Annual report and accounts 2012

Other non-current liabilities

OAO Severstal and Subsidiaries
Notes to the Consolidated Financial Statements
25. Other non-current liabilities

for the years ended December 31, 2012, 2011 and 2010
(Amounts expressed in thousands of US dollars, except as otherwise stated)

 December 31,
 201220112010
Decommissioning liability129,300106,899182,894
Amounts payable to employees41,22924,56229,735
Deferred income28,54529,8372,610
Provisions15,26615,40418,271
Lease liabilities1,5021,8212,894
Derivative financial liabilities1,19124,93816,573
Restructured tax liabilities--725
Other liabilities38,23529,71823,447
 255,268233,179277,149

Decommissioning liability

The Group has environmental liabilities related to restoration of soil and other related works, which are due upon the closures of its mines and production facilities. These costs are expected to be incurred between 2013 – 2045. The present value of expected cash outflows were estimated using existing technology, and discounted using a real discount rate. These rates, presented by segment, are as follows:

 Discount rates, %
 201220112010
Severstal Resources:   
Russia2.1 - 3.73.0 - 4.70.0 - 2.0
USA4.0 - 6.53.4 - 4.61.0 - 3.3
Gold:   
Kazakhstan--0.1 - 0.9
Burkina Faso--0.6
Guinea--0.8

The movements in the decommissioning liability were as follows:

 Year ended December 31,
 201220112010
Opening balance119,302182,894279,426
Additional accrual9,79866,14610,508
Change in assumptions8,730(76,860)-
Interest cost11,91815,50510,597
Business combinations--9,828
Usage of decommissioning liability(16,601)(1,103)(21,762)
Reclassified to liabilities related to assets held for sale-(61,262)(104,637)
Foreign exchange differences3,348(6,018)(1,066)
Closing balance136,495119,302182,894

The change in assumptions in 2012 and 2011 related to the re-scheduling of the decommissioning of the Vorkutaugol mines and the change in the discount rate.

 December 31,
 201220112010
Current portion7,19512,403-
Non-current portion129,300106,899182,894
 136,495119,302182,894

Provisions

The current portion of provisions is included in the caption ‘Other current liabilities’. The total amount of the provisions is presented in the table below:

 December 31,
 201220112010
Legal claims32,55132,37526,219
Other employee related6,0667,4009,724
Environmental claims4,0622,0922,682
Tax and social security claims75726,8372,555
Other13,09110,9696,252
 56,52779,67347,432
 December 31,
 201220112010
Current portion41,26164,26929,161
Non-current portion15,26615,40418,271
 56,52779,67347,432

These provisions represent management’s best estimate of the potential losses arising in these cases, calculated based on available information and appropriate assumptions used. The actual outcome of those cases is currently uncertain and might differ from the recorded provisions.

The movements in the provisions were as follows:

 Year ended December 31,
 201220112010
Opening balance79,67347,432203,038
Charge to the income statement(24,277)62,9877,919
Business combinations--22,841
Usage of provisions-(6,582)(14,459)
Reclassified to liabilities related to assets held for sale-(23,442)(165,217)
Foreign exchange differences1,131(722)(6,690)
Closing balance56,52779,67347,432