Notes to the consolidated financial statements: notes
1 Total operating revenue
In the 2016 financial year, profits from the sale/liquidation of group companies relate to the disposal of connecta ag (TCHF 1,643) and translation gains of TCHF 2,456 on the winding-up of SEI S.p.A reclassified to profit or loss in the Market Switzerland segment. The prior year profits on disposals essentially comprise proceeds from the sales of Repower GuD Leverkusen Verwaltungs-GmbH and Repower Leverkusen GmbH & Co. KG, also in the Market Switzerland segment (see Note 25).
The profits from the disposal of tangible assets relate in particular to proceeds from the sale of properties in other segments and activities.
The previous year, TCHF 5,213 in revenues accruing on the termination of a contract were recognised under revenues from other operating activities in the Market Switzerland segment.
2 Personnel expenses
4 Financial result
The loss of TCHF 5,207 on the premature repayment of liabilities relates to the repayment of registered bonds (see Note 17).
The changes in the value of securities held for trading relate to currency and interest rate hedges.
Income from sale of investments in associates and financial assets largely relates to the sale of the convertible loan granted with respect of Swissgrid AG and the shares in Swissgrid AG.
5 Income taxes
The reconciliation between the actual tax burden and the expected tax burden for the financial years ending on 31 December 2016 and 2015 is as follows:
DEFERRED INCOME TAXES BY ORIGIN OF DIFFERENCe
Change in deferred taxes 2016 by category
CHANGE IN DEFERRED TAXES 2015 BY CATEGORY
UNRECOGNISED TAX LOSS CARRYFORWARDS
Individual group companies had tax loss carryforwards totalling TCHF 203,114 (previous year: TCHF 243,275) at 31 December 2016, which they can set off in future periods with taxable profits. Deferred tax assets are recognised only to the extent that it is probable that the tax benefits can be realised. On the balance sheet date the group had not recognised tax loss carryforwards of TCHF 146,746 (previous year: 153,747), since the future utilisation of these amounts for tax purposes is not probable.
These are due on the following dates:
6 Result per share
16 dividend subject to approval by the annual general meeting.
The Board of Directors proposes that no divided be distributed.
In the 2016 financial year the existing bearer shares and participation certificates, each of which entitled the same participation in the profit or loss, were converted into registered shares, and new registered shares were issued as part of a rights issue to increase the capital (see Note 16).
7 Tangible assets
The pledged fixed assets were put up as collateral for the investment loans and mortgages as listed in Note 17.
Disposals of consolidated companies relate to the liquidation of SEI S.p.A.
Prior-year disposals from changes in consolidation relate to the sale of Repower GuD Leverkusen GmbH & Co. KG and Repower GuD Leverkusen Verwaltungs-GmbH (see Note 25).
Impairments and reversals of impairments on tangible assets
In the 2016 financial year there were impairment losses and impairment gains on generation assets. These break down by segment as follows:
Market Switzerland segment
In 2016 an impairment gain of TCHF 2,834 was recognised on hydropower generation assets (previous year: TCHF 0) and an impairment loss of TCHF 570 (previous year: TCHF 12,589).
The impairment gain of TCHF 2,834 was recognised for the Taschinas asset. It is due to a fall in the cost of capital (WACC) prompted by the interest rate environment and a reduction in maintenance and operating expenditure in line with the current market situation.
The impairment loss of TCHF 570 in the 2016 financial year is connected with damage to machinery at the Igiser Mühlbach power plants. Repairs in 2017 will lead to additional expense and lower revenues. The impairment loss the previous year breaks down as follows: Taschinas TCHF 10,937, Ladral TCHF 834 and Ferrera TCHF 818.
No impairment losses or gains were recognised for wind power assets in 2016. The previous year there was an impairment gain of TCHF 2,508 on the Lübbenau wind farm and an impairment loss of TCHF 1,222 on the Prettin wind farm.
Generation assets are valued on the basis of their value in use calculated on a discounted cash flow basis. The value in use for the impaired assets comes to TCHF 54,559 (previous year: TCHF 92,954). WACC before tax is 5.0 per cent for the Taschinas plant and 9.6 per cent for the Igiser Mühlbach power plants. The previous year, WACC had been 5.6 per cent for the Swiss generation assets Taschinas and Ladral and 5.7 per cent for the Swiss generation asset Ferrera. WACC for the Prettin and Lübbenau wind farms were 6.4 per cent and 8.0 per cent respectively.
