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.
Long-term contracts are recognised in accordance with the percentage of completion method. Revenues from services and other usual business activities contain revenues of CHF 6,767 thousand (prior year: CHF 0 thousand).
A breakdown of net revenues by Repower AG 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 AG’s generation and grid assets.
3 Change in inventory of sales orders
The item “Change in inventory of sales orders” relates to work orders not yet completed for inventories.
4 Other operating income
In 2018 a technical fault occurred at the Teverola power plant which was remedied in the course of the annual overhauls in 2018 and 2019. Repower received reimbursement of CHF 9,737 thousand (2019) and CHF 2,944 thousand (2018) from its business interruption insurance for downtime.
Furthermore in 2019 a good performance guarantee for the construction of a power plant was collected for an amount of CHF 967 thousand (see Note 15).
5 Earnings from associates and joint ventures
The prior year loss was substantially due to tiko Energy Solutions AG. In 2019 the company was no longer recognised using the equity method, but was recognised under financial assets (see Note 18).
6 Energy procurement
In 2019 provisions of CHF 5,900 thousand for long-term energy procurement agreements (versus CHF 5,954 thousand the prior year) were reversed and recognised under energy procurement (see Note 27).
7 Concession fees
8 Personnel expenses
To compensate for the future reduction in conversion rates for the occupational pensions of employees in Switzerland, Repower AG made an additional employer’s contribution of CHF 3,087 thousand in the 2019 financial year. The resulting expense is recognised in social security costs and other personnel costs.
9 Materials and outside services
Materials and outside services contain expenses for maintaining and operating technical assets, external services for operational processes and the performance of services by third parties.
The increase in outside services is due among other things to the following: growth in contracts for third parties, particularly the construction of the Mendrisio substation; the development of new products and the first-time inclusion of Repower Renewable for a full year, and higher compensation paid to commercial agents in Italy.
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
The balance for the 2018 financial year contains neither a reversal nor impairment, while the 2019 balance contains impairment of CHF 1,983 thousand (see Note 15).
12 Depreciation/Amortisation, impairment and reversal of impairment of intangible assets
Neither impairment gains nor impairment losses were recognised in 2018 and 2019.
13 Net financial income
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.
The revaluation of financial assets in 2019 comprises the reversal of the equity investment and loan to tiko Energy Solutions AG up to the acquisition costs.
In 2019 the early repayment of a loan liability continued to result in income of CHF 1,193 thousand.
In 2018 the losses on early repayment of liabilities related to the early partial re-purchase of bonds with a nominal value of CHF 18,555 thousand.
14 Income taxes
The reconciliation between the actual tax burden and the expected tax burden for the financial years ending on 31 December 2019 and 2018 is as follows:
UNRECOGNISED TAX LOSS CARRYFORWARDS
On the balance sheet date there were unrecognised tax loss carryforwards of CHF 106,960 thousand (prior year: CHF 214,660 thousand). The ability to offset of loss carryforwards against future earnings involves uncertainty.
This results in unrecognised deferred tax assets of CHF 22,395 thousand (prior year: CHF 43,218 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 accounted for under power plants and grid assets.
The increase in the net values of tangible assets pledged as security for debts relates essentially to a bank loan taken up in the 2019 financial year.
The impairment charge recognised in 2019 related to a payment to a supplier that was unable to meet its obligation. In this context a good performance guarantee was collected for an amount of CHF 967 thousand. The income is recognised as other operating income (see Note 4).
LEASED POWER PLANTS
CHF 47,469 thousand of the addition in scope of consolidation the prior year relates 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 41,057 thousand (previous year: CHF 46,721 thousand) at the closing date.
Total lease liabilities come to CHF 27,431 thousand (prior year: CHF 31,375 thousand).
16 Intangible assets
The goodwill stems from the acquisition of Repower Renewable S.p.A. in December 2018 (see the “Additions to the scope of consolidation“ section).
17 Investments in associated organisations and joint ventures
Losses exceeding the carrying amount of the investments deriving from at-equity valuation are netted with the loans receivable (see Note 18) as part of the net investment, and are presented in the table above.
Since 1 October 2019, SWIBI AG has no longer been recognised as a subsidiary, but as an associate under the name of esolva ag in the consolidated financial statements (see the “Transition from full consolidation to equity method“ section).
In March 2019 Engie New Business acquired an interest in tiko Energy Solutions AG by way of a unilateral capital increase. Repower’s interest declined from 35.0 to 19.85 per cent. The carrying amount of the investment came to CHF 0 thousand, and the cumulated loan’s reductions for losses came to CHF 12,843 thousand. The investment and loan are recognised at cost under financial assets (see Note 18).
The loan’s reductions for losses of CHF 6,713 thousand as of 31 December 2019 relates to the loan to the associate Aerochetto S.r.l.
18 Financial assets
Repower AG 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. Repower’s interest in tiko Energy Solutions AG, Ittingen, is 19.85 per cent.
The investment in tiko Energy Solutions AG was recognised as an associate the prior year (see Note 17). The carrying amounts of the investment and loan to the company came to CHF 0 thousand and CHF 5,365 thousand respectively. With the inclusion of the new investor and the debt relief, an impairment gain of CHF 4,481 thousand was recognised in financial income (see Note 13). The carrying amounts disclosed for both the investment and the loan correspond to their amortised cost.
