kaduna refining and petrochemical company limited - NNPC

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I ANNUAL REPORT FOR THE YEAR EN DED

31 DECEMBER 2020

KADUNA REFINING AND PETROCHEMICAL COMPANY LIMITED

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a a a a a a a Q I 1F1 Et3. OYEABIOYEQUAYE&CO

(Chartered Accountant)

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ANNUAL REPORT FOR THE YEAR ENDED 31 DECEMBER 2020

Contents Page

2 Corporate Information

Results at a Glance 3

4-7 Directors' Report

Statement of Directors' Responsibilities 8

9-11 Independent Auditor's Report

Statement of Financial Position 12

Statement of Profit or Loss and Other Comprehensive Income 13

Statement of Changes in Equity 14

Statement of Cash Flows 15

Notes to the Financial Statements 16-61

Value Added Statement 62

5 Years Financial Summary 63

KADUNA REFINING AND PETROCHEMICAL COMPANY LIMITED 2020 FINANCIAL STATEMENTS 1

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KADUNA REFINING AND PETROCHEMICAL COMPANY LIMITED ANNUAL REPORT FOR THE YEAR ENDED 31ST DECEMBER, 2020

CORPORATE INFORMATION

Registration Number RC. 120314 Directors Ezekiel Osarolube - Managing Director/CEO

Usman Umar - Executive Director (Operations) Agboola R. Balure - Executive Director (Finance and Accounts) Abdullahi Idris - Executive Director (Services)

Executive Management Committee: Ezekiel Osarolube

Usman Umar Abdullahi Idris A.R.Balure Musa Umar

Registered Office! Km 16 Kachia Road Refinery address: Kaduna, Kaduna State

Acting Company Musa Umar Secretary: Km 16 Kachia

Kaduna, Kaduna State

Principal Bankers: Central Bank of Nigeria

Joint Auditors: Haruna Yahaya & Co. (Chartered Accountants) Ahmadu Bello House Shiroro Road, Minna Niger State


Managing Director/CEO - Executive Director (Operations) - Executive Director (Services) - Executive Director (Fine and Accounts) - Acting Secretary/Legal Adviser

Oye Abioye Quaye & Co. (Chartered Accountants) Suit C 34-35, 2nd Floor TA Abdulkadir Complex B I Mogadisu Layout Kaduna

2020 FINANCIAL STATEMENTS 2

KADUNA REFINING AND PETROCHEMICAL COMPANY LIMITED ANNUAL REPORT FOR THE YEAR ENDED 31ST DECEMBER, 2020 RESULTS AT A GLANCE

2020

N'OOO

2019

N'OOO

% Increase I(Decrease)

-

(28,212,865)

37,169

(51,315,487)

-100.00%

-45.02%

36,060 104,590 -65.52%

(28,235,502) (61,456,936) -54.06%

(90) (186) -51.49%

(55,773,415) (65,992,976) -15.49%

- -

(55,773,415) (65,992,976) -15.49%

5,000 5,000 0.00%

(594,296,278) (541,844,220) 9.68%

5,000 5,000 0.00%

S

Revenue

• Operating Loss

• Other Income

• Loss before minimum tax and income tax

Minimum Tax

Loss for the year 5 Other comprehensive income, net of tax

Total comprehensive loss

S Share Capital

5 Total equity

• Number of Ni ordinary share issued

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KADUNA REFINING AND PETROCHEMICAL COMPANY LIMITED ANNUAL REPORT FOR THE YEAR ENDED 31 DECEMBER 2020 Directors' Report For the year ended 31 December 2020 The Directors present their report on the affairs of Kaduna Refining and Petrochemical Company

Limited ("the Company"), together with the financial statements and auditor's report for the year ended

31 December 2020.

• Legal Form Kaduna Refining and Petrochemical Company Limited commenced business in 1980 as Nigerian

National Petroleum Corporation Refinery Kaduna, a branch of Nigerian National Petroleum

Corporation (NNPC. In March 1988, the Petrochemical Plant was added to the assets of the branch. On 3

• November 1988, NNPC merged the two plants (Refinery and Petrochemical Plants) and formed a

• subsidiary company of NNPC known as Kaduna Refining and Petrochemical Company Limited (KRPC)

• to manage the plants. KRPC was incorporated as a private limited liability company on 3 November

•1988.

Principal Activity and Business Review • The principal activities of the Company continue to be the processing of crude oil into petroleum

N products and related derivatives as well as the production of liquefied petroleum gas, tin., and drums

using the refinery and petrochemical plants which are under lease from NNPC. The Company processes

pCrude oil on behalf of its parent company (NNPC) for a fee. The crude oil processed as well as the

refined products are owned by NNPC.

Operating results and dividend S The following is a summary of the Company's operating results:

U Revenue

• Operating loss

Minimum Tax

Loss for the year

2020 2Q19 N'OOO N'OOO

37,169

(28,212,865) (51,315,487)

(90) (186)

(55,773,415) (65,992,976)

No dividend is recommended by the Directors during the year - I (2019: Nil)

S Directors and their interests The Directors who served during the year were as follows:

Name Date appointed I Ezekiel Osarolube Managing Director/CEO 13th May, 2019

rnUsman Umar Executive Director (Operations) 3rd June, 2019 A.R.Balure Executive Director (F&A)) 6th June, 2019

• Abdullahi Idris Executive Director (Services) 14th Nov., 2016

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a KADUNA REFINING AND PETROCHEMICAL COMPANY LIMITED 2020 FINANCIAL STATEMENTS 4

R ANNUAL REPORT FOR THE YEAR ENDED 31 DECEMBER 2020 KADUNA REFINING AND PETROCHEMICAL COMPANY LIMITED

a The Directors do not have any interests that required to be disclosed under Section 275 of the

u Companies and Allied Matters Act, Cap C. 20, Laws of the Federation of Nigeria 2004.

• For the purpose of Section 277 of the Companies and Allied Matters Act, Cap C. 20, Laws of the

U Federation of Nigeria, 2004, none of the Directors has notified the Company of any declarable interests

• in Contractors with the Company.

'UShareholding Structure The shareholding structure of the Company was as follows:

U Ordinary Shares of Ni each as at Issued and fully paid up

U31-Dec- 31-Dec-19

20 Number Number

Nigerian National Petroleum Corporation (NNPC) 4,999,996 4,999,996

Mallam Mele Kolo Kyari, GMD, Nigerian National Petroleum

U Corporation (held in Trust for NNPC) 1 1

• Engr Mustapha Y. Yakubu, GED/COO Refineries and Petrochemicals

p(held in trust for NNPC)

Umar Ajiya, GED/CFO, Finance and Accounts

(held in trust for NNPC)

Hadiza Coomassie, Secretary/Legal Adviser to the

a Corporation (held in Trust for NNPC)

a5,000,000 5,000,000

Property, Plant and Equipment • Information relating to changes in property, plant and equipment are disclosed in Note 13 to the

• Financial statements.

• Events after the reporting date There were no events after the reporting date which could have had a material effect on the financial

a position of the Company as at 31st December 2020 and on the loss for the year ended on thc' date which

has not been adequately disclosed or provided for.

Donations

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In the year under review 2020, the company made a donation of N2,718,720 to charitable organization

(2019: Nil). In accordance with Section 38(2) of the Companies and Allied Matters Act, Cap C.20, Laws

U of the Federation of Nigeria, 2004, the Company did not make any donation or gift to any political party,

• political association or for any political purpose in the course of the year under review (2019: Nil).

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U KADUNA REFINING AND PETROCHEMICAL COMPANY LIMITED 2020 FINANCIAL STATEMENTS 5

KADUNA REFINING AND PETROCHEMICAL COMPANY LIMITED ANNUAL REPORT FOR THE YEAR ENDED 31 DECEMBER 2020

Community Development The Company was involved in Local community Development service this development service programme was directed to the host community and other surrounding communities. The total amount spent on local community development in 2020 was 22,054,868.52 (2019: Nil).

(a) Employment and Employees

• Employee consultation and training The company places considerable value on the involvement of its employees in major policy

matters and keeps them informed on matters affecting them as employees and on various factors

S affecting the performance of the company. This is achieved through regular meetings with

I employees and consultations with their representatives

(b) Dissemination of Information In order to maintain shared perception of our goals, the company is committed to comnmnicating

information to employees in as fast and effective a manner as possible. This is considered critical

N to the maintenance of team spirit and high employee morale

S (c) Employment of physically challenged persons

SThe Company has no physically challenged person in its employment (2019 Nil). However,

applications for employment by physically challenged persons are always fully considered,

S bearing in mind the respective aptitudes and abilities of the applicants concerned. In the event of

N members of staff becoming physically challenged, every effort is made to ensure that their

• employment with the Company continues and that appropriate training is arranged. It is the

• policy of the Company that training, career development and promotion of physically challenged

persons should, as far as possible, be identical with that of other employees.

(d) Employee Health, Safety and Welfare S The Company places a high premium on the health, safety and welfare of its employees in their

5 places of work. To this end, the Company has various forms of insurance policies, including

aworkmen's compensation and group life insurance, to adequately secure and protect its

employees.

The Company has a well-established Environmental Health and Safety (EH&S) management

system, which formalizes EH&S processes, procedures and programmes and provides for

integration of EH&S issues into business planning and operations.

N The Employees are seconded to the Company by the parent company, NNPC, and the Company

5 bears the cost of their salaries and wages. However, the pension of these employees as well as

a other long term benefit are borne by the parent company, and not recharged to the Company.


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Auditors

Messrs. Haruna Yahaya & Co. and Messrs Oye Abioye Quaye Co., having satisfied the relevant

corporate governance rules on their tenure in otfice have indicated their willingness to continue in

office as auditors to the Company. In accordance with Section 401 (2) of the Companies and Allied

Matters Act, Cap C. 20, Laws of the Federation of Nigeria 2020 therefore, the auditors will be re-

appointed at the next annual general meeting of the Company without any resolution being

passed.

B order of the Board

mar Lagos, Nigeria FRC/ 017/NBA/00000016522 19/07/2021 Acting Company Secretary

KADUNA REFINING AND PETROCHEMICAL COMPANY LiMITED 2020 FINANCIAL STATEMENTS 7

* KADUNA REFINING AND PETROCHEMICAL COMPANY LIMITED ANNUAL REPORT FOR THE YEAR ENDED 31 DECEMBER 2020

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Statement of Directors' Responsibilities in Relation to the Financial Statements for the year ended

31 December 2020

The Directors accept responsibility for the preparation of the annual financial statements that give a

true and fair view in accordance with International Financial Reporting Standards (IFRSs) and in the

manner required by the Companies and Allied Matters Act, Cap C.20, Laws of the Federation of

Nigeria, 2020 and the Financial Reporting Council of Nigeria Act. 2011.

The Directors further accept responsibilities for maintaining adequate accounting records as required

by the Companies and Allied Matters Act, Cap C.20, Laws of the Federation of Nigeria, 2020 and for

such internal control as the Directors determine is necessary to enable the preparation of financial

statements that are free from material misstatement whether due to fraud or error.

As disclosed in note 25, the Directors have made an assessment of the Companys ability to continue

as a going concern and have no reason to believe the Company will not remain a going concern in the

year ahead.

SIGNED ON BEHALF OF THE BOARD OF DIRECTORS BY:

Ezekiel Osarolube (Managing Director) Date 19th July,2021


Jacob Palang P (Covering Director, Finance & Account) Date 19th July,2021

2020 FINANCIAL STATEMENTS 8

I" Q OYE ABIOYE OUAYE & Co

(Chartered Accountants &Tax Practitioners)(Chartered Accountant)

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REPORT OF THE INDEPENDENT AUDITORS TO THE BOARD MEMBERS OF KADUNA REFINING AND PETROCHEMICAL COMPANY LIMITED Opinion We have audited the accompanying financial statements of Kaduna Refining and Petrochemical

Company Limited ("the Company"), which comprise the statement of financial position as at 31st

December 2020, and the statement of profit or loss and other comprehensive income, statement of

changes in equity, and statement of cash flows for the year then ended, and a summary of significant

accounting policies and other explanatory information, as set out on pages 12 to 63.

