Sunoco 2008 Annual Report Download - page 47

In November 2008, the Partnership purchased a refined products pipeline system, refined products terminal
facilities and certain other related assets located in Texas and Louisiana from affiliates of Exxon Mobil
Corporation for $185 million. In March 2006, the Partnership purchased two separate crude oil pipeline systems
and related storage facilities located in Texas, one from affiliates of Black Hills Energy, Inc. (“Black Hills”) for
$41 million and the other from affiliates of Alon USA Energy, Inc. for $68 million. The Black Hills acquisition
also includes a lease acquisition marketing business and related inventory. During 2008, the Partnership
continued its construction of new crude oil storage tanks, four of which were placed into service in 2007 and
three in 2008. In August 2006, the Partnership purchased from Sunoco for $65 million a company that has a 55
percent interest in Mid-Valley Pipeline Company, a joint venture which owns a crude oil pipeline system in the
Midwest. Sunoco did not recognize any gain or loss on this transaction. The Partnership intends to take
advantage of additional growth opportunities in the future, both within its current system and with third-party
acquisitions.
Coke
The Coke business, through SunCoke Energy, Inc. and its affiliates (individually and collectively, “SunCoke
Energy”), currently makes high-quality, blast-furnace coke at its Indiana Harbor facility in East Chicago, IN, at
its Jewell facility in Vansant, VA, at its Haverhill facilities in Franklin Furnace, OH, and at a facility in Vitória,
Brazil, and produces metallurgical coal from mines in Virginia, primarily for use at the Jewell cokemaking
facility. In addition, the Indiana Harbor plant produces heat as a by-product that is used by a third party to
produce electricity. The Haverhill facility produces steam that is sold to Sunoco’s Chemicals business and
electricity from its associated cogeneration power plant for the regional power market. The Vitória, Brazil
facility commenced operations in 2007. SunCoke Energy is the operator of the Vitória facility, and, during 2007,
increased its investment in the project company by becoming the sole subscriber of preferred shares for a total
equity interest of $41 million. An additional cokemaking facility is currently under construction in Granite City,
IL, which is expected to be completed in the fourth quarter of 2009 and an agreement has been entered into for a
cokemaking facility and associated cogeneration power plant to be built, owned and operated by SunCoke
Energy in Middletown, OH, which is subject to resolution of all contingencies, including necessary permits.
2008 2007 2006
Income (millions of dollars) ........................................... $105 $29 $50
Coke production (thousands of tons):
United States ..................................................... 2,626 2,469 2,510
Brazil ........................................................... 1,581 1,091 —
Coke segment income increased $76 million in 2008 primarily due to increased price realizations from coke
production at Jewell. Partially offsetting this positive factor were higher minority interest, selling, general and
administrative and depreciation expenses.
Coke segment income decreased $21 million in 2007 primarily due to a $12 million increase in the partial
phase-out of tax credits resulting from the high level of crude oil prices and the absence of a $3 million
investment tax credit adjustment related to the Haverhill facility. Also contributing to the decline in earnings
were higher costs and lower sales prices at the Jewell coal operations and higher depreciation and selling, general
and administrative expenses. Partially offsetting these negative factors was $4 million of income from the
cokemaking facility in Vitória, Brazil. In 2007 and 2006, Coke recorded 30 and 65 percent, respectively, of the
tax credits that otherwise would have been available without regard to the phase-out provisions with the partial
phase-out reducing earnings by $20 and $8 million, respectively, during those periods.
Sunoco received a total of $309 million in exchange for interests in its Jewell cokemaking operations in two
separate transactions in 1995 and 2000. Sunoco also received a total of $415 million in exchange for interests in
its Indiana Harbor cokemaking operations in two separate transactions in 1998 and 2002. Sunoco did not
recognize any gain as of the dates of these transactions because the third-party investors were entitled to a
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