Cash flow from operating activities after changes in working capital was SEK 3,647 million in 2010, an increase ofSEK 2,276 million from SEK 1,371 million in 2009. The increase in cash flow after changes in working capital is attributableto a decrease in inventory of SEK 50 million in 2010 compared to an increase in inventory of SEK 1,945 million in 2009, or achange of SEK 1,995 million. In both 2010 and 2009, oil prices increased, but in 2010 the effects of this increase were offsetby a decrease in volume of crude oil and oil products. The increase in cash flow from operating activities after changes inworking capital is also attributable to an increase in liabilities in 2010 of SEK 2,263 million compared to an increase of SEK877 million in 2009, or a change of SEK 1,386 million. The increase in liabilities in 2010 is mainly attributable to largeacquisitions of crude oil made in December 2010 to return to normal purchasing levels following the completion of plannedmaintenance at <strong>Preem</strong>raff Lysekil, and the positive impact on cash flows for the fourth quarter is expected to be reversed forthe first quarter of 2011. The positive impact on cash flow from increases in liabilities was to some extent offset by anincrease in receivables of SEK 1,191 million in 2010 compared to SEK 303 million in 2009, or a change of SEK 888 million.The increase in receivables is mainly attributable to an increase in market prices for refined products in 2010 as compared to2009.Cash flow used in investment activities in 2010 was SEK 762 million, an increase of SEK 143 million, compared toSEK 619 million for 2009. These investment activities are primarily related to maintenance and upgrades at our refineries inLysekil and Gothenburg, and to some extent at our service stations in our marketing division .Cash flow used in financing activities was SEK 3,090 million in 2010, an increase of SEK 2,071 million, comparedto cash used in financing activities of SEK 1,019 million for 2009. This increase is primarily attributable to the refinancingof the 2007 Notes in May 2010. The 2007 Notes were repaid at the amount of SEK 6,946 million and the Existing Notes andSubordinated Notes amounted to SEK 5,087 million, or a decrease of SEK 1,859 million. Total transaction expenses inconnection with refinancing the 2007 Notes amounted to SEK 318 million in 2010.Year ended December 31, 2009 compared with year ended December 31, 2008Cash flow from operating activities before changes in working capital increased by SEK 3,687 million, fromnegative SEK 945 million in 2008 to positive SEK 2,742 million in 2009. Adjustments for non-cash items was negative SEK725 million in 2009 compared to positive SEK 4,398 million in 2008, or a change of SEK 5,123 million. This change inadjustments for non-cash items is mainly attributable to unrealized gains from revaluation in US dollar and euro-denominatedloans of approximately SEK 730 million in 2009 compared to a loss of approximately SEK 1,760 million in 2008, a changeof SEK 2,490 million. In addition, the reversal in 2009 of the write-down in our inventory for 2008 had a negative effect onadjustment of non-cash items of SEK 1,098 million in 2009 compared to a positive effect of SEK 1,098 million for 2008, atotal change of SEK 2,196 million. In 2009, there was no write-down on inventory.Cash flow from operating activities after changes in working capital was SEK 1,371 million in 2009, an increase ofSEK 1,666 million from negative SEK 295 million in 2008. The increase in cash flow after changes in working capital ismainly attributable to the increase in cash flow from operating activities partly offset by an increase in inventory 2009 due toan increase in prices for crude oil in 2009 which in turn has been to some extent offset by lower volumes and exchange ratelosses in 2009. The increase in liabilities is to a large extent attributable to the same factors as for the inventory.Cash flow used in investment activities in 2009 was SEK 619 million, a decrease of SEK 147 million, compared toSEK 766 million for 2008. The investment activities are primarily related to maintenance and upgrades at our refineries inLysekil and Gothenburg, and to some extent at our stations in our marketing division.Cash flow used in financing