KELAG Group
Annual report 2012
KELAG-Kärntner Elektrizitäts-Aktiengesellschaft
Annual report 2012 – Table of contents
2
TABLE OF CONTENTS
I. Consolidated financial statements .................................................................................... 3
I.a Notes to the consolidated financial statements .......................................................... 8
I.b Exhibit ....................................................................................................................... 80
II. Group management report ............................................................................................ 82
KELAG-Kärntner Elektrizitäts-Aktiengesellschaft
Annual report 2012 | Income statement of the KELAG Group
3
I. CONSOLIDATED FINANCIAL STATEMENTS
1. Income statement of the KELAG Group
EUR k Note
1/1 –
31/12/2012
1/1 –
31/12/2011
Revenue (including gross income from energy trading activities) 2,007,040 1,660,270
thereof electricity/gas 1,847,706 1,522,387
thereof heat 146,350 134,049
thereof miscellaneous 12,983 3,834
Cost of purchased energy from energy trading activities -1,002,424 -705,699
Revenue (including net income from energy trading activities) * (1) 1,004,615 954,571
Other income (2) 71,188 44,802
Cost of materials and supplies, and of other purchased services * (3) -659,150 -648,401
Personnel expenses (4) -147,568 -124,302
Amortisation, depreciation and impairment (5) -96,991 -62,593
Other expenses (6) -74,290 -66,243
Operating result 97,803 97,834
Interest income (7) 2,399 2,274
Interest cost (7) -21,268 -18,348
Other investment result (8) 29,273 32,083
Earnings from investments accounted for using the equity method (12) 3,093 -217
Earnings before income taxes 111,300 113,627
Income taxes (9) -15,074 -21,736
Consolidated net profit 96,226 91,890
Attributable to non-controlling interests -37 39
Attributable to the equity holders of the parent company 96,263 91,851
* The disclosure of energy trading activities in the income statement was adjusted in these financial statements. As a result the revenue item
corresponds to the revenue from all divisions less cost of purchased energy from energy trading activities. Accordingly, the cost of materials and
supplies and of other purchased services item was reduced compared to 2011.
KELAG-Kärntner Elektrizitäts-Aktiengesellschaft
Annual report 2012 | Statement of comprehensive income of the KELAG Group
4
2. Statement of comprehensive income of the
KELAG Group
EUR k Note
1/1 –
31/12/2012
1/1 –
31/12/2011
Consolidated net profit 96,226 91,890
Amounts that are not reclassified in future periods to the
income statement -12,627 -278
Actuarial gains and losses (22) -16,836 -371
Tax effects on amounts that are not reclassified in future periods
to the income statement 4,209 93
Amounts that might be reclassified in future periods to the
income statement 102 -380
Gains or losses from exchange differences -61 -436
Unrealised gains/losses from the disposal of available-for-sale
financial instruments 486 -13
Hedges -356 0
Tax effects on amounts that will be reclassified in future periods
to the income statement 33 69
Other comprehensive income (after income taxes) -12,525 -659
Total comprehensive income 83,700 91,232
Attributable to the equity holders of the parent company 83,776 91,193
Attributable to non-controlling interests -75 39
KELAG-Kärntner Elektrizitäts-Aktiengesellschaft
Annual report 2012 | Statement of financial position of the KELAG Group
5
3. Statement of financial position of the KELAG Group
EUR k Note 31/12/2012 31/12/2011
Non-current assets 1,441,923 1,322,164
Intangible assets (10) 303,050 289,912
Property, plant and equipment (11) 965,347 858,456
Investments accounted for using the equity method (12) 6,878 12,130
Other interests in other entities (13) 124,943 125,884
Other securities and book-entry securities (14) 29,693 28,071
Other non-current receivables and assets (15) 6,179 6,804
Deferred tax assets (16) 5,832 907
Current assets 381,597 184,851
Inventories (17) 17,323 18,158
Trade receivables and other receivables and assets (18) 113,470 79,078
Cash and cash equivalents (19) 250,804 87,614
Assets 1,823,520 1,507,015
Equity 644,840 587,956
Equity attributable to the equity holders of the parent company (20) 638,730 584,998
Equity attributable to non-controlling interests (21) 6,110 2,958
Non-current liabilities 912,027 698,983
Financial liabilities (22) 454,245 264,116
Provisions (23) 300,214 273,457
Deferred tax liabilities (16) 0 6,028
Construction cost subsidies (24) 93,200 93,939
Other liabilities (25) 64,368 61,442
Current liabilities 266,653 220,076
Financial liabilities (26) 3,700 13,403
Current tax provisions (27) 113 53
Other provisions * (27) 43,656 41,039
Trade payables and other liabilities * (28) 219,184 165,580
Equity and liabilities 1,823,520 1,507,015
* With regard to the reclassification from other provisions to trade payables and other liabilities in the comparative period 2011, reference is made to
the explanations in the section “Summary of significant accounting policies.”
KELAG-Kärntner Elektrizitäts-Aktiengesellschaft
Annual report 2012 | Statement of changes in equity of the KELAG Group
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4. Statement of changes in equity of the KELAG Group
EUR k Cap
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Cap
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To
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ity
As of 1 January 2011 58,160 263 493,269 -71 -27,343 -442 0 523,836 2,923 526,758
Other comprehensive income 0 0 0 -436 -371 -13 0 -820 0 -820
Tax on the above 0 0 0 66 93 3 0 162 0 162
Other comprehensive income after
income taxes 0 0 0 -371 -278 -10 0 -659 0 -659
Consolidated net profit 0 0 91,851 0 0 0 0 91,851 39 91,890
Total comprehensive income 0 0 91,851 -371 -278 -10 0 91,193 39 91,232
Dividends 0 0 -30,000 0 0 0 0 -30,000 -4 -30,004
Other income and expenses
recognised without effect on profit or
loss 0 0 -31 0 0 0 0 -31 0 -31
As of 31 December 2011 58,160 263 555,090 -442 -27,622 -452 0 584,998 2,958 587,956
As of 1 January 2012 58,160 263 555,090 -442 -27,622 -452 0 584,998 2,958 587,956
Other comprehensive income 0 0 0 -61 -16,836 486 -305 -16,716 -51 -16,767
Tax on the above 0 0 0 0 4,209 -56 76 4,229 13 4,242
Other comprehensive income after
income taxes 0 0 0 -61 -12,627 430 -229 -12,487 -38 -12,525
Consolidated net profit 0 0 96,263 0 0 0 0 96,263 -37 96,226
Total comprehensive income 0 0 96,263 -61 -12,627 430 -229 83,776 -75 83,700
Dividends 0 0 -30,000 0 0 0 0 -30,000 0 -30,000
Acquisition of a subsidiary 0 0 0 0 0 0 0 0 2,869 2,869
Other income and expenses
recognised without effect on profit or
loss 0 0 -43 0 0 0 0 -43 358 314
As of 31 December 2012 58,160 263 621,309 -503 -40,249 -22 -229 638,730 6,110 644,840
KELAG-Kärntner Elektrizitäts-Aktiengesellschaft
Annual report 2012 | Statement of cash flows of the KELAG Group
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5. Statement of cash flows of the KELAG Group
EUR k Note 2012 2011
Earnings before income taxes 111,300 113,627
Non-cash adjustment to reconcile earnings before income taxes to net cash flow
Amortisation, depreciation and impairment and reversal of impairment losses on
intangible assets and property, plant and equipment (5) 96,991 62,593
Impairment and reversal of impairment losses on financial assets including share
of profit/loss from investments accounted for using the equity method 652 1,317
Gain/loss on the disposal of property, plant and equipment, and securities 1,677 3,035
Interest cost (7) 21,268 18,348
Interest income (7) -2,399 -2,274
Sundry 1,029 82
Taxes paid -17,814 -12,439
Interest received 2,399 2,274
Changes in non-current provisions (23) 2,049 4,779
Changes in construction cost subsidies (24) -177 -2,241
Cash flow from operating activities 216,973 189,100
Changes in inventories (17) 1,144 -784
Changes in trade receivables and other receivables and assets (18) -18,028 10,765
Changes in trade payables and other liabilities (28) 20,775 8,874
Changes in current provisions (27) 2,766 -13,871
Cash flow from operating activities* 223,629 194,083
Investments in intangible assets and property, plant and equipment
(10)
(11) -144,021 -168,961
Proceeds from the disposal of intangible assets and property, plant and equipment 569 2,266
Acquisition of subsidiaries, net of cash acquired -8,351 -14,015
Investments in other securities and book-entry securities -24,751 -520
Disposals of financial assets 23,236 2,500
Cash flow from investing activities -153,319 -178,730
Repayment and proceeds from financial liabilities * 138,942 -395
Interest paid -16,480 -14,098
Cash received and paid for non-current loans and financial receivables 364 693
Profit distribution -30,000 -30,004
Cash received from other shareholders 55 0
Cash flows from financing activities 92,881 -43,805
Changes in cash and cash equivalents 163,190 -28,450
Cash and cash equivalents at the beginning of the financial year (19) 87,614 116,065
Cash and cash equivalents at the end of the financial year (19) 250,804 87,614
Changes in cash and cash equivalents according to the statement of financial
position (19) 163,190 -28,450
* Please refer to 6.8
KELAG-Kärntner Elektrizitäts-Aktiengesellschaft
Annual report 2012 | Notes
8
I.a NOTES TO THE CONSOLIDATED
FINANCIAL STATEMENTS
1. The company
The KELAG Group is one of the leading energy service providers in Austria. The
company operates throughout Austria in the fields of electricity and natural gas, focusing
on Carinthia. The subsidiary KELAG Wärme GmbH operates successfully in the heat
business throughout Austria. The grids in Carinthia (electricity and natural gas) are
operated by the subsidiary KNG-Kärnten Netz GmbH: The hydroelectric and wind power
activities and energy trading outside Austria are bundled at KI-KELAG International
GmbH.
The KELAG Group has decades of experience in the production and distribution of
energy.
2. Accounting policies
KELAG-Kärntner Elektrizitäts-Aktiengesellschaft (KELAG), with registered office at
Arnulfplatz 2, A-9020 Klagenfurt am Wörthersee, commercial register court: regional and
commercial court Klagenfurt 99133 i, and its subsidiaries form the KELAG Group for
which the following IFRS financial statements for 2012 were prepared. These have an
exempting effect pursuant to Sec. 245a UGB (Austrian Commercial Code).
Information on its ultimate parent is presented in Note 6.9.
2.1. General information
The consolidated financial statements of KELAG were prepared in accordance with
International Financial Reporting Standards (IFRSs) as adopted by the European Union.
The consolidated financial statements are generally prepared in accordance with the
historical cost convention. This does not apply to derivative financial instruments and
available-for-sale financial assets which are measured at fair value.
The annual financial statements of entities included in the consolidated financial
statements (whether fully consolidated or accounted for using the equity method) have
KELAG-Kärntner Elektrizitäts-Aktiengesellschaft
Annual report 2012 | Notes
9
been prepared on the basis of uniform accounting policies. The end of the reporting
period for all fully consolidated entities is 31 December 2012.
The consolidated financial statements are prepared in thousands of euro (EUR k)
(income statement, statement of comprehensive income, statement of financial position,
statement of cash flows and statement of changes in equity) and millions of euro
(EUR m) (notes). Rounding differences may arise from totalling rounded amounts and
percentages using automatic calculation tools.
The addition or presentation of rounded figures can lead to rounding differences.
Classification as current/non-current in the statement of financial position has been
performed pursuant to IAS 1.60 et seq.
KELAG-Kärntner Elektrizitäts-Aktiengesellschaft
Annual report 2012 | Notes
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2.2. Scope of consolidation and consolidation methods
KELAG’s
share-
holding
%
Capital
stock/share
capital
EUR k
Consolidation
method*
1. KNG-Kärnten Netz GmbH, Klagenfurt, Austria 100.00 35 FC
2. KELAG Wärme GmbH, Villach, Austria 100.00 1,820 FC
2.1. EKO-TOPLOTA Energetika d.o.o., Ljubljana, Slovenia** 100.00 9 FC
2.2. SWH – Strom und Wärme aus Holz, Heizwerk Errichtungs-
Betriebs GmbH, Purkersdorf, Austria** 50.00 200 EQ
2.2.1. Biowärme Imst GmbH, Imst, Austria** 45.00 100 EQ
2.2.2. SBH Biomasseheizkraftwerk GmbH, Enns, Austria** 25.50 36 EQ
2.3. Biofernwärme Fürstenfeld GmbH, Fürstenfeld, Austria** 50.00 218 EQ
2.4. KWH Kraft & Wärme aus Holz GmbH, St. Gertraud, Austria** 26.00 36 EQ
2.5. Bio-Teplo Czechia s.r.o., Znaim, Czech Republic** 100.00 7 FC
2.6. BES-BioEnergie für Spittal GmbH, Spittal/Drau, Austria** 51.00 35 FC
3. KELAG Finanzierungsvermittlungs GmbH, Klagenfurt,
Austria** 100.00 254 FC
4. KI-KELAG International GmbH, Klagenfurt, Austria 100.00 10,000 FC
4.1. Interenergo d.o.o., Laibach, Slovenia** 100.00 10,200 FC
4.1.1. Interenergo d.o.o. Zagreb, Zagreb, Coatia** 100.00 41 FC
4.1.2. EHE d.o.o. Banja Luka, Banja Luka, Bosnia and
Herzegovina** 100.00 1,001 FC
4.1.3. Interenergo d.o.o. Sarajevo, Sarajevo, Bosnia and
Herzegovina** 100.00 511 FC
4.1.4. PLC Interenergo d.o.o. Beograd, Belgrade, Serbia** 100.00 533 FC
4.1.5. Hidrowatt d.o.o. Beograd, Belgrade, Serbia** 80.00 0 FC
4.1.6. Interenergo Makedonija d.o.o.e.l., Skopje, Macedonia** 100.00 115 FC
4.1.7. IEP energija d.o.o. Gornji Vakuf-Uskoplje, Gornji Vakuf
Uskoplje, Bosnia and Herzegovina** 100.00 1 FC
4.1.8. LSB Elektrane d.o.o. Banja Luka, Banja Luka, Bosnia and
Herzegovina** 100.00 106 FC
4.1.9. Interhem d.o.o. Banja Luka, Banja Luka, Bosnia and
Herzegovina** 100.00 69 FC
4.1.10. Inter-Energo d.o.o. Gornji Vakuf, Gornji Vakuf, Bosnia and
Herzegovina** 100.00 1 FC
4.2. Windfarm MV I s.r.l., Bucharest, Romania** 100.00 2,010 FC
4.3. Lumbardhi Beteiligungs GmbH, Klagenfurt, Austria** 90.00 35 FC
4.3.1. KelKos Energy Sh.p.k., Pristina, Kosovo** 90.00 0 FC
4.4. Windfarm Balchik 1 OOD, Sofia, Bulgaria** 52.00 3 FC
4.5. Windfarm Balchik 2 OOD, Sofia, Bulgaria** 52.00 3 FC
4.6. Windfarm Balchik 4 OOD, Sofia, Bulgaria** 52.00 3 FC
4.7. KelaVENT Charlie SRL, Bucharest, Romania** 99.99 393 FC
4.8. KelaVENT Echo SRL, Bucharest, Romania** 99.99 531 FC
5. Wärmeversorgung Arnoldstein Errichtungs- und
Betriebsgesellschaft mbH, Arnoldstein, Austria 99.00 36 FC
6. Kraftwerk Waben GmbH, Klagenfurt, Austria 51.00 36 FC
KELAG-Kärntner Elektrizitäts-Aktiengesellschaft
Annual report 2012 | Notes
11
KELAG’s
share-
holding
%
Capital
stock/share
capital
EUR k
Consolidation
method*
7. Kraftwerksgesellschaft Tröpolach GmbH, Klagenfurt, Austria 51.00 35 FC
8. Kärntner Restmüllverwertungs GmbH, Arnoldstein, Austria 85.74 44 FC
9. Waldensteiner Kraftwerke GmbH, Waldenstein, Austria 40.00 36 EQ
10. Waldensteiner Kraftwerke GmbH & Co KG, Waldenstein,
Austria (limited partner‟s interest) 40.00 7 EQ
11. Stadtwerke Kapfenberg GmbH, Kapfenberg, Austria 35.00 2,000 EQ
* FC = full consolidation, EQ = equity method
** Indirect interest
The parent company is KELAG-Kärntner Elektrizitäts-Aktiengesellschaft. The
consolidated financial statements include all entities (“subsidiaries”) that are controlled
(controlling influence) by the parent company by means of full consolidation. Controlling
influence is where the parent company is able, whether directly or indirectly, to determine
the entity‟s financial and operating policy. The inclusion of a subsidiary begins when
controlling influence is acquired and ends when controlling influence is lost. The financial
statements of the subsidiaries are prepared for the same reporting period as the parent
company, using consistent accounting policies. Losses within a subsidiary are attributed
to the non-controlling interest even if that results in a deficit balance.
A change in the ownership interest of a subsidiary without involving the loss of control is
accounted for as an equity transaction. If the parent company loses its controlling
influence over a subsidiary, it takes the following steps:
Derecognises the assets (including goodwill) and liabilities of the subsidiary
Derecognises the carrying amount of any non-controlling interest
Derecognises the cumulative translation differences, recorded in equity
Recognises the fair value of the consideration received
Recognises the fair value of any investment retained
Recognises any surplus or deficit in profit or loss
Reclassifies the parent‟s share of components previously recognised in other
comprehensive income to profit or loss or retained earnings, as appropriate under
IFRSs.
In addition to KELAG as parent company, the consolidated financial statements include
30 subsidiaries (prior year: 24) and 8 associates (prior year: 9).
KELAG-Kärntner Elektrizitäts-Aktiengesellschaft
Annual report 2012 | Notes
12
31/12/2012 31/12/2011
Scope of consolidation
Full
consolidation
Equity
method
Full
consolidation
Equity
method
As of the beginning of the reporting
period 25 9 20 11
Included in the financial statements
for the first time in the reporting
period 8 0 6 0
Merged in the reporting period -2 0 0 0
Deconsolidated in the reporting
period 0 -1 -1 -2
As of the end of the reporting period 31 8 25 9
of which Austrian entities 11 8 9 9
of which non-Austrian entities 20 0 16 0
Alternative Energie Salzburg GmbH and Biowärme Friesach GmbH were merged with
KELAG Wärme GmbH at the beginning of financial year 2012.
For more details of business combinations, reference is made to Section 5. “Notes to the
statement of financial position”.
Entities on which the parent company can exercise significant influence, whether directly
or indirectly, (“associates”) and shares in joint ventures are accounted for using the equity
method. The same consolidation principles are applied. The financial statements of all
material entities accounted for using the equity method are prepared using uniform
accounting policies.
Under the equity method, the investment in the associate is carried in the statement of
financial position at cost plus post acquisition changes in the Group‟s share of net assets
of the associate. Goodwill relating to the associate is included in the carrying amount of
the investment and is neither amortised nor individually tested for impairment.
The income statement reflects the Group‟s share of the results of operations of the
associate. Where there has been a change recognised directly in the equity of the
associate, the Group recognises its share of any changes and discloses this, when
applicable, in the statement of changes in equity. Unrealised gains and losses resulting
from transactions between the Group and the associate are eliminated to the extent of
the interest in the associate. Losses by an associate exceeding the Group‟s share in this
associate are only recognised to the extent that the Group has entered into legal or
constructive obligations or makes payments on behalf of the associate.
The share of profit of an associate is shown on the face of the income statement. This is
the profit attributable to equity holders of the associate and therefore is profit after tax and
non-controlling interests in the subsidiaries of the associates.
Investments in
associates and in joint
ventures
KELAG-Kärntner Elektrizitäts-Aktiengesellschaft
Annual report 2012 | Notes
13
After application of the equity method, the Group determines whether it is necessary to
recognise an additional impairment loss on the Group‟s investment in its associate. The
Group determines at each reporting date whether there is any objective evidence that the
investment in the associate is impaired. If this is the case the Group calculates the
amount of impairment as the difference between the recoverable amount of the associate
and its carrying value and recognises the amount in the „share of profit of an associate‟ in
the income statement.
Upon loss of significant influence over the associate, the Group measures and
recognises any retaining investment at its fair value. Any difference between the carrying
amount of the associate upon loss of significant influence and the fair value of the
retaining investment and proceeds from disposal is recognised in profit or loss under
earnings from investments accounted for using the equity method.
Intercompany transactions, receivables, liabilities and intercompany profits are
eliminated. The reversal of impairment losses and the impairment losses recognised on
investments in consolidated entities in separate financial statements are reversed.
The acquisition of subsidiaries and businesses is accounted for using the acquisition
method. The cost of an acquisition is the aggregate of the consideration transferred,
measured at acquisition date fair value and the amount of any non-controlling interest in
the acquiree. The identifiable assets, liabilities and contingent liabilities of the acquired
entity that satisfy the recognition criteria of IFRS 3 Business combinations are recognised
at their fair values as of the acquisition date. Goodwill is initially measured at cost being
the excess of the aggregate of the consideration transferred and the amount recognised
for the non-controlling interest over the net identifiable assets acquired and liabilities of
the Group assumed. If, upon reassessment, the fair value of the net assets exceeds total
compensation, the difference is recognised immediately through profit or loss. The share
of non-controlling interests in the acquired entity is measured as of acquisition date at its
shares in the net fair value of the assets, liabilities and contingent liabilities. Acquisition-
related costs incurred are expensed.
When the Group acquires a business, it assesses the financial assets and liabilities
assumed for appropriate classification and designation in accordance with the contractual
terms, economic circumstances and pertinent conditions as of the acquisition date.
If the business combination is achieved in stages, the acquisition-date fair value of the
acquirer‟s previously held equity interest in the acquiree is remeasured to fair value at the
acquisition date through profit or loss. The fair value of the shares held to date are
included in the cost of the business combination to determine the goodwill.
Any contingent consideration to be transferred by the acquirer is recognised at fair value
at the acquisition date. Subsequent changes to the fair value of the contingent
consideration which is deemed to be an asset or liability is recognised in accordance with
Consolidation methods
Business combinations
and incorporations
KELAG-Kärntner Elektrizitäts-Aktiengesellschaft
Annual report 2012 | Notes
14
IAS 39 either in profit or loss or as a change to other comprehensive income. If the
contingent consideration is classified as equity, it is not remeasured and its subsequent
settlement is accounted for within equity.
KELAG-Kärntner Elektrizitäts-Aktiengesellschaft
Annual report 2012 | Notes
15
2.3. Accounting policies
For the preparation of these consolidated financial statements all mandatory
amendments to existing and new IAS and IFRSs as of 31 December 2012 as well as to
IFRIC and SIC interpretations as adopted by the European Union were applied.
Those IAS and IFRSs as well as those IFRIC and SIC interpretations already adopted by
the European Union but not yet mandatory for the financial year 2012 are not early
adopted. One exception to this is the early adoption of IAS 1.
The following standards and interpretations were applied for the first time for the financial
year 2012:
Newly applied IFRSs/IFRICs Effective as of
IAS 1 Amendments: Presentation of Items of Other Comprehensive Income 1 July 2012
IAS 12 Amendments: Deferred Taxes/Recovery of Underlying Assets 1 January 2012
IFRS 1 Amendments: Severe Hyperinflation and Removal of Fixed Dates 1 July 2011
IFRS 7 Amendments: Financial Instruments – Disclosures 1 July 2011
Pursuant to the amendment in IAS 1 “Presentation of Financial Statements” entities must
classify the items presented in other comprehensive income into two categories – items
that are subsequently posted through profit and loss (recycling) and those that are not.
The amendment also affects the KELAG Group‟s statement of comprehensive income
and was already implemented in the 2012 financial statements.
The amendments to IAS 12 provide an exception to the existing regulation on the
measurement of deferred tax assets and liabilities for certain non-financial assets
measured at fair value. This essentially affects entities that measure investment
properties, property, plant and equipment and intangible assets at fair value in their
statement of financial position and originate from countries that stipulate different tax
rates for investment income and gains on disposal. It can be assumed that the KELAG
Group will not be affected.
The amendment to IFRS 1 relates to entities whose functional currency is subject to
severe hyperinflation. As the KELAG Group is not a first-time adopter of IFRSs, this
amendment is not relevant.
New accounting policies
KELAG-Kärntner Elektrizitäts-Aktiengesellschaft
Annual report 2012 | Notes
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The amendments to IFRS 7 “Financial Instruments – Disclosures” relate to additional
mandatory disclosures when derecognising financial assets. In contrast to the previous
provisions, where financial assets are not fully derecognised despite the rights being
transferred or there being an obligation to transfer cash inflows there is a requirement to
make additional disclosures on the newly created liabilities. This includes in particular
disclosure as to whether the financial assets that continue to be carried can be used
without restriction or the acquiring party has an entitlement to the financial asset. The
amendments affect entities that transfer financial assets to another party through sale,
securitisation transaction, factoring or another form of transaction. As none of these kinds
of transaction have been performed within the KELAG Group to date, no new disclosure
requirements are expected to arise.
