Page 78 - InterEnergo - Annual Report 2020
P. 78

Interenergo                       Accounting report                                                                    Interenergo                       Accounting report

            Movement of investments in subsidiaries                                                                                Impairment testing was carried out on 31 December 2020 based on the present value method of expected
                                                                                                                                   cash flows. The significant assumptions used for individual investments are shown in the table below.
             in EUR                                                                     2020            2019
             Balance at 1 Jan                                                      15,527,984      13,721,230

               Additions                                                             9,392,316       2,894,943
               Impairments                                                          -3,906,237      -2,484,384                                                            Production period ill year
               Transfer of impairment from loans to subsidiaries                    -5,225,554      -1,548,570                                      Cash generating unit   Discount rate (WACC)   Average annual  production of electricity   Initial market purchase   price in EUR/MWh*  Period of market prices  Value of investments  and loans granted **  prior to impairment  Estimate of recoverable   investments recognised   in income statement
               Share capital increase in subsidiaries based on conversion of loans granted  9,918,147  2,944,765                                                    in MWh          FIT period                           amount  Impairment of

             Balance at 31 Dec                                                     25,706,657      15,527,984                       Investment        (CGU)  in %
                                                                                                                                                  CGU1   9.00%  10,500  2046  2021-2031  59.35  2031-2046

            As at the reporting date, the Company assessed the indications of impairment and established that following             EHE d.o.o.    CGU2   9.00%  17,000  2056  2021-2028  56.34  2028-2056  26,597,624  26,430,360  -167,263
            investments show signs of impairment:                                                                                                 CGU3   9.00%  20,000  2056  2021-2031  59.40  2032-2056
            •   EHE, d.o.o.: downward forecasting on the future movement of electricity prices for the period for which             Inter-        CGU1   8.80%  3,800  2035         -  51.97  2021-2035
                the subsidized electricity price is no longer valid on the basis of the contract;                                   Energo d.o.o                                                        2,667,530  4,360,522      0
                                                                                                                                    Gornji Vakuf  CGU2   8.80%  8,600  2042  2021-2027  56.64  2027-2042
            •   Inter-Energo, d.o.o Gornji Vakuf: downward forecasting on the future movement of electricity prices for                           CGU1   9.00%  25,000  2056        -  51.97  2021-2056
                the period for which the subsidized electricity price is no longer valid on the basis of the contract;
                                                                                                                                    Lumbardhi     CGU2   9.05%  20,000  2069  2021-2026  54.82  2026-2069
            •   Lumbardhi Beteiligungs GmbH that owns Kelkos Sh.p.k., which operates four power plants: temporary                   GmbH                                                                7,531,500  3,408,691  4,122,809
                suspension of the power plants’ operations and additionally planned investments;                                                  CGU3   9.05%  29,500  2069  2021-2026  54.82  2026-2069
                                                                                                                                                  CGU4   9.05%  14,000  2069  2021-2029  58.40  2030-2069
            •   Vjetropark Jasenice, d.o.o.: shortening the economic life of the power plant from 24 years to 16 years.
            The recoverable value estimate was calculated based on the return-based approach using the discounted                   Jasenice      CGU1   5.70%  21,500  2035  2021-2033  62.00  2034-2035  13,953,079  17,641,168  0
            cash flow method. The estimated value is in view of assumptions used classified as Level 3 within the fair              d.o.o.
            value hierarchy (Note 2.5.6). Assumptions used the anticipated quantity of electricity produced, assessed on
            the basis of hydrological curves, estimated value of investments in the construction of power plants, duration         * Market prices are based on the stock exchange prices of standardized futures contracts on the HUPX stock exchange for the 2021–2024 period; upon that period,
            of concessions, the amount of concession fees and the structure of other operating expenses (industrial                the RWE study is the source of long-term forecasts of market price movements.
                                                                                                                                   ** Inclusive of long-term and short-term loans and interest receivables.
            standard combined with a historical analysis of other comparable power plants owned by Kelag Group and its
            companies). The discount rates used were calculated as the weighted average costs of capital for investments
            in power plants by taking into account the risk of individual country.                                                 While the calculation method remained the same – relative to the impairment-related estimates made by the
                                                                                                                                   Company last year – the key change in this year’s impairment assumptions was the general lowering of the
            The recoverable value estimate was determined based on following assumptions:                                          electricity price level in the price forecasting study and emergencies related to unforeseen activities by state
            •   electricity produced on an annual basis equals the estimated production as confirmed by the competent              bodies in Kosovo, due to which the operation of power plants has been partially curtailed. At the same time,
                bodies and the parent company. An exception would apply with power plants, where their 10-year average             the need for impairment also resulted from the share capital increases.
                production, normalised by one-off events, would fail to achieve the initially expected production; however,        The Company is of the opinion that the stated changes in assumptions contribute to a more accurate and realistic
                there were no such cases.                                                                                          valuation of non-current investments in subsidiaries. In view of the results of the performed analysis, which

            •   during the initial phase, the “feed-in” (FiT) tariffs were used as the price for electricity produced. The         included the aforesaid changes in assumptions, the Company impaired the investments in EHE, d.o.o. (in the
                transition to the market price for electricity, whose amount is assessed via an external study, is carried         amount of EUR 976,383, whereof EUR 167,976 refers to impairment and EUR 808,406 to transfer of impairment
                out once the announced market price for electricity exceeds the “feed-in” tariff or not later than at the          from ‘loans’ to ‘investments’) and investments in Lumbardhi Beteiligungs GmbH (EUR 3,738,260). Within the
                latter’s expiry.                                                                                                   conversion of the loan into equity of EHE, d.o.o., the Company also transferred the relevant impairment of the
                                                                                                                                   loan over to the investment (EUR 4,417,148).
            •   considered duration of the project equals the duration of the licence.
                                                                                                                                   The Management assesses that the key assumptions for estimating the recoverable amount of investments
                                                                                                                                   are the quantity of electricity production and the weighted average cost of capital. The sensitivity analysis of
                                                                                                                                   the recoverable amount to changes in the projected amount of electricity production and the weighted average
                                                                                                                                   cost of capital is shown in the table below.

            76    Integrated Annual Report 2020                                                                                                                                                       Integrated Annual Report 2020  77
   73   74   75   76   77   78   79   80   81   82   83