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What changed in Westlake Chemical Partners LP's 10-K — 2023 vs 2024

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Paragraph-level year-over-year comparison of Westlake Chemical Partners LP's 2023 and 2024 10-K annual filings, covering the Business, Risk Factors, Legal Proceedings, Cybersecurity, MD&A and Market Risk sections. Every new, removed and edited paragraph is highlighted side-by-side so you can see exactly what management changed in the 2024 report.

+188 added−184 removedSource: 10-K (2025-03-05) vs 10-K (2024-02-28)

Top changes in Westlake Chemical Partners LP's 2024 10-K

188 paragraphs added · 184 removed · 153 edited across 6 sections

Item 1. Business

Business — how the company describes what it does

12 edited+4 added−12 removed58 unchanged
Biggest changeSee "Business—Our Agreements with Westlake— Omnibus Agreement ." We anticipate that stringent environmental regulations will continue to be imposed on us and the industry in general. Under the Ethylene Sales Agreement, we may be entitled to charge Westlake a monthly surcharge as a result of complying with certain changes in law occurring after our IPO.
Biggest changeUnder the Ethylene Sales Agreement, we may be entitled to charge Westlake a monthly surcharge as a result of complying with certain changes in law occurring after our IPO. See "Business—Our Agreements with Westlake— Ethylene Sales Agreement. " Although we cannot predict with certainty future expenditures, management believes that our current spending trends for environmental compliance will continue.
OpCo primarily uses ethane (a component of natural gas liquids, or NGLs) to produce ethylene. 1 Table of Contents Ownership of Westlake Chemical Partners LP The following simplified diagram depicts our organizational structure as of December 31, 2023: Public Common Units 59.9 % Interests of Westlake: Common Units 40.1 % Non-Economic General Partner Interest — Incentive Distribution Rights (1) — 100.0 % ______________________________ (1) Incentive distribution rights represent a variable interest in distributions and thus are not expressed as a fixed percentage.
OpCo primarily uses ethane (a component of natural gas liquids, or NGLs) to produce ethylene. 1 Table of Contents Ownership of Westlake Chemical Partners LP The following simplified diagram depicts our organizational structure as of December 31, 2024: Public Common Units 59.9 % Interests of Westlake: Common Units 40.1 % Non-Economic General Partner Interest — Incentive Distribution Rights (1) — 100.0 % ______________________________ (1) Incentive distribution rights represent a variable interest in distributions and thus are not expressed as a fixed percentage.
The following table provides information regarding OpCo's ethylene production facilities as of December 31, 2023: Plant Location (Description) Annual Production Capacity (millions of pounds) Feedstock Primary Uses of Ethylene Lake Charles, Louisiana (Petro 1) 1,500 Ethane PE and PVC Lake Charles, Louisiana (Petro 2) 1,490 Ethane, ethane/propane mix, propane, butane or naphtha PE and PVC Calvert City, Kentucky (Calvert City Olefins) 730 Ethane or propane PVC Total 3,720 Lake Charles Olefins Two of OpCo's ethylene production facilities, which we refer to as Petro 1 and Petro 2 and, collectively, as Lake Charles Olefins, are located at Westlake's Lake Charles site.
The following table provides information regarding OpCo's ethylene production facilities as of December 31, 2024: Plant Location (Description) Annual Production Capacity (millions of pounds) Feedstock Primary Uses of Ethylene Lake Charles, Louisiana (Petro 1) 1,500 Ethane PE and PVC Lake Charles, Louisiana (Petro 2) 1,490 Ethane, ethane/propane mix, propane, butane or naphtha PE and PVC Calvert City, Kentucky (Calvert City Olefins) 730 Ethane or propane PVC Total 3,720 Lake Charles Olefins Two of OpCo's ethylene production facilities, which we refer to as Petro 1 and Petro 2 and, collectively, as Lake Charles Olefins, are located at Westlake's Lake Charles site.
Because we own OpCo's general partner, we have control over all of OpCo's assets and operations. As of December 31, 2023, Westlake held a 77.2% limited partner interest in OpCo and held a 40.1% limited partner interest in us (consisting of 14,122,230 common units), our general partner interest and our incentive distribution rights.
Because we own OpCo's general partner, we have control over all of OpCo's assets and operations. As of December 31, 2024, Westlake held a 77.2% limited partner interest in OpCo and held a 40.1% limited partner interest in us (consisting of 14,122,230 common units), our general partner interest and our incentive distribution rights.
Westlake's purchase price for ethylene under the Ethylene Sales Agreement includes a $0.10 per pound margin, the total costs incurred by OpCo for the feedstock and natural gas to produce each pound of ethylene (subject to a usage cap and a floor), and estimated operating costs, maintenance capital expenditures and other turnaround expenditures, less net proceeds from co-products sales.
Westlake's purchase price for its minimum commitment of ethylene under the Ethylene Sales Agreement includes a $0.10 per pound margin, the total costs incurred by OpCo for the feedstock and natural gas to produce each pound of ethylene (subject to a usage cap and a floor), and estimated operating costs, maintenance capital expenditures and other turnaround expenditures, less net proceeds from co-products sales.
Among other agreements entered into in connection with the closing of the IPO, OpCo entered into a 12-year ethylene sales agreement with Westlake, under which Westlake agreed to purchase 95% of OpCo's planned ethylene production each year, on a cost-plus basis that is expected to generate a fixed margin per pound of $0.10 (the "Ethylene Sales Agreement").
Among other agreements entered into in connection with the closing of the IPO, OpCo entered into an ethylene sales agreement with Westlake with an initial term of 12 years, under which Westlake agreed to purchase 95% of OpCo's planned ethylene production each year, on a cost-plus basis that is expected to generate a fixed margin per pound of $0.10 (the "Ethylene Sales Agreement").
It is our policy to comply with all environmental, health and safety requirements in the jurisdictions in which we and OpCo operate and to provide safe and environmentally sound workplaces for our employees. In some cases, compliance can be achieved only by incurring capital expenditures. In 2023, OpCo incurred capital expenditures of $0.6 million related to environmental compliance.
It is our policy to comply with all environmental, health and safety requirements in the jurisdictions in which we and OpCo operate and to provide safe and environmentally sound workplaces for our employees. In some cases, compliance can be achieved only by incurring capital expenditures. In 2024, OpCo incurred capital expenditures of $3.5 million related to environmental compliance.
Although we cannot predict with certainty the ultimate resolution of lawsuits, investigations and claims asserted against us, we do not believe that any currently pending legal proceeding or proceedings to which we or Westlake or any of our or Westlake's subsidiaries, including OpCo, are a party will have a material adverse effect on our business, results of operations, cash flows or financial condition.
Although we cannot predict with certainty the ultimate resolution of lawsuits, investigations and claims asserted against us, we do not believe that any currently pending legal proceeding or proceedings to which we or Westlake or any of our or Westlake's subsidiaries, including OpCo, are a party will have a material adverse effect on our business, results of operations, cash flows or financial condition. 6 Table of Contents Competition Due to the Ethylene Sales Agreement and integration with Westlake, OpCo does not directly compete with other ethylene producers for 95% of the planned volumes it produces.
Westlake is responsible for human capital management policies, including any human capital measures and objectives that management focuses on in managing the business. Legal Proceedings In the ordinary conduct of our business, we and Westlake and our and Westlake's subsidiaries, including OpCo, are subject to lawsuits, investigations and claims, including environmental claims and employee related matters.
Legal Proceedings In the ordinary conduct of our business, we and Westlake and our and Westlake's subsidiaries, including OpCo, are subject to lawsuits, investigations and claims, including environmental claims and employee related matters.
We estimate that OpCo will make capital expenditures of approximately $3.5 million in 2024 and $3.6 million in 2025, respectively, related to environmental compliance.
We estimate that OpCo will make capital expenditures of approximately $3.6 million in 2025 and $3.6 million in 2026, respectively, related to environmental compliance. We anticipate that stringent environmental regulations will continue to be imposed on us and the industry in general.
Westlake is responsible for indemnifying the Partnership in connection with any loss OpCo may have incurred as a result of the fire. 6 Table of Contents Also, see the discussion of our environmental matters contained in "Item 1A. Risk Factors" and "Item 3. Legal Proceedings" below. Human Capital Neither we nor OpCo has any employees.
Also, see the discussion of our environmental matters contained in "Item 1A. Risk Factors" and "Item 3. Legal Proceedings" below. Human Capital Neither we nor OpCo has any employees.
If OpCo's actual production is in excess of planned ethylene production, Westlake has the option to purchase up to 95% of production in excess of planned production.
If OpCo's actual production is in excess of planned ethylene production, Westlake has the option to purchase up to 95% of production in excess of planned production. The price for the sale of such excess ethylene to Westlake is based on a formula similar to that used for the minimum purchase commitment, with the exception of certain fixed costs.
Removed
Additionally, in 2024, capital expenditures of approximately $1.0 million are expected to be paid by Westlake in connection with corrective actions required by the Environmental Protection Agency (the "EPA") to resolve the flare enforcement matter discussed below. Pursuant to the Omnibus Agreement, Westlake has paid and will continue to pay for all such corrective actions.
Added
As of December 31, 2024, 153 employees of Westlake were seconded to OpCo. Of these, 25 are covered by collective bargaining agreements.
Removed
See "Business—Our Agreements with Westlake— Ethylene Sales Agreement. " Although we cannot predict with certainty future expenditures, management believes that our current spending trends for environmental compliance will continue. Flare Modifications . For several years, the EPA has been conducting an enforcement initiative against petroleum refineries and petrochemical plants with respect to emissions from flares.
Added
On November 1, 2024, bargaining unit employees of Local Lodge No. 2781 of the International Association of Machinists and Aerospace Workers ("IAM") began a strike at our Calvert City, Kentucky, facility, after the IAM members, who work in the OpCo's ethylene facility and Westlake's chlorine units, did not accept Westlake's final offer for a new collective bargaining agreement.
Removed
On April 21, 2014, Westlake received a Clean Air Act Section 114 Information Request from the EPA, which sought information regarding flares at the Calvert City and Lake Charles facilities. The EPA informed Westlake that the information provided led it to believe that some of the flares were out of compliance with applicable standards.
Added
The ethylene unit continued to operate without disruption with the use of management and other salaried personnel. The strike ended on November 8, 2024, after the IAM accepted Westlake's offer for a new collective bargaining agreement, which will expire on November 9, 2029.
Removed
In June 2022, the Department of Justice announced that certain subsidiaries of Westlake, including OpCo, the EPA and state environmental agencies had reached agreement on a consent decree resolving this matter. The consent decree was entered by the court and became effective in October 2022.
Added
Despite the recent strike, we believe that Westlake's relationship with local union officials and bargaining committees is open and positive. Westlake is responsible for human capital management policies, including any human capital measures and objectives that management focuses on in managing the business.
Removed
The consent decree requires OpCo and other Westlake subsidiaries to install flare gas recovery units, implement fence line monitoring, install and operate flare monitoring and control equipment to meet certain performance standards, and pay a civil penalty of $1 million.
Removed
We estimate that the total cost to implement the requirements under the decree will be approximately $110 million, which includes capital expenditures associated with installation of the flare gas recovery units and monitoring and control equipment that are required to be installed at our Calvert City and Lake Charles facilities.
Removed
The substantial majority of the capital expenditures and other costs required to comply with the consent decree were incurred in 2021, 2022, or 2023. Westlake has paid all penalties required under the consent decree and has planned, budgeted for and scheduled all compliance requirements going forward. As discussed above, Westlake is expected to fully indemnify us for such costs.
Removed
While the final consent decree does provide for stipulated penalties if certain requirements are not met, we do not believe that any stipulated penalties, if incurred and assessed, will have a material adverse effect on our financial condition, results of operations or cash flows. Flash Fire at Petro 2.
Removed
In September 2021, Westlake and OpCo were subject to lawsuits related to a flash fire at the quench tower of the Petro 2 facility. Contractors and employees working on and near the quench tower were injured.
Removed
Final settlements were reached with all of the plaintiffs to fully resolve the lawsuits by Westlake, but payment by the insurance carriers has not yet been completed.
Removed
As of December 31, 2023, 152 employees were seconded to OpCo. Of these, 25 are covered by collective bargaining agreements that expire on November 1, 2024. There have been no strikes, lockouts or work stoppages at OpCo's facilities. We believe that Westlake's relationship with the local union officials and bargaining committees is open and positive.
Removed
Competition Due to the Ethylene Sales Agreement and integration with Westlake, OpCo does not directly compete with other ethylene producers for 95% of the planned volumes it produces.

