Related Party Transactions

6 Months Ended

Jun. 30, 2019

The Partnership and OpCo regularly enter into related party transactions with Westlake. See below for a description of transactions with related parties.

Sales to Related Parties

OpCo sells ethylene to Westlake under the Ethylene Sales Agreement. Additionally, the Partnership and OpCo from time to time provide other services or products for which each charges Westlake a fee.

Sales to related parties were as follows:



	Three Months Ended June 30,				Six Months Ended June 30,
	2019		2018		2019		2018
Net sales—Westlake	$	230,047	$	253,673	$	487,087	$	488,704

Cost of Sales from Related Parties

Charges for goods and services purchased by the Partnership and OpCo from Westlake and included in cost of sales relate primarily to feedstock purchased under the Feedstock Supply Agreement and services provided under the Services and Secondment Agreement.

Charges from related parties in cost of sales were as follows:



	Three Months Ended June 30,				Six Months Ended June 30,
	2019		2018		2019		2018
Feedstock purchased from Westlake and included in cost of sales	$	89,599	$	119,925	$	211,754	$	225,340
Other charges from Westlake and included in cost of sales	27,464		26,537		55,036		54,943
Total	$	117,063	$	146,462	$	266,790	$	280,283

Services from Related Parties Included in Selling, General and Administrative Expenses

Charges for services purchased by the Partnership from Westlake and included in selling, general and administrative expenses primarily relate to services Westlake performs on behalf of the Partnership under the Omnibus Agreement, including the Partnership's finance, legal, information technology, human resources, communication, ethics and compliance and other administrative functions.

Charges from related parties included within selling, general and administrative expenses were as follows:



	Three Months Ended June 30,				Six Months Ended June 30,
	2019		2018		2019		2018
Services received from Westlake and included in selling, general and administrative expenses	$	6,464	$	7,041	$	13,067	$	13,292

Goods and Services from Related Parties Capitalized as Assets

Charges for goods and services purchased by the Partnership and OpCo from Westlake which were capitalized as assets relate primarily to the services of Westlake employees under the Services and Secondment Agreement.

Charges from related parties for goods and services capitalized as assets were as follows:



	Three Months Ended June 30,				Six Months Ended June 30,
	2019		2018		2019		2018
Goods and services purchased from Westlake and capitalized as assets	$	641	$	791	$	1,284	$	1,142

Receivable under the Investment Management Agreement

On August 1, 2017, the Partnership, OpCo and Westlake executed an investment management agreement (the "Investment Management Agreement") that authorized Westlake to invest the Partnership's and OpCo's excess cash with Westlake for a term of up to a maximum of nine months. Per the terms of the Investment Management Agreement, the Partnership earns a market return plus five basis points and Westlake provides daily availability of the invested cash to meet any liquidity needs of the Partnership or OpCo. Accrued interest of $371 and $496 was included in the receivable under the Investment Management Agreement balance at June 30, 2019 and December 31, 2018, respectively. Total interest earned related to the Investment Management Agreement was $1,155 and $568 for the three months ended June 30, 2019 and 2018, respectively, and $1,973 and $1,108 for the six months ended June 30, 2019 and 2018, respectively.

The Partnership's receivable under the Investment Management Agreement was as follows:



	June 30, 2019		December 31, 2018
Receivable under the Investment Management Agreement	$	141,327	$	148,956

Accounts Receivables

The Partnership's accounts receivable from Westlake result primarily from ethylene sales to Westlake under the Ethylene Sales Agreement.

The Partnership's accounts receivable from Westlake were as follows:



	June 30, 2019		December 31, 2018
Accounts receivable—Westlake	$	38,995	$	57,280

Accounts Payable to Related Parties

The Partnership's accounts payable to Westlake result primarily from feedstock purchases under the Feedstock Supply Agreement and services provided under the Services and Secondment Agreement and the Omnibus Agreement.

The related party accounts payable balances were as follows:



	June 30, 2019		December 31, 2018
Accounts payable—Westlake	$	9,996	$	27,477

Related Party Leases

OpCo is obligated to Westlake under various rail cars leases. Operating lease rentals paid to Westlake for such leases were $562 and $700 for the three months ended June 30, 2019 and 2018, respectively, and $1,076 and $1,018 for six months ended June 30, 2019 and 2018, respectively, and reflected in other charges from Westlake that are included in cost of sales.

OpCo has two site lease agreements with Westlake, each of which has a term of 50 years. Pursuant to the site lease agreements, OpCo pays Westlake one dollar per site per year.

Debt Payable to Related Parties

See Note 9 for a description of related party debt payable balances. Interest on related party debt payable balances for the three months ended June 30, 2019 and 2018 was $5,125 and $5,547, respectively, and for the six months ended June 30, 2019 and 2018 was $11,025 and $10,413, respectively. Interest on related party debt payable is presented as interest expense—Westlake in the consolidated statements of operations. Interest capitalized as a component of property, plant and equipment on related party debt was zero and $31 for the three months ended June 30, 2019 and 2018, respectively, and for the six months ended June 30, 2019 and 2018 was zero and $46, respectively. At June 30, 2019 and December 31, 2018, accrued interest on related party debt was $5,384 and $5,448, respectively, and is reflected as a component of accrued liabilities in the consolidated balance sheets.

Debt payable to related parties was as follows:



	June 30, 2019		December 31, 2018
Long-term debt payable to Westlake	$	399,674	$	477,608

Major Customer and Concentration of Credit Risk

During the three months ended June 30, 2019 and 2018, Westlake accounted for approximately 85.2% and 84.0%, respectively, of the Partnership's net sales. During the six months ended June 30, 2019 and 2018, Westlake accounted for approximately 85.6% and 83.4%, respectively, of the Partnership's net sales.

Other

See Note 7 above for an additional related party transaction.