Page 38 - KELAG Annual Report 2017
P. 38

To take into account increased political and macroeconomic risk from foreign operations, country-
           specific risk premiums were taken into account in the cost of equity and borrowing costs. The
           country-specific risk premiums were primarily calculated on the basis of local government bonds
           denominated in euro directly unless unavailable, in which case they were calculated indirectly
           based on government bonds with comparable ratings as of 31 December 2017. This method is
           adapted from the calculation of country-specific risk premiums published by Damodaran.

           The beta factors were determined on the basis of a peer group consisting of European benchmark
           electricity producing companies with similar operational risk structures to KELAG. The capital
           market calculation of the peer group was based on a five-year period, with monthly yield intervals
           and local indices.


           The  borrowing costs  of  the  respective  business  divisions  are determined  on  the basis  of  the
           respective risk-free interest rate plus the country risk premium and the credit spread of the peer
           group. The local nominal marginal tax rates are used to calculate the after-tax cost of borrowed
           capital.


           Given the volatility of the financial market environment, the development of the cost of capital
           (and in particular the country risk premiums) is monitored on an ongoing basis.

           Liabilities  from contingent consideration  from  the  acquisition  of Windpark  Nikitsch  GmbH  of
           EUR 0.1m  were  recognised  in  the  reporting  year  2014.  EUR 0.1m  thereof  was  settled  in  the
           financial year 2015. Due to the remeasurement of the future wind energy based on existing data,
           a new estimate resulted in a carrying amount of EUR 0.1m as of 31 December 2017.


           The purchase agreement for the shares in Windfarm MV I from 2010 stipulates that the sellers
           participate in the three-year net additional income from 2011 until 2031 and are entitled to an
           earn-out payment based on the realisable prices for green certificates. The remeasurement of the
           obligation resulted in a carrying amount of EUR 1.0m (prior year: EUR 0.5m).

           As part of the share increase to secure the majority shareholding in Windfarm Balchik 1 OOD,
           Windfarm Balchik 2 OOD and Windfarm Balchik 4 OOD in the financial year 2014, agreements were
           made to pay a subsequent purchase price depending on the statutory framework conditions. In
           the current reporting year, there is a liability of EUR 0.6m (prior year: 0.5m).



           The pension and severance obligations as of 31 December 2017 and 31 December 2016 are based
           on the following assumptions:
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