Welcome to the 2017 second quarter conference call for Genesis Energy. Genesis has 4 business segments. The Offshore Pipeline Transportation Division is engaged in providing the critical infrastructure to move oil produced from the long-lived, world-class reservoirs from the deepwater Gulf of Mexico to onshore refining centers.

The Refinery Services Division primarily processes sour gas streams to remove sulfur at refining operations. The Marine Transportation Division is engaged in the maritime transportation of primarily refined petroleum products.

The Onshore Facilities and Transportation Division is engaged in the transportation, handling, blending, storage and supply of energy products, including crude oil and refined products. Genesis operations are primarily located in Texas, Louisiana, Arkansas, Mississippi, Alabama, Florida, Wyoming and the Gulf of Mexico. .

During this conference call, management may be making forward-looking statements within the meaning of the Securities Act of 1933 and the Securities Exchange Act of 1934. The law provides safe harbor protection to encourage companies to provide forward-looking information.

Genesis intends to avail itself of those safe harbor provisions and directs you to its most recently filed and future filings with the Securities and Exchange Commission. We also encourage you to visit our website at genesisenergy.com, where a copy of the press release we issued last night is located.

The press release also presents a reconciliation of non-GAAP financial measures to the most comparable GAAP financial measures. At this time, I would like to introduce Grant Sims, CEO of Genesis Energy, L.P. Mr. Sims will be joined by Bob Deere, Chief Financial Officer; and Karen Pape, Chief Accounting Officer. .

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Good morning.

As we mentioned in the release, we've entered into a stock purchase agreement with a subsidiary of Tronox Limited, pursuant to which we will acquire for approximately $1.325 billion in cash, all of Tronox's trona and trona-based exploring, mining, processing, producing, marketing and selling business through the acquisition of 100% of the equity interest in Tronox Alkali corporation on the terms and conditions set forth in the purchase agreement.

The Alkali business is the world's largest producer of natural soda ash, also known as sodium carbonate, a basic building block for a number of ubiquitous products, including flat glass, container glass, dry detergent and a variety of chemicals and other industrial products.

The business produces approximately 4 million tons of natural soda ash per year, representing approximately 28% of all the natural soda ash produced in the world and, based on current production rates, has an estimated reserve life remaining of over 100 years.

Having been in continuous operations for almost 7 years, it sells its products to a broad, industry-diverse and worldwide customer base, including numerous long-term relationships. .

In conjunction with the transaction, we've received binding commitments for the purchase of approximately $750 million of 8.75% Class A convertible preferred units from investment vehicles affiliated with KKR Global Infrastructure Investors II and GSO Capital Partners.

KKR and GSO will acquire approximately 22.2 million units at a price of $33.71 per unit. The acquisition of Tronox Alkali business is an exciting growth opportunity for us. We believe the acquisition to be immediately deleveraging and will provide further diversification and substantial scale to the partnership.

The business is a great strategic fit with our current asset base and shares many characteristics with our existing Refinery Services business.

It is a market leader with high barriers to entry and generates stable and predictable cash flow, with production sold out each of the last 7 years and estimated last 12 months adjusted EBITDA of $166 million. We're very excited to partner with KKR and GSO, 2 leading global investment firms.

We believe their investment not only validates our view of the Alkali business opportunity but also underscores the quality of Genesis' existing diverse asset footprint, including the industry-leading positions in multiple businesses.

We currently expect to fund the acquisition price and related transaction costs with proceeds from the preferred units, a note offering and/or borrowings under our senior secured credit facility as well as cash on hand. We expect to close the acquisition in the second half of 2017 with a very high probability of closing before the end of the quarter.

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With regards to our quarterly results.

During the quarter, we experienced extraordinarily planned and unplanned downtime by our producer customers at several major fields in the Gulf of Mexico which resulted in our reported segment margin for the quarter being negatively impacted by some-$9 million relative to expectations and relative to the first quarter.

While we expect some continuation of such negative effects in the third quarter, we believe they will be largely behind us going into the fourth quarter and in no way reflect the underlying long-term resiliency of the deepwater.

During the second quarter in our newly renamed Onshore Facilities and Transportation segment, we saw a ramp in volumes around the Baton Rouge corridor and an increase in sequential volumes on our Texas pipeline system as the repurposing of our Houston area crude oil pipeline and expansion of our terminal infrastructure became operational May 1 in and around Texas City.

