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Related Party Transactions

9 Months Ended

Sep. 30, 2020

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:



	Three Months Ended September 30,				Nine Months Ended September 30,
	2020		2019		2020		2019
Net sales—Westlake	$	217,763	$	216,678	$	660,022	$	703,765

During the third quarter of 2020, the Lake Charles Petro 1 and Petro 2 facilities were impacted by Hurricane Laura, which resulted in a force majeure event under the Ethylene Sales Agreement. As a result of the force majeure event, the Partnership recognized a buyer deficiency fee of $41,329 as a component of net sales in the quarter ended September 30, 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 event. Payment for the buyer deficiency fee is scheduled to be received by the Partnership after the conclusion of the year.

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 September 30,				Nine Months Ended September 30,
	2020		2019		2020		2019
Feedstock purchased from Westlake and included in cost of sales	$	60,646	$	73,813	$	189,608	$	285,567
Other charges from Westlake and included in cost of sales	23,166		25,990		71,164		81,026
Total	$	83,812	$	99,803	$	260,772	$	366,593

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 September 30,				Nine Months Ended September 30,
	2020		2019		2020		2019
Services received from Westlake and included in selling, general and administrative expenses	$	5,679	$	6,808	$	16,492	$	19,875

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 September 30,				Nine Months Ended September 30,
	2020		2019		2020		2019
Goods and services purchased from Westlake and capitalized as assets	$	404	$	634	$	1,268	$	1,918

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 $69 and $601 was included in the receivable under the Investment Management Agreement balance at September 30, 2020 and December 31, 2019, respectively. Total interest earned related to the Investment Management Agreement was $69 and $716 for the three months ended September 30, 2020 and 2019, respectively, and $876 and $2,688 for the nine months ended September 30, 2020 and 2019, respectively.

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



	September 30, 2020		December 31, 2019
Receivable under the Investment Management Agreement	$	191,241	$	162,773

Accounts Receivable from Related Parties

The Partnership's accounts receivable from Westlake result primarily from ethylene sales to Westlake and the buyer deficiency fee recognized under the Ethylene Sales Agreement, as discussed above under "Sales to Related Parties."

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



	September 30, 2020		December 31, 2019
Accounts receivable—Westlake	$	56,237	$	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 related party accounts payable balances were as follows:



	September 30, 2020		December 31, 2019
Accounts payable—Westlake	$	17,923	$	15,201

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 $407 and $597 for the three months ended September 30, 2020 and 2019, respectively, and $1,803 and $1,673 for the nine months ended September 30, 2020 and 2019, 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 September 30, 2020 and 2019 was $2,320 and $4,411, respectively. Interest on related party debt payable balances for the nine months ended September 30, 2020 and 2019 was $9,701 and $15,436, respectively. Interest on related party debt payable is presented as interest expense—Westlake in the consolidated statements of operations. At September 30, 2020 and December 31, 2019, accrued interest on related party debt was $2,320 and $4,187, respectively, and is reflected as a component of accrued liabilities in the consolidated balance sheets.

Debt payable to related parties was as follows:



	September 30, 2020		December 31, 2019
Long-term debt payable to Westlake	$	399,674	$	399,674

Major Customer and Concentration of Credit Risk

During the three months ended September 30, 2020 and 2019, Westlake accounted for approximately 93.9% and 86.7%, respectively, of the Partnership's net sales. During the nine months ended September 30, 2020 and 2019, Westlake accounted for approximately 91.5% and 85.9%, respectively, of the Partnership's net sales.

Other

See Note 7 above for an additional related party transaction.