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ORASCOM CONSTRUCTION PLC Consolidated Financial Statements For the year ended 31 December 2019 Orascom Construction PLC TABLE OF CONTENTS Independent auditors’ report on the consolidated financial statements 1-8 Consolidated statement of financial position 9 Consolidated statement of profit or loss and other comprehensive income 10 Consolidated statement of changes in equity 11 Consolidated statement of cash flows 12 Notes to the consolidated financial statements 13 - 48 Orascom Construction PLC Independent Auditors’ Report 31 December 2019 Key Audit Matters (continued) 1 Accounting for construction contracts (continued) How our audit addressed the key audit matter (continued) ° conducting site visits to certain higher risk or larger value contracts, physically observing the progress of individual projects and identifying areas of complexity through observation and discussion with site personnel; . assessing the reasonableness of the Group’s judgment in respect of forecast contract out-turn, contingencies, settlements and the recoverability of contract balances via reference to our own assessments based on certain quantitative and qualitative factors, historical outcomes and industry norms; . analyzing correspondence and other relevant documents obtained by Management from customers around variations and claims and considering whether this information is consistent with the estimates made by the management; . inspecting selected contracts for key clauses, identifying relevant contractual mechanisms such as liquidated damages, defects liability and warranties and, assessing whether these key clauses have been appropriately reflected in the amounts recognised in the financial statements; . assessing whether the amounts recognised in the financial statements resulting from the estimates and assumptions made represent a balanced view of the risks and opportunities pertaining to each contract position; . considering whether provisions against contracts sufficiently reflect the level of risk, and challenging management's judgment in this area with reference to our own assessments; and . considering the adequacy of the Group's disclosures in the consolidated financial statements in respect of contract accounting and the key risks relating to these amounts. 2 Expected credit loss allowances on receivables Refer to note 9 of the consolidated financial statements Key audit matter The Group is exposed to credit risk on its receivable balances including contract receivables, contract assets, and retention receivables. The determination of expected credit loss ("ECL") involves significant estimates and judgement. Key areas involving judgements include current and future looking external factors, probability of default and loss given default. Due to judgement and complexities involved in the computation of ECL for determining impairment provision, this is considered as a key audit matter. 3 KPNG Limten Liabiiy =anna'shin ot KOMG LLP. wgisored and Ieonsed inthe Dubat Internat anal Financial Gunite 1s a aveibo! hmv of the KEMG network of msependen| miamber firms aftiales with KP'G Inteinational Cacpetave , KPMG Inlernaionel a Sits unlry Al nghis eseved KERIG LLP is vegistoied wi ne Duoar Financia’ Seraces &.hoy Orascom Construction PLC independent Auditors’ Report 31 December 2019 Key Audit Matters (continued) 2 Expected credit loss allowances on receivables (continued) How our audit addressed the key audit matter ° obtaining an understanding of the Group’s process for estimating ECL and assessing the appropriateness of the ECL preparation methodology against the requirement of IFRS 9. . identitying and testing key controls over the ECL model; . assessing the reasonableness of key assumptions and judgments made by the management in determining the ECL allowances including segmentation of receivables, selection of ECL models and macroeconomic factors; and ° testing key inputs of the model, such as those used to calculate the likelinood of default and the subsequent loss on default, by comparing to the historical data. 3 Litigation and claims Refer to note 26 of the consolidated financial statements Key audit matter Considering the nature of the Group‘s operations, it can be exposed to a number of litigations and claims. The recognition and measurement of provisions, contingent liabilities and contingent assets as well as making the necessary disclosures in respect of litigation and claims requires significant judgment by the management in assessing the outcome of each legal case which is based on management's discussion with internal and external legal advisors. Due to the significance of the litigations and claims and the judgment applied in assessing and measuring the resulting outcome, this is considered as a key audit matter. How our audit addressed the key audit matter Our audit procedures included the following: ° evaluating the Group’s policies, procedures and controls in relation to litigation, claims and provision assessments; . obtaining inputs from the Group’s legal counsel in regards to the Group’s litigations and claims, making independent enquiries and obtaining confirmations from internal and external lawyers to understand the background of each case, legal position and the material risks that may impact the Group's financial statements; and . assessing reasonableness of judgment made by management in assessing and measuring the current and final outcome of the claim, determining the adequacy of the level of provisioning or disclosure in the consolidated financial statements in accordance with IAS 37. 4 My Parnes p cl APN LLP. ragsloted anil bsensad in the Dubar inlalional Futivial Cua 1s @ mesrher staIk of mdependert member rms all a KPMG Inleinavonal Connetat ve | KPMG Internal) his ese-ved KPMG LLP is reaterau wilh thi: Dubai Finencal Services Authony  Orascom Construction PLC independent Auditors’ Report 31 December 2019 Key Audit Matters (continued) 4 Accounting for tax Refer to note 11 of the consolidated financial staternents Key audit matter The Group operates in a number of tax jurisdictians. The complexities of local and international tax legislations requires an understanding of the applicable tax laws and regulations in these jurisdictions. Furthermore, the recognition of deferred tax assets invalves significant judgment and estimates with regards to the Group's future operations and the applicable tax laws in the respective jurisdictions and, as a result, this is considered as a key audit matter. How our audit addressed the key audit matter Our approach included: ° involving our tax specialists to assess the Group's tax positions including deferred tax, its compliance with the relevant tax legislations, to analyse and challenge the assumptions used by management in determining the tax provisions; . identifying and testing key controls over calculation for income tax and deferred tax; . For the purpose of assessing the valuation of deferred tax assets recognised in the Group's statement of financial position, we have reviewed and assessed the reasonableness of the assumptions used in projecting the Group’s future taxable profits, the applicable tax losses in the respective jurisdictions and evaluated the expected tax planning strategies; and e considering the adequacy of the Group’s tax disclosures in the consolidated financial statements. Other Information Management is responsible for the other information. The other information comprises the information included in the annual report, but does not include the consolidated financial statements and our auditors’ report thereon. Our opinion on the consolidated financial statements does not cover the other information and we do not express any form of assurance conclusion thereon. In connection with our audit of the consolidated financial statements, our responsibility is to read the other information and, in doing so, consider whether the other information is materially inconsistent with the consolidated financial statements or our knowledge obtained in the audit, or otherwise appears to be materially misstated. If, based on the work we have performed, we conclude that there is a material misstatement of this other information, we are required to report that fact. We have nothing to report in this regard. S KEMG Liman Listy Parlnerstye ol KPMG LLP rogioleled ane hrensed inthe Dub Inlemmatienal Finance! Cente 182 member Inn of the KPME network af ndependen! member trme atllaled wih K=MG Inlernauional Cooperalve + KMS Inlernaonal, a Swssenity Alliguiciessived KPMG LLP is reaislered wh the Dub Financia Seraces Auticnty Orascom Construction PLC independent Auditors’ Report 31 December 2019 Report on Other Legal and Regulatory Requirements We further report that the consolidated financial statements comply, in all material respects, with the applicable provisions of the Companies Law pursuant to DIFC Law No. 5 of 2018. KPMe- Teblass KPMG LLP KPMG LLP P.O. Box 3800 Dubai, United Arab Emirates Dubai, UAE Tel: 04 - 4030300 Freddie Closte Partner Date: 25 March 2020 8 KPMG .mtes Listlty Parmerehp 01 KPMG LLP. ragisioven gnd lizonsad in the Oubai [nlemnatinnal Financia: Cente 18a marnbel firm of ne KPMG newark of adenendent marrber fre afiialed wilh KP2AG Intemational Cooperative ( KPIAG Iniematinel) = Swwss enlny Allsightsieserved KPMG LLP 1 regis ce withthe Duhar Financial Services Authovity Orascom Construction PLC CONSOLIDATED STATEMENT OF FINANCIAL POSITION As at 31 Decemer ‘3H December $ millions ‘Note 219 2018 Assets Non-current assets Property, plant ane! eauipment ” 1813 1593 Goodwill ) 13.8 3.8 Trade end other receivables @ 444 Equity accounted invastees 0) 430.0 0 tax “) 39.6 Total non-current assets 709.1 Current assets Inventories: (12) 293.0 283.3 Trade and other receivables @ 1.2585 12434 Contracts work in progress (1h 869.8 526.7 Current income tax receivables on a Cash and cash equivalents 14) 3748 402.5 Total current assets 2,796.2 2455.7 Total assets 3,505.3 3,099.4 Equity Share capital +3) 1168 1168 Share premium 480.2 480.2 Reserves (18) (3046) 6356) Retained eacning 249.5 170.5 Equity attributable to owners of the Company 541.9 431.9 Nor-conteoling interest (ty) 438 396 Total equity 585.7 a71s Liabilities Non-current liabilities Loans and borrowings 18) 54 23 Trade and other payables 119} 56.7 43.0 Dafersect tax habiitiss wy 36 33 Total non-current liabilities 657 48.6 Current liabilities Loans and borrowings (8) 903 373.0 d other pa les ug 1,192.0 1,025.7 Advanced payments fram construction contracts 1,096.1 406.0 S$ of construction contiacts (13) 375.3 410.3 (20) 533 1033 46.9 60.5 2,853.9 2,579.3, Total liabilities 29196 2627.9 /\ 35053 3,099.8 Total equity and liabilities of these consolidated financial pproved by the Board of Directors of nts. and quthorized for is ig O25 March 2020 and signed on | Peport 2019 10 Orascom Construction PLC Year Ended Report 2019 Orascom Construction PLC CONSOLIDATED STATEMENT OF PROFIT OR LOSS AND OTHER COMPREHENSIVE INCOME for the year ended $ millions Note 31 December 2019 31 December 2018 Revenue (25) 3,184.0 3,013.5 Cost of sales (21) (2,820.5) (2,673.4) Gross profit 363.5 340.1 Other income (22) 15.0 8.3 Selling, general and administrative expenses (21) (162.1) (181.3) Operating profit 216.4 167.1 Finance income (23) 25.2 23.0 Finance cost (23) (98.5) (28.1) Net finance cost (73.3) (5.1) Income from equity accounted investees (net of tax) (10) 27.1 56.3 Profit before income tax 170.2 218.3 Income tax (11) (39.1) (63.6) Net profit for the year 131.1 154.7 Other comprehensive income: Items that are or may be reclassified to profit or loss Foreign currency translation differences 34.6 (17.0) Other comprehensive income (loss), net of tax 34.6 (17.0) Total comprehensive income 165.7 137.7 Net profit attributable to: Owners of the Company 121.3 144.7 Non-controlling interest (17) 9.8 10.0 Net profit for the year 131.1 154.7 Total comprehensive income attributable to: Owners of the Company 152.3 127.9 Non-controlling interest (17) 13.4 9.8 Total comprehensive income 165.7 137.7 Earnings per share (in USD) Basic earnings per share (24) 1.04 1.24 The notes on pages 13 to 48 are an integral part of these consolidated financial statements. 13 Orascom Construction PLC Year Ended Report 2019 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS Orascom Construction PLC 1. General Orascom Construction PLC (‘OC PLC’) is a Public Company, incorporated with registered number 1752 in the Dubai International Financial Center (DIFC) with its head office located at Gate Village-Building 1, DIFC, Dubai, UAE. OC PLC is dual listed on the NASDAQ Dubai and the Egyptian Stock Exchange. The consolidated financial statements for the year ended 31 December 2019 comprise the financial statements of OC PLC, its subsidiaries and joint operations (together referred to as the ‘Group’) and the Group’s interests in associates and joint ventures. OC PLC was incorporated on 18 January 2015 as Orascom Construction Limited, a company limited by shares and converted to a Public Company under the Law, DIFC Law No. 5 of 2018 as at 12 November 2018. OC PLC is primarily engaged as an international engineering and construction contractor focused on large-scale infrastructure, complex industrial and high-end commercial projects in the United States,Middle East, Africa and Central Asia for public and private clients. 2. Basis of preparation 2.1 General These consolidated financial statements have been prepared in accordance with International Financial Reporting Standards(”IFRS”), and applicable requirements of the Commercial Companies Law and the Capital Market Authority in Dubai / Egypt. This is the first set of the Group’s annual financial statements in which IFRS 16 Leases has been applied. The related changes to significant accounting policies are described in Note 3.17. The consolidated financial statements have been prepared on the historical cost basis, except when otherwise indicated. The financial year of OC PLC commences on 1 January and ends on 31 December. These consolidated financial statements are presented in US dollars (‘USD’), which is OC PLC’s presentation currency. All values are rounded to the nearest tenth million (in millions of USD), except when stated otherwise. The consolidated financial statements have been authorised for issue by the Company’s Board of Directors on 25 March 2020. 3. Summary of significant accounting policies 3.1 Consolidation The consolidated financial statements include the financial statements of OC PLC, its subsidiaries and the proportion of OC PLC’s ownership of joint operations. Subsidiaries Subsidiaries are all companies to which OC PLC is exposed or has rights to variable returns from its involvement with the investee and has the ability to affect those returns through its control over the investee, generally accompanying a shareholding of more than half of the shares issued and related voting power. In assessing control, potential voting rights that are presently exercisable or convertible are taken into account. Subsidiaries are fully consolidated from the date that control commences until the date that control ceases. When OC PLC ceases to have control over a subsidiary, it derecognizes the assets and liabilities of the subsidiary, and any related non-controlling interest and other components of equity. Any resulting gain or loss is recognized in profit or loss including related cumulative translation adjustments accumulated in other comprehensive income. If it becomes an associate, the interest retained is subsequently valued in accordance with the equity method. The principal subsidiaries are listed in the section ‘Miscellaneous’. Transactions eliminated in the consolidated financial statements Intra-group balances and transactions, and any unrealized income and expenses arising from intra-group transactions, are eliminated in preparing the consolidated financial statements. Unrealized gains arising from transactions with equity accounted investees are eliminated against the investment to the extent of OC PLC’s interest in the investees. Unrealized losses are eliminated in the same way as unrealized gains, but only to the extent that there is no evidence of impairment. 