Annual Report 2010 - Enel.com

expected future cash flows and applying an appropriate
discount rate, selected on the basis of market inputs such
as risk-free rates, betas and market risk premiums. More
specifically, the cash flows were determined on the basis
of the most recent forecasts and the assumptions underlying
those forecasts, in line with the Group business plan. To
discount certain flows, an explicit period consistent with
the time horizon of the business plan was used and the
overall length of the period is consistent with the average
useful life of the assets or the duration of the concessions.
The terminal value was calculated as a perpetuity or annuity
with a nominal growth rate equal to the long-term
rate of growth in electricity (depending on the country
involved) or in any case no higher than the average longterm
growth rate of the reference market. The value in use
calculated as described above was found to be greater
than the amount recognized on the balance sheet.
In order to verify the robustness of the value in use of the
198 Enel Annual Report 2010 Consolidated financial statements
assets, sensitivity analyses were conducted, which fully
supported that value. With specific reference to the main
goodwill amounts recognized, sensitivity analyses were
conducted for changes in the discount rate (+100 basis
points) and the growth rate (-100 basis points) used in
determining terminal values. The criteria used to identify
the cash generating units were essentially based (in line
with management’s strategic and operational vision) on
the specific characteristics of their business, on the operational
rules and regulations of the markets in which Enel
operates and on the corporate organization, including
technical and management factors, as well as the level of
reporting monitored by management
The table below reports the balance of main goodwill
according to the company to which the cash generating
unit belongs, along with the discount rates applied and
the time horizon over which the expected cash flows have
been discounted.
Growth
Millions of euro Amount Tax rate
rate (1)
Discount rate
WACC (2)
Explicit period Terminal
of cash flows value (3)
at Dec. 31,
2010
Endesa - Iberian peninsula (4) 11,241 29.9% 2.1% 5.8% 10 years Perpetuity
Endesa - Latina America 3,260 29.3% 4.5% 7.6% 10 years Perpetuity
Enel OGK-5 1,242 20% 1.4% 9.8% 10 years Perpetuity
Slovenské elektrárne 697 19% 2.0% 5.9% 10 years 20
Enel Energia 579 36.9% 1.6% 5.1% 10 years 10
Enel Romania (5) 495 16% 3.0% 8.3% 10 years Perpetuity
Enel Green Power España (6) 385 30% 2.0% 5.7% 5 years 17
Enel North America 120 35% 2.0% 5.8% 5 years 22
Enel Panama 100 30% 2.5% 7.6% 5 years Perpetuity
Inelec 92 28% 2.5% 7.8% 5 years Perpetuity
Enel Green Power Hellas 70 25% 2.0% 6.0% 10 years Repowering (7)
Enel Latin America 64 26.5% 2.5%
no terminal
7.7% 5 years 34
RusEnergoSbyt 44 20%
value 9.1% 13 years -
Nuove Energie 26 31.4% 1.6% 5.6% 10 years 22
Enel Green Power France 25 33.3% 2.0% 6.0% 5 years Repowering (7)
Marcinelle Energie 20 34% 1.4% 5.3% 10 years 16
(1) Perpetual growth rate of cash flows after explicit period.
(2) WACC represents the weighted average capital cost.
(3) The terminal value has been estimated on the basis of a perpetuity or an annuity with a rising yield for the years indicated in the column.
(4) Goodwill includes the portion referring to Enel Green Power España.
(5) Includes all companies operating in Romania.
(6) Includes the goodwill of Enel Unión Fenosa Renovables.
(7) Terminal value calculated as the perpetual yield of a cash flow that includes the annual investment in repowering of the plants at the end of the explicit period.