IFRS/IFRIC already adopted by EU but not yet applicable
Prospective
effective date
IAS 19 Amendment: Employee Benefits 1 January 2013
IAS 27 Amendments: Separate Financial Statements 1 January 2014
IAS 28 Amendments: Investments in Associates 1 January 2014
IAS 32 Amendments: Financial Instruments – Offsetting Financial
Assets and Financial Liabilities
1 January 2014
IFRS 1 Amendments: First-time Adoption of International Financial
Reporting Standards
1 January 2013
IFRS 7 Amendment: Disclosure – Offsetting of Financial Assets and
Liabilities
1 January 2013
IFRS 10 Consolidated Financial Statements 1 January 2014
IFRS 11 Joint Arrangements 1 January 2014
IFRS 12 Disclosures of Interests in Other Entities 1 January 2014
IFRS 13 Fair Value Measurement 1 January 2013
IFRIC 20 Stripping Costs in the Production Phase of a Surface Mine 1 January 2013
There have been material amendments to IAS 19 “Employee Benefits” that relate to the
recognition and measurement of the expenses for defined benefit plans and post-
employment benefits. Subsequently, the mandatory disclosures on employee benefits
also change. Actuarial gains and losses must be recognised immediately in other
comprehensive income. Recognition using the corridor approach and immediate
recognition in profit and loss, which were permissible in the past, are no longer allowed.
KELAG-Kärntner Elektrizitäts-Aktiengesellschaft
Annual report 2012 | Notes
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The amended standard will in future affect the net benefit expense (net of income), as the
planned income from plan assets is determined using the same interest rate as that used
to discount the defined benefit obligation. Apart from a change in the disclosures in the
notes, this will not affect the KELAG Group as it had already converted to the method
allowed under the amended version of IAS 19 in 2010.
IAS 27 “Consolidated and Separate Financial Statements” has been renamed and in
future only contains provision on separate financial statements. The existing guidelines
for separate financial statements remain unchanged, however.
IAS 28 “Investments in Associates” has been amended such that the disclosure
requirements it contained for investments in associates have been transferred to IFRS 12
and are no longer part of IAS 28.
The amendments to IAS 32 “Financial Instruments: Presentation” do not concern the
provisions relating to the offsetting of financial instruments, but rather clarify certain
terms; there are therefore no effects on the KELAG Group.
The amendments to IFRS 1 “First-time Adoption of International Financial Reporting
Standards” concern government loans granted at below-market rates of interest. As the
KELAG Group is not a first-time adopter of IFRSs, the amendment does not affect the
consolidated financial statements.
Pursuant to the amendment of IFRS 7 “Offsetting of Financial Assets and Financial
Liabilities”, entities have to disclose information on rights to set-off and related
arrangements (e.g., collateral arrangements). This is intended to provide users of an
entity‟s financial statements information to evaluate the effect of netting arrangements on
the entity‟s financial position. The new disclosures are required for all recognised financial
instruments that were netted under IAS 32 “Financial Instruments: Presentation.” The
disclosures apply to the financial instruments used subject to enforceable master netting
agreements or similar agreements, irrespective of whether they are netted in accordance
with IAS 32. The amendment is effective for the first time for fiscal years beginning on or
after 1 January 2013, and is not expected to have any effect on the Group‟s financial
position and performance.
IFRS 10 “Consolidated Financial Statements” will replace IAS 27 “Consolidated and
Separate Financial Statements” and SIC 12 “Consolidation – Special Purpose Entities”; it
contains guidelines on control and consolidation. The definition of control is amended
such that the criterion of control is met where the controlling entity is able to exercise
control over the relevant activities, leading to variable returns from the entity. Returns can
KELAG-Kärntner Elektrizitäts-Aktiengesellschaft
Annual report 2012 | Notes
18
be positive, negative or both. The provisions for consolidation are not affected. Within the
KELAG Group it will be necessary to review each individual equity interest with a view
reference to the new definition of control, but it may be assumed that there will be no
material changes.
According to IFRS 11 “Joint Arrangements” there will be two types of joint arrangement in
future: joint operations and joint ventures. A joint operation is a joint arrangement where
direct rights to the assets and liabilities are transferred to the partner entities in this joint
arrangement. A partner entity in a joint operation records its share on the basis of its
share in the joint operation instead of on the basis of the interest in the joint arrangement.
A partner entity in a joint venture on the other hand does not have any rights to individual
assets or liabilities. Partner entities in a joint venture have a share in the net assets and
thus in the results of the activities performed by the joint venture. Joint ventures are
accounted for using the equity method; proportionate consolidation is now prohibited by
IFRS 11. The KELAG Group must review its existing or new agreements in order to
decide whether it invested in a joint arrangement or a joint venture, pursuant to the new
standard.
IFRS 12 “Disclosure of Interests in Other Entities” stipulates the disclosures that have to
be made by an entity on its interests in other entities. According to the new standard,
entities must make disclosures that enable the users of the financial statements to assess
the nature of the entity‟s interest in subsidiaries, associates, joint arrangements and
unconsolidated structured entities (special purpose vehicles) and the associated risks
and financial impact.
IFRS 13 “Fair Value Measurement” specifies how the fair value is measures and expands
the disclosures on fair value. The fair value is uniformly defined as the price that would be
received to sell an asset or paid to transfer a liability in an orderly transaction between
market participants at the measurement date. The standard, however, does not contain
any details when fair value is to be applied. As almost all entities, including the KELAG
Group, perform measurement at fair value, the new requirements have to be met.
However, it is mainly the extended disclosure requirements that will affect the KELAG
Group.
The new IFRIC 20 “Stripping Costs in the Production Phase of a Surface Mine” is not
relevant for KELAG.
KELAG-Kärntner Elektrizitäts-Aktiengesellschaft
Annual report 2012 | Notes
19
Summary of significant accounting policies
Assets and liability items that are expected to be recovered or settled within the normal
operating cycle are reported as current items.
Assets and liability items that are not expected to be recovered or settled within the
normal operating cycle are reported as non-current items.
In these financial statements, an amount of about EUR 6.4m was reclassified in the
comparative period 2011 from “Other current provisions” to the item of the statement of
financial position “Trade payables and other liabilities.” Accrued vacation and time
accounts of employees fall within the scope of the “hierarchy of uncertainty” pursuant to
IAS 37.11. Due to a lack of disclosure guidance in IAS 37, they are frequently recorded in
the other liabilities.
The disclosure of energy trading activities in the income statement was adjusted in these
financial statements. As a result the revenue item corresponds to the revenue from all
divisions less cost of purchased energy from energy trading activities. This provides the
users of the financial statements improved comparability of financial statements within the
energy industry.
When accounting for business combinations, differences can emerge between the
consideration and the remeasured net assets. If the difference is negative, the calculation
of cost and the purchase price allocation must be reassessed.
Under IFRSs, any positive difference is recognised as goodwill. Pursuant to IFRS 3, the
goodwill recognised in the statement of financial position is not amortised but must be
tested for impairment at least once a year. For this purpose, the goodwill must be
allocated to those cash-generating units that are expected to benefit from the synergies
resulting from a business combination. These cash-generating units correspond to the
lowest organisational level at which management monitors the goodwill for internal
management purposes. The recoverability of goodwill is tested by comparing the
recoverable amount of a cash-generating unit with its carrying amount including goodwill.
If the recoverable amount falls below the carrying amount of the cash-generating unit,
goodwill must be written down in a first step. If there is any further need for an impairment
charge, the carrying amounts of the other assets must be reduced proportionately.
Impairment losses charged on goodwill cannot be reversed in subsequent periods.
In the KELAG Group, the annual impairment test of goodwill at the level of the cash-
generating units takes place in the fourth quarter of the reporting period based on the
mid-range planning.
Where goodwill forms part of a cash-generating unit and part of the operation within that
unit is disposed of, the goodwill associated with the operation disposed of is included in
Current versus non-
current classification
Reclassification of
financial statements
items
Goodwill
KELAG-Kärntner Elektrizitäts-Aktiengesellschaft
Annual report 2012 | Notes
20
the carrying amount of the operation when determining the gain or loss on disposal of the
operation. Goodwill disposed of in this circumstance is measured based on the relative
values of the operation disposed of and the portion of the cash-generating unit retained.
Acquired intangible assets are recorded at amortised cost. Intangible assets acquired as
part of a business combination are recognised separately from goodwill if they meet the
definition as an intangible asset and their fair value can be reliably determined. The cost
of such intangible assets corresponds to their fair value as of the acquisition date. All of
these assets have finite useful lives, and are thus amortised using the straight-line
method. Following initial recognition, intangible assets are carried at cost less any
accumulated amortisation and accumulated impairment losses.
Gains or losses arising from derecognition of an intangible asset are measured as the
difference between the net disposal proceeds and the carrying amount of the asset and
are recognised in the income statement when the asset is derecognised.
As long as intangible assets are not yet available for use, they must be tested for
impairment annually.
Property, plant and equipment is stated at cost, net of accumulated depreciation and/or
accumulated impairment losses, if any. Such cost includes the cost of replacing part of
the property, plant and equipment and borrowing costs for long-term construction projects
if the recognition criteria are met. When significant parts of property, plant and equipment
are required to be replaced at intervals, the Group recognises such parts as individual
assets with specific useful lives and depreciation, respectively. Likewise, when a major
inspection is performed, its cost is recognised in the carrying amount of the plant and
equipment as a replacement if the recognition criteria are satisfied. All other repair and
maintenance costs are recognised in the income statement as incurred.
An item of property, plant and equipment is derecognized upon disposal or when no
future economic benefits are expected from its use or disposal. Any gain or loss arising
on derecognition of the asset (calculated as the difference between the net disposal
proceeds and the carrying amount of the asset) is included in the income statement when
the asset is derecognised.
The cost of self-constructed assets includes direct production and materials costs and an
appropriate portion of materials and production overheads less any idle capacity costs.
The amortisation of intangible assets and depreciation of property, plant and equipment
subject to depletion are based on the expected useful lives in the Group and begin when
the asset is ready for use. The expected useful lives, residual values and amortisation
and depreciation methods are assessed annually and all necessary changes in estimates
are taken into account prospectively. Amortisation and depreciation is calculated
according to the following uniform group useful lives:
Property, plant and
equipment and
intangible assets
KELAG-Kärntner Elektrizitäts-Aktiengesellschaft
Annual report 2012 | Notes
21
Useful lives Years
Intangible assets
Water usage rights 0-90
Other rights of use 0-50
Software 4-10
Property, plant and equipment
Office and factory buildings 33-55
Plant and machinery 10-60
Other property, plant and equipment 1-10
Wind turbines 12-16
The gain or loss on disposal or closure of an item of property, plant and equipment is
determined as the difference between the net disposal proceeds and the carrying amount
of the asset, and is posted to profit or loss.
Borrowing costs directly attributable to the acquisition, construction or production of an
asset that necessarily takes a substantial period of time to get ready for its intended use
or sale are capitalised as part of the cost of the respective asset. This is done in line with
the Group‟s accounting guidelines. All other borrowing costs are expensed in the period
they occur. Borrowing costs consist of interest and other costs that an entity incurs in
connection with the borrowing of funds. The Group capitalises borrowing costs for all
eligible assets where construction was commenced on or after 1 January 2009. The
financing cost of the investment allocable to the first half of 2012 comes to 4.5% and that
allocable to the second half of the year comes to 4.0% (in the prior year for the full
financial year: 4.5%).
The determination of whether an arrangement is, or contains, a lease is based on the
substance of the arrangement at inception date, whether fulfilment of the arrangement is
dependent on the use of a specific asset or assets or the arrangement conveys a right to
use the asset, even if that right is not explicitly specified in an arrangement.
Assets held under finance leases are written down over their expected useful lives in the
same way as assets owned by the Group or, if shorter, over the term of the underlying
lease. Initial recognition of the assets is at the present values of the minimum lease
payments (or their fair values, if lower) in non-current assets in the statement of financial
position of the KELAG Group. On the liabilities side, the lease liability is recognised and
rolled forward in subsequent periods using the effective interest method.
All other leases where the KELAG Group is the lessee are accounted for as operating
leases. The lease payments are expensed on a straight-line basis over the term of the
lease.
If there is an indication of impairment of non-financial assets that fall within the scope of
IAS 36, the recoverability of the carrying amounts is tested (impairment test). Regardless
of whether or not there is an indication of impairment, an annual impairment test must be
Borrowing costs
Leases
Recoverability of non-
financial assets
KELAG-Kärntner Elektrizitäts-Aktiengesellschaft
Annual report 2012 | Notes
22
carried out for goodwill, intangible assets with indefinite useful lives and assets that are
not yet ready for use. An impairment charge has to be recognised if the carrying amount
exceeds the recoverable amount of the asset. The recoverable amount is the higher of an
asset‟s value in use or fair value less costs to sell. The value in use is calculated based
on an income-based approach using the discounted cash flow method (DCF method). To
this end, the relevant cash flows are derived based on management‟s financial plans. The
discount rate is the pre-tax rate that reflects the current market assessments of the time
value of money and the specific risks, taking into account the capital structure of the
asset. An impairment loss must be recognised at the amount by which the carrying
amount exceeds the recoverable amount. If the reasons for impairment no longer apply in
subsequent periods, impairment losses are reversed (except in the case of goodwill).
Other interests in other entities are recognised at cost less impairment losses if it is not
possible to derive the fair value using comparable transactions for the corresponding
period and measurement was not performed by discounting the expected cash flows
because cash flows could not be reliably determined.
In accordance with IAS 28, investments accounted for using the equity method are
initially recognised at cost and subsequently recognised according to the amortised
interest in net assets. The carrying amounts of the investment are increased or
decreased by the share of the KELAG Group in the earnings for the period and in other
comprehensive income as well as by distributions, material elimination of intercompany
profits and rolled forward fair value adjustments from share acquisitions recognised in
accordance with IFRS 3. Goodwill included therein in accordance with IFRS 3 is not
subject to amortisation and, in accordance with IAS 28, is not reported separately.
As of the respective reporting date, other interests in other entities are checked for signs
of impairment as defined by IAS 39, and if necessary an impairment test is carried out in
accordance with IAS 36.
Recoverability is assessed by calculating the recoverable amount, which is the higher of
the value in use and fair value less costs to sell. The recoverable amount of the equity
investments is calculated primarily based on the concept of the fair value less costs to
sell. To determine the fair value less costs to sell, market-based approaches are favoured
over income-based approaches. The best information available must be used for the
measurement, which is the information that a company would use as of the reporting date
in connection with the sale of the asset at market conditions between willing, competent
and independent business partners. To determine value in use, the present value of the
estimated cash flows allocated to the KELAG Group and to be recorded by the associate
or joint venture as a whole in future is generally used. Alternatively, in accordance with
IAS 28, the proportionate present value of estimated future dividends and liquidation
proceeds can be used.
Other interests in other
entities and investments
accounted for using the
equity method
Recoverability of other
interests in other entities
and investments
accounted for using the
equity method
KELAG-Kärntner Elektrizitäts-Aktiengesellschaft
Annual report 2012 | Notes
23
The securities and book-entry securities reported in the statement of financial position
mainly comprise securities and sovereign bonds. At the KELAG Group, securities are
classified as available for sale or, if the criteria of IAS 39 are satisfied, as held to maturity.
Securities are classified as available for sale if the entity has the positive intention and
ability to hold or use them to maturity. This category essentially comprises financial
instruments that are not loans or receivables, not held to maturity and not measured at
fair value through profit or loss.
They are measured at fair value, which is calculated based on market prices. Initial
measurement is performed on the settlement date. Changes in value are posted to other
comprehensive income (in equity) up until sale or any impairment losses in accordance
with IAS 39. In the event of a prolonged decline in fair value, impairment losses are
posted to profit or loss (see recoverability of financial assets). The gain or loss on sale is
posted to profit or loss. If an asset is impaired, the accumulated loss is reclassified to
finance cost in profit or loss and derecognised from the reserve for available-for-sale
financial assets.
If the fair value falls significantly or for a longer period, impairment losses are recognised
in profit or loss.
Acquisitions and sales are recognised on their settlement date. Interest income
calculated using the effective interest rate method is recognised in the financial result with
an effect on income.
Securities are classified as financial investments held to maturity if the Group has the
intention and ability to hold these to maturity.
After initial measurement, held-to-maturity investments are measured at amortised cost
using the effective interest method, less impairment. Amortized cost is calculated by
taking into account any discount or premium on acquisition and fees or costs that are an
integral part of the effective interest rate. The effective interest rate amortisation is
included in finance income in the income statement. The losses arising from impairment
are recognised in the income statement in finance costs.
The Group did not have any held-to-maturity investments in the fiscal years prior to
reporting period 2012. All sovereign bonds purchased in financial year 2012 were
classified as held-to-maturity investments.
Interest-bearing non-current receivables are allocated to the loans and receivables
category. These are recognised at amortised cost less any impairment losses using the
effective interest rate method. In the case of impairment, measurement is at the present
value of the repayments expected.
Other securities and
book-entry securities
Other non-current
receivables and assets
KELAG-Kärntner Elektrizitäts-Aktiengesellschaft
Annual report 2012 | Notes
24
All trade receivables, receivables from affiliated non-consolidated entities and receivables
from other investees and investors are allocated to the loans and receivables category
and measured at amortised cost in accordance with IAS 39. If impairment losses are
expected, the items are recognised in the statement of financial position less impairment
losses for parts that are expected to be uncollectible.
Impairment losses adjusted on an item by item basis via allowance costs make sufficient
provisions for the expected default risks. Actual default leads to derecognition of the
receivables in question.
Other assets are recognised at cost loss impairment losses.
Current other receivables contain derivatives relating to energy. The derivative financial
instruments are recognised at fair value. The values of derivatives with a netting
agreement are offset and thus reported as net figures in the statement of financial
position. Other non-current and current receivables are carried at amortised cost. Any
impairment losses must also be recognised.
The carrying amounts of financial assets not carried at fair value through profit or loss are
tested on each reporting date as defined by IAS 39 for objective evidence of impairment
(such as significant financial difficulties of the debtor, a high probability of insolvency
proceedings against the debtor). If such evidence exists, the impairment losses to be
recognised are recorded in the income statement.
Natural gas inventories are measured using the FIFO method. Materials and supplies are
measured at the lower of cost or net realisable value on the reporting date. For
marketable inventories, this stems from the current market price. For all other inventories,
the net realisable value can be derived from the planned income less cost yet to be
incurred. Measurement is based on the moving average price method.
Services not yet invoiced and work in process are measured at cost, which comprises
direct production and materials costs as well as an appropriate portion of materials and
production overheads, taking any idle capacity costs into account.
The “Cash and cash equivalents” item in the statement of financial position comprises
cash in hand, bank balances and short-term highly liquid deposits that can be converted
into a fixed amount of cash at any time and are subject only to immaterial risks of
changes in value.
Cash and cash equivalents as reported in the statement of cash flows comprise the items
defined above.
Liabilities are recognised at fair value less transaction costs. A premium, debt discount or
other difference between the amount received and the repayment amount is spread over
Trade receivables and
other receivables and
assets
Recoverability of
financial assets
Inventories
Cash and cash
equivalents
Financial liabilities
KELAG-Kärntner Elektrizitäts-Aktiengesellschaft
Annual report 2012 | Notes
25
the term of the financing using the effective interest method and recognised in the
financing result.
The provisions for current pensions, claims to future pensions and similar obligations are
calculated using the projected unit credit method in accordance with IAS 19. The Group
recognises actuarial gains and losses in full in the period in which they occur in other
comprehensive income. Such actuarial gains and losses are also immediately recognised
in other comprehensive income and are not reclassified to profit or loss in subsequent
periods.
Based on company agreements and individual contracts, there is an obligation to pay
pensions to certain employees under certain circumstances after they have retired.
Earmarked pension trust funds exist for these defined benefit obligations. To the extent
that these obligations have to be met by the pension trust fund, there is an obligation on
the part of the employer to make additional capital contributions. The plan assets are not
available to the creditors of the Group, nor can they be paid directly to the Group. Fair
value is based on market price information and, in the case of quoted securities, is the
published bid price.
Pension obligations are determined on the basis of actuarial reports. The biometrical
assumptions used were the “AVÖ 2008-P – Rechnungsgrundlagen für die
Pensionsversicherung – Pagler & Pagler” for employees. Apart from death and invalidity
or retirement upon reaching the imputed pension age, the actuarial experts did not take
any other reasons for leaving the company into account, such as employee turnover or
similar reasons.
The amount of the pension depends on the period of service at KELAG before payment
of a pension commences. The pension age taken as a basis for the calculations is the
earliest possible age at which (early) retirement is possible in accordance with the
relevant statutory regulations, taking transitional regulations into account. For female
employees with vested pension rights, the pension age taken as a basis for the
calculations was gradually increased in accordance with the “Bundesverfassungsgesetz
über unterschiedliche Altersgrenzen von männlichen und weiblichen Sozialversicherten”
(Austrian Federal Constitutional Law on Different Retirement Ages of Men and Women
under Social Security).
The pension trust invests the pension trust funds mainly in different investment funds,
observing the regulations of the PKG (Austrian Pension Fund Act).
Based on labour-law obligations, employees who commenced service (in Austria) on or
before 31 December 2002 receive a one-off severance payment if the employment
relationship is terminated by the employer or upon retirement. The amount of the
entitlement depends on the number of years served at the company and the
remuneration authoritative at the time the payment falls due. This obligation is calculated
Pension obligations and
statutory severance
payments
KELAG-Kärntner Elektrizitäts-Aktiengesellschaft
Annual report 2012 | Notes
26
in accordance with the projected unit credit method with a savings period of 25 years
pursuant to IAS 19. Resulting actuarial gains and losses are also taken into account in
other comprehensive income.
For all (Austrian) employment relationships commencing after 31 December 2002,
employees no longer have any direct entitlement to statutory severance. For the
employees affected by this regulation, the employer pays a monthly amount of 1.53% of
the remuneration into a staff provision fund where the contributions are deposited on an
account of the employee. This severance model means that the employer is obliged only
to pay the regular contributions, and it is therefore recognised as a defined contribution
plan pursuant to IAS 19.
The calculations of the above provisions as of 31 December 2012 and 31 December 2011
are based on the following assumptions:
Actuarial assumptions 2012 2011
Pensions
Discount rate 3.50% 4.30%
Pension increases 1.50 – 2.00% 1.50 – 2.00%
Salary increases 2.00 – 3.00% 2.00 – 3.00%
Employee turnover None None
Pension age for women 56.5 – 62 56.5 – 62
Pension age for men 61.5 – 62 61.5 – 62
Expected long-term return on plan assets 3.50% 4.10%
Statutory severance payments
Discount rate 3.50% 4.30%
Salary increases 3.00% 3.00%
Employee turnover (depending on period of service at the company) None None
The provision for long-service awards is recognised in accordance with the same
actuarial assumptions as the provision for severance payments.
Other provisions are recognised in accordance with the regulations in IAS 37 if the
company has a legal or constructive obligation to a third party based on a past event and
it is probable that this obligation will lead to an outflow of resources. It must be possible to
make a reliable estimate of the amount of the obligation. If a reliable estimate cannot be
made, no provision is recognised. Provisions are stated at the amount needed to settle
the obligation and are not netted against any rights to reimbursement. The settlement
amount is calculated based on the best estimate with which a present obligation could be
settled or transferred to a third party on the reporting date. Future cost increases that are
foreseeable and probable as of the reporting date are taken into account.
Provisions for potential losses from onerous agreements are also included in KELAG‟s
consolidated financial statements in accordance with the regulations in IAS 37. The
Provisions
KELAG-Kärntner Elektrizitäts-Aktiengesellschaft
Annual report 2012 | Notes
27
amount recognised in the statement of financial position reflects the amount of the
outflow of resources that cannot be avoided.
If there is a material difference between the present value of the provision calculated on
the basis of a customary market discount rate and its nominal value, the present value of
the obligation is recognised in the statement of financial position and any expense
incurred on unwinding the discount on the provision is recorded in the financing result.
KELAG has “Altersteilzeit” (special phased retirement scheme) models that give
employees the option to avail themselves of a subsidised model before reaching the age
for a pension entitlement under the ASVG (Austrian General Social Security Act) with
continued payment of their remuneration until they reach the statutory retirement age.
The projected unit credit method in accordance with IAS 19 is used to measure the
provision reported in the statement of financial position, and actuarial gains or losses are
recognised immediately in profit or loss (i.e., without using the corridor method). The
measurement parameters correspond more or less to those used for pension-related
obligations. The expenses to be recorded as a result are reported in the income
statement under salaries.
Trade payables and other liabilities are measured at amortised cost.
Current other liabilities contain derivatives relating to energy. The derivative financial
instruments are recognised at fair value. The values of derivatives with a netting
agreement are offset and thus shown as net figures in the statement of financial position.
Contingent liabilities are possible obligations to third parties or existing obligations that
will probably not lead to an outflow of resources or whose amount cannot be reliably
measured. Contingent liabilities are recognised in the statement of financial position only
if they were assumed as part of a business combination.
They are recognised at fair value. Subsequently, they are measured at the higher of:
the amount that would be recognised in accordance with the guidance for
provisions above (IAS 37) or
the amount initially recognised less, when appropriate, cumulative amortisation
recognised in accordance with the guidance for revenue recognition (IAS 18)
The volumes of contingent liabilities reported in the notes correspond to the potential
liability as of the end of the reporting period.
Government grants are recognised where there is reasonable assurance that the grant
will be received and all attached conditions will be complied with. When the grant relates
to an expense item, it is recognised as income over the period necessary to match the
Trade payables and
other liabilities
Contingent liabilities
Investment subsidies
and construction cost
subsidies
KELAG-Kärntner Elektrizitäts-Aktiengesellschaft
Annual report 2012 | Notes
28
grant on a systematic basis to the costs that it is intended to compensate. Since 2004,
investment subsidies are offset against the corresponding cost.
