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 regarding the relevant contractual prices and expected procurement or sales prices.

In the 2020 financial year additions in provisions totalling CHF 24,124 thousand were recognised under energy procurement for identifiable losses on procurement contracts. Of this, CHF 16,469 thousand and CHF 4,533 thousand fall to procurement contracts for electricity and guarantees of origin respectively in the “Market Switzerland” segment, and CHF 3,122 thousand to procurement contracts for gas transport capacity in the “Market Italy” segment.

The provisions were calculated on the basis of risk-adjusted interest rates of between 6.8 and 14.2 per cent.

The provision that existed on 1 January 2019 was reversed in full the prior year via energy procurement in the “Market Switzerland” segment.

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 2020 were recognised under tangible assets.

Other provisions

In 2020 provisions of CHF 763 thousand were recognised for expected repayments of investment contributions. Other provisions still include severance pay paid to sales agents in Italy amounting to CHF 1,348 thousand.

In 2019 a supplier of wind power equipment was unable to meet its commitment (see Note 15), delaying the construction of a Repower AG wind power installation 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.