Cemex 2012 Annual Report Download - page 108

Notes to the
consolidated
financial
statements
108
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23C) Other commitments
As of December 31, 2012 and 2011, CEMEX had commitments for the purchase of raw materials for an approximate amount of
US$127 ($1,632) and US$184 ($2,569), respectively.
In 2006, in order to take advantage of the high wind potential in the “Tehuantepec Isthmus,” CEMEX and the Spanish company
ACCIONA formed an alliance to develop a wind farm project for the generation of 250 Megawatts (MW) in the Mexican state of
Oaxaca. CEMEX acted as promoter of the project, which was named EURUS. ACCIONA provided the required financing, constructed
the facility and currently operates the wind farm. The installation of 167 wind turbines in the farm was finished on November 15,
2009. The agreements between CEMEX and ACCIONA established that CEMEX’s plants in Mexico will acquire a portion of the
energy generated by the wind farm for a period of at least 20 years, which began in February 2010, when EURUS reached the
committed limit capacity. For the years ended December 31, 2012, 2011 and 2010, EURUS supplied (unaudited) approximately
29.1%, 23.7% and 20.1%, respectively, of CEMEX’s overall electricity needs in Mexico during such year. This agreement is for
CEMEX’s own use and there is no intention of trading in energy by CEMEX.
In 1999, CEMEX entered into agreements with an international partnership, which built and operated an electrical energy
generating plant in Mexico called Termoeléctrica del Golfo (“TEG”). In 2007, another international company replaced the original
operator. The agreements established that CEMEX would purchase the energy generated for a term of not less than 20 years,
which started in April 2004. Likewise, CEMEX committed to supply TEG all fuel necessary for its operations, a commitment that
has been hedged through a 20-year agreement entered with Petróleos Mexicanos, which terminates in 2024. With the change of
the operator, in 2007, CEMEX extended the term of its agreement with TEG until 2027. Consequently, for the last 3 years of the
TEG fuel supply contract, CEMEX intends to purchase the required fuel in the market. CEMEX is not required to make any capital
expenditure in the project. For the years ended December 31, 2012, 2011 and 2010, TEG supplied (unaudited) approximately
67.8%, 69.3% and 72.8%, respectively, of CEMEX’s 15 cement plants’ electricity needs in Mexico during such year. This agreement
is for CEMEX’s own use and there is no intention of trading in energy by CEMEX.
In 2007, CEMEX Ostzement GmbH (“COZ”), CEMEX’s subsidiary in Germany, entered into a long-term energy supply contract with
Vattenfall Europe New Energy Ecopower (“VENEE”), pursuant to which VENEE committed to supply energy to CEMEX’s Rüdersdorf
plant for a period of 15 years starting on January 1, 2008. Based on the contract, each year COZ has the option to fix in advance
the volume of energy that it will acquire from VENEE, with the option to adjust the purchase amount one time on a monthly
and quarterly basis. According to the contract, COZ acquired (unaudited) approximately 27 MW in 2010, 2011 and 2012. COZ
expects to acquire 27 MW per year for 2013 and 2014, and expects to acquire between 26 and 28 MW per year starting in 2015
and thereafter. The contract, which establishes a price mechanism for the energy acquired, based on the price of energy future
contracts quoted on the European Energy Exchange, did not require initial investments and was expected to be performed at a
future date. Based on its terms, this contract qualified as a financial instrument under IFRS. However, as the contract is for CEMEX’s
own use and CEMEX sells any energy surplus as soon as actual energy requirements are known, regardless of changes in prices
and thereby avoiding any intention of trading in energy, such contract is not recognized at its fair value.
In April 2008, Citibank entered into put option transactions on CEMEX’s CPOs with a Mexican trust that CEMEX established
on behalf of its Mexican pension fund and certain of CEMEX’s directors and current and former employees (the “participating
individuals”). The transaction was structured with two main components. Under the first component, the trust sold, for the benefit
of CEMEX’s Mexican pension fund, put options to Citibank in exchange for a premium of approximately US$38. The premium
was deposited into the trust and was used to purchase, on a prepaid forward basis, securities that track the performance of the
Mexican Stock Exchange. Under the second component, the trust sold, on behalf of the participating individuals, additional put
options to Citibank in exchange for a premium of approximately US$38, which was used to purchase prepaid forward CPOs. These
prepaid forward CPOs, together with additional CPOs representing an equal amount in U.S. dollars, were deposited into the trust by
the participating individuals as security for their obligations, and represent the maximum exposure of the participating individuals
under this transaction. The put options gave Citibank the right to require the trust to purchase, in April 2013, approximately
136 million CPOs at a price of US$2.6498 per CPO (120% of initial CPO price in dollars), as adjusted as of December 31, 2012.
If the value of the assets held in the trust (34.7 million CPOs and the securities that track the performance of the Mexican Stock
Exchange) were insucient to cover the obligations of the trust, a guarantee would be triggered and CEMEX, S.A.B. de C.V. would
be required to purchase, in April 2013, the total CPOs at a price per CPO equal to the difference between US$2.6498 and the
market value of the assets of the trust. The purchase price per CPO in dollars and the corresponding number of CPOs under this
transaction are subject to dividend adjustments. CEMEX recognizes a liability for the fair value of the guarantee, and changes in
valuation were recorded in the statements of operations (note 16D).