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Annual Report
Editorial
Year in review
2027 Strategy
Corporate Governance
Sustainability
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Financial statements Swiss GAAP FER

Notes

1. Accounting principles

General

The 2022 financial statements of Swissgrid Ltd (hereinafter: Swissgrid) have been prepared in accordance with Swiss GAAP FER. The financial statements provide a true and fair view of the company’s assets, financial position and results of operations.

Conversion of foreign currency items

The accounting records are maintained in the local currency (Swiss francs, CHF). All monetary assets and liabilities recognised in foreign currencies are converted at the exchange rate as of the balance sheet date. Transactions in foreign currencies are converted at the exchange rate on the day the transaction took place. Foreign exchange gains and losses resulting from transactions in foreign currencies are recognised in the income statement and are presented in the same item as the underlying transaction.

Cash flow statement

Cash and cash equivalents form the basis for the presentation of the cash flow statement. The cash flow from operating activities is calculated using the indirect method.

Revenue recognition

Revenue is recognised in the income statement upon performance of Swissgrid’s obligations. For activities regulated under the Electricity Supply Act (StromVG), the measurement of performance is based mainly on energy volumes directly metered on the transmission grid or reported from downstream grid levels. For certain revenue and procurement items, initial billing values are available six weeks after delivery at the earliest, thereby rendering accruals based on historical and statistical data, as well as on estimates necessary for the revenue recognition of these items.

The activities defined in the Ordinance on the Establishment of a Hydropower Reserve (WResV) are intermediary transactions in accordance with the accounting regulations, which is why only the value of the services provided by the company itself is reported in the power reserve segment.

Activities according to StromVG / WResV

Volume- and tariff-related timing differences (surpluses and deficits)

According to Art. 14 of the Electricity Supply Act and WResV, grid usage costs must be allocated to users on a user-pays basis. The tariffs for a financial year are determined based on planned costs. Due to price and volume deviations, actual expenses and income vary from the tariff calculation on both the revenue and procurement side. This results in surpluses or deficits, i.e. the tariff revenues from a financial year are higher or lower than the actual expenses incurred during the same period. These volume- and tariff-related timing differences are transferred to the balance sheet and taken into account in cost and revenue calculations for future tariff periods. The expected reduction in volume- and tariff-related timing differences within twelve months of the balance sheet date is recognised as short-term surpluses or deficits in the balance sheet.

EBIT regulated under StromVG

Earnings before interest and taxes (EBIT) from activities related to the Electricity Supply Act (StromVG) are defined in Article 13 of the Electricity Supply Ordinance (StromVV) and are equivalent to the interest applied to the invested operating assets with the weighted average cost of capital rate (WACC) for the current year under review (= WACCt+0) and the interest applied to the volume and tariff-related timing differences with the weighted average cost of capital rate of WACCt+2 plus income taxes.

Invested operating assets consist of net current assets calculated on a monthly basis as well as the property, plant and equipment and intangible assets as at the end of the financial year. The weighted average cost of capital rate (WACC) is based on the current international practice of the WACC capital cost concept with reference to the Capital Asset Pricing Model (CAPM). Besides considering the findings of financial market theory, the regulatory framework conditions in Switzerland and the current situation in the money and capital market are also taken into account. The official weighted average cost of capital rates based on this method of calculation are 3.83% for 2022 (WACCt+0) and 4.13% for 2024 (WACCt+2).

EBIT according to WResV

In the power reserve segment, the legally prescribed cost recovery principle results in neutral earnings before interest and taxes (EBIT).

Chargeability of operating and capital costs

ElCom has the right to verify ex post the chargeability of Swissgrid’s operating and capital costs for tariff-setting purposes. In case of an ex post cost adjustment, an appeal can be lodged with the Federal Administrative Court with the possibility of appeal to the Federal Supreme Court. A cost adjustment impacting Swissgrid’s operating result is applied whenever no appeal is lodged, or whenever an appeal’s prospects for success are judged to be less than 50% on the basis of a reappraisal, or whenever a legally binding ruling is issued.

Property, plant and equipment

Property, plant and equipment are recognised at the cost of acquisition or production less accumulated amortisation and any impairment losses. Significant spare parts which are likely to be used for a longer period and whose use only takes place in connection with a non-current asset item are recognised in non-current assets and depreciated over the remaining useful life of the relevant asset.

