Notes to the consolidated financial statements: notes
1 Net sales from goods and services
Revenue from energy business and revenues from services and other usual business activities are recognised in the income statement when delivery of goods or services has been performed. Sales of products and related services are broken down into their material performance obligations, measured, and realised on the date they are performed.
A breakdown of net revenues by Repower business segment is presented in the note on segment reporting (Note 37).
2 Internally produced and capitalised assets
Internally produced and capitalised assets essentially comprise investments in Repower’s generation and grid assets.
3 Change in inventory of sales orders
The change in inventory of sales orders relates to as yet uncompleted work for third parties.
4 Other operating income
The profits from the disposal of tangible assets in the prior year relate in particular to proceeds from the sale of properties in other segments and activities.
The overhaul of the Teverola power plant scheduled for the first quarter took considerably longer than expected owing to technical problems. The interruption in the operation of the plant is insured. In the second half of 2018 Repower received reimbursement of CHF 2,944 thousand from its business interruption insurance.
5 Earnings from associates and joint ventures
The development of interests in associates and joint ventures is shown in Note 17.
6 Energy procurement
In 2018 provisions of CHF 5,954 thousand were made for long-term energy procurement agreements (versus CHF 1,719 thousand the prior year). Information on the development of provisions can be found in Note 27.
7 Concession fees
8 Personnel expenses
9 Materials and outside services
The materials and outside services item contains expenses for maintaining and operating technical assets, external services for operational processes and the performance of services by third parties.
10 Other operating expenses
Information on the development of allowances for doubtful accounts can be found in Note 21.
11 Depreciation/Amortisation, impairment and reversal of impairment of tangible assets
Neither impairment gains nor impairment losses were recognised in 2017 and 2018.
12 Depreciation/Amortisation, impairment and reversal of impairment of intangible assets
Neither impairment gains nor impairment losses were recognised in 2017 and 2018.
13 Net financial income
In 2018 the losses on premature repayment of liabilities relate to the premature repayment or bonds with a nominal value of CHF 18,555 thousand; in 2017 they relate to the closing of an off-balance-sheet interest rate swap held until that point for hedging purposes.
The changes in the value of securities held for trading relate to interest rate swaps and forward exchange transactions to hedge currency and interest rate risks.
14 Income taxes
The reconciliation between the actual tax burden and the expected tax burden for the financial years ending on 31 December 2018 and 31 December 2017 is as follows:
Unrecognised tax loss carryforwards
On the balance sheet date there were unrecognised tax loss carryforwards of CHF 214,660 thousand (prior year: CHF 174,317 thousand). The offsettability of loss carryforwards against future earnings involves uncertainty.
This results in unrecognised deferred tax assets of CHF 43,218 thousand (prior year: CHF 37,770 thousand) Given the uncertainty involved in offsetting loss carryforwards against future earnings, deferred taxes are not capitalised (Swiss GAAP FER 11/23).
15 Tangible assets
Land and buildings connected with power generation and grid facilities are stated under generation and grid assets.
The increase in the net values of tangible assets pledged as security for debts relates to mortgage assignments pledged for security for bank loans in connection with the business acquisition.
Leased tangible assets
Vehicles
The net carrying amount of the motor vehicles held as part of the finance leasing agreement totalled CHF 62 thousand (previous year: CHF 64 thousand) at the closing date.
Total lease liabilities come to CHF 32 thousand (prior year: CHF 53 thousand).
Generation assets
CHF 47,469 thousand of the addition in scope of consolidation relate to leased power plants (see the “Additions to the scope of consolidation” section).
The net carrying amount of the generation assets held as part of the finance leasing agreement totalled CHF 46,721 thousand (previous year: CHF 0 thousand) at the closing date.
Total lease liabilities come to CHF 31,375 thousand (prior year: CHF 0 thousand).
16 Intangible assets
The CHF 962 thousand addition to goodwill relates to the acquisition of Elettrostudio Energia S.p.A. in December 2018 (see the “Additions to the scope of consolidation” section).
17 Investments in associated organisations and joint ventures
Part of the net investments in associates tiko Energy Solutions AG and Aerochetto S.r.l. are loans extended to these entities recognised under financial assets. Losses of CHF 19,404 thousand in excess of the carrying value of the investments (prior year: CHF 15,530 thousand) were netted with the loans (Note 18).
