Report on the Consolidated Financial Statements
We have audited the consolidated financial statements of
Energie AG Oberösterreich,
and its subsidiaries (“the Group”) comprising the consolidated balance sheet as at 30 September 2018, the consolidated income statement/consolidated statement of comprehensive income, the consolidated cash-flow statement and the statement of changes in consolidated equity for the fiscal year ending on 30 September 2018, as well as the notes to the consolidated accounts.
It is our opinion that the consolidated financial statements comply with the statutory requirements and offer an adequately accurate representation of the asset and financial position of the Group as at 30 September 2018, as well as the Group's earnings position and cash flows during the fiscal year ending as of that date, in accordance with the International Financial Reporting Standards (IFRS), as they are to be applied in the EU and the additional requirements stipulated in section 245a of the Austrian Commercial Code (UGB).
Basis for Forming the Audit Opinion
We have conducted our audit in accordance with the EU Directive No. 537/2014 (AP Directive hereinafter) and the Austrian Principles of Proper Auditing of Financial Statements. These principles require the application of the International Standards on Auditing (ISA). Our responsibilities under these regulations and standards are set out in more details in Section “Responsibilities of the Auditor in Auditing the Consolidated Financial Statements” of our audit certificate. We are independent from the Group in compliance with the Austrian corporate law and professional regulation and have discharged our other professional duties in accordance with these requirements. We are of the opinion that the audit evidence we have obtained is sufficient and suitable for acting as a basis for our audit assessment.
Audit Findings Bearing Special Significance
Audit findings bearing special significance are findings concerning circumstances that, in our professional judgement, were the most significant for our audit of the consolidated financial statements for the fiscal year. These findings were considered in the context of our audit of the consolidated financial statements in their entirety as well as in forming our audit opinion, which we do not present separately for these findings.
Impairment of Goodwill Assets
Please refer to the Notes, Section 5.4 “Impairment of Goodwill Assets” and Section 16 “Intangible Assets and Property, Plant and Equipment”.
Risks Inherent in the Financial Statements
As at 30 September 2018, the consolidated balance sheet of Energie AG Oberösterreich reports goodwill assets with a carrying amount of EUR 66.1 million (previous year: EUR 65.9 million).
Goodwill assets are subjected to impairment testing at least once in each fiscal year. This requires the Management to make material estimates and assumptions on future profits and capital cost rates, which in the case of adjustments may significantly change the results of impairment testing. This affects the cash-generating unit “Waste Management Austria” in particular.
The risk for the consolidated financial statements is based on the uncertainty of whether goodwill assets might turn out to be overvalued if any or all of the underlying assumptions change in an unfavourable way.
Our Audit Approach
We have evaluated all impairment testing carried out by the company for material goodwill assets in consultation with our valuation experts as follows.
To form an opinion about the adequacy of the underlying internal planning, we have examined the planning process and verified the planning data, on which the measurement is based, against the current budget figures approved by the Supervisory Board as well as the mid-term planning approved by the Management Board.
Additionally, we discussed the assumptions made for growth rates and operating results with the company's respective managers and ascertained to what degree the historical experiences influence the Management's planning process, and whether external factors were given adequate consideration. We have assessed adherence to the budget by comparing the budgets of previous years with the reported actual figures.
We furthermore examined the methodology used for impairment testing and determination of the capital cost rates on its compliance with the applicable standard. Our valuation experts assessed the appropriateness of the assumptions, on which the determination of capital cost rates were based, against market- and industry-specific reference values and verified the arithmetic accuracy of the calculation procedure.
Impairment of property, plant and equipment, procurement rights and other rights
Please refer to the Notes, Section 5.5 “Impairment of Intangible Assets, Property, Plant and Equipment” and Section 16 “Intangible Assets and Property, Plant and Equipment”.
Risks Inherent in the Financial Statements
Property, plant and equipment at a carrying amount of EUR 2,009.2 million, procurement rights at a carrying amount of EUR 80.8 million and other rights at a carrying amount of EUR 26.8 million represent approx. 65.7% of the assets reported in the consolidated balance sheet of Energie AG Oberösterreich. During the 2017/2018 fiscal year, impairments in the amount of EUR 9.4 million and reversals of impairment in the amount of EUR 2.1 million were recognised through profit or loss.
