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BKW GROUP CONSOLIDATED FINANCIAL STATEMENTS

Notes to the Financial Statements

1 Business activities

BKW AG, Bern (CH), along with its Group companies (hereinafter “BKW” or the “BKW Group”), is an international energy and infrastructure company. Its company network and extensive expertise allow it to offer its customers a full range of overall solutions. The Group plans, builds and operates infrastructure to produce and supply energy to businesses, households and the public sector, and offers digital business models for renewable energies. The BKW Group portfolio of services comprises everything from engineering consultancy and planning for energy, infrastructure and environmental projects, through integrated offers in the field of building technology, to the construction, servicing and maintenance of energy, telecommunications, transport and water networks.

2 Basis of preparation

2.1 General principles

The consolidated financial statements have been prepared in accordance with International Financial Reporting Standards (IFRS). They provide a true and fair view of the financial position, the results of operations and the cash flows of BKW. The consolidated financial statements also comply with Swiss company law. The closing date for the consolidated financial statements is 31 December. The consolidated financial statements are presented in Swiss francs (CHF).

The consolidated financial statements have been prepared on the historical cost basis. Exceptions are described in the Accounting and valuation principles.

2.2 Adoption of new standards and interpretations

Since 1 January 2019 BKW has applied various new and amended standards and interpretations which, with the exception of the amendments to the new IFRS 16 lease standard described in Note 3, have no material impact on BKW’s financial position, results of operations or cash flows.

2.3 Future adoption of new standards and interpretations

The following new and amended standards and interpretations had been published by the balance sheet date, but will not be applied until subsequent financial years. BKW intends to apply the changes from the date on which they enter into force (entry into force for financial years beginning on or after the dates in brackets):

No material effects on BKW’s consolidated financial statements are expected.

3 Changes to accounting principles

The first-time application of IFRS 16 had a material impact on the consolidated financial statements. The effects of IFRS 16 are explained in more detail below, along with the accounting and measurement principles that have applied since 1 January 2019 or that differ from existing principles.

IFRS 16 – “Leases”

IFRS 16 amends the rules on accounting for leases and replaces the previous standard IAS 17 and related interpretations. The standard provides a single accounting model for lessees, which means that almost all assets (right of use to the leased asset) and liabilities from leases must be recognised in the balance sheet. The distinction between operating and finance leases does not apply to lessees. The right of use is depreciated on a straight-line basis over the shorter of the lease term and the useful life of the leased asset. The lease liability is carried forward using the effective interest method and taking lease payments into account. The lease liability is discounted by applying an incremental borrowing rate specific to maturities and countries, unless the interest rate on which the lease payments are based is available. In the cash flow statement, the depreciation portion of newly recognised leases reduced the cash flow from financing activities. Previously, lease payments from operating leases reduced cash flow from operating activities. Interest payments are reported as cash flow from financing activities.

Lessor accounting is essentially unchanged on the former rules of IAS 17. Lessors continue to classify operating and finance leases on the basis of the distribution of opportunities and risks arising from the asset.

IFRS 16 was applied for the first time in accordance with the transitional rules of the modified retrospective approach. The comparative figures for the 2018 financial year have not been restated.

Using the option provided for in the standard, it was elected to keep the previous assessment under IAS 17 and IFRIC 4 instead of reassessing whether a lease that was concluded before the date of transition was or contained a lease at the date of initial application. BKW has also made use of the simplifications relating to the accounting for short-term and low-value leases. Payments made under leases with a term of no more than 12 months and leases in which the underlying asset is of low value are carried to expenses over the lease term using the straight-line method, as permitted under the option provided. At the date of initial application, leases that expire before 1 January 2020 were classified as current leases regardless of the lease’s inception date.

With the transition to IFRS 16, assets for the rights to use the leased assets of CHF 139.7 million (“property, plant and equipment” balance sheet item) and lease liabilities (“financial liabilities” balance sheet item) in the same amount were recognised as at 1 January 2019. The changeover had no effect on equity as at 1 January 2019.

Based on the operating lease liabilities as at 31 December 2018, the following reconciliation was made to the opening balance sheet value of the lease liabilities as at 1 January 2019:

CHF millions

Operating lease commitments as at 31.12.2018

82.0

Minimum lease payments (notional amount) on finance lease liabilities as at 31.12.2018

36.6

Relief option for short-term leases

– 2.0

Relief option for leases of low-value assets

– 1.5

Reasonably certain extension and termination options

79.1

Gross lease liabilities as at 01.01.2019

194.2

Discounting

– 24.1

Lease liabilities as at 01.01.2019

170.1

Present value of finance lease liabilities as at 31.12.2018

– 30.4

Additional lease liabilities as a result of the initial application of IFRS 16 as at 01.01.2019

139.7

The additional lease liabilities shown in the balance sheet were discounted using the incremental borrowing rate as at 1 January 2019. The weighted average interest rate was 2.3 %.

Payments from prior operating leases will no longer be recorded under “Operating expenses”. In the income statement, this reduced the operating result before depreciation, amortisation and impairment by CHF 26.3 million. However, the amount of depreciation on the newly recognised rights of use was similar, which is why there was only a minor impact on operating profit.

4 Consolidation

4.1 Consolidation principles

The consolidation is based on the financial statements of the individual Group companies, which have been drawn up according to uniform principles of valuation and presentation. Intercompany balances, transactions, profits and expenses are eliminated in full.

With one exception, all Group companies use 31 December as their closing date. The closing date for some associates and one joint arrangement differs from that of BKW since these companies close their accounts on 30 September in line with the hydrological year. The closing date for consolidation of these companies is set at 30 September. Adjustments are made for material transactions that occur between the closing date of the companies and the closing date of BKW.

4.2 Scope of consolidation

Group companies

Group companies are included in the consolidated financial statements in their entirety. There are no material restrictions on the transfer of funds from subsidiaries to the parent company.

Joint arrangements

Companies over which there is joint control are treated as joint ventures or joint operations. Joint operations are accounted for in the consolidated financial statements by recognising the Group’s share of the assets and liabilities and of the revenues and expenses. The Group’s joint ventures are accounted for using the equity method.

Associates

Investments in companies in which BKW is able to exercise significant influence but not overall control are classified as associates and accounted for using the equity method. A significant influence is generally held to be a share of voting rights of between 20 and 50 %. Rights agreed in contract may in some circumstances mean that a significant influence can be exerted even though the share of voting rights is smaller than 20 %. This applies in particular in the case of partner plants.

Partner plants comprise companies that build and operate power plants or that manage energy procurement rights and plan nuclear storage facilities. The energy produced by these companies is purchased at production cost (including interest and repayment of borrowed funds) in line with contractual agreements. Partner plants are assigned to the Energy business area.

4.3 Acquisition and sale of Group companies

Companies acquired by BKW during the year are consolidated as from the effective date of acquisition. Net assets acquired are measured at fair value and integrated using the acquisition method. The excess of the cost of acquisition over the fair value of net assets acquired is classified as goodwill. Any negative difference is immediately recognised in income.

Group companies that BKW ceases to control are excluded from consolidation as of the date on which control ceases. The difference between the proceeds from the sale and the net assets disposed of is recognised in the income statement on the effective date. Attributable goodwill and accumulated foreign currency translation differences and revaluations of financial instruments recognised in other comprehensive income are derecognised in income as a component of the gain or loss on sale.

In the course of acquisitions, non-controlling interests are sometimes granted put options, with BKW receiving call options under the same conditions. If this should cause BKW to receive economic ownership, the transaction is represented as though the shares in question had also been acquired. Otherwise, the non-controlling interest is recognised.

Acquisition-related transaction costs are recorded as “Other operating expenses”.

4.4 Foreign currency translation

The reporting currency is the Swiss franc (CHF). BKW records transactions in foreign currencies at the prevailing exchange rates on the transaction date. Exchange rate gains and losses arising from such transactions and the translation of foreign currency balances on the balance sheet date are charged to the financial result.

Foreign-currency financial statements of Group companies outside Switzerland are converted to Swiss francs according to the following principles:

Closing date 31.12.2018

Closing date 31.12.2019

Average 2018

Average 2019

CHF / EUR

1.1269

1.0854

1.1550

1.1127

Goodwill and adjustments to fair value made in the apportionment of purchase prices to the carrying amounts of identified net assets of companies in foreign currency are carried in the foreign currency.

Differences arising from the translation of the financial statements of Group companies, associates and joint arrangements in foreign currencies are accounted for in other comprehensive income.

5 Accounting policies and valuation

5.1 Revenue recognition

BKW generates revenue in its three business segments: Energy, Grid and Services.

Energy

Sales in the Energy business segment mainly comprise income from the sale of energy to end customers and distribution partners in Switzerland, income from the sale of electricity, certificates and raw materials on the wholesale market, income from the direct feed-in of energy from power plants with feed-in remuneration and income from the production of heat.

In the energy sector, “own use” transactions (“own use exemption” under IFRS 9) fall under the provisions of IFRS 15. Sales from these business activities must be recognised over the duration of the agreed performance. However, since the energy is consumed at the same time as the delivery, the sale of energy immediately gives rise to a right to payment that is directly equivalent to the value to the customer of the energy delivered. Thus, in these cases, an exemption under IFRS 15 is applied to revenue recognition and revenue is recognised in the amount that can be invoiced. Thus, the income is considered to be realised and recognised as revenue when delivery has taken place.

Energy-trading revenue is presented according to the purpose of the underlying transaction. Energy transactions are conducted either for the purpose of actively managing the power plant portfolio or to ensure physical coverage of energy supply or purchase contracts. Such management transactions can be broken down into “own-use” and “hedging” transactions. The revenue from own-use transactions falls under the provisions of IFRS 15 and is recorded as gross in revenue at the time of delivery.

Hedging transactions result from extended activities to manage the production portfolio, comprising additional transactions undertaken to hedge BKW’s own production. These additional hedging transactions qualify as financial instruments under IFRS 9. Other energy transactions are conducted with the sole intention of achieving a trading margin. Such transactions also qualify as financial instruments under IFRS 9.

Energy transactions defined as financial instruments are measured at fair value at the closing date; realised and unrealised gains and losses from these transactions are recorded as net figures in “Income from energy hedging” and “Income from proprietary energy trading” (see Note 38.2). The income from such transactions consists of two components: on the one hand, the effective realised gains or losses from transactions in progress is recorded. On the other hand, the unrealised valuation gains and losses from measurement at fair value of the open contracts are included.

Grid

The Grid business segment mostly generates income from charging distribution grid usage fees for the distribution grid. Income from the transmission of energy must be recognised over the duration of the agreed performance. When energy is transmitted, there is a direct entitlement to remuneration which corresponds directly to the value to the customer of the energy transmitted. This performance falls under the exemption in IFRS 15 for revenue recognition. BKW applies this exemption and books revenue in the amount that can be invoiced. Thus, the income is considered to be realised and recognised as revenue when delivery has taken place.

Fees charged to customers for compensatory feed-in remuneration (KEV) and grid usage fees of third-party grid operators are not recognised as revenue owing to the provisions governing principal-agent relationships, but are shown net against the corresponding energy procurement /  transport costs.

Services

In the Services segment, revenues are generated mainly through the provision of engineering planning and consulting services for energy, infrastructure and environmental projects, planning and installation services in the field of building technology, and the construction, servicing and maintenance of energy, telecommunications, transport and water networks. These are principally customer-specific construction contracts. Owing to the contractual provisions governing these services, which grant BKW the right to compensation for the performance, revenue is recognised over a certain period. The extent of performance is measured using the cost-to-cost method. The costs incurred to obtain customer contracts are not capitalised if these costs are amortised within one year.

5.2 Trade accounts receivable / payable, prepaid / accrued expenses and deferred / accrued income

Trade accounts receivable / payable are recognised as financial instruments at amortised cost in accordance with IFRS 9. The forward-looking expected credit loss model is used to calculate the loss allowance of receivables. Depending on the amount, trade accounts receivable are subjected to an impairment test and, if necessary, individual writedowns are made.

For trade accounts receivable in energy trading, probabilities of default are calculated on the basis of externally or internally calculated counterparty ratings and corresponding impairments are recognised for expected losses occurring within the next 12 months. The simplified impairment model is applied to the remaining trade receivables. Assets are assessed here on the basis of being in arrears and grouped into various categories. Different impairment rates for the expected losses over the entire residual term are allocated to these groups based on historical values.

Prepaid / accrued expenses and deferred / accrued income cover the periodic adjustment of expenses and income and are also recorded at nominal value and broken down into financial and other accruals. Financial accruals consist of goods and services provided or purchased on a contractual basis but not billed by the balance sheet date. In the case of financial accruals and deferrals, a general impairment is recognised in accordance with the simplified impairment model pursuant to IFRS 9.

5.3 Assets / liabilities from customer orders

“Assets from customer orders” (contract assets) exists in connection with the provision of engineering planning and consulting services for energy, infrastructure and environmental projects, planning and installation services in the field of building technology, and the construction, servicing and maintenance of energy, telecommunications, transport and water networks. These are primarily customer-specific construction contracts for which a right to consideration exists for goods or services that are transferred to the customer. If consideration is received before goods or services are transferred to the customer, a contract liability “Liabilities from customer orders” is recognised.

BKW evaluates the extent of performance for the purposes of valuing customer orders. The extent of performance is measured using the cost-to-cost method. Customer orders are assessed for credit risk and valued using the simplified impairment model under IFRS 9. Anticipated losses are immediately recorded in their entirety.

5.4 Inventories

5.4.1 Stock materials

Materials held in stock for grid construction and the electrical installation business are recorded at the lower of acquisition / manufacturing cost or net realisable value. The acquisition / manufacturing cost of raw and auxiliary materials is measured at the weighted moving average. Semi-finished and finished products include the directly assignable cost and the share of overall construction costs. Stock materials with an unsatisfactory turnover are written off in full or in part.

5.4.2 Emission rights and green certificates

For emission rights held under national or international emissions allowance schemes for the purpose of compliance with carbon emission allowances, the net liability method is used. These emission rights are recorded at the lower of acquisition cost or net realisable value. A provision is recognised as soon as the carbon output exceeds the emission allowances originally allocated and still held. The value of the emission rights and certificates is realised when they are sold or returned to the authorities as compensation for emissions.

Green certificates certify the generation of electricity from renewable energies and can be sold separately from the delivery of electricity. Income from green certificates from BKW’s own production is accrued at the time the energy is produced based on the expected proceeds from the sale. Purchased green certificates are carried in the balance sheet at acquisition cost.

