Statutory financial statements

1. Accounting principles

General

The financial statements for Swissgrid Ltd, Aarau, have been prepared in accordance with the Swiss Law on Accounting and Financial Reporting (Title 32 of the Swiss Code of Obligations). The valuation principles applied are described below.

Conversion of foreign currency items

The accounting records are maintained in the local currency (Swiss francs, CHF). All short-term 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 (StromVG), 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 for the current year under review (= WACC_t+0) and the interest applied to the volume and tariff-related timing differences with the weighted average cost of capital rate of WACC_t+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 is based on the current international practice of the 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 2023 (WACC_{t +0}) and 3.98% for 2025 (WACC_t+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). Borrowing costs are recorded under operating expenses in accordance with Art. 22 WResV.

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: 3 to 5 years
• Intangible assets under development: only applicable in the case of an impairment loss

The merger losses (goodwill) resulting from the mergers on 3 January 2013 and 5 January 2015 are also recognised in this item. Goodwill is depreciated on a straight-line basis over 20 years and is reviewed annually for impairments.

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. Employer contribution reserves without conditional renounced use are also recognised in financial assets.

Shareholdings

Shareholdings 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% that do have a significant impact.

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 probable 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.

Income taxes

Current income taxes are calculated based on the taxable results on an accrual basis.

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 Note 25.

3. Net turnover and procurement costs

Net turnover

For the 2023 financial year, net turnover across all segments amounts to CHF 1,219.2 million. This represents an increase of CHF 232.1 million in relation to the previous year’s figure of CHF 987.1 million. The rise is mainly attributable to the general ancillary services (CHF 191.2 million) and active power loss (CHF 71.7 million) segments. The increase in the general ancillary services segment is the result of higher tariff revenues, higher income from balance group/balancing energy and the higher auction income to cover the chargeable costs of the transmission system allocated to this segment. Net turnover in the active power loss segment increased due to higher tariff revenues and higher pro rata income from ITC and auctions. By contrast, income in the grid usage segment fell by CHF 46.1 million in relation to the previous year due to the lower income from ITC and auctions allocated to this segment. Revenue in the reactive energy segment remained at the previous year’s level.

Procurement costs

At CHF 899.9 million, procurement costs are CHF 33.7 million higher than the previous year’s value of CHF 866.2 million. This increase is primarily due to higher costs for reactive energy (CHF 6.6 million) and active power loss (CHF 9.9 million). The rise in the reactive energy segment is due to the higher pro rata voltage maintenance costs payable by this segment. The rise in the active power loss segment is due to higher prices for the procurement of the energy required to compensate for active power losses. In contrast, costs in the grid usage and general ancillary services segments remained at the previous year’s level.

More detailed comments on the individual segments, including the effects on the volume- and tariff-related timing differences, can be found in Note 4 to the financial statements in accordance with Swiss GAAP FER.

4. Other operating income

5. Materials and third-party supplies

Other grid-related services include remuneration for easements, including easement management services performed by third parties and operating expenses for mixed-use plants.

Several measures associated with the initial implementation of Strategy 2027 were launched in the reporting year, which is why higher expenses were incurred for projects, advisory and non-cash benefits and for hardware/software maintenance.

6. Personnel expenses

Other personnel expenses include, in particular, the costs of training and further education, recruitment, lump-sum expenses as well as contributions to external catering for employees.

The average number of full-time equivalents exceeded 250 in the reporting period, as was the case in the previous year.

7. Other operating expenses

For the first time, other administrative costs include borrowing costs of CHF 6.1 million, which were incurred in connection with the additional tasks transferred to Swissgrid by the federal government in the power reserve segment and represent chargeable costs in accordance with Art. 22 WResV.

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 77,500 pro rata temporis for 2023, including lump-sum expenses (previous year: between CHF 57,500 and CHF 72,700).

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

8. Trade receivables

As at 31 December 2023, trade receivables include CHF 57.2 million (previous year: CHF 63.6 million) in relation to companies with a direct or indirect shareholding in Swissgrid.

9. Other receivables

Other receivables include the receivable for the 2023 enforcement costs for handling congestion management amounting to CHF 16.3 million (previous year: CHF 17.5 million).

10. Prepaid expenses and accrued income

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.

11. Balance sheet items held on a fiduciary basis

Pursuant to the ElCom ruling issued on 22 February 2022 and the supplement dated 7 February 2023, income from auctions in 2023 amounting to CHF 351.7 million (previous year: CHF 385.7 million) was paid to Swissgrid. At CHF 33.9 million, the balance sheet item is CHF 20.3 million below the previous year’s value of CHF 54.2 million. The decrease is due to the lower level of outstanding trade accounts receivable and trade accounts payable as at 31 December 2023.