Market Italy segment
In the 2016 financial year an impairment gain of TEUR 11,626 or TCHF 12,672 (prior year: impairment loss of TEUR 46,992 or TCHF 50,132) was recognised for generation assets. The impairment gain for 2016 and the impairment loss recognised the previous year relate to the Teverola combined-cycle gas turbine generation asset.
This impairment gain on the Teverola combined-cycle gas turbine plant was triggered by a sharp improvement in revenues from ancillary services and an increase in the clean spark spread. The clean spark spread is the theoretical gross margin earned by a combined-cycle plant on the sale of one unit of energy, containing only the costs of the fuel and the carbon certificates. All other costs have to be covered by the gross margin. The generation asset is valued on the basis of its value in use calculated on a discounted cash flow basis. The value in use comes to TEUR 98,737 (previous year: TEUR 92,290). In Swiss francs this is equivalent to TCHF 106,034 (previous year: TCHF 99,996). WACC before tax is 9.7 per cent (previous year: 9.7 per cent).
LEASED TANGIBLE ASSETS
The net carrying amount of the motor vehicles held as part of the finance leasing agreement totalled TCHF 80 (previous year: TCHF 177) at the closing date. More information on finance leasing can be found in Note 29.
8 Intangible assets
The previous year there had been an impairment charge of TCHF 289 for goodwill at the Prettin wind farm. The value of the goodwill after impairment is CHF 0.
9 Disclosures of interests in other entities
TYPE OF INTEREST AND NUMBER
Changes in the ownership interests without loss of control
Elbe Finance Holding Verwaltungs-GmbH and Repower Deutschland GmbH merged with effect 1 January 2016, with Repower Deutschland GmbH absorbing the other company. The company that disappeared with the merger was wholly owned by the Group before the combination. In the 2016 financial year the assets and liabilities of Elbe Finance Holding GmbH & Co. KG were merged with Elbe Beteiligungs AG in liquidation.
In the 2016 financial year Repower sold another 2 per cent of its interest in Repartner Produktions AG to outside energy utilities. The net cash inflow of TCHF 2,046 is offset against minority interests of TCHF 1,402. The difference of TCHF 644 was allocated to the majority shareholder’s capital.
Consequences of the loss of subsidiary control
In the 2016 financial year the companies connecta ag and Repower Furnizare România S.r.l. were sold. SEI S.p.A., Repower Macedonia DOOEL Skopje and Repower Adria d.o.o. were wound up. For these disposals a translation loss of TCHF 1,327 net was reclassified to profit or loss (see Note 25).
Change in associates
In the 2016 financial year the associate Rhiienergie AG was sold.
List of fully consolidated companies as at 31 December 2016 and 2015.
E Energy business
C Customer (supply/sales)
RE Real estate
G Generation company
H Holding or purchase rights
PC Project company
The date of the financial statements of the subsidiaries on which the group financial statements are based is consistent with the date of the consolidated financial statements.
Ovra electrica Ferrera SA, Trun, is a power plant company in which the local municipality holds a 51 per cent stake. The Repower Group bears full operating responsibility for this company via Repower AG, and sells 100 per cent of the energy generated on the market. The Repower Group thus exercises overall control and Ovra electrica Ferrera SA is fully consolidated.
The following overview provides information on the subsidiary with significant non-controlling interests:
Key figures for subsidiary with significant non-controlling interests
ASSOCIATES AND JOINT VENTURES
Partner plants classified as associates are listed under associated partner plants. The other holdings categorised as associates form the group designated as other associates. Both classes are accounted for using the equity method.
E Energy business
C Customer (supply/sales)
GC Grid company
G Generation company
H Holding or purchase rights
Repower’s holdings in the AKEB and KHR partner plants amount to only 7 per cent and 6.5 per cent respectively. Repower does, however, have the binding right of nomination of a mandate and can make use of this guaranteed seat on the Board of Directors to be involved in the financial and business policy decisionmaking processes of the partner plants.
Investments in associates changed as follows:
Investments in associates and joint ventures
Part of the net investment in associate Swisscom Energy Solutions AG is a loan extended to Swisscom Energy Solutions AG recognised under other financial assets. The pro-rata loss of TCHF 6,451 in excess of the carrying value of the holding was netted with the existing loan.
Disposals amounting to TCHF 3,779 related to the sale of the interest in Rhiienergie AG in the Market Switzerland segment. This resulted in income of TCHF 98 that is disclosed under financial income. The transaction resulted in a cash inflow of CHF 3,877.
