Dow Chemical 2011 Annual Report Download - page 226

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The sixth joint venture is an ethylene storage joint venture located in Alberta, Canada. Previously accounted for as an
equity method investment, the Company became the primary beneficiary upon execution of new storage cavern agreements in
the second quarter of 2011. The Company's variable interests relate to arrangements involving a majority of the joint venture's
storage capacity on take-or-pay terms with pricing ensuring a guaranteed return to the joint venture; and favorably priced leases
provided to the joint venture. The Company provides the joint venture with operation and maintenance services and utilities.
The seventh joint venture is a development-stage enterprise located in Brazil that will produce ethanol from sugarcane and
expand into downstream derivative products. The Company owned 100 percent of this entity until November 2011, when the
Company sold a 50 percent interest to a third party. The Company's variable interests in this joint venture relate to an equity
option between the partners and contractual arrangements limiting the partner's initial participation in the economics of certain
assets and liabilities. Terms of the equity option require the Company to purchase the partner's equity investment at a fixed
price if the partner elects to terminate a specific contract within 24 months of initial equity investment. Therefore, the Company
has classified the partner's equity investment as "Redeemable Noncontrolling Interest" in the consolidated balance sheets. The
joint venture is expected to begin operations in 2015.
The Company also holds a variable interest in an owner trust, for which the Company is the primary beneficiary. The
owner trust leases an ethylene facility in The Netherlands to the Company, whereby substantially all of the rights and
obligations of ownership are transferred to the Company. The Company’s variable interest in the owner trust relates to a
residual value guarantee provided to the owner trust. Upon expiration of the lease, which matures in 2014, the Company may
purchase the facility for an amount based on a fair market value determination. At December 31, 2011, the Company had
provided to the owner trust a residual value guarantee of $363 million, which represents the Company’s maximum exposure to
loss under the lease.
As the primary beneficiary of these VIEs, the entities’ assets, liabilities and results of operations are included in the
Company’s consolidated financial statements. The other equity holders’ interests are reflected in “Net income attributable to
noncontrolling interests” in the consolidated statements of income and “Noncontrolling interests” in the consolidated balance
sheets except as noted above. The following table summarizes the carrying amounts of these entities’ assets and liabilities
included in the Company’s consolidated balance sheets at December 31, 2011 and 2010:
Assets and Liabilities of Consolidated VIEs at December 31
In millions
Cash and cash equivalents (2)
Other current assets
Property
Other noncurrent assets
Total assets (3)
Current liabilities (nonrecourse 2011: $226; 2010: $190)
Long-term debt (nonrecourse 2011: $1,138; 2010: $167)
Other noncurrent liabilities (nonrecourse 2011: $86; 2010: $64)
Total liabilities
2011
$ 170
104
2,169
151
$ 2,594
$ 226
1,484
86
$ 1,796
2010 (1)
$ 145
83
1,388
122
$ 1,738
$ 837
513
64
$ 1,414
(1) December 31, 2010 values do not include assets and liabilities attributable to a development-stage
enterprise located in Brazil that became a VIE in November 2011 and an ethylene storage joint
venture located in Canada that became a VIE in the second quarter of 2011.
(2) Included $3 million at December 31, 2011 specifically restricted for the construction of a
manufacturing facility.
(3) All assets were restricted at December 31, 2011 and December 31, 2010.
In addition, the Company holds a variable interest in an entity created to monetize accounts receivable of select European
entities. The Company is the primary beneficiary of this entity as a result of holding subordinated notes while maintaining
servicing responsibilities for the accounts receivable. The carrying amounts of assets and liabilities included in the Company’s
consolidated balance sheets pertaining to this entity, were current assets of $233 million (zero restricted) at December 31, 2011
($158 million, zero restricted, at December 31, 2010) and current liabilities of less than $1 million (less than $1 million
nonrecourse) at December 31, 2011 ($1 million, $1 million nonrecourse, at December 31, 2010).
Amounts presented in the consolidated balance sheets and the table above as restricted assets or nonrecourse obligations
relating to consolidated VIEs at December 31, 2011 and 2010 are adjusted for intercompany eliminations, parental guarantees
and residual value guarantees.