2008 Annual report - Sappi

Notes to the group annual financial statements // continued
for the year ended September 2008
US$ million 2008 2007
25. Commitments
Capital commitments
Contracted but not provided 76 188
Approved but not contracted 130 249
206 437
Future forecasted cashflows of capital commitments:
2008 – 389
2009 154 33
2010 35 15
Thereafter 17 –
206 437
The capital expenditure is expected to be financed by funds generated by the business,
existing cash resources and borrowing facilities available to the group.
Lease commitments
Future minimum obligations under operating leases:
Payable in the year ended September:
2008 – 112
2009 28 14
2010 14 10
2011 9 5
2012 4 2
2013 (September 2007: thereafter) 2 2
Thereafter 35 –
92 145
Future minimum obligations under operating leases include the following two significant arrangements:
Sale and Lease Back of the Somerset Paper Machine: In 1997 we sold one of our paper machines at our Somerset Mill for
US$150 million and entered into a leaseback arrangement. This transaction diversified our sources of funding and provided
a longer-term horizon to our repayment profile. This qualified as an operating lease under the applicable accounting principles.
The lease term expired after 15 years, and an option was available to either return the paper machine; renew the lease
for at least 2 years, but for no longer than 80% of its remaining useful life; or repurchase it at its fair market value at the
end of the lease term. On January 29, 2008, we exercised our purchase option under the lease agreement to buy back
Somerset Paper Machine No. 3 for approximately US$75 million. Lease payments made during fiscal year 2008 amounted
to US$7.6 million.
Westbrook Cogeneration Agreement: In 1982 a cogeneration facility was installed adjacent to our Westbrook Mill at a cost
of US$86 million, to supply steam and electricity to the mill on a take-or-pay basis. We took the position that this was an
operating lease. An unrelated investor owned the facility. In July 2007, we notified the lessor of our intent to purchase the
asset in accordance with the terms of the agreement at the end of the Basic Term (July 15, 2008) at its fair market value and
on 29 August 2008, we purchased the facility for approximately US$10 million. Lease payments in fiscal 2008 amounted to
US$4.8 million.
Environmental matters: Further information on capital commitments relating to environmental matters can be found in note 33.
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