Annual Report 2020

Notes to the Consolidated Financial Statements

1 Overview

1.1 Basis of preparation of the consolidated financial statements

1.1 Basis of preparation of the consolidated financial statements

The consolidated financial statements of the Alpiq Group have been prepared in accordance with International Financial Reporting Standards (IFRS) and Interpretations (IFRIC and SIC) issued by the International Accounting Standards Board (IASB), and comply with Swiss law. The consolidated financial statements give a true and fair view of the financial position, financial performance and cash flows of the Alpiq Group. They have been prepared on a historical cost basis, except for certain items such as financial instruments, which have been measured at fair value in some instances. The consolidated financial statements were authorised for issue by the Board of Directors of Alpiq Holding Ltd. on 24 February 2021 and are subject to approval by shareholders at the Annual General Meeting on 28 May 2021.

1.2 Adoption of new and revised accounting standards

1.2 Adoption of new and revised accounting standards

Amendments, standards and interpretations adopted for the first time in 2020

At 1 January 2020, the following amendments to the International Financial Reporting Standards (IFRS) entered into force and were applied by the Alpiq Group:

  • Amendments to the Conceptual Framework for Financial Reporting
  • Amendments to IAS 1 and IAS 8: Definition of Material
  • Amendments to IFRS 3: Definition of a Business
  • Amendments to IFRS 9, IAS 39 and IFRS 7: Interest Rate Benchmark Reform – Phase 1
  • Amendments to IFRS 16: COVID-19-Related Rent Concessions (early adopted)

These amendments had no significant impact on the Alpiq Group.

IFRSs effective in future periods

The IASB has published the following standards and interpretations of relevance for Alpiq:

Standard / interpretation

Effective at

Adoption planned from

Amendments to IFRS 9, IAS 39 und IFRS 7: IBOR Reform and its Effects on Financial Reporting – Phase 2

1 Jan 2021

1 Jan 2021

Amendments to IAS 16: Proceeds before intended Use

1 Jan 2022

1 Jan 2022

Amendments to IAS 37: Onerous Contracts – Cost of Fulfilling a Contract

1 Jan 2022

1 Jan 2022

Amendments to IAS 1: Classification of Liabilities as Current or Non-Current

1 Jan 2023

1 Jan 2023

IFRS 17: Insurance Contracts

1 Jan 2023

1 Jan 2023

Amendments to IFRS 10 and IAS 28: Sale of Assets by an Investor or Contribution to their Associate or Joint Venture

indefinite

indefinite

Based on previous analyses, Alpiq does not expect the aforementioned changes in standards to have any significant effect on the consolidated financial statements of the Alpiq Group.

1.3 Significant estimation uncertainties and judgments

1.3 Significant estimation uncertainties and judgments 

The preparation of the consolidated financial statements requires the management to exercise judgment and make estimates and assumptions. These can significantly affect recognised assets and liabilities, reported income and expenses and disclosures. Estimates and assumptions are based on historical experience and expectations of future events that are believed to be reasonable under the circumstances. Actual amounts may differ from these estimates. Any revisions to estimates and assumptions are recognised and disclosed in the period in which they are identified.

Impact of the COVID-19 pandemic on Alpiq

The coronavirus and the disease it causes (COVID-19) have been spreading on a global scale since the beginning of 2020, forcing governments to take drastic protective measures. Thus far, the pandemic has not led to any substantial restrictions on the operating activities of the Alpiq Group. However, the spread of COVID-19 and the protective and stimulation measures taken by governments and central banks are having far-reaching effects on the macroeconomic environment of all industries across the globe and thus also on Alpiq. These effects were assessed at 31 December 2020 and taken into account in the 2020 consolidated financial statements, although the effects of COVID-19 cannot be estimated separately from other market fluctuations:

  • The COVID-19 pandemic caused wholesale electricity prices to drop in 2020, hitting short-term prices particularly hard. In addition to this, electricity consumption was also lower. Medium and long-term forward prices have more or less recovered in the meantime and are now at a similar level to that seen before the pandemic. Alpiq had to increase its provisions for onerous contracts (see note 4.7) and recognise impairment losses (see note 4.1) at the reporting date. Alpiq’s revenue in 2020 was also negatively affected to a limited extent.
  • The development of the financial markets had a significant impact on the performance of the decommissioning and waste disposal funds for nuclear power plants, which in turn has an impact on Alpiq’s energy procurement costs. The assets of the pension funds were also impacted, which had an influence on the defined benefit liabilities. Exchange losses incurred during the year were compensated for by the end of 2020.

At the time of approval of the consolidated financial statements by the Board of Directors of Alpiq Holding Ltd., the financial impact of the pandemic on the financial position, financial performance and cash flows of the Group cannot yet be fully assessed and estimated, as the effective impact will only become apparent as the situation develops over the coming months. This could have a significant impact, in particular on the following assumptions made by management regarding estimation uncertainties:

  • Recoverable amount of non-current assets
  • Provisions for onerous contracts
  • Recoverability of deferred tax assets
  • Calculation of defined benefit liabilities

Furthermore, the development of the financial markets in particular has a significant impact on the performance of the decommissioning and waste disposal funds for nuclear power plants, which in turn has an impact on Alpiq’s energy procurement costs. In addition, the market changes caused by the pandemic may have an effect on the future measurement of derivative financial instruments. Alpiq regularly monitors the development of the pandemic as well as its effects on the aforementioned estimation uncertainties, and takes the necessary measures.

1.4 Change in the presentation of the financial statements

1.4 Correction of presentation errors

Alpiq determined that the carrying amount of the investment in Nant de Drance SA was overstated by CHF 9 million, both at 1 January 2019 and at 31 December 2019, due to an error in the application of the equity method prior to the 2019 financial year. As a result, the provision for the onerous contract relating to the future procurement of energy from the Nant de Drance pumped storage power plant was also overstated by the same amount.

The balance sheet as well as notes 4.3 and 4.7 were adjusted. As a result, the equity ratio increased from 49.8 % to 49.9 % at 31 December 2019 (1 January 2019: unchanged at 43.5 %). This correction did not impact the consolidated income statement or statement of cash flows.

CHF million

31 Dec 2019 (reported)

Correction

31 Dec 2019 (restated)

Investments in partner power plants and other associates

2,333

– 9

2,324

Remaining non-current assets

2,242

 

2,242

Non-current assets

4,575

– 9

4,566

Current assets

2,794

 

2,794

Total assets

7,369

– 9

7,360

Total equity

3,671

 

3,671

Non-current provisions

423

– 9

414

Remaining non-current liabilities

1,785

 

1,785

Non-current liabilities

2,208

– 9

2,199

Current liabilities

1,490

 

1,490

Total liabilities

3,698

– 9

3,689

Total equity and liabilities

7,369

– 9

7,360

2 Performance

2.1 Segment information

2.1 Segment information

The segment reporting of the Alpiq Group is based on the Group’s internal organisational and management structure and the internal financial information reported to the chief operating decision maker. The reportable segments under IFRS 8 consist of the three business divisions Generation Switzerland, Generation International and Digital & Commerce, as shown in the organisational chart in the “Corporate Governance” section of the Annual Report. The Executive Board evaluates each of these separately for the purpose of assessing performance and allocating resources. Segment results (EBITDA, EBIT) are the key performance indicators used for internal management and assessment purposes at Alpiq. Besides energy procurement and production costs, operating costs comprise all costs of operations, including personnel and service expenses. No operating business segments have been aggregated in the presentation of reportable segments.

The internal organisational and management structure was adjusted in 2020. As a result, Oyster Lab was moved from Digital & Commerce to the Group Centre. The key for internal allocation of Group Centre expenses was also adjusted. Moreover, due to the sale of Flexitricity Ltd. in 2020 and Alpiq’s decision to no longer pursue the e-mobility business, the EBITDA effects from these two businesses are now classified as exceptional items in internal reporting. Segment reporting for 2019 has been adjusted for comparability. As a result, the Alpiq Group’s EBITDA before exceptional items increased by CHF 4 million in 2019 from CHF 106 million to CHF 110 million.

  • The Generation Switzerland business division comprises the production of electricity from Swiss hydropower and nuclear power. The power plant portfolio includes run-of-river power plants, storage and pumped storage power plants, investments in the Gösgen and Leibstadt nuclear power plants as well as the Nant de Drance pumped storage power plant project. Moreover, the business division manages shares in HYDRO Exploitation SA and Kernkraftwerk-Beteiligungsgesellschaft AG (KBG).
  • The Generation International business division comprises power production of wind power plants, small-scale hydropower plants and industrial photovoltaic plants, the operation of power plants and the development of several wind farm projects. The business division also covers the production of electricity and heat in thermal power plants in Hungary, Italy, Spain and, until 30 August 2019, Czechia. The power plant portfolio is made up of gas-fired combined-cycle power plants and gas-fired turbine power plants. Power is sold on the European electricity trading market via the Digital & Commerce business division or via third parties. The power plants are used by the respective grid operators to balance the grids.
  • The Digital & Commerce business division comprises the optimisation of Alpiq’s own power plants as well as the optimisation of decentralised generation units and the production of electricity from third parties’ renewable energies. The business division also covers trading activities with standardised and structured products for electricity and gas as well as emission allowances and certificates. In addition, it includes direct marketing and energy management for industrial and business customers to help these meet their cost efficiency and sustainability goals. Digital & Commerce specifically utilises digitalisation and technologies such as artificial intelligence, connectivity, the Internet of Things and blockchain to further develop products and services for customer and business partners, always with a view to increasing customer benefits and creating value.

The business divisions’ results are carried over to the Alpiq Group’s consolidated figures by way of including the units with no market operations (Group Centre & other companies), Group consolidation effects (including foreign currency effects from using other average exchange rates in management reporting) as well as other reconciliation items presented in a separate column. This reconciliation item comprises shifts between external net revenue and other income due to the difference in account structures between internal and external reporting. Group Centre & other companies includes the financial and non-strategic investments which cannot be allocated directly to the business divisions as well as activities of the Group headquarters, including Alpiq Holding Ltd. and the functional units.

2020: Information by business division

CHF million

Generation Switzerland

Generation Interna- tional

Digital & Commerce

Group Centre & other companies

Consoli- dation

Reconcili- ation

Alpiq Group

Net revenue from third parties

149

135

3,587

21

– 2

15

3,905

Inter-segment transactions

613

31

20

– 24

– 640

 

 

Exceptional items 1

– 7

– 8

– 66

 

– 1

 

– 82

Net revenue before exceptional items

755

158

3,541

– 3

– 643

15

3,823

Net revenue

762

166

3,607

– 3

– 642

15

3,905

Other income

96

19

12

28

– 16

– 15

124

Exceptional items 1

– 40

 

– 7

– 7

 

 

– 54

Total revenue and other income before exceptional items

811

177

3,546

18

– 659

0

3,893

Total revenue and other income

858

185

3,619

25

– 658

0

4,029

Operating costs

– 751

– 118

– 3,486

– 39

658

 

– 3,736

Exceptional items 1

75

 

39

– 9

 

 

105

EBITDA before exceptional items

135

59

99

– 30

– 1

0

262

EBITDA

107

67

133

– 14

0

0

293

Depreciation, amortisation and impairment 2

– 59

3

– 15

– 9

 

 

– 80

Exceptional items 1

 

– 17

4

 

 

 

– 13

EBIT before exceptional items

76

45

88

– 39

– 1

0

169

EBIT

48

70

118

– 23

0

0

213

Number of employees at 31 December

138

212

558

350

 

 

1,258

Property, plant and equipment

1,394

424

4

99

 

 

1,921

Intangible assets

48

21

18

12

 

 

99

Investments in partner power plants and other associates

2,268

9

 

3

 

 

2,280

Non-current assets

3,710

454

22

114

0

0

4,300

Net capital expenditure on property, plant and equipment and intangible assets

24

26

13

5

 

 

68

1 Includes effects from business disposals as well as the performance of the fund shares for the decommissioning and waste disposal of Kernkraftwerk Gösgen-Däniken AG and Kernkraftwerk Leibstadt AG, fair value changes of energy derivatives that were entered into in connection with hedges for future power production, provisions, impairment losses, reversals of impairment losses as well as restructuring costs. For more information, please refer to the explanations in the “Alternative performance measures of Alpiq” section of the Financial Review.

