Westlake Chemical Partners LP 10-Q

Item 1. Financial Statements WESTLAKE CHEMICAL PARTNERS LP CONSOLIDATED BALANCE SHEETS (Unaudited) June 30, 2021 December 31, 2020 (in thousands of dollars, except unit amounts) ASSETS Current assets Cash and cash equivalents $ 17,665 $ 17,154 Receivable under the Investment Management Agreement—Westlake Chemical Corporation ("Westlake") 222,249 123,228 Accounts receivable, net—Westlake 66,948 108,028 Accounts receivable, net—third parties 24,962 11,029 Inventories 4,929 3,474 Prepaid expenses and other current assets 61 392 Total current assets 336,814 263,305 Property, plant and equipment, net 1,030,016 1,050,677 Goodwill 5,814 5,814 Deferred charges and other assets, net 29,111 36,692 Total assets $ 1,401,755 $ 1,356,488 LIABILITIES Current liabilities Accounts payable—Westlake $ 20,134 $ 7,855 Accounts payable—third parties 12,435 13,131 Accrued and other liabilities 16,084 18,768 Total current liabilities 48,653 39,754 Long-term debt payable to Westlake 399,674 399,674 Deferred income taxes 1,634 1,542 Other liabilities 36 381 Total liabilities 449,997 441,351 Commitments and contingencies (Note 12) EQUITY Common unitholders—publicly and privately held ( 21,082,331 and 21,076,673 units issued and outstanding at June 30, 2021 and December 31, 2020, respectively) 476,076 471,701 Common unitholder—Westlake ( 14,122,230 and 14,122,230 units issued and outstanding at June 30, 2021 and December 31, 2020, respectively) 51,103 48,270 General partner—Westlake ( 242,572 ) ( 242,572 ) Total Westlake Chemical Partners LP partners' capital 284,607 277,399 Noncontrolling interest in Westlake Chemical OpCo LP ("OpCo") 667,151 637,738 Total equity 951,758 915,137 Total liabilities and equity $ 1,401,755 $ 1,356,488 The accompanying notes are an integral part of the consolidated financial statements. 1 Table of Contents WESTLAKE CHEMICAL PARTNERS LP CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited) Three Months Ended June 30, Six Months Ended June 30, 2021 2020 2021 2020 (in thousands of dollars, except unit amounts and per unit data) Revenue Net sales—Westlake $ 240,956 $ 227,431 $ 460,759 $ 442,259 Net co-product, ethylene and other sales—third parties 81,273 11,069 129,677 46,790 Total net sales 322,229 238,500 590,436 489,049 Cost of sales 191,200 148,470 371,708 295,471 Gross profit 131,029 90,030 218,728 193,578 Selling, general and administrative expenses 8,269 6,139 16,942 12,335 Income from operations 122,760 83,891 201,786 181,243 Other income (expense) Interest expense—Westlake ( 2,224 ) ( 3,431 ) ( 4,460 ) ( 7,381 ) Other income, net 21 123 28 708 Income before income taxes 120,557 80,583 197,354 174,570 Income tax provision 263 206 438 423 Net income 120,294 80,377 196,916 174,147 Less: Net income attributable to noncontrolling interest in OpCo 95,195 65,517 156,671 141,540 Net income attributable to Westlake Chemical Partners LP and limited partners' interest in net income $ 25,099 $ 14,860 $ 40,245 $ 32,607 Net income per limited partner unit attributable to Westlake Chemical Partners LP per limited partner unit (basic and diluted) Common units $ 0.71 $ 0.43 $ 1.14 $ 0.93 Weighted average limited partner units outstanding (basic and diluted) Common units—publicly and privately held 21,079,657 21,072,315 21,078,173 21,072,315 Common units—Westlake 14,122,230 14,122,230 14,122,230 14,122,230 The accompanying notes are an integral part of the consolidated financial statements. 2 Table of Contents WESTLAKE CHEMICAL PARTNERS LP CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY (Unaudited) Partnership Common Unitholders — Public and Privately Held Common Unitholder — Westlake General Partner — Westlake Noncontrolling Interests in OpCo Total (in thousands of dollars) Balance at December 31, 2020 $ 471,701 $ 48,270 $ ( 242,572 ) $ 637,738 $ 915,137 Net income 9,069 6,077 — 61,476 76,622 Quarterly distribution to unitholders ( 9,936 ) ( 6,657 ) — — ( 16,593 ) Quarterly distribution to noncontrolling interest retained in OpCo by Westlake — — — ( 62,058 ) ( 62,058 ) Balance at March 31, 2021 $ 470,834 $ 47,690 $ ( 242,572 ) $ 637,156 $ 913,108 Net income 15,029 10,070 — 95,195 120,294 Units issued for vested phantom units 149 — — — 149 Quarterly distribution to unitholders ( 9,936 ) ( 6,657 ) — — ( 16,593 ) Quarterly distribution to noncontrolling interest retained in OpCo by Westlake — — — ( 65,200 ) ( 65,200 ) Balance at June 30, 2021 $ 476,076 $ 51,103 $ ( 242,572 ) $ 667,151 $ 951,758 The accompanying notes are an integral part of the consolidated financial statements. 