For transactions in emission rights and certificates conducted with the sole intention of achieving a trading margin, BKW applies the brokerage exemption for traders in raw materials and commodities. The brokerage exemption stipulates that these may be recognised at fair value, less costs to sell. Changes in value on the balance sheet date as well as realised purchases and sales are recorded in the income statement. Transactions in derivatives on emission rights that are conducted with the intention of achieving a trading margin are treated in the same way as energy-trading derivatives (see Note 5.6.1).

5.5 Financial assets

Financial assets cover holdings, securities, loans, term deposits and other financial assets. Interests in state funds that are not recognised in accordance with the provisions of IFRIC 5 and do not therefore fall under the scope of IAS 32, IFRS 7 and IFRS 9 are also included as financial assets.

Financial assets are recorded and derecognised on the trade date.

Stock exchange-listed securities that constitute part of a portfolio of financial instruments, that are jointly managed and that are regularly purchased and sold are categorised as “Assets at fair value through profit or loss” and recorded under current assets. Other holdings and securities are allocated to the “Financial assets at fair value through other comprehensive income” category and reported under non-current assets. Term deposits, loans and other financial assets are valued at amortised cost. Pursuant to IFRS 9, in the case of term deposits and loans, probabilities of default are calculated on the basis of externally or internally calculated counterparty ratings, and corresponding impairments are recognised for expected losses occurring within the next 12 months.

Nuclear power plant operators are required by law to make annual payments to state funds (Federal Decommissioning and Waste Disposal Funds). The operators will be paid the future costs for disposal and decommissioning by these state funds according to the statutory requirements. Such payments are regarded as reimbursements and are capitalised as interests in state funds pursuant to IFRIC 5. Changes in fund valuations are recorded in the financial result for the period in question.

5.6 Derivatives

5.6.1 Energy derivatives

BKW trades in contracts in the form of forwards with fixed and flexible profiles, and futures on electricity, gas, oil, coal and certificates. Contracts concluded with the sole intention of achieving a trading margin, as well as hedging transactions resulting from extended production portfolio management, are treated as financial instruments and designated as energy derivatives.

Transactions that are open on the balance sheet date are measured at fair value. BKW receivables in respect of counterparties are recorded under assets as positive replacement values (under Derivatives), while payables are recorded under liabilities as negative replacement values (under Derivatives). Positive replacement values correspond to the costs that BKW would incur to replace all transactions that represent benefits for BKW if all counterparties were simultaneously unable to pay and the transactions could be immediately replaced. Negative replacement values correspond to the costs that counterparties would incur to replace all transactions that represent benefits for them if BKW were no longer able to meet its obligations. Ongoing transactions with positive or negative replacement values are netted if the respective contract terms provide for this, and settlement is legally enforceable and intended.

Realised and unrealised gains and losses from energy derivatives are recorded as income from proprietary energy trading or as income from energy hedges as applicable within net revenue.

5.6.2. Hedge accounting

Financial instruments can be used to hedge fluctuations in the fair value of an asset or liability (fair value hedge), to hedge exposure to variability in cash flows (cash flow hedge) and to hedge exposure of net investments in business operations abroad (net investment hedge). This is done in accordance with the existing guidelines governing BKW’s hedging and credit risk policy.

Realised and unrealised changes in the value of financial instruments that serve economically and according to Group guidelines to hedge against exchange rate and interest rate risks related to ongoing business activities, but which do not qualify as hedging transactions, are charged to income as financial income / expenses.

5.7 Property, plant and equipment

Property, plant and equipment are recorded at acquisition or manufacturing cost less accumulated depreciation and recognised impairment losses. Depreciation is calculated systematically using the straight-line method and based on the useful lives of the assets. The useful lives and indications of impairment are reviewed annually. Impairments in respect of property, plant and equipment are determined according to the principles set out in Note 5.9. Property, plant and equipment dependent on concessions that will revert without compensation are written down at most over the expected term of the concession.

The present values of estimated dismantling, decommissioning and disposal costs are charged to the balance sheet together with acquisition or manufacturing costs (see also Note 5.13). Fuel elements produced specifically for the nuclear power plant are disclosed in the balance sheet under property, plant and equipment. They are written down on the basis of wear and tear (burn-up).

For long-term investment projects, the borrowing interest is charged to the balance sheet during the set-up phase. Land is valued at acquisition cost. Corrections of the acquisition cost are recorded only in the event of impairment.

The costs of repairs and maintenance that do not add value are charged to the income statement as they are incurred. They are carried as assets only if the costs extend the original useful life or give rise to other significant economic benefits (cost reduction, increase in earnings). Costs incurred due to legal requirements that generate no direct future benefit are capitalised only if and when this enables other assets to generate benefits. The estimated useful lives of property, plant and equipment lie within the ranges listed below and are unchanged compared with the previous year:

Buildings

50 years

Power plants

12 to 80 years

Distribution grid

20 to 60 years

IT systems

10 to 30 years

Operating facilities and vehicles

3 to 20 years

Fuel rods

according to burn-up

Assets from rights to use leased assets are reported in the balance sheet item “Property, plant and equipment”. See Note 5.15.

5.8 Intangible assets

Intangible assets include rights of use, contractual or legal rights acquired as a result of acquisitions, brands, customer relationships, software and goodwill.

Rights of use comprise contractually agreed one-off amounts to a contractual partner for the use of its operating installations as well as licences for the construction and operation of BKW’s own installations.

Intangible assets are amortised over the period of use, or at most the contract period, using the straight-line method. Goodwill and brands are not written down but assigned to the relevant cash-generating unit and subjected to annual impairment tests or ad hoc tests whenever impairment is indicated.

Rights of use

Licences

60 to 80 years

Energy procurement rights

36 to 60 years

Installation utilisation rights

7 to 50 years

Transit rights

25 to 60 years

Other

Software

3 to 8 years

Customer lists, technologies

4 to 10 years

Brands

indefinite

5.9 Impairment of non-financial non-current assets

On each balance sheet date, assets are tested for impairment or improvement in value. If indications of impairment or improvement are identified, the recoverable amount of the asset is measured. Assets with an indefinite useful life are assessed for impairment irrespective of whether there are any indications.

The value of assets with a carrying value that exceeds the recoverable amount is adjusted in the income statement. If the amount estimated for an impairment loss is greater than the carrying value of the asset, a liability is recognised only if the requirements for a provision or other obligation are met. An impairment loss recognised in previous years for an asset other than goodwill is reversed if no impairment or only a reduced impairment exists. Impairment losses for assets subject to depreciation are reversed to the value that would have been determined had the acquisition value been depreciated on a systematic basis. The reverse posting is also charged to income.

Energy produced by partner plants is billed to shareholders on the basis of existing agreements – irrespective of the current market prices – at the cost of production. Provisions for onerous energy procurement contracts are formed if the cost of production is above the future expected market price due to the contractual obligation to pay energy production costs. Based on the obligation of the shareholders to pay production costs, it is assumed that the holdings in partner plants measured at the proportionate equity value are recoverable.

5.10 Financial liabilities

Financial liabilities comprise interest-bearing financial obligations, namely bonds, loans and lease liabilities. Bonds and loans are carried at amortised cost using the effective interest method. Lease liabilities are accounted for in accordance with IFRS 16.

5.11 Assigned rights of use

Assigned rights of use are recognised under other non-current liabilities. They consist of third-party payments for transit rights to transmission systems, plant usage rights and contributions to grid costs (connection contributions). Such assigned rights are recognised in the balance sheet at the nominal value of the cash inflow less any reversed amounts charged to income. The liability is reversed on a straight-line basis over the useful life of the facility but for no longer than the life of the relevant assigned right.

5.12 Pension plans

BKW operates various pension plans in accordance with legal requirements. The majority of employees are covered by the Pensionskasse BKW. This is a legally autonomous defined benefit scheme compliant with the terms of IAS 19. In addition, employees are also members of other pension funds, which are similarly classed as defined benefit plans.

5.13 Provisions

Provisions cover all obligations on the balance sheet date arising from past transactions and events where it is probable that an outflow of resources embodying economic benefits will be required to settle the obligation, the amount of which is not known but can be reliably measured. If an outflow of resources is no longer probable or determinable, a provision is charged to contingent liabilities. If the effect of the time value of the cash outflow is material, the amount of the provision is measured at the present value of the expected cash outflow.

As the operator of Mühleberg Nuclear Power Plant, BKW is required by law to decommission the plant after the operating phase ending on 20 December 2019 and to dispose of the nuclear waste. The expected costs were capitalised and the corresponding provision was recognised on the date on which the plant went into operation. Furthermore, the additional disposal costs incurred by power plant operation were capitalised annually and written down over the average useful life of the fuel elements using the straight-line method, and the corresponding provision was recognised. The decommissioning and waste disposal costs are subject to regular review. The present value of estimated decommissioning and disposal costs is provisioned and adjusted annually subject to interest. The same amount was carried during operations together with the acquisition / manufacturing costs of the plant and written down over the useful life using the straight-line method.

For calculating provisions for decommissioning and disposal, the following assumptions were made, having changed since the previous year:

Due to the short-term timeframe (to 2024), 0.5 % is now used for both the interest rate and for inflation for the post-operational phase.

The assumptions used no longer correspond to the parameters defined in the Decommissioning and Waste Disposal Funds Ordinance (SEFV), as BKW no longer considers them appropriate due to the adjustments made. BKW has instead made its own estimates and based them on these (for explanation see Note 6.2). The adjustment of these parameters led to a one-off increase in provisions of CHF 13.9 million.

BKW holds non-controlling interests in power plant companies, under the terms of which it is committed to purchasing the energy generated by these plants at production cost. Provisions are recognised for obligations to purchase energy at production costs that exceed the expected future realisable sales prices. The calculations are made using the discounted cash flow method.

5.14 Income taxes

Income taxes include current taxes based on profit and deferred taxes based on valuation differences. Current income taxes are determined based on local tax regulations. Deferred taxes account for the income tax effects between internal and local tax valuation guidelines for assets and liabilities according to the liability method. This is based on the actual tax rates or the tax rates expected to apply when this difference is adjusted.

Deferred tax liabilities are generally recognised in the balance sheet. Deferred tax assets are recognised only if it appears probable on the basis of future anticipated gains that they can be realised.

Changes in deferred taxes are recorded in the income statement except when the origin of temporary differences is recognised as not affecting income. In this case, deferred taxes are recorded in other comprehensive income or, where appropriate, directly under equity.

5.15 Leasing

The accounting rules for leases stipulate that almost all assets (right to use the leased asset) and liabilities arising from lessee arrangements are recognised in the balance sheet. More information on the first-time adoption of IFRS 16 can be found in Note 3.

If the evaluation at the inception of a contract indicates that it qualifies as, or contains, a lease, a right to use the leased asset and a lease liability are recognised. The right of use is depreciated on a straight-line basis over the shorter of the lease term and the useful life of the leased asset. The lease liability is carried forward using the effective interest method and taking lease payments into account. The lease liability is discounted by applying an incremental borrowing rate specific to maturities and countries, unless the interest rate on which the lease payments are based is available. Lease liabilities are presented in the balance sheet under current and non-current financial liabilities.

Under the accounting standards, lessor arrangements are divided into operating leases and finance leases. A finance lease is a leasing arrangement in which the lessor essentially transfers to the lessee all risks and opportunities associated with the ownership of an asset. Other lessor arrangements are classified as operating leases and are not recorded in the balance sheet.

5.16 Segment reporting

Segments and segment results are defined on the basis of the management approach. The reportable segments correspond to the business areas of BKW: Energy, Grid and Services. The CEO, who has prime decision-making authority, uses the operating result (EBIT) as the basis for allocating resources and measuring performance.

6 Measurement uncertainties

Preparation of the consolidated financial statements in accordance with the applicable accounting standards necessitates the use of estimates and assumptions that affect the reported amounts of assets, provisions, liabilities and contingent liabilities on the balance sheet date, and the reported amounts of revenues and expenses during the reporting period. These estimates and assumptions are based both on past findings and on the best possible assessment of future developments. Actual results may differ from these estimates. Estimates and assumptions are regularly reviewed, and changes are recognised in the period in which they were identified.

6.1 Impairment testing of non-current assets

The recoverable amount calculated for the purposes of impairment testing of non-current assets is the higher of the fair value minus sale costs and value in use (present value of estimated future cash flows). The calculation of the recoverable amount is reliant to a significant extent on estimates of the expected future cash flows from use, long-term growth rates, useful life of assets and discounting rates or estimates of the potential net sale price of the asset. The actual results may differ significantly from these estimates.

6.2 Mühleberg Nuclear Power Plant / provisions for nuclear waste disposal

Measurement of the provision for nuclear waste disposal and the inherent value of property, plant and equipment (power plant and equipment, fuel rods, including present disposal value) is material for the purposes of assessing BKW’s balance sheet and income statement. Detailed costs for decommissioning nuclear power plants and nuclear waste disposal are jointly calculated by the industry and updated every five years in accordance with the Ordinance on the Decommissioning and Waste Disposal Funds for Nuclear Power Plants (SEFV). These cost calculations are reviewed by independent cost specialists and the Swiss Federal Nuclear Safety Inspectorate (ENSI). The last scheduled estimate of decommissioning and disposal costs (KS16) took place in 2016. The adjustment was carried out at the request of and in accordance with the strict requirements of the Administrative Commission for the Decommissioning Fund for Nuclear Facilities and Waste Disposal Fund for Nuclear Power Plants (AC STENFO) and in collaboration with swissnuclear. The KS16 estimates the overall costs (overnight costs) in the baseline variant for the Mühleberg Nuclear Power Plant to be CHF 3.06 billion. On this basis, BKW assumes overnight costs of CHF 3.0 billion for calculating its provisions. BKW considers it most likely that the “combination repository” (cost-reducing) and “conventional dismantling” (cost-increasing) scenarios envisaged in KS16 will be implemented. In addition, BKW takes plant-specific costs into account. The difference between BKW’s estimated overnight costs and the provisions recorded on the balance sheet as at 31 December 2019 in the amount of CHF 1.5 billion is due to costs of around CHF 899 million that had already been paid by the end of 2019 and to discounting effects of CHF 554 million.

After reviewing the KS16, AC STENFO increased its cost estimates, including through flat safety surcharges, and the Federal Department of the Environment, Transport, Energy and Communications (DETEC) also ordered additional costs. The cost adjustments made by AC STENFO and DETEC are not operationally justified from BKW’s perspective. For this reason, BKW adheres to the cost estimates submitted by the industry association swissnuclear and to its own estimates for recognition of nuclear provisions on the balance sheet.

Work in connection with decommissioning is expected to last until 2034. Costs for operations related to the repository and monitoring of stored nuclear materials are expected to be incurred until 2126.

