Notes to the consolidated financial statements: notes

1Net 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.

In particular, significantly higher average energy prices during 2022 led to an increase in revenue from energy business. A breakdown of net revenues by Repower business segment is presented in the note on segment reporting (see Note 37). The costs of energy procurement developed analogously (see Note 6).

Repower made a successful bid in the Swissgrid auction for the hydropower reserve and will retain a specific volume of water to keep energy production of 24 GWh on standby until May 2023. Repower will receive a retention fee for the period from December 2022 to May 2023. This retention fee is recognised proportionally to the time elapsed as revenue from energy business.

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 2,690 thousand (prior year: CHF 6,363 thousand) from long-term contracts in the Market Switzerland segment.

2Own costs capitalised

As in the prior year, own costs capitalised result mainly from services in connection with the overall renovation of Robbia power plant and the Repower electricity grid.

3Change in inventory of sales orders

The change in inventory of sales orders relates to work in progress in inventories.

4Other operating income

The profits from the disposal of tangible assets in 2021 relate in particular to grid assets and land.

In the year under review, revenues from other operating activities in the Market Italy segment include insurance payments of CHF 12,371 thousand for the damage and failure suffered in 2020 by Teverola combined cycle gas turbine power plant, which was initially repaired temporarily and, as planned, fully repaired in 2022 in the course of a scheduled overhaul. Insurance payments of CHF 6,321 thousand for the damaged tangible assets are recognised in cash flow from investing activities, whereas the insurance payments for the operating loss are recognised in cash flow from operating activities in the amount of CHF 6,050 thousand.

The prior year figure comprises the following one-time items: CHF 24,811 falling to the Market Switzerland segment (a CHF 21,013 purchase price adjustment made for the transfer of transmission grids and a CHF 3,798 thousand market premium received for large hydropower projects); a CHF 875 thousand gain on disposal from the sale of Aerochetto S. r.l. falling to the Market Italy segment; and CHF 2,873 thousand falling to the other segments and activities segment (payments of CHF 1,918 thousand received on the basis of a legal dispute won and a CHF 955 thousand gain on the disposal of the associate EL.IT.E. S.p.A.).

5Earnings from associates and joint ventures

Prior-year earnings from associates and joint ventures consist in particular of a total of CHF –4,071 thousand representing Repower’s share in the accumulated losses and an impairment on existing loans, which are assigned to the Other segments and activities segment.

6Energy procurement

The higher prices of energy products meant higher energy procurement costs (see Note 1).

Energy procurement consists on a net basis of CHF 18,511 thousand in income from a change in the provision for long-term contracts (prior year: CHF 4,737 thousand); of this amount income of CHF 18,098 thousand (prior year: CHF 5,026 thousand) falls to the Market Switzerland segment and income of CHF 413 thousand (prior year: expense of CHF 289 thousand) falls to the Market Italy segment (see Note 27).

7Concession fees

The decline in water rates/hydro plant taxes is in connection with a decline in own production in the Market Switzerland segment.

8Personnel expenses

9Materials and third-party services

Materials and third-party services contain expenses for maintaining and operating technical assets, external services for operational processes and the performance of services by third parties.

Expenses for materials and third-party services were lower than the prior year overall, partly owing to the Mendrisio project. In the previous year, significant costs were incurred for the construction of substations under this long-term contract, while in the year under review fewer costs were incurred, as the project was completed in 2022. (see Note 22).

10Other operating expenses

The increase in allowances for doubtful accounts relates in particular to an allowance of CHF 9,863 thousand (prior year: reversal of an allowance of CHF 1,981 thousand) for doubtful accounts relating to the sale of electricity and gas to retail consumers in the Market Italy segment.

Information on the development of allowances for doubtful accounts can be found in Note 21.

11Depreciation and value adjustments of tangible assets

As a project for the construction of a solar power plant on a previously impaired property was further concretised in 2022, an existing impairment of CHF 3,819 thousand was reversed. The reversal of the impairment is recognised in the Market Italy segment.