14 Orascom Construction PLC Year Ended Report 2019 Orascom Construction PLC 3.2 Discontinued operations / assets held for sale A discontinued operation is a component of OC PLC’s business which: • has operations and cash flows that can be clearly distinguished from the rest of OC PLC; • represents a separate major line of business or geographical area of operations; and • is part of a single coordinated plan to dispose of a separate major line of business or geographical area of operations. Classification as a discontinued operation occurs upon disposal or when the operation meets the criteria to be classified as held for sale. When an operation is classified as a discontinued operation, the comparative information in the statement of comprehensive income and the consolidated statement of cash flows are reclassified as if the operation had been discontinued from the start of the comparative period. In the statement of financial position, the comparative numbers are not reclassified. 3.3 Business combinations Business combinations are accounted for using the acquisition method. The cost of an acquisition is measured as the aggregate of the consideration transferred measured at acquisition date fair value and the amount of any non-controlling interest in the acquiree. For each business combination, the Group elects whether to measure the non-controlling interest in the acquiree at fair value or at the proportionate share of the acquiree’s identifiable net assets. Acquisition-related costs are expensed as incurred and included in administrative expenses. When the Group acquires a business, it assesses the financial assets and liabilities assumed for appropriate classification and designation in accordance with the contractual terms, economic circumstances and pertinent conditions as at the acquisition date. This includes the separation of embedded derivatives in host contracts by the acquiree. If the business combination is achieved in stages, the previously held equity interest is remeasured at its acquisition date fair value and any resulting gain or loss is recognized in profit or loss. Any contingent consideration to be transferred by the acquirer will be recognized at fair value at the acquisition date. Contingent consideration classified as an asset or liability that is a financial instrument, is measured at fair value with changes in fair value recognized either in profit or loss or as a change to other comprehensive income. Contingent consideration classified as equity is not remeasured and subsequent settlement is accounted for within equity. Non-controlling interests Non-controlling interests are presented as a separate component in equity. Changes in the Group’s interest in a subsidiary or joint operation that do not result in a loss of control are accounted for as an equity transaction. 3.4 Associates Associates are those companies in which the Group exercises significant influence, but does not have control over the financial and operating policies, which is presumed to exist when the Group holds 20 percent to 50 percent of the shareholding and related voting rights of the other entity. Associates are accounted for by applying the ‘equity method’. The Group’s share of profit or loss of an investee is recognized in profit or loss from the date when significant influence begins up to the date when that influence ceases. Investments in associates with negative shareholder’s equity are impaired and a provision for its losses is recognized only if the Group has a legal or constructive obligation to cover the losses. Equity changes in investees accounted for using the equity method that do not result from profit or loss are recognized directly in other comprehensive income. Unrealized gains on transactions between the Group and its associates are eliminated to the extent of the Group’s interest in the associates. Unrealized losses are also eliminated unless the transaction provides evidence of an impairment of the asset transferred. Unrealized gains on transactions between two associates are not eliminated. 3.5 Joint arrangements Under IFRS 11 investments in joint arrangements are classified as either joint ventures or joint operations depending on the contractual rights and obligations of each investor. Those joint arrangements that are assessed as joint ventures are accounted for using the equity method. Joint operations are accounted for using the line-by-line accounting. Under the equity method of accounting, interests in joint ventures are initially recognized at cost and adjusted subsequently for the group’s share in the post-acquisition profit or losses and movements in comprehensive income. When the Group’s share of losses in a joint venture equals or exceeds its interest in the joint venture (which includes any long-term interest that, in substance, forms part of the Group’s net investment in joint ventures), the Group does not recognize further losses, unless it has incurred obligations or made payments on behalf of the joint venture. NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 15 Orascom Construction PLC Year Ended Report 2019 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS Orascom Construction PLC A joint operation is proportionately consolidated until the date on which the Group ceases to have joint control over the joint operation. Upon loss of joint control, the Group reassesses the joint operation. 3.6 Foreign currency translation Foreign currency transactions The financial statements of subsidiaries and joint operations are prepared in the currencies which are determined based on the primary economic environment in which they operate (‘the functional currency’). Transactions in currencies other than the functional currency are recorded at the rates of exchange prevailing on the transaction dates. At each balance sheet date, monetary items denominated in foreign currencies are translated into the entity’s functional currency at the then prevailing closing-rates. Exchange differences arising on the settlement and translation of monetary items are included in profit or loss for the period except when deferred to other comprehensive income for available-for-sale assets and the effective part of qualifying cash flow hedges. Foreign operations Upon consolidation, the assets and liabilities of subsidiaries with a functional currency other than the US dollar are translated into US dollars using the exchange rates prevailing at the balance sheet date. Income and expense items are translated using exchange rates prevailing at the date of the transactions. Investments in joint ventures and associates with a functional currency other than the US dollar are translated into US dollar using exchange rates prevailing on the balance sheet date. Exchange rate differences arising during consolidation and on the translation of investments in subsidiaries, joint arrangements and associates are included in other comprehensive income, as ‘currency translation adjustments’. When a foreign operation is (partly) disposed of or sold, (the proportionate share of) the related currency translation differences that were recorded in other comprehensive income are recycled to profit or loss as part of the gain and loss on disposal or sale. Goodwill and fair value adjustments arising on the acquisition of a foreign subsidiary are considered as assets and liabilities denominated in the functional currency of the foreign subsidiary. 3.7 Financial instruments I. Recognition and initial measurement Trade receivables and debt securities issued are initially recognised when they are originated. All other financial assets and financial liabilities are initially recognised when the Group becomes a party to the contractual provisions of the instrument. A financial asset (unless it is a trade receivable without a significant financing component) or financial liability is initially measured at fair value plus, for an item not at fair value through profit or loss (FVTPL), transaction costs that are directly attributable to its acquisition or issue. A trade receivable without a significant financing component is initially measured at the transaction price. II. Classification and subsequent measurement On initial recognition, a financial asset is classified as measured at: amortised cost; fair value through other comprehensive income (FVOCI) – debt investment; FVOCI – equity investment; or FVTPL. Financial assets are not reclassified subsequent to their initial recognition unless the Group changes its business model for managing financial assets, in which case all affected financial assets are reclassified on the first day of the first reporting period following the change in the business model. A financial asset is measured at amortised cost if it meets both of the following conditions and is not designated as at FVTPL: • it is held within a business model whose objective is to hold assets to collect contractual cash flows; and • its contractual terms give rise on specified dates to cash flows that are solely payments of principal and interest on the principal amount outstanding. A debt investment is measured at FVOCI if it meets both of the following conditions and is not designated as at FVTPL: • it is held within a business model whose objective is achieved by both collecting contractual cash flows and selling financial assets; and • its contractual terms give rise on specified dates to cash flows that are solely payments of principal and interest on the principal amount outstanding. 18 Orascom Construction PLC Year Ended Report 2019 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS Orascom Construction PLC is presented in share premium. 3.10 Property, plant and equipment Items of property, plant and equipment are measured at cost less accumulated depreciation and any impairment. Cost includes expenditure that is directly attributable to the acquisition of the asset. The cost of self-constructed assets includes cost of material, direct labour, other directly attributable cost incurred to bring the asset ready to its intended use, cost of asset retirement obligations and any capitalized borrowing cost. Purchased software that is integral to the functionality of the related equipment is capitalized as part of that equipment. When parts of property, plant and equipment have different useful lives, they are accounted for as separate items (major components) of property, plant and equipment. Any gain or loss on disposal of an item of property, plant and equipment (calculated as the difference between the net proceeds from disposal and the carrying amount of the item) is recognized in profit or loss. Subsequent expenditures are capitalized only when it is probable that the future economic benefits associated with the expenditure will flow to the Group. Ongoing repairs and maintenance costs are expensed as incurred. Spare parts of property, plant and equipment are recognized under property, plant and equipment if the average turn-over exceeds 12 months or more, otherwise they are recognized within inventories. Property, plant and equipment under construction Expenditures incurred for purchasing and constructing property, plant and equipment are initially recorded as ‘under construction’ until the asset is completed and becomes ready for use. Upon the completion of the assets, the recognized costs are reclassified from ‘under construction’ to its final category of property, plant and equipment. Assets under construction are not depreciated and measured at cost less any impairment losses. Depreciation Items of property, plant and equipment are depreciated on a straight line basis through profit or loss over the estimated useful lives of each component, taking into account any residual values. Land is not depreciated. Items of property, plant and equipment are depreciated from the date that they are installed and are ready for use, or in respect of internally constructed assets, from the date that the asset is completed and ready for use. The estimated useful lives for items of property, plant and equipment are as follows: Years Buildings 10 - 50 Equipment 5 - 25 Fixtures, fittings and scaffolding 3 - 10 Depreciation methods, useful lives and residual values are reviewed at each reporting date. Borrowing costs Borrowing costs attributable to the acquisition, construction or production of assets that necessarily take a substantial period of time to get ready for their intended use or sale, are recognized as part of the cost of those assets. All other borrowing costs are recognized as ‘Finance cost’ in the period in which they are incurred. 3.11 Goodwill Goodwill represents the excess of the cost, being the excess of the aggregate of the consideration transferred including the amount recognized for non-controlling interest, of an acquisition over the fair value of the Group’s share in the net identifiable assets and liabilities assumed of the acquired subsidiary at the date of acquisition. If the fair value of the net assets acquired is in excess of the aggregate consideration transferred, the gain is recognized in profit or loss. Goodwill on acquisition of entities that qualify as subsidiaries is presented under ‘Intangible assets’. Goodwill on acquisitions of entities that qualify as associates or joint ventures is included in ‘Associates’. Goodwill on acquisition of subsidiaries is allocated to cash-generating units for the purpose of impairment testing. The allocation is made to those cash-generating units or group of units that are expected to benefit from the business combination through which the goodwill arose, based on past experience. Goodwill is initially measured at cost. After initial recognition, goodwill is measured at cost less any impairment losses. Goodwill is tested 19 Orascom Construction PLC Year Ended Report 2019 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS Orascom Construction PLC annually for impairment; an impairment loss is recognized for the amount by which the cash-generating unit’s carrying amount exceeds its recoverable amount. The recoverable amount of the cash-generating unit is determined by the higher of its fair value less cost to sell and its value in use. Impairment losses on goodwill are not reversed. Gains and losses on the disposal of an entity include the carrying amount of goodwill related to the entity sold. All other expenditures on internally generated goodwill and other intangible assets are recognized in profit or loss as incurred. 3.12 Inventories Inventories are measured at the lower of cost and net realisable value. The cost of inventories of raw materials, spare parts and supplies cost are based on weighted average principle or the first-in-first-out method, and includes expenditure incurred in acquiring the inventories and bringing them to their existing location and condition. In case of manufactured inventories and work in progress, cost includes an appropriate share of production overheads based on normal operating capacity. Net realisable value is the estimated selling price in the ordinary course of business, less the estimated costs of completion and selling expenses. 