Notes to the consolidated financial statements

3) Consolidation

Scope of consolidation

The consolidated financial statements cover Repower AG and all Swiss and foreign companies over which Repower AG exercises control. Control exists when Repower has the power to decide on the relevant processes and activities of the Swiss or foreign entity, is exposed to variable returns from its involvement, and has the ability to affect those returns through its decision-making authority over the other entity. These companies are fully consolidated and designated as Group companies. They are included in the consolidated financial statements from the date on which control has been transferred to the Repower Group, and deconsolidated when such control has ended. For all consolidated companies, the financial year ends on 31 December.

A joint arrangement is an arrangement in which two or more parties exercise joint control. IFRS 11 distinguishes between joint operations and joint ventures. Joint control is the contractually agreed sharing of control over the arrangement, which exists only when the relevant business decisions require the unanimous consent of the parties sharing control. In addition to being governed by an explicit arrangement, joint control can also be implicit, i.e. indirect, based on the ownership interest. Joint operations are joint arrangements whereby the parties that have joint control of the arrangement have rights to the assets, and obligations for the liabilities, relating to the arrangement. Assets, liabilities, income and expenses arising from joint operations are recognised in relation to the partner's ownership interest. The (proportionate) inclusion of assets, liabilities, income and expenses is based on the share (e.g. of output) contractually agreed between the parties. This need not necessarily be the same as the parties' share of capital in the legal entity. A joint venture is a joint arrangement in which the parties exercising joint control over the arrangement are entitled to the net assets of the arrangement. Joint ventures are accounted for using the equity method in accordance with IAS 28.

Investments in associates whose financial and business policies Repower Group is unable to control but over which it is able to exert a significant influence are accounted for in the consolidated financial statements using the equity method.

Partner plants are power plants which Repower plans, builds, maintains and/or operates in conjunction with partners. By acquiring a stake in a partner plant, both the acquirer and future partners undertake, in accordance with the memorandum of association, to assume a share of the annual costs commensurate with their stake in the authorised capital. In return partners have the right to procure, at cost, a share of the services and energy produced by the partner plant that corresponds to their share of the authorised capital (electricity purchase obligation or electricity purchase right).

The partner plants are accounted for depending on the quality of the potential influence or composition of the entity's articles of incorporation and other agreements between the entity and/or its shareholders. Repower exercises significant influence over the main activities of partner plants AKEB Aktiengesellschaft für Kernenergie-Beteiligungen and Kraftwerke Hinterrhein AG; hence they are classified as associates and accounted for in the Repower Group's financial statements using the equity method. Grischelectra AG is managed jointly with the Canton of Graubünden. Repower administers all procurement rights related to Grischelectra AG and classifies this joint arrangement as a joint operation; hence Grischelectra AG's assets, liabilities, income and expenses must be included in the Group's consolidated financial statements .

The companies included in the consolidation and any changes in the scope of consolidation are listed in Note 9.

Consolidation method

The Repower Group accounts for business combinations using the purchase method. The acquisition costs are calculated by measuring the purchased net assets at fair value on the date of acquisition. A positive difference is capitalised as goodwill and subject to an annual impairment test. A negative difference is recognised in profit or loss as negative goodwill on the date of acquisition. In the case of an acquisition achieved via successive share purchases, the fair value of the interests already held in the acquired entity must be remeasured at the time of acquisition. The resultant gain or loss must be recognised in profit or loss. Non-controlling interests are accounted for in accordance with their proportionate share in identifiable net assets.

Acquisition-related costs are recognised as expenses in the period in which they are incurred. Conditional payments are recognised at fair value on the date of acquisition. Changes in fair value are recognised in profit or loss in subsequent periods.

Fully consolidated companies are included in the consolidated financial statements in their entirety (assets, liabilities, income and expenses). A change in the interest in an entity that does not affect its full consolidation is recognised as an equity transaction and recorded by adjusting the carrying amounts of the controlling and non-controlling interests. Any difference between the amount by which the non-controlling interests are adjusted and the fair value of the consideration paid or received is recognised directly in equity and attributed to the owners of the parent company. It is recognised in profit or loss only if the sale results in a loss of control and the subsidiary is therefore deconsolidated. At the same time, all positions in the statement of other comprehensive income (OCI) requiring reclassification are reclassified (recycling).