In our opinion, the accompanying financial statements give a true and fair view of the financial

position of the Company as at 31st December 2020, and of its financial performance and its cash flows

for the year then ended in accordance with International Financial Reporting Standards and in the

maimer required by the Companies and Allied Matters Act, Cap C.20, Laws of the Federation of

Nigeria, 2020 and the Financial Reporting Council of Nigeria Act, 2011.

Basis for Opinion

We conducted our audit in accordance with International Standards on Auditing (ISAs). Our

responsibilities under those standards are further described in the Auditor's Responsibilities for the

Audit of the Financial Statements section of our report. We are independent of the Company in

accordance with the International Ethics Standards Board for Accountants' Code of Ethics for

Professional Accountants (TESBA Code) together with the ethical requirements that are relevant to our

audit of the financial statements in Nigeria and we have fulfilled our other ethical responsibilities in

accordance with these requirements and the IESBA code. We believe that the audit evidence we have

obtained is sufficient and appropriate to provide a basis for opinion.

Independence

We are independent of KPRC in accordance with the International Code of Ethics for Professional

Accountants (including International Independence Standards), i.e. the IESBA Code issued by the

International Ethics Standards Board for Accountants. We have fulfilled our other ethical

responsibilities in accordance with the JESBA Code.

Other Information

The Directors are responsible for other information which include the corporate information, director's

report, statement of director's responsibilities and other national disclosures, but does not include the

financial statements and our audit report thereon.

Our opinion on the 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 financial statements, our responsibility is to read the other

U information and in doing so, consider whether the other information is materially consistent with the

financial statements or our knowledge obtained in the audit or otherwise appears to he 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.

Responsibilities of the Directors for the Financial Statements

The Directors are responsible for the preparation of financial statements that give a true and fair view

U in accordance with IFRSs and in the manner required by the Companies and Allied Matters Act, Cap

• C.20, Laws of the Federation of Nigeria 2020, and the Financial Reporting Council of Nigeria Act, 2011,

and for such internal control as the Directors determine 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, the Directors are responsible for assessing the Company's ability

to continue as a going concern, disclosing, as applicable, matters related to going concern and using the

N going concern basis of accounting unless the Directors either intend to liquidate the Company or to

cease operations, or have no realistic alternative but to do so.

• Auditor's 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 auditor's 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.

U 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

U 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

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Oye Ahioy'. Quaye, FCA FRC2O14/ ICAN/ 00000008583 For: Oye Abioye Quaye & Co. Chartered Accountants

19th July, 2021 Kaduna, Nigeria

aruna N. Yahaya, mni, FCA FRC/ 2013/ ICAN/ 00000002270 For: Haruna Yahaya & Co. Chartered Accountants 19th July, 2021 Mima; Nigeria

opinion on the effectiveness of the Company's internal control.

• Evaluate the appropriateness of accounting policies used and the reasonableness of accounting

estimates and related disclosures made by the Directors.

• Conclude on the appropriateness of Directors' 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 auditor's

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

auditor's 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.

We communicate with the Board of Directors regarding, among other matters, the planned scope and

timing of the audit and significant audit findings, including any significant deficiencies in internal

control that we identify during the audit.

Report on Other Legal and Regulatory Requirements

Compliance with the requirements of Schedule 6 of the Companies and Allied Matters Act, Cap C.20,

Laws of the Federation of Nigeria, 2020.

In our opinion, proper books of account have been kept by the Company, so far as appears from our

examination of those books and the statement of financial position and the statement of profit or loss

and other comprehensive income are in agreement with the books of account.

Signed:

These financial statements were approved by the Board of Directors on -19th of July-2021 and signed on its behalf by:

Ezekiel Osarolube (Managing Director) FRC/ 2020/003/00000020716 Usman Umar (Executive Director, Operations) FRC/ 2020/003/00000020226

Jacob, Palang P. (Covering Director, Finance and Accounts) FRC/2021/ 001/00000023665


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KADUNA REFINING AND PETROCHEMICAL COMPANY LIMITED ANNUAL REPORT FOR THE YEAR ENDED 31ST DECEMBER 2020 STATEMENT OF FINANCIAL POSITION

ASSETS Note

2020 N'OOO

2019 N'OOO

NON-Current Assets Property, plant and equipment 13A 3,857,620 247,959 Right of Use Asset 13B - 73,028,587 Trade and other receivables (Non current) 16 1,079,805 1,305,012 Total Non-Current Assets 4,937,425 74,581,558 Current Assets Inventories 15 4,742,008 3,360,772 Trade and other receivables 16 187,801 108,786 Prepayments 14 324,813 1,302,756 Cash and cash equivalent 17 10,330,654 18,696,184 Total Current Assets 15,585,276 23,468,498 Total Assets 20,522,701 98,050,055 EQUITY AND LIABILITIES Equity Share Capital 18 5,000 5,000 Retained Earnings 19 (594,301,278) (595,612,285) Actuarial Reserve 21.4 - 53,763,065 Total Equity (594,296,278) (541,844,220) Liabilities Non Current Liabilities Leasehold Liability 20 - 78,558,488 Defined Benefit Obligation (Employee Benefits) 21 95,800,091 68,262,268 Total Non Current Liabilities 95,800,091 146,820,756 Current Liabilities Leasehold Liability 20 - 10,359,635 Current Tax liabilities 12(d) 751,377 751,299 Trade and other payables 22 518,267,511 481,962,585 Total Current Liabilities 519,018,888 493,073,519 Total Liabilities 614,818,979 639,894,275 Total equity and liabilities 20,522,701 98,050,055

KADUNA REFINING AND PETROCHEMICAL COMPANY LIMITED ANNUAL REPORT FOR THE YEAR ENDED 31ST DECEMBER 2020 STATEMENT OF PROFIT OR LOSS AND OTHER COMPREHENSIVE INCOME

Note 2020

N'OOO 2019

N000

Revenue 6 - 37,169

Direct Cost 8(a) (10,479,159) (15,775,353)

Gross Loss (10,479,159) (15,738,184)

Other Income 7 36,060 104,590

Administrative Expenses 8(b) (17,769,766) (35,681,893)

Operating Loss (28,212,865) (51,315,487)

Finance Income 10 - 226,981

Finance Cost 10 (22,636) (10,368,429)

Net Finance Income (22,636) (10,141,448)

Loss Before Minimum Tax and Income Tax 9 (28,235,502) (61,456,936)

Company Income Tax 12(a) (90) (186)

Loss Before Income Tax (28,235,592) (61,457,121)

Income Tax Expense 12(b)

Other Comprehensive Income, Net of Tax Reversal of Material Revaluation Surplus Actuarial (Expenses)! Benefit on Liability (27,537,823) (4,535,855)

Total Comprehensive Loss (55,773,415) (65,992,976)

The notes on pages 16 to 63 are an integral part of these financial statements


KADUNA REFINING AND PETROCHEMICAL COMPANY LIMITED ANNUAL REPORT FOR THE YEAR ENDED 31ST DECEMBER 2020 STATEMENT OF CHANGES IN EQUITY

For the year ended 31st December 2019

Attributable to the owners of the Company Share Actuarial Retained

Capital Reserve earnings N'OOO M'OOO N'OOO

Total

,0Oo

Balance at 1 January 2019 5,000 35,482,099 (529,619,308) (494,132,209)

Total Comprehensive Income Loss for the year (65,992,976) (65,992,976)

Movement in Actuarial Reserve 18,280,966 18,280,966

Balance at 31 December 2019 5,000 53,763,065 (595,612,285) (541,844,220)

For the year ended 31st December 2020 Balance at 1 January 2020 5,000 53,763,065 (595,612,285) (541,844,220)

Adjustment to retained earnings - - 57,084,422 57,084,422

Total Comprehensive Income Loss for the year - - (55,773,415) (55,773,415)

Movement in Actuarial Reserve - (53,763,065) - (53,763,065)

Balance at 31 December 2020 5,000 (594,301,278) (594,296,278)

U The notes on pages 16 to 63 are an integral part of these financial statements

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V. ; KADUNA REFINING AND PETROCHEMICAL COMPANY LIMITED 2020 FINANCIAL STATEMENTS 14

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KADUNA REFINING AND PETROCHEMICAL COMPANY LIMITED ANNUAL REPORT FOR THE YEAR ENDED 31ST DECEMBER 2020 STATEMENT OF CASH FLOWS

Cash flow from operating activities: Note

2020 N'OOO

2019 N'OOO

Loss for the year (28,235,502) (61,456,936) Adjustments for: Amortization Impact Actuarial Gain/ (Losses) on Liability (27,537,823) 4,535,856 Depreciation of property, plant and equipment 13(a) 59,793 24,827 Depreciation of Right of Use Asset 13(b) - 5,529,901 Gain on disposal of property, plant and equipment Allowance for obsolete inventory 15(a) Finance Cost 10 22,636 8,794 Impairment of employee receivables 16(c) -

(74,982,198) (51,357,558) Changes in: Inventories (1,381,237) (332,959) Trade and Other Receivables 146,192 132,480 Prepayments 977,943 (236,162) Trade and Other Payables (27,134,197) 125,734,847 Cash from Operating Activities (12,493,746) 73,940,648 Income Taxes Paid 12(d) (13) Net Cash generation from Operating Activities (12,493,759) 73,940,648 Cash flows from Investing Activities Movement in work in Progress (1,688,641) - Right of Use Asset (78,558,488) Acquisition of Property, Plant and Equipment - (245) Net Cash used in Investing Activities (1,688,641) (78,558,733) Cash flows from financing Activities Prior Year Adjustment 57,084,422 - Actuarial Reserve (53,763,065) 18,280,966 Issues of shares - - Dividend paid - Net cash flow from financing activities 3,321,357 18,280,966 Net Increase in cash and cash equivalents (8,365,530) 13,662,881 Cash and Cash Equivalents at 1 January 18,696,184 5,033,303 Cash and Cash Equivalents at 31 December 10,330,654 18,696,184

The notes on pages 16 to 63 are an integral part of these financial statements

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- - L KADUNA REFINING AND PETROCHEMICAL COMPANY LIMITED 2020 FINANCIAL STATEMENTS 15

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Notes to the Financial Statements R 1 Reporting Entity

• Kaduna Refining and Petrochemical Company Limited commenced business in 1980 as Nigerian

• National Petroleum Corporation Refinery Kaduna (a branch of NNPC). In March 1988, the

Petrochemical Plant was added to the assets of the branch. On 3 November 1988, NNPC merged the

two plants (Refinery and Petrochemical Plants) and formed a subsidiary company of NNPC known

as Kaduna Refining and Petrochemical Company Limited (KRPC) to manage the plants. KRPC was a incorporated as a limited liability company on 3 November 1988.

• The principal activities of the Company continue to be the processing of crude oil into petroleum

products and related derivatives as well as the production of tins and drums using the refinery and

petrochemical plants which are under lease from NNPC.

The Company is domiciled in Nigeria and has its registered office address at:

Km 16 Kachia

Kaduna, Kaduna Nigeria s 2 Basis of preparation

• (a) Statement of Compliance

These financial statements have been prepared in accordance with International Financial Reporting

• Standards (IFRS) and in the manner required by the Companies and Allied Matters Act, Cap C. 20,

Laws of the Federation of Nigeria, 2004 and the Financial Reporting Council of Nigeria Act, 2011.

The financial statements were authorised for issue by the Board of Directors on 19th July, 2021.

(b) Basis of Measurement

These financial statements have been prepared on the historical cost basis, except otherwise stated.

3 Functional and presentation currency

• These financial statements are presented in Nigerian Naira (u), which is the Companys functional

a currency. All financial information presented in Naira have been rounded to the nearest thousand,

unless otherwise indicated.

