OG&E 2013 Annual Report Download - page 75

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Payments for operating lease obligations were $8.8 million,
$14.2 million and $10.4 million for the years ended December 31, 2013,
2012 and 2011, respectively.
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.
OG&E Wind Farm Land Lease Agreements
OG&E has wind farm land operating leases for its Centennial, OU Spirit
and Crossroads wind farms expiring at various dates. The Centennial lease
has rent escalations which increase annually based on the Consumer Price
Index. The OU Spirit and Crossroads leases have rent escalations which
increase after five and 10 years. Although the leases are cancellable,
OG&E is required to make annual lease payments as long as the wind
turbines are located on the land. OG&E does not expect to terminate
the leases until the wind turbines reach the end of their economic life.
OGE Energy Noncancellable Operating Lease
On August 29, 2012, OGE Energy executed a five-year lease agreement
for office space from September 1, 2013 to August 31, 2018. This lease
has rent escalations which increase after five-years and allows for
leasehold improvements.
OGE Holdings Noncancellable Operating Lease
As a result of the formation of Enable Midstream Partners on May 1, 2013
and the Company’s deconsolidation of Enogex Holdings, the Company
has no obligations included in its Consolidated Financial Statements at
December 31, 2013 under OGE Holdings’ noncancellable lease obliga-
tions previously disclosed in the Company’s 2012 Form 10-K.
Other Purchase Obligations and Commitments
The Company’s other future purchase obligations and commitments
estimated for the next five years are as follows:
OGE Energy Corp. 69
(In millions) 2014 2015 2016 2017 2018 Total
Other purchase obligations and commitments
Cogeneration capacity and fixed operation
and maintenance payments $÷85.1 $÷82.7 $÷81.9 $÷79.6 $÷77.0 $÷«406.3
Expected cogeneration energy payments 61.1 60.9 75.7 81.5 87.4 366.6
Minimum fuel purchase commitments 451.8 451.8 368.5 385.1 – 1,657.2
Expected wind purchase commitments 58.0 58.9 59.8 60.8 59.5 297.0
Long-term service agreement commitments 70.5 2.8 2.5 2.6 19.1 97.5
Total other purchase obligations and commitments $726.5 $657.1 $588.4 $609.6 $243.0 $2,824.6
15. Commitments and Contingencies
Operating Lease Obligations
The Company has operating lease obligations expiring at various dates,
primarily for OG&E railcar leases, OG&E wind farm land leases and
OGE Energy noncancellable operating lease. Future minimum payments
for noncancellable operating leases are as follows:
After
(In millions, year ended December 31) 2014 2015 2016 2017 2018 2018 Total
Operating lease obligations
Railcars $3.8 $3.1 $27.3 $÷«– $÷«– $÷÷«– $34.2
Wind farm land leases 2.1 2.1 2.1 2.4 2.4 48.8 59.9
OGE Energy noncancellable operating lease 0.8 0.8 0.8 0.8 0.7 – 3.9
Total operating lease obligations $6.7 $6.0 $30.2 $3.2 $3.1 $48.8 $98.0