BP 2010 Annual Report Download - page 191


Notesonnancialstatements
Financial statements
27.Financialinstrumentsandnancialriskfactorscontinued
Themovementinthevaluationallowancefortradereceivablesissetoutbelow.
 $million
   2010 2009
At1January       430 391
Exchangeadjustments       (9) 12
Chargefortheyear       150  157
Utilization        (143) (130)
At31December       428  430
  
(c)Liquidityrisk
Liquidityriskistheriskthatsuitablesourcesoffundingforthegroup’sbusinessactivitiesmaynotbeavailable.Thegroup’sliquidityismanagedcentrally
withoperatingunitsforecastingtheircashandcurrencyrequirementstothecentraltreasuryfunction.Unlessrestrictedbylocalregulations,subsidiaries
pooltheircashsurplusestotreasury,whichwillthenarrangetofundothersubsidiaries’requirements,orinvestanynetsurplusinthemarketorarrangefor
necessaryexternalborrowings,whilemanagingthegroup’soverallnetcurrencypositions.
FollowingtheGulfofMexicooilspill,thegroupfacedsignicantchallengesinmanagingliquidityrisk.Thegroupwasrequiredtomakesubstantial
cashpaymentsinconnectionwiththeoilspillandalsoexperiencedincreasedrequirementsduringtheyeartopostlettersofcredittocollateralizea
numberofenvironmentalliabilitiestotalling$624millionandpostfurthercashcollateralundertradingagreementstotalling$728million.Furtherinformaton
isprovidedinLiquidityandcapitalresourcesonpages63to67.
Inmanagingitsliquidityrisk,thegrouphasaccesstoawiderangeoffundingatcompetitiveratesthroughcapitalmarketsandbanks.Thegroup’s
treasuryfunctioncentrallyco-ordinatesrelationshipswithbanks,borrowingrequirements,foreignexchangerequirementsandcashmanagement.The
groupbelievesithasaccesstosufcientfundingthroughitsowncurrentcashholdingsandfuturecashgenerationincludingdisposalproceeds,the
commercialpapermarkets,andbyusingundrawncommittedborrowingfacilities,tomeetforeseeableliquidityrequirements.At31December2010,the
grouphadsubstantialamountsofundrawnborrowingfacilitiesavailable,includingcommittedfacilitiesof$12,500million(2009$4,950million),consisting
of$5,250millionofstandbyfacilities(ofwhich$400millionisavailabletodrawandrepaybymid-September2011,$4,550millionuntilmid-October2011,
and$300millionuntilmid-January2013)and$7,250millionof364-dayfacilities(ofwhich$4,000millioncanbedrawnuntillateMay2011andisrepayable
upto364daysfromthedateofdrawing,$2,000milliondrawnuntiltheendofJune2011,$750milliondrawnuntilearlyJuly2011,and$500milliondrawn
untillateAugust2011).Thesefacilitiesarewithanumberofinternationalbanksandborrowingsunderthemwouldbeatpre-agreedrates.
ThegrouphasinplaceaEuropeanDebtIssuanceProgramme(DIP)underwhichthegroupmayraiseupto$20billionofdebtformaturitiesofone
monthorlonger.At31December2010,theamountdrawndownagainsttheDIPwas$12,272million(2009$11,403million).Inaddition,thegrouphasin
placeanunlimitedUSShelfRegistrationunderwhichitmayraisedebtwithmaturitiesofonemonthorlonger.
Thegrouphaslong-termdebtratingsofA2(stableoutlook)assignedbyMoody’sandA(negativeoutlook)assignedbyStandard&Poor’s,a
downgradingfromAa1(stableoutlook)andAA(stableoutlook),respectivelyassignedpriortotheGulfofMexicooilspill.
Sincethecreditratingdowngrading,wehaveissued$6.2billionoflong-termdebtearlyinthefourthquarter2010,andissuedshort-term
commercialpaperatcompetitiverates,asandwhenrequired.Asanadditionalmeasure,wehaveincreasedandmaintainedthecashandcashequivalents
heldbythegroupto$18.6billionattheendof2010,comparedwith$8.3billionattheendof2009.
Theamountsshownfornancedebtinthetablebelowincludeexpectedinterestpaymentsonborrowingsandthefutureminimumlease
paymentswithrespecttonanceleases.
IncludedwithincurrentnancedebtareUSIndustrialRevenue/Municipalbondswherebondholdershavetheoptiontotenderthebondsfor
repaymentatinterestresetdates,andthenextresetdatefallswithin12monthsofthebalancesheetdate.Theamountsattheendof2010totalled$379
million,downfrom$2,895millionattheendof2009.Thereductionlargelyreectstheinitialfailuretore-marketthebondsfollowingtheGulfofMexicooil
spill,aswellasactivemanagementbyBPtowithdraworre-negotiateterm-outofthebondsonresetdatestofurtherremovetheuncertaintyofthe
liquidityrisk.Alsoincludedwithincurrentnancedebtattheendof2009wasanamountof$1,622millionforloansassociatedwithlong-termgassupply
contractsbackedbygaspre-paidbondswithtenderoptionsatinterestrateresetswithBPastheliquidityprovider.FollowingtheGulfofMexicooilspillthe
bondsfailedre-marketingrequiringBPtoacquireandholdallofthebonds,withcorrespondingreductiontonilintheamountreectedinnancedebtat
theendof2010.
Currentnancedebtonthegroupbalancesheetat31December2010includes$6,197million(2009nil)inrespectofcashdepositsreceived
fordisposalsexpectedtocompletein2011whichwillbeconsideredextinguishedoncompletionofthetransactions.Thisamountisexcludedfromthe
tablebelow.
Thetablealsoshowsthetimingofcashoutowsrelatingtotradeandotherpayablesandaccruals.
 $million
 2010 2009
        Trade and   Tradeand
        other Finance other  Finance
        payablesa Accruals debt payables Accruals debt
Withinoneyear   42,691 5,612 9,353 31,413 6,202 9,790
1to2years   6,549 278 6,816 1,059 231 6,861
2to3years   6,242 125 7,542 1,089 106 5,359
3to4years   411 42 6,105 566 78 5,528
4to5years   365 28 5,494 67 49 3,151
5to10years   323 110 6,642 85 163 5,723
Over10years   25 54 724 46 76 1,150
   56,6066,24942,676 34,325 6,905 37,562

aTradeandotherpayablesat31December2010includestheGulfofMexicooilspilltrustfundliabilitywhichispayableasfollows:$5,008millionwithinoneyear;$5,000millionpayablein1to2yearsand
$5,000millionpayablein2to3years.
BPAnnualReportandForm20-F2010 189