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. - KADUNA REFINING AND PETROCHEMICAL COMPANY LIMITED 2020 FINANCIAL STATEMENTS 16

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U Notes to the Financial Statements, Cont'd

U 4 Use of judgements and estimates

In preparing these financial statements, management has made judgement, estimate and assumptions

that affect the application of the Company's accounting policies and the reported amounts of assets, N liabilities, income and expenses. Actual results may differ from these estimates.

U Estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting

U estimates are recognised prospectively.

U (a) Judgements

• Information about. judgments made in applying accounting policies that have the most significant

effects on the amount recognised in the financial statements is included in the following notes:

Note 13B - Schedule of Lease Asset and note 20: Lease liability U (b) Assumptions

Information about assumptions and estimation uncertainties that have significant risk of resulting

in a material adjustments to the carrying amounts of assets and liabilities within the year ending

31 December 2020 is included in the following Notes: -Note 12(e) - recognition of deferred tax

assets: availability of future taxable profit against which carried forward losses can be used. -

Note 23 - recognition and measurement of provisions and contingencies: key assumptions about

the likelthood and magnitude of an outflow of resources.

(i) Measurement of fair values

A number of the company's accounting policies and disclosures require the measurement of fair

value, for both the financial and non-financial assets and liabilities. The Company has an

established framework with respect to the measurement of fair values. The General Manager

Finance has the overall responsibility for overseeing all significant fair value measurements,

including level 3 fair values and report directly to the Board of Directors.

When measuring the fair value of an asset or a liability, the Company uses observable data as far

as possible. Fair values are categorized into different levels in a fair value hierarchy based on the

inputs used in the valuation technique as follows:

Level 1: quoted prices (unadjusted) in active markets for identical assets or liabilities.

Level 2: input other than quoted prices included in level 1 that are observable for the assets or

liability, either directly (i.e. as prices) or indirectly (i.e. as derived from prices).


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1 Notes to the Financial Statements, Cont'd Level 3: inputs for the assets or liability that are not based on observable market data (unobservable

inputs).

If the inputs used to measure fair value of an asset or a liability might be categorized in different N levels of the fair value hierarchy, then the fair value measurement must be categorized in its entirely

in the same level of the fair value hierarchy as the lowest level inputs that is significant to the entire

measurement.

The company recognizes transfers between levels of the fair value hierarchy at the end of the

reporting period during which the change has occurred.

Further information about the assumptions made in measuring fair values is included in the

following notes:

Note 22 - Financial risk management & Financial Instruments

• 5 Significant accounting policies

I The accounting policies set out below have been applied consistently by the Company to all

periods presented in these financial statements.

a(a) Revenue

IRevenue is recognised when or as the Company transfers control of products or provides services

to a customer at the amount to which the Company expects to be entitled. 1 (i) Sale of goods

I Revenue from the sale of goods is recognized at a point in time when control of the goods is

U transferred to the customer, which is typically on delivery.

R (ii) Rendering of Services

MThe Company process or refine crude for its related party at an agreed tariff rates. Revenue earned

from crude refining and other services is recognised over time as the services are rendered.

Progress of performance obligations for crude refining services revenue recognised over time is

I measured using the output method which most accurately measures the progress towards

I satisfaction of the performance obligation of the services provided.

• Policy

IRevenue is measured at the fair value of the consideration received or receivables, net of value

added tax, discounts allowed and rebates in the ordinary course of business.

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- tA - a - KADUNA REFINING AND PETROCHEMICAL COMPANY LIMITED 2020 FINANCIAL STATEMENTS 18

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Notes to the Financial Statements, Cont'd (i) Sale of goods

Revenue from sale of goods is recognized when significant risks and rewards of ownership have

been transferred to the customer, recovery of the consideration is probable, the associated costs

and possible return of goods can be estimated reliably, there is no continuing management R involvement with the goods, and the amount of revenue can be measured reliably. If it is probable

I that discounts will be granted and the amount can be measured reliably, then the discount is

recognised as a reduction as a reduction of revenue as the sales are recognised.

• (ii) Rendering of Services

.Revenue from services (i.e. earned from processing crude) is recognised in profit or loss in the

proportion to the stage of completion of the transaction at the reporting date using predetermined 1 processing rates net of value added tax and measured at fair value of consideration received or

a receivable. Revenue is recognised only when it is probable that the economic benefits associated

I with the transaction will flow to the company and the amount can be measured reliably.

• (b) Finance Income and Finance costs

The Companys finance income and finance costs include:

Interest Income

Interest Expense

The foreign currency gain or loss on financial assets and financial liabilities;

I Interest income or expense is recognised using the effective interest method

I(c) Foreign Currency transactions

Transactions denominated in foreign currencies during the year are translated and recorded in

Nigerian Naira at actual exchange rates as of the date of the transaction. Monetary assets and

a

liabilities denominated in foreign currencies at the reporting date are translated into the

functional currency at the rates of exchange prevailing at that date. Non-monetary items that are

1 measured in terms of historical cost in a foreign currency are translated using the exchange rate at

I the date of the transaction. Foreign currency differences arising on translation are recognised in

• profit or loss.

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• Notes to the Financial Statements, Cont'd

• (d) Financial Instruments

Policy

Initial recognition and subsequent measurement

The Company classifies its financial assets, at initial recognition, as subsequently measured at

amortised cost. The classification of financial assets at initial recognition depends on the financial

I assets contractual cash flow characteristics and business model the Company uses to manage them. At

initial recognition, the Company measures a financial asset at its fair value plus, in the case of a

financial asset not at fair value through profit or loss, transaction costs that are directly attributable to

the acquisition of the financial asset.

UFinancial liabilities are classified, at initial recognition, as financial liabilities measured at amortised

cost. All financial liabilities are recognised initially at fair value and, in the case of payables and

borrowings, net of directly attributable transaction costs.

U The subsequent measurement of financial instruments depends on their classification, as described

• below:

• Amortised cost

Financial assets are measured at amortised cost if the asset is held within a business model to collect

acontractual cash flows where those cash flows represent solely payments of principal and interest.

Financial assets at amortised cost are subsequently measured using the effective interest method and

are subject to impairment. Gains and losses are recognised in profit or loss when the asset is

I derecognised, modified or impaired. The Company's financial assets at amortised cost include trade

and other receivables and cash and cash equivalents.

Financial liabilities are recognised initially at fair value and subsequently measured at amortised cost

• using the effective interest method. The Company's financial liabilities include trade and other

apayables.

The Company classifies non-deriavative financial assets into the following categories: Loans and

receivables

The Company classifies non-deriavative financial liabilities into other financial liabifities

W category

- KADUNA REFINING AND PETROCHEMICAL COMPANY LIMITED 2020 FINANCIAL STATEMENTS 20

KADUNA REFINING AND PETROCHEMICAL COMPANY LIMITED ANNUAL REPORT FOR THE YEAR ENDED 31 DECEMBER 2020 Notes to the Financial Statements, Cont'd

(1) Non-derivative financial assets and liabilities - Recognition and derecognition

I The Company initially recognizes loans and receivables on the date when they are originated.

Financial liabffities are initially recognised on the trade date.

The Company derecognises a financial asset when the contractual rights to the cash flows from

the asset expire or it transfers the rights to receive the contractual cash flows in a transaction in

which substantially all the risks and rewards of ownership of the financial asset are transferred or

a it neither transfers nor retains substantially all the risks and rewards of ownership and does not

I retain control over the transferred asset. Any interest in such derecognised financial assets that is

a created or retained by the Company is recognised as a separate asset or liabffity. The company

derecognises a financial liability when its contractual obligations are discharged or cancelled or

expire. Financial assets and liabilities are offset and the net amount presented in the statement of

financial position when, and only when, the Company has a legal right to offset the amounts and

intends either to settle them on a net basis or to realize the asset and settle the liability

I simultaneously.

(ii) Non-derivative financial assets - Measurement

Loans and receivables

These assets are initially measured at fair value plus any directly attributable transaction costs.

Subsequent to initial recognition, they are measured at amortised cost using the effective interest

method.

a (iii) Non-derivative financial liabilities - Measurement

U Other non-derivative financial liabilities are initially recognized at fair value less any directly

I attributable transaction costs. Subsequent to initial recognition, these liabilities are measured at

amortised cost using the effective interest method. The Company has the following non-

aderivative financial liabilities: trade and other payables. Short term payables that do not attract

interest are measured at original invoice amount where the effect of discounting is not material.

(e) Cash and Cash Equivalents

a Cash and cash equivalents comprise cash balances with the Central Bank of Nigeria, Letter of

• Credit and Deposit for Letters.

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a I KADUNA REFINING AND PETROCHEMICAL COMPANY LIMITED 2020 FINANCIAL STATEMENTS 21

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(f) Share Capital

The Company has only one class of shares, ordinary shares. Ordinary shares are classified as

equity. When new shares are issued, they are recorded in share capital at their par value.

Incremental costs directly attributable to the issue of ordinary shares are recognised as a

deduction from equity, net of any tax effects.

(g) Impairment

(i) Non-derivative financial assets

Financial assets not classified at fair value through profit or loss are assessed at each reporting

date to determine whether there is objective evidence of impairment.

Objective evidence that financial assets are impaired includes:

* default or delinquency by a debtor;

* restructuring of an amount due to the company on terms that the Company would not consider

otherwise;

* indications that a debtor or issuer will enter bankruptcy;

On 1 January 2018 the Company changed the methodology of assessing impairment of its

financial assets from the incurred loss model (used in lAS 39) to the expected credit loss model

(used in IFRS 9). In accordance with the transitional provisions of IFRS 9, the Company has not

restated prior periods but it has reassessed the impairment allowances under the new approach

as of 1 January 2018. Test of impairment was also carried out in 2020 on its trade receivables

with intercompany accounts, staff loans and cash balances.

* the disappearance of an active market for a security; or

* observable data indicating that there is measurable decrease in expected cash flows from a

group of financial assets.



Financial assets measured at amortised cost

UFrom 1 January 2018, the Company assesses on a forward-looking basis the expected credit losses

associated with its financial assets carried at amortised cost. The impairment methodology applied

depends on the determined risk profile of each financial asset and the future expected credit risks

1 relating to the identified asset. For trade receivables and contract asset, the Company applies a

I simplified approach to calculating expected credit losses, recognising a loss allowance based on

a expected credit losses at each reporting date. The Company has established a provision matrix that is

based on historical credit loss experience, adjusted for forward-looking factors specific to the debtors

and the economic environment. I I

The Company considers evidence of impairment for these assets at both an individual asset and

collective level. All individually significant assets are individually assessed for impairment. Those

1 found not to be impaired are then collectively assessed for any impairment that has been incurred

I but not yet individually identified. Assets that are not individually significant are collectively

a assessed for impairment. Collective assessment is carried out by grouping together assets with

similar risk characteristics.

Ih-i assessing collective impairment, the Company uses historical information on timing of recoveries

and the amount of loss incurred, and makes adjustment if current economic and credit conditions are

such that the actual losses are likely to be greater or less than suggested by historical trends.

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; KADUNA REFINING AND PETROCHEMICAL COMPANY LIMITED 2020 FINANCIAL STATEMENTS 23

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24

S KADUNA REFINING AND PETROCHEMICAL COMPANY LIMITED 2020 FINANCIAL STATEMENTS

TEST OF IMPAIRMENT ASSESSMENT

The corporate headquarters appointed an Independent Auditor (KPMG) to carry out impairment assessment on the assets c the company, the company's assets suffered impairment of N3.136mi111on (2019: N8.887million) as contained in Note 8b,16 and 17 of the Financial statements. Below are the results of the assessment: Ent Business Assets Description Key assumption Value of assets Value of assets Impairment ity model of

the in Scope

of assets in scope

in scope as per schedule

scope as per

KR Refining Interco Non-trade We summed up all intercompany accounts, if the - (485,671,304,06 - PC of crude

oil into petroleu m products

mpariy Accoun ts

transactions between related parties (e.g. transfer of staff assets)

sum is positive we apply a 100% loss rate and if the sum is negative no impairment is taken

3.76)

Staff Loans

Compassio nate loans with equal monthly

We analysed 5-year historical data and observed zero default rate. We also qualitatively assessed the likelihood of default, taking into consideration the structure of the loans:

1,266,620,914.34 1,266,620,914.34 Immaterial

repayments for 1 year and vehide loans with equal monthly repayments for tenors between 4 years to 6 years with an option to prepay after 4 years

- repayments are deducted at source; - total loan amounts disbursed to each member of staff is limited to one-third of the staff member's consolidated income; - repayment is taken from the staff member's gratuity in the event that the staff member exits the company; - loan amounts are not disbursed in excess of the staff member's gratuity

Based on this assessment, we have conduded that the expected credit loss on this portfolio is immaterial.

