did not call into question the existence of a positive difference between the book value and recoverable value.
The updated impairment test at the year-end showed that the difference between the recoverable value and the book value was higher than at 31 December 2020, due to favourable electricity price scenarios, and a higher value for wind power following increased capacity resulting from projects validated in 2021.
For tests of the nuclear plants operated by the ENGIE Group in which Luminus owns a 10.2% share (419MW), it has historically been assumed that operations will continue until 2025 at the latest depending on the plants.
Sensitivity analyses were conducted to incorporate the risk that the hydropower concessions may be shortened, and no associated risk of impairment has been identified.
Impairment of -€219 million was also recognised on associates at 31 December 2021, principally in respect of assets owned by EDF Renewables (see note 12.3). Impairment of €189 million was also booked at 31 December 2020 in respect of associates.
The accounting treatment of public distribution electricity concessions in France is determined by the concession agreements, with particular reference to their special clauses. It takes into consideration the possibility that the EDF group, particularly Enedis, may one day lose its status as the sole authorised State concession operator.
In application of the concession agreements, the concession operator manages the facilities at its own risk for the entire term of the concession, and bears substantially all the risks and benefits (both technical and economic) over the useful life of the network infrastructure. Under IAS 16, the assets are controlled by the operator and the grantors have no decisive characteristics of control over the infrastructures as defined by IFRIC 12.
All concession assets are consequently carried in the balance sheet, regardless of their origin (facilities constructed or purchased by the concession operators, and facilities provided by the concession grantors) and the source of financing, while the contractual obligations to the grantor are recognised in the liabilities.
Public electricity distribution facilities that are constructed or purchased by the concession operator are carried at production or acquisition cost:
New facilities provided by the concession grantors are carried at the value of the cost the Company would have borne if it had constructed them itself.
In the specific case of rising mains transferred for no consideration to the public distribution network in application of article 176 of French law 2018-1021 of 2 November 2018 on housing, development and digital affairs (the “ELAN” law), these assets are carried at their market value under article 213 of France’s national chart of accounts.
Balance sheet liabilities are recognised in respect of new facilities provided for no consideration by the concession grantors and the rising mains transferred under the ELAN law are included in “Special French public electricity distribution concession liabilities” in the balance sheet liabilities.
Distribution assets (pipes, substations) are depreciated over periods of 30 to 60 years, meters and metering equipment over periods of 20 to 30 years. The Group regularly checks the relevance of the main accounting parameters for concession assets (depreciation periods, replacement values, management levels).