2 Including reversals of impairment losses

2019: Information by business division (adjusted)

CHF million

Generation Switzerland

Generation Interna- tional

Digital & Commerce

Group Centre & other companies

Consoli- dation

Reconcili- ation

Alpiq Group

Net revenue from third parties

147

198

3,752

– 7

– 7

16

4,099

Inter-segment transactions

453

85

46

11

– 595

 

 

Exceptional items 1

1

14

– 53

– 2

 

 

– 40

Net revenue before exceptional items

601

297

3,745

2

– 602

16

4,059

Net revenue

600

283

3,798

4

– 602

16

4,099

Other income

53

6

5

24

– 17

– 16

55

Exceptional items 1

 

 

 

– 2

 

 

– 2

Total revenue and other income before exceptional items

654

303

3,750

24

– 619

0

4,112

Total revenue and other income

653

289

3,803

28

– 619

0

4,154

Operating costs

– 586

– 210

– 3,724

– 84

618

 

– 3,986

Exceptional items 1

– 74

1

30

27

 

 

– 16

EBITDA before exceptional items

– 6

94

56

– 33

– 1

0

110

EBITDA

67

79

79

– 56

– 1

0

168

Depreciation, amortisation and impairment

– 57

– 313

– 27

– 7

3

 

– 401

Exceptional items 1

 

258

19

 

– 3

 

274

EBIT before exceptional items

– 63

39

48

– 40

– 1

0

– 17

EBIT

10

– 234

52

– 63

2

0

– 233

Number of employees at 31 December

136

204

567

319

 

 

1,226

Property, plant and equipment

1,431

396

5

102

 

 

1,934

Intangible assets

44

26

20

12

 

 

102

Investments in partner power plants and other associates (adjusted) 2

2,317

5

 

2

 

 

2,324

Non-current assets (adjusted) 2

3,792

427

25

116

0

0

4,360

Net capital expenditure on property, plant and equipment and intangible assets

25

32

9

4

 

 

70

1 Includes effects from business disposals as well as the performance of the fund shares for the decommissioning and waste disposal of Kernkraftwerk Gösgen-Däniken AG and Kernkraftwerk Leibstadt AG, fair value changes of energy derivatives that were entered into in connection with hedges for future power production, provisions, impairment losses as well as restructuring costs. For more information, please refer to the explanations in the “Alternative performance measures of Alpiq” section of the Financial Review.

2 See note 1.4

2020: Information by geographical area

CHF million

Switzerland

Germany

France

Italy

Czechia

Hungary

Poland

United Kingdom

Other countries

Alpiq Group

Net revenue from third parties

721

404

934

551

49

168

156

174

748

3,905

Property, plant and equipment

1,454

 

118

258

2

27

 

 

62

1,921

Intangible assets

76

 

10

8

 

 

 

 

5

99

Investments in partner power plants and other associates

2,276

 

 

 

 

 

 

 

4

2,280

Non-current assets

3,806

0

128

266

2

27

0

0

71

4,300

2019: Information by geographical area

CHF million

Switzerland

Germany

France

Italy

Czechia

Hungary

Poland

United Kingdom

Other countries

Alpiq Group

Net revenue from third parties

473

558

1,122

485

115

331

233

116

666

4,099

Property, plant and equipment

1,492

 

122

232

2

29

 

 

57

1,934

Intangible assets

77

 

7

11

 

 

 

 

7

102

Investments in partner power plants and other associates (adjusted) 1

2,324

 

 

 

 

 

 

 

 

2,324

Non-current assets (adjusted) 1

3,893

0

129

243

2

29

0

0

64

4,360

1 See note 1.4

Net revenue from external customers by country is allocated based on the customer’s country of domicile. Those countries in which Alpiq generated the most net revenue in the reporting period and / or previous year are presented separately in this segment information. There were no transactions with any single external customers that amounted to 10 % or more of the consolidated net revenue of the Alpiq Group. Non-current assets consist of property, plant and equipment (including right-of-use assets), intangible assets and investments in the respective countries.

2.2 Net revenue

2.2 Net revenue

The Alpiq Group’s net revenue comprises revenue from contracts with customers (IFRS 15) and income from energy and financial derivatives (IFRS 9).

2020: Disaggregation of net revenue

CHF million

Generation Switzerland

Generation International

Digital & Commerce

Group Centre & other companies

Total

Revenue from energy and grid services

148

135

3,487

 

3,770

Revenue from digital energy services and e-mobility

 

 

11

1

12

Revenue from other services

15

 

 

 

15

Total revenue from contracts with customers

163

135

3,498

1

3,797

Income from energy and financial derivatives

1

 

87

20

108

Net revenue from third parties

164

135

3,585

21

3,905

2019: Disaggregation of net revenue (adjusted)

CHF million

Generation Switzerland

Generation International

Digital & Commerce 1

Group Centre & other companies 1

Total

Revenue from energy and grid services

119

196

3,736

 

4,051

Revenue from digital energy services and e-mobility

 

 

8

1

9

Revenue from other services

15

 

1

 

16

Total revenue from contracts with customers

134

196

3,745

1

4,076

Income from energy and financial derivatives

28

1

3

– 9

23

Net revenue from third parties

162

197

3,748

– 8

4,099

1 The internal organisational and management structure was adjusted in 2020. As a result, Oyster Lab was moved from Digital & Commerce to the Group Centre. The disaggregation of net revenue for 2019 has been adjusted for comparability.

Accounting policies

Alpiq generally satisfies its performance obligations as principal. However, for performance obligations in connection with the transmission of energy, Alpiq acts as agent in all represented markets. Where Alpiq acts as agent, revenue is recognised net of the corresponding costs.

Revenue from energy and grid services

Revenue from energy supply from contracts with customers (“own use exception” pursuant to IFRS 9) is generally recognised over the period agreed for completion of performance. However, for energy supplies, Alpiq has a right to consideration that directly corresponds to the value to the customer of the energy already supplied. For such cases, Alpiq exercises the practical expedient and recognises revenue in the amount that can be billed. In single contracts, Alpiq sells the proportionate right in energy production of a power plant. Revenue from these contracts is recognised over the period that corresponds to the timing of the costs.

Revenue from standing ready to deliver ancillary services is recognised on a straight-line basis over the period in which Alpiq is available to render these services. Revenue for called ancillary services is recognised when it is delivered.

Contractual penalties – for example, for deviations between the delivered and contractually agreed-upon quantity of energy – represent a variable component in energy sales, which are only included in estimating the transaction price when they are highly probable, which normally can only be determined towards the end of the delivery period. The point in time when such variable price components are recognised requires significant judgment.

Revenue from digital energy services and e-mobility

Revenue from the e-mobility and energy management business is recognised upon successful installation of the respective device. Any costs incurred prior to revenue recognition are recognised under inventories and any prepayments received under contract liabilities (advances from customers). Any services in this area beyond installation are identified as separate performance obligations. The transaction price for these services is recognised in revenue when the customer receives the economic benefit. Revenue from projects is recognised over the period for completion of performance; progress is primarily measured using a cost-based input method. Revenue which cannot yet be billed is recognised in the balance sheet as contract assets, less any prepayments. In case of an excess of prepayments, revenue which cannot yet be billed is recognised as contract liabilities.

The method for determining project process is at the discretion of Alpiq. Under the cost-based input method, the revenue recognised best reflects the service already rendered to the customer. Applying this method requires certain estimates and forecasts. As a result, the expected additional costs in particular until the project is completed, which influence the degree of completion, are subject to significant uncertainty. Furthermore, estimated total costs may deviate from costs actually incurred upon the project being completed. Under project controlling, the cost estimates are reviewed regularly and adjusted if necessary. The adjustments relate to the expected total costs, the degree of completion and therefore also the amount of revenue already recognised.

Revenue from other services

Revenue from other services from contracts with customers is recognised, on the one hand, over the time period over which the performance obligation is satisfied on a straight-line basis. On the other hand, Alpiq applies the following practical expedient: if Alpiq has a right to consideration that directly corresponds to the value to the customer, then revenue is recognised in the amount that can be billed.

Practical expedients applied regarding revenue from contracts with customers

Alpiq exercises the practical expedient provided in IFRS 15 and, wherever possible, opts not to disclose the remaining performance obligations at the end of the reporting period. After applying this practical expedient, the remaining performance obligations disclosed in continuing operations at the end of the reporting period are not significant.

Alpiq applies the practical expedient and does not capitalise incremental costs of obtaining a customer contract, as far as these costs would be amortised within one year. Due to the application of this practical expedient, Alpiq did not disclose any significant costs of this type.

Income from energy and financial derivatives

Energy and financial derivatives are measured at fair value through profit or loss. Changes in value in energy derivatives are disclosed in net revenue in the period in which they occur. Revenue from trading in energy and financial derivatives comprises realised net gains and losses from settled contracts and unrealised changes in the fair value of unsettled contracts. For more information on measurement, please refer to note 3.2.

2.3 Other operating income

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.

CHF million

2020

2019

Gain from disposal of companies 1

53

 

Market premiums

33

31

Income from operating leases

2

2

Gain on sale of non-current assets

 

3

Miscellaneous

30

14

Other operating income

118

50

1 See note 5.2

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.

 

 

 

 

 

 

 

Cash flow

 

< 1 year

1 – 2 years

2 – 3 years

3 – 4 years

4 – 5 years

> 5 years

Total

Expected, undiscounted lease payments per 31.12.2020

2

2

1

1

1

1

8

Expected, undiscounted lease payments per 31.12.2019

2

2

1

1

1

1

8

2.4 Energy and inventory costs

2.4 Energy and inventory costs

CHF million

2020

2019

Electricity purchased from third parties

– 2,258

– 2,542

Electricity purchased from partner power plants

– 452

– 345

Other energy purchases

– 554

– 619

Cost of inventories

– 7

– 6

Other energy and inventory costs

– 78

– 82

Energy and inventory costs before provisions

– 3,349

– 3,594

Provisions for onerous contracts

– 102

– 59

Energy and inventory costs

– 3,451

– 3,653

The item “Other energy purchases” primarily contains the cost of acquiring fuels (gas and in 2019 also coal) and certificates. The item “Other energy and inventory costs” mainly comprises water taxes, concession fees and plant maintenance costs.

