OG&E 2010 Annual Report Download - page 77

Long-Term Debt Maturities
There are no maturities of the Company’s long-term debt during the next five years.
The Company has previously incurred costs related to debt refinancings. Unamortized debt expense and unamortized loss
on reacquired debt are classified as Deferred Charges and Other Assets and the unamortized premium and discount on long-term debt
is classified as Long-Term Debt, respectively, in the Balance Sheets and are being amortized over the life of the respective debt.
Issuance of Long-Term Debt
On June 8, 2010, the Company issued $250 million of 5.85% senior notes due June 1, 2040. The proceeds from the issuance
were added to the Company’s general funds and were used to fund the Company’s ongoing capital expenditure program and for
working capital. The Company expects to issue additional long-term debt from time to time when market conditions are favorable and
when the need arises.
10. Short-Term Debt and Credit Facility
At December 31, 2010 and 2009, there were $68.9 million and $125.9 million, respectively, in net outstanding advances to
OGE Energy. The Company has an intercompany borrowing agreement with OGE Energy whereby the Company has access to up to
$250 million of OGE Energy’s revolving credit amount. This agreement has a termination date of January 9, 2012. At December 31,
2010, there were no intercompany borrowings under this agreement. The Company also has $389.0 million of liquidity under a bank
facility which is available to back up the Company’s commercial paper borrowings and to provide revolving credit borrowings. This
bank facility can also be used as a letter of credit facility. At December 31, 2010, there was $0.3 million supporting letters of credit at
a weighted-average interest rate of 0.33 percent. There were no outstanding borrowings under this revolving credit agreement and no
outstanding commercial paper borrowings at December 31, 2010. At December 31, 2010, the Company had less than $0.1 million in
cash and cash equivalents.
OGE Energy’s and the Company’s ability to access the commercial paper market could be adversely impacted by a credit
ratings downgrade or major market disruptions. Pricing grids associated with OGE Energy’s and the Company’s credit facilities could
cause annual fees and borrowing rates to increase if an adverse ratings impact occurs. The impact of any future downgrade could
include an increase in the cost of OGE Energy’s and the Company’s short-term borrowings, but a reduction in OGE Energy’s and the
Company’s credit ratings would not result in any defaults or accelerations. Any future downgrade of the Company could also lead to
higher long-term borrowing costs and, if below investment grade, would require the Company to post cash collateral or letters of
credit.
Unlike OGE Energy, the Company must obtain regulatory approval from the FERC in order to borrow on a short-term
basis. The Company has the necessary regulatory approvals to incur up to $800 million in short-term borrowings at any one time for a
two-year period beginning January 1, 2011 and ending December 31, 2012.
11. Retirement Plans and Postretirement Benefit Plans
Defined Benefit Pension Plan and Restoration of Retirement Income Plan
In October 2009, OGE Energy’s Pension Plan and OGE Energy’s 401(k) Plan were amended, effective January 1, 2010 to
provide eligible employees a choice to select a future retirement benefit combination from OGE Energy’s Pension Plan and OGE
Energy’s 401(k) Plan.
Employees hired or rehired on or after December 1, 2009 do not participate in the Pension Plan but are eligible to participate
in the 401(k) Plan where, for each pay period, OGE Energy contributes to the 401(k) Plan, on behalf of each participant, 200 percent
of the participant’s contributions up to five percent of compensation.
It is OGE Energy’s policy to fund the Pension Plan on a current basis based on the net periodic pension expense as
determined by OGE Energy’s actuarial consultants. During each of 2010 and 2009, OGE Energy made contributions to its Pension
Plan of $50 million, of which $47 million in each of 2010 and 2009 was the Company’s portion, to help ensure that the Pension Plan
maintains an adequate funded status. Such contributions are intended to provide not only for benefits attributed to service to date, but
also for those expected to be earned in the future. During 2011, OGE Energy may contribute up to $50 million to its Pension Plan, of
which $47 million is expected to be the Company’s portion. The expected contribution to the Pension Plan during 2011 would be a
discretionary contribution, anticipated to be in the form of cash, and is not required to satisfy the minimum regulatory funding
requirement specified by the Employee Retirement Income Security Act of 1974, as amended. OGE Energy could be required to make
additional contributions if the value of its pension trust and postretirement benefit plan trust assets are adversely impacted by a major
market disruption in the future.
70