Skanska Annual Report 2003

Note 4 continuedTable 1b. Reported value and fair value of interest-bearing financial instruments,Parent CompanyOn Dec. 31, 2003ReportedFairSEK M value valueLong-term receivables from Group companies 2,835 2,840Assets 2,835 2,840Liabilities to credit institutions 252 257Liabilities to Group companies 3,534 3,534Liabilities 3,786 3,791Non-interest-bearing financial instruments, such as accounts receivable andaccounts payable, are reported at fair value and are not included in the table.Fair value of interest-bearing financial instruments has been calculated bydiscounting future cash flow at current market interest rates for each maturity.Fair value of derivatives related to borrowing and derivatives related totransaction exposure does not include underlying capital amounts and accruedinterest.4. FundingGeneralEstablished relationships with capital markets are a prerequisite for Skanska’s abilityto ensure a supply of capital on good terms. Via several borrowing programs, theGroup is well prepared for temporary fluctuations in its liquidity requirements.Central bank credit facilitiesSkanska’s committed credit facilities consist of:• A syndicated bank loan (Multicurrency Revolving Credit Facility) with a ceiling ofEUR 400 M and a final due date of June 21, 2006. On December 31, 2003, thissyndicated loan facility had a utilization level of 0 percent. Its utilization level hasvaried between 0 and 75 percent during the existence of the loan.• A 364-day bilateral bank loan agreement totaling SEK 500 M, with a final due dateof March 11, 2004.• A bilateral bank loan agreement totaling SEK 500 M with a final due date ofJanuary 13, 2006.The two bilateral bank loans serve primarily as back-up facilities and have neverbeen utilized to date.Market funding programsSkanska has two market funding programs:• Commercial paper (CP) program related to short-term borrowing for maturities ofup to one year. The loan ceiling in the CP program amounts to SEK 6,000 M. OnDecember 31, 2003, the borrowed amount was SEK 0 M.• Medium Term Note program (MTN) for borrowing with maturities between1–10 years. The loan ceiling in the MTN program amounts to SEK 8,000 M. OnDecember 31, 2003, the borrowed amount was SEK 5,720 M and the averagematurity was 2.2 years.These borrowing programs are mainly intended for borrowing in the Swedishcredit market; however, it is possible to borrow in EUR within the framework ofthese programs.Liquidity reserve and maturity structureThe target is to have a liquidity reserve of at least SEK 4,000 M available throughcash equivalents or committed credit facilities.The average maturity of the borrowing portfolio shall be in the 2-4 year range. Atyear-end 2003, the average maturity was 2.2 (2.4) years.The maturity structure of assets and liabilities on December 31, 2003 wasdistributed over coming years according to the table below.Table 2. Maturity structure, interest-bearing assets and liabilities, excludingderivatives and provisions for pensionsInterest-bearing assets, SEK MYear of maturity Fixed rate Adjustible rate Total2004 4,123 3,967 8,0902005 4 1,561 1,5652006 4 327 3312007 2 0 22008 0 71 712009 and later 112 70 182Total assets 4,245 5,996 10,241Interest-bearing liabilitiesYear of maturity Fixed rate Adjustible rate Total2004 872 1,630 2,5022005 609 826 1,4352006 497 1,134 1,6312007 563 131 6942008 775 676 1,4512009 and later 196 256 452Total liabilities 3,512 4,653 8,165Net assets 733 1,343 2,076Through interest rate swaps, an additional SEK 1,971 M of debt was swapped fromadjustable to fixed interest rates.5. Risk managementForeign exchange riskTransaction exposureExpected contracted flows in currencies that are foreign to the respective subsidiaryare distributed among currencies and maturities as follows.Table 3. The Group’s expected net foreign currency flowsAmounts in SEK M 2004 2005 2006 and laterUSD 124.2 22.4EUR 936.6 131.6 48.3GBP –7.5 –5.7JPY 52.0 43.3 93.8Other currencies –53.9 –5.7 –0.6Total equivalent value 1,051.4 185.9 141.5The table below shows unreported gains and losses related to currency hedging ofoperative transaction exposure.Table 4. Unreported gains and losses for derivatives related to transaction exposure.Amounts in SEK M 2004 2005 2006 and later TotalUSD 8.0 1.1 9.1EUR 1.5 2.8 4.2GBP 0.1 0.1 0.2JPY 0.3 0.3Other currencies 0.8 0.2 0.4 1.4Unreported gains 10.7 4.2 0.4 15.3USD –4.8 –4.8EUR –11.7 –5.5 –5.0 –22.2GBP 0.0JPY –1.6 –1.6Other currencies –1.7 –1.7Unreported losses –19.9 –5.5 –5.0 –30.456 Notes, including accounting and valuation principles – Skanska Annual Report 2003