Bank Letters of This was assessed using the general approach. The 10,107,254,001.88 10,107,254,001.8 3,136,230.85 Balance s

credits parameters used were estimated as follows: Probability of default: We have assigned Nigeria's

8

S&P rating of B to it, as their exposure is to CBN. Using these credit ratings, we have obtained a multi-year PD term structure using S&P's multi-year Global Sovereign Average Cumulative Default Rates Loss Given Default we have assumed a loss given default of 0%,0% and 10% for the base case, best case and worse case scenarios respectively Exposure at Default outstanding balance as at reporting date Tenor we have assumed a tenor of 1 year

Balances with CBN

This was assessed using the general approach. The parameters used were estimated as follows:

223,397,809.59 223,397,809.59 57.95

Probability of default We have assigned Nigeria's S&P rating of B to it. Using these credit ratings, we have obtained a multi-year PD term structure using S&P's multi-year Global Sovereign Average Cumulative Default Rates Loss Given Default we have assumed a loss given default of 0%,0% and 10% for the base case, best case and worse case scenarios respectively Exposure at Default outstanding balance as at reporting date Tenor we have assumed a tenor of 3 da s TOTAL 11,597,272,725.81 - 3,136,288.8

- 474 074 031 337 95


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IAn impairment loss is calculated as the difference between an assets carrying amount and the

present value of the estimated future cash flows discounted at the asset's original effective interest

rate. Losses are recognised in profit or loss and reflected in an allowance account. When the

a Company considers that there are no realistic prospects of recovery of the asset, the relevant amounts

are written off. if the amount of impairment loss subsequently decreases and the decrease can be

related objectively to an event occurring after the impairment was recognized, then the previously

recognised impairment loss is reversed through profit or loss.

I(ii) Non-financial assets

IAt each reporting date, the Company reviews the carrying amounts of its non-financial assets (other

than inventories and deferred tax assets) to determine whether there is any indication of impairment.

I If any such indication exists, then the asset's recoverable amount is estimated.

I For impairment testing, assets are grouped together into the smallest group of assets that generates

cash flows from continuing use that are largely independent of the cash flows of other assets or cash

generating units (CGUs).

The recoverable amount of an asset or cash-generating unit 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

I value of money and the risks specific to the asset or CGU.

An impairment loss is recognized if the carrying amount of an asset or CGU exceeds its estimated

arecoverable amount.

Impairment losses are recognized in profit or loss. 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 recognized.

h Property, Plant and Equipment (i) Recognition and Measurement

Items of property, plant and equipment are measured at cost less accumulated depreciation and

accumulated impairment losses. S

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1 KADUNA REFINING AND PETROCHEMICAL COMPANY LIMITED 2020 FINANCIAL STATEMENTS 25

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• If significant parts of an item of property, plant and equipment have different useful lives, then

a they are accounted for as separate items (major components) of property, plant and equipment.

Any gain or loss on disposal of property, plant and equipment is recognized in profit or loss.

a(ii) Subsequent costs

$ Subsequent expenditure is capitalized only if it is probable that the future economic benefit

a associated with the expenditure will flow into the Company.

U

• (iii) Depreciation

aDepreciation is calculated to write off the cost of items of property, plant and equipment less their

estimated residual values using the straight-line method over their estimated useful lives, and is

generally recognised in profit or loss. Leased assets are depreciated over the shorter of the lease

• term and their useful lives unless it is reasonably certain that the Group will obtain ownership by

the end of the lease term. Land is not depreciated.

The estimated useful lives and methods of depreciation of significant items of property, plant

and equipment for current and comparative years are as follows:

Leasehold Improvement

Over the earlier of useful life or tenure of

the lease

Plant and Equipment 10%

Motor Vehicles 25%

Furniture 20%

Office Equipment 10%

Computer Equipment 10%

aDepreciation methods, useful lives and residual values are reviewed at each reporting date and

adjusted as appropriate.

Gains and losses on disposal of an item of property, plant and equipment are determined by a comparing the proceeds from the disposal with the carrying amount of property, plant and

a equipment and are recognized in profit or loss. Any amount of revaluation reserve relating to

• that asset is transferred to retained earning directly.

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Notes to the Financial Statements, Cont'd

(i) Inventories

Inventories are measured at the lower of cost and net realisable value. The cost of inventories

includes expenditure incurred in acquiring the inventories, production or conversion cost and

other cost incurred in bringing them to their existing location and condition. In the case of

manufactured inventories and work in progress, cost includes an appropriate share of

production overheads based on normal operating capacity.

The basis of costing inventories are as follows:

a Net-realisable value is the estimated selling price in the ordinary course of business, less the

a estimated costs of completion and selling expenses. Inventory values are adjusted for obsolete,

slow-moving or defective items.

(j) Provisions and contingent liabilities

Provisions

A provision is recognized if, as a result of a past event, the company has a present legal or

* constructive obligation that can be estimated reliably, and it is probable that an outflow of

economic benefits wifi be required to settle the obligation. Provisions are determined by

discounting the expected future cash flows at a pre-tax rate that reflects current market

aassessments of the time value of money and the risks specific to the liability. The unwinding of

athe discount is recognized as finance cost.

A provision for restructuring is recognized when the Company has approved a detailed and

formal restructuring plan, and the restructuring either has commenced or has been announced

publicly. Future operating losses are not provided for.

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Product Type Cost Basis

Raw Materials

Weighted average cost, including

transportation and handling charges

Plant spares, chemicals, lubricants and other

consumables

Weighted average cost, including

transportation and handling charges

Inventory-in-transit Purchase cost incurred to date


(i) Current Tax Current tax comprises the expected tax payable or receivable on the taxable income or loss for the year

and any adjustment to the tax payable or receivable in respect of previous years. The amount of current

tax payable or receivable is the best estimate of the tax amount expected to be paid or received that

reflects uncertainty related to income taxes, if any, it is measured using tax rates enacted or

substantively enacted at the reporting date. Current tax also includes any tax arising from dividends.

The Company is subject to tax under the Companies Income Tax Act (CITA). The Company is also

* subject to tertiary education tax governed by the Tertiary Education Trust Fund (Establishment) Act. it

is measured using tax rates enacted or substantively enacted at the reporting date.

The Company is subject to the Companies Income Tax Act (CITA). Total amount of tax payable under

CITA is determined based on the higher of two components namely Company Income Tax based on

taxable income (or loss) for the year; and minimum tax.

The Finance Act 2020 makes some amendments to CITA as it relates to minimum tax. This act came into

effect on 1st February 2020 and to be applied retrospect. This implies that the base rate of 0.25% of the

qualifying company's gross turnover less franked investment income are applicable. This modification

was made in recognition of the need to shift the impact of minimum tax from capital basis to a purely

revenue-based approach.

(ii) Deferred Tax Deferred tax is recoginsed in respect of temporary differences between the carrying amounts of assets

and liabilities for financial reporting purposes and the amounts used for taxation purposes. Deferred tax

is not recognised for temporary differences on the initial recognition of assets or liabilities in a

transaction that is not a business combination and that affects neither accounting nor taxation profit or S

loss.

Deferred tax assets are recognised for unused tax losses, unused tax credit and deductible temporary

• differences to the extent that it is probable that future taxable profits wifi be available against which they

5 can be used. Future taxable profits are determined based on the reversal of taxable temporary

adifferences is insufficient to recognise a deferred tax asset in full, then future taxable profits, adjusted for

reversals of existing temporary differences, are considered based on business plans for the company

a

approved by the Board of Directors. deferred tax assets are reviewed at each reporting date and are

reduced to the extent that it is no longer probable that the related tax benefit will be realised; such

reductions are reversed when the probability of future taxable profits improves.

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Deferred tax is measured at the tax rates that are expected to be applied to temporary differences

when they reverse, using tax rates enacted or substantively enacted at the reporting date.

The measurement of deferred tax reflects the tax consequences that would follow from the manner in

which the Company expects, at the reporting date, to recover or settle the carrying amount of its

assets and liabilities.

Deferred tax assets and liabilities are offset only if certain criteria are met.

Contingent Liabilities

A contingent liability is a possible obligation that arises from past events and whose existence will be

confirmed only by the occurrence or non-occurrence of one or more uncertain future events not

wholly within the control of the company, or a present obligation that arises from past events but is

not recognised because it is not probable that an outflow of resources embodying economic benefits

wifi be required to settle the obligation; or the amount of the obligation cannot be measured with

• sufficient reliability.

Contingent liabilities are only disclosed and not recognized as liabilities in the statement of financial

position. If the likelihood of an oufflow of resources is remote, the possible obligation is neither a

aprovision nor a contingent liability and no disclosure is made.

k Leases

(i) Determining whether an arrangement contains a lease

At inception of an arrangement, the Company determines whether the arrangement is or contains a

lease.

At inception or on reassessment of an arrangement that contains a lease, the company separates

apayments and other consideration required by the arrangement into those for the lease and those for

aother elements on the basis of their relative fair values, if the company concludes for a finance lease

that it is impracticable to separate the payments reliably, then an asset and a liability re recognised at

an amount equal to the fair value of the underlying asset; subsequently, the liability is reduced as

payments are made and an imputed finance cost on liability is recognised using the Company's

a incremental borrowing rate.

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• KADUNA REFINING AND PETROCHEMICAL COMPANY LIMITED 2020 FINANCIAL STATEMENTS 29

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KADUNA REFINING AND PETROCHEMICAL COMPANY LIMITED ANNUAL REPORT FOR THE YEAR ENDED 31 DECEMBER 2020 Notes to the Financial Statements, Cont'd (ii) Leased Assets

Leases of property, plant and equipment that transfer to the Company substantially all of the

risks and rewards of ownership are classified as finance leases. The leased assets are measured

initially at an amount equal to the lower of their fair value and the present value of the minimum

lease payments. subsequent to initial recognition, the assets are accounted for in accordance with

the accounting policy applicable to that asset.

In line with IFRS16 all asset are recorded in KRPC Books.

(iii) Lease Payments

a Payments made under operating leases are recognised in profit or loss on a straight-line basis

over the term of the lease. Lease incentives received are recognised as an integral part of the total

lease expense, over the term of the lease.

• Minimum lease payments made under finance leases are apportioned between the finance

expense and the reduction of the outstanding liability. The finance expense is allocated to each

period during the lease term so as to produce a constant periodic rate of interest on the

U remaining balance of the liability.

• (I) Income Tax

aIncome tax expense comprises current and deferred tax. It is recognised in profit or loss except to

the extent that it relates to a business combination, or items recognised directly in equity or in

other comprehensive income. a

• (m) Statement of cash flows

aThe statement of cash flows is prepared using the indirect method. Changes in statement of

financial position items that have not resulted in cash flows such as other non cash items have

a

been eliminated for the purpose of preparing the statement. Finance cost paid is included in

financing activities while finance income is included in investing activities.

(n) Fair Value Measurement

U Fair value is the price that would be received to sell an asset or paid to transfer a liability in an

S orderly transaction between market participants at the measurement date in the principal or, in

its absence, the most advantageous market to which Company has access at that date. The fair

value of a liability reflects its non-performance risk.