3 Table of Contents WESTLAKE CHEMICAL PARTNERS LP CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY (Unaudited) Partnership Common Unitholders— Public and Privately Held Common Unitholder— Westlake General Partner— Westlake Noncontrolling Interests in OpCo Total (in thousands of dollars) Balance at December 31, 2019 $ 471,736 $ 48,350 $ ( 242,572 ) $ 674,621 $ 952,135 Net income 10,626 7,121 — 76,023 93,770 Quarterly distribution to unitholders ( 9,934 ) ( 6,657 ) — — ( 16,591 ) Quarterly distribution to noncontrolling interest retained in OpCo by Westlake — — — ( 79,223 ) ( 79,223 ) Balance at March 31, 2020 $ 472,428 $ 48,814 $ ( 242,572 ) $ 671,421 $ 950,091 Net income 8,897 5,963 — 65,517 80,377 Quarterly distributions to unitholders ( 9,933 ) ( 6,657 ) — — ( 16,590 ) Quarterly distribution to noncontrolling interest retained in OpCo by Westlake — — — ( 78,025 ) ( 78,025 ) Balance at June 30, 2020 $ 471,392 $ 48,120 $ ( 242,572 ) $ 658,913 $ 935,853 The accompanying notes are an integral part of the consolidated financial statements. 4 Table of Contents WESTLAKE CHEMICAL PARTNERS LP CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited) Six Months Ended June 30, 2021 2020 (in thousands of dollars) Cash flows from operating activities Net income $ 196,916 $ 174,147 Adjustments to reconcile net income to net cash provided by operating activities Depreciation and amortization 56,244 51,844 Loss from disposition of property, plant and equipment 1,391 446 Other gains, net 759 ( 310 ) Changes in operating assets and liabilities Accounts receivable—third parties ( 14,600 ) 3,235 Net accounts receivable—Westlake 53,191 ( 8,890 ) Inventories ( 1,455 ) 955 Prepaid expenses and other current assets 331 405 Accounts payable 653 1,207 Accrued and other liabilities ( 3,140 ) 998 Other, net ( 3,172 ) ( 318 ) Net cash provided by operating activities 287,118 223,719 Cash flows from investing activities Additions to property, plant and equipment ( 27,289 ) ( 20,595 ) Maturities of investments with Westlake under the Investment Management Agreement 83,000 181,000 Investments with Westlake under the Investment Management Agreement ( 182,000 ) ( 190,000 ) Other 126 — Net cash used for investing activities ( 126,163 ) ( 29,595 ) Cash flows from financing activities Quarterly distributions to noncontrolling interest retained in OpCo by Westlake ( 127,258 ) ( 157,248 ) Quarterly distributions to unitholders ( 33,186 ) ( 33,181 ) Net cash used for financing activities ( 160,444 ) ( 190,429 ) Net increase in cash and cash equivalents 511 3,695 Cash and cash equivalents at beginning of period 17,154 19,923 Cash and cash equivalents at end of period $ 17,665 $ 23,618 The accompanying notes are an integral part of the consolidated financial statements. 5 Table of Contents WESTLAKE CHEMICAL PARTNERS LP NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — Continued (Unaudited) (in thousands of dollars, except unit amounts and per unit data) 1. Description of Business and Basis of Presentation Description of Business Westlake Chemical Partners LP (the "Partnership") is a Delaware limited partnership formed in March 2014 to operate, acquire and develop ethylene production facilities and related assets. On August 4, 2014, the Partnership completed its initial public offering (the "IPO") of 12,937,500 common units representing limited partner interests. In connection with the IPO, the Partnership acquired a 10.6 % limited partner interest in Westlake Chemical OpCo LP ("OpCo") and a 100 % interest in Westlake Chemical OpCo GP LLC ("OpCo GP"), which is the general partner of OpCo. OpCo owns three ethylene production facilities and one common carrier ethylene pipeline (collectively, the "Contributed Assets" ) . Since the IPO, the Partnership has periodically purchased additional limited partner interest in OpCo. Most recently, on March 29, 2019, the Partnership purchased an additional 4.5 % newly-issued limited partner interest in OpCo for approximately $ 201,445 , resulting in an aggregate 22.8 % limited partner interest in OpCo, effective January 1, 2019. The remaining 77.2 % limited partner interest in OpCo is owned by Westlake Chemical Corporation. Basis of Presentation The