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 2022 supports its current book value.
Finally, the test of the service subsidiary Imtech in the United Kingdom did not indicate any risk of impairment.
In terms of asset value, this segment consists almost entirely of the generation fleet in mainland France. 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. It includes the Flamanville 3 plant, with net book value of €15,472 million (see note 10.6). It does not include any goodwill.
The recoverable value of the generation fleet is estimated by discounting future cash flows by the Group’s usual methodology, described in the accounting policies, over the assets’ useful life, using an after-tax WACC of 6.3% at 31 December 2022 (120bp higher than the 5.1% at 31 December 2021). For nuclear assets, the Group’s benchmark model assumes an operating lifetime of 50 years for 900MW and 1300MW-series plants and 40 years for N4-series plants, based on the depreciation period applicable at 31 December 2022, although it is the Group’s strategy to keep plants in operation well beyond 50 years. The impairment test also incorporates the latest forecasts for Flamanville 3 (which has a planned operating lifetime of 60 years), with an adjusted schedule and cost revised (see note 10.6).
For the period 2023-2025, the key assumptions concerning price and regulation take account of forward prices (significantly higher over this horizon than at the 2021 year-end) and hedges already contractualised, an ARENH volume of 100TWh and price of €42/MWh, a tariff cap for final consumers that will be funded by the French State budget in accordance with the current Finance Law (and therefore no loss of cash flow for EDF) and the best estimate of the inframarginal rent cap, considering the negative rents for 2022 (see note 5.4). These assumptions are consistent with the 2023 budget approved by the Board of Directors.
From 2026, when the ARENH scheme ends, since to date there is no regulation of the existing nuclear power fleet, the reference impairment test framework apply an assumption of full market exposure in constructing tariffs and prices (see the section on Electricity prices).
As a result of medium and long-term price analyses, in the context of a gradual recovery in nuclear power generation starting from a range of 300-330TWh for 2023, the impairment test indicates substantially higher headroom than in 2021 (even before the effect of measures associated with the exceptional additional ARENH allocation and the impacts of the drop in nuclear power output in 2022), although the increase is mitigated by the higher WACC. The test shows that the recoverable value is well above the net book value.
The key assumptions in the test still concern:
These key assumptions were subjected to individual and combined sensitivity analyses (a 50bp increase in the WACC; a 10TWh per year decrease in nuclear power output across the whole period; a 5% increase in investments or operating expenses across the whole period; a decline in capacity prices; and post-2026 market prices 10% below the reference scenario price for a sustaned period) and the results did not call into question the existence of a positive difference between the book value and the recoverable value. An additional sensitivity test was also conducted using a less favourable income scenario over the 2024-2025 horizon, particularly considering potential unfavourable regulatory measures which could lead to a significant decrease in the test headroom, all other things being equal.
The impairment test update for Luminus showed that the difference between the recoverable value and the book value was stable overall compared to 2021, due to the combined effects of more favourable medium and long-term price scenarios - although that effect will be largely offset by the inframarginal rent cap introduced (see note 5.4), a 130bp increase in the WACC (from 5.1% to 6.4%), and the contrasting effect of inclusion of the new CCGT plant under construction at the Seraing site, scheduled for commissioning in 2025, which will benefit from capacity revenue.
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. This test did not take into consideration the possible 10-year extension for the Doel 4 and Tihange 3 reactors following the agreement in principle between the Belgian government and ENGIE announced in January 2023, since the conditions for the extension and its consequences in terms of future cash flows are not yet known.
Sensitivity analyses were conducted to incorporate the risk that the hydropower concessions may be shortened, and no associated risk of impairment was identified.
Net impairment of €(141) million was recorded on associates at 31 December 2022, principally in respect of assets owned by EDF Renewables (see note 12.3). Impairment of €(219) million was also booked at 31 December 2021 in respect of associates.