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i KADUNA REFINING AND PETROCHEMICAL COMPANY LIMITED 2020 FINANCIAL STATEMENTS 30

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KADUNA REFINING AND PETROCHEMICAL COMPANY LIMITED ANNUAL REPORT FOR THE YEAR ENDED 31 DECEMBER 2020 Notes to the Financial Statements, Cont'd A number of the Company's accounting policies and disclosures require the measurement of fair

values, for both financial and non-financial assets and liabilities (see Note 4(b)(i)). When one is

available, the Company measures the fair value of an instrument using the quoted price in an active

market for that instrument. A market is regarded as active if transactions for the asset or liability take

place with sufficient frequency and volume to provide pricing information on an ongoing basis. If

there is no quoted price in an active market, then the Company uses valuation techniques that

maximize the use of relevant observable inputs and minimize the use of unobservable inputs. The

chosen valuation technique incorporates all of the factors that market participants would take into

5 account in pricing a transaction. If an asset or a liability measured at fair value has a bid price and an

ask price, then the Company measures assets and long positions at a bid price and liabilities and

short positions at an ask price. The best evidence of the fair value of a financial instrument on initial

recognition is normally the transaction price - i.e the fair value of the consideration given or received.

If the Company determines that the fair value on initial recognition differs from the transaction price

and the fair value is evidenced neither by a quoted price in an active market for an identical asset or

liability nor based on a valuation technique for which any unobservable inputs are judged to be

5 insignificant in relation to the measurement, then the financial instrument is initially measured at fair

value, adjusted to defer the difference between the fair value on initial recognition and the

transaction price. Subsequently, that difference is recognised in profit or loss on an appropriate basis

over the life of the instrument but no later than when the valuation is wholly supported by

observable market data or the transaction is closed out.

On 1 January 2018 the Company changed the methodology of assessing impairment of its financial

S assets from the incurred loss model (used in lAS 39) to the expected credit loss model (used in IFRS

5 9). In accordance with the transitional provisions of IFRS 9, the Company has not restated prior

periods but it has reassessed the impairment allowances under the new approach as at 31st

December, 2020.

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(ii) Adoption of IFRS 15: Revenue from Contracts with Customers

The Company has applied IFRS 15 'Revenue from contracts with customers' with effect

from 1 January 2018. IFRS 15 provides a single, principles-based approach to the

recognition of revenue from all contracts with customers. It focuses on the identification of

performance obligations in a contract and requires revenue to be recognised when or as

those performance obligations are satisfied.

The Company adopted IFRS 15 applying the modified retrospective approach. IFRS 15 did

not have a material impact on the amount or timing of recognition of reported revenue. At

1 January 2018, there was no cumulative adjustment to retained earnings.

(iii) IFRS 9 Financial Instruments - Impact of adoption

The new financial instruments standard, IFRS 9 replaces the provisions of lAS 39. The new

standard presents a new model for classification and measurement of assets and liabilities,

a new impairment model which replaces the incurred credit loss approach with an

expected credit loss approach, and new hedging requirements.

Classification and measurement of financial instruments.

The Company's management assessed the classification of its financial assets which is

driven by the cash flow characteristics of the instrument and the business model in which

the asset is held. The Company's financial assets include cash and cash equivalents and

trade and other receivables. Cash and cash equivalents and trade and other receivables are

held to collect contractual cash flows and to earn contractual interest.

IFRS 9 has not resulted in changes in the carrying amount of the Company's financial

instruments due to changes in measurement categories. All financial assets that were

classified as loans and receivables and measured at amortised cost under lAS 39 continue

to be measured at amortised cost.

Impairment of financial assets.

On 1 January 2018 the Company changed the methodology of assessing impairment of its

financial assets from the incurred loss model (used in lAS 39) to the expected credit loss

model (used in IFRS 9). In accordance with the provisions of IFRS 9, the Company has

reassessed the impairment allowances as at 31st December, 2020.

The total impairment loss in 2020 was N 3,136,288.80



ANNUAL REPORT FOR THE YEAR ENDED 31 DECEMBER 2020

U

• Notes to the Financial Statements, Cont'd 2020 2019

6 Revenue N'OOO N'OOO

Revenue Comprises:

Processing fee - 37,169

37,169 I For the year 2020, the company did not earn any income through

shutdown of the plants and the ongoing turn around maintenance.

processing fee due to the

I 7 Gain/ (Loss) on disposal of property, plant and equipment

I Sale of electricity 30,274

• Penalties for the loss of ID card 316

Miscellaneous Income 5,470 104,590

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36,060 104,590

8 Expenses by nature

(a) Direct Cost

• Depreciation of Right of Use lease - Refinery assets - 5,529,901

• other direct cost 685,520 1,238,782

• Employee benefits (Note 11(a)) 9,793,639 9,006,670

I 10,479,159 15,775,353

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KADUNA REFINING AND PETROCHEMICAL COMPANY ANNUAL REPORT FOR THE YEAR ENDED 31 DECEMBER


(b) Administrative Expenses

LIMITED 2020

2020

N'OOO

2019

N'OOO

Depreciation 59,793 24,827

Auditor's Remuneration 50,000 50,000

Bank Charges 3,164 3,650

Communication 35,127 22,194

Head office (NNPC) overhead (Note 25(c)) - 5,677,603

Photocopying 11,723 7,580

Consumables 22,566 2,048

Maintenance 257,857 382,796

Public relations and publicity 4,049 8,515

Security 233,727 342,095

Subscription and dues 14,631 2,835

Local Community Development 22,055

Training Expenses 200,812 220,812

Local and International Travel 327,261 342,720

Utilities 717 -

Employee benefits (Note 11(a)) 16,222,567 25,516,854

Gifts 2,719 1,200

Other operating lease rentals 68,784

Technical backup expenses 17,299 -

Consultancy fees 59,036 1,237,482

Electricity - 1,424

Entertainment 683 118

Licenses 14,629 905

Impairment (Note 3,136 8,819

Local Area Network Maintenance 30

Safety Consumables & Awareness 11,613

Office Expenses 125,789 1,827,419

17,769,766 35,681,893

Total direct costs and administrative expenses 28,248,926 51,457,247

- l - i KADUNA REFINING AND PETROCHEMICAL COMPANY LIMITED 2020 FINANCIAL STATEMENTS 34

S

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a a U

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2020

N'OOO

2019

N'OOO

(59,793) (24,827)

50,000 50,000

26,016,206 34,523,525

(2,018,082) (11,187,235)

(22,636) (10141,448)

- 5,529,901

68,784

(28,235,502) (61,456,936)


9 Loss before minimum and income taxes

Loss before minimum and income taxes is stated after

charging! (crediting)

Depreciation (Note 13)

Auditor's remuneration

Employee benefit expense (Note 11(a))

Other Direct/Administrative Expense

Net Finance Income (Note 10)

Depreciation lease:

Refinery assets

Staff Bus



•

• 10


Net Finance Income

2020

N'OOO

2019

N'OOO Interest on Employee Loans - 226,981

Finance Income - 226,981

Net foreign exchange loss (22,636) (8,794)

Interest Expense on Lease - (10,359,635)

Finance Cost (22,636) (10,368,429) • Net Finance Income (22,636) (10,141,448)

non utilization of the asset by the lessee (KRPC).

11 Employee benefits and Directors remuneration

(a) Employee Benefits

(i) Employee costs during the year comprise:

Salaries and Wages 7,301,147 8,048,601

Death Benefits* 7,753 18,390

Other Employee benefits ** 18,707,305 26,456,534

26,016,206 34,523,525

Direct cost 9,793,639 9,006,670

Administrative expenses 16,222,567 25,516,854

Total Employee Costs 26,016,206 34,523,525 * . . . Death benefits represent amount paid to the next of km of employee that died during active

a service and other burial expenses incurred by the Company.

S (i) The average number of full-time persons seconded to the Company during the year from

5 the parent, NNPC (other than executive Directors) was as follows:

Operations 501 687

Administration 154 186

655 873

In 2020, interest and depreciation on lease were not charged due to approval from the lessor

U (CHQ) suspending charges on the asset as a result of a change in accounting policy as well as

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(iii) Higher paid employees of the Company, other than Directors, whose duties were

wholly or mainly discharged in Nigeria, received remuneration (excluding pension

contributions) in the following ranges

Annual Salary Band

2020 2019

Number Number

N100,000 - N1,000,000 - 5

N1,000,001 - N2,000,000 - 4

N2,000,001 N3,000,000 26 37

N3,000,001 - N4,000,000 50 87

N4,000,001 - N5,000,000 24 38

N5,000,001 - N6,000,000 51 44

N6,000,001 - N7,000,000 42 77

N7,000,001 - N8,000,000 41 59

N8,000,001 - N9,000,000 32 83

N9,000,001 - N10,000,000 77 118

N10,000,001 - N11,000,000 79 72

N11,000,001 - N12,000,000 55 47

N12,000,001 - N13,000,000 - 23 29

N13,000,001 - N14,000,000 26 30

N14,000,001 - N15,000,000 23 49

N15,000,000 - Above 106 94

655 873

2020 2019

N '000 N '000

Other emoluments

The Directors received emoluments in the following ranges:

(b) Directors remuneration (excluding pension contributions and certain other benefits) for

S Directors of the Company charged to the profit or loss account are as follows:

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I i 5 KADUNA REFINING AND PETROCHEMICAL COMPANY LIMITED 2020 FINANCIAL STATEMENTS 37

U


2020 2019

Number Number

Naira 5,000,001 - Naira 10,000,000

• Naira 10,000,001 - Naira 20,000,000 1 3

Naira 20,000,001 - Naira 25,000,000 2

Above Naira 25,000,000 a

3 3 R The Directors' remuneration shown above include:

• 2020 2019

• N'OOO

aHighest paid director 22,811 8,116

• 12 Taxation

(a) The Company has applied the provisions of the Companies Income Tax Act that

Umandates a minimum tax assessment, where a taxpayer does not have taxable profit which

would generate an eventual tax liability when assessed to tax. The Company's assessment 1 based on the minimum tax legislation for the year ended 31 December 2020 is NO.090

I million (2019: NO.186 million).

(b) The Company is subject to tax under the Companies Income Tax Act as amended to date.

U Companies Income Tax and Tertiary Education Tax was not charged during the year as the

Company did not have taxable or assessable profit for the year ended 31 December 2020. No

deferred tax asset has been recorded on losses incurred to date by the Company because of

the uncertainties around the recoverability of the losses (Note 12(e)).

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a

- I KADUNA REFINING AND PETROCHEMICAL COMPANY LIMITED 2020 FINANCIAL STATEMENTS 38

a


(c) Reconciliation of effective tax rate The tax on the Company's profit before tax differs from the theoretical amount as follows:

2020 N '000 %

2019 N '000 %

Loss before minimum and income tax

(28,235,502) 100 (61,456,936) 100

Statutory tax rate (8,470,650) 30 (18,437,081) 30

Tertiary Education Tax (169,413) 2 (368,742) 2

Effect of Movement in un-recognised 8,188,295 deferred tax assets

(29) 17,822,511 (29)

Non-deductible expenses 847,065 (3) 1,843,708 (3) Other difference Total Income Tax Expense

(d) Movement in Current Tax Liability 2020 2019

IN '000 N '000

Balance beginning of year 751,299 751,114

Charge for the year (minimum tax) Note 12(a) 90 186

Tax paid (13)

Balance end of year 751,377 751,299

(e) Un-recognised deferred tax assets

Deferred tax assets have not been recognised in respect of unrelieved tax losses and other

deductible temporary differences, because it is not probable that future taxable profits wifi a be available against which the Company can use the benefits there from.