accompanying unaudited consolidated interim financial statements were prepared in accordance with the rules and regulations of the Securities and Exchange Commission (the "SEC") for interim periods. Accordingly, certain information and footnotes required for complete financial statements under generally accepted accounting principles in the United States ("U.S. GAAP") have not been included. These interim consolidated financial statements should be read in conjunction with the consolidated financial statements and notes thereto of the Partnership included in the annual report on Form 10-K for the fiscal year ended December 31, 2020 (the "2020 Form 10-K"), filed with the SEC on March 2, 2021. These financial statements have been prepared in conformity with the accounting principles and practices as disclosed in the notes to the consolidated financial statements of the Partnership for the fiscal year ended December 31, 2020. References to "Westlake" refer collectively to Westlake Chemical Corporation and its subsidiaries, other than the Partnership, OpCo and OpCo GP. The Partnership holds a 22.8 % limited partner interest and the entire non-economic general partner interest in OpCo. The remaining 77.2 % limited partner interest in OpCo is owned directly by Westlake, which has no rights to direct the activities that most significantly impact the economic performance of OpCo. As a result of the fact that substantially all of OpCo's activities are conducted on behalf of Westlake, and the fact that OpCo exhibits disproportionality of voting rights to economic interest, OpCo was deemed to be a variable interest entity. The Partnership, through its ownership of OpCo's general partner, has the power to direct the activities that most significantly impact the economic performance of OpCo, and it also has the obligation or right to absorb losses or receive benefits from OpCo that could potentially be significant to OpCo. As such, the Partnership was determined to be OpCo's primary beneficiary and therefore consolidates OpCo's results of operations and financial position. Westlake's retained interest of 77.2 % is recorded as noncontrolling interest in the Partnership's consolidated financial statements. In the opinion of the Partnership's management, the accompanying unaudited consolidated interim financial statements reflect all adjustments (consisting only of normal recurring adjustments) that are necessary for a fair statement of the Partnership's financial position as of June 30, 2021, its results of operations for the three and six months ended June 30, 2021 and 2020 and the changes in its cash position for the six months ended June 30, 2021 and 2020. Results of operations and changes in cash position for the interim periods presented are not necessarily indicative of the results that will be realized for the fiscal year ending December 31, 2021 or any other interim period. The preparation of financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenues and expenses and the disclosure of contingent assets and liabilities. Actual results could differ materially from those estimates. 6 Table of Contents WESTLAKE CHEMICAL PARTNERS LP NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — Continued (Unaudited) (in thousands of dollars, except unit amounts and per unit data) The COVID pandemic resulted in widespread adverse impacts on the global economy in 2020. The Partnership has not experienced significant disruptions to its business operations in 2020 or during the six months ended June 30, 2021 and does not expect significant disruptions to its business operations resulting from COVID-19. However, the impact that COVID-19 will have on the Partnership's financial condition, results of operations and cash flows cannot be estimated with certainty at this time as it will depend on future developments, including, among others, the timing and logistics with respect to the distribution of vaccines globally and the efficacy of the available vaccines (including with respect to the more recent variants of COVID-19) and other treatments, the ultimate duration of the pandemic, geographic spread and severity of the virus, the consequences of governmental and other measures designed to prevent the spread of the virus, the impact on the operation of OpCo's facilities, Westlake, customers, suppliers and other third parties and the timing and extent to which normal economic and operating conditions resume. Recent Accounting Pronouncements Reference Rate Reform (ASU No. 2020-04) In March 2020, the FASB issued an accounting standards update to provide optional expedients and exceptions for applying generally accepted accounting principles to contracts, hedging relationships and other transactions affected by reference rate reform if certain criteria are met. The amendments in this update are effective for all entities as of March 12, 2020 through December 31, 2022 and are not expected to have a material impact on the Partnership's consolidated financial position, results of operations and cash flows. 