Depreciation/amortisation is calculated using the straight-line method on the basis of the estimated useful technical and economic service life. The service life is determined as follows:
– Lines: 15 to 60 years
– Substations: 10 to 35 years
– Buildings and expansions: 5 to 50 years
– Other property, plant and equipment: 3 to 8 years
– Construction in progress and properties: only applicable in the case of an impairment loss

Intangible assets

Intangible assets are recognised at the cost of acquisition or production less accumulated amortisation and any impairment losses. Depreciation/amortisation is calculated using the straight-line method on the basis of the estimated useful technical and economic service life.

The service life is determined as follows:
– Rights of use: contract term
– Software and technical regulations: 3 to 5 years
– Intangible assets under development: only applicable in the case of an impairment loss

Impairment losses

The value of property, plant and equipment and intangible assets is reviewed annually. If there is an indication of an impairment loss, the book value is reduced to the realisable value and an impairment loss is charged to the results of the period.

Construction in progress/intangible assets under development

Construction in progress and intangible assets under development are non-current assets that are not yet completed or not yet operational. All items of property, plant and equipment and intangible assets, including self-constructed assets, are classified as non-current assets. As of each balance sheet date, a review is performed to determine whether any construction in progress or intangible assets under development have to be impaired. These are recognised as impairment losses in the year of completion. Ordinary depreciation or amortisation of these assets begins once they are completed or are ready for operation.

Financial assets

Financial assets are measured at acquisition costs less any impairment losses. These include shareholdings with a capital share of over 20%, but which do not have a significant impact on the financial statements, as well as shareholdings with a capital share of less than 20%. Employer contribution reserves without conditional renounced use are also recognised in financial assets.

Inventory

Inventory includes waste material for maintaining the grid systems. Inventory is measured at the lower of acquisition cost or market price.

Accounts receivable

Accounts receivable are reported at their nominal value less any impairment losses required for business reasons.

Cash and cash equivalents

Cash and cash equivalents include cash in hand, cash at banks and deposits at banks maturing in 90 days or less. They are recognised at their nominal value.

Bonds

Bonds issued on the capital market are recognised at their nominal value. Deviations from the nominal value in the case of below- or above-par issues are recognised as accruals and deferrals and are reversed on a straight-line basis over the term of the bond.

Liabilities

Liabilities are recognised at their nominal value.

Provisions

Provisions are recognised if there is an obligation based on an event that took place prior to the balance sheet date, the amount and/or due date of which is uncertain but capable of being estimated.

Contingent liabilities

Contingent liabilities are measured as of the balance sheet date. A provision is reported if a cash outflow without a usable countervalue is probable and assessable. Otherwise, contingent liabilities are disclosed in the notes to the financial statements.

Interest on borrowed capital

Interest on borrowed capital is recognised as an expense in the period in which it arises.

Employee pension plan

Swissgrid is a member of an industry-wide retirement benefit plan (PKE Vorsorgestiftung Energie). This is a legally independent pension fund. All permanent employees of the company are included in this pension fund from 1 January of the year after they turn 17. Members of the Board of Directors are also to be insured in the pension fund under the conditions defined in the pension regulations of PKE Vorsorgestiftung Energie. All persons affiliated to the pension fund are insured for disability and death. From 1 January of the year after they turn 24, employees are also covered by retirement insurance.

Economic benefits arising from a pension fund surplus (e.g. in the form of a positive impact on future cash flows) are not capitalised, since the prerequisites for this are not met and the company does not intend to use such benefits to reduce employer contributions. Any benefits arising from freely available employer contribution reserves are recognised as an asset.

An economic obligation (e.g. in the form of negative effects on future cash flows due to a pension fund deficit) is recognised if the prerequisites for the creation of a provision are met. Accrued contributions for the period, the difference between the annually calculated economic benefit from pension fund surpluses and obligations, as well as the change in the employer contribution reserves are recognised in the income statement as personnel expenses.

Transactions with related parties

Related parties are organisations and persons that can have a significant influence, either directly or indirectly, on Swissgrid’s financial or operational decisions. Shareholders holding at least 20% of the voting rights in Swissgrid, either alone or together with others, are considered to be related parties. As regards shareholders, other criteria in addition to the proportion of voting rights held are also taken into account (including representation in committees and the possibility of exerting influence due to the shareholder structure). Subsidiaries of related shareholders as well as partner plant companies whose shares are 100% owned by related shareholders or which are controlled by a related shareholder, are also considered to be related parties. Related parties also include companies over which Swissgrid exercises a significant influence. Members of the Board of Directors and of the Executive Board are also considered to be related parties. Provided they exist and are significant, relations with related parties are disclosed in the notes to the financial statements. All transactions are conducted at arm’s length.

