EDF / 2018 Reference document

6.

FINANCIAL STATEMENTS Balance sheet

DEPRECIATION, AMORTISATION AND IMPAIRMENT NOTE 17 OF INTANGIBLE AND TANGIBLE FIXED ASSETS

31/12/2017

Increases

Decreases

31/12/2018

(in millions of euros)

Software

772 128 900

229

51 10 61 59

950 124

Other

6

Intangible assets Land and buildings Nuclear power plants

235 255

1,074 7,338

7,142

39,414

2,303

1,338

40,379

Machinery and plant other than networks

8,448

419

226

8,641

EDF-owned networks

474 989

28

-

502

Other

136

64

1,061

Property, plant and equipment owned by EDF

56,467

3,141

1,687

57,921

Land and buildings

6,342 1,052 1,140

142

5

6,479 1,066 1,200

Machinery and plant other than networks

29 73

15 13

Concession networks

Other

10

-

-

10

Property, plant and equipment operated under concessions

8,544

244

33 40

8,755

Tangible assets in progress

188

29

177

66,099

3,649

1,821

67,927

TOTAL DEPRECIATION, AMORTISATION AND IMPAIRMENT

IMPAIRMENT TESTS ON ASSETS 17.1 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, have led EDF to consider 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 the financial statements and its substantial exposure to market prices since discontinuation of the “yellow” and “green” regulated tariffs on 1 January 2016. The recoverable value of the generation fleet is estimated by discounting future cash flows under the usual methodology, described in note 1.6, over the assets’ useful life, using an after-tax WACC of 5.2% at 31 December 2018. For nuclear assets currently in operation (except for Fessenheim), EDF’s basic valuation assumes that the useful life is extended to 50 years, in line with its industrial strategy. The nuclear capacity remains subject to a ceiling of 63.2GW in the test, consistent with France’s Energy Transition Law.

The assumption of stable returns on capacity of €10/KW is adopted over a long-term horizon, in line with the analysis of system fundamentals used in the benchmark scenario. The average auction price achieved in 2018 was €18/KW. The impairment test indicated a significant positive difference between the recoverable value and the book value of the generation fleet, supported by the rise in electricity prices on the market horizon and implementation of savings plans. The margin resulting from the test is down slightly from 31 December 2017, principally due to lower long-term price scenarios, and because in the short term the ARENH system cannot capture all the value associated with higher forward prices. The key assumptions used in the test include the useful life of nuclear assets, the long-term price scenario, the discount rate, developments in costs and investments, and the assumed capacity premium. Each of these assumptions has been subjected to a sensitivity analysis, which does not call into question the existence of a positive difference between the recoverable value and book value. The test conducted at 31 December 2018 also took into consideration the sensitivity associated with the proposals for early closures of certain nuclear plants, as set out in the proposed multi-year energy programme. This did not affect the conclusions of the test.

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EDF I Reference Document 2018