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KUWAIT ENERGY PLC

NOTES TO THE CONDENSED SET OF FINANCIAL STATEMENTS

For the six month period ended 30 June 2017

17

11.

CONVERTIBLE LOANS

30 June

31 December

2017

2016

Unaudited

Audited

US$ 000’s

US$ 000’s

Non-current portion

23,933

117,198

Current portion

124,197

19,075

148,130

136,273

Movement in convertible loan

30 June

31 December

2017

2016

Unaudited

Audited

US$ 000’s

US$ 000’s

As at 1 January

136,273

119,400

Change in fair value

17,011

27,211

Payment

(5,154)

(10,338)

As end of the period

148,130

136,273

The change in fair value since the prior period arises as a result of changes in the forecasted cash flows, and forecasted

likelihood and timing of an equity offering. Of this amount US$ 1.9 million (31 December 2016: US$ 2.4 million) has

been capitalised to qualifying assets in the period, see note 7, resulting in a net charge to the income statement of US$

15.1 million (31 December 2016: US$ 24.8 million).

During 2017 the Group and one of the lenders holding 50% of the principal amended certain terms of the convertible

murabaha agreement. The Group and Qatar First Bank have agreed that, subject to a certain conditions, the principal

and part of the premium amounts outstanding under the convertible murabaha agreement will mandatorily convert

into ordinary shares of the Company prior to the first repayment date. Following this amendment, the loan from this

lender has been recognised entirely as a current liability.

The convertible loans are classified as Level 3 in the fair value hierarchy in all the years presented. Level 3 fair value

measurements are those derived from inputs that are not based on observable market data (unobservable inputs). The

group uses a weighted average discounted cash flow technique to determine the fair value of the loans. The significant

inputs considered in the valuation are likelihood and timing of a conversion event and the discount rate. The discount

rate used was in the range of 10-18% (31 December 2016: 10-18%). Possible changes to the likelihood and timing

assumptions in the fair value measurement could have a maximum impact of increasing the liability by US$2.5 million

or reducing the liability by US$22.5 million.

12.

TRADE AND OTHER PAYABLES

30 June

31 December

2017

2016

Unaudited

Audited

US$ 000’s

US$ 000’s

Trade Payables and accruals

124,617

118,514

Advance against farm-out of working interest (note 10)

12,000

3,500

Joint venture partners payables

5,328

7,568

Accrued interest payable

10,278

10,313

Salaries and bonus payables

3,099

4,473

155,322

144,368