OG&E 2013 Annual Report Download - page 23

OGE Energy Corp. 17
Additional Information
Allowance for Equity Funds Used During Construction. Allowance
for equity funds used during construction was $6.2 million in 2012
as compared to $20.4 million in 2011, a decrease of $14.2 million,
or 69.6 percent, primarily due to higher levels of construction costs
for the Crossroads wind farm in 2011.
Other Income. Other income was $8.0 million in both 2012 and 2011.
Factors affecting other income included an increased margin of $8.8 mil-
lion recognized in the guaranteed flat bill program in 2012 as a result of
milder weather offset by a decrease of $8.9 million related to the benefit
associated with the tax gross-up of allowance for equity funds used
during construction.
Other Expense. Other expense was $4.3 million in 2012 as compared to
$8.4 million in 2011, a decrease of $4.1 million, or 48.8 percent primarily
due to a decrease in charitable contributions.
Interest Expense. Interest expense was $124.6 million in 2012 as
compared to $111.6 million in 2011, an increase of $13.0 million, or
11.6 percent, primarily due to a $6.9 million increase in interest expense
related to lower allowance for borrowed funds used during construction
costs for the Crossroads wind farm in 2011 and a $5.5 million increase in
interest expense related to the issuance of long-term debt in May 2011.
Income Tax Expense. Income tax expense was $94.6 million in 2012
as compared to $117.9 million in 2011, a decrease of $23.3 million, or
19.8 percent. The decrease in income tax expense was primarily due
to an increase in the amount of Federal renewable energy tax credits
recognized associated with the Crossroads wind farm and lower pre-tax
income in 2012 as compared to 2011.
OGE Holdings (Natural Gas Midstream Operations)
(In millions, December 31) 2013 2012 2011
Operating revenues $630.4 $1,608.6 $1,787.1
Cost of sales 489.0 1,120.1 1,346.6
Other operation and maintenance 60.9 172.9 162.5
Depreciation and amortization 36.8 108.8 77.6
Impairment of assets –0.4 6.3
Gain on insurance proceeds –(7.5) (3.0)
Taxes other than income 10.5 28.3 22.0
Operating income (loss) 33.2 185.6 175.1
Equity in earnings of
unconsolidated affiliates 101.9 ––
Other income 10.2 1.0 3.9
Other expense 1.3 4.5 1.3
Interest expense 10.6 32.6 22.9
Income tax expense 26.9 45.7 51.7
Net income 106.5 103.8 103.1
Less: Net income attributable
to noncontrolling interests 6.6 29.7 20.8
Net income attributable to OGE Holdings $÷99.9 $÷÷«74.1 $÷÷«82.3
Effective May 1, 2013, the Company deconsolidated its previously
held investment in Enogex Holdings and acquired a 28.5 percent equity
interest in Enable which is being accounted for using the equity method
of accounting. The former natural gas transportation and storage segment
and natural gas gathering and processing segment have been combined
into the natural gas midstream operations segment and have been
restated for all prior periods presented. All financial statement line items
included in the table above (except equity in earnings of unconsolidated
affiliates and income tax expense) reflect 2013 operations only through
April 30, 2013 and are not comparable to the prior year due to the
deconsolidation discussed above.
2013 Compared to 2012
Natural Gas Natural Gas
Midstream Midstream
Operations OGE Holdings Total Operations
(Consolidated – (Equity Method –
Four Months Eight Months (Consolidated –
Ended Ended (Year Ended Year Ended
(In millions) April 30, 2013) Dec 31, 2013) Dec 31, 2013) Dec 31, 2012)
Operating revenues $630.4 $÷÷÷«– $630.4 $1,608.6
Cost of sales 489.0 – 489.0 1,120.1
Operating expenses 108.2 – 108.2 302.9
Operating income 33.2 – 33.2 185.6
Equity in earnings
of unconsolidated
affiliates – 101.9 101.9 –
Income tax expense 9.4 17.5 26.9 45.7
Net income 15.5 84.4 99.9 74.1
OGE Holdings’ results of operations for the four months ended April
2013 as compared to the same period of 2012 decreased due to lower
NGLs prices, lower keep-whole processing spreads and the contract
conversion of the Texas production volumes of one of Enogex LLC’s five
largest customers from keep-whole to fixed-fee, in addition to slightly
higher other operation and maintenance expense and depreciation and
amortization expense. These decreases were partially offset by increased
gathering rates and volumes and inlet processing volumes associated
with ongoing Enogex LLC expansion projects and the gas gathering
assets acquired in August 2012.
Enable’s results for the eight months ended December 31, 2013, were
consistent with management’s expectations in light of lower natural gas
liquids prices and low seasonal and geographic price differentials. Enable
continued to increase processing volumes through system expansions.
Transportation throughput was impacted by system integrity projects and
slightly lower demand. Gathering throughput was slightly lower, impacted
by well connects, with lower throughput offset by the impact of minimum
commitment features.