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PROPERTY, PLANT AND EQUIPMENT
 12 Months Ended
Dec. 31, 2017
Property, plant and equipment [abstract]  
PROPERTY, PLANT AND EQUIPMENT
PROPERTY, PLANT AND EQUIPMENT
The company’s property, plant and equipment relates to the operating segments as shown below:
 
Renewable
Power (a)
 
Infrastructure (b)
 
Real Estate (c)
 
Private Equity
and Other (d)
 
Total
AS AT DEC. 31
(MILLIONS)
2017

 
2016

 
2017

 
2016

 
2017

 
2016

 
2017

 
2016

 
2017

 
2016

Costs
$
24,991

 
$
18,031

 
$
9,253

 
$
8,045

 
$
5,854

 
$
5,783

 
$
4,050

 
$
5,268

 
$
44,148

 
$
37,127

Accumulated fair value changes1
13,280

 
12,298

 
3,272

 
2,690

 
798

 
694

 
(231
)
 
(243
)
 
17,119

 
15,439

Accumulated depreciation
(4,681
)
 
(3,776
)
 
(1,622
)
 
(1,190
)
 
(873
)
 
(825
)
 
(1,086
)
 
(1,429
)
 
(8,262
)
 
(7,220
)
Total
$
33,590

 
$
26,553

 
$
10,903

 
$
9,545

 
$
5,779

 
$
5,652

 
$
2,733

 
$
3,596

 
$
53,005

 
$
45,346

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 

1.
The accumulated fair value changes for private equity and other represent accumulated impairment charges, as assets in these segments are carried at amortized cost
Renewable Power, Infrastructure and Real Estate segments carry property, plant and equipment assets at fair value, classified as Level 3 in the fair value hierarchy due to the use of significant unobservable inputs when determining fair value. Private Equity and other segments carry property, plant and equipment assets at amortized cost. As at December 31, 2017, $38.3 billion (2016 – $29.6 billion) of property, plant and equipment, at cost, were pledged as collateral for the property debt at their respective properties.
a)
Renewable Power
Our renewable power property, plant and equipment consists of the following:
 
Hydroelectric
 
Wind Energy, Solar
and Other
 
Total
AS AT AND FOR THE YEARS ENDED DEC. 31
(MILLIONS)
2017

 
2016

 
2017

 
2016

 
2017

 
2016

Cost, beginning of year
$
14,382

 
$
7,441

 
$
3,649

 
$
3,509

 
$
18,031

 
$
10,950

Additions, net of disposals and assets reclassified as held for sale
256

 
253

 
(273
)
 
80

 
(17
)
 
333

Acquisitions through business combinations
—

 
5,731

 
6,923

 
10

 
6,923

 
5,741

Foreign currency translation
29

 
957

 
25

 
50

 
54

 
1,007

Cost, end of year
14,667

 
14,382

 
10,324

 
3,649

 
24,991

 
18,031

 
 
 
 
 
 
 
 
 
 
 
 
Accumulated fair value changes, beginning of year
11,440

 
11,035

 
858

 
615

 
12,298

 
11,650

Fair value changes
341

 
100

 
33

 
216

 
374

 
316

Dispositions and assets reclassified as held for sale
(8
)
 
—

 
—

 
—

 
(8
)
 
—

Foreign currency translation and other
403

 
305

 
213

 
27

 
616

 
332

Accumulated fair value changes, end of year
12,176

 
11,440

 
1,104

 
858

 
13,280

 
12,298

 
 
 
 
 
 
 
 
 
 
 
 
Accumulated depreciation, beginning of year
(2,947
)
 
(2,248
)
 
(829
)
 
(614
)
 
(3,776
)
 
(2,862
)
Depreciation expenses
(579
)
 
(586
)
 
(287
)
 
(217
)
 
(866
)
 
(803
)
Dispositions and assets reclassified as held for sale
—

 
9

 
51

 
5

 
51

 
14

Foreign currency translation and other
(38
)
 