2.5 Employee costs

2.5 Employee costs

CHF million

2020

2019

Wages and salaries

– 149

– 152

Defined benefit pension costs

– 7

– 13

Defined contribution pension costs

– 1

– 1

Social security costs and other employee costs

– 29

– 24

Employee costs

– 186

– 190

Number of employees at the reporting date

 

31 Dec 2020

31 Dec 2019

Employees (full-time equivalents)

1,247

1,218

Apprentices

11

8

Total

1,258

1,226

2.6 Finance costs and finance income

2.6 Finance costs and finance income

CHF million

2020

2019

Finance costs

 

 

Interest expense

– 38

– 50

Net interest on pension plans and provisions

– 18

– 15

Other finance costs

– 5

– 8

Net foreign exchange losses

– 11

 

Total

– 72

– 73

 

 

 

Finance income

 

 

Interest income

14

2

Other finance income

3

11

Net foreign exchange losses

 

1

Total

17

14

Financial result

– 55

– 59

2.7 Income tax

2.7 Income tax

Income tax expense charged to the income statement

CHF million

2020

2019

Current income tax

– 25

– 21

Deferred income tax

68

131

Income tax

43

110

Reconciliation

CHF million

2020

2019

Earnings before tax

123

– 336

Expected income tax rate (Swiss average rate)

16 %

21 %

Income tax at the expected income tax rate

– 20

71

Tax effects from:

 

 

16 % (21 %) difference in tax rate compared to locally expected income tax rates

– 5

– 25

Income exempt from tax

23

35

Non-deductible expenses for tax purposes

– 28

– 34

Valuation from tax loss carryforwards

11

42

Effect of changes in tax rates

72

3

Previous years

– 9

17

Other effects

– 1

1

Total income tax expense

43

110

Effective income tax rate

– 35 %

33 %

On 19 May 2019, the Swiss electorate voted on the Federal Act on Tax Reform and Old Age and Survivors’ Insurance Funding (TRAF). Numerous cantons lowered their corporate income tax rates on account of this tax reform. The Solothurn electorate did not accept the cantonal implementation of TRAF until 9 February 2020, resulting in the main effect for the Alpiq Group this year. The expected income tax rate therefore decreased from 21 % in the previous year to 16 %. The implementation of TRAF in the canton of Solothurn is also the main reason for the effect of changes in tax rates caused by the adjustment of the deferred tax rate.

Change in deferred tax assets and liabilities

CHF million

Deferred tax assets

Deferred tax liabilities

Net deferred tax liabilities

Balance at 31 December 2018

37

492

455

Deferred taxes recognised in the income statement

60

– 71

– 131

Deferred taxes recognised in other comprehensive income

5

11

6

Acquisition / disposal of subsidiaries

 

– 5

– 5

Currency translation differences

– 3

– 1

2

Balance at 31 December 2019

99

426

327

Deferred taxes recognised in the income statement

– 18

– 86

– 68

Deferred taxes recognised in other comprehensive income

– 1

– 1

 

Acquisition / disposal of subsidiaries

 

– 1

– 1

Currency translation differences

– 1

 

1

Balance at 31 December 2020

79

338

259

Deferred tax assets and liabilities by origination of temporary differences

CHF million

31 Dec 2020

31 Dec 2019

Tax losses and tax assets not yet used

41

36

Property, plant and equipment

29

49

Other non-current assets

2

4

Current assets

19

17

Provisions and liabilities

26

27

Total gross deferred tax assets

117

133

Property, plant and equipment

127

155

Other non-current assets

182

228

Current assets

39

49

Provisions and liabilities

28

28

Total gross deferred tax liabilities

376

460

Net deferred tax liabilities

259

327

Tax assets recognised in the balance sheet

79

99

Tax liabilities recognised in the balance sheet

338

426

At 31 December 2020, individual subsidiaries held tax loss carryforwards totalling CHF 782 million (previous year: CHF 770 million), which are available for offsetting against future taxable profits. Of this, the Alpiq Group has not recognised tax benefits on tax loss carryforwards of CHF 577 million (CHF 614 million) in the balance sheet item “Deferred tax assets”, as they are recognised for tax loss carryforwards only to the extent that realisation of the related tax benefit is probable. The average tax rate on tax loss carryforwards not eligible for capitalisation is 15 % (18 %). These tax loss carryforwards expire in the following periods:

CHF million

31 Dec 2020

31 Dec 2019

Within 1 year

59

53

Within 2 – 3 years

45

77

After 3 years

370

357

Unlimited use

103

127

Total non-capitalisable tax loss carryforwards

577

614

In addition, non-capitalised deductible temporary differences exist in an amount of CHF 91 million (CHF 161 million).

Assumptions are made based on local legal principles in calculating current income tax. Income taxes that are actually payable may deviate from the values originally calculated, as the definitive assessment is not finalised until years after the end of the reporting period in some cases. Furthermore, the definitive clarification of the taxation issue at the partner power plants in the cantons of Valais and Grisons is still pending. The resulting risks are identified, assessed and recognised where necessary. Deferred tax assets are calculated in part using far-reaching estimates. The underlying forecasts pertain to a period of several years and comprise, among other things, a forecast of future taxable income as well as interpretations of the existing legal basis.

Accounting policies

Income tax expense represents the sum of current and deferred income tax. Current income tax is calculated on taxable earnings using the tax rates that have been enacted by the end of the reporting period. Deferred income tax is calculated using the tax rates enacted or substantively enacted at the reporting date.

Deferred taxes are recognised due to the differing recognition of certain income and expense items in the Group’s annual internal accounts and annual tax accounts. Deferred tax arising from temporary differences is calculated applying the balance sheet liability method. Deferred tax is not recognised for differences associated with investments in group companies, which will not reverse in the foreseeable future and where the timing of the reversal is controlled by the Group. Deferred tax assets are recognised when it is probable that they will be realised. Unrecognised tax loss carryforwards and unrecognised tax assets are disclosed.

2.8 Earnings per share

2.8 Earnings per share

 

2020

2019 (adjusted) 1

Earnings after tax from continuing operations attributable to equity investors of Alpiq Holding Ltd. (CHF million)

163

– 229

Interest on hybrid capital attributable to the period (CHF million) 2

– 29

– 29

Share of Alpiq Holding Ltd. stockholders in earnings from continuing operations (CHF million)

134

– 258

Earnings after tax from discontinued operations attributable to equity investors of Alpiq Holding Ltd. (CHF million)

– 56

– 42

Share of Alpiq Holding Ltd. stockholders in earnings from continuing and discontinued operations (CHF million)

78

– 300

Weighted average number of shares outstanding

33,110,364

33,110,364

Earnings per share from continuing operations in CHF, diluted and undiluted

4.02

– 7.81

Earnings per share from discontinued operations in CHF, diluted and undiluted

– 1.69

– 1.26

Earnings per share in CHF, diluted and undiluted

2.33

– 9.07

1 The conversion of the hybrid loan from the shareholders created 5,235,715 new shares; the weighted average number of shares outstanding in 2019 was therefore adjusted for comparative purposes. This also had an impact on earnings per share. For more information, see note 3.7.

2 See note 3.7

There are no circumstances that would lead to a dilution of earnings per share.

3 Risk management, financial instruments and financing

3.1 Financial risk management

3.1 Financial risk management

General principles

The Alpiq Group’s operating activities are exposed to strategic and operational risks, in particular credit, liquidity and market risks (energy price risk, foreign currency risk and interest rate risk). The principles of the Group’s risk management policy are established by the Board of Directors. The Executive Board is responsible for their development and implementation. The Risk Management Committee monitors compliance with the principles and policies. It also defines the hedging strategy for the production of the Group’s own power plant portfolio, which is approved by the Executive Board.

The principles for managing risks in the Alpiq Group are set out in the Group Risk Policy. They comprise guidelines on the incurring, measurement, management and mitigation of business risks and specify the organisation and responsibilities for risk management. The units responsible manage their risks within the framework of the risk management policy and the limits defined for their areas of activity. The objective is to maintain a reasonable balance between the business risks incurred, earnings and risk-bearing equity.

The Group Risk Policy comprises a Group-wide Business Risk Policy, an Energy Risk Policy specifically for the energy business and a Financial Risk Policy. The Business Risk Policy governs the annual risk mapping process, the definition and monitoring of the measures to reduce exposure to operational and strategic risks as well as integral security management. The Energy Risk Policy defines the processes and methods to manage market and credit risks in the energy business. It also regulates the management of liquidity fluctuations caused by trading activities on stock exchanges and under bilateral arrangements to settle margin differences. Furthermore, it defines the principles of the hedging strategy for energy production trading books. The Financial Risk Policy defines the substance, organisation and system for financial risk management within the Alpiq Group. It defines the management of liquidity, foreign currency and interest rate risks.

The Risk Management functional unit is responsible for managing risks and reports to the Executive Chairman. The functional unit provides methods and tools for implementing risk management, and ensures timely reporting to the Board of Directors, Executive Board and the Risk Management Committee.

During the annual business risk assessment process, strategic and operational risks throughout the Group are recorded and assessed, and then assigned to the identified risk owners for management and monitoring. The Risk Management functional unit monitors the implementation of the measures. Exposure limits are set for market, credit and liquidity risks, which are adjusted in the context of the company’s overall risk-bearing capacity and with compliance monitored on an ongoing basis.

Capital management

Across the Alpiq Group, capital is managed in line with the Group’s overall financial strategy. During the budgeting and planning process, the Board of Directors takes notice annually of the planned performance of the figures critical for capital management. In addition, it receives regular reports on current developments. The strategy is focused on the Group’s reported consolidated equity and net debt to EBITDA ratio. At 31 December 2020, the Group reports an equity ratio of 51.2 % (previous year: 49.9 %).

Alpiq Holding Ltd. procures a significant portion of financing centrally for the Alpiq Group. The Swiss capital market forms the main source of financing. At 31 December 2020, Alpiq Holding Ltd. held 61 % of the Group’s total financial liabilities (60 %). The level of financial liabilities must be reasonable in proportion to profitability in order to ensure a solid credit rating in line with sector norms. The ratio of net debt to EBITDA before exceptional items plays a decisive role in capital management. This is calculated as follows:

CHF million

31 Dec 2020

31 Dec 2019

Non-current financial liabilities

913

1,175

Current financial liabilities

299

132

Financial liabilities

1,212

1,307

Current term deposits

596

634

Securities

27

26

Cash and cash equivalents

340

440

Cash and cash equivalents under assets held for sale

 

1

Financial assets (liquidity)

963

1,101

Net debt

249

206

EBITDA before exceptional items 1

262

110

Net debt / EBITDA before exceptional items 1

1.0

1.9

1 The previous-year figure has been adjusted, for explanations see note 2.1

The Alpiq Group has the following covenants from finance agreements:

 

 

 

 

 

 

 

 

 

 

 

 

 

Financial covenants

Other covenants

Agreement

Maturity

In CHF million

Utilisation at 31 Dec 2020 in CHF million

Utilisation at 31 Dec 2019 in CHF million

Equity ratio

Net debt / EBITDA

Bank rating

Syndicated loan line

Dec 22

200

0

0

x

x

x

The counterparty has a right to terminate the agreement if the covenants are breached. All covenants were met at 31 December 2020 and 31 December 2019.

Credit risk management

Credit risk management deals with potential losses arising from business partners’ inability to meet their contractual obligations to the Alpiq Group.