activities was SEK 1,019 million in 2009, a decrease of SEK 2,320 million, comparedto cash flow from financing activities of SEK 1,301 million for 2008, as a consequence of a higher cash flow generated fromoperations in 2009 compared to 2008, borrowings could be repaid instead of being increased. Equity contribution receivedamounted to SEK 153 million in 2009 compared to no contribution received in 2008. The equity contributions in 2009correspond to payments of interest expense for the bond loans in April 15, July 15 and October 15.Future Capital Needs and Resources and Capital Expenditures<strong>Corral</strong> <strong>Petroleum</strong> <strong>Holdings</strong>’ future capital needs relate primarily to the obligation to make a principal payment onthe Existing Notes and the Subordinated Notes or, to make a principal payment on the Subordinated Notes and semi-annualinterest payments on any new notes issued in a refinancing thereof. As a holding company, <strong>Corral</strong> <strong>Petroleum</strong> <strong>Holdings</strong> isdependent upon equity contributions from its parent company, Moroncha <strong>Holdings</strong>, or its shareholder, dividends, permittedrepayment of intercompany debt, if any, and other transfers of funds from <strong>Preem</strong>. See “—Restrictions on Transfers ofFunds” and “Risk Factors—Risks related to our <strong>Business</strong>—<strong>Corral</strong> <strong>Petroleum</strong> <strong>Holdings</strong> is a holding company with no revenuegenerating operations of its own. <strong>Corral</strong> <strong>Petroleum</strong> <strong>Holdings</strong> depends on its subsidiaries and shareholder to distribute cash toit.”26
As of December 31, 2010, we had approximately SEK 504 million in operating lease obligations. We continue toreview opportunities for improving our refineries where returns on investment would justify these improvements. Any suchinvestments could require considerable capital investment. We intend to fund these expenditures from equity contributionsfrom our parent company, Moroncha <strong>Holdings</strong>, or its shareholder, available cash reserves, internally generated cash flowfrom operating activities and amounts available under our unutilized credit facilities.We made capital expenditures of SEK 641 million (€72 million) for the year ended December 31, 2009, comparedwith SEK 726 million (€81 million) for the year ended December 31, 2008. For the year ended December 31, 2010, we madecapital expenditures of SEK 710 million (€79 million), an increase of approximately 11% from the year ended December 31,2009. For the six months ended June 30, 2011, we made capital expenditures of SEK 305 million (€33 million), compared tocapital expenditures of SEK 371 million (€41 million) for the six months ended June 30, 2010. These expenditures werefunded from available cash reserves, internally generated cash flow from operating activities and long-term debt. Most of ourcapital expenditures in 2008 at <strong>Preem</strong>raff Gothenburg and <strong>Preem</strong>raff Lysekil related to a few medium-sized projects and alarge number of small projects. The medium-sized projects at <strong>Preem</strong>raff Gothenburg consisted of (i) the revamp of the crudedistillations units for improved yield and energy saving, (ii) the modification of the mild hydrocracker for production ofgreen diesel and (iii) the upgrade of the tank bunds and sewer system. <strong>Preem</strong>raff Lysekil’s medium-size projects consisted of(i) the modification of the vacuum distillation unit for increased yield and (ii) the installation of low nitrogen oxide burners inthe visbreaker heaters. In 2010, capital expenditures focused primarily on maintenance and health, safety and environmentalupgrades.Description of IndebtednessIndebtedness. As of June 30, 2011, we had total consolidated indebtedness (consisting of total long-term debt andtotal current debt) of SEK 16,790 million (€1,836 million). We also had amounts available under our unutilized creditfacilities of SEK 664 million (€73 million). As of December 31, 2010, we had total consolidated indebtedness (consisting oftotal long-term debt and total current debt) of SEK 14,630 million (€1,599 million). We also had amounts available underour unutilized