On 6 November 2019, the Federal Council approved the revised SEFV with new parameters for inflation and investment returns which will determine the size of contributions. Inflation was decreased from 1.5 % to 0.5 %, and the return on investment from 3.5 % to 2.1 %. This will theoretically mean additional payments of around CHF 100 million by 2022. Because of the excellent performance of the decommissioning and waste disposal funds in 2019, the annual contributions for contribution years 2020 – 2022 will be lower than previously expected. Compared with the contributions provisionally assessed to date, BKW’s annual contributions to the decommissioning fund will be CHF 7.9 million lower, while contributions to the waste disposal fund will be CHF 4 million higher.

BKW believes it is not appropriate to calculate the provisions to be created over a long-term horizon by adjusting the parameters based on the current market situation observable over the short term. Hence the parameters defined in the SEFV are no longer used as the basis for accounting for provisions. No macroeconomic studies are available for the time horizons up to 2126, so BKW has to estimate the relevant parameters. A rate of 1 % is applied to long-term inflation, based on the Swiss National Bank’s target range of 0 – 2 %. Based on historical actual yields on long-term government bonds, an expected real interest rate of 1.75 % has been estimated, producing a nominal discount rate of 2.75 %. Due to the short-term timeframe (to 2024), 0.5 % is now used for both the interest rate and for inflation for the post-operational phase. The adjustment of these parameters led to a one-off increase in provisions of CHF 13.9 million.

Changes to cost calculations and the statutory requirements for nuclear waste disposal may have a material effect on the Group’s financial position and results of operations. The inflation and discount rate parameters are also particularly relevant for determining the level of provisions for decommissioning (expected costs up to 2034) and nuclear waste disposal (expected costs up to 2126). In the event of an increase / decrease in the assumptions shown below, provisions as at 31 December 2019 would vary as follows (+ increase in provisions / – decrease in provisions):

CHF millions

Inflation + 0.5 %

Inflation – 0.5 %

Discount rate + 0.5 %

Discount rate – 0.5 %

Decommissioning

30.7

– 29.4

– 21.6

22.9

Waste disposal

111.7

– 89.5

– 87.9

110.3

Total

142.4

– 118.9

– 109.5

133.2

6.3 Provision for onerous energy procurement contract Wilhelmshaven

BKW holds a 33 % stake in the Wilhelmshaven coal power plant. The partners are under an obligation to take on the energy produced according to their stake. Due to the higher estimated production costs compared with the expected electricity market prices a provision for the obligation to purchase energy had to be made in the past.

In January 2020, the German government enacted the Coal Phase-Out Act, which set a timetable for phasing out coal by 2038. The Coal Phase-Out Act provides for compensation to lignite and coal power plant operators. BKW believes that operators of coal power plants will receive compensation payments comparable to those made to lignite power plant operators. Therefore, a compensation payment by the German Government was included in determining the provision. The estimate of future income and expenses depends largely on the estimation of future energy prices, the estimation of the power plants’ production costs, the assumed discount rates and the estimated size of the compensation payment. These estimations and assumptions constitute uncertainties and can deviate significantly from actual results. As at the end of 2019, the carrying amount of the investment was CHF 454.8 million and the provision was CHF 254.6 million.

6.4 Pension plans

The pension liabilities arising from defined benefit pension plans are calculated based on actuarial assumptions that may not reflect reality and hence may have an impact on BKW’s results of operations and cash flows. The actuarial assumptions used in the calculation and a corresponding sensitivity analysis are disclosed in Note 27.

6.5 EICom proceedings

The tariffs that BKW is permitted to charge to its customers for grid usage and energy are reviewed in part by the Federal Electricity Commission (ElCom). At present, there are several proceedings awaiting decisions by various bodies. The main object of the proceedings is to rule on the chargeable capital and operating costs. Decisions issued by the court of last instance may have implications for BKW’s future cash flows.

7 Business combinations

Business combinations in 2019

CHF millions

ingenhoven architects

LTB Leitungsbau GmbH

swisspro

Miscellaneous

Total

Cash and cash equivalents

1.2

12.7

19.5

12.4

45.8

Trade accounts receivable and other receivables

21.6

7.1

54.5

11.5

94.7

Other current assets

11.8

22.4

21.1

11.6

66.9

Financial assets

0.0

0.1

3.9

0.6

4.6

Property, plant and equipment

4.5

28.1

20.8

13.3

66.7

Intangible assets

11.0

1.0

23.8

16.2

52.0

Deferred tax assets

0.0

0.0

6.4

2.0

8.4

Current liabilities

– 9.3

– 19.8

– 48.0

– 13.2

– 90.3

Financial liabilities

– 4.1

– 10.1

– 20.7

– 10.6

– 45.5

Provisions

– 1.1

– 1.6

– 3.5

– 0.9

– 7.1

Deferred tax liabilities

– 12.4

0.0

– 4.5

– 2.9

– 19.8

Pension liability

0.0

– 15.5

– 45.8

– 8.8

– 70.1

Fair value of acquired net assets

23.2

24.4

27.5

31.2

106.3

Non-controlling interests

– 2.4

– 2.4

Goodwill

62.4

23.6

102.2

64.0

252.2

Purchase price

85.6

45.6

129.7

95.2

356.1

Cash and cash equivalents acquired

– 1.2

– 12.7

– 19.5

– 12.4

– 45.8

Deferred and contingent purchase price liabilities

– 19.4

– 10.0

– 18.3

– 47.7

Deferred and uncontingent purchase price liabilities

– 2.8

– 3.9

– 8.5

– 8.1

– 23.3

Liabilities incurred

– 19.1

– 19.1

Cash outflow

43.1

29.0

91.7

56.4

220.2

Unless stated otherwise, the values for the transactions listed are provisional as the purchase price allocations have not been finalised.

ingenhoven architects

In the engineering sector, BKW acquired 100 % of the shares in ingenhoven architects GmbH, based in Düsseldorf (D), at the end of September 2019. The ingenhoven architects Group is assigned to the Services segment.

The contingent purchase price liabilities recognised on the acquisition date are due depending on the future economic growth of the companies. The goodwill recognised is mainly attributable to the expected synergies and the acquisition of a qualified workforce. The transaction costs amounted to CHF 0.5 million.

Had the company been acquired at the start of the current year, total operating revenue for 2019 would have been CHF 15.4 million higher and net profit CHF 5.1 million higher. Between the point at which the company was fully consolidated and 31 December 2019, the acquired company recorded a total operating income of CHF 10.0 million and a net profit of CHF 4.2 million.

LTB Leitungsbau GmbH

In the infra services sector, BKW acquired 90 % of the shares in LTB Leitungsbau GmbH at the end of October 2019. Based in Radebeul (D), the company is active in transmission line construction and is assigned to the Services segment.

The goodwill recognised is mainly attributable to the expected synergies and the acquisition of a qualified workforce. The transaction costs amounted to CHF 0.8 million.

Had the company been acquired at the start of the current year, total operating revenue for 2019 would have been CHF 85.3 million higher and net profit CHF 1.7 million higher. Between the point at which the company was fully consolidated and 31 December 2019, the acquired company recorded a total operating income of CHF 22.8 million and a net profit of CHF 0.8 million.

swisspro

In the building solutions sector, BKW acquired 100 % of the shares in swisspro group AG, based in Oberkirch, in October 2019. The swisspro Group is active in ICT and building automation solutions and electrical installation and is assigned to the Services segment.

The contingent purchase price liabilities recognised on the acquisition date are due depending on the future economic growth of the companies. The goodwill recognised is mainly attributable to the expected synergies and the acquisition of a qualified workforce. The transaction costs amounted to CHF 0.4 million.

Had the company been acquired at the start of the current year, total operating revenue for 2019 would have been CHF 169.7 million higher and net profit CHF 7.5 million higher. Between the point at which the company was fully consolidated and 31 December 2019, the acquired company recorded a total operating income of CHF 62.2 million and a net profit of CHF 3.1 million.

Miscellaneous

In the 2019 financial year, BKW conducted a number of other corporate acquisitions. All of the businesses acquired have been assigned to the Services segment. Due to the number of acquisitions, their key financial figures and their allocation to the same segment, aggregated figures are shown with no separate presentation of individual business combinations.

In the infrastructure engineering sector in Germany, BKW acquired 100 % of the shares in Institut Gauer GmbH, Dr.-Ing. Gauer Ingenieurgesellschaft mbH, KMT Planungsgesellschaft mbH, KMT Port Consult GmbH, and osd GmbH. It also acquired 100 % of the shares in the Austrian company Daninger + Partner Engineering GmbH, and the Swiss companies Kindschi Ingenieure und Geometer AG and Flotron AG. In Germany, Hascher Jehle Architektur, KFP Ingenieure and hydrodat were also acquired.

In the building solutions sector, 100 % of the shares in WAB Technique S. à.r.l., Jaggi & Rieder AG, TECPLAN AG, Hensel AG Elektrotechnische Unternehmungen, ASAG Air System AG, b+s Elektro Telematik AG, Gebr. Bräm AG, pi-System GmbH, Monnet Holding Management SA and 70 % of the shares in R. Monnet & Cie SA were acquired in Switzerland.

The contingent purchase price liabilities recognised on the acquisition date are due depending on the future economic growth of the companies.

The transactions generated total goodwill of CHF 64.0 million. The goodwill recognised is mainly attributable to the expected future synergies and the acquisition of a qualified workforce. The transaction costs amounted to CHF 1.6 million.

Had the companies already been acquired as at 1 January 2019, total operating revenue for the current year would have been CHF 48.1 million higher and the net profit CHF 5.6 million higher. Between the point at which the individual companies were fully consolidated and 31 December 2019, the acquired companies recorded cumulative total operating revenue of CHF 50.1 million and a total net profit of CHF 4.7 million.

CHF 12.6 million was paid for conditional purchase price liabilities and CHF 11.8 million for unconditional purchase price liabilities for acquisitions made in the reporting year and previous years.

Business combinations in 2018

CHF millions

Total

Cash and cash equivalents

15.5

Trade accounts receivable and other receivables

27.2

Other current assets

20.8

Financial assets

2.5

Property, plant and equipment

6.6

Intangible assets

30.5

Current liabilities

– 26.1

Financial liabilities

– 2.0

Provisions

– 3.1

Deferred tax liabilities

– 7.8

Pension liability

– 7.3

Fair value of acquired net assets

56.8

Non-controlling interests

– 0.2

Goodwill

114.7

Purchase price

171.3

Cash and cash equivalents acquired

– 15.5

Deferred and contingent purchase price liabilities

– 35.2

Deferred and uncontingent purchase price liabilities

– 12.6

Cash outflow

108.0

In 2018 BKW acquired various companies and assigned them to the Services segment. The values for the transactions conducted in the previous year are provisional since the purchase price allocations had not been finalised. The purchase price allocations are now final and only resulted in very minor changes.

In the infrastructure engineering sector in Germany, BKW acquired 90 % of the shares in Michael Thillmann GmbH and KHP Architekten Planungsgesellschaft mbH and 100 % of the shares in Kulla, Herr + Partner GbR, WALD + CORBE GmbH & Co. KG, WALD + CORBE Consulting GmbH, WALD + CORBE Infrastrukturplanung GmbH, Climaplan GmbH, Igr AG, emutec GmbH and emutec energy link GmbH, IHB GmbH Ingenieurdienstleistungen, Ingenieurbüro Prof. Dr. Ing. Vogt Planungsgesellschaft mbH, the Swiss company IWM AG and the Austria-based IKK Group GmbH. Podufal-Wiehofsky Architektin und beratender Ingenieur PartmbB was also taken over.

In the building technology sector, electrical installation companies Michel Rime AG, Elektro Winter AG, Werner Electro AG, MORA Holding AG with its 100 % subsidiary Elektro Naegelin AG, and also E3 HLK AG, and Kurz Heizungen AG were acquired in Switzerland.

The German company TSS Technischer Strahlenschutz e. K. was acquired and integrated into DfN Dienstleistungen für Nukleartechnik GmbH.

The transactions generated total goodwill of CHF 114.7 million. The goodwill recognised is mainly attributable to the expected future synergies and acquisition of a qualified workforce. There are no material value adjustments in trade accounts receivable.

At the acquisition date, there were contingent purchase price liabilities amounting to CHF 35.2 million in relation to the acquisition of these companies. The final amount due will depend on the future business performance of the companies and on unconditional purchase price liabilities of CHF 12.6 million. The transaction costs amounted to CHF 1.7 million.

Had the companies already been acquired as at 1 January 2018, total operating revenue in 2018 would have been CHF 83.3 million higher, with net profit CHF 8.3 million higher. Between the point at which the individual companies were fully consolidated and 31 December 2018, the acquired companies recorded cumulative total operating income of CHF 76.3 million and a total net profit of CHF 9.7 million.

CHF 6.4 million was paid for conditional purchase price liabilities and CHF 7.4 million for unconditional purchase price liabilities for acquisitions made before 2018.

8 Segment reporting

Segments and segment results are defined on the basis of the management approach. In accordance with the strategy, BKW’s reporting lines are structured around the business areas Energy, Grid and Services.

BKW operates the following three reportable business segments:

The column “Other” covers activities that are centrally managed within the Group; these largely consist of Group financing, real estate, fleet management, procurement, financial assets and tax. Some of the costs that arise in conjunction with the expansion of the business areas (acquisition / integration costs, technology development costs, etc.) are borne centrally.

Segment figures are determined in accordance with the same accounting and valuation principles that are applied for the Group-level presentation of consolidated figures. The prices for intercompany transactions (transfer prices) are based on the market price on the transaction date.