Item 1A. Risk Factors

Risk Factors — what could go wrong, per management

78 edited+20 added−11 removed220 unchanged
Biggest changeHolders of our common units have limited voting rights and are not entitled to elect our general partner or its directors, which could reduce the price at which our common units trade. Compared to the holders of common stock in a corporation, unitholders have limited voting rights and, therefore, limited ability to influence management's decisions regarding our business.
Biggest changeCompared to the holders of common stock in a corporation, unitholders have limited voting rights and, therefore, limited ability to influence management's decisions regarding our business. Unitholders will have no right on an annual or ongoing basis to elect our general partner or its board of directors.
As a result, our ability to pay the minimum quarterly distribution is based on the following factors, some of which are beyond our control: • severe financial hardship or bankruptcy of Westlake or one of our other customers, or the occurrence of other events affecting our ability to collect payments from Westlake or our other customers, including any of our customers' default; • volatility and cyclical downturns in the chemicals industry and other industries which materially and adversely impact Westlake and our other customers; • Westlake's inability to perform, or any other default on its obligations, under the Ethylene Sales Agreement, the Services and Secondment Agreement and the Omnibus Agreement; • the age of, and changes in the reliability, efficiency and capacity of the various equipment and operating facilities used in OpCo's operations, and in the operations of Westlake and our other customers, business partners and/or suppliers; • the cost of environmental remediation at OpCo's facilities not covered by Westlake or third parties; • changes in the expected operating levels of OpCo's assets; • OpCo's ability to meet minimum volume requirements, yield standards and ethylene quality requirements in the Ethylene Sales Agreement; • OpCo's ability to renew the Ethylene Sales Agreement or to enter into new, long-term agreements for the sale of ethylene under terms that are similar or more favorable; 10 Table of Contents • changes in the marketplace that may affect supply and demand for ethane or ethylene, including decreased availability of ethane (which may result from greater restrictions on hydraulic fracturing, any reduction in hydraulic fracturing due to low crude oil prices or exports of natural gas liquids from the United States, for example), increased production of ethylene (a number of new ethylene capacity expansions have been recently completed) or export of ethane or ethylene from the United States; • changes in overall levels of production, production capacity, pricing and/or margins for ethylene; • OpCo's ability to secure adequate supplies of ethane, other feedstocks and natural gas from Westlake or third parties; • the need to use higher priced or less attractive feedstock due to the unavailability of ethane; • the effects of pipeline, railroad, barge, truck and other transportation performance and costs, including any transportation disruptions; • the effects of inflation and fluctuations in interest rates; • the availability and cost of labor; • risks related to employees and workplace safety; • the effects of adverse events relating to the operation of OpCo's facilities and to the transportation and storage of hazardous materials (including equipment malfunction, explosions, fires, spills and the effects of severe weather conditions); • changes in product specifications for the ethylene that we produce; • changes in insurance markets and the level, types and costs of coverage available, and the financial ability and willingness of our insurers to meet their obligations; • changes in, or new, statutes, regulations or governmental policies by federal, state and local authorities with respect to protection of the environment; • changes in accounting rules and/or tax laws or their interpretations; • nonperformance or force majeure by, or disputes with or changes in contract terms with, Westlake, our other major customers, suppliers, dealers, distributors or other business partners; and • changes in, or new, statutes, regulations, governmental policies and taxes, or their interpretations.
As a result, our ability to pay the minimum quarterly distribution is based on the following factors, some of which are beyond our control: • severe financial hardship or bankruptcy of Westlake or one of our other customers, or the occurrence of other events affecting our ability to collect payments from Westlake or our other customers, including any of our customers' default; • volatility and cyclical downturns in the chemicals industry and other industries which materially and adversely impact Westlake and our other customers; • Westlake's inability to perform, or any other default on its obligations, under the Ethylene Sales Agreement, the Services and Secondment Agreement and the Omnibus Agreement; • the age of, and changes in the reliability, efficiency and capacity of the various equipment and operating facilities used in OpCo's operations, and in the operations of Westlake and our other customers, business partners and/or suppliers; • the cost of environmental remediation at OpCo's facilities not covered by Westlake or third parties; • changes in the expected operating levels of OpCo's assets; • OpCo's ability to meet minimum volume requirements, yield standards and ethylene quality requirements in the Ethylene Sales Agreement; • OpCo's ability to renew the Ethylene Sales Agreement or to enter into new, long-term agreements for the sale of ethylene under terms that are similar or more favorable; • changes in the marketplace that may affect supply and demand for ethane or ethylene, including decreased availability of ethane (which may result from greater restrictions on hydraulic fracturing, any reduction in hydraulic fracturing due to low crude oil prices or exports of natural gas liquids from the United States, for example), increased production of ethylene (a number of new ethylene capacity expansions have been recently completed) or export of ethane or ethylene from the United States; • changes in overall levels of production, production capacity, pricing and/or margins for ethylene; • OpCo's ability to secure adequate supplies of ethane, other feedstocks and natural gas from Westlake or third parties; • the need to use higher priced or less attractive feedstock due to the unavailability of ethane; • the effects of pipeline, railroad, barge, truck and other transportation performance and costs, including any transportation disruptions; • the effects of inflation and fluctuations in interest rates; • the availability and cost of labor; • risks related to employees and workplace safety; • the effects of adverse events relating to the operation of OpCo's facilities and to the transportation and storage of hazardous materials (including equipment malfunction, explosions, fires, spills and the effects of severe weather conditions); • changes in product specifications for the ethylene that we produce; • changes in insurance markets and the level, types and costs of coverage available, and the financial ability and willingness of our insurers to meet their obligations; 10 Table of Contents • changes in, or new, statutes, regulations or governmental policies by federal, state and local authorities with respect to protection of the environment; • changes in accounting rules and/or tax laws or their interpretations; • nonperformance or force majeure by, or disputes with or changes in contract terms with, Westlake, our other major customers, suppliers, dealers, distributors or other business partners; and • changes in, or new, statutes, regulations, governmental policies and taxes, or their interpretations.
If OpCo is unable to renew or extend the Ethylene Sales Agreement beyond the initial 12-year term or the other agreements with Westlake upon expiration of these agreements, our ability to make distributions in the future could be materially adversely affected and the value of our units could decline.
If OpCo is unable to renew or extend the Ethylene Sales Agreement beyond the initial 12-year initial term or the other agreements with Westlake upon expiration of these agreements, our ability to make distributions in the future could be materially adversely affected and the value of our units could decline.
The board of directors adopted a cash distribution policy pursuant to which we intend to distribute quarterly at least $0.2750 per unit on all of our units to the extent we have sufficient cash after the establishment of cash reserves and the payment of our expenses, including payments to our general partner and its affiliates.
The board of directors of our general partner adopted a cash distribution policy pursuant to which we intend to distribute quarterly at least $0.2750 per unit on all of our units to the extent we have sufficient cash after the establishment of cash reserves and the payment of our expenses, including payments to our general partner and its affiliates.
If Westlake does not pay us under the terms of the Ethylene Sales Agreement or if our assets fail to perform as intended, we may not have sufficient cash from operations following the establishment of cash reserves and payment of costs and expenses, including cost reimbursements to our general partner and its affiliates, to enable us to pay the minimum quarterly distribution to our unitholders. • OpCo is subject to the credit risk of Westlake on a substantial majority of its revenues, and Westlake's leverage and creditworthiness could adversely affect our ability to make distributions to our unitholders. • OpCo is a restricted subsidiary under certain indentures governing Westlake's senior notes. • The ethylene sales price charged under the Ethylene Sales Agreement is designed to permit OpCo to cover the substantial majority of its operating costs, but not our public partnership and other OpCo costs, which reduce our net operating profit. • If OpCo is unable to renew or extend the Ethylene Sales Agreement beyond the initial 12-year term or the other agreements with Westlake upon expiration of these agreements, our ability to make distributions in the future could be materially adversely affected and the value of our units could decline. • OpCo has the right to use the real property underlying Lake Charles Olefins and Calvert City Olefins pursuant to two, 50-year site lease agreements with Westlake.
If Westlake does not pay us under the terms of the Ethylene Sales Agreement or if our assets fail to perform as intended, we may not have sufficient cash from operations following the establishment of cash reserves and payment of costs and expenses, including cost reimbursements to our general partner and its affiliates, to enable us to pay the minimum quarterly distribution to our unitholders. • OpCo is subject to the credit risk of Westlake on a substantial majority of its revenues, and Westlake's leverage and creditworthiness could adversely affect our ability to make distributions to our unitholders. • OpCo is a restricted subsidiary under certain indentures governing Westlake's senior notes. • The ethylene sales price charged under the Ethylene Sales Agreement is designed to permit OpCo to cover the substantial majority of its operating costs, but not our public partnership, debt and other OpCo costs, which reduce our net operating profit. • If OpCo is unable to renew or extend the Ethylene Sales Agreement beyond the initial 12-year term or the other agreements with Westlake upon expiration of these agreements, our ability to make distributions in the future could be materially adversely affected and the value of our units could decline. • OpCo has the right to use the real property underlying Lake Charles Olefins and Calvert City Olefins pursuant to two, 50-year site lease agreements with Westlake.
These conflicts include the following situations, among others: 18 Table of Contents • our general partner is allowed to take into account the interests of parties other than us, such as Westlake, in exercising certain rights under our partnership agreement; • neither our partnership agreement nor any other agreement requires Westlake to pursue a business strategy that favors us; • our partnership agreement replaces the fiduciary duties that would otherwise be owed by our general partner with contractual standards governing its duties, limits our general partner's liabilities and restricts the remedies available to our unitholders for actions that, without such limitations, might constitute breaches of fiduciary duty; • except in limited circumstances, our general partner has the power and authority to conduct our business without unitholder approval; • our general partner determines the amount and timing of asset purchases and sales, borrowings, issuances of additional partnership securities and the level of reserves, each of which can affect the amount of cash that is distributed to our unitholders; • our general partner determines the amount and timing of any cash expenditure and whether an expenditure is classified as a maintenance capital expenditure, which reduces operating surplus, or an expansion capital expenditure, which does not reduce operating surplus.
These conflicts include the following situations, among others: • our general partner is allowed to take into account the interests of parties other than us, such as Westlake, in exercising certain rights under our partnership agreement; • neither our partnership agreement nor any other agreement requires Westlake to pursue a business strategy that favors us; • our partnership agreement replaces the fiduciary duties that would otherwise be owed by our general partner with contractual standards governing its duties, limits our general partner's liabilities and restricts the remedies available to our unitholders for actions that, without such limitations, might constitute breaches of fiduciary duty; 19 Table of Contents • except in limited circumstances, our general partner has the power and authority to conduct our business without unitholder approval; • our general partner determines the amount and timing of asset purchases and sales, borrowings, issuances of additional partnership securities and the level of reserves, each of which can affect the amount of cash that is distributed to our unitholders; • our general partner determines the amount and timing of any cash expenditure and whether an expenditure is classified as a maintenance capital expenditure, which reduces operating surplus, or an expansion capital expenditure, which does not reduce operating surplus.
The issuance of additional common units or other equity interests of equal or senior rank will have the following effects: • our existing unitholders' proportionate ownership interest in us will decrease; • the amount of earnings per each unit may decrease; • the ratio of taxable income to distributions may increase; • the relative voting strength of each previously outstanding unit may be diminished; and • the market price of the common units may decline. 23 Table of Contents The market price of our common units could be adversely affected by sales of substantial amounts of our common units in the public or private markets, including sales by Westlake or other large holders.
The issuance of additional common units or other equity interests of equal or senior rank will have the following effects: • our existing unitholders' proportionate ownership interest in us will decrease; • the amount of earnings per each unit may decrease; • the ratio of taxable income to distributions may increase; • the relative voting strength of each previously outstanding unit may be diminished; and • the market price of the common units may decline. 24 Table of Contents The market price of our common units could be adversely affected by sales of substantial amounts of our common units in the public or private markets, including sales by Westlake or other large holders.
The incurrence of additional commercial borrowings or other debt to finance our growth strategy would result in increased interest expense, which, in turn, may impact the cash that we have available to distribute to our unitholders. 22 Table of Contents The holder or holders of our incentive distribution rights may elect to cause us to issue common units to it in connection with a resetting of the target distribution levels related to the incentive distribution rights, without the approval of the conflicts committee of our board of directors or the holders of our common units.
The incurrence of additional commercial borrowings or other debt to finance our growth strategy would result in increased interest expense, which, in turn, may impact the cash that we have available to distribute to our unitholders. 23 Table of Contents The holder or holders of our incentive distribution rights may elect to cause us to issue common units to it in connection with a resetting of the target distribution levels related to the incentive distribution rights, without the approval of the conflicts committee of our board of directors or the holders of our common units.
Based upon our current operations and current Treasury Regulations, we believe we satisfy the qualifying income requirement. 24 Table of Contents Prior to our initial public offering, we requested and obtained a favorable private letter ruling from the IRS to the effect that, based on facts presented in the private letter ruling request, our income from the production, transportation, storage and marketing of ethylene and its co-products constitutes "qualifying income" within the meaning of Section 7704 of the Internal Revenue Code of 1986, as amended (the "Code").
Based upon our current operations and current Treasury Regulations, we believe we satisfy the qualifying income requirement. 25 Table of Contents Prior to our initial public offering, we requested and obtained a favorable private letter ruling from the IRS to the effect that, based on facts presented in the private letter ruling request, our income from the production, transportation, storage and marketing of ethylene and its co-products constitutes "qualifying income" within the meaning of Section 7704 of the Internal Revenue Code of 1986, as amended (the "Code").
Any acquisition involves potential risks, some of which are beyond our control, including, among other things: • mistaken assumptions about revenues and costs, including synergies; • the inability to successfully integrate the businesses we acquire; • the inability to hire, train or retain qualified personnel to manage and operate our business and newly acquired assets; • the assumption of unknown liabilities; • limitations on rights to indemnity from the seller; • mistaken assumptions about the overall costs of equity or debt; 14 Table of Contents • the diversion of management's attention from other business concerns; • unforeseen difficulties in connection with operating in new product areas or new geographic areas; and • customer or key employee losses at the acquired businesses.
Any acquisition involves potential risks, some of which are beyond our control, including, among other things: • mistaken assumptions about revenues and costs, including synergies; • the inability to successfully integrate the businesses we acquire; • the inability to hire, train or retain qualified personnel to manage and operate our business and newly acquired assets; • the assumption of unknown liabilities; • limitations on rights to indemnity from the seller; • mistaken assumptions about the overall costs of equity or debt; • the diversion of management's attention from other business concerns; • unforeseen difficulties in connection with operating in new product areas or new geographic areas; and • customer or key employee losses at the acquired businesses.
We expect that each of OpCo's facilities will have a turnaround approximately once every five years and will not operate for typically between 30 and 60 days during each separate turnaround. However, the duration of any turnaround activities may be longer than expected or may cost more than originally estimated.
We expect that each of OpCo's facilities will have a turnaround approximately once every five to eight years and will not operate for typically between 30 and 60 days during each separate turnaround. However, the duration of any turnaround activities may be longer than expected or may cost more than originally estimated.
If we or our securities are unable to meet the ESG standards or investment criteria set by these investors and funds, we may lose investors or investors may allocate a portion of their capital away from us, our cost of capital may increase, and our common unit price may be negatively impacted.
If we or our securities are unable to meet the sustainability standards or investment criteria set by these investors and funds, we may lose investors or investors may allocate a portion of their capital away from us, our cost of capital may increase, and our common unit price may be negatively impacted.
Over the past few years, there has also been an acceleration in investor demand for ESG investing opportunities, and many large institutional investors have committed to increasing the percentage of their portfolios that are allocated towards ESG investments.
Over the past few years, there has also been an acceleration in investor demand for sustainability investing opportunities, and many large institutional investors have committed to increasing the percentage of their portfolios that are allocated towards sustainability investments.
This effectively permits a "change of control" without the vote or consent of the unitholders. 21 Table of Contents Our general partner has a call right that may require unitholders to sell their common units at an undesirable time or price.
This effectively permits a "change of control" without the vote or consent of the unitholders. 22 Table of Contents Our general partner has a call right that may require unitholders to sell their common units at an undesirable time or price.
