42. Significant events (cont’d.) (d) On 9 November 2012, the Corporation’s wholly-owned subsidiary, Gumusut-Kakap Semi-Floating Production System (L) Limited (“GKL”) entered into a Semi FPS Lease Agreement with Sabah Shell Petroleum Company Limited (“SSPC”), a wholly-owned subsidiary of Shell, for the construction and lease of Gumusut-Kakap SemiFloating Production System (“Semi-FPS”) for the purposes of the production of crude oil (“the Contract”). On 2 September 2016, GKL filed a Notice of Arbitration dated 2 September 2016 with the Kuala Lumpur Regional Centre for Arbitration to commence arbitration proceedings against SSPC and on 23 September 2016, GKL filed a Notice of Adjudication against SSPC under Construction Industry Payment and Adjudication Act (“CIPAA”) 2012 (“Legal Proceedings”). The Legal Proceedings were commenced to seek resolution on contractual disputes covering claims for outstanding additional lease rates, payment for completed variation works and other associated costs under the Contract. (e) A wholly-owned subsidiary of the Corporation, MISC Offshore Floating Terminals (L) Limited (“MOFT”), was awarded a contract for the lease and operations of a Floating, Storage and Offloading Vessel (“FSO”) for the FSO Benchamas 2 Project by Chevron Offshore (Thailand) Limited (“COTL”) in the Gulf of Thailand (“the Contract”) on 23 August 2016. The Contract, valued at approximately USD230 million, is for a duration of 10 years with COTL having the right to extend for up to 5 extensions of one year each. The scope of work under the Contract includes engineering, procurement, construction, installation, commissioning, lease and operations of the FSO Benchamas 2 Project, which is expected to commence operations by the second quarter of 2018. 43. Subsequent event As disclosed in Note 42, GKL commenced an Adjudication Proceedings against SSPC under CIPAA 2012 by issuance of a Notice of Adjudication dated 23 September 2016. Following the Adjudication Proceedings, an Adjudication Decision has been issued in GKL’s favour and GKL was awarded, amongst others, the following: (i) the total sum of USD254,447,464.00 being the amount due to GKL for variation works undertaken by GKL. The said amount will be paid as increased Day Rates pursuant to the terms of the Lease Agreement dated 9 November 2012 between GKL and SSPC for the construction and lease of the Gumusut-Kakap SemiFloating Production System for the purposes of the production of crude oil; (ii) applicable interest; and (iii) costs of RM308,634.04. The Adjudication Decision is binding on GKL and SSPC pursuant to CIPAA 2012. The financial impact of the Adjudication Decision will be recorded accordingly beginning financial year ending 31 December 2017. Financial Statements 333
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