Universal Registration Document 2021

6. Financial statements

Depreciation period of coal-fired plants in France

In view of France’s Energy and Climate law of 8 November 2019, the ends of the depreciation periods for the Le Havre and Cordemais coal-fired plants were changed at 1 June 2019, setting the closure of Le Havre at 1 April 2021 while Cordemais is to continue operating until 2026, considering a conversion to biomass as part of the Ecocombust project.

Le Havre power plant was permanently shut down on 31 March 2021.

On 8 July 2021, EDF announced it had decided to put an end to the Ecocombust project to develop fuel from class B “waste” wood as an alternative to coal, since the conditions for continuing the project were not fulfilled: the project cost could not guarantee an attractive price for the final product, and the industrial partner had recently withdrawn.

EDF began the Ecocombust project in 2015. Since late 2018 the project had consisted of adapting the Cordemais plant to use this alternative fuel, and creating a dedicated facility to produce pellets on site. EDF carried out successful technical and environmental feasibility studies.

The economics of the project were penalised by its very innovative nature, and the lack of experience with this type of product, as well as recently soaring commodity prices. Also, the partner with which EDF was holding discussions for the treatment of effluents from the pellet production facility decided to withdraw from the project. This meant the industrial commissioning date had to be deferred to 2024, as the Cordemais plant would not have been able to produce electricity from an alternative non-coal fuel during the period 2022/2024.

Cordemais will continue to operate until 2024, perhaps even 2026, to meet the requirements of the electricity system as defined by RTE, in compliance with the Energy and Climate law which allows the Cordemais plant to be used at full capacity for a maximum 750 hours a year. Consequently, the end of the depreciation period is currently unchanged at 2026, and the depreciation schedule was accelerated from the second half of 2021 to take account of the expected new operating arrangements. The investment expenditure on the Ecocombust project was written off at 30 June 2021.

17.1 Impairment tests on assets

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, EDF considers the entire fleet as a single CGU.

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 EDF’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 1.6, 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, EDF’s benchmark model assumes an operating lifetime of 50 years for currently active plants, as it is the Company’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 – see note 2.1.2 (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 41). 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.