18 Financial assets
Repower holds interests of 7.0 per cent and 6.5 per cent respectively in the partner plants AKEB Aktiengesellschaft für Kernenergie-Beteiligungen, Lucerne, and Kraftwerke Hinterrhein AG, Thusis. These investments are carried at acquisition cost.
The active loans relate to loans to associates and joint ventures. Accumulated impairments of CHF 19,404 thousand (prior year: CHF 15,530 thousand) were recognised under this item (see Note 17).
Information on the development of the employer contribution reserve account can be found in Note 34.
19 Deferred tax assets
The tax rates used to calculate deferred income tax items are 16.1 per cent for Switzerland, 24.0 per cent for Italy, and between 29.0 and 32.8 per cent for Germany.
20 Inventories
Work in progress relates to services provided by Repower to third parties and not yet billed. In the 2018 financial year no impairment loss was recognised on inventories (prior year: CHF 0 thousand), and CHF 18 thousand (prior year: CHF 36 thousand) in impairment losses was reversed.
21 Receivables from goods and services
The stated receivables from goods and services also include claims on associates and joint ventures amounting to CHF 2,200 thousand (prior year: CHF 6,638 thousand).
Receivables from goods and services are measured by applying individual and lump-sum adjustments to the non-impaired positions based on their maturity structure and historical experience.
In 2017 impaired receivables were sold to a factoring company. This transaction resulted in a loss of CHF 586 thousand recognised under other operating expense in the Market Italy segment.
22 Other receivables
23 Prepaid expenses and accrued income
24 Securities
25 Replacement values of held-for-trading positions
26 Cash and cash equivalents
At the balance sheet date, Repower also has the following unused bank credit lines:
27 Provisions
PROVISIONS FOR ONEROUS CONTRACTS
Provisions had been recognised for onerous energy procurement contracts in prior years. The reversal in the amount of CHF 5,954 thousand (prior year: CHF 1,719 thousand), the result of high prices, was recognised under energy procurement in the Market Switzerland segment. The provision was calculated on the basis of a risk-adjusted interest rate of 7.41 per cent (prior year: 11.15 per cent).
SEVERANCE PAY
When an employment relationship is terminated in Italy, the employee is entitled to severance pay corresponding to around one month’s pay for each year of employment (see Note 34).
DISMANTLING PROVISIONS
The dismantling provisions category comprises various provisions for the dismantling of operating installations. Taken individually they are immaterial.
28 Deferred tax liabilities
The tax rates used to calculate deferred income tax items are 16.1 per cent for Switzerland, 24.0 per cent for Italy, and between 29.0 and 32.8 per cent for Germany.
29 Current and non-current financial liabilities
Negative amounts presented in the table are scheduled allocations of net expenditures.
30 Other non-current liabilities
This item comprises accrued connection fees and grid cost contributions received from customers, which are charged to profit or loss over a period of 35 years via net sales from goods and services in the Market Switzerland segment.
31 Trade accounts payable
The stated trade accounts payable also include liabilities vis-à-vis associates and joint ventures amounting to CHF 2,689 thousand (prior year: CHF 889 thousand)
32 Other current liabilities
The customer prepayments item contains prepayments of CHF 3,855 thousand (prior year: CHF 0) for third-party contracts.
33 Deferred income and accrued expenses
34 Pension schemes
EMPLOYER CONTRIBUTION RESERVES
For reasons of materiality, employer contribution reserves are not discounted. The nominal value corresponds to the carrying value. Employer contribution reserves are recognised under non-current financial assets.
ECONOMIC BENEFIT/ECONOMIC LIABILITY AND PENSION BENEFIT EXPENSES
The pension fund for employees of Repower AG is organised as a pension scheme of the collective foundation of the PKE Vorsorgestiftung Energie foundation. Swibi AG is affiliated to a joint pension scheme of the PKE Vorsorgestiftung Energie foundation. Based on the most recent financial statements available, neither of these pension schemes is under- or overfunded.
The item “Pension institutions without own assets” relates to the obligation to pay severance pay in Italy (see Note 27). The change in the stated provision in the income statement comes to CHF 371 thousand at the average exchange rate.
35 Derivative financial instruments
The line “netting” refers to the netting of energy derivatives transactions entered into with the same counterparty and with whom there are enforceable netting agreements.
Cash flow hedges used as hedging transactions are not recognised on the balance sheet and therefore do not yet impact the balance sheet. Off-balance-sheet energy and interest derivatives are used to hedge future cash flows with a high probability of occurrence.
