OG&E 2013 Annual Report Download - page 25

OGE Energy Corp. 19
Impairment of assets decreased $5.9 million, or 93.7 percent,
primarily due to an impairment of $5.0 million related to a management
decision in August 2011 to use third-party processing exclusively for
gathered volumes dedicated to the Atoka processing plant and, there-
fore, to take the processing plant out of service and return it to the lessor
in accordance with the rental agreement. The noncontrolling interest
portion of the impairment was $2.5 million which was included in Net
Income Attributable to Noncontrolling Interests in the Company’s
Consolidated Statement of Income.
Gain on insurance proceeds increased $4.5 million related to the
reimbursement of costs incurred to replace the damaged train at the
Cox City natural gas processing plant.
Taxes other than income increased $6.2 million, or 28.1 percent,
primarily due to:
•Sales tax of $3.5 million related to the acquisition of certain gas
gathering assets in September 2012 as discussed in Note 3 of Notes
to Consolidated Financial Statements; and
•Increased ad valorem taxes resulting from additional assets placed in
service throughout 2011 and 2012.
Other Income. Enogex’s consolidated other income was $1.0 million
during 2012 as compared to $3.9 million during 2011, a decrease of
$2.9 million, or 74.4 percent, due to the recognition in April 2011 of a
$2.3 million gain related to the sale of the Harrah processing plant and
the associated Wellston and Davenport gathering assets.
Other Expense. Enogex’s consolidated other expense was $4.5 million
during 2012 as compared to $1.3 million during 2011, an increase of
$3.2 million due to higher non-cash losses on retirements of equipment
during 2012.
Interest Expense. Enogex’s consolidated interest expense was
$32.6 million during 2012 as compared to $22.9 million during 2011,
an increase of $9.7 million, or 42.4 percent, primarily due to:
•A decrease in capitalized interest during 2012 due to the completion
of several large capital projects as compared to 2011;
•Higher borrowings partially offset by repayments under Enogex’s
revolving credit agreement during 2012 as compared to 2011; and
•Borrowings under Enogex’s term loan during 2012 with no comparable
item during 2011.
Income Tax Expense. Enogex’s consolidated income tax expense was
$45.7 million during 2012 as compared to $51.7 million during 2011, a
decrease of $6.0 million, or 11.6 percent, primarily due to lower pre-tax
income (net of noncontrolling interest) during 2012 as compared to 2011.
Noncontrolling Interest. Enogex’s net income attributable to noncontrolling
interest was $29.7 million during 2012 as compared to $20.8 million during
2011, an increase of $8.9 million or 42.8 percent, due to higher net income,
the ArcLight group’s increased ownership in Enogex Holdings as a result
of the ArcLight group funding capital contributions at a disproportionate
percentage to OGE Holdings throughout 2011 and an impairment recorded
in August 2011 related to the Atoka processing plant.
Off-Balance Sheet Arrangement
OG&E Railcar Lease Agreement
OG&E has a noncancellable operating lease with purchase options,
covering 1,389 coal rotary gondola railcars to transport coal from
Wyoming to OG&E’s coal-fired generation units. Rental payments are
charged to Fuel Expense and are recovered through OG&E’s tariffs and
fuel adjustment clauses. On December 15, 2010, OG&E renewed the
lease agreement effective February 1, 2011. At the end of the new lease
term, which is February 1, 2016, OG&E has the option to either purchase
the railcars at a stipulated fair market value or renew the lease. If OG&E
chooses not to purchase the railcars or renew the lease agreement and
the actual fair value of the railcars is less than the stipulated fair market
value, OG&E would be responsible for the difference in those values
up to a maximum of $22.8 million. OG&E is also required to maintain all
of the railcars it has under the operating lease and has entered into an
agreement with a non-affiliated company to furnish this maintenance.
On January 11, 2012, OG&E executed a five-year lease agreement
for 135 railcars to replace railcars that have been taken out of service
or destroyed. OG&E has a unilateral right to terminate this lease upon
a 6-month notice effective April 2015 and April 2016.
Liquidity and Capital Resources
Working Capital
Working capital is defined as the amount by which current assets
exceed current liabilities. The Company’s working capital requirements
are driven generally by changes in accounts receivable, accounts payable,
commodity prices, credit extended to, and the timing of collections from,
customers, the level and timing of spending for maintenance and expan-
sion activity, inventory levels and fuel recoveries.
The balance of Accounts Receivable, Net and Accrued Unbilled
Revenues was $250.5 million and $352.7 million at December 31, 2013
and 2012, respectively, a decrease of $102.2 million, or 29.0 percent,
primarily due to the deconsolidation of Enogex Holdings on May 1, 2013
partially offset by higher transmission revenue, an increase in billings for
reimbursable construction costs and an increase in billings to partners
of jointly-owned power plants,
The balance of Accounts Payable was $251.0 million and
$396.7 million at December 31, 2013 and 2012, respectively, a decrease
of $145.7 million, or 36.7 percent, primarily due to the deconsolidation
of Enogex Holdings on May 1, 2013 partly offset by increases primarily
due to the timing of vendor payments and an increase in accruals.