OG&E 2014 Annual Report Download - page 32

60 OGE Energy Corp. OGE Energy Corp. 61
Other Operations primarily includes the operations of the holding
company.
Intersegment revenues are recorded at prices comparable to those
of unaffiliated customers and are affected by regulatory considerations.
14. Commitments and Contingencies
Operating Lease Obligations
The Company has operating lease obligations expiring at various
dates, primarily for OG&E railcar leases, OG&E wind farm land leases
and OGE Energy noncancellable operating lease. Future minimum
payments for noncancellable operating leases are as follows:
Year ended December 31 (In millions) 2015 2016 2017 2018 2019 After 2019 Total
Operating lease obligations
Railcars $4.5 $28.7 $1.0 $ — $ —— $ — $34.2
Wind farm land leases 2.1 2.1 2.4 2.4 2.4 46.4 57.8
OGE Energy noncancellable operating lease 0.8 0.8 0.8 0.7 — — 3.1
Total operating lease obligations $7.4 $31.6 $4.2 $3.1 $2.4 $46.4 $95.1
Payments for operating lease obligations were $6.7 million,
$8.8 million and $14.2 million for the years ended December 31, 2014,
2013 and 2012, respectively.
OG&E Railcar Lease Agreement
OG&E has a noncancellable operating lease with purchase options,
covering 1,387 coal rotary gondola 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 the operating
lease and has entered into an agreement with a non-affiliated company
to furnish this maintenance.
On January 11, 2012, OG&E executed a five-year lease agreement
for 135 railcars to replace railcars that have been taken out of service
or destroyed. OG&E has a unilateral right to terminate this lease upon
a 6-month notice effective April 2016.
Natural Gas
2014 Electric Midstream Other
(In millions) Utility Operations Operations Eliminations Total
Operating revenues $2,453.1 $ — $ — $ — $2,453.1
Cost of sales 1,106.6 — — — 1,106.6
Other operation and maintenance 453.2 1.2 (14.8) — 439.6
Depreciation and amortization 270.8 — 10.6 — 281.4
Taxes other than income 84.5 — 4.2 — 88.7
Operating income (loss) 538.0 (1.2) — — 536.8
Equity in earnings of unconsolidated affiliates — 172.6 — — 172.6
Other income (expense) 7.1 — 0.7 (0.2) 7.6
Interest expense 141.5 — 7.1 (0.2) 148.4
Income tax expense 111.6 69.1 (7.9) — 172.8
Net income (loss) $ 292.0 $ 102.3 $ 1.5 $ — $ 395.8
Investment in unconsolidated affiliates (at historical cost) $— $1,318.2 $ — $ — $1,318.2
Total assets $8,266.2 $1,461.2 $129.2 $(328.8) $9,527.8
Capital expenditures $ 565.4 $ — $ 10.8 $(6.9) $ 569.3
2013
(In millions)
Operating revenues $2,262.2 $ 630.4 $ — $ (24.9) $2,867.7
Cost of sales 965.9 489.0 — (26.0) 1,428.9
Other operation and maintenance 438.8 60.9 (10.5) — 489.2
Depreciation and amortization 248.4 36.8 12.1 — 297.3
Taxes other than income 83.8 10.5 4.5 — 98.8
Operating income (loss) 525.3 33.2 (6.1) 1.1 553.5
Equity in earnings of unconsolidated affiliates — 101.9 — — 101.9
Other income (expense) 10.1 8.9 (2.3) (0.5) 16.2
Interest expense 129.3 10.6 8.1 (0.5) 147.5
Income tax expense 113.5 26.9 (10.6) 0.5 130.3
Net income (loss) 292.6 106.5 (5.9) 0.6 393.8
Less: Net income attributable to noncontrolling interests — 6.6 — (0.4) 6.2
Net income attributable to OGE Energy $ 292.6 $ 99.9 $ (5.9) $ 1.0 $ 387.6
Investment in unconsolidated affiliates (at historical cost) $ — $1,298.8 $ — $ — $1,298.8
Total assets $7,694.9 $1,348.6 $216.2 $(125.0) $9,134.7
Capital expenditures $ 797.6 $ 181.5 $ 11.5 $ — $ 990.6
2012
(In millions)
Operating revenues $2,141.2 $1,608.6 $ — $ (78.6) $3,671.2
Cost of sales 879.1 1,120.1 — (80.5) 1,918.7
Other operation and maintenance 446.3 172.9 (17.7) — 601.5
Depreciation and amortization 248.7 109.2 13.5 — 371.4
Gain on insurance proceeds — (7.5) — — (7.5)
Taxes other than income 77.7 28.3 4.2 — 110.2
Operating income (loss) 489.4 185.6 — 1.9 676.9
Other income (expense) 10.1 (3.5) 1.8 (1.1) 7.3
Interest expense 124.6 32.6 8.0 (1.1) 164.1
Income tax expense 94.6 45.7 (5.8) 0.6 135.1
Net income (loss) 280.3 103.8 (0.4) 1.3 385.0
Less: Net income attributable to noncontrolling interests — 29.7 — 0.3 30.0
Net income attributable to OGE Energy $ 280.3 $ 74.1 $ (0.4) $ 1.0 $ 355.0
Total assets $7,222.4 $2,681.3 $242.6 $(224.1) $9,922.2
Capital expenditures $ 704.4 $ 506.5 $ 18.3 $ — $1,229.2
On October 14, 2014, OG&E signed a three-year lease effective
beginning December 2014 for 131 railcars to replace railcars that have
been taken out of service or destroyed.
OG&E Wind Farm Land Lease Agreements
OG&E has wind farm land operating leases for its Centennial,
OU Spirit and Crossroads wind farms expiring at various dates. The
Centennial lease has rent escalations which increase annually based
on the Consumer Price Index. The OU Spirit and Crossroads leases
have rent escalations which increase after five and 10 years. Although
the leases are cancellable, OG&E is required to make annual lease
payments as long as the wind turbines are located on the land. OG&E
does not expect to terminate the leases until the wind turbines reach
the end of their economic life.
OGE Energy Noncancellable Operating Lease
On August 29, 2012, OGE Energy executed a five-year lease
agreement for office space from September 1, 2013 to August 31,
2018. This lease has rent escalations which increase after five-years
and allows for leasehold improvements.
Other Purchase Obligations and Commitments
The Company’s other future purchase obligations and commitments
estimated for the next five years are as follows:
(In millions) 2015 2016 2017 2018 2019 Total
Other purchase obligations and commitments
Cogeneration capacity and fixed operation and maintenance payments $ 85.2 $ 83.3 $ 80.7 $ 77.8 $ 70.6 $ 397.6
Expected cogeneration energy payments 74.4 78.5 81.2 89.7 85.1 408.9
Minimum fuel purchase commitments 389.3 246.6 43.6 — — 679.5
Expected wind purchase commitments 58.4 59.3 60.3 59.1 58.4 295.5
Long-term service agreement commitments 2.5 2.6 2.7 19.4 27.5 54.7
Environmental compliance plan expenditures 66.5 138.1 117.6 50.1 3.9 376.2
Total other purchase obligations and commitments $676.3 $608.4 $386.1 $296.1 $245.5 $2,212.4
The following tables summarize the results of the Company’s
business segments for the years ended December 31, 2014, 2013
and 2012.