Annual Report 2012
Annual Report 2012
Annual Report 2012
Create successful ePaper yourself
Turn your PDF publications into a flip-book with our unique Google optimized e-Paper software.
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)<br />
for the year ended 31 December <strong>2012</strong><br />
29 DEBENTURES PAYABLE (Continued)<br />
Note: (Continued)<br />
(v) On 1 March 2011, the Company issued convertible bonds due 2017 with an aggregate principal amount of RMB 23 billion in the PRC (the “2011 Convertible Bonds”).<br />
The 2011 Convertible Bonds are issued at par value of RMB 100 and bear a fixed interest rate of 0.5% per annum for the first year, 0.7% for the second year, 1.0%<br />
for the third year, 1.3% for the fourth year, 1.8% for the fifth year and 2.0% for the sixth year. The holders can convert the 2011 Convertible Bonds into shares of<br />
the Company from 24 August 2011 onwards at an initial conversion price of RMB 9.73 per share, subject to adjustment for, amongst other things, cash dividends,<br />
subdivision or consolidation of shares, bonus issues, issue of new shares, rights issues, capital distribution, change of control and other events which have an effect on<br />
the issued share capital of the Company (the “Conversion Option”). Unless previously redeemed, converted or purchased and cancelled, the 2011 Convertible Bonds<br />
will be redeemed within 5 trading days after maturity at 107% of the principal amount, including interest for the sixth year. The initial carrying amounts of the liability<br />
component and the derivative component, representing the Conversion Option of the 2011 Convertible Bonds, were RMB 19,279 million and RMB 3,610 million,<br />
respectively.<br />
During the term of the 2011 Convertible Bonds, the conversion price may be subject to downward adjustment that if the closing prices of the Company’s A Shares in<br />
any fifteen trading days out of any thirty consecutive trading days are lower than 80% of the prevailing conversion price, the board of directors may propose downward<br />
adjustment to the conversion price subject to the shareholders’ approval. The adjusted conversion price shall be not less than (a) the average trading price of the<br />
Company’s A Shares for the twenty trading days prior to the shareholders’ approval, (b) the average trading price of the Company’s A Shares on the day immediately<br />
before the shareholders’ approval, (c) the net asset value per share based on the latest audited financial statements prepared under ASBE, and (d) the nominal value<br />
per share.<br />
At 31 December <strong>2012</strong>, the carrying amounts of the liability component and the derivative component were RMB 20,104 million (2011: RMB 20,017 million) and RMB<br />
2,462 million (2011: RMB 2,610 million), respectively.<br />
During the year ended 31 December <strong>2012</strong>, the conversion price of the 2011 Convertible Bonds was adjusted to RMB 6.98 per share as a result of the final dividends<br />
for the year ended 31 December 2011 and the interim dividends for the year ended 31 December <strong>2012</strong> declared and paid during the year.<br />
During the year ended 31 December <strong>2012</strong>, RMB 857,033 thousand of the 2011 Convertible Bonds were converted into 117,724,450 A shares of the Company.<br />
At 31 December <strong>2012</strong> and 2011, the fair value of the derivative component of the 2011 Convertible Bonds was calculated using the Binomial Model. The following are<br />
the major inputs used in the Binomial Model:<br />
<strong>2012</strong> 2011<br />
Stock price of A shares RMB 6.92 RMB 7.18<br />
Conversion price RMB 6.98 RMB 7.28<br />
Credit spread 120 basis points 180 basis points<br />
RMB onshore swap rate 3.66% 2.81%<br />
Any change in the major inputs into the Binomial Model will result in changes in the fair value of the derivative component. The changes in the fair value of the<br />
derivative component from 31 December 2011 to 31 December <strong>2012</strong> resulted in an unrealised loss of RMB 19 million (2011: RMB an unrealised gain of RMB 1,000<br />
million), which has been recorded as “gain/(loss) from changes in fair value” in the income statement for the year ended 31 December <strong>2012</strong>.<br />
The initial carrying amount of the liability component of the 2011 Convertible Bonds is the residual amount, which is after deducting the allocated issuance cost of<br />
the 2011 Convertible Bonds relating to the liability component and the fair value of the derivative component on 1 March 2011. Interest expense is calculated using<br />
the effective interest method by applying the effective interest rate of 5.10% to the adjusted liability component. Should the aforesaid derivative component not been<br />
separated out and the entire 2011 Convertible Bonds been considered as the liability component, the effective interest rate would have been 2.07%.<br />
30 PROVISIONS<br />
Provisions primarily represent provision for future dismantlement costs of oil and gas properties. The Group has established certain standardised<br />
measures for the dismantlement of its retired oil and gas properties by making reference to the industry practices and is thereafter constructively<br />
obligated to take dismantlement measures of its retired oil and gas properties. Movement of provision of the Group’s obligations for the<br />
dismantlement of its retired oil and gas properties is as follows:<br />
The Group The Company<br />
RMB millions RMB millions<br />
Balance at 1 January <strong>2012</strong> 18,317 17,114<br />
Provision for the year 2,833 2,164<br />
Accretion expenses 856 798<br />
Utilised for the year (480) (478)<br />
Exchange adjustment (1) —<br />
Balance at 31 December <strong>2012</strong> 21,525 19,598<br />
111<br />
CHINA PETROLEUM & CHEMICAL CORPORATION <strong>Annual</strong> <strong>Report</strong> <strong>2012</strong><br />
Financial Statements (PRC)