7) Estimation uncertainties

Assumptions and sources

Management makes estimations and assumptions in line with 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 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 render important changes necessary:

Tangible assets

The Repower Group reported tangible assets at a total carrying amount of CHF 918 million at 31 December 2013 (Note 7). These values are tested for indications of impairment on each balance sheet date. If indications of impairment are identified, the recoverable amount 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 impairments of 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. The high-voltage grids of Repower AG have been fully integrated into Repower Transportnetz AG. Repower Transportnetz AG was transferred to the national grid company on 3 January 2013. The provisional transfer value of the company is based on the ElCom tariff ruling of 2012 with value of plant calculated as of 31 December 2012, results of Post Closing Due Diligence, and the financial statements of 31 December 2012. The provisional transfer value of the company is a total of MCHF 73.5 (Note 26). The definitive values of the integrated transmission grids are determined with consideration for the principle of equal treatment of all former transmission grid owners under the scope of what is known as revaluation 2.The prerequisite here is that all legally enforceable rulings on the still ongoing tariff proceedings of the years 2009 to 2012 and the currently suspended proceedings on margin differences 2011 and 2012 are available. In its ruling on 11 November 2013 relating to “Transaction transmission grid/definitive value”, the Swiss Federal Administrative Court upheld the appeals of several former transmission grid owners, particularly their objection to the valuation method used to determine the definitive value for the transfer. As a result, ElCom must review the valuation method to be used and recalculate the definitive value of the Swiss transmission grid. The final contribution value may vary significantly from the provisional contribution value. Management is of the opinion that the definitive transfer value will not be lower than the contribution value currently appearing in the consolidated financial statements.

A regulatory uncertainty exists with regard to distribution grids because ElCom proceedings are still 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 estimated at this point in time.

Receivables and liabilities

Trade accounts receivable amounting to CHF 455 million (previous year: CHF 456 million) are measured by applying individual and lump-sum adjustments to the non-impaired positions 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 profit or loss 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.

Pension fund obligation

Most employees of the Repower Group are insured with the pension fund PKE Pensionskasse Energie. The calculations of the balances and liabilities reported for this fund are based on statistical and actuarial assumptions. This is particularly the case with the recognised pension fund obligation, which totalled around CHF 27 million at 31 December 2013 (previous year restated: CHF 41 million), which 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 insureds are defined by independent actuaries. The assumptions underlying the actuarial calculations can deviate considerably from the actual results due to changes in market conditions and the economic environment, higher or lower rates of turnover, longer or shorter life expectancy of the insureds or as a result of other estimated factors.

Planned projects

The Repower Group invests in various projects involving tangible assets according to clearly defined rules. The various projects are in different phases of development. The earlier the project development phase, the more difficult it is to judge whether a project will be carried out. The feasibility of projects and the subsequent profit-generating operation or a possible sale depend on various factors such as 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 has invested in and are recognised in accordance with the equity method may deviate from the future realisable value. In the year under review, all planned projects were assessed for their cost-effectiveness. Significant value adjustments were necessary as a result of the challenging energy policy environment (Note 7).