NONCONSOLIDATED AFFILIATES

The Company’s investments in companies accounted for using the equity method (“nonconsolidated affiliates”), by classification in the consolidated balance sheets, and dividends received from nonconsolidated affiliates are shown in the following tables:



Investments in Nonconsolidated Affiliates at Dec 31	2017 ¹			2016 ¹
In millions	2017 ¹			2016 ¹
Investment in nonconsolidated affiliates	$	3,742		$	3,747
Other noncurrent obligations	(752		)	(1,030		)
Net investment in nonconsolidated affiliates	$	2,990		$	2,717

The carrying amount of the Company’s investments in nonconsolidated affiliates at December 31, 2017, was $32 million less than its share of the investees’ net assets, exclusive of additional differences for EQUATE and AFSI, which are discussed separately in the disclosures that follow. At December 31, 2016, the carrying amount of the Company’s investments in nonconsolidated affiliates was $62 million more than its share of the investees’ net assets, exclusive of additional differences relating to EQUATE and AFSI.



Dividends Received from Nonconsolidated Affiliates	2017 ¹		2016		2015
In millions	2017 ¹		2016		2015
Dividends from nonconsolidated affiliates	$	865	$	685	$	816

1. Includes a non-cash dividend of $8 million.

Except for AFSI, the nonconsolidated affiliates in which the Company has investments are privately held companies; therefore, quoted market prices are not available.

Dow Corning and the HSC Group

As a result of the DCC Transaction, Dow Corning, previously a 50:50 joint venture between Dow and Corning, became a wholly owned subsidiary of Dow as of June 1, 2016. The Company's equity interest in Dow Corning, which was previously classified as "Investment in nonconsolidated affiliates" in the consolidated balance sheets, was remeasured to fair value. See Note 4 for additional information on the DCC Transaction, including details on the fair value of assets acquired and liabilities assumed. Dow Corning continues to maintain equity interests in the HSC Group, which includes Hemlock Semiconductor L.L.C. and DC HSC Holdings LLC. The negative investment balance in Hemlock Semiconductor L.L.C. was $752 million at December 31, 2017 ($902 million at December 31, 2016).

EQUATE

At December 31, 2017, the Company had an investment balance in EQUATE of $42 million, which is classified as "Investment in nonconsolidated affiliates" in the consolidated balance sheets (negative $128 million at December 31, 2016, classified as "Other noncurrent obligations" in the consolidated balance sheets). The Company's investment in EQUATE was $516 million less than the Company's proportionate share of EQUATE's underlying net assets at December 31, 2017 ($536 million less at December 31, 2016), which represents the difference between the fair values of certain MEGlobal assets acquired by EQUATE and the Company's related valuation on a U.S. GAAP basis. A basis difference of $200 million at December 31, 2017 ($216 million at December 31, 2016) is being amortized over the remaining useful lives of the assets and the remainder is considered a permanent difference.

AFSI

On July 31, 2015, the Company sold its AgroFresh business to AFSI. Proceeds received on the divestiture of AgroFresh included 17.5 million common shares of AFSI, which were valued at $210 million and represented an approximate 35 percent ownership interest in AFSI. Based on the December 31, 2016 closing stock price of AFSI, the value of this investment would have been lower than the carrying value by $143 million. In the fourth quarter of 2016, the Company determined the decline in market value of AFSI was other-than-temporary and recognized a $143 million pretax impairment charge related to its equity interest in AFSI. The impairment charge was included in "Restructuring, goodwill impairment and asset related charges - net" in the consolidated statements of income. At December 31, 2017, the Company's investment in AFSI was $92 million less than the Company's proportionate share of AFSI's underlying net assets ($96 million at December 31, 2016). This amount primarily relates to the other-than-temporary decline in the Company's investment in AFSI.

On April 4, 2017, the Company and AFSI revised certain agreements related to the divestiture of the AgroFresh business and Dow entered into an agreement to purchase up to 5,070,358 shares of AFSI's common stock, which represented approximately 10 percent of AFSI's common stock outstanding at signing of the agreement, subject to certain terms and conditions. At December 31, 2017, the Company held an approximate 36 percent ownership interest in AFSI (35 percent at December 31, 2016). See Notes 5, 22 and 23 for further information on this investment.

Sadara

The Company and Saudi Arabian Oil Company formed Sadara Chemical Company ("Sadara") to build and operate a world-scale, fully integrated chemicals complex in Jubail Industrial City, Kingdom of Saudi Arabia. Sadara achieved its first polyethylene production in December 2015 and announced the start-up of its mixed feed cracker and a third polyethylene train (which added to the two polyethylene trains already in operation) in August 2016. Sadara achieved successful startup of its remaining production units in 2017. At December 31, 2017, the Company had a $275 million note receivable with Sadara, included in "Noncurrent receivables" in the consolidated balance sheets ($258 million at December 31, 2016). In 2017, the Company loaned $735 million to Sadara and $718 million was converted to equity ($1,015 million loaned and $1,230 million converted to equity in 2016).

Transactions with Nonconsolidated Affiliates

The Company has service agreements with certain nonconsolidated affiliates, including contracts to manage the operations of manufacturing sites and the construction of new facilities; licensing and technology agreements; and marketing, sales, purchase, lease and sublease agreements.

The Company sells excess ethylene glycol produced at Dow's manufacturing facilities in the United States and Europe to MEGlobal, an EQUATE subsidiary. The Company also sells ethylene to MEGlobal as a raw material for its ethylene glycol plants in Canada. Sales of these products to MEGlobal represented 1 percent of total net sales in 2017 (1 percent of total net sales in 2016 and 1 percent of total net sales in 2015).