In 2016 Repower joined forces with Reichmuth Infrastruktur Schweiz KGK to establish Kraftwerk Morteratsch AG for the construction and operation of the Morteratsch hydropower plant. The establishment of the company in cash entailed investment of TCHF 100 on Repower’s part. Reichmuth has financed 90 per cent of the company and Repower 10 per cent. Under the terms of the agreement, all relevant decisions have to be made unanimously. Kraftwerk Morteratsch AG is a joint venture.
In 2016 an impairment requirement was identified at Aerochetto S.r.l., assigned to the Market Italy segment, with an impairment loss of TCHF 1,463 recognised in the consolidated financial statements under the share of results of associates. The reason for the impairment is that the expected revenues on wind power fail to cover the pro-rata value of the interest. The generation asset is valued on the basis of its value in use calculated on a discounted cash flow basis. The pro-rata value in use comes to TCHF 2,745. WACC before tax is 10.1 per cent.
In 2015 an impairment requirement was identified at Aerochetto S.r.l., assigned to the Market Italy segment, with an impairment loss of TCHF 198 recognised in the consolidated financial statements under share of results of associates. The impairment was the result of a decline in expected revenues on wind power due to lower energy prices, and lower night-time output in an effort to reduce noise emissions. The generation asset is valued on the basis of its value in use calculated on a discounted cash flow basis. An impairment test yielded a value in use of TCHF 4,961 for the asset. WACC before tax is 11.2 per cent.
Associated partner works, other associates and joint ventures are each presented together.
Key figures for associated partner plants
Key figures for other associates
Key figures for joint ventures
Reconciliation of the share of equity of associates and joint ventures at 31 December
H Holding or purchase rights
Grischelectra AG is classified as a joint arrangement. The company’s business is selling electricity procurement rights. Based on the interest of 11 per cent and other votes granted through a guaranteed proxy, Repower manages the company together with Canton Graubünden. Repower procures 100 per cent of the energy bundled in Grischelectra AG from hydropower in return for reimbursement of the generation costs. From an economic perspective, Repower is indirectly responsible for Grischelectra’s liabilities. The holding in Grischelectra was classified as a joint operation. In contrast to the shares held, Repower includes 100 per cent of the company assets, debts, expenses and earnings in its consolidated financial statements.
10 Other financial assets
The loans granted are allocated to the category loans and receivables and recognised at amortised cost. This also includes a loan to Swisscom Energy Solutions AG, which is viewed as part of the net investment in this associate (see Note 9). All other non-current securities are classified as available for sale and measured at fair value. This affects not listed shares or equity securities for which there is no active market and hence for which the fair value cannot be reliably determined. The fair value corresponds to the acquisition value less impairments.
Inventories consist of material inventories, gas inventories and certificates, and are measured at the lower of acquisition costs and net realisable value. Certificates that are not necessary for own generation needs and which are held for trading purposes are measured at fair value less selling costs. No inventories were held for trading purposes in 2016 and 2015.
In the 2016 financial year an impairment loss of TCHF 98 (previous year: TCHF 74) was recognised and TCHF 0 (previous year: TCHF 219) released. The balance of guarantees of origin the previous year, amounting to TCHF 15,914, was related to the holdings of Repower Furnizare România, which was sold in the 2016 financial year.
All receivables fall into the category loans and receivables and are measured at amortised cost. The total sum of receivables at 31 December 2016 (and 31 December 2015) falls due within one year. Owing to their short-term nature, the carrying amounts are assumed to be fair values.
Receivables include collateral in the form of deposits lodged by Repower in the context of its business, particularly with respect of its trading operations. These came to TCHF 3,566 (previous year: TCHF 12,392) for the year under review.
The maturity structure of the receivables and the development of impairments are shown in the risk management and financial risk management section.
13 Securities and other financial instruments
Fixed term deposits fall into the category loans and receivables and are measured at amortised cost. Other securities, and positive replacement values, fall into the held-for-trading category and are measured at fair value. The positive replacement values are related to forward exchange transactions.
14 Positive/negative replacement values for held-for-trading positions
The figures for the replacement values correspond to all financial instruments from energy trading transactions open on the balance sheet date. The replacement value corresponds to the fair value of the open financial instruments. Positive replacement values represent receivables. Positive replacement values represent liabilities.
