1 Accounting and valuation principles
With effect 1 January 2017 the Repower Group has prepared its financial statements in accordance with the entire Accounting and Reporting Recommendations (Swiss GAAP FER), providing a true and fair view of the assets, liabilities, financial position and profit or loss of the Repower Group. Prior-year figures have been adjusted.
Adjustments in connection with the change to Swiss GAAP FER
The switch from IFRS to Swiss GAAP FER as of the 2017 financial year was announced in a news release dated 12 September 2017. The accounting principles applied in the preparation of the financial statements diverge from the 2016 financial statements, prepared in accordance with IFRS, in the following key respects:
In accordance with Swiss GAAP FER 16 Pension Benefit Obligations, the economic liabilities and benefits of Swiss pension plans are determined on the basis of financial statements prepared in accordance with Swiss GAAP FER 26 Accounting of Pension Plans. Under IFRS, pension liability was determined in accordance with IAS 19 using the projected unit credit method.
In accordance with the option provided for in Swiss GAAP FER 30 Consolidated Financial Statements, investments conferring a share of less than 20 per cent of the voting rights are recognised at acquisition cost. Under IFRS, by contrast, in the case of significant influence, investments conferring a lower share were also treated as associates and recognised according to the share of equity.
In accordance with the option provided for in Swiss GAAP FER 30 Consolidated Financial Statements, joint ventures are recognised using the equity method. Under IFRS the share of assets, liabilities, income and expenses of joint ventures had to be taken proportionally into account.
Under Swiss GAAP FER 24 Equity and Transactions with Shareholders, interest-free and low-interest loans are classified in their entirety as liabilities and recognised at their nominal value. Under IFRS, financial instruments were initially recognised at fair value.
The adjustments to the opening balance for minorities in the consolidated statement of changes in equity are primarily related to the discontinuation of the previous equity component of shareholder loans.
The separate customer list drawn up on a business combination under IFRS is now part of goodwill. In accordance with the option provided for in Swiss GAAP FER 30 Consolidated Financial Statements, goodwill is capitalised and amortised according to a schedule.
Cash flow hedges
In accordance with the option provided for in Swiss GAAP FER 27 Derivative Financial Instruments, cash flow hedges (hedges of certain future cash flows) are not recognised on the balance sheet, but are disclosed in the notes. Under IFRS these hedges basically had to be recognised on the balance sheet. Forward transactions relating to purchases and sales of energy for physical delivery were not recognised on the balance sheet under IFRS either (own-use exemption).
Linear amortisation bonds
Under Swiss GAAP FER 2 Valuation, liabilities are recognised at nominal value. Repower amortises any differences between the acquisition cost and the redemption value of bonds or registered bonds on a straight-line basis over the term of the instruments. Under IFRS these differences were amortised using the effective interest rate method in the course of subsequent measurement.
Deferred taxes on loss carryforwards
Under IFRS, deferred taxes on loss carryforwards were recognised. Given the uncertainty involved in offsetting loss carryforwards against future earnings, in accordance with Swiss GAAP FER 11 Income Taxes, deferred taxes are not capitalised.
Connection fees and grid cost contributions
A grid connection agreement entitles the subscriber to connect its assets to Repower’s distribution network in return for a connection fee and grid cost contribution. These amounts are now classified as a liability and amortised over time, and are not recognised immediately in the income statement as they were previously under IFRS.
The contractual obligation to deliver free energy is a so-called executory contract, a pending transaction where the contract has not yet been fully performed or fully executed. Under Swiss GAAP FER 23 Provisions, no provision has to be recognised, as it does not constitute a probable obligation based on a past event.
Income from disposals
Differences in measurement, and in particular the fact that accumulated translation differences on business disposals are no longer recycled in the income statement, have an impact on the reconciliation of group earnings under IFRS with group earnings under Swiss GAAP FER.
The differences in measurement and recognition presented have a corresponding effect on deferred taxes in the consolidated balance sheet and income statement.
Presentation and structure of financial statements
The presentation and structure of the balance sheet, income statement, statement of changes in equity and cash flow statement have been adjusted in line with Swiss GAAP FER. As of 1 January 2016 capital reserves were reclassified from retained earnings, and the resultant translation differences were set to zero. The effects of the adjustment were allocated among Repower’s majority and minority shareholders.