Valuations of land were adjusted as part of the winding up of Alvezza SA in Liquidation. Impairments of CHF 151 thousand were recognised in the Market Switzerland segment (see Note 15).

12Amortisation and value adjustments of intangible assets

Neither extraordinary impairment gains nor impairment losses were recognised in 2021 and 2022.

13Net financial result

Currency translation in the amount of CHF 12,137 thousand (prior year: CHF –7,815 thousand) stems primarily from Repower AG. The receivables and liabilities of this company exist to a large extent in the invoicing and payment currency euro and occur primarily in the energy business. Owing to fluctuations in the exchange rate between the euro and the Swiss franc, currency gains or losses may occur between the time the receivable or liability arises and the time it falls due. In 2022 the weakening of the euro against the Swiss franc gained momentum. There were higher currency translation losses than in the previous year. Offsetting this were gains from forward transactions recognised under changes in the value of securities held for trading in financial income.

In 2021 a reversal of CHF 963 thousand of the impairment loss for the investment in tiko Energy Solutions AG, which was sold at its carrying amount in 2021, was recognised.

The prior-year loss on premature repayment of liabilities consists in particular of the closing of a previously unrecognised interest rate swap of CHF 2,693 thousand held for hedging purposes that was released as part of a refinancing.

14Income taxes

The reconciliation between the actual tax burden and the expected tax burden for the financial years ending on 31 December 2022 and 2021 is as follows:

Unrecognised tax loss carryforwards

On the balance sheet date there were unrecognised tax loss carryforwards of CHF 65,855 thousand (prior year: CHF 36,179 thousand). The offsettability of loss carryforwards against future earnings involves uncertainty. This results in unrecognised deferred tax assets of CHF 17,851 thousand (prior year: CHF 11,000 thousand). Given the uncertainty involved in offsetting loss carryforwards against future earnings, deferred taxes are not capitalised (Swiss GAAP FER 11/23).

Unrecognised tax interest carryforwards

On the balance sheet date there were unrecognised tax interest carryforwards of CHF 9,926 thousand (prior year: CHF 11,783 thousand). The offsettability of interest carryforwards against future earnings for tax purposes involves uncertainty. This results in unrecognised deferred tax assets of CHF 2,382 thousand (prior year: CHF 2,828 thousand). Given the uncertainty involved in offsetting interest carryforwards against future earnings, deferred taxes are not capitalised (Swiss GAAP FER 11/23).

15Tangible assets

Land and buildings connected with power generation and grid facilities are stated under generation and grid assets.

The stated subsidies received are essentially subsidies received in connection with the total renovation of Robbia power plant.

Leased power plants

The net carrying amount of the generation assets held as part of the finance leasing agreement, which are recognised in power plants, totalled CHF 8,043 thousand (prior year: CHF 9,044 thousand) at the closing date.

Total lease liabilities come to CHF 5,799 thousand (prior year: CHF 6,902 thousand).

16Intangible assets

In 2021, Repower paid CHF 24,110 thousand in reversion waiver compensation, required for the continued operation of the Campocologno I and II plants. These payments are recognised under 2021 additions.

The goodwill stems from the acquisition of Repower Renewable S.p.A. in December 2018.

17Investments in associates and joint ventures

In 2022, Repower Italia S.p.A. acquired interests of 27.77 per cent and 29.52 per cent respectively in the two companies Erreci S.r.l. and Erreci Impianti S.r.l. The acquisition values are recognised as additions to the scope of consolidation (see Acquisition of associates section).

The prior-year disposals of CHF 2,087 thousand relate to the investment in the associate EL.IT.E S.p.A., which was sold in the second half of 2021 after the distribution of a dividend of CHF 1,494 thousand (see the section Disposal of associates). This resulted in a gain on disposal of CHF 955 thousand recognised as other operating income (see Note 4).

Losses in excess of the carrying value of the investments from measurement according to the share of equity are netted with the loans that also exist (see Note 18) as a component of the net investment, and are presented in the table above (Loss carryforward for loan receivable).