Replacement values of held-for-trading positions relate to forward contracts measured at current market values. Forward contracts cover forwards and futures with flexible profiles. The replacement value is the difference in price compared to the closing price. The price fluctuations of forward contracts are recorded by adjusting the replacement values, since there is no daily financial balancing of fluctuations in value.
The employment of held-for-trading positions exposes the company to credit and market risks. If the counterparty fails to fulfil its obligations arising from the contract, the counterparty risk for the company corresponds to the positive replacement value. These risks related to held-for-trading positions are limited by imposing stringent requirements on the creditworthiness of contracting parties. An obligation by Repower towards the counterparty exists in the event of a negative replacement value. In this case the counterparty bears the risk.
15 Cash and cash equivalents
All cash and cash equivalents fall into the category loans and receivables and are measured at amortised cost. The average interest rate on CHF-denominated cash and cash equivalents was -0.20 per cent (previous year: 0.05 per cent) and -0.10 per cent for EUR-denominated cash and cash equivalents (previous year: 0.00 per cent).
Cash and cash equivalents are held in the following currencies:
All positions are freely disposable or are due within 90 days. The carrying amounts correspond approximately to the fair values.
CASH AND CASH EQUIVALENTS FOR THE CASH FLOW STATEMENT
Cash and cash equivalents held for sale are disclosed under assets held for sale (Note 26). These must be added again to cash and cash equivalents for the cash flow statement.
16 Share capital
CONVERSION OF BEARER SHARES AND PARTICIPATION CERTIFICATES
In the first half of 2016 the existing bearer shares and participation certificates with a nominal value of CHF 1 were converted into 3,408,115 registered shares, also with a nominal value of CHF 1, on a one-for-one basis. Participation certificates carried no voting rights at the general meeting but were otherwise subject to the same provisions as shares.
INCREASE IN CAPITAL VIA RIGHTS ISSUE
The Repower extraordinary general meeting (EGM) held on 21 June 2016 resolved to increase the company’s capital by means of a rights issue to shareholders. The period for subscription to the new shares began on 24 June 2016 and lasted until 4 July 2016. Existing shareholders were allocated one subscription right per share held. Five subscription rights entitled the holder to subscribe to 7 new shares at a subscription price of CHF 43.00 per share. The two existing main shareholders, Canton Graubünden and Axpo Holding AG, waived their subscription rights in favour of Elektrizitätswerke des Kantons Zürich (EKZ) and UBS Clean Energy Infrastructure Switzerland KGK (UBS-CEIS); these rights were allotted to the two new shareholders. After the subscription period had closed, on 5 July 2016, and with an addendum dated 14 July 2016, the Board of Directors of Repower AG resolved to increase the company’s capital from CHF 3,408,115, divided into 3,408,115 fully paid-up registered shares each with a nominal value of CHF 1.00, by issuing 3,982,853 new fully paid-up registered shares each with a nominal value of CHF 1.00; the rights issue generated gross proceeds of TCHF 171,263. The share capital now comes to CHF 7,390,968.
The four shareholders with major interests are bound by a shareholders’ agreement.
On 31 December 2016, 382 treasury shares were held (previous year: 0).
17 Non-current financial liabilities
With the exception of interest rate swaps, all non-current financial liabilities fall into the category of other financial liabilities and are recognised at amortised cost using the effective interest method. The weighted average interest rate based on the nominal value on the balance sheet date was 2.84 per cent (previous year: 2.91 per cent). The fair value of non-current financial liabilities amounted to TCHF 328,929 (previous year: TCHF 509,429). Repower has fully complied with all credit and loan agreements. The registered bonds (“Namensschuldverschreibungen”) totalling EUR 35 million and EUR 84 million contain clauses pertaining to change of control. With the new investors joining on 5 July 2016, creditors had made use of their right of termination. Repayment of registered bonds totalling EUR 116.5 million was demanded, and was effected in the form of payments amounting to TCHF 126,995. A TCHF 5,207 loss on premature repayment is recognised under financial income.
18 Pension fund obligation
The pension plans operated by Repower qualify as defined benefit plans, with the main plan established in Switzerland. Employees in Switzerland are members of the legally independent pension fund PKE Vorsorgestiftung Energie. This is a pension fund within the meaning of the Federal Law on Occupational Pensions for Old Age, Survivors and Disability (BVG). The law governs the benefits employees are entitled to as well as the organisation and financing of pension funds. The fund is designed to provide occupational pensions for employees of the affiliated companies and their family members and survivors that cover the economic consequences of old age, disability and death. PKE Vorsorgestiftung is a defined contribution plan in Switzerland in accordance with the BVG. Under the defined contribution plan, the benefits paid out in the case of an insured event are based on the insured’s contributions plus interest.
