7 Tangible assets

The pledged fixed assets were put up as collateral for the investment loans and mortgages as listed in Notes 17 and 22. Insured value of tangible assets: CHF 1,624 million (previous year: CHF 1,769 million). In the year under review, no borrowing costs (previous year: TCHF 874) were capitalised for assets under construction. A financing cost rate of 2.97 per cent was used the previous year.

Impairment of tangible assets

In the reporting year there were no impairments or reversals of impairments of tangible assets, while in the previous year there were extensive impairments, which were shown broken down by segment. Both existing plants and projects were affected. The recoverability was determined by means of the discounted cash flow method (calculation of the value in use). The time period in the business plan is the same as the time periods of the individual plants and projects.

Market Switzerland segment

Existing plants

In the previous year impairment losses of CHF 3.5 million were recognised on various small hydroelectric plants. WACC before tax was between 4.2 and 5.4 per cent. The main reason for the impairment was reduced returns due to lower anticipated market prices.

Projects

The previous year the energy policy environment was not conducive to investments in non-subsidised technologies. As a result, an impairment loss of CHF 77.5 million was recognised relating to the project portfolio. This mainly affected the Lagobianco project (CHF 50 million), the Leverkusen combined-cycle gas turbine plant (CHF 12.5 million), the Chlus project (CHF 9.5 million), the Taschinas 2 project (CHF 4.9 million), and projects for small hydroelectric plants (CHF 0.6 million). WACC before tax was between 5.3 and 6.9 per cent. The reasons for the larger items are outlined below:

The Lagobianco project was deemed to be economically unviable owing to the adverse market situation for pumped-storage plants (high investment costs coupled with inadequate price differences between pumping and turbining). The recoverable amount of the project was lower than the reported carrying amount. An impairment loss was recognised to meet the requirements of IAS 36.59.

Owing to the uncertain market situation for combined-cycle gas turbine plants in Germany (design of the electricity market does not create incentives to invest in conventional power plants), the Leverkusen combined-cycle gas turbine plant project was deemed to be economically unviable. The recoverable amount of the project was lower than the reported carrying amount. An impairment loss was recognised to meet the requirements of IAS 36.59.

Owing to the difficult market situation for Swiss hydropower (low prices on the exchange), the Chlus project was deemed to be economically unviable. The recoverable amount of the project was lower than the reported carrying amount. An impairment loss was recognised to meet the requirements of IAS 36.59.

The Taschinas 2 project was formerly linked to the Chlus project. After the Chlus project was fundamentally overhauled, the new plan was to carry out Taschinas 2 independently. Whether or not the project will be carried out was questionable owing to the adverse market situation for Swiss hydropower (low prices on the exchange). Implementation and thus the cash flows associated with this project were uncertain.

Market Italy segment

Existing plants

An impairment loss of CHF 57.1 million was recognised relating to the Teverola (CHF 51.4 million) and Corleto Perticara (CHF 5.7 million) power plants. WACC before tax was 8.7 per cent.

Teverola is a combined-cycle gas turbine plant. Market conditions for the Teverola combined-cycle gas turbine power plant are challenging as a result of the massive expansion of renewable energy in southern Italy (renewables are given priority over conventional power plants for feed-in to the grid) as well as a decline in electricity consumption in the Italian market. Both developments had led to a reduction in the spark spread and to less than optimum utilisation of the plant.

The Corleto Perticara installation plant is a wind farm. Owing to the massive expansion of renewable energy, market prices in southern Italy had fallen by more than 30 per cent. An increase in prices for guarantees of origin was not sufficient to compensate for the drop in prices. In addition, the national grid operator was planning to relocate the current grid connection, which would generate considerable extra costs. Repower expects to close the wind farm at the end of 2016.

Projects

The previous year an impairment loss of CHF 21 million was recognised relating to the project portfolio, broken down as follows: impairment of a property related to the Saline Joniche project (CHF 13.3 million), Campolattaro pumped-storage plant (CHF 4.0 million), Pontremoli wind farm (CHF 2.7 million) and the Pistoia combined-cycle gas turbine plant (CHF 1.0 million). The reasons for the larger items are outlined below:

As far as the Saline Joniche project is concerned, Repower will be adhering to the overall strategic approach formulated by its majority shareholder, the government of Canton Graubünden. This owner strategy, combined with overall developments in the environment, prompted a resolution from Repower's Board of Directors not to consider any more interests in coal-fired generation plants. Repower no longer anticipates recoverable utilisation of the property planned for the coal-fired power plant. An impairment loss was recognised on the property related to the Saline Joniche project.

As a result of changes in market and regulatory conditions, formerly profitable ancillary services for pumped-storage plants in Italy were no longer compensated. This directly impacted the recoverable amount of the Campolattaro project. WACC before tax was 10.1 per cent.

With the elimination of the new incentive system introduced in July 2012 for renewables with the exception of photovoltaics (Decreto Ministeriale FER), there was no incentive to pursue the Pontremoli wind farm project.

“Other segments and activities” segment

The return flows from the wind farms in Germany subsidised under the German Renewable Energy Act (EEG) are heavily dependent on the amount of wind. The anticipated wind yield was less than expected, which led to an impairment loss of CHF 3.1 million being recognised on the Lübbenau wind farm. WACC before tax was 7.8 per cent.

Leased tangible assets

The net carrying amount of the motor vehicles held as part of the finance leasing agreement totalled TCHF 553 (previous year: TCHF 714) at the closing date. More information about the finance leasing can be found in Note 29.