I 2020 2019 N'OOO . N'OOO

I Deductible temporary differences 2,758,930 2,758,930

I Tax losses (will never expire) 364,173,032 364,173,032

1 366,931,962 366,931,962

U a

Deferred Tax thereon 111,196,719 109,353,011

I I - I

IKADUNA REFINING AND PETROCHEMICAL COMPANY LIMITED 2020 FINANCIAL STATEMENTS 39

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Notes to the Financial Statements, Cont'd 13AProperty, Plant and Equipment (a) Reconciliation of carrying amount

Cost

Plant & equipment

Motor vehicles

Furniture & fittings

Assets Under

Construction

Office equipment

Computer equipment

Total

N'OOO N'OOO N'OOO N'OOO N'OOO N'OOO N'OOO

Balance at 1 January 2019 543,568 405,953 308,904 285,920 135,421 1,679,766 Additions 245 245 Disposals Balance at 31 December 2019 543,568 405,953 308,904 286,165 135,421 1,680,011 Balance at 1 January 2020 543,568 405,953 308,904 286,165 135,421 1,680,011 Additions - - - Adjustments - - 3,731,807 3,731,807 Disposals - - Balance at 31 December 2020 543,568 405,953 308,904 3,731,807 286,165 135,421 5,411,818 Depreciation and Impairment Losses Balance at 1 January 2019 383,356 360,832 276,556 257,751 128,731 1,407,225 Charge for the year 13,050 1,709 5,261 3,871 936 24,827 Disposals Balance at 31 December 2019 396,406 362,541 281,817 261,622 129,667 1,432,053

Balance at 1 January 2020 396,406 362,541 281,817 261,622 129,667 1,432,053 Adjustment to Accumulated Depreciation 25,392 11,751 17,282 6,745 1,183 62,352 Charge for the year 37,900 2,885 9,593 8,159 1,256 59,793 Disposals Balance at 31 December 2020 459,698 377,177 308,691 276,525 132,106 1,554,198

Carrying Amounts:

At 31 December 2019 147,162 43,412 27,087 24,543 5,754 247,959 At 31 December 2020 83,870 28,776 212 3,731,807 9,640 3,314 3,857,620


KADUNA REFINING AND PETROCHEMICAL COMPANY LIMITED ANNUAL REPORT FOR THE YEAR ENDED 31 DECEMBER 2020 NOTES TO THE FINANCIAL STATEMENTS CONT'D 13B SCHEDULE OF RIGHT OF USE ASSET

Right-of-use Asset Cost

Balance as at 1 January 2019

Recognition of right-of-use asset on initial application of IFRS 16 Adjusted balance as at 1 January 2019

78,558,488

Balance as at 31 December 2019

78,558,488

Balance as at 1 January 2020 Additions Disposal Termination of lease agreement

78,558,488

(78,558,488)


N'OOO

78,558,488

Additions Disposal

Right-of-use Asset N'OOO

Depreciation Balance as at 1 January 2019 Recognition of right-of-use asset on initial application of IFRS 16

Adjusted balance as at 1 January 2019

Charge for the year Disposal

5,529,901

Balance as at 31 December 2019 5,529,901

Balance as at 1 January 2020 Charge for the year Disposal Termination of lease agreement

5,529,901

(5,529,901)


Right-of-use Asset N'OOO

Carrying Amounts At 31 December 2019

73,028,587

At 31 December 2020 The Corporate Headquarter (the lessor) terminated the Lease Agreement with KRPC on 1st January 2020, which resulted to the reversal of associated Right of Use Asset, Accumulated Depreciation and

Leasehold Liability initially recognised in 2019.

, KADUNA REFINING AND PETROCHEMICAL COMPANY LIMITED2020 FINANCIAL STATEMENTS 41

• (a) Included in the prepayment was prepaid employee benefits representing benefits from interest free loans granted to staff which is linked to future services to be derived from the

a employees. This amount is amortised on a prorata basis as part of employee benefit expense. 15 Inventories

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•

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Raw materials 83,438 83,438 Spares 1,444,286 1,118,774 Chemicals 1,644,033 1,644,033 Lubricants and other consumables 619,732 386,296 Goods in transit 950,520 128,231

(a) Movement in allowance for obsolete inventories

4,742,008 3,360,772

Balance, beginning of year 5,543,201 5,543,201 Allowance during the year Balance, end of year 5,543,201 5,543,201


14 Prepayment Prepayments comprise:

2020 N'OOO

2019 N'OOO

Prepaid employee benefits (Note 14(a)) 324,813 1,302,756 324,813 1,302,756

Less: Non-current portion - (627,176) Current portion 324,813 675,580

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•

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• 16

The value of inventory items are stated net of allowances for Allowance for obsolete inventory items as at year end was Trade and other receivables Trade receivables

obsolete inventories. The N5.543billion. (2019: N5.543 billion)

- $ Receivables due from related parties (Note 16(a)) 86,291 55,776 . Employee receivables (Note 16(b)) 1,180,790 1,357,497

Other receivables 525 525

a 1,267,606 1,413,799

S Less: non-current portion Current portion

(1,079,805) (1,305,012) 187,801 108,786

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R (a) Due from related parties comprise: 2020 2019

a

a

Integrated Data Services Limited National Engineering and Technical Company Limited

N'OOO N'OOO 12,137

6,112 7,967 6,112

Pipeline and Products Marketing Company 48,924 61,566 I Nigerian National Petroleum Company 333 37,169

Other related parties 18,784 (50,848) a Sub Total 86,291 61,966

a Impairment of Receivables - (6,189)

86,291 55,776 • (b) Employee loans are interest free loans granted to staff members to purchase motor vehicles and are

usually secured with the employee's retirement benefit obligations held by the Parent Company NNPC. The Loans are usually repayable within 3 to 6 years. The fair value of the employee loans recorded at initial recognition is based on future contractual cashflows discounted at 17%.

(c) Movement in impairment allowance in receivables N'OOO N'OOO • NNPC CHQ - 4,994

NPDC 86 I NGC - 43

NETCO - 61 I IDSL - 80 - NAPIMS - 309

PPMC - 573

I NPSC - 43 Balance, end of year 6,189 The Company's exposure to credit risk and market risks, related to trade and other receivables are

I discounted in Note 20(a) 17 Cash and cash equivalents

•

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I 18

a

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I All ordinary shares rank equally with regard to the Company's residual assets. Holders of these shares are entitled to dividends as declared from time to time and are entitled to one vote per share at general meetings of the Company.


I

Cash at Bank - CBN 223,400 9,733,700 Letter of Credit 4,705,650 4,708,277 Deposit for Letter 5,401,604 4,256,837 Sub Total 10,330,654 18,698,814 Impairment - (2,630) Total Cash and cash equivalents 10,330,654 18,696,184 Movement in impairment of Cash and cash equivalents N'OOO N'OOO Letters of credits - 2,627 Balances with CBN - 2

- 2,630 The Company's exposure to credit risks are disclosed in (Note 20(d)) Share Capital Authorised 5,000,000 ordinary shares of Ni each 5,000 5,000 Issued, called-up and fully paid: 5,000,000 ordinary shares of Ni each 5,000 5,000

U U


2020 2019 N'OOO N'OOO

19 Retained Earnings

a Opening Balance (595,612,285) (529,619,308)

U Adjustment to retained earnings Note 19a 57,084,422 Profit/ (Loss) for the Period (55,773,415) (65,992,976)

U Total (594,301,278) (595,612,285)

U The adjustment carried out on retain earnings relates to items that have hitherto been expended but rejusted/ classified

a 19a Adjustment to retained earnings

a

a

1 2 3

Actuarial Reserve 53,763,065 Other miscellaneous items 960,390 Prior year amortization of status car in lieu (1,024,427)

I 4 2019 prior Year lease Charge 3,385,394

Total 57,084,422

I 20 Leasehold Liability (Non Current)

a

a

Opening balance 78,558,488 Charge for the year (78,558,488) 78,558,488 Closing balance 78,558,488

a Leasehold Liability (Current) Opening balance 10,359,635

a Movement in the year (10,359,635) 10,359,635

a Closing balance 10,359,635

The Corporate Headquarter (the lessor) terminated the Lease Agreement with KRPC on 1st January a 2020, which resulted to the reversal of associated Right of Use Asset, Accumulated Depreciation

U and Leasehold Liability initially recognised in 2019. 21 Defined Benefit Obligation (Employee Benefits)

a Pension Plan 39,519,701 31,670,537

a Gratuity 52,970,217 34,451,480 Post Retirement Medical Benefits 2,439,428 1,397,350

a Long Service Award 870,745 742,901

a Total 95,800,091 68,262,268

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a


Average Long-Term Future: 2019

(% p.a.)

2020

(% p.a.)


21 Defined benefit plans

The Company operates defined benefit plans for employees. The plan is based on employee

pensionable remuneration and length of service. The plan covers pension, gratuity, post-

employment medical and long service awards. The Company's net obligation for retirement

benefits as defined by contract is calculated for each participation in the plan, estimating the

amount of future benefits that employees have acquired for their services during the current and

prior periods; this benefit is discounted in order to determine its present value which is reduced by

the fair market value of plan assets. The actuarial valuation was performed by Ernst & Young an

independent actuary using the projected unit credit method to arrive at the accrued liability value.

The assumptions used in arriving at the financial position is as presented below:

21.1 Valuation Assumption

The actuarial recognized the corporation service rendered by each member of staff at the review

date and anticipates that cost will increase between the review date and each future milestone

anniversary and then, discounts the expected benefit payments to the review date. The emerging

total value (for each individual) is described by lAS 19 as the Defined Benefit Obligation (DBO).

The valuation assumptions fall under two broad categories.

0 Financial Assumptions

0 Demographic Assumptions

The assumptions depict our estimates of the likely future experience of the corporation.

Financial Assumptions

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Rate of Inflation 11.00% 12.00%

Discount Rate 13.50% 8.00%

Salary Increase Rate (Gratuity) 12.00% 12.00%

Salary Increase Rate (Pension) 7.00% 7.00%

Benefit Inflation Rate 4.00% 4.00%


of the longest Nigerian Government bond as at 31st December 2020 was 11.06 years with a gross

redemption yield of 7.55% and adopted 8.0% p.a. as the discount rate for the current valuation.

Terminologies Some of the terminology is describe below some of the terminologies used in the report


aNotes to the Financial Statements, Cont'd

Discount Rate

To measure the liability, the projected benefit must be discounted to a net present value as at the current

balance sheet date.

• IFRS through lAS 19 requires that the discount rate determined on the corporation's balance sheet date be

reference to market yields on high quality corporate bonds, except where there is no deep market in such

bonds, in which case the discount rate should be based on market yields on Government bonds. We are

• adopting FGN Bonds although State Bonds exist with (Broadly) higher yields.

UThe discount rate should reflect the duration of the liabilities of the benefit programme.

The weighted average liability duration for the Plan is 5.14 years, while the average weighted duration a

a

a

S

Interest Cost:

Since our liability values are discounted, they wifi automatically

increase by the discount rate over a period. The interest cost is the

expected increase in liability values in the course of the review year.

This is the value of benefits acquired by service rendered in the review

year

Service Cost:

Net Periodic Benefit Cost: The corporation benefit expense to be charged/recognized for the

year

Defined Benefit Obligation This is the total value of leaving service benefits accrued as at the

(DBO) review date.

Actuarial (Gains)/Losses: Changes in Benefit Obligation or Fair Value of Assets arising from

change in actuarial valuation assumptions or actual experience

differing from expectation.


S

a


21.2 Movement in the Financial Statement

The movement in the defined benefit obligation over the past three years are as presented below:

i. Net (Liability)/Assets Recognized in the Financial Position as at 31 December 2020

Net (Liability)/Assets Recognized in the Financial Position

Pension

N000

Gratuity

N000

Post-

Retirement

Medical

N000

Long

Service

awards

N000

Total

N000

1) Opening Net (Liability)/Asset 31,670,537 34,4.5 1,397,350 742,901 68,262,268

Recognized in the Balance Sheet

2) Benefit (Expense)/Income 5.555.5...5,824,426 249,356 262,960 11,892,309

Recognized in P&L

3) Contribution made in the

financial Year

4) Transfer-In 369,184 399,576 16,574 7,391 792,725

5) Transfer-Out -3,428,510 -3,818,879 -164,335 -77,155 -7,488,879

6) Benefit Paid by the Corporation -5,265,509 -3,716,602 -216,067 -65,352 -9,263,530

7) Amount Recognized in OCI 24,068,948 6,379,700 1,156,550 0 31,605,198

Closing Net Balance in P&L/OCI 21,299,680 5,068,221 1,042,078 127,844 27,537,823

Closing Net (Liability)/Asset 52,970,217 39,519,701 2,439,428 870,745 95,800,091

Recognized in the Balance Sheet


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21.3


Summary analysis of the movement in the Financial Position, statement of Income and

other comprehensive income.