In preparing the financial statements, Energie AG Oberösterreich assesses all material cash generating units (CGUs) on the presence of external or internal indications for a material change in their respective recoverable amount. Where such indicators are present, the recoverable amount for the affected cash-generating units is determined and the CGU's carrying value is impaired/appreciated accordingly to reflect the recoverable amount. With exception of the electricity grid, which is measured at the higher fair value less disposal costs (on the basis of transaction multiples observable on the market), the recoverable amount corresponds to the value in use of the cash-generating unit.
The measurement of the recoverable amount of cash-generating units under IAS 36 requires estimates and discretionary decisions, such as the estimated future cash inflows surpluses, as well as the determination of the applicable discount rate. The consolidated financial statements are therefore exposed to the risk of inadequate estimates and discretionary decisions having a significant impact on the recoverable amount and therefore the recognised value of the cash-generating units reported in the consolidated statement of financial position, as well as the operating result in the consolidated income statement.
Our Audit Approach
We have examined the Group's analysis of external and internal indicators for an impairment or recovery in value for all material cash-generating units. Where we detected an indicator for a potential impairment of cash-generating units, for which a realistic change in the measurement assumptions results in a material effect on the consolidated financial statements, we assessed the measurement carried out by the company in consultation with our valuation experts.
Our approach in auditing the material assumptions made for determining the value in use, on which the important impairment testing of cash-generating units is based, is generally identical to our approach in auditing the impairment of the company's goodwill. We refer to the audit activities explained in the previous section.
We have discussed the material impairment-critical assumptions in detail with the responsible staff members and have verified the expectations for future price developments on the energy markets against the external market appraisals used by the company.
With regard to the electricity grid measured at the higher fair value less disposal costs, we compared the transaction-based multiple used in the calculation of an asset value against the transaction multiple assessed in the external expert report, and verified the arithmetic accuracy as well as the adjustments made by management to the basis (EBITDA) on which the multiple was assessed.
We further assessed whether the information with regard to impairment testing as presented in the Notes is adequate and complete.
Responsibilities of the Legal Representatives and the Audit Committee for the Consolidated Financial Statements
The legal representatives are responsible for compiling the consolidated financial statements and their compliance with the IFRS rules applicable in the EU and the additional requirements stipulated in section 245a of the Austrian Commercial Code (UGB), which requires a reasonably accurate representation of the Group's asset, financial and earnings position. The Group's legal representatives are further responsible for the internal controls deemed necessary by them for preparing consolidated financial statements that are free from significant intentional or unintentional misrepresentations.
In compiling the consolidated financial statements, the legal representatives are responsible for forming an opinion on the Group's ability to continue its business operations, for disclosing any relevant circumstances relating to the continuation of the business operations and to base their considerations on the principle of continued business operations, unless the representatives intend to liquidate the Group, cease business operations or find themselves in lack of any viable alternative to such action.
The Audit Committee is responsible for supervising the Group's accounting processes.
Responsibilities of the Auditor for the Audit of the Consolidated Financial Statements
Our objective is to assure an adequate degree of certainty on whether the consolidated financial statements are entirely free from significant intentional or unintentional misrepresentations and to issue an audit certificate reflecting our audit findings. An adequate degree of certainty means a high degree of certainty, but is not an absolute guarantee that the audit conducted in accordance with the AP Directive and the Austrian Principles of Proper Auditing, which require application of ISA, has in fact identified all significant misrepresentations that may be contained in the audited financial statements. Misrepresentations may result from malicious acts or misconceptions and are deemed significant if they could, individually or collectively, have a potential influence on the economic decisions made by their readers on the basis of these consolidated financial statements.
In conducting our audit in accordance with the AP Directive and the Austrian Principles of Proper Auditing, which require application of ISA, we form our opinions on the basis of our professional judgement and maintain a critical view of the circumstances presented to us throughout the entire course of the audit.
Additionally, we adhere to the following:
- We identify and assess the risks stemming from any significant intentional and unintentional misrepresentations in the financial statements, plan our audit activities as a response to these risks, perform our audit activities and gain sufficient and suitable audit evidence to serve as the basis for our audit findings. The risk of significant misrepresentations resulting from malicious acts remaining undetected is higher than the risk resulting from misconceptions, because malicious acts may include fraudulent acts, forgery, intentional omissions, deceiving representations or the circumvention of internal controls.
- In order to plan audit activities that adequately address the prevailing circumstances, we gain an understanding of the system of internal controls bearing relevance for our audit, but without the objective of forming an audit opinion on its effectiveness.