This was partially offset by a decrease in margin contribution in our legacy crude oil marketing business of some-$2 million on a sequential quarter basis and $5 million on a year-earlier quarter. .

Heading into the third quarter, we are anticipating slightly lower volumes at our Scenic Station rail facility, primarily associated with seasonal summer maintenance at several production facilities in Canada but would anticipate the reduction to be temporary, with volumes beginning to ramp back up in the fourth quarter. .

Our Marine and Refinery Services segments performed consistent with our expectations. All in all, we feel we are reasonably positioned at this point to realize increasing financial contributions from our legacy businesses with little additional capital required.

We believe the acquisition of the Alkali business is a continuation of our successful strategy to build and acquire cash-flowing assets with leading market positions with high barriers to entry.

This business, along with our offshore Gulf of Mexico assets, existing Refinery Services business and onshore refinery-centric assets, makes us #1 or #2 in 4 diversified business segments, high barriers to entry which, in our opinion, is a good place to be long-term.

The acquisition is immediately credit-enhancing with an accretive acquisition multiple and accelerates long-term deleveraging goals. .

Culturally, we are very excited about the existing Alkali employees and their shared commitment to safe and responsible operations. We would like to welcome them to the Genesis family and look forward to the future together. .

With that I'll turn it over to Bob to discuss our quarterly results in greater detail. .

Thank you, Grant. In the second quarter of 2017, we generated total available cash before reserves of $90.2 million, representing a decrease of $5.9 million or 6.1% over the second quarter of 2016. Adjusted EBITDA decreased $7 million over the prior year quarter to $126.4 million, representing a 5.3% decrease.

Net income attributable to Genesis for the quarter was $33.7 million or $0.28 per unit compared to $23.7 million or $0.22 per unit for the same period in 2016. Segment margin from our Offshore Pipeline Transportation segment decreased $6.1 million or 7% between the second quarter periods.

The 2017 quarter was negatively impacted by both anticipated and unanticipated downtime at several major fields, including weather-related downtime, affecting certain of our deepwater Gulf of Mexico customers. And thus, certain of our key crude oil and natural gas assets, including our Poseidon pipeline and certain associated laterals which we own.

While such downtime was temporary and each of the major fields are back to being fully operational, we expect additional planned downtime for the maintenance involving certain customers' fields during the third quarter of 2017. .

Onshore Facilities and Transportation segment margin increased by $5 million or 24.9% between the 2 quarters. In the 2017 quarter, this increase is primarily attributable to the ramp-up in volumes on our pipeline, rail and terminal facilities on our recently completed infrastructure in the Baton Rouge corridor.

In addition, relative to the first quarter of 2017, we experienced an increase in sequential volumes on our Texas pipeline system as the repurposing of our Houston area crude oil pipeline and expansion of our terminal infrastructure became operational in the 2017 quarter.

These factors were partially offset by a decrease in our segment margin due to lower demand in our historical back-to-back, or buy/sell, crude oil marketing business associated with aggregating and trucking crude oil from producers' leases to local or regional resale points. .

Refinery Services segment margin for the 2017 quarter decreased $3.5 million or 17.7%. The 2017 quarter results were in line with our expectations and include the effects of previously disclosed commercial discussions with certain of our host refineries and several NaHS customers.

These discussions resulted in extending the term and tenor of a large number of contractual relationships. This includes the extension of our largest refinery services agreement at our Westlake facility through 2026. .

Marine Transportation segment margin for the 2017 quarter decreased $3.9 million or 21.7% from the 2016 quarter.

The decrease in segment margin is primarily due to a combination of slightly lower utilization and lower day rates on our inland fleet, as well as lower day rates on our offshore fleet which offset higher utilization as adjusted for planned dry docking time.

This excludes the M/T American Phoenix, which is under long-term contract through September 2020. In our inland fleet, utilization was strong at the beginning of 2017 quarter but slowed toward the end as turnarounds at certain of our refinery customers ended and other market factors resulted in weaker demand for black oil barge freight. .

In addition to the overall net decrease in segment margin, available cash before reserves declined as a result of increased interest. This increase in interest expense was primarily due to an increase in our average outstanding indebtedness from acquired and constructed assets.