credit facilities of SEK 1,926 million (€211 million). As of December 31, 2010, our indebtedness bore interestat a weighted average annual rate of 6.84%.In connection with the Former <strong>Corral</strong> <strong>Petroleum</strong> <strong>Holdings</strong> Acquisition, pursuant to which we acquired all of theissued and outstanding share capital of Former <strong>Corral</strong> <strong>Petroleum</strong> <strong>Holdings</strong> from Moroncha <strong>Holdings</strong>, we issued and delivereda promissory note to Moroncha <strong>Holdings</strong> in the amount of SEK 6,500 million. On April 5, 2007, <strong>Corral</strong> <strong>Petroleum</strong> <strong>Holdings</strong>issued the 2007 Notes. We used proceeds from the offering of the 2007 Notes to partially repay the Moroncha Note (theremainder of which (approximately SEK 1,407 million) was set off entirely at the closing of the offering of the 2007 Notesagainst an unconditional shareholder’s contribution to us by Moroncha <strong>Holdings</strong>).Pursuant to the 2010 Exchange Offer and Consent Solicitation, we exchanged the 2007 Notes for the Existing Notesand the Subordinated Notes. Up to and including December 31, 2010, the Existing Notes bore interest in cash at a rate of2.0% per annum, plus additional interest which was payable at our option either in cash at 8.5% per annum or through theissuance of additional senior secured notes at 10.5% per annum in a principal amount equal to such interest amount. FromJanuary 1, 2011, the Existing Notes bore interest in cash at a rate of 2.0% per annum, plus additional interest which ispayable at our option either in cash at 11.0% per annum or through the issuance of additional secured notes at 13.0% perannum in a principal amount equal to such interest amount. For at least as long as any amounts remain outstanding under theExisting Notes, interest on the Subordinated Notes is payable through the issuance of Additional Subordinated Notes at10.5% per annum in a principal amount equal to such interest amount.<strong>Preem</strong> and Former <strong>Corral</strong> <strong>Petroleum</strong> <strong>Holdings</strong>, as original borrower and guarantor, entered into the 2008 CreditFacility pursuant to a Facilities Agreement dated September 17, 2008, among Merchant Banking, Skandinaviska EnskildaBanken <strong>AB</strong> (<strong>publ</strong>), Handelsbanken Capital Markets, Svenska Handelsbanken (<strong>AB</strong>) (<strong>publ</strong>), as mandated lead arrangers,certain financial institutions, as lenders, Merchant Banking, Skandinaviska Enskilda Banken <strong>AB</strong> (<strong>publ</strong>), as facility andsecurity agent, Skandinaviska Enskilda Banken <strong>AB</strong> (<strong>publ</strong>) as factoring bank, and Svenska Handelsbanken <strong>AB</strong> (<strong>publ</strong>) asissuing bank. Following the merger of Former <strong>Corral</strong> <strong>Petroleum</strong> <strong>Holdings</strong> into <strong>Preem</strong> on October 30, 2008, <strong>Preem</strong> assumedall the assets and liabilities of Former <strong>Corral</strong> <strong>Petroleum</strong> <strong>Holdings</strong>. The 2008 Credit Facility provides <strong>Preem</strong> with an SEK7,200 million term loan and multi-currency revolving facility comprised of a SEK 5,200 million term loan facility and anSEK 2,000 million multi-currency revolving facility and $1,783 million (or the equivalent thereof in other currencies) ofrevolving credit and term loan facilities comprised of a $433 million multi-currency term loan facility and a $1,350 million(as amended) multi-currency revolving credit loan. The proceeds of the loans under the term loan facility were used to repayoutstanding debt including the facility agreement dated June 16, 2006 between <strong>Preem</strong> and Former <strong>Corral</strong> <strong>Petroleum</strong><strong>Holdings</strong>, as borrowers, and Skandinaviska Enskilda Banken <strong>AB</strong> (<strong>publ</strong>), as facility agent, as amended. The 2008 CreditFacility has been amended and supplemented a number of times, in particular, in connection with the refinancing transactionswe completed in 2010, as part of which we issued the Exchange Notes and the Subordinated Notes. We intend to refinance27