Notes to the 2019 Financial Statements of the Enbw Group
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140 Financial statements of the EnBW Group 2019 › Notes Integrated Annual Report 2019 of EnBW – Extended Version Notes to the 2019 financial statements of the EnBW Group General principles In accordance with section 315e (1) German Commercial Code (HGB), EnBW Energie Baden-Württemberg AG (EnBW), as the highest-level parent company in the EnBW Group, prepares the consolidated financial statements according to the International Financial Reporting Standards (IFRS), the adoption of which is mandatory in the European Union as of the reporting date. The interpretations promulgated by the International Financial Reporting Interpre- tations Committee (IFRIC) are also taken into account. IFRS and interpretations whose application is not yet man- datory are not adopted. The consolidated financial statements therefore comply with those IFRS and interpret- ations issued by the International Accounting Standards Board (IASB) which have been endorsed by the EU. The consolidated financial statements are presented in millions of euros (€ million). The income statement as well as the statement of comprehensive income, the balance sheet, the cash flow statement and the statement of changes in equity of the EnBW Group are presented separately. There may be rounding differences in both individ- ual and total figures. In the interest of clarity, items have been combined in the income statement and in the balance sheet, and dis- closed separately and explained in the notes. Rounding differences may occur due to the methods used to carry out the calculations. The income statement has been prepared using the nature of expense method. Significant events in the reporting period are described in the section “The EnBW Group” of the management report. Due to the first-time application of IFRS 16 in the 2019 financial year utilising the modified retrospective approach, the reports for the 2019 and 2018 financial years are only comparable to a limited extent. The consolidated financial statements are prepared as of the reporting date of the parent company’s financial statements. The parent company’s financial year is the calendar year. The registered office of the company is in Karlsruhe, Germany. The address is EnBW Energie Baden-Württemberg AG, Durlacher Allee 93, 76131 Karlsruhe. It is entered at the District Court of Mannheim under HRB no. 107956. EnBW’s principal activities are described in the segment reporting. EnBW’s Board of Management prepared and released the consolidated financial statements for issue on 4 March 2020. Consolidation principles The financial statements of the domestic and foreign companies included in the consolidation were prepared in a standardised manner in accordance with the accounting policies which are applicable at EnBW. Business combinations are accounted for using the acquisition method. The cost of a business combination is measured based on the fair value of the assets acquired and liabilities assumed or entered into as of the acquisition date. Non-controlling interests are measured at the proportionate fair value of the identified assets and the liabil- ities assumed. Incidental acquisition costs are expensed as incurred. 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 when the acquirer obtains control. Any excess of the cost of a business combination plus the amount of any non-controlling interest in the acquiree over the acquired iden- tifiable assets, assumed liabilities and contingent liabilities is reported as goodwill if positive or, if negative, is reassessed and recognised through profit or loss. A change in the ownership interest in an entity which continues to be fully consolidated is accounted for as an equity transaction. All remaining interests are remeasured at fair value upon loss of control. Integrated Annual Report 2019 of EnBW – Extended Version Financial statements of the EnBW Group 2019 › Notes 141 Receivables, liabilities and provisions between the consolidated entities are netted. Intercompany income is set off against the corresponding expenses. Intercompany profits and losses are eliminated unless they are not of minor importance. Consolidated companies In accordance with the full consolidation method, all subsidiaries under the control of the Group are included. The Group controls an associate if it is exposed to risks or has rights to variable returns as a result of its involvement in the associate, and the Group has the ability to use its power over the associate in a way that affects the amount of the returns from the associate. In the full consolidation process, the assets and liabilities of a subsidiary are included in the consolidated financial statements in their entirety. The equity method is used when there is a joint arrangement in the form of a joint venture or a significant influ- ence may be exercised over the business policy of the associate, but the entity does not qualify as a subsidiary. At the time of acquisition