16.Intangible assets and property, plant and equipment

Changes in intangible assets and goodwill

Changes in property, plant and equipment

16.1. Impairment of cash generating units with own goodwill

For the purposes of impairment testing, goodwill is allocated to the following cash-generating units and the cash flows of these cash-generating units are discounted at the following discount rates:

The recoverable amount attributable to the cash generating unit “Sales” exceeds the carrying amount by EUR 259.1 million. In the event of a decrease in future cash flows by 68.5%, or an increase in the interest rate by 7.8%, the carrying amount corresponds to the present value of the future cash flows.

The recoverable amount of the “Waste Management segment/Austria” cash-generating unit exceeds the carrying amount by EUR 70.0 million (previous year: EUR 20.3 million), while the recoverable amount of CEVAK a.s. exceeds the carrying amount by EUR 143.7 million (previous year: EUR 114.8 million). In the event of a decrease in future cash flows by 27.1%, or an increase in the interest rate by 1.7%, the carrying amount of the “Waste Management segment/Austria” cash-generating unit corresponds to the present value of the future cash flows. A decrease in CEVAK a.s.' future cash flows by 10% would not result in an impairment.

16.2. Impairment of cash generating units without own goodwill

Timelkam CCGT (combined cycle gas-turbine) power plant

Due to the current situation on the market, impairment testing was performed for the Timelkam combined cycle gas-turbine power plant (Energy segment). The maximum output of the power plants amounts to 422 MW, maximum district heating supply is 100 MW. Efficiency was estimated at 55.7%. Annual electricity generation was recognised at up to 1,729 GWh per year (previous year: 1,442 GWh). The assumptions for the future electricity and gas prices are based, where available, on market data; if no market data were available, estimates were made based on market studies. The estimated electricity price is EUR 49.13 to EUR 78.22/MWh (previous year: EUR 36.82 to EUR 77.45/MWh). Expenses for maintenance and repair were recognised according to maintenance plans and contracts. Other material expense items such as personnel costs, insurance and infrastructure costs are annually increased by an estimated increase rate. The discount rate is 4.8% (previous year: 4.9%). The planning horizon ends in the 2037/2038 fiscal year. In particular due to the increased electricity prices and the resultant increased use, a reversal of impairment in the amount of EUR 7.9 million (previous year: impairment of EUR 2.5 million) was recognised. The recoverable amount determined using the DCF method corresponds to the value in use in the amount of EUR 51.5 million (previous year: EUR 47.3 million). Fluctuations in cash flows of 20% resulted in a change of EUR 25.9 million in the recoverable amount. An increase in the interest rate by 0.5% results in a reduction of the recoverable amount by EUR 1.9 million.

Electricity grid

The impairment of the cash generating unit “Electricity grid” depends, inter alia, on the grid utilisation fees. In Austria, the electricity grid utilisation fees are determined by the legislator. The billable grid utilisation fees include, inter alia, interest on the employed capital (regulatory asset base, short "RAB"), with the determination of the employed capital essentially based on the carrying amounts pursuant to the Austrian Commercial Code (UGB) and the Electricity Industry Organisation Act (EIWOG). The applicable interest rate is prescribed by the regulatory authority. Due to the different useful lives and capitalised interest on borrowed capital in particular, the carrying amount under IFRS exceeds the calculation basis for the interest on the employed capital (RAB).

In order to validate the potential impairment, IAS 36 requires determination of the recoverable amount, with the recoverable amount to be based on the higher of the two fair value amounts less the costs of disposal and value in use. The value in use was, in particular due to the statutory regulation system, lower than the carrying amount under IFRS. In the past, the recoverable amount was determined via the fair value amounts less the cost of disposal on the basis of a market-based approach (multiplier method). ¹⁾The measurement methods under IFRS 13 are the cost-based method, the market-based method, and the income-based method. The market-based method and the income-based method appear to be suitable for the purposes of validating the potential impairment of the electricity grid. The market-based method is a measurement method that uses prices and other relevant information generated in market transactions involving identical or comparable/similar assets. This was based on sales transactions of companies (grid operators) in countries with comparable regulatory models. As of 30 September 2018, the fair value amounts less costs of disposal exceeded the carrying amount under IFRS.

