4.3.13Property, Plant and Equipment
The line item ’Property, plant and equipment’ consists of property, plant and equipment owned by the Company and right-of-use assets following the early adoption of IFRS 16:
Property, plant and equipment (summary)
|
31 December 2018 |
31 December 2017 |
|
|---|---|---|
|
Property, plant and equipment excluding leases |
1,072 |
1,243 |
|
Right-of-use assets |
126 |
- |
|
Total |
1,198 |
1,243 |
Property, Plant and Equipment owned by the company
The movement of the property, plant and equipment during the year 2018 is summarized as follows:
2018
|
Land and buildings |
Vessels and floating equipment |
Other fixed assets |
Assets under construction |
Total |
|
|---|---|---|---|---|---|
|
Cost |
61 |
3,255 |
68 |
19 |
3,402 |
|
Accumulated depreciation and impairment |
(20) |
(2,084) |
(55) |
- |
(2,160) |
|
Book value at 1 January |
41 |
1,170 |
13 |
19 |
1,243 |
|
Additions |
0 |
17 |
8 |
9 |
34 |
|
Disposals |
- |
0 |
0 |
0 |
0 |
|
Depreciation |
(5) |
(203) |
(5) |
- |
(212) |
|
(Impairment)/impairment reversal |
- |
11 |
- |
- |
11 |
|
Foreign currency variations |
(2) |
- |
(1) |
0 |
(3) |
|
Other movements |
- |
8 |
9 |
(17) |
0 |
|
Total movements |
(7) |
(166) |
11 |
(8) |
(170) |
|
Cost |
58 |
3,266 |
75 |
11 |
3,410 |
|
Accumulated depreciation and impairment |
(24) |
(2,262) |
(52) |
- |
(2,337) |
|
Book value at 31 December |
34 |
1,004 |
23 |
11 |
1,072 |
2017
|
Land and buildings |
Vessels and floating equipment |
Other fixed assets |
Assets under construction |
Total |
|
|---|---|---|---|---|---|
|
Cost |
55 |
3,570 |
66 |
4 |
3,694 |
|
Accumulated depreciation and impairment |
(14) |
(2,155) |
(52) |
- |
(2,220) |
|
Book value at 1 January |
41 |
1,415 |
14 |
4 |
1,474 |
|
Additions |
- |
31 |
2 |
19 |
51 |
|
Disposals |
0 |
0 |
0 |
0 |
0 |
|
Depreciation |
(5) |
(214) |
(4) |
- |
(223) |
|
(Impairment)/impairment reversal |
- |
10 |
- |
- |
10 |
|
Foreign currency variations |
5 |
- |
1 |
0 |
7 |
|
Other movements |
(1) |
(72) |
0 |
(3) |
(76) |
|
Total movements |
0 |
(245) |
(1) |
16 |
(231) |
|
Cost |
61 |
3,255 |
68 |
19 |
3,402 |
|
Accumulated depreciation and impairment |
(20) |
(2,084) |
(55) |
- |
(2,160) |
|
Book value at 31 December |
41 |
1,170 |
13 |
19 |
1,243 |
During the 2018 period the following main events occurred:
- Additions to property, plant and equipment regarding the capitalization of major overhaul expenditure related to FPSO Capixaba according to the component approach method.
- Deep Panuke MOPU impairment reversal of US$ 11 million; the impairment assessment of Deep Panuke MOPU was triggered by the last gas notification received from the client. This resulted in an increased value in use due to lower market rates and improved operating results when compared with the last impairment test performed in 2014. If the discount rate varies by +/- 1% the reversal of the impairment would be -/+ US$ 4 million.
- US$ 212 million of annual depreciation charges.
Property, plant and equipment at year-end comprises of:
- Three (2017: three) integrated floating production, storage and offloading systems (FPSOs) (namely FPSO Espirito Santo, FPSO Capixaba and FPSO Cidade de Anchieta) each consisting of a converted tanker, a processing plant and one mooring system. These three FPSOs are leased to third parties under an operating lease contract.
