27 Business combinations and disposals

2010 financial year

Acquisition of wind farms, 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 WKN Windkraftwerk Nord GmbH & Co. Windpark Lübbenau KG was acquired in full for CHF 44 million. Expansion of its own wind-power generating capacity is one of Repower Group's strategic targets. The wind farms have an installed capacity of 10 megawatts and 16 megawatts respectively, and both are located in Germany. Considered individually, these business combinations are insignificant. They are therefore described here in aggregate.

In 2010, revenue and income earned by the two wind farms since their acquisition by Repower totalled TCHF 3,207 and TCHF -913 respectively. Third-party costs arising in connection with these transactions came to TCHF 268 and were 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:  
Property, plant and equipment 63,098
Deferred tax assets 48
Receivables 3,106
Prepaid expenses and accrued income 1,215
Cash and cash equivalents 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 related to the acquisition  
Acquired 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 2011 and 2012 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 the end of 2010 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 due to currency reasons.

At the end of 2011 the deferred purchase price balance and the fair value of the contingent liability totalled TCHF 231 and TCHF 227 respectively. Goodwill decreased further to TCHF 546 for currency reasons.

Acquisition of Repower Furnizare România S.r.l. (formerly Elcomex EN S.r.l.)

On 19 November 2010 Repower AG acquired 80 per cent of the shares and hence control of Repower Furnizare România S.r.l., 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. Repower Furnizare România S.r.l. mainly supplies electricity to small and medium-sized enterprises that have a yearly electricity requirement of 0.5 to 20 gigawatt hours. The company merger is illustrated below.

As of 31 December 2010, revenue and income earned by Repower since the acquisition totalled TCHF 18,839 and TCHF -37 respectively. Third-party costs arising in connection with this transaction came to TCHF 450 and were 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
Property, plant and equipment 152
Financial asstes 11
Deferred tax assets 92
Inventories 1
Receivables 14,761
Prepaid expenses and accrued income 3,361
Cash and cash equivalents 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 related to the acquisition  
Assumed short-term negative overdraft -7,957
Acquired liquid assets 6,775
Cash consideration -21,006
Net cash outflow related to the acquisitions -22,188

The acquisition costs include a deferred purchase price, estimated 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 per cent. The receivables valued at fair values of TCHF 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 Repower Furnizare România S.r.l. as a cash-generating unit. At 31 December 2010 the valuation of the deferred contingent purchase price was unchanged apart from exchange rate fluctuations, and on the reporting date totalled TCHF 13,791. For currency reasons, goodwill decreased to TCHF 18,249 at the end of the previous year.

In 2011 the goodwill and capitalised customers totalling TCHF 18,270 and TCHF 8,704 respectively were fully impaired. A reversal of TCHF 396 was made to the residual purchase obligation. The reduced liability has added TCHF 13,054 to other income.

Had the wind farms and the Romanian sales company been acquired on 1 January 2010, Repower's consolidated net revenue in 2010 would have been TCHF 2,303,283 and its consolidated income including minority interests TCHF 82,286 or TCHF 78,868 after restatement.

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 Repower Group in 2010.

  aurax electro ag TGK Skavica S.r.l. Total
Property, plant and equipment 500 3,700 4,200
Deferred tax assets 63 23 86
Inventories 335 - 335
Receivables 1,245 314 1,559
Cash and cash equivalents 1,484 44 1,528
Accumulated translation differences - 243 243
Minority interests -59 -1,079 -1,138
Non-current provisions -818 - -818
Deferred tax liabilities - -1,217 -1,217
Current income tax liabilities -105 - -105
Current financial liabilities -45 - -45
Other current liabilities -508 -25 -533
Deferred 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 2010 the office in Ljubljana was closed and the corresponding legal entity RE Energija d.o.o, Ljubljana, was dissolved.

Purchases/sales of minority interests

In the first half of 2010, the Group acquired the remaining 33 per cent 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 per cent of Energia Sud S.r.l. In addition, a stake of around 1 per cent in SWIBI AG was sold.