Construction cost subsidies received are reported as a liability on the equity and liabilities
side of the statement of financial position and reversed over the useful lives of the items
of property, plant and equipment concerned.
Green certificates and CO2 allowances obtained without charge qualify as grants related
to income within the meaning of IAS 20. Pursuant to IAS 20.7, these are recognised
when there is assurance that the company will comply with the conditions attaching to
them and the grants will be received. In the special case of government grants of non-
monetary goods, the KELAG Group elects to record the fair value of the assets
concerned.
IFRIC 12 “Service Concession Arrangements” does not apply to the KELAG Group
because this interpretation gives guidance on the accounting by operators for public-to-
private service concession arrangements, and the hydroelectric power station in Kosovo,
to which the interpretation could possibly be applied, is a public-sector company in the
broader sense.
The income tax expense reported in the income statement for the past financial year
comprises the income tax calculated from the income liable to tax and the applicable tax
rate for the individual entities as well as the change in deferred tax liabilities and assets.
Current income tax assets and liabilities for the period are measured at the amount
expected to be recovered from or paid to the taxation authorities. The tax rates and tax
laws used to compute the amount are those that are enacted or substantively enacted by
the reporting date in the countries where the Group operates and generates taxable
income.
With a group and tax equalisation agreement dated 7 December 2004, KELAG formed a
tax group pursuant to Sec. 9 KStG (Austrian Corporate Income Tax Act) as a member
with KÄRNTNER ENERGIEHOLDING BETEILIGUNGS GMBH as the group parent.
Since 2005 and 2009 respectively, several new members from the Group were added to
this tax group. The group parent allocates the corporate income tax amounts caused by
the group members (calculated using the standalone method) to those group members
using tax allocations. The tax expense in the income statement of the group parent is
adjusted by means of the tax allocations.
Deferred taxes (future taxes) are calculated using the liability method prescribed in
IAS 12 for all temporary differences between the carrying amounts of the items in the
IFRS consolidated financial statements and the tax amounts for the individual entities.
The probable realisable tax benefit from existing unused tax losses is also included in the
calculation if this can be offset against taxable profits in the future. Deferred tax assets
Emissions allowances
Service concession
arrangements
Income taxes
KELAG-Kärntner Elektrizitäts-Aktiengesellschaft
Annual report 2012 | Notes
29
and tax liabilities are netted if there is a legally enforceable right to offset current tax
assets with current tax liabilities and if they relate to income taxes levied by the same
taxation authority. Goodwill resulting from first-time consolidation of subsidiaries does not
lead to deferred taxes. By contrast, temporary differences that result or change in
subsequent periods as a result of the ability to amortise goodwill for tax purposes are
taken into account accordingly when calculating the deferred taxes.
The income tax rates to be used to calculate deferred taxes are the rates expected to
apply at the time when the temporary differences are likely to be reversed.
Deferred tax assets and liabilities are measured at the tax rates that are expected to
apply in the period in which the asset is realised or the liability is settled, based on tax
rates (and tax laws) that have been enacted or substantively enacted.
Deferred taxes relating to items recognised outside profit or loss are recognised outside
profit or loss. Deferred taxes are recognised in correlation to the underlying transaction
either in other comprehensive income or directly in equity.
The corporate income tax rate applicable to the parent company KELAG-Kärntner
Elektrizitäts-Aktiengesellschaft amounts to 25%.
The following income tax rates were used for the fully consolidated entities:
Income tax rates in % 2012 2011
Bosnia and Herzegovina 10 10
Bulgaria 10 10
Kosovo 10 10
Croatia 20 20
Macedonia 10 10
Austria 25 25
Romania 16 16
Serbia 10 10
Slovenia 18 20
Czech Republic 19 19
The financial instruments in the KELAG Group can be broken down into primary and
derivative financial instruments. In the case of KELAG, derivative financial instruments
constitute commodity forwards relating to energy (electricity and gas) as defined in
accordance with IAS 39. The derivative financial instruments are recognised at fair value.
The measurement basis in the field of electricity is provided by the market prices on the
EEX in the last active trading day for annual products in 2013 to 2015. For gas products,
fair value is measured in line with the procedure for electricity products, using the listings
of the corresponding virtual trading hubs. The following overview shows the derivative
financial instruments measured at fair value broken down according to their main
Derivative financial
instruments relating to
energy
KELAG-Kärntner Elektrizitäts-Aktiengesellschaft
Annual report 2012 | Notes
30
measurement parameters. The resulting measurement levels are defined as follows in
accordance with IFRS 7:
Level 1: Quoted prices for similar instruments. This means that the measurement is
based on unadjusted prices of products traded on active markets.
Level 2: Inputs other than those included within level 1 that are directly observable. This
means that the measurement is based on models which in turn have observable
parameters (quotations) as inputs.
Level 3: Inputs that are not based on observable market data.
Derivative financial instruments resulting from the trade and sale of energy are measured
at fair value. Unrealised measurement gains and losses are generally recognised in the
income statement unless the prerequisites for hedge accounting pursuant to IAS 39 are
met. The KELAG Group currently does not use hedge accounting in the energy business.
The income and expenses from the measurement at fair values are netted for each
trading partner and reported in revenue and in the cost of materials in the income
statement.
Contracts entered into and for the purpose of the receipt or delivery of non-financial items
in accordance with the expected purchase, sale or usage requirements of the KELAG
Group are recognised not as derivative financial instruments but as pending transactions
(own use exemption). If such an agreement for own use is onerous as defined by IAS 37,
a provision for losses from pending transactions must be created. If the agreements
contain embedded derivatives, these and the host contracts are recognised separately
unless the economic characteristics and risks are closely linked to those of the host
contract. Reassessment only occurs if there is a change in the terms of the contract that
significantly modifies the cash flows that would otherwise be required.
All commercial transactions that optimise energy production constitute derivative financial
instruments as defined by IAS 39. They are reported in other assets if they have a
positive fair value and in other liabilities if they have a negative fair value.
The fair values of the derivatives used in the KELAG Group (forwards) can be measured
reliably as of each reporting date. The measurement of derivative financial instruments
relating to energy is based on market prices and a price forward curve derived from
market prices. As already mentioned, in the field of gas, listings for the corresponding
virtual trading hubs are used directly for measurement.
The results of fair value measurement are recorded in the corresponding income and
expense items concerning the energy industry. The resulting total comprehensive income
is part of the operating result.
KELAG-Kärntner Elektrizitäts-Aktiengesellschaft
Annual report 2012 | Notes
31
The KELAG Group designates individual hedging instruments (derivatives) to hedge cash
flows (cash flow hedges).
The hedging relationship between the hedged item and the hedge instrument is
documented at the inception of hedge accounting, including the aims of risk management
and the entity‟s strategy on which the hedge relationship is based. Moreover, it is
regularly documented, both at the inception of the hedge and during its term, whether the
designated hedging instrument is highly effective at offsetting changes in cash flows
attributable to the hedged risk.
The effective part of the change in fair value of derivatives suitable as cash flow hedges
and designated as such is recorded in the hedging reserve under other comprehensive
income. The gain or loss allocable to the ineffective portion is immediately released to
profit or loss in the line items “Other income” or “Other expenses”.
Amounts that are recognised in other comprehensive income are reclassified to profit or
loss in the period in which the hedged item affects the profit or loss for the period. The
disclosure in the statement of comprehensive income and the income statement is made
in the same line items as are use for the hedged item. However, if a hedged forecast
transaction leads to the recognition of a non-financial asset or non-financial liability, the
gains and losses previously recognised in the other comprehensive income and
accumulated in equity are reclassified from equity and taken into account in the first-time
measurement of the cost of the asset or liability.
The hedge is derecognised when the Group dissolves the hedging relationship, the
hedging instrument matures, is sold, is cancelled or is exercised or is no longer suitable
for hedging purposes. The complete amount of the gains and losses recognised at that
point in time in other comprehensive income and accumulated in equity remains in equity
is not released to profit or loss until the forecast transaction is also recognised in the
income statement. If the forecast transaction is no longer expected to occur, the full
amount of gains recognised in equity is immediately released to the income statement.
Energy trading transactions that are settled physically and are allocable to the value-
added activities in the energy industry are presented on a gross basis, while pure trading
or speculative transactions (including, but not limited to price optimisation transactions)
which are settled net (such as an offsetting transaction) are presented on a net basis.
Contracts that satisfy the own use exemption in IAS 39 are always allocable to the value-
added activities in the energy industry.
Revenue is recognised when the goods are delivered to the customer or the service is
performed. The corresponding revenue is recognised when the significant risks and
rewards of ownership of the goods have passed to the buyer in accordance with the
contractual agreements, payment has been fixed contractually and it is probable that the
trade receivable will be fulfilled.
Cash flow hedges
Disclosure of energy
trading transactions
Revenue recognition
KELAG-Kärntner Elektrizitäts-Aktiengesellschaft
Annual report 2012 | Notes
32
Most of the revenue is generated from the sale of electricity, gas and heat to industry
customers and consumers, energy supply companies and electricity exchanges as well
as network services.
For all financial instruments measured at amortised cost and interest bearing financial
assets classified as available for sale, interest income or cost is recorded using the
effective interest rate (EIR), which is the rate that exactly discounts the estimated future
cash payments or receipts through the expected life of the financial instrument or a
shorter period, where appropriate, to the net carrying amount of the financial asset or
liability. Interest income is included under finance income in profit or loss.
Dividends are recognised when the Group‟s right to receive the payment is established.
Preparation of the consolidated financial statements in accordance with IFRS requires
judgements in the application of accounting policies. In addition, assumptions must be
made by management about future developments that can materially affect the
recognition and value of assets and liabilities, the disclosure of other obligations as of the
reporting date and the presentation of income and expenses during the financial year.
All assumptions and estimates are based on circumstances and judgements prevailing on
the reporting date.
Qualifying assets are projects with a construction period of at least six months.
The recoverability of the carrying amounts of associates included at equity is assessed
on the basis of forecasts for future cash flows as well as using a discount rate adjusted to
the industry and the company risk.
The assessment of the existing social capital obligations are based on assumptions
concerning the discount rate, pensionable age, life expectancy and future salary and
wage increases.
In order to calculate any goodwill impairment, it is necessary to determine the value in
use of the cash-generating unit to which the goodwill is allocated. Calculation of the value
is use is based on estimates of future cash flows of the cash-generating unit as well as on
determining an appropriate discount rate. The discount rate is derived from the risk-free
interest rate plus a risk mark-up for borrowed capital (calculated based on current long-
term refinancing costs) and market risk, taking into account the beta factor. Valuation
appraisals and cost of capital assessments were referred to in determining the beta
factor, taking into account listed peer companies in the energy sector. A pre-tax WACC of
7.1% was determined for impairment testing of the domestic cash-generating units.
To cover country-specific risks, a corresponding mark-up for country risk was added to
WACC. This was derived applying a bond spread model.
Judgements and
forward-looking
statements
KELAG-Kärntner Elektrizitäts-Aktiengesellschaft
Annual report 2012 | Notes
33
For the purpose of the impairment test, the goodwill resulting in the KELAG Group was
allocated to cash-generating units (CGUs) as follows:
Goodwill in EUR m 2012 2011
Total goodwill in the KELAG Group 3.9 4.5
International wind projects – Romania 0.0 1.1
International hydroelectric power projects – Bosnia 0.4 0.0
International hydroelectric power projects – Kosovo 0.2 0.2
National heat projects 3.3 3.2
The goodwill of the international hydroelectric projects in Bosnia is solely preliminary
goodwill due to purchase price allocations for the business combinations carried out in
the financial year 2012 that have not yet been completed. From a current perspective it
can be assumed that when the assets and liabilities assumed have been finally
determined and remeasured, goodwill will no longer have an effect due to the adjusted
first-time consolidation in the financial year 2013.
The impairment test of wind turbines in Romania led to impairment losses of around
EUR -1.7m due to changed market conditions on the Romanian energy sector. This
reduces the goodwill existing in the KELAG Group.
Goodwill of around EUR 0.2m resulted as part of the asset deal of the power plant in
Kosovo in the financial year 2009. The computational basis for impairment testing is the
2013 budget and the medium-term planning. A terminal value based on a normalised
financial year without growth reduction was applied at the end of plan periods. The
impairment test did not result in any need for impairment losses.
Uncertainties also exist with respect to the interpretation of complex tax regulations,
changes in tax laws, and the amount and timing of future taxable income. Given the wide
range of international business relationships and the long-term nature and complexity of
existing contractual agreements, differences arising between the actual results and the
assumptions made, or future changes to such assumptions, could necessitate future
adjustments to tax income and expense already recorded.
Deferred tax assets are recognised for all unused tax losses to the extent that it is
probable that taxable profit will be available against which the losses can be utilised.
Significant management judgment is required to determine the amount of deferred tax
assets that can be recognised, based upon the likely timing and the level of future taxable
profits together with future tax planning strategies.
The measurement of provisions for potential losses was based on assumptions and
estimates as of the reporting date.
The cost of defined benefit plans and the present value of the pension obligation are
determined using actuarial valuations. An actuarial valuation involves making various
KELAG-Kärntner Elektrizitäts-Aktiengesellschaft
Annual report 2012 | Notes
34
assumptions that can differ from actual developments in the future. These include the
determination of the discount rate, future salary increases, mortality rates and future
pension increases. Due to the complexity of the valuation, the underlying assumptions
and its long-term nature, a defined benefit obligation is highly sensitive to changes in
these assumptions. All assumptions are reviewed at each reporting date.
Contingent liabilities amounting to EUR 31.0m not recorded in the consolidated statement
of financial position are regularly assessed in relation to their probability of occurrence. If
the probability of an outflow of resources embodying economic benefits is not high
enough to require the recognition of provisions and is not remote either, the relevant
obligations are to be disclosed as contingent liabilities. The estimates are made by the
experts responsible, taking market-related inputs into account (where possible).
In their separate financial statements, the entities measure non-monetary items
denominated in foreign currency on the reporting date at the rate prevailing when they
were first recorded. Monetary items are translated at the exchange rate as of the
reporting date. Any exchange rate gains generated and losses incurred as of the
reporting date from the measurement of monetary items in the statement of financial
position that are denominated in foreign currency are recognised through profit or loss in
other income and expenses respectively.
The Group‟s consolidated financial statements are presented in euros, which is also the
parent company‟s functional currency. Each entity in the Group determines its own
functional currency. Because the main foreign entities included in the consolidated
financial statements conduct their business independently in their local currency, the
items in the statement of financial position of all foreign entities are translated to the euro
at closing rates (mean rate) in the consolidated financial statements as of the reporting
date. Goodwill is translated at the closing rate as an asset of the economically
independent foreign entities. The exchange differences arising on the translation are
recognised in other comprehensive income. On disposal of a foreign operation, the
component of other comprehensive income relating to that particular foreign operation is
reclassified to the income statement.
The translation of the equity roll-forward of foreign companies accounted for at equity is
performed by analogy. Currency translation was based on the following exchange rates:
Currency translation
KELAG-Kärntner Elektrizitäts-Aktiengesellschaft
Annual report 2012 | Notes
35
Exchange rates Average
Reporting
date
per EUR 2012 31/12/2012
Bulgarian leva (BGN) 1.9558 1.9558
Czech koruny (CZK) 25.1893 25.1510
Romanian lei (RON) 4.4471 4.4445
Croatian kuna (HRK) 7.5269 7.5575
Macedonian denari (MKD) 61.5214 61.5000
Serbian dinara (RSD) 112.8799 113.7183
Bosnian marks (BAM) 1.9558 1.9558
Exchange rates Average
Reporting
date
per EUR 2011 31/12/2011
Bulgarian leva (BGN) 1.9558 1.9558
Czech koruny (CZK) 24.6351 25.7870
Romanian lei (RON) 4.2416 4.3233
Croatian kuna (HRK) 7.4441 7.5370
Macedonian denari (MKD) 61.5317 61.5050
Serbian dinara (RSD) 102.3105 104.6409
Bosnian marks (BAM) 1.9558 1.9558
KELAG-Kärntner Elektrizitäts-Aktiengesellschaft
Annual report 2012 | Notes
36
3. Notes on segment reporting
The segments and the information to be reported are based on the internal control and
reporting (management approach). The segments in the KELAG Group of
“Electricity/Gas”, “Heat” and “Investments/Misc.” correspond to the internal reporting
structure to the Board of Directors as the chief operating decision maker. The internal
performance of business segments is assessed primarily on the basis of operating
income; for the “Investments/Misc.” segment, the investment result is also relevant.
In segment reporting, the business activities of the KELAG Group are allocated to the
following segments:
Electricity/Gas
Heat
Investments/Misc.
The segments in these consolidated financial statements follow the management
approach concept set out in IFRS 8.5 and reflect the basis on which the management
and control of the company‟s economic situation is carried out by the Group‟s chief
operating decision makers. It is based on the internal reporting.
The “Electricity/Gas” segment contains the following (where applicable) for each product:
Production
Trading
Distribution
Network
Pursuant to Sec. 8 (3) ElWOG (Austrian Electricity Industry and Organisation Act),
electricity companies that provide at least two of the three functions of production,
transfer and distribution are required to provide separate statements of financial position
and income statements for production, transfer and distribution and to publish them in the
notes. This obligation to present the segments is already fulfilled in the separate financial
statements of KELAG and KNG-Kärnten Netz GmbH.
All activities in the field of utilising waste heat and bio-energy to supply heat on domestic
and foreign markets are allocated to the “Heat” segment.
KELAG-Kärntner Elektrizitäts-Aktiengesellschaft
Annual report 2012 | Notes
37
The “Investments/Misc.” segment consists of
Management and control functions as well as activities in the field of domestic
investments
Financing function of KELAG Finanzierungsvermittlungs GmbH and
Activities in the telecommunications sector
The accounting policies applied to the segments subject to mandatory reporting are the
same as those described in the group accounting guidelines.
The chief decision maker monitors the investments in intangible assets and property,
plant and equipment and investments in equity investments for the purpose of monitoring
performance and allocating resources between the segments. This information is
disclosed to the users of financial statements in the segment reporting.
The internal performance of the business segments is assessed primarily on the basis of
operating income. This corresponds to the total operating income achieved by the entities
incorporated in the respective business segment under consideration of inter-segment
revenue and expenses.
Additions to intangible assets and property, plant and equipment and equity investments
(investments accounted for using the equity method and other investments) include
investments and increases through business combinations. These values also
correspond to the asset volume reported internally.
Geographical information on the revenue generated with external customers and on non-
current assets was not provided, as the information required is not available and the
costs for gathering such information would be disproportionate.
KELAG-Kärntner Elektrizitäts-Aktiengesellschaft
Annual report 2012 | Notes
38
Segment reporting 2012**
Electricity/
Gas* Heat*
Investments/
Misc. Eliminations
Total
Group
EUR m
External revenue (including net income
from energy trading activities) 843.9 158.0 2.7 0.0 1,004.6
Intercompany revenue 10.8 1.4 0.0 -12.3 0.0
Total revenue 854.7 159.5 2.7 -12.3 1,004.6
Operating result 105.4 24.4 -31.9 0.0 97.8
Amortisation, depreciation and
impairment -70.9 -19.3 -6.8 0.0 -97.0
thereof impairments -25.8 0.0 0.0 0.0 -25.8
Investment result 0.0 0.0 29.3 0.0 29.3
Profit/loss from investments accounted
for using the equity method 0.0 0.0 3.1 0.0 3.1
Carrying amount of investments
accounted for using the equity method 0.0 0.0 6.9 0.0 6.9
Investments in intangible assets and
property, plant and equipment 128.7 13.9 6.0 0.0 148.6
Investments in other interests in other
entities 6.0 2.4 0.0 0.0 8.4
Segment reporting 2011**
Electricity/
Gas* Heat*
Investments/
Misc. Eliminations
Total
Group
EUR m
External revenue (including net income
from energy trading activities) 815.7 136.0 2.9 0.0 954.6
Intercompany revenue 12.3 0.3 0.0 -12.5 0.0
Total revenue 828.0 136.2 2.9 -12.5 954.6
Operating result 94.4 17.0 -13.5 0.0 97.8
Amortisation, depreciation and
impairment -42.0 -14.1 -6.5 0.0 -62.6
thereof impairments 0.0 -1.5 0.0 0.0 -1.5
Investment result 0.0 0.0 31.9 0.0 31.9
Profit/loss from investments accounted
for using the equity method 0.0 0.0 -0.2 0.0 -0.2
Carrying amount of investments
accounted for using the equity method 0.0 0.0 12.1 0.0 12.1
Investments in intangible assets and
property, plant and equipment 140.0 24.9 8.2 0.0 173.1
Investments in other interests in other
entities 4.8 9.2 0.0 0.0 14.0
* Earnings are calculated from the proceeds from secondary business (LWL mediation) after deduction of overheads for the central division.
** The revenue reported in the income statement from Electricity/Gas, Heat and Investments/Misc. are not comparable with the segment reporting, as
the segments record revenue in all of the aforementioned areas.
KELAG-Kärntner Elektrizitäts-Aktiengesellschaft
Annual report 2012 | Notes
39
4. Notes to the income statement
The breakdown of revenue proceeds by area of activity presents the following picture for
the year 2012:
Revenue
EUR m 2012 2011
Revenue (including gross income from energy trading activities) 2,007.0 1,660.3
thereof electricity/gas 1,847.7 1,522.4
thereof heat 146.4 134.0
thereof miscellaneous 13.0 3.8
Cost of purchased energy from energy trading activities -1,002.4 -705.7
Revenue (including net income from energy trading activities) 1,004.6 954.6
Of the electricity revenues including gross income from energy trading activities,
electricity trading accounted for about EUR 1,157.8m (prior year: approximately
EUR 897.0m). The total increase of EUR 260.8m is due to the economic growth and to
making use of the market volatility in electricity trading. The revenue including gross
income from energy trading activities also comprises around EUR 163.2m (prior year:
roughly EUR 94.2m) of income from natural gas trading.
Other income
EUR m 2012 2011
Changes in inventories of finished goods and work in process 1.7 -1.9
Own work capitalised 26.7 25.0
Income from the reversal of provisions 17.2 5.0
Sundry 25.5 16.7
Total other income 71.2 44.8
The largest items included in sundry other income are income from rentals and leases of
approximately EUR 2.2m (prior year: approximately EUR 2.4m) and various offsetting
transactions of approximately EUR 19.2m (prior year: approximately EUR 11.5m).
Cost of materials and supplies, and of other purchased services
EUR m 2012 2011
Cost of materials -86.9 -75.7
Cost of purchased services
Electricity -467.5 -484.4
Natural gas -74.1 -74.1
Third-party services -30.6 -14.1
Total cost of purchased services -572.3 -572.7
Total cost of materials and supplies, and of other purchased services -659.1 -648.4
(1)
Revenue
(2)
Other income
(3)
Cost of materials and
supplies, and of other
purchased services
KELAG-Kärntner Elektrizitäts-Aktiengesellschaft
Annual report 2012 | Notes
40
Personnel expenses
EUR m 2012 2011
Wages and salaries -113.4 -92.6
Expenses for statutory social insurance contributions, payroll-related
taxes and mandatory contributions -24.4 -23.2
Expenses for trainees‟ wages -1.3 -1.2
Other expenses relating to social security -1.2 -1.2
Subtotal -140.3 -118.2
Expenses for severance payments -1.6 -1.3
Expenses for old-age pensions -5.7 -4.8
Total personnel expenses -147.6 -124.3
The increase in personnel expenses of around EUR 23.3m is largely due to the decision
to extend the phased retirement model and the recognition of personnel expenses as part
of full consolidation of Kärntner Restmüllverwertungs GmbH.
The number of employees, measured as an annual average of full-time equivalents (part-
time jobs taken into account pro rata, including dormant employment contracts), was as
follows in the KELAG Group
Headcount 2012 2011 Change
Salaried employees 1,406 1,357 49
Trainees 116 114 2
Total employees 1,522 1,471 51
The increase is mostly attributable to the expansion of the investment in Kärntner
Restmüllverwertungs GmbH in 2012 and the associated first-time inclusion of its
employees in the group headcount as well as the implementation of the growth strategy
abroad.
About EUR 0.3m was paid in the form of contributions to employee pension funds during
the financial year 2012 (prior year: about EUR 0.3m).
Depreciation of property, plant and equipment amounted to EUR 53.5m (prior year:
EUR 49.0m), while amortisation of intangible assets amounted to EUR 41.8m (prior year:
EUR 13.6m). In addition, an impairment loss of around EUR 1.7m was charged on
goodwill within this item (prior year: EUR 0.0m). This includes an impairment loss of
around EUR 24.1m for a pumped storage power station. The impairment loss was due to
changed market conditions.
(4)
Personnel expenses
(5)
Amortisation,
depreciation and
impairment
KELAG-Kärntner Elektrizitäts-Aktiengesellschaft
Annual report 2012 | Notes
41
Other expenses
EUR m 2012 2011
Taxes (excluding taxes on income) -1.9 -2.4
Office and factory buildings -2.9 -2.7
Motor vehicle costs -2.4 -2.1
Travel expenses -3.9 -3.8
Communication expenses -2.1 -2.0
Rental and lease expenses -6.6 -5.8
Personnel leasing -7.6 -7.5
Operating costs -0.7 -0.9
Advertising and promotion expenses -5.3 -5.3
Insurance -2.9 -2.8
Sundry expenses -38.0 -30.9
Total other expenses -74.3 -66.2
With regard to other expenses, reference is made to Note 23 “Non-current provisions”
and Note 27 “Current provisions”.