- One second-hand tanker (2017: one).
- One semi-submersible production platform, the Thunder Hawk (2017: one), leased to third parties under operating lease contracts.
- One MOPU facility, the Deep Panuke (2017: one), leased to a third party under an operating lease contract.
The depreciation charge for the semi-submersible production facility Thunder Hawk is calculated based on its future anticipated economic benefits, resulting in a depreciation plan partly based on the unit of production method and, for the other part, based on the straight-line method.
All other property, plant and equipment is depreciated on a straight-line method.
Company-owned property, plant and equipment with a carrying amount of US$ 569 million (2017: US$ 662 million) has been pledged as security for liabilities, mainly for external financing.
No interest has been capitalized during the financial year as part of the additions to property, plant and equipment (2017: nil).
Right-of-use Assets
The Company leases buildings, cars and an installation vessel. The most significant lease contract relates to the installation vessel SBM Installer. The charter contract is for a fixed period of twelve years with the option to acquire the vessel during the charter period. The other significant contracts relate to the lease of offices. The contract periods of the Company’s office rentals vary between six to fifteen years and most of the contracts include extension options between three to fifteen years. The extension options are taken into account in the measurement of lease liabilities when the Company is reasonably certain to exercise these options. The lease agreements do not impose any covenants.
The movement of the right-of-use assets during the year 2018 is summarized as follows:
|
Buildings |
Vessels and floating equipment |
Other fixed assets |
Total |
|
|---|---|---|---|---|
|
Book value recognized at 1 January following early adoption of IFRS 16 |
73 |
71 |
2 |
146 |
|
Additions |
3 |
- |
0 |
3 |
|
Depreciation |
(12) |
(8) |
0 |
(20) |
|
Foreign currency variations |
(3) |
- |
0 |
(3) |
|
Total movements |
(12) |
(8) |
(1) |
(21) |
|
Cost |
73 |
71 |
2 |
146 |
|
Accumulated depreciation and impairment |
(12) |
(8) |
(1) |
(20) |
|
Book value at 31 December |
61 |
63 |
1 |
126 |
Operating Leases as a Lessor
The category ’Vessels and floating equipment’ mainly relates to facilities leased to third parties under various operating lease agreements which terminate between 2021 and 2030. Leased facilities included in the ’Vessels and floating equipment’ amount to:
Leased facilities included in the vessels and floating equipment
|
31 December 2018 |
31 December 2017 |
||
|---|---|---|---|
|
Cost |
3,230 |
3,220 |
|
|
Accumulated depreciation and impairment |
(2,256) |
(2,081) |
|
|
Book value at 31 December |
974 |
1,139 |
The nominal values of the future expected bareboat receipts (undiscounted lease payments) in respect of those operating lease contracts are:
Nominal values of the future expected bareboat receipts
|
31 December 2018 |
31 December 2017 |
||
|---|---|---|---|
|
Within 1 year |
320 |
376 |
|
|
2 years |
324 |
328 |
|
|
3 years |
302 |
323 |
|
|
4 years |
141 |
301 |
|
|
5 years |
126 |
156 |
|
|
After 5 years |
607 |
723 |
|
|
Total |
1,820 |
2,207 |
A number of agreements have extension options, which have not been included in the above table.
Purchase and termination options in operating lease contracts
The operating lease contracts of FPSO Espirito Santo and MOPU Deep Panuke, where the Company is the lessor, include call options for the client to (i) purchase the underlying asset or (ii) terminate the contract early without obtaining the underlying asset. The operating lease contract of semi-submersible Thunder Hawk includes a call option for the client to purchase the underlying asset. The exercise of any of the purchase options would have resulted in a gain for the Company as of December 31, 2018, while exercising the options for early termination as of December 31, 2018 would have resulted in a gain or a near break-even result for the Company.