Estimation uncertainties

Assumptions and sources

Management makes estimations and assumptions in line with the IFRS accounting rules that affect the assets, liabilities, income and expenses of the reported figures and how they are presented. The estimations and assumptions are made taking into account past findings and various factors that exist at the time the financial statements are drawn up. These are used as the basis for all of the assets and liabilities in the balance sheet that cannot be directly measured or have other sources. The actual values may deviate from the estimated values. The estimates and assumptions are periodically reviewed. Changes to the estimates are necessary if the circumstances on which the assumptions are based change or have changed and are recognised in the respective period. The following section describes the most important estimates and assumptions in the assets and liabilities in the balance sheet that could make important changes necessary:

Property, plant and equipment

The Repower Group reported property, plant and equipment at a total carrying amount of CHF 1,041 million at 31 December 2011 (Note 9). These values are tested for indications of impairment on each balance sheet date. If indications of impairment are identified, the recoverable amount of the asset is calculated in accordance with the provisions of IAS 36 and, if necessary, an impairment is recognised. Estimates of the useful life and residual value of the asset are reviewed annually based on technical and economic developments, and revised as necessary. Changes to laws or ordinances, particularly relating to the environment and energy, could lead to significant changes in useful lives and thus depreciation periods or value adjustments to parts of assets.

Grids

The Electricity Supply Act (StromVG) and the Electricity Supply Ordinance (StromVV) came into force on 1 January 2008. Under the terms of the Electricity Supply Act, the high-voltage grid (220/380kV) must be transferred to the national grid company (Swissgrid) within five years, i.e. no later than 1 January 2013. The high-voltage grids of Repower AG have been fully integrated into Repower Transportnetz AG. The net carrying amount of the company that will be transferred is CHF 68.8 million. The transfer value is defined as the value which, according to the most recent EICom ruling, was applied to calculate the chargeable costs prior to the transfer to Swissgrid AG. This value, however, is only a provisional transfer value and not definitive. It is management's view that the carrying amount is not higher than the expected definitive transfer value. The way Repower Transportnetz AG is treated in the consolidated financial statements is described in Note 28. A regulatory uncertainty exists for distribution grids because ElCom proceedings are still currently underway. The figure estimated for the assets is thus uncertain as are the earnings they can potentially generate in the future. Possible negative factors cannot be forecast at this point in time.

Receivables and liabilities

Trade accounts receivable amounting to CHF 607 million (previous year: CHF 475 million) were measured by applying individual and lump-sum value adjustments based on their maturity structure and historical experience. Effective losses on receivables may deviate from these estimates.

In individual countries, invoicing and payment of the national grid operator and any rulings of the regulator sometimes involve a delay of more than a year. The best possible estimates have been made in the cases where indicated. Definitive invoicing, payments and rulings may vary from these estimates and affect the overall results. Deviations of this kind are recognised in the income statement for the following year.

Provisions

Provisions are recognised taking into account the best possible estimate of the amount and date of the probable cash outflow.

Repower is currently being investigated by the anti-trust authorities in Italy. Their investigation is looking at issues involving the use of gas-fired combined-cycle power plants. Repower is supporting the authorities as best it can to clarify the situation as quickly as possible. Repower has no reason to create provisions linked to this investigation on the basis of the current assessment.

Pension fund obligation

Most employees of the Repower Group are insured by PKE Vorsorgestiftung Energie. The calculations of the balances and liabilities reported for this fund are based on statistical and actuarial assumptions made by the actuaries. The pension fund obligation in the balance sheet in particular, which totalled CHF 8 million on 31 December 2011, is dependent on assumptions such as the discount rate, future wage and salary rises and expected increases in pension benefits. Factors such as the rate of employee turnover and the life expectancy of the insured are defined by independent actuaries. The assumptions made by the actuaries can deviate considerably from the actual results due to changes in market conditions and economic environment, higher or lower rates of turnover, longer or shorter life expectancy of the insured or as a result of other estimated factors.

Planned projects

The Repower Group invests in various projects involving property, plant and equipment according to clearly defined rules. The various projects are in different phases of project development. The earlier the project development phase, the more difficult it is to estimate whether a project will be realised. The feasibility of projects and the subsequent profit-generating operation or a possible sale depend on various factors such as, for example, the legal framework and how the market environment develops in the future. As a result, the figure reported for assets under construction on the balance sheet date and the value of the project companies that Repower Group has invested in and are recognised in accordance with the equity method may deviate from the future realisable value. In addition to other projects, the key projects in the Repower Group are the Lagobianco project, Saline Joniche and the GuD Leverkusen combined cycle plant project. The carrying amount of these three projects on the reporting date is CHF 45 million (previous year: CHF 37 million).