(122
)
 
(52
)
 
(3
)
 
(90
)
 
(125
)
Accumulated depreciation, end of year
(3,564
)
 
(2,947
)
 
(1,117
)
 
(829
)
 
(4,681
)
 
(3,776
)
Balance, end of year
$
23,279

 
$
22,875

 
$
10,311

 
$
3,678

 
$
33,590

 
$
26,553


The following table presents our renewable power property, plant and equipment measured at fair value by geography:
AS AT DEC. 31
(MILLIONS)
2017

 
2016

North America
$
22,832

 
$
17,132

Brazil
3,443

 
2,893

Colombia
5,401

 
5,275

Europe
1,088

 
1,253

Other1
826

 
—

 
$
33,590

 
$
26,553


1.
Other refers primarily to South Africa, China, India, Malaysia and Thailand
Renewable power assets are accounted for under the revaluation model and the most recent date of revaluation was December 31, 2017. Valuations utilize significant unobservable inputs (Level 3) when determining the fair value of renewable power assets. The significant Level 3 inputs include:
Valuation Technique
 
Significant Unobservable Inputs
 
Relationship of Unobservable Inputs to Fair Value
 
 Mitigating Factors
Discounted cash flow analysis
 
•    Future cash flows – primarily driven by future electricity price assumptions

 
•    Increases (decreases) in future cash flows increase (decrease) fair value

 
•    Increases (decreases) in cash flows tend to be accompanied by increases (decreases) in discount rates that may offset changes in fair value from cash flows
 
 
•    Discount rate
 
•    Increases (decreases) in discount rate decrease (increase) fair value
 
•    Increases (decreases) in discount rates tend to be accompanied by increases (decreases) in cash flows that may offset changes in fair value from discount rates

 
 
•    Terminal capitalization rate

 
•    Increases (decreases) in terminal capitalization rate decrease (increase) fair value

 
•    Increases (decreases) in terminal capitalization rates tend to be accompanied by increases (decreases) in cash flows that may offset changes in fair value from terminal capitalization rates
 
 
•    Exit date

 
•    Increases (decreases) in the exit date decrease (increase) fair value

 
•    Increases (decreases) in the exit date tend to be the result of changing cash flow profiles that may result in higher (lower) growth in cash flows prior to stabilizing in the terminal year

Key valuation metrics of the company’s hydro, wind and solar generating facilities at the end of 2017 and 2016 are summarized below.
 
North America
 
Brazil
 
Colombia
 
Europe
AS AT DEC. 31
2017
 
2016
 
2017

 
2016

 
2017

 
2016
 
2017
 
2016
Discount rate
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Contracted
4.9 – 6.0%
 
4.8 – 5.5%
 
8.9
%
 
9.2
%
 
11.3
%
 
n/a
 
4.1 – 4.5%
 
4.1 – 5.0%
Uncontracted
6.5 – 7.6%
 
6.6 – 7.2%
 
10.2
%
 
10.5
%
 
12.6
%
 
n/a
 
5.9 – 6.3%
 
5.9 – 6.8%
Terminal capitalization rate1
6.2 – 7.5%
 
6.3 – 6.9%
 
n/a

 
n/a

 
12.6
%
 
n/a
 
n/a
 
n/a
Exit date
2037
 
2036
 
2032

 
2031

 
2037

 
n/a
 
2031
 
2031

1.
Terminal capitalization rate applies only to hydroelectric assets in in North America and Colombia
Terminal values are included in the valuation of hydroelectric assets in the United States, Canada and Colombia. For the hydroelectric assets in Brazil, cash flows have been included based on the duration of the authorization or useful life of a concession asset without consideration of potential renewal value. The weighted-average remaining duration at December 31, 2017 is 15 years (2016 – 15 years). Consequently, there is no terminal value attributed to the hydroelectric assets in Brazil. The terminal value of hydroelectric assets in Europe is based on a percentage of replacement cost and consequently there is no terminal capitalization rate attributed to the hydroelectric assets in Europe.
Key assumptions on contracted generation and future power pricing are summarized below:
 
