Page 116 - KELAG Annual Report 2019
P. 116

price increase at a rate of 2.0% is assumed for the extrapolation of the forecast electricity prices
                                      (from 2041 onwards). In cases where the respective public authorities have guaranteed feed-in
                                      tariffs,  these  were  used  for  the  relevant  period.  For  the  recoverable  amounts  from  heating
                                      projects, the forecast price developments of the energy sources serve as a price structure to
                                      calculate the recoverable amount. By means of indexing, these are also used to adjust the heat
                                      sales prices under the terms of the contract.

                                      The price structure to calculate fair value less costs to sell based on the income-based approach
                                      is the same as in the aforementioned procedure, subject to a discount for costs to sell.

                                      The discount rate represents a weighted average interest rate of equity capital and debt capital.
                                      This is derived from the risk-free interest rate plus risk mark-ups for debt capital and market risk.

                                      The risk-free interest rate is derived from the interest rates paid on German government bonds
                                      with matching terms using the “Svensson method”. For heat, wind power and hydroelectric power
                                      business divisions in Austria, a matching interest rate of 0.04% and 0.34% (prior year: 0.95%) for a
                                      period of 15 and 30 years was used and for the remaining business divisions, a rate of between -
                                      0.19%  and  0.34%  (prior  year:  0.57%)  for  a  period  of  between 10  and  30  years.  As  a rule,  the
                                      matching interest rate was determined by deriving the remaining useful life of a cash-generating

                                      The market risk premium was fixed uniformly at 8.25% (prior year: 7.50%).

                                      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 2019. 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
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