12. Shareholdings

Letters used for locations and currencies:
A = Luxembourg (Lux) | Currency EUR
B = Munich (D) | Currency EUR
C = Paris (F) | Currency EUR
D = Frick (CH) | Currency CHF
E = Embrach (CH) | Currency CHF
F = Arnheim (NL) | Currency EUR

Swissgrid is not legally obliged to prepare consolidated financial statements. Either the control principle necessary to prepare a consolidated financial statement (Art. 963 of the Swiss Code of Obligations (CO)) is not met, or the subsidiaries do not have a material influence on Swissgrid’s financial statements. In particular, Pronovo AG is regulated by the Swiss Federal Office of Energy (SFOE) and is explicitly excluded from any consolidation with Swissgrid based on Art. 64 (5) of the Energy Act (EnG).

The figures are unchanged from the previous year.

13. Property, plant and equipment

The book values of the individual categories are as follows:

14. Intangible assets

The book values of the individual categories are as follows:

15. Trade accounts payable

As at 31 December 2023, trade accounts payable include CHF 65.6 million (previous year: CHF 216.8 million) in relation to companies with a direct or indirect shareholding in Swissgrid. Liabilities of CHF 0.1 million exist in relation to the external auditor as at 31 December 2023 (previous year: no outstanding liabilities).

16. Other liabilities

In particular, the «Other» item contains outstanding obligations towards PKE Vorsorgestiftung Energie of CHF 1.7 million (no outstanding obligations as at the balance sheet date in the previous year).

17. Accrued expenses and deferred income

18. Financial liabilities

Convertible loans and loans

Convertible loans have a term of nine years and one-fifth of the loans become payable annually from year five. 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:

Convertible loans and loans are assessed at their nominal value.

As at 31 December 2023, convertible loans of CHF 40.1 million (previous year: CHF 70.4 million) exist towards companies with a direct or indirect shareholding in Swissgrid.

19. Provisions

Procedural costs

The provision amount includes the estimated compensation payable to parties and the court costs imposed on Swissgrid due to the administrative procedures in conducting proceedings.

20. Share capital and reserves from capital contributions

The share capital consists of 334,495,151 (previous year: 334,495,151) fully paid-up registered shares with a par value of CHF 1 per share.

21. Intermediary business

The power reserve segment handles the orders regulated by the WResV for the use of the hydropower reserve and reserve power plants, pooled emergency power groups and combined heat and power plants (CHP plants). It will be financed via tariff revenues from 2024. In accordance with the accounting regulations, these activities are intermediary transactions, which is why only the value of the services provided by the company itself is reported in the power reserve segment.

The expenses resulting from the intermediary business amounted to CHF 403.2 million in the reporting year (previous year: CHF 54.4 million).

22. 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 208.5 million (previous year: EUR 121.3 million), with negative replacement values of EUR 96.9 million as at 31 December 2023 (previous year: EUR 5.4 million).

23. Contingent receivables

Billing method for ancillary services (AS)

ElCom defined the billing method for the AS surcharge in its 4/2018 directive. Under this method, Swissgrid and the distribution system operators wait until the subsequent year to finally settle payments of AS tariffs for the previous financial year.

The settlement will result in receivables owed to Swissgrid by the distribution system operators. However, since the amount of these receivables could not be reliably determined when the financial statements were prepared, they were recognised as contingent receivables.

24. 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.

Off-balance-sheet lease commitments

Swissgrid has the following off-balance-sheet lease commitments for vehicles and office equipment:

Long-term rental contracts

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

The long-term rental obligations primarily include the rental commitments for Swissgrid’s head office in Aarau.

25. Legal proceedings

Swissgrid’s legal mandate and business activities expose the company to costs that can be passed on to the lower grid levels and end consumers in the form of tariff revenues if EICom deems the costs to be chargeable. ElCom has the right to verify ex post the chargeability of Swissgrid’s costs for tariff-setting purposes.

At present, ElCom has not initiated any proceedings to examine Swissgrid’s chargeable costs. Swissgrid’s Board of Directors and Executive Board believe that all costs were incurred within the framework of Swissgrid’s legal mandate and should therefore qualify as chargeable. Based on this assessment, Swissgrid has treated all operating and capital costs as chargeable and consequently recognised them in full in the volume- and tariff-related timing differences. If, contrary to Swissgrid’s assessment, the costs claimed are ruled to be non-chargeable, this would be reflected in future financial statements.

Third-party proceedings

The financial impact of third-party proceedings in which Swissgrid is involved are included in Swissgrid’s financial statements if the Swiss GAAP FER criteria for recognition have been met. However, they have no direct impact on Swissgrid’s results as they are included in the volume- and tariff-related timing differences.

26. Audit fees

In 2023, the fees for audit services amount to CHF 214,000 (previous year: CHF 165,000) and CHF 146,200 (previous year: CHF 0) for other services.

27. Events after the balance sheet date

There are no events after the balance sheet date that would require disclosure or recognition in the 2023 financial statements.

On 15 April 2024, the Board of Directors of Swissgrid Ltd approved the 2023 financial statements for submission to the General Assembly and for publication.