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Related Party Transactions

12 Months Ended

Dec. 31, 2020

11. Related Party Transactions

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 it charges Westlake a fee.

Sales to related parties were as follows:


	Year Ended December 31,
	2020		2019		2018
Net sales—Westlake	$	888,245	$	937,625	$	1,074,957

Under the Services and Secondment Agreement, OpCo uses a portion of its production capacity to process purge gas for Westlake. On August 4, 2016, OpCo and Westlake entered into an amendment to the Ethylene Sales Agreement in order to provide that certain of the pricing components that make up the price for ethylene sold thereunder would be modified to reflect the portion of OpCo's production capacity that is used to process Westlake's purge gas instead of producing ethylene and to clarify that costs specific to the processing of Westlake's purge gas would be recovered under the Services and Secondment Agreement, and not the Ethylene Sales Agreement.

During the year ended December 31, 2020, the Lake Charles Petro 1 and Petro 2 facilities were impacted by Hurricanes Laura and Delta, which resulted in force majeure events under the Ethylene Sales Agreement. As a result of the force majeure events, the Partnership recognized a buyer deficiency fee of $69,555 as a component of net sales for the year ended December 31, 2020, representing fixed margin and unavoided operating and maintenance capital expenditures and maintenance expenses per pound of volume committed by Westlake during the force majeure events. Payment for the buyer deficiency fee was received by the Partnership in January 2021.

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:


	Year Ended December 31,
	2020		2019		2018
Feedstock purchased from Westlake and included in cost of sales	$	255,910	$	366,031	$	556,362
Other charges from Westlake and included in cost of sales	103,273		106,564		114,364
Total	$	359,183	$	472,595	$	670,726

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:


	Year Ended December 31,
	2020		2019		2018
Services received from Westlake and included in selling, general and administrative expenses	$	22,162	$	26,946	$	24,618

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:


	Year Ended December 31,
	2020		2019		2018
Goods and services purchased from Westlake and capitalized as assets	$	1,736	$	2,503	$	2,519

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 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 $56 and $601 was included in the receivable under the Investment Management Agreement balance at December 31, 2020 and 2019, respectively. The interest earned related to the Investment Management Agreement was $932, $3,289 and $2,646 for the years ended December 31, 2020, 2019 and 2018, respectively.

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


	December 31,
	2020		2019
Receivable under the Investment Management Agreement	$	123,228	$	162,773

Accounts Receivable from Related Parties

The Partnership's accounts receivable from Westlake result primarily from ethylene sales to Westlake, any shortfall recoverable from Westlake and any buyer deficiency fees, in each case under the Ethylene Sales Agreement. Under the Ethylene Sales Agreement, if production costs billed to Westlake on an annual basis are less than 95% of the actual production costs incurred by OpCo during the year, OpCo is entitled to recover the shortfall in the subsequent year. The shortfall is recognized in the period when such production activities occur. The Partnership's accounts receivable from Westlake were as follows:


	December 31,
	2020		2019
Accounts receivable—Westlake	$	108,028	$	42,847

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 Partnership's accounts payable to Westlake were as follows:


	December 31,
	2020		2019
Accounts payable—Westlake	$	7,855	$	15,201

Debt Payable to Related Parties

See Note 8 for a description of related party debt payable balances.

Interest on related party debt payable balances, net of capitalized interest, for the years ended December 31, 2020, 2019 and 2018 was $12,038, $19,623 and $21,433, respectively, and is reflected as a component of other income (expense) in the consolidated and statements of operations. Interest capitalized as a component of property, plant and equipment on related party debt was zero for the years ended December 31, 2020 and 2019, respectively. At December 31, 2020 and 2019, accrued interest on related party debt was $2,336 and $4,187, and is reflected as a component of accrued liabilities in the consolidated balance sheets.

Debt payable to related parties was as follows:


	December 31,
	2020		2019
Long-term debt payable to Westlake	$	399,674	$	399,674

Related Party Leases

OpCo is obligated to Westlake under various long-term and short-term noncancelable operating leases, primarily related to rail car leases and land. Operating lease rentals paid to Westlake for such leases were $3,038, $2,343 and $2,219 for the years ended December 31, 2020, 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.

Major Customer and Concentration of Credit Risk

During the years ended December 31, 2020, 2019 and 2018, Westlake accounted for approximately 91.9%, 85.9% and 83.6%, respectively, of the Partnership's net sales.

General

During the years ended December 31, 2020, 2019 and 2018, the Partnership reimbursed $279, $293 and $418, respectively, to Westlake for certain state tax payments.

Other

See Note 10 above for an additional related party transaction.