Westlake Chemical Partners (WLKP) risk factors, FY2024 10-K

Risks Relating to Our Partnership Structure

1. 01Cash Distributions to Unitholders
2. 02Ownership of Our Common Units
3. 24Our general partner has limited its liability regarding our obligations
4. 25Our partnership agreement replaces our general partner's fiduciary duties to holders of our units
5. 26Our partnership agreement restricts the remedies available to holders of our units for actions taken by our general partner that might otherwise constitute breaches of fiduciary duty
6. 27(2) approved by the vote of a majority of the outstanding common units, excluding any common units owned by our general partner and its affiliates
7. 28Affiliates of our general partner, including Westlake, are not prohibited from engaging in other businesses or activities, including those that might be in direct competition with us. In addition, Westlake may compete with us for investment opportunities and may own an interest in entities that compete with us
8. 29Holders of our common units have limited voting rights and are not entitled to elect our general partner or its directors, which could reduce the price at which our common units trade
9. 30Even if holders of our common units are dissatisfied, they cannot currently remove our general partner without its consent
10. 31Control of our general partner may be transferred to a third party without unitholder consent
11. 32Our general partner has a call right that may require unitholders to sell their common units at an undesirable time or price
12. 33The board of directors may modify or revoke our cash distribution policy at any time at its discretion. Our partnership agreement does not require us to pay any distributions at all
13. 34We expect to distribute a significant portion of our available cash to our partners, which could limit our ability to grow and make acquisitions
14. 35The incentive distribution rights may be transferred to a third party without unitholder consent
15. 36We may issue additional units without unitholder approval, which would dilute existing unitholder ownership interests
16. 37The market price of our common units could be adversely affected by sales of substantial amounts of our common units in the public or private markets, including sales by Westlake or other large holders
17. 38Our partnership agreement restricts the voting rights of unitholders owning 20% or more of our common units
18. 39Unitholders may have liability to repay distributions
19. 40Public and investor sentiment towards climate change and other sustainability matters could adversely affect our cost of capital and the price of our common units

Tax Risks

1. 03Operational Relationship with Westlake
2. 04OpCo is subject to the credit risk of Westlake on a substantial majority of its revenues, and Westlake's leverage and creditworthiness could adversely affect our ability to make distributions to our unitholders
3. 05OpCo is a restricted subsidiary under certain indentures governing Westlake's senior notes
4. 06The ethylene sales price charged under the Ethylene Sales Agreement is designed to permit OpCo to cover the substantial majority of its operating costs, but not our public partnership, debt and other OpCo costs, which reduce our net operating profit
5. 07The fee structure of the Ethylene Sales Agreement may limit OpCo's ability to take advantage of favorable market developments in the future
6. 08If OpCo is unable to renew or extend the Ethylene Sales Agreement beyond the initial 12-year initial term or the other agreements with Westlake upon expiration of these agreements, our ability to make distributions in the future could be materially adversely affected and the value of our units could decline
7. 09OpCo depends upon Westlake for numerous services and for its labor force
8. 10OpCo's ability to receive greater cash flows from increased production may be limited by the Ethylene Sales Agreement
9. 11Cost reimbursements due to our general partner and Westlake for services provided to us or on our behalf reduce our earnings and therefore our cash available for distribution to our unitholders. The amount and timing of such reimbursements are determined by our general partner
10. 12Substantially all of OpCo's sales are generated at three facilities located at two sites. Any adverse developments at any of these facilities or sites could have a material adverse effect on our results of operations and therefore our ability to distribute cash to unitholders
11. 13The amount of cash we have available for distribution to holders of our units depends primarily on our cash flow and not solely on profitability, which may prevent us from making cash distributions during periods when we record net income
12. 14If we are unable to make acquisitions from Westlake or third parties on economically acceptable terms, our future growth would be limited, and any acquisitions we make may reduce, rather than increase, our cash generated from operations on a per unit basis
13. 15If we consummate any future acquisitions, our capitalization and results of operations may change significantly, and unitholders will not have the opportunity to evaluate the economic, financial and other relevant information that we will consider in determining the application of our funds and other resources
14. 16Our production facilities process volatile and hazardous materials that subject us to operating risks that could adversely affect our operating results
15. 17Our operations and assets are subject to extensive environmental, health and safety laws and regulations
16. 18Our operations and assets are subject to climate-related risks and uncertainties
17. 19We are subject to operational and financial risks and liabilities associated with the implementation of and efforts to achieve carbon emission reduction goals
18. 20We are increasingly dependent on digital technologies and services to conduct our business. We use these technologies for internal and operational purposes, including data storage, processing, and transmission, as well as in our interactions with our business associates, such as customers and suppliers
19. 21Our variable-rate debt exposes us to increases in interest rates, which could have a material impact on our financial position, results of operation and cash flows, and could reduce the price at which our common units trade
20. 22A terrorist attack or armed conflict could harm our business
21. 23The impact and effects of public health crises, pandemics and epidemics could materially adversely affect OpCo's business, financial condition and results of operations
22. 41The tax treatment of publicly-traded partnerships or an investment in our units could be subject to potential legislative, judicial or administrative changes or differing interpretations, possibly applied on a retroactive basis
23. 42If the IRS were to contest the U.S. federal income tax positions we take, it may adversely impact the market for our common units, and the costs of any such contest would reduce our cash available for distribution to our unitholders
24. 43Even if unitholders do not receive any cash distributions from us, unitholders will be required to pay taxes on their share of our taxable income
25. 44Tax gain or loss on the disposition of our common units could be more or less than expected
26. 45Unitholders may be subject to limitation on their ability to deduct interest expense incurred by us
27. 46Tax-exempt entities face unique tax issues from owning our common units that may result in adverse tax consequences to them
28. 47We treat each purchaser of our common units as having the same tax benefits without regard to the common units actually purchased. The IRS may challenge this treatment, which could adversely affect the value of our common units
29. 48We have adopted certain valuation methodologies in determining a unitholder's allocations of income, gain, loss and deduction. The IRS may challenge these methodologies or the resulting allocations, which could adversely affect the value of our common units
30. 49Our unitholders will likely be subject to state and local taxes and income tax return filing requirements in jurisdictions where they do not live as a result of investing in our common units