OG&E 2011 Annual Report Download - page 31

OGE Energy Corp. 29
Off-Balance Sheet Arrangement
OG&E Railcar Lease Agreement
OG&E has a noncancellable operating lease with purchase options,
covering 1,392 coal hopper railcars to transport coal from Wyoming to
OG&E’s coal-fired generation units. Rental payments are charged to Fuel
Expense and are recovered through OG&E’s tariffs and fuel adjustment
clauses. On December 15, 2010, OG&E renewed the lease agreement
effective February 1, 2011. At the end of the new lease term, which is
February 1, 2016, OG&E has the option to either purchase the railcars at
a stipulated fair market value or renew the lease. If OG&E chooses not
to purchase the railcars or renew the lease agreement and the actual fair
value of the railcars is less than the stipulated fair market value, OG&E
would be responsible for the difference in those values up to a maximum
of $22.8 million.
OG&E is also required to maintain all of the railcars it has under lease
to transport coal from Wyoming and has entered into agreements with
Progress Rail Services and WATCO, both of which are non-affiliated
companies, to furnish this maintenance.
Liquidity and Capital Resources
Cash Flows
(In millions, year ended December 31) 2011 2010 2009
Net cash provided from
operating activities $÷÷833.9 $«782.5 $«654.5
Net cash used in investing activities (1,395.8) (846.1) (808.5)
Net cash provided from financing activities 564.2 7.8 37.7
Operating Activities
The increase of $51.4 million, or 6.6 percent, in net cash provided from
operating activities in 2011 as compared to 2010 was primarily due to
lower fuel refunds at OG&E in 2011 as compared to 2010 and cash
received in 2011 from an increase in billings to OG&E’s customers due
to warmer weather in OG&E’s service territory in 2011 partially offset by
income tax refunds received in 2010 related to a carry back of the 2008
tax loss resulting from a change in tax method of accounting for capital-
ization of repair expenditures and accelerated tax bonus depreciation.
The increase of $128.0 million, or 19.6 percent, in net cash provided
from operating activities in 2010 as compared to 2009 was primarily due to:
•An increase in cash receipts for sales at Enogex due to an increase in
natural gas prices and NGLs prices and volumes in 2010 as compared
to 2009;
•Income tax refunds received in 2010 related to a carry back of the 2008
tax loss resulting from a change in tax method of accounting for capital-
ization of repair expenditures and accelerated tax bonus depreciation;
•A cash collateral payment to counterparties of OER related to OER’s
NGLs hedge positions in 2009; and
•Cash received in 2010 from the implementation of rate increases and
riders at OG&E.
These increases in net cash provided from operating activities were
partially offset by:
•An increase in payments for purchases at Enogex due to an increase in
natural gas prices and NGLs prices and volumes in 2010 as compared
to 2009; and
•Higher fuel refunds at OG&E in 2010 as compared to 2009.
Investing Activities
The increase of $549.7 million, or 65.0 percent, in net cash used in
investing activities in 2011 as compared to 2010 primarily related to
higher levels of capital expenditures in 2011 related to various transmis-
sion projects and Crossroads at OG&E and gathering and processing
expansion projects at Enogex.
The increase of $37.6 million, or 4.7 percent, in net cash used in
investing activities in 2010 as compared to 2009 primarily related to a
customer’s reimbursement of Enogex’s costs related to the ongoing
construction of a transportation pipeline in 2009.
Financing Activities
The increase of $556.4 million in net cash provided from financing activities
in 2011 as compared to 2010 was primarily due to:
•Repayment in 2010 of the remaining balance of Enogex LLC’s $400 million
8.125% senior notes which matured on January 15, 2010;
•An increase in short-term debt borrowings in 2011 as compared to 2010;
•Contributions from the noncontrolling interest partners in 2011;
•Higher borrowings under Enogex LLC’s revolving credit agreement in
2011; and
•A decrease in repayments of borrowings under Enogex LLC’s revolving
credit agreement in 2011 as compared to 2010.
The decrease of $29.9 million, or 79.3 percent, in net cash provided from
financing activities in 2010 as compared to 2009 was primarily due to:
•Repayment of the remaining balance of Enogex LLC’s $400 million
8.125% senior notes which matured on January 15, 2010 partially offset
by the retirement of $110.8 million of senior notes related to the tender
offer Enogex completed in July 2009;
•Proceeds received from the issuance of $450 million of long-term debt
at Enogex LLC in June 2009; and
•A decrease in the issuance of common stock in 2010.
These decreases in net cash provided from financing activities were
partially offset by:
•Proceeds received from the issuance of $250 million of long-term debt
at OG&E in June 2010;
•Proceeds received from the ArcLight group for the equity investment
in Enogex Holdings in November 2010;
•Lower repayments of short-term debt borrowings in 2010;
•A higher level of proceeds received from borrowings on Enogex LLC’s
line of credit in 2010; and
•A higher level of repayments made on Enogex LLC’s line of credit in 2009.