29 Impairment of assets

2012 financial year

In the current financial year, an impairment was made for two affiliated small power plants acquired as part of the Chlus project in accordance with the guidelines of IAS 36 “Impairment of Assets”. In line with IAS 36.59, the carrying amount of the assets has been revised upwards to the recoverable amount. The recoverable amount was calculated using the value in use. When calculating the value in use, the current plans authorised by management are taken into account.

The cash flow forecast relates to the useful life until the Chlus project is finally complete and requires a value adjustment through profit and loss since the resulting investments cannot be generated over the useful life. After the impairment of MCHF 10.8 the value is as follows:

The underlying discount factor before taxes is 9.00 per cent. The impairment loss is included in the consolidated statement of comprehensive income under depreciation/amortisation and impairment.

The residual purchase obligation arising from the acquisition of Repower Furnizare România S.R.L. was fully reversed in the 2012 financial year. There is no longer an obligation. The income from the reversal in the amount of TCHF 391 is reported under other operating income.

2011 financial year

Repower Furnizare România S.R.L. (formerly S.C. Elcomex EN S.R.L.), a subsidiary of Repower AG, is a company in Romania whose purpose is to sell electricity and natural gas to small- and medium-sized enterprises (SMEs). Due to indications of impairment, Repower Furnizare România S.R.L. was subjected to an impairment test on 30 June 2011. Repower Furnizare România S.R.L. was identified as a cash generating unit (CGU) for the impairment test.

The CGU consists of the following assets:

• Property, plant and equipment

• Intangible assets (goodwill, customers, software)

• Net current assets

The value of the CGU is determined based on intangible assets, in particular goodwill and customers. The impairment test confirmed indications of impairment losses. A complete impairment loss was recognised for the intangible assets in the amount of TCHF 27,424 arising from the acquisition, since the CGU no longer has any intrinsic value. The impairment loss was recognised in the consolidated statement of comprehensive income under depreciation/amortisation and impairment.

The impairment is mainly attributable to the following events:

• Significant changes in the market, leading to reduced and at times negative margins

• Discontinuation of all gas business operations from May 2011

The carrying amount was compared against the value in use in order to determine the intrinsic value of the CGU. A fair value less costs to sell cannot be determined since at present there are no reference values for the Romanian market. When calculating the value in use, the current plans authorised by management are taken into account. The cash flow forecasts refer to a period of five years. The residual corporate value was extrapolated using a growth rate of 3 per cent. A discount rate of 6.7 per cent before tax (11.4% after tax) was applied. The main assumption on which the cash flows were calculated is a realistic estimate of gross margin, primarily based on the most recent economic developments.

Parallel to the impairment, lower expectations have resulted in liabilities in connection with the full takeover of Repower Furnizare România S.R.L. Consequently, the related liability has declined from TCHF 13,450 to TCHF 396. The reduced liability has added TCHF 13,054 to other operating income.