4.3.26Provisions
The movement and type of provisions during the year 2020 are summarized as follows:
Provisions (movements)
|
Demobilisation |
Onerous contracts |
Warranty |
Employee benefits |
Restructuring |
Other |
Total |
|
|---|---|---|---|---|---|---|---|
|
Balance at 31 December 2019 |
124 |
- |
49 |
28 |
0 |
81 |
283 |
|
Derecognition at 1 January following early application IFRS 16 |
- |
- |
- |
- |
- |
- |
- |
|
Balance at 1 January 2020 |
124 |
- |
49 |
28 |
0 |
82 |
283 |
|
Arising during the year |
18 |
3 |
19 |
5 |
46 |
95 |
187 |
|
Unwinding of interest |
7 |
- |
- |
0 |
- |
- |
7 |
|
Utilised |
(13) |
0 |
(1) |
(1) |
(16) |
(5) |
(35) |
|
Released to profit |
(0) |
- |
(30) |
(3) |
(0) |
(12) |
(46) |
|
Other movement |
0 |
- |
(0) |
5 |
(25) |
1 |
(19) |
|
Balance at 31 December 2020 |
135 |
3 |
37 |
34 |
6 |
161 |
377 |
|
of which : |
|||||||
|
Non-current portion |
111 |
1 |
- |
34 |
- |
102 |
248 |
|
Current portion |
23 |
2 |
37 |
- |
6 |
59 |
128 |
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).
The increase in the provision for demobilization related mainly to a reassessment of the expected demobilization, towing and green recycling costs of the Deep Panuke MOPU unit. The utilization of the provision over the year also relate to the decommissioning of this unit, which has commenced in 2020.
Expected outflow within one year is US$23 million and amounts to US$85 million between one and five years, and US$24 million after five years.
Onerous contracts
The restructuring activities and the reallocation of activities and resources has led to vacating certain leased office buildings. This has resulted into a provision for onerous service facilities contracts for an amount of US$3 million, of which US$2 million is the current portion.
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.
Restructuring
For the year 2020, total restructuring costs provided for were US$46 million. US$25 million has been reclassified to payables as the company has reached settlement agreements with the terminated employees and which is still unpaid as at December 31, 2020. The restructuring of the Company leads to a reduction of approximately 600 positions compared with year-end 2019.
Other
Other provisions mainly relate to claims, regulatory fines related to operations and local content penalty on construction projects. The latter being the main driver of the increase in Other provisions during 2020.