3.2 Financial instruments

Carrying amounts and fair values of financial assets and liabilities

The table below presents the fair values of the Group’s financial assets and financial liabilities. Cash and cash equivalents, trade receivables, trade payables and other receivables and liabilities are excluded from the table, as their carrying amounts do not differ materially from their respective fair values.

Fair value hierarchy of financial instruments

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 that are not based on quoted prices in active markets and which have a significant effect on the fair value

At the reporting date, the Alpiq Group measured the following assets and liabilities at their fair value or disclosed a fair value.

The energy, currency and interest rate derivatives comprise only OTC products, the majority of which are classified as Level 2. Fair value of energy derivatives is determined using a price curve model. The observable input factors (market prices) in the price curve model 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 correspond to the contractually agreed interest and amortisation payments discounted at market rates.

Level 3 energy derivatives

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

Transfers from Level 2 to Level 3 relate to energy derivatives measured on the basis of input factors that are no longer observable in an active market due to decreased market activity. Transfers out of Level 3 relate to energy derivatives measured on the basis of input factors that became observable in the financial year. Alpiq always applies reclassifications between Level 2 and Level 3 at the end of the reporting period. Both in the reporting year and during the previous year, no transfers between Level 1 and 2 took place.

A change of EUR 1 in the price of the underlying commodity would increase or decrease the fair value of Level 3 instruments by CHF 8.0 million. The sensitivity analysis does not consider any interdependencies between different commodities. Furthermore, it reflects only the standalone effect on these instruments and does not include any offsetting effects from related hedging positions.

Development of day one gains and losses

Measurement of financial instruments that rely on valuation inputs not directly observable in active markets may give rise to differences between the fair value determined at initial recognition and the transaction price. Such differences (“day-one gains or losses”) are deferred at inception and recognised in profit or loss over time, typically on a straight-line basis, until the underlying valuation inputs become observable or the instrument is derecognised.

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.

Expense / income related to financial assets and liabilities

For information on the impairment of trade receivables, see 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 does not have financial instruments measured at fair value through other comprehensive income.

Financial assets and liabilities at fair value through profit or loss

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.

In principle, contracts entered into for the purchase or sale of energy for the Group’s own use are not recognised in the balance sheet until delivery. This also includes contracts to buy or sell non-financial items that can be settled net, provided they are entered into and continue to be held for the purpose of receipt or delivery in accordance with the Group’s expected purchase, sale or usage requirements. By way of exception, Alpiq irrevocably designates some of these transactions as contracts measured at fair value through profit or loss, if otherwise an accounting mismatch would occur.

Hedging is usually carried out using physical forwards or futures contracts and is related mainly to Alpiq’s own asset portfolio in Switzerland. Such non-speculative hedging transactions are treated as own-use contracts. They are not reported as derivative financial instruments measured at fair value, but rather as executory contracts. Revenue or costs from such activities is recognised on delivery. Margin calls related to these futures are recognized as other receivables or other liabilities.

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 minus direct transaction costs. Trade receivables are measured at transaction price.

For the subsequent measurement of financial assets at amortised cost, any impairments are calculated using the expected credit loss model according to which losses on unsecured financial assets expected in future are also recognised. Impairment losses expected in the future are determined using publicly available probability of default, which takes into account forward-looking information and historical probabilities 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 to trade receivables for the measurement of the expected losses by recognising the lifetime expected credit losses (see note 4.5).

Cash flow hedge accounting

Foreign currency hedges

Foreign currency positions arising from the sale of Swiss production capacity in euros are hedged with forward contracts based on expected transaction volumes. The hedge accounting programme applied up to year-end 2024 was subsequently terminated, with accumulated amounts in other comprehensive income being recycled to profit or loss when the underlying transactions occur. In 2025, Alpiq introduced a new hedge accounting programme that continues to designate the spot component as the hedging instrument, while also applying the cost-of-hedging approach whereby changes in the forward components are recognised in other comprehensive income and reclassified upon realisation of the hedged transactions. At the reporting date, no ineffectiveness was identified in relation to the foreign currency hedges. The underlying forecasted transactions will affect the income statement in the years 2026 to 2030.

Change in cash flow hedge reserves

Interest rate swaps

In previous years, interest rate swaps were used to hedge the interest rate exposure arising from project financing facilities in Italy. In 2024 and 2025, parts of these financing facilities were repaid, resulting in the partial discontinuation of the associated hedge accounting relationships. Besides the remaining interest rate swaps related to these facilities, one additional interest rate swap is in place for a partner power plant.