3.13 Impairment of assets Non-derivative financial assets The Group recognises loss allowances for ECLs on: • financial assets measured at amortised cost; • debt investments measured at FVOCI; and • contract assets. Loss allowances are measured on either of the following bases: • 12-month ECLs: these are ECLs that result from possible default events within the 12 months after the reporting date; and • lifetime ECLs: these are ECLs that result from all possible default events over the expected life of a financial instrument. The Group measures loss allowances at an amount equal to lifetime ECLs, except for the following, which are measured at 12-month ECLs: • debt securities that are determined to have low credit risk at the reporting date; and • other debt securities and bank balances for which credit risk (i.e. the risk of default occurring over the expected life of the financial instrument) has not increased significantly since initial recognition. The Group measures loss allowances for trade receivables and contract assets at an amount equal to lifetime ECLs. When determining whether the credit risk of a financial asset has increased significantly since initial recognition and when estimating ECLs, the Group considers reasonable and supportable information that is relevant and available without undue cost or effort. This includes both quantitative and qualitative information and analysis, based on the Group’s historical experience and informed credit assessment and including forward-looking information. The Group assumes that the credit risk on a financial asset has increased significantly if it is more than 90 days past due. The Group considers a financial asset to be in default when: • the trade receivable is unlikely to pay its credit obligations to the Group in full, without recourse by the Group to actions such as realising security (if any is held); or • the financial asset is more than 90 days past due. The maximum period considered when estimating ECLs is the maximum contractual period over which the Group is exposed to credit risk. Measurement of ECLs: ECLs are a probability-weighted estimate of credit losses. Credit losses are measured as the present value of all cash shortfalls (i.e. the difference between the cash flows due to the entity in accordance with the contract and the cash flows that the Group expects to receive). ECLs are discounted at the effective interest rate of the financial asset. Credit-impaired financial assets At each reporting date, the Group assesses whether financial assets carried at amortised cost are credit-impaired. A financial asset is ‘credit- impaired’ when one or more events that have a detrimental impact on the estimated future cash flows of the financial asset have occurred. Presentation of impairment Loss allowances for financial assets measured at amortised cost are deducted from the gross carrying amount of the assets. For debt securities at FVOCI, the loss allowance is recognised in OCI, instead of reducing the carrying amount of the asset. 20 Orascom Construction PLC Year Ended Report 2019 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS Orascom Construction PLC Derivative financial assets Derivative financial assets are measured at fair value and the Group investigates whether the counterparty creditworthiness gives rise to an impairment. Non-financial assets Non-financial assets that have an indefinite useful life, for example goodwill, are not subject to amortization but are tested annually for impairment or more frequently when indicators arise. Assets with a finite useful life are subject to depreciation or amortization and are reviewed (at least at the balance sheet date) for impairment whenever events or changes in circumstances indicate that the carrying amount may not be fully recoverable. An impairment loss is recognized for the amount by which the assets’ carrying amount exceeds its recoverable amount. The recoverable amount is the higher of an asset’s fair value less costs of disposal and its value in use. For the purposes of assessing impairment, assets are grouped based on the lowest level for which there are separately identifiable cash flows (cash-generating units). Impairment is recognized as an expense in profit or loss. Non-financial assets, which are impaired, are tested periodically to determine whether the recoverable amount has increased and the impairment has to be (partially) reversed. Impairment losses on goodwill are not reversed. Reversal of impairments is only permitted if in a subsequent period after an impairment loss has been recognized, the amount of the impairment loss decreases and the decrease can be related objectively to an event after the impairment loss was recognized. 3.14 Provisions Provisions are recognized when a present legal or constructive obligation as a result of a past event exists, and it is probable that an outflow of economic benefits is required to settle the obligation. The non-current part of provisions is determined by discounting the expected future cash flows at a pre-tax rate that reflects current market assessments of the time value of money and the risks specific to the liability. The unwinding of the discount is recognized as finance cost. Warranties A provision for warranties is recognized with respect to services performed and goods sold. Restructuring A provision for restructuring is recognized when the Group has approved a detailed and formal restructuring plan, and the restructuring either has commenced, the Group has committed itself by public announcement or is expected to commit itself to a restructuring plan. Onerous contract A provision for contracts onerous loss is recognized if the Group expects that the unavoidable costs of meeting the obligations under a contract exceed the economic benefits expected to be received under it. A provision for contracts onerous loss is measured at the present value of the lower of the expected cost of terminating the contract and the expected net cost of continuing with the contract. Before a provision is established, the Group recognizes any impairment loss on the assets associated with that contract. Legal The Group is subject to legal and regulatory proceedings in various jurisdictions. Such proceedings may result in criminal or civil sanctions, penalties or disgorgements against the Group. If it is probable that an obligation to the Group exists, which will result in an outflow of resources and the amount of the outflow can be reliably estimated, a provision is recognized. 3.15 Revenue from Contracts with Customers The Group recognises revenue from contracts with customers based on the five steps model set out in IFRS 15: Step 1 Identify the contract(s) with a customer: A contract is defined as an agreement between two or more parties that creates enforceable rights and obligations and sets out the criteria for every contract that must be met. Step 2 Identify the performance obligations in the contract: A performance obligation is a unit of account and a promise in a contract with a customer to transfer a good or service to the customer. 23 Orascom Construction PLC Year Ended Report 2019 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS Orascom Construction PLC Policy applicable from 1 January 2019 The Group has applied IFRS 16 using the modified retrospective approach and therefore the comparative information has not been restated and the effect of initial application is recognized in retained earnings at 1 January 2019. On transition to IFRS 16, the Group elected to apply the practical expedient to grandfather the assessment of which transactions are leases. It applied IFRS 16 only to contracts that were previously identified as leases. Contracts that were not identified as leases under IAS 17 was not reassessed for whether there is a lease. Therefore, the definition of a lease under IFRS 16 was applied only to contracts entered into or changed on or after 1 January 2019. At inception of a contract, the Group assesses whether a contract is, or contains, a lease. A contract is, or contains, a lease if the contract conveys the right to control the use of an identified asset for a period of time in exchange for consideration. To assess whether a contract conveys the right to control the use of an identified asset, the Group assesses whether: • the contract involves the use of an identified asset - this may be specified explicitly or implicitly, and should be physically distinct or represent substantially all of the capacity of a physically distinct asset. If the supplier has a substantive substitution right, then the asset is not identified; • the Group has the right to obtain substantially all of the economic benefits from use of the asset throughout the period of use; and • the Group has the right to direct the use of the asset. The Group has this right when it has the decision- making rights that are most relevant to changing how and for what purpose the asset is used. In rare cases where the decision about how and for what purpose the asset is used is predetermined, the Group has the right to direct the use of the asset if either: • the Group has the right to operate the asset; or • the Group designed the asset in a way that predetermines how and for what purpose it will be used. The Group recognizes a right-of-use asset and a lease liability at the lease commencement date. The right-of-use asset is initially measured at cost, which comprises the initial amount of the lease liability adjusted for any lease payments made at or before the commencement date, plus any initial direct costs incurred and an estimate of costs to dismantle and remove the underlying asset or to restore the underlying asset or the site on which it is located, less any lease incentives received. The right-of-use asset is subsequently depreciated using the straight-line method from the commencement date to the earlier of the end of the useful life of the right-of-use asset or the end of the lease term. The estimated useful lives of right-of-use assets are determined on the same basis as those of property and equipment. In addition, the right-of-use asset is periodically reduced by impairment losses, if any, and adjusted for certain remeasurements of the lease liability. The lease liability is initially measured at the present value of the lease payments that are not paid at the commencement date, discounted using the interest rate implicit in the lease or, if that rate cannot be readily determined, the Component’s incremental borrowing rate. Lease payments included in the measurement of the lease liability comprise the following: • fixed payments, including in-substance fixed payments; • variable lease payments that depend on an index or a rate, initially measured using the index or rate as at the commencement date; • amounts expected to be payable under a residual value guarantee; and • the exercise price under a purchase option that the Group is reasonably certain to exercise, lease payments in an optional renewal period if the Group is reasonably certain to exercise an extension option, and penalties for early termination of a lease unless the Group is reasonably certain not to terminate early. The lease liability is subsequently increased by the interest cost on the lease liability and decreased by lease payments made. It is remeasured when there is a change in future lease payments arising from a change in an index or rate, if there is a change in the Group’s estimate of the amount expected to be payable under a residual value guarantee, or if the Group changes its assessment of whether it will exercise a purchase, extension or termination option. When the lease liability is remeasured in this way, a corresponding adjustment is made to the carrying amount of the right-of-use asset, or is recorded in profit or loss if the carrying amount of the right-of-use asset has been reduced to zero. The Group presents right-of-use assets in ‘property, plant and equipment’ and lease liabilities in ‘trade and other payables’ in the statement of financial position. 24 Orascom Construction PLC Year Ended Report 2019 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS Orascom Construction PLC Short-term leases and leases of low-value assets The Group has elected not to recognize right-of-use assets and lease liabilities for short-term leases that have a lease term of 12 months or less and leases of low-value assets. The Group recognizes the lease payments associated with these leases as an expense on a straight-line basis over the lease term. 3.18 Finance income and cost Finance income comprises: • interest income on funds invested; • gains on the disposal of financial assets; • fair value gains on financial assets at fair value through profit or loss; • gains on the re-measurement to fair value of any pre-existing interest in an acquired business combination; • gains on hedging instruments that are recognized in profit or loss and reclassifications of amounts previously recognized in other comprehensive income; and • interest income is recognized as it accrues in profit or loss, using the effective interest method. Dividend income is recognized in profit or loss on the date that the Group’s right to receive payment is established, which in the case of quoted securities is normally the ex-dividend date. Finance cost comprise: • interest expense on borrowings; • unwinding of the discount on provisions and contingent consideration; • losses on disposal of financial assets; • fair value losses on financial assets at fair value through profit or loss; and • impairment losses recognized on financial assets (other than trade receivables). Borrowing costs that are not directly attributable to the acquisition, construction or production of a qualifying asset are recognized in profit or loss are expensed as incurred. Foreign currency gains and losses are recognized on a net basis as either finance income or finance cost depending on whether foreign currency movements are in a net gain or net loss position. 3.19 Employee benefits Defined contribution plan Certain Group subsidiaries provide ‘pension plans’, ‘end of service remuneration plans’ and ‘long-term service benefits’. These pension plans qualify as defined contribution plans. Obligations for contributions to defined contribution plans are expensed as the related service is provided. Prepaid contributions are recognized as an asset to the extent that a cash refund or a reduction in future payments is available. Short-term employee benefits Short-term employee benefits are expensed as the related service is provided. A liability is recognized for the amount expected to be paid if the Group has a present legal or constructive obligation to pay this amount as a result of past service provided by the employee and the obligation can be estimated reliably. Long-term employee benefits The Group long-term employee benefits are recognized if the Group has a present legal or constructive obligation to pay this amount as a result of past service provided by the employee and the obligation can be estimated reliably to determine its present value. The discount rate is the yield at the balance sheet date on triple-A (‘AAA’) credit rated bonds that have maturity dates approximating to the terms of the Group’s obligations. Re-measurements are recognized in profit or loss in the period in which they arise. Termination benefits 25 Orascom Construction PLC Year Ended Report 2019 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS Orascom Construction PLC Employee termination benefits are payable when employment is terminated before the normal retirement date, or whenever an employee accepts voluntary redundancy in exchange for these benefits. OC PLC recognizes termination benefits when OC PLC is demonstrably committed to either terminating the employment of current employees according to a detailed formal plan without possibility of withdrawal, or when OC PLC is providing termination benefits as a result of an offer made to encourage voluntary redundancy. Benefits falling due more than 12 months after balance sheet date are discounted to present value. 