2. Accounts Receivable—Third Parties Accounts receivable—third parties consist of the following: June 30, 2021 December 31, 2020 Trade customers $ 25,908 $ 11,344 Allowance for credit losses ( 982 ) ( 315 ) 24,926 11,029 Other receivables 36 — Accounts receivable, net—third parties $ 24,962 $ 11,029 3. Inventories Inventories consist of the following: June 30, 2021 December 31, 2020 Finished products $ 4,566 $ 3,157 Feedstock, additives and chemicals 363 317 Inventories $ 4,929 $ 3,474 4. Property, Plant and Equipment Depreciation expense on property, plant and equipment of $ 22,983 and $ 22,714 is included in cost of sales in the consolidated statements of operations for the three months ended June 30, 2021 and 2020, respectively. Depreciation expense on property, plant and equipment of $ 45,785 and $ 45,467 is included in cost of sales in the consolidated statements of operations for the six months ended June 30, 2021 and 2020, respectively. 5. Deferred Charges and Other Assets Amortization expense on other assets of $ 5,719 and $ 3,099 is included in costs of sales in the consolidated statements of operations for the three months ended June 30, 2021 and 2020, respectively. Amortization expense on other assets of $ 10,459 and $ 6,377 is included in costs of sales in the consolidated statements of operations for the six months ended June 30, 2021 and 2020, respectively. 7 Table of Contents WESTLAKE CHEMICAL PARTNERS LP NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — Continued (Unaudited) (in thousands of dollars, except unit amounts and per unit data) 6. Distributions and Net Income Per Limited Partner Unit On August 2, 2021, the board of directors of Westlake Chemical Partners GP LLC ("Westlake GP"), the Partnership's general partner, declared a quarterly cash distribution for the three months ended June 30, 2021 of $ 0.4714 per unit. This distribution is payable on August 26, 2021 to unitholders of record as of August 12, 2021. Distributions are declared subsequent to quarter end; therefore, the table below represents total cash distributions declared from earnings of the related periods pertaining to such distributions. Three Months Ended June 30, Six Months Ended June 30, 2021 2020 2021 2020 Net income attributable to the Partnership $ 25,099 $ 14,860 $ 40,245 $ 32,607 Less: Limited partners' distribution declared on common units 16,595 16,590 33,188 33,181 Net income in excess of distribution (distribution in excess of net income) $ 8,504 $ ( 1,730 ) $ 7,057 $ ( 574 ) Net income per unit applicable to common limited partner units is computed by dividing the respective limited partners' interest in net income by the weighted-average number of common units outstanding for the period. Because the Partnership has more than one class of participating securities, it uses the two-class method when calculating the net income per unit applicable to limited partners. The classes of participating securities include common units and incentive distribution rights. Net income attributable to the Partnership is allocated to the unitholders in accordance with their respective ownership percentages in preparation of the consolidated statements of changes in equity. However, when distributions related to the incentive distribution rights are made, net income equal to the amount of those distributions is first allocated to the general partner before the remaining net income is allocated to the unitholders based on their respective ownership percentages. Basic and diluted net income per unit is the same because the Partnership does not have any potentially dilutive units outstanding for the periods presented. Three Months Ended June 30, 2021 Limited Partners' Common Units Incentive Distribution Rights