EDP announced this evening that it had to set up impairments to deal with a potential less favourable scenario at its coal-fired Pecém Geração de Energia power plant in Brazil - taking E130 million from the profits of the company led by Miguel Stilwell.
The national electric utility, through its 57.55%-owned subsidiary EDP Brasil, said in a statement to the CMVM that its subsidiary Pecém Geração de Energia will record an impairment of E230 million in 2022 (non-cash impact).
"Pecém is a 720 MW coal-fired power plant in the state of Ceará with an operating license until January 2044, contributing to the security of supply of the Brazilian electricity system. The plant has a Power Purchase Agreement (PPA) in force until July 2027, providing a stable revenue stream, adjusted to inflation and availability levels," explains EDP.
However, "the postponement of the A-5 energy auction (for new PPAs starting in 2027), which was scheduled to take place in November 2022, and the lack of visibility regarding the upcoming energy auctions in Brazil have impacted expectations of the power plant's economic conditions when the existing PPA matures," the document states.
Therefore, "EDP incorporated this scenario in the annual impairment tests, which resulted in an extraordinary impairment cost to be recorded in EDP Brasil's net income in 2022, with a negative impact of E130 million on EDP's net income for the same year."
"The final impact is subject to the approval of the external auditors and this extraordinary accounting cost is neutral in terms of cash flow and net debt in 2022," the statement from the national electric company also says.
The document also recalls that "EDP is committed to maintaining its leadership position in the energy transition, with a clear growth strategy focused on renewable energies, having set the goal of eliminating coal activity from the EDP Group's revenue mix by 2025."
EDP directly holds 56.05% of EDP Brasil, but consolidates 57.55% through the adjustment of own shares.