Occidental Petroleum 2001 Annual Report Download - page 62

renewal and/or purchase options and require Occidental to pay for utilities,
taxes, insurance and maintenance expense.
At December 31, 2001, future net minimum lease payments for capital and
operating leases (excluding oil and gas and other mineral leases) were the
following (in millions):
CAPITAL OPERATING
============================================================================ ========== ==========
2002 $ 1 $ 67
2003 1 57
2004 1 45
2005 1 37
2006 1 33
Thereafter 30 187
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TOTAL MINIMUM LEASE PAYMENTS 35 $ 426
==========
Less:
Imputed interest (8)
Current portion (1)
----------
PRESENT VALUE OF MINIMUM CAPITAL LEASE PAYMENTS, NET OF CURRENT PORTION $ 26
============================================================================ ==========
Rental expense for operating leases, net of sublease rental income, was $84
million in 2001, $98 million in 2000 and $93 million in 1999. Rental expense was
net of sublease income of $8 million in 2001 and 2000 and $9 million in 1999. At
December 31, 2001, sublease rental amounts included in the future operating
lease payments totaled $93 million, as follows (in millions): 2002--$7,
2003--$7, 2004--$8, 2005--$8, 2006--$8, and 2007 and thereafter--$55.
Occidental has guaranteed the residual value of certain leased assets of
approximately $152 million. If the assets are not purchased at the end of the
lease-term, Occidental would be obligated to pay any deficiency between the fair
value of the assets and the guaranteed residual; however, Occidental does not
expect to make payments under this provision.
Included in the 2001 and 2000 property, plant and equipment accounts were
$11 million and $62 million, respectively, of property leased under capital
leases and $8 million and $57 million, respectively, of related accumulated
amortization.
Occidental has undertaken certain commitments in connection with the
construction and leasing of a cogeneration facility in Taft, LA. This facility
will supply all the steam and electric power requirements for Occidental's Taft
chlor-alkali plant for less cost than if the plant were to generate its own
steam and purchase electricity from a public utility. An owner trust with
investors as participating beneficiaries owns the project, with Occidental
acting as general contractor during construction. The equity participant in the
owner trust has committed to fund the owner trust with equity in the amount of
three percent of the total project cost during construction and 13 percent of
the total project cost upon commencement of the lease term. During the
construction period, Occidental is fully liable for total project costs if an
event of termination occurs due to its willful misconduct or bankruptcy, and
Occidental is liable to pay up to 89.9 percent of the eligible construction
costs if an event of termination occurs for reasons other than force majeure.
Upon completion of construction and satisfaction of certain other conditions,
expected to occur by December 31, 2002, Occidental will enter into a 26-year
operating lease of the facility. The total cost of the project at the inception
of the lease is expected to be approximately $450 million. The total accumulated
costs of the project as of December 31, 2001 amount to approximately $328
million. If these costs were recorded as liabilities on Occidental's balance
sheet, either during construction or during the lease term, the Taft
cogeneration facility would also be recorded as an asset on the balance sheet.
Occidental has entered into various operating lease agreements, mainly for
railcars, manufacturing facilities and office space. The leased assets are used
in Occidental's operations where leasing offers advantages of greater operating
flexibility and generally costs less than alternative methods of funding. Lease
payments are charged to Occidental's operations, mainly as cost of sales.
Occidental estimates the present value of the remaining lease payments to be
$310 million at December 31, 2001. Occidental has fixed-price purchase options
associated with certain leases at various dates ranging from 2003 to 2015, with
an estimated present value of $285 million. These obligations are not recorded
as liabilities on Occidental's consolidated balance sheets. If they were so