Examples of decisions that our general partner may make in its individual capacity include: • how to allocate business opportunities among us and its affiliates; • whether to exercise its call right; • how to exercise its voting rights with respect to the units it owns; • whether to exercise its registration rights; • whether to elect to reset target distribution levels; and • whether or not to consent to any merger or consolidation of the partnership or amendment to the partnership agreement.
Examples of decisions that our general partner may make in its individual capacity include: • how to allocate business opportunities among us and its affiliates; • whether to exercise its call right; • how to exercise its voting rights with respect to the units it owns; 20 Table of Contents • whether to exercise its registration rights; • whether to elect to reset target distribution levels; and • whether or not to consent to any merger or consolidation of the partnership or amendment to the partnership agreement.
For example, virtually all of our income allocated to organizations that are exempt from U.S. federal income tax, including IRAs and other retirement plans, will be unrelated business taxable income ("UBTI") and will be taxable to them. Tax-exempt entities should consult a tax advisor before investing in our common units. Non-U.S.
For example, virtually all of our income allocated to organizations that are exempt from U.S. federal income tax, including IRAs and other retirement plans, will be unrelated business taxable income ("UBTI") and will be taxable to them. Tax-exempt entities should consult a tax advisor before investing in our common units. 28 Table of Contents Non-U.S.
Our partnership agreement provides that any action taken by our general partner to limit its liability is not a breach of our general partner's duties, even if we could have obtained more favorable terms without the limitation on liability. 19 Table of Contents Our partnership agreement replaces our general partner's fiduciary duties to holders of our units.
Our partnership agreement provides that any action taken by our general partner to limit its liability is not a breach of our general partner's duties, even if we could have obtained more favorable terms without the limitation on liability. Our partnership agreement replaces our general partner's fiduciary duties to holders of our units.
With respect to any of these investors, our ESG disclosures and efforts may not satisfy the investor requirements or their requirements may not be made known to us.
With respect to any of these investors, our sustainability disclosures and efforts may not satisfy the investor requirements or their requirements may not be made known to us.
The actual ratio of taxable income to cash distributions could be higher or lower than expected, and any differences could be material and could materially affect the value of the common units. Tax gain or loss on the disposition of our common units could be more or less than expected.
The actual ratio of taxable income to cash distributions could be higher or lower than expected, and any differences could be material and could materially affect the value of the common units. 27 Table of Contents Tax gain or loss on the disposition of our common units could be more or less than expected.
The vote, including Westlake, of the holders of at least 66 2 / 3 % of all outstanding common and subordinated units voting together as a single class is required to remove our general partner. As of February 21, 2024, Westlake owned an aggregate of 40.1% of our common units.
The vote, including Westlake, of the holders of at least 66 2 / 3 % of all outstanding common and subordinated units voting together as a single class is required to remove our general partner. As of February 26, 2025, Westlake owned an aggregate of 40.1% of our common units.
As our chemical processing results in GHG emissions, these and other GHG laws and regulations could affect our costs of doing business. 16 Table of Contents We also may face liability for alleged personal injury or property damage due to exposure to chemicals or other hazardous substances at our facilities or to chemicals that we otherwise manufacture, handle or own.
As our chemical processing results in GHG emissions, these and other environmental disclosure laws and regulations could affect our costs of doing business. We also may face liability for alleged personal injury or property damage due to exposure to chemicals or other hazardous substances at our facilities or to chemicals that we otherwise manufacture, handle or own.
Liabilities to partners on account of their partnership interests and liabilities that are non-recourse to the partnership are not counted for purposes of determining whether a distribution is permitted. Public and investor sentiment towards climate change and other environmental, social and governance ("ESG") matters could adversely affect our cost of capital and the price of our common units.
Liabilities to partners on account of their partnership interests and liabilities that are non-recourse to the partnership are not counted for purposes of determining whether a distribution is permitted. Public and investor sentiment towards climate change and other sustainability matters could adversely affect our cost of capital and the price of our common units.
Our industry is highly regulated and monitored by various environmental regulatory authorities such as the EPA.
Our industry is highly regulated and monitored by various environmental regulatory authorities such as the Environmental Protection Agency (the "EPA").
OpCo depends upon Westlake for numerous services and for its labor force. Pursuant to the Services and Secondment Agreement, Westlake is obligated to provide OpCo operating services, utility access services and other key site services. Westlake provides the services of certain of its employees, who act as OpCo's agents in operating and maintaining OpCo's ethylene production facilities and other assets.
Pursuant to the Services and Secondment Agreement, Westlake is obligated to provide OpCo operating services, utility access services and other key site services. Westlake provides the services of certain of its employees, who act as OpCo's agents in operating and maintaining OpCo's ethylene production facilities and other assets.
Our ability to make payments on and refinance this debt will depend on our ability to generate cash in the future, which is subject to the same factors described above in connection with our ability to pay quarterly distributions to unitholders.
Our ability to make payments on and refinance this debt will depend on our ability to generate cash in the future, which is subject to the same factors described above in connection with our ability to pay quarterly distributions to unitholders. Cash that is used to service debt will be unavailable for distributions to our unitholders.
Business Operations Substantially all of OpCo's sales are generated at three facilities located at two sites. Any adverse developments at any of these facilities or sites could have a material adverse effect on our results of operations and therefore our ability to distribute cash to unitholders. OpCo's operations are subject to significant hazards and risks inherent in ethylene production operations.
Any adverse developments at any of these facilities or sites could have a material adverse effect on our results of operations and therefore our ability to distribute cash to unitholders. OpCo's operations are subject to significant hazards and risks inherent in ethylene production operations.
Cyber-attacks could include, but are not limited to, ransomware attacks, malicious software, attempts to gain unauthorized access to our systems or data or other electronic security breaches that could lead to disruptions in critical systems, unauthorized release, corruption or loss of data including protected information such as personal information of our employees, interruptions in communication, loss of our intellectual property or theft of our sensitive or proprietary technology, loss or damage to our data delivery systems, or other cybersecurity and infrastructure systems, including our property and equipment.
Cyber-attacks could include, but are not limited to, ransomware attacks, malicious software, attempts to gain unauthorized access to our systems or data or other electronic security breaches that could lead to disruptions in critical systems, unauthorized release, corruption or loss of data including protected information such as personal information of our employees, interruptions in communication, loss of our intellectual property or theft of our sensitive or proprietary technology, loss or damage to our data delivery systems, or other cybersecurity and infrastructure systems, including our property and equipment, diversion of management or work force attention, or increased costs required to prevent, respond to or mitigate the incident.
Any adverse developments at any of these facilities or sites could have a material adverse effect on our results of operations and therefore our ability to distribute cash to unitholders. • The amount of cash we have available for distribution to holders of our units depends primarily on our cash flow and not solely on profitability, which may prevent us from making cash distributions during periods when we record net income. • If we are unable to make acquisitions from Westlake or third parties on economically acceptable terms, our future growth would be limited, and any acquisitions we make may reduce, rather than increase, our cash generated from operations on a per unit basis. • Our operations and assets are subject to climate-related risks and uncertainties. • Our variable-rate debt exposes us to increases in interest rates, which could have a material impact on our financial position, results of operation and cash flows, and could reduce the price at which our common units trade. 8 Table of Contents Risks Relating to Our Partnership Structure Our General Partner • Westlake owns and controls our general partner, which has sole responsibility for conducting our business and managing our operations.
Any adverse developments at any of these facilities or sites could have a material adverse effect on our results of operations and therefore our ability to distribute cash to unitholders. • The amount of cash we have available for distribution to holders of our units depends primarily on our cash flow and not solely on profitability, which may prevent us from making cash distributions during periods when we record net income. • If we are unable to make acquisitions from Westlake or third parties on economically acceptable terms, our future growth would be limited, and any acquisitions we make may reduce, rather than increase, our cash generated from operations on a per unit basis. • Our operations and assets are subject to climate-related risks and uncertainties. • Our variable-rate debt exposes us to increases in interest rates, which could have a material impact on our financial position, results of operation and cash flows, and could reduce the price at which our common units trade. • The impact and effects of public health crises, pandemics and epidemics could materially adversely affect OpCo's business, financial condition and results of operations.
If OpCo is unable to renew the site lease agreements or if Westlake terminates one or both of the site lease agreements, OpCo may have to relocate Lake Charles Olefins and Calvert City Olefins, abandon the assets or sell the assets to Westlake, the result of which may have a material adverse effect on our business, results of operations and financial condition.
If OpCo is unable to renew the site lease agreements or if Westlake terminates one or both of the site lease agreements, OpCo may have to relocate Lake Charles Olefins and Calvert City Olefins, abandon the assets or sell the assets to Westlake, the result of which may have a material adverse effect on our business, results of operations and financial condition. 12 Table of Contents OpCo depends upon Westlake for numerous services and for its labor force.
Moreover, the costs of any contest between us and the IRS will result in a reduction in our cash available for distribution to our unitholders and thus will be borne indirectly by our unitholders. 25 Table of Contents If the IRS makes audit adjustments to our income tax returns, it (and some states) may assess and collect any taxes (including any applicable penalties and interest) resulting from such audit adjustments directly from us, in which case our cash available for distribution to our unitholders might be substantially reduced and our current and former unitholders may be required to indemnify us for any taxes (including any applicable penalties and interest) resulting from such audit adjustments that were paid on such unitholders behalf.
If the IRS makes audit adjustments to our income tax returns, it (and some states) may assess and collect any taxes (including any applicable penalties and interest) resulting from such audit adjustments directly from us, in which case our cash available for distribution to our unitholders might be substantially reduced and our current and former unitholders may be required to indemnify us for any taxes (including any applicable penalties and interest) resulting from such audit adjustments that were paid on such unitholders behalf.
These proposed amendments, among other things, would impose tougher emissions limits, additional leak detection and repair obligations, certain performance standards for the operation of flares at applicable facilities, and new fenceline air monitoring for several chemicals.
The proposed amendments were finalized on May 16, 2024 and became effective July 15, 2024. These amendments, among other things, impose tougher emissions limits, additional leak detection and repair obligations, certain performance standards for the operation of flares at applicable facilities, and new fenceline air monitoring for several chemicals.
If Westlake is not able to meet its minimum payment obligations to OpCo as a result of any one or more of these factors, our ability to make distributions to our unitholders would be reduced or eliminated.
As a result, Westlake's margins and cash flows could be negatively impacted during such period. If Westlake is not able to meet its minimum payment obligations to OpCo as a result of any one or more of these factors, our ability to make distributions to our unitholders would be reduced or eliminated.
The IRS may challenge this treatment, which could adversely affect the value of our common units. Because we cannot match transferors and transferees of common units, we have adopted certain methods for allocating depreciation and amortization deductions that may not conform to all aspects of existing Treasury Regulations.
Because we cannot match transferors and transferees of common units, we have adopted certain methods for allocating depreciation and amortization deductions that may not conform to all aspects of existing Treasury Regulations. A successful IRS challenge to the use of these methods could adversely affect the amount of tax benefits available to our unitholders.
Unitholders currently are unable to remove our general partner without its consent because our general partner and its affiliates own sufficient units to be able to prevent its removal.
If our unitholders are dissatisfied with the performance of our general partner, they currently cannot remove our general partner. Unitholders currently are unable to remove our general partner without its consent because our general partner and its affiliates own sufficient units to be able to prevent its removal.
If we consummate any future acquisitions, our capitalization and results of operations may change significantly, and unitholders will not have the opportunity to evaluate the economic, financial and other relevant information that we will consider in determining the application of our funds and other resources.
If we consummate any future acquisitions, our capitalization and results of operations may change significantly, and unitholders will not have the opportunity to evaluate the economic, financial and other relevant information that we will consider in determining the application of our funds and other resources. 14 Table of Contents Many of our assets have been in service for many years and require significant expenditures to maintain them.
A unitholder's share of our taxable income may be increased as a result of the IRS successfully contesting any of the U.S. federal income tax positions we take. • Tax-exempt entities and non-U.S. unitholders face unique tax issues from owning our common units that may result in adverse tax consequences to them. 9 Table of Contents Risks Inherent in Our Business Operational Relationship with Westlake We are substantially dependent on Westlake for our cash flows.
A unitholder's share of our taxable income may be increased as a result of the IRS successfully contesting any of the U.S. federal income tax positions we take. • Tax-exempt entities and non-U.S. unitholders face unique tax issues from owning our common units that may result in adverse tax consequences to them.
Cash that is used to service debt will be unavailable for distributions to our unitholders. 11 Table of Contents OpCo is subject to the credit risk of Westlake on a substantial majority of its revenues, and Westlake's leverage and creditworthiness could adversely affect our ability to make distributions to our unitholders.
OpCo is subject to the credit risk of Westlake on a substantial majority of its revenues, and Westlake's leverage and creditworthiness could adversely affect our ability to make distributions to our unitholders.
Many of our assets have been in service for many years and require significant expenditures to maintain them. As a result, our maintenance or repair costs may increase in the future. In addition, while we establish cash reserves in order to cover turnaround expenditures, the amounts we reserve may not be sufficient to fully cover such expenditures.
As a result, our maintenance or repair costs may increase in the future. In addition, while we establish cash reserves in order to cover turnaround expenditures, the amounts we reserve may not be sufficient to fully cover such expenditures. Many of the assets we use to produce ethylene are long-lived assets.
Pursuant to the terms of our partnership agreement, the doctrine of corporate opportunity, or any analogous doctrine, does not apply to our general partner or any of its affiliates, including its executive officers and directors and Westlake.
In addition, Westlake may compete with us for investment opportunities and may own an interest in entities that compete with us. Pursuant to the terms of our partnership agreement, the doctrine of corporate opportunity, or any analogous doctrine, does not apply to our general partner or any of its affiliates, including its executive officers and directors and Westlake.
Additionally, members of the investment community may screen companies such as ours for ESG disclosures and performance before investing in our common units.
As a result, we may continue to face increasing pressure regarding our sustainability disclosures and practices. Additionally, members of the investment community may screen companies such as ours for sustainability disclosures and performance before investing in our common units.
Although we cannot predict the outcome or timing of EPA's final rule amendments, the amendments as proposed would require us to incur further capital expenditures and increase operating costs. Our operations also produce greenhouse gas ("GHG") emissions, which have been the subject of increased scrutiny and regulation.
The amendments may require us to incur further capital expenditures and increase operating costs. 16 Table of Contents Our operations also produce greenhouse gas ("GHG") emissions, which have been the subject of increased scrutiny and regulation.
The EPA currently requires certain industrial facilities to report their GHG emissions and to obtain permits with stringent control requirements before constructing or modifying new facilities with significant criteria pollutant and GHG emissions.
The EPA currently requires certain industrial facilities to report their GHG emissions and to obtain permits with stringent control requirements before constructing or modifying new facilities with significant criteria pollutant and GHG emissions. As our chemical processing results in GHG emissions, these and other GHG laws and regulations could affect our costs of doing business.
In addition, because the amount realized includes a unitholder's share of our nonrecourse liabilities, if a unitholder sells its units, a unitholder may incur a tax liability in excess of the amount of cash received from the sale. 26 Table of Contents A substantial portion of the amount realized from a unitholder's sale of our units, whether or not representing gain, may be taxed as ordinary income to such unitholder due to potential recapture items, including depreciation recapture.
A substantial portion of the amount realized from a unitholder's sale of our units, whether or not representing gain, may be taxed as ordinary income to such unitholder due to potential recapture items, including depreciation recapture.
If OpCo were unable to reach agreement with Westlake on an extension or replacement of these agreements, then our ability to make distributions on our common units could be materially adversely affected and the value of our common units could decline. 12 Table of Contents OpCo has the right to use the real property underlying Lake Charles Olefins and Calvert City Olefins pursuant to two, 50-year site lease agreements with Westlake.
If OpCo were unable to reach agreement with Westlake on an extension or replacement of these agreements, then our ability to make distributions on our common units could be materially adversely affected and the value of our common units could decline.
A single-member conflicts committee would not have the benefit of discussion with, and input from, other independent directors. 20 Table of Contents Westlake and other affiliates of our general partner may compete with us.
