Transneft increases Druzhba force-majeure provision to 26.066 bln rubles; paid 8.2 bln rubles already
MOSCOW. March 27 (Interfax) - Transneft (MOEX: TRNF) has increased the provision that it created to settle with shippers the consequences of the incident along the Druzhba oil pipeline.
The provision is 26.066 billion rubles according to the company's International Financial Reporting Standards (IFRS) report for 2019. The company reported a reserve of 23 billion rubles for the third quarter of last year.
Transneft remitted payment of 8.2 billion rubles as per the agreements with shippers on settling out of court the consequences of the incident along the Druzhba oil pipeline. The company paid 3.3 billion rubles in the fourth quarter of 2019 and 4.9 billion rubles in the first quarter of 2020.
The company said that the provision reflects a calculated estimate of the potential cost of resolving the consequences of the incident as per the concluded agreements on the provision of oil transportation services for 2019, provided there is documented justification for the losses and confirmation of the corresponding negative consequences and their size. "The provision is not an unconditional legal obligation of the group to shippers to render payments," the report said.
Company management said that the expected term for out-of-court settlement of the consequences of the incident is no more than a year under the procedure approved by the board of directors, and is subject to the interest of the shippers in implementing the proposed mechanism.