CORRAL PETROLEUM HOLDINGS AB (PUBL) - Preem

Liquidity riskLiquidity risk is handled by means of the Group having sufficient cash and cash equivalents and currentinvestments with a liquid market and available financing through agreed credit facilities. Every month the Group paysapprox. SEK 1,300 million in the form of product taxes and VAT, which combined with fluctuations in purchasing andsales patterns can make demands on the availability of short-term borrowing facilities.To make sure that the Group has access to external financing at all times, both short-term and long-term creditfacilities must always be available.The table below analyzes the Group’s financial liabilities and net settled derivatives that constitute financialliabilities, broken down by the term remaining after the balance sheet date until the contractual maturity date. Theamounts specified in the table are the contractual, non-discounted cash flows and do not therefore correspond with theamounts in the balance sheet. The amounts that fall due within 12 months correspond with the book amounts, as thediscount effect is insignificant.It is the Group’s policy that renegotiation of loans must take place no later than 12 months before maturity.As of December 31, 2010Within1 yearBetween1 and 2 yearsBetween2 and 5 yearsMore than5 yearsBorrowing............................................................................. 14,314 - - 1,864Interest rate swaps ................................................................ - - - -Oil derivatives....................................................................... (8) - - -Trade and other payables...................................................... 3,916 - - -Other current liabilities......................................................... 1,978 - - -As of December 31, 2009Within1 yearBetween1 and 2 yearsBetween2 and 5 yearsMore than5 yearsBorrowing ........................................................................... 11,084 9,914 - -Interest rate swaps............................................................... 53 - - -Oil derivatives..................................................................... (9) - - -Trade and other payables .................................................... 4,193 - - -Other current liabilities ....................................................... 1,579 - - -The Group has syndicated bank loans that are subject to a clause on the requirement to satisfy a number of keyratios (known as covenants).Management of capital riskThe Group’s objective with regard to the capital structure is to secure the Group’s access to capital markets andto maintain an optimal capital structure in order to keep down the costs of capital and to balance the Company’scommercial risk with the cost of the capital.The Board of Directors constantly monitors the Group’s financial position and net debt against expected futureprofitability and cash flow, investment and expansion plans, and developments in the interest rate and credit markets.The Group’s net debt/total capitalization ratio is shown in the table below:(In million SEK) 2010 2009Total borrowing ..................................................................................................................... 14,630 20,227Minus cash and cash equivalents ........................................................................................... (603) (809)Net debt................................................................................................................................. 14,027 19,418Total equity............................................................................................................................ 2,205 (1,689)Total capitalization .............................................................................................................. 16,232 17,729Net debt/total capitalization ratio....................................................................................... 86% 110%Calculation of fair valueThe fair value of derivatives traded on an active market is based on listed market prices on the balance sheetdate. The listed market price used for the Group’s financial assets is the current bid price. The fair value of oil derivativesis defined using listed prices of oil futures on the balance sheet date.The fair value of financial instruments not traded on an active market (e.g., OTC derivatives) is defined with theaid of valuation techniques. The fair value of interest rate swaps is calculated as the current value of estimated future cashflows.F-20