Interest result
EUR m 2012 2011
Interest income 2.4 2.3
Interest expenses -21.3 -18.3
Total interest result -18.9 -16.1
Interest income mainly includes interest income from bank balances.
Interest expenses are mainly composed of interest payments and deferred interest for the
bonds and interest components of additions to provisions, which contain the annual
accrued interest amounts in connection with rolling forward the present value of the non-
current provisions. Of the borrowing costs, around EUR 4.6m (previous year: around
EUR 4.2m) had to be capitalised in the reporting year in accordance with IAS 23.
The investment result included all income and expenses recorded in connection with the
operating investments. Income from investments amounting to approximately EUR 28.3m
(prior year: around EUR 31.8m) was recognised as the main item in the other investment
result.
(6)
Other expenses
(7)
Interest result
(8)
Other investment result
KELAG-Kärntner Elektrizitäts-Aktiengesellschaft
Annual report 2012 | Notes
42
Income taxes
EUR m 2012 2011
Current income taxes / tax allocation -24.7 -17.4
Deferred income taxes 9.7 -4.3
Total income taxes -15.1 -21.7
The tax expense in the 2012 reporting period of approximately EUR -15.1m is around
EUR 12.8m lower than the imputed tax expense of approximately EUR -27.8m, which
would result from applying a tax rate from 25% to earnings before income taxes (around
EUR 111.3m). The reasons for the difference between the imputed and reported tax
expense in the Group are as follows:
Tax reconciliation
EUR m 2012 2011
Earnings before income taxes 111.3 113.6
Imputed income tax expense -27.8 -28.4
Differences due to different tax rates 0.1 0.1
Tax-free income 7.2 9.5
Non-deductible expenses 4.0 -0.8
Income tax expense for the period -16.6 -19.6
Income tax income/expense relating to other periods 1.5 -2.2
Reported income tax expense -15.1 -21.8
(9)
Income taxes
KELAG-Kärntner Elektrizitäts-Aktiengesellschaft
Annual report 2012 | Notes
43
5. Notes to the statement of financial position
Effective as of 27 October 2011, all of the shares in IEP energija d.o.o. were acquired at a
cost of EUR 4.0m. The entity‟s hydroelectric power stations at Duboki potok and Sastavci
in the Federation of Bosnia and Herzegovina have 1.9 MW of installed capacity. The final
purchase price allocation is as follows:
Cost of IEP energija d.o.o.
EUR k
Purchase price paid in cash (including cash equivalents acquired) 3,989
Contingent purchase price adjustments 0
Cost of acquisition 3,989
IEP energija d.o.o.
EUR k
Acquisition date 27/10/2011
Acquired share (direct) 100%
Non-current assets 3,990
Current assets 1
Remeasured assets 3,991
Equity 3,991
Non-current liabilities 0
Current liabilities 0
Remeasured liabilities 0
Net assets 3,991
Cost 3,989
Residual goodwill as of the acquisition date -1
Net outflow of cash from the acquisition
Purchase price paid in cash 3,989
less cash acquired 0
Net outflow from the acquisition 3,989
Included in the consolidated net profit 27/10 – 31/12/2011
Revenue 2011 0
Net profit or loss 2011 -2
Revenue and net profit or loss 1/1 – 31/12/2011
Revenue 2011 0
Net profit or loss 2011 -2
Purchase price
allocation for business
acquisitions and
business start-ups
KELAG-Kärntner Elektrizitäts-Aktiengesellschaft
Annual report 2012 | Notes
44
The purchase transaction relating to 99.99% of the shares in KelaVENT Charlie SRL was
closed on 22 December 2011. Upon completion, the wind farm will have an installed
capacity of 8 MW. The final amounts from purchase accounting are as follows based on
the purchase price adjustment of EUR 0.3m:
KelaVENT Charlie SRL
EUR k
Acquisition date 22/12/2011
Acquired share (direct) 99.99%
Non-current assets 2,580
Current assets 420
Remeasured assets 3,000
Equity 343
Non-current liabilities 2,456
Current liabilities 201
Remeasured liabilities 2,657
Net assets 343
Cost 1,191
Residual goodwill as of the acquisition date 848
Net outflow of cash from the acquisition
Purchase price paid in cash 920
less cash acquired -387
Net outflow from the acquisition 533
Included in the consolidated net profit 22/12 – 31/12/2011
Revenue 2011 0
Net profit or loss 2011 0
Revenue and net profit or loss 1/1 – 31/12/2011
Revenue 2011 0
Net profit or loss 2011 -50
KELAG-Kärntner Elektrizitäts-Aktiengesellschaft
Annual report 2012 | Notes
45
Effective 30 September 2011 and 11 August 2011 100% of the shares in the entities
Alternative Energie Salzburg GmbH and Biowärme Friesach GmbH were acquired at a
cost of EUR 7.5m and EUR 2.3m respectively. Provisional amounts were consolidated for
both entities in the 2011 reporting period. The final purchase price allocation is as follows:
Alternative Energie Salzburg GmbH
EUR k
Acquisition date 30/9/2011
Acquired share (direct) 100%
Non-current assets 6,006
Current assets 855
Remeasured assets 6,861
Equity 5,011
Non-current liabilities 957
Current liabilities 893
Remeasured liabilities 1,850
Net assets 5,011
Cost 7,500
Residual goodwill as of the acquisition date 2,489
Net outflow of cash from the acquisition
Purchase price paid in cash 7,500
less cash acquired -393
Net outflow from the acquisition 7,107
Included in the consolidated net profit 30/9 – 31/12/2011
Revenue 2011 1,646
Net profit or loss 2011 160
Revenue and net profit or loss 1/1 – 31/12/2011
Revenue 2011 1,646
Net profit or loss 2011 160
KELAG-Kärntner Elektrizitäts-Aktiengesellschaft
Annual report 2012 | Notes
46
Biowärme Friesach GmbH
EUR k
Acquisition date 11/8/2011
Acquired share (direct) 100%
Non-current assets 2,022
Current assets 402
Remeasured assets 2,424
Equity 1,602
Non-current liabilities 419
Current liabilities 403
Remeasured liabilities 822
Net assets 1,602
Cost 2,300
Residual goodwill as of the acquisition date 698
Net outflow of cash from the acquisition
Purchase price paid in cash 2,300
less cash acquired -214
Net outflow from the acquisition 2,086
Included in the consolidated net profit 11/8 – 31/12/2011
Revenue 2011 463
Net profit or loss 2011 40
Revenue and net profit or loss 1/1 – 31/12/2011
Revenue 2011 463
Net profit or loss 2011 63
Effective 10 May 2012, the previously held interests in Kärntner Restmüllverwertungs
GmbH (KRV) were increased from 42.87% to 85.74%. KRV, which was incorporated in
1997, operates a thermal waste treatment facility at Industriepark Arnoldstein/Carinthia
with the objective of disposing of the annual volume of household waste in Carinthia.
Thermal waste treatment is not part of the KELAG Group‟s core competence. Taking into
account the generation of green electricity and district heating extraction based on
biogenic waste, the increase in the shareholding in KRV will, however, contribute to the
implementation of the growth strategy adopted by KELAG on the basis of renewable
energies.
KELAG-Kärntner Elektrizitäts-Aktiengesellschaft
Annual report 2012 | Notes
47
The overall assets and liabilities of KRV are as follows as of the acquisition date:
Kärntner Restmüllverwertungs GmbH
EUR k
Acquisition date 10/5/2012
Acquired share (direct) 85.74%
Non-current assets 59,543
Current assets 13,955
Remeasured assets 73,498
Equity 20,123
Non-current liabilities 42,258
Current liabilities 11,117
Remeasured liabilities 53,375
Net assets 20,123
Consideration paid 17,259
Non-controlling interests recognised as of the acquisition date 2,869
Residual goodwill as of the acquisition date 5
Net outflow of cash from the acquisition
Purchase price paid in cash 9,450
less cash acquired -7,173
Net outflow from the acquisition 2,277
Disclosures relating to the
business combination achieved in stages
Carrying amount of the previously held investment accounted for using the equity
method 4,246
Gain on remeasurement of previously held equity interests* 3,563
Acquisition-date fair value of previously held equity interests 7,809
Included in the consolidated net profit 10/5 – 31/12/2012
Revenue 2012 9,561
Net profit or loss 2012 -1,903
Revenue and net profit or loss 1/1 – 31/12/2012
Revenue 2012 16,909
Net profit or loss 2012 708
* Recognised in the profit/loss from investments accounted for using the equity method
KELAG-Kärntner Elektrizitäts-Aktiengesellschaft
Annual report 2012 | Notes
48
The purchase transaction relating to 99.99% of the shares in KelaVENT Echo SRL was
closed by KI-KELAG International GmbH on 28 September 2012. KelaVENT Echo SRL is
constructing a wind farm in Pogoanele, Romania. The four turbines have a total output of
8 MW.
KelaVENT Echo SRL
EUR k
Acquisition date 28/9/2012
Acquired share (direct) 99.99%
Non-current assets 796
Current assets 419
Remeasured assets 1,215
Equity 448
Non-current liabilities 233
Current liabilities 534
Remeasured liabilities 767
Net assets 448
Cost 1,292
Residual goodwill as of the acquisition date 844
Net outflow of cash from the acquisition
Purchase price paid in cash 1,292
less cash acquired -314
Net outflow from the acquisition 978
Included in the consolidated net profit 28/9 – 31/12/2012
Revenue 2012 0
Net profit or loss 2012 111
Revenue and net profit or loss 1/1 – 31/12/2012
Revenue 2012 0
Net profit or loss 2012 68
KELAG-Kärntner Elektrizitäts-Aktiengesellschaft
Annual report 2012 | Notes
49
The entity Interhem d.o.o. Banja Luka was consolidated for the first time by Interenergo
d.o.o. as of 11 July 2012. It has a concession to construct and operate Kobiljska Rijeka
hydroelectric power station in the Bosnian region of Republika Srpska.
Interhem d.o.o. Banja Luka
EUR k
Acquisition date 11/7/2012
Acquired share (direct) 100.00%
Non-current assets 54
Current assets 9
Remeasured assets 62
Equity 49
Non-current liabilities 0
Current liabilities 13
Remeasured liabilities 13
Net assets 50
Cost 100
Residual goodwill as of the acquisition date 50
Net outflow of cash from the acquisition
Purchase price paid in cash 100
less cash acquired 0
Net outflow from the acquisition 100
Included in the consolidated net profit 11/7 – 31/12/2011
Revenue 2012 0
Net profit or loss 2012 -15
Revenue and net profit or loss 11/7 – 31/12/2011
Revenue 2012 0
Net profit or loss 2012 -15
KELAG-Kärntner Elektrizitäts-Aktiengesellschaft
Annual report 2012 | Notes
50
Effective 22 March 2012, the entity LSB Elektrarne d.o.o. Banja Luka was included in
KELAG‟s scope of consolidation for the first time. This entity holds the concession for
Medna hydroelectric power station with a planned installed capacity of 4.9 MW. The
purchase price for the project company domiciled in the Bosnian region of Republika
Srpska came to EUR 0.4m.
LSB Elektrane d.o.o. Banja Luka
EUR k
Acquisition date 22/3/2012
Acquired share (direct) 100.00%
Non-current assets 289
Current assets 7
Remeasured assets 296
Equity 1
Non-current liabilities 291
Current liabilities 4
Remeasured liabilities 295
Net assets 1
Cost 400
Residual goodwill as of the acquisition date 399
Net outflow of cash from the acquisition
Purchase price paid in cash 400
less cash acquired 0
Net outflow from the acquisition 400
Included in the consolidated net profit 22/3 – 31/12/2011
Revenue 2012 0
Net profit or loss 2012 -42
Revenue and net profit or loss 22/3 – 31/12/2011
Revenue 2012 0
Net profit or loss 2012 -42
KELAG-Kärntner Elektrizitäts-Aktiengesellschaft
Annual report 2012 | Notes
51
In addition, Interenergo d.o.o. purchased 100% of the shares in Inter-Energo d.o.o. Gornji
Vakuf – Uskoplje on 31 December 2012.
The purchase price allocation was as follows:
Inter-Energo d.o.o. Gornji Vakuf
EUR k
Acquisition date 31/12/2012
Acquired share (direct) 100.00%
Non-current assets 7,250
Current assets 54
Remeasured assets 7,305
Equity 24
Non-current liabilities 2,450
Current liabilities 4,831
Remeasured liabilities 7,281
Net assets 24
Cost 1
Residual goodwill as of the acquisition date -23
Net outflow of cash from the acquisition
Purchase price paid in cash 1
less cash acquired 0
Net outflow from the acquisition 1
Included in the consolidated net profit 31/12/2011
Revenue 2012 0
Net profit or loss 2012 0
Revenue and net profit or loss 1/1 – 31/12/2011
Revenue 2012 0
Net profit or loss 2012 0
The net assets reported in the consolidated financial statements as of 31 December 2012
from all business combinations in the financial year 2012 are based solely on a
preliminary assessment of fair value. The final accounting for the business combinations
takes place within the twelve-month period defined in IFRS 3.45, since the fair values of
identifiable assets, liabilities and contingent liabilities of the acquirees could not be
reliably determined at the time of preparing the financial statements.
KELAG-Kärntner Elektrizitäts-Aktiengesellschaft
Annual report 2012 | Notes
52
5.1. Non-current assets
Electricity purchase rights, natural gas purchase rights and other rights – including
software and memo items for concessions and goodwill – were reported as intangible
assets.
Goodwill – development of carrying amounts*
EUR k 2012 2011
Opening balance 4,309 0
Additional amounts recognised from business combinations in the
financial year 1,411 4,309
Adjustment due to final purchase price allocation -253 0
Impairment losses -1,697 0
Total carrying amount of goodwill 3,769 4,309
* From consolidation procedures
Accumulated impairment losses as of the beginning of the financial year 2012 totalled
some EUR 20.1m.
The development of the other intangible assets and of property, plant and equipment is
shown in the statement of changes in non-current assets at the end of the notes.
Investments accounted for using the equity method
EUR m 2012 2011
Share in assets and liabilities of the investments accounted for
using the equity method
Current assets 3.8 6.5
Non-current assets 23.6 38.5
Liabilities 21.5 32.9
Equity 5.8 12.1
Share in revenue and profit/loss from investments accounted for
using the equity method
Revenue 12.7 19.3
Profit/loss 0.6 1.7
Carrying amount of the investment 6.9 12.1
The profit/loss from investments accounted for using the equity method reported in the
income statement included around EUR 3.6m from the remeasurement of the equity
interests held in Kärntner Restmüllverwertungs GmbH before the change in consolidation
methods.
In addition to affiliates that are not fully consolidated on grounds of immateriality, interests
in other entities reported in the statement of financial position also include immaterial
investments in associates that are not accounted for using the equity method. Other
(10)
Intangible assets
Goodwill
(11)
Property, plant and
equipment
(12)
Investments accounted
for using the equity
method
(13)
Other interests in other
entities
KELAG-Kärntner Elektrizitäts-Aktiengesellschaft
Annual report 2012 | Notes
53
interests in other entities with a shareholding of less than 20.0% are also reported in this
item.
As these equity instruments are not listed and their fair values cannot be reliably
determined, they are recognised at cost less any impairment.
The main investment is the 10% investment in VERBUND Hydro Power AG of around
EUR 123.3m.
Long-term securities (mainly government bonds) serve to cover the pension and
severance provisions.
Other securities and book-entry securities
EUR m 2012 2011
Securities 29.6 27.9
Book-entry securities 0.1 0.1
Total other securities and book-entry securities 29.7 28.1
Other non-current receivables and assets
EUR m 2012 2011
Loans 4.1 4.9
Receivables from offsetting of loans 0.7 0.8
Payments on account 0.0 0.3
Sundry 1.4 0.9
Total other non-current receivables and assets 6.2 6.8
The differences between the tax bases and the IFRS carrying amounts as well as the
existing unused tax losses as of the reporting date result in the following deferred taxes:
(14)
Other securities and
book-entry securities
(15)
Other non-current
receivables and assets
(16)
Deferred tax assets and
liabilities
KELAG-Kärntner Elektrizitäts-Aktiengesellschaft
Annual report 2012 | Notes
54
Deferred tax assets and liabilities 31/12/2012 31/12/2011
EUR m
Deferred
tax assets
Deferred tax
liabilities
Deferred tax
assets
Deferred tax
liabilities
Non-current assets 9.1 35.8 7.3 31.9
Current assets 0.0 7.0 0.0 0.6
Special tax-allowed items 8.9 13.8 9.8 14.1
Pension provisions 11.3 0.0 9.6 0.0
Other non-current provisions 25.0 0.0 15.3 0.1
Other non-current liabilities 1.3 0.0 0.1 0.5
Current liabilities 6.6 0.0 0.1 0.0
Subtotal 62.3 56.7 42.1 47.2
Unused tax losses 0.2 0.0 0.1 0.0
Total before netting* 62.5 56.7 42.2 47.2
Netting* -56.7 -56.7 -41.2 -41.2
Recognised in the statement of financial
position 5.8 0.0 0.9 6.0
* The adjustment item for netting relates to the netting of deferred taxes at group entity level.
In the 2012 reporting period, the net item for deferred tax assets and liabilities changed
as follows:
Deferred tax assets and liabilities
EUR m 2012 2011
Opening balance as of 1 January -5.1 -0.2
Change not recognised in profit or loss 1.2 -0.6
Change recognised in profit or loss 9.7 -4.3
Closing balance as of 31 December 5.8 -5.1
The change not recognised in profit or loss essentially refers to gains and losses
recognised directly in other comprehensive income from available-for-sale financial
instruments, actuarial gains and losses arising from use of the projected unit credit
method in accordance with IAS 19 for pension obligations and statutory severance
payments and the initial recognition as a result of changes in the scope of consolidation.
Tax effects on other comprehensive income
EUR m 2012 2011
Actuarial gains and losses 4.2 0.1
Gains or losses from exchange differences 0.0 0.1
Unrealised gains/losses from the disposal of available-for-sale financial
instruments -0.1 0.0
Hedges 0.1 0.0
Total income taxes 4.2 0.2
KELAG-Kärntner Elektrizitäts-Aktiengesellschaft
Annual report 2012 | Notes
55
5.2. Current assets
The current assets item includes all assets that are expected to be recovered or settled
within the course of ordinary operations.
Inventories
EUR m 2012 2011
Materials and supplies 10.6 11.7
Work in process 0.0 0.1
Finished goods and merchandise 4.8 6.2
Services not yet invoiced 1.9 0.2
Total inventories 17.3 18.2
The value of the natural gas inventory on the reporting date amounted to approximately
EUR 3.9m (prior year: roughly EUR 5.8m). Write-downs of approximately EUR 0.3m were
recognised in inventories in the financial year 2012 (prior year: around EUR 1.2m).
Trade receivables and other receivables and assets
EUR m 2012 2011
Trade receivables from third parties 53.6 40.3
Receivables from associates 0.7 2.8
Other receivables and assets 59.2 35.9
Total trade receivables and other receivables and assets 113.5 79.1
Trade receivables from third parties related chiefly to electricity, heat and natural gas
receivables already billed.
See Note 6.3 “Credit risk” on the credit risk of trade receivables to understand how the
Group manages and measures credit quality of trade receivables that are neither past
due nor impaired.
Receivables from associates all involved trade receivables.
(17)
Inventories
(18)
Trade receivables and
other receivables and
assets
KELAG-Kärntner Elektrizitäts-Aktiengesellschaft
Annual report 2012 | Notes
56
Impairment losses
EUR m
Carrying
amount
Impairment
loss Gross
2011
Trade receivables from third parties 40.3 3.6 43.9
Receivables from associates 2.8 0.0 2.8
Other receivables and assets 35.9 0.0 35.9
Total trade receivables and other receivables and
assets 79.1 3.6 82.7
2012
Trade receivables from third parties 53.6 4.0 57.6
Receivables from associates 0.7 0.0 0.7
Other receivables and assets 59.2 0.1 59.2
Total trade receivables and other receivables and
assets 113.5 4.0 117.5
Other receivables and assets
EUR m 2012 2011
Receivables from offsetting of taxes 11.2 9.6
Prepayments made 1.1 3.0
Market value of derivatives 27.7 17.7
Sundry 19.2 5.6
Total other receivables and assets 59.2 35.9
Other receivables and assets on the reporting date included receivables from claims,
accrued interest, receivables from the tax office, market value of derivatives, etc. With the
exception of the derivatives, other receivables and assets have been accounted for at
amortised cost, which essentially corresponded to their fair values. The derivatives were
recognised at fair value.
Age structure of the trade receivables
EUR m Total
Neither past
due nor
impaired < 30 days
31 – 120
days
121 – 360
days > 360 days
2012 53.6 42.3 6.0 0.6 1.0 3.7
2011 40.3 29.7 8.6 2.0 0.0 0.0
As of the reporting date on 31 December 2012, bank balances and cash in hand
amounting to about EUR 250.8m (prior year: approximately EUR 87.6m) were
recognised.
(19)
Cash and cash
equivalents
KELAG-Kärntner Elektrizitäts-Aktiengesellschaft
Annual report 2012 | Notes
57
Cash and cash equivalents
EUR m 2012 2011
Cash in hand 0.1 0.5
Bank balances 250.7 87.1
Total cash and cash equivalents 250.8 87.6
For an explanation of the increase, reference is made to the statement of cash flows (see
5. Statement of cash flows of the KELAG Group).
5.3. Equity
Issued capital was unchanged at EUR 58.2m and is divided into 8,000,000 registered no-
par value shares. There were no options to issue new shares.
The capital reserves amounting to about EUR 263k reported in the statement of changes
in equity are appropriated capital reserves.
The accumulated profit or loss reported in the statement of changes in equity included the
statutory reserve, which was unchanged on the prior year at around EUR 5.8m and, with
10% of the issued capital, was fully endowed in accordance with stock corporation law.
The item also comprises untaxed reserves of around EUR 54.4m (prior year:
approximately EUR 56.4m).
The accumulated profit or loss included the Group‟s retained earnings.
The dividend is determined on the basis of the net profit for the year shown in the
separate financial statements of KELAG-Kärntner Elektrizitäts-Aktiengesellschaft as
parent company, which are prepared in accordance with company law. Accordingly, it will
be proposed to the Annual General Meeting to distribute approximately EUR 40.0m to the
shareholders. This is equivalent to a proposed dividend per share of EUR 5.0.
Equity attributable to non-controlling interests shows the shareholdings of third parties in
group entities. These stemmed from the consolidation of Lumbardhi/Kosovo
Beteiligungsgesellschaft mbH, KelKos Energy Sh.p.k, Windfarm Balchik 1 OOD,
Windfarm Balchik 2 OOD and Windfarm Balchik 4 OOD. Third-party ownerships interests
from the consolidation of Interenergo-Gesellschaft Hidrowatt d.o.o. Beograd, Kärntner
Restmüllverwertungs GmbH, Kraftwerk Waben GmbH as well as Wärmeversorgung
Arnoldstein Errichtungs- und Betriebsgesellschaft mbH, Kraftwerksgesellschaft Tröpolach
GmbH and BES-BioEnergie für Spittal GmbH are also reported in this item.
(20)
Equity attributable to the
equity holders of the
parent company
Capital reserves
Accumulated profit or
loss and dividend
(21)
Equity attributable to
non-controlling interests
KELAG-Kärntner Elektrizitäts-Aktiengesellschaft
Annual report 2012 | Notes
58
5.4. Non-current liabilities
Non-current financial liabilities rose on the prior-year level from around EUR 264.1m to
around EUR 454.2m. This item of the statement of financial position includes the
EUR 250m bond issued in 2009 at an issue price of 99.383% and interest of 4.5% for the
five-year term, the EUR 150m bond issued in the financial year 2012 at an interest rate of
3.25% for a ten-year term. The issue price was at 99.916%.
In addition to provisions for severance payments and pensions, other non-current
provisions were recognised in the item for non-current provisions.
