7) Estimation uncertainty

Assumptions and sources

Management makes estimates 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 estimates 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. Estimates and assumptions are periodically reviewed. Changes to 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 771 million at 31 December 2015 (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 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 Swiss Electricity Supply Act (StromVG) and 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 operator (Swissgrid) within five years. The high-voltage grids of Repower AG were fully integrated into Repower Transportnetz AG. Repower Transportnetz AG was transferred to the national grid operator on 3 January 2013. The provisional transfer value of the company is based on the ElCom ruling on 2012 costs and tariffs 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 came to CHF 73.5 million. The definitive values of the integrated transmission grids are determined taking account of 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 of 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. In the 2015 financial year the interests received with respect to Swissgrid in return for the contribution were disposed of at the current carrying value (see Note 26). In the event of an increase in valuation, the additional interests or loan will be passed from Repower to the buyers. In the event of a decrease in valuation, Repower will pay the buyers compensation for the redemption of the interest or the reduction in the loan. The final transfer value may differ significantly from the provisional transfer value. Management is of the opinion that the definitive transfer value will not be lower than the transfer value that has appeared so far in the consolidated financial statements.

Receivables and liabilities

Trade accounts receivable amounting to CHF 351 million (previous year: CHF 444 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. Provisions for onerous energy contracts are recognised if the unavoidable costs of fulfilling a contractual obligation are higher than the economic benefit expected to flow from the contract. The parameters used to calculate onerous energy procurement contracts include anticipated developments in the price of energy on the supply and trading market, the exchange rate used, and the discount rate.

Pension fund obligation

Most employees of the Repower Group are insured with the PKE Pensionskasse Energie pension fund. The balances and liabilities reported for this fund are calculated on the basis of statistical and actuarial assumptions. This is particularly the case with the recognised pension fund obligation, which totalled around CHF 42 million at 31 December 2015 (previous year: CHF 29 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 insureds are defined by independent actuaries. The assumptions underlying the actuarial calculations can deviate considerably from the actual results owing to changes in the market and economic environment, higher or lower rates of turnover, longer or shorter life expectancy of insureds or as a result of other estimated factors.