The active loans relate to loans to associates and joint ventures amounting to CHF 486 thousand (prior year: CHF 5,873 thousand). Accumulated impairments of CHF 6,713 thousand (prior year: CHF 19,404 thousand) were recognised under this item (see Note 17).
The employer contribution reserve account in the prior year related to SWIBI AG, which in the prior year was fully consolidated and is now recognised as an associate under the name esolva ag (see the “Transition from full consolidation to equity method” section).
19 Deferred tax assets
The tax rates used to calculate deferred income tax items are 14.7 per cent for Switzerland (prior year: 16.1 per cent), 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 2019 financial year impairment losses of CHF 51 thousand were recognised on inventories (prior year: CHF 0 thousand), and CHF 0 thousand (prior year: CHF 18 thousand) in impairment losses was reversed.
By the end of the year the entire inventories of gas had been sold.
21 Receivables from goods and services
The stated receivables from goods and services also include claims on associates and joint ventures amounting to CHF 476 thousand (prior year restated: CHF 523 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.
22 Other receivables
Other receivables include accrued revenues from contracts amounting to CHF 6,767 (prior year: CHF 0 thousand) less advance payments received of CHF 5,761 thousand (prior year: CHF 0 thousand).
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
The decision on whether there is a threat of loss on a long-term sales or procurement contract and the resulting recognition of a provision essentially depends on the situation of the relevant contractual prices and expected procurement or sales prices. In 2019 the entire provision that existed at the end of the prior year was released under energy procurement in the Market Switzerland segment because there was no longer a provisioning requirement on the 31 December 2019 cut-off date.
SEVERANCE PAY
When an employment relationship is terminated in Italy, the employee is entitled to severance pay corresponding to almost 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. Additions in 2019 were recognised under tangible assets.
OTHER PROVISIONS
A supplier of wind power equipment was unable to meet its commitment (see Note 15), delaying the construction of a Repower AG wind power plant for which a minimum feed-in tariff had already been agreed. Given the threat of a penalty resulting from the delay in the commencement of production, a provision of CHF 818 thousand was made.
28 Deferred tax liabilities
The tax rates used to calculate deferred income tax items are 14.7 per cent for Switzerland (prior year: 16.1 per cent), 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 creditors
The stated liabilities from goods and services also include liabilities vis-à-vis associates and joint ventures amounting to CHF 838 thousand (prior year restated: CHF 1,704 thousand)
32 Other current liabilities
The customer prepayments item contains prepayments of CHF 1,032 thousand (prior year: CHF 3,855 thousand) for third-party contracts.
33 Deferred income and accrued expenses
34 Pension schemes
EMPLOYER CONTRIBUTION RESERVES
The employer contribution reserve account of CHF 68 thousand recognised as of 31 December 2018 under non-current financial assets relates to SWIBI AG, which was a fully consolidated group company the prior year. Since 2019 the company has been recognised as an associate under the name of esolva ag. The utilisation and result of employer contribution reserves came to CHF 0 thousand (prior year: CHF 12 thousand).
ECONOMIC BENEFIT/ECONOMIC LIABILITY AND PENSION BENEFIT EXPENSES
In 2019 Repower AG and its employees joined the joint pension scheme of the PKE Vorsorgestiftung foundation. The previous year the pension fund for employees of Repower AG had still been organised as an independent pension scheme of the collective foundation of the PKE Vorsorgestiftung foundation.
The item “Pension institutions with unfunded obligations” relates to the obligation to pay severance pay in Italy (see Note 27). The change in the stated provision related to pension benefit expenses in the income statement comes to CHF 554 thousand at the average exchange rate.
To compensate for the future reduction in conversion rates for the occupational pensions of employees in Switzerland, Repower AG made an additional employer’s contribution of CHF 3,087 thousand in the 2019 financial year (see Note 8).
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.
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 AG entities, associates, partner plants 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. Canton Graubünden’s energy business is transacted via Grischelectra AG, which is included as a related party in the table above. Official business such as levying taxes, concession-related charges, fees, etc., is done on a statutory basis and is therefore not included here.
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 351 shares (prior year 605) at CHF 86.12 (prior year CHF 70.80) and sold 480 shares (prior year 560) at an average price of CHF 90.29 (prior year CHF 71.31).
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 144,431 thousand (prior year: CHF 150,236 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 10,431 thousand as per 31 December 2019 (prior year: CHF 11,970 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 (see Note 27). On the other hand there is litigation under way where Repower is asserting its rights, which, if it is successful, could result in inflowing payments.
At the reporting date of the financial year under review, the outstanding minimum lease payments consisted of CHF 12,297 thousand for property and buildings (prior year: CHF 13,850 thousand) and CHF 1,023 thousand for motor vehicles (prior year CHF 927 thousand).
Obligations to take delivery of electrical energy deriving from 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 companies.
Pledges are recognised under the relevant assets.
40 Events occurring after the balance sheet date
On 17 December 2019 Repower AG, its subsidiary Repartner Produktions AG, and the other companies with interests in this company agreed to transfer the power generation assets in the Prättigau, including the concessions, to Repartner Produktions AG. The transfer took place on 1 January 2020. In connection with this transaction the shareholders of Repartner Produktions AG transferred their shareholder loan of CHF 49,176 thousand to Repower AG. From the group point of view this transfer should be seen as an advance payment received for energy delivery, and will be charged to profit or loss over the remaining 66 year concession period.
The financial statements were approved for publication by the board of directors on 2 April 2020. They are subject to the approval of the annual general meeting, which will take place on 20 May 2020.