Occidental Petroleum 2002 Annual Report Download - page 27

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$165 million private placement bonds due 2016 and 100 percent of a $220 million
revolving line of credit which matures in 2005, under which $105 million was
outstanding at December 31, 2002. These amounts are reflected as debt on
OxyMar's balance sheet. Marubeni has a right to put its interest in OxyMar to
Occidental in 2004 by paying approximately $25 million to Occidental and, in
connection with this
18
transfer, require Occidental to assume Marubeni's guarantee of OxyMar's debt.
Occidental determined that Marubeni's strike price was equal to fair value as of
the issue date and assigned a fair value of zero to the option. Therefore,
Occidental did not record an asset or liability associated with this put option
in the consolidated financial statements. Since the put price was negotiated on
arms'-length terms and has no predetermined conditions that would require
exercise of the option, Occidental cannot determine whether Marubeni will
exercise its option. Occidental does not expect to record a loss if the option
is exercised. If OxyMar were to be consolidated at December 31, 2002, assets
would increase by $172 million and liabilities would increase by $163 million on
Occidental's consolidated balance sheets. As of December 31, 2002, Occidental
had advanced $95 million to OxyMar and had a net equity investment of $30
million. As discussed under "Additional Accounting Changes" (below), FIN No. 46
is expected to result in the consolidation of OxyMar in the third quarter of
2003. This consolidation is not expected to have a significant effect on
Occidental's financial condition and will not change Occidental's results of
operations.
INGLESIDE
Occidental and ConocoPhillips (Conoco) each has a 50-percent interest in
Ingleside Cogeneration Limited Partnership, a limited partnership (Ingleside
LP), which operates a cogeneration plant in Texas. The cogeneration facility
supplies all of the steam and electric power requirements to Occidental's
Ingleside chlor-alkali plant and OxyMar's VCM plant at less cost than if these
facilities were to produce their own steam and purchase electric power from a
public utility. At December 31, 2002, Ingleside LP had approximately $171
million in debt, which is secured by its assets. Occidental has not guaranteed
this debt; however, Occidental and Conoco currently each guarantee half of a
debt service reserve amount of approximately $8 million. Occidental accounts for
this investment using the equity method.
* OTHER TRANSACTIONS
RECEIVABLES SALE PROGRAM
Occidental has an agreement in place to sell, under a revolving sale
program, an undivided interest in a designated pool of trade receivables. This
program is used by Occidental as a low-cost source of working capital funding.
The balance of receivables sold at December 31, 2002 and 2001 was $360 million.
This amount is not included in the debt and related trade receivables accounts,
respectively, on Occidental's consolidated balance sheets. Receivables must meet
certain criteria to qualify for the program.
Under this program, Occidental serves as the collection agent with respect
to the receivables sold. An interest in new receivables is sold as collections
are made from customers. Fees and expenses under this program are included in
selling, general and administrative and other operating expenses. The fair value
of any retained interests in the receivables sold is not material. The buyers of
the receivables are protected against significant risk of loss on their purchase
of receivables. Occidental provides for allowances for any doubtful receivables
based on its periodic evaluation of such receivables. The provisions for such
receivables were not material in the years ended December 31, 2002, 2001 and
2000.
The program terminates upon certain events, including Occidental's senior
debt rating falling below investment grade. In such an event, alternative
funding would have to be arranged, which could result in an increase in debt
recorded on the consolidated balance sheet, with a corresponding increase in the
accounts receivable balance. The consolidated income statement effect of such an
event would not be significant.