Information by business segment

2019 CHF millions

Energy

Grid

Services

Other

Consoli- dation

Total

External revenue

1,289.2

519.5

1,005.6

18.8

33.5

2,866.6

Net sales

1,247.7

484.5

978.0

0.6

0.0

2,710.8

Own work capitalised

4.9

32.1

0.3

1.1

33.2

71.6

Other operating income

36.6

2.9

27.3

17.1

0.3

84.2

Internal revenue

26.2

7.8

101.2

152.5

– 287.7

0.0

Net sales

15.9

0.7

91.6

0.0

– 108.2

0.0

Other operating income

10.3

7.1

9.6

152.5

– 179.5

0.0

Total operating income

1,315.4

527.3

1,106.8

171.3

– 254.2

2,866.6

Total operating expenses

– 985.6

– 278.4

– 987.0

– 185.0

247.8

– 2,188.2

Operating profit before depreciation, amortisation and impairment (EBITDA)

329.8

248.9

119.8

– 13.7

– 6.4

678.4

Depreciation, amortisation and impairment

– 126.8

– 86.7

– 47.6

– 22.7

3.1

– 280.7

Income from associates

24.2

11.5

0.0

0.0

0.0

35.7

Operating profit / loss (EBIT)

227.2

173.7

72.2

– 36.4

– 3.3

433.4

Financial result

44.1

Profit / loss before income taxes (EBT)

477.5

2018 CHF millions

Energy

Grid

Services

Other

Consoli- dation

Total

External revenue

1,296.1

536.4

788.4

19.9

34.4

2,675.2

Net sales

1,266.5

495.6

762.1

1.3

0.0

2,525.5

Own work capitalised

3.4

34.4

0.1

2.5

34.4

74.8

Other operating income

26.2

6.4

26.2

16.1

0.0

74.9

Internal revenue

29.6

19.0

92.4

127.6

– 268.6

0.0

Net sales

16.3

1.0

90.1

0.0

– 107.4

0.0

Other operating income

13.3

18.0

2.3

127.6

– 161.2

0.0

Total operating income

1,325.7

555.4

880.8

147.5

– 234.2

2,675.2

Total operating expenses

– 1,109.7

– 302.1

– 797.2

– 98.0 1

228.1

– 2,078.9

Operating profit before depreciation, amortisation and impairment (EBITDA)

216.0

253.3

83.6

49.5

– 6.1

596.3

Depreciation, amortisation and impairment

– 82.7

– 85.1

– 25.6

– 17.5

2.8

– 208.1

Income from associates

8.4

21.4

0.0

– 1.5

0.0

28.3

Operating profit / loss (EBIT)

141.7

189.6

58.0

30.5

– 3.3

416.5

Financial result

– 167.6

Profit / loss before income taxes (EBT)

248.9

1 Operating expenses were positively influenced by the one-off effect of CHF 52.4 million from the change to the benefit plan of the BKW pension fund.

Net sales per business segment are broken down as follows between Switzerland and abroad:

Switzerland

Foreign countries

Switzerland

Foreign countries

CHF millions

2018

2018

2019

2019

Energy

719.5

547.0

644.2

603.5

Grid

495.6

0.0

484.5

0.0

Services

561.6

200.5

685.0

293.0

Other

1.3

0.0

0.6

0.0

Total net sales

1,778.0

747.5

1,814.3

896.5

Of net sales, CHF 2,603.4 million or 96 % (previous year: CHF 2,479.1 million or 98 %) relates to revenues from contracts with customers in accordance with IFRS 15. In the Energy business segment, certain transactions come under the provisions of IFRS 9.

Information by country

Net sales to external customers by country are broken down by the delivery location for the respective product. Non-current assets cover property, plant and equipment, intangible assets and investments in associates in the respective countries.

Switzerland

Germany

Italy

France

Other countries

Total

CHF millions

2018

2019

2018

2019

2018

2019

2018

2019

2018

2019

2018

2019

Net sales

1,778.0

1,814.3

557.4

645.5

32.2

95.8

86.7

47.4

71.2

107.8

2,525.5

2,710.8

Non-current assets

3,791.6

4,086.1

807.9

949.7

562.1

511.6

138.3

135.6

164.0

173.2

5,463.9

5,856.2

Information on significant customers

There are no transactions with individual external customers that generate revenue accounting for 10 % or more of net sales.

9 Energy procurement / transport 

CHF millions

2018

2019

Cost of energy procurement from third parties and associates

913.5

739.2

Provision for onerous energy procurement contracts

Provisions used

– 39.6

– 35.8

Provisions added

0.0

10.2

Provisions released

– 42.3

– 9.7

Total energy procurement expenses

831.7

703.9

Energy transport expenses

106.9

92.1

Total

938.6

796.0

Expenses for energy transport include expenses for system services and municipal taxes, while expenses for water rates are included in energy procurement costs.

10 Personnel expenses

CHF millions

2018

2019

Salaries and wages

533.9

629.1

Social security contributions and other personnel expenses 1

55.4

138.5

Total

589.3

767.6

1 In 2018 social security expenses were positively affected by the one-off effect of CHF 52.4 million from the change to the benefit plan of the BKW pension fund on 1 January 2019.

11 Other operating expenses

CHF millions

2018

2019

Charges, levies and other taxes

19.8

21.2

Rent and maintenance of real estate and other property, plant and equipment

36.9 1

19.3

Miscellaneous operating expenses

147.2

161.5

Total

203.9

202.0

1 In 2018 including expense from operating leases.

12 Depreciation, amortisation and impairment

CHF millions

2018

2019

Depreciation

Property, plant and equipment

172.6

219.2

Intangible assets

34.5

36.5

Impairment

Property, plant and equipment

15.1

25.5

Intangible assets

0.7

0.5

Reversal of impairments

Property, plant and equipment

– 14.8

– 1.0

Total

208.1

280.7

The impairments in the reporting year and the previous year relate to wind farms and hydroelectric plants in the Energy business area. Existing impairments in the Energy business area were simultaneously reversed in both financial years.

13 Financial result

CHF millions

2018

2019

Interest income

7.7

5.1

Dividend income

0.1

0.2

Value adjustment on state funds

0.0

147.7

Gains from the disposal of financial assets

0.0

1.1

Other financial income

2.6

2.5

Financial income

10.4

156.6

Interest expenses

– 48.1

– 42.9

Capitalised borrowing costs

0.0

0.2

Interest on provisions

– 63.3

– 61.4

Value adjustment on state funds

– 57.1

0.0

Losses from the disposal of financial assets

– 1.0

– 0.2

Value adjustment on financial instruments held for trading

– 0.6

– 0.3

Currency translations

– 3.0

– 2.9

Other financial expenses

– 4.9

– 5.0

Financial expenses

– 178.0

– 112.5

Financial result

– 167.6

44.1

14 Income taxes

CHF millions

2018

2019

Current income taxes

43.2

80.1

Deferred taxes

2.7

– 6.2

Total

45.9

73.9

Reconciliation with reported income taxes

CHF millions

2018

2019

Profit / loss before income taxes

248.9

477.5

Tax expenses at anticipated rate of 23.4 % (2018: 25.3 %)

63.0

111.7

Effects of changes in tax rate

0.0

– 14.8

Participation reduction and non-taxable income

– 17.2

– 10.9

Use / capitalisation of uncapitalised tax losses

– 3.0

– 4.3

Non-tax-deductible expenses

7.4

2.9

Uncapitalised or partially capitalised tax losses

2.9

0.4

Taxes in respect of previous years

– 3.8

– 5.8

Write-down / reversal of write-down of participations

– 5.1

– 5.6

Other items

1.7

0.3

Total income taxes

45.9

73.9

Effective tax rate

18.4 %

15.5 %

The anticipated tax rate is determined annually as a weighted average (based on the pre-tax earnings of individual Group companies and the applicable local tax rate). The decrease on the previous year was due to the tax rate cuts in Switzerland arising from the STAF tax reform and the higher proportion of the overall result of the companies in Switzerland.

Changes in deferred tax assets / liabilities

CHF millions

2018

2019

Net deferred tax liabilities at 01.01.

– 413.3

– 412.4

Changes in the scope of consolidation

– 7.9

– 11.1

Addition / release in the income statement

– 2.7

6.2

Change in value of cash flow and net investment hedges in other comprehensive income

0.0

0.0

Taxes on actuarial gains / losses

5.0

– 7.0

Transactions in treasury shares

2.7

0.0

Currency translations

3.8

2.9

Net deferred tax liabilities at 31.12.

– 412.4

– 421.4

Deferred tax assets / liabilities by origin of temporary difference

31.12.2018

31.12.2019

CHF millions

Assets

Liabilities

Assets

Liabilities

Current assets

2.2

– 13.9

24.4

– 19.0

Financial assets and holdings

0.7

– 50.4

1.8

– 58.7

Property, plant and equipment

16.5

– 266.5

16.8

– 289.6

Intangible assets

0.4

– 37.5

1.9

– 39.5

Current liabilities

3.7

– 2.6

9.0

– 38.0

Provisions

1.3

– 120.6

2.6

– 125.9

Other non-current liabilities

55.1

– 6.5

94.0

– 10.0

Capitalised loss carry-forwards

5.7

0.0

8.8

0.0

Credit / liability for gross deferred taxes

85.6

– 498.0

159.3

– 580.7

Netting of assets and liabilities

– 53.6

53.6

– 125.0

125.0

Credit / liability for deferred taxes according to balance sheet

32.0

– 444.4

34.3

– 455.7

The change in temporary differences resulted in deferred tax revenue of CHF 3.1 million recorded in the income statement (previous year: tax revenue of CHF 0.7 million).

As in the previous year, on 31 December 2019 no deferred tax liabilities were recognised in respect of temporary differences relating to associates. No deferred taxes are recognised for Group companies, joint arrangements or partner plants at which a dividend payment is contractually agreed, since BKW is able to monitor the reversal of the temporary difference and such a difference is not probable in the foreseeable future. The temporary differences for which no deferred tax liabilities have been recognised in this respect amount to CHF 2,378.0 million in total (previous year: CHF 2,309.7 million).

Tax loss carry-forwards

As at 31 December 2019, there were tax loss carry-forwards of CHF 5.5 million (previous year: CHF 16.6 million) for which deferred taxes were not capitalised. These were not capitalised since their charge against future taxable earnings is not regarded as probable within the permissible tax period. The average applicable tax rate on tax loss carry-forwards would be 19.7 % (previous year: 21.1 %).

These loss carry-forwards fall due in the following periods:

in CHF millions

31.12.2018

31.12.2019

Expiry within 1 year

0.0

0.0

Expiry within 2 to 5 years

2.6

1.1

Expiry after 5 years

9.1

2.5

Valid indefinitely

4.9

1.9

Total

16.6

5.5

15 Earnings per share

The undiluted earnings per share is calculated based on the weighted average number of outstanding shares. The diluted earnings per share in the previous year includes the dilution effect arising from the convertible bond still outstanding at the end of June 2018. When calculating the diluted earnings per share, it is assumed that the outstanding conversion rights had already been exercised at the beginning of the year. The net profit attributable to the shareholders is adjusted according to the corresponding interest expense for the convertible bond after accounting for tax.

Earnings per share

2018

2019

Net profit attributable to BKW shareholders, in CHF millions

186.4

391.2

Number of shares issued (weighted average)

52,800,000

52,800,000

Less treasury shares (weighted average)

– 379,568

– 66,666

Number of outstanding shares (weighted average)

52,420,432

52,733,334

Earnings per share in CHF

3.56

7.42

Diluted earnings per share

2018

2019

Net profit attributable to BKW shareholders, in CHF millions

186.4

391.2

Tax-adjusted interest expense on convertible bonds

0.1

0.0

BKW shareholders’ portion of net profit, adjusted for dilution effect

186.5

391.2

Number of outstanding shares (weighted average)

52,420,432

52,733,334

Adjustment for theoretical conversion of convertible bonds

338,382

0

Number of shares in circulation, adjusted for dilution effect

52,758,814

52,733,334

Diluted earnings per share in CHF

3.53

7.42

Dividend per share

The dividend of CHF 2.20 per share for the 2019 financial year (previous year: CHF 1.80) corresponds to the proposal by the Board of Directors to the General Meeting and must be approved by shareholders at this meeting. Based on the shares in circulation on the balance sheet date, the proposed dividend amounts to CHF 116.1 million.

16 Trade accounts receivable and other receivables

CHF millions

31.12.2018

31.12.2019

Trade accounts receivable 1

595.5

579.3

Other financial receivables

70.0

69.6

Other receivables

54.6

38.1

Total

720.1

687.0

1 Of which, an amount of CHF 491.4 (previous year: CHF 452.8 millions) stems from contracts with customers pursuant to IFRS 15

The following table shows the ageing of trade accounts receivable:

31.12.2018

31.12.2019

CHF millions

Gross carrying amount

Loss allowance

Net carrying amount

Gross carrying amount

Loss allowance

Net carrying amount

Trade accounts receivable

612.8

– 17.3

595.5

603.8

– 24.5

579.3

of which:

not past due

507.2

– 0.6

506.6

489.3

– 1.5

487.8

1 – 30 days past due

51.0

– 0.8

50.2

48.9

– 2.0

46.9

31 – 360 days past due

27.5

– 3.3

24.2

35.8

– 4.3

31.5

over 360 days past due

27.1

– 12.6

14.5

29.8

– 16.7

13.1

Most of the trade accounts receivable are due for payment between 30 and 60 days. The business combinations in the current year increased trade accounts receivable by CHF 68.2 million.

The loss allowance for trade accounts receivable, other financial receivables, and loans are as follows:

CHF millions

Trade receivables

Other financial receivables

Loans

Loss allowances at 31.12.2017

16.2

2.9

8.2

Initial application of IFRS 9

0.4

0.3

0.2

Addition / release

2.6

– 0.5

Derecognition of uncollectable receivables

– 1.8

Currency translations

– 0.1

Loss allowances at 31.12.2018

17.3

2.7

8.4

Addition / release

10.1

0.7

Derecognition of uncollectable receivables

– 2.7

– 1.8

Currency translations

– 0.2

Loss allowances at 31.12.2019

24.5

1.6

8.4

There is no material loss allowance for other financial assets. The other balance sheet items contain no material overdue but unimpaired financial assets.

17 Contract assets and contract liabilities

Contract assets and contract liabilities as at 31 December 2019 included a writedown of CHF 0.1 million for expected defaults on receivables in accordance with the provisions of IFRS 9 (previous year: CHF 0.1 million).

31.12.2018

31.12.2019

CHF millions

Contract assets

Contract liabilities

Contract assets

Contract liabilities

Services provided (cumulative costs and gains)

421.1

260.3

907.8

383.5

Partial payments received / advance payments

– 327.8

– 301.8

– 767.2

– 455.8

Contract assets / liabilities

93.3

– 41.5

140.6

– 72.3

Recognised revenue from contract liabilities included at the start of the reporting period amounted to CHF 39.1 million (previous year: CHF 45.7 million).

