Xcel Energy 2006 Annual Report Download - page 110

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100
Leases — Xcel Energy and its subsidiaries lease a variety of equipment and facilities used in the normal course of business. Two of
these leases qualify as capital leases and are accounted for accordingly. The capital leases contractually expire in 2025 and 2028. The
assets and liabilities acquired under capital leases are recorded at the lower of fair market value or the present value of future lease
payments, and are amortized over their actual contract term in accordance with practices allowed by regulators.
Following is a summary of property held under capital leases:
2006 2005
(Millions of Dollars)
Storage, leaseholds and rights..................................... $ 40.5 $ 40.5
Gas pipeline .................................................. 20.7 20.7
61.2 61.2
Accumulated amortization ....................................... (15.0 ) (13.6)
Total property held under capital leases............................. $ 46.2 $ 47.6
The remainder of the leases, primarily for office space, railcars, generating facilities, trucks, cars and power-operated equipment, are
accounted for as operating leases. Rental expense under operating lease obligations for Xcel Energy and its subsidiaries was
approximately $60.3 million, $57.2 million and $57.5 million for 2006, 2005 and 2004, respectively.
Future commitments under operating and capital leases for continuing operations are:
Operating Leases Capital Leases
(Millions of Dollars)
2007 ......................................................... $ 57.4 $ 6.3
2008 ......................................................... $ 53.2 6.1
2009 ......................................................... $ 53.5 6.0
2010 ......................................................... $ 51.9 5.8
2011 ......................................................... $ 49.5 5.6
Thereafter..................................................... $ 546.3 62.4
Total minimum obligation ...................................... $ 92.2
Interest component of obligation ................................... (46.0)
Present value of minimum obligation.............................. $ 46.2
Technology Agreement — Xcel Energy has a contract that extends through 2015 with International Business Machines Corp. (IBM)
for information technology services. The contract is cancelable at Xcel Energy’s option, although there are financial penalties for early
termination. In 2006, Xcel Energy paid IBM $129.2 million under the contract and $0.6 million for other project business. The
contract also has a committed minimum payment each year from 2007 through September 2015.
Fuel Contracts — Xcel Energy and its subsidiaries have contracts providing for the purchase and delivery of a significant portion of
its current coal, nuclear fuel and natural gas requirements. These contracts expire in various years between 2007 and 2027. In total,
Xcel Energy is committed to the minimum purchase of approximately $3.4 billion of coal, $386.6 million of nuclear fuel and $2.5
billion of natural gas, including $1.5 billion of natural gas storage and transportation, or to make payments in lieu thereof, under these
contracts. In addition, Xcel Energy is required to pay additional amounts depending on actual quantities shipped under these
agreements. Xcel Energy’s risk of loss, in the form of increased costs from market price changes in fuel, is mitigated through the use
of natural gas and energy cost rate adjustment mechanisms, which provide for pass-through of most fuel, storage and transportation
costs to customers.
Purchased Power Agreements — The utility subsidiaries of Xcel Energy have entered into agreements with utilities and other energy
suppliers for purchased power to meet system load and energy requirements, replace generation from company-owned units under
maintenance and during outages, and meet operating reserve obligations. NSP-Minnesota, PSCo and SPS have various pay-for-
performance contracts with expiration dates through the year 2033. In general, these contracts provide for capacity payments, subject
to meeting certain contract obligations, and energy payments based on actual power taken under the contracts. Certain contractual
payment obligations are adjusted based on indices. However, the effects of price adjustments are mitigated through cost-of-energy rate
adjustment mechanisms.