Total Generation Contracted under Power Purchase Agreements
 
Power Prices from Long-Term Power Purchase Agreements
(weighted average)
 
Estimates of Future Electricity Prices
(weighted average)
AS AT DEC. 31, 2017
1 – 10 years
 
11 – 20 years
 
1 – 10 years
 
11 – 20 years
 
1 – 10 years
 
11 – 20 years
North America (prices in US$/MWh)
35
%
 
15
%
 
95

 
100

 
60

 
114

Brazil (prices in R$/MWh)
66
%
 
57
%
 
274

 
407

 
309

 
458

Colombia (prices in COP$/MWh)
17
%
 
—
%
 
211,000

 
—

 
238,000

 
339,000

Europe (prices in €/MWh)
78
%
 
35
%
 
90

 
107

 
78

 
95


The company’s estimate of future renewable power pricing is based on management’s estimate of the cost of securing new energy from renewable sources to meet future demand between 2021 and 2025 (2016 – 2023), which will maintain system reliability and provide adequate levels of reserve generations.
b)
Infrastructure
Our infrastructure property, plant and equipment consists of the following:
 
Utilities (i)
 
Transport (i)
 
Energy (i)
 
Sustainable Resources (ii)
 
Total
AS AT AND FOR THE YEARS ENDED DEC. 31
(MILLIONS)
2017

 
2016

 
2017

 
2016

 
2017

 
2016

 
2017

 
2016

 
2017

 
2016

Cost, beginning of year
$
2,894

 
$
2,945

 
$
2,361

 
$
1,953

 
$
2,382

 
$
1,487

 
$
408

 
$
340

 
$
8,045

 
$
6,725

Additions, net of disposals and assets reclassified as held for sale
350

 
367

 
103

 
78

 
81

 
89

 
93

 
5

 
627

 
539

Acquisitions through business combinations
—

 
—

 
—

 
242

 
100

 
825

 
—

 
—

 
100

 
1,067

Foreign currency translation
229

 
(418
)
 
191

 
88

 
67

 
(19
)
 
(6
)
 
63

 
481

 
(286
)
Cost, end of year
3,473

 
2,894

 
2,655

 
2,361

 
2,630

 
2,382

 
495

 
408

 
9,253

 
8,045

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Accumulated fair value changes, beginning of year
1,044

 
946

 
782

 
973

 
351

 
209

 
513

 
385

 
2,690

 
2,513

Fair value changes
136

 
184

 
24

 
25

 
257

 
123

 
13

 
56

 
430

 
388

Foreign currency translation and other
76

 
(86
)
 
67

 
(216
)
 
21

 
19

 
(12
)
 
72

 
152

 
(211
)
Accumulated fair value changes, end of year
1,256

 
1,044

 
873

 
782

 
629

 
351

 
514

 
513

 
3,272

 
2,690

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Accumulated depreciation, beginning of year
(384
)
 
(291
)
 
(517
)
 
(418
)
 
(258
)
 
(172
)
 
(31
)
 
(19
)
 
(1,190
)
 
(900
)
Depreciation expenses
(113
)
 
(128
)
 
(147
)
 
(126
)
 
(117
)
 
(99
)
 
(10
)
 
(19
)
 
(387
)
 
(372
)
Dispositions and assets reclassified as held for sale
16

 
1

 
22

 
1

 
4

 
—

 
3

 
1

 
45

 
3

Foreign currency translation and other
(28
)
 
34

 
(45
)
 
26

 
(12
)
 
13

 
(5
)
 
6

 
(90
)
 
79

Accumulated depreciation, end of year
(509
)
 
(384
)
 
(687
)
 
(517
)
 