3.20 Income tax Current tax Current tax is the expected tax payable or receivable on the taxable income or loss for the year, using tax rates enacted or substantively enacted at the reporting date, and any adjustment to tax payable in respect of previous years. Current tax payable also includes any tax liability arising from the declaration of dividends. Current income tax assets and liabilities are offset when there is a legally enforceable right to offset and when the current income tax relates to the same fiscal authority. Deferred tax Deferred income tax liabilities are recognized for all taxable temporary differences arising between the tax bases of assets and liabilities and their carrying amounts in the consolidated financial statements (‘liability’ method). Deferred income tax assets are recognized for all deductible temporary differences, unused carry forward losses and unused carry forward tax credits, to the extent that it is probable that future taxable profit will be available against which the deferred income tax assets can be utilized. Deferred income tax is not recognized if it arises from initial recognition of an asset or liability in a transaction that is not a business combination and at the time of the transaction affects neither accounting nor taxable profit or loss. Also, no deferred income tax is recognized regarding the initial recognition of goodwill. Deferred income tax is measured at the tax rates that are expected to apply to the period when the asset is realized or the liability is settled, based on tax rates (and tax laws) that have been enacted or substantively enacted at the balance sheet date. Deferred income tax assets and liabilities are offset when there is a legally enforceable right to offset current tax assets against current tax liabilities and when the deferred income tax relates to the same fiscal authority. 3.21 Segment reporting An operating segment is a component of an entity that engages in business activities for which it may earn revenues and incur expenses (including revenues and expenses relating to transactions with other components of the same entity), whose operating results are regularly reviewed by the entity’s Chief Operating Decision Maker (CODM) to make decisions about resource allocation to the segment and to assess its performance and for which discrete financial information is available. The Group determines and presents operating segments on the basis of information that internally is provided to the CODM during the period. 3.22 Consolidated statement of cash flows The consolidated statement of cash flows has been prepared using the ‘indirect’ method. Cash flows in foreign currencies have been translated applying average exchange rates. Currency translation differences are shown separately in the consolidated statement of cash flows. Cash flows from investing activities consist mostly of investments and divestments in property, plant and equipment, intangible assets, and acquisitions insofar as these are paid for in cash. Acquisitions or disposals of subsidiaries are presented as acquisition of subsidiary, net of cash, acquired. Cash flows relating to capitalized borrowing cost are presented as cash flows from investment activities similar as other cash flows to acquire the qualifying asset. 3.23 Earnings per share Earnings per ordinary share are calculated by dividing the profit or loss (net) attributable to holders of ordinary shares by the weighted average number of ordinary shares outstanding during the year. In making this calculation the (ordinary) treasury shares are deducted from the number of ordinary shares outstanding. The calculation of the diluted earnings per share is based on the weighted average number of ordinary shares outstanding plus the potential increase as a result of the conversion of convertible bonds and the settlement of share-based compensation plans (share option plans). Anti-dilutive effects are not included in the calculation. With regard to the convertible notes it is assumed that these are converted in full. An adjustment is made to profit or loss (net) to eliminate interest charges, whilst allowing for effect of taxation. Regarding equity-settled share option plans it is assumed that all outstanding plans will vest. The potential increase arising from share option plans is 28 Orascom Construction PLC Year Ended Report 2019 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS Orascom Construction PLC to the customer over the period of construction contract. This method places considerable importance on accurate estimates of the extent of progress towards completion and may involve estimates on the scope of deliveries and services required for fulfilling the contractually defined obligations. In addition, in determining the transaction price, the Group make significant judgment as to whether any variable consideration to be included in the contract price. The significant estimates include total contract costs, remaining costs to completion, contract price, contract risks, including technical, political and regulatory risks, and other judgments. Management of the operating divisions continually review all estimates involved in such construction contracts, including commercial feasibility, and adjusts them as necessary. Income taxes OC PLC is subject to income taxes in numerous jurisdictions. Estimates are required in determining the worldwide provision for income taxes. There are some transactions and calculations for which the ultimate tax position is uncertain during the ordinary course of business. The Group recognizes provisions for anticipated tax audit issues based on estimates of whether additional taxes will be due. Where the final tax outcome of these matters is different from amounts that were initially recorded, such differences will impact the current income tax and deferred tax provisions in the period in which such determination is made. OC PLC recognizes deferred tax assets to the extent that it is probable that future taxable profits will be available for the deferred tax asset to be recovered. This is based on estimates of taxable future income by jurisdiction in which OC PLC operates and the period over which deferred tax assets are expected to be recoverable. In the event that actual results or new estimates differ from previous estimates and depending on the possible tax strategies that may be implemented, changes to the recognition of deferred tax assets could be required, which could impact the financial position and profit or loss. Asset held for sale and discontinued operations OC PLC used judgment in determining what a disposal group or a discontinued operation is and when it qualifies for reclassification according to IFRS 5 (management commitment, ready for sale / demerger, highly probable, completion within one year). In determining what is a disposal group or a discontinued operation, OC PLC judges whether the cash flows of the disposal group or a discontinued operation can be distinguished from the rest of the group, what determines a major line of operation and whether a single coordinated plan to dispose exists and at what date it was formally approved. 6. Financial risk and capital management Overview The Group has exposure to the following risks arising from financial instruments: • Credit risk • Liquidity risk • Market risk These risks arise from exposures that occur in the normal course of business and are managed on a consolidated company basis. This note presents information about the Group’s exposure to each of the above risks, the Group’s objectives, policies and processes for measuring and managing risk, and the Group’s management of capital. Risk management framework Senior management has an overall responsibility for the establishment and oversight of the Group’s risk management framework. The Board is responsible for developing and monitoring the Group’s risk management policies. The Group’s risk management policies are established to identify and analyze the risks faced by the Group, to set appropriate risk limits and controls and to monitor risks and adherence to limits. Risk management policies and systems are reviewed regularly to reflect changes in market conditions and the Group’s activities. The Group through its training and management standards and procedures, aims to develop a disciplined and constructive control environment in which all employees understand their roles and obligations. The Audit Committee oversees how management monitors compliance with the Group’s risk management policies and procedures, and reviews the adequacy of the risk management framework in relation to the risks faced by the Group. The Audit Committee is assisted in its oversight role by the Internal Audit Department. The Internal Audit Department undertakes both regular and ad hoc reviews of risk management controls and procedures, the results of which are reported to the Audit Committee. 6.1 Exposure to credit risk The Group establishes an allowance for impairment that represents its estimate of incurred losses in respect of trade and other receivables. The main components of this allowance are a specific loss component that relates to individually significant exposures. The carrying amount 29 Orascom Construction PLC Year Ended Report 2019 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS Orascom Construction PLC of financial assets represents the maximum credit exposure. With respect to transactions with financial institutions, the group sets limits to the credit worthiness rating of the counterparty. The maximum credit risk is the carrying amount of financial instruments, for an overview reference is made to the tables financial instruments by category. The major exposure to credit risk at the reporting date was as follows: $ millions Note 31 December 2019 31 December 2018 Trade and other receivables (excluding prepayments) (9) 1,292.5 1,249.4 Contract work in progress (13) 869.8 526.7 Cash and cash equivalents (excluding cash on hand) (14) 373.8 401.8 Total 2,536.1 2,177.9 The major exposure to credit risk for trade and other receivables by geographic region was as follows: $ millions 31 December 2019 31 December 2018 Middle East and Africa 948.4 880.3 Asia and Oceania 147.1 148.7 Europe and United States 197.0 220.4 Total 1,292.5 1,249.4 6.2 Liquidity risk Liquidity risk is the risk that the Group will encounter difficulty in meeting the obligations associated with its financial liabilities that are settled by delivering cash or another financial asset. The Group’s approach to managing liquidity is to ensure, as far as possible, that it will always have sufficient liquidity to meet its liabilities when due, under both normal and stressed conditions, without incurring unacceptable losses or risking damage to the Group’s reputation. This is also safeguarded by using multiple financial institutions in order the mitigate any concentration of liquidity risk. The availability of cash is monitored internally at Group level, on an ongoing basis by the corporate treasury department. In addition management prepared at closing date a cash flow projection to assess the ability of the Group to meet its obligations. The following are the contractual maturities of financial liabilities, including estimated interest payments and exclude the impact of netting arrangements. At 31 December 2018 $ millions Note Carrying amount Contractual cash flow 6 months or less 6–12 months 1–5 years Financial liabilities Loans and borrowings (18) 375.3 416.0 217.2 196.2 2.6 Trade and other payables (19) 1,068.7 1,068.7 1,025.7 - 43.0 Advanced payments from construction contracts 606.0 606.0 606.0 - - Total 2,050.0 2,090.7 1,848.9 196.2 45.6 30 Orascom Construction PLC Year Ended Report 2019 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS Orascom Construction PLC At 31 December 2019 $ millions Note Carrying amount Contractual cash flow 6 months or less 6–12 months 1–5 years Financial liabilities Loans and borrowings (18) 95.7 105.2 53.9 45.5 5.8 Trade and other payables (excluding lease obligation) (19) 1,230.4 1,230.4 1,185.8 - 44.6 Lease obligation (19) 18.3 21.9 2.9 3.1 15.9 Advanced payments from construction contracts 1,096.1 1,096.1 1,096.1 - - Total 2,440.5 2,453.6 2,338.7 48.6 66.3 The interest on floating rate loans and borrowings is based on forward interest rates at year-end. This interest rate may change as the market interest rate changes. 6.3 Market risk Market risk is the risk that changes in market prices, such as foreign exchange rates, interest rates, commodity prices and equity prices will affect the Group’s income or the value of its holdings of financial instruments. The objective of market risk management is to manage and control market risk exposures within acceptable parameters, while optimizing the return. The Group is exposed to foreign currency risk arising in separate ways: Foreign exchange translation exposure Due to the Group’s international presence, OC PLC’s Financial Statements are exposed to foreign exchange fluctuations as these affect the translation of the subsidiaries’ assets and liabilities presented in foreign currencies to the US dollar (the Group’s presentation currency). The currencies concerned are mainly Egyptian Pound, Algerian Dinar and Euro. Foreign exchange translation exposure is considered a part of doing business on an international level; this risk is not actively managed, nor is it hedged. OC PLC is not exposed to Saudi Riyal, UAE Dirham and Qatar Riyal. These currencies are pegged to the US dollar. Foreign exchange transaction exposure The Group entities predominantly execute their activities in their respective functional currencies. Some Group subsidiaries are, however, exposed to foreign currency risks in connection with the scheduled payments in currencies that are not their functional currencies. In general this relates to foreign currency denominated supplier payables due to project procurement, capital expenditures and receivables. The Group monitors the exposure to foreign currency risk arising from operating activities. The Group is exposed to foreign exchange transaction exposure to the extent that there is a mismatch between the currencies in which sales, purchases and borrowings are denominated and the respective functional currencies of Group companies. The functional currencies of Group companies are primarily Euro, US Dollar, Egyptian Pound, Saudi Riyal, Algerian Dinar and UAE Dirham. The Group uses foreign exchange contracts to manage its foreign exchange transaction exposure. No hedge accounting is applied; therefore all fair value changes are recognised in profit and loss. The summary of quantitative data about the Group’s exposure to foreign exchange transaction exposure provided to management of the Group based on its risk management policy for the main currencies was as follows: At 31 December 2018 $ millions EUR EGP Cash and cash equivalents (including loans and borrowings) 65.4 21.2 Trade and other receivables 16.6 134.2 Trade and other payables (30.5) (81.7) 33 Orascom Construction PLC Year Ended Report 2019 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS Orascom Construction PLC 7. Property plant and equipment $ millions Land Buildings Equipment Fixtures, fittings and scaffollding Under construction Total Cost 5.8 72.3 250.9 126.0 5.1 460.1 Accumulated depreciation - (28.2) (189.1) (83.5) - (300.8) At 1 January 2019 5.8 44.1 61.8 42.5 5.1 159.3 Movements in the carrying amount: Additions purchased during the year 6.9 19.1 25.9 8.9 2.5 63.3 Disposals (0.1) (2.8) (2.6) (0.9) - (6.4) Depreciation - (5.8) (24.7) (21.3) - (51.8) Transfers - 0.3 2.2 0.5 (3.0) - Effect of movement in exchange rates 1.3 4.5 6.5 4.0 0.6 16.9 At 31 December 2019 8.1 15.3 7.3 (8.8) 0.1 22.0 Cost 13.9 93.7 273.3 135.9 5.2 522.0 Accumulated depreciation - (34.3) (204.2) (102.2) - (340.7) At 31 December 2019 13.9 59.4 69.1 33.7 5.2 181.3 Property, plant and equipment’ comprise owned and leased assets: $ millions 2019 Owned assets 162.9 Right to use 18.4 At 31 December 181.3 The information about ‘Right to use’ for which assets of the Group is presented below: $ millions Buildings Equipment Total Cost 17.8 6.0 23.8 Depreciation (3.4) (2.0) (5.4) At 31 December 2019 14.4 4.0 18.4 8. Goodwill $ millions Goodwill Cost 13.8 At 1 January 2019 13.8 Movements in the carrying amount: Additions - Impairment - At 31 December 2019 - Cost 13.8 Impairment - At 31 December 2019 13.8 On 31 July 2012, the Group acquired the Weitz Company LLC, a United States general contractor based in Des Moines, Iowa, resulting in USD 12.4 million of goodwill. The transaction was completed on 12 December 2012. On 2 April 2015, the Group acquired Alico resulting in 34 Orascom Construction PLC Year Ended Report 2019 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS Orascom Construction PLC USD 1.4 million of goodwill. Goodwill was tested for impairment in the 4th Quarter of 2019 or whenever an impairment trigger exists. No impairment was recorded in the year 2019. The impairment test is based on cash-flow projections of the five year plan. Key assumptions used in the projections are: i. Revenue growth: based on expected growth in 2020 as a result of development in backlog and expected general market growth in the USA. ii. Margin development: based on actual experience and management’s longer-term projections. The terminal value was calculated using a long-term average market growth rate of 2.5%. The estimated cash flows are discounted to their present value using a weighted average cost of capital of 9.73%. An increase or decrease of 100 basis points in the assumed WACC or the terminal growth rate would not have resulted in an impairment. 