Statement of Financial Position 2020 2019

N000 N000 Gratuity Benefits 39,519,701 34,451,480

Pension Benefits 52,970,217 31,670,537

Post-Retirement Medical Benefits 2,439,428 1,397,350

Long Service Award 870,745 742,901

Liability in the statement of Financial Positions 95,800,091 68,262,268

Statement of Profit or Loss

21.4 Actuarial Reserve

Opening Balance 53,763,065 35,482,099

Charge for the year Profit! (Loss) - 12,973,068

Charge for the year OCT - 4,535,855

Movement in Charge - 772 043

Adjustment to Retain Earning (53,763,065)

Closing Balance - 53,763,065

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a Notes to the Financial Statements, Cont'd

R 21.5 Sensitivity analysis as at 31 December 2020

Sensitivity Analysis

Base Rate

Defined Benefit Obligation N'OOO

Pension

N000

Gratuity

N000

Post- Retirement

medical N000

2,439,428

Long service awards

N000

870,745 52,970,217 39,519,701

Discount Rate 1%

-1%

46,573,565 37,499,618

41,767,298

2,104,396 835,192

2,855,185 909,388 60,730,139

Salary Increase Rate 1% N/A 41,848,115 897,465

-1% N/A 37,383,494 845,564

Pension Benefit Escalation

Rate

1% 55,456,469 N/A 2872982 885765

-1% 50,655,563 N/A 2085903 856837

Future Pension Increase 1% 58,182,075 N/A N/A

-1% 48,456,127 N/A N/A

Life Expectancy

Improved by

1 year

51,671,192 39,498,784 2,509,834 874,163

Improved by

lyear

54,268,467 39,538,620 2,369,864 869,576

U 21.6 Maturity Profile of the Defined Benefit Obligation Maturity Profile of the Defined Benefit Obligation

Period Pension Gratuity Post- Long Retirement service

Medical Awards

N000 N000 N000 N000

2021 618,284 5,189,611 19,290 198,235

2022 1,189,531 4,851,781 39,562 182,739

2023 1,710,749 4,459,438 58,766 3,702

2014 2,344,452 5,555,403 83,695 25,505

2025 3,012,764 6,180,420 108,190 22,435

2026-2030 27,875,372 27,146,811 263,739 917,708

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• 22

KADUNA REFINING AND PETROCHEMICAL COMPANY LIMITED ANNUAL REPORT FOR THE YEAR ENDED 31 DECEMBER 2020 Notes to the Financial Statements, Cont'd Trade and other payables Trade payables

Payables due to related parties (Note 20(a))

Accrued expenses

Payroll Related Liabilities

2020 N'OOO

2019 N'OOO

5,908,370

505,379,068

60,699

3,930,365

5,691,753

470,262,317

57,500

2,892,101 U Other payables 2,670,600 2,696,048

U Total Trade payables 517,949,102 481,599,717

a Statutory liability (Note 20(b)) 318,409 362,867

a 518,267,511 481,962,585

(a) Amount due to related parties comprise: Nigerian National Petroleum Corporation 505,254,250 470,082,438

• Warn Refining and Petrochemical Company Limited 118,058 173,118

I Port Harcourt Refining Company Limited (Note 25(b)) 6,761 6,761

• 505,379,068 470,262,317

• (b) Statutory deductions consist of Industrial Training Fund (ITF), Withholding Tax, Value Added

Tax and PAYE liabilities. Information about the Company's exposure to liquidity risk is included

in Note 22(b)

23 Financial risk management and financial instrument The Company has exposure to the following risks from its use of financial instruments:

• * Credit Risk * Liquidity Risk * Market Risk Risk Management Framework The Company's board of Directors has overall responsibility for the establishment and oversight

of the Company's risk management framework

The Company's risk management policies are established to identify and analyse the risks faced

U by the Company's to set appropriate risk limits and controls, and to monitor risks and adherence

U to limits. Risk management policies and systems are reviewed regularly to reflect changes in

• market conditions and the Company's activities. The Company through its training and

amanagement standards and procedures, aims to maintain a disciplined and constructive control

environment in which all employees understand their roles and obligations.


KADUNA REFINING AND PETROCHEMICAL COMPANY LIMITED ANNUAL REPORT FOR THE YEAR ENDED 31 DECEMBER 2020 Notes to the Financial Statements, Cont'd The Company's Management Executive Committee monitors compliance with the Company's risk

a management policies arid procedures, and reviews the adequacy of the risk management framework

in relation to the risks faced by the Company. The Company's Management Executive Committee is

• assisted in its oversight role by Internal Audit. Internal Audit undertakes both regular and ad hoc

a reviews of risk management controls and procedures, the results of which are reported to the

aManagement Executive Committee.

(a) Credit Risk

Credit risk is the risk of financial loss to the Company if a customer or counterparty to a financial 1 instrument fails to meet its contractual obligations, and arises principally from the Company's

I receivables from customers and counterparty.

The carrying amount of financial assets represents the maximum credit exposure

Trade receivables

Notes

2020

N'OOO

2019

N'OOO

16 -

Due from related parties 16(a) 86,291 55,776

Employee receivables 16 1,180,790 1,357,497

Other receivables 16 525 525

Cash and cash equivalents 17 10,330,654 18,696,184

11,598,260 20,109,983

Trade receivables

The Company's exposure to credit risk is influenced mainly by the individual characteristics of each

customer. However, Management also considers the factors that may influence the credit risk if its

customer base, including the default risk of the industry and country in which customers operates.

The Commercial unit of the Company has established a credit policy under which each new customer

is analysed individually for creditworthiness before the Company's standard payment, terms and

conditions are offered. The Company's review includes external ratings, if they are available.

The Company's customers consist of Oil Companies which have been transacting business with the

Company for over 5 years, and no impairment loss has been recognised against these customers.

Customers are grouped with respect to their previous financial difficulties.


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At 31 December 2018, the Maximum exposure to credit risk for trade receivables was as follows:

2020 2019

N'OOO N'OOO

Major customers 0

All the Companys trade receivables are due from customers within Nigeria. However, this was

written off (impairment in line with IFRS 9) because the receivables have been due for over five years

and there is no any indication of recovery anytime soon.

At 31 December 2020, the aging of trade receivables that were not impaired was as follows: 2020 2019

N'OOO N'OOO Above 360 days

Other Receivables

Other receivables include other sundry receivables. The Company reviews the balance due from this

category on a periodic basis taking into consideration functions such as continued business relationship

and ability to offset amounts against transactions due to these parties. The Company believes that the

amounts are still collectible. No impairment was recognised during the year (2019:nil)

Due from related parties

The Company has transactions with its parent company and other related parties who are related to the

Group by virtue of being members of NNPC group. Payment terms are usually not established for

transactions within the Group companies and amounts receivables from members of the Group are not

impaired except the member is facing bankruptcy. In the Directors view, all amounts are collectible. No

impairment was recorded with respect to amounts due to related parties in the current year (2019:nil)

Cash and cash equivalents

The Company held cash and cash equivalents of N1O.331 bfflion as at 31 December 2020 (2019: N18.696

billion), which represents its maximum credit exposure on these assets. The cash and cash equivalents as

at 31 December 2020 is held by the Central Bank of Nigeria (CBN) following the introduction of Treasury

Single Account (TSA) for all government agencies and affiliated agencies by the Federal Government of

Nigeria. Also included in the cash and cash equivalents is letter of credits and deposit letters.



a

W with its financial liabilities that are settled by delivering cash or another financial asset. The Company's

S approach to managing liquidity is to ensure, as far as possible, that it will have sufficient liquidity to meet

its liabilities when they are due, under both normal and stressed conditions, without incurring

unacceptable losses or risking damage to the Company's reputation.

The Company relies on short term funding from its parent, NNPC to meet it obligations as and when due.

Although the funding arrangement is short term in nature, the Directors based on historical patterns and

continued discussions, with the parent, believe that the funding wifi be available for at least the next one

year.

I The following are the contractual maturities of financial liabilities at the reporting date.

(b) Liquidity risk

Liquidity risk is the risk that the company will encounter difficulties in meeting the obligations associated

a

S Non-derivative financial liabilities

Carrying Contractual 3month or less amount cashf low

N '000 N '000 N'OOO 31-Dec-19 Trade and other Payables* 481,599,717 481,599,717 481,599,717

S 31-Dec-20 Trade and other Payables* 518,585,920 518,585,920 518,585,920 *Excluding statute based deductions

(c) Market Risk

Market risk is the risk that changes in market prices, such as foreign exchange rates, interest rates and

a equity prices will affect the Company's income or the value of its holdings of financial instruments. The

aobjective of market risk management is to manage and control market risk exposures within acceptable

Iparameters, while optimizing the return.

a

The Company manages market risks by keeping costs low through various cost optimisation programs.

Moreover, market developments are monitored and discussed regularly, and mitigating actions are

I taken where necessary.

S (i) Currency risk

The Company is exposed to currency risk on certain settlement obligations that are denominated in a

currency other than the functional currency of the Company, which is the Nigerian Naira The currency

a

in which these transactions primarily area denominated is US Dollars (USD). The currency risk is the

risk that the fair value or future cash flows of a financial instrument will fluctuate due to the changes in

foreign exchange rates.



In managing currency risk the company aims to reduce the impact of short-term fluctuations on

earnings Although the Company has various measures to mitigate exposure to foreign exchange rate

movement, over the longer term, permanent changes in exchange rates would have an impact on profit.

The Company monitors the movement in the currency rates on an ongoing basis.

2020 2019 USD USD

Other Financial Liabilities

Trade and other Payables

Net Exposure

Sensitivity analysis

A strengthening of the Naira, as indicated below against the Dollar at 31 December would have

affected profit or loss and equity by the amounts shown below. This analysis is based on foreign

currency exchange rate variances that the Company considered to be reasonably possible at the end of

the reporting period and has no impact on equity. The analysis assumes that all other variables, in

particular interest rates, remain constant. The analysis is performed on the same basis for 2020 albeit

that the reasonably possible foreign exchange rate variances were different, as indicated below:

31st December 2020

NGN (20 percent strengthening)

31st December 2019

NGN (20 percent strengthening)

A weakening of the Naira against the Dollar at 31 December would have had the equal but opposite

effect on the above dollar to the amount shown above, on the basis that all other variables remain

constant.

The following significant exchange rates were applied during the year

Average rate Reporting date spot rate

Reporting date spot rate

31-Dec-20 31-Dec-19 31-Dec-20 31-Dec-19 31-Dec-20 31/1/2019 N N N N N N

306.92 306.92 363.46 363.46 363.46 363.46


U

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N

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S

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N

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a

a

a

Increase in profit or loss and equity N 000


(d) Analysis of financial instruments by categories Financial assets and liabilities as determined under IFRS 9 in 2020 are categorized as follows:

Note Amortized Loans & Total cost receivables

M'OOO 'O00 '0O0 31st December 2020

Financial Assets

Trade and other receivables 16 1,267,606 1,267,606

Cash and cash equivalents 17 10,330,654 10,330,654

11,598,260 - 11,598,260

Financial Liabilities

Trade and other payables 22 518,267,511 518,267,511

518,267,511 - 518,267,511

31st December 2019

Financial Assets

Trade and other receivables 16 1,413,799 - 1,413,799

Cash and cash equivalents 17 18,696,184 - 18,696,184

20,109,983 - 20,109,983

Financial Liabilities

Trade and other payables 22 481,962,585 - 481,962,585

481,962,585 - 481,962,585

* Excluding statute based deductions

U

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a


U

S $

•

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•

1

5

•

S

I

S

•

a

S

56 2020 FINANCIAL STATEMENTS KADUNA REFINING AND PETROCHEMICAL COMPANY LIMITED


31st December 2020

Carrying Amount Loans & receivables Other

financial liabilities

N '000

Total

N '000

Financial assets not measured at fair value

Trade and other receivables 1,267,606 - 1,267,606

Cash arid cash equivalents 10,330,654 - 10,330,654

11,598,260 11,598,260

Financial assets not measured at fair value

Trade and other payables

518,267,511 - 518,267,511

Interest Expense -

* Excluding statute based

deductions

518,267,511 518,267,511

Cash and cash equivalents, trade and other payables and trade and other receivables represent the

I Company's short term financial instruments. Accordingly, the Directors believe that their fair values

I are not expected to be materially different from their carrying values.