Total Net income attributable to the Partnership: Distribution $ 16,595 $ — $ 16,595 Net income in excess of distribution 8,504 — 8,504 Net income $ 25,099 $ — $ 25,099 Weighted average units outstanding: Basic and diluted 35,201,887 35,201,887 Net income per limited partner unit: Basic and diluted $ 0.71 8 Table of Contents WESTLAKE CHEMICAL PARTNERS LP NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — Continued (Unaudited) (in thousands of dollars, except unit amounts and per unit data) Three Months Ended June 30, 2020 Limited Partners' Common Units Incentive Distribution Rights Total Net income attributable to the Partnership: Distribution $ 16,590 $ — $ 16,590 Distribution in excess of net income ( 1,730 ) — ( 1,730 ) Net income $ 14,860 $ — $ 14,860 Weighted average units outstanding: Basic and diluted 35,194,545 35,194,545 Net income per limited partner unit: Basic and diluted $ 0.43 Six Months Ended June 30, 2021 Limited Partners' Common Units Incentive Distribution Rights Total Net income attributable to the Partnership: Distribution $ 33,188 $ — $ 33,188 Net income in excess of distribution 7,057 — 7,057 Net income $ 40,245 $ — $ 40,245 Weighted average units outstanding: Basic and diluted 35,200,403 35,200,403 Net income per limited partner unit: Basic and diluted $ 1.14 Six Months Ended June 30, 2020 Limited Partners' Common Units Incentive Distribution Rights Total Net income attributable to the Partnership: Distribution $ 33,181 $ — $ 33,181 Distribution in excess of net income ( 574 ) — ( 574 ) Net income $ 32,607 $ — $ 32,607 Weighted average units outstanding: Basic and diluted 35,194,545 35,194,545 Net income per limited partner unit: Basic and diluted $ 0.93 The amended Partnership Agreement provides that the Partnership will distribute cash each quarter to all the unitholders, pro rata, until each unit has received a distribution of $ 1.2938 . If cash distributions to the Partnership's unitholders exceed $ 1.2938 per common unit in any quarter, the Partnership's unitholders and Westlake, as the holder of the Partnership's incentive distribution rights, will receive distributions according to the following percentage allocations: Marginal Percentage Interest in Distributions Total Quarterly Distribution Per Unit Unitholders IDR Holders Above $ 1.2938 up to $ 1.4063 85.0 % 15.0 % Above $ 1.4063 up to $ 1.6875 75.0 % 25.0 % Above $ 1.6875 50.0 % 50.0 % 9 Table of Contents WESTLAKE CHEMICAL PARTNERS LP NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — Continued (Unaudited) (in thousands of dollars, except unit amounts and per unit data) The Partnership's distribution for the three months ended June 30, 2021 did not exceed the $ 1.2938 per unit threshold, and, as a result, no distribution was made with respect to the Partnership's incentive distribution rights to Westlake, as the holder of the Partnership's incentive distribution rights. Distribution Per Common Unit Distributions per common unit for the three and six months ended June 30, 2021 and 2020 were as follows: Three Months Ended June 30, Six Months Ended June 30, 2021 2020 2021 2020 Distributions per common unit $ 0.4714 $ 0.4714 $ 0.9428 $ 0.9428 7. Partners' Equity On October 4, 2018, the Partnership and Westlake Chemical Partners GP LLC, the general partner of the Partnership, entered into an Equity Distribution Agreement with UBS Securities LLC, Barclays Capital Inc., Citigroup Global Markets Inc., Deutsche Bank Securities Inc., RBC Capital Markets, LLC, Merrill Lynch, Pierce, Fenner & Smith Incorporated and Wells Fargo Securities, LLC to offer and sell the Partnership's common units, from time to time, up to an aggregate offering amount of $ 50,000 . The Equity Distribution Agreement was amended on February 28, 2020 to reference a new shelf registration for utilization under this agreement. No common units were issued under this program as of June 30, 2021. On March 29, 2019, the Partnership completed the issuance and sale of 2,940,818 common units at a price of $ 21.40 per unit through a private placement. TTWF LP, Westlake's principal stockholder and a related party, acquired 1,401,869 common units out of 2,940,818 common units issued in the private placement. 