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Item 7. Management’s Discussion and Analysis

2021-03-02 compared with 2020-02-28 · 110 added, 67 removed, 272 unchanged (39% of the section changed)

21 unchanged sentences

The Ethylene Sales Agreement is a long-term, fee-based agreement with a minimum purchase commitment and includes variable pricing based on OpCo's actual feedstock and natural gas costs and estimated other costs of producing ethylene (including OpCo's estimated operating costs and a five-year average of OpCo's expected future maintenance capital expenditures and other turnaround expenditures based on OpCo's planned ethylene production capacity for the year), plus a fixed margin per pound of $0.10 less revenue from co-products sales.

Pursuant to the Ethylene Sales Agreement, Westlake's obligation to pay for the annual minimum commitment (95% of OpCo's budgeted ethylene production), which is measured at the end of the year, is generally not reduced for the first 45 days of a force majeure event, but is reduced for the portion of a force majeure event extending beyond the 45th day.

Pursuant to the Ethylene Sales Agreement, Westlake's obligation to pay for the annual minimum commitment (95% of OpCo's budgeted ethylene production), which is measured on an annual basis, is not reduced for the first 45 days of a force majeure event, but is reduced for the portion of a force majeure event extending beyond the 45th day.

In the event of a force majeure event, we recognize buyer deficiency fees representing fixed margin and unavoided operating and maintenance capital expenditures and maintenance expenses per pound of volume committed by Westlake during the force majeure event.

Payment for the buyer deficiency fee is scheduled to be received by the Partnership after the conclusion of the year.

Westlake has an option to take 95% of volumes in excess of the minimum commitment on an annual basis under the Ethylene Sales Agreement if we produce more than our planned production.

1 unchanged sentence

In addition, under the Ethylene Sales Agreement, if production costs billed to Westlake on an annual basis are less than 95% of the actual production costs incurred by OpCo during the contract year, OpCo is entitled to recover the shortfall in such production costs (proportionate to the volume sold to Westlake) in the subsequent year ("Shortfall").

The Shortfall is recognized during the period in which the related operating, maintenance or turnaround activities occur.

The Shortfall is generally recognized during the period in which the related operating, maintenance or turnaround activities occur.

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 matter.

We sell ethylene production in excess of volumes sold to Westlake, as well as all associated co-products resulting from the ethylene production, directly to third parties on either a spot or contract basis.

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Because the expenses other than feedstock costs and natural gas are based on forecasted amounts and remain a fixed component of the price per pound of ethylene sold under the Ethylene Sales Agreement for any given 12-month period, our ability to manage operating expenses, maintenance expenditures and turnaround cost may directly affect our profitability and cash flows.

The impact on profitability is partially mitigated by the fact that we recognize any Shortfall as revenue in the period such costs and expenses are incurred.

The impact on profitability is partially mitigated by the fact that we generally recognize any Shortfall as revenue in the period such costs and expenses are incurred.

We seek to manage our operating and maintenance expenses on our ethylene production facilities by scheduling maintenance and turnarounds over time to avoid significant variability in our operating margins and minimize the impact on our cash flows, without compromising our commitment to safety and environmental stewardship.

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We define EBITDA as net income before interest expense, income taxes, depreciation and amortization.

MLP distributable cash flow and EBITDA are non-GAAP supplemental financial measures that management and external users of our consolidated financial statements, such as industry analysts, investors, lenders and rating agencies, may use to assess:

our operating performance as compared to other publicly traded partnerships;

We use each of MLP distributable cash flow and EBITDA to analyze our performance.

our ability to incur and service debt and fund capital expenditures;

the viability of acquisitions and other capital expenditure projects and the returns on investment of various investment opportunities.

and the viability of acquisitions and other capital expenditure projects and the returns on investment of various investment opportunities.

MLP distributable cash flow is not a substitute for the GAAP measures of net income and net cash provided by operating activities.

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While we believe we have substantially mitigated our indirect exposure to commodity price fluctuations during the term of the Ethylene Sales Agreement through the minimum commitment and the cost-plus based pricing, our ability to execute our growth strategy in our areas of operation will depend, in part, on the demand for ethylene derivatives in the geographical areas served by our ethylene production facilities.

