3.5 Description of assumptions for the Wind Energy project
In 2021, Ørsted acquired stakes in the increased share capital of Elektrownia Wiatrowa Baltica – 2 sp. z o.o. and Elektrownia Wiatrowa Baltica – 3 sp. z o.o. Following this transaction, Ørsted Group became a 50% shareholder in EWB2 and EWB3. In effect, PGE Group lost control over these two companies. Based on agreements executed between PGE Group and Ørsted Group companies, Elektrownia Wiatrowa Baltica – 2 sp. z o.o. and Elektrownia Wiatrowa Baltica – 3 sp. z o.o. constitute a joint operation in the meaning of IFRS 11 Joint Arrangements. As a resulting of accounting for the loss of control, goodwill of PLN 81 million were recognised in the consolidated financial statements.
Impairment tests on goodwill were conducted as of December 31, 2022, by establishing the recoverable amounts of assets. The recoverable value of the analysed assets was estimated on the basis of discounted net cash flow method which relied on the financial projections prepared for the assumed useful life of the particular CGU.
The EWB2 and EWB3 projects are at an advanced stage of development.
Presented below are the key assumptions having impact on estimates of the useful value of CGU:
- Revenue: EWB2 and EWB3 projects are entitled to public support in the form of a bilateral contract for difference (right to cover the negative balance) for a period of 25 years from the first day of electricity generation and injection into the grid under the awarded concession:
- The support price is expressed in 2021 values (as a result of amendments made to the Offshore Act by the Act of 15 December 2022 on the special protection of certain consumers of gaseous fuels in 2023) and is subject to annual indexation in accordance with the average annual CPI published by the Central Statistical Office,
- The European Commission issued a positive decision in the individual support notification process and the price set by the EC was accepted in December 2022 by the Energy Regulatory Office – confirming a support level of 319.60 PLN/MWh.
- Capital expenditure and operating costs have been estimated by the JO partners (PGE and Ørsted) based on their internal competences and experience in the implementation of analogous investments, taking into account information obtained in the process of on-going procurement proceedings.
- Development expenditure includes, inter alia, external costs and the cost of re-invoiced Ørsted and PGE staff hours.
- Energy production was estimated based on:
- Data collected during a measurement campaign in the immediate vicinity of the EWB2 and EWB3 offshore wind farm area, as well as data from long-term sources, which made it possible to determine the long-term average wind speed in the project area.
- Productivity characteristics for the selected turbine model and the planned distribution of turbines on water bodies.
- Energy conversion and transformation losses and equipment availability.
As at December 31, 2022, the value of the tested property, plant and equipment of EW Baltica 2 Sp. z
o.o. and EW Baltica 3 Sp. z o.o. amounted to PLN 305 million and goodwill to PLN 81 million. As a result of the asset impairment test, the Group estimated an excess of the value in use of the assets tested over the carrying amount, and therefore concluded that no impairment losses needed to be recognised for these assets.