Segment information

Segmentation is based on tariff groups as defined in the Electricity Supply Act (StromVG), the Ordinance on the Establishment of a Hydropower Reserve (WResV) and other activities, and is aligned with Swissgrid’s internal reporting structure.

Income taxes

Current income taxes are calculated based on the taxable results on an accrual basis. The annual accrual of deferred taxes is based on a balance sheet perspective (balance sheet method) and considers all future income tax effects (comprehensive method).

Derivative financial instruments

Swissgrid may use derivative financial instruments to hedge against currency and market price risks. If the conditions are met, Swissgrid will apply hedge accounting to hedge expected future cash flows. The instruments used for this purpose will be disclosed in the notes to the financial statements until the underlying transaction is realised.

2. Estimation uncertainty

Financial-statement reporting requires estimates and assumptions to be made that may have a significant impact on Swissgrid’s financial statements. With respect to assets and liabilities recognised in the balance sheet, accruals and deferrals (prepaid expenses and accrued income/ accrued expenses and deferred income) and volume- and tariff-related timing differences in particular are based on various assumptions and estimates that may necessitate significant adjustments. This is due to specific volumes not being available for certain revenue and procurement items when the financial statements are prepared, as well as regulatory uncertainties. The volume- and tariff-related timing differences are also influenced by estimates in the allocation of operating expenses to the segments.

For more information on this, the reader is referred to the comments in the sections on «Revenue recognition» and «Activities according to StromVG» in Note 1, as well as the comments in the following section.

4. Segment reporting

For segment reporting, the costs of capitalised self-constructed assets are deducted from operating expenses and are therefore not included in total operating income.

Eliminations: active power losses are a separate internal balance group. As a result, internal transactions occur between the general ancillary services/balancing energy and active power loss segments.

Congestion management is included in the other activities.

Segment report 2022

Transactions with related parties in millions of CHF 2022 2021.0
Total operating activities
Net turnover 421.3 332.8
thereof grid utilisation 330.9 243.6
thereof general ancillary services /balance energy 42.4 36.6
thereof active power losses 34.0 36.2
thereof reactive energy 14.0 16.3
Other operating income 0.1 0.1
Procurement costs and operating expenses
Procurement costs 578.4 242.9
thereof grid utilisation 3.0 33.1
thereof general ancillary services /balance energy 506.3 178.9
thereof active power losses 43.3 23.9
thereof reactive energy 4.9 7.0
thereof power reserve 20.9
Cost of materials and third-party supplies 14.4 12.7
Other operating expenses 2.4 4.4
Financial result
Financial expenses 1.5 24.6

Letters used for segment allocation:
A = Grid usage
B = General ancillary services/balancing energy
C = Active power losses (individual ancillary services)
D = Reactive energy (individual ancillary services)

Segment reporting is provided in Note 4. Income from ITC consists of the following:
– Compensation for grid usage (A) CHF 11.3 million (previous year: CHF 1.9 million)
– Compensation for active power losses (C) CHF 13.7 million (previous year: CHF 4.4 million)

The ITC compensation for grid usage and active power losses corresponds to net income. Supervision charges paid to ElCom and to the Swiss Federal Office of Energy (SFOE) amounting to CHF 4.6 million (previous year: CHF 4.6 million) are deducted from the gross income of CHF 13.4 million for grid usage (previous year: CHF 3.3 million) and CHF 16.3 million for active power losses (previous year: CHF 7.6 million) on a pro rata basis.

Auction income to cover the chargeable costs of the transmission system is broken down as follows:
– Grid usage (A): CHF 68.7 million (previous year: CHF 100.8 million)
– General AS (B): CHF 75.6 million (previous year: CHF 0.0 million)
– Active power losses (C) CHF 31.1 million (previous year: CHF 0.0 million)

Expenses for reactive energy/voltage maintenance are comprised as follows:
– General AS (B): CHF 53.5 million (previous year: CHF 49.7 million)
– Reactive energy (D): CHF 10.3 million (previous year: CHF 15.6 million)

Eliminations: active power losses are a separate internal balance group. As a result, internal transactions occur between the general ancillary services/balancing energy and active power loss segments.

Segment report 2021

7. Materials and third-party supplies

8. Personnel expenses

Board of Directors’ fees and expenses represent fixed gross remuneration including the deduction of any employee contributions to the employee pension plan. The remuneration paid to the Chairman of the Board of Directors amounted to CHF 250,000, including lump-sum expenses (previous year: CHF 250,000). The remaining members of the Board of Directors received remuneration of between CHF 57,500 and CHF 72,700 pro rata temporis for 2022, including lump-sum expenses (previous year: CHF 57,500 to CHF 70,000).

