4.3.31Interest in Joint Ventures and Associates

The Company has several joint ventures and associates:

The Company has no joint operation as per definition provided by IFRS 11 ‘Joint arrangements’.

The movements in investments in associates and joint ventures are as follows:

Impairment of the Brazilian yard

Brazil is a key market for SBM Offshore where a number of opportunities are being actively pursued. However, given the lead time for opportunities to mature in terms of construction activities, combined with the uncertainties around local content regulations, SBM Offshore together with joint venture partners, decided to take steps to close the BRASA construction yard for at least the coming few years. This decision resulted in the impairment of the assets of the joint venture (50% owned by the Company) of US$ 19 million. Because this investment is accounted for using the equity method, this impairment has been recognized on the line item ’Share of profit of equity-accounted investees’ of the consolidated income statement for the period ended December 31, 2018 bringing the value of the net investment in the joint venture to nil.

The recoverable amount of the net investment is determined based on a value-in-use calculation which requires the use of assumptions. The cash flow projections used for the value-in-use calculation, as approved by the Management Board of the Company, use a horizon of five years. In the event (i) the yard is reopened (ii) and SBM Offshore will be successful on the ongoing Brazilian FPSO bids, with local content requirements reaching the higher end of the scale, justifying the reopening of the BRASA construction yard, the impairment could be (partly) reversed in the future.

Purchase and termination options in finance lease contracts - Joint ventures and associates

The finance lease contracts of FPSO N'Goma, FPSO Saxi and FPSO Mondo, where the Company is the lessor, include call options for the client to purchase the underlying asset or to terminate the contract early. The finance lease contract of FPSO Kikeh also includes options for the client to purchase the underlying asset or to terminate the contract early, but it should be noted that the first option for the client to exercise the purchase option on FPSO Kikeh is early 2022.

The exercise of the purchase option on FPSOs N'Goma, Saxi and Mondo as per December 31, 2018 would have resulted in a gain for the Company or a near break-even result. The exercise of the option to terminate the contract early, in which case the Company retains ownership of the vessel, would result in a break-even result for FPSOs Saxi and Mondo while this would result in a loss for the Company on FPSOs N'Goma and Kikeh. The Company considers the likelihood of the client exercising the option to terminate the contract on these two specific contracts as remote.

Hyperinflation Angola

The Company applies hyperinflation accounting in line with the requirements of IAS 29 for its local branch in Angola (OPS-Serviçõs de Produção de Petróleos Ltd.). The effects of this hyperinflation accounting on the consolidated financial figures of the Company are limited. The results of the Angolan branch represent an insignificant part of the Company’s total assets or results. The results and the financial position of the Angolan branch are translated from Kwanza to US dollars based on the closing exchange rate of December 31, 2018.

The following tables present the figures at 100%.

Information on significant joint arrangements and associates - 2018

Information on significant joint arrangements and associates - 2017

The bank interest-bearing loans and other borrowings held by joint ventures and associates are as follows:

Information on loans and borrowings of joint ventures and associates

• ¹ Please refer to note 4.3.16 'Loans to joint-ventures and associates' for presentation of the carrying amount of these loans in Company's Consolidated Statement of financial position.
• ² Mainly loans from the joint ventures SBM Shipyard Ltd to the JV PAENAL - Porto Amboim Estaleiros Navais Ltda.

Aggregated information on joint ventures and associates

Reconciliation equity at 100 % with investment in associates and joint ventures