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2009 Annual consolidated
financial statements
Notes
SIGNIFICANT ACCOUNTING ESTIMATES AND KEY UNCERTAINTIES AFFECTING ESTIMATES
Assumptions used to measure the fair value of solar panels
WDP has made a significant investment in solar energy. Following initial recognition, the solar panels (PV) installed on roofs are valued using the revaluation model of IAS 16 and recorded as fixed assets in ‘Other tangible fixed assets’. This revaluation is taken directly to equity as revaluation surplus.
After a web investigation, no best practice was found to exist for valuing this asset category. WDP proceeds as follows:
The fair value of the PV installations is calculated by discounting future revenues and costs.
The main assumptions used for the discounted cash flow model to value the solar panels are:
| 1. |
Last year the calculation was based on an implicit number of hours of sunshine of 960. On the basis of data since May 2008 on the actual production of the site in Grimbergen and compared to the output stated by the suppliers of an equivalent of 850 hours, we can establish that a surplus of 22% was achieved. This is confirmed by the production of the site in Willebroek that has been operational since November 2008, where a 17% surplus was realised. Accordingly, an average surplus of 20% above the supplier’s norm is assumed and this valuation is based on 1020 hours at the end of 2009.
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| 2. |
The green electricity certificates (GSC) at a rate of EUR 450 per MWh are awarded for 20 years. |
| 3. |
The energy price increases in real terms by 1,5% per year. This increase is applied on the Endex basis. As a starting point, the average Endex price (BE-power) Cal t + 1,2,3 is selected. Our valuation at the end of 2009 is based on the Cal 10, 11 and 12 published on 31 December 2009. |
| 4. |
The required return applied is the interest rate for 30 years (OLO 30 years) increased by 125 bp (on 31 December 2009 this was 4,38%). |
| 5. |
The PV installation has a fall in return of 0,6% per annum and is decommissioned after 30 years. No account is taken of any residual value of the installation, nor of the costs for dismantling the installation. |
6.
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Account is taken of various minor cost items and 10-year maintenance costs. No account is taken of theoretical rental expenses for the roofs. |
| 7. |
No allowance of 2,5% is deducted to establish fair value, in order to take account of the registration charges a future buyer may have to pay for the premises including solar panels, if these are considered as real property in terms of their use. |
| 8. |
This procedure is carried out each year for the sites in production and the aforementioned assumptions are adjusted if necessary. The added value on the start-up of a new site for the installed electrical capacity is recorded as an addition to shareholders’ equity, as revaluation surplus in a separate line item. Downward valuation adjustments are also recorded in this category, unless realised or unless fair value falls below cost, in which case they are taken through profit or loss. |
Valuation of Lefebvredok based on the assumption of extending the lease period
The property located on the Lefebvredok, Antwerp is built on land leased from Antwerp Harbour Authority. The extension of the lease is assumed in the fair value assessment, as is usually the case.
WDP more specifically assumes in the valuation at fair value (EUR 3,6 million as of 31 December 2009) that it will have obtained an extension of the lease by 20 years.
WDP has already obtained an official extension by 5 years as of 1 January 2008, after which the site would have to be transferred to Wijngaardnatie, without statement of the sale value.
WDP has accepted this arrangement under reserve of any prejudicial acknowledgement and under reserve of all its rights, with the intention that if unable to reach an agreement with Wijngaardnatie in relation to the transfer of the site within 5 years, WDP may approach the Council of State to object against this decision.
Sensitivity analysis
In the case of a hypothetical negative revision of the return (yield or capitalisation rate) used by the property experts in the valuation of the portfolio by 1%, the fair value of the property would decrease by EUR 92,3 million or 11%. The gearing of WDP would thereby rise by 6,19% to 61,44%.
In the case of a hypothetical positive revision of the return (yield or capitalisation rate) used by the property experts in the valuation of the portfolio by 1%, the fair value of the property would increase by EUR 119,2 million or 15%. The gearing of WDP would thereby fall by 6,36% to 48,89%.
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