NONCONSOLIDATED AFFILIATES AND RELATED COMPANY TRANSACTIONS

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 December 31
In millions	2016 (1)			2015 (2)
Investment in nonconsolidated affiliates	$	3,747		$	3,958
Other noncurrent obligations	(1,030		)	(148		)
Net investment in nonconsolidated affiliates	$	2,717		$	3,810


(1)	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 for EQUATE and AFSI, which are discussed separately below.


(2)	The carrying amount of the Company’s investments in nonconsolidated affiliates was $97 million more than its share of the investees’ net assets, exclusive of additional differences for Dow Corning and EQUATE, which are discussed separately below.



Dividends Received from Nonconsolidated Affiliates
In millions	2016		2015		2014 (1)
Dividends from nonconsolidated affiliates	$	685	$	816	$	961


(1)	Includes accrued dividends of $5 million.

The nonconsolidated affiliates in which the Company has investments, excluding AFSI, 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 an equity interest in the HSC Group. The HSC Group was included as part of the Dow Corning equity method investment and was classified as "Investment in nonconsolidated affiliates" in the consolidated balance sheets. The following table includes the carrying value of the nonconsolidated affiliates included in the HSC Group at June 1, 2016, including the balance sheet classification of each investment:



HSC Group at June 1, 2016	Ownership Interest		Investment			Balance Sheet Classification
In millions	Ownership Interest		Investment			Balance Sheet Classification
Hemlock Semiconductor L.L.C. (1)	50.1	%	$	(958	)	Other noncurrent obligations
DC HSC Holdings LLC (2)	50.0	%	$	571		Investment in nonconsolidated affiliates


(1)	Hemlock Semiconductor L.L.C. is a nonconsolidated variable interest entity. See Note 20 for additional information.


(2)	DC HSC Holdings LLC holds an 80.5 percent indirect ownership interest in Hemlock Semiconductor Operations.

At December 31, 2016, the negative investment balance in Hemlock Semiconductor L.L.C. was $902 million.

At December 31, 2015, the Company’s investment in Dow Corning was $149 million less than the Company’s proportionate share of Dow Corning’s underlying net assets. This amount was considered a permanent difference related to the other-than-temporary decline in the Company's investment in Dow Corning, triggered by Dow Corning's May 15, 1995, bankruptcy filing, and Dow Corning's purchase of additional ownership interests in its HSC Group in 2013.

MEGlobal and EQUATE

On December 23, 2015, the Company sold its interest in MEGlobal to EQUATE. The Company eliminated 42.5 percent of the gain on the sale (equivalent to Dow's ownership interest in EQUATE), or $555 million, against the Company's investment in EQUATE, resulting in a negative investment of $148 million at December 31, 2015, which is classified as "Other noncurrent obligations" in the consolidated balance sheets. The Company's investment in EQUATE was $555 million less than the Company's proportionate share of EQUATE's underlying net assets, which represents the difference between the preliminary fair values of certain MEGlobal assets acquired and the Company's related valuation on a U.S. GAAP basis, of which approximately $250 million was being amortized over the remaining useful lives of the assets and approximately $305 million was considered a permanent difference. At December 31, 2016, the negative investment balance was $128 million and the Company's investment in EQUATE was $536 million less than the Company's proportionate share of EQUATE's underlying net assets, of which $216 million of the difference 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 ($80 million based on the closing stock price at December 31, 2015). 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 "Sundry income (expense) - net" in the consolidated statements of income and reflected in the Agricultural Sciences segment. At December 31, 2016, the Company's investment in AFSI was $96 million less than the Company's proportionate share of AFSI's underlying net assets. This amount primarily relates to the other-than-temporary decline in the Company's investment in AFSI. See Notes 5, 12 and 20 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 will follow a phased approach to start up the remaining manufacturing facilities. At December 31, 2016, the Company had a $258 million note receivable with Sadara, included in "Noncurrent receivables" in the consolidated balance sheets, of which $193 million is expected to be converted to equity in the first quarter of 2017 ($473 million at December 31, 2015, of which $460 million was converted to equity in the first quarter of 2016). During 2016, the Company loaned $1,015 million to Sadara and $1,230 million was converted to equity.