Interest costs on an ongoing basis are net of capitalized interest costs attributable to our growth capital expenditures. The impacts of these items were partially offset by a decrease in general and administrative costs as well as proceeds from certain asset sales.

General and administrative costs included in the available cash calculation decreased on a comparative basis, primarily due to changes in assumptions used to value our equity-based compensation awards that are tied to our unit price. .

In addition to the above factors, the increase in net income principally relates to a $26.7 million gain involving the sale and disposition of certain non-core natural gas gathering and platform assets in the Gulf of Mexico.

This increase was partially offset by a noncash provision of $12.6 million related to certain leased rail cars no longer in use. Grant will now provide some concluding remarks to our prepared comments. .

As discussed, we are excited about the prospects of our announced acquisition. Our legacy businesses are performing reasonably well and we are increasingly confident in the ultimate performance of our growth projects.

The actions we have taken should provide financial and opportunistic flexibilities, as our significant recent investments to continue to ramp up and our consolidated financial results resume growing.

As we remain confident in our business prospects in the current environment, we continue to believe we are well positioned to deliver long-term value to all of our stakeholders without ever losing our absolute commitment to safe, reliable and responsible operations. .

As always, we would like to recognize the efforts and commitment to all of those with whom we are fortunate enough to work. With that, I'll turn it back to the moderator for any questions. .

[Operator Instructions] And your first question comes from the line of TJ Schultz with RBC Capital Markets. .

I think just first, what's the exposure to soda ash prices here? To what extent do you share or pass that exposure to customers and what correlation does the cash flow from this business have to soda ash pricing?.

I think that we've put out a little investor presentation or introductory presentation that's up on the website. But basically, domestic soda ash prices had been relatively stable over the back -- last -- where's the part I'm looking for? As of 2010, the average sales price per ton is -- on a year-over-year basis has been plus or minus 2.5%.

So it's relatively stable bulk commodity. .

Okay.

Do you -- but to the extent that you have contracts with customers, are there any kind of price sharing or passing on of some of that exposure?.

Well, the prices are -- typically, the contracts are -- the tenure of the contracts are -- for domestic sales are in the 2- to 5-year time horizon with annual price redeterminations. And it's basically a manufacturing business. Basically, we mine it and process it into soda ash and sell the soda ash. So basically, it's a market-determined price.

And in many cases, the price redeterminations are, in essence, hedged that the price will be plus or minus 2% of the previous year's annual price. .

Okay. Understood.

Any synergies that you're thinking about that you can pull out of the business when integrating with your refinery services business?.

Well, I think that we've not included any synergies in our evaluation. But just to give a little bit of background, as part of their overall trona processing operations in Wyoming, they both use and make caustic soda.

We have been, for years and years and years, one of the largest customers of excess caustic soda that they make up in the Rocky Mountain regions. So we have a -- we've had a long history of them. In fact, in 2008, we actually had some discussions about the possibility of figuring out if there was a transaction to do at that time.

There wasn't but became actionable. So it's something that we've kind of kept an eye on for a long time. Additionally, I mean it's very similar. It's a bulk chemical. There's a lot of logistical requirements of moving it from the production sites in Wyoming to customers both domestically and internationally.

So I think there's -- as we get into it, there will be some optimization but it's clearly that none of our acquisition economics made any assumption whatsoever on driving synergistic value either on the revenue side and, certainly, not on the cost side. .

Okay. Just one last on the business into the second half the year. On shore, for you guys, you mentioned some volume impacts at Scenic, I think, in the third quarter.

Can you just explain on the drivers behind that which appears to be temporary?.

Yes. As we mentioned in the prepared remarks, this is really driven by -- this is turnaround season, if you will, in the oil sands production facilities in Alberta, given this is the ideal weather to do things. So we would anticipate reduced volumes coming -- relative to what we saw in the second quarter coming in, in the third quarter.

But that would, in essence, be temporary and we should see them ramping back up in the fourth quarter. .

And your next question comes from the line of Gabriel Moreen from Bank of America Merrill Lynch. .

So in terms of thinking about this business and opportunities for growth, Grant, are there opportunities for growth here? I think you mentioned, obviously, to TJ some of the logistics opportunities potentially down the line.

But pricing power, expansion, spending capacity, is there an opportunity for growth?.