A single-member conflicts committee would not have the benefit of discussion with, and input from, other independent directors. Westlake and other affiliates of our general partner may compete with us. Affiliates of our general partner, including Westlake, are not prohibited from engaging in other businesses or activities, including those that might be in direct competition with us.
Moreover, given the integration of OpCo's ethylene production facilities and Westlake's Lake Charles and Calvert City facilities, it may not be practical for us or for a third party to provide site services or labor for OpCo's ethylene production facilities separately. OpCo's ability to receive greater cash flows from increased production may be limited by the Ethylene Sales Agreement.
Moreover, given the integration of OpCo's ethylene production facilities and Westlake's Lake Charles and Calvert City facilities, it may not be practical for us or for a third party to provide site services or labor for OpCo's ethylene production facilities separately. Additionally, certain of Westlake's employees in North America are represented by labor unions and works councils.
The amount and timing of such reimbursements are determined by our general partner. • The impact and effects of public health crises, pandemics and epidemics could materially adversely affect OpCo's business, financial condition and results of operations. Business Operations • Substantially all of OpCo's sales are generated at three facilities located at two sites.
The amount and timing of such reimbursements are determined by our general partner. 7 Table of Contents Business Operations • Substantially all of OpCo's sales are generated at three facilities located at two sites.
All such potentially responsible parties (or any one of them, including us) may be required to bear all of such costs regardless of fault, legality of the original disposal or ownership of the disposal site. In addition, CERCLA and similar state laws could impose liability for damages to natural resources caused by contamination.
All such potentially responsible parties (or any one of them, including us) may be required to bear all of such costs regardless of fault, legality of the original disposal or ownership of the disposal site.
The ethylene sales price charged under the Ethylene Sales Agreement is designed to permit OpCo to cover the substantial majority of its operating costs, but not our public partnership and other OpCo costs, which reduce our net operating profit.
In addition, any acceleration of debt under Westlake's credit facility will constitute a default under some of Westlake's other debt, including the indentures governing its senior notes. 11 Table of Contents The ethylene sales price charged under the Ethylene Sales Agreement is designed to permit OpCo to cover the substantial majority of its operating costs, but not our public partnership, debt and other OpCo costs, which reduce our net operating profit.
It also could affect the amount of gain recognized from the sale of our common units, have a negative impact on the value of our common units or result in audit adjustments to our unitholders' tax returns without the benefit of additional deductions. 28 Table of Contents Our unitholders will likely be subject to state and local taxes and income tax return filing requirements in jurisdictions where they do not live as a result of investing in our common units.
It also could affect the amount of gain recognized from the sale of our common units, have a negative impact on the value of our common units or result in audit adjustments to our unitholders' tax returns without the benefit of additional deductions.
We use these technologies for internal and operational purposes, including data storage, processing, and transmission, as well as in our interactions with our business associates, such as customers and suppliers. 17 Table of Contents Information technology system failures, network disruptions and breaches of data security due to internal or external factors including cyber-attacks could have material adverse impacts on our business or cause disruptions to our operations.
Information technology system failures, network disruptions and breaches of data security due to internal or external factors including cyber-attacks could have material adverse impacts on our business or cause disruptions to our operations.
Ownership of Our Common Units • We may issue additional units without unitholder approval, which would dilute existing unitholder ownership interests. • The market price of our common units could be adversely affected by sales of substantial amounts of our common units in the public or private markets, including sales by Westlake or other large holders.
Ownership of Our Common Units • We may issue additional units without unitholder approval, which would dilute existing unitholder ownership interests. • The market price of our common units could be adversely affected by sales of substantial amounts of our common units in the public or private markets, including sales by Westlake or other large holders. 8 Table of Contents Tax Risks • Our tax treatment depends on our status as a partnership for U.S. federal income tax purposes, and not being subject to a material amount of entity-level taxation.
A reduction in demand for our common units may cause their trading price to decline. A terrorist attack or armed conflict could harm our business. Terrorist activities, anti-terrorist efforts and other armed conflicts involving the United States or other jurisdictions could adversely affect the United States and global economies and could prevent us from meeting financial and other obligations.
Terrorist activities, anti-terrorist efforts and other armed conflicts involving the United States or other jurisdictions could adversely affect the United States and global economies and could prevent us from meeting financial and other obligations.
At December 31, 2023, we had $399.7 million in principal amount of variable-rate debt outstanding, including $22.6 million outstanding under the OpCo Revolver and $377.1 million outstanding under the MLP Revolver. Each of the OpCo Revolver and the MLP Revolver have interest rates in-part based on SOFR at the time of any borrowing.
We are exposed to interest rate risk with respect to our outstanding debt, all of which is variable-rate debt. At December 31, 2024, we had $399.7 million in principal amount of variable-rate debt outstanding, including $22.6 million outstanding under the OpCo Revolver and $377.1 million outstanding under the MLP Revolver.
A suspension of Westlake's obligations under the Ethylene Sales Agreement, including during periods where OpCo's facilities are not operating due to scheduled or unscheduled maintenance or turnarounds, would reduce OpCo's revenues and cash flows, and could materially adversely affect our ability to make distributions to our unitholders.
A suspension of Westlake's obligations under the Ethylene Sales Agreement, including during periods where OpCo's facilities are not operating due to scheduled or unscheduled maintenance or turnarounds, would reduce OpCo's revenues and cash flows, and could materially adversely affect our ability to make distributions to our unitholders. 9 Table of Contents Westlake may be unable to generate enough cash flow from operations to meet its minimum obligations under the Ethylene Sales Agreement if its business is adversely impacted by competition, operational problems, international trade barriers, general adverse economic conditions or the inability to obtain feedstock.
For a transfer of interests in a publicly traded partnership that is effected through a broker on or after January 1, 2023, the obligation to withhold is imposed on the transferor's broker.
For a transfer of interests in a publicly traded partnership that is effected through a broker on or after January 1, 2023, the obligation to withhold is imposed on the transferor's broker. Current and prospective non-U.S. unitholders should consult their tax advisors regarding the impact of these rules on an investment in our common units.
If the IRS were to contest the U.S. federal income tax positions we take, it may adversely impact the market for our common units, and the costs of any such contest would reduce our cash available for distribution to our unitholders. The IRS may adopt positions that differ from the positions we take.
You are urged to consult with your own tax advisor with respect to the status of regulatory or administrative developments and proposals and their potential effect on your investment in our common units. 26 Table of Contents If the IRS were to contest the U.S. federal income tax positions we take, it may adversely impact the market for our common units, and the costs of any such contest would reduce our cash available for distribution to our unitholders.
For example, lower prices of crude oil could lead to a reduction in the cost advantage for natural gas liquids-based ethylene derivatives in North America, such as Westlake's, as compared to naphtha-based ethylene derivatives. As a result, Westlake's margins and cash flows could be negatively impacted during such period.
For example, lower prices of crude oil could lead to a reduction in the cost advantage for natural gas liquids-based ethylene derivatives in North America, such as Westlake's, as compared to naphtha-based ethylene derivatives. Additionally, Westlake operates internationally and could be adversely affected by trade barriers, tariffs and duties, or violations of international fair trade laws by global competitors.
Many of the assets we use to produce ethylene are long-lived assets. As a result, some of those assets have been in service for many decades. The age and condition of these assets could result in increased maintenance or repair expenditures.
As a result, some of those assets have been in service for many decades. The age and condition of these assets could result in increased maintenance or repair expenditures. In addition, while we establish certain cash reserves to cover our expected turnaround expenditures, the amounts we reserve may be insufficient to fully cover such expenditures.
Although we seek to take preventive action, our operations are inherently subject to accidental spills, discharges or other releases of hazardous substances that may make us liable to governmental entities or private parties. This may involve contamination associated with our current and former facilities, facilities to which we sent wastes or by-products for treatment or disposal and other contamination.
In addition, CERCLA and similar state laws could impose liability for damages to natural resources caused by contamination. 17 Table of Contents Although we seek to take preventive action, our operations are inherently subject to accidental spills, discharges or other releases of hazardous substances that may make us liable to governmental entities or private parties.
The reimbursement of expenses and payment of fees, if any, to our general partner and its affiliates reduce the amount of our earnings and, thereby, our ability to distribute cash to our unitholders. 13 Table of Contents The impact and effects of public health crises, pandemics and epidemics could materially adversely affect OpCo's business, financial condition and results of operations.
The reimbursement of expenses and payment of fees, if any, to our general partner and its affiliates reduce the amount of our earnings and, thereby, our ability to distribute cash to our unitholders. 13 Table of Contents Business Operations Substantially all of OpCo's sales are generated at three facilities located at two sites.
It may be necessary to resort to administrative or court proceedings to sustain some or all of the positions we take. A court may not agree with some or all of the positions we take. Any contest with the IRS may materially and adversely impact the market for our common units and the price at which they trade.
The IRS may adopt positions that differ from the positions we take. It may be necessary to resort to administrative or court proceedings to sustain some or all of the positions we take. A court may not agree with some or all of the positions we take.
Unitholders will have no right on an annual or ongoing basis to elect our general partner or its board of directors. The board of directors, including the independent directors, is chosen entirely by Westlake, as a result of it owning our general partner, and not by our unitholders.
The board of directors, including the independent directors, is chosen entirely by Westlake, as a result of it owning our general partner, and not by our unitholders. Unlike publicly-traded corporations, we do not conduct annual meetings of our unitholders to elect directors or conduct other matters routinely conducted at annual meetings of stockholders of corporations.
Members of the investment community are increasing their focus on ESG practices and disclosures by public companies, including practices and disclosures related to climate change and sustainability, D&I initiatives and heightened governance standards. In March 2022, the SEC proposed enhanced climate-change disclosure requirements. As a result, we may continue to face increasing pressure regarding our ESG disclosures and practices.
Members of the investment community are increasing their focus on sustainability practices and disclosures by public companies, including practices and disclosures related to climate change and sustainability, D&I initiatives and heightened governance standards. On March 6, 2024, the SEC adopted a new set of rules that require a wide range of climate-related disclosures, including material climate-related risks.
Public health crises, pandemics and epidemics, such as the COVID-19 pandemic, could materially adversely affect OpCo's business, financial condition and results of operations. Such events have resulted in and may again result in authorities implementing numerous measures to try to contain the disease, such as travel bans and restrictions, quarantines, shelter-in-place orders and shutdowns, among others.
Such events have resulted in and may again result in authorities implementing numerous measures to try to contain the disease, such as travel bans and restrictions, quarantines, shelter-in-place orders and shutdowns, among others. Such events have had and could again have widespread adverse impacts on the global economy, many of OpCo's facilities and its employees, customers and suppliers.
In addition, laws and regulations governing cybersecurity, data privacy, and the unauthorized disclosure of confidential or protected information pose increasingly complex compliance challenges, and failure to comply with these laws could result in penalties and legal liability.
In addition, laws and regulations governing cybersecurity, data privacy, and the unauthorized disclosure of confidential or protected information pose increasingly complex compliance challenges, and failure to comply with these laws could result in penalties and legal liability. 18 Table of Contents Our variable-rate debt exposes us to increases in interest rates, which could have a material impact on our financial position, results of operation and cash flows, and could reduce the price at which our common units trade.
Security holders and potential investors should carefully consider the following risk factors together with all of the other information included in this report.
Security holders and potential investors should carefully consider the following risk factors together with all of the other information included in this report. If any of the following risks were actually to occur, our business, financial condition, results of operations or cash flows could be materially adversely affected.
A unitholder whose units are the subject of a securities loan (e.g., a loan to a "short seller" to cover a short sale of units) may be considered to have disposed of those units.
If the IRS were to challenge our proration method, we may be required to change the allocation of items of income, gain, loss and deduction among our unitholders. 29 Table of Contents A unitholder whose units are the subject of a securities loan (e.g., a loan to a "short seller" to cover a short sale of units) may be considered to have disposed of those units.
As a result, significant increases in interest rates could have a material impact on our financial position, results of operations and cash flows. An increase in interest rates may also cause a corresponding decline in demand for equity securities in general, and in particular, for yield-based equity securities such as our common units.
An increase in interest rates may also cause a corresponding decline in demand for equity securities in general, and in particular, for yield-based equity securities such as our common units. A reduction in demand for our common units may cause their trading price to decline. A terrorist attack or armed conflict could harm our business.
Treasury Regulations allow a similar monthly simplifying convention, but such regulations do not specifically authorize all aspects of our proration method. If the IRS were to challenge our proration method, we may be required to change the allocation of items of income, gain, loss and deduction among our unitholders.
Treasury Regulations allow a similar monthly simplifying convention, but such regulations do not specifically authorize all aspects of our proration method.
Our production facilities process volatile and hazardous materials that subject us to operating risks that could adversely affect our operating results.
Any significant and unexpected increase in these expenditures could adversely affect our results of operations, financial position or cash flows, as well as our ability to pay cash distributions. Our production facilities process volatile and hazardous materials that subject us to operating risks that could adversely affect our operating results.
If any of the following risks were actually to occur, our business, financial condition, results of operations or cash flows could be materially adversely affected. 7 Table of Contents Risk Factor Summary Risks Inherent in Our Business Operational Relationship with Westlake • We are substantially dependent on Westlake for our cash flows.
Risk Factor Summary Risks Inherent in Our Business Operational Relationship with Westlake • We are substantially dependent on Westlake for our cash flows.
Westlake has publicly announced a GHG emissions reduction target for 2030 (which includes emissions from our operations), which is a 20% reduction in Westlake's scope 1 and scope 2 carbon dioxide equivalent emissions per ton of production by 2030 from a 2016 baseline.
We are subject to operational and financial risks and liabilities associated with the implementation of and efforts to achieve carbon emission reduction goals. Westlake has publicly announced a target 20% reduction in its Scope 1 and Scope 2 CO2 equivalent emissions intensity per ton of production by 2030 from a 2016 baseline.
This may create actual and potential conflicts of interest between us and affiliates of our general partner and result in less than favorable treatment of us and our unitholders.
This may create actual and potential conflicts of interest between us and affiliates of our general partner and result in less than favorable treatment of us and our unitholders. 21 Table of Contents Holders of our common units have limited voting rights and are not entitled to elect our general partner or its directors, which could reduce the price at which our common units trade.
Even if holders of our common units are dissatisfied, they cannot currently remove our general partner without its consent. If our unitholders are dissatisfied with the performance of our general partner, they currently cannot remove our general partner.
As a result of these limitations, the price at which the common units trade could be diminished because of the absence or reduction of a takeover premium in the trading price. Even if holders of our common units are dissatisfied, they cannot currently remove our general partner without its consent.
Westlake's obligations under the Ethylene Sales Agreement, the Feedstock Supply Agreement and the related Services and Secondment Agreement will become terminable by either party commencing December 31, 2026.
Westlake's obligations under the Ethylene Sales Agreement, the Feedstock Supply Agreement and the related Services and Secondment Agreement continue in effect until December 31, 2026, after which such agreements will extend on an annual basis unless and until terminated by either party upon at least 12 months' prior written notice.
Current and prospective non-U.S. unitholders should consult their tax advisors regarding the impact of these rules on an investment in our common units. 27 Table of Contents We treat each purchaser of our common units as having the same tax benefits without regard to the common units actually purchased.
We treat each purchaser of our common units as having the same tax benefits without regard to the common units actually purchased. The IRS may challenge this treatment, which could adversely affect the value of our common units.
The Board of Governors of the Federal Reserve System increased benchmark interest rates seven times in 2022, four times in 2023, and may further raise rates in future periods. Should interest rates increase significantly, the amount of cash required to service our debt would increase.
However, rates remain above the ten-year average and may rise in future periods. Should interest rates increase significantly, the amount of cash required to service our debt would increase. As a result, significant increases in interest rates could have a material impact on our financial position, results of operations and cash flows.
Removed
Westlake may be unable to generate enough cash flow from operations to meet its minimum obligations under the Ethylene Sales Agreement if its business is adversely impacted by competition, operational problems, general adverse economic conditions or the inability to obtain feedstock.
Added
Risks Inherent in Our Business Operational Relationship with Westlake We are substantially dependent on Westlake for our cash flows.