8. Related Party Transactions The Partnership and OpCo regularly enter into related party transactions with Westlake. See below for a description of transactions with related parties. Sales to Related Parties OpCo sells ethylene to Westlake under the Ethylene Sales Agreement. Additionally, the Partnership and OpCo from time to time provide other services or products for which it charges Westlake a fee. Sales to related parties were as follows: Three Months Ended June 30, Six Months Ended June 30, 2021 2020 2021 2020 Net sales—Westlake $ 240,956 $ 227,431 $ 460,759 $ 442,259 10 Table of Contents WESTLAKE CHEMICAL PARTNERS LP NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — Continued (Unaudited) (in thousands of dollars, except unit amounts and per unit data) During June 2021, OpCo's Petro 1 facility experienced an outage, which resulted in a force majeure event under the Ethylene Sales Agreement. In addition, OpCo declared a force majeure in February 2021 due to the severe winter storm. As a result of these force majeure events, the Partnership updated its estimate of OpCo's 2021 anticipated production as of June 30, 2021. The buyer deficiency fee is measured based upon the lower of the actual production deficiency at period end or the estimated annual production deficiency based upon OpCo's annual anticipated production. Based upon this change in estimate of OpCo's 2021 anticipated production, the Partnership has recognized buyer deficiency fees and shortfall fees of $ 8,742 and $ 18,420 during the three and six months ended June 30, 2021, respectively. The buyer deficiency fees and shortfall fees are classified as a component of net sales. During 2020, the Lake Charles Petro 1 and Petro 2 facilities were impacted by Hurricanes Laura and Delta, which resulted in force majeure events under the Ethylene Sales Agreement. As a result of the force majeure events, the Partnership recognized a buyer deficiency fee of $ 69,555 as a component of net sales in 2020. Payment for the buyer deficiency fee was received by the Partnership in January 2021. Cost of Sales from Related Parties Charges for goods and services purchased by the Partnership and OpCo from Westlake and included in cost of sales relate primarily to feedstock purchased under the Feedstock Supply Agreement and services provided under the Services and Secondment Agreement. Charges from related parties in cost of sales were as follows: Three Months Ended June 30, Six Months Ended June 30, 2021 2020 2021 2020 Feedstock purchased from Westlake and included in cost of sales $ 100,979 $ 69,324 $ 183,095 $ 128,962 Other charges from Westlake and included in cost of sales 27,466 23,898 59,308 47,998 Total $ 128,445 $ 93,222 $ 242,403 $ 176,960 Services from Related Parties Included in Selling, General and Administrative Expenses Charges for services purchased by the Partnership from Westlake and included in selling, general and administrative expenses primarily relate to services Westlake performs on behalf of the Partnership under the Omnibus Agreement, including the Partnership's finance, legal, information technology, human resources, communication, ethics and compliance and other administrative functions. Charges from related parties included within selling, general and administrative expenses were as follows: Three Months Ended June 30, Six Months Ended June 30, 2021 2020 2021 2020 Services received from Westlake and included in selling, general and administrative expenses $ 7,000 $ 5,698 $ 14,912 $ 10,813 Goods and Services from Related Parties Capitalized as Assets Charges for goods and services purchased by the Partnership and OpCo from Westlake which were capitalized as assets relate primarily to the services of Westlake employees under the Services and Secondment Agreement. Charges from related parties for goods and services capitalized as assets were as follows: Three Months Ended June 30, Six Months Ended June 30, 2021 2020 2021 2020 Goods and services purchased from Westlake and capitalized as assets $ 533 $ 384 $ 936 $ 864 11 Table of Contents WESTLAKE CHEMICAL PARTNERS LP NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — Continued (Unaudited) (in thousands of dollars, except unit amounts and per unit data) Receivable under the Investment Management Agreement On August 1, 2017, the Partnership, OpCo and Westlake executed an investment management agreement (the "Investment Management Agreement") that authorized Westlake to invest the Partnership's and OpCo's excess cash with Westlake for a term of up to a maximum of nine months. Per the terms of the