Flughafen Zürich AG - Annual Report 2020

19 PROVISION FOR FORMAL EXPROPRIATIONS PLUS SOUND INSULATION AND RESIDENT PROTECTION

(CHF 1,000)	Formal expropriations	Sound insulation and resident protection	Total
Balance as at 1 January 2019	275,183	148,170	423,353
Provision used 1)	–9,771	–11,498	–21,269
Release of provision	–20,000	0	–20,000
Present value adjustment 2)	2,667	2,756	5,423
Balance as at 31 December 2019	248,079	139,428	387,507
of which current (planned payment within 1 year)	12,981	14,502	27,483
of which non-current (planned payment from 1 year on)	235,098	124,926	360,024

Balance as at 1 January 2020	248,079	139,428	387,507
Provision used 1)	–2,629	–14,263	–16,892
Release of provision	0	0	0
Present value adjustment 2)	0	0	0
Balance as at 31 December 2020	245,450	125,165	370,615
of which current (planned payment within 1 year)	17,900	14,239	32,139
of which non-current (planned payment from 1 year on)	227,550	110,926	338,476

1) The amount paid for formal expropriations only includes effective payments of compensation, and excludes other associated external costs in accordance with the regulations of the Airport of Zurich Noise Fund (see note 20, Airport of Zurich Noise Fund).

2) In the year under review as well as in the previous year, a reassessment was made of the discount rates and the expected cash outflows.

Provision for formal expropriations

On 22 November 2019, the Swiss Federal Supreme Court handed down a ruling in test cases regarding the period of limitation on claims for compensation in Oberglatt. This Swiss Federal Supreme Court ruling and other fundamental issues that have been decided enabled Flughafen Zürich AG to undertake a reappraisal of the outstanding cost of compensation for formal expropriations. Based on the recalculation, the total cost expected in relation to formal expropriations decreased from CHF 350.0 million to CHF 330.0 million, enabling the provision for formal expropriations to be reduced by CHF 20.0 million as at 31 December 2019. At the same time, the intangible asset from the right of formal expropriation was reduced by the same amount (see note 11, Intangible assets).

As at the reporting date, the estimated costs for formal expropriations remained unchanged at CHF 330.0 million, of which CHF 84.5 million had already been paid out at that date. In the consolidated financial statements for the period ended 31 December 2020, a provision was recognised at present value for the outstanding costs of CHF 245.5 million (nominal amount). As the interest rate used to adjust the present value of the nominal payment flows remained unchanged at 0.00% at the reporting date due to the low level of interest rates, the present value is the nominal amount. It is expected that the payments can be completed by the end of 2030.

Provision for sound insulation and resident protection

The company is also required to implement sound insulation measures in the area where it claims exemptions from noise limits (emission limit). In this context, the FOCA initiated a night-time noise abatement procedure. The area with exemptions under the Sectoral Aviation Infrastructure Plan adopted by the Federal Council on 23 August 2017 was extended. In this context, Flughafen Zürich AG recognised a provision for further costs of CHF 60.0 million in addition to the cost of CHF 340.0 million previously estimated for sound insulation and resident protection.

As at the reporting date, the estimated costs for sound insulation and resident protection measures remained unchanged at CHF 400.0 million, of which CHF 274.8 million had already been paid out at that date. In the consolidated financial statements for the period ended 31 December 2020, a provision was recognised at present value for the outstanding costs of CHF 125.2 million (nominal amount). As the interest rate used to adjust the present value of the nominal payment flows remained unchanged at 0.00% at the reporting date due to the low level of interest rates, the present value is the nominal amount. It is expected that the payments can be completed by the end of 2030.