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Item 1C. Cybersecurity

Cybersecurity — threats and controls disclosure

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Biggest changeRisk Factors—Failure to adequately protect critical data and technology systems could materially affect our operations." 29 Table of Contents The board of directors has authorized and approved our entry into the Services and Secondment Agreement and the Omnibus Agreement with Westlake, and has thereby charged Westlake's Corporate Risk and Sustainability Committee with assisting the board of directors with its oversight of cybersecurity risks, which is a component of our overall enterprise risk management program.
Biggest changeRisk Factors—Failure to adequately protect critical data and technology systems could materially affect our operations." The board of directors has authorized and approved our entry into the Services and Secondment Agreement and the Omnibus Agreement with Westlake, and has thereby charged Westlake's Corporate Risk and Sustainability Committee with assisting the board of directors with its oversight of cybersecurity risks, which is a component of our overall enterprise risk management program.

Item 5. Market for Registrant's Common Equity

Market for Common Equity — stock, dividends, buybacks

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Biggest changeMarket for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities Our Partnership Interests Our common units are listed and traded on the New York Stock Exchange ("NYSE") under the symbol "WLKP." As of the close of business on February 21, 2024, based upon information received from our transfer agent, there were four holders of record of our common units.
Biggest changeMarket for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities Our Partnership Interests Our common units are listed and traded on the New York Stock Exchange ("NYSE") under the symbol "WLKP." As of the close of business on February 26, 2025, based upon information received from our transfer agent, there were five holders of record of our common units.
In determining operating surplus and capital surplus, we will only take into account our proportionate share of our consolidated subsidiaries that are not wholly owned, such as OpCo. 31 Table of Contents Minimum Quarterly Distribution On July 27, 2018, the partnership agreement was amended to revise the minimum quarterly distribution thresholds for the Partnership's incentive distribution rights.
In determining operating surplus and capital surplus, we will only take into account our proportionate share of our consolidated subsidiaries that are not wholly owned, such as OpCo. 33 Table of Contents Minimum Quarterly Distribution On July 27, 2018, the partnership agreement was amended to revise the minimum quarterly distribution thresholds for the Partnership's incentive distribution rights.
Unregistered Sales of Equity Securities We did not have any unregistered sales of equity securities during the quarter or fiscal year ended December 31, 2023 that we have not previously reported on a Quarterly Report on Form 10-Q or a Current Report on Form 8-K. Issuer Purchases of Equity Securities None. 32 Table of Contents
Unregistered Sales of Equity Securities We did not have any unregistered sales of equity securities during the quarter or fiscal year ended December 31, 2024 that we have not previously reported on a Quarterly Report on Form 10-Q or a Current Report on Form 8-K. Issuer Purchases of Equity Securities None. 34 Table of Contents