Investment Management Agreement, the Partnership earns a market return plus five basis points and Westlake provides daily availability of the invested cash to meet any liquidity needs of the Partnership or OpCo. Accrued interest of $ 77 and $ 56 was included in the receivable under the Investment Management Agreement balance at June 30, 2021 and December 31, 2020, respectively. Total interest earned related to the Investment Management Agreement was $ 77 and $ 219 for the three months ended June 30, 2021 and 2020, respectively, and $ 145 and $ 807 for the six months ended June 30, 2021 and 2020, respectively. The Partnership's receivable under the Investment Management Agreement was as follows: June 30, 2021 December 31, 2020 Receivable under the Investment Management Agreement $ 222,249 $ 123,228 Accounts Receivable from Related Parties The Partnership's accounts receivable from Westlake result primarily from ethylene sales to Westlake and the buyer deficiency fee and shortfall fee recognized under the Ethylene Sales Agreement, as discussed above under "Sales to Related Parties." The buyer deficiency fee and shortfall fee recognized in the six months ended June 30, 2021are scheduled to be received by the Partnership after the end of 2021. The Partnership's accounts receivable from Westlake were as follows: June 30, 2021 December 31, 2020 Accounts receivable—Westlake $ 66,948 $ 108,028 Accounts Payable to Related Parties The Partnership's accounts payable to Westlake result primarily from feedstock purchases under the Feedstock Supply Agreement and services provided under the Services and Secondment Agreement and the Omnibus Agreement. The related party accounts payable balances were as follows: June 30, 2021 December 31, 2020 Accounts payable—Westlake $ 20,134 $ 7,855 Related Party Leases OpCo is obligated to Westlake under various long-term and short-term noncancelable operating leases, primarily related to rail car leases and land. Operating lease rentals paid to Westlake for such leases were $ 608 and $ 726 for the three months ended June 30, 2021 and 2020, respectively, and $ 1,295 and $ 1,396 for the six months ended June 30, 2021 and 2020, respectively, and reflected in other charges from Westlake that are included in cost of sales. OpCo has two site lease agreements with Westlake, each of which has a term of 50 years. Pursuant to the site lease agreements, OpCo pays Westlake one dollar per site per year. 12 Table of Contents WESTLAKE CHEMICAL PARTNERS LP NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — Continued (Unaudited) (in thousands of dollars, except unit amounts and per unit data) Debt Payable to Related Parties See Note 9 for a description of related party debt payable balances. Interest on related party debt payable balances for the three months ended June 30, 2021 and 2020 was $ 2,224 and $ 3,431 , respectively. Interest on related party debt payable is presented as interest expense—Westlake in the consolidated statements of operations. At June 30, 2021 and December 31, 2020, accrued interest on related party debt was $ 2,224 and $ 2,336 , respectively, and is reflected as a component of accrued liabilities in the consolidated balance sheets. Debt payable to related parties was as follows: June 30, 2021 December 31, 2020 Long-term debt payable to Westlake $ 399,674 $ 399,674 Major Customer and Concentration of Credit Risk During the three months ended June 30, 2021 and 2020, Westlake accounted for approximately 74.8 % and 95.4 %, respectively, of the Partnership's net sales. During the six months ended June 30, 2021 and 2020, Westlake accounted for approximately 78.0 % and 90.4 %, respectively, of the Partnership's net sales. Other See Note 7 above for an additional related party transaction. 9. Long-term Debt Payable to Westlake Long-term debt payable to Westlake consists of the following: June 30, 2021 December 31, 2020 OpCo Revolver (variable interest rate of London Interbank Offered Rate ("LIBOR") plus 2.0 %, scheduled maturity of September 25, 2023) $ 22,619 $ 22,619 MLP Revolver (variable interest rate of LIBOR plus 2.0 %, scheduled maturity of March 19, 2023) 377,055 377,055 $ 399,674 $ 399,674 The weighted average interest rate on all long-term debt was 2.2 % at June 30, 2021 and December 31, 2020. As of June 30, 2021, the Partnership was in compliance with all of the covenants under the OpCo Revolver and the MLP Revolver. 