Page 48 - Annual Report KELAG Group 2018

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 income will be available against which the losses can be utilised. Significant management
judgement 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 income together with future tax
planning strategies (see Note 16).

Any contingent liabilities are regularly assessed in terms of their likelihood 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 these financial statements, provisions are measured based on assumptions and estimates as of
the reporting date (Notes 23 and 27). The major factors here were the expectations regarding the
future development of energy prices, the success of negotiations and the discount rate. The
discount rate for provisions due in between one and five years is 0.75% (prior year: 0.75%), for
provisions due in more than five years it is 1.50% (prior year: 1.50%).

Provisions for measures for power plants relate to official regulations and other legal
requirements, such as the implementation of the EU Water Framework Directive and pending
damage claims. Accounting provisions for sediment management measures, which are necessary
for the business and envisaged by the authorities, are also recognised under this item. Any
obligations arising from the acquisition of assets for environmental protection reasons are
recorded as subsequent acquisition costs in non-current assets in accordance with IAS 16.11. This
resulted in a total amount recorded in the KELAG Group’s books and records of EUR 19.3m (prior
year: EUR 9.4m).

The company has several long-term natural gas storage agreements with different terms expiring
between 2020 and 2027. Storage capacity remains under economic pressure due to a significant
change in the market model (e.g., accounting on a daily basis for small customers), because sales
can be structured in their entirety via the market. Due to these facts, there are onerous contracts
in terms of IAS 37.10. The loss of EUR 6.5m (prior year: EUR 7.7m) to be provisioned from these
contracts is the cost of meeting the natural gas storage contract obligations net of the income
recoverable from the storage capacities.