Credit risk management in the energy business encompasses all business units and subsidiaries that transact significant business volumes with external counterparties. It entails regular monitoring of outstanding receivables from counterparties and their expected future changes, as well as an analysis of the creditworthiness of new and existing counterparties. Besides energy derivatives recognised as financial instruments on the balance sheet, credit risk management also covers physical receipt or delivery contracts. Credit risk is primarily managed by applying rating- based credit limits. The Alpiq Group classifies counterparties or groups of counterparties (with similar risk characteristics) in risk categories (AAA – CCC) based on probability of default. Once established, these ratings are applied as the basis for setting credit limits. Such limits may be increased if collateral (such as guarantees, advances or insurance cover) is provided. The ratings of active counterparties are reviewed periodically and credit limits are adjusted where appropriate. The policy in the energy business is to enter into contracts only with counterparties that meet the criteria of the Group Risk Policy. Outstanding credit exposures are monitored and managed on an ongoing basis using a formalised process.

In order to actively manage the credit risk associated with cash and cash equivalents and term deposits, the Treasury functional unit at the Alpiq Group centrally sets limits that restrict the amount of assets held at a counterparty. The limits are calculated and monitored monthly based on a number of factors. As in the previous year, no significant concentrations of risk existed at the reporting date, as cash and cash equivalents and term deposits are widely diversified, staggered over time and invested with counterparties with a low credit risk. To date, there have been no impairment losses on receivables due from financial counterparties.

The maximum credit risk corresponds to the carrying amount of the financial assets and is calculated at CHF 2,720 million at 31 December 2020 (previous year: CHF 2,674 million). Credit risk is reduced by collateral. The Alpiq Group’s exposure to concentrations of risk is minimised due to the number of customers, geographical diversification as well as the consolidation of positions.

Offsetting of financial assets and liabilities

A substantial portion of the energy contracts entered into by the Alpiq Group is based on agreements containing a netting arrangement. Netting arrangements are used widely in energy trading to reduce the volume of effective cash flows. Items relating to the same counterparties are only presented on a net basis in the balance sheet if a legally enforceable right to offsetting of the recognised amounts exists in the netting arrangement, and the intention exists to settle on a net basis.

 

 

 

 

 

 

 

 

31 Dec 2020

31 Dec 2019

CHF million

Gross

Offsetting

Net (balance sheet)

Gross

Offsetting

Net (balance sheet)

Financial assets

 

 

 

 

 

 

Trade receivables

1,739

– 1,025

714

2,026

– 1,410

616

Energy derivatives

1,805

– 1,184

621

2,297

– 1,772

525

Currency and interest rate derivatives

5

5

11

 

11

Financial liabilities

 

 

 

 

 

 

Trade payables

1,434

– 1,025

409

1,796

– 1,410

386

Energy derivatives

1,626

– 1,184

442

2,178

– 1,772

406

Currency and interest rate derivatives

19

19

26

 

26

Financial collateral

Furthermore, additional collateral, such as guarantees, variation margin payments or insurance cover, is collected where required. As a rule, the collateral held by the Alpiq Group covers both unrecognised energy transactions involving physical delivery and transactions recognised as financial instruments. Financial collateral received and issued in connection with the bilateral agreements to settle margin differences is presented in the following:

 

 

 

 

 

 

31 Dec 2020

31 Dec 2019

CHF million

Collateral received

Collateral issued

Collateral received

Collateral issued

Cash collateral

58

12

2

27

Guarantees 1

6

 

 

11

Total

64

12

2

38

1 Guarantees to associates or third parties in favour of third parties are presented in note 4.8.

Liquidity risk

A substantial portion of the receivables in European energy trading are offset and settled on specified dates, reducing peak cash flow requirements. Margin agreements are commonly used on energy commodity exchanges and among large energy traders to reduce counterparty risk. Energy price movements can consequently lead to substantial receivables or payables in the short term. The Alpiq Group manages such variable liquidity requirements by means of an early warning system, by maintaining sufficient liquid resources and by obtaining committed credit facilities from banks. The role of liquidity management is to plan, monitor, provide and optimise liquidity of the Alpiq Group on a monthly rolling basis.

The anticipated cash flows of financial liabilities and derivative financial instruments are disclosed in the table below. Where the intention exists to refinance loans at the end of the contract term, but refinancing has not yet been contractually secured, a cash outflow on maturity is assumed. Accordingly, actual cash flows can differ significantly from the contractual maturities. A majority of the receivables in European energy trading are offset and settled on specified dates (netting). The cash flows from derivatives are presented net when there are netting arrangements in place with counterparties and the amounts are expected to be settled net. Depending on the future changes in value of the derivatives until maturity, the effective cash flows may deviate significantly from the amounts reported. In order to demonstrate the effective liquidity risk from derivative financial instruments, the cash inflows and outflows from contracts with positive and negative replacement values are shown in the following table, even though IFRS only requires the presentation of the liquidity risk of financial liabilities. Derivative financial instruments for hedging future own use energy transactions are not included in the table, because these are unrecognised pending transactions. On account of a clerical error, cash received from and paid to derivative financial instruments was presented with an incorrect sign in the previous year, and the net cash flow was therefore understated. The comparative figures have been adjusted accordingly.

2020: Maturity analysis of financial liabilities and derivative financial instruments

 

 

 

 

 

 

 

 

 

Carrying amount

Cash flows

CHF million

 

Total

< 1 month

1 – 3 months

4 – 12 months

1 – 5 years

> 5 years

Trade payables

409

– 409

– 379

– 23

– 7

Bonds

818

– 870

– 162

– 708

Loans payable

346

– 365

– 29

– 112

– 174

– 50

Lease liabilities

48

– 60

– 1

– 1

– 5

– 26

– 27

Other financial liabilities 1

263

– 157

– 114

– 34

– 8

– 1

Cash outflows from non-derivative financial liabilities

 

– 1,861

– 494

– 87

– 294

– 909

– 77

Energy derivatives

179

Cash inflows

3,355

3

351

1,405

1,587

9

Cash outflows

– 3,095

– 5

– 421

– 1,363

– 1,301

– 5

Currency / interest rate derivatives

– 14

Cash inflows

1,669

74

327

1,252

16

Cash outflows

– 1,683

– 73

– 327

– 1,257

– 26

Net cash inflows / (outflows) from derivative financial instruments

 

246

– 1

– 70

37

276

4

1 The carrying amount includes liabilities in connection with the convertible loans of Swissgrid Ltd, for which no cash outflow is expected (see note 3.3).

2019: Maturity analysis of financial liabilities and derivative financial instruments

 

 

 

 

 

 

 

 

 

Carrying amount

Cash flows

CHF million

 

Total

< 1 month

1 – 3 months

4 – 12 months

1 – 5 years

> 5 years

Trade payables

386

– 386

– 338

– 41

– 7

 

 

Bonds

818

– 890

 

 

– 19

– 871

 

Loans payable

437

– 466

– 1

– 54

– 63

– 255

– 93

Lease liabilities

52

– 63

– 1

– 2

– 6

– 22

– 32

Other financial liabilities 1

263

– 115

– 73

– 22

– 9

– 11

 

Cash outflows from non-derivative financial liabilities

 

– 1,920

– 413

– 119

– 104

– 1,159

– 125

Energy derivatives

119

 

 

 

 

 

 

Cash inflows (adjusted)

 

2,895

 

454

1,507

933

1

Cash outflows (adjusted)

 

– 2,812

 

– 403

– 1,480

– 926

– 3

Currency / interest rate derivatives

– 15

 

 

 

 

 

 

Cash inflows (adjusted)

 

1,651

83

451

1,113

4

 

Cash outflows (adjusted)

 

– 1,667

– 83

– 451

– 1,114

– 18

– 1

Net cash inflows / (outflows) from derivative financial instruments (adjusted)

 

67

0

51

26

– 7

– 3

1 The carrying amount includes liabilities in connection with the convertible loans of Swissgrid Ltd, for which no cash outflow is expected (see note 3.3).

Market risk

The Alpiq Group’s exposure to market risk primarily comprises energy price risk, foreign currency risk and interest rate risk. These risks are monitored on an ongoing basis and managed using derivative financial instruments. Market risk is measured within the framework of the Group Risk Policy that sets out rules on the taking of risks as well as their measurement, limitation and monitoring. Compliance with the risk limits is monitored on an ongoing basis by the Risk Management Committee based on regular reporting by the Risk Management functional unit.

Energy price risk

Energy price risk refers to potential price fluctuations that could have an adverse impact on the Alpiq Group. They can arise from factors such as variations in price volatility, market price movements or changing correlations between markets and products. Energy liquidity risks also belong to this category. They occur when an open energy position cannot be closed out or can only be closed out on very unfavourable terms due to a lack of market bids. Future own use energy transactions are not reported in the balance sheet. Energy transactions are also conducted as part of the programme to optimise Alpiq’s power plant portfolio. A large proportion of the replacement values for energy derivatives shown at the reporting date are attributable to optimisation positions, with positive and negative replacement values generally cancelling each other out. Alpiq also engages in energy derivatives trading. The energy derivatives concluded by the Alpiq Group are usually forward contracts. The fair values are calculated on the basis of the difference between the contractually fixed forward prices and current forward prices applicable at the reporting date. The effect of credit risk on fair values is not material. The risks associated with trading and optimisation transactions are managed via clearly defined responsibilities and stipulated risk limits in accordance with the Group Risk Policy. Risk Management reports regularly on compliance with these limits to the Risk Management Committee and the Executive Board utilising a formalised risk reporting system. The risk positions are monitored in accordance with the Value at Risk (VaR) and Profit at Risk (PaR) industry standards.

Foreign currency risk

The Alpiq Group seeks wherever possible to mitigate foreign currency risks by natural hedging of operating income and expenses denominated in foreign currencies. The remaining foreign currency risk is hedged by means of forward transactions in accordance with the Group’s Financial Risk Policy. Foreign currency risk arising from energy generation or purchasing is contractually transferred to the counterparty wherever possible. Where this is not possible or is only partly possible, forward currency contracts with a medium-term hedging horizon are deployed to manage exposure centrally on the market in line with the Group’s Financial Risk Policy. Hedge accounting is used where possible to avoid fluctuations in results. The foreign currency derivatives are all OTC products. The fair values are calculated on the basis of the difference between the contractually fixed forward prices and forward prices applicable at the reporting date. Net investments in foreign subsidiaries are also exposed to changes in foreign exchange rates, although the difference in inflation rates should offset these changes in the long term. Investments in foreign subsidiaries (translation risks) are therefore not hedged.

Interest rate risk

The risks arising from volatility in interest rates relate to the interest-bearing financial assets and liabilities of the Alpiq Group. According to the Group’s Financial Risk Policy, liquidity is invested for a maximum of two years. The funding required for the business, however, is obtained on a long-term basis at fixed interest rates. Financing instruments with variable interest rates, particularly those that are long-term, are generally hedged by means of interest rate swaps. This means that a change in interest rates applied to interest-bearing assets has an impact on financial income. The interest rate derivatives are all OTC products. The fair value is determined by discounting the contractually agreed payment streams with current market interest rates.

