REG - Evraz Plc - Half-year Report <Origin Href="QuoteRef">EVRE.L</Origin> - Part 4

EvrazAnnouncement

19/08/2016 13:41

- Part 4: For the preceding part double click  ID:nRSR4887Hc 

in a manner not currently determinable. 
 
12.     Commitments and Contingencies (continued) 
 
Taxation 
 
Russian and Ukrainian tax, currency and customs legislation is subject to varying interpretations, and changes, which can
occur frequently. Management's interpretation of such legislation as applied to the transactions and activity of the Group
may be challenged by the relevant regional and federal authorities. 
 
Management believes that it has paid or accrued all taxes that are applicable. Where uncertainty exists, the Group has
accrued tax liabilities based on management's best estimate of the probable outflow of resources embodying economic
benefits, which will be required to settle these liabilities. Possible liabilities which were identified by management at
the end of the reporting period as those that can be subject to different interpretations of the tax laws and other
regulations and are not accrued in these financial statements could be up to approximately $21 million. 
 
Contractual Commitments 
 
At 30 June 2016, the Group had contractual commitments for the purchase of production equipment and construction works for
an approximate amount of $144 million. 
 
In 2010, the Group concluded a contract for the construction of an air separation plant and for the supply of oxygen and
other gases produced by a third party at this plant for a period of 20 years. Due to a change in plans of the third party
provider and in management's assessment of the extent of sales of gases to third parties the Group no longer considers this
supply contract to fall within the scope of IFRIC 4 "Determining whether an Arrangement Contains a Lease". At 30 June 2016,
the Group has a committed expenditure of $553 million over the life of the contract. 
 
Social Commitments 
 
The Group is involved in a number of social programmes aimed to support education, healthcare and social infrastructure
development in towns where the Group's assets are located. The Group budgeted to spend approximately $24 million under
these programmes in the second half of 2016. 
 
Environmental Protection 
 
In the course of the Group's operations, the Group may be subject to environmental claims and legal proceedings. The
quantification of environmental exposures requires an assessment of many factors, including changing laws and regulations,
improvements in environmental technologies, the quality of information available related to specific sites, the assessment
stage of each site investigation, preliminary findings and the length of time involved in remediation or settlement. 
 
The Group has a number of environmental claims and proceedings which are at an early stage of investigation. Environmental
provisions in relation to these proceedings that were recognised at 30 June 2016 amounted to $12 million. Preliminary
estimates available of the incremental costs indicate that such costs could be up to $263 million. The Group has insurance
agreements, which are expected to provide reimbursement of the costs to be actually incurred. Management believes that, as
of now, an economic outflow of the additional costs is not probable and any pending environmental claims or proceedings
will not have a material adverse effect on its financial position and results of operations. 
 
In addition, the Group has committed to various environmental protection programmes covering periods from 2016 to 2022,
under which it will perform works aimed at reductions in environmental pollution and contamination. As of 30 June 2016, the
costs of implementing these programmes are estimated at $114 million. 
 
Legal Proceedings 
 
The Group has been and continues to be the subject of legal proceedings, none of which has had, individually or in
aggregate, a significant effect on the Group's operations or financial position. At 30 June 2016, possible liabilities were
estimated at $8 million. 
 
13.     Fair Value of Financial Instruments 
 
The Group uses the following hierarchy for determining and disclosing the fair value of financial instruments by valuation
technique: 
 
§ Level 1: quoted prices (unadjusted) in active markets for identical assets and liabilities; 
 
§ Level 2: other techniques for which all inputs which have a significant effect on the recorded fair value are observable,
either directly or indirectly; and 
 
§ Level 3: techniques which use inputs which have a significant effect on the recorded fair value that are not based on
observable market data (unobservable inputs). 
 
The carrying amounts of financial instruments, such as cash, short-term and long-term investments, short-term accounts
receivable and payable, short-term loans receivable and payable and promissory notes, approximate their fair value. 
 
The Group held the following financial instruments measured at fair value: 
 
                                                    30 June 2016  31 December 2015  
 US$ million                                        Level 1       Level 2           Level 3  Level 1  Level 2  Level 3  
                                                                                                                        
 Assets measured at fair value                                                                                          
 Available-for-sale financial assets                4             -                 -        5        -        -        
                                                                                                                        
 Liabilities measured at fair value                                                                                     
 Derivatives not designated as hedging instruments  -             -                 -        -        274      -        
 Hedging instruments                                -             37                -        -        59       -        
 
 
The following table shows fair values of the Group's bonds and notes. 
 
 US$ million                   30 June 2016     31 December 2015  
                               Carrying amount  Fairvalue         Carrying amount  Fairvalue     
                                                                                                 
 USD-denominated                                                                                 
 7.40% notes due 2017          $          179   $        187      $          290   $        299  
 7.75% bonds due 2017          27               27                195              190           
 9.50% notes due 2018          138              152               354              379           
 6.75% notes due 2018          542              564               802              804           
 7.50% bonds due 2019          347              342               347              328           
 6.50% notes due 2020          1,009            1,038             1,009            955           
 8.25% notes due 2021          778              845               746              747           
 6.75% notes due 2022          498              510               -                -             
                                                                                                 
 Rouble-denominated                                                                              
 8.40% rouble bonds due 2016   -                -                 167              165           
 12.95% rouble bonds due 2019  233              239               205              208           
 12.60% rouble bonds due 2021  241              247               -                -             
                                                                                                 
                               $      3,992     $     4,151       $      4,115     $     4,075   
 
 
The fair value of the non-convertible bonds and notes was determined based on market quotations
(Level 1). 
 
14.     Subsequent Events 
 
Repayment of Notes 
 
In August 2016, the Group fully settled its liabilities under the 7.40% notes due 2017 paying a premium over the carrying
value of $9 million. 
 
This information is provided by RNS
The company news service from the London Stock Exchange