4.7 Provisions
|
CHF million |
Onerous contracts |
Decommis- sioning own power plants |
Other |
Total |
|
Non-current provisions at 1 January 2022 |
416 |
48 |
26 |
490 |
|
Current provisions at 1 January 2022 |
121 |
|
8 |
129 |
|
Provisions at 1 January 2022 |
537 |
48 |
34 |
619 |
|
Increase |
130 |
|
9 |
139 |
|
Unwinding of discount |
9 |
2 |
|
11 |
|
Utilised |
– 206 |
|
– 3 |
– 209 |
|
Unused amounts reversed |
– 428 |
|
– 7 |
– 435 |
|
Reclassified to “Liabilities held for sale” |
– 1 |
– 1 |
|
– 2 |
|
Currency translation differences |
– 19 |
|
– 1 |
– 20 |
|
Provisions at 31 December 2022 |
22 |
49 |
32 |
103 |
|
Non-current provisions at 31 December 2022 |
14 |
49 |
23 |
86 |
|
Current provisions at 31 December 2022 |
8 |
|
9 |
17 |
Onerous contracts
These provisions comprise the present value of the onerous contracts in place at the reporting date.
Due to movements in electricity and gas prices, own use contracts for the physical purchase or sale of electricity can become onerous. Although Alpiq hedges these contracts from an economic perspective, this hedging also involves financial contracts. As Alpiq applies hedge accounting for energy purchase and sale contracts only for firm commitments in very restricted cases, own use contracts and associated financial hedges normally have to be accounted for and presented separately.
The onerous contract provision relating to the future procurement of energy from the Nant de Drance (NdD) pumped storage power plant, which amounted to CHF 389 million at the beginning of the year, was reversed in full at 30 June 2022, resulting in a positive effect on earnings of CHF 399 million. The section below explains the background of the reversal.
Electricity produced by Swiss assets (hydropower plants and nuclear plants) as well as some long-term energy purchase contracts are all hedged, optimised and marketed together on a portfolio basis within the Switzerland business division and thus form the Production Switzerland CGU. With the full commercial commissioning of NdD on 1 July 2022 the energy produced by NdD is hedged, optimised and marketed together with the other production facilities in the portfolio of the Production Switzerland CGU and thus its cashflows are no longer independent. As a result, NdD became part of the Production Switzerland CGU and no longer constitutes a separate valuation unit. As the combined expected economic benefits of the Production Switzerland CGU exceeded the expected cost, the provision for NdD was reversed in full. The integration of NdD into the Production Switzerland CGU represented a triggering event. The impairment test performed at 30 June 2022 did not lead to any impairment losses on PPE.
The amount of the provisions for onerous contracts depends on various assumptions, relating in particular to the development of wholesale prices on European forward markets and forecasts of medium-term and long-term energy prices. These assumptions associated with uncertainties are made at the reporting date, some of which can result in significant adjustments in subsequent periods.
Decommissioning own power plants
The provision for decommissioning the Group’s own power plant portfolio covers the estimated costs of decommissioning and restoration obligations associated with the Group’s existing power plants.
Other provisions
Other provisions include obligations arising from the human resources area, existing and pending obligations from litigation as well as other operating risks deemed probable.
Provisions for pending obligations from litigation are based on information available in each case and estimates made by management as to the outcome of the litigation. Depending on the actual outcome, the effective cash outflow can differ significantly from the provisions.
Accounting policies
Provisions cover all (legal or constructive) obligations arising from past transactions or events that are known at the reporting date and likely to be incurred, but are uncertain as to timing and / or amount. The amount is determined at the reporting date and corresponds to the best possible estimate of the expected cash outflow, discounted to the reporting date.