CHF millions

2018

2019

Expected future income from existing contracts

731.3

1,015.3

thereof:

expected within the next 12 months

469.3

725.7

expected after 12 months

262.0

289.6

18 Inventories

CHF millions

31.12.2018

31.12.2019

Goods and materials

21.8

29.1

Valuation adjustment on goods and materials

– 0.2

– 0.8

Certificates (proprietary trading)

0.7

10.2

Certificates (own use)

21.2

17.4

Total

43.5

55.9

19 Accrued / deferred income and prepaid / accrued expenses

CHF millions

31.12.2018

31.12.2019

Financial accruals

57.4

75.5

Other prepaid expenses and accrued income

16.3

16.3

Total prepaid expenses and accrued income

73.7

91.8

Financial accruals

167.6

139.6

Other deferred income and accrued expenses

72.3

58.3

Total deferred income and accrued expenses

239.9

197.9

20 Financial assets

CHF millions

Financial assets at fair value through other comprehensive income

Financial assets at fair value through profit or loss

Loans

Term deposits

Interest in state funds

Other non-current assets

Total

At 01.01.2018

8.6

176.1

69.8

191.4

1,183.3

100.3

1,729.5

Changes in the scope of consolidation

0.2

0.4

1.9

2.5

Additions

0.5

13.2

18.1

105.1

43.6

1.6

182.1

Disposals

– 1.7

– 52.2

– 15.4

– 190.0

– 36.9

– 296.2

Currency translations

0.1

– 1.3

– 0.2

– 0.1

– 1.5

Value adjustment in the income statement

– 0.6

– 57.1

– 1.8

– 59.5

Value adjustment in other comprehensive income

– 0.3

0.1

– 0.2

At 31.12.2018

7.4

136.9

71.2

106.4

1,169.8

65.0

1,556.7

Changes in the scope of consolidation

0.2

3.4

0.1

0.9

4.6

Additions

0.2

9.7

12.9

95.3

30.4

0.1

148.6

Disposals

– 0.6

– 115.6

– 35.0

– 105.0

– 46.6

– 23.5

– 326.3

Currency translations

– 1.2

– 0.1

– 0.1

– 1.4

Value adjustment in the income statement

– 0.1

147.7

147.6

At 31.12.2019

7.2

30.9

51.3

96.7

1,301.3

42.4

1,529.8

of which:

Current financial assets

30.9

15.8

95.9

84.7

227.3

Non-current financial assets

7.2

35.5

0.8

1,216.6

42.4

1,302.5

of which:

Financial assets according to IAS 32 and IFRS 9

7.2

30.9

51.3

96.7

42.4

228.5

Other assets

1,301.3

1,301.3

The state funds are managed by the Federal Government; BKW has no access to the managed assets. As at 31 December 2019, “Other non-current assets” no longer include any credit balances with pension plans (previous year: CHF 4.0 million), see Note 27.

In November 2016, BKW sold a Swissgrid convertible loan totalling CHF 97.2 million to Credit Suisse. The loan was sold without the associated conversion right. As certain conditions transpire, Swissgrid can or must convert the loan into equity, and BKW undertakes to acquire the resulting share of Swissgrid equity. Thus, although BKW sold the loan, it entered into a directly linked obligation at the same time. The loan could therefore not be derecognised. By the end of the 2019 financial year, the loan had been amortised to CHF 38.8 million. As at 31 December 2019, CHF 38.9 million was still reported under “Other non-current assets” and CHF 19.5 million under “Other receivables”. The liabilities are listed as CHF 38.9 million under non-current and CHF 19.5 million under current liabilities (see Notes 24 and 28).

21 Investments in associates

CHF millions

Total

At 31.12.2017

1,439.6

Additions

79.9

Disposals

– 35.9

Dividends

– 19.8

Pro rata income

28.3

Currency translations

– 26.2

Actuarial gains / losses

15.8

At 31.12.2018

1,481.7

Changes in the consolidation method

– 0.6

Disposals

– 33.4

Dividends

– 21.5

Pro rata income

35.7

Currency translations

– 21.8

Actuarial gains / losses

– 12.8

Hedging transactions

– 4.7

At 31.12.2019

1,422.6

The change to the consolidation method affected Wärme Mittelland AG. This company no longer qualifies as an associate, and is now listed as a joint operation instead.

The disposals include capital reductions at ENGIE Kraftwerk Wilhelmshaven GmbH & Co. KG (CHF 26.5 million) and at EP Produzione Livorno Ferraris S. p.A. (CHF 4.3 million).

Pro rata key figures for associates at 31.12.2019

The table below gives the pro rata key figures for associates by business area. In addition, the Energy business area is broken down by type of power plant.

BKW share CHF millions

Hydro

Nuclear

Fossil-fuel

New renewable energy

Other

Total Energy

Grid

Services

Total

Current assets

40.1

65.0

36.5

14.8

5.2

161.6

126.1

2.6

290.3

Non-current assets

1,017.5

790.8

493.7

175.9

26.6

2,504.5

974.8

2.4

3,481.7

Current liabilities

– 111.2

– 77.1

– 20.0

– 9.8

– 1.9

– 220.0

– 248.5

– 0.3

– 468.8

Non-current liabilities

– 666.0

– 641.3

– 9.9

– 94.5

– 17.6

– 1,429.3

– 450.4

– 0.9

– 1,880.6

Shareholders’ equity

280.4

137.4

500.3

86.4

12.3

1,016.8

402.0

3.8

1,422.6

Income

148.2

136.0

117.4

18.1

8.3

428.0

265.4

2.7

696.1

Expenses

– 141.9

– 129.1

– 107.5

– 16.8

– 8.5

– 403.8

– 253.9

– 2.7

– 660.4

Net profit / loss

6.3

6.9

9.9

1.3

– 0.2

24.2

11.5

0.0

35.7

Other comprehensive income

– 4.0

– 3.4

0.0

– 4.8

0.0

– 12.2

– 5.3

0.0

– 17.5

Comprehensive income

2.3

3.5

9.9

– 3.5

– 0.2

12.0

6.2

0.0

18.2

All associates are valued using the equity method.

Of the total pro rata assets and liabilities, CHF 1,360.6 million (previous year: CHF 1,396.0 million) relate to net financial debt (financial liabilities less cash and cash equivalents and current financial assets).

Associates in the Energy segment are, in particular, partner plants. For these, BKW is obliged to pay the annual costs due on its share (including interest and repayment of borrowed funds). The pro rata annual costs for BKW for the purchase of energy in 2019 amounted to CHF 392.9 million (previous year: CHF 428.6 million). These are included in the energy procurement expense. CHF 773.3 million of the total pro rata assets and liabilities of partner plants (previous year: CHF 797.0 million) relate to net financial debt.

Pro rata key figures for associates at 31.12.2018

The table below gives the pro rata key figures for associates by business area. In addition, the Energy business area is broken down by type of power plant.

BKW share CHF millions

Hydro

Nuclear

Fossil-fuel

New renewable energy

Other

Total Energy

Grid

Total

Current assets

47.3

79.6

56.4

16.4

5.6

205.3

210.0

415.3

Non-current assets

1,031.2

740.4

544.8

143.5

26.5

2,486.4

961.7

3,448.1

Current liabilities

– 133.5

– 81.8

– 39.6

– 10.5

– 2.4

– 267.8

– 142.0

– 409.8

Non-current liabilities

– 662.6

– 599.3

– 20.8

– 52.2

– 17.1

– 1,352.0

– 619.9

– 1,971.9

Shareholders’ equity

282.4

138.9

540.8

97.2

12.6

1,071.9

409.8

1,481.7

Income

158.1

114.7

140.6

15.5

8.1

437.0

296.7

733.7

Expenses

– 148.2

– 111.5

– 144.5

– 16.3

– 8.2

– 428.7

– 276.7

– 705.4

Net profit / loss

9.9

3.2

– 3.9

– 0.8

– 0.1

8.3

20.0

28.3

Other comprehensive income

6.2

5.8

0.0

0.0

0.0

12.0

5.2

17.2

Comprehensive income

16.1

9.0

– 3.9

– 0.8

– 0.1

20.3

25.2

45.5

Key figures for major associates

The table below gives the key figures for the major associates. The holdings ENGIE Kraftwerk Wilhelmshaven and Kraftwerke Oberhasli are part of the Energy business area. The interest in Swissgrid is assigned to the Grid business area.

The reported figures are provisional and come from the respective companies, with the exception of Swissgrid, which has bonds listed on the SIX Swiss Exchange. BKW has no final figures for Swissgrid. The key figures as at 31.12 and the income statement including the net profit will be estimated by BKW on the basis of Swissgrid’s business reports from the previous year, as well as relevant press releases issued in the current financial year and transferred to IFRS. Deviations from Swissgrid’s actual figures will be captured in profit and loss calculations for the following year.

The company ENGIE Kraftwerk Wilhelmshaven GmbH & Co. KG is a limited partnership under German law. In companies with this legal form, the effective share of profit and capital of the partners may differ from their share of investment.

100 % key figures

ENGIE Kraftwerk Wilhelmshaven GmbH & Co. KG

Kraftwerke Oberhasli AG

Swissgrid AG

CHF millions

31.12.2018

31.12.2019

31.12.2018

31.12.2019

31.12.2018

31.12.2019

Current assets

73.1

25.5

44.3

34.1

553.9

345.3

Non-current assets

1,547.3

1,408.9

812.4

809.2

2,623.2

2,679.6

Current liabilities

– 75.4

– 32.7

– 72.6

– 102.2

– 386.0

– 687.2

Non-current liabilities

– 56.9

– 23.6

– 588.7

– 543.1

– 1,692.1

– 1,246.5

Shareholders’ equity

1,488.1

1,378.1

195.4

198.0

1,099.0

1,091.2

Shareholding in % as at 31.12.

33.0 % 

33.0 % 

50.0 % 

50.0 % 

36.4 % 

36.1 % 

Goodwill

0.0

0.0

0.0

0.0

6.0

5.9

Reported carrying amount of the investment

491.1

454.8

97.7

99.0

406.0

400.0

Income

201.9

146.6

145.1

143.6

762.0

677.8

Expenses

– 218.7

– 123.4

– 133.1

– 137.0

– 704.4

– 646.0

Net profit / loss

– 16.8

23.2

12.0

6.6

57.6

31.8

Other comprehensive income

0.0

0.0

– 4.9

– 4.1

– 13.6

– 14.8

Comprehensive income

– 16.8

23.2

7.1

2.5

44.0

17.0

Goodwill impairment

0.0

0.0

0.0

0.0

0.0

0.0

Recognised proportionate result from associates

– 5.5

7.7

6.0

3.3

21.0

11.5

Dividend received

0.0

0.0

0.0

0.0

10.7

11.9

22 Property, plant and equipment

CHF millions

Power plants

Mühleberg Nuclear Power Plant

Distribution grid

Buildings and land

Other property, plant and equipment

Construction in progress

Right-of-Use Assets

Total

Gross values at 31.12.2018

2,205.8

1,468.3

3,174.7

225.5

264.0

256.4

7,594.7

Effect of initial application of IFRS 16

– 126.7

– 2.3

268.7

139.7

At 01.01.2019 (restated)

2,079.1

1,468.3

3,174.7

225.5

261.7

256.4

268.7

7,734.4

Changes in the scope of consolidation

2.1

14.3

20.0

1.4

31.8

69.6

Additions

18.9

19.6

4.9

0.1

8.2

195.4

14.4

261.5

Disposals

– 3.4

– 185.2

– 30.2

– 6.9

– 18.5

– 1.3

– 3.7

– 249.2

Reclassifications

77.3

4.1

140.2

6.7

26.3

– 253.4

– 1.2

– 0.0

Contract modifications

– 0.1

– 0.1

Currency translations

– 37.6

– 0.2

– 0.8

– 0.3

– 7.7

– 46.6

Gross values at 31.12.2019

2,136.4

1,306.8

3,289.6

239.5

296.9

198.2

302.2

7,769.6

Accumulated depreciation and impairments at 31.12.2018

1,010.3

1,468.3

1,582.7

118.6

178.3

1.7

4,359.9

Effect of initial application of IFRS 16

– 56.1

– 0.8

56.9

0.0

At 01.01.2019 (restated)

954.2

1,468.3

1,582.7

118.6

177.5

1.7

56.9

4,359.9

Changes in the scope of consolidation

– 0.2

– 0.2

Depreciation

58.4

23.7

74.9

5.0

26.1

31.1

219.2

Impairment

18.7

0.3

6.5

25.5

Disposals

– 2.3

– 185.2

– 30.2

– 2.5

– 17.2

– 0.6

– 238.0

Reversal of impairment

– 1.0

– 1.0

Reclassifications

0.4

– 0.4

0.0

Currency translations

– 12.8

– 0.3

– 2.6

– 15.7

Accumulated depreciation and impairments at 31.12.2019

1,016.2

1,306.8

1,627.4

121.4

186.3

0.7

90.9

4,349.7

Net values at 31.12.2019

1,120.2

0.0

1,662.2

118.1

110.6

197.5

211.3

3,419.9

thereof pledged for liabilities

19.0

10.8

0.1

29.9

The effect of the first-time application of IFRS 16 includes the reclassification of former finance leases to right-of-use assets and the recognition of newly capitalised leases as at 1 January 2019 in the amount of CHF 139.7 million (see Note 3).

Changes in the scope of consolidation relate to business combinations to the amount of CHF 66.7 million (previous year: CHF 6.6 million), to the change in the consolidation method of Wärme Mittelland AG in the amount of CHF 3.3 million (see Note 21) and to disposals of companies in the amount of CHF – 0.4 million (previous year: CHF – 0.2 million).

The column “Mühleberg Nuclear Power Plant” covers all relevant property, plant and equipment including nuclear fuels. The entries for the Mühleberg Nuclear Power Plant do not include non-cash provision increases totalling CHF 19.6 million (previous year: CHF 5.8 million) due to the additional disposal costs caused by plant operations up to the point of decommissioning as well as the adjustment in parameters for inflation and return on investment associated with the revised SEFV on 6 November 2019 (see Note 6.2). The disposals relate to the nuclear fuel which was derecognised after the decommissioning of the power plant (net value: CHF 0).

Further non-cash additions for power plants are the supply of provision restoration obligation for wind farms of CHF 4.9 million as well as entries of CHF 14.4 million for rights of use arising from leases.

Borrowing costs amounting to CHF 0.2 million were capitalised in the reporting year (previous year: none). In the year under review, compensation of CHF 2.9 million for property, plant and equipment that was impaired, lost or decommissioned was recognised in the income statement (previous year: CHF 1.0 million).

The following table contains information on the rights of use under leases per asset class.