Included in trade and other receivables is loans to staff in respect to the purchase of motor vehicles

• amounting to N1.l7lbillion (2019: N 0.326b111i0n) with a fair value of N 0.204bi11ion.

(e) Measurement of fair values N Valuation techniques and significant unobservable inputs

The following table shows the valuation techniques used in measuring Level 2 fair values for

financial instruments not measured at fair value in the statement of financial position, as well as the

significant unobservable inputs used.

Type valuation technique Inter-relationship between significant unobservable inputs and fair value measurement

other financial assets discounted cash flows: The valuation model considers the present value of the expected future receipts, discounted using a risk adjusted discount rate

Risk adjusted discount rate (2019: 14%) expected future receipts

Not applicable

a a a •

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a

a

a

a

a


(f) Capital Risk Management The Management Executive Committee's policy is to maintain a strong capital base so as to

U maintain investor, creditor and market confidence and to sustain future development of the

business. Management monitors capital using a ratio of adjusted net debt to 'total equity'. For this

apurpose, adjusted net debt is defined as total liabilities less cash and cash equivalents. Total equity

comprises all components of equity.

The Company's debt to adjusted capital ratio at the end of the reporting period was as follows:

2020 N '000

2019 N '000

Total liabilities 614,818,979 639,894,275

Less: Cash and cash equivalents (10,330,654) (18,696,184)

Adjusted net debt 604,488,325 621,198,091

Total equity (594,296,278) (541,844,220)

Adjusted net debt to equity ratio (1.0) (1.1)

There were no changes in the Company's approach to capital management during the year. The

Company is not subject to externally imposed capital requirements.

rn24 Finance Leases

With the coming in effect of IFRS16, the Company leases its buses and equipment's. Similarly, the 1 refinery assets are under lease arrangement with NNPC this resulted to KRPC recording the asset

• in her books while also charging interest and depreciation.

(i) Future minimum lease payments At 31 December, the future minimum lease payments under non-cancellable leases were payable

as follows: U

I Amount in the Financial Position Less than one year : Interest Expense Liability

I Between one and five years : Lease Liability - 78,558,488

U - 78,558,488

(ii) Amounts recognized in profit or loss

Refinery assets Depreciation - 5,529,901 U Interest Expense - 10,359,635

I15,889,536


a

U

U

a

2020 2019 N'OOO N'OOO


1 25 Related party transactions

U Parent and ultimate controlling party

The Company's parent and ultimate parent company is Nigerian National Petroleum Corporation. This is

the oil corporation through which the Federal Government of Nigeria regulates and participates in the

country's petroleum industry.

Other related party transactions

The Company has transactions with its parent and other related parties who are related to the Company

R by virtue of being members of the NNPC Group. The significant transactions with related parties during

I the year and total amounts due from! (to) related parties by nature of the transactions are shown below:

I

(a) Sales of Goods and Services Sales of Services:

I Nigerian National Petroleum Corporation - Parent

2020 N'OOO

2019 N'OOO

3 7,169

• Total 37,169

• (b) Purchase of Goods and Services Purchase of goods:

U Nigerian National Petroleum Corporation - Parent

a Purchase of services: Lease rental Nigerian National Petroleum Corporation - Parent - 5,529,901

Head office allocation U Nigerian National Petroleum Corporation - Parent - 5,677,603

I Total - 11,207,504

The reduction in the lease rental was as a result of the coming into effect of IFRS 16 which recognized all

lease asset as finance lease. This change in policy hitherto has effect on the lease cost.

Net balances due (to)/from related entities within the group are as follows:

Nigerian National Petroleum Corporation - Parent - (470,082,438) U Warn Refining and Petrochemical Company limited -Fellow subsidiary (173,118)

• Port Harcourt Refining Company Limited - Fellow Subsidiary (6,761) Pipeline and Products Marketing Company - 61,566

U Integrated Data Services Limited - 7,967 National Engineering and Technical Company Limited - 6,112 Other Related Companies - (50,848)

U Total - (470,237,520)

— f KADUNA REFINING AND PETROCHEMICAL COMPANY LIMITED 2020 FINANCIAL STATEMENTS 58


2020 2019 '000 N000

(c) Corporate Headquarter Overhead

Insurance 1,918

Pension 1,678,457

Staff Training - 48,827

Medical Expenses 98,338

Transport and Travels - 108,327

Stationeries 26,708

Consultancy 373,913

Information Technology 534,161

Security Service 1,068,322

Maintenance 667,701

Salaries and Welfare 1,070,931

Total 5,677,603

(d) Transactions with key management personnel

Key Management personnel are those persons having authority and responsibility for

planning, directing and controlling the activities of the Company, directly or indirectly,

including any director of the Company.

Key management personnel compensation comprises:

2020 2019 N'OOO N'OOO

Short term employee benefits 324,813 675,580

Total

The employees are seconded to the Company which bears the cost of their salaries and wages.

However, the pension of these employees as well as other long term benefits are borne by the

parent Company, NNPC, and not recharged to the company.

26 Contingent Liabilities

The Company is subject to various claims and litigations arising in the normal course of

business. In the opinion of the Directors, based on legal advice for the year under review, KRPC

has a contingent liability totaling 54,178,321.44 in 2020. These contingent liabilities arise from

two transactions that are currently in court involving breach of contractual agreements.



aNotes to the Financial Statements, Cont'd

27 Events after the reporting period

Subsequent Event: Impact of COVID-19 on the operation of KRPC

The impact of the COVID-19 corona virus outbreak has caused a significant deterioration in

economic conditions for companies and has increase economic uncertainty for the nation and

aothers. However, Management needs to assess whether these events or conditions, either

aindividually or collectively ('current events or conditions'), cast significant doubt on the company's

a

ability to continue as a going concern or, in severe cases, whether the going concern assumption is

still appropriate as a basis for the preparation of the company's financial statements. In view of this

we have assess the impact of COVID-19 on the going concern of KRPC as well as business

a operations.

i. Impact on Going Concern

aUnder lAS 10 events after reporting period defines events as those events favorable or unfavorable

athat occurs between the end of the period and the date when the financial statements are authorized

a

for issue. There are basically two events which are adjusting event and Non-Adjusting events.

Management is required to assess the company's ability to continue as a going concern. A company

is no longer a going concerns if management either intends to liquidate the entity or cease trading or

U has no realistic alternative but to do so. Companies are required to disclose material uncertainties

related to events or conditions that may cast significant doubt on their ability to continue as a going

concern. In addition, disclosure is required when management concludes that there are no material

Uuncertainties but reaching that conclusion involved significant judgment * (a 'close call').

Management has assessed the company's ability to continue as a going concern and has come to

conclusion that the current economic uncertainty and market volatility caused by the COVID-19

U outbreak, which has been further exacerbated by a decline in oil prices as no material effect on

• KRPC. This is as a result that the parent company NNPC has provide letter of comfort for the KRPC.

In addition, management has also assess all available information about the future (which is at least,

but not limited to, 12 months from the reporting date), considering the possible outcomes of events

and changes in conditions, and the realistically possible responses to such events and conditions

that are available. The company has no doubt that it will meet its obligation. U

a



a . 28 Going Concern

The Company incurred a net loss of N55.77 billion for the year ended 31 December 2020 (2019:

N65.99 billion), and as of that date, current liability exceeded current assets by 503.43 billion (2019:

N470.23 billion). The Company's losses have arisen principally from:

* Its inability to operate profitably under its current processing contract with its parent, Nigerian

National Petroleum Corporation (NNPC). KRPC's primary source of revenue is from the

.processing of crude oil for NNPC. The processing fees are determined solely by NNPC, without

consideration for related costs and are significantly lower than the costs incurred to produce.

* in the year under review, the company did not earned any income from processing fee due to the

U nonfunctioning of the company. The high cost is also due to the current structure of the

organization where by the company bear the total cost of personnel expenses.

The Parent company, Nigeria National Petroleum Corporation (NNPC) has undertaken not to

reduce its shareholding in the Company and to continue to support the Company by funding its

.operations until such time the Company is in a position to adequately finance its own operations.

In addition, NNPC has undertaken to settle all liabilities of the Company (KRPC).

On the basis of the above, the Directors have reasonable expectation that the parent Company

U (NNPC) will continue to provide adequate funding for the Company to continue operational

existence for the foreseeable future and as such realize its assets and settle its liabilities in the

foreseeable future. It is as a result of this, that the financial statements have been prepared on the

principles applicable to a going concern.

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KADUNA REFINING AND PETROCHEMICAL COMPANY LIMITED ANNUAL REPORT FOR THE YEAR ENDED 31ST DECEMBER 2020

U Other National Disclosures

UValue Added Statement For the year ended 31 December

U 2020 N'OOO

2019 N'OOO

- 37,169

(5,932,253) (27,957)

(23,729,012) (31,122,080)

(29,661,265) (31,112,867)

(22,636) (10,141,448)

36,060 104,590

(29,674,689) 100 (21,076,009) 100

90 0% 186 0%

22,636 0% 10,368,429 -49%

26,016,206 -88% 34,523,525 -164%

59,793 0% 24,827 0%

(55,773,415) 188% (65,992,976) 313%

(29,674,689) 100% (21,076,009) 100%

• Revenue Brought-in-materials and services I Local

• Foreign

• Finance Income

Other Income U

U Distribution: To Government: Taxes

To Provider of finance:

• Finance costs

To Employees: U Salaries, Wages and other fringe benefits

• Retained in the business: To maintain and replace:

• Property, plant and equipment

• To deplete reserves

•

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KADUNA REFINING AND PETROCHEMICAL COMPANY LIMITED ANNUAL REPORT FOR THE YEAR ENDED 31 DECEMBER 2020 Other National Disclosures Five Year Financial Summary Statement of Profit or Loss and Other Comprehensive Income

2020 2019 2018 1st January 2016 2018

Restated Restated N'OOO N '000 N'OOO N '000 N '000

37,169 2,241,489 1,473,850

(28,212,865) (51,315,487) (80,095,303) (205,797,647) (30,220,853)

(28,235,502) (61,456,936) (79,886,405) (205,683,298) (30,191,997)

(55,773,415) (65,992,976) (63,639,251) (218,776,860) (30,193,851)

(55,773,415) (65,992,976) (63,639,251) (218,776,860) (30,193,851)

2020 2019 2018 2017 2016 N'OOO N '000 N '000 N '000 N '000

3,857,620 247,959 272,541 369,629 476,939

73,028,587

627,176 535,588 918,743 275,022

1,079,805 1,305,012 1,427,299 806,602 803,043

(503,433,612) (470,232,198) (427,333,326) (361,188,847) (259,273,674)

(498,496,187) (395,023,464) (425,097,898) (359,093,873) (247,203,197)

5,000 5,000 5,000 5,000 5,000

(594,301,278) (595,612,285) (529,619,308) (465,980,057) (247,208,197)

53,763,065 35,482,099 17,347,430

78,558,488

95,800,091 68,262,268 69,034,311 89,533,754

(498,496,187) (395,023,464) (425,097,898) (359,093,873) (247,203,197)

Revenue Results from operating activities Loss before taxation

Loss for the year

Total Comprehensive loss for the year

Statement of Financial Position

Employment of Funds Property, Plant and Equipment Right of Use Asset

Prepayments

Trade and other receivables

Net current liabilities

Net Liabifities

Funds Employed (inclusive of Leasehold Liability) Share Capital

Accumulated deficit

Actuarial Reserve

Leasehold Liability

Defined Benefit Obligation (Employee Benefits)


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