The suitability of this method presupposes the existence of transactions involving identical, comparable or similar assets. In cases where recently completed market transactions conducted by sufficiently comparable companies are lacking, the previous measurement method can no longer be applied as of 30 September 2019. The combination of lacking comparable transactions and the difference resulting from the carrying amount under IFRS and the regulatory asset base (RAB) indicate a potential impairment, which resulted in the assets of the cash generating unit “Electricity grid” to be assessed on a potential impairment as of 30 September 2019.

For this reason, the recoverable amount is now determined on the basis of the value in use. This is done by calculating a present value of future cash flow surpluses on the basis of a five-year mid-term planning. The mid-term planning is based on the grid utilisation fees prescribed by the legislator. A perpetual annuity was assumed at the end of the detail planning phase, with the assumption of the perpetual annuity experiencing no additional growth. A discount rate of 3.7% was used. The recoverable amount (value in use) is EUR 413.8 million. In the Grid segment, an impairment in the amount of EUR 109.3 million was recognised through profit or loss (in the item for depreciation, amortisation and impairment). The impairment in the amount of EUR -192.4 million was recognised in the item property, plant and equipment, and in the amount of EUR 83.1 million in the item construction cost subsidies. A decrease (increase) of future cash flows by 5% would result in an impairment (reversal of impairment) after reversal of construction cost subsidies in the amount of EUR 20.7 million.

Impairments in the previous year

The impairment of the “Price Authority Heat Sales” cash-generating unit (Energy segment) was tested in the past fiscal year. This unit includes the thermal plants in Timelkam/Vöcklabruck, Riedersbach and Kirchdorf, for which the sales prices are jointly set by a price authority. Future revenues were based on an annual output of 236.4 GWh and were planned under the assumption that cost components can be compensated by a higher price for heat over the medium term. Past price approvals by the price authority supported this assumption. Using a discount rate of 4.9%, the recoverable amount (value in use) was assessed at EUR 8.1 million. The impairment amounted to EUR 3.0 million.

Additionally, an impairment in the amount of EUR 3.2 million was recognised for the cash generating unit “7-Fields gas reservoir”. The impairment was based on a new appraisal of future gas prices on the trading market during the summer and winter months (“summer-winter spread”). Using a discount rate of 5.5%, the recoverable amount (value in use) was EUR 8.8 million.

16.3. Other disclosures

Research costs in the amount of EUR 4.5 million (previous year: EUR 3.7 million) were recognised as expenses.

In the 2018/2019 fiscal year, interest on borrowed capital in the amount of EUR 2,593.3 thousand (previous year: EUR 1,537.5 thousand) was capitalised. The applied interest rate was 4.3%.

Additions to assets under construction led to outflows of payment instruments in the amount of EUR 40,337.8 thousand (previous year: EUR 59,370.5 thousand). Obligations for the acquisition of property, plant and equipment amount to EUR 47,002.1 thousand (previous year: EUR 32,318.3 thousand).

In the 2007/2008 fiscal year, property, plant and equipment assets in the Waste Management segment were sold and leased back for a period of 15 years “Sale and Lease back”). The assets of this financing lease relationship continue to be capitalised in the balance sheet. The present value of the minimum lease payments is recognised in the same amount on the liabilities side. During and at the end of the contract term, there are options to terminate at certain points against repayment of the outstanding loan amount. At the end of the lease term, the lessor has the right to sell the asset to the lessee at the outstanding loan amount. During the leasing term, subleasing to third parties is not permitted. The carrying amount as of 30 September 2019 is EUR 19,281.9 thousand (previous year: EUR 22,287.5 thousand). The future minimum lease payments for the following year are EUR 2,610.4 thousand (previous year: EUR 2,618.3 thousand), for terms between one and five years EUR 42,870.9 thousand (previous year: EUR 45,929.6 thousand). Leasing payments calculated on the basis of a variable interest rate were recognised as expenses in the amount of EUR -2,388.6 thousand (previous year: -2,387.8).

The present value of the minimum lease payments is as follows:

¹⁾ The measurement methods under IFRS 13 are the cost-based method, the market-based method, and the income-based method. The market-based method and the income-based method appear to be suitable for the purposes of validating the potential impairment of the electricity grid. The market-based method is a measurement method that uses prices and other relevant information generated in market transactions involving identical or comparable/similar assets.