27 Business combinations and disposals (IFRS 3)

2009 financial year

No combinations or disposals took place in 2009.

2010 financial year

Acquisition of wind farms in Germany

On 7 May 2010 PROASEGO Windpark Prettin Drei GmbH & Co. KG was acquired in full for CHF 18 million and on 28 May 2010 the WKN Windkraftwerk Nord GmbH & Co. Windpark Lübbenau KG was acquired in full for CHF 44 million. Expansion of own wind-power generation capacity is one of the Repower Group's strategic targets. The wind farms have an installed capacity of 10 MW and 16 MW respectively, and both are located in Germany. Considered individually, these business combinations are insignificant. They are therefore described here in aggregate.

The revenue and income earned by the two wind farms since their acquisition by Repower totals TCHF 3,207 and TCHF -913 respectively. Third-party costs arising in connection with these transactions come to TCHF 268 and are recognised in other operating expenses.

The acquisition costs and the fair value of the identifiable assets and liabilities on the date of acquisition are summarised below:

CHF thousands Fair value
Cash consideration 61,762
Deferred consideration 440
Acquisition costs 62,202
Acquired assets and liabilities:  
Fixed assets 63,098
Deferred tax assets 48
Receivables 3,106
Pre – paid expenses and accrued income 1,215
Liquid assets 450
Identifiable assets 67,917
Non – current provisions 3,522
Deferred tax liabilities 644
Current income tax liabilities 143
Other current liabilities 2,034
Deferred income and accrued expenses 10
Identifiable liabilities 6,353
Net assets acquired 61,564
Goodwill 638
Acquisition costs 62,202
Cash flow interrelated to the aquisition  
Aquired liquid assets 450
Cash consideration -61,762
Net cash outflow related to the acquisitions -61,312

The acquisition costs include a deferred purchase price balance of TCHF 440, which will be paid in the next two years subject to the vendor's adherence to guarantee commitments. An asset value for compensation payments of TCHF 440 was estimated for the right of retaining the deferred purchase price. The provisions position includes contingent liabilities with a fair value of TCHF 787 for contract risks. The goodwill of TCHF 638 is related to expected synergies from the integration of the wind farms into the Repower Group. It is allocated entirely to Repower Wind Prettin GmbH and Repower Wind Lübbenau GmbH as cash generating units for the purpose of reviewing them for impairments.

At year-end the deferred purchase price balance and the fair value of the contingent liability totalled TCHF 388 and TCHF 694 respectively. Goodwill decreased to TCHF 562 for currency reasons.

Acquisition of Elcomex EN SRL, Romania

On 19 November 2010 Repower AG acquired 80 % of the shares and thus control of Elcomex EN SRL, Bucharest. Based on a fixed price formula, the remaining shares in the company will be transferred on 30 June 2015. The commercial opportunities and risks associated with the remaining shares have already been transferred to Repower AG. Minority shares (non-controlling interests) are not to be recognised. The company will be fully incorporated into the consolidated financial statements. Romania, alongside Switzerland, Italy and Germany, ranks among Repower's defined key markets. Elcomex EN SRL mainly supplies electricity to small and medium-sized enterprises that have a yearly demand of 0.5 to 20 GWh of electricity. The company merger is illustrated below.

The revenue and income earned by Repower since the acquisition totals TCHF 18,839 and TCHF -37 respectively. Third-party costs arising in connection with this transaction come to TCHF 450 and are recognised in other operating expenses.

CHF thousands Fair value
Cash consideration 21,006
Deferred consideration 14,888
Acquisition costs 35,894
Acquired assets and liabilities:  
Intangible assets 12,135
Fixed assets 152
Financial asstes 11
Deferred tax assets 92
Inventories 1
Receivables 14,761
Pre – paid expenses and accrued income 3,361
Liquid assets 6,775
Identifiable assets 37,288
Deferred tax liabilities 1,940
Other current liabilities 10,990
Current financial liabilities 7,957
Identifiable liabilities 20,887
Net assets acquired 16,401
Goodwill 19,493
Acquisition costs 35,894
Cash flow interrelated to the aquisition  
Aquired liquid assets 6,775
Cash consideration -21,006
Net cash outflow related to the acquisitions -22,188

The acquisition costs include a deferred, contingent purchase price, determined using an EBITDA-multiple price formula for the years 2010 to 2014. The lower limit of the non-discounted payments is TCHF 0. There is no higher limit to the price formula. The fair value on the acquisition date is TCHF 14,888, and is based on the company's probability-weighted business plan values discounted at 7.5 %. The receivables valued at fair values of CHF 14,761 consist of the gross value of the contractually-due receivables (TCHF 15,330) and a del credere for items considered uncollectable bad debts (TCHF 569). Goodwill related to the acquisition mainly reflects the value of expected buyer-specific synergies and the workforce taken over. For the purpose of impairment testing it is assigned in full to Elcomex EN S.r.l. as a cash-generating unit. The valuation of the deferred contingent purchase price is unchanged apart from exchange rate fluctuations and on the reporting date totalled TCHF 13,791. Due to the depreciation of the EUR, capitalised goodwill amounted to TCHF 18,249 at year-end.

If the wind farm and the Romanian company had been acquired on 1 January of this financial year, Repower's consolidated net revenue in 2010 would have been TCHF 2,303,283 and its consolidated income including minority interests TCHF 82,286.

Business disposals

The disposal of all the shares in aurax electro ag and in TGK Skavica S.r.l. had the following effect on the assets and liabilities of the Repower Group.

  aurax electro ag TGK Skavica S.r.l. Total
Property, plant and equipment 500 3,700 4,200
Deffered tax assets 63 23 86
Inventories 335 - 335
Receivables 1,245 314 1,559
Cash and equivalents 1,484 44 1,528
Cumulative translation adjustment - 243 243
Minority interest -59 -1,079 -1,138
Non – current provisions -818 - -818
Deffered tax liabilities - -1,217 -1,217
Current income tax liabilities -105 - -105
Current financial liabilities -45 - -45
Other current liabilities -508 -25 -533
Deffered income and accrued expenses -265 - -265
Gain/loss 2,499 -2,003 496
Selling price 4,326   4,326
Cash consideration received 4,326 - 4,326
Outflow of cash and cash equivalents -1,484 -44 -1,528
Net cash inflow related to the disposal 2,842 -44 2,798

The pre-tax gains and losses from the disposal of the two group companies are recognised in other operating income and other operating expenses.

In the current financial year, the office in Ljubljana was closed and the corresponding legal entity RE Energija d.o.o, Ljubljana dissolved.

Purchases/sales of minority interests

During the first half of 2010, the Group acquired the remaining 33 % of the shares in Energia Sud S.r.l for the total price of TCHF 428; at the time of the purchase, these minority interests were worth TCHF 651. The difference was written to retained earnings. Repower therefore now owns 100 % of Energia Sud S.r.l. In addition, a stake of around 1 % in SWIBI AG was sold.