they are recognised at cost and subsequently according to the amortised proportionate net assets. The carrying amounts are increased or reduced each year by the proportionate profit or loss, dividends paid or other changes in equity. This means that when shareholdings are being measured, only the company’s propor- tional equity, rather than its assets and liabilities, is shown in the consolidated financial statements. Any goodwill is included in the stated value of the shareholding in question. Any negative differences are recognised in profit or loss in the investment result. Joint arrangements that are classified as joint operations are reported based on the proportion of the assets, liabil- ities, income and expenses which are attributable to us in compliance with the respective applicable IFRS. Interests in subsidiaries, joint ventures or associates which, in the Group’s opinion, are of minor significance, or are not controlled due to their participation structure and as such no significant influence is exercised over them, are recognised at amortised cost. Indicators for determining the materiality of subsidiaries are the revenue, earn- ings and equity of these companies. There are no reciprocal shareholdings in the EnBW Group as defined by section 19 (1) German Stock Corporation Act (AktG). The consolidated companies are as follows: Type of consolidation Number of companies 31 / 12 / 2019 31 / 12 / 2018 Fully consolidated companies 192 171 Entities accounted for using the equity method 22 23 Joint operations 3 3 Changes in the consolidated companies Of the companies included in the consolidated financial statements by way of full consolidation, 15 (previous year: 15) domestic companies and 23 (previous year: 17) foreign companies were consolidated for the first time in the report- ing year. 3 (previous year: 0) domestic companies and 2 (previous year: 2) foreign companies were deconsolidated. In addition, 3 (previous year: 5) domestic companies and 9 (previous year: 0) foreign companies were merged. 142 Financial statements of the EnBW Group 2019 › Notes Integrated Annual Report 2019 of EnBW – Extended Version First-time full consolidation of affiliated entities 2019 First-time full consolidation of Valeco In order to strengthen its onshore wind business, EnBW acquired 100% of the shares in the developer and operator of wind farms and solar parks Valeco S.A.S., Montpellier, France, from Holding GAY and the minority shareholder Caisse des dépôts et consignations (CDC) on 3 June 2019. Valeco was fully consolidated in the EnBW consolidated financial statements from this point in time. The fair value of the holding company Valeco at the time of full consolidation was €603.6 million. There were no significant incidental acquisition costs incurred as part of the transaction. The purchase price was paid in the form of cash and cash equivalents. The amount reported for goodwill is preliminary due to the fact that the analysis of the fair value of the assets and liabilities has not yet been concluded. In particular, it represents future business generation and is not deductible for tax purposes. Following its full consolidation, Valeco contributed €18.0 million to revenues and €-3.2 million to earnings after income taxes in the 2019 financial year. If Valeco had been fully consolidated since the beginning of the year, Group revenue would have increased by €18.0 million to €18,783.0 million, and earnings after income taxes would have decreased by €3.2 million to €901.1 million. The following assets and liabilities were taken over as part of the acquisition: in € million Fair value Intangible assets 148.2 Property, plant and equipment 146.5 Other non-current assets 282.6 Cash and cash equivalents 41.9 Other current assets 24.5 Total assets 643.7 Non-current liabilities 246.4 Current liabilities 33.5 Total liabilities 279.9 Net assets 1 363.8 Non-controlling interests 4.5 Fair value of the shares 603.6 Goodwill 244.3 1 The calculation of the fair value of these assets and liabilities has not yet been concluded because analyses relating to the assets and liabilities are still outstanding. Therefore, provisional values have been stated in accordance with IFRS 3.45. The fair value of the trade receivables acquired as part of the business combination stood at €4.3 million. There were no material individual impairment losses. It is anticipated that the total amount of the trade receivables will be largely collected. First-time full consolidation of Plusnet The expansion of activities in the area of telecommunications through the acquisition of 100% of the shares in Plusnet GmbH, Cologne, from QSC AG on 30 June 2019 is part of the strategy to develop EnBW into a supplier of sustainable infrastructure. The company was fully consolidated in the EnBW consolidated financial statements from this point in time. Plusnet has long-standing experience in the operation of modern broadband technology, as well as established sales channels, and operates its own nationwide voice / data network.