An equal number of employer and employee representatives make up the fund’s Board of Trustees. The Board of Trustees defines the fund’s objectives and principles and regulates and monitors the investment process (investment strategy, investment policy and investment guidelines). In the management of the fund’s assets, the financial interests of the insureds are given top priority. Assets must be managed in accordance with the respective investment regulations so as to guarantee the timely payment of benefits and compliance with the risk limits laid down in the investment policy.
In the event of any necessary restructuring measures, the companies determine the interest rate and shortfall contributions to be paid together with their insureds. The contribution of the companies must be at least as high as the sum of the contributions of the insureds. This means that Repower may have a legal or constructive obligation to pay additional benefits. For this reason, a defined contribution plan also constitutes a defined benefit plan under IFRS.
The probability and scope of any restructuring measures as a result of a plan shortfall can be reduced in the defined contribution plan (in accordance with BVG) by lowering the interest rate applied to the capital accrued by beneficiaries.
The defined contribution plan operated by PKE Vorsorgestiftung Energie will pay out pensions in two parts: 90 per cent of the pension will be guaranteed as a basic pension and 10 per cent as a variable pension, depending on PKE’s coverage ratio. If the coverage ratio is below 90 per cent, only the basic pension will be paid out. If the coverage ratio is higher than 120 per cent, the target pension will be increased by a maximum of 10 per cent. The variable component will be redefined each year and be valid for an entire year. This rule makes it possible for future retirees to also contribute to eliminating a potential coverage shortfall. They can, however, also participate in a positive development.
PKE Vorsorgestiftung Energie was converted from a joint foundation into a collective foundation with effect 1 January 2015. Rather than a single binding coverage ratio, there is a separate coverage ratio for each affiliated company.
The following table provides an overview of the balances recognised in relation to the pension plans in the consolidated financial statements:
The present value of the defined benefit obligation of the Swiss pension plans is broken down as follows into the individual groups of pension beneficiaries:
All pension commitments are vested. The weighted average term of the defined benefit pension obligation under the defined contribution plan totalled 17.7 years (previous year: 16.6 years) at 31 December 2016.
The investment strategy is based on the results of an asset and liability analysis. The following table provides a breakdown of the plan assets and strategy of the investment portfolio:
Fluctuations in pension provisions with separate reconciliation statements for the plan assets and the present value of the defined benefit obligation are shown in the table below:
The key actuarial assumptions are as follows:
The average retirement age is 63.
An increase or decline in the key actuarial parameters would affect the present value of the defined benefit obligation at 31 December 2016 as follows:
Employer contributions of TCHF 3,943 (previous year: TCHF 4,048) are expected for the 2017 financial year.
19 Other provisions
Reversion provisions have been set aside for the extensive deliveries of free energy to the municipality of Poschiavo.
Provisions for onerous contracts
Provisions were recognised for onerous energy procurement contracts. The creation of the provision in the amount of TCHF 685 (previous year: 1,706) was recognised under energy procurement in the Market Switzerland segment.
Repower has a sub-participation in the Gösgen nuclear power plant, from which it purchases electricity. In the 2015 financial year Repower had recognised a provision of TCHF 3,000 in the Market Switzerland segment in anticipation of the charge for the pro-rata valuation difference for the plant’s decommissioning fund. This provision was released in the 2016 financial year. Taken individually, the other components of the other provisions item are immaterial.
20 Other current liabilities
All positions fall into the category other liabilities and are recognised at amortised cost. They are due within one year. The fair values have been taken as the carrying amounts.
21 Current financial liabilities
Current financial liabilities and leasing commitments fall into the other financial liabilities category and are recognised at amortised cost. Owing to their short-term nature, the carrying amounts are assumed to be fair values. The previous year the item current financial liabilities included the CHF 200 million bond. This amount was repaid in 2016. The replacement values consist of forward exchange transactions and currency options and correspond to the market value.
22 Prepaid expenses and accrued income/deferred income and accrued expenses
PREPAID EXPENSES AND ACCRUED INCOME
DEFERRED INCOME AND ACCRUED EXPENSES
The financial assets under prepaid expenses and accrued income are allocated to the category other financial receivables, and financial liabilities under deferred income and accrued expenses are allocated to the category other financial liabilities. They are measured at amortised cost and are due within one year. The fair values have been taken as the carrying amounts.