Sensitivity analysis

To illustrate the sensitivity of market risks to the Alpiq Group’s financial results, the effects of reasonably possible changes in the market risks listed above are set out below. The sensitivities are based in each case on financial instruments recognised on the reporting date. The possible annual percentage changes in the fair values of energy derivatives are determined from the commodity market prices for electricity, gas, coal and oil over the past three years. The sensitivities are calculated by applying maximum deviations from the mean with a 99 % confidence level. Taking into consideration the historical fluctuations, the reasonably possible changes in foreign currency prices are estimated at 5 %. Interest rate swap sensitivity is shown as the effect on the change in fair value that would arise from a 1 % parallel shift in the yield curve. Alpiq quantifies each type of risk assuming that all other variables remain constant. The effects for continuing operations are shown before tax.

 

 

 

 

 

 

 

 

31 Dec 2020

31 Dec 2019

CHF million

+ / – in %

+ / – effect on profit before income tax

+ / – effect on OCI before income tax

+ / – in %

+ / – effect on profit before income tax

+ / – effect on OCI before income tax

Energy price risk

47.4

85

 

49.4

59

 

EUR / CHF currency risk

5.0

0

35

5.0

5

30

EUR / CZK currency risk

5.0

0

 

5.0

1

 

EUR / PLN currency risk

5.0

0

 

5.0

1

 

Interest rate risk

1.0

6

4

1.0

5

6

3.2 Financial instruments

3.2 Financial instruments

Carrying amounts and fair values of financial assets and liabilities

 

 

 

 

 

 

31 Dec 2020

31 Dec 2019

CHF million

Carrying amount

Fair value

Carrying amount

Fair value

Financial assets at fair value through profit or loss

 

 

 

 

Financial investments

1

1

1

1

Securities

27

27

26

26

Positive replacement values of derivatives

 

 

 

 

Energy derivatives

621

621

525

525

Currency and interest rate derivatives

5

5

11

11

Financial liabilities at amortised cost

 

 

 

 

Bonds

818

857

818

873

Loans payable

346

358

437

454

Financial liabilities at fair value through profit or loss

 

 

 

 

Negative replacement values of derivatives

 

 

 

 

Energy derivatives

442

442

406

406

Currency and interest rate derivatives

19

19

26

26

Apart from lease liabilities, the carrying amounts of all other financial instruments measured at amortised cost differ only insignificantly from the fair values. This is why the corresponding fair values have not been disclosed.

Fair value hierarchy of financial instruments

At the reporting date, the Alpiq Group measured the following assets and liabilities at their fair value or disclosed a fair value. The fair value hierarchy shown below was used to classify the financial instruments:

Level 1:
Quoted prices in active markets for identical assets or liabilities

Level 2:
Valuation model based on prices quoted in active markets that have a significant effect on the fair value

Level 3:
Valuation models utilising inputs which are not based on quoted prices in active markets and which have a significant effect on fair value

CHF million

31 Dec 2020

Level 1

Level 2

Level 3

Financial assets at fair value through profit or loss

 

 

 

 

Financial investments

1

 

1

 

Securities

27

 

27

 

Energy derivatives

621

 

540

81

Currency and interest rate derivatives

5

 

5

 

Financial liabilities at amortised cost

 

 

 

 

Bonds

857

857

 

 

Loans payable

358

 

358

 

Financial liabilities at fair value through profit or loss

 

 

 

 

Energy derivatives

442

 

440

2

Currency and interest rate derivatives

19

 

19

 

CHF million

31 Dec 2019

Level 1

Level 2

Level 3

Financial assets at fair value through profit or loss

 

 

 

 

Financial investments

1

 

1

 

Securities

26

 

26

 

Energy derivatives (adjusted)

525

 

524

1

Currency and interest rate derivatives

11

 

11

 

Financial liabilities at amortised cost

 

 

 

 

Bonds

873

873

 

 

Loans payable

454

 

454

 

Financial liabilities at fair value through profit or loss

 

 

 

 

Energy derivatives (adjusted)

406

 

397

9

Currency and interest rate derivatives

26

 

26

 

Both in the reporting year and during the previous year, no reclassifications were applied between Levels 1 and 2. The reclassification from Level 3 to Level 2 mentioned below relates to longer-term energy derivatives, which are now measured based on observable market prices as a result of their increasing market liquidity.

The energy, currency and interest rate derivatives comprise OTC products, the majority of which are to be classified as Level 2. Fair value of energy derivatives is determined using a price curve model. The observable input factors in the price curve model (market prices) are supplemented by hourly forward prices, which are arbitrage-free and compared with external price benchmarking on a monthly basis.

The fair value of the loans payable corresponds to the contractually agreed interest and amortisation payments discounted at market rates.

Level 3 energy derivatives

Energy derivatives disclosed under Level 3 are measured using methods that in some cases utilise input factors, such as long-term energy prices or discount rates, which cannot be derived directly from an active market. In complex cases, a discounted cash flow method is used for the measurement. A realistic change in unobservable input factors would not have a significant impact on Alpiq’s total comprehensive income or equity. Level 3 items were not disclosed separately in the previous year on the grounds of immateriality. The previous year has now been adjusted for comparative purposes.

The following table shows the development of Level 3 energy derivatives:

 

 

 

 

 

 

2021

2020

CHF million

Assets

Liabilities

Assets

Liabilities

Replacement values at 1 January

1

9

1

9

Purchases

 

 

 

 

Fair value changes through profit and loss in net revenue 1

 

 

 

 

Transfer out of level 3

 

 

 

 

Offsetting

 

 

 

 

Replacement values at 30 June

 

2

1

9

1 Of which, CHF xx million (previous year: CHF x million) is attributable to assets and CHF xx million (CHF xx million) to liabilities, which were still held at 30 June.

Development of day one gains and losses

Measuring financial instruments with valuation inputs that are not entirely based on quoted prices in active markets may result in deviations between the fair value and the transaction price if measured at the time of entering into the contract. These deviations are recognised as a day one gains or losses and are amortised on a straight-line basis until the underlying markets of the valuation inputs become solvent.

The following table shows the reconciliation of the change in deferred day one gains and losses. These items relate entirely to Level 3 energy derivatives.

 

 

 

 

 

 

2021

2020

CHF million

Day one gains

Day one losses

Day one gains

Day one losses

Balance at 1 January

11

12

0

13

Deferred profit / loss arising from new transactions

 

 

 

 

Profit or loss recognised in the income statement

 

 

 

 

Currency translation differences

 

 

 

 

Balance at 30 June

11

12

0

13

Expense / income related to financial assets and liabilities

 

 

 

 

 

 

2020

2019

CHF million

Income statement

Other comprehensive income

Income statement

Other comprehensive income

Net gains / losses (excluding interest)

 

 

 

 

Financial assets and liabilities at fair value through profit and loss

91

 

38

 

Financial assets at amortised cost 1

40

 

– 5

 

Designated for hedge accounting

19

– 8

– 11

38

Interest income and expense

 

 

 

 

Interest income for financial assets at amortised cost 1

14

 

2

 

Interest expense for financial liabilities at amortised cost

– 31

 

– 42

 

Interest expense for financial liabilities measured at fair value and designated for hedge accounting

– 7

 

– 8

 

1 2020 includes the effect from the purchase price adjustment for the transfer of the Swiss high-voltage grid (see note 5.2)

Information about the impairment of trade receivables is disclosed in note 4.5.

Accounting policies

Financial investments, securities and derivatives are measured at fair value through profit or loss. All other financial assets and liabilities are measured at amortised cost. The Alpiq Group did not have any financial instruments that are measured at fair value through other comprehensive income.

Financial assets and liabilities at fair value through profit or loss

Financial assets and financial liabilities in this category are initially recognised at fair value. The corresponding transaction costs are recognised immediately in the income statement. Changes in value of the financial instruments measured at fair value are recognised through profit or loss in the financial result with the exception of energy derivatives and currency derivatives concluded in connection with the hedging of energy transactions. Changes in the fair value of derivatives in connection with the energy business are presented in net revenue.

Financial assets and liabilities at amortised cost

With the exception of trade receivables, financial assets and financial liabilities at amortised cost are initially recognised at fair value plus or less direct transaction costs. Trade receivables are measured at transaction price.

For the subsequent measurement of financial assets at amortised cost, the following method is used to calculate impairments: in accordance with the expected credit loss model, losses on unsecured financial assets expected in future are also recognised. The impairment losses expected in future are determined using the publicly available probability of default, which takes into account forward-looking information as well as historical probability of default. For financial assets, losses that are expected to occur in the next 12-month period are generally recognised. If the credit risk increases significantly for specific counterparties, impairment is recognised on the assets affected over the entire residual term of the asset. In accordance with IFRS 9, the simplified approach is applied for trade receivables for the measurement of the expected losses by recognising the lifetime expected credit losses (see note 4.5).

Alpiq analyses historical credit losses and derives an estimate of expected credit losses taking into account the economic conditions and information obtained externally. The estimates are reviewed and analysed periodically. However, actual results can differ from these estimates, resulting in adjustments in subsequent periods.

Hedge accounting

Alpiq uses energy, foreign currency and interest rate derivatives to hedge exposure to fluctuations in the cash flows of highly probable forecast transactions (cash flow hedges). In contrast to the recognition of energy derivatives, hedge accounting is used for certain foreign currency and interest rate derivatives.

 

 

 

 

 

 

31 Dec 2020

31 Dec 2019

 

Foreign currency hedges

Interest rate swaps

Foreign currency hedges

Interest rate swaps

Derivative financial instruments in current assets (in CHF million)

3

 

7

 

Derivative financial instruments in current liabilities (in CHF million)

1

16

1

21

Nominal value (in CHF million)

230

 

212

 

Nominal value (in EUR million)

1,026

139

843

164

The hedged items and the interest rate swaps are both based on EURIBOR rates. Thus far, no contract adjustments have been negotiated and no existing contracts have been replaced in connection with the Interest Rate Benchmark Reform. The financial impact of the reform on the Alpiq Group is considered immaterial. In accordance with the practical expedients under IFRS 9, hedged future cash flows are still expected and hedge accounting will be continued following the implementation of the reform.

Before designating a new hedging instrument, the Group conducts a thorough analysis of the risk situation by analysing the risk management strategy and objective and defines the relationship between the hedging instrument and underlying transaction. It also ensures that the effectiveness requirements are met at the beginning of the hedging relationship. The formal designation occurs by documenting the hedging relationship. The designation of a new hedging instrument is authorised formally.

Change in cash flow hedge reserves

 

 

 

 

 

 

2020

2019

CHF million

Foreign currency hedges

Interest rate swaps

Foreign currency hedges

Interest rate swaps

Cash flow hedge reserves at 1 January

33

– 17

9

– 23

Recognition of gain / loss

6

– 2

22

– 3

Reclassification of realised gain / loss to net revenue

– 19

 

9

 

Reclassification of realised gain / loss to financial result

 

7

 

8

Reclassification to financial result due to early settlement 1

 

 

 

2

Change from partner power plants and other associates

 

– 2

 

1

Income tax expense

4

– 1

– 7

– 2

Cash flow hedge reserves at 31 December

24

– 15

33

– 17

1 A portion of the interest rate swaps was settled ahead of schedule because the associated project financing was repaid.

