Sunoco 2012 Annual Report Download - page 66

for environmental remediation activities will depend upon, among other things, the identification of any
additional sites, the determination of the extent of the contamination at each site, the timing and nature of
required remedial actions, the technology available and needed to meet the various existing legal requirements,
the nature and extent of future environmental laws, inflation rates, and the determination of the liability at
multiparty sites, if any, in light of the number, participation levels, and financial viability of other parties. We
have agreed to indemnify Sunoco and its affiliates for events and conditions associated with the operation of the
assets that occur on or after the closing of the IPO and for environmental and toxic tort liabilities to the extent
Sunoco is not required to indemnify us.
Sunoco has also agreed to indemnify us for liabilities relating to:
• the assets contributed to the Partnership, other than environmental and toxic tort liabilities, that arise
out of the operation of the assets prior to the closing of the IPO and that are asserted within ten years
after the closing of the IPO;
• certain defects in title to the assets contributed to the Partnership and failure to obtain certain consents
and permits necessary to conduct the business that arise within ten years after the closing of the IPO;
• legal actions related to the period prior to the IPO currently pending against Sunoco or its affiliates;
and
• events and conditions associated with any assets retained by Sunoco or its affiliates.
Treasury Services Agreement
We have a treasury services agreement with Sunoco pursuant to which, among other things, we participate
in Sunoco’s centralized cash management program. Under this program, all of the cash receipts and cash
disbursements are processed, together with those of Sunoco and its other subsidiaries, through Sunoco’s cash
accounts with a corresponding credit or charge to an affiliated account. The affiliated balances are settled
periodically, but no less frequently than monthly. Amounts due from Sunoco and its subsidiaries earn interest at a
rate equal to the average rate of our third-party money market investments, while amounts due to Sunoco and its
subsidiaries bear interest at a rate equal to the interest rate provided in the $350 million Credit Facility.
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
We are exposed to various market risks, including changing interest rates and volatility in crude oil and
refined products commodity prices. To manage such exposure, interest rates, inventory levels and expectations of
future commodity prices are monitored when making decisions with respect to risk management.
Interest Rate Risk
We have interest-rate risk exposure for changes in interest rates relating to our outstanding borrowings. We
manage our exposure to changing interest rates through the use of a combination of fixed- and variable-rate debt.
At December 31, 2012, we had $139 million of variable-rate borrowings under our revolving credit facilities.
Outstanding borrowings bear interest cost of LIBOR plus an applicable margin. An increase in short-term interest
rates will have a negative impact on funds borrowed under variable-rate debt arrangements.
At December 31, 2012, we had $1.45 billion of fixed-rate borrowings which was comprised of our
outstanding senior notes. This amounts excludes the $143 million premium resulting from the adjustment of our
assets and liabilities to fair value resulting from the application of push-down accounting in connection with the
acquisition of the general partner by ETP. The estimated fair value of our senior notes was $1.64 billion at
December 31, 2012. A hypothetical one-percent decrease in interest rates would increase the fair value of our
fixed-rate borrowings at December 31, 2012 by approximately $150 million.
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