upon completion of remedial work in August 2020, management would operate the plant at its full capacity (600 MWH per hour) 

 Internal usage at 5% - This was lower than that used in the last year. Further, average internal usage of past 4 years was 12% 

 System loss at 10% - The auditors consider that the expected system losses % was too low as compared to actual performance over the past few years where the % loss was in the range of 14%-15%. 

 Tariff rate of thebe 104 and 10% increment thereafter – The auditors considered that 10% annual increment was too aggressive. 

 Cost estimations – Cost estimation for 2018/19 year was consistent with approved budget. For subsequent periods, the increase was estimated at a flat rate of 5% - 7%. The view of the auditors was that management had not considered the impact of fixed and capital charges associated with coal purchases. 

In evaluating the management approach, the auditors indicated that decision to determine Morupule B Power Station as a Cash Generating Unit (CGU) was not appropriate because it could not generate cash flows on its own without the involvement of transmission and distribution network. Further, the auditors noted that there was no active market for the output of the plant. In the impairment assessment performed by management, as noted by auditors, the gross inflows were considered as the income earned from sales of electricity to end customers. In order to earn that income, the Corporation should have a transmission and distribution infrastructure and to spend on transmission and distribution costs. 

In conclusion, the auditors were of the view that the CGU for impairment assessment was Generation, Transmission and Distribution assets group of the Corporation and that the revised carrying value of the same CGU was P15.21 billion. Revised calculations resulted in a value-in-use of P18.4 billion which was still above the carrying value of Generation, Transmission and Distribution assets group. 