Investments in associates and joint ventures are accounted for using the equity method on the basis of the share of equity, whereby shares in an associate are initially recognised at cost. A positive difference between the total purchase price and share of the acquired equity remeasured at the time of acquisition is capitalised as goodwill within the participating interest position. A negative difference is charged to profit or loss. The carrying amount of the investment subsequently increases or decreases depending on the investor's share of the gain/loss of the investment, which is recognised in profit or loss. Distributions from investments reduce the carrying amount of the shares. Non-cash increases and decreases in the carrying amount in the associate's financial statements are recognised directly in the investor's equity. If associates and joint ventures apply accounting and valuation principles that deviate from those adopted by the Repower Group, appropriate adjustments are made in the consolidated financial statements.

Joint operations are joint arrangements whereby the parties that have joint control of the arrangement have rights to the assets, and obligations for the liabilities, relating to the arrangement. Under such arrangements, the joint operator must account for its share of the assets, liabilities, income and expenses relating to its involvement in a joint operation.

Intragroup transactions

All intragroup transactions (receivables and payables, income and expenses) as well as the share of a subsidiary's equity attributable to a parent company are eliminated. Existing shares of equity attributable to minority shareholders, as well as their share in the results of consolidated entities, are recognised separately. Gains arising from intragroup transactions and holdings are eliminated in the income statement.

The agreed prices, which are based on market prices, apply for internal billing between Group companies. Electricity purchased from partner plants is billed at actual cost to the Repower Group on the basis of existing partner contracts – irrespective of market prices.

Currency translation

Each Group company determines the functional currency in which it draws up its individual financial statements. Foreign currency transactions are converted using the Group company's functional currency at the exchange rate on the date of the transaction. Monetary assets and liabilities denominated in foreign currencies are converted to the functional currency at the closing rate on the balance sheet date. Currency translation differences are recognised in profit or loss. Non-monetary foreign currency items carried at fair value are translated at the rate that existed on the date on which the fair values were determined.

The consolidated financial statements are drawn up and presented in Swiss francs. The functional currency for the significant foreign Group companies is the euro. Assets and liabilities of Group companies are translated into Swiss francs at the closing rate on the balance sheet date. Income statement items are translated using the average exchange rate for the year. The following CHF exchange rates are incorporated in the Repower Group's consolidated financial statements:

    Closing exchange rate Average exchange rate
Currency Unit 31.12.2013 31.12.2012 2013 2012
BAM 1 0.61900 0.62050 0.62205 0.60801
CZK 100 4.48000 4.81000 4.73565 4.78856
EUR 1 1.22760 1.20800 1.23113 1.20540
GBP 1 1.47700 1.48540 1.44923 1.48463
HRK 100 16.09800 15.98200 16.24098 16.02925
HUF 100 0.41190 0.41330 0.41421 0.41608
MKD 100 1.99550 1.92470 1.98078 1.94352
PLN 100 29.49000 29.54000 29.30527 29.11011
RON 100 27.54517 27.19387 27.88257 27.07921
RSD 1 0.01073 0.01076 0.01090 0.01064
USD 1 0.89280 0.91550 0.92659 0.93705

When translating the functional currency into the reporting currency, the translation differences between the closing exchange rate and the average exchange rate are recognised as an effect of currency translation under other comprehensive income in the statement of comprehensive income. If Group companies or associates are disposed of, the cumulative amount of the translation differences are reclassified to profit or loss.

Segment reporting

Repower's segment reporting is based on internal management and reporting structures (management approach) so as to provide the information used by management for steering and assessing the business performance and development of the individual segments. Within the Repower Group, segment reporting is therefore carried out in line with the method for internal reporting to the primary decision-maker. The CEO of the Repower Group has been designated as the principal decision-maker for Repower. For each business segment, internal steering, performance measurement and capital allocation are carried out on the basis of the segment's income before interest and income taxes (EBIT).

Repower's Market Switzerland and Market Italy have been identified as reportable segments.

  • Market Switzerland covers the generation of electricity in Repower's own power plants and in plants operated by partners, as well as trading in electricity, gas and other commodities and certificates. Other elements in the value chain comprise the distribution and sale of energy to end customers and distribution partners in Switzerland. Additional business activities cover the provision of energy and communication services.
  • Market Italy also covers the generation of electricity in Repower's own power plants, trading in electricity, gas and certificates, and the delivery of electricity and gas to end customers. Energy efficiency services complete the offerings.

No operating divisions were combined to create the reportable business segments. Other Repower Group business operations are combined under the other segments and activities segment. The main sources of revenue are the generation, distribution and trading activities of Repower companies in Germany, Romania and Eastern Europe. Reconciliation with the consolidated figures of the Repower Group is based on the two reportable business segments plus other segments and activities, which are shown together with the consolidation effects.