9. Trade and other receivables $ millions 31 December 2019 31 December 2018 Trade receivables (gross) 640.6 646.0 Allowance for trade receivables (12.3) (11.9) Trade receivables (net) 628.3 634.1 Trade receivables due from related parties (Note 27) 25.7 52.2 Prepayments 10.4 8.9 Other tax receivable 62.4 74.5 Supplier advanced payments 203.9 176.7 Other investments 2.4 6.3 Retentions 222.7 179.9 Derivative financial instruments 1.5 - Other receivables 145.6 125.7 Total 1,302.9 1,258.3 Non-current 44.4 15.2 Current 1,258.5 1,243.1 Total 1,302.9 1,258.3 The carrying amount of ‘Trade and other receivables’ as at 31 December 2019 approximates its fair value. Prepayments relate for the largest part to the amounts prepaid to sub-contractors, retentions related for the largest part to amounts withheld by customers resulting from contractual clauses. The aging of gross trade receivables at the reporting date that were as follows: $ millions 31 December 2019 31 December 2018 Neither past due nor impaired 387.7 409.8 Past due 1 - 30 days 32.4 29.5 Past due 31 - 90 days 58.9 21.6 Past due 91 - 360 days 70.8 110.1 More than 360 days 90.8 75.0 Total 640.6 646.0 35 Orascom Construction PLC Year Ended Report 2019 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS Orascom Construction PLC Management believes that the unimpaired amounts that are past due by more than 30 days are collectible in full, based on historic payment behaviour and extensive analysis of customer credit risk, including underlying customers’ credit ratings if they are available. The movement in the allowance for impairment in respect of trade receivables during the year ended 31 December 2019 was as follows: $ millions 2019 2018 At 1 January (11.9) (27.1) Unused amounts reversed 0.9 - Amount formed (0.7) (0.5) Other (0.6) 15.7 At 31 December (12.3) (11.9) Derivative financial instruments include the following: Foreign exchange contracts The group entered into forward exchange contracts to hedge its currency risk exposure to the Egyptian Pound in certain projects. As at 31 December 2019 the remaining notional amounts of these contracts are USD 70 million related to the Egyptian Pound. The foreign exchange contracts have a fair value of USD 1.5 million. The Group does not apply hedge accounting, therefore all fair value changes related to these financial instruments are recognized in profit and loss. 10. Equity accounted investees The following table shows the movement in the carrying amount of the Group’s associates and joint ventures: $ millions 2019 2018 At 1 January 419.5 421.8 Acquisition 8.3 - Share in results 27.1 56.3 Dividends (22.8) (43.2) Effect of movement in exchange rates (2.1) (15.4) At 31 December 430.0 419.5 The entity disclosed under ‘Equity accounted investees’ that is significant to the Group is BESIX. BESIX Group (BESIX) Established in 1909 in Belgium, BESIX is a global multi-service group offering engineering, procurement and construction (EPC) services. BESIX operates in the construction, real estate and concession sectors in 15 countries focusing on Europe, Africa, the Middle East and Australia. Their core construction competencies include buildings, infrastructure and environmental projects, industrial civil engineering, maritime and port works and real estate development. In addition to EPC services, BESIX is active in real estate development and holds concessions in several Public Private Partnerships (PPP) and design, build, finance, and maintain/operate (DBFM) contracts, through which it develops, operates and maintains projects. 38 Orascom Construction PLC Year Ended Report 2019 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS Orascom Construction PLC 13. Contracts work in progress / billing in excess of construction contracts $ millions 31 December 2019 31 December 2018 Costs incurred on incomplete contracts (including estimated earnings) 21,850.7 17,848.1 Less: billings to date (Net) (21,356.2) (17,732.2) Total 494.5 115.9 Presented in the consolidated statements of financial position as follows: Construction contracts in progress - current assets 869.8 526.7 Billing in excess on construction contracts - current liabilities (375.3) (410.8) Total 494.5 115.9 14. Cash and cash equivalents $ millions 31 December 2019 31 December 2018 Cash on hand 1.0 0.7 Bank balances 355.4 368.3 Restricted funds 6.7 6.5 Restricted cash 11.7 27.0 Total 374.8 402.5 Restricted funds The restricted amounts mostly relate to letters of credits of Orascom E&C (USD 4.7 million) and Alico (USD 1.3 million) and to letters of guarantee of OCI Algeria (USD 0.1 million), Alico (USD 0.1 million), and United Holding Company (USD 0.5 million). Restricted cash Restricted cash relates to amounts withheld in relation to amounts restricted for use for an amount of USD 11.7 million as collateral against loans. 15. Share capital The movements in the number of shares (nominal value USD 1 per share) can be summarized as follows: 2019 2018 At 1 January 116,761,379 116,761,379 At 31 December - fully paid 116,761,379 116,761,379 At 31 December (in millions of USD) 116.8 116.8 The shareholders of the Company at the Extraordinary General Meeting (EGM) held on 9 May 2018, approved the resolution passed by the Board of Directors for reducing the share premium of the Company with USD 281.3 million. 39 Orascom Construction PLC Year Ended Report 2019 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS Orascom Construction PLC 16. Reserves $ millions Currency translation Total At 1 January 2018 (318.8) (318.8) Currency translation differences (16.8) (16.8) At 31 December 2018 (335.6) (335.6) $ millions Currency translation Total At 1 January 2019 (335.6) (335.6) Currency translation differences 31.0 31.0 At 31 December 2019 (304.6) (304.6) 17. Non-controlling interest 31 December 2018 $ million United Holding Company Orascom Saudi Suez Industrial Development Other individual insignificant entities Total Non-controlling interest percentage 43.5% 40.0% 39.5% Non-current assets 5.5 0.2 4.4 4.8 14.9 Current assets 35.6 110.8 19.7 3.0 169.1 Non-current liabilities - (1.0) (10.9) (0.1) (12.0) Current liabilities (21.6) (102.6) (5.8) (2.4) (132.4) Net assets 19.5 7.4 7.4 5.3 39.6 Revenue 45.1 20.0 4.5 0.7 70.3 Profit 7.5 (2.9) 1.4 4.0 10.0 Other comprehensive income - - (0.1) (0.1) (0.2) Total comprehensive income 7.5 (2.9) 1.3 3.9 9.8 31 December 2019 $ million United Holding Company Orascom Saudi Suez Industrial Development Other individual insignificant entities Total Non-controlling interest percentage 43.5% 40.0% 39.5% Non-current assets 7.1 - 6.4 1.7 15.2 Current assets 47.9 101.4 21.2 3.2 173.7 Non-current liabilities - (0.9) (11.8) - (12.7) Current liabilities (28.9) (95.1) (5.5) (2.9) (132.4) Net assets 26.1 5.4 10.3 2.0 43.8 Revenue 55.5 12.6 4.4 5.8 78.3 Profit 7.4 (2.0) 2.4 2.0 9.8 Other comprehensive income 2.5 - 1.0 0.1 3.6 Total comprehensive income 9.9 (2.0) 3.4 2.1 13.4 40 Orascom Construction PLC Year Ended Report 2019 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS Orascom Construction PLC 18. Loans and borrowings Borrowing Company Interest rate Date of maturity Long term portion Short term portion Bank facilities Total Orascom Construction USD: LIBOR + 2.28 - 4.00% EUR: LIBOR + 2.21 - 5.00% EGP: Corridor 17.25 - 20.75% Annual - - 286.1 286.1 Orascom Saudi Saibor + 3.00% Annual - 26.2 - 26.2 Orascom Construction Industries- Algeria Fixed 6.97% 04/2019 - 15.2 - 15.2 The Weitz Group, LLC Multiple rates Multiple 2.3 12.3 - 14.6 Contrack Watts Inc LIBOR + 2.5% Annual - - 24.9 24.9 Other Multiple rates - - - 8.3 8.3 Total as of 31 December 2018 2.3 53.7 319.3 375.3 Borrowing Company Interest rate Date of maturity Long term portion Short term portion Bank facilities Total Orascom Construction USD: LIBOR + 2.0 - 2.5% EGP: Corridor 12.40 - 13.35% Annual - - 40.7 40.7 OCI Saudi Limited Saibor + 1.80% Annual 3.6 8.7 - 12.3 Orascom Construction Industries- Algeria Fixed 6.97% 10/2020 - 4.8 - 4.8 The Weitz Group, LLC Multiple rates Multiple 1.8 0.6 - 2.4 Contrack Watts Inc LIBOR + 2.5% Annual - - 11.1 11.1 Other Multiple rates - - 13.8 10.6 24.4 Total as of 31 December 2019 5.4 27.9 62.4 95.7 Information about the Group’s exposure to interest rate, foreign currency and liquidity risk is disclosed in the financial risk and capital management paragraph in Note 6. The fair value of loans and borrowings approximates the carrying amount. Certain covenants apply to the aforementioned borrowings. 43 Orascom Construction PLC Year Ended Report 2019 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS Orascom Construction PLC management and employees in critical positions or high performers. These awards will carry a 3-year vesting period. They will be focused on EBITDA, cash flow from operations and share performance. The plan is cash-settled; no transfer of equity instruments will take place under this plan. 22. Other income $ millions 31 December 2019 31 December 2018 Net gain on sale of property, plant and equipment 1.7 1.6 Scrap and other 13.3 6.7 Total 15.0 8.3 23. Net finance cost $ millions 31 December 2019 31 December 2018 Interest income on financial assets measured at amortized cos 8.2 16.2 Fair value gain on derivatives 1.5 - Foreign exchange gain 15.5 6.8 Finance income 25.2 23.0 Interest expense on financial liabilities measured at amortized cost (53.0) (26.2) Foreign exchange loss (45.5) (1.9) Finance cost (98.5) (28.1) Net finance cost recognized in profit or loss (73.3) (5.1) The above finance income and finance cost include the following interest income and expense in respect of assets (liabilities) not measured at fair value through profit or loss: $ millions 31 December 2019 31 December 2018 Total interest income on financial assets 8.2 16.2 Total interest expense on financial liabilities (53.0) (26.2) 24. Earnings per share i. Basic 31 December 2019 31 December 2018 Net profit attributable to shareholders (1 million USD) 121.3 144.7 Number of ordinary share (million) 116.8 116.8 Basic earnings per ordinary share 1.04 1.24 25. Segment reporting The Group determines and presents operating segments on the information that internally is provided to the Chief Executive Officer during the period. The Group has three reportable segments, as described below. Each of the segments is managed separately because they require different operating strategies and use their own assets and employees. Factors used to identify the Group’s reportable segments, are a combination of factors and whether operating segments have been aggregated and types of products and services from which each reportable segment derives its revenues. 44 Orascom Construction PLC Year Ended Report 2019 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS Orascom Construction PLC Business information for 31 December 2018 $ millions MENA USA Besix Total Total revenue 2,032.6 980.9 - 3,013.5 Share in profit of associates 1.5 0.1 54.7 56.3 Depreciation and amortization (38.1) (1.9) - (40.0) Interest income (including gain on derivatives) 15.8 0.4 - 16.2 Interest expense (including loss on derivatives) (24.0) (2.2) - (26.2) Profit before tax 199.6 (36.0) 54.7 218.3 Investment in PP&E 49.7 0.5 - 50.2 Non-current assets 196.6 52.6 394.5 643.7 Total assets 2,253.7 451.2 394.5 3,099.4 Total liabilities 2,213.2 414.7 - 2,627.9 Business information for 31 December 2019 $ millions MENA USA Besix Total Total revenue 2,182.2 1,001.8 - 3,184.0 Share in profit of associates 2.5 1.7 22.9 27.1 Depreciation and amortization (44.8) (7.0) - (51.8) Interest income (including gain on derivatives) 9.6 0.1 - 9.7 Interest expense (including loss on derivatives) (50.6) (2.4) - (53.0) Profit before tax 163.1 (15.8) 22.9 170.2 Investment in PP&E 39.5 23.8 - 63.3 Non-current assets 245.3 69.0 394.8 709.1 Total assets 2,657.5 453.0 394.8 3,505.3 Total liabilities 2,533.4 386.2 - 2,919.6 Segment revenues have been presented based on the location of the entity which is managing the contracts. BESIX is presented as part of ‘equity accounted investees’, therefore in the above schedule only the income from equity accounted investees and the asset value are reflected. For further information with respect to liabilities, revenues and cost, reference is made to note 10. The geographic information above analysis the Group’s revenue and non-current assets by the Company where the activities are being operated. The Orascom Construction Group has customers that represent 10 percent or more of revenues: Percentage 2019 2018 Egyptian Government 57.6% 51.5% 26. Contingencies 26.1 Contingent liabilities 26.1.1 Letters of guarantee / letters of credit Letters of guarantee issued by banks in favor of others as at 31 December 2019 amount to USD 1,384.6 million (31 December 2018: USD 1,164.7 million). Outstanding letters of credit as at 31 December 2019 (uncovered portion) amount to USD 55.7 million (31 December 2018: USD 56.7 million). 45 Orascom Construction PLC Year Ended Report 2019 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS Orascom Construction PLC Certain of our sub-holdings have put general performance guarantees for the execution of more significant projects by our subsidiaries. As of 31 December 2019, mechanic liens have been received in respect of one of our US project for a total of USD 5.0 million (31 December 2018: USD 58.7 million). 26.1.2 Litigations and claims In the ordinary course of business, the Group entities and joint ventures are involved in some arbitration or court cases as defendants or claimants. These litigations are carefully monitored by the entities’ management and legal counsels, and are regularly assessed with due consideration for possible insurance coverage and recourse rights on third parties. OC PLC does not expect these proceedings to result in liabilities that have a material effect on the company’s financial position. In cases where it is probable that the outcome of the proceedings will be unfavourable, and the financial outcome can be measured reliably, a provision has been recognized in the financial statements which is disclosed in note 20 ‘Provisions’. It should be understood that, in light of possible future developments, such as: (a) potential additional lawsuits, (b) possible future settlements, and (c) rulings or judgments in pending lawsuits, certain cases may result in additional liabilities and related costs. At this point in time, OC PLC cannot estimate any additional amount of loss or range of loss in excess of the recorded amounts with sufficient certainty to allow such amount or range of amounts to be meaningful. Moreover, if and to the extent that the contingent liabilities materialize, they are typically paid over a number of years and the timing of such payments cannot be predicted with confidence. While the outcome of said the cases, claims and disputes cannot be predicted with certainty, we believe, based upon legal advice and information received, that the final outcome will not materially affect our consolidated financial position but could be material to our results of operations or cash flows in any one accounting period. 