Foreign currency hedges

Foreign currency positions from the sale of Swiss production capacity in euros are hedged utilising forward transactions on the basis of the expected transaction volumes. Each spot component is designated as hedging instruments for hedge accounting. The unrealised gains / losses of the spot components are included in other comprehensive income taking deferred taxes into account. Changes in the forward components are recognised through profit or loss. There were no ineffective portions of the hedge from the foreign currency hedges at the reporting date. The underlying transactions will be recognised in the income statements for 2021 to 2024.

Interest rate swaps

At 31 December 2020, interest rate swaps were in place in order to fix interest rates on variable-interest project financing facilities in Italy. The project financing facilities have a remaining maturity of between 4 and 10 years.

CHF million

2020

2019

Negative replacement values of interest rate swaps at 1 January

21

30

Realised interest payments

– 7

– 8

Change in fair value

2

3

Early settlement 1

 

– 2

Currency translation differences

– 2

Negative replacement values of interest rate swaps at 31 December

16

21

1 A portion of the interest rate swaps was settled ahead of schedule because the associated project financing was repaid.

3.3 Other non-current assets

3.3 Other non-current assets

CHF million

Financial investments

Loans receivable

Other non-current assets

Total

Carrying amount at 1 January 2020

1

7

99

107

Additions

 

5

 

5

Reclassifications

 

– 1

– 50

– 51

Carrying amount at 31 December 2020

1

11

49

61

CHF million

Financial investments

Loans receivable

Other non-current assets

Total

Carrying amount at 1 January 2019

1

10

149

160

Additions

 

2

 

2

Reclassifications

 

– 4

– 50

– 54

Reclassified to “Assets held for sale”

 

– 1

 

– 1

Carrying amount at 31 December 2019

1

7

99

107

Alpiq has disposed of all of the loan claims received from Swissgrid Ltd in 2014 as part of the transfer of high-voltage grids. As part of the disposal, the Swissgrid loan tranches were sold without the contractually related conversion rights. Swissgrid Ltd can, or must, convert the loans into equity if certain conditions arise. In this instance, the buyers of the loans would receive shares in the equity of Swissgrid Ltd. In the case of a conversion, however, Alpiq is obligated on the basis of the contract with the buyers of the loans to purchase from the buyer all shares in the equity of Swissgrid Ltd arising from the conversion to a maximum amount of CHF 99 million (previous year: CHF 148 million). As a consequence, although Alpiq has sold the loans, it has also entered into a directly related obligation in the amount of CHF 99 million (CHF 148 million). Due to the aforementioned contractual structure of the transaction, the loans could not be derecognised and remain on Alpiq’s books as “Other non-current assets” in the amount of CHF 50 million (CHF 99 million) and as “Receivables” in the amount of CHF 49 million (CHF 49 million) on account of the maturity of the underlying Swissgrid Ltd convertible bonds. The reclassification to receivables means that this amount of Swissgrid Ltd convertible bonds will be due for repayment in the next 12 months. Financial liabilities also exist in the amount of the obligations that were entered into as a result of the sales. These are included under “Other non-current liabilities” in the amount of CHF 50 million (CHF 99 million) and under “Other current liabilities” in the amount of CHF 49 million (CHF 49 million).

3.4 Other non-current liabilities

3.4 Other non-current liabilities

Among other things, this item includes obligations in an amount of CHF 50 million (previous year: CHF 99 million) arising from the sale of loans receivable due from Swissgrid Ltd. Note 3.3 provides further information about the transaction.

3.5 Financial liabilities

3.5 Financial liabilities

CHF million

Bonds

Loans payable

Lease liabilities

Total

Non-current financial liabilities at 1 January 2020

818

311

46

1,175

Current financial liabilities at 1 January 2020

 

126

6

132

Financial liabilities at 1 January 2020

818

437

52

1,307

Proceeds from financial liabilities

 

13

3

16

Repayment of financial liabilities

 

– 102

– 9

– 111

Unwinding of discount

 

 

2

2

Currency translation differences

 

– 2

 

– 2

Financial liabilities at 31 December 2020

818

346

48

1,212

Non-current financial liabilities at 31 December 2020

675

196

42

913

Current financial liabilities at 31 December 2020

143

150

6

299

CHF million

Bonds

Loans payable

Lease liabilities

Total

Non-current financial liabilities at 31 December 2018

817

490

 

1,307

Current financial liabilities at 31 December 2018

149

46

 

195

Financial liabilities at 31 December 2018

966

536

0

1,502

Impact of change in accounting standard (first-time application of IFRS 16)

 

– 35

60

25

Financial liabilities at 1 January 2019

966

501

60

1,527

Proceeds from financial liabilities

 

53

2

55

Repayment of financial liabilities

– 149

– 110

– 9

– 268

Unwinding of discount

1

1

2

4

Reclassified to “Liabilities held for sale”

 

 

– 1

– 1

Currency translation differences

 

– 8

– 2

– 10

Financial liabilities at 31 December 2019

818

437

52

1,307

Non-current financial liabilities at 31 December 2019

818

311

46

1,175

Current financial liabilities at 31 December 2019

126

6

132

Bonds outstanding at the reporting date

CHF million

Maturity

Earliest repayment date

Effective interest rate %

Carrying amount at 31 Dec 2020

Carrying amount at 31 Dec 2019

Alpiq Holding Ltd. CHF 144 million face value, 2 1/4 % fixed rate

2011 / 2021

20 Sept 2021

2.401

143

143

Alpiq Holding Ltd. CHF 145 million face value, 3 % fixed rate

2012 / 2022

16 May 2022

3.060

145

145

Alpiq Holding Ltd. CHF 141 million face value, 2 1/8 % fixed rate

2015 / 2023

30 Jun 2023

2.123

141

141

Alpiq Holding Ltd. CHF 260 million face value, 2 5/8 % fixed rate

2014 / 2024

29 Jul 2024

2.712

259

259

Electricité d’Emosson SA CHF 130 million face value, 1 3/8 % fixed rate

2017 / 2022

2 Nov 2022

1.441

130

130

Relative to face value, the weighted interest rate issued at the reporting date on bonds listed on the SIX Swiss Exchange was 2.35 % (previous year: 2.34 %), and 3.52 % (3.53 %) on loans payable. The latter also includes project financing facilities denominated in euros. The weighted average rate of interest on the bonds and loans payable amounts to 2.67 % (2.72 %).

Accounting policies

The accounting policies for financial liabilities are disclosed in note 3.2 and note 3.6.

3.6 Leases

3.6 Leases

The Alpiq Group is the lessee in several cases, particularly in connection with power production from wind farms as well as land and building and IT infrastructure rentals. These leases are generally concluded for a fixed term of one month to 20 years, and may contain renewal or termination options. The table below shows the change in net carrying amounts of the right-of-use assets capitalised in the line item property, plant and equipment:

CHF million

Rights of use for buildings

Rights of use for power plants

Rights of use for others

Total

Net carrying amount at 1 January 2020

16

28

4

48

Investments

2

2

Depreciation

– 3

– 2

– 1

– 6

Impairments

– 1

– 1

Reversal of impairment

1

1

Currency translation differences

– 1

– 1

Net carrying amount at 31 December 2020

16

24

3

43

Of which, cost value

22

38

5

65

Of which, accumulated depreciation

– 6

– 14

– 2

– 22

CHF million

Rights of use for buildings

Rights of use for power plants

Rights of use for others

Total

Net carrying amount at 1 January 2019

20

33

4

57

Investments

1

 

1

2

Reclassified to “Assets held for sale”

 

– 1

 

– 1

Depreciation

– 3

– 3

– 1

– 7

Impairments

– 1

 

 

– 1

Currency translation differences

– 1

– 1

 

– 2

Net carrying amount at 31 December 2019

16

28

4

48

Of which, cost value

20

38

5

63

Of which, accumulated depreciation

– 4

– 10

– 1

– 15

The change in carrying amounts of the lease liabilities included under financial liabilities can be seen in note 3.5. The total cash outflow from leases amounted to CHF 9 million in 2020 (previous year: CHF 9 million).

Accounting policies

The Alpiq Group applies a uniform procedure for the recognition and measurement of leases. It does not make use of the practical expedients for short-term and low-value leases permitted under IFRS 16. It is assessed upon concluding a contract whether it constitutes a lease in accordance with IFRS 16 or contains such an element. A lease exists if a contract grants Alpiq the right to control a certain asset over a period of time in exchange for payment. The right-of-use assets and the lease liabilities representing Alpiq’s obligation to make lease payments are recognised in the balance sheet at the time when the lease asset becomes available. The right-of-use assets are included under property, plant and equipment in the balance sheet. They are measured at amortised cost and depreciated on a straight-line basis over the lease term or their lifetime taking any impairment losses into account. Acquisition costs include the amount of recognised lease liabilities plus any dismantling obligations, directly attributable acquisition costs and one-off payments made at or before the start of the contract, less any lease incentives received.

The lease liabilities are initially recognised at the present value of the expected future lease payments. The present value is calculated with the lessee’s incremental borrowing rate applicable for the country, the term and the currency. In subsequent periods, the lease liabilities are measured at amortised cost by applying the effective interest method. The lease liabilities are recognised in current or non-current financial liabilities as appropriate.

The determination of the lease term as a basis for the expected future payments may require various estimates from management regarding the future use of the leased asset. Extension options are only taken into account in the contractual term if it is reasonably certain that the option will be exercised. Termination options are only taken into account if it is reasonably certain that the option will not be exercised. Alpiq takes into account all relevant factors that create an economic incentive to exercise the option. Alpiq has internally defined the following limits to determine the contractual term for callable leases with an unlimited term: for buildings, car parks and power plants a maximum of ten years, and for all others such as furniture, IT equipment and vehicles a maximum of two years.

3.7 Equity

3.7 Equity

Share capital

At 1 January 2020, the share capital was at CHF 278.7 million, comprising 27,874,649 fully-paid-in registered shares at par value of CHF 10 each. On 24 June 2020, the Annual General Meeting of Alpiq Holding Ltd. approved the squeeze-out merger with Alpha 2020 Ltd. proposed by the Board of Directors. Following the approval resolution passed at the Extraordinary General Meeting of Alpha 2020 Ltd. on the same day, Alpiq Holding Ltd. was merged as the transferring company into Alpha 2020 Ltd., which was renamed Alpiq Holding Ltd. on the same day. The merger became legally effective upon entry in the Swiss commercial register on 26 June 2020. After the merger and change of name, Alpiq Holding Ltd. had a share capital of CHF 0.279 million, comprising 27,874,649 registered shares at par value of CHF 0.01 each.

The conversion of the hybrid loan from the shareholders in the fourth quarter of 2020 (see below) created 5,235,715 new registered shares at par value of CHF 0.01 each, leading to a share capital increase of CHF 52,357.15. At 31 December 2020, the share capital was at CHF 0.331 million, comprising 33,110,364 fully-paid-in registered shares at par value of CHF 0.01 each.

The shareholder structure breaks down as follows:

 

Stakes in % at 31 Dec 2020

Stakes in % at 31 Dec 2019

EOS HOLDING SA

33.33

31.44

Schweizer Kraftwerksbeteiligungs-AG

33.33

27.06

EBM (Genossenschaft Elektra Birseck)

19.90

13.66

EBL (Genossenschaft Elektra Baselland)

6.44

7.13

Eniwa Holding AG

2.12

2.00

Aziende Industriali di Lugano (AIL) SA

1.79

2.13

IBB Holding AG

1.12

 

Regio Energie Solothurn

1.00

 

WWZ AG

0.96

0.91

Canton of Solothurn

 

5.61

Other

 

10.06

The Board of Directors of Alpiq Holding Ltd. submits a proposal to the Annual General Meeting at 28 May 2021 to distribute a dividend of CHF 1.40 per share (totalling CHF 46 million) for the 2020 financial year.

