Dow Chemical 2011 Annual Report Download - page 129

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On July 25, 2011, the Company and Saudi Arabian Oil Company (“Saudi Aramco”) announced that the Board of Directors
of both companies had approved the formation of a joint venture, Sadara Chemical Company (“Sadara”), to build and operate a
world-scale, fully integrated chemicals complex in Jubail Industrial City, Kingdom of Saudi Arabia. On October 8, 2011, the
Shareholders' Agreement was signed. Comprised of 26 manufacturing units, building on Saudi Aramco's project management
and execution expertise, and utilizing many of Dow's industry leading technologies, the complex will be one of the world's
largest integrated chemical facilities, and the largest ever built in a single phase. The complex will possess flexible cracking
capabilities and will produce over 3 million metric tons of high value-added chemical products and performance plastics,
capitalizing on rapidly growing end-markets in energy, transportation, infrastructure and consumer products. Construction
began immediately and the first production units are expected to come on-line in the second half of 2015, with all units
expected to be up and running in 2016. Sadara is expected to deliver annual revenues of approximately $10 billion within a few
years of operation. Total project investment, including third-party investments, is expected to be approximately $20 billion. In
addition to equity from the partners, Export Credit Agencies and financial institutions will provide project financing to Sadara.
Sundry income (expense) - net includes a variety of income and expense items such as the gain or loss on foreign currency
exchange, dividends from investments, and gains and losses on sales of investments and assets. Sundry income (expense) - net
for 2011 was net expense of $316 million, compared with net income of $125 million in 2010 and net income of $891 million
in 2009. In 2011, sundry income (expense) - net included a $482 million loss on the early extinguishment of debt (reflected in
Corporate), a $42 million loss on the sale of a contract manufacturing business (reflected in Performance Materials) and losses
on foreign currency exchange, partially offset by a small gain on the divestiture of the Polypropylene business (reflected in
Performance Plastics) and gains on other small divestitures and asset sales, $25 million of dividend income received from the
Company's ownership interest in Styron (reflected in Corporate), gains from the mark-to-market of trading securities, favorable
working capital adjustments from prior divestitures, and a gain from the consolidation of a joint venture.
In 2010, sundry income (expense) - net included a net $27 million gain on the Styron divestiture, reflected in the following
operating segments: Performance Materials ($20 million) and Performance Plastics ($7 million). In addition to the net gain on
the Styron divestiture, sundry income (expense) - net for 2010 included net gains on several other divestitures, partially offset
by a loss of $46 million related to the early extinguishment of debt and a charge of $47 million for an obligation related to a
past divestiture (both reflected in Corporate).
Sundry income (expense) - net in 2009 included a gain of $513 million on the sale of the Company's ownership interest in
TRN and related inventory on September 1, 2009 (reflected in Feedstocks and Energy) and a gain of $339 million on the sale of
the Company's ownership interest in OPTIMAL on September 30, 2009 (reflected in Performance Materials ($146 million) and
Feedstocks and Energy ($193 million)). Sundry income (expense) - net in 2009 was reduced by a loss of $56 million related to
the Company's early extinguishment of debt in the third quarter of 2009 (reflected in Corporate). See Liquidity and Capital
Resources in Management's Discussion and Analysis of Financial Condition and Results of Operations; and Note P to the
Consolidated Financial Statements for additional information on the Company's early extinguishment of debt. See Note E to the
Consolidated Financial Statements for additional information concerning the Company's divestitures.
Net interest expense (interest expense less capitalized interest and interest income) was $1,301 million in 2011, down from
$1,436 million in 2010, reflecting the impact of redemption of certain notes and InterNotes during the year. In 2010, net interest
expense decreased compared with net interest expense of $1,532 million in 2009, reflecting lower debt financing costs. Interest
income was $40 million in 2011, up slightly from $37 million in 2010 and $39 million in 2009. Interest expense (net of
capitalized interest) and amortization of debt discount totaled $1,341 million in 2011, $1,473 million in 2010 and
$1,571 million in 2009. See Liquidity and Capital Resources in Management's Discussion and Analysis of Financial Condition
and Results of Operations for additional information regarding debt financing activity.