Company as a lessee

(1)	Lease contracts

The Company applies the short-term leases recognition exemption to its lease contracts that have a lease term of 12 months or less from the commencement date, and recognized ￦45,787 million and ￦199,490 million respectively, as expense for the years ended December 31, 2020 and 2021. The Company also applies the leases of low-value assets recognition exemption to leases contracts with underlying assets considered to be

low value (i.e., approximately less than ￦5 million), and recognized ￦2,796 million and ￦2,349 million respectively, as expense for the year ended December 31, 2020 and 2021. The Company has lease contracts for various items such as consecutive voyage charter contracts, power purchase agreements (PPA), real estate lease contracts including buildings, switchyard, and land for electric substation, vehicles, and other equipment.

(2)	Right-of-use assets as of December 31, 2020 and 2021 are as follows:


		2020
		Acquisition cost		Accumulated depreciation			Book value

		In millions of won
Land	￦		811,014		(104,435	)		706,579
Buildings			82,749		(35,527	)		47,222
Structures			24,175		(3,689	)		20,486
Machinery			1,308		(613	)		695
Ships			4,280,331		(842,968	)		3,437,363
Vehicles			29,281		(15,756	)		13,525
Others(*)			2,676,356		(2,360,060	)		316,296

	￦		7,905,214		(3,363,048	)		4,542,166

(*)

Including power purchase agreements (“PPA”) with GS EPS and another LNG combined power supplier.


		2021
		Acquisition cost		Accumulated depreciation			Book value

		In millions of won
Land	￦		814,795		(162,000	)		652,795
Buildings			106,823		(43,939	)		62,884
Structures			26,374		(5,226	)		21,148
Machinery			1,308		(743	)		565
Ships			4,217,735		(1,188,516	)		3,029,219
Vehicles			30,375		(16,757	)		13,618
Others(*)			2,650,728		(2,371,560	)		279,168

	￦		7,848,138		(3,788,741	)		4,059,397

(*)

Including a power purchase agreement (“PPA”) with CGN Yulchon Generation Co., Ltd.

(3)	Changes in right-of-use assets for the years ended December 31, 2020 and 2021 are as follows:


		2020
		Beginning balance		Increase		Depreciation			Decrease			Others			Ending balance

		In millions of won
Land	￦		644,074		12,269		(52,069	)		—			102,305			706,579
Buildings			34,577		53,182		(37,609	)		(803	)		(2,125	)		47,222
Structures			25,644		260		(1,485	)		—			(3,933	)		20,486
Machinery			824		—		(129	)		—			—			695
Ships			3,688,289		183,789		(427,221	)		—			(7,494	)		3,437,363
Vehicles			13,708		9,009		(7,747	)		(21	)		(1,424	)		13,525
Others			376,457		32,825		(59,994	)		(3	)		(32,989	)		316,296

	￦		4,783,573		291,334		(586,254	)		(827	)		54,340			4,542,166


		2021
		Beginning balance		Increase		Depreciation			Decrease			Others			Ending balance

		In millions of won
Land	￦		706,579		7,312		(57,231	)		—			(3,865	)		652,795
Buildings			47,222		22,336		(25,780	)		(1,469	)		20,575			62,884
Structures			20,486		2,198		(1,536	)		—			—			21,148
Machinery			695		—		(130	)		—			—			565
Ships			3,437,363		9,694		(411,291	)		—			(6,547	)		3,029,219
Vehicles			13,525		9,583		(8,162	)		(7	)		(1,321	)		13,618
Others			316,296		27,090		(50,485	)		(10,311	)		(3,422	)		279,168

	￦		4,542,166		78,213		(554,615	)		(11,787	)		5,420			4,059,397

(4)	Lease liabilities as of December 31, 2020 and 2021 are as follows:


		2020			2021
		In millions of won
Less than 1 year	￦		614,442			620,121
1 ~ 5 years			2,133,538			2,158,145
More than 5 years			2,461,557			2,150,722

			5,209,537			4,928,988
Less : Discount			(588,441	)		(518,485	)