Hybrid capital

Hybrid loan from the main Swiss shareholders

In 2013, the main Swiss shareholders subscribed to a hybrid loan in the amount of CHF 367 million. In the fourth quarter of 2020, the Board of Directors of Alpiq Holding Ltd. proposed a conversion of the outstanding hybrid loan from the shareholders into equity. By resolution dated 29 October 2020, the Extraordinary General Meeting approved the share capital increase. The amendment to the Articles of Association and the approval of the audited capital increase report by the Board of Directors both took place in mid-November. The share capital increase became legally effective upon entry in the Swiss commercial register on 16 November 2020.

Interest payments on the hybrid loan from the main Swiss shareholders could be suspended without the need for Alpiq to subsequently pay the suspended interest. As in the previous year, Alpiq resolved not to pay any interest on the hybrid loan from the main Swiss shareholders for the period from March 2019 to March 2020. Any claim to interest accrued after March 2020 was waived as part of the conversion.

Public hybrid bond

In 2013, Alpiq placed a CHF 650 million public hybrid bond on the Swiss capital market. It has an unlimited maturity and qualifies as equity under IFRS accounting guidelines. Alpiq is entitled to repay the public hybrid bond at 15 November of each year. As in the previous year, Alpiq again opted not to exercise this option in the 2020 financial year. The interest rate was adjusted for the first time in 2018 to reflect the market conditions prevailing at the time and since then has stood at 4.5325 %. The interest rate is adjusted to reflect prevailing market conditions every five years and therefore for the next time at 15 November 2023. In 2023 and 2043, the interest rate will be increased by an additional 25 bps and 75 bps respectively. Interest payments on the public hybrid bond can be suspended at Alpiq’s discretion. In this case, the payment of interest lapses after three years.

The interest after tax attributable to 2020 was CHF 29 million (previous year: CHF 29 million). Interest from the public hybrid bond that is attributable to the reporting year meets the criteria of a preference dividend, irrespective of whether the interest was paid or a legal obligation for the payment exists, and is deducted from the “Net income attributable to equity investors of Alpiq Holding Ltd.” for the calculation of the undiluted earnings per share. The accrued interest after tax amounted to a total of CHF 4 million at 31 December 2020 (CHF 18 million; of which CHF 4 million for the public hybrid bond). As no legally enforceable payment obligation exists, the accrued interest was not accrued as a financial liability, and was not deducted from equity. Interest payments totalling CHF 29 million occurred in 2020. Due to the equity character of the hybrid capital, these distributions were carried directly to equity (retained earnings).

4 Operating assets and liabilities

4.1 Property, plant and equipment

4.1 Property, plant and equipment

CHF million

Land and buildings

Power plants

Transmission assets

Others 1

Assets under construction and prepayments

Right-of-use assets 2

Total

Net carrying amount at 1 January 2020

116

1,673

11

26

60

48

1,934

Acquisition / disposal of subsidiaries

 

 

 

 

– 4

 

– 4

Investments

 

 

 

1

50

2

53

Own work capitalised

 

 

 

 

1

 

1

Reclassifications

 

27

 

1

– 34

 

– 6

Depreciation

– 4

– 85

– 1

– 4

 

– 6

– 100

Impairment

 

– 22

 

 

 

– 1

– 23

Reversals of impairment

 

63

 

 

4

1

68

Currency translation differences

 

– 1

 

 

 

– 1

– 2

Net carrying amount at 31 December 2020

112

1,655

10

24

77

43

1,921

Of which, cost value

175

4,933

41

37

81

65

5,332

Of which, accumulated depreciation

– 63

– 3,278

– 31

– 13

– 4

– 22

– 3,411

1 Includes machinery, equipment and vehicles as well as decommissioning and maintenance costs

2 For details, see note 3.6

CHF million

Land and buildings

Power plants

Transmission assets

Others 1

Assets under construction and prepayments

Right-of-use assets 2

Total

Net carrying amount at 1 January 2019

119

2,266

11

29

33

57

2,515

Investments

 

17

 

1

40

2

60

Own work capitalised

 

 

 

 

1

 

1

Reclassifications

 

22

 

2

– 9

 

15

Reclassified to “Assets held for sale”

 

– 310

 

– 2

– 4

– 1

– 317

Depreciation

– 3

– 98

 

– 4

 

– 7

– 112

Impairment

 

– 201

 

 

 

– 1

– 202

Currency translation differences

 

– 23

 

 

– 1

– 2

– 26

Net carrying amount at 31 December 2019

116

1,673

11

26

60

48

1,934

Of which, cost value

177

4,917

42

37

182

63

5,418

Of which, accumulated depreciation

– 61

– 3,244

– 31

– 11

– 122

– 15

– 3,484

1 Includes machinery, equipment and vehicles as well as decommissioning and maintenance costs

2 For details, see note 3.6

Impairment losses and reversals of impairment losses in 2020

Impairment losses of CHF 23 million (previous year: CHF 202 million) and reversals of impairment losses of CHF 68 million (CHF 0 million) were recognised in 2020.

On 27 January 2020, Gestore dei Servizi Energetici GSE S.p.A. (GSE), which is responsible for implementing and monitoring incentive mechanisms and subsidies for the production of electricity from renewable energies in Italy, issued Società Agricola Solar Farm 4 S.r.l. (SASF 4) with the final report on its inspection, which started in July 2017 and ended in 2019. In this, GSE stated that, on the one hand, it identified deviations between the specifications named in the documentation to apply for feed-in tariffs and the evidence provided, and, on the other hand, that certain evidence was not available. The application to receive feed-in tariffs was made by the Moncada Energy Group before the solar plants were constructed. As the builder of the plants, it was also responsible for ensuring that the plants were built in compliance with the specifications and that the corresponding evidence could be provided. Alpiq acquired SASF 4 from the Moncada Energy Group S.r.l. in 2018. GSE deemed the deviations identified to be significant and therefore withdrew the right of SASF 4 to the feed-in tariffs it had already received and stipulated that SASF 4 loses the right to all future feed-in tariffs. Alpiq contested the decision by making use of the legal means of appeal at its disposal. On account of the potential reduction of the right to future feed-in tariffs, Alpiq recognised impairment losses on the solar plants concerned in the previous year and in the first half of 2020. In the previous year, it also posted a provision in other provisions for potential repayments of feed-in tariffs received. Following the submission of further evidence and various proceedings, at the end of 2020, GSE reversed the complete revocation of the right to feed-in tariffs ordered at the start of 2020 and, instead, stipulated a reduction of the feed-in tariffs originally awarded by 18 %. Alpiq therefore recognised a reversal of the impairment loss of CHF 12 million on the power plants and a reversal of the provision of CHF 9 million on SASF 4, which belongs to the Generation International business division. The recoverable amount was calculated using a pre-tax discount rate of 7.54 %. Alpiq is also reviewing the legal steps against the Moncada Energy Group to protect itself from losses.

In the Generation International business division, impairment losses had to be recognised on the wind farms of the Italian companies Alpiq Wind Italia S.r.l. and Enpower 2 S.r.l., on the solar plants of the Italian company Società Agricola Solar Farm 2 S.r.l. (SASF 2) and on the small-scale hydropower plants of Isento Wasserkraft AG. These came to CHF 17 million for the wind farms, CHF 2 million for the solar plants and CHF 2 million for the small-scale hydropower plants. The main reasons behind these impairment losses are feed-in tariffs that have expired or are due to expire in the coming years, forecasts of falling electricity prices and a higher discount rate. The recoverable amount was calculated using a pre-tax discount rate of 6.77 % for Alpiq Wind Italia, of 5.39 % for Enpower 2, of 6.20 % for SASF 2 and of 5.25 % for Isento Wasserkraft.

Alpiq recognised a reversal of the impairment loss of CHF 52 million on the thermal power plant San Severo in Italy, which belongs to the Generation International business division. The profits generated and the future prospects demonstrate that the performance potential has increased for the long term. The recoverable amount was calculated using a pre-tax discount rate of 9.62 %.

In connection with the sale of the Swedish wind farm Tormoseröd, which belonged to the Generation International business division, Alpiq recognised a reversal of the impairment loss of CHF 4 million. For more information about the sale, please refer to note 5.2.

Impairment 2019

Impairment losses of CHF 186 million related to the sold Czech coal-fired power plants Kladno and Zlín in the Generation International business division before the reclassification to assets held for sale. For detailed explanations on this and on impairment losses on sold assets, please refer to note 5.2. In addition, impairment losses of CHF 14 million had to be recognised on solar plants in connection with GSE’s final inspection report (see impairment losses and reversals of impairment losses in 2020). The recoverable amount was calculated using a pre-tax discount rate of 4.63 %.

Contractual obligations

At the reporting date, the Group had contractual commitments of CHF 29 million (previous year: CHF 25 million) for the construction and acquisition of property, plant and equipment.

Accounting policies

Property, plant and equipment is stated at cost, net of accumulated depreciation and any impairment losses. Obligations to restore land and sites after licence expiry or decommissioning are accounted for individually in accordance with the contract terms. Estimated restoration costs (including decommissioning costs) are included in the cost of acquisition and manufacture, and are recognised as a provision. Replacements and improvements are capitalised if they substantially extend the useful life, increase the capacity or substantially improve the quality of the property, plant or equipment.

Depreciation is applied to property, plant and equipment on a straight-line basis over their estimated useful lives, or to the expiry date of power plant licences. Assets under construction and prepayments are not subject to depreciation until they are completed or in working condition and have been reclassified to the corresponding asset category; they are depreciated for the first time once they have been completed or have been brought to a working condition. The estimated useful lives of the various classes of assets range as follows:

  • Power plants: 20 – 80 years
  • Transmission assets: 15 – 40 years
  • Buildings: 20 – 60 years
  • Machinery, equipment and vehicles: 3 – 20 years
  • Land: only in case of impairment
  • Assets under construction and prepayments: if impairment is already evident

The residual value and useful life of an asset are reviewed regularly, but at least at each financial year end, and adjusted where required. At every reporting date, a test is performed to determine whether there is any indication that items of property, plant and equipment are impaired. If there is any indication of impairment, the recoverable amount is determined for the asset. If the asset’s carrying amount exceeds its estimated recoverable amount, an impairment loss equivalent to the difference is recognised. An impairment loss previously recognised for an asset is reversed in the income statement if the impairment no longer exists, or has decreased. An impairment loss is reversed only to the extent that the asset’s carrying amount does not exceed the carrying amount that would have been determined, net of depreciation, had no impairment loss been recognised.

