BP 2005 Annual Report Download - page 87
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39 Finance debt continued
Interest rates on borrowings repayable wholly or partly more than five years from 31 December 2005 range from 2% to 12%, with a weighted
average of 5%. The weighted average interest rate on finance debt is 5%.
Fixed rate Floating rate Interest free
Weighted
Weighted average Weighted Weighted
average time for average average
interest which rate interest time until
rate is fixed Amount rate Amount maturity Amount Total
% Years $ million % $ million Years $ million $ million
2005
US dollar 7 11 665 5 18,073 – – 18,738
Sterling – – – 6 76 – – 76
Euro – – – 3 150 – – 150
Other currencies 9 14 157 12 41 – – 198
822 18,340 – 19,162
2004
US dollar 7 11 707 3 21,789 – – 22,496
Sterling – – – 5 96 – – 96
Euro – – – 3 297 – – 297
Other currencies 9 15 167 8 35 – – 202
874 22,217 – 23,091
2003
US dollar 8 14 578 2 20,991 – – 21,569
Sterling – – – 4 107 – – 107
Euro – – – 3 125 – – 125
Other currencies 9 15 141 3 383 – – 524
719 21,606 – 22,325
The proportion of floating rate debt at 31 December 2005 was 96% of total finance debt outstanding. Aside from debt issued in the US municipal
bond markets, interest rates on floating rate debt denominated in US dollars are linked principally to London Inter-Bank Offer Rate (LIBOR), while
rates on debt in other currencies are based on local market equivalents. The group monitors interest rate risk using a process of sensitivity analysis.
Assuming no changes to the finance debt and hedges described above, it is estimated that a change of 1% in the general level of interest rates
on 1 January 2006 would change 2006 profit before tax by approximately $180 million.
The group uses finance leases to acquire property, plant and equipment. These leases have terms of renewal but no purchase options and
escalation clauses. Renewals are at the option of the lessee. During the year, the group terminated its finance leases on the petrochemicals
manufacturing plant at Grangemouth, Scotland. Future minimum lease payments under finance leases are set out below.
$ million
Obligations under finance leases 2005 2004 2003
Minimum future lease payments payable within
1 year 78 152 127
2 to 5 years 320 1,060 979
Thereafter 838 3,540 3,528
1,236 4,752 4,634
Less finance charges 455 2,354 2,452
Net obligations 781 2,398 2,182
Of which – payable within 1 year 60 115 90
– payable within 2 to 5 years 133 187 111
– payable thereafter 588 2,096 1,981
BP Annual Report and Accounts 2005 85