4.8 Contingent liabilities and guarantees
ANAF’s tax audit at Alpiq Energy SE
After the tax audit on the Bucharest branch of Alpiq Energy SE, Prague, the Romanian tax authority ANAF (Agenţia Naţională de Administrare Fiscală) issued the final tax assessment notice to Alpiq in the amount of RON 793 million or CHF 176 million for value added tax, corporate income tax and penalties (including late payment penalties) for the period of 2010 to 2014 in September 2017. The tax assessment determined by ANAF is being contested on account of its merits and the amount assessed, as Alpiq is convinced that the activities of Alpiq Energy SE in Romania have always been carried out in accordance with the applicable Romanian and European rules and regulations. Alpiq’s position is supported by current assessments provided by external legal and tax experts. Alpiq filed an objection with ANAF against the tax assessment in 2017. Alpiq received a decision from ANAF at the end of June 2018. In the main matter, ANAF supported its own view and dismissed the objection with regard to an amount of RON 589 million or CHF 131 million as being without merit. With regard to an amount of RON 204 million or CHF 45 million, it repealed the decision from the tax audit and ordered a reassessment. In one matter concerning an immaterial amount, ANAF ruled in favour of Alpiq. Alpiq contested the decision on the appeal made by ANAF by making use of the legal means of appeal at its disposal. Multiple hearings concerning this matter were held in 2020. In addition, the independent expert appointed by the court submitted his expert report to the court. However, ANAF made further accusations, which were contested by Alpiq. The next hearing will take place in March 2021.
On 29 January 2019, the Supreme Court in Bucharest decided that ANAF’s tax assessment of RON 589 million or CHF 131 million is not enforceable until a first-instance court decision has been reached. On 3 September 2019, the court of appeal in Bucharest also endorsed Alpiq’s request that the tax assessment is not enforceable until a last-instance court decision has been reached. This ruling is legally binding. Alpiq is demanding reimbursement of the costs arising from the bank guarantee and other expenses from ANAF and therefore filed a corresponding claim at the court of appeal in Bucharest in autumn 2019. This was partially endorsed in a first-instance ruling and Alpiq was awarded an immaterial amount of compensation for damages due to ANAF’s illegal safety measures. The claim for damages will be tried in civil proceedings.
Alpiq continues to deem it unlikely that this assessment will result in a negative outcome for the company and has therefore decided not to record a liability for the tax assessment.
Compensation review proceedings against Alpiq Holding Ltd.
In the squeeze-out merger (see note 3.7 Equity), all minority shareholders of Alpiq Holding Ltd. received compensation for each share held in Alpiq Holding Ltd. at the time of the merger. The compensation paid by a shareholder came to CHF 70 per share. In this way, the shareholders who received compensation in connection with the merger were treated the same as public shareholders who had tendered their Alpiq shares in the public purchase offer of Schweizer Kraftwerksbeteiligungs-AG (SKBAG).
As communicated in Alpiq’s press release on 4 September 2020, the two investors Knight Vinke (KVIP International V L.P.) and Merion Capital (Merion Capital LP, Merion Capital ERISA LP and Merion Capital II LP) each filed compensation review proceedings against Alpiq Holding Ltd. pursuant to Art. 105 of the Swiss Merger Act (FusG). In these two proceedings, the companies are seeking a judicial review of the compensation approved by both Annual General Meetings and paid by SKBAG. The two compensation review proceedings were filed with the competent court, Chambre patrimoniale cantonale of the canton of Vaud, as a request for arbitration (French: Requête de conciliation) on 1 September 2020. The two investors are demanding compensation based on the value of the registered shares of Alpiq Holding Ltd. at that time, amounting to at least CHF 140 (Knight Vinke) or CHF 130 (Merion) per share. This would correspond to additional compensation of around CHF 195 million to be paid by Alpiq Holding Ltd. to all minority shareholders who received compensation.
In the context of the voluntary public purchase offer by SKBAG, PricewaterhouseCoopers (PwC) was engaged as an independent expert to prepare and submit a fairness opinion on the appropriateness of the offer price from a financial perspective. Following a thorough analysis, PwC calculated a value range of CHF 65 to CHF 73 per share held in Alpiq Holding Ltd. At the time, PwC concluded in its fairness opinion that the offer price is fair and appropriate from a financial perspective. In connection with the squeeze-out merger, Alantra Ltd was engaged to compile an independent valuation report for the members of the Board of Directors of Alpiq Holding Ltd. and Alpha 2020 Ltd. The valuation report of Alantra determined a value range of CHF 63.30 to CHF 72.50 per share held in Alpiq Holding Ltd. and therefore confirmed that the agreed compensation of CHF 70 per share is appropriate.
On account of the facts and circumstances known at that time, including the two independent valuation reports which deemed the amount of compensation per share to be appropriate, Alpiq considers it unlikely that this litigation will result in a negative outcome for the company.
There were no significant contingent liabilities from pledges, guarantees and other commitments to third parties in favour of third parties at the reporting date, as was also the case at 31 December 2019. For additional obligations in connection with partner power plants, please see note 4.3. Contingent liabilities in connection with the sale of the Engineering Services business can be found in note 5.2.