With ewz joining as a new shareholder of EVUlution AG, Repower’s shareholding fell from 42.8 per cent to 36.1 per cent. In the process, loan receivables of Repower vis-a-vis the associate in the amount of CHF 1,061 thousand (comprising the nominal value of the loan receivable in the amount of CHF 5,710 thousand and the recognised impairment in the amount of CHF 4,649 thousand) were converted into equity.

The investment in Aerochetto S.r.l. and the existing loan, which was part of the net investment in the company, were disposed of in 2021 (see the section Disposal of associates»). This resulted in a gain on disposal of CHF 875 thousand (see Note 4).

18Financial 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.

The active loans relate to loans to associates and joint ventures amounting to CHF 1,849 thousand (prior year: CHF 437 thousand). Accumulated impairments of CHF 0 thousand (prior year: CHF 4,649 thousand) were recognised under this item (see Note 17).

19Deferred tax assets

The tax rates used to calculate deferred tax items are 14.8 per cent for Switzerland, 28.0 per cent for Italy, and 29.0 per cent for Germany.

Given that offsetting loss and interest carryforwards against future earnings for tax purposes involve uncertainty, deferred taxes on offsettable loss and interest carryforwards are not capitalised (see Note 14).

20Inventories

In the 2022 financial year, CHF 33 thousand in impairments on inventories was recognised as costs of materials (prior year: reversal of CHF 235 thousand).

21Trade accounts receivable

The increase in trade accounts receivable stems mainly from the Market Italy segment’s sales business.

The stated trade accounts receivable also include claims on associates and joint ventures amounting to CHF 81 thousand (prior year: CHF 285 thousand).

Trade accounts receivable are measured by applying individual and lump-sum adjustments to the non-impaired positions based on their maturity structure and historical experience.

22Other receivables

In the Market Italy segment there was an increase in income tax receivables compared with the previous year owing to the use of a company’s existing loss carryforwards in 2022. The prepayments made in 2022 exceed the tax accrual for the year under review.

Security deposits paid contains security deposits paid in connection with trading activities.

Other receivables include accrued revenues from long-term contracts amounting to CHF 0 (prior year: CHF 17,260 thousand) less advance payments of CHF 0 thousand (prior year: CHF 13,461 thousand) received, balances from excise tax of CHF 2,690 thousand (prior year: CHF 340 thousand) and CHF 5,276 thousand (prior year: CHF 2,367 thousand) in receivables from subsidies in connection with the total modernisation of Robbia hydropower plant.

The receivables of CHF 10,321 thousand from the purchase price adjustment for transmission grids recognised the prior year as other receivables were paid in 2022 (see Note 4 and the Consolidated cash flow statement).

23Prepaid expenses and accrued income

Trade accounts receivable invoices not invoiced yet represent goods and services that have been delivered but not yet invoiced.

24Securities

25Replacement values of held-for-trading positions

In 2022 there were considerable year-on-year declines in the positive replacement values of trading positions (CHF 989,860 thousand versus CHF 1,775,197 thousand the prior year) and the negative replacement values of trading positions (CHF –938,633 thousand versus CHF –1,771,778 thousand the prior year). However, net replacement values increased from CHF 3,419 thousand to CHF 51,227 thousand (see Note 35).

26Cash and cash equivalents

At the balance sheet date, Repower also has the following unused bank credit lines:

27Provisions

Provisions for onerous contracts

Provisions of CHF 4,126 thousand (prior year: CHF 20,792 thousand) for onerous contracts comprise CHF 0 thousand for onerous energy contracts (prior year: 15,567), CHF 690 for guarantees of origin (prior year: CHF 1,721 thousand) and CHF 3,436 thousand for transport capacity (prior year: CHF 3,504 thousand).

Provisions are reviewed and adjusted on the balance sheet date. 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 future procurement or sales prices.

The adjustment to the provision for onerous energy contracts has a particular impact on Repower’s income. The expected future prices of energy have increased. As a result, this provision was written back in full via energy procurement in the amount of CHF 16,841 thousand after interest had been paid.

