Sunoco 2009 Annual Report Download - page 48

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During March 2009, Sunoco permanently shut down its Bayport, TX polypropylene plant which had
become uneconomic to operate and in 2008 also determined that the goodwill related to its polypropylene
business no longer had value. In connection therewith, in 2009, the Company recorded a $4 million after-tax
accrual for a take-or-pay contract loss, employee terminations and other exit costs in connection with the
shutdown of the Bayport facility and, in 2008, recorded a $54 million after-tax provision to write down the
affected Bayport assets to estimated fair value and to write off the remaining polypropylene business goodwill.
During 2007, Sunoco decided to permanently shut down a previously idled phenol production line at its
Haverhill, OH plant that had become uneconomic to restart. In connection with this shutdown, the Company
recorded an $8 million after-tax provision to write off the affected production line. During 2007, Sunoco also
recorded a $7 million after-tax loss associated with the sale of its Neville Island, PA terminal facility, which
included an accrual for enhanced pension benefits associated with employee terminations and for other required
exit costs. These items are reported as part of the Asset Write-Downs and Other Matters shown separately in
Corporate and Other in the Earnings Profile of Sunoco Businesses (see Note 2 to the Consolidated Financial
Statements under Item 8).
During 2003, Sunoco formed a limited partnership with Equistar Chemicals, L.P. (“Equistar”) involving
Equistar’s ethylene facility in LaPorte, TX. Equistar is a wholly owned subsidiary of LyondellBasell Industries.
Under the terms of the partnership agreement, the partnership has agreed to provide Sunoco with 500 million
pounds per year of propylene for 15 years priced on a cost-based formula that includes a fixed discount that declines
over the life of the partnership. Realization of these benefits is largely dependent upon performance by Equistar. In
January 2009, LyondellBasell Industries announced that its U.S. operations (including Equistar) filed to reorganize
under Chapter 11 of the U.S. Bankruptcy Code. Neither the partnership nor the Equistar entities that are partners of
the partnership has filed for bankruptcy. Equistar has met all of its obligations under the contracts during 2009 and
has not given any indication that it will not perform under its contracts in the future. Sunoco does not believe that
the bankruptcy will have a significant adverse impact on its business. Effective December 31, 2009, the partners
mutually agreed to discontinue a separate 200 million pounds-per-year propylene supply agreement. In connection
therewith, under the terms of the partnership agreement, Equistar will increase the amount of propylene provided to
Sunoco from 500 to 520 million pounds per year. The limited partnership and the supply contract are included in the
polypropylene assets which are being sold to Braskem S.A.
Logistics
The Logistics business operates refined product and crude oil pipelines and terminals and conducts crude oil
acquisition and marketing activities primarily in the Northeast, Midwest and South Central regions of the United
States. In addition, the Logistics business has an ownership interest in several refined product and crude oil
pipeline joint ventures. Substantially all logistics operations are conducted through Sunoco Logistics Partners
L.P. (the “Partnership”), a consolidated master limited partnership. Sunoco has a 33 percent interest in Sunoco
Logistics Partners L.P., which includes its 2 percent general partnership interest (see “Capital Resources and
Liquidity—Other Cash Flow Information” below).
2009 2008 2007
Income (millions of dollars) .......................................... $97 $85 $45
Pipeline and terminal throughput (thousands of barrels daily)*:
Unaffiliated customers ............................................ 1,436 1,221 1,137
Affiliated customers .............................................. 1,449 1,587 1,665
2,885 2,808 2,802
*Excludes joint-venture operations.
Logistics segment income increased $12 million in 2009 due to record earnings from Sunoco Logistics
Partners L.P. resulting from higher lease acquisition results, increased crude oil pipeline and storage revenues,
and earnings from a refined products pipeline and terminal system acquired in November 2008 (see below).
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