CHF millions

Power plants

Distribution grid

Buildings and land

Other property, plant and equipment

Total

Gross values at 31.12.2018

0.0

0.0

0.0

0.0

0.0

Effect of initial application of IFRS 16

126.7

6.0

129.8

6.2

268.7

At 01.01.2019 (restated)

126.7

6.0

129.8

6.2

268.7

Changes in the scope of consolidation

29.2

2.6

31.8

Additions

9.6

4.8

14.4

Disposals

– 3.3

– 0.4

– 3.7

Reclassifications

– 1.2

– 1.2

Contract modifications

– 0.1

– 0.1

Currency translations

– 4.7

– 2.9

– 0.1

– 7.7

Gross values at 31.12.2019

122.0

6.0

162.3

11.9

302.2

Accumulated depreciation and impairments at 31.12.2018

0.0

0.0

0.0

0.0

0.0

Effect of initial application of IFRS 16

56.1

0.8

56.9

At 01.01.2019 (restated)

56.1

0.0

0.0

0.8

56.9

Depreciation

5.5

1.6

21.5

2.5

31.1

Impairment

6.5

6.5

Disposals

– 0.5

– 0.1

– 0.6

Reclassifications

– 0.4

– 0.4

Currency translations

– 2.3

– 0.2

– 0.1

– 2.6

Accumulated depreciation and impairments at 31.12.2019

65.8

1.6

20.8

2.7

90.9

Net values at 31.12.2019

56.2

4.4

141.5

9.2

211.3

of which land lease for wind parks

38.6

CHF millions

Power plants

Mühleberg Nuclear Power Plant

Distribution grid

Buildings and land

Other property, plant and equipment

Construction in progress

Total

Gross values at 31.12.2017

2,256.8

1,461.4

3,069.2

233.9

264.4

199.5

7,485.2

Changes in the scope of consolidation

0.4

4.1

1.9

6.4

Additions

1.4

8.6

6.2

8.0

209.8

234.0

Disposals

– 17.5

– 2.3

– 32.0

– 9.2

– 22.2

– 2.7

– 85.9

Reclassifications

6.5

0.6

131.3

0.5

10.3

– 149.2

0.0

Currency translations

– 41.4

– 0.1

– 0.6

– 2.9

– 45.0

Gross values at 31.12.2018

2,205.8

1,468.3

3,174.7

225.5

264.0

256.4

7,594.7

Accumulated depreciation and impairments at 31.12.2017

968.1

1,461.4

1,539.4

117.7

175.6

1.6

4,263.8

Changes in the scope of consolidation

– 0.1

– 0.1

Depreciation

65.7

6.9

71.3

5.0

23.7

172.6

Impairment

14.1

0.4

0.6

15.1

Disposals

– 9.8

– 28.1

– 4.5

– 20.6

– 63.0

Reversal of impairment

– 14.3

– 0.5

– 14.8

Reclassifications

0.1

– 0.1

0.0

Currency translations

– 13.5

– 0.2

– 13.7

Accumulated depreciation and impairments at 31.12.2018

1,010.3

1,468.3

1,582.7

118.6

178.3

1.7

4,359.9

Net values at 31.12.2018

1,195.5

0.0

1,592.0

106.9

85.7

254.7

3,234.8

thereof in financial leasing

70.6

1.5

72.1

thereof pledged for liabilities

20.3

20.3

23 Intangible assets

CHF millions

Rights of use

Goodwill

Other

Total

Gross values at 31.12.2018

174.3

621.5

297.8

1,093.6

Changes in the scope of consolidation

0.1

250.6

51.0

301.7

Additions from acquisitions

0.5

5.1

5.6

Additions from internally generated intangible assets

6.1

6.1

Disposals

– 2.9

– 2.9

Currency translations

– 3.2

– 8.8

– 2.6

– 14.6

Gross values at 31.12.2019

171.7

863.3

354.5

1,389.5

Accumulated depreciation and impairments at 31.12.2018

131.3

93.9

121.0

346.2

Changes in the scope of consolidation

– 0.3

– 0.3

– 0.6

Depreciation

2.4

34.1

36.5

Impairment

0.5

0.5

Disposals

– 2.9

– 2.9

Currency translations

– 3.1

– 0.8

– 3.9

Accumulated depreciation and impairments at 31.12.2019

130.6

93.6

151.6

375.8

Net values at 31.12.2019

41.1

769.7

202.9

1,013.7

Changes in the scope of consolidation relate to business combinations in the amount of CHF 304.2 million (previous year: CHF 145.2 million) and disposals of companies in the amount of – CHF 1.9 million (previous year: CHF – 2.9 million).

CHF millions

Rights of use

Goodwill

Other

Total

Gross values at 31.12.2017

172.7

517.2

248.7

938.6

Changes in the scope of consolidation

111.7

30.3

142.0

Additions from acquisitions

5.2

17.9

23.1

Additions from internally generated intangible assets

6.2

6.2

Disposals

0.2

– 3.1

– 2.9

Currency translations

– 3.8

– 7.4

– 2.2

– 13.4

Gross values at 31.12.2018

174.3

621.5

297.8

1,093.6

Accumulated depreciation and impairments at 31.12.2017

132.3

94.1

91.7

318.1

Changes in the scope of consolidation

– 0.2

– 0.1

– 0.3

Depreciation

2.6

31.9

34.5

Impairment

0.7

0.7

Disposals

– 2.6

– 2.6

Currency translations

– 3.6

– 0.6

– 4.2

Accumulated depreciation and impairments at 31.12.2018

131.3

93.9

121.0

346.2

Net values at 31.12.2018

43.0

527.6

176.8

747.4

On the balance sheet date, goodwill was distributed among the following cash-generating units:

CHF millions

31.12.2018

31.12.2019

Energy

108.3

107.9

Services

419.3

661.8

Total

527.6

769.7

The goodwill carried in the balance sheet was tested for impairment by comparing the carrying value with the realisable value of the cash-generating units. The realisable value corresponds to the value in use. The calculations were made on the basis of estimated cash flows from business projections approved by management over a period of four years. Cash flows beyond this period were extrapolated using an estimated growth rate. The impairment test on goodwill disclosed in the balance sheet did not identify any need for impairment.

The value in use is measured on the basis of the following material assumptions:

WACC (before tax)

WACC (after tax)

Long-term growth rate

%

31.12.2018

31.12.2019

31.12.2018

31.12.2019

31.12.2018

31.12.2019

Energy

7.2

7.2

5.9

5.9

1.0

1.0

Services

8.1

6.5

6.5

6.5

1.0

1.0

Based on the findings of a sensitivity analysis, realistic changes in the material assumptions do not suggest that the recoverable amount could fall below the carrying amount.

24 Trade accounts payable and other liabilities

CHF millions

31.12.2018

31.12.2019

Trade accounts payable

327.5

334.5

Other financial liabilities

186.9

165.4

Other liabilities

27.5

39.2

Pension plans

9.1

12.5

Total

551.0

551.6

Other financial liabilities include the short-term portion of the sold Swissgrid convertible loan in the amount of CHF 19.5 million (previous year: CHF 19.5 million) (see Note 20).

25 Financial liabilities

CHF millions

31.12.2018

31.12.2019

Bonds

1,043.4

891.9

Registered bonds

294.4

284.4

Lease liabilities

30.4

180.1

Bank liabilities

119.3

86.6

Other financial liabilities

81.9

93.4

Total

1,569.4

1,536.4

of which:

Current financial liabilities

413.3

89.1

Non-current financial liabilities

1,156.1

1,447.3

In July 2019, the CHF 350 million bond due was repaid. At the same time, BKW issued a 0.25 % green bond worth CHF 200 million with a term of eight years.

CHF millions

31.12.2018

Effect of initial application of IFRS 16

01.01.2019

Cash flows

Foreign exchange movement

Changes in fair values

Other

31.12.2019

Current financial liabilities

413.3

22.3

435.6

– 383.9

– 1.9

0.0

39.3

89.1

Bonds

349.5

349.5

– 350.0

0.5

0.0

Lease liabilities

4.9

22.3

27.2

– 28.9

– 0.6

35.2

32.9

Bank liabilities

18.8

18.8

– 15.4

– 0.1

2.9

6.2

Other financial liabilities

40.1

40.1

10.4

– 1.2

0.7

50.0

Non-current financial liabilities

1,156.1

117.4

1,273.5

171.8

– 15.1

– 2.9

20.0

1,447.3

Bonds

693.9

693.9

200.0

– 2.9

0.9

891.9

Registered bonds

294.4

294.4

– 10.8

0.8

284.4

Lease liabilities

25.5

117.4

142.9

0.0

– 3.3

7.6

147.2

Bank liabilities

100.5

100.5

– 22.9

– 1.0

3.8

80.4

Other financial liabilities

41.8

41.8

– 5.3

6.9

43.4

Other non-current liabilities

407.7

407.7

22.4

– 0.9

– 18.7

410.5

Total liabilities from financing activities

1,977.1

139.7

2,116.8

– 189.7

– 17.9

– 2.9

40.6

1,946.9

CHF millions

31.12.2017

Cash flows

Foreign exchange movement

Changes in fair values

Other

31.12.2018

Current financial liabilities

211.8

– 172.0

– 1.5

0.0

375.0

413.3

Bonds

149.8

– 150.0

349.7

349.5

Finance leasing liabilities

8.9

– 8.5

– 0.2

4.7

4.9

Bank liabilities

7.9

– 5.2

– 0.1

16.2

18.8

Other financial liabilities

45.2

– 8.3

– 1.2

4.4

40.1

Non-current financial liabilities

1,387.6

189.5

– 13.6

– 3.1

– 404.3

1,156.1

Bonds

845.5

198.8

– 3.1

– 347.3

693.9

Convertible bond

33.8

– 0.1

– 33.7

0.0

Registered bonds

304.9

– 11.4

0.9

294.4

Finance leasing liabilities

44.1

– 12.9

– 1.1

– 4.6

25.5

Bank liabilities

117.3

1.2

– 1.1

– 16.9

100.5

Other financial liabilities

42.0

2.5

– 2.7

41.8

Other non-current liabilities

416.8

20.1

– 29.2

407.7

Total liabilities from financing activities

2,016.2

37.6

– 15.1

– 3.1

– 58.5

1,977.1

26 Provisions

CHF millions

Nuclear waste disposal

Onerous contracts, energy procurement

Other provisions

Total

At 31.12.2017

1,517.2

354.6

57.3

1,929.1

Changes in the scope of consolidation

3.1

3.1

Provisions added

5.8

3.1

8.9

Interest

53.1

9.5

0.7

63.3

Provisions used

– 47.8

– 39.6

– 7.0

– 94.4

Provisions released

– 14.6

– 42.3

– 7.1

– 64.0

Currency translations

– 1.2

– 1.2

At 31.12.2018

1,513.7

282.2

48.9

1,844.8

Changes in the scope of consolidation

7.0

7.0

Provisions added

5.7

10.2

13.4

29.3

Interest

53.0

7.7

0.7

61.4

Provisions used

– 63.6

– 35.8

– 5.3

– 104.7

Provisions released

– 9.7

– 6.0

– 15.7

Change in estimate for nuclear disposal

13.9

13.9

Currency translations

– 1.1

– 1.1

At 31.12.2019

1,522.7

254.6

57.6

1,834.9

of which:

Current provisions

150.4

34.5

8.9

193.8

Non-current provisions

1,372.3

220.1

48.7

1,641.1

Nuclear waste disposal

As at 31 December 2019, the provision for nuclear waste disposal comprised the following:

The current year saw an allocation of CHF 5.7 million (previous year: CHF 5.8 million) owing to the annual additional disposal costs of operating the power plant. This allocation increased the acquisition cost for nuclear fuels in the same amount without affecting income.

Due to the adjustment in the parameters of inflation and return on investment in connection with the revised SEFV (see Note 6.2), an estimate adjustment of CHF 13.9 million was carried out. The adjustment increased the acquisition costs for the power plants in the same amount without affecting income.

In addition, CHF 63.6 million (previous year: CHF 47.8 million) was used for planning and preparatory work for post-operation and decommissioning.

BKW is required to make regular payments to the state funds for decommissioning and nuclear waste disposal. These funds pay the costs of decommissioning and disposal on behalf of operators following shutdown of the plants. The state fund receivables are disclosed under non-current financial assets (see Note 20).

Onerous contracts, energy procurement

The provisions for onerous energy procurement contracts cover the future purchase of energy from partner plants at production costs that exceed the expected realisable selling prices. These provisions are associated with the energy procurement contracts agreed with the fossil-fuel power stations at Livorno Ferraris in Italy and Wilhelmshaven in Germany. Due to updated expectations regarding future electricity price trends, the strong Swiss franc and, in particular, the decision to phase out coal in Germany (see Note 6.3), provisions of CHF 0.5 million net were set aside in the reporting year (previous year: CHF 42.3 million reversed).

The cash outflow from provisions results from BKW’s obligation to take the electricity produced at production cost and extends over a period of eight years.

Other provisions

The provision for restructuring, which covers future expenses for defined restructuring measures, stood at CHF 0.4 million as at 31 December 2019 (previous year: CHF 0.4 million).

Other provisions include guarantee obligations, obligations related to personnel, estimations of probable payments in respect of legal disputes, provisions for impending losses from customer orders and various minor operating obligations. Cash outflows in respect of these provisions are largely anticipated over the next three years. There are also provisions for the dismantling and break-up of power plants and for rehabilitation of the environment. These costs will be incurred at the end of the useful life of the respective power plants; the cash outflow is anticipated within the next 20 to 25 years.

Interest on provisions calculated at present value is charged through financial expenses.

27 Pension plans

Pension funds are regulated by the Federal Act on Occupational Retirement, Survivors’ and Invalidity Pension (BVG). This requires pension funds to be managed by independent, legally autonomous bodies. Employees and their survivors are insured through the pension plan against the economic consequences of old age, invalidity and death. All actuarial risks are borne by the BKW pension fund (Pensionskasse BKW). The pension plan is financed through contributions and revenue from the assets. The member companies and insured persons pay the premium contributions to the pension scheme, as a percentage of the insured salary of the insured person. Responsibility for investing the pension assets is held by the Board of the foundation.

Employees of BKW in Switzerland are covered by Pensionskasse BKW and other autonomous pension funds, which are classed as defined benefit plans under IAS 19. Outside of Switzerland, some employees are also covered by defined pension plans in accordance with IAS 19. Independent pensions experts carry out annual assessments in line with the terms of IAS 19, based on the projected-unit-credit method.

Pensionskasse BKW

The majority of employees working in Switzerland are covered by the Pensionskasse der Bernischen Kraftwerke (Pensionskasse BKW) pension fund. At the end of April 2018, the Board of the BKW pension fund decided to change the benefit plan with a view to improving long-term financial stability. The existing benefit plan was converted into a defined contribution plan under the Swiss Occupational Pensions Act (BVG) on 1 January 2019.

In the 2018 annual financial statements, the conversion resulted in a one-off, non-cash effect in the amount of CHF 52.4 million. Operating expenses for 2018 fell by that amount. The reason for the one-off effect was the new pension scheme commitment based on a defined contribution plan, which by virtue of its configuration is lower than for a defined benefit plan. Despite the changeover to a defined contribution plan under Swiss law, the BKW pension fund’s pension plan continues to qualify as a defined benefit plan under IAS 19.

