2.3 Other operating income

Other operating income includes income from government grants such as the market premium for large-scale hydropower plants in Switzerland. This item also includes income from operating leases as well as income that does not arise in the course of ordinary activities of the Alpiq Group. The latter is therefore generally not of a plannable or recurring nature. It includes gains from sales of non-current assets or business disposals, insurance claims received and payments received from litigation.

Market premium for large-scale hydropower plants in Switzerland

In accordance with the Energy Act (EnA), operators of large-scale hydropower plants in Switzerland with a mean mechanical gross output of more than 10 MW that sell their energy on the market at prices below production cost are eligible to receive a market premium. If the risk of uncovered production costs is not borne by the operators of the hydropower plants, but instead by the owners or electricity suppliers as a result of purchase agreements for the electricity, then the latter are eligible to the market premium. The entitlement first arose in 2018 based on the business figures for 2017 and, due to the time limit prescribed by the Energy Act, last arises in 2022 based on the business figures for 2021. In order to assert a claim for a market premium in a given year, the applicant must submit the entire application documentation by 31 May of that year at the latest. Should the claims of all those applicants entitled to do so exceed the funds available, all claims will be reduced on a straight-line basis. As a result, if demand exceeds the funds available, each claim for a market premium is dependent on all other claims. For this reason, the Swiss Federal Office of Energy (BFE) informs the applicants at the same time about the claims made by all applicants by issuing an order.

As both the amount of the funds made available for the market premium and the effective entitlement to a market premium are still unknown upon issuing the first order, the BFE may decide to pay 100 % or 80 % of the provisional amount assigned by order to the applicants with the first order. For practical reasons, 20 % may be retained and only paid out when the second order is issued in order to avoid the time-consuming administrative process of reclaiming any overpayments where possible.

2020 claim

The first order for the claim for market premiums for 2020 was made on 5 November 2020 and took legal effect in December 2020. Alpiq’s claim for the 2020 financial year amounted to CHF 33 million and was posted in full, as the BFE had decided to pay out 100 % of the amount once the first order became legally binding.

2019 claim

The first order for the claim in 2019 was made on 7 November 2019 and took legal effect in December 2019. Alpiq’s claim for the 2019 financial year amounted to CHF 25 million and was posted in full in the 2019 financial year, as the BFE had decided to pay out 100 % of the amount once the first order became legally binding.

Accounting policies

The market premium for large-scale hydropower plants in Switzerland relates to government grants as defined by IAS 20. Government grants may not be posted until there is reasonable assurance as to the entitlement. Alpiq deems reasonable assurance of the claim for a market premium in the amount of the prospective payment to be given within the meaning of IAS 20 as soon as the order is legally binding. This means that 100 % or 80 % of the provisional amount assigned by order will be recognised as soon as the first order is legally binding, depending on the amount of the payment. The remaining amount will be recognised as soon as the second order is legally binding.

Income from operating leases

Under IFRS 16, lessors are to classify leases as either finance or operating leases. Leases that transfer substantially all the risks and rewards incidental to ownership of an underlying asset are treated as finance leases. All other leases that do not satisfy the requirement of a finance lease are accounted for as operating leases. As in the previous period, Alpiq only has operating leases. They relate in particular to the rental of commercial premises in property owned by Alpiq. The leased assets are recognised in property, plant and equipment in the balance sheet and lease payments are recognised on a straight-line basis over the lease term.