List of non-current provisions
EUR m 2012 2011
Pension provisions 96.5 91.2
Provision for severance payments 69.5 62.3
Provisions for phased retirement 36.7 21.5
Provision for long-service awards 13.0 12.0
Other 84.5 86.3
Total non-current provisions 300.2 273.5
(22)
Non-current financial
liabilities
(23)
Non-current provisions
KELAG-Kärntner Elektrizitäts-Aktiengesellschaft
Annual report 2012 | Notes
59
Development of pension provisions
EUR m 2012 2011
Reconciliation of the provision reported in the statement of financial
position
Present value (DBO) of the obligations covered by the plan assets 147.6 136.5
Fair value of plan assets -51.0 -45.3
Provision recognised as of 31 December 96.5 91.2
The expense for pension provisions breaks down as follows:
Service cost 0.9 0.9
Interest cost 5.6 5.8
Expected return on investment -1.8 -1.9
Pension cost recognised in the income statement 4.7 4.7
Development of the pension provision
Provision recognised as of 1 January 91.2 91.7
Net expense recognised in profit or loss 4.7 4.7
Change in the fully recognised actuarial gains/losses in the period 10.5 1.4
Pension/bonus payments -9.8 -10.1
Plan payments 3.4 3.3
Contributions to plan assets -3.6 0.0
Net transfer contributions 0.2 0.1
Provision recognised as of 31 December 96.5 91.2
Development of actuarial gains/losses (accumulated)
Accumulated actuarial gain (+)/loss (-) as of 1 January -265 -25.1
Actuarial gain (+)/loss (-) -14.1 0.9
Investment gains (+)/losses (-) for the year 3.6 -2.3
Accumulated actuarial gain (+)/loss (-) * -37.0 -26.5
Development of the present value of the obligation (DBO)
Present value (DBO) as of 1 January 136.5 140.7
Service cost (entitlements acquired) 0.9 0.9
Interest cost 5.6 5.8
Pension payments -9.8 -10.1
Transfer amount due to additions 0.2 0.1
Actuarial gains/losses 14.1 -0.9
Actual DBO as of 31 December 147.6 136.5
Development of the plan assets
Plan assets at fair value as of 1 January 45.3 49.0
Contributions to plan assets 3.6 0.0
Plan payments -3.4 -3.3
Expected return on plan assets 1.8 1.9
Actuarial gains (+)/losses (-) 3.6 -2.3
Plan assets at fair value as of 31 December 51.0 45.3
* Reported in other comprehensive income
Pension provisions
KELAG-Kärntner Elektrizitäts-Aktiengesellschaft
Annual report 2012 | Notes
60
Plan assets
in % 2012 2011
Bonds – euros 25.76 46.20
Bonds – Euro High Yield 11.61 0.00
Bonds – Euro Emerging Markets 0.00 2.61
Corporate bonds – euros 17.70 21.86
Shares – euros 12.64 4.40
Shares – non-euros 12.72 9.70
Shares – Emerging Markets 6.79 0.40
Real estate 3.24 9.82
Alternative investment instruments 3.39 5.01
Cash 6.15 0.00
Total 100.00 100.00
Experience adjustments on actuarial gains and losses
EUR m 2012 2011 2010 2009
Expected present value (DBO) at the end of the period 112.1 137.1 125.9 113.7
-
Present value (DBO) at the end of the period according to
the measurement parameters of the beginning of the
period -124.8 -136.5 -126.4 -117.8
+/- Transfer amount due to additions/exits 0.0 0.1 0.2 0.2
+ Expected pension payments 8.6 10.3 10.2 10.1
- Current pension payments -6.3 -10.1 -10.5 -10.4
= Experience adjustments on actuarial gains and losses -10.4 0.9 -0.6 -4.2
KELAG-Kärntner Elektrizitäts-Aktiengesellschaft
Annual report 2012 | Notes
61
Development of the provision for severance payments
EUR m 2012 2011
Provision recognised in the statement of financial position
Present value (DBO) of the obligation 69.5 62.3
Provision recognised as of 31 December 69.5 62.3
The expense for provisions for severance payments breaks down as
follows:
Service cost 1.2 1.0
Interest cost 2.6 2.6
Severance expenses recognised in the income statement 3.8 3.6
Development of the provision
Provision recognised as of 1 January 62.3 61.3
Net expense recognised in profit or loss 3.8 3.6
Change in the fully recognised actuarial gains/losses in the period 6.2 -0.7
Severance payments -2.8 -1.9
Provision recognised as of 31 December 69.5 62.3
Development of actuarial gains/losses (accumulated)
Accumulated actuarial gain (+)/loss (-) as of 1 January -8.8 -9.5
Actuarial gain (+)/loss (-) -6.2 0.7
Accumulated actuarial gain (+)/loss (-) -15.0 -8.8
Experience adjustments on actuarial gains and losses
EUR m 2012 2011 2010 2009
Expected present value (DBO) at the end of the period 62.9 62.5 57.5 51.9
- Present value (DBO) at the end of the period according to the
measurement parameters of the beginning of the period -64.0 -62.3 -56.5 -52.9
+ Expected total payments 3.3 2.4 3.5 3.2
- Actual total payments -2.8 -1.9 -3.9 -3.7
= Experience adjustments on actuarial gains and losses -0.7 0.7 0.7 -1.6
Other non-current provisions contain provisions for potential losses from onerous
agreements. Other material items relate to measures necessary due to official regulations
for existing power plants as well as provisions in connection with pending and anticipated
litigation. Non-current provisions are discounted at 3.5% (prior year: 3.5%).
The development of other non-current provisions for the financial year 2012 is as follows:
Provisions for
severance payments
Other non-current
provisions
KELAG-Kärntner Elektrizitäts-Aktiengesellschaft
Annual report 2012 | Notes
62
Provisions for
EUR m
German phased
retirement
(“Altersteilzeit”)
Long-
service
awards Other
Carrying amount as of 1 January 2011 21.3 11.1 70.7
Additions 0.0 1.4 14.6
Unwinding of the discount 0.9 0.5 0.4
Utilisation 0.0 0.9 1.1
Reversal 0.6 0.0 2.1
Other income and expenses recognised in equity 0.0 0.0 -0.5
Reclassification 0.0 0.0 4.3
Carrying amount as of 31 December 2011 /
1 January 2012 21.6 12.0 86.3
Additions 14.2 1.1 8.6
Unwinding of the discount 0.9 1.0 0.4
Utilisation 0.0 1.0 0.2
Reversal 0.0 0.0 10.5
Other income and expenses recognised in equity 0.0 0.0 -0.5
Reclassification 0.0 0.0 0.4
Carrying amount as of 31 December 2012 36.7 13.0 84.5
For more details on other provisions, reference is made to Note 27 – Current provisions.
In the electricity sector, around EUR 39.7m (prior year: around EUR 37.2m) related to
construction cost subsidies for grids and around EUR 47.5m (prior year: around
EUR 49.5m) for connection costs. From 2007, the construction cost subsidies are
amortised at a rate of 5% and offset against revenue in accordance with Sec. 3 (6) SNT-
VO (system user charges ordinance) 2006.
Non-current other liabilities of EUR 3.8m (prior year: EUR 3.8m) related to liabilities to
affiliates, while EUR 60.5m (prior year: EUR 57.5m) concerned sundry other liabilities.
5.5. Current liabilities
Current financial liabilities accounted for around EUR 3.7m in the reporting period (prior
year: around EUR 13.4m). The reduction can mainly be explained by the repayment of
current liabilities to banks and other loan providers.
The development of current provisions in the KELAG Group is as follows:
(24)
Construction cost
subsidies
(25)
Non-current other
liabilities
(26)
Current financial
liabilities
(27)
Current provisions
KELAG-Kärntner Elektrizitäts-Aktiengesellschaft
Annual report 2012 | Notes
63
EUR m
Current
taxes Other Total
Carrying amount as of 1 January 2011 0.2 58.8 59.0
Additions 0.1 15.2 15.3
Utilisation 0.2 25.8 26.0
Reversal 0.0 2.8 2.8
Reclassification 0.0 -4.3 -4.3
Other income and expenses recognised in equity and
changes in the scope of consolidation 0.0 0.0 0.0
Carrying amount as of 31 December 2011/
1 January 2012 0.1 41.1 41.1
Additions 0.0 22.9 22.9
Utilisation 0.0 12.4 12.4
Reversal 0.0 7.9 7.9
Reclassification 0.0 -0.4 -0.4
Other income and expenses recognised in equity and
changes in the scope of consolidation 0.0 0.4 0.4
Carrying amount as of 31 December 2012 0.1 43.7 43.8
Non-current and current other provisions
EUR m 2012 2011
Easements, transfer fees and similar obligations 31.8 18.9
Potential losses and rate risks relating to electricity 50.1 48.8
Potential losses from long-term natural gas agreements 16.7 8.5
Measures due to requirements made by authorities relating to power
stations 7.9 7.5
Other 21.7 43.7
Total non-current and current other provisions 128.3 127.5
Trade payables and other liabilities totalled EUR 219.2m (prior year: EUR 165.6m), which
constitutes a rise of roughly EUR 53.6m on the prior-year level.
Trade payables and other liabilities
EUR m 2012 2011
Trade payables to third parties 50.7 43.0
Liabilities to affiliates 47.5 28.7
Liabilities to associates 3.0 8.8
Other liabilities 118.1 85.2
Total trade payables and other liabilities 219.2 165.6
Maturities of trade payables
EUR m Total On demand
less than 3
months 3 to 12 months 1 to 5 years
2012 50.8 46.1 4.0 0.5 0.1
(28)
Trade payables and
other liabilities
KELAG-Kärntner Elektrizitäts-Aktiengesellschaft
Annual report 2012 | Notes
64
Other liabilities
EUR m 2012 2011
Tax liabilities 34.9 17.6
Social security liabilities 2.3 2.2
Liabilities from advance payments received 1.9 1.1
Market value of derivatives 26.5 12.6
Sundry 52.5 51.6
Total other liabilities 118.1 85.2
For the measurement of derivatives, please refer to accounting policies in Section 2.3.
6. Other notes
6.1. Financial instruments and risk management
With the exception of derivative financial instruments related to trading activities and one
interest hedging instrument, the KELAG Group holds only non-derivative financial
instruments, which on the assets side include mainly cash, securities, trade receivables,
bank balances and other receivables, and on the liabilities side bank loans, bonds, trade
payables and other liabilities. The fair values result from market prices or are determined
using generally accepted measurement methods.
The fair value of the bonds issued by KELAG amounted to EUR 416.0m (prior year:
EUR 259.9m) as of the reporting date and was determined based on observable market
prices (Level 1). For the other financial instruments under IFRS 7, we refer to Note 18
“Trade receivables and other receivables and assets”, Note 19 “Cash and cash
equivalents”, and Note 28 “Trade payables and other liabilities”. The carrying amount
recognised in the statement of financial position for the items mentioned corresponds to
the market value as of the reporting date.
Non-current and current financial
liabilities 2012
Principal
repayments Interest payments
EUR m
Carrying
amounts 2013
2014-
2017
from
2018 2013
2014-
2017
from
2018
1. Bonds 400.0 0.0 250.0 150.0 16.1 30.8 24.4
2. Liabilities to banks 46.0 7.4 17.6 20.9 0.5 6.1 3.2
3. Liabilities to others 12.0 0.1 5.3 6.6 0.0 0.0 1.0
Total financial liabilities 457.9 7.5 272.9 177.5 16.6 36.9 28.6
Reporting on
financial instruments
KELAG-Kärntner Elektrizitäts-Aktiengesellschaft
Annual report 2012 | Notes
65
Non-current and current financial
liabilities 2011
Principal
repayments Interest payments
EUR m
Carrying
amounts 2012
2013-
2016
from
2017 2012
2013-
2016
from
2017
1. Bonds 248.7 0.0 250.0 0.0 11.3 23.8 0.0
2. Liabilities to banks 21.4 15.6 3.4 2.4 0.4 0.6 0.1
3. Liabilities to others 7.4 0.1 6.1 1.3 0.3 0.6 0.1
Total financial liabilities 277.5 15.7 259.5 3.7 12.0 25.1 0.3
There were no delayed payments or payment defaults and contract breaches relating to
loan liabilities during the financial year.
Fair value hierarchy in the measurement of the derivative financial instruments
2012
EUR m Level 1 Level 2 Level 3 Total
Market value of derivatives (assets) 0.0 27.7 0.0 27.7
Market value of derivatives (liabilities) 0.0 26.5 0.0 26.5
Cash flow hedge (liabilities) 0.0 4.6 0 4.6
Fair value hierarchy in the measurement of the derivative financial instruments
2011
EUR m Level 1 Level 2 Level 3 Total
Market value of derivatives (assets) 0.0 17.7 0.0 17.7
Market value of derivatives (liabilities) 0.0 12.6 0.0 12.6
The net gain or loss from the measurement of the derivatives used came to around
EUR -3.9m (prior year: roughly EUR 3.7m). Because earnings are recognised in the
corresponding income and expense accounts for energy, these earnings are part of the
operating result.
Net gain or loss pursuant to IFRS 7 from derivative financial instruments
EUR m 2012 2011
Financial assets and liabilities at fair value through profit or loss -3.9 3.7
of which held for trading -3.9 3.7
The risks from the area of derivative financial instruments are essentially market and
credit risks that arise from the company‟s trading activities and the sale of energy. In
terms of market risks, adverse price developments represent the main risk for KELAG.
This risk is counteracted by a commodity risk management system with limit systems
derived from the central risk management system. The same applies to the area of credit
risk, where bad debts and the replacement and re-use risks are limited and controlled by
strict selection and intense monitoring of the trading and distribution partners.
KELAG-Kärntner Elektrizitäts-Aktiengesellschaft
Annual report 2012 | Notes
66
The carrying amount of the loans and receivables corresponds more or less to fair value.
Carrying amounts and fair values by measurement category 2012
Assets – items in the statement of financial position
Measurement
category
pursuant to
IAS 39 Level
Carrying
amount as of
31/12/2012
Fair value as
of 31/12/2012
EUR m
Other interests in other entities FAAC 124.9 124.9
Securities FAAFS/HTM 1 29.6 29.3
Other loans LAR 4.1 4.1
Other - 2.2 -
Other financial assets and other non-current
receivables 35.9
Trade receivables LAR 53.6 53.6
Receivables from associates LAR 0.7 0.7
Derivative financial instruments relating to energy FAHFT 2 27.7 27.7
Other - 31.4 -
Trade receivables and other current assets 113.5
Cash and cash equivalents LAR 250.8 250.8
Aggregated by measurement category
Financial assets at cost FAAC 124.9 -
Loans and receivables LAR 309.2 -
Available-for-sale and held-to-maturity financial assets FAAFS/HTM 29.6 -
Financial assets related to trading FAHFT 27.7 -
FAAC … financial assets at cost
LAR … loans and receivables
FAAFS … financial assets available for sale
FAHFT … financial assets held for trading
HTM … held to maturity
KELAG-Kärntner Elektrizitäts-Aktiengesellschaft
Annual report 2012 | Notes
67
Carrying amounts and fair values by measurement category 2012
Liabilities – items in the statement of financial position
Measurement
category
pursuant to
IAS 39 Level
Carrying
amount as of
31/12/2012
Fair value as
of 31/12/2012
EUR m
Bonds FLAAC 1 400.0 416.0
Financial liabilities to banks and others FLAAC 53.3 53.3
Financial liabilities to others FLHFT 1 4.6 4.6
Non-current and current financial liabilities 457.9 474.0
Trade payables FLAAC 0.1 0.1
Liabilities to associates FLAAC 3.8 3.8
Other - 60.5 -
Other non-current liabilities 64.4
Trade payables FLAAC 50.7 50.7
Liabilities to associates FLAAC 3.0 3.0
Liabilities to affiliates FLAAC 47.5 47.5
Derivative financial instruments relating to energy FLHFT 2 26.5 26.5
Other - 91.6 -
Trade payables and other current liabilities 219.2
Aggregated by measurement category
Financial liabilities at amortised cost FLAAC 558.3 -
Financial liabilities held for trading FLHFT 31.1 -
FLAAC … financial liabilities at amortized cost
FLHFT … financial liabilities held for trading
KELAG-Kärntner Elektrizitäts-Aktiengesellschaft
Annual report 2012 | Notes
68
Carrying amounts and fair values by measurement category 2011
Assets – items in the statement of financial position
Measurement
category
pursuant to
IAS 39 Level
Carrying
amount as of
31/12/2011
Fair value as
of 31/12/2011
EUR m
Other interests in other entities FAAC 125.9 125.9
Securities FAAFS/HTM 1 27.9 27.9
Loans to other investees and investors LAR 0.1 0.1
Other loans LAR 4.8 4.8
Other - 2.1 -
Other financial assets and other non-current
receivables 34.9 -
Trade receivables LAR 40.3 40.3
Receivables from associates LAR 2.8 2.8
Derivative financial instruments relating to energy FAHFT 2 17.7 17.7
Other - 18.2 -
Trade receivables and other current assets 79.1 -
Cash and cash equivalents LAR 87.6 87.6
Aggregated by measurement category
Financial assets at cost FAAC 125.9 -
Loans and receivables LAR 135.6 -
Available-for-sale financial assets FAAFS 27.9 27.9
Financial assets related to trading FAHFT 17.7 17.7
FAAC … financial assets at cost
LAR … loans and receivables
FAAFS … financial assets available for sale
FAHFT … financial assets held for trading
KELAG-Kärntner Elektrizitäts-Aktiengesellschaft
Annual report 2012 | Notes
69
Carrying amounts and fair values by measurement category 2011
Liabilities – items in the statement of financial position
Measurement
category
pursuant to
IAS 39 Level
Carrying
amount as of
31/12/2011
Fair value as
of 31/12/2011
EUR m
Bonds FLAAC 1 248.7 259.9
Financial liabilities to banks and others FLAAC 28.8 28.8
Non-current and current financial liabilities 277.5 288.7
Trade payables FLAAC 0.2 0.2
Liabilities to associates FLAAC 3.8 3.8
Other - 57.5 -
Other non-current liabilities 61.4 -
Trade payables FLAAC 43.0 43.0
Liabilities to associates FLAAC 8.9 8.9
Liabilities to affiliates FLAAC 28.7 28.7
Derivative financial instruments relating to energy FLHFT 2 12.6 12.6
Other - 66.1 -
Trade payables and other current liabilities 159.2 -
Aggregated by measurement category
Financial liabilities at amortised cost FLAAC 348.7 -
Financial liabilities held for trading FLHFT 12.6 -
FLAAC … financial liabilities at amortized cost
FLHFT … financial liabilities held for trading
In the income statement, a total interest expense of roughly EUR 2.3m (prior year:
roughly EUR 1.2m) calculated using the effective interest method was recognised for
financial assets and liabilities not measured at fair value through profit or loss.
6.2. Liquidity risk
The KELAG Group is well positioned in terms of liquidity and met all its payment
obligations on time and properly in the financial year 2012. A possible liquidity risk is
countered by proactive planning of liquidity and cash flows, medium and long-term capital
requirement planning, a conscious move to maintain sufficient liquidity reserves as well
as open credit lines from banks. Maintaining liquidity at all times and increasing financial
flexibility are on the one hand guaranteed by large cash reserves (EUR 250.8m as of
31 December 2012; EUR 87.6m as of 31 December 2011) and on the other by a
contracted cash advance credit line amounting to EUR 250.0m (prior year: EUR 150.0m)
until April, September and December 2015 with a renewal option. Reflecting the
overarching corporate strategy, ensuring adequate liquidity reserves and maintaining an
excellent credit rating remain the primary objectives of the KELAG Group. The liquidity
KELAG-Kärntner Elektrizitäts-Aktiengesellschaft
Annual report 2012 | Notes
70
risk can therefore be classified as very moderate, as has also been confirmed by the
rating agency.
6.3. Credit risk
Credit risks arise from non-fulfilment of contractually agreed services. In terms of assets
(mainly receivables and other assets), the reported amounts also represent the maximum
default or credit risk. The risk of default is monitored using regular credit rating analyses
and market observations. Transactions are only concluded with counterparties with an
excellent credit rating based on the external rating of an internationally recognised rating
agency or according to an internal credit rating review. To the extent that default risks can
be identified in financial assets, they are immediately recognised by value adjustments.
Collateral may be required in individual cases, depending on the type and amount of the
respective service.
KELAG‟s investment strategy allows for conservative investments in a diversified portfolio
with banks of good to prime credit ratings. In addition, risk is mitigated for money market
investments by means of limit systems and monitoring. Counterparty risk is limited,
evaluated and monitored based on a uniform approach throughout the Group.
6.4. Market risk
Interest rate risk
The interest rate risk currently remains manageable given the structure of financial
liabilities, as the KELAG Group pursues a conservative investment and financing policy.
The share of variable-rate debt amounts to about 4.25% of total borrowed capital (prior
year: approximately 9.80%). Most of the financing portfolio therefore has a fixed interest
rate and as a result is not subject to any fluctuations affecting cash. The variable interest
rate share is continuously monitored and risks limited to 40% at group level. An interest
rate increase of 1% for variable-rate financial liabilities as of the reporting date would
reduce financial income by around EUR 0.2m (prior year: around EUR 0.3m) per year. An
interest rate decrease of 1% for variable-rate financial liabilities as of the reporting date
would increase financial income by around EUR 0.2m (prior year: around EUR 0.3m) per
year. The KELAG Group is financed with an average effective interest rate of 4.54% (prior
year: 4.60%). The equivalent nominal interest rate is 4.30% (prior year: 4.34%).
Currency risk
The Group Finance Framework Directive stipulates that only transactions in euros are
approved for the fully consolidated group entities with their registered offices in Austria.
KELAG‟s scope of consolidation at year end has no financial liabilities in foreign currency
KELAG-Kärntner Elektrizitäts-Aktiengesellschaft
Annual report 2012 | Notes
71
and for this reason the foreign currency risk is negligible. Because of the limited assets in
foreign currencies (approximately 4.97% of total assets in 2012 and approximately 4.34%
of total assets in 2011), the currency translation risk for goodwill and assets is also
negligible.
6.5. Financial risk
The KELAG Group operates as an international energy supplier in an increasingly
complex environment. On the financial markets, energy suppliers are not as heavily
affected by the negative effects of the difficult economic situation because of the non-
cyclical development of their business and the stability of their cash flows. Nevertheless
the KELAG Group is confronted with liquidity, market and credit risks in the course of its
ordinary business activities. The conservative financial strategy of the KELAG Group that
is geared toward continuity and yet adjusted to the varied challenges of day-to-day
business has shown its worth in the current unstable environment. In the area of financial
management, a Group Framework Directive as well as implementation guidelines for
operations serve as a basis for carrying out business and set out binding and stringent
risk measures, responsibilities and controls.
In 2012, Standard & Poor‟s confirmed the KELAG Group‟s A rating, giving the Group a
leading position in both a national and international comparison. The basic prerequisites
for maintaining this position include commitment to a capital structure that is stable and
robust in the long term, compliance with the main KPIs relevant for the rating and regular
and intensive communication and discussion of the Group‟s strategic objectives with the
rating agency.
The fully consolidated companies of the KELAG Group generally do not hold any
derivative financial instruments. Exceptions to this rule are those instruments relating to
trading and one interest hedging instrument that is presented in the consolidated financial
statements as part of the increase in the shareholding and associated full consolidation of
Kärntner Restmüllverwertungs GmbH (KRV) for the first time.
Interest rate and currency risks are minimised by an adequate internal control system for
all financial products used. It is not permissible to use derivatives for speculative
purposes. The risk of counterparty default is reduced by written regulations for Treasury.
Transactions with counterparties (banks) are carried out only if they have at least the
same credit rating as KELAG.
As of 31 December 2012, there are no indications of any further financial risks for the
financial year 2012 that could impact negatively on the business development of the
KELAG Group.
KELAG-Kärntner Elektrizitäts-Aktiengesellschaft
Annual report 2012 | Notes
72
6.6. Capital management
The objective of capital management is to maintain a strong capital base, to successfully
continue the path of the value-based growth and innovation strategy based on renewable
energies and thus to promote the Group‟s future development.
For management, the Group‟s capital is its equity reported pursuant to IFRSs. Equity
came to EUR 644.8m as of the reporting date (prior year: EUR 588.0m). Financial
liabilities (current and non-current) amounted to EUR 457.9m (prior year: EUR 277.5m),
while cash and cash equivalents totalled EUR 250.8m (prior year: EUR 87.6m). The
Group monitors its capital using net gearing, which is the ratio of net financial liabilities to
total equity.
With net gearing of 32.1% as of the reporting date (prior year: 32.3%), the KELAG Group
has a stable capital structure.
Net gearing
EUR m 2012 2011
Non-current financial liabilities 454.2 264.1
Current financial liabilities 3.7 13.4
Total financial liabilities 457.9 277.5
less cash and cash equivalents -250.8 -87.6
Net financial liabilities / net debt 207.1 189.9
Equity 644.8 588.0
Net gearing 32.1% 32.3%
Further objectives of capital management include retaining a high credit rating (A rating),
which is also firmly entrenched as a component of the Group‟s strategy, ensuring an
adequate return on equity and a consistent dividend policy.
No changes were made to the capital management objectives, policies or processes as
of 31 December 2012.
6.7. Risk policy
Entrepreneurial activity means that “opportunity is not without risk”. Consequently, the
willingness to take risk and, in turn, risk limits have to be defined. To this end, KELAG
operates a risk management system that addresses risks from its own activities as well
risks from its market environment. The group-wide rules and minimum standards ensure
a systematic and uniform risk management system. It is the KELAG Group‟s strategic
goal to raise risk awareness at all levels, to systematically consider risk aspects in all
business decisions, to improve performance of internal control systems and reporting and
KELAG-Kärntner Elektrizitäts-Aktiengesellschaft
Annual report 2012 | Notes
73
to establish a value-oriented risk culture at all levels of the Group, beyond the scope of
the requirements set by the legal minimum standards.
The main focus of group-wide risk management relates to the five risk categories
identified for the KELAG Group – market risks, operational risks, financial risks, systemic
risks and other risks. Risks are identified and managed for each business division and for
material equity investments.
Risks can arise during the execution of operational processes, in any business division or
investment. These are mitigated using for example an extensive internal control system
and with the support of corresponding hardware and software.
The default of trading partners or customers encompasses the risk that energy already
supplied may not be paid or that replacement energy may have to be sourced
(replacement and settlement risk). Risks also arise due to changes in the value of
commodity positions as well as regulatory changes to transfer prices. Risks are mitigated
by executing an initial credit worthiness screening and ongoing credit worthiness
monitoring in line with the value of contracts with each trading partner or customer; in
addition the commodity positions concerned are closed and offset against each other.
6.8. Additional notes
Dividends and interest received are allocated to the cash flow from operating activities.
Dividend and interest paid are recognised in the cash flow from financing activities.