26.1.3 Sidra Medical Center The contract for the design and build of the Sidra Medical and Research Centre in Doha, Qatar, was awarded by the Qatar Foundation for Education, Science & Community Development (the “Foundation”) in February 2008 to the associate owned by Obrascón Huarte Lain (55%) and Contrack (45%), for a total contract value of approximately USD 2.4 billion. The project was more than 95% complete and is not part of the Construction Group’s backlog as the project is accounted for under the equity method. In July 2014, the consortium received a Notice of Termination from the Foundation. On 23 July 2014, the Foundation commenced arbitration proceedings against the associate by serving a Request for Arbitration with the ICC (seat in London) dated 23 July 2014. Procedural hearings and expert meetings took place, with the substantive hearing being held 23 October 2017 to 17 November 2017. In February 2018, the Arbitral Tribunal issued a partial award in respect of certain variation claims and defects, and further agreed that questions of quantum as well as the remaining matters in dispute will be addressed in three long hearings, two that were held in April/May and October/November 2018, and upcoming hearings, including for procedural matters, scheduled to be held on 2020 and beyond. In August 2017, the Foundation again served a Request for Arbitration, this time in parallel proceedings against OCI SAE with the ICC (seat in London). The claims made by the Foundation in this new arbitration arise in connection with a Parent Company Guarantee (the “PCG”) issued by OCI SAE on 7 February 2018. The Foundation alleged that the terms of the PCG protect it in respect of liabilities and obligations of Contrack (Cyprus) Limited on the Project. The Foundation has not yet specified the amount/s that it claims against OCI under the PCG. OCI filed its Answer to the Request for Arbitration on 9 November 2017 asserting lack of jurisdiction, premature and inadmissible claim, and that the PCG has expired. The Terms of Reference were signed on 22 January 2018, and the Tribunal issued its first Procedural Order on 12 March 2018. The Foundation filed its Statement of Case on 23 April 2018, and OCI filed its Statement of Defence in 15 August 2018. At this time, the Tribunal has not ordered the parties to take any further substantive steps. 26.1.4 Iowa Fertilizer Project In relation to this dispute a settlement has been finalised with MEI in the second half of August. All outstanding liens on the Iowa Fertilizer project have been released. 48 Orascom Construction PLC Year Ended Report 2019 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS Orascom Construction PLC 29. List of principal subsidiaries, associates and joint ventures Companies Country Percentage of interest Consolidation method Cementech Limited BVI 100.00 Full Orascom Construction Industries Algeria Spa Algeria 99.90 Full IMAGRO Construction SRL Italy 49.90 Full BESIX Group SA Belgium 50.00 Equity Aluminium & Light Industries Co Ltd Egypt 100.00 Full OCI Construction Limited Cyprus 100.00 Full Orascom Construction Egypt 100.00 Full Orascom Road Construction Egypt 99.98 Full Orasqualia for the Development of the Wastewater Treatment Plant Egypt 50.00 Equity National Steel Fabrication Egypt 99.90 Full Suez Industrial Development Company Egypt 60.50 Full Orascom Saudi Company Kingdom of Saudi Arabia 60.00 Full Contrack Watts Inc USA 100.00 Full Orascom E&C USA USA 100.00 Full Orascom Construction USA Inc USA 100.00 Full Orascom Investments Netherlands 100.00 Full The Weitz Group LLC USA 100.00 Full Orascom for Wind Energy Egypt 100.00 Full Furthermore, OC PLC has various holding companies in the Netherlands and the countries it operates in. On 21 May 2019, the shareholders’ at the Annual General Meeting had approved a dividend of USD 0.30 per share amounting to USD 35 million. 30. Subsequent events Subsequent to the year-end the Board of Directors has proposed a dividend of USD 0.21 per share, which is to be approved by the shareholders at the Annual General Meeting on May 2020. The coronavirus outbreak since early 2020 has brought about additional uncertainties in the Group’s operating environment and may impact the Group’s operations in the areas we operate in, with our main activities in Egypt and the USA. The Group has been closely monitoring the impact of the developments on the Group’s businesses and has put in place contingency measures. These contingency measures include amongst others communication plans with our clients, mitigation plans at project level to minimize the impact of possible slowdowns, if any, and measures to safeguard the welfare of our employees and subcontractor staff at our project sites and offices. Furthermore we are assessing the level of available credit-lines and whether additional lines need to be made available to manage our liquidity. The Group will keep these contingency measures under review as the situation is fast evolving, the effect of the outbreak is by nature subject to significant levels of uncertainty, with the full range of possible effects unknown. Dubai, UAE, 25 March 2020 The Orascom Construction PLC Board of Directors, Jérôme Guiraud Chairman Osama Bishai Chief Executive Officer Sami Haddad Member Johan Beerlandt Member Wiktor Sliwinski Member ORASCOM CONSTRUCTION PLC (the Company) Summary of the Board Resolutions A meeting of the board of directors of the Company was held on 25 March 2020. After due and careful consideration, IT WAS RESOLVED that: (a) that the financial statements of the Company for the period ended 31 December 2019 be approved. (b) that the directors propose a dividend distribution of USD 0.21 per share subject to shareholder approval at the upcoming Annual General Meeting in May 2020. Orascom Construction PLC (“the Company”) Separate financial statements 31 December 2019 Orascom Gonstruction PLC Independent Auditors’ Report 31 December 2019 Key Audit Matters (continued) 1 Impairment of investment in subsidiaries Refer to note 9 of the separate financial statements Key audit matter Impairment of investment in subsidiaries is an area that involves significant management judgment and requires an assessment as to whether the carrying value of the subsidiaries can be supported by their value in use based on their current and expected future operations. To assess whether an impairment exists in the carrying value of the Company's subsidiaries, management is required to assess whether events or changes in circumstances indicate that their carrying value may not be recoverable. Factors that are considered important which could trigger an impairment review include evidence that no sufficient profits or cash flows will be generated from the related investment. The assessment process is complex and highly judgmental and is based on assumptions that are affected by expected future market or economic conditions. Due to the significance of the carrying value of the investment in subsidiaries in the Company's financial statements and the inherent and uncertainties associated with estimating future cash flows, the appropriate discount rates and growth rates, the impairment of investment in subsidiaries is significant audit risk. How our audit addressed the key audit matter Our audit procedures included the following: e We reviewed management's impairment analysis, including the assumptions and estimates used in developing the model. To test the accuracy of the model, we re- pertormed the calculations prepared by management; e We assessed the historical accuracy of the management's forecasting and challenged the significant assumptions and critical areas of judgment; «© We performed sensitivity analysis on significant assumptions used in the model, including the discount rates and terminal growth rates; and e We assessed the adequacy of the disclosure in the separate financial statements. 2 Expected credit loss allowances on loans and amounts due from related parties Refer to note 11 of the separate financial statements The Company is exposed to credit risk on its loans and amounts due from related parties. The determination of expected credit loss (“ECL”) involves significant estimates and judgement. FETA Wena | seve om, been Mt hese  Orascom Construction PLC Independent Auditors’ Report 31 December 2019 Key Audit Matters (continued) 2 Expected credit loss allowances on loans and amounts due from related parties (continued) Key areas involving judgements include current and future looking external factors, probability of default and loss given default. Due to judgement and complexities involved in the computation of ECL for determining impairment provision, this is considered as a key audit matter. How our audit addressed the key audit matter e We obtained an understanding of the Company's process for estimating ECL and assessing the appropriateness of the ECL preparation methodology against the requirement of IFRS 9; ° We assessed the reasonableness of key assumptions and judgments made by the management in determining the ECL allowances; and ° We tested key inputs of the model, such as those used to calculate the likelihood of default and the subsequent loss on default. Responsibilities of Management and Those Charged with Governance for the Financial Statements Management is responsible for the preparation and fair presentation of the financial statements in accordance with IFRS and their preparation in compliance with the applicable provisions of the Companies Law pursuant to DIFC Law No. 5 of 2018, and for such internal control as management determines is necessary to enable the preparation of financial statements that are free from material misstatement, whether due to fraud or error. In preparing the financial statements, management is responsible for assessing the Company's ability to continue as a going concern, disclosing, as applicable, matters related to going concern and using the going concern basis of accounting unless management either intends to liquidate the Company or to cease operations, or has no realistic alternative but to do so. Those charged with Governance are responsible for overseeing the Company's financial reporting process.  Orascom Construction PLC independent Auditors’ Report 31 December 2019 Auditors’ Responsibilities for the Audit of the Financial Statements Our objectives are to obtain reasonable assurance about whether the financial statements as a whole are free from material misstatement, whether due to fraud or error, and to issue an auditors’ report that includes our opinion. Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in accordance with ISAs will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of these financial statements. As part of an audit in accordance with ISAs, we exercise professional judgment and maintain professional skepticism throughout the audit. We also: ° Identify and assess the risks of material misstatement of the financial statements, whether due to fraud or error, design and perform audit procedures responsive to those risks, and obtain audit evidence that is sufficient and appropriate to provide a basis for our opinion. The risk of not detecting a material misstatement resulting from fraud is higher than for one resulting from error, as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the override of internal control. ° Obtain an understanding of internal control relevant to the audit in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Company's internal control. e Evaluate the appropriateness of accounting policies used and the reasonableness of accounting estimates and related disclosures made by management. ° Conclude on the appropriateness of management's use of the going concern basis of accounting and, based on the audit evidence obtained, whether a material uncertainty exists related to events or conditions that may cast significant doubt on the Company's ability to continue as a going concern. If we conclude that a material uncertainty exists, we are required to draw attention in our auditors’ report to the related disclosures in the financial statements or, if such disclosures are inadequate, to modify our opinion. Our conclusions are based on the audit evidence obtained up to the date of our auditors’ report. However, future events or conditions may cause the Company to cease to continue as a going concern. ° Evaluate the overall presentation, structure and content of the financial statements, including the disclosures, and whether the financial statements represent the underlying transactions and events in a manner that achieves fair presentation. Jno Dh fu, tanta eens ete aa eae a Croyteralie APIAC hn natn Ce Blt by Fated pee PREG LLE, tg stoted ot Orascom Construction PLC Separate statement of financial position As at 31 December 2019 2019 2018 Note USD USD Non-current assets Investment in subsidiaries 9 787,817,170 787,817,170 Loans due from related parties WW - 94,851,548 787,817,170 882,668,7 18 Current assets Prepayments and other receivables 10 1,774,509 213,630 Due from related parties il 666,886 537,328 Loans due from related parties i 20,376,725 - Cash at banks 462,959 1,259,818 23,281, 079 2, 010, 776 Total assets 811,098,; 249 884, 679, 494 Liabilities and shareholder’s equity Shareholder’s equity Share capital 13 116,761,379 116,761,379 Share premium Is 483,025,196 483,025,196 Retained earnings 181,760,228 204,303,639 781,546,! 803 Non-current liability Loans due to related parties il 21,389,540 Current liabilities Accounts payable and accrued expenses 12 2,077,999 3,416,688 Due to related parties i 6,083,907 6,456,808 8,161,906 9,873,496 Total liabilities 29,551,446 Total liabilities and shareholder's equity 811,098,249 The notes on pages 10 to 32 form an integral part of these separate financial statements. These separate financial statements werg approved by the Board of Directors and authorissd for issue on 2 St. Director Director The independent auditors’ report is set out on pages 1 to 5. 8 Orascom Construction PLC Separate statement of cash flows for the year ended 31 December 2019 2019 2018 Note USD USD Operating activities Profit/(loss) for the year 12,170,856 (36,339,899) Adjustments for: Finance expenses 8 749,528 1,324,665 Gain on waiver of amount due to a related party 11 (4,448,963) - Gain on waiver of a related party loan 11 (11,617,607) (205,884,848) Finance income 7 (12,845,426) (14,144,040) Impairment loss on investment in subsidiaries 9 - 142,530,106 Impairment loss on loans due from related parties 11 2,384,810 100,117,752 Depreciation 6 - 268,277 -------------- -------------- (13,606,802) (12,127,987) Change in prepayments and other receivables 10 (21,255) 48,165 Change in due from related parties 11 (1,661,180) (202,460) Change in accounts payable and accrued expenses 12 (1,338,689) 1,509,974 Change in due to related parties 11 31,055,873 1,600,855 ------------- ------------ Net cash generated from/(used in) operating activities 14,427,947 (9,171,453) ------------- ------------ Investing activities Net movement in loan due from related parties 7,892,878 4,473,770 ------------ ------------ Net cash generated from investing activities 7,892,878 4,473,770 ------------ ------------ Financing activities Net movement in loan due to related parties 11,596,583 33,923,207 Dividends paid (34,714,267) (30,000,000) ------------- ------------ Net cash (used in)/generated from financing activities (23,117,684) 3,923,207 ------------- ------------ Net decrease in cash and cash equivalents (796,859) (774,474) Cash and cash equivalents at the beginning of the year 1,259,818 2,034,292 ------------ ------------ Cash and cash equivalents at the end of the year 462,959 1,259,818 ====== ======= The notes on pages 10 to 32 form an integral part of these separate financial statements. The independent auditors’ report is set out on pages 1 to 5. 