The effects of the adjustments described on equity and the income statement are summarised in the following tables:
Scope of consolidation
The present consolidated financial statements encompass the financial statements of Repower AG and all investments where Repower holds, directly or indirectly, more than 50 per cent of the votes or can exercise control in some other way. These investments are fully consolidated. Associated organisations and joint ventures are included in the financial statements in accordance with the equity method.
Overview of subsidiaries, associates and joint ventures
All subsidiaries, associates and joint ventures with the exception of Grischelectra AG, which closes its accounts on 30 September, close their accounts at the end of the calendar year.
Ovra electrica Ferrera SA, Trun, is a power plant company in which the local municipality holds a 51 per cent stake. Repower bears full operating responsibility for this company and sells 100 per cent of the energy generated on the market. Repower thus exercises overall control and Ovra electrica Ferrera SA is fully consolidated.
In contrast to the share capital held, Repower exercises 30 per cent of the votes in Grischelectra AG and on the basis of contractual arrangements controls Grischelectra AG in conjunction with Canton Graubünden.
Under the contractual arrangements governing the interest in Kraftwerk Morteratsch AG, all relevant decisions must be made unanimously. Kraftwerk Morteratsch AG is a joint venture.
Changes in the ownership interests without loss of control
Repower Wind Deutschland GmbH, Repartner Wind GmbH (formerly Repower Wind Prettin GmbH) and Repower Wind Lübbenau GmbH merged with effect 1 January 2017, with Repartner Wind GmbH absorbing the other companies.
In the 2017 financial year Repower sold another 6 per cent of its interest in Repartner Produktions AG to the shareholder EKZ. The cash inflow of TCHF 5,721 is offset against minority interests of TCHF 2,902. The difference of TCHF 2,819 was allocated to the majority shareholder’s capital. Repower likewise sold 0.1 per cent of its interest to Swibi AG. Minority interests of TCHF 6 are offset against sales proceeds of TCHF 24. The difference of TCHF 18 was allocated to the majority shareholder’s capital.
In 2016 Repower sold another 2 per cent of its interest in Repartner Produktions AG to outside energy utilities. The cash inflow of TCHF 2,046 is offset against minority interests of TCHF 1,842. The difference of TCHF 204 was allocated to the majority shareholder’s capital.
Consequences of the loss of subsidiary control
In 2017 the companies Elbe Beteiligungs AG in Liquidation, Energia Eolica Pontremoli S.r.l., Repower Trading Česká republika s.r.o. v likvidaci, S.C. Repower Vanzari Romania S.R.L., Repower Serbia d.o.o. - u likvidaciji and Repower Hrvatska d.o.o. u likvidaciji were liquidated. Translation losses of TCHF 19 from accumulated translation differences were reclassified directly to retained earnings.
In the 2016 financial year the fully consolidated companies connecta ag and Repower Furnizare Romania S.r.l. were sold.
The components of the balance sheets of the companies sold related to:
With the disposal of Repower Furnizare Romania S.r.l., translation gains of TCHF 5 from accumulated translation differences were reclassified to retained earnings.
SEI S.p.A., Repower Macedonia DOOEL Skopje and Repower Adria d.o.o. were liquidated. This resulted in translation losses of THCF 297 to be reclassified.
Capital consolidation is done in accordance with the purchase method. When an entity is purchased, its assets and liabilities as of the date of acquisition are revalued in accordance with uniform group principles. Any remaining goodwill (the difference between the purchase price and the share of equity) is capitalised and amortised over five years or a maximum of 20 years. Assets and liabilities and income and expenses at fully consolidated entities are integrated in their entirety in the consolidated financial statements. Minority interests in the equity and minority interests in the profits of fully consolidated entities are stated separately.
Intragroup receivables and liabilities, income and expenses and investments are netted out and interim gains eliminated. Investments in associates and joint ventures are accounted for using the equity method.
Conversion of foreign currencies
Each group company determines the functional currency in which it draws up its individual financial statements. Company financial statements in foreign currencies are converted as follows: assets and liabilities at the closing rate on the balance sheet date, equity at historical rates. The income and cash flow statements are converted at the average rate for the year. The resulting translation differences are recognised directly in equity. On the disposal of entities, the translation differences attributable to them are reclassified in the consolidated statement of changes in equity from accumulated translation differences to retained earnings.