Borrowed capital amounting to around EUR 153.5m was obtained in the financial year
2012.
KELAG has taken over a guarantee for all liabilities resulting from the service agreement
dated 27 October 1998 between KÄRNTNER Entsorgungsvermittlungs GmbH and
Kärntner Restmüllverwertungs GmbH. As the value of this guarantee is secured with the
1996 Consumer Price Index, a contingent liability of approximately EUR 8.1m exists as of
31 December 2012 (prior year: around EUR 3.9m). This guarantee is valid until the end of
the service agreement, in which the two parties waive their termination rights until
31 December 2023.
Bank guarantees recognised as contingent liabilities of approximately EUR 8.7m have
been assumed for the Slovenian subsidiary Interenergo and its subsidiaries as well as for
KelKos Energy Sh.p.k., KelaVENT Charlie SRL and KelaVENT Echo SRL. These chiefly
relate to liability declarations.
In the course of the restructuring of SWH, KELAG Wärme GmbH signed a 50% liability
waiver for the general managers of the SWH Group. In the event that the general
Process risks
Market and credit risks
in energy trading and
distribution
Notes to the
consolidated statement
of cash flows
Contingent liabilities
KELAG-Kärntner Elektrizitäts-Aktiengesellschaft
Annual report 2012 | Notes
74
managers are made liable and up to a maximum amount of EUR 2.8m, KELAG Wärme
GmbH will assume 50% of the liability, i.e., a maximum of EUR 1.4m.
In addition, five letters of comfort were issued for the entities Interenergo d.o.o. (for
EUR 12.0m), KelKos Energy Sh.p.k. (for EUR 1.2m) and KelaVENT Charlie SRL (for
EUR 0.8m).
The 2013 ordinance on the renewable electricity contribution charge based on the ÖSG
(Austrian Green Electricity Act) 2012 entered into force on 1 January. It sets the charges
payable by all final customers connected to the public grid by grid level for promoting
renewable electricity for the 2013 calendar year.
On the basis of the authorisation by the ÖSG 2012, the Austrian regulator E-Control
confirmed the price for guarantees of origin that the Green Electricity Settlement Agency
allocates to electricity traders based on their supply volume to final customers at EUR 1.5
per MWh.
As part of the multiple-year incentives regulation system, the new SNE-VO (system user
charge ordinance for electricity) came into effect on 1 January 2013 based on the second
regulatory period for electricity (2010 to 2013). The regulator raised the system user
charges for electricity customers of KNG-Kärnten Netz GmbH by an average of 4.0%.
The second regulatory period for natural gas commenced at the start of 2013. The
existing regulatory system will generally be continued for the second regulatory period
within the new legal framework (Austrian Gas Industry Act (GWG) 2011). Compared to
the first regulatory period, the main changes were a reduction in WACC to 6.42% and
changes in the investment and operating cost factor. The rate setting procedure for
natural gas has set the costs, targets and quantities by means of notice and charges by
ordinance effective 1 January 2013.
Accordingly, as part of the multiple-year incentives regulation system, the new GSNE-VO
(system user charge ordinance for gas) came into effect on 1 January 2013 based on the
second regulatory period for natural gas (2013 to 2017). For grid level 3 customers of
KNG-Kärnten Netz GmbH with an annual consumption of 15,000 kWh this translates into
a decrease in user charges of about 3.3%.
6.9. Related party disclosures
Related parties of KELAG Group include all non-consolidated affiliates or associates and
the controlling companies and their affiliates. Due to its position as majority shareholder,
KÄRNTNER ENERGIEHOLDING BETEILIGUNGS GMBH is a related party, as is its
Subsequent events
KELAG-Kärntner Elektrizitäts-Aktiengesellschaft
Annual report 2012 | Notes
75
owner – the state of Carinthia and RWE. The latter also qualifies as a related party on
account of its direct shareholding in KELAG. Companies that are controlled by the state
of Carinthia are also related parties. Because of its direct participation in KELAG,
VERBUND and its subsidiaries are also related parties, as is the Austrian state as the
majority shareholder of VERBUND together with its majority interests.
The parent company that prepares the consolidated financial statements for the largest
group of companies is KÄRNTNER ENERGIEHOLDING BETEILIGUNGS GMBH with its
registered offices in Klagenfurt. The consolidated financial statements are disclosed in the
commercial register of Klagenfurt regional court. The parent company that prepares the
consolidated financial statements for the smallest group of companies is Interenergo
d.o.o. with its registered offices in Ljubljana, Slovenia. The consolidated financial
statements are published with the Agency of the Republic of Slovenia for Public Legal
Records and Related Services (AJPES) in Ljubljana, Slovenia.
The members of the Board of Directors and Supervisory Board of KELAG are related
parties, as are their immediate family members.
The following transactions took place with investments accounted for using the equity
method:
Related party transactions
EUR m 2012 2011
Income statement
Revenue 4.0 4.8
Other income 0.3 0.5
Other expenses -1.4 2.5
Statement of financial position
Receivables 0.7 2.8
Liabilities 6.8 12.6
The transactions with associates mainly relate to energy procurement and supply
transactions.
Revenues from electricity trading activities with shareholders and their affiliates amounted
to about EUR 54.0m (prior year: around EUR 41.2m). Services from electricity trading
activities, subscription rights and network costs of approximately EUR 145.8m (prior year:
around EUR 91.1m) were purchased from the shareholders and their affiliates.
Furthermore, KEH-Kärntner Energieholding Beteiligungs GmbH was charged
approximately EUR 24.2m in the financial year 2012 (prior year: around EUR 17.2m) in
expenses from the tax allocation.
Business relationships
with associates
Business relationships
with shareholders and
their affiliates
KELAG-Kärntner Elektrizitäts-Aktiengesellschaft
Annual report 2012 | Notes
76
All transactions were entered into at arm‟s length conditions. The business relationships
are no different from the trade relationships with entities that are not related to the KELAG
Group.
A total of less than 10% of total revenue is recorded with all related parties in the state of
Carinthia.
Information relating to internal group matters must be eliminated and are not subject to
mandatory disclosure in the consolidated financial statements. Transactions by KELAG
with subsidiaries that are fully consolidated therefore do not have to be reported.
Dividends paid
Total
Number of
shares Per share
EUR m EUR
Dividends paid in 2012 for the financial year 2011 30.0 8,000,000 3.75
Dividends paid in 2011 for the financial year 2010 30.0 8,000,000 3.75
In the financial year 2012, the fixed remuneration of KELAG‟s Board of Directors
amounted to EUR 719k (prior year: EUR 696k), while variable remuneration totalled
EUR 296k (prior year: EUR 294k) and non-cash benefits came to EUR 35k (prior year:
EUR 34k). All of these relate to short-term benefits arising from the remuneration of
persons in key positions in the KELAG Group. Long-term benefits to the Board of
Directors in the form of pensions and severance payments of about EUR 428k (prior
year: around EUR 361k) were taken into account.
Members of KELAG‟s Supervisory Board received no compensation.
The KELAG Group does not have any additional material related party transactions.
The KELAG Group is jointly audited by the companies Ernst & Young
Wirtschaftsprüfungsgesellschaft m.b.H. and MOORE STEPHENS ALPEN ADRIA
Wirtschaftsprüfungs GmbH. Expenses of around EUR 264k (prior year: approximately
EUR 230k) were incurred for each of the group auditors in relation to the audit of the
annual financial statements. In addition, expenses of around EUR 198k (prior year:
approximately EUR 36k) were charged by the audit firms for advisory services.
Dividends paid
Notes on corporate
boards
Audit fees
KELAG-Kärntner Elektrizitäts-Aktiengesellschaft
Annual report 2012 | Notes
77
Audit fees
EUR k
MOORE STEPHENS
ALPEN ADRIA
Wirtschaftsprüfungs
GmbH
Ernst & Young
Wirtschaftsprüfungsge
sellschaft m.b.H.
Statutory audit
KELAG-Kärntner Elektrizitäts-Aktiengesellschaft 70 77
KNG - Kärnten Netz GmbH 26 27
KI-KELAG International GmbH 9 9
KELAG Wärme GmbH 15 15
KELAG Finanzierungsvermittlungs GmbH 3 3
Kärntner Restmüllverwertungs GmbH 6 0
Wärmeversorgung Arnoldstein Errichtungs- und
Betriebsgesellschaft mbH 4 0
Other services
KELAG-Kärntner Elektrizitäts-Aktiengesellschaft 164 35
296 166
The Board of Directors consisted of the following members during the reporting year:
Univ.-Prof. Dipl.-Ing. Dr. Hermann Egger
Dipl.-Ing. Harald Kogler
Dipl.-Kfm. Armin Wiersma
Members of the Board of
Directors
KELAG-Kärntner Elektrizitäts-Aktiengesellschaft
Annual report 2012 | Notes
78
The Supervisory Board consisted of the following members during the reporting year:
Mag. Dr. Günther Pöschl
Chairman
Dr. Rolf Martin Schmitz
First deputy chairman
Ing. Willibald Dörflinger
Dr. Thomas Glimpel
Mag. Leopold Rohrer
Dr. Joachim Schneider
Dr. Johann Sereinig
Dkfm. Dr. Heinz Taferner
Dr. Bernd Widera
Dipl.-Ing. Jochen Ziegenfuß
The following persons were delegated by the works council in accordance with Sec. 110
ArbVG (Austrian Labour Constitution Act):
Gerald Loidl
Second deputy chairman
Gerd Altersberger
Herwig Kircher (until 19 June 2012)
Mag. Petra Krainer (since19 June 2012)
Ing. Helmut Polsinger
Johann Prentner
Members of the
Supervisory Board
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Annual report 2012 | Notes
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These consolidated financial statements were prepared by the Board of Directors on the
date indicated. The consolidated financial statements of KELAG-Kärntner Elektrizitäts-
Aktiengesellschaft will be submitted to the Supervisory Board for review and approval on
22 March 2013. The Board of Directors assures that to the best of its knowledge the
annual financial statements prepared in accordance with the relevant financial reporting
standards present a fair view of the KELAG Group‟s financial position and performance.
Klagenfurt am Wörthersee, 18 February 2013
The Board of Directors:
Univ.-Prof. Dipl.-Ing. Dr. Hermann Egger e. h.
Spokesperson of the Board
Dipl.-Ing. Harald Kogler e. h.
Member of the Board
Dipl.-Kfm. Armin Wiersma e. h.
Member of the Board
Approval of the 2012
consolidated financial
statements for
publication
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I.b EXHIBIT
Statement of changes in non-current assets
EUR k
Intangible
assets
Developed
land and
buildings
Un-
developed
land
Plant and
machinery
Other
property,
plant and
equipment
Pre-
payments,
assets under
construction
and projects
Total
property,
plant and
equipment
Cost as of 1 January 2011 380,043 144,306 4,779 1,634,109 122,491 88,559 1,994,244
Additions 60,706 10,061 0 63,562 8,968 29,844 112,435
Changes in the scope of consolidation 78 2,548 0 13,317 4,252 2,580 22,697
Disposals -294 -211 0 -12,789 -2,084 -2,031 -17,115
Reclassifications 2 22,698 0 43,666 299 -66,665 -2
Exchange differences (net) 0 -1 0 0 0 -140 -141
As of 31 December 2011 440,536 179,401 4,779 1,741,865 133,927 52,147 2,112,118
Accumulated amortisation, depreciation and impairment
as of 1 January 2011 141,213 85,274 0 1,044,769 76,271 4,757 1,211,070
Addition in 2011 *) 14,100 4,881 0 37,159 7,243 0 49,283
Reversal of impairment losses in 2011 0 0 0 -196 0 -296 -492
Changes in the scope of consolidation 25 754 0 4,689 255 0 5,699
Disposals in 2011 -233 -185 0 -9,745 -1,966 0 -11,897
Reclassifications 1 9,164 0 -9,177 23 -11 -1
As of 31 December 2011 155,106 99,889 0 1,067,498 81,826 4,450 1,253,662
Net carrying amount as of 31 December 2011 285,430 79,512 4,779 674,367 52,100 47,697 858,455
Cost as of 1 January 2012 440,536 179,401 4,779 1,741,865 133,927 52,147 2,112,118
Additions 38,391 6,171 63 59,296 8,314 36,396 110,240
Changes in the scope of consolidation 16,984 14,870 315 48,383 15,065 2,211 80,845
Disposals -147 -241 -2 -4,782 -4,068 -843 -9,936
Reclassifications 905 4,697 -7 30,153 -3,937 -31,811 -905
Exchange differences (net) 1 -10 0 -6 -17 -588 -621
As of 31 December 2012 496,671 204,888 5,148 1,874,909 149,283 57,512 2,291,740
Accumulated amortisation, depreciation and impairment
as of 1 January 2012 155,106 99,889 0 1,067,498 81,826 4,450 1,253,662
Addition in 2012 41,764 4,679 0 40,915 7,935 0 53,529
Reversal of impairment losses in 2012 0 0 0 0 0 0 0
Changes in the scope of consolidation 838 3,638 0 18,422 4,855 0 26,915
Disposals in 2012 -147 -138 0 -3,958 -3,617 0 -7,713
Reclassifications 1 -52 0 51 0 0 -1
Exchange differences (net) 0 0 0 2 -1 0 1
As of 31 December 2012 197,562 108,016 0 1,122,930 90,998 4,450 1,326,393
Net carrying amount as of 31 December 2012 299,109 96,872 5,148 751,979 58,285 53,062 965,347
*) In the income statement of the KELAG Group, the impairments were reduced by around EUR 0.3m due to the utilisation of a provision.
KELAG-Kärntner Elektrizitäts-Aktiengesellschaft
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Intangible assets in the statement of financial position also comprise goodwill from
consolidation entries of around EUR 3.8m (prior year: approximately EUR 4.3m).
Reference is made to Note 10 “Goodwill” for further details.
In accordance with IAS 23, borrowing costs of around EUR 4.6m (prior year: around
EUR 4.2m) were capitalised in intangible assets and property, plant and equipment in
these consolidated financial statements for the financial year 2012; this equates to a
capitalisation rate of 4.5% for the first half-year and 4.0% for the second half of 2012
(prior year for the entire reporting period: 4.5%).
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II. GROUP MANAGEMENT REPORT
1. Company and environment
Economic environment
The slowdown in global economic growth which started in 2011 continued throughout
2012. The subdued demand in the industrialised countries, in the eurozone and the US in
particular, reduced global trade and led to a decrease in exports in the emerging
countries of Asia, Latin America, Africa and the Middle East, which had most recently
been the drivers of global economic growth. International financial markets were
characterised by the downturn in the global economy as well as a renewed tightening of
the sovereign debt crisis in the eurozone. Global economic growth slowed from 3.9% in
2011 to 3.1% in 2012.
The loss of trust in public finances and the financial system as well as dramatic
consolidation programmes placed a burden on economic development in many member
states of the European Union in 2012. Exceptionally high risk premiums on the secondary
market for government bonds reflected the deteriorating financing terms and conditions
for southern European banks and governments. By contrast, the Netherlands, Finland,
Luxembourg, Austria and in particular Germany benefited from shifts in capital towards
safe havens, which reduced their financing costs. The interest spread between the euro
countries did not decrease until the ECB intervened in the summer months. There were
considerable differences in economic development within the eurozone in 2012. While
there was a continuing downturn in economic output in crisis states such as Spain,
Portugal, Italy and Cyprus, other euro countries, including Germany, still recorded positive
growth rates. The growth rate within the EU for 2012 was most recently reported at -0.2%
after +1.5% in the prior year.
Austria‟s economy has to date been able to escape the recession in the eurozone. In the
first quarter of 2012, the domestic economy expanded strongly once again, and then
stagnated over the course of the rest of the year. With estimated economic growth of
0.6% for 2012, Austria is expected to have fallen clearly below the prior-year value of
2.7%, yet seen a significantly higher rate than the eurozone (-0.4%).
The labour market recorded an above-average increase in employment rates in 2012
compared to the long-term trend. However, the economic development was also reflected
here. According to the EU definition, the unemployment level in Austria increased from
4.2% in 2011 to 4.4%. By comparison to the other EU member states, Austria still has the
lowest unemployment rate. Particularly the countries that are severely affected by the
crisis, such as Greece, Spain or Ireland, face high double-digit rates of unemployment.
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At the beginning of July, in a further step the ECB lowered the key interest rates by a
quarter of a percentage point to 0.75%. Since then interest rates have been at a historical
low. The inflation rate in Austria averaged 2.4% in 2012.
Economic development is expected to stay subdued in the near future. At 1.0%, the
present forecast for economic growth in Austria in 2013 is slightly higher than the 2012
level. A further increase in the unemployment rate is expected on the labour market in
2013.
Conditions in the energy sector
Electricity consumption in Austria of around 69.3 TWh increased moderately by 1.0% in
2012. Austria‟s natural gas consumption fell by 4.5% compared to 2011 to around 95.9
TWh.
The decline in global economic growth was also reflected in the price development on the
international markets for raw materials. With regard to crude oil, however, the economic
impact was outweighed by geopolitical factors. Tensions in Iran on account of its nuclear
programme and the civil war in Syria gave rise to concerns of declining oil supply, driving
prices upwards in the first and third quarter. In 2012, Brent oil traded at an average of
USD 111.5 per barrel, slightly up by 0.7% on the annual average for 2011.
Since a large volume of gas imports into continental Europe are still governed by oil-
indexed contracts, the development of gas prices tends to track oil prices with a time lag.
Since 2010, a small portion of the supply volumes governed by these contracts are
sourced based on the forward prices quoted on the central European gas market. Over
the past several years, trade in freely available gas volumes has become more
prominent. These gas volumes, which are not indexed to the price of oil, trade at lower
prices, as a result of which gas markets are drifting apart. Annual average prices for the
constant supply of natural gas on the German spot market rose from EUR 22.8 per MWh
in 2011 to EUR 25.3 per MWh in 2012. The average forward price for the respective
following year rose less by comparison, up from EUR 26.3 per MWh in 2011 to
EUR 27.0 per MWh in 2012.
The price of hard coal fell considerably due, on the one hand, to weaker demand from
Europe, India and China and, on the other, to excess supply. This was primarily
attributable to coal exports from the USA, where coal is increasingly being substituted by
cheaper shale gas. The forward rates quoted on the European Energy Exchange (EEX)
averaged USD 103.4 per metric ton in the past calendar year. This corresponds to a
decrease of 16.5% compared to 2011.
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The average price of CO2 emission allowances was halved from EUR 13.8 per metric ton
in 2011 to EUR 7.6 per metric ton in 2012. On the one hand, this substantial fall in price is
primarily due to the sovereign debt crisis in the eurozone and the economic slowdown
this has triggered. On the other, the increasing volume of electricity generated from
renewable sources means that fossil-fired power stations are used less, and the demand
for emission allowances is consequently lower. The EU is pursuing initiatives to reduce
supply in order to raise prices for CO2 emission allowances.
As a result of the fall in prices for coal and CO2 emission allowances and the sharp rise in
feed-in volumes from renewable energy sources, prices on European electricity
exchanges dropped considerably. Base-load electricity on the EEX averaged EUR 42.6
per MWh in spot trading over the reporting period, compared to EUR 53.4 per MWh for
peak electricity. Compared to the financial year 2011, this corresponds to a decrease of
EUR 8.5 per MWh or 16.6% for base load and EUR 7.7 per MWh or 12.6% for peak load.
Prices have also fallen considerably on forward markets. In the reporting period, forward
contracts for the following year (2013 forwards) averaged EUR 49.3 per MWh for base-
load and EUR 60.9 per MWh for peak-load electricity. Compared to the forward for 2012
in the financial year 2011, this corresponds to a decrease of EUR 7.1 per MWh or 12.6%
for base load and EUR 8.5 per MWh or 12.3% for peak load.
Relative price development on wholesale markets
KELAG pursues a long-term sourcing and marketing strategy. This means that a large
portion of the energy production volume is gradually marketed for subsequent years. At
the same time, energy requirements are likewise sourced in advance. KELAG‟s
marketing and sourcing policy levels out short-term price fluctuations and thus helps
improve planning certainty and in turn the stability of earnings. Nevertheless, falling
0
0,5
1
1,5
2
2,5
3
3,5
02.01.2007 02.01.2008 02.01.2009 02.01.2010 02.01.2011 02.01.2012
Electricity
Oil
Coal
2007 2008 2009 2010 2012 2011
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electricity prices on wholesale markets mean that the profitability of our generation
capacity is in decline.
In the past financial year, the Heating division benefited from colder weather conditions
compared to the long-term average.
Consequences of the legal framework for energy
As part of the 18th UN Climate Change Conference in Qatar in December 2012,
fundamental decisions were made for the future of international climate change policy. In
addition to extending the Kyoto Protocol to 2020, resolutions covered rules on financing
and compensation, promising developing countries an annual USD 200b as of 2020 for
climate protection and compensation for losses due to climate change. Only six countries
besides the EU have committed to the agreement to extend the Kyoto Protocol. A farther-
reaching global climate agreement with the commitment of developing countries as well
as the US, Canada, Russia and Japan is to be developed by 2015 to take effect from
2020.
For years, KELAG has set great store by climate protection and energy efficiency. The
company‟s entrepreneurial alignment is anchored in the 20-20-20 energy and climate
policy targets of the European Union. Under these targets, the EU‟s energy consumption
and CO2 emissions have to be reduced by 20% by 2020. The EU plans to cut
greenhouse emissions by between 80% and 95% by 2050 compared to 1990 levels. The
aim is to raise the share of renewables in the EU‟s energy mix to 20% by 2020. These
European targets were broken down into national targets for each individual member
state. As a result, Austria has to cut its energy consumption by 20% by 2020 and build up
the share of renewables in its total consumption from 23.3% in 2005 to 34%. In 2011,
Austria had already reached a share of 31.0%.
Austria is pursuing the European targets with its national energy strategy which is set on
three pillars: increase energy efficiency, build up renewables and secure energy supply.
Based on the European and national energy policy targets, KELAG has adopted a value-
driven growth and innovation strategy focused on expanding energy production capacity
based on renewables in Austria and abroad while raising energy efficiency. Preconditions
for this are a stable regulatory framework that eases investment in renewables as well as
the expansion and renewal of grids. Other changes to the law that will affect our business
operations also entered into force in 2012.
The new ÖSG (Austrian Green Electricity Act) entered into effect on 1 July 2012. The
main amendments concern the substantial step-up of the annual subsidy increase and
the changed mechanism for the collection of subsidies. The cost of green electricity is
Commitment to
sustainability
Austria‟s national energy
strategy
Austrian Green
Electricity Act entered
into force
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now mostly billed to final customers via network operators rather than through energy
traders.
On the basis of the new ÖSG, the Austrian regulator E-Control set the price for
guarantees of origin for subsidised quantities of green electricity at EUR 1.5 per MWh.
The ÖSG contains the relevant authorisation for E-Control to set the prices annually.
The new Austrian 2012 ordinance governing feed-in tariffs for green electricity entered
into effect in mid-September. It governs the feed-in tariffs for electricity generated from
renewable facilities with retroactive effect as of the beginning of July 2012 through to the
end of 2013.
The subsidy programme for the production of green electricity in Austria provides for an
annual adjustment of the transfer prices between electricity traders and Abwicklungsstelle
für Ökostrom AG (the clearing and settlement company for green electricity). The Austrian
transfer price ordinance 2012 reduced this clearing price as of 1 January 2012, especially
for electricity from small hydroelectric power plants. The Austrian transfer price ordinance
went out of force upon entry in effect of the 2012 ordinance on the renewable electricity
contribution charge as of 1 July 2012.
The amendment to the UVPG came into force at the beginning of August. This not only
enhanced the participation rights of environmental protection organisations, but also
introduced measures to accelerate the determination process. With respect to
hydroelectric power, the regulations governing small-scale hydropower projects were
revised and an exemption was introduced for efficiency enhancement measures for
existing hydropower projects. Small-scale hydropower plants or wind turbines below
defined thresholds are exempt from the duty to have environmental impact assessments
performed.
At the end of November, the Carinthian state parliament adopted the amendment of the
Carinthian Electricity Act. This amendment introduces a preliminary inspection duty for
underground cabling when installing electrical systems.
At the end of April 2012, the Austrian Federal Ministry of the Economy, Family and Youth
issued the IME-VO (smart meter rollout ordinance). This ordinance provides for at least
10% of the metering points connected to the grid to be converted to smart meters in
Austria by the end of 2015, at least 70% by the end of 2017 and, if technically feasible, at
least 95% by the end of 2019.
As part of the multiple-year incentives regulation system, the new SNE-VO (Austrian
system user charges ordinance) for electricity came into effect on 1 January 2012 based
on the second regulatory period for electricity (2010 to 2013). The regulator raised the
system user charges for electricity customers of KNG-Kärnten Netz GmbH by an average
of 2.8%.
Green electricity transfer
prices 2012
Amendment to the
UVPG (Austrian
Environmental Impact
Assessment Act)
Amendment to the
Carinthian Electricity Act
Smart metering
Regulator‟s ordinances
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Also on 1 January 2012, the new SNE-VO for natural gas came into effect based on the
multiple-year incentives regulation system for natural gas (2008 to 2012). For retail and
business customers with an annual consumption of 15,000 kWh this translates into a
decrease in user changes of about 6.8%.
