81 ANNUAL REPORT 2022 STRATEGY & OUTLOOK LEGAL & INSURANCE REVIEW To improve internal stakeholder management, we introduced an electronic feedback form with the objective of continual improvement in the provision of our legal and insurance services to the Company as a whole. This new introduction has been greeted with warm reception, and participation has been very encouraging. Both positive and negative comments were taken onboard, round discussions held with participants, and actions taken as an output of all such comments made. This is very much in line with Yinson’s core value of ‘openness’. Engaging external professional associates is part of how Yinson operates. We have a core in-house legal and insurance team, supported on the peripheral by external firms and consultants, including in the legal and insurance sectors. In FYE 2022, we enhanced our engagement with external professional associates to include a comprehensive onboarding process; and developed a framework for engagement during the tendering process and direct selection process. We believe that these engagements will help both parties to understand respective concerns, expectations and abilities to add value, leading to better outcomes for sustained value creation. Another highlight for the year was Yinson’s participation in a closed door, deep dialogue with Singapore Minister of State for Trade & Industry Alvin Tan on the business trends, opportunities and challenges companies face while operating in Africa’s oil & gas sector. Yinson was joined by other leading industry representatives in the session, which was organised by Enterprise Singapore. GMOS lawsuit successfully struck off On another note, we are pleased to have successfully struck off the lawsuit commenced by Globalmariner Offshore Services Sdn Bhd (“GMOS”) summarily. On 6 March 2020, GMOS commenced an action against various Yinson companies and 9 other parties (“Defendants”) in the Kuala Lumpur High Court by way of Suit No. WA22NCVC-150-03/2020 dated 3 March 2020 (“Suit”). The Writ of Summons, together with the Statement of Claim in the Suit was ordered to be struck out with costs by an Order of Court dated 31 March 2021, pursuant to a successful application made by the Defendants (which includes Yinson) and all avenues of appeal concerning the order made against GMOS have been completely exhausted. Charter contracts Charter contracts require special mention, given their level of complexity and sophistication within the upstream sector. The terms and conditions of Yinson’s charter contracts are not linked to macro-economic factors or conditions beyond the control of Yinson such as the price of oil & gas and/ or the performance of the reservoir on which the relevant production asset is operating. Charter rates will typically cover the cost of the capital expenditure of the project, including engineering, procurement, construction and installation (EPCI), financing costs as well as contributing to commercially acceptable returns to the Group over the tenure of the firm charter period. The Group considers any revenue earned during the option period as surplus revenue beyond the capital expenditure and projected returns of the project. Typically, assets are owned by Yinson, and upon termination of the relevant charter contract, there remains a possibility of redeployment of the asset to another offshore oil field. Given the bespoke nature of the assets, all charter contracts are typically negotiated to ensure that the risks of termination by charterers are minimised and termination can occur only in highly specific and prescribed circumstances. In the event a charter contract is prematurely terminated by the charterer at their convenience, there is a corresponding obligation on the part of the charterer to pay Yinson compensation in the form of a pre-agreed Early Termination Payment (“ETP”). This is so even in the case of termination due to a default on the part of Yinson, albeit in more limited circumstances, and at discounted ETPs. The ETP or discounted ETP payments are normally derived based on inter alia, the present value of lost future revenue and contractually structured as lump sum payments payable within a stipulated period post termination. Where applicable, charter contracts are further supported by a charterers’ parent company guarantees or undertakings to guarantee the obligations of the charterers over the course of the charters' firm and option periods. This includes the payment of ETPs. CLOSING REMARKS As a business, we rely on the robustness of our contracts and the strength of our legal competencies to minimise contract and legal risks. We believe this sets a crucial foundation that safeguards the sustainability of our business, allowing us to continue generating value for all our stakeholders for many years to come.
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