10. Fair Value Measurements The Partnership reports certain assets and liabilities at fair value, which is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date (exit price). Under the accounting guidance for fair value measurements, inputs used to measure fair value are classified in one of three levels: Level 1: Quoted market prices in active markets for identical assets or liabilities. Level 2: Observable market-based inputs or unobservable inputs that are corroborated by market data. Level 3: Unobservable inputs that are not corroborated by market data. 13 Table of Contents WESTLAKE CHEMICAL PARTNERS LP NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — Continued (Unaudited) (in thousands of dollars, except unit amounts and per unit data) The Partnership has financial assets and liabilities subject to fair value measures. These financial assets and liabilities include cash and cash equivalents, accounts receivable, net, accounts payable and long-term debt payable to Westlake, all of which are recorded at carrying value. The amounts reported in the consolidated balance sheets for accounts receivable, net and accounts payable approximate their fair value due to the short maturities of these instruments. The carrying and fair values of the Partnership's long-term debt at June 30, 2021 and December 31, 2020 are summarized in the table below. The Partnership's long-term debt includes the OpCo Revolver and the MLP Revolver at June 30, 2021. The fair value of debt is determined based on the present value of expected future cash flows using a discounted cash flow methodology. Because the Partnership's valuation methodology used for long-term debt requires the use of significant unobservable inputs, the inputs used to measure the fair value of the Partnership's long-term debt are classified as Level 3 within the fair value hierarchy. Inputs used to estimate the fair values of the Partnership's long-term debt include the selection of an appropriate discount rate. June 30, 2021 December 31, 2020 Carrying Value Fair Value Carrying Value Fair Value OpCo Revolver $ 22,619 $ 22,924 $ 22,619 $ 23,301 MLP Revolver 377,055 379,868 377,055 383,284 11. Supplemental Information Accrued and Other Liabilities Accrued and other liabilities were $ 16,084 and $ 18,768 at June 30, 2021 and December 31, 2020, respectively. Accrued taxes, accrued maintenance expense and accrued capital expenditures, which are components of accrued liabilities, were $ 3,925 , $ 3,025 and $ 2,823 , respectively, at June 30, 2021 and $ 6,207 , $ 3,905 and $ 2,286 , respectively, at December 31, 2020. No other component of accrued and other liabilities was more than five percent of total current liabilities. Non-cash Investing Activity The non-cash investing activities related to accruals for capital expenditures were $ 669 and $ 182 for the six months ended June 30, 2021 and 2020, respectively. 12. Commitments and Contingencies The Partnership is subject to environmental laws and regulations that can impose civil and criminal sanctions and that may require the Partnership to mitigate the effects of contamination caused by the release or disposal of hazardous substances into the environment. These laws include the federal Clean Air Act, the federal Water Pollution Control Act, the Resource Conservation and Recovery Act ("RCRA"), the Comprehensive Environmental Response, Compensation, and Liability Act ("CERCLA"), the Toxic Substances Control Act and various other federal, state and local laws and regulations. Under CERCLA, an owner or operator of property may be held strictly liable for remediating contamination without regard to whether that person caused the contamination, and without regard to whether the practices that resulted in the contamination were legal at the time they occurred. Because the Partnership's production sites have a history of industrial use, it is impossible to predict precisely what effect these legal requirements will have on the Partnership. Westlake will indemnify the Partnership for liabilities that occurred or existed prior to August 4, 2014. The Partnership is involved in various legal proceedings incidental to the conduct of its business. The Partnership does not believe that any of these legal proceedings will have a material adverse effect on its financial condition, results of operations or cash flows. 14 Table of Contents