Based on the Energy Efficiency Directive adopted by the EU parliament in September, a
draft appraisal was presented at the end of December on the federal government‟s
energy efficiency package. This package is intended to drive forward the implementation
of measures to increase energy efficiency both at energy supply companies and
businesses. In addition, some of the changes relate to switching supplier, basic supply by
grid operators and stricter electricity labelling regulations.
Talks have already been initiated between Österreichs Energie and E-Control as regards
the design of the third regulatory period for electricity grids beginning on 1 January 2014.
Increase in energy
efficiency
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2. Strategic alignment
The KELAG Group pursues a strategy of value-driven growth and an innovation strategy
based on renewables. The Group‟s strategic alignment was confirmed in 2012 in the
course of the related annual review. The key finding of the strategy review was that,
backed by KELAG‟s solid financial position and performance, it is possible to hold on to
the existing growth and innovation strategy.
Domestic and international growth
KELAG is focusing its domestic growth efforts on building up hydroelectric power
generation capacity in Carinthia and the nationwide heating and bioenergy business.
2012 was the first full operating year of the new Feldsee pumped storage power station at
Kraftwerksgruppe Fragrant and of the new storage pump at the Koralpe power station in
Lavamünd.
KELAG continued to invest in the construction of new power stations in Carinthia in 2012.
The construction phase started at the Tröpolach power station. Work on the joint project
Reißeck II in collaboration with VERBUND Hydro Power AG is progressing according to
plan. This project adds an additional 430 MW of generation and pumping capacity to the
existing Reißeck/Kreuzeck and Malta power station groups.
At an international level, KELAG studies the development and acquisition of selected
hydroelectric, wind and solar power projects. A key company in this regard is the wholly
Growth
Domestic
International
Focus: expansion of hydroelectric activities in Carinthia
Wind power in Austria
Biomass in Austria
Acquiring new customers
Selective growth in South-East Europe for smaller hydroelectric and wind power projects
Innovation
Positioning as a “full-service - provider for renewables,
energy efficiency and new technologies”
Energy consulting
Photovoltaic pilot projects
E - mobility
Smart grids / smart meters / smart home
E - business
Improved positioning as a “green company”
Value management
Value-oriented corporate management as an overarching objective
Securing…
solid equity and an A rating
appropriate returns and cost efficiency
value added for Carinthia as a centre for business and energy
Corporate strategy
Review of group
strategy
Expanding hydroelectric
power and bioenergy in
Austria
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owned subsidiary Interenergo d.o.o., which is active in electricity trading and the
development of hydroelectric power station projects in the former Yugoslavian states.
With KELAG Trading‟s support, it was already possible to grow the electricity trading
volume to just under 4 billion kWh in 2012. At the beginning of the year, KELAG had four
hydroelectric power stations operating in Serbia, Bosnia and Kosovo. One further 5 MW
hydroelectric power station went online in the summer of 2012 in Bosnia-Herzegovina. In
addition, three hydroelectric power stations with a total capacity of 3 MW were acquired.
Another two small-scale hydroelectric power stations in Kosovo with a total of 20 MW are
under construction.
KELAG has a 10 MW wind farm in operation in Balchik on the Bulgarian Black Sea coast.
Another wind farm on the Romanian Black Sea coast with 14 MW went into operation in
2012. Two further wind farms in Romania with a total capacity of 24 MW are under
construction. The implementation of further wind power projects is in preparation.
In the field of photovoltaics, KELAG commissioned two small-scale projects in Slovenia
with a total capacity of 2 MW in 2012.
Innovation
Energy consulting
The KELAG Group is driving forward its positioning as a full-service provider of
renewables and energy efficiency. Owing to the rising interest of customers in energy-
saving measures, KELAG offers attractive industry-specific energy services such as
energy monitoring for industry and municipalities as well as professional energy
consulting services for private and business customers. As an innovative energy service
provider, KELAG develops forward-looking products. It sells its service packages for
industry and commercial customers via market partners throughout Austria. These are
aimed at affording customers long-term energy efficiency and cost savings. With
SmartMonitoring, KELAG launched a new product in 2013 for industrial companies to
permanently monitor their own energy needs. Under the SmartHome Austria brand,
KELAG sells an innovative home management system, which offers not only increased
energy efficiency but also comfort and safety in households. Private and business
customers can determine their energy-saving potential themselves using the interactive
energy consultant (www.kelag.at). All advice provided by KELAG‟s energy consulting
team centres on customer benefits and responsibility for climate protection and energy
efficiency.
Full-service provider for
renewables
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Smart metering
The smart metering pilot project launched by KNG-Kärnten Netz GmbH in Ferlach in the
2009 financial year was continued and brought to a close in 2012. The purpose of the
project, which was to achieve a consistent communication infrastructure currently
encompassing 361 metering points to the SAP/IS-U settlement system, was achieved in
full. A total of 270 pilot customers are optimising their consumption patterns and making a
more conscious use of electricity. The pilot project has produced significant findings on
the technical options of different transmission channels. Know-how with respect to future
processes and the organisational measures required support the implementation of the
first steps for the introduction of smart meters required by law.
E-mobility
KELAG is also demonstrating its innovative power in its activities in the field of e-mobility.
Electric cars are seen as an energy-efficient alternative to combustion engine vehicles in
the medium to long term. To this extent, KELAG views e-mobility as a very important topic
for the future. Under the cooperation agreement with RWE, KELAG is installing a modern,
smart public charging infrastructure. In addition, KELAG is in charge of the sale of RWE
charging infrastructure in Austria and Slovenia. KELAG offers charging infrastructure
throughout Austria for dealerships selling and buyers of Renault electric vehicles. In
addition, KELAG is deeply involved in raising awareness of the topic of electromobility
among the general public.
Photovoltaic power
KELAG is engaged in future-oriented technologies for the production of electricity. As part
of a pilot project, it has set up five local photovoltaic facilities in the district of St. Veit an
der Glan with a total output of around 450 kWp and a module surface of about 3,100 m2.
The project was completed at the end of 2012 and serves primarily research and
development as well as demonstration purposes. The heterogeneous structure and
orientation of the power station locations and the use of different technologies provides
plant configurations that make it possible to draw important conclusions about the
performance of the facilities and their long-term behaviour patterns. KNG-Kärnten Netz
GmbH uses the research facilities erected by KELAG to gather experience for the low-
voltage grid in terms of the integration and operational use of local generation facilities.
Further photovoltaics projects in the form of public participation models are at the
preparation stage in Carinthia.
Smart metering
Installation of e-charging
stations
Photovoltaic power
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E-business
E-business solutions mean that KELAG customers can benefit from modern services
based on the latest technology. The user friendliness and value added of the online
applications available on KELAG‟s website are continually checked and improved.
Renowned benchmarking studies have repeatedly testified to its high service quality on
the internet. KELAG ranked first in the most recent survey of all energy supply companies
in Austria. In the benchmarking of the 100 largest electricity providers in German-
speaking countries carried out in 2012, KELAG came third.
Since the end of 2012, KELAG has been operating an online store of its own for the sale
of energy efficiency products under the SmartHome Austria brand. A specially developed
portal displays the contents of the “Generation climate protection” campaign in interactive
form. For smart phone users, KELAG provides special apps online, such as a filling
station finder, the PlusClub events calendar or the energy diary. Acceptance of these
online services is very high – some 4,200 online registrations in 2012 show that the
majority of new energy customers in the B2C and B2B sectors enter into their contracts
online.
IT projects
In the financial year 2012, KELAG‟s IT implemented a range of business process support
projects. In preparation for ISO certification in terms of IT security, the IT successfully
passed test audits and developed an information security management system. As part of
the Green IT initiative, emissions and electricity consumption are being reduced, as are
resources used and IT operating costs for central IT facilities. The company-wide SAP
system was adapted to future requirements regarding the electricity switching ordinance
2012 and smart metering processes.
Value management
The overarching objective of the KELAG Group‟s approved strategy focuses on value-
based corporate governance. Creating value for investors, customers and employees is
the benchmark for all activities at KELAG.
Our corporate activities are planned, managed and controlled based on a value-driven
management system. Taking the strategic objectives as a starting point, value-based
operational measures are derived and implemented.
Product variety in the
internet
Value-based
management
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Value added constitutes the central target and indicator in this context. It indicates the
growth in the value of the company and is determined by comparing the return on capital
employed (ROCE) and the cost of capital. Value added is generated when ROCE
exceeds the cost weighted average cost of capital.
As an operating yield indicator, ROCE reflects the ratio of operating result to capital
employed. The cost of capital reflects the minimum interest required for value-based
corporate governance.
Investment in growth is measured based on clear return requirements. Additional value-
driven criteria such as a solid equity ratio and a suitable rating have to be observed.
In the financial year 2012, Standard & Poor‟s once again confirmed KELAG‟s rating of
“A/stable”. This favourable rating is necessary to obtain the best possible terms on the
capital market, with which the objective of an optimal financing structure can be reached.
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3. Financial position and performance
KELAG was able to defend its good competitive position in the energy market. The
company‟s financial position and performance was strengthened further. In the financial
year 2012, the Group generated consolidated net profit of about EUR 96.3m.
Consolidated income statement
Condensed version in EUR m
1/1 –
31/12/2012
1/1 –
31/12/2011
Revenue, gross 2,007.0 1,660.3
Revenue, net 1,004.6 954.6
Operating result 97.8 97.8
Financial and investment result 13.5 15.8
Consolidated net profit 96.3 91.9
Earnings per share in EUR 12.0 11.5
The high increase in gross revenue is principally attributable to an increased trading
volume. However, even without the trading volume, an increase in revenue was achieved
due to new business and higher water levels.
Revenue, net 1/1 – 31/12/2012 1/1 – 31/12/2011
EUR m % EUR m %
Electricity 760.5 75.7 737.2 77.3
Heat 146.4 14.6 134.0 14.0
Natural gas 84.7 8.4 80.1 8.4
Other 13.0 1.3 3.0 0.3
1,004.6 100.0 954.3 100.0
The entire personnel expenses for the financial year 2012 are above the prior-year level
as a result of the decision to extend the phased retirement model and the associated
provisions of EUR 147.6m recognised.
Cost of materials increased to EUR 659.1m, in line with revenue growth adjusted for
trading volume, on account of the new business generated.
Amortisation, depreciation and impairment came to about EUR 97.0m and, among other
factors, reflect the intensive investment activities of the last few years. Due to changed
market conditions, an impairment loss had to be recognised on a pumped storage power
station.
Other operating expenses of about EUR 74.3m are above the prior-year level, primarily
due to required additions to provisions.
Improved financial
position and
performance
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The financial and investment result of about EUR 13.5m declined compared to the prior
year mainly due to a lower dividend payment by VERBUND Hydro Power AG.
No financial transactions exposed to risks, such as cross-border leasing, were entered
into by the KELAG Group. Consequently, it was not necessary to recognise any valuation
allowances on such transactions.
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4. Business divisions
4.1. Electricity/Gas
Electricity Production
KELAG is one of the largest Austrian producers of electricity from hydroelectric power. In
addition, KELAG has activities in the wind power segment. Pilot projects are being
realised in the field of photovoltaic power. With a total of 75 of its own power stations and
drawing on supply rights from third-party power stations, KELAG has a total power station
capacity of 1,070 MW and a total production volume of about 2,906 million kWh in an
average year. KELAG‟s largest production plants are located in the Fragant power station
group. The Feldsee pumped storage power station has seen full operation for more than
one year. Likewise Koralpe power station near Lavamünd completed its first full operating
year as a pumped storage facility.
Work started on the construction of Tröpolach hydroelectric power station with a capacity
of around 8 MW in the financial year 2012. The power station is being realised in
cooperation with a private partner. Further small-scale hydroelectric power projects are at
the approval stage.
KELAG brought the “Solar City St. Veit” pilot project to a close in December when the fifth
facility went online. In total the project has a total module surface of about 3,100 m² and
an output of around 450 kWp. In addition, KELAG commissioned two photovoltaic
facilities in Slovenia with an annual feed-in volume of some 2 GWh.
At present, KELAG‟s largest single investment is the Reißeck II joint project in
collaboration with VERBUND Hydro Power AG. Construction work began in the summer
of 2010. The existing Reißeck/Kreuzeck and Malta power station groups are being
upgraded by an additional 430 MW of generation and pumping output. Start of operation
is scheduled for 2014. Until then, KELAG will invest about EUR 191m for its share of 181
MW generation output and 137 MW pumping output. The investment in this power station
will raise KELAG‟s annual production by 415 million kWh.
In addition to the new construction activities, KELAG undertook further replacement
investments and maintenance measures in 2012 to ensure the availability and supply
reliability of the existing generation facilities. Extensive renewal measures were
implemented on the generator of Wurten 4 machine and modernisation work was
performed on the turbine and ball valve. With respect to the storage facilities, the surface
sealing was completely overhauled at Wölla storage facility. After the Innerfragrant
storage facility had been emptied, KELAG performed an extensive inspection of the
facility.
Photovoltaic power
Pumped storage power
station Reißeck II
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KELAG continued to pursue its activities abroad with success. In addition to the existing
small-scale hydroelectric power stations in operation in Serbia, Bosnia and in Kosovo, the
Novakovici small-scale hydroelectric power station with a capacity of around 5 MW in
Bosnia-Herzegovina was commissioned once construction was completed in June. The
ground-breaking ceremony was held for two further small-scale hydroelectric power
stations at the site of the existing Lumbardhi power station in Kosovo. Together with the
additionally planned Lumbardhi II power station, the power station chain is planned to
generate some 115 GWh of electricity per year. In December, the project Rosewood was
closed in Bosnia-Herzegovina, involving the acquisition of three operating power stations
with an annual generation capacity in excess of 10 GWh.
In the Dobrogea region on the Romanian Black Sea coast, KELAG built Mihai Viteazu
wind farm with an installed output of 14 MW. Since completion of the commissioning
process, this wind farm has been in full operation. Together with Balchik wind farm,
KELAG has a wind power generation capacity of 24 MW in operation with an expected
annual energy yield of 62 GWh. In the second half of the year 2012, construction work
started on three additional wind power projects in Romania with a total output of 24 MW.
Further hydroelectric and wind power projects are being developed and expected to be
implemented in the near future.
Energy Trading and Distribution
Electricity production
The KELAG Group‟s electricity production increased in the financial year 2012 by
4,610 million kWh or 21.4% to 26,129 million kWh compared to 2011. Besides an
increased trading volume, this is attributable to a higher level of electricity generated by
the Group itself, which rose by 634 million kWh or 27.4% to 2,946 million kWh. This was
driven by the higher water levels, with a water flow quota of 103.4% compared to 88.5%
in 2011. The volume of purchased electricity rose by 3,975 million kWh or 20.7% to
23,183 million kWh.
Electricity sales
The external electricity sales of the KELAG Group increased to 25,242 million kWh. The
change compared to the prior year corresponds to an increase of 4,320 million kWh or
20.6%.
The unit sales to final customers of 4,102 million kWh was at prior-year level. Thanks to
consistent measures to win new customers, KELAG recorded an absolute addition of
Expansion of
hydroelectric generation
capacity abroad
Growth in wind turbines
Increase in electricity
unit sales
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some 1,800 retail and business customers. About half of private customer unit sales in
2012 were allocable to industry customers outside Carinthia.
By expanding trading frequency, KELAG was able to make optimal use of the volatility of
wholesale prices in electricity trading. Reaching a total of 20,969 million kWh the trading
volume was up 4,318 million kWh or 25.9% compared to 2011.
KELAG holds a solid competitive positioning in all customer segments. KELAG
customers value in particular the responsible use of natural resources, employees‟ high
competence and the reliability of supply.
Thanks to targeted customer retention measures, KELAG was able to further increase
the high level of customer loyalty. For instance, the number of PlusClub members was
increased by about 3% to about 35,000 households. The successful events series for
industry customers, KELAG Business Circle, was continued in the financial year 2012
with events in Graz, Linz, Carinthia and Vienna.
Customers likewise value KELAG‟s commitment to the topics of climate protection and
energy efficiency. Apart from supplying electricity from renewable resources, KELAG has
a core competence in the field of energy consulting. A manifestation of the keen customer
interest in this area is the fact that about 7,000 energy consulting services were rendered
in 2012, resulting in an annual savings potential of about 25 million kWh or 5,300 metric
tons of CO2. This is equivalent to the heating requirements of more than 1,400 detached
houses. These savings will have a sustained impact and ease the long-term burden on
the environment. Moreover, additional savings will be made each year.
In the area of heat pumps, KELAG acquired contracts for some 800 new installations in
2012. In total, this brought the number of heat pump customers up to around 9,000. In
this context, in partnership with “power partners” – selected technicians, electricians and
manufacturers – KELAG offers retail and business customers financing for heating,
photovoltaics and energy systems.
As a special service, KELAG organised energy days for municipalities at which residents
received competent advice on a range of topics from planning of heating systems through
to the financial assistance programmes available. In addition, 103 municipalities in
Carinthia have partnered with KELAG‟s energy consulting team and offer KELAG‟s
municipal energy consulting package to all residents.
With EnergieMonitoring, a special offer for industry customers and municipalities,
potential for cutting operating and maintenance costs can be analysed. In the key
customer segment, more than 50% of KELAG‟s energy consulting services are already
provided outside of Carinthia. Via its own online store, KELAG sells products under the
SmartHome Austria brand to improve energy efficiency as well as comfort and safety in
households.
Defended strong
competitive position
Commitment to climate
protection and energy
efficiency
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The survey conducted in 2012 among energy consulting customers once again confirmed
the high quality of consulting. 98% of all participants awarded KELAG energy consulting
services top marks and would recommend them.
In addition, KELAG energy consulting offered premium service quality on the internet.
The online energy advisor includes a calculator that allows a comparison of costs and
emissions of heating systems. Some 13,000 visitors were recorded by this service offered
by KELAG energy consulting in 2012.
KELAG‟s range of products and services is subject to ongoing expansion and innovative
and service-driven realignment to make sure that it always meets customers‟ needs.
Gas sourced
The volume of gas sourced increased by 1,840 million kWh or 27.7% to 8,478 million
kWh compared to the prior year. The increase in the amount sourced is primarily
attributable to the increase in the volume of gas trading transactions. Most of the gas was
sourced using long-term supply agreements and via trading partners on the free market.
Seasonal consumption fluctuations were levelled out using gas storage facilities.
Gas sales
The group-wide unit sales of gas rose by 2,148 million kWh or 34.6% to a total of 8,355
million kWh. This increase in unit sales is chiefly a consequence of the increased gas
trading activities of 5,839 million kWh.
In the retail and business customers sector, the number of customers rose by around
1,200 through attractive pricing. An increase in volume was recorded with key customers.
KELAG‟s unit sales of gas to final customers outside of Carinthia were already
considerably higher than 50%.
4.2. Electricity and Natural Gas Grid
As an operator of distribution grids for electricity and natural gas in Carinthia, KNG-
Kärnten Netz GmbH is tasked with providing non-discriminatory access to the grid
infrastructure to all customers and energy suppliers. The high-performance grid
infrastructure has to be functional around the clock, 365 days a year. KNG-Kärnten Netz
GmbH main tasks include managing operations, expanding the distribution grids for
Increased gas trading
activities
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electricity and gas in line with requirements, ensuring necessary maintenance and
providing efficient repair management.
Extensive investments in the medium- and low-voltage grids over the financial year 2012
were aimed at continuing to guarantee customers in Carinthia the premium quality of
electricity supply to which they are accustomed. To secure future electricity supply in the
Villach region, the approval process for the Villach South 220/110 kV transformer
substation was continued. To further secure electricity supplies for the company Infineon,
KNG-Kärnten Netz GmbH built a new 110/20 kV transformer substation in Auen and
commissioned it in June.
Further focal points were the renewal of the 110/20 kV switchgear installed in the
Innerfragant transformer substation, construction of the new 20 kV load dispatch centres
in St. Michael ob Bleiburg, Goldeck, Völkermarkt Industriepark and Moosburg as well as
renewal and expansion of the 20 kV switchgear at UW Bleiburg. In addition, work started
on renewing the 110 kV switchgear at UW Landskron. In total, the KELAG Group invested
EUR 58.0m in grid facilities in the financial year 2012.
The ÖSG (Austrian Green Electricity Act) 2012 entered into force on 1 July 2012. The
annual subsidy increase for new facilities in Austria rose from EUR 21m to EUR 50m. In
future, grid operators will have to collect not only the flat-rate green electricity charge but
also the green electricity contribution charge. The green electricity contribution charge is
set as a fixed mark-up on the grid user and grid loss charge for all grid levels.
Electricity and natural gas grid sales
The electricity grid sales of KNG-Kärnten Netz GmbH grew by 104 million kWh or 2.6% to
4,100 million kWh compared to the prior year.
The natural gas grid sales rose by 93 million kWh or 4.8% to 2,044 million kWh compared
to the prior year 2011 on account of the higher demand for natural gas from key
customers.
Investment in quality of
supply
Austrian 2012 Green
Electricity Act
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4.3. Heat
KELAG Wärme GmbH is one of the largest nationwide heating service providers in
Austria. It operates some 900 central heating stations and 79 district heating grids
throughout Austria to supply customers with energy for heating purposes or process
energy. In addition to the generation and distribution of heating and process energy,
KELAG Wärme GmbH also generates electricity through combined heat and power
plants.
The focus of entrepreneurial activity of KELAG Wärme GmbH is on generating heating
and process energy for our customers in as environmentally friendly as possible a form.
The heat sources used are primarily biomass and otherwise unused industrial waste heat
– areas in which KELAG Wärme GmbH holds a leading position throughout Austria.
KELAG Wärme GmbH is the first large Austrian heat provider to do entirely without heavy
heating oil as a primary energy source. Where it is not possible to use industrial waste
heat and heating energy cannot be generated from biomass, natural gas as the by far
most environmentally friendly of all fossil energy sources is given preference as heating
medium.
Besides implementing new projects, i.e., constructing new district heating systems and
central heating stations, KELAG Wärme GmbH expands existing district heating grids to
supply new customers with district heat. It also optimises generation facilities on an
ongoing basis and realises potential for efficiency.
In 2012, KELAG Wärme GmbH received ISO certificates 9001 and 14001. The ISO 9001
certificate attests an efficient and high-quality business organisation, and ISO certificate
14001 documents resource efficiency and appropriate preventive measures to avoid any
negative environmental impact from business operations.
Austria is KELAG Wärme GmbH‟s core market. In addition, it is active in the Slovenian
market via a subsidiary.
Besides KELAG Wärme GmbH, our Heat business division comprises Wärmeversorgung
Arnoldstein Errichtungs- und Betriebsgesellschaft mbH and the Slovenian bio mass
activities as well as Kärntner Restmüllverwertungs GmbH (KRV). The majority of shares
was acquired by Verbund Renewable Power GmbH in 2012, and KRV was therefore
consolidated in full for the first time.
Heat production
The Heat business division‟s heat production increased by 105 million kWh or 5.0% to
2,221 GWh compared to 2011. This increase is attributable to the colder weather in 2012
Biomass and waste heat
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as well as to the acquisition of a majority holding in Kärntner Restmüllverwertungs GmbH
and the associated full consolidation of the entity. About half of the heat produced
stemmed from renewable energy sources such as biomass and waste heat.
Heat sales
The heat sales grew by 78 million kWh or 4.8% to 1,716 million kWh compared to the
prior year.
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5. Capital expenditures and maintenance
In the financial year 2012, KELAG implemented an extensive investment programme.
The Group invested about EUR 148.6m in property, plant and equipment and electricity
purchase rights.
Capital expenditures focused on power station projects in Austria and other countries and
distribution grid facilities. In addition, the investments in the 45% interest in the Reißeck II
pumped storage power station should also be mentioned.
KELAG invested about EUR 43.8m in the area of generation in Austria. Some
EUR 58.0m were spent on distribution grid facilities. Around EUR 13.9 million was
attributable to the Heat business division and about EUR 6.9 million to miscellaneous.
Abroad, KELAG chiefly invested around EUR 26.1m in the construction of wind power
projects in Bulgaria and Romania.
Investment
EUR m 2012 2011
Intangible assets 38.4 61.0
Property, plant and equipment 110.2 112.0
Total 148.6 173.0
KELAG spent around EUR 34.7m on maintenance in the financial year 2012.
Maintenance
EUR m 2012 2011
Generation facilities, Austria 5.7 4.7
Grids 15.2 16.6
Heat 2.8 2.3
Other 11.0 1.9
Total 34.7 25.5
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6. Financing and financial strategy
The current uncertainties on the financial and capital markets illustrate the advantages of
the KELAG Group‟s conservative financing strategy. The focus is placed on maintaining
liquidity and strengthening the Group‟s credit standing. The financial strategy is a system
of rules that is embraced by employees and is embedded in the overarching corporate
strategy of the KELAG Group.
In this context, safeguarding a suitable liquidity reserve and maintaining the A rating,
which was once again confirmed, are still the primary objectives that guarantee the
KELAG Group a high level of flexibility and access to the financial markets. In addition,
one of the Group‟s key tasks is to centrally manage financing of group companies such
that it is in line with requirements while ensuring that it is balanced and that maturity
terms match. When selecting financing structures, the Group aims to diversify its sources
of finance and thereby reduce use of existing bank lines. Net financial liabilities increased
from EUR 189.9m to EUR 207.1m. The KELAG Group‟s financing strategy is anchored in
guidelines to this effect that have remained unchanged strategically for years now. It is
essentially based on the following pillars.
