The impairment test of the HPC project at 31 December 2022, based on an updated project model incorporating the information announced in May 2022 and the 100bp increase in WACC, identified a loss of value of €(551) million at 31 December 2022. This impairment is reversible.
Despite the greater headroom observed at the end of December 2022 in EDF Energy’s other CGUs (Nuclear assets plants in operation, Sales and Supply), consideration of the revised value of the HPC project which was seriously affected by the higher discount rate led to recognition of partial impairment of €(1,176) million on EDF Energy goodwill at 31 December 2022.
The book value of the HPC project, and of EDF Energy goodwill, are both now sensitive to any unfavourable variation in assumptions.
Capitalised costs for the Sizewell C project (note 10.6) amount to €808 million and are included at net book value in the impairment test of EDF Energy’s goodwill, without considering prospects for their appreciation in value.
Land and securities accounted for by the equity method in the project company Bradwell (gross value of around €330 million) owned 80% by CGN are totally covered by provisions, partly in 2021 and the rest in 2022 as it no longer certain that the project will go ahead.
As an intangible asset with an indefinite useful life, the impairment test of the Edison brand, first recognised at the value of €945 million when Edison was taken over in 2012, is updated annually using the royalty relief method and a 100bp risk premium in determining the discount rate. The test was updated at 31 December 2022, based on the adjusted model of 31 December 2021 which incorporated the recommendations of the most recent external assessment carried out in 2020 (reducing the long-term growth rate from 2% to 1.5% based on GDP forecasts; increasing the royalty rate for the Business customer segment following a survey of business customers). The result shows a rise in the brand’s recoverable value, reflecting higher medium and long-term price scenarios, mitigated by the effect of an increase of over 100bp in the WACC. Sensitivity analyses including an additional 50bp increase in the WACC, and a -0.2% decrease in royalties, do not indicate any risk of impairment.
At 31 December 2022, the recoverable value of Edison’s generation CGUs (Thermal assets, Hydropower, Wind power, Solar power, Gas) is higher overall due to more favourable medium and long-term price scenarios, although this effect was mitigated by the windfall tax introduced for electricity producing companies by the Italian government in late 2022, and the increase of around 100bp in the WACC. The recoverable value of the Hydropower CGU is down slightly, as future cash flows include an increase in investments in preparation for concession renewals. No risk of impairment was thus identified for these CGUs.
The following sensitivity tests were performed and did not indicate any risk of impairment:
Conversely, impairment of €68 million was recognised on certain specific Energy Services assets (contracts, customer relations, goodwill).
The recoverable value of Framatome is determined on the basis of a 10 - year business plan and a terminal value. This business plan is sensitive to assumptions concerning the completion of major construction projects that are incorporated into the reactor scenario, and market share assumptions concerning services to the installed base and fuel deliveries to customers’ reactors. The reference scenario includes expansion of the EPR2 programme in France and realisation of the Sizewell C project in the United Kingdom, and also other EPR project opportunities in India or elsewhere. The WACC used to discount future cash flows is weighted according to Framatome’s different businesses and their risk profiles. The headroom indicated by the impairment test on goodwill remains very significant (€1,448 million) although lower than at 31 December 2021, principally due to the increase of over 100bp in the WACC (from 5.9% to 7%), partly mitigated by the rise in the long-term growth rate (to 1.5%) in line with inflation.
Sensitivity analyses were conducted using a 50bp increase in WACC, or with a 0% growth rate to infinity. The test conclusions were not affected.
Framatome’s intangible assets recognised after its acquisition (technologies, including the EPR, which are depreciated over an average 15 to 20 years; customer relations amortised over an average period of 11 years; and the brand) were tested, and no risk of impairment was identified.
EDF Renewables’ assets mainly consist of CGUs that benefit from Power Purchase Agreements (PPAs) providing contractually defined revenues over most of the assets’ useful lives, and consequently have low market risk exposure.
In 2021, impairment of €(54) million was recognised in respect of various CGUs of EDF Renewables.
Following impairment tests performed at 30 June 2022, impairment was booked in respect of wind farms in Texas (€(60) million on 1 fully consolidated plant, and €(134) million on 3 plants accounted for by the equity method) due to congestion on the transmission networks following recent expansion in renewable energies, with a significant and durable impact on projected sales. This impairment was updated at 31 December 2022 (notably for exchange rate adjustment) and amounts to €(62) million, and €(139) million on investments accounted for by the equity method (see note 12.3).
Furthermore, after the Federal Electricity Commission decided to cancel a PPA, impairment of €(37) million was previously booked on a wind farm under construction in Mexico (€(39) million at 31 December 2022).
Other impairment totalling €(28) million was recognised on specific assets in France and the United States, notably concerning a wind farm in the United States that is likely to be sold for a price below the value of the assets.
At 31 December 2022, Dalkia’s goodwill amounts to €643 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 test update at 31 December 2022 found that the recoverable value had decreased, principally due to the 100bp increase in the WACC (from 4.2% to 5.2%), which was partly mitigated by an increase in the long-term growth rate (to 1.9%) in line with inflation. Sensitivity analyses of these two key parameters, increasing the WACC by 50bp and reducing the growth rate by 30bp, did not identify any risk of impairment.
