Annual Report 2019

212 CHINA MERCHANTS PORT HOLDINGS COMPANY LIMITED Notes to the Consolidated Financial Statements For the year ended 31 December 2019 35. OTHER NON-CURRENT LIABILITIES 2019 2018 HK$’million HK$’million TCP Concession Liabilities (Note (a)) 3,610 3,622 Put Option Liability (Note (b)) — 661 Royalty Provision (Note (c)) 925 940 Net deferred benefit obligation (Note (d)) 420 428 Deferred income 420 63 Others 46 92 5,421 5,806 Notes: (a) Amount represents the liabilities arising from the concession arrangements for a port located in Brazil with the local port authority due by the TCP Group (the “TCP Concession Liabilities”). The relevant concession arrangement allows for operations in the relevant port for up to 2048. Pursuant to the said concession arrangements, including the amendments thereto, with the relevant authority, concession payment is payable on a monthly basis and is adjusted from time to time, among other conditions, with reference to an official inflation index in Brazil. The TCP Concession Liabilities are designated as FVTPL at initial recognition upon the completion of the TCP Acquisition (as defined in note 40) and subsequently measured at fair value, with any gains or losses arising on remeasurement (other than those attributable to changes in credit risks of these liabilities) recognised in profit or loss. The current portion of the TCP Concession Liabilities amounting to HK$104 million (2018: HK$100 million) is included in creditors and accruals under current liabilities. (b) Amount represents gross obligation arising from a put option issued to non-controlling equity holders of subsidiaries during the year ended 31 December 2018 (“Put Option Liability”). The excess of Put Option Liability over the fair value of the put option (as stated in note 40) amounting to HK$579 million at initial recognition was debited to the non-controlling interests. The amount is designated as FVTPL at initial recognition and subsequently measured at fair value, with any gains or losses arising on remeasurement (other than those attributable to changes in credit risks of these liabilities) recognised in profit or loss and is exercisable in 2020 and has been reclassified as current liability as at 31 December 2019 (note 37). Further details are set out in note 40. (c) Amount represents the minimum guaranteed royalty and premium provision (the “Royalty Provision”) under a Build-Operate-Transfer Agreement (the “BOT Agreement”) with Sri Lanka Ports Authority (“SLPA”) due by a non-wholly-owned subsidiary, Colombo International Container Terminals Limited, to SLPA. The BOT Agreement was entered into in 2011 for the right to construct, operate, manage and develop Colombo South Container Terminal for 35 years. The current portion of the Royalty Provision amounting to HK$59 million (2018: HK$56 million) is included in creditors and accruals in current liabilities. The initial recognition of the Royalty Provision is determined by discounting the future annual guaranteed cash flows at the then market rate. (d) Amount represents the net defined benefit obligation for a defined benefit plan. The present value of the defined benefit plan liability is calculated by reference to the best estimate of the mortality rate of plan participants both during and after their employment and future salaries of plan participants. An increase in the life expectancy and future salaries of the plan participants will both increase the plan’s liability. The most recent actuarial valuations of plan assets and the present value of the defined benefit obligation were carried out as at 31 December 2019 by an independent qualified professional valuer. The present value of the defined benefit obligation, and the related current service cost and past service cost, were measured using the Projected Unit Credit Method. Of the expense for the year, HK$20 million (2018: HK$12 million) has been included in administrative expenses. The remeasurement of the net defined benefit liability is included in other comprehensive income.