The interest derivatives held for cash flow hedges come from the business acquisition in 2018 (see the “Additions to the scope of consolidation” section).
36 Transactions with related parties
The balances and liabilities reported on the balance sheet and the transactions contained in the income statement vis-à-vis related parties are related to business with the main shareholders and Repower entities, associates, partner works and joint ventures controlled by them.
The following balance sheet and profit and loss items contain the following amounts vis-à-vis related third parties:
Transactions are at market prices, or in the case of Grischelectra AG at annual costs.
Canton Graubünden is deemed to be a related party in its capacity as a shareholder. Official business such as levying taxes, concession-related charges, fees, etc., is done on a statutory basis and is therefore not included here. Canton Graubünden’s energy business is transacted via Grischelectra AG, which is included as a related party in the table above.
In 2017 Repower sold 6 per cent of its interest in Repartner Produktions AG to the related party Elektrizitätswerke des Kantons Zürich (EKZ). The net cash inflows for the sale of the interests and the shareholder’s loans granted to date by Repower come to CHF 5,721 thousand and CHF 9,779 thousand respectively. The disposal was made at carrying values. The sale of minority interests in Repartner Produktions AG has resulted in a CHF 5,721 thousand increase in Repower’s consolidated equity.
In 2017 Repower AG sold the Morteratsch power plant, which it built, to the joint venture Kraftwerk Morteratsch AG at a carrying value of CHF 9,055 thousand, realising a gain of CHF 1,001 thousand.
Compensation paid to members of the board of directors and executive board is disclosed in the Corporate governance section.
37 Segment reporting
Segment reporting is done by geographic market and reflects internal management and reporting structures. The information provided is that used by management for steering and assessing the business performance and development of the individual segments. For each business segment, internal steering, performance measurement and capital allocation are carried out on the basis of the segment’s income before interest and income taxes (EBIT). Segment income is calculated on the basis of the accounting and valuation principles used at group level.
38 Treasury shares
Purchases/disposals of treasury shares relate to Repower AG registered shares. In the year under review Repower AG bought 605 shares (prior year 2,637) at CHF 70.80 (prior year CHF 57.83) and sold 560 shares (prior year 2,763) at an average price of CHF 71.31 (prior year CHF 59.38).
39 Off-balance-sheet business
In the course of regular business the group granted guarantees, bank guarantees and sureties in favour of third parties, directly and via commercial banks. These came to CHF 150,236 thousand (prior year: CHF 179,744 thousand).
There is a service agreement for the Teverola power plant, concluded for 25 years and ending in June 2029. This resulted in an irrevocable payment obligation of CHF 11,970 thousand as per 31 December 2018 (prior year: CHF 13,613 thousand).
In the course of usual business, litigation can arise which results in contingent liabilities. These contingent liabilities are not expected to result in material liabilities within Repower Group in addition to the provisions already made for litigation (Note 27). On the other hand there is litigation under way where Repower is asserting its rights, which, if it is successful, could resulting in inflowing payments.
At the reporting date of the financial year under review, the outstanding minimum lease payments consisted of CHF 13,850 thousand for property and buildings (prior year: CHF 15,640 thousand) and CHF 927 thousand for motor vehicles (prior year CHF 1,202 thousand).
Obligations to take delivery of electrical energy on the basis of the interests in AKEB Aktiengesellschaft für Kernenergie, Lucerne, Kraftwerke Hinterrhein AG, Thusis, and Grischelectra AG are not included in the above table. The volume and price of electricity delivered depend on actual future production and costs incurred by these associates and joint ventures.
Pledges are recognised under the relevant assets.
40 Events occurring after the balance sheet date
In March 2019 Engie New Business acquired an interest in tiko Energy Solutions AG by way of a unilateral capital increase. Repower’s interest in tiko Energy Solutions AG declines from 35.0 to 19.8 per cent. The entity is no longer recognised using the equity method under investments in associated organisations and joint ventures; instead, from 2019 it will be recognised as financial assets at cost. With the new investor on board and the related debt waiver, losses netted with investments and loan receivables for the application of the at-equity method to the amount of CHF 6,481 thousand will be compensated as part of the net investment in tiko.
The group financial statements were approved for publication by the board of directors on 3 April 2019. They are subject to the approval of the annual general meeting, which will take place on 15 May 2019.