Sunoco 2009 Annual Report Download - page 51

Steel, each under long-term contracts. In addition, the technology and operating fees, as well as preferred
dividends pertaining to the Brazilian cokemaking operation are payable to SunCoke Energy under long-term
contracts with a project company in which a Brazilian subsidiary of ArcelorMittal is the major shareholder.
There has been no indication that ArcelorMittal, AK Steel or US Steel will not perform under those contracts.
However, in the event of nonperformance, SunCoke Energy’s results of operations and cash flows would be
adversely affected.
In March 2008, SunCoke Energy entered into a coke purchase agreement and related energy sales
agreement with AK Steel under which SunCoke Energy will build, own and operate a cokemaking facility and
associated cogeneration power plant adjacent to AK Steel’s Middletown, OH steelmaking facility subject to
resolution of all contingencies, including necessary permits. In February 2010, the Ohio EPA issued a final air
permit which is subject to a 30-day appeal period. These facilities are expected to cost in aggregate
approximately $380 million and be completed in the second half of 2011. The plant is expected to produce
550 thousand tons of coke per year and provide on average, 46 megawatts of power. In connection with this
agreement, AK Steel has agreed to purchase, over a 20-year period, all of the coke and available electrical power
from these facilities. Expenditures through December 31, 2009 totaled $76 million. In the event contingencies
(including permit issues) to constructing the project cannot be resolved, AK Steel is obligated to reimburse
substantially all of this amount to Sunoco.
SunCoke Energy is currently discussing other opportunities for developing new heat recovery cokemaking
facilities with domestic and international steel companies. Such cokemaking facilities could be either wholly
owned or developed through other business structures. As applicable, the steel company customers would be
expected to purchase coke production under long-term contracts. The facilities would also generate steam, which
would typically be sold to the steel customer, or electrical power, which could be sold to the steel customer or
into the local power market. SunCoke Energy’s ability to enter into additional arrangements is dependent upon
market conditions in the steel industry.
Corporate and Other
Corporate Expenses—Corporate administrative expenses decreased $8 million in 2009 primarily due to
lower payroll and other employee-related costs. In 2008, corporate administrative expenses decreased $21
million primarily due to the absence of an adjustment to charitable contributions expense that was made in 2007
and lower accruals for performance-related incentive compensation.
Net Financing Expenses and Other—Net financing expenses and other increased $28 million in 2009
primarily due to lower interest income ($8 million) and higher interest expense ($17 million). In 2008, net
financing expenses and other decreased $19 million primarily due to higher capitalized interest ($8 million) and
the absence of expense attributable to the preferential return of third-party investors in Sunoco’s Indiana Harbor
cokemaking operations ($9 million).
Asset Write-Downs and Other Matters—During 2009, Sunoco recorded a $284 million after-tax
provision in connection with the shutdown of all process units at the Eagle Point refinery; established a $100
million after-tax accrual for employee terminations and related costs in connection with a business improvement
initiative; recorded a $24 million after-tax provision to write down to estimated fair value certain other assets
primarily in the Refining and Supply business, including $3 million after tax attributable to discontinued Tulsa
operations; established $11 million of after-tax accruals related to the shutdown of Chemicals’ polypropylene
plant in Bayport, TX and for costs associated with MTBE litigation; and recognized a $5 million net after-tax
curtailment gain related to a freeze of pension benefits for most participants in the Company’s defined benefit
pension plans and a phasedown or elimination of postretirement medical benefits, effective June 30, 2010.
During 2008, Sunoco recorded a $95 million after-tax provision to write down Refining and Supply’s Tulsa
refinery, which was sold on June 1, 2009; recorded a $35 million after-tax provision to write down Chemicals’
Bayport, TX polypropylene plant; recorded a $19 million after-tax provision to write off the goodwill pertaining
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