Further information on the members of the Board of Directors can be found in the Corporate Governance Report.

11. Financial expenses

12. Income taxes

13. Non-current assets

Summary of property, plant and equipment – 2021

In millions of CHF Advances and construction in progress Substations Lines Properties and buildings Other property, plant and equipment Total
Acquisition cost at 1.1.2021 325.4 2,019.2 2,666.3 253.1 56.1 5,320.1
Final compensation grid takeover 227.2 111.3 –4.1 334.4
Additions 164.2 4.5 11.7 2.5 4.3 187.2
Disposals –31.1 –1.1 –0.5 –0.1 –32.8
Reclassification –27.4 22.2 2.4 1.3 2.6 1.1
Acquisition cost at 31.12.2021 462.2 2,242.0 2,790.6 252.3 62.9 5,810.0
Accumulated depreciation and amortisation at 1.1.2021 5.2 1,246.8 1,599.9 79.3 45.9 2,977.1
Final compensation grid takeover 163.5 77.8 –6.9 –234.4
Depreciation and amortisation 78.6 51.6 7.3 8.5 146.0
Impairment losses
Disposals –30.0 –1.1 –0.5 –0.1 –31.7
Reclassification
Accumulated depreciation and amortisation at 31.12.2021 5.2 1,458.9 1,728.2 79.2 54.3 3,325.8
Net book value at 1.1.2021 320.2 772.4 1,066.4 173.8 10.2 2,343
Net book value at 31.12.2021 457.0 783.1 1,062.4 173.1 8.6 2,484.2

Gross investments in property, plant and equipment amounted to CHF 232.6 million (previous year: CHF 190.3 million). Thereof, CHF 226.6 million (previous year: CHF 3.1 million) was financed by proceeds from the auctioning of bottleneck capacities for cross-border supplies. Project costs of CHF 0.1 million were reclassified from construction in progress to intangible assets under development in the year under review (previous year: CHF 1.1 million from intangible assets under development to construction in progress). In addition, property, plant and equipment increased by CHF 3.7 million due to a reclassification (see comments in Note 15).

Property, plant and equipment of CHF 20.1 million (previous year: CHF 14.2 million) were purchased from related parties in 2022.

Summary of intangible assets – 2021

In millions of CHF Intangible
assets under development
Usage rights Software Total intangible assets
Purchased Self-constructed Total Purchased Self-constructed Total Purchased Self-constructed Total Purchased Self-constructed Total
Acquisition cost at 1.1.2021 8.1 1.6 9.7 160.7 160.7 141.7 60.4 202.1 310.5 62.0 372.5
Final compensation grid takeover 31.0 31.0 31.0 31.0
Additions 8.5 3.6 12.1 5.0 1.2 6.2 13.5 4.8 18.3
Disposals -0.1 – 0.1 – 2.7 – 2.7 -2.8 – 2.8
Reclassification –5.6 –1.2 -6.8 -0.2 – 0.2 4.7 1.2 5.9 -1.1 – 1.1
Acquisition cost at 31.12.2021 11.0 4.0 15.0 191.4 191.4 148.7 62.8 211.5 351.1 66.8 417.9
Accumulated depreciation and amortisation at 1.1.2021 74.7 74.7 115.8 45.2 161.0 190.5 45.2 235.7
Final compensation grid takeover 5.1 5.1 5.1 5.1
Depreciation and amortisation 9.7 9.7 15.7 7.6 23.3 25.4 7.6 33.0
Impairment losses
Disposals – 0.1 – 0.1 – 2.7 – 2.7 – 2.8 – 2.8
Reclassification
Accumulated depreciation and amortisation at 31.12.2021 89.4 89.4 128.8 52.8 181.6 218.2 52.8 271.0
Net book value at 1.1.2021 8.1 1.6 9.7 86.0 86.0 25.9 15.2 41.1 120.0 16.8 136.8
Net book value at 31.12.2021 11.0 4.0 15.0 102.0 102.0 19.9 10.0 29.9 132.9 14.0 146.9

Gross investments in intangible assets amounted to CHF 24.8 million (previous year: CHF 18.3 million). Thereof, CHF 24.1 million (previous year: CHF 0.0 million) was financed by proceeds from the auctioning of bottleneck capacities for cross-border supplies. In 2022, intangible assets amounting to CHF 190,605 (previous year: CHF 12,300) were purchased from related parties.  