Dow Corning supplies trichlorosilane, a raw material used in the production of polycrystalline silicon, to the HSC Group. Sales of this material to the HSC Group represented less than 1 percent of total net sales in 2017. Sales of this material to the HSC Group for the period of June 1, 2016 through December 31, 2016 represented less than 1 percent of total net sales in 2016.

Dow is responsible for marketing the majority of Sadara products outside of the Middle East zone through the Company’s established sales channels. Under this arrangement, the Company purchases and sells Sadara products for a marketing fee. Purchases of Sadara products represented 3 percent of "Cost of sales" in 2017. Purchases of Sadara products were not material in prior periods.

Dow purchases products from The SCG-Dow Group, primarily for marketing and distribution in the Asia Pacific region. Purchases of The SCG-Dow Group products represented 2 percent of "Cost of sales" in 2017 (3 percent in 2016 and 3 percent in 2015).

Sales to and purchases from other nonconsolidated affiliates were not material to the consolidated financial statements.

Balances due to or due from nonconsolidated affiliates at December 31, 2017 and 2016 are as follows:



Balances Due To or Due From Nonconsolidated Affiliates at Dec 31	2017		2016
In millions	2017		2016
Accounts and notes receivable - Other	$	474	$	388
Noncurrent receivables	283		267
Total assets	$	757	$	655
Notes payable	$	—	$	44
Accounts payable - Other ¹	1,260		400
Total current liabilities	$	1,260	$	444

1. Increase in "Accounts payable - Other" at December 31, 2017, compared with December 31, 2016, is primarily due to higher purchases from Sadara.

Principal Nonconsolidated Affiliates

Dow had an ownership interest in 53 nonconsolidated affiliates at December 31, 2017 (59 at December 31, 2016). The Company's principal nonconsolidated affiliates and its ownership interest (direct and indirect) for each at December 31, 2017, 2016 and 2015 are as follows:



Principal Nonconsolidated Affiliates at Dec 31	Ownership Interest
	2017		2016		2015
Dow Corning Corporation ¹	N/A		N/A		50	%
EQUATE Petrochemical Company K.S.C.	42.5	%	42.5	%	42.5	%
The HSC Group: ²
DC HSC Holdings LLC	50	%	50	%	N/A
Hemlock Semiconductor L.L.C.	50.1	%	50.1	%	N/A
The Kuwait Olefins Company K.S.C.	42.5	%	42.5	%	42.5	%
The Kuwait Styrene Company K.S.C.	42.5	%	42.5	%	42.5	%
Map Ta Phut Olefins Company Limited ³	32.77	%	32.77	%	32.77	%
Sadara Chemical Company	35	%	35	%	35	%
The SCG-Dow Group:
Siam Polyethylene Company Limited	50	%	50	%	50	%
Siam Polystyrene Company Limited	50	%	50	%	50	%
Siam Styrene Monomer Co., Ltd.	50	%	50	%	50	%
Siam Synthetic Latex Company Limited	50	%	50	%	50	%


1.	On June 1, 2016, Dow became the 100 percent owner of Dow Corning. See Note 4 for additional information.


2.	The HSC Group was previously part of the Dow Corning equity method investment and was added as principal nonconsolidated affiliates in the fourth quarter of 2016.


3.	The Company's effective ownership of Map Ta Phut Olefins Company Limited is 32.77 percent, of which the Company directly owns 20.27 percent and indirectly owns 12.5 percent through its equity interest in Siam Polyethylene Company Limited and Siam Synthetic Latex Company Limited.

The Company’s investment in and equity earnings from its principal nonconsolidated affiliates are shown in the tables below:



Investment in Principal Nonconsolidated Affiliates at Dec 31	2017			2016
In millions	2017			2016
Investment in nonconsolidated affiliates	$	3,323		$	3,029
Other noncurrent obligations	(752		)	(1,030		)
Net investment in principal nonconsolidated affiliates	$	2,571		$	1,999



Equity Earnings from Principal Nonconsolidated Affiliates	2017		2016 ¹		2015 ²
In millions	2017		2016 ¹		2015 ²
Equity in earnings of principal nonconsolidated affiliates	$	701	$	449	$	704


1.	Equity in earnings of principal nonconsolidated affiliates for 2016 includes the results of Dow Corning through May 31, 2016.


2.	Equity in earnings of principal nonconsolidated affiliates for 2015 includes the results of Univation through April 30, 2015.

The summarized financial information that follows represents the combined accounts (at 100 percent) of the principal nonconsolidated affiliates.



Summarized Balance Sheet Information at Dec 31	2017		2016 ¹
In millions	2017		2016 ¹
Current assets	$	8,039	$	6,092
Noncurrent assets	28,300		28,588
Total assets	$	36,339	$	34,680
Current liabilities	$	5,164	$	3,953
Noncurrent liabilities	22,240		23,223
Total liabilities	$	27,404	$	27,176
Noncontrolling interests	$	304	$	300


1.	The summarized balance sheet information for 2016 does not include Dow Corning.



Summarized Income Statement Information ¹	2017		2016 ²		2015 ³
In millions	2017		2016 ²		2015 ³
Sales	$	13,345	$	12,003	$	15,468
Gross profit	$	2,461	$	2,518	$	3,206
Net income	$	1,401	$	831	$	1,343


1.	The results in this table reflect purchase and sale activity between certain principal nonconsolidated affiliates and the Company, as previously discussed in the "Transactions with Nonconsolidated Affiliates" section.


2.	The summarized income statement information for 2016 includes the results of Dow Corning through May 31, 2016.


3.	The summarized income statement information for 2015 includes the results of Univation through April 30, 2015 and MEGlobal through November 30, 2015.