7 Financial instruments and fair values

Carrying amounts and fair values of financial assets and liabilities

 

 

 

 

 

 

30 Jun 2021

31 Dec 2020

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

27

27

Positive replacement values of derivatives

 

 

 

 

Energy derivatives

2,060

2,060

621

621

Currency and interest rate derivatives

3

3

5

5

Financial liabilities at amortised cost

 

 

 

 

Bonds

818

852

818

857

Loans payable

298

308

346

358

Financial liabilities at fair value through profit or loss

 

 

 

 

Negative replacement values of derivatives

 

 

 

 

Energy derivatives

1,887

1,887

442

442

Currency and interest rate derivatives

19

19

19

19

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

30 Jun 2021

Level 1

Level 2

Level 3

Financial assets at fair value through profit or loss

 

 

 

 

Financial investments

1

 

1

 

Securities

27

 

27

 

Energy derivatives

2,060

 

1,902

158

Currency and interest rate derivatives

3

 

3

 

Financial liabilities at amortised cost

 

 

 

 

Bonds

852

852

 

 

Loans payable

308

 

308

 

Financial liabilities at fair value through profit or loss

 

 

 

 

Energy derivatives

1,887

 

1,873

14

Currency and interest rate derivatives

19

 

19

 

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

 

Both in the first half of 2021 and during the 2020 financial year, no significant reclassifications were applied between Levels 1 and 2. The reclassification from Level 2 to Level 3 mentioned below relates to energy derivatives with a significantly increased credit risk. Alpiq always applies reclassifications between Level 2 and Level 3 at the end of the reporting period.

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. Apart from the credit risk, a realistic change in unobservable input factors would not have a significant impact on Alpiq’s total comprehensive income or equity. More information about the credit risk associated with Level 3 energy derivatives can be found in note 6. 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

81

2

1

9

Purchases

7

2

 

 

Sales

– 6

 

 

 

Fair value changes through profit and loss in net revenue 1

66

22

5

– 8

Transfer to level 3

8

 

 

 

Offsetting

 

– 12

– 1

– 1

Currency translation differences

2

 

Replacement values at 30 June

158

14

5

0

1 Of which, CHF 66 million (previous year: CHF 5 million) is attributable to assets and CHF 22 million (CHF – 8 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 day one gains or losses and are amortised on a straight-line basis until the underlying markets of the valuation inputs become active.

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

7

1

 

 

Profit or loss recognised in the income statement

– 5

– 1

 

 

Balance at 30 June

13

12

0

13

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