9 Orascom Construction PLC Separate statement of changes in equity for the year ended 31 December 2019 Share capital Share premium Retained earnings Total USD USD USD USD At 1 January 2018 116,761,379 764,325,196 (10,656,462) 870,430,113 Total comprehensive income for the year Loss for the year - - (36,339,899) (36,339,899) Transactions with owners, recognised directly in equity Dividends declared and paid (refer note 14) - - (30,000,000) (30,000,000) Reduction of share premium (refer note 15) - (281,300,000) 281,300,000 - --------------- --------------- --------------- --------------- Balance at 31 December 2018 116,761,379 483,025,196 204,303,639 804,090,214 ========= ========= ========= ========= At 1 January 2019 116,761,379 483,025,196 204,303,639 804,090,214 Total comprehensive income for the year Profit for the year - - 12,170,856 12,170,856 Transactions with owners, recognised directly in equity Dividends declared and paid (refer note 14) - - (34,714,267) (34,714,267) --------------- --------------- --------------- --------------- Balance at 31 December 2019 116,761,379 483,025,196 181,760,228 781,546,803 ========= ========= ========= ========= The notes on pages 10 to 32 form an integral part of these separate financial statements. Orascom Construction PLC Notes (continued) 12 3 New accounting standards and policies (continued) IFRS 16 Leases (continued) - the Company has the right to direct the use of the asset. The Company has this right when it has the decision- making rights that are most relevant to changing how and for what purpose the asset is used. In rare cases where the decision about how and for what purpose the asset is used is predetermined, the Company has the right to direct the use of the asset if either: i. the Company has the right to operate the asset; or ii. the Company designed the asset in a way that predetermines how and for what purpose it will be used. The Company recognises a right-of-use asset and a lease liability at the lease commencement date. The right-of-use asset is initially measured at cost, which comprises the initial amount of the lease liability adjusted for any lease payments made at or before the commencement date, plus any initial direct costs incurred and an estimate of costs to dismantle and remove the underlying asset or to restore the underlying asset or the site on which it is located, less any lease incentives received. The right-of-use asset is subsequently depreciated using the straight-line method from the commencement date to the earlier of the end of the useful life of the right-of-use asset or the end of the lease term. The estimated useful lives of right-of-use assets are determined on the same basis as those of property and equipment. In addition, the right-of-use asset is periodically reduced by impairment losses, if any, and adjusted for certain remeasurements of the lease liability. The lease liability is initially measured at the present value of the lease payments that are not paid at the commencement date, discounted using the interest rate implicit in the lease or, if that rate cannot be readily determined, and the Company’s incremental borrowing rate. Lease payments included in the measurement of the lease liability comprise the following: - fixed payments, including in-substance fixed payments; - variable lease payments that depend on an index or a rate, initially measured using the index or rate as at the commencement date; - amounts expected to be payable under a residual value guarantee; and - the exercise price under a purchase option that the Company is reasonably certain to exercise, lease payments in an optional renewal period if the Company is reasonably certain to exercise an extension option, and penalties for early termination of a lease unless the Company is reasonably certain not to terminate early. The lease liability is subsequently increased by the interest cost on the lease liability and decreased by lease payments made. It is remeasured when there is a change in future lease payments arising from a change in an index or rate, if there is a change in the Company’s estimate of the amount expected to be payable under a residual value guarantee, or if the Company changes its assessment of whether it will exercise a purchase, extension or termination option. When the lease liability is remeasured in this way, a corresponding adjustment is made to the carrying amount of the right-of-use asset, or is recorded in profit or loss if the carrying amount of the right-of- use asset has been reduced to zero. The Company presents right-of-use assets in ‘property and equipment’ and lease liabilities in ‘trade and other payables’ in the statement of financial position. Orascom Construction PLC Notes (continued) 13 3 New accounting standards and policies (continued) IFRS 16 Leases (continued) Short term leases and leases of low-value assets The Company has elected not to recognise right-of-use assets and lease liabilities for short-term leases that have a lease term of 12 months or less and leases of low-value assets. The Company recognises the lease payments associated with these leases as an expense on a straight-line basis over the lease term. IFRS 9 Financial Instruments and IFRS 15 Revenue from Contracts with Customers In the previous year, the Company had adopted IFRS 9 Financial instruments and IFRS 15 Revenue from Contracts with Customers which were applicable from 1 January 2018. IFRS 9 and IFRS 15 did not have a significant effect on the Company’s separate financial statements. 4 Significant accounting policies The following accounting policies, which comply with IFRS, have been consistently applied during the year in dealing with the material items in relation to the Company’s financial statements, except as mentioned in note 3. Financial instruments i. Recognition and initial measurement Trade receivables and debt securities issued are initially recognised when they are originated. All other financial assets and financial liabilities are initially recognised when the Company becomes a party to the contractual provisions of the instrument. A financial asset (unless it is a trade receivable without a significant financing component) or financial liability is initially measured at fair value plus, for an item not at fair value through profit or loss (FVTPL), transaction costs that are directly attributable to its acquisition or issue. A trade receivable without a significant financing component is initially measured at the transaction price. ii. Classification and subsequent measurement Financial assets On initial recognition, a financial asset is classified as measured at: amortised cost; fair value through other comprehensive income (“FVOCI”) – debt investment; FVOCI – equity investment; or fair value through profit or loss (“FVTPL”). Financial assets are not reclassified subsequent to their initial recognition unless the Company changes its business model for managing financial assets, in which case all affected financial assets are reclassified on the first day of the first reporting period following the change in the business model. Orascom Construction PLC Notes (continued) 14 4 Significant accounting policies (continued) Financial instruments (continued) ii. Classification and subsequent measurement (continued) Financial assets (continued) A financial asset is measured at amortised cost if it meets both of the following conditions and is not designated as at FVTPL: - it is held within a business model whose objective is to hold assets to collect contractual cash flows; and - its contractual terms give rise on specified dates to cash flows that are solely payments of principal and interest on the principal amount outstanding. A debt investment is measured at FVOCI if it meets both of the following conditions and is not designated as at FVTPL: - it is held within a business model whose objective is achieved by both collecting contractual cash flows and selling financial assets; and - its contractual terms give rise on specified dates to cash flows that are solely payments of principal and interest on the principal amount outstanding. On initial recognition of an equity investment that is not held for trading, the Company may irrevocably elect to present subsequent changes in the investment’s fair value in OCI. This election is made on an investment-by-investment basis. All financial assets not classified as measured at amortised cost or FVOCI as described above are measured at FVTPL. This includes all derivative financial assets. On initial recognition, the Company may irrevocably designate a financial asset that otherwise meets the requirements to be measured at amortised cost or at FVOCI as at FVTPL if doing so eliminates or significantly reduces an accounting mismatch that would otherwise arise. Financial assets – Business model assessment The Company makes an assessment of the objective of the business model in which a financial asset is held at a portfolio level because this best reflects the way the business is managed and information is provided to management. The information considered includes: - the stated policies and objectives for the portfolio and the operation of those policies in practice. These include whether management’s strategy focuses on earning contractual interest income, maintaining a particular interest rate profile, matching the duration of the financial assets to the duration of any related liabilities or expected cash outflows or realizing cash flows through the sale of the assets; - how the performance of the portfolio is evaluated and reported to the Company’s management; - the risks that affect the performance of the business model (and the financial assets held within that business model) and how those risks are managed; - how managers of the business are compensated – e.g. whether compensation is based on the fair value of the assets managed or the contractual cash flows collected; and - the frequency, volume and timing of sales of financial assets in prior periods, the reasons for such sales and expectations about future sales activity. Transfers of financial assets to third parties in transactions that do not qualify for derecognition are not considered sales for this purpose, consistent with the Company’s continuing recognition of the assets. Orascom Construction PLC Notes (continued) 17 4 Significant accounting policies (continued) Impairment i. Non-derivative financial assets Financial instruments and contract assets The Company recognises loss allowances for ECLs on: - financial assets measured at amortised cost; - debt investments measured at FVOCI; and - contract assets. The Company also recognises loss allowances for ECLs on lease receivables, which are disclosed as part of trade and other receivables. The Company measures loss allowances at an amount equal to lifetime ECLs, except for the following, which are measured at 12-month ECLs: - debt securities that are determined to have low credit risk at the reporting date; and - other debt securities and bank balances for which credit risk (i.e. the risk of default occurring over the expected life of the financial instrument) has not increased significantly since initial recognition. Loss allowances for trade receivables (including lease receivables) and contract assets are always measured at an amount equal to lifetime ECLs. When determining whether the credit risk of a financial asset has increased significantly since initial recognition and when estimating ECLs, the Company considers reasonable and supportable information that is relevant and available without undue cost or effort. This includes both quantitative and qualitative information and analysis, based on the Company’s historical experience and informed credit assessment that includes forward-looking information. The Company considers a financial asset to be in default when: - the debtor is unlikely to pay its credit obligations to the Company in full, without recourse by the Company to actions such as realising security (if any is held); or - the financial asset is more than 90 days past due. Lifetime ECLs are the ECLs that result from all possible default events over the expected life of a financial instrument. 12-month ECLs are the portion of ECLs that result from default events that are possible within the 12 months after the reporting date (or a shorter period if the expected life of the instrument is less than 12 months). The maximum period considered when estimating ECLs is the maximum contractual period over which the Company is exposed to credit risk. Measurement of ECLs ECLs are a probability-weighted estimate of credit losses. Credit losses are measured as the present value of all cash shortfalls (i.e. the difference between the cash flows due to the entity in accordance with the contract and the cash flows that the Company expects to receive). ECLs are discounted at the effective interest rate of the financial asset. Orascom Construction PLC Notes (continued) 18 4 Significant accounting policies (continued) Impairment (continued) i. Non-derivative financial assets (continued) Financial instruments and contract assets (continued) Credit-impaired financial assets At each reporting date, the Company assesses whether financial assets carried at amortised cost and debt securities at FVOCI are credit-impaired. A financial asset is ‘credit-impaired’ when one or more events that have a detrimental impact on the estimated future cash flows of the financial asset have occurred. Evidence that a financial asset is credit-impaired includes the following observable data: - significant financial difficulty of the debtor; - a breach of contract such as a default; - the restructuring of a loan or advance by the Company on terms that the Company would not consider otherwise; or - it is probable that the debtor will enter bankruptcy or other financial reorganisation. Presentation of allowance for ECL in the statement of financial position Loss allowances for financial assets measured at amortised cost are deducted from the gross carrying amount of the assets. For debt securities at FVOCI, the loss allowance is charged to profit or loss and is recognised in OCI. Write-off The gross carrying amount of a financial asset is written off when the Company has no reasonable expectations of recovering a financial asset in its entirety or a portion thereof. The Company expects no significant recovery from the amount written off. However, financial assets that are written off could still be subject to enforcement activities in order to comply with the Company’s procedures for recovery of amounts due. Non-financial assets At each reporting date, the Company reviews the carrying amounts of its non-financial assets to determine whether there is any indication of impairment. If any such indication exists, then the asset’s recoverable amount is estimated. For impairment testing, assets are grouped together into the smallest group of assets that generates cash inflows from continuing use that are largely independent of the cash inflows of other assets or CGUs. The recoverable amount of an asset or CGU is the greater of its value in use and its fair value less costs to sell. Value in use is based on the estimated future cash flows, discounted