Significant Developments Affecting Industry Conditions and Our Business

COVID-19, Industry Conditions and Our Business

On March 11, 2020, the World Health Organization declared the ongoing coronavirus (COVID-19) outbreak a pandemic and recommended containment and mitigation measures worldwide.

The pandemic has resulted in widespread adverse impacts on the global economy and on our employees, customers and suppliers.

We did not experience significant disruptions to our business operations in the year ended December 31, 2020 and do not expect to experience significant disruptions to our business operations resulting from COVID-19, primarily due to the fact that 95% of our production is sold to Westlake on a take-or-pay contract.

Although the price of crude oil has partially recovered from its sudden collapse in early March 2020, due to the continuing impact of low crude oil prices and the addition of ethylene production capacity in recent months, prices for ethylene and co-products have remained weak and have also negatively impacted our plants' operating rates.

Crude oil prices have recovered somewhat since the second quarter of 2020.

Regardless, we may idle production and reduce operating rates if it is not economical for us to produce ethylene to sell to third parties.

Our first priority in our response to this crisis has been the health and safety of our operators, who are seconded to us by Westlake, and those of our customers and vendors.

Westlake has implemented preventative measures and developed corporate and regional response plans to minimize unnecessary risk of exposure.

We and Westlake have modified certain business practices (including those related to employee travel, employee work locations and employee work practices) to conform to government restrictions and best practices encouraged by the Center for Disease Control and Prevention, the World Health Organization and other governmental and regulatory authorities.

We and Westlake have implemented strategies to reduce costs, increase operational efficiencies and lower capital spending.

We have also deferred the planned turnaround at OpCo's Petro 2 ethylene unit and associated maintenance cost into the second half of 2021.

The turnaround is expected to last approximately 60 days.

Impact of Hurricanes Laura and Delta

On August 27, 2020, Hurricane Laura made landfall in Louisiana as a Category 4 storm, which resulted in widespread damage to property and infrastructure in the greater Lake Charles area, including the electricity transmission system.

On October 9, 2020, Hurricane Delta made landfall as a Category 2 storm in the same general vicinity of Louisiana.

As a precautionary measure, OpCo idled its units in the Lake Charles area, Petro 1 and Petro 2, in advance of each storm.

As a result of the storms and certain pre-existing issues discovered during start-up following Hurricanes Laura and Delta, Petro 1 and Petro 2 remained completely shut down for a significant period of time in the months of August, September and October 2020 and returned to more routine operations by the beginning of November 2020.

In connection with these outages and pursuant to the Ethylene Sales Agreement, OpCo provided notices of force majeure events to Westlake.

Under the Ethylene Sales Agreement, Westlake's obligation to pay for the annual minimum commitment (95% of OpCo's budgeted ethylene production) is not reduced for the first 45 days of a force majeure event.

As a result of the force majeure events due to Hurricanes Laura and Delta, we recognized a buyer deficiency fee of $69.6 million as a component of net sales in 2020, representing fixed margin and unavoided operating and maintenance capital expenditures and maintenance expenses per pound of volume committed by Westlake during the force majeure events.

Payment for the buyer deficiency fee was received in January 2021.

February Weather Event

In February 2021, large parts of the southern United States, including Louisiana and Kentucky, experienced extreme winter weather.

Due to the extreme weather, OpCo's ethylene production facilities in the region experienced disruption to their operations, resulting in lost production and additional maintenance costs.

OpCo has declared force majeure under the Ethylene Supply Agreement and expects to recognize a buyer deficiency fee in 2021.

Results of Operations

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Year Ended December 31,

2020 2019 2018

(in thousands of dollars, except unit amounts and per unit data)

2 unchanged sentences

Total net sales 966,670 1,091,871 1,285,622

Gross profit 378,883 379,428 377,159

Selling, general and administrative expenses 25,895 29,278 27,590

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Provision for income taxes 564 728 22

Net income $ 341,119 $ 332,895 $ 330,571

Net income attributable to noncontrolling interest in OpCo 274,952 271,914 281,224

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Partners LP and limited partners' interest in net income

$ 66,167 $ 60,981 $ 49,347

Net income attributable to Westlake Chemical Partners LP

per limited partner unit (basic and diluted)

Subordinated units

Common units $ 1.88 $ 1.77 $ 1.51

Weighted average limited partner units outstanding

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Common units—Westlake 14,122,230 14,122,230 14,122,230

Subordinated units—Westlake

MLP distributable cash flow (1)

$ 71,983 $ 73,181 $ 60,024

$ 456,875 $ 460,566 $ 460,868

Year Ended December 31,

Average Sales

Price Volume Average Sales

Product sales price and volume percentage change

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Year Ended December 31,

2020 2019 2018

Average industry prices (2)

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17.5 18.5 19.0

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(1) See "Item 6.

