We are a Delaware limited partnership formed by Westlake in March 2014 to operate,
acquire and develop ethylene production facilities and related assets. On August
4, 2014, we completed our IPO of 12,937,500 common units representing limited
partner interests. In connection with the IPO, we acquired a 10.6% interest
in OpCo and a 100% interest in OpCo GP, which is the general partner of OpCo.
On April 29, 2015, we purchased an additional 2.7% newly-issued limited partner
interest in OpCo, resulting in an aggregate 13.3% limited partner interest in
OpCo effective April 1, 2015. Our business and operations are conducted through
OpCo. Because we own OpCos general partner, we have control over all of OpCos
assets and operations.
OpCos assets are comprised of three ethylene production facilities, which
primarily convert ethane into ethylene and have an aggregate annual capacity
of approximately 3.4 billion pounds, and a 200-mile ethylene pipeline. OpCo
derives substantially all of its revenue from these ethylene production facilities.
Ethylene is the worlds most widely used petrochemical in terms of volume and
is a key building block used to produce a number of key derivatives, such as
polyethylene ("PE") and polyvinyl chloride ("PVC"), which
are used in a wide variety of end markets including packaging, construction
and transportation. Westlakes downstream PE and PVC production facilities consume
a substantial majority of the ethylene produced by OpCo. OpCo generates revenue
primarily by selling ethylene to Westlake and others, as well as through the
sale of co-products of ethylene production, including propylene, crude butadiene,
pyrolysis gasoline and hydrogen. Our sole revenue generating asset is our 13.3%
limited partner interest in OpCo.
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 OpCos 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"). Any ethylene not sold to Westlake
and all co-products that are produced by OpCo will be sold to third parties
on either a spot or contract basis. OpCo also entered into a feedstock supply
agreement with Westlake that supplies OpCo with all of the ethane (and any other
feedstocks) required for OpCo to produce ethylene under the Ethylene Sales Agreement
(the "Feedstock Supply Agreement").
OpCo primarily uses ethane (a component of natural gas liquids, or NGLs) to
produce ethylene. OpCo completed an upgrade and capacity expansion of its Petro
1 ethylene unit at our Lake Charles site in the third quarter of 2016. The Petro
1 expansion project increased OpCos ethylene capacity by approximately 250
million pounds annually. In January 2016, we announced an expansion project
to increase the ethylene capacity at our Calvert City facility. The expansion,
along with other initiatives, is expected to increase ethylene capacity by approximately
100 million pounds annually and is targeted for completion during the first
half of 2017. The total ethylene capacity at Calvert City Olefins is expected
to increase to 730 million pounds annually at the completion of this project.
Two of OpCos ethylene production facilities, which we refer to as Petro 1
and Petro 2 and, collectively, as Lake Charles Olefins, are located at Westlakes
Lake Charles site. The combined capacity of these two ethylene production facilities
is approximately 3.0 billion pounds per year which includes the additional annual
capacity of 250 million resulting from the Lake Charles Petro 1 expansion project
that was completed during 2016.
Within Westlakes Lake Charles site, Petro 1 and Petro 2 are connected by pipeline
systems to Westlakes polyethylene plants. Westlake may use the ethylene it
purchases from OpCo at its Lake Charles facility or transfer it to its Geismar
facility or its Longview facility, either through physical transportation or
via exchange transactions. Westlake may also use the ethylene it purchases from
OpCo with chlorine to produce ethylene dichloride and transport it via barge
to Westlakes Calvert City site.
In addition, OpCo produces ethylene co-products including chemical grade propylene,
crude butadiene, pyrolysis gasoline and hydrogen. OpCo sells its output of these
co-products to external customers.
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