(383
)
 
(258
)
 
(43
)
 
(31
)
 
(1,622
)
 
(1,190
)
Balance, end of year
$
4,220

 
$
3,554

 
$
2,841

 
$
2,626

 
$
2,876

 
$
2,475

 
$
966

 
$
890

 
$
10,903

 
$
9,545


i.
Infrastructure – Utilities, Transport and Energy
Infrastructure’s PP&E assets are accounted for under the revaluation model, and the most recent date of revaluation was December 31, 2017. The company’s utilities assets consist of regulated transmission and regulated distribution networks, which are operated primarily under regulated rate base arrangements. In the company’s transport operations, the PP&E assets consist of railroads, toll roads and ports. PP&E assets in the energy operations are comprised of energy transmission, distribution and storage and district energy assets.
Valuations utilize significant unobservable inputs (Level 3) when determining the fair value of infrastructure’s utilities, transport and energy assets. The significant Level 3 inputs include:
Valuation Technique
 
Significant Unobservable Inputs
 
Relationship of Unobservable Inputs to Fair Value
 
 Mitigating Factors
Discounted cash flow analysis
 
•    Future cash flows
 
•    Increases (decreases) in future cash flows increase (decrease) fair value

 
•    Increases (decreases) in cash flows tend to be accompanied by increases (decreases) in discount rates that may offset changes in fair value from cash flows
 
 
•    Discount rate
 
•    Increases (decreases) in discount rate decrease (increase) fair value
 
•    Increases (decreases) in discount rates tend to be accompanied by increases (decreases) in cash flows that may offset changes in fair value from discount rates
 
 
•    Terminal capitalization multiple
 
•    Increases (decreases) in terminal capitalization multiple increases (decreases) fair value
 
•    Increases (decreases) in terminal capitalization multiple tend to be accompanied by increases (decreases) in cash flows that may offset changes in fair value from terminal capitalization multiple
 
 
•    Investment horizon
 
•    Increases (decreases) in the investment horizon decrease (increase) fair value
 
•    Increases (decreases) in the investment horizon tend to be the result of changing cash flow profiles that may result in higher (lower) growth in cash flows prior to stabilizing in the terminal year

ii.
Infrastructure – Sustainable Resources
Sustainable resources assets represent timberlands and other agricultural land. PP&E within our sustainable resource operations is accounted for under the revaluation model and the most recent date of revaluation was December 31, 2017.
Valuations utilize significant unobservable inputs (Level 3) when determining the fair value of sustainable resources assets. The significant Level 3 inputs include:
Valuation Technique
 
Significant Unobservable Inputs
 
Relationship of Unobservable Inputs to Fair Value
 
 Mitigating Factors
Discounted cash flow analysis
 
•    Future cash flows – primarily driven by avoided cost or future replacement value
 
•    Increases (decreases) in future cash flows increase (decrease) fair value
 
•    Increases (decreases) in cash flows tend to be accompanied by increases (decreases) in discount rates that may offset changes in fair value from cash flows
 
 
•    Discount rate
 
•    Increases (decreases) in discount rate decrease (increase) fair value
 
•    Increases (decreases) in discount rates tend to be accompanied by increases (decreases) in cash flows that may offset changes in fair value from discount rates
 
 
•    Investment horizon
 
•    Increases (decreases) in the investment horizon decrease (increase) fair value
 
•    Increases (decreases) in the investment horizon tend to be the result of changing cash flow profiles that may result in higher (lower) growth in cash flows prior to stabilizing in the terminal year

Key valuation metrics of the company’s utilities, transport, energy and sustainable resources assets at the end of 2017 and 2016 are summarized below.
 