Selected Financial Data", for discussions on non-GAAP financial measures.

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(3) Represents average North American spot prices of ethylene over the period as reported by IHS.

For the year ended December 31, 2019 , net income was $332.9 million on net sales of $1,091.9 million , which was comparable to net income of $330.6 million on net sales of $1,285.6 million for the year ended December 31, 2018.

Net income attributable to the Partnership in 2019 was $61.0 million as compared to $49.3 million in 2018 , an increase of $11.7 million , which was primarily due to a 4.5% increase in the Partnership's interest in OpCo, effective as of January 1, 2019, and higher third party sales margins.

Net sales for 2019 decreased by $193.7 million as compared to 2018 mainly due to decreased sales prices to Westlake per the terms of the Ethylene Sales Agreement.

Income from operations was $350.2 million for 2019 , which was comparable to $349.6 million for 2018 .

For the year ended December 31, 2020, net income was $341.1 million on net sales of $966.7 million.

This represents an increase in net income of $8.2 million as compared to net income of $332.9 million on net sales of $1,091.9 million for the year ended December 31, 2019.

Net income attributable to the Partnership in 2020 was $66.2 million as compared to $61.0 million in 2019, an increase of $5.2 million, which was primarily due to the higher sales price for ethylene sold to Westlake per the terms of the Ethylene Sales Agreement, the buyer deficiency fee of $69.6 million recognized in 2020 as a result of the force majeure events at the Petro 1 and Petro 2 units and lower interest expense, partially offset by lower sales to third parties, lower sales volumes to Westlake due to the force majeure events and increased maintenance expense.

Net sales for 2020 decreased by $125.2 million as compared to 2019 mainly due to lower sales to third parties and lower sales volumes to Westlake due to the force majeure events, partially offset by higher sales prices to Westlake per the terms of the Ethylene Sales Agreement and the buyer deficiency fee recognized during the year ended December 31, 2020.

Income from operations was $353.0 million for 2020, as compared to $350.2 million for 2019.

Income from operations for the year ended December 31, 2020 increased mainly as a result of the higher sales price for ethylene sold to Westlake, and the buyer deficiency fee recognized during the year, partially offset by increased maintenance expense and lower sales volumes to third parties and to Westlake, as compared to the year ended December 31, 2019.

2020 Compared with 2019

Net sales decreased by $125.2 million, or 11.5%, to $966.7 million in 2020 from $1,091.9 million in 2019.

The decrease in net sales in 2020 was primarily due to lower production during the year, mainly due to the force majeure events and lower sales prices to third parties, partially offset by the buyer deficiency fee of $69.6 million recognized in 2020 and higher sales price to Westlake per the terms of the Ethylene Sales Agreement in 2020.

The lower sales volume during 2020 contributed to a decrease in net sales of 18.6% for the year ended December 31, 2020 compared to the year ended December 31, 2019.

The decrease in sales volume during 2020 was primarily due to the force majeure events at our Lake Charles Petro 1 and Petro 2 units.

The average sales price in 2020 contributed to a 0.8% increase in net sales, compared to 2019, which was mainly due to higher sales prices to Westlake per the terms of the Ethylene Sales Agreement, partially offset by lower third party sales prices.

Gross Profit .

Gross profit was $378.9 million in 2020, as compared to gross profit of $379.4 million in 2019.

The gross profit margin was 39.2% in 2020 as compared to 34.7% in 2019.

The increased 2020 gross profit margin was due to higher earnings on ethylene sold to Westlake and the buyer deficiency fee of $69.6 million recognized during the year, partially offset by lower sales volumes resulting from lower production at the Lake Charles Petro I and Petro 2 units compared to 2019.

Selling, General and Administrative Expenses .

