4.3.26Provisions
The movement and type of provisions during the year 2019 are summarized as follows:
Provisions (movements)
|
Demobilisation |
Warranty |
Employee benefits |
Brazil investigation |
Other |
Total |
|
|---|---|---|---|---|---|---|
|
Balance at 1 January 2019 |
96 |
34 |
26 |
48 |
262 |
467 |
|
Arising during the year |
28 |
18 |
3 |
(2) |
29 |
75 |
|
Unwinding of interest |
1 |
- |
0 |
1 |
- |
2 |
|
Utilised |
- |
(2) |
(1) |
(0) |
(182) |
(185) |
|
Released to profit |
- |
(1) |
0 |
- |
(26) |
(27) |
|
Other movement |
- |
(0) |
(1) |
(47) |
(1) |
(49) |
|
Balance at 31 December 2019 |
124 |
49 |
28 |
- |
82 |
283 |
|
of which : |
||||||
|
Non-current portion |
124 |
- |
28 |
- |
13 |
165 |
|
Current portion |
(0) |
49 |
- |
- |
69 |
118 |
Demobilization
The provision for demobilization relates to the costs for demobilization of the vessels and floating equipment at the end of the respective operating lease periods. The obligations are valued at net present value, and a yearly basis interest is added to this provision. The recognized interest is included in the line item ’Financial expenses’ of the consolidated income statement (please refer to note 4.3.9 Net Financing Costs).
Expected outflow within one year is nil and amounts to US$59 million between one and five years, and US$65 million after five years.
Warranty
For most Turnkey sales, the Company gives warranties to its clients. Under the terms of the contracts, the Company undertakes to make good, by repair or replacement, defective items that become apparent within an agreed period starting from the final acceptance by the client. The increase of the warranty provision consists of new provisions accrued on projects under construction over the period.
Brazilian Investigation
Provision regarding the Brazilian investigation decreased during the year due to the reclassification of the payment agreed with the Brazilian Federal Prosecutor's Office ('MPF'), from provision to liabilities (refer to note 4.3.27 Trade and Other Payables), upon notification that the Federal Court has formally closed the Improbity Lawsuit (refer to note 4.3.1 Financial Highlights).
Other
The decrease of 'Other' provisions during the period mainly relates to the insurance income shared with Repsol in relation to the Yme insurance claim. During the first half of the year 2019, the Company paid the full amount due to Repsol.
The remainder of 'Other' provisions mainly relate to commercial claims, regulatory fines related to operations and local content penalty.