- We evaluate the appropriateness of the accounting methods applied by the legal representatives, as well as the tenability of values estimated by the legal representatives and represented in the accounts and the disclosures associated with such estimates.
- We draw inferences about the appropriateness of the legal representatives operating under the accounting principle of continued business operations, as well as, on the basis of the evidence presented to us for our audit, whether any events or circumstances are subject to a considerable uncertainty that would give rise to doubts about the viability of the Group continuing its business operations. If we arrive at the conclusion that a material uncertainty exists, we are obliged to draw attention to the associated disclosures contained in the consolidated financial statements in our audit certificate, or to modify our audit certificate if these disclosures are inappropriate. We form our opinion on the basis of the audit evidence gathered by the date of our audit certificate. Future events or circumstances may however result in the Group resolving to discontinue its business operations.
- We form an opinion on the overall presentation, structure and contents of the consolidated financial statements including the disclosures therein, as well as on whether they are an adequately accurate representation of the underlying business transactions and events.
- We issue our audit opinion on the consolidated financial statements on the basis of sufficient and suitable audit evidence for the financial information of the business units or the business activities of the Group. We are responsible for managing, supervising and performing the audit of the consolidated financial statements. We bear the sole responsibility for our audit opinion.
- We consult with the Audit Committee on matters such as the planned scope and timing of the audit as well as significant audit findings, including any significant defects in the system of internal controls detected during our audit.
- We also issue a statement to the Audit Committee, which confirms that we have adhered to the relevant professional requirements pertaining to our independence and exchange information with the Audit Committee on all relationships and other circumstances that may reasonably be expected to affect our independence and, if applicable, any protective measures associated with it.
- From the circumstances discussed with the Audit Committee, we determine those that had the highest significance for the audit of the consolidated financial statements for the fiscal year and are therefore the circumstances bearing special audit significance. We describe these circumstances in our audit certificate, unless public disclosure of a certain circumstance is prohibited by law or other legal requirement, or determine in very rare cases that certain circumstances should not be disclosed in our audit certificate because the negative implications of disclosing them could reasonably be expected to exceed the benefits for the public interest.
Other Statutory and Legal Requirements
Report on the Group Management Report
Austrian corporate law requires an assessment of whether the Group Management Report reconciles with the consolidated financial statements and whether it has been compiled in compliance with the applicable legal requirements.
The legal representatives are responsible for compiling the Group Management Report in compliance with the requirements under Austrian corporate law.
We have conducted our audit on the basis of the professional principles for the auditing of the Group Management Report.
We have formed the opinion that the Group Management Report was compiled in compliance with the applicable legal requirements and that it reconciles with the consolidated financial statements.
Our audit of the consolidated financial statements and the knowledge gained about the Group and its business environment has not identified any material misrepresentations in the Group Management Report.
The legal representatives are responsible for the other required disclosures. Such other disclosures encompass all information presented in the annual report, except the (consolidated) financial statements, the management report respectively the Group management report and the audit certificates issued for them. We expect to be provided with the Annual Report after the date of this auditor's certificate.
These other disclosures are not included in our audit opinion for the consolidated financial statements and we give no assurance for their accuracy.
The audit of the consolidated financial statements requires us to read these other disclosures as soon as they are made available and to decide whether, considering our understanding formed during the audit, they represent a material inconsistency to the consolidated financial statements or are otherwise misrepresented in a significant way.
Additional Information Pursuant to Article 10 of the AP Directive
Our firm has been elected auditors of the financial statements by the General Meeting held on 20 December 2017. The Supervisory Board issued its engagement letter on 26 March 2018. Our firm has been providing financial auditing services for more than 25 years.
We hereby declare that our audit opinion presented in Section “Report on the Consolidated Financial Statements” reconciles with the additional report to the Audit Committee pursuant to Article 11 of the AP Directive.
We hereby declare that we have not performed any prohibited non-audit services (Article 5 para. 1 AP-VO) and that we have maintained our independence from the Group companies during the conduct of our audit of the financial statements.
Auditor in Charge of the Assignment
Mag. Gabriele Lehner is the auditor in charge of the audit of the financial statements.
Linz, 30 November 2018
KPMG Austria GmbH
Chartered Accountants and Tax Consultants
Mag. Gabriele Lehner
The consolidated financial statements with our audit certificate may only be published or disseminated in the format certified by us. This Auditor's Certificate exclusively refers to the complete German version of the consolidated financial statements including the Group management report. The provisions of Section 281 para. 2 UGB must be observed for any other versions.