Selling, general and administrative expenses decreased by $3.4 million, or 11.6%, to $25.9 million in 2020 from $29.3 million in 2019.

The decrease in 2020, as compared to 2019, was mainly attributable to lower service cost.

Interest Expense .

Interest expense decreased by $7.6 million to $12.0 million in 2020 from $19.6 million in 2019, largely due to a lower interest rate on debt as a result of a decrease in the London Interbank Offered Rate ("LIBOR").

Other Income, net.

Other income, net decreased by $2.4 million to $0.7 million in 2020 from $3.1 million in 2019, primarily due to a decrease in interest income earned under the Investment Management Agreement as a result of lower average interest rates.

Provision for Income Taxes.

Provision for income taxes was $0.6 million in 2020 as compared to $0.7 million in 2019.

MLP Distributable Cash Flow.

MLP distributable cash flow decreased by $1.2 million to $72.0 million in 2020 from $73.2 million in 2019.

The decrease in MLP distributable cash flow was primarily a result of lower production, increased turnaround reserves and higher maintenance expense, partially offset by the buyer deficiency of $69.6 million recognized in 2020 and lower interest expense during the year.

EBITDA decreased by $3.7 million to $456.9 million in 2020 from 2019 EBITDA of $460.6 million.

The decreased EBITDA, as compared to the prior year, was primarily due to lower sales volumes as a result of lower production and higher maintenance expense, partially offset by the buyer deficiency fee of $69.6 million recognized during 2020 and lower selling, general and administrative expenses.

2019 Compared with 2018

Net sales decreased by $193.7 million, or 15.1%, to $1,091.9 million in 2019 from $1,285.6 million in 2018, primarily due to lower ethylene sales prices to Westlake per the terms of the Ethylene Sales Agreement.

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Gross Profit .

Gross profit was $379.4 million in 2019 , which was comparab le to gross profit of $377.2 million in 2018 .

Gross profit was $379.4 million in 2019 as compared to gross profit of $377.2 million in 2018.

The gross profit margin was 34.7% in 2019 as compared to 29.3% in 2018.

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Interest Expense .

Interest expense decreased by $1.8 million to $19.6 million in 2019 from $21.4 million in 2018 , largely due to a lower average debt balance resulting from the partial repayment of borrowings under the OpCo Revolver in April 2019 and a decrease in the applicable margin on the OpCo Revolver from 3% to 2% effective September 25, 2018, partially offset by a higher interest rate on debt due to an increase in the London Interbank Offered Rate ("LIBOR") in 2019 .

Interest expense decreased by $1.8 million to $19.6 million in 2019 from $21.4 million in 2018, largely due to a lower average debt balance resulting from the partial repayment of borrowings under the OpCo Revolver in April 2019 and a decrease in the applicable margin on the OpCo Revolver from 3% to 2% effective September 25, 2018, partially offset by a higher interest rate on debt due to an increase in LIBOR in 2019.

Other Income, net.

Other income, net increase d by $0.6 million in 2019 , as compared to 2018 , primarily due to an increase in interest income earned under the Investment Management Agreement.

Other income, net increased by $0.6 million in 2019 to $2.5 million, as compared to 2018, primarily due to an increase in interest income earned under the Investment Management Agreement.

Provision for Income Taxes.

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EBITDA for 2019 was $460.6 million, which was comparable to 2018 EBITDA of $460.9 million.

2018 Compared with 2017

Net sales increased by $112.6 million, or 9.6%, to $1,285.6 million in 2018 from $1,173.0 million in 2017, primarily due to higher sales volumes to Westlake and third parties, higher ethylene sales prices to Westlake and higher pipeline services fee income, partially offset by lower third party ethylene sales prices.

The overall increase in sales volumes for 2018 contributed to a 3.6% increase in net sales, as compared to 2017, which was mainly due to higher sales volumes to Westlake and third parties and higher pipeline services fees income.

The average sales price contributed to an increase in net sales by 6.0% in 2018 compared to 2017, primarily as a result of higher sales prices to Westlake per the terms of the Ethylene Sales Agreement, partially offset by lower third party ethylene sales prices.

Gross Profit .

Gross profit decreased to $377.2 million in 2018 from $403.7 million in 2017.

The gross profit margin was 29.3% in 2018 as compared to 34.4% in 2017.