Foreign currency transactions contained in the individual financial statements of consolidated entities are converted at the relevant daily rate, and foreign currency balances are converted on the closing date at the closing rate on the balance sheet date. The resulting differences in rates are recognised in profit or loss.
The following exchange rates were used for the most important foreign currency:
Cash flow statement
The cash and cash equivalents fund forms the basis of the consolidated cash flow statement. Cash flow from operating activities is calculated by the indirect method.
3 Valuation principles
Tangible assets are initially recognised at the lower of cost (acquisition or manufacturing cost). Repower capitalises borrowing costs if construction takes more than one year and it is a major investment project. For the purposes of subsequent measurement, Repower does scheduled straight-line amortisation over the expected useful life. Estimated useful lives are calculated in accordance with the recommendations of the Association of Swiss Electricity Companies and are within the following ranges for each category:
Intangible assets are initially recognised at the lower of cost (acquisition or manufacturing cost). Provided the prerequisites for capitalisation are met, intangible assets generated internally are capitalised. Amortisation is done on a straight-line basis. The estimated useful lives for the individual categories are within the following ranges:
The useful lives of concession rights and rights of use are determined by the relevant contractual provisions.
Assets are tested for impairment on every balance sheet date. If there is evidence of impairment, an impairment test is carried out to calculate the recoverable value. The recoverable value is the higher of net selling price and value in use. If the carrying amount exceeds the recoverable value, an adjustment is made in the income statement by way of unscheduled amortisation. If there is a material improvement in the facts considered in the course of calculating the recoverable value, an impairment recognised in earlier reporting periods will be fully or partially reversed in the income statement, with the exception of goodwill.
Investments in associates and joint ventures
Investments in associates and joint ventures are recognised using the equity method.
Financial assets comprise securities and loans extended for the purpose of long-term investment, and derivatives. Non-current securities and loans are recognised at cost less any impairment. Derivatives are recognised at current values.
Deferred taxes are calculated on the basis of balance sheet temporary differences. Temporary differences between the values of balance sheet positions determined in accordance with Swiss GAAP FER principles and those determined in accordance with tax law form the basis for recognising deferred income tax assets and liabilities. Given the uncertainty involved in offsetting loss carryforwards against future earnings, deferred taxes are not capitalised.
Inventories are goods used in the regular course of business for the purposes of disposal, manufacturing goods or providing services. They are initially recognised at the lower of cost (acquisition or manufacturing cost). The closing inventory is valued at the lower of average cost or net market price. Settlement discounts received are recognised as financial income.
Work in progress comprises goods and services not yet transferred. Smaller contracts are measured at acquisition or production cost, comprising all expenses actually incurred to bring orders to their current status (completed contract method). Large contracts are recognised as per Swiss GAAP FER 22 as long-term contracts according to the percentage-of-completion method if the respective preconditions are met. The percentage of completion is calculated for each contract using the cost-to-cost method.
Receivables from goods and services
Receivables from goods and services comprise receivables from business activities where the delivery or service has already been fulfilled but the counterperformance or debt has not been fulfilled. Receivables are measured at nominal value taking due account of necessary impairment.
This item comprises all other current receivables. They are measured at nominal value taking due account of necessary impairment.
Prepaid expenses and accrued income/deferred income and accrued expenses
Prepaid expenses and accrued income/deferred income and accrued expenses are designed to ensure that assets and liabilities at the balance sheet date are presented correctly and that income and expense are recognised in the appropriate period in the income statement.
Securities comprise shares, bonds and fund units as well as derivatives and short-term investments. Both initial and subsequent measurement is done at current values. If no current value is available, non-current securities are valued no higher than their acquisition costs less any impairments.
Replacement values of held-for-trading positions
Contracts in the form of forward transactions (forwards and futures) conducted with the intention of achieving a trading profit or margin are treated as derivative financial instruments and recognised as held-for-trading positions or replacement values. On the balance sheet date, all open derivative financial instruments from energy trading transactions are measured at fair value through profit or loss, and the positive and negative replacement values are recognised under assets and liabilities. Positive replacement values represent receivables. Negative replacement values represent liabilities. The replacement value is the difference in price compared to the closing price.
