4.1 Property, plant and equipment

Impairment and reversals of impairment 2022

The integration of Nant de Drance (NdD) into the Production Switzerland CGU as of 1 July 2022 constituted a triggering event. The impairment test of the Production Switzerland CGU was performed at half-year closing and did not lead to any impairment losses. Further information can be found in note 4.7.

In the second half of 2022, the management initiated the sale of the three Bulgarian companies. As a result, the corresponding assets and liabilities were classified as "held for sale" (see note 5.2). Prior to this reclassification Alpiq tested the assets of the cash-generating unit Vetrocom for impairment and determined the recoverable amount based on the fair value less cost to sell which was calculated on the basis of the non-binding offers (level 2) received. The assessment led to a reversal of impairment losses recognized in prior years in the amount of CHF 23 million in the International business division, thereof CHF 18 million on wind park assets and CHF 5 million on intangible assets.

Impairment 2021

Impairment losses of CHF 8 million were recognised in 2021. Thereof, an amount of CHF 6 million was attributable to the Spanish gas-fired combined-cycle power plant Plana del Vent in the International business division. Major drivers for the impairment in Plana del Vent were the deterioration in earnings prospects and the extended downtime until December 2021 as a result of delivery delays at the manufacturer in connection with additional repairs. The recoverable amount was calculated using a pre-tax discount rate of 6.24 %.

Contractual obligations

At the reporting date, the Group had contractual commitments of CHF 66 million (previous year: CHF 59 million) for the construction and acquisition of property, plant and equipment.

Accounting policies

Property, plant and equipment is stated at cost, net of accumulated depreciation and any impairment losses. Obligations to restore land and sites after licence expiry or decommissioning are accounted for individually in accordance with the contract terms. Estimated restoration costs (including decommissioning costs) are included in the cost of acquisition and manufacture, and are recognised as a provision. Replacements and improvements are capitalised if they substantially extend the useful life, increase the capacity or substantially improve the quality of the property, plant or equipment.

Depreciation is applied to property, plant and equipment on a straight-line basis over their estimated useful lives, or to the expiry date of power plant licences. Assets under construction and prepayments are not subject to depreciation until they are completed or in working condition and have been reclassified to the corresponding asset category. The estimated useful lives of the various classes of assets range as follows:

• Power plants: 20 – 80 years
• Transmission assets: 15 – 40 years
• Buildings: 20 – 60 years
• Machinery, equipment and vehicles: 3 – 20 years
• Land: only in case of impairment
• Assets under construction and prepayments: if impairment is already evident

The residual value and useful life of an asset are reviewed regularly, but at least at each financial year end, and adjusted where required. At every reporting date, a test is performed to determine whether there is any indication that items of property, plant and equipment are impaired. If there is any indication of impairment, the recoverable amount is determined for the asset. If the asset’s carrying amount exceeds its estimated recoverable amount, an impairment loss equivalent to the difference is recognised. An impairment loss previously recognised for an asset is reversed in the income statement if the impairment no longer exists, or has decreased. An impairment loss is reversed only to the extent that the asset’s carrying amount does not exceed the carrying amount that would have been determined, net of depreciation, had no impairment loss been recognised.