Pensionskasse BKW takes the form of a pension fund organised as a foundation established under private law. The supreme governing body of the Pensionskasse BKW foundation is the Board of Trustees, which is composed of an equal number of representatives of the employer and the employees. The benefits and financing of Pensionskasse BKW are stipulated in pension regulations. These are issued by the Board of the foundation. The Board delegates the management of the business to the executive management. The foundation is subject to supervision by the relevant authority of the Canton of Bern.

The pension plan assets are invested in a widely diversified portfolio in Switzerland and abroad in line with the statutory requirements and the guidelines issued by the Board. Assets are invested to guarantee security and an appropriate return on the investment, with a balanced distribution of risks and coverage of the forecast requirement of cash and cash equivalents. The occupational pensions expert prepares the annual actuarial valuation and verifies the financial and actuarial situation of Pensionskasse BKW. The unaudited actuarial coverage rate of Pensionskasse BKW in accordance with BVG at 31 December 2019 with an actuarial interest rate of 1.75 % (previous year: 2.0 %) was 112.9 % (previous year: 106.4 %). In the event of a coverage shortfall according to BVG, the Board must, in agreement with the occupational pensions expert, agree suitable recovery measures (such as increasing the ordinary contributions or collecting recovery contributions). The contribution made by the employer must be at least equivalent to the total contributions paid by the employee.

27.1 Pension liability recorded in the balance sheet

CHF millions

31.12.2018

31.12.2019

Present value of defined benefit obligations

– 2,007.6

– 2,398.3

Fair value of plan assets

1,815.9

2,159.5

Net pension liability recorded in the balance sheet

– 191.7

– 238.8

of which amount disclosed as credit

4.0

0.0

of which amount disclosed as liability

– 195.7

– 238.8

27.2 Pension expense according to IAS 19

CHF millions

2018

2019

Current service cost (employer)

38.6

36.4

Past service cost (employer)

– 52.4

0.0

Interest expenses on defined benefit obligation

13.3

14.7

Interest income from plan assets

– 12.0

– 13.3

Administration costs excluding costs for management of plan assets

1.0

0.9

Pension plan expenses

– 11.5

38.7

27.3 Remeasurement of pension plans

CHF millions

2018

2019

Actuarial gains / losses

Change in financial assumptions

– 4.3

119.7

Change in demographic assumptions

– 4.9

0.0

Adjustments based on experience

– 5.2

19.6

Return on plan assets (excluding interest based on discount rate)

53.7

– 170.9

Total revaluation reported in other comprehensive income

39.3

– 31.6

27.4 Change in present value of defined benefit obligation

CHF millions

2018

2019

Present value of defined benefit obligation at 01.01.

2,023.2

2,007.6

Interest expenses on defined benefit obligation

13.3

14.7

Current service cost (employer)

38.6

36.4

Contributions paid / benefits paid out

– 77.6

– 62.2

Employee contributions

22.9

22.8

Past service cost (employer)

– 52.4

0.0

Business combination

53.6

237.6

Administration costs (excluding asset management costs)

1.0

0.9

Actuarial gains / losses

– 15.0

140.5

Present value of defined benefit obligations at 31.12.

2,007.6

2,398.3

At the balance sheet date, the active members’ share of the defined benefit obligation was CHF 1,410.9 million (previous year: CHF 1,052.6 million). The share of those drawing a pension in the defined benefit obligation was CHF 987.4 million (previous year: CHF 955.0 million).

27.5 Change in fair value of plan assets

CHF millions

2018

2019

Fair value of plan assets at 01.01.

1,828.3

1,815.9

Interest income from plan assets

12.0

13.4

Employer contributions

37.0

31.2

Employee contributions

22.9

22.9

Contributions paid / benefits paid out

– 77.6

– 62.3

Business combination

47.0

167.5

Return on plan assets (excluding interest based on discount rate)

– 53.7

170.9

Fair value of plan assets at 31.12.

1,815.9

2,159.5

27.6 Asset structure of plan assets

CHF millions

31.12.2018

%

31.12.2019

%

Cash and cash equivalents

60.3

3.3

80.8

3.7

Equity instruments

572.2

31.5

710.4

32.9

Debt instruments

651.7

35.9

751.7

34.8

Other instruments

169.6

9.3

200.7

9.3

Properties

362.1

20.0

415.9

19.3

Total plan assets

1,815.9

100.0

2,159.5

100.0

thereof own transferrable financial instruments

3.3

3.4

thereof properties used by BKW

16.8

19.1

Equity capital instruments include investments in shares and are generally listed at their market price in an active market. As a percentage of the total assets, the proportion of Swiss shares at the end of the reporting period was 15.4 % (previous year: 13.5 %) and that of foreign shares was 17.6 % (previous year: 17.9 %). Investments in Swiss and foreign shares are made directly (through external asset managers) and through investment foundations and funds.

The composition of debt instruments as a percentage of total assets on 31 December 2019 was 16.3 % (previous year: 14.5 %) for Swiss bonds, 8.4 % (previous year: 9.5 %) for foreign bonds with currency hedging and 9.6 % (previous year: 11.9 %) for mortgage loans and mortgage bonds. The bonds and mortgage bonds are listed in an active market at their market price, whereas there is no market price listing in an active market for the mortgage loans.

Most of the other instruments are listed in an active market at their market price.

On 31 December 2019, the proportion of property as a percentage of total assets was spilt between 10.1 % (previous year: 12.4 %) for properties (direct investments in Switzerland) and 7.0 % (previous year: 7.6 %) for property funds listed in active markets (of which almost half involved foreign properties).

The effective return from the plan assets was 11.2 % in the current year (previous year: – 2.4 %).

27.7 Actuarial assumptions

Switzerland

Germany

Switzerland

Germany

2018

2018

2019

2019

Discount rate

0.80 % 

n / a

0.25 % 

1.11 % 

Expected rate of future salary increases

0.50 % 

n / a

0.50 % 

2.75 % 

Expected rate of future pension increases

0.00 % 

n / a

0.00 % 

1.75 % 

Mortality table

BVG 2015 GT

n / a

BVG 2015 GT

Heubeck 2018 G

The weighted average term of the employee pension plan obligation amounted to 14.8 years (previous year: 14.0 years).


Sensitivities of the major actuarial assumptions

The discount rate, changes in salaries and pensions, and life expectancy constitute significant actuarial assumptions and were therefore subjected to a sensitivity analysis. In the event of an increase / decrease in the assumptions shown below, the employee pension plan obligation will vary as follows:

31.12.2019

Defined benefit obligation

CHF millions

Increase

Decrease

Discount rate (0.25 % change)

– 80.9

86.5

Salary increase (0.25 % change)

4.7

– 4.8

Changes in pensions (+ 0.20 % change)

69.0

Life expectancy (1 year change)

76.8

– 78.0

31.12.2018

Defined benefit obligation

CHF millions

Increase

Decrease

Discount rate (0.25 % change)

– 61.6

65.8

Salary increase (0.25 % change)

3.3

– 3.3

Changes in pensions (+ 0.20 % change)

54.0

Life expectancy (1 year change)

61.7

– 62.8

The sensitivity analysis was conducted on the basis of a method that extrapolates the impact on the employee pension plan obligation through changes in the above assumptions at the end of the reporting period.


27.8 Estimated contributions for the next period

CHF millions

2018

2019

Expected employer contributions

29.7

35.7

Expected employee contributions

22.0

26.9

28 Other non-current liabilities

CHF millions

31.12.2018

31.12.2019

Assigned rights of use

295.2

306.1

Other non-current financial liabilities

112.1

104.1

Other non-current liabilities

0.4

0.3

Total

407.7

410.5

Liabilities resulting from the sale of the Swissgrid convertible loan in November 2016 are recorded at CHF 38.9 million under “Other non-current liabilities”. The transaction is detailed in Note 20.

29 Share capital and reserves

29.1 Share capital

The issued and fully paid-in share capital of BKW AG amounting to CHF 132.0 million consists of 52,800,000 registered shares at a par value of CHF 2.50 each.

Major shareholders and treasury shares

To BKW’s knowledge, the following shareholders held more than 3 % of the shares as at 31 December.

31.12.2018

31.12.2019

Canton of Bern

52.54 % 

52.54 % 

Groupe E Ltd.

10.00 % 

10.00 % 

Transactions in treasury shares

Number

Carrying amount CHF millions

Cash-relevant proportion CHF millions

31.12.2017

955,921

65.8

Purchases

400,735

26.0

26.0

Sales

– 1,286,562

– 87.0

– 19.4

31.12.2018

70,094

4.8

6.6

Purchases

466,915

32.2

32.2

Sales

– 515,985

– 35.5

– 30.3

31.12.2019

21,024

1.5

1.9

29.2 Reserves

Capital reserves

Capital reserves include reserves paid in by shareholders.

Retained earnings

Retained earnings consist of legal and statutory reserves (excluding capital reserves), retained earnings from previous years and gains / losses on the sale of treasury shares.

Treasury shares

BKW shares held by BKW or its Group companies are deducted from equity at acquisition cost. As at 31 December 2019, 21,024 shares (previous year: 70,094) were held by BKW AG and its Group companies.

Other reserves

CHF millions

Currency translations

Valuation reserve of financial assets measured at fair value

Hedging

Actuarial gains / losses

Total

At 31.12.2017

– 254.8

0.0

2.1

81.0

– 171.7

Currency translations

Currency translations

– 47.4

– 47.4

Reclassification to the income statement

0.1

0.1

Financial assets at fair value through other comprehensive income

Value adjustments

– 0.2

– 0.2

Reclassification to retained earnings

0.1

0.1

Hedging transactions

Value adjustments of Group companies

– 0.3

– 0.3

Actuarial gains / losses

of Group companies

– 39.3

– 39.3

of associates

14.0

14.0

Income taxes

4.4

4.4

At 31.12.2018

– 302.1

– 0.1

1.8

60.1

– 240.3

Currency translations

Currency translations

– 42.3

– 42.3

Hedging transactions

Value adjustments of associates

– 4.7

– 4.7

Actuarial gains / losses

of Group companies

31.6

31.6

of associates

– 10.9

– 10.9

Income taxes

– 6.2

– 6.2

At 31.12.2019

– 344.4

– 0.1

– 2.9

74.6

– 272.8

Currency translations

Reserves for currency translations contains currency differences arising from the translation of the financial statements drawn up in foreign currencies of foreign Group companies and associates.

Valuation reserve of financial assets at fair value through other comprehensive income

This valuation reserve includes changes in the value of financial assets at fair value through profit or loss until their realisation. When these financial assets are sold, the valuation reserve is reclassified to retained earnings.

Hedging

The hedging reserve comprises unrealised adjustments in the value of financial instruments as a hedge of payment streams (cash flow hedge) and as a hedge of net investment in a foreign business operation (net investment hedge) in the amount of the effective portion of the hedge, as well as the realised gains and losses from completed hedging transactions that have not yet been recognised in profit or loss since the underlying transaction has not yet been recognised in income.

Actuarial gains / losses

The reserve for actuarial gains and losses recognises the effect of periodic actuarial recalculations.

29.3 Capital management

BKW pursues a strategy aimed at the sustainable increase and retention of corporate value. The aim of BKW capital management is to ensure the Group’s long-term capital market standing and financing capability by maintaining a balance sheet structure that is compatible with the defined target rating, and to keep the potential impact of fluctuations in the value of the entire financial and risk portfolio within narrow boundaries. BKW is committed to a consistent dividend payout based on a ratio of 40 % to 50 % of adjusted net profit. BKW’s financial resources primarily serve the core business and provide the requisite scope for action in accordance with the requirements of the Group strategy. There were no changes in capital management in 2019.

30 Derivatives

The following table provides information on replacement values and contract volumes for derivative financial instruments open on the balance sheet date in respect of energy trading, and of interest and exchange rate hedging. Derivatives that qualify as hedging instruments under IFRS 9 and are treated according to hedge accounting provisions are disclosed separately.

Derivatives are recorded at fair value in the balance sheet, as positive replacement values (receivables) or negative replacement values (liabilities). The contract volume corresponds to the basic value or contract volume of the underlying derivative financial instrument.

The replacement value for futures is zero, since price fluctuations are offset daily compared with the agreed closing prices. Forward energy trading contracts include forwards with fixed and flexible profiles.

Positive replacement value

Negative replacement value

Contract volume

CHF millions

31.12.2018

31.12.2019

31.12.2018

31.12.2019

31.12.2018

31.12.2019

Futures (energy trading)

189.1

367.7

Forward contracts (energy trading)

230.8

138.5

242.0

124.5

1,826.7

2,091.6

Swaps

3.4

3.8

25.0

15.0

Exchange rate hedging

0.4

0.9

0.1

175.1

228.7

Hedge accounting

Swaps

1.9

1.2

110.0

100.0

Exchange rate hedging

0.0

5.6

Total

233.1

139.4

245.4

129.6

2,331.5

2,803.0

of which:

Current derivatives

197.7

132.4

192.5

106.8

Non-current derivatives

35.4

7.0

52.9

22.8

31 Hedge accounting

The following hedging transactions were open on 31 December 2019:

Fair value hedge

The interest rate swap to convert fixed interest rates into variable rates / to hedge fluctuations in the fair value of a portion of the issued bonds expired in the third quarter of 2019. The hedge qualified as a fair value hedge and was classified as highly effective. The change in the fair value of the underlying portion of the bonds amounted to CHF 1.9 million (previous year: CHF 3.1 million).

In the reporting year, a new interest rate swap was concluded. This is used to convert fixed interest rates into variable rates / to hedge against fluctuations in the fair value of a portion of the newly issued green bonds. This hedging relationship is assessed as highly effective and qualifies as a fair value hedge. The change in the fair value of the green bond amounted to CHF 1.0 million in the reporting year.

No ineffective portion of hedging relationships was reported in the financial result either in 2019 or in 2018.

Cash flow hedge

There were no hedges relating to outstanding investment obligations on the balance sheet date. All hedging instruments expired in the previous year. In the previous year the hedging instrument qualified as a cash flow hedge and was assessed as highly effective. The gain / loss on measurement in the previous year (CHF 0.0 million) was recorded under other comprehensive income. In 2018, no ineffective portion of hedging relationships was reported in the financial result.

Net investment hedge

In previous years, BKW placed three registered bonds with nominal amounts of EUR 275.0 million in total. The registered bonds were placed in Germany and hedge a part of its investment projects in that country. The registered bonds have been designated as a net investment hedge. Foreign exchange gains or losses on the registered bonds are recognised in other comprehensive income and correspondingly offset the gains or losses from currency conversion of the designated net investments. In the current year, no ineffective portion of hedging relationships was reported in the financial result.