Secure a suitable liquidity reserve
KELAG still has high and very stable cash inflows from operating activities. The financing
strategy for 2012 centred on ensuring that the Group had stable internal financing as well
as fast and secure access to cash based on contractually fixed facilities. The KELAG
Group has contractually agreed financing lines amounting to EUR 250m. In addition, the
new bond issued significantly improved the Group‟s liquidity base.
Provide central group financing for KELAG and its subsidiaries in line with
requirements to ensure financial flexibility
KELAG Finanzierungsvermittlungs GmbH (KFG) was established for the purpose of
optimum bundling of all medium to long-term financing measures of the KELAG Group.
KFG is also responsible for short-term liquidity clearance between group companies.
Optimise the risk structure based on predefined limits
Without exception, all financing activities of the KELAG Group are handled in accordance
with the respective rules of the group finance guidelines, which are continually adjusted to
the ever more stringent requirements.
Secure solid creditworthiness by maintaining the A rating
The cost of borrowing and the unrestricted access to financial instruments hinge on the
company‟s credit rating. Because risk premiums are determined based on rating
categories, maintaining KELAG‟s high credit rating in the long term is of crucial
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importance. In June 2012 Standard & Poor‟s confirmed the good A rating with a stable
outlook.
Statement of cash flows
Cash flow from operating activities of EUR 223.6m increased on the prior year by 15.2%.
It was possible to cover all investments and dividend distributions from the company‟s
internal financing power.
Statement of cash flows
EUR m 2012 2011
Cash flow from operating activities 223.6 194.1
Cash flow from investing activities -153.3 -178.7
Cash flow from financing activities 92.9 -43.8
Change in cash and cash equivalents 163.2 -28.5
Cash and cash equivalents as of 31 December 250.8 87.6
Cash and cash equivalents as of 1 January 87.6 116.1
Key financial indicators
Key financial indicators
EUR m 2012 2011
Cash flow from operating activities 223.6 194.1
Interest cost -21.3 -18.3
Interest income 2.4 2.3
Net gearing as of 31 December 32.1% 32.3%
Net financial liabilities as of 31 December 207.1 189.9
A key financial indicator, the net gearing ratio indicates the degree of indebtedness
expressed as net financial liabilities (interest-bearing financial liabilities less cash and
cash equivalents) as a percentage of equity. This indicator remained virtually stable
compared to 2011 at 32.3%.
Net financial liabilities of about EUR 207.1m are calculated as the sum of non-current and
current financial liabilities of about EUR 457.9m less cash and cash equivalents of about
EUR 250.8m.
The value added constitutes the central target and indicator of KELAG‟s value
management. It indicates the growth in the value of the company and is determined by
comparing the return on capital employed (ROCE) and the cost of capital. Value added is
generated when ROCE exceeds the weighted average cost of capital. ROCE for the
financial year 2012 came to 12.9% and cost of capital to 8.0%, producing a relative value
added of 4.9%.
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7. Composition of assets, equity and liabilities
In the financial year 2012, KELAG was able to keep its financial and earnings power
stable. The ratio of equity to debt capital remained at a very good level.
Consolidated statement of financial
position 31/12/2012 31/12/2011
Condensed version EUR m % EUR m %
Assets 1,823.5 100.0 1,507.0 100.0
Non-current assets 1,441.9 79.1 1,322.2 87.7
Current assets 381.6 20.9 184.9 12.3
Equity and liabilities 1,823.5 100.0 1,507.0 100.0
Equity 644.8 35.4 588.0 39.0
Non-current liabilities 912.0 50.0 699.0 46.4
Current liabilities 266.7 14.6 220.1 14.6
Relative value added
ROCE
(Return on capital employed)
Operating result
Cost of capital
Average capital employed ÷
−
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8. Value added
Value added % EUR m
Inputs 74.8 830.4
1 Cost of materials 59.4 659.1
2 Amortisation, depreciation and impairment 8.7 97.0
3 Other expenses 6.7 74.3
Value added 25.2 280.2
4 Employees 13.3 147.6
5 Public sector 1.4 15.1
6 Lenders 1.9 21.3
7 Shareholders 3.6 40.0
8 Company (retained profits) 5.1 56.3
Company output 100.0 1,110.6
Overall, about 76% of the value added remains in the Carinthia region. This corresponds
to about EUR 213m.
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9. Subsequent events
The 2013 ordinance on the renewable electricity contribution charge based on the ÖSG
(Austrian Green Electricity Act) 2012 entered into force on 1 January. It sets the charges
payable by all final customers connected to the public grid by grid level for promoting
renewable electricity for the 2013 calendar year.
On the basis of the authorisation by the ÖSG 2012, the Austrian regulator E-Control
confirmed the price for guarantees of origin that the Green Electricity Settlement Agency
allocates to electricity traders based on their supply volume to final customers at EUR 1.5
per MWh.
As part of the multiple-year incentives regulation system, the new SNE-VO (system user
charge ordinance for electricity) came into effect on 1 January 2013 based on the second
regulatory period for electricity (2010 to 2013). The regulator raised the system user
charges for electricity customers of KNG-Kärnten Netz GmbH by an average of 4.0%.
The second regulatory period for natural gas commenced at the start of 2013. The
existing regulatory system will generally be continued for the second regulatory period
within the new legal framework (Austrian Gas Industry Act (GWG) 2011). Compared to
the first regulatory period, the main changes were a reduction in WACC to 6.42% and
changes in the investment and operating cost factor. The rate setting procedure for
natural gas has set the costs, targets and quantities by means of notice and charges by
ordinance effective 1 January 2013.
Accordingly, as part of the multiple-year incentives regulation system, the new GSNE-VO
(system user charge ordinance for gas) came into effect on 1 January 2013 based on the
second regulatory period for natural gas (2013 to 2017). For grid level 3 customers of
KNG-Kärnten Netz GmbH with an annual consumption of 15,000 kWh this translates into
a decrease in user charges of about 3.3%.
There were no events after the end of the reporting period on 31 December 2012 that
would have led to a different presentation of financial position and performance.
2013 ordinance on the
renewable electricity
contribution charge
Regulator‟s ordinances
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10. Development of risks and opportunities
Adequate risk policy
Entrepreneurial activity means that opportunity is not without risk. Consequently, the
willingness to take risk and, in turn, risk limits have to be defined.
To this end, KELAG operates a risk management system that addresses risks from its
own activities as well risks from its market environment. The group-wide rules and
minimum standards ensure a systematic and uniform risk management system. It is the
KELAG Group‟s strategic goal to raise risk awareness at all levels, to systematically
consider risk aspects in all business decisions, to improve performance of internal control
systems and reporting and to establish a value-oriented risk culture at all levels of the
Group, beyond the scope of the requirements set by the legal minimum standards.
Risk organisation
The organisation of the risk management system that has been implemented is designed
to ensure that business decisions and business activities are only executed within defined
risk limits. Risk management is an integral element of the structural and workflow
organisation.
The risks are regularly reported by the company‟s divisions to the Board of Directors.
Risk management process
Key objectives of the risk management system are to create transparency in order to
avoid risks and to efficiently manage risk exposures. Timely notification of all current risks
is essential in order to achieve these objectives.
In accordance with a risk management guideline, risks are treated in a uniform manner
and presented in a risk inventory broken down by probability of occurrence and potential
loss.
Risk categories
Identified risks are classified into five categories (markets risks, operating risks, financial
risks, systemic risks and other risks).
Risks are identified and managed for each business division and for material
investments.
High risk awareness
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Process risks
Risks can arise during the execution of operational processes, in any business division or
investment. These are mitigated using for example an extensive internal control system
and with the support of corresponding hardware and software.
Market and credit risks in energy trading and distribution
The default of trading partners or customers encompasses the risk that energy already
supplied may not be paid or that replacement energy may have to be sourced
(replacement and settlement risk). Risks also arise due to changes in the value of
commodity positions as well as regulatory changes to transfer prices. Risks are mitigated
by executing an initial credit worthiness screening and ongoing credit worthiness
monitoring in line with the value of contracts with each trading partner or customer; in
addition the commodity positions concerned are closed and settled. Specific guidelines
on commodity risks have been developed in this regard.
Quantity and market price risks in production
In the case of hydroelectric power, whether a planned production quantity is reached or
not largely hinges on the water levels and, in turn, on the weather. Apart from quantity, the
market price level is another factor influencing revenue. Risks are mitigated based on a
long-term sales strategy and by updating forecasts of water levels on a rolling basis.
Operating risks from grid and production activities
The risk of defects in technical plant and equipment due to major weather events (wind
storms, sleet) is minimised using an appropriate maintenance strategy and by taking out
suitable insurance policies.
Regulatory risks in grid activities
The risk that the regulator might fail to factor in existing cost positions when setting
charges is mitigated by means of active regulatory and cost management.
Investment risks
Investment decisions are based on investment and M&A guidelines that define clear
profitability and risk criteria. Observance of high technical standards serves to keep
technical risks to a minimum.
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Equity investment risks
Equity investment risks result from potential fluctuations in dividends from subsidiaries
and other investees. Targeted equity investment management in accordance with a
guideline (early warning indicators and ongoing monitoring and reporting) is used to
mitigate the risk.
Financial risk
Interest and currency risks are mitigated using an adequate internal control system for all
financial products used.
The risk of counterparty default is reduced by written regulations for Treasury.
Transactions are only entered into with counterparties (banks) that have at least the same
credit rating as the KELAG Group.
Legal risks – compliance
Part of risk management activities are also dedicated to the identification and handling of
legal risks. To this end, a group-wide compliance system was implemented in cooperation
with an international law firm. This system ensures that the probability of legal
infringements by employees of the KELAG Group is kept as low as possible. The
compliance system thus serves to protect both the KELAG Group as well as every
individual KELAG employee, while making a contribution to safeguarding the business
value in the long term.
Internal control and risk management system relating to the financial reporting
processes
In accordance with Sec. 82 AktG (Austrian Stock Corporations Act), it is the responsibility
of the Board of Directors to install an adequate internal control and risk management
system relating to the financial reporting process. KELAG‟s Board of Directors has
accordingly adopted policies that apply group-wide with binding effect.
The accounting department of the group parent KELAG prepares the separate financial
statements of the individual group entities and the consolidated financial statements
using SAP software. KELAG‟s financial reporting process is based on consistent group-
wide accounting policies as well as corporate instructions that are updated at regular
intervals. These contain consistent accounting policies on the recognition, posting and
accounting for transactions that must be complied with by all entities concerned
throughout the Group.
The financial reporting systems are protected by access rights. In addition, the various
processes involve compulsory, automatically triggered control and approval steps.
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To avoid any material misstatements, automatic controls have also been implemented in
the reporting and consolidation system along with a range of manual controls in the
process. These measures range from a review by management of the profit or loss for the
period through to the specific reconciliation of accounts.
Every quarter, the Supervisory Board is provided with a report on the Group‟s financial
position and performance by the Board of Directors. This also includes additional
information such as detailed variance analyses. Ahead of supervisory board meetings,
the individual KELAG organisational units provide an activity report to the Supervisory
Board.
Risk management covers not only operating risks but also the financial reporting system.
Potential risks relating to the financial reporting process are surveyed on a regular basis
and preventive measures taken. The focus is placed on those risks that typically qualify
as material for the entity.
Compliance and the quality of the internal control system are monitored on an ongoing
basis as part of internal audits. The internal audit function reports directly and regularly to
the Board of Directors.
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11. Employees
High-performing and dedicated employees constitute prerequisites for the company‟s
ability to compete and continue as a going concern. KELAG tackles the demands of
modern personnel management.
Personnel figures
In 2012, the KELAG Group employed an average of 1,406 employees (measured as full-
time-equivalents, including inactive employees, excluding trainees).
Group company Full-time equivalents
1 KELAG 532
2 KNG-Kärnten Netz GmbH 619
3 KELAG Wärme GmbH 191
4 Kärntner Restmüllverwertungs GmbH 28
5 Foreign investments 36
Total 1,406
Strategic personnel management
Against the backdrop of the company‟s strategic alignment and the growing complexity
this entails, transformation efforts toward a modern human resources function continued.
Underlying factors such as demographic change and labour market shortages
necessitate long-term personnel planning and activities to secure human resources
together with the systematic, requirements-based development of employees. The
methods and tools of personnel management in particular are continually enhanced to
support the implementation of the corporate strategy.
Targeted focal points of 2012
The Job Families project developed as a follow-on project of the HR strategy project was
pursued further. This project supports the development of a company-wide functional
structure. Job families are career profiles derived from existing functions. These career
profiles serve as the basis for future HR measures such as models for career
development as well as personnel marketing or recruiting activities. A modern salary
system drawing on market analyses and existing collective agreements and company
agreements is developed on that basis.
KELAG has traditionally had a large emphasis on training to secure the next generation
of skilled employees. Group-wide, 116 trainees were trained up as electrical engineers,
metal workers, technical drawing designers, warehouse logistics staff, cooks and office
clerks on average for the year 2012. This corresponds to a ratio of trainees to total
Long-term personnel
planning and retainment
“Job Families” project
Diverse basic and
advanced training
opportunities
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workforce of roughly 10%. A total of 38 trainees were taken on in 2012. KELAG thus
makes an important contribution to the training of qualified professionals and the
employment of young people.
KELAG supports the individual development of employees using targeted measures. In
total, 970 employees of the KELAG Group participated in 4,296 training days. A particular
emphasis is placed on requirements-based further training.
The existing phased retirement model has been extended until 2017 to optimise the
employee structure. This model allows a smooth transition into retirement. Participating
employees remain employed by the company for 18 months on average. In this context,
particular attention is paid to securing the transfer of knowledge to young employees.
Health is the most important asset of each employee. KELAG sees it as one of its tasks
as employer to support its employees through healthcare promotion. As part of the
occupational healthcare promotion project, a holistic concept was prepared to keep fit
and actively prevent illnesses. Focal points are industrial health and safety, a healthy diet,
sport and psychosocial healthcare.
In order to position KELAG as an attractive employer for young people during their
training, the company presents itself regularly at various events held by vocational
training colleges, universities of applied sciences and universities, such as at the
Teconomy job fair organised by the Graz University of Technology. For the third time the
KELAG HR Night was held as part of the Connect job fair of the University of Klagenfurt.
The event‟s objective is to provide companies, personnel managers and students with a
communication platform to discuss personnel topics while identifying future prospects and
trends.
The Group conducted an employee survey in 2012. At three-year intervals, all employees
are surveyed on topics such as work processes, innovations and learning, customers and
quality, leadership, industrial health and safety. The results of the survey are integrated in
the Group‟s continuous improvement measures.
One of the objectives of strategic personnel management is to secure the competences
that will be required in key positions in future. This objective is supported by the group-
wide talent management programme. An orientation centre helps nominated candidates
to identify their individual strengths and potential for improvement based on the KELAG
competence model. Individual development measures are then arranged in subsequent
feedback talks.
In order to increase KELAG‟s attractiveness for women, too, and employee satisfaction
on the part of the female workforce, a group-wide women‟s network has been put in
place. It offers a forum for regular exchange on topics of relevance for women.
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12. Sustainability
KELAG sees sustainability as an integrated approach to economic, environmental and
social matters. This is a central aspect of the KELAG‟s responsible and long-term
corporate strategy and involves being an active partner for customers, employees and
the region. Company policy is characterised by the increased use of renewable sources
of energy and the implementation of innovative solutions in order to contribute to supply
quality and climate protection in a forward-looking manner.
KELAG’s sustainability programme
The profitability and economic stability of the company are key prerequisites for KELAG‟s
actions to be oriented not only towards business facts and figures, but to also take into
account social and ecological aspects in the management of the business. By making the
use of renewable sources of energy its central task, the company is already making an
important contribution to environmental protection. Many parts of the company are also
proactively taking measures based on a feeling of responsibility towards future
generations. In order to bundle these activities and improve communication and also to
apply sustainability measures to further areas, a group-wide sustainability programme
was launched at the end of 2010.
A core team with representatives from all parts of the company is in charge of
implementing defined measures while at the same time developing the programme
further. The aim is to tackle future challenges in a sustainable manner.
For the first time, KELAG presented the development of its sustainability work to its
stakeholders and the interested public in the form of a sustainability report in the financial
year 2012. This report was prepared in accordance with the guidelines issued by the
Global Reporting Initiative (GRI) for application level B and confirmed by GRI. Besides a
qualitative description of the measures and projects under the sustainability programme,
the report also contains quantitative indicators on economic, ecological and social topics.
Resource-saving energy generation and CO2 avoidance
KELAG generates electricity from domestic hydroelectric power. These clean energy
sources open up a solid foundation for electricity supply while proactively protecting the
climate. With the electricity production from hydroelectric power, KELAG avoids about
one million metric tons of CO2 emissions each year compared to the European energy
mix (ENTSO e-mix). The use of wind power and photovoltaics also emphasises KELAG‟s
commitment to sustainable electricity generation.
Diverse sustainability
activities
Using clean energy
sources
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KELAG also offers heating from biomass and waste heat. Environmentally compatible
heat generation translates to a reduction of a further 300,000 metric tons of CO2 each
year compared to individual heating systems based on fossil fuels.
Further expansion of renewables in Austria and abroad is one of the central objectives of
the KELAG Group. The focus here is on compliance with environmental standards both in
the construction and the operation of power stations.
Reliable economic factor in the region
For KELAG, sustainability involves not only climate protection and saving resources
along the entire value added chain, but also being a reliable partner for the region.
KELAG meets this standard by not just guaranteeing supply reliability for energy, but also
making a significant contribution to the generation of value added in Carinthia. In the past
financial year, the KELAG Group purchased services with a volume of around EUR 60m
from some 1,000 suppliers in Carinthia. In Carinthia, the KELAG Group generates value
added, including indirect effects, in excess of EUR 330m per year. The company plans to
invest around EUR 1.9b in the expansion of the energy infrastructure by 2022.
Businesses in Carinthia will be among the first to benefit from this investment volume.
In addition to the roughly 1,400 jobs that KELAG offers, the company secures a total of
about 3,000 jobs in Carinthia in light of its growth strategy. Furthermore, the KELAG
Group offers training for some 110 young people every year in anticipation of the future
demand for qualified employees, thereby also providing impetus against youth
unemployment.
Social responsibility
KELAG promotes initiatives in the areas of art, culture, sport and other social activities.
Apart from responsibility for climate protection and energy efficiency, KELAG supports
numerous sustainable corporate social responsibility projects.
KELAG is involved in various cooperation projects to foster the social integration of
people with disabilities and the integration of the long-term unemployed in the workplace.
In 2012, for instance, KELAG again supported the organisation INCLUSIA, which
organises workshops at which school children from Carinthia can engage with disabled
people from across Europe. Concerts in senior citizen‟s, nursing and disabled people‟s
homes are supported via the Live Music Now project. Besides the therapeutic effect of
music, this project also provides important support for young musicians in Carinthia.
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In the field of sports, KELAG sponsors young sportsmen and women from Carinthia, for
example via the Kärnten Sport association. KELAG has also confirmed its commitment to
sport for disabled persons via a cooperation agreement with Kärntner
Behindertensportverband.
On the culture stage, KELAG has two focal points, namely music and literature. Apart
from the Carinthia music association, with its rich tradition, and the Carinthian Summer,
KELAG supported the events Trigonale and La Guitarra Esencial in 2012. “Tage der
deutschsprachigen Literatur” (German-language literature days) was one of the Group‟s
main areas of involvement in the world of literature. In addition, KELAG furthered reading
and writing at schools with projects such as the Schulhausroman project.
In the area of education, activities focused on initiatives like “NAWIMIX”, which promotes
efforts to provide children early access to the natural sciences and technology. With
support for projects such as “Safety on tour” children‟s safety olympics or “Große
schützen Kleine” (the big protect the little ones), KELAG again promoted fun ways to give
children safety training and prevent accidents at an early stage in 2012. The long-
standing cooperation with Kärntner Bildungswerk is further evidence of KELAG‟s social
commitment.
Climate Protection Generation
Since 2008, KELAG has bundled its climate protection and energy efficiency activities
under the slogan “Climate Protection Generation”. The emphasis is placed on creating an
awareness for the responsibility of each and every individual. The company is in a
position to share its expertise with customers, showing them the contribution to climate
protection that they could make with KELAG at their side. This involves activities that can
be put in practice in everyday life as well as expert energy consulting sessions
highlighting extensive energy savings potential.
In 2012, KELAG further pursued its campaign with the slogan “Climate Protection
Generation – Changing the Future. Now.” The focus in on topics such as grids, energy
efficiency using the example of smart homes, or heat generated from biomass.
Raising public
awareness for climate
protection
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13. Research and development
In research and development, KELAG focuses on application-oriented activities in the
field of technology, primarily in cooperation with universities. The Group cooperated with
institutes of Graz University of Technology, the University of Klagenfurt, RWTH Aachen
University and the Milan Vidmar Electric Power Research Institute in Ljubljana in 2012.
Current projects relate to the following topics: technical diagnosis of operating resources,
assessment of the condition and risks from technical plant and equipment, earth fault
detection in grounded grids and stability issues in the establishment of isolated grids. In
addition, basic considerations on the topic of smart grids, likewise addressed in
cooperation with industry partners, are of significance. E-business activities were the
focus of the efficient use of electric power again in 2012.
Supplementary to its in-house activities, KELAG co-finances R&D projects under the
“Research and Innovation” programme of the Austrian energy advocacy group,
Österreichs Energie. Österreichs Energie initiates and coordinates joint research
activities of its member companies. The key issues in 2012 were: supply security and
reliability, regulatory issues, power station capacity, information and communication
technology, smart metering.
14. Other disclosures
All financial instruments of relevance for the assessment of the financial position and
performance are presented in the consolidated financial statements. KELAG does not
have any branches in Austria or abroad.
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15. Outlook
The energy industry is facing a difficult market environment. Due to the high level of
capital employed, investment decisions must be based on a reliable long-term political
framework or relatively stable planning parameters. In light of the EU‟s 20-20-20 targets
in the context of liberalisation and regulation as well as the energy policy decisions on the
new energy concept, there has been an increase in the uncertainties relating to the legal
and economic framework for the energy industry. Added to this are uncertainties arising
from the financial crisis and the economic development in Europe. The improvement in
leading indicators points to an economic recovery by mid-year 2013. For the year as a
whole, Austria is expected to see a slight increase in the growth rate to 1.0%.
The new energy concept has many different implications. In view of the economic
development and substantial increase in generation capacity for renewable energies, in
Germany in particular, we anticipate the temporary excess supply of generation
capacities to continue. Accordingly, we forecast slightly declining wholesale market prices
on the European electricity market. In the long term, we therefore expect a lower level of
profitability of our hydroelectric power stations, as we market the respective quantities
amidst the competition on the wholesale market. At the same time, we expect the return
on capital employed to be lower for our grid business on the basis of discussions with the
regulator on the mechanisms of the third incentive regulation period although investment
incentives for the grids are needed for the new energy concept to succeed. The draft
Austrian Efficiency Act also highlights that the rules of measurability and chargeability of
energy efficiency measures initiated and performed by energy companies are unclear and
could lead to an increase in expenses subject to risks.
Despite the uncertainties inherent in the economic and legal framework conditions
affecting the energy industry, we will uphold our strategic alignment in terms of the value-
based growth and investment strategy on the basis of renewable energies. Our stable
financial and earnings power anchored in our broad portfolio of business segments
means that we are able to continue our long-term investment programme. We have
budgeted about EUR 234m for new construction and maintenance in 2013. The focus will
remain on hydroelectric and wind power projects, biomass projects in the heating sector
and the modernisation of the grid infrastructure. However, we will examine these projects
against tighter risk criteria in a market environment that is becoming increasingly
uncertain.
We will rigorously grow our portfolio of products and services in line with changing
customer requirements as well as the competitive and market environment. The focus will
be on expanding the offering of energy-related services in the context of climate
protection and energy efficiency. In addition, we will continue to address the development
of innovative technologies ranging from increasing convergence of telecommunications,
Continuation of growth
and innovation strategy
Further development of
products and services
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information and electricity networks through to smart technologies, electromobility and
internet developments.
Apart from consistent market and customer orientation, operational excellence and cost
management are key management tasks for the flexibility and future sustainability of our
company. This means that we will increasingly review our processes and organisation for
efficiency and adapt them according to the economic requirements in a continuous
improvement process. For example, we aim to capture additional cost improvement
potential, proactively use our block phased retirement model and monitor and structure
the optimal capital allocation of our finances in a targeted manner.
Our corporate philosophy is founded on the principle of sustainability. To this end, we
endeavour to strike an optimal balance between business stability, reliability of supply,
climate protection and social responsibility. With the “Climate Protection Generation”
campaign we will again communicate our commitment to climate protection in the coming
year. Our aim is to further underscore the sustainable gearing of our entrepreneurial
activities and to clearly confirm KELAG‟s green image. In addition, we will show our
customers how they can make a joint contribution to climate protection. In addition, we
will intensify the open dialog with our stakeholders on a partnership basis regarding the
opportunities and risks of the new energy concept and our entrepreneurial activity.
We will continue to systematically pursue the course we have taken, guided by values,
growth, innovation and climate protection principles. Despite the high level of
uncertainties regarding the market environment, we anticipate earnings stability in 2013.
Klagenfurt am Wörthersee, 18 February 2013
The Board of Directors:
Univ.-Prof. Dipl.-Ing. Dr. Hermann Egger e. h.
Spokesperson of the Board
Dipl.-Ing. Harald Kogler e. h.
Member of the Board
Dipl.-Kfm. Armin Wiersma e. h.
Member of the Board
Earnings stability
anticipated