Item 7. Management's Discussion & Analysis

Management's Discussion & Analysis (MD&A) — revenue / margin commentary

55 edited+11 added−8 removed74 unchanged
Biggest changeThe increased EBITDA, as compared to the prior year, was primarily due to lower ethane feedstock and natural gas costs in 2023 as compared to 2022, partially offset by lower ethylene and co-products sales prices.
Biggest changeThe increased EBITDA, as compared to the prior year, was primarily due to higher third-party ethylene sales prices, lower ethane feedstock and natural gas costs and higher ethylene and co-products sales volumes in 2024 as compared to 2023, partially offset by lower ethylene sales prices to Westlake including the impact of the sale of excess quantities of ethylene at prices that excluded certain non-variable costs of production. 41 Table of Contents Cash Flows Operating Activities Operating activities provided cash of $485.0 million in 2024 as compared to cash provided by operating activities of $452.0 million in 2023.
Although Westlake has committed to purchasing minimum volumes from us under the Ethylene Sales Agreement, our results of operations are impacted by our ability to: • produce sufficient volumes of ethylene to meet our commitments under the Ethylene Sales Agreement or recover our estimated costs through the pricing provisions of the Ethylene Sales Agreement; • contract with third parties for the remaining uncommitted production capacity; • add or increase capacity at our existing production facilities, or add additional production capacity via organic expansion projects and acquisitions; and • achieve or exceed the specified yield factors for natural gas, ethane and other feedstock under the Ethylene Sales Agreement. 34 Table of Contents Operating Expenses, Maintenance Capital Expenditures and Turnaround Costs Our management seeks to maximize the profitability of our operations by effectively managing operating expenses, maintenance capital expenditures and turnaround costs.
Although Westlake has committed to purchasing minimum volumes from us under the Ethylene Sales Agreement, our results of operations are impacted by our ability to: • produce sufficient volumes of ethylene to meet our commitments under the Ethylene Sales Agreement or recover our estimated costs through the pricing provisions of the Ethylene Sales Agreement; • contract with third parties for the remaining uncommitted production capacity; • add or increase capacity at our existing production facilities, or add additional production capacity via organic expansion projects and acquisitions; and • achieve or exceed the specified yield factors for natural gas, ethane and other feedstock under the Ethylene Sales Agreement. 36 Table of Contents Operating Expenses, Maintenance Capital Expenditures and Turnaround Costs Our management seeks to maximize the profitability of our operations by effectively managing operating expenses, maintenance capital expenditures and turnaround costs.
The Shortfall is generally recognized during the period in which the related operating, maintenance or turnaround activities occur. 33 Table of Contents The Ethylene Sales Agreement provides that, if compliance with any law adopted or modified following our IPO results in OpCo incurring additional costs in excess of $500,000 in any contract year, OpCo is entitled to charge Westlake a monthly surcharge following efforts to mitigate the effects of such compliance.
The Shortfall is generally recognized during the period in which the related operating, maintenance or turnaround activities occur. 35 Table of Contents The Ethylene Sales Agreement provides that, if compliance with any law adopted or modified following our IPO results in OpCo incurring additional costs in excess of $500,000 in any contract year, OpCo is entitled to charge Westlake a monthly surcharge following efforts to mitigate the effects of such compliance.
At December 31, 2023, recorded goodwill was $5.8 million, all of which was associated with the acquisition of the Longview Pipeline as part of the past acquisition of Westlake's Longview production facilities. We perform our annual impairment assessment in the fourth quarter. We may elect to perform an optional qualitative assessment to determine whether a quantitative impairment analysis is required.
At December 31, 2024, recorded goodwill was $5.8 million, all of which was associated with the acquisition of the Longview Pipeline as part of the past acquisition of Westlake's Longview production facilities. We perform our annual impairment assessment in the fourth quarter. We may elect to perform an optional qualitative assessment to determine whether a quantitative impairment analysis is required.
The repayment of borrowings under the MLP Revolver is subject to acceleration upon the occurrence of an event of default. As of December 31, 2023, the outstanding borrowings under the MLP Revolver totaled $377.1 million and bore interest at SOFR plus the Applicable Margin and credit spread adjustment, which is accrued in arrears quarterly.
The repayment of borrowings under the MLP Revolver is subject to acceleration upon the occurrence of an event of default. As of December 31, 2024, the outstanding borrowings under the MLP Revolver totaled $377.1 million and bore interest at SOFR plus the Applicable Margin and credit spread adjustment, which is accrued in arrears quarterly.
Reconciliations for each of MLP distributable cash flow and EBITDA are included in the "—Results of Operations" section below. 35 Table of Contents Factors Affecting Our Business Supply and Demand for Ethylene and Resulting Co-products We generate a substantial majority of our revenue from the Ethylene Sales Agreement.
Reconciliations for each of MLP distributable cash flow and EBITDA are included in the "—Results of Operations" section below. 37 Table of Contents Factors Affecting Our Business Supply and Demand for Ethylene and Resulting Co-products We generate a substantial majority of our revenue from the Ethylene Sales Agreement.
The Partnership intends to use the net proceeds of sales of the common units, if any, for general partnership purposes, which may include the funding of potential drop-downs and other acquisitions. No common units had been issued under the ATM Program as of December 31, 2023 .
The Partnership intends to use the net proceeds of sales of the common units, if any, for general partnership purposes, which may include the funding of potential drop-downs and other acquisitions. No common units had been issued under the ATM Program as of December 31, 2024 .
Reconciliations for each of MLP distributable cash flow and EBITDA are included below. 37 Table of Contents Reconciliation of MLP Distributable Cash Flow to Net Income and Net Cash Provided by Operating Activities The following table presents reconciliations of MLP distributable cash flow to net income and net cash provided by operating activities, the most directly comparable GAAP financial measures, for each of the periods indicated.
Reconciliations for each of MLP distributable cash flow and EBITDA are included below. 39 Table of Contents Reconciliation of MLP Distributable Cash Flow to Net Income and Net Cash Provided by Operating Activities The following table presents reconciliations of MLP distributable cash flow to net income and net cash provided by operating activities, the most directly comparable GAAP financial measures, for each of the periods indicated.
Recent Accounting Pronouncements See Note 1 to the consolidated financial statements included in Item 8 of this form 10-K for a full description of recent accounting pronouncements, including expected dates of adoption and estimated effects on results of operations and financial condition, which is incorporated herein by reference. 43 Table of Contents
Recent Accounting Pronouncements See Note 1 to the consolidated financial statements included in Item 8 of this form 10-K for a full description of recent accounting pronouncements, including expected dates of adoption and estimated effects on results of operations and financial condition, which is incorporated herein by reference.
Changes in components of working capital, which we define for the purposes of this cash flow discussion as accounts receivable, net—Westlake, accounts receivable, net—third parties, inventories, prepaid expenses and other current assets less accounts payable—Westlake, accounts payable—third parties and accrued and other liabilities, provided cash of $34.4 million in 2023 as compared to $9.5 million of cash provided in 2022, resulting in a favorable change of $24.9 million.
Changes in components of working capital, which we define for the purposes of this cash flow discussion as accounts receivable, net—Westlake, accounts receivable, net—third parties, inventories, prepaid expenses and other current assets less accounts payable—Westlake, accounts payable—third parties and accrued and other liabilities, provided cash of $24.8 million in 2024 as compared to $34.4 million of cash provided in 2023, resulting in a unfavorable change of $9.6 million.
As described above, we, OpCo and Westlake are parties to an Investment Management Agreement that authorizes Westlake to invest the Partnership's and OpCo's excess cash with Westlake for durations of up to a maximum of nine months. The Partnership had $94.4 million of cash invested under the Investment Management Agreement at December 31, 2023.
As described above, we, OpCo and Westlake are parties to an Investment Management Agreement that authorizes Westlake to invest the Partnership's and OpCo's excess cash with Westlake for durations of up to a maximum of nine months. The Partnership had $134.6 million of cash invested under the Investment Management Agreement at December 31, 2024.
Purchase obligations include agreements to purchase goods and services that are enforceable and legally binding and that specify all significant terms, including a minimum quantity and price. As of December 31, 2023, we had $69.8 million of enforceable and legally binding purchase commitments due within the near term, and none due over the long-term period.
Purchase obligations include agreements to purchase goods and services that are enforceable and legally binding and that specify all significant terms, including a minimum quantity and price. As of December 31, 2024, we had $128.7 million of enforceable and legally binding purchase commitments due within the near term, and none due over the long-term period.
The $63.9 million increase in cash used for investing activities was mainly due to an increase in net cash invested under the Investment Management Agreement in 2023 as compared to 2022. During 2023, we invested $174.1 million with Westlake, and $145.0 million of such investments matured.
The $13.1 million increase in cash used for investing activities was mainly due to an increase in net cash invested under the Investment Management Agreement in 2024 as compared to 2023. During 2024, we invested $40.0 million with Westlake. During 2023, we invested $174.1 million with Westlake, and $145.0 million of such investments matured.
As of December 31, 2023, there was $1.6 million in operating lease obligations due within the near term and $3.1 million due over the long-term period related to noncancelable operating leases with respect to rail cars that are subleased to OpCo. Purchase Obligations.
As of December 31, 2024, there was $1.7 million in operating lease obligations due within the near term and $2.2 million due over the long-term period related to noncancelable operating leases with respect to rail cars that are subleased to OpCo. Purchase Obligations.
During 2023, all third-party ethylene and associated co-products sales generated 13.8% of our total revenues. Under the Services and Secondment Agreement, OpCo uses a portion of its production capacity to process purge gas for Westlake.
During 2024, all third-party ethylene and associated co-products sales generated 16.3% of our total revenues. Under the Services and Secondment Agreement, OpCo uses a portion of its production capacity to process purge gas for Westlake.
A detailed comparison of the Partnership's 2022 operating results to its 2021 operating results can be found in the Management's Discussion and Analysis of Financial Condition and Results of Operations section in the Partnership's 2022 Annual Report on Form 10-K filed March 1, 2023.
A detailed comparison of the Partnership's 2023 operating results to its 2022 operating results can be found in the Management's Discussion and Analysis of Financial Condition and Results of Operations section in the Partnership's 2023 Annual Report on Form 10-K filed February 28, 2024.
On January 22, 2024, the board of directors of Westlake Chemical Partners GP LLC, our general partner, approved a quarterly distribution of $0.4714 per unit payable on February 20, 2024 to unitholders of record as of February 2, 2024, which equates to approximately $16.6 million per quarter, or approximately $66.4 million per year in aggregate, based on the number of common units outstanding on December 31, 2023.
On January 27, 2025, the board of directors of Westlake Chemical Partners GP LLC, our general partner, approved a quarterly distribution of $0.4714 per unit payable on February 25, 2025 to unitholders of record as of February 7, 2025, which equates to a total amount of approximately $16.6 million per quarter, or approximately $66.4 million per year in aggregate, based on the number of common units outstanding on December 31, 2024.
Westlake's purchase price for ethylene purchased under the Ethylene Sales Agreement includes a component (adjusted annually) designed to cover, over the long term, substantially all of OpCo's turnaround expenditures. Our cash is generated from cash distributions from OpCo.
We commenced the planned maintenance turnaround in the first quarter of 2025. Westlake's purchase price for ethylene purchased under the Ethylene Sales Agreement includes a component (adjusted annually) designed to cover, over the long term, substantially all of OpCo's turnaround expenditures. Our cash is generated from cash distributions from OpCo.
On July 12, 2022, the Partnership entered into the Fourth Amendment (the "MLP Revolver Amendment") to the MLP Revolver. The MLP Revolver Amendment, among other things, extended the maturity date to July 12, 2027 and provided for the replacement of LIBOR with SOFR as the reference rate.
The MLP Revolver Amendment, among other things, extended the maturity date to July 12, 2027 and provided for the replacement of LIBOR with SOFR as the reference rate.
The cash outflows during 2022 were related to distributions of $337.6 million to the noncontrolling interest retained in OpCo by Westlake and of $66.4 million to unitholders by the Partnership.
The cash outflows during 2023 were related to distributions of $315.8 million to the noncontrolling interest retained in OpCo by Westlake and of $66.4 million to unitholders by the Partnership.
Financing Activities Net cash used for financing activities during 2023 was $382.2 million as compared to net cash used for financing activities of $404.0 million in 2022. The cash outflows during 2023 were related to distributions of $315.8 million to the noncontrolling interest retained in OpCo by Westlake and of $66.4 million to unitholders by the Partnership.
Financing Activities Net cash used for financing activities during 2024 was $396.3 million as compared to net cash used for financing activities of $382.2 million in 2023. The cash outflows during 2024 were related to distributions of $329.9 million to the noncontrolling interest retained in OpCo by Westlake and of $66.4 million to unitholders by the Partnership.
Year Ended December 31, 2023 2022 2021 (in thousands of dollars) Net cash provided by operating activities $ 451,999 $ 463,736 $ 408,439 Loss from disposition of property, plant and equipment (4,933) (4,707) (4,198) Changes in operating assets and liabilities and other (112,440) (124,200) (2,856) Net income 334,626 334,829 401,385 Add: Depreciation, amortization and disposition of property, plant and equipment 115,136 125,781 113,032 Less: Contribution to turnaround reserves (29,520) (29,175) (80,090) Maintenance capital expenditures (49,212) (45,249) (87,783) Distributable cash flow attributable to noncontrolling interest in OpCo (308,456) (310,316) (276,487) MLP distributable cash flow $ 62,574 $ 75,870 $ 70,057 Reconciliation of EBITDA to Net Income, Income from Operations and Net Cash Provided by Operating Activities The following table presents reconciliations of EBITDA to net income, income from operations and net cash provided by operating activities, the most directly comparable GAAP financial measures, for each of the periods indicated.
Year Ended December 31, 2024 2023 2022 (in thousands of dollars) Net cash provided by operating activities $ 485,001 $ 451,999 $ 463,736 Loss from disposition of property, plant and equipment (2,345) (4,933) (4,707) Changes in operating assets and liabilities and other (113,497) (112,440) (124,200) Net income 369,159 334,626 334,829 Add: Depreciation, amortization and disposition of property, plant and equipment 114,244 115,136 125,781 Less: Contribution to turnaround reserves (43,880) (29,520) (29,175) Maintenance capital expenditures (50,731) (49,212) (45,249) Distributable cash flow attributable to noncontrolling interest in OpCo (321,928) (308,456) (310,316) MLP distributable cash flow $ 66,864 $ 62,574 $ 75,870 Reconciliation of EBITDA to Net Income, Income from Operations and Net Cash Provided by Operating Activities The following table presents reconciliations of EBITDA to net income, income from operations and net cash provided by operating activities, the most directly comparable GAAP financial measures, for each of the periods indicated.
In addition, we have cash invested under the Investment Management Agreement and a revolving credit facility with Westlake available to supplement cash on hand, if needed, as described under "Indebtedness" below.
Cash and Cash Equivalents As of December 31, 2024, our cash and cash equivalents totaled $58.3 million. In addition, we have cash invested under the Investment Management Agreement and a revolving credit facility with Westlake available to supplement cash on hand, if needed, as described under "Indebtedness" below.
Debt Obligations and Interest Payments. As of December 31, 2023, we had $29.0 million of debt related interest expense due within the near term, and debt obligations of $399.7 million and related interest expense of $73.2 million due over the long-term period, respectively. All $399.7 million of our outstanding debt matures in 2027.
As of December 31, 2024, we had $25.8 million of debt related interest expense due within the near term, and debt obligations of $399.7 million and related interest expense of $39.4 million due over the long-term period, respectively. All $399.7 million of our outstanding debt matures in 2027.
Inherent in such estimates are certain key assumptions. We periodically update the estimates used in the preparation of the financial statements based on our latest assessment of the current and projected business and general economic environment. We believe the following to be our most critical accounting estimates required for the preparation of our financial statements. Long-Lived Assets.
Inherent in such estimates are certain key assumptions. We periodically update the estimates used in the preparation of the financial statements based on our latest assessment of the current and projected business and general economic environment.
We do not have a legal or contractual obligation to pay distributions on a quarterly basis or any other basis at our minimum quarterly distribution rate or any other rate. 40 Table of Contents Capital Expenditures Westlake has historically funded expansion capital expenditures related to Lake Charles Olefins and Calvert City Olefins.
We do not have a legal or contractual obligation to pay distributions on a quarterly basis or any other basis at our minimum quarterly distribution rate or any other rate. Capital Expenditures Westlake has historically funded expansion capital expenditures related to Lake Charles Olefins and Calvert City Olefins. No such funding was required by OpCo during 2024, 2023 or 2022.
The significant assumptions used in determining the fair value of the reporting unit using the market value methodology include the determination of appropriate market comparables and the estimated multiples of EBITDA a willing buyer is likely to pay. We elected to perform the quantitative assessment during 2023, and such assessment did not indicate impairment of the goodwill.
The significant assumptions used in determining the fair value of the reporting unit using the market value methodology include the determination of appropriate market comparables and the estimated multiples of EBITDA a willing buyer is likely to pay.
Year Ended December 31, 2023 2022 (in thousands of dollars, except unit amounts and per unit data) Net sales—Westlake $ 1,026,655 $ 1,342,910 Net co-products, ethylene and other sales—third parties 164,136 250,237 Total net sales 1,190,791 1,593,147 Gross profit 387,459 377,365 Selling, general and administrative expenses 29,751 29,678 Income from operations 357,708 347,687 Other income (expense) Interest expense—Westlake (26,501) (13,407) Other income, net 4,232 1,566 Income before income taxes 335,439 335,846 Provision for income taxes 813 1,017 Net income 334,626 334,829 Less: Net income attributable to noncontrolling interest in OpCo 280,343 270,656 Net income attributable to Westlake Chemical Partners LP and limited partners' interest in net income $ 54,283 $ 64,173 Net income per limited partner unit attributable to Westlake Chemical Partners LP (basic and diluted) Common units $ 1.54 $ 1.82 Weighted average limited partner units outstanding (basic and diluted) Common units—publicly and privately held 21,102,110 21,095,106 Common units—Westlake 14,122,230 14,122,230 MLP distributable cash flow (1) $ 62,574 $ 75,870 EBITDA (1) $ 472,143 $ 470,327 Year Ended December 31, 2023 2022 Average Sales Price Volume Average Sales Price Volume Net sales percentage change from prior-year period due to average sales price and volume -25.5 % +1.4 % +20.3% +21.8% Year Ended December 31, 2023 2022 Domestic US prices percentage change from prior-year period for fuel cost and feedstock Fuel cost (Natural Gas) -58.5 % +66.7 % Feedstock (Ethane) -48.8 % +55.8 % ______________________________ (1) See above for discussions on non-GAAP financial measures.
Year Ended December 31, 2024 2023 (in thousands of dollars, except unit amounts and per unit data) Net sales—Westlake $ 950,801 $ 1,026,655 Net co-products, ethylene and other sales—third parties 185,095 164,136 Total net sales 1,135,896 1,190,791 Gross profit 418,939 387,459 Selling, general and administrative expenses 28,495 29,751 Income from operations 390,444 357,708 Other income (expense) Interest expense—Westlake (25,701) (26,501) Other income, net 5,251 4,232 Income before income taxes 369,994 335,439 Provision for income taxes 835 813 Net income 369,159 334,626 Less: Net income attributable to noncontrolling interest in OpCo 306,767 280,343 Net income attributable to Westlake Chemical Partners LP and limited partners' interest in net income $ 62,392 $ 54,283 Net income per limited partner unit attributable to Westlake Chemical Partners LP (basic and diluted) Common units $ 1.77 $ 1.54 Weighted average limited partner units outstanding (basic and diluted) Common units—publicly and privately held 21,110,640 21,102,110 Common units—Westlake 14,122,230 14,122,230 MLP distributable cash flow (1) $ 66,864 $ 62,574 EBITDA (1) $ 507,594 $ 472,143 Year Ended December 31, 2024 2023 Average Sales Price Volume Average Sales Price Volume Net sales percentage change from prior-year period due to average sales price and volume -6.6 % +2.0 % -25.5 % +1.4% Year Ended December 31, 2024 2023 Domestic US prices percentage change from prior-year period for fuel cost and feedstock Fuel cost (Natural Gas) -17.3 % -58.5 % Feedstock (Ethane) -22.6 % -48.8 % ______________________________ (1) See above for discussions on non-GAAP financial measures.