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 since December 23, 2015. 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 2016 (1 percent of total net sales in 2015 and 1 percent of total net sales in 2014). Sales of ethylene glycol to MEGlobal are reflected in the Performance Materials & Chemicals segment and represented 2 percent of the segment's sales in 2016 (2 percent in 2015 and 2 percent in 2014). Sales of ethylene to MEGlobal are reflected in the Performance Plastics segment and represented 1 percent of the segment's sales in 2016 (1 percent in 2015 and 1 percent in 2014).

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 for the period from June 1, 2016 through December 31, 2016, represented less than 1 percent of total net sales in 2016 (2 percent of Infrastructure Solutions sales).

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 and sales of Sadara products were not material in 2016.

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, 2016 and 2015 are as follows:



Balances Due To or Due From Nonconsolidated Affiliates at December 31
In millions	2016		2015
Accounts and notes receivable - Other	$	388	$	389
Noncurrent receivables	267		473
Total assets	$	655	$	862
Notes payable	$	44	$	171
Accounts payable - Other	400		230
Total current liabilities	$	444	$	401

Principal Nonconsolidated Affiliates

Dow had an ownership interest in 59 nonconsolidated affiliates at December 31, 2016 (55 at December 31, 2015). The Company's principal nonconsolidated affiliates and its ownership interest (direct and indirect) for each at December 31, 2016, 2015 and 2014 are as follows:



Principal Nonconsolidated Affiliates at December 31	Ownership Interest
	2016		2015		2014
Dow Corning Corporation (1)	N/A		50	%	50	%
EQUATE Petrochemical Company K.S.C.	42.5	%	42.5	%	42.5	%
The HSC Group: (2)
DC HSC Holdings LLC	50	%	N/A		N/A
Hemlock Semiconductor L.L.C.	50.1	%	N/A		N/A
The Kuwait Olefins Company K.S.C. ("TKOC")	42.5	%	42.5	%	42.5	%
The Kuwait Styrene Company K.S.C. ("TKSC")	42.5	%	42.5	%	42.5	%
Map Ta Phut Olefins Company Limited (3)	32.77	%	32.77	%	32.77	%
MEGlobal (4)	N/A		N/A		50	%
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	%
Univation Technologies, LLC (5)	N/A		N/A		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.


(4)	On December 23, 2015, the Company sold its 50 percent ownership interest in MEGlobal to EQUATE. MEGlobal is treated as a separate principal nonconsolidated affiliate through the date of divestiture. See Note 5 for additional information.


(5)	On May 5, 2015, Univation, previously a 50:50 joint venture between Dow and ExxonMobil, became a wholly owned subsidiary of Dow. See Note 4 for additional information.

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 December 31
In millions	2016			2015 (1)
Investment in nonconsolidated affiliates	$	3,029		$	3,120
Other noncurrent obligations	(1,030		)	(148		)
Net investment in principal nonconsolidated affiliates	$	1,999		$	2,972


(1)	Adjusted to conform to the current year presentation.



Equity Earnings from Principal Nonconsolidated Affiliates
In millions	2016		2015		2014
Equity in earnings of nonconsolidated affiliates	$	449	$	704	$	845

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



Summarized Balance Sheet Information at December 31
In millions	2016 (1)		2015 (2)
Current assets	$	6,092	$	8,794
Noncurrent assets	28,588		31,723
Total assets	$	34,680	$	40,517
Current liabilities	$	3,953	$	9,850
Noncurrent liabilities	23,223		21,461
Total liabilities	$	27,176	$	31,311
Noncontrolling interests	$	300	$	663


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


(2)	The summarized balance sheet information for 2015 does not include Univation; MEGlobal is included as part of EQUATE.



Summarized Income Statement Information
In millions	2016 (1)		2015 (2)		2014
Sales	$	12,003	$	15,468	$	19,333
Gross profit	$	2,518	$	3,206	$	3,526
Net income	$	831	$	1,343	$	1,673


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


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