Annual Report 2010 - Enel.com

lated depreciation and any impairment losses determined
as set out below. Depreciation is calculated on a straightline
basis over the item’s estimated useful life, which is
reviewed annually, and any changes are reflected on a
prospective basis. Depreciation begins when the asset is
ready for use.
The estimated useful life of the main items of property,
plant and equipment is as follows:
Civil buildings
Useful life
40-65 years
Hydroelectric power plants (1) 20-50 years
Thermal power plants (1) 10-40 years
Nuclear power plants 40 years
Geothermal power plants 10-40 years
Alternative energy power plants 15-40 years
Transport lines 20-40 years
Transformation plant 32-42 years
Medium- and low-voltage distribution networks 10-60 years
Gas distribution networks and meters 25-50 years
Industrial and commercial equipment 4-25 years
(1) Excluding assets to be relinquished free of charge, which are depreciated
over the duration of the concession if shorter than useful life.
Land, both unbuilt and on which civil and industrial buildings
stand, is not depreciated as it has an undetermined
useful life.
Leased assets
Property, plant and equipment acquired under finance
leases, whereby all risks and rewards incident to ownership
are substantially transferred to the Group, are initially
recognized as assets at the lower of fair value and the present
value of the minimum lease payments due, including
the payment required to exercise any purchase option.
The corresponding liability due to the lessor is recognized
under financial liabilities. The assets are depreciated on
the basis of their useful lives. If it is not reasonably certain
that the Group will acquire the assets at the end of the
lease, they are depreciated over the shorter of the lease
term and the useful life of the assets.
Leases where the lessor retains substantially all risks and
rewards incident to ownership are classified as operating
leases. Operating lease costs are taken to profit or loss on
a systematic basis over the term of the lease.
Assets to be relinquished free of charge
The Group’s plants include assets to be relinquished free
of charge at the end of the concession. These mainly regard
major water diversion works and the public lands
used for the operation of the thermal power plants. For
plants in Italy, the concessions terminate in 2029 (2020 for
plants located in the Autonomous Province of Trento and
2040 in the Autonomous Province of Bolzano) and 2020.
If the concessions are not renewed, at those dates all intake
and governing works, penstocks, outflow channels
and other assets on public lands will be relinquished free
of charge to the State in good operating condition. The
Group believes that the existing ordinary maintenance
programs ensure that the assets will be in good operating
condition at the termination date. Accordingly, depreciation
on assets to be relinquished is calculated over the
shorter of the term of the concession and the remaining
useful life of the assets.
In accordance with Spanish laws 29/85 and 46/99, hydroelectric
power stations in Spanish territory operate under
administrative concessions at the end of which the plants
will be returned to the government in good operating
condition. The concessions will expire in the period between
2011 and 2067.
A number of companies that operate in Argentina, Brazil
and Mexico hold administrative concessions with similar
conditions to those applied under the Spanish concession
system. These concessions will expire in the period between
2013 and 2088.
Enel also operates under administrative concessions for
the distribution of electricity in Spain. The concessions
give Endesa the right to build and operate distribution
networks for an indefinite period of time.
The Group is a concession holder in Italy for the distribution
of electricity. The concession, granted by the Ministry
for Economic Development, was issued free of charge and
terminates on December 31, 2030. If the concession is not
renewed upon expiry, the grantor is required to pay an indemnity.
The amount of the indemnity will be determined
by agreement of the parties using appropriate valuation
methods, based on both the balance sheet value of the
assets themselves and their profitability. In determining
the indemnity, such profitability will be represented by
the present value of future cash flows. The infrastructure
serving the concessions is owned and available to the concession
holder. It is recognized under “Property, plant and
equipment” and is depreciated over their useful lives.
159