Equity Method Investments

9 Months Ended

Sep. 30, 2022

Equity Method Investments and Joint Ventures [Abstract]

Equity Method Investments

Equity Method Investments

Wink to Webster Pipeline

On February 21, 2020, we, through our wholly-owned direct subsidiary Delek Energy, entered into the W2W Holdings LLC Agreement with MPLX Operations LLC ("MPLX") (collectively, with its wholly-owned subsidiaries, the "WWP Project Financing Joint Venture" or the "WWP Project Financing JV"). The WWP Project Financing JV was created for the specific purpose of obtaining financing to fund our combined capital calls resulting from and occurring during the construction period of the pipeline system under the Wink to Webster Pipeline LLC ("WWP") Joint Venture, and to service that debt. In connection with the arrangement, both Delek Energy and MPLX contributed their respective 15% ownership interests in WWP to the WWP Project Financing JV as collateral for and in service of the related project financing. On June 2, 2022, the WWP Project Financing JV refinanced its project finance debt using the proceeds from a $535.0 million senior secured notes issuance due January 31, 2032. In connection with this notes issuance, on June 2, 2022 the WWP Project Financing JV also entered into a senior secured credit agreement that provides for revolving loan commitments in an amount of up to $75.0 million and the issuance of letters of credit in an amount of up to $44.0 million. The maturity date of the revolver and letter credit commitments is June 2, 2027. Distributions received from WWP through the WWP Project Financing JV will first be applied in service of its debt, with excess distributions being made to the members of the WWP Project Financing JV as provided for in the W2W Holdings LLC Agreement and as allowed for under its debt agreements. The obligations of the members under the W2W Holdings LLC Agreement are guaranteed by the parents of the members of the WWP Project Financing JV. On October 13, 2022, we received a $7.9 million excess distribution in accordance with financing arrangements and the W2W Holdings LLC Agreement.

The Company evaluated Delek Energy's investment in W2W Holdings LLC ("HoldCo") and determined that HoldCo is a VIE. The Company determined it is not the primary beneficiary since it does not have the power to direct activities that most significantly impact HoldCo. The Company does not hold a controlling financial interest in HoldCo because no single party has the power to direct the activities that most significantly impact HoldCo’s economic performance since power to make the decisions about the significant activities is shared equally with MPLX and all significant decisions require unanimous consent of the board of directors of HoldCo. The Company accounts for its investment in HoldCo using the equity method of accounting due to its significant influence with its 50% membership interest.

The Company's maximum exposure to any losses incurred by HoldCo is limited to its investment. As of September 30, 2022, except for the guarantee of member obligations under the W2W Holdings LLC Agreement, the Company does not have other existing guarantees with or to HoldCo, or any third-party for work contracted with it.

On September 30, 2021, WWP made the decision to buy Delek out of the Midland Connector Financing Commitment Agreement which provided an interest-free commitment to fund us up to $65.0 million upon completion of a connector to connect the WWP long-haul pipeline to our Big Spring Gathering System, with repayment over 14 years. The buy-out totaled $27.5 million and represented the estimated incremental cost of capital to fund the $65.0 million in expenditures over a 14-year term, and enabled us to recover approximately $18.0 million of capital expenditures that we may not have incurred had it not been for the financing commitment, including approximately $6.6 million that was written off during the third quarter. As a result of the transaction, we recognized $20.9 million of other non-operating income in the third quarter, representing the excess over our current period recognized write-offs.

As of September 30, 2022 and December 31, 2021, Delek's investment balance in WWP Project Financing Joint Venture totaled $54.7 million and $49.3 million, respectively, and is included as part of total assets in corporate, other and eliminations in our segment disclosure. In addition on the investment, we recognized income of $1.2 million and $5.4 million for the three and nine months ended September 30, 2022, respectively, and a loss of $8.8 million and $12.9 million for the three and nine months ended September 30, 2021, respectively.

Delek Logistics Investments

Delek Logistics has a 33% membership interest in Red River Pipeline Company LLC (“Red River”), which owns a 16-inch crude oil pipeline running from Cushing, Oklahoma to Longview, Texas. As of September 30, 2022 and December 31, 2021, Delek's investment balance in Red River totaled $143.7 million and $144.0 million, respectively. We made no capital contributions during the nine months ended September 30, 2022 and made $1.4 million in capital contributions during the nine months ended September 30, 2021 based on capital calls. We recognized income on the investment totaling $4.7 million and $14.6 million for the three and nine months ended September 30, 2022, respectively, and $3.9 million and $9.9 million for the three and nine months ended September 30, 2021, respectively. This investment is accounted for using the equity method and is included as part of total assets in our logistics segment.

In addition to Red River, Delek Logistics has two joint ventures that own and operate logistics assets, and which serve third parties and subsidiaries of Delek. We own a 50% membership interest in the entity formed with an affiliate of Plains All American Pipeline, L.P. to operate one of these pipeline systems (the "Caddo Pipeline") and a 33% membership interest in Andeavor Logistics Rio Pipeline LLC which operates the other pipeline system (the "Rio Pipeline"). As of September 30, 2022 and December 31, 2021, Delek Logistics' investment balances in these joint ventures totaled $104.3 million and $106.0 million, respectively, and were accounted for using the equity method. We recognized income on these investments totaling $3.9 million and $8.1 million for the three and nine months ended September 30, 2022, respectively, and $3.4 million and $8.0 million for the three and nine months ended September 30, 2021, respectively.

Other Investments

In addition to our pipeline joint ventures, we also have a 50% interest in a joint venture that owns asphalt terminals located in the southwestern region of the U.S., as well as a 50% interest in a joint venture that owns, operates and maintains a terminal consisting of an ethanol unit train facility with an ethanol tank in Arkansas. As of September 30, 2022 and December 31, 2021, Delek's investment balance in these joint ventures was $57.9 million and $44.8 million, respectively. We recognized income on these investments totaling $8.0 million and $16.3 million for the three and nine months ended September 30, 2022, respectively, and $4.4 million and $9.5 million for the three and nine months ended September 30, 2021, respectively. These investments are accounted for using the equity method and is included as part of total assets in corporate, other and eliminations in our segment disclosure.