The calculation of the useful life, residual value and recoverable amount involves estimates. The recoverable amount of an asset or cash-generating unit is the higher of its fair value less costs of disposal, and its value in use. Value in use is calculated by discounting the estimated future cash flows (discounted cash flow method). This is based on business plans as approved by management for the next three financial years as well as further influencing factors announced after the plans have been approved. These plans are based on historical empirical data as well as current market expectations and therefore contain significant estimation uncertainties and assumptions. These largely relate to wholesale prices on European forward markets and forecasts of medium- and long-term energy prices, foreign currencies (especially EUR / CHF and EUR / USD exchange rates), inflation rates, discount rates, regulatory conditions and investment activities relating to the company. The estimates made are reviewed periodically using external market data and analyses. To calculate the terminal values, the cash flows were inflated by a growth rate of 2.0 % (previous year: 2.0 %). This growth rate corresponds to the long-term average growth that Alpiq expects and represents a forecast. The discount rates that have been applied reflect the current market estimate for the specific risks to be allocated to the assets and represent a best estimate. Actual results can differ from these estimates, assumptions and forecasts, resulting in significant adjustments in subsequent periods. If the asset does not generate cash inflows that are independent of those from other assets, the recoverable amount of the individual asset is estimated for the cash-generating unit to which the asset belongs.

4.2 Intangible assets

4.2 Intangible assets

CHF million

Energy purchase rights 1

Goodwill

Other intangible assets

Assets under development and prepayments

Total

Net carrying amount at 1 January 2020

30

0

66

6

102

Investments

 

 

 

11

11

Own work capitalised

 

 

 

5

5

Reclassifications

 

 

21

– 15

6

Amortisation

– 2

 

– 19

 

– 21

Impairment

– 1

 

– 3

 

– 4

Net carrying amount at 31 December 2020

27

0

65

7

99

Of which, cost value

1,492

 

514

7

2,013

Of which, accumulated amortisation

– 1,465

 

– 449

 

– 1,914

1 Include prepayments for rights to purchase energy in the long term, including capitalised interest, as well as long-term energy purchase agreements acquired in business combinations.

CHF million

Energy purchase rights 1

Goodwill

Other intangible assets

Assets under development and prepayments

Total

Net carrying amount at 1 January 2019

31

16

77

8

132

Investments

 

 

 

8

8

Own work capitalised

 

 

 

4

4

Reclassifications

 

 

7

– 7

0

Reclassified to “Assets held for sale”

 

– 16

– 1

 

– 17

Amortisation

– 1

 

– 14

 

– 15

Impairment

 

 

– 2

– 7

– 9

Currency translation differences

 

 

– 1

 

– 1

Net carrying amount at 31 December 2019

30

0

66

6

102

Of which, cost value

1,492

 

500

6

1,998

Of which, accumulated amortisation

– 1,462

 

– 434

 

– 1,896

1 Include prepayments for rights to purchase energy in the long term, including capitalised interest, as well as long-term energy purchase agreements acquired in business combinations.

Impairment 2020

In the Digital & Commerce business division, an impairment loss of CHF 3 million was recognised in other intangible assets, which relates to the software that was impaired in the previous year. In the Generation International business division, impairment losses of CHF 1 million had to be recognised on the energy purchase rights of Alpiq Wind Italia S.r.l. Please refer to note 4.1 for more information.

Impairment 2019

In the Digital & Commerce business division, an impairment loss of CHF 7 million had to be recognised in assets under development and of CHF 2 million in other intangible assets, as software could not be used to the extent originally expected.

Accounting policies

Intangible assets are stated at cost, net of accumulated amortisation and any impairment losses. Assets with a limited useful life are generally amortised on a straight-line basis over their estimated useful economic lives. Amortisation of energy purchase rights is applied in line with the scope of the energy purchases made each year in relation to the total energy purchase quantity agreed contractually. The amortisation period and amortisation method are reviewed at each financial year end. The useful lives of the intangible assets recognised range from 1 to 77 years. Assets under development and prepayments are not subject to amortisation. An impairment test is only performed whenever indications exist that the assets may be impaired.

If the asset’s carrying amount exceeds its estimated recoverable amount, it is written down to its recoverable amount. An impairment loss previously recognised for an intangible asset is reversed in the income statement if the impairment no longer exists, or has decreased. An impairment loss is reversed only to the extent that the asset’s carrying amount does not exceed the carrying amount that would have been determined, net of depreciation, had no impairment loss been recognised.

For the significant estimation uncertainties and assumptions, please refer to note 4.1.

4.3 Investments in partner power plants and other associates

4.3 Investments in partner power plants and other associates

CHF million

Partner power plants

Other associates

Total

Carrying amount at 1 January 2020 (adjusted) 1

2,314

10

2,324

Dividends

– 22

 

– 22

Share of profit / loss

– 35

 

– 35

IAS 19 and IFRS 9 effects recognised in other comprehensive income

13

2

15

Investments

 

1

1

Reclassifications

– 6

3

– 3

Carrying amount at 31 December 2020

2,264

16

2,280

1 See note 1.4

CHF million

Partner power plants

Other associates

Total

Carrying amount at 1 January 2019 (adjusted) 1

2,398

20

2,418

Dividends

– 22

 

– 22

Share of profit / loss

– 38

– 2

– 40

IAS 19 and IFRS 9 effects recognised in other comprehensive income

– 18

– 2

– 20

Reclassifications

– 6

 

– 6

Disposals

 

– 2

– 2

Impairment

 

– 4

– 4

Carrying amount at 31 December 2019 (adjusted) 1

2,314

10

2,324

1 See note 1.4

Summarised financial information

Under the partner agreements in force, the shareholders of partner power plants are required to take on the energy and pay the annual costs allotted to their ownership interest throughout the concession period. Furthermore, nuclear power plant owners are required to pay limited additional contributions to the decommissioning and waste disposal fund, in case one primary contributor is unable to fulfil payments. The partner agreements run through the useful life of the power plant, or through the concession period, and cannot be terminated. For individual partner power plants, Alpiq assigned a portion of the energy to be granted to it on account of its ownership interest as well as the associated obligation to pay its annual costs to another company. In such cases, the reported interest relevant from an economic perspective may differ from the interest held pursuant to corporate law. The Alpiq Group’s share of the regular annual costs of all partner power plants in 2020 amounted to CHF 452 million (previous year: CHF 345 million). This amount is included in energy and inventory costs.

The merger of Atel and EOS, which formed Alpiq in 2009, led to fair value adjustments being made on the acquired assets in the course of the business combination. These are included in the summarised financial information and are calculated on the basis of a weighting.

Material partner power plants 2020

 

 

 

 

 

 

 

 

 

 

 

 

Grande Dixence SA

Nant de Drance SA

Kernkraftwerk Gösgen-Däniken AG

Kernkraftwerk Leibstadt AG

Kernkraftwerk- Beteiligungs- gesellschaft AG (KBG)

CHF million

Gross values

Alpiq share

Gross values

Alpiq share

Gross values

Alpiq share

Gross values

Alpiq share

Gross values

Alpiq share

Non-current assets

2,135

1,282

2,054

800

3,743

1,487

5,469

1,431

735

246

Of which, non-current financial assets

49

30

9

4

2,329

925

2,290

599

 

 

Current assets

19

11

281

110

108

43

297

77

14

5

Of which, cash and current financial assets

1

 

278

108

17

7

99

26

6

2

Non-current liabilities

666

400

1,646

642

3,364

1,337

4,309

1,127

87

29

Of which, non-current financial liabilities

665

399

1,646

642

105

42

485

127

87

29

Current liabilities

235

141

283

110

132

52

198

52

38

13

Of which, current financial liabilities

166

100

250

98

46

18

40

10

23

7

Total equity

1,253

752

406

158

355

141

1,259

329

624

209

Income

168

101

3

1

421

168

520

137

131

44

Expenses

– 195

– 117

– 14

– 5

– 407

– 162

– 530

– 139

– 169

– 56

Net income

– 27

– 16

– 11

– 4

14

6

– 10

– 2

– 38

– 12

Other comprehensive income

3

2

– 5

– 2

18

7

19

5

 

 

Total comprehensive income

– 24

– 14

– 16

– 6

32

13

9

3

– 38

– 12

Dividends received

 

5

 

 

 

7

 

6

 

2

The associates classified as material by Alpiq comprise only strategically significant partner power plants. No market prices are available for any of these companies.

Material partner power plants 2019

 

 

 

 

 

 

 

 

 

 

 

 

Grande Dixence SA

Nant de Drance SA (adjusted) 1

Kernkraftwerk Gösgen-Däniken AG

Kernkraftwerk Leibstadt AG

Kernkraftwerk- Beteiligungs- gesellschaft AG (KBG)

CHF million

Gross values

Alpiq share

Gross values

Alpiq share

Gross values

Alpiq share

Gross values

Alpiq share

Gross values

Alpiq share

Non-current assets

2,192

1,315

1,975

770

3,641

1,447

5,349

1,399

777

259

Of which, non-current financial assets

56

34

9

4

2,213

879

2,165

566

 

 

Current assets

6

4

25

10

183

73

378

99

5

2

Of which, cash and current financial assets

2

1

18

7

48

19

160

42

1

 

Non-current liabilities

835

494

1,417

552

3,343

1,329

4,212

1,102

67

22

Of which, non-current financial liabilities

814

489

1,417

552

136

54

485

127

67

22

Current liabilities

89

53

167

65

142

56

243

64

47

16

Of which, current financial liabilities

30

18

138

54

 

 

 

 

39

13

Total equity

1,274

772

416

163

339

135

1,272

332

668

223

Income

154

94

3

1

418

166

501

131

145

48

Expenses

– 193

– 113

– 20

– 8

– 403

– 160

– 499

– 131

– 177

– 59

Net income

– 39

– 19

– 17

– 7

15

6

2

0

– 32

– 11

Other comprehensive income

– 8

– 2

2

1

– 23

– 9

– 20

– 5

 

 

Total comprehensive income

– 47

– 21

– 15

– 6

– 8

– 3

– 18

– 5

– 32

– 11

Dividends received

 

5

 

 

 

7

 

6

 

2

1 See note 1.4

Individually immaterial partner power plants and other associates 2020

 

 

 

 

 

 

Individually immaterial partner power plants

Other associates

CHF million

Gross values

Alpiq share

Gross values

Alpiq share

Non-current assets

3,881

1,027

47

18

Of which, non-current financial assets

51

7

1

 

Current assets

112

21

28

9

Of which, cash and current financial assets

51

 

15

5

Non-current liabilities

1,419

306

18

5

Of which, non-current financial liabilities

1,392

300

 

 

Current liabilities

341

67

20

6

Of which, current financial liabilities

203

40

6

2

Total equity

2,233

675

37

16

Income

429

88

60

19

Expenses

– 443

– 95

– 57

– 19

Net income

– 14

– 7

3

Other comprehensive income

6

1

8

2

Total comprehensive income

– 8

– 6

11

2

Dividends received

 

2

 

 

Individually immaterial partner power plants and other associates 2019

 

 

 

 

Individually immaterial partner power plants

Other associates

CHF million

Gross values

Alpiq share

Gross values

Alpiq share

Non-current assets

3,994

1,055

25

10

Of which, non-current financial assets

60

8

 

 

Current assets

101

17

23

8

Of which, cash and current financial assets

52

9

10

4

Non-current liabilities

1,525

319

22

6

Of which, non-current financial liabilities

1,504

315

 

 

Current liabilities

299

64

6

2

Of which, current financial liabilities

148

35

 

 

Total equity

2,271

689

20

10

Income

385

80

84

26

Expenses

– 400

– 87

– 98

– 32

Net income

– 15

– 7

– 14

– 6

Other comprehensive income

– 12

– 2

– 8

– 2

Total comprehensive income

– 27

– 9

– 22