KUWAIT ENERGY plc GROUP
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
For the year ended 31 December 2012
F-117
30.
FINANCIAL INSTRUMENTS (CONTINUED)
Capital risk management
The Group manages its capital to ensure that it will be able to continue as a going concern while maximising the
return to the shareholders through the optimisation of debt and equity balance. The Group’s overall strategy
remains unchanged from 2010 and 2011.
The capital structure of the Group consists of equity comprising issued share capital, share premium and merger
reserve (see note 18), other reserves (see note 19) and retained earnings.
Gearing ratio
The gearing ratio at year end was as follows:
2012
2011
USD 000’s
USD 000’s
Debt (i)
143,213
53,000
Less: Cash and bank balances and liquid investments
(48,384)
(40,477)
Net debt
94,829
12,523
Equity
756,943
734,292
Net debt to equity ratio (%)
12.5
1.7
(i) Debt is defined as long-term and short term loans as detailed in note 20 and convertible loans as detailed in
note 21.
28.
CONTINGENT LIABILITIES AND CAPITAL COMMITMENTS
a) Ukrnafta dispute
The Joint Activity Agreement # 410/95 as amended (JAA) governed the joint exploration and development of
the Rudivsky-Chervonozavodsky gas condensate field in Ukraine (the RC Field) by Carpatsky Petroleum
Corporation (CPC), a subsidiary undertaking of Kuwait Energy, and Ukrnafta OJSC (Ukrnafta).
In September 2007, CPC commenced arbitration proceedings against Ukrnafta for various breaches of the JAA
including Ukrnafta’s refusal to permit CPC to make additional investments in the JAA in violation of the
provisions of the JAA permitting CPC to make such investments, in order to restore its investment in the RC
Field from approximately 14.91% back to the 50% level envisaged by the JAA.
The arbitration tribunal issued its decision on 24 September 2010 awarding CPC damages in the amount of
USD145.7 million plus post-award interest plus costs of approximately USD1.2 million, and declared the JAA
terminated by reason of Ukrnafta’s breach. This decision was confirmed by an arbitration tribunal on 16
November 2010. CPC is diligently pursuing collection of the award but has not yet recognized it in the financial
statements as recovery efforts are ongoing.
Since CPC’s interest in the RC field has been terminated by the tribunal, the Group has re-classified all the
related historical assets and liabilities of USD 12.5 Million into ‘other receivables (see note 16). These
receivables will be set off against the arbitration award upon receipt.
