4.3.14Finance Lease Receivables

The reconciliation between the total gross investment in the lease and the net investment in the lease at the statement of financial position date is as follows:

Finance lease receivables (reconciliation gross / net investment)

As of December 31, 2017, finance lease receivables relate to the finance lease of:

• FPSO Cidade de Marica, which started production in February 2016 for a charter of 20 years;
• FPSO Cidade de Saquarema, which started production in July 2016 for a charter of 20 years;
• Turritella (FPSO), which started production in September 2016 with an initial lease charter of 10 years. Following the exercise of a purchase option by Shell on July 11, 2017, the finance lease will mainly be recovered though a selling price at the effective purchase option closing date, being January 16, 2018, resulting in a classification in current portion of the total net book value of the finance lease receivable as of December 31, 2017 (please refer to note 4.3.1).
• FPSO Cidade de Ilhabela, which started production in November 2014 for a charter of 20 years;
• FPSO Cidade de Paraty, which started production in June 2013 for a charter of 20 years;
• FPSO Aseng, which started production in November 2011 for a charter of 20 years;
• FSO Yetagun life extension, started in May 2015 for a charter of 3 years.

The decrease in the finance lease receivables is driven by the invoicing of bareboat charter rates in 2017 as per redemption plan and US$ 40 million impairment of Turritella (FPSO) for the difference between net investment in the finance lease and purchase price payment (please refer to note 4.3.1). This non-cash impairment is recognized in the Company’s consolidated income statement on the line item ’Other operating income/(expense)’.

Included in the gross receivable is an amount related to unguaranteed residual values. The total amount of unguaranteed residual values at the end of the lease term amounts to US$ 57 million as of December 31, 2017. Allowances for uncollectible minimum lease payments are nil.

Gross receivables are expected to be invoiced to the lessee within the following periods:

Finance lease receivables (gross receivables invoiced to the lessee within the following periods)

The following part of the net investment in the lease is included as part of the current assets within the statement of financial position:

Finance lease receivables (part of the net investment included as part of the current assets)

The maximum exposure to credit risk at the reporting date is the carrying amount of the finance lease receivables taking into account the risk of recoverability. The Company does not hold any collateral as security.

Purchase Options in Finance Lease Contracts

The finance lease contracts of the FPSOs Aseng and Turritella, where the Company is the lessor, include call options for the client to purchase the underlying asset or to terminate the contract early. Exercising of the purchase option for FPSO Aseng as of December 31, 2017 would have resulted in a gain for the Company while exercising of the early termination option, in which case the Company would retain the vessel, would have resulted in an insignificant loss. Please refer to note 4.3.1 for the detailed impact of Shell exercising the purchase option on Turritella (FPSO).