Year Ended December 31, 2023 2022 2021 (in thousands of dollars) Net cash provided by operating activities $ 451,999 $ 463,736 $ 408,439 Loss from disposition of property, plant and equipment (4,933) (4,707) (4,198) Changes in operating assets and liabilities and other (112,440) (124,200) (2,856) Net income 334,626 334,829 401,385 Less: Other income, net 4,232 1,566 62 Interest expense—Westlake (26,501) (13,407) (8,816) Provision for income taxes (813) (1,017) (549) Income from operations 357,708 347,687 410,688 Add: Depreciation and amortization 110,203 121,074 108,814 Other income, net 4,232 1,566 62 EBITDA $ 472,143 $ 470,327 $ 519,564 38 Table of Contents Summary For the year ended December 31, 2023, net income was $334.6 million on net sales of $1,190.8 million.
Year Ended December 31, 2024 2023 2022 (in thousands of dollars) Net cash provided by operating activities $ 485,001 $ 451,999 $ 463,736 Loss from disposition of property, plant and equipment (2,345) (4,933) (4,707) Changes in operating assets and liabilities and other (113,497) (112,440) (124,200) Net income 369,159 334,626 334,829 Less: Other income, net 5,251 4,232 1,566 Interest expense—Westlake (25,701) (26,501) (13,407) Provision for income taxes (835) (813) (1,017) Income from operations 390,444 357,708 347,687 Add: Depreciation and amortization 111,899 110,203 121,074 Other income, net 5,251 4,232 1,566 EBITDA $ 507,594 $ 472,143 $ 470,327 40 Table of Contents Summary For the year ended December 31, 2024, net income was $369.2 million on net sales of $1,135.9 million.
Other income, net increased by $2.6 million to $4.2 million in 2023 from $1.6 million in 2022 primarily due to an increase in interest earned on the balance with Westlake under the Investment Management Agreement. Provision for Income Taxes. Provision for income taxes was $0.8 million in 2023 as compared to $1.0 million in 2022. MLP Distributable Cash Flow.
Other income, net increased by $1.1 million to $5.3 million in 2024 from $4.2 million in 2023 primarily due to an increase in interest earned on the balance with Westlake under the Investment Management Agreement due to a higher average amount of cash invested in 2024 as compared to 2023. Provision for Income Taxes.
During 2022, we invested $319.9 million with Westlake, and $362.0 million of such investments matured. Capital expenditures were $46.8 million in 2023 as compared to $54.1 million in 2022. Capital expenditures during 2023 and 2022 were related to projects to improve production capacity or reduce costs, maintenance and safety and environmental projects at our facilities.
Capital expenditures were $49.0 million in 2024 as compared to $46.8 million in 2023. Capital expenditures during 2024 and 2023 were related to projects to improve production capacity or reduce costs, maintenance and safety and environmental projects at our facilities.
This represents a decrease in net income of $0.2 million as compared to net income of $334.8 million on net sales of $1,593.1 million for the year ended December 31, 2022. Net income attributable to the Partnership in 2023 was $54.3 million as compared to $64.2 million in 2022, a decrease of $9.9 million.
This represents an increase in net income of $34.6 million as compared to net income of $334.6 million on net sales of $1,190.8 million for the year ended December 31, 2023. Net income attributable to the Partnership in 2024 was $62.4 million as compared to $54.3 million in 2023, an increase of $8.1 million.
Depreciation and amortization of these assets, including amortization of deferred turnaround costs, under the straight-line method over their estimated useful lives totaled $110.2 million, $121.1 million and $108.8 million in 2023, 2022 and 2021, respectively.
Depreciation and amortization of these assets, including amortization of deferred turnaround costs, under the straight-line method over their estimated useful lives totaled $111.9 million, $110.2 million and $121.1 million in 2024, 2023 and 2022, respectively. If the useful lives of the assets were found to be shorter than originally estimated, depreciation or amortization charges would be accelerated.
We capitalize the costs of major maintenance activities, or turnarounds, and amortize the costs over the period until the next planned turnaround of the affected facility. Operating expenses, maintenance capital expenditures and turnaround costs are built into the price per pound of ethylene charged to Westlake under the Ethylene Sales Agreement.
Operating expenses, maintenance capital expenditures and turnaround costs are built into the price per pound of ethylene charged to Westlake under the Ethylene Sales Agreement.
Goodwill is evaluated for impairment when events or changes in circumstances indicate the fair value of a reporting unit with goodwill has been reduced below its carrying value, and otherwise at least annually.
There were no derivative positions during the years ended December 31, 2024, 2023 and 2022. However, we may enter into derivative arrangements in the future. Goodwill. Goodwill is evaluated for impairment when events or changes in circumstances indicate the fair value of a reporting unit with goodwill has been reduced below its carrying value, and otherwise at least annually.
Key estimates related to long-lived assets include useful lives, recoverability of carrying values and existence of any retirement obligations. Such estimates could be significantly modified.
We believe the following to be our most critical accounting estimates required for the preparation of our financial statements. 44 Table of Contents Long-Lived Assets. Key estimates related to long-lived assets include useful lives, recoverability of carrying values and existence of any retirement obligations. Such estimates could be significantly modified.
Total costs deferred on turnarounds were $30.9 million, $6.7 million and $131.2 million in 2023, 2022 and 2021, respectively. Amortization of previously deferred turnaround costs was $25.4 million, $26.0 million and $16.5 million in 2023, 2022 and 2021, respectively. As of December 31, 2023, deferred turnaround costs, net of accumulated amortization, totaled $133.2 million.
Amortization of previously deferred turnaround costs was $25.1 million, $25.4 million and $26.0 million in 2024, 2023 and 2022, respectively. As of December 31, 2024, deferred turnaround costs, net of accumulated amortization, totaled $129.6 million.
The Partnership has conditional asset retirement obligations for the removal and disposal of hazardous materials and the remediation of the cause of any such release from certain of the Partnership's manufacturing facilities.
Business — Environmental" and in Note 16 to the consolidated financial statements included in Item 8 of this form 10-K. The Partnership has conditional asset retirement obligations for the removal and disposal of hazardous materials and the remediation of the cause of any such release from certain of the Partnership's manufacturing facilities.
We believe that cash generated from these sources will be sufficient to meet our short-term working capital requirements and long-term capital expenditure requirements and to make quarterly cash distributions. Westlake may also provide other direct and indirect financing to us from time to time, although it is not obligated to do so.
We believe that cash generated from these sources will be sufficient to meet our short-term working capital requirements and long-term capital expenditure requirements and to make quarterly cash distributions.
We expect that Westlake will loan additional cash to OpCo to fund its expansion capital expenditures in the future, but Westlake is under no obligation to do so. Cash and Cash Equivalents As of December 31, 2023, our cash and cash equivalents totaled $58.6 million.
Total capital expenditures for the years ended December 31, 2024, 2023 and 2022 were $49.0 million, $46.8 million, and $54.1 million, respectively. We expect that Westlake will loan additional cash to OpCo to fund its expansion capital expenditures in the future, but Westlake is under no obligation to do so.
Recent Development Calvert City Olefins Turnaround During May 2023, we performed our planned major maintenance activities, or turnaround, of OpCo's Calvert City Olefins production facility located at Westlake's Calvert City, Kentucky site. 36 Table of Contents Results of Operations The table below and descriptions that follow represent the consolidated results of operations of the Partnership for the years ended December 31, 2023 and 2022.
Recent Development Petro 1 Turnaround During the first quarter of 2025, we commenced our planned maintenance turnaround of the Petro 1 production facility. 38 Table of Contents Results of Operations The table below and descriptions that follow represent the consolidated results of operations of the Partnership for the years ended December 31, 2024 and 2023.
In order to fund non-annual turnaround expenditures, we cause OpCo to reserve an amount for turnaround costs during each twelve-month period designed to cover future turnaround activities. Each of OpCo's ethylene production facilities requires turnaround maintenance approximately every five years. By reserving additional cash annually, we intend to reduce the variability in OpCo's cash flow.
Each of OpCo's ethylene production facilities requires turnaround maintenance approximately every five to eight years. By reserving additional cash annually, we intend to reduce the variability in OpCo's cash flow.
The $11.7 million decrease in cash flows from operating activities was mainly due to cash used for the Calvert City Olefins turnaround activity and higher interest expense, which was partially offset by an increase in cash provided by working capital.
The $33.0 million increase in cash flows from operating activities was mainly due to higher income from operations, which was partially offset by a decrease in cash provided by working capital.
As of December 31, 2023, outstanding borrowings under the OpCo Revolver totaled $22.6 million and bore interest at SOFR plus the Applicable Margin and credit spread adjustment, which is accrued in arrears quarterly.
As of December 31, 2024, outstanding borrowings under the OpCo Revolver totaled $22.6 million and bore interest at SOFR plus the Applicable Margin and credit spread adjustment, which is accrued in arrears quarterly. 43 Table of Contents MLP Revolver In 2015, we entered into a senior, unsecured revolving credit agreement with an affiliate of Westlake, as amended in August and November 2017, March 2020 and July 2022 (the "MLP Revolver").
We intend to use the MLP Revolver to purchase additional limited partnership interests in OpCo in the future, in the event OpCo desires to sell such additional interests to us, for other acquisitions and for general partnership purposes. 41 Table of Contents Contractual Obligations and Commercial Commitments The Partnership's material cash requirements for contractual obligations and commercial commitments in the near term (next 12 months) and the long-term period (2025 and thereafter) include repayment of long-term debt, interest payments, operating leases and purchase obligations.
Contractual Obligations and Commercial Commitments The Partnership's material cash requirements for contractual obligations and commercial commitments in the near term (next 12 months) and the long-term period (2026 and thereafter) include repayment of long-term debt, interest payments, operating leases and purchase obligations. Debt Obligations and Interest Payments.
We accrue an expense when we determine that it is probable that a liability has been incurred and the amount is reasonably estimable. While we believe that the amounts recorded in the accompanying consolidated financial statements related to these contingencies are based on the best estimates and judgments available, the actual outcomes could differ from our estimates.
While we believe that the amounts recorded in the accompanying consolidated financial statements related to these contingencies are based on the best estimates and judgments available, the actual outcomes could differ from our estimates. Additional information about certain legal proceedings and environmental matters appears in "Item 1.
MLP Revolver In 2015, we entered into a senior, unsecured revolving credit agreement with an affiliate of Westlake, as amended in August and November 2017, March 2020 and July 2022 (the "MLP Revolver"). The MLP Revolver has a borrowing capacity of $600.0 million and is scheduled to mature on July 12, 2027.
The MLP Revolver has a borrowing capacity of $600.0 million and is scheduled to mature on July 12, 2027. On July 12, 2022, the Partnership entered into the Fourth Amendment (the "MLP Revolver Amendment") to the MLP Revolver.
The increased gross profit margin in 2023 was primarily due to lower ethane feedstock and natural gas costs in 2023 as compared to 2022. Selling, General and Administrative Expenses . Selling, general and administrative expenses remained relatively unchanged at $29.8 million in 2023 as compared to $29.7 million in 2022. Interest Expense—Westlake .
The gross profit margin was 36.9% in 2024 as compared to 32.5% in 2023. The increased gross profit margin in 2024 was primarily due to lower ethane feedstock and natural gas costs and higher third-party ethylene sales prices in 2024 as compared to 2023. Selling, General and Administrative Expenses .
These favorable changes were partially offset by an unfavorable change in net accounts receivable—Westlake due to fluctuating ethane feedstock costs and a smaller buyer deficiency fee and Shortfall collected in 2023 compared to 2022. 39 Table of Contents Investing Activities Net cash used for investing activities during 2023 was $75.9 million as compared to net cash used for investing activities of $12.0 million in 2022.
These unfavorable changes were partially offset by a favorable change in accounts receivable, net—third parties due to collection of a maintenance cost reimbursement and lower third party receivables at the end of 2024. Investing Activities Net cash used for investing activities during 2024 was $89.0 million as compared to net cash used for investing activities of $75.9 million in 2023.
Higher sales volumes in 2023 contributed to a 1.4% increase in net sales compared to 2022. Gross Profit . Gross profit was $387.5 million in 2023, as compared to gross profit of $377.4 million in 2022. The gross profit margin was 32.5% in 2023 as compared to 23.7% in 2022.
Lower average sales prices in 2024 contributed to a 6.6% decrease in net sales compared to 2023. Higher sales volumes in 2024 contributed to a 2.0% increase in net sales compared to 2023. Gross Profit . Gross profit was $418.9 million in 2024, as compared to gross profit of $387.5 million in 2023.
Income from operations for 2023 increased compared to 2022 due to lower ethane feedstock and natural gas costs, partially offset by lower ethylene and co-products sales prices.
Income from operations, net income and net income attributable to the Partnership for 2024 increased compared to 2023 due to higher third-party ethylene sales prices, lower ethane feedstock and natural gas costs and higher ethylene and co-products sales volumes, partially offset by lower ethylene sales prices to Westlake including the impact of the sale of excess quantities of ethylene at prices that excluded certain non-variable costs of production. 2024 Compared with 2023 Net Sales .
MLP distributable cash flow decreased by $13.3 million to $62.6 million in 2023 from $75.9 million in 2022. The decrease in MLP distributable cash flow was primarily a result of higher interest expense. EBITDA. EBITDA increased by $1.8 million to $472.1 million in 2023 from EBITDA of $470.3 million in 2022.
The increase in MLP distributable cash flow was primarily a result of higher net income, partially offset by higher reserves for future turnarounds. EBITDA. EBITDA increased by $35.5 million to $507.6 million in 2024 from EBITDA of $472.1 million in 2023.
The favorable change in working capital was mainly attributable to a favorable change in accounts receivable—third parties, accounts payable—third parties and accrued and other liabilities, primarily due to the timing of payment of accruals and the impact on accounts receivable of the Petro 2 turnaround activities in 2021, which impacted the changes in working capital during 2022.
The unfavorable change in working capital was mainly attributable to unfavorable changes in accrued and other liabilities and accounts payable—third parties primarily due to higher maintenance costs accrual at December 31, 2023 as compared to December 31, 2024.
If the useful lives of the assets were found to be shorter than originally estimated, depreciation or amortization charges would be accelerated. 42 Table of Contents We defer the costs of planned major maintenance activities, or turnarounds, and amortize the costs over the period until the next planned turnaround of the affected unit.
We defer the costs of planned major maintenance activities, or turnarounds, and amortize the costs over the period until the next planned turnaround of the affected unit. Total costs deferred on turnarounds were $21.5 million, $30.9 million and $6.7 million in 2024, 2023 and 2022, respectively.
Net income and net income attributable to the Partnership for 2023 decreased as compared to 2022 despite the higher income from operations due to higher interest expense. 2023 Compared with 2022 Net Sales . Net sales decreased by $402.3 million, or 25.3%, to $1,190.8 million in 2023 from $1,593.1 million in 2022.
Selling, general and administrative expenses decreased by $1.3 million , or 4.4%, to $28.5 million in 2024 from $29.8 million in 2023. The decrease in 2024, as compared to 2023, was mainly attributable to lower service costs. Interest Expense—Westlake . Interest expense remained relatively consistent at $25.7 million in 2024 compared to $26.5 million in 2023. Other Income, net.
Removed
Income from operations was $357.7 million for 2023, as compared to $347.7 million for 2022. Net sales for 2023 decreased by $402.3 million as compared to 2022 primarily due to lower ethylene and co-products sales prices in 2023 compared to 2022. Additionally, net sales in 2022 includes a buyer deficiency fee of $23.8 million.
Added
We capitalize the costs of major maintenance activities, or turnarounds, and amortize the costs over the period until the next planned turnaround of the affected facility. We commenced the next maintenance turnaround at Petro 1 in the first quarter of 2025.
Removed
The decrease in net sales in 2023 was primarily due to lower ethylene and co-products sales prices in 2023 as compared to 2022. Additionally, net sales in 2022 includes a buyer deficiency fee of $23.8 million. Lower average sales prices in 2023 contributed to a 25.5% decrease in net sales compared to 2022.
Added
Income from operations was $390.4 million for 2024, as compared to $357.7 million for 2023, an increase of $32.7 million .
Removed
Interest expense increased by $13.1 million to $26.5 million in 2023 from $13.4 million in 2022 due to a higher interest rate on debt owed to Westlake. Other Income, net.
Added
Net sales for 2024 decreased by $54.9 million as compared to 2023 primarily due to lower ethylene sales prices to Westlake in 2024 compared to 2023, including the impact of the sale of excess quantities of ethylene in 2024 at prices that excluded certain non-variable costs of production pursuant to the Ethylene Sales Agreement, partially offset by higher ethylene and co-products sales volumes and higher third-party ethylene sales prices.
Removed
Cash Flows Operating Activities Operating activities provided cash of $452.0 million in 2023 as compared to cash provided by operating activities of $463.7 million in 2022.
Added
Net sales decreased by $54.9 million, or 4.6%, to $1,135.9 million in 2024 from $1,190.8 million in 2023.
Removed
No such funding was required by OpCo during 2023, 2022 or 2021. Total capital expenditures for the years ended December 31, 2023, 2022 and 2021 were $46.8 million, $54.1 million, and $81.2 million, respectively.
Added
The decrease in net sales in 2024 was primarily due to lower ethylene sales prices to Westlake in 2024 as compared to 2023 including the impact of the sale of excess quantities of ethylene at prices that excluded certain non-variable costs of production, partially offset by higher ethylene and co-products sales volumes and higher third-party ethylene sales prices.
Removed
We settled all derivatives in 2020 and did not enter into any new derivative arrangements during 2021, 2022 or 2023; however, we may enter into derivative arrangements in the future. Goodwill impairment.
Added
Provision for income taxes remained consistent at $0.8 million in 2024 as compared to $0.8 million in 2023. MLP Distributable Cash Flow. MLP distributable cash flow increased by $4.3 million to $66.9 million in 2024 from $62.6 million in 2023.
Removed
Under the discounted cash flow methodology, even if the fair value of OpCo decreased by 10%, the carrying value of OpCo would not exceed its fair value. Environmental and Legal Obligations. We consult with various professionals to assist us in making estimates relating to environmental costs and legal proceedings.
Added
Westlake may also provide other direct and indirect financing to us from time to time, although it is not obligated to do so. 42 Table of Contents In order to fund non-annual turnaround expenditures, we cause OpCo to reserve an amount for turnaround costs during each twelve-month period designed to cover future turnaround activities.
Removed
Additional information about certain legal proceedings and environmental matters appears in "Item 1. Business — Environmental" and in Note 16 to the consolidated financial statements included in Item 8 of this form 10-K.
Added
Although we had previously planned to commence the next maintenance turnaround at the Petro 1 ethylene unit in the third quarter of 2024, we made the decision to defer the planned turnaround in order to maintain production and capitalize on higher average third-party ethylene sales prices during the third quarter of 2024.
Added
We intend to use the MLP Revolver to purchase additional limited partnership interests in OpCo in the future, in the event OpCo desires to sell such additional interests to us, for other acquisitions and for general partnership purposes.
Added
We elected to perform the qualitative assessment in the fourth quarter of 2024 and concluded that it is more likely than not that the fair value of the reporting unit exceeds the carrying amount and, as such, the quantitative impairment test was not required. 45 Table of Contents Environmental and Legal Obligations.
Added
We consult with various professionals to assist us in making estimates relating to environmental costs and legal proceedings. We accrue an expense when we determine that it is probable that a liability has been incurred and the amount is reasonably estimable.