to their present value using a pre-tax discount rate that reflects current market assessments of the time value of money and the risks specific to the asset or CGU. An impairment loss is recognised if the carrying amount of an asset or CGU exceeds its recoverable amount. Orascom Construction PLC Notes (continued) 19 4 Significant accounting policies (continued) Impairment (continued) Non-financial assets (continued) Impairment losses are recognised in profit or loss. They are allocated first to reduce the carrying amount of any goodwill allocated to the CGU, and then to reduce the carrying amounts of the other assets in the CGU on a pro rata basis. An impairment loss is reversed only to the extent that the asset’s carrying amount does not exceed the carrying amount that would have been determined, net of depreciation or amortisation, if no impairment loss had been recognised. Investment in subsidiaries Subsidiaries are entities controlled by the Company. The Company controls an entity when it is exposed to, or has rights to, variable returns from its involvement with the entity and has the ability to affect those returns through its power over the entity. Investment in subsidiaries is stated at cost less any provision for impairment, if any. Share premium and treasury shares Share premium is the excess amount received over the par value of the shares. Incremental costs directly attributable to the issue of new shares are recognised in equity as a deduction, net of tax, from the proceeds. When ordinary shares are repurchased, the amount of the consideration paid, which includes directly attributable costs, net of tax effects, is classified as treasury shares on the statement of changes in equity. When treasury shares are sold or reissued subsequently, the amount received is recognised as an increase in ‘Treasury shares’, and the resulting surplus or deficit on the transaction is presented in share premium. Retained earnings The amount included in retained earnings includes accumulated profits and reduced by dividends, and also include transfers of share premium. Dividends are recognised as a liability and deducted from equity when they are approved by the Company’s shareholders. Dividends for the year that are approved after the reporting date are dealt with as an event after the reporting date. Retained earnings may also include effect of changes in accounting policy as may be required by the standard’s transitional provisions. Finance income Finance income include interest income on loans due from related parties, interest on bank balances, net foreign exchange gain and gain on foreign currency exchange forward contracts. Interest income is recognised as it accrues, using the effective interest rate method. Finance expense Finance expense include interest incurred on loans due to related parties and bank charges. Interest income on bank balances, Interest expense is recognized as it accrues, using the effective interest rate method. Orascom Construction PLC Notes (continued) 22 5 Financial risk management and capital management (continued) Market rate risk (continued) Interest rate risk Interest rate risk arises from the possibility that changes in interest rates will affect the net finance income/ cost of the Company. The Company has exposure to interest rate risk on loans due from and loans due to related parties on which interests are charged at agreed upon rates. Price risk Price risk is the risk that the value of a financial instrument will fluctuate as a result of change in market prices, whether those changes are caused by factors specific to the individual instrument or its issuer or factors affecting all instruments traded in the market. The Company has no significant exposure to price risk. Capital management The Company sets the amount of capital in proportion to risk. The Company manages the capital structure and makes adjustments to it in the light of change in economic conditions and the risk characteristics of the underlying assets. In order to maintain or adjust the capital structure, the Company may adjust the amount of dividend paid to the shareholders or issue new shares. Fair value The fair value of the financial assets and liabilities of the Company approximate their carrying values as at the reporting date. 6 General and administrative expenses 2019 2018 USD USD Salaries and wages 9,088,701 9,275,430 Expenses recharged from a related party (refer to note 11) 1,706,817 - Consultancy fees 1,476,462 2,032,624 Rent expense 232,308 232,308 Travel expense 214,137 180,354 Communication expense 32,482 28,460 Depreciation expense (refer below) - 268,277 Other expenses 838,955 1,090,158 -------------- -------------- 13,589,862 13,107,611 ======== ======== During the year, the Company has been operating on fully depreciated assets. 7 Finance income 2019 2018 USD USD Interest on loans due from related parties (refer note 11) 8,942,868 13,382,220 Foreign exchange gain - net 2,362,934 761,820 Unrealised gain on foreign currency exchange forward contracts (refer to note 10(i)) 1,539,624 - Interest on bank balances - 5,147 ------------- ------------- 12,845,426 14,149,187 ======== ======== Orascom Construction PLC Notes (continued) 23 8 Finance expenses 2019 2018 USD USD Interest on loans due to related parties (refer note 11) 749,528 1,324,665 Bank charges 16,940 - ---------- ------------ 766,468 1,324,665 ====== ======= 9 Investment in subsidiaries 2019 2018 USD USD Orascom Holding Cooperatief U.A. (refer to note (i) below) 930,297,276 930,297,276 Orascom Holding Limited (refer to note (ii) below) 50,000 50,000 --------------- --------------- 930,347,276 930,347,276 Less: Provision for impairment (142,530,106) (142,530,106) --------------- --------------- 787,817,170 787,817,170 ========= ========= (i) The Company holds 100% interest in Orascom Holding Cooperatief U.A. At the reporting date, management assessed the recoverable amount of its investment in OHC. Accordingly, the impairment assessment was performed considering OHC and its downstream subsidiaries as a single Cash Generating Unit (“CGU”). The recoverable amount of the investment in subsidiary was estimated based on its value in use, by aggregating the present value of net cash flows of each segment within the OHC Group. In arriving at the estimated cash flows, the following post-tax discount and terminal growth rates were used. Segment Post – tax discount rate Terminal growth rates Middle and North Africa Region (MENA Region) 18.5% 2.5% United States of America Region (USA Region) 8.3% 1.9% BESIX 9.1% 0% Based on the management’s assessment, there is no impairment as of 31 December 2019 (2018: USD 142,530,106). In 2018, the Board of Directors of OHC declared and paid dividends of USD 50,000 to the Company (refer note 11). (ii) The Company holds 100% interest in Orascom Holding Limited. Orascom Construction PLC Notes (continued) 24 10 Prepayments and other receivables 2019 2018 USD USD Unrealised gain on foreign currency exchange forward contracts (refer note (i) below) 1,539,624 - Prepayments 175,542 154,287 Deposits 59,343 59,343 ------------ ---------- 1,774,509 213,630 ======= ====== (i) The Company entered into forward exchange contracts to hedge its currency risk exposure to the Egyptian Pound in certain projects of its downstream subsidiaries. As at 31 December 2019, the outstanding notional amounts of these contracts are USD 70 million. The Company does not apply hedge accounting, therefore all fair value changes related to these contracts are recognised in profit and loss (refer to note 7). 11 Related party transactions The Company, in the ordinary course of business, enters into transactions with other business enterprises that fall within the definition of a related party contained in International Accounting Standard No. 24. These transactions are carried out at mutually agreed rates. The significant transactions with related parties during the year are as follows: 2019 2018 USD USD Gain on waiver of a related party loan (see note (i) below) 11,617,607 205,884,848 Interest income on loans due from related parties (refer note 7) 8,942,868 13,382,220 Gain on waiver of amount due to a related party (see note (ii) below) 4,448,963 - Expenses incurred by related parties on behalf of the Company 4,261,339 3,819,981 Expenses recharged from a related party (refer to note 6) 1,706,817 - Interest expense on loans due to related parties (refer note 8) 749,528 1,324,665 Dividend income from a subsidiary (refer note 9 (i)) - 50,000 ===== ======== (i) During the current year, the Company obtained a loan from Cementech Limited, a related party, amounting to USD 11.6 million. Based on the intercompany loan settlement agreement between the Company and Cementech Limited, the full loan amount was waived off during the year. Accordingly, an amount of USD 11.6 million was recognised as gain on waiver of a related party loan for the year ended 31 December 2019. Orascom Construction PLC Notes (continued) 27 11 Related party transactions (continued) 2019 2018 Current portion Non-current portion Total Current portion Non-current portion Total Relationship Interest terms Repayment terms USD USD USD USD USD USD Loans due from related parties Orascom Holding Cooperatief U.A Subsidiary refer note (iv.b) receivable on 31 December 2025 - 20,573,954 20,573,954 - - - Orascom Construction SAE Subsidiary refer note (iv.a) receivable on 31 December 2020 20,376,725 - 20,376,725 - 25,522,743 25,522,743 OCI Saudi Arabia Subsidiary refer note (iv.c) receivable on 31 December 2020 17,117,759 17,117,759 - 16,513,642 16,513,642 OCI Construction Holding Cyprus Subsidiary refer note (iv.d) receivable on 31 December 2025 - - - - 83,604,110 83,604,110 OCI Construction International B.V. Subsidiary refer note (iv.b) receivable on 31 December 2020 - - - - 69,328,805 69,328,805 ------------- -------------- -------------- ------- --------------- --------------- 37,494,484 20,573,954 58,068,438 - 194,969,300 194,969,300 Less: Impairment loss on loans due from related parties (refer to note 11(iii)) (17,117,759) (20,573,954) (37,691,713) - (100,117,752) (100,117,752) -------------- -------------- -------------- ------- -------------- -------------- 20,376,725 - 20,376,725 - 94,851,548 94,851,548 ======== ==== ======== ==== ======== ======== Due from related parties Orascom Holding Limited Subsidiary no interest receivable on demand 64,810,849 - 64,810,840 15,975 - 15,975 The Weitz Company, LLC Subsidiary no interest receivable on demand 352,219 - 352,219 352,219 - 352,219 Orascom Saudi Subsidiary no interest receivable on demand 314,667 - 314,667 169,134 - 169,134 -------------- ------- -------------- ---------- ------- ---------- 65,477,735 - 65,477,735 537,328 - 537,328 Less: Impairment loss on amounts due from related parties (refer to note 11(iii)) (64,810,849) - (64,810,849) - - - ------------- 666,886 ------- - -------------- 666,886 ---------- 537,328 ------- - ---------- 537,328 ====== ==== ====== ====== ==== ====== Loans due to related parties OCI Construction Limited Subsidiary refer note (iv.e) payable on 31 December 2025 - 17,482,160 17,482,160 - 16,744,708 16,744,708 NSF Global Limited. Subsidiary refer note (iv.f) payable on 31 December 2025 - 3,907,380 3,907,380 - 3,820,588 3,820,588 Orascom Holding Cooperatief U.A. Subsidiary refer note (iv.d) payable on 31 December 2020 - - - - 50,150,488 50,150,488 ------- -------------- -------------- ------- -------------- -------------- - 21,389,540 21,389,540 - 70,715,784 70,715,784 ==== ======== ======== ==== ======== ======== Due to related parties Contrack International Inc. USA Subsidiary no interest payable on demand 5,012,285 - 5,012,285 - - - Orascom E&C Subsidiary no interest payable on demand 578,616 - 578,616 - - - Orascom Holding Cooperatief U.A. Subsidiary no interest payable on demand 493,006 - 493,006 352,285 - 352,285 OCI N.V. Related via key management personnel no interest payable on demand - - - 2,449,796 - 2,449,796 Contrack Watts, Inc. Subsidiary no interest payable on demand - - - 3,654,727 - 3,654,727 ------------ ------- ------------ ------------ ------- ------------ 6,083,907 - 6,083,907 6,456,808 - 6,456,808 ======= ==== ======= ======= ==== ======= Orascom Construction PLC Notes (continued) 28 11 Related party transactions (continued) (iv) Interest terms (a) The loan due from Orascom Construction SAE comprise the following loans: i. A loan denominated in Egyptian pounds amounting to USD 15,786,138 (31 December 2018: USD 23,722,671) which carries interest at Egyptian Central Bank Mid Corridor rate plus 1%. ii. A loan denominated in USD amounting to USD 4,590,587 (31 December 2018: USD 1,800,072) which carries no interest. (b) The loan carries interest at one month LIBOR rate plus 3.25%. (c) The loan carries interest at one month LIBOR rate plus 1.40%. (d) The loan carries interest at six months LIBOR rate plus 3.30%. (e) The loan carries interest at one month rate charged by one of the Company’s bank plus 0.05%. (f) The loan carries interest at one month LIBOR rate plus 0.05%. Key management remuneration The Company considers the members of the Board of Directors (Executive and Non-executive), and the senior management to be the key management personnel of the Company. The remuneration of the key management for the year is as follows: 2019 2018 USD USD Salaries and benefits 600,000 600,000 ====== ====== 12 Accounts payable and accrued expenses 2019 2018 USD USD Accounts payable 118,335 216,688 Accrued expenses 1,959,664 3,200,000 ------------ ------------ 2,077,999 3,416,688 ======= ======= 13 Share capital 2019 2018 USD USD Authorised, issued and paid up capital: 116,761,379 shares with a par value of USD 1 116,761,379 116,761,379 ========= ========= 14 Dividends During the current year, the Board of Directors and shareholders approved and paid a dividend of USD 34,714,267 (2018: USD 30,000,000). Orascom Construction PLC Notes (continued) 29 15 Share premium In the previous year, the balance in the share premium account was reduced by USD 281.3 million pursuant to the resolution approved by the Board of Directors on 11 April 2018 and approved by the shareholders at extraordinary general meeting held on 9 May 2018. The share premium reduction was used to offset the accumulated losses of the Company. 16 Financial instruments The financial assets of the Company include cash at banks, loans due from related parties and amounts due from related parties. The financial liabilities of the Company include accounts payable and accrued expenses, loans due to related parties and amounts due to related parties. Accounting policies for financial assets and liabilities are set out in note 4. Exposure to credit risk The carrying amount of financial assets represents the maximum credit exposure. The maximum exposure to credit risk at the reporting date was as follows: 2019 2018 USD USD Loans due from related parties 20,376,725 94,851,548 Due from related parties 666,886 537,328 Cash at banks 462,959 1,259,818 -------------- -------------- 21,506,570 96,648,694 ======== ======== Management believes that the loans and the amounts due from related parties are fully recoverable and accordingly, no provision for impairment was made. The Company’s cash is placed with banks of repute. Liquidity risk The following are the contractual maturities of financial liabilities including estimated interest payments and excluding the impact of netting arrangements: Carrying Contractual 1 year More than amount cash flows or less 1 year USD USD USD USD 31 December 2019 Non-derivative financial liabilities Loans due to related parties 21,389,540 21,889,467 - 21,889,467 Due to related parties 6,083,907 6,083,907 6,083,907 - Accounts payable and accrued expenses 2,077,999 2,077,999 2,077,999 - -------------- -------------- ------------ -------------- 29,551,446 30,051,373 8,161,906 21,889,467 ======== ======== ======= ========