
4.	RELATED-PARTY TRANSACTIONS

Agreements Effective with the Houston and St. Charles Terminal Acquisition

The following agreements became effective on March 1, 2015, the date of the Houston and St. Charles Terminal Acquisition.

Commercial Agreements

In connection with the Houston and St. Charles Terminal Acquisition, we entered into additional schedules under our existing master transportation services agreement and master terminal services agreement (collectively, the commercial agreements) with Valero with respect to each terminal acquired. Each schedule has an initial term through March 1, 2025 and, in the case of the Houston Terminal, provides us an option to renew for one additional five-year term, and, in the case of the St. Charles Terminal, provides us an option to renew for one additional term through January 31, 2030.

Amended and Restated Omnibus Agreement

In connection with the Houston and St. Charles Terminal Acquisition, we entered into amended and restated schedules to our amended and restated omnibus agreement with Valero that include the following modifications, among others:


•	the indemnification obligations of Valero and the Partnership were extended to apply to the Houston Terminal and the St. Charles Terminal;


•	our payment of an annual administrative fee was increased from $9.2 million to $10.4 million per year, which amount will be prorated for the remainder of 2015 based on the number of days from March 1, 2015 to December 31, 2015; and


•	the grant to Valero of a right of first refusal with respect to the Houston Terminal and the St. Charles Terminal.

Amended and Restated Services and Secondment Agreement

In connection with the Houston and St. Charles Terminal Acquisition, our general partner entered into an amended and restated services and secondment agreement with Valero to provide for the additional secondment of employees to our general partner for the provision of services with respect to the assets acquired in the Houston and St. Charles Terminal Acquisition.

Lease and Access Agreements

In connection with the Houston and St. Charles Terminal Acquisition, we entered into two lease and access agreements with Valero with respect to the land on which each terminal is located. Each agreement has an initial term through March 1, 2025 with four automatic successive renewal periods of five years each, provided that the final renewal period for the St. Charles terminal agreement will end on December 31, 2044. Either party may terminate the lease after the initial term by providing written notice. Initially, our base rent under the Houston and St. Charles terminal agreements is $1.7 million per year and $4.7 million per year, respectively, and each agreement is subject to annual inflation escalators.

Subordinated Credit Agreement

In connection with the Houston and St. Charles Terminal Acquisition, we entered into a subordinated credit agreement with Valero as further described in Note 6.

Summary of Transactions

Receivables from related party consist of the following (in thousands):



	March 31, 2015			December 31, 2014
	March 31, 2015			December 31, 2014
Trade receivables – related party	$	20,339		$	10,515
Due to related party	(4,178		)	(2,016		)
Receivables from related party	$	16,161		$	8,499

The amounts shown in our balance sheets as deferred revenue from related party represent the unearned revenues from Valero associated with Valero’s quarterly deficiency payment, which is the result of Valero not meeting its minimum quarterly throughput commitments under our commercial agreements.

The following table reflects significant transactions with Valero (in thousands):



	Three Months Ended March 31,
	2015		2014 (a)
Operating revenues – related party	$	41,886	$	29,489
Operating expenses	6,555		6,029
General and administrative expenses	2,512		2,587

(a) Prior period financial information has been retrospectively adjusted for the Acquisitions.

Costs associated with Valero’s benefit plans were included in the costs allocated to our Predecessor. Our share of pension and postretirement costs and defined contribution plans costs was as follows (in thousands):



	Three Months Ended March 31,
	2015		2014 (a)
Pension and postretirement costs	$	2	$	35
Defined contribution plan costs	2		31

(a) Prior period financial information has been retrospectively adjusted for the Acquisitions.

Concentration Risk

All of our operating revenues were derived from transactions with Valero and all of our receivables were due from Valero. Therefore, we are subject to the business risks associated with Valero’s business.

Leases

Certain schedules under our commercial agreements with Valero are considered operating leases under U.S. GAAP. These agreements contain minimum throughput requirements and escalation clauses to adjust transportation tariffs and terminaling and storage fees to reflect changes in price indices. Revenues from all lease agreements are recorded within “operating revenues – related party” in our consolidated statements of income. Contingent lease revenues from all lease agreements totaled $2.7 million and $0.2 million for the three months ended March 31, 2015 and 2014, respectively.

As of March 31, 2015, future minimum rentals to be received related to these noncancelable lease agreements were as follows (in thousands):



Remainder of 2015	$	96,306
2016	127,824
2017	127,824
2018	127,824
2019	127,824
Thereafter	637,196
Total minimum rental payments	$	1,244,798