32 Related parties

The following financial relationships between BKW and related parties existed in the periods reported. Unless stated otherwise, all transactions were conducted under the same terms and conditions as with independent third parties:

Parent

Associates

Pension funds

CHF millions

2018

2019

2018

2019

2018

2019

Income

Energy sales

3.3

2.7

43.2

39.3

Other sales and services

6.3

5.4

21.3

21.3

1.3

1.3

Interest and dividends

2.2

2.3

21.7

23.3

Expenses

Energy purchases

276.5

218.0

Water charges

19.0

19.0

Other purchases and services

0.4

0.4

108.8

95.1

37.1

32.0

Taxes and charges

5.6

2.5

Interest and dividends

50.1

50.1

0.1

0.1

Income taxes

4.8

20.5

Assets

Cash and cash equivalents

33.9

23.1

Receivables and accruals

4.5

1.5

15.9

40.9

Current financial assets

32.8

14.3

Loans

26.2

24.8

Rights of use

11.6

9.2

Liabilities

Liabilities and accruals

5.5

19.9

51.1

23.1

9.2

11.7

Loans

0.8

3.7

Rights of use

0.4

0.6

Transactions with the parent

The Canton of Bern is the majority shareholder of BKW. As such, it has a controlling influence on all decisions at the Annual General Meeting, including the election of members of the Board of Directors and the appropriation of retained earnings. The relationship with the Canton of Bern, its authorities, public-law institutions and the private-law companies it controls takes place on many levels: BKW delivers energy and other services, purchases material and services, and pays taxes, water rates and other levies and charges. In addition, financial transactions are conducted with Berner Kantonalbank, in which the Canton of Bern holds a majority interest.

Transactions with associates

Reported transactions consist of energy deliveries, energy transports, dividends, engineering services (income), operational management and maintenance / servicing (income), energy purchases, material / third-party services and other services (expense). Energy produced by partner plants is billed to shareholders at production cost (including interest and repayment of borrowed funds) on the basis of existing partner contracts. In the 2019 financial year, associates borrowed CHF 10.8 million in loans from BKW (previous year: CHF 17.4 million in loans granted). Repayments reduced loans in the current year by CHF 28.5 million (previous year: repayments CHF 8.3 million). Furthermore, loans were reduced by CHF 1.4 million in the reporting year owing to changes in the scope of consolidation. In the current year, BKW capitalised services and materials from associates worth CHF 18.8 million (previous year: CHF 14.8 million).

Transactions with pension funds

Transactions with pension funds are conducted as part of the occupational pension plan and consist of employer contributions, administrative charges (personnel, operational and administrative costs), real estate services (management of properties) and financial transactions (liquidity management including interest).

Transactions with the Board of Directors and Group Executive Board

Remuneration

CHF millions

2018

2019

Short-term benefits

3.9

4.5

Contributions to pension plans

1.2

0.9

Share-based payments

1.5

1.5

Total

6.6

6.9

The performance-related payments contained in short-term benefits reflect the variable profit shares for the corresponding financial year.

Detailed information on the remuneration paid to the Board of Directors and the Group Executive Board can be found in the Remuneration Report, which is published in accordance with the Ordinance against Excessive Compensation in Listed Stock Companies.

Transactions with companies in which members of the Board of Directors and Group Executive Board have significant influence

In the 2019 financial year, BKW supplied companies in which members of the Board of Directors and the Group Executive Board have significant influence with energy amounting to CHF 2.8 million (previous year: CHF 1.7 million) and provided services amounting to CHF 0.5 million (previous year: CHF 1.3 million). At the balance sheet date, there were outstanding receivables from these companies in the amount of CHF 0.7 million (previous year: CHF 0.6 million).

33 Leasing

The lessee arrangements relate to wind farms, leases for land and distribution facilities, easements on land, vehicles and other movable property, plant and equipment.

Information on the rights of use under lessee arrangements is provided in Note 22. The terms of the lease liabilities are disclosed in Note 39.3.

CHF millions

2019

Leases in the consolidated income statement

Income from operating leases

0.8

Expense relating to short-term leases

2.4

Expense relating to low-value assets

0.7

Expense relating to variable lease payments not included in the measurement of lease liabilities

0.4

Interest expense on lease liabilities

2.3

Leases in the consolidated cash flow statement

Total cash outflows from lessee arrangements

34.8

The lessor arrangements mainly concern heating systems under heat contracting. The future undiscounted lease payments as at the balance sheet date were:

CHF millions

31.12.2018

31.12.2019

Up to 1 year

1.0

0.7

Later than 1 year and not later than 2 years

0.7

0.7

Later than 2 years and not later than 3 years

0.7

0.6

Later than 3 years and not later than 4 years

0.6

0.5

Later than 4 years and not later than 5 years

0.5

0.4

More than 5 years

4.1

4.0

Total

7.6

6.9

34 Additional disclosures on the cash flow statement

Cash and cash equivalents covers cash on hand, bank account balances and cash invested with financial institutes for a maximum period of three months.

CHF millions

31.12.2018

31.12.2019

Bank and cash balances

602.9

668.6

Term deposits

214.5

14.9

Total cash and cash equivalents

817.4

683.5

Adjustments to the operating cash flow for non-cash transactions are composed as follows:

CHF millions

2018

2019

Depreciation, amortisation and impairment

208.1

280.7

Income from associates

– 28.3

– 35.7

Financial result

167.6

– 44.1

Gains / losses from sale of non-current assets

– 4.2

– 1.5

Change in non-current provisions (excl. interest and excl. utilisation of nuclear provisions)

– 97.0

– 1.3

Change in assigned rights of use

– 11.9

– 12.5

Change from the valuation of energy derivatives

3.3

– 25.2

Other non-cash positions

– 54.1

9.6

Total adjustment for non-cash transactions

183.5

170.0

Details on acquisitions of Group companies in the current year are provided in Note 7. The cash flow arising from the acquisition of Group companies amounting to CHF 244.6 million corresponds to the purchase price of CHF 356.1 million less the acquired cash and cash equivalents of CHF 45.8 million, the acquired obligations of CHF 19.1 million, and the deferred, contingent purchase price payments of CHF 71.0 million at the time of acquisition, plus the payment of CHF 24.4 million that had been made in respect of deferred and contingent consideration payments in 2019.

Sub-total “Cash flow from operating activities before utilisation of nuclear provisions”

To ensure better interpretability and comparability of the effective operating cash flow, the “Cash flow from operating activities” item now includes a sub-total of the cash flow before utilisation of provisions for nuclear decommissioning and waste disposal.

This is because the costs for nuclear decommissioning and waste disposal have already been incurred in connection with the decommissioning of the Mühleberg Nuclear Power Plant and will continue to be incurred in the future. These costs represent the utilisation of existing provisions and are therefore charged to “cash flow from operating activities” determined in accordance with IAS 7. However, the nuclear decommissioning is not related to BKW’s actual operating performance, and reported “cash flow from operating activities” is therefore not a suitable metric for assessing operating cash generation in BKW’s view.

Most of the costs for nuclear decommissioning and waste disposal are borne by the state-run decommissioning and waste disposal funds. BKW is thus entitled to a refund of the costs incurred, although the costs incurred and the refund do not coincide chronologically. Both payments into and refunds from the state funds are classified in the cash flow statement as part of “cash flow from investing activities”. This means there is therefore a discrepancy in the presentation of these directly related cash flows. To adequately interpret cash flow, the corresponding individual items presented separately in the cash flow statement should be considered together. Therefore, the utilisation of provisions with and without claim to refunds is now reported separately in “cash flow from operating activities”.

35 Share-based payment

BKW employees have the opportunity to purchase BKW AG share capital on preferential terms. Full-time employees of BKW and members of the Board of Directors (except the Group Executive Board and senior management) are offered a limited number of BKW shares every year at a fixed preferential price, set for that year, subject to a blocking period. In the current year, employees had the opportunity to acquire up to 348,650 shares in BKW (previous year: 327,450 shares) at a preferential price. In the 2019 financial year, 79,148 shares (previous year: 77,701 shares) were purchased at a price of CHF 45.45 per share (previous year: CHF 40.75). The underlying present value per share was CHF 68.30 (previous year: CHF 60.00). The personnel expense for this share-based payment was CHF 1.8 million (previous year: CHF 1.5 million). No purchase rights remained open on the balance sheet date.

In addition, a performance-related bonus has been allocated to members of the Group Executive Board and senior management in the form of BKW shares as part of their fixed annual base salary. The allocation of shares to members of the Group Executive Board is decided on an annual basis for the current financial year. The shares are subject to a blocking period. In the 2019 financial year, 28,608 shares (previous year: 26,546 shares) with an underlying fair price of CHF 69.70 per share (previous year: CHF 71.60) were allocated. As part of the performance management process, BKW shares are allocated to senior management in March of the following year. In the 2019 financial year, 22,314 shares (previous year: 21,213 shares) with an underlying fair price of CHF 67.00 per share (previous year: CHF 63.60) were allocated. The shares are subject to a blocking period. The total personnel expense booked for profit-sharing to the Group Executive Board and senior management amounted to CHF 3.5 million (previous year: CHF 3.2 million). No purchase rights remained open on the balance sheet date.

Allocation of shares to employees is not subject to any other conditions in either of the aforementioned cases, hence there is no vesting period and the compensation is recorded on the grant date. Fair value is measured on the basis of the share price. The corresponding expense is recognised in personnel expenses at the time of the grant being made. In relation to the share purchase programme, the personnel expense corresponds to the difference between the fair value and the preferential price paid by employees.

36 Group companies with material non-controlling interests

With BKW Netzbeteiligung Ltd., which is headquartered in Switzerland, BKW holds a Group company with material non-controlling interests. BKW Netzbeteiligung Ltd. holds interests in Swissgrid Ltd.

The financial information of BKW Netzbeteiligung Ltd. is disclosed separately in the table below. The breakdown is before the elimination of inter-company transactions.

BKW Netzbeteiligung Ltd.

CHF millions

31.12.2018

31.12.2019

Non-controlling interests in %

49.9 %

49.9 %

Carrying amount of non-controlling interests

180.6

180.6

Net income allocated to non-controlling interests

5.3

5.9

Dividends on non-controlling interests

5.6

5.9

Balance sheet

Non-current assets

361.7

361.7

Current assets

0.3

0.3

Non-current liabilities

0.0

0.0

Current liabilities

0.0

0.0

Income statement

Financial income

10.7

11.8

Net profit

10.7

11.8

Cash flow statement

Cash flow from operating activities

10.6

11.8

Cash flow from investing activities

0.0

0.0

Cash flow from financing activities

– 11.3

– 11.8

37 Assets and liabilities measured at fair value

Assets and liabilities measured at fair value are classified according to the following hierarchy:

There were no transfers between the different levels during the year under review or during the previous year.

CHF millions

Carrying amount at 31.12.2019

Level 1

Level 2

Level 3

Financial assets at fair value through profit or loss

Current financial assets

Debt instruments

30.9

1.0

29.9

Inventories

Certificates (proprietary trading)

10.2

10.2

Derivatives (current and non-current)

139.4

139.4

Non-current financial assets

Interest in state funds

1,301.3

1,301.3

Financial assets at fair value through other comprehensive income

Non-current financial assets

Equity instruments

7.2

7.2

Financial liabilities at fair value through profit or loss (FVPL)

Derivatives (current and non-current)

129.6

129.6

Other financial liabilities

Contingent purchase price liabilities in relation to business combinations

79.0

79.0

Liabilities relating to non-controlling interests

10.8

10.8

CHF millions

Carrying amount at 31.12.2018

Level 1

Level 2

Level 3

Financial assets at fair value through profit or loss

Current financial assets

Debt instruments

136.9

106.9

30.0

Inventories

Certificates (proprietary trading)

0.7

0.7

Derivatives (current and non-current)

233.1

233.1

Non-current financial assets

Interest in state funds

1,169.8

1,169.8

Financial assets at fair value through other comprehensive income

Non-current financial assets

Equity instruments

7.4

7.4

Financial liabilities at fair value through profit or loss (FVPL)

Derivatives (current and non-current)

245.4

245.4

Other financial liabilities

Contingent purchase price liabilities in relation to business combinations

56.8

56.8

Liabilities relating to non-controlling interests

8.1

8.1

In addition, the liabilities on 31 December 2019 include the following at fair value:

The Level 3 debts and assets measured at fair value developed as follows during the period under review:

Equity instruments liabilities

Contingent purchase price liabilities

Liabilities to non-controlling interests

CHF millions

2018

2019

2018

2019

2018

2019

At 01.01.

8.6

7.4

41.4

56.8

11.7

8.1

Additions

0.7

0.5

35.2

47.6

5.0

Disposals

– 1.7

– 0.7

– 6.4

– 11.2

– 3.4

– 1.5

Value adjustment

Transfer to income statement

n / a

n / a

– 12.2

– 13.1

– 0.2

– 0.8

Changes in value included in other comprehensive income

– 0.2

0.0

– 1.2

– 1.1

0.0

0.0

At 31.12.

7.4

7.2

56.8

79.0

8.1

10.8

38 Disclosure of financial assets and liabilities

38.1 Carrying amount by balance sheet item and allocation to measurement categories in accordance with IFRS 9

Financial assets

Note

Financial assets at amortised cost

Financial assets at fair value through profit or loss

Financial assets at fair value through other comprehensive income

Total

CHF millions

2018

2019

2018

2019

2018

2019

2018

2019

Cash and cash equivalents

34

817.4

683.5

817.4

683.5

Trade accounts receivable

16

595.5

579.3

595.5

579.3

Other current financial receivables

16

70.0

69.6

70.0

69.6

Current financial assets

20

140.6

111.7

136.9

30.9

277.5

142.6

Derivatives (current and non-current)

30

233.1

139.4

233.1

139.4

Financial accruals

19

57.4

75.5

57.4

75.5

Non-current financial assets

20

96.4

78.7

7.4

7.2

103.8

85.9

Total

1,777.3

1,598.3

370.0

170.3

7.4

7.2

2,154.7

1,775.8

Financial liabilities

Note

Financial liabilities at amortised cost

Financial liabilities at fair value through profit or loss

Lease liabilities

Total

CHF millions

2018

2019

2018

2019

2018

2019

2018

2019

Trade accounts payable

24

327.5

334.5

327.5

334.5

Other current financial liabilities

24

157.4

120.8

29.5

44.6

186.9

165.4

Current financial liabilities

25

408.6

56.2

4.7

32.9

413.3

89.1

Derivatives (current and non-current)

30

245.4

129.6

245.4

129.6

Financial accruals

19

167.6

139.6

167.6

139.6

Non-current financial liabilities

25

1,018.6

1,201.1

111.8

99.0

25.7

147.2

1,156.1

1,447.3

Other non-current financial liabilities

28

66.2

40.0

45.9

64.1