Open contracts are measured on the basis of market data from electricity exchanges (e.g. EEX Leipzig). For contracts for which no liquid market exists, measurement is based on a valuation model.
Current transactions are offset at positive and negative replacement value if the respective contract terms provide for this and the intention to offset exists and is legally permitted.
Realised and unrealised income from held-for-trading positions is recognised as net sales from goods and services.
Cash and cash equivalents
The cash and cash equivalents item comprises cash, sight deposits at banks and other financial institutions (e.g. PostFinance) and cash equivalents, provided they are held as a cash reserve, are highly liquid and convertible to cash at short notice, and are subject to only negligible fluctuations in value. Cash equivalents have a maximum residual term to maturity of 90 days at the balance sheet date. Fixed-term deposits callable at short notice with an agreed term of more than 90 days are likewise deemed to be cash equivalents, provided that on the balance sheet date they are available to Repower for payment purposes on 90 days’ notice.
A provision is a probable liability on the basis of an event before the balance sheet date; the amount of the liability and/or the date on which it will fall due is uncertain but can be estimated. Provisions are recognised for actual and statutory obligations and for impending risks and losses. Existing provisions are remeasured on every balance sheet date. Provisions are divided into current provisions (due within 12 months) and non-current provisions (due after 12 months). If there is a material time factor involved, the provision is discounted.
Financial liabilities comprise both financing activities and derivatives, and are recognised at nominal or current values. Any differences between the acquisition cost and the redemption value of bonds or registered bonds are amortised on a straight-line basis over the term of the instruments. Interest accrued but not yet charged is accrued and recognised as deferred income and accrued expenses on the balance sheet date. Depending on the term, it is recognised under non-current or current financial liabilities.
Other non-current liabilities
Other non-current liabilities comprise all liabilities not belonging to the other categories that are not due within 12 months after the balance sheet date. In particular, under this item Repower recognises received connection fees and grid cost contributions, which are charged to profit or loss over a period of 35 years.
Liabilities from goods and services
Liabilities from goods and services are current liabilities with a remaining term of less than 12 months arising from deliveries, work performances, services, lease agreements, etc.). They are recognised at nominal values.
Other current liabilities
This item comprises all other current liabilities that cannot be assigned to liabilities from goods and services. They are recognised at nominal values.
On the balance sheet date, employees of Repower in Switzerland were members of the PKE Vorsorgestiftung Energie pension fund. This is a legally independent pension fund operating as a defined contribution plan in accordance with the Federal Law on Occupational Pensions for Old Age, Survivors and Disability (BVG). Pension benefit obligations are measured and recognised in accordance with Swiss GAAP FER 16. The economic impacts of pension institutions on the entity are either economic benefits or economic obligations. Economic benefits and economic obligations are evaluated at the balance sheet date and recognised in the entity’s financial statements. Employer contribution reserves are recognised at nominal or present value as financial assets.
A peculiarity of Italian law is the payment of severance pay. This corresponds to around one month’s pay for every year of employment, and must be paid in all cases when an employment relationship is terminated. The provision for this obligation is calculated according to a recognised method specific to the country, and the change is recognised in personnel expenses.
Cash flow hedges
Derivative transactions entered into for the purpose of hedging cash flows with a high probability of occurrence are not recorded on the balance sheet, but are disclosed in the notes.
A lease is an agreement whereby certain goods are ceded for the use of the lessee in return for a payment. A distinction is made between finance and operating leases. A finance lease is defined as a lease that transfers all material risks and rewards of ownership to the lessee. Otherwise the lease is deemed to be an operating lease. The components of a finance lease are recognised as tangible assets and financial liabilities. Lease instalments paid are apportioned between the finance charge and the reduction in the outstanding liability. Assets leased under operating leases are not recognised on the balance sheet. Paid and received leasing instalments are recognised in the period in which they occur.
Contingent assets and liabilities are measured at the balance sheet date and disclosed in the notes. If an outflow of funds without a simultaneous usable inflow of funds is probable and estimable, a corresponding provision is recognised.
Transactions with related parties
Related parties (natural persons and legal entities) are parties which can directly or indirectly exert a significant influence on the group’s financial and operational decisions. Organisations that for their part are directly or indirectly controlled by related parties are likewise deemed to be related. All material transactions and resulting balances or liabilities vis-à-vis related parties are disclosed in these consolidated financial statements.