HollyFrontier 2014 Annual Report Download - page 34

Table of Content
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We may not be able to obtain funding on acceptable terms or at all because of volatility and uncertainty in the credit and capital
markets. This may hinder or prevent us from meeting our future capital needs.
The domestic and global financial markets and economic conditions are disrupted and volatile from time to time due to a variety
of factors, including low consumer confidence, high unemployment, geoeconomic and geopolitical issues, weak economic
conditions and uncertainty in the financial services sector. In addition, the fixed-income markets have experienced periods of
extreme volatility, which negatively impacted market liquidity conditions. As a result, the cost of raising money in the debt and
equity capital markets has increased substantially at times while the availability of funds from these markets diminished
significantly. In particular, as a result of concerns about the stability of financial markets generally and the solvency of lending
counterparties specifically, the cost of obtaining money from the credit markets may increase as many lenders and institutional
investors increase interest rates, enact tighter lending standards, refuse to refinance existing debt on similar terms or at all and
reduce, or in some cases cease, to provide funding to borrowers. In addition, lending counterparties under any existing revolving
credit facility and other debt instruments may be unwilling or unable to meet their funding obligations, or we may experience a
decrease in our capacity to issue debt or obtain commercial credit or a deterioration in our credit profile, including a rating agency
lowering or withdrawing of our credit ratings if, in its judgment, the circumstances warrant. Due to these factors, we cannot be
certain that new debt or equity financing will be available on acceptable terms. If funding is not available when needed, or is
available only on unfavorable terms, we may be unable to meet our obligations as they come due or we may be required to sell
assets. Moreover, without adequate funding, we may be unable to execute our growth strategy, complete future acquisitions or
construction projects, take advantage of other business opportunities or respond to competitive pressures, comply with regulatory
requirements, or meet our short-term or long-term working capital requirements, any of which could have a material adverse effect
on our revenues and results of operations. Failure to comply with regulatory requirements in a timely manner or meet our short-
term or long-term working capital requirements could subject us to regulatory action.
We depend upon HEP for a substantial portion of the crude supply and distribution network that serve our refineries and we
own a significant equity interest in HEP.
We currently own a 39% interest in HEP, including the 2% general partner interest. HEP operates a system of crude oil and
petroleum product pipelines, distribution terminals and refinery tankage in Arizona, Idaho, Kansas, New Mexico, Oklahoma,
Texas, Utah, Washington and Wyoming. HEP generates revenues by charging tariffs for transporting petroleum products and crude
oil through its pipelines, leasing certain pipeline capacity to Alon, charging fees for terminalling refined products and other
hydrocarbons and storing and providing other services at its terminals. HEP serves the Cheyenne, El Dorado, Navajo, Woods
Cross and Tulsa Refineries under several long-term pipeline and terminal, tankage and throughput agreements expiring in 2019
through 2026. Furthermore, our financial statements include the consolidated results of HEP. HEP is subject to its own operating
and regulatory risks, including, but not limited to:
• its reliance on its significant customers, including us;
• competition from other pipelines;
• environmental regulations affecting pipeline operations;
• operational hazards and risks;
• pipeline tariff regulations affecting the rates HEP can charge;
• limitations on additional borrowings and other restrictions due to HEP's debt covenants; and
• other financial, operational and legal risks.
The occurrence of any of these risks could directly or indirectly affect HEP's as well as our financial condition, results of operations
and cash flows as HEP is a consolidated VIE. Additionally, these risks could affect HEP's ability to continue operations which
could affect their ability to serve our supply and distribution network needs.
For additional information about HEP, see “Holly Energy Partners, L.P.” under Items 1 and 2, “Business and Properties.” For risks
related to HEP's business, see Item 1A of HEP's Annual Report on Form 10-K for the fiscal year ended December 31, 2014.
We are exposed to the credit risks, and certain other risks, of our key customers and vendors.
We are subject to risks of loss resulting from nonpayment or nonperformance by our customers. We derive a significant portion
of our revenues from contracts with key customers.
If any of our key customers default on their obligations to us, our financial results could be adversely affected. Furthermore, some
of our customers may be highly leveraged and subject to their own operating and regulatory risks. In addition, nonperformance
by vendors who have committed to provide us with products or services could result in higher costs or interfere with our ability
to successfully conduct our business.