The 2018 gross profit margin was lower mainly due to lower third party ethylene sales prices and higher feedstock costs, partially offset by overall higher sales volumes to Westlake and third parties as a result of higher overall production at OpCo's facilities and higher pipeline services fee income, as compared to 2017.

Selling, General and Administrative Expenses .

Selling, general and administrative expenses decreased by $1.7 million, or 5.8%, to $27.6 million in 2018 from $29.3 million in 2017.

The decrease was mainly attributable to lower service costs, partially offset by an increase in professional consulting fees in 2018, as compared to 2017.

Interest Expense .

Interest expense decreased by $0.5 million to $21.4 million in 2018 from $21.9 million in 2017, largely due to a lower average debt balance in 2018, mostly offset by a higher interest rate on debt due to an increase in the London Interbank Offered Rate ("LIBOR") in 2018.

The lower debt balance was due to the partial repayment of borrowings under the OpCo Revolver and full repayment of the August 2013 Promissory Notes during the third quarter of 2017.

Other Income.

The increase in other income in 2018 as compared to 2017 was primarily due to the interest income related to the investment management agreement entered into in August 2017 between the Partnership, OpCo and Westlake that authorized Westlake to invest the Partnership's and OpCo's excess cash with Westlake ("Investment Management Agreement").

Provision for Income Taxes.

Provision for income taxes decreased to $0.02 million in 2018 as compared to $1.3 million in 2017.

The decrease was mainly attributable to the revaluation of state deferred income tax liability as a result of a decrease in state tax apportionment.

MLP Distributable Cash Flow.

MLP distributable cash flow increased by $5.3 million to $60.0 million in 2018 from $54.7 million in 2017.

The increase in MLP distributable cash flow as compared to 2017 was primarily due to the 5% increase in the Partnership's interest in OpCo, effective as of July 1, 2017, an increase in overall production at OpCo's facilities, lower maintenance capital expenditures and the elimination of the Partnership's distributions to Westlake as the holder of the Partnership's incentive distribution rights per the July 2018 amendment to the Partnership's target distribution tiers, partially offset by lower margins on third party sales.

EBITDA decreased by $29.3 million to $460.9 million in 2018 from $490.2 million in 2017.

The decrease in EBITDA, as compared to 2017, was primarily due to lower third party ethylene sales prices, partially offset by higher sales volumes as a result of higher overall production at OpCo's facilities.

Operating Activities

Operating activities provided cash of $450.8 million in 2019 compared to cash provided of $436.2 million in 2018 .

Operating activities provided cash of $373.4 million in 2020 as compared to cash provided by operating activities of $450.8 million in 2019.

The $77.4 million decrease in cash flows from operating activities was mainly due to an increase in use of cash in working capital during 2020 as compared to 2019.

Changes in components of working capital, which we define for the purposes of this cash flow discussion as accounts receivable—Westlake, accounts receivable, net—third parties, inventories, prepaid expenses and other current assets less accounts payable and accrued liabilities and other liabilities, used cash of $67.9 million in 2020 as compared to $11.7 million of cash provided in 2019, resulting in an overall unfavorable change of $79.6 million.

This change was due to an unfavorable change in Westlake accounts receivable in 2020 as compared to 2019, primarily due to the buyer deficiency fee recognized in 2020.

Operating activities provided cash of $450.8 million in 2019 as compared to cash provided of $436.2 million in 2018.

The $14.6 million increase in cash flows from operating activities was mainly due to a decrease in use of cash in working capital during 2019 as compared to 2018.

Changes in components of working capital, which we define for the purposes of this cash flow discussion as accounts receivable—Westlake, accounts receivable, net—third parties, inventories, prepaid expenses and other current assets less accounts payable—Westlake, accounts payable—third parties and accrued liabilities, provided cash of $11.7 million in 2019 as compared to $4.3 million of cash used in 2018 , resulting in an overall favorable change of $16.0 million .

Changes in components of working capital provided cash of $11.7 million in 2019 as compared to $4.3 million of cash used in 2018, resulting in an overall favorable change of $16.0 million.

This change was due to a favorable change in third party and Westlake accounts receivable, accounts payable and accrued liabilities in 2019 as compared to 2018, primarily resulting from lower ethylene sales prices and feedstock costs.