14. Financial assets

In millions of CHF 31.12.2022 31.12.2021
Shareholdings 5.6 8.5
Employer contribution reserves 0.9 0.5
6.5 9.0

1 The CHF 55.0 million also includes CHF 54.4 million of expenses for the provision of the hydropower reserve resulting from the intermediary business.

Negative values represent surpluses, and positive figures deficits.

Reclassification: in the reporting year, an inappropriate allocation of costs and revenues between the general ancillary services and grid usage segments was identified in the past. In agreement with ElCom, the allocation was adjusted by means of a reclassification. As well as leading to a movement in volume- and tariff-related timing differences, the reclassification also resulted in an increase in non-current assets.

Further information on volume- and tariff-related timing differences (function, estimation uncertainties and current legal proceedings) can be found in Notes 1, 2 and 3.

Liabilities held on a fiduciary basis

In millions of CHF 31.12.2022 31.12.2021
Trade accounts payable 32.9 93.6
Accrued expenses and deferred income 21.3 44.2
54.2 137.8

The revenues and the manner in which they are used are as follows:

17. Trade receivables

In millions of CHF 31.12.2022 31.12.2021
Value-added tax 39.3 2.0
Security deposits on blocked bank accounts 1.2 1.1
Other 18.7 16.6
59.2 19.7

Other receivables include the receivable for the 2022 enforcement costs for handling congestion management amounting to CHF 17.5 million (previous year: CHF 15.6 million).

In particular, other prepaid expenses and accrued income include the discount on bond issues and financing and issue costs, which are amortised over the term of the financing instrument.

Bonds

Nominal amount in CHF Interest rate Term Expiration at nominal value
350 million 1.625% 2013 – 2025 30.01.2025
150 million 0.000% 2021 – 2026 30.06.2026
175 million 1.100% 2022 – 2027 30.06.2027
150 million 0.000% 2020 – 2028 30.06.2028
150 million 0.625% 2015 – 2030 25.02.2030
150 million 0.200% 2020 – 2032 30.06.2032
110 million 0.050% 2021 – 2033 30.06.2033
125 million 0.150% 2020 – 2034 30.06.2034
130 million 0.125% 2020 – 2036 30.06.2036
100 million 0.200% 2021 – 2040 29.06.2040
125 million 0.050% 2019 – 2050 30.06.2050

Convertible loans and loans

Convertible loans have a term of nine years and one-fifth of the loans become payable annually from year five. Partial repayments of convertible loans amounting to CHF 254.6 million were made in the 2022 financial year. Moreover, loans are also assigned a conversion right by Swissgrid in the event of occurrence of contractually defined events and an associated conversion obligation by the creditors. Creditors are compensated by a premium on the interest rate for the conversion right assigned to Swissgrid. Convertible loans are recognised in full in liabilities.

The interest conditions and maturities of convertible loans and loans are as follows:

21. Provisions

23. Accrued expenses and deferred income

25. Other off-balance sheet commitments

Joint Allocation Office (JAO)

As a shareholder of the Joint Allocation Office (JAO), Swissgrid is contractually obliged to assume its share of the annual costs.

TSCNET Services Gmbh

As a shareholder of TSCNET Services GmbH, Swissgrid is contractually obliged to assume its share of the annual costs.

Equigy B.V.

As a shareholder of Equigy B.V., Swissgrid is contractually obliged to assume its share of the annual costs.

Long-term rental contracts

Long-term rental contracts with fixed terms exist with several parties. These result in the following obligations:

26. Derivative financial instruments

Swissgrid made use of derivative financial instruments to partially hedge against market price risk from future procurement costs for active power losses. The nominal amount of these instruments is EUR 121.3 million (previous year: EUR 36.1 million), with negative replacement values of EUR 5.4 million as at 31 December 2022 (previous year: positive replacement values of EUR 13.4 million).

Swissgrid is affiliated to a collective plan by the pension fund PKE Vorsorgestiftung Energie. Therefore, an economic benefit or economic obligation cannot be determined on the basis of the individual affiliation contract. The coverage ratio of the collective plan is 107.7% as at 31 December 2022 (previous year: 125.2%).

29. Events after the balance sheet date

There are no events after the balance sheet date that would require disclosure or recognition in the 2022 financial statements.

On 19 April 2023, the Board of Directors of Swissgrid Ltd approved the 2022 financial statements for submission to the General Assembly and for publication.

The conditions relating to related parties are described in Note 1.