The adjustment of provisions for onerous contracts has the effect of reducing energy procurement by a total of CHF 18,511 thousand (prior year CHF 4,737 thousand) (see Note 6).

The provisions were calculated on the basis of risk-adjusted interest rates of between 7.0 and 18.5 per cent (prior year: 8.8 and 15.0 per cent).

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 were recognised under tangible assets.

Other provisions

CHF 1,546 thousand in provisions for contractual penalties that are no longer expected were written back in in the Market Italy segment in the 2022 financial year, whereas provisions for excise taxes and other contractual risks, in the amount of CHF 2,812 thousand and CHF 865 thousand respectively, were recognised in the Market Switzerland segment the prior year.

28Deferred tax liabilities

The tax rates used to calculate deferred tax liabilities are 14.8 per cent for Switzerland, 28.0 per cent for Italy, and 29.0 per cent for Germany.

29Current and non-current financial liabilities

In July 2022, the Repower bond that was recognised as a current financial liability the prior year was repaid on schedule for the amount of CHF 96,445 thousand. In December of the same year, a new two-year bond was issued at a nominal value of CHF 150,000. The cash inflow (see Consolidated cash flow statement) and the carrying value of the bond at the end of the year is CHF 149,770.

Negative amounts presented in the table are scheduled allocations of net expenditures.

30Other non-current liabilities

Connection fees and grid cost contributions consist of 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.

Advance payments on energy deliveries are recognised every year as income of CHF 745 thousand in the profit and loss item net sales from goods and services in the Market Switzerland segment.

31Trade accounts payable

The increase in trade accounts payable stems mainly from the Market Italy segment’s sales business.

The stated trade accounts payable also include liabilities vis-à-vis associates and joint ventures amounting to CHF 1,574 thousand (prior year: CHF 1,558 thousand).

32Other current liabilities

Owing to good results from companies in the Market Switzerland segment there was a year-on-year increase in income tax liabilities.

The customer prepayments item contains prepayments of CHF 6,491 thousand (prior year: CHF 1,032) from customers for future deliveries of inventory.

Other current liabilities include in particular margin payments of CHF 16,917 thousand (prior year: CHF 31,966 thousand) in connection with exchange trading.

The prior year a security deposit of CHF 84,094 thousand for over-the-counter (direct) trading was received via energy and recognised as a liability. The deposit was paid back in 2022.

33Deferred income and accrued expenses

Trade accounts payable invoices to be received relate to goods and services that have been received but not yet invoiced.

34Pension schemes

Economic benefit/economic liability and pension benefit expenses

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 related to pension benefit expenses in the income statement comes to CHF 842 thousand at the average exchange rate.

35Derivative 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.

36Transactions 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 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.

Compensation paid to members of the board of directors and executive board is disclosed in the Corporate Governance section.

37Segment 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.

38Treasury shares

Purchases/disposals of treasury shares relate to Repower AG registered shares. In the year under review Repower AG bought 603 shares (prior year 500) at CHF 136.98 (prior year CHF 118.95) and sold 590 shares (prior year 562) at an average price of CHF 143.69 (prior year CHF 121.80).

39Off-balance-sheet liabilities

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 220,206 thousand (prior year: CHF 189,903 thousand).

There is a service agreement for the Teverola power plant ending in 2038. This resulted in an irrevocable payment obligation of CHF 21,417 thousand at 31 December 2022 (prior year: CHF 23,927 thousand). Furthermore, at 31 December 2022 there were various full maintenance contracts, taken out for several years for hydro, solar and wind power plants in Germany and Italy, with irrevocable payment obligations amounting to CHF 17,320 thousand (prior year: CHF 13,139 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 6,806 thousand for property and buildings (prior year: CHF 8,920 thousand) and CHF 503 thousand for motor vehicles (prior year CHF 615 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 companies.

Pledges are recognised under the relevant assets.

40Events occurring after the balance sheet date

Since 31 December 2022 there have been no other events which require disclosure.

The financial statements were approved for publication by the board of directors on 31 March 2023. They are subject to the approval of the annual general meeting, which will take place on 17 May 2023.