Liquidity risk

Liquidity risk is the risk that suitable sources of funding for the Group may not be available (funding liquidity risk), or that the Group is unable to sell its assets on the market place (asset liquidity risk), making it unable to meet its short-term finance requirements and settle obligations. Such a situation would negatively impact the Group's results as it would result in the Company incurring higher borrowing expenses to meet its obligations or under the worst of conditions the inability of the Company to continue as a going concern. Saipem manages liquidity risk by targeting a capital structure that guarantees a level of liquidity adequate for the Group's needs, optimising the opportunity cost of maintaining liquidity reserves and achieving an optimal profile in terms of maturity and composition of debt, in accordance with management plans and business objectives including prescribed limits in terms of maximum ratio of debt to total equity and minimum ratio of medium and long-term debt to total debt as well as fixed rate medium and long-term debt to total medium-long term debt. In spite of the significant deterioration of market conditions, which during the year led to credit expansion and strong pressure on spreads, Saipem believes it has access to sufficient funding and borrowing facilities to meet currently foreseeable requirements, thanks to a use of credit lines that is both flexible and targeted to meet business needs. The liquidity management policies used - which were being applied even before the worsening of the crisis - have the objective of ensuring both the availability of adequate funding to meet short-term requirements and obligations and a sufficient level of operating flexibility to fund Saipem's development plans, while maintaining an adequate finance structure in terms of debt composition and maturity. At June 30, 2009, Saipem maintained unused borrowing facilities of o1,392 million. These facilities were unde interest rates that reflected market conditions. Fees charged for unused facilities were not significant. The following tables show total contractual payments (including interest payments) and maturities on financial debt and payments and due dates for trade and other payables.

Finance debtMaturity
(€ million)2011(*)2012201320142015AfterTotal
Long-term debt480210 5434471.2794833.442
Short-term debt1.212-----1.212
Fair value of derivative instruments59510----605
Interest on debt1106861523663390
(*) Includes second half of 2010.
Trade and other payablesMaturity
(€ million)2011(*)2012-2015AfterTotal
Trade payables3.054--3.054
Other payables and advances3.2953-3.298
(*) Includes second half of 2010.

In addition to the financial and trade debt recorded in the balance sheet, the Saipem Group has contractual obligations relating to non-cancellable operating leases whose performance will entail payments being made in future years. The following table shows undiscounted payments due in future years in relation to outstanding contractual obligations.

Outstanding contractual obligationsMaturity
(€ million)20112012201320142015AfterTotal
Non-cancellable operating leases50 91321941197

The table below summarises Saipem's capital expenditure commitments for property, plant and equipment and capital projects, for which procurement contracts will normally have been entered into.

Saipem's capital expenditureMaturity
(€ million)20102011
Committed on major projects483266
Other committed projects12137
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