Utilities
 
Transport
 
Energy
 
Sustainable Resources
AS AT DEC. 31
2017
 
2016
 
2017
 
2016
 
2017

 
2016
 
2017
 
2016
Discount rates
7 – 12%
 
7 – 12%
 
10 – 15%
 
10 – 17%
 
12 – 15%

 
9 – 14%
 
5 – 8%
 
6%
Terminal capitalization multiples
7x – 21x
 
7x – 18x
 
9x – 14x
 
8x – 14x
 
8x – 13x

 
10x – 12x
 
n/a
 
n/a
Investment horizon / Exit date(years)
10 – 20
 
10 – 20
 
10 – 20
 
10 – 20
 
10

 
10
 
3 – 30
 
3 – 30
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 

c)
Real Estate
 
Cost
 
Accumulated Fair Value Changes
 
Accumulated Depreciation
 
Total
AS AT AND FOR THE YEARS ENDED DEC. 31
(MILLIONS)
2017

 
2016

 
2017

 
2016

 
2017

 
2016

 
2017

 
2016

Balance, beginning of year
$
5,783

 
$
5,300

 
$
694

 
$
612

 
$
(825
)
 
$
(596
)
 
$
5,652

 
$
5,316

Additions/(dispositions)1, net of assets reclassified as held for sale
(502
)
 
254

 
44

 
—

 
246

 
(6
)
 
(212
)
 
248

Acquisitions through business combinations
281

 
652

 
—

 
—

 
—

 
—

 
281

 
652

Foreign currency translation
292

 
(423
)
 
1

 
—

 
(13
)
 
21

 
280

 
(402
)
Fair value changes
—

 
—

 
59

 
82

 
—

 
—

 
59

 
82

Depreciation expenses
—

 
—

 
—

 
—

 
(281
)
 
(244
)
 
(281
)
 
(244
)
Balance, end of year
$
5,854

 
$
5,783

 
$
798

 
$
694

 
$
(873
)
 
$
(825
)
 
$
5,779

 
$
5,652


1.
For accumulated depreciation, (additions)/dispositions
The company’s real estate PP&E assets include hospitality assets accounted for under the revaluation model, with the most recent revaluation as at December 31, 2017. The company determined fair value for these assets by using the depreciated replacement cost method. Valuations utilize significant unobservable inputs (Level 3) when determining the fair value of real estate assets. The significant Level 3 inputs include estimates of assets’ replacement cost and remaining economic life.
d)
Private Equity and Other
Private Equity and other PP&E includes assets owned by the company’s private equity and residential development operations. These assets are accounted for under the cost model, which requires the assets to be carried at cost less accumulated depreciation and any accumulated impairment losses. The following table presents the changes to the carrying value of the company’s property, plant and equipment assets included in these operations:
 
Cost
 
Accumulated Impairment
 
Accumulated Depreciation
 
Total
AS AT AND FOR THE YEARS ENDED DEC. 31
(MILLIONS)
2017

 
2016

 
2017

 
2016

 
2017

 
2016

 
2017

 
2016

Balance, beginning of year
$
5,268

 
$
5,309

 
$
(243
)
 
$
(231
)
 
$
(1,429
)
 
$
(1,197
)
 
$
3,596

 
$
3,881

Additions/(dispositions)1, net of assets reclassified as held for sale
(1,966
)
 
(101
)
 
36

 
4

 
752

 
125

 
(1,178
)
 
28

Acquisitions through business combinations
501

 
—

 
—

 
—

 


 
—

 
501

 
—

Foreign currency translation
247

 
60

 
(16
)
 
(16
)
 
(51
)
 
(14
)
 
180

 
30

Depreciation expenses
—

 
—

 
—

 
—

 
(358
)
 
(343
)
 
(358
)
 
(343
)
Impairment charges
—

 
—

 
(8
)
 
—

 
—

 
—

 
(8
)
 
—

Balance, end of year
$
4,050

 
$
5,268

 
$
(231
)
 
$
(243
)
 
$
(1,086
)
 
$
(1,429
)
 
$
2,733

 
$
3,596

1.
For accumulated depreciation, (additions)/dispositions