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KUWAIT ENERGY PLC

NOTES TO THE CONDENSED SET OF FINANCIAL STATEMENTS

For the nine month period ended 30 September 2017

16

11.

CONVERTIBLE LOANS

30 September

31 December

2017

2016

Unaudited

Audited

US$ 000’s

US$ 000’s

Non-current portion

-

117,198

Current portion

155,017

19,075

155,017

136,273

Movement in convertible loan

30 September

31 December

2017

2016

Unaudited

Audited

US$ 000’s

US$ 000’s

As at 1 January

136,273

119,400

Change in fair value

25,998

27,211

Payment

(7,254)

(10,338)

As end of the period

155,017

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$ 2.8 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$

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

During 2017 the Group and Qatar First Bank (QFB) holding 50% of the principal amended certain terms of the

convertible murabaha agreement. The Group and QFB 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. Subsequent to the period ended 30 September

2017, the Group and the other lender holding balance 50% of the principal amended certain terms of the convertible

loan agreement to defer the first repayment date by 2018 half-year end (see note 14).

The convertible loans are classified as Level 3 in the fair value hierarchy in all the periods 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 reducing the liability by US$26.8 million.

12.

TRADE AND OTHER PAYABLES

30 September

31 December

2017

2016

Unaudited

Audited

US$ 000’s

US$ 000’s

Trade Payables and accruals

114,221

118,514

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

-

3,500

Joint venture partners payables

5,011

7,568

Accrued interest payable

5,653

10,313

Salaries and bonus payables

421

4,473

125,306

144,368