What changed in this filing

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Item 1. Business

2023-03-01 compared with 2022-03-02 · 18 added, 13 removed, 155 unchanged (17% of the section changed)

75 unchanged sentences

This purchase price is not designed to cover capital expenditures for expansion.

Variable costs not incurred by OpCo due to a deficiency in takes are rebated to Westlake.

Variable costs not incurred by OpCo due to a deficiency in purchases by Westlake are rebated to Westlake.

Under specified circumstances, unrecovered costs may be carried forward for recovery in subsequent years.

3 unchanged sentences

Pursuan t 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 a force majeure event lasting fewer than 45 consecutive days.

In the event of a force majeure event, the Partnership recognizes 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.

In the event Westlake purchases less than its annual commitment, we recognize buyer deficiency fees representing fixed margin and all expenses and expenditures incurred per pound of volume committed but not taken by Westlake.

Payment for the buyer deficiency fee is scheduled to be received by the Partnership after the conclusion of the year in which the force majeure event occurred.

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").

12 unchanged sentences

Pursuant to the Site Leases, Westlake has the right to restore and repurchase the units for fair market value if OpCo fails to expeditiously restore Calvert City Olefins or Lake Charles Olefins, as applicable, following a casualty loss.

Subject to the foregoing repurchase right, OpCo may remove its ethylene production facilities and other related improvements for up to one year after expiration or termination of the applicable Site Lease, so long as such removal can be accomplished without material damage or harm to Westlake's property or operations;

provided that any assets that are not timely removed by OpCo will be deemed to have been surrendered to Westlake.

Omnibus Agreement

4 unchanged sentences

OpCo and Westlake are parties to an exchange agreement, which had an initial term through August 1, 2015 and continues on an annual basis unless and until terminated by either party.

Under the exchange agreement, OpCo may require Westlake to deliver up to 200 million pounds of ethylene for OpCo per year from the Site Leases to an ethylene hub in Mt.

Belvieu, Texas, for which OpCo would be required to pay Westlake an exchange fee of $0.006 per pound.

Under the exchange agreement, OpCo may require Westlake to deliver up to 200 million pounds of ethylene for OpCo per year from the Site Leases to an ethylene hub in Mont Belvieu, Texas, for which OpCo would be required to pay Westlake an exchange fee of $0.006 per pound.

OpCo Partnership Agreement

4 unchanged sentences

Investment Management Agreement

On August 1, 2017, we, OpCo and Westlake executed 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.

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.

11 unchanged sentences

We estimate that OpCo will make capital expenditures of approximately $3.4 million in 2023 and $3.2 million in 2024, respectively, related to environmental compliance.

Additionally, in 2022 and 2023 capital expenditures of approximately $24.9 million and $29.8 million, respectively, are expected to be incurred related to corrective actions required by the Environmental Protection Agency (the "EPA") to resolve the flare enforcement matter discussed below.

Under the Omnibus Agreement, Westlake will incur costs for such corrective actions.

Additionally, in 2023 and 2024, capital expenditures of approximately $41.5 million and $9.1 million, respectively, are expected to be paid 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.

See "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.

2 unchanged sentences

" Although we cannot predict with certainty future expenditures, management believes that our current spending trends for environmental compliance will continue.

Potential Flare Modifications .

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.

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 notified Westlake that it believes that some of the flares are out of compliance with applicable standards.

The EPA has indicated that it is seeking a consent decree that would obligate Westlake to take corrective actions relating to the alleged noncompliance.

The Partnership believes the resolution of these matters may require the payment of a monetary sanction in excess of $300,000.

The EPA informed Westlake that the information provided led it to believe that some of the flares were out of compliance with applicable standards.

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 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.

Implementation of the requirements under the decree is estimated to cost approximately $110 million, which includes capital expenditures associated with installation of the flare gas recovery units that are required to be installed at our Calvert City and Lake Charles facilities.

The capital expenditures and other costs required to comply with the consent decree have either been incurred in 2021 and 2022 or will be incurred over the course of 2023 and 2024.

The consent decree was entered by the court and became effective in October 2022.

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.

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.

27 unchanged sentences

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 1. Business