Operating activities provided cash of $436.2 million in 2018 compared to cash provided of $537.4 million in 2017.

The $101.2 million decrease in cash flows from operating activities was mainly due to lower operating income and an increase in use of cash in working capital during 2018 as compared to 2017.

Changes in components of working capital, which we define for the purposes of this cash flow discussion as accounts receivable—Westlake, accounts receivable, net—third parties, inventories, prepaid expenses and other current assets less accounts payable—Westlake, accounts payable—third parties and accrued liabilities, used cash of $4.3 million in 2018 as compared to $78.3 million of cash provided in 2017, resulting in an overall unfavorable change of $82.6 million.

This change was primarily due to the unfavorable change in the Westlake accounts receivable balance in 2018 as compared to 2017.

The unfavorable change was primarily due to the recovery of the Shortfall and a buyer deficiency fee in 2017 that were recognized in 2016 as accounts receivable from Westlake.

Investing Activities

Net cash provided by investing activities during 2020 was $2.0 million as compared to net cash used for investing activities of $57.7 million in 2019, mainly due to maturities of investments under the Investment Management Agreement and a decrease in additions to property, plant and equipment in 2020, as compared to 2019.

During 2020, we invested $349.0 million with Westlake, and $388.0 million of such investments matured.

Capital expenditures were $37.0 million in 2020 as compared to $43.7 million in 2019.

Capital expenditures during 2020 and 2019 were primarily related to projects to improve production capacity or reduce costs, maintenance and safety and environmental projects at our facilities.

Net cash used for investing activities during 2019 was $57.7 million as compared to net cash used for investing activities of $51.8 million in 2018, mainly due to increased net cash used under the Investment Management Agreement in 2019, as compared to 2018.

During 2019, we invested $529.4 million with Westlake, and $515.4 million of such investments matured.

Capital expenditures were $43.7 million in 2019 compared to $39.9 million in 2018 .

Capital expenditures were $43.7 million in 2019 as compared to $39.9 million in 2018.

Capital expenditures during 2019 and 2018 were primarily related to projects to improve production capacity or reduce costs, maintenance and safety and environmental projects at OpCo's facilities.

Net cash used for investing activities during 2018 was $51.8 million as compared to net cash used for investing activities of $203.2 million in 2017, mainly due to lower net cash invested with Westlake under the Investment Management Agreement and lower capital expenditures in 2018, as compared to 2017.

During 2018, we invested $384.0 million with Westlake and maturities of such investments were $372.1 million.

Capital expenditures were $39.9 million in 2018 compared to $68.9 million in 2017.

Capital expenditures during 2018 were primarily related to planned and unplanned outages at our facilities while those in 2017 primarily reflected capital expenditures incurred for the Calvert City expansion project.

Financing Activities

Net cash used for financing activities during 2020 was $378.2 million as compared to net cash used for financing activities of $392.9 million in 2019.

The cash inflows during 2019 were a result of borrowings under the MLP Revolver of $123.5 million and net proceeds from the private placement of common units of approximately $62.7 million .

The outflows during 2019 were related to partial repayments of borrowings under the OpCo Revolver of $201.4 million and the distribution of $315.6 million to Westlake and of $62.1 million to other unitholders by the Partnership.

The cash outflows during 2020 were related to distributions of $311.8 million to Westlake and of $66.4 million to other unitholders by the Partnership.

Net cash used for financing activities during 2019 was $392.9 million as compared to net cash used for financing activities of $391.6 million in 2018.

The cash outflows during 2018 were related to the distribution of $341.9 million to Westlake and of $53.4 million to other unitholders by the Partnership.

The distributions in 2018 were partially offset by borrowings under the OpCo Revolver of $3.6 million.

The cash inflows during 2019 were a result of borrowings under the MLP Revolver of $123.5 million and net proceeds from the private placement of common units of approximately $62.7 million.

The cash outflows during 2019 were related to partial repayments of borrowings under the OpCo Revolver of $201.4 million and the distribution of $315.6 million to Westlake and of $62.1 million to other unitholders by the Partnership.

Liquidity and Capital Resources

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Westlake may also provide other direct and indirect financing to us from time to time, although it is not required to do so.