Item 7A. Quantitative and Qualitative Disclosures About Market Risk

Market Risk — interest-rate, FX, commodity exposure

4 edited+0 added−0 removed6 unchanged
Biggest changeAll derivative positions were settled as of December 31, 2020 and we did not enter into any new derivative contracts during 2021, 2022 or 2023. Interest Rate Risk We are exposed to interest rate risk with respect to our outstanding debt, all of which is variable rate debt.
Biggest changeThere were no derivative positions during the years ended December 31, 2024, 2023 and 2022. Interest Rate Risk We are exposed to interest rate risk with respect to our outstanding debt, all of which is variable rate debt.
As of December 31, 2023, we had variable rate debt of $399.7 million outstanding, all of which was owed to wholly-owned subsidiaries of Westlake. On July 12, 2022, OpCo entered into the OpCo Revolver Amendment. The OpCo Revolver Amendment, among other things, provided for the replacement of LIBOR with SOFR as the reference rate.
As of December 31, 2024, we had variable rate debt of $399.7 million outstanding, all of which was owed to wholly-owned subsidiaries of Westlake. On July 12, 2022, OpCo entered into the OpCo Revolver Amendment. The OpCo Revolver Amendment, among other things, provided for the replacement of LIBOR with SOFR as the reference rate.
A hypothetical increase in our average interest rate on variable rate debt by 100 basis points would increase our annual interest expense by approximately $4.0 million, of which $3.8 million would relate to the MLP Revolver and $0.2 million would relate to the OpCo Revolver based on the December 31, 2023 debt balance. 44 Table of Contents
A hypothetical increase in our average interest rate on variable rate debt by 100 basis points would increase our annual interest expense by approximately $4.0 million, of which $3.8 million would relate to the MLP Revolver and $0.2 million would relate to the OpCo Revolver based on the December 31, 2024 debt balance. 46 Table of Contents
The Applicable Margin under the MLP Revolver varies between 1.75% and 2.75%, depending on the Partnership's Consolidated Leverage Ratio. The weighted average variable interest rate of our debt as of December 31, 2023 was 7.2%.
The Applicable Margin under the MLP Revolver varies between 1.75% and 2.75%, depending on the Partnership's Consolidated Leverage Ratio. The weighted average variable interest rate of our debt as of December 31, 2024 was 6.4%.

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