Changes in property, plant and equipment for 2012 and 2013 are shown below:
|Millions of euro||Land||Buildings||Plant and machinery||Industrial and commercial equipment||Other assets||Leased assets||Leasehold improvements||Assets under construction and advances||Total|
|Balance at Jan. 1, 2012 restated||580||5,302||63,554||92||367||1,070||71||9,556||80,592|
|Assets entering service||10||222||4,828||1||23||3||40||(5,127)||-|
|Exchange rate difference||8||29||363||-||(3)||8||-||63||468|
|Change in scope of consolidation||1||-||215||-||-||-||-||6||222|
|Remeasurement at fair value after changes in control||-||-||-||-||-||-||-||4||4|
|Reclassification from/to “assets held for sale”||-||(4)||(314)||-||-||-||-||-||(318)|
|Balance at Dec. 31, 2012 restated||589||5,562||66,246||95||320||1,055||97||9,151||83,115|
|Assets entering service||15||188||3,341||5||59||76||14||(3,698)||-|
|Exchange rate differences||(24)||(134)||(1,740)||-||(17)||(24)||-||(419)||(2,358)|
|Change in scope of consolidation||9||30||590||-||-||-||-||(45)||584|
|Reclassification from/to “assets held for sale”||-||(3)||(14)||-||-||-||-||-||(17)|
|Balance at Dec. 31, 2013||581||5,466||64,670||93||285||986||105||8,864||81,050|
“Plant and machinery” includes assets to be relinquished free of charge with a net carrying amount of €9,864 million (€11,002 million at December 31, 2012), €5,120 million of which related to power generation plants (€5,986 million at December 31, 2012) and €3,192 million to Endesa’s electricity distribution network (€3,688 million at December 31, 2012).
“Leased assets” include certain assets which the Group is using in Spain, France, Greece, Italy, Latin America and Slovakia. More specifically, in Spain the assets relate to a 25-year “tolling” contract for which an analysis pursuant to IFRIC 4 identified an em200 Enel Annual Report 2013 Consolidated financial statements bedded finance lease, under which Endesa has access to the generation capacity of a combined-cycle plant for which the toller, Elecgas, has undertaken to transform gas into electricity in exchange for a toll at a rate of 9.62%. The other lease agreements regard wind plants that the Group uses in France (with a term of 15 years expiring in 2024-2025), in Greece (with a term of 10 years expiring in 2014) and in Italy (with a term of 18 years expiring in 2029-2031).
In Latin America, the assets relate to leased power transmission lines and plant (Ralco-Charrúa), with a residual term of 10 years on the lease at a 6.5% rate, a lease of a combined-cycle plant (Talara) with a term of 9 years at a fixed rate of 5.8%, as well as a number of combined cycle plants in Peru (residual lease term of three years bearing a floating rate). The leased assets in Slovakia essentially relate to the sale and lease back agreements for the V1 nuclear power plant at Jaslovske Bohunice and the hydroelectric plant at Gabcikovo. The leasing arrangements were a necessary condition for the start of the privatization of the Slovakian electricity system. The lease for the V1 plant covers the entire remaining useful life of the asset and the period between the end of generation and the start of the decommissioning process, while the lease for the Gabcikovo plant has a 30-year term as from April 2006.
The following table reports the minimum lease payments and the related present value.
|Millions of euro||Minimum lease payments||Present value|
|at Dec. 31, 2012|
|Millions of euro||Minimum lease payments||Present value|
|at Dec. 31, 2013|
The table below summarizes capital expenditure in 2013 by category. These expenditures, totaling €5,346 million, fell by €1,090 million compared with 2012.
|Millions of euro|
|- alternative resources||942||911|
|Total power plants||3,185||3,535|
|Electricity distribution network||2,022||2,782|
|Land, buildings and other assets and equipment||139||119|
Capital expenditure on power plants totaled €3,185 million, a decrease of 350 million on the previous year. This mainly reflects lower investment in conventional thermal plants and nuclear power plants in Italy, eastern Europe and Latin America.
These effects were only partially offset by increased investment in renewable generation plants by the Renewable Energy Division.
Capital expenditure for the electricity distribution network totaled €2,022 million, a decrease of €760 million over the previous year. The decrease is essentially attributable to a selective approach to work on the medium and low voltage grids in Italy and Spain.
The “change in scope of consolidation” for the period mainly concerned the acquisitions of control of the US companies Chisholm View Wind Project and Prairie Rose Wind Project (€499 million), the acquisition of a 100% stake in Parque Eólico Talinay Oriente, a company operating in the wind generation sector in Chile (€127 million), and of 50% of PowerCrop, which operates in biomass generation in Italy (€10 million). These factors were partially offset by the impact of the deconsolidation of the Buffalo Dunes Wind Project (€64 million).
“Impairment losses” on property, plant and equipment amounted to €180 million, mainly accounted for by the impairment losses recognized in respect of a number of generation plants and fuel storage facilities in view of changes in plans for their future use as well as an increase in impairment losses on photovoltaic manufacturing facilities in Italy, a number of geothermal plants in Nicaragua and a number of specific projects in North America and the Iberian peninsula.
Owing to the persistence of the economic crisis in Italy and in view of the adverse impact of that crisis on the traditional generation sector, although the Group has already incorporated assumptions of a slow economic recovery in the business plan approved in March 2013, we have found that the continuation of economic distress could represent evidence of impairment in accordance with IAS 36. Accordingly, we conducted an impairment test at December 31, 2013 of the Enel Produzione cash generating unit (whose assets are represented by conventional generation facilities in Italy). No impairment losses requiring recognition were found by those tests.
The model used in that testing was a unlevered discounted cash flow (DCF) approach applied to pre-tax amounts, with a time horizon based on an explicit period of 10 years plus a terminal value calculated as a perpetuity with stable growth. The assumptions concerning the growth rate and the discount rate were analogous to those adopted for other CGUs. In particular, the growth rate was determined on the basis of the average forecast for medium/ long-term electricity demand and set at 1.1%, while the discount rate was determined as the pre-tax WACC of 9.9%.
“Other changes” include, among other items, the effect of the capitalization of interest on specific loans for capital expenditure in the amount of €129 million (€91 million in 2012), as well as the change (positive in 2012 and negative in 2013) in the change in decommissioning plans for nuclear plants (see note 31).
“Reclassification to ‘assets held for sale’” essentially reports the property, plant and equipment of the French company WP France 3, which in view of the decisions taken by management meets the requirements of IFRS 5 for classification as assets held for sale.