Present value of lease payment	￦		4,621,096			4,410,503

(5)	The details of the liquidity classification of lease liabilities as of December 31, 2020 and 2021 are as follows:


		2020		2021
		In millions of won
Current lease liabilities	￦		576,665		583,558
Non-current lease liabilities			4,044,431		3,826,945

	￦		4,621,096		4,410,503

(6)	Changes in lease liabilities for the years ended December 31, 2020 and 2021 are as follows:


		2020
		Beginning balance		Increase		Decrease			Interest expenses		Others(*)			Ending balance
		In millions of won
Lease liabilities	￦		5,070,133		280,114		(725,759	)		111,782		(115,174	)		4,621,096

(*)

Including translation effect of foreign currency lease liabilities and others.


		2021
		Beginning balance		Increase		Decrease			Interest expenses		Others(*)		Ending balance
		In millions of won
Lease liabilities	￦		4,621,096		73,090		(665,687	)		93,651		288,353		4,410,503

(*)

Including translation effect of foreign currency lease liabilities and others.

(7)	Details of expense relating to lease contracts as lessee for the years ended December 31, 2020 and 2021 are as follows:


		2020		2021
		In millions of won
Depreciation of right-of-use assets	￦		586,254		554,615
Interest expenses of lease liabilities			111,782		93,651
Leases expenses for short-term leases			45,787		199,490
Leases expenses for leases of low-value assets			2,796		2,349
Variable lease payments			33,267		54,675

	￦		779,886		904,780

(8)	The total cash outflow related to the lease contracts, including cash outflows due to short-term leases and leases of low-value assets , amounts to ￦ 807,609 million and ￦ 922,200 million, for the years ended December 31, 2020 and 2021, respectively.

Company as a lessor

(1)	Finance lease contracts

The Company entered into power purchase agreements (“PPA”) with Jordan Electric Power Company to provide a 373MW level Qatrana

Gas Combined Power Plant

over a 25-year lease term, and an 89.1MW level Fujeij

Wind Power Plant

over a 20-year lease term. Also, the Company has provided fly-ash pipe

conduits

as finance leases with an average lease term of 7 years. In addition, the Company provides 26 energy storage system installation projects and 131 energy efficiency contracts as finance leases with a lease term of 2 to 11 years. Also, the Company entered into a PPA with the Comission Federal de Electricidad in Mexico to provide for 25 years (from December 2013 to November 2038) all electricity generated from the power plant after completion of its construction and collect rates consisting of fixed costs (to recover the capital) and variable costs during the contracted period.

(2)	Profit and loss related to finance lease for the years ended December 31, 2020 and 2021 are as follows:


		2020		2021
		In millions of won
Finance income on the net investment in the lease	￦		117,763		111,569

(3)	Maturity analysis of the lease payments receivable and reconciliation of the undiscounted lease payments to the net investment in the lease as of December 31, 2020 and 2021 are as follows:


		2020			2021
		In millions of won
Less than 1 year	￦		162,211			172,528
1 ~ 2 years			148,485			163,937
2 ~ 3 years			144,913			158,933
3 ~ 4 years			139,605			156,450
4 ~ 5 years			136,962			155,068
More than 5 years			1,583,576			1,588,403

			2,315,752			2,395,319
Less : Unearned finance income			(1,192,686	)		(1,194,627	)

Net investment in the lease(*)	￦		1,123,066			1,200,692

(*)

Including the present value of unguaranteed residual value amounting to ￦16,407 million and ￦19,574 million, as of December 31, 2020 and 2021, respectively.

The implicit interest rate for a lease term is determined on the lease contract date. The implicit interest rate of the finance lease contracts is from 0.00% up to 16.83% per year as of December 31, 2021. (prior year : 1.39% ~ 16.60%)

(4)	Changes in the allowance for doubtful accounts of finance lease receivables for the years ended December 31, 2020 and 2021 are as follows:


		2020		2021
		In millions of won
Beginning balance	￦		862		990
Bad debt expense			128		—
Reversal of allowance for doubtful accounts			—		(222	)

Ending balance	￦		990		768