In order to fund non-annual turnaround expenditures, we cause OpCo to reserve approximately $30.0 million during each twelve-month period for turnaround activities.

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 for turnaround activities in future years.

Each of OpCo's ethylene production facilities requires turnaround maintenance approximately every five years.

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OpCo is a restricted subsidiary under certain indentures governing Westlake's senior notes.

The indentures governing Westlake's senior notes prevent OpCo from making distributions to us if any default or event of default (as defined in the indentures) exists.

Westlake's credit facility does not prevent OpCo from making distributions to us.

These restrictions limit OpCo's ability to incur additional debt, among other things.

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 a term of up to a maximum of nine months.

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Westlake has historically funded expansion capital expenditures related to Lake Charles Olefins and Calvert City Olefins.

During the year ended December 31, 2018 , Westlake loaned OpCo $3.6 million to fund capital expenditures.

No funding was required by OpCo to fund its capital expenditures during 2019 .

No funding was required by OpCo to fund its capital expenditures during 2020 or 2019.

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.

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OpCo Revolver

In connection with the IPO, OpCo entered into a $600.0 million revolving credit facility with Westlake ("OpCo Revolver") that may be used to fund growth projects and working capital needs.

On April 30, 2019, the Partnership repaid $201.4 million of borrowings under the OpCo Revolver.

In connection with the IPO, OpCo entered into a $600.0 million revolving credit facility with Westlake, as amended in August and December 2017 and March 2020 ("OpCo Revolver") that may be used to fund growth projects and working capital needs.

On April 30, 2019, OpCo repaid $201.4 million of borrowings under the OpCo Revolver.

As of December 31, 2020, outstanding borrowings under the OpCo Revolver totaled $22.6 million and bore interest at the LIBOR rate plus 2.0%, which is accrued in arrears quarterly.

On September 25, 2018, the OpCo Revolver was amended to extend the scheduled maturity date from August 4, 2019 to September 25, 2023 and to revise the applicable margin from 3% to 2%.

In 2015, we entered into a senior, unsecured revolving credit agreement with an affiliate of Westlake (as subsequently amended, the "MLP Revolver").

The MLP Revolver has a borrowing capacity of $600.0 million and is scheduled to mature in 2021.

In 2015, we entered into a senior, unsecured revolving credit agreement with an affiliate of Westlake (the "MLP Revolver").

The MLP Revolver has a borrowing capacity of $600.0 million.

On March 29, 2019, the Partnership borrowed $123.5 million under the MLP Revolver to partially fund the purchase of an additional 4.5% interest in OpCo.

Borrowings under the MLP Revolver bear interest at LIBOR plus a spread ranging from 2.0% to 3.0% (depending on our consolidated leverage ratio), payable quarterly.

On March 19, 2020, the Partnership entered into an amendment to the MLP Revolver, to extend the maturity date to March 19, 2023 and add a phase-out provision for LIBOR, which is to be replaced by an alternate benchmark rate.

Borrowings under the MLP Revolver bear interest at a variable rate of either (a) LIBOR plus 2.0% or, if LIBOR is no longer available, (b) Alternate Base Rate plus 1.0%.

The MLP Revolver provides that we may pay all or a portion of the interest on any borrowings in kind, in which case any such amounts would be added to the principal amount of the loan.

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Payment Due by Period

Total 2021 2022-2023 2024-2025 Thereafter

(dollars in millions)

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Principal (1)

$ 399.7 $ — $ 399.7 $ — $ —

20.0 8.9 11.1 — —

Operating leases (3)

1.2 0.8 0.4 — —

Purchase obligations (4)

37.9 37.9 — — —

Total $ 458.8 $ 47.6 $ 411.2 $ — $ —

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(1) Long-Term Debt .

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Fair Value Estimates.

We develop estimates of fair value to allocate the purchase price paid to acquire a business to the assets acquired and liabilities assumed in an acquisition, to assess impairment of long-lived assets, goodwill and intangible assets and to record derivative instruments.

We develop estimates of fair value to allocate the purchase price paid to acquire a business to the assets acquired and liabilities assumed in an acquisition, to assess impairment of long-lived assets and goodwill and to record derivative instruments.

We use all available information to make these fair value determinations, including the engagement of third-party consultants.

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Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-K

Item 7. Management’s Discussion and Analysis