I think that if you look at the worldwide soda ash market, it's currently around 56 million tons a year. It is really driven by GDP growth, primarily in developing countries that are less developed and less mature than the U.S. and Europe, for instance.

It's estimated by a number of internal sources, as well as external sources that, that market is growing by roughly 600,000 tons to 700,000 tons per year per annum. And certainly, being the largest low-cost producer in the world is a good thing in increasing the demand market from an overall pricing point of view.

There are some identified and actually well thought out and planned expansion capabilities, overall production capability from the 4 million tons to upwards of 4.7 million, 4.8 million on an annual basis for pretty attractive marginal expansion opportunities.

But again, that's something that we think could be meaningful in the 3- to 4- to 5-year time frame. But we're very comfortable that in the current environment that this is a good, solid and steady opportunity for us. .

Okay.

And then in terms of kind of the run rate EBITDA here, is there any reason to deviate in either direction from the EBITDA you cited in sort of what this business did last 12 months going forward?.

Yes. I think that -- I mean, from our perspective, we're -- there shouldn't be much downside to it.

On an approximate every 14 or 15 months, there's something called a long-haul move, not to get overly complicated at this point, which can affect financial results in the quarter that it occurs to the tune of $5 million to $7 million just because of the production declines during that period in which they're making some modifications to their operations down below.

So that's about the only thing that kind of contributes to any kind of bottles, if you will, on a quarter-to-quarter basis. But we feel very comfortable in $160 million, $170 million EBITDA run rate range. .

Got it. Great.

And then on the convertible -- on the preferreds, can you just talk about conversion features there? When they convert and are they mandatory?.

It's a perpetual, so there is no mandatory redemption whatsoever. There is elective on behalf of the purchaser under certain scenarios. And there are optional call rights, if you will, on our part. But there is no -- absolutely no mandatory conversion feature in it.

There's also -- for the first 18 months after issuance, there is at our sole election as the issuer the opportunity to pick the dividend rather than pay in cash. So we think that our banks -- our bank group clearly is a 100% equity credit relative to picking our capital structure from a bank perspective. .

And is it fair to say that you'll be picking considering relative cost to capital here? Is it too early to make that conclusion?.

I think it's too early to reach that conclusion. .

Okay. And then last one from me just in terms of larger-picture questions on distribution growth, whether this changes anything in terms of, I guess, the revised provisions you had made recently. And then also, I think on last call, you had mentioned you're looking for some big opportunities. Clearly, this was one of them.

I'm just wondering in terms of organic large opportunities whether there's still any out there?.

We are always looking at things. But it's really kind of a -- this is something that we're really excited about, and we think it's going to occupy our time and -- look, and occupy a substantial growth in our in our upcoming quarter -- quarterly results.

Relative to distribution policy and under the current circumstances and what's, I think, important from a long-term point of view, we would anticipate -- and you saw that we emphasize that this is -- and especially how we have capitalized it, we consider it to be a significant deleveraging event and an acceleration of our overall ability to delever our balance sheet with our increasing -- anticipated increasing EBITDA capabilities as we go forward.

So we are a very serious about deleveraging and preserving and restoring the financial flexibility to the partnership as we go through time. .

And your next question comes from the line of Ethan Bellamy with Baird. .

Congrats on the deal. When I hear Tronox, I think Kerr-McGee Payne.

Just to confirm there are no legacy environmental liabilities or material outstanding litigation, correct?.

That is absolutely correct. .

Okay, that's good.

With respect to these funds at GSO and KKR, do you know what the life remaining on those funds is?.

I have no clue. I know that they -- as is often the case and we've said to affiliates, they have the -- they have transfer rights within different funds that are controlled by the lead funds. .

Okay.

Is there any significant customer concentration in the business? Or is it pretty diversified?.

It's pretty diversified with fairly large recognizable customers like PPG and Cargill and other large chemical companies. So yes, it has a remarkable track record of no bad debt expense and other things. So very, very solid and extremely well run.

And that's another point that we need to emphasize is that the management team and dedicated employees are all coming over to and continue to run the business. .

Okay.

That long wall move that you mentioned to Gabe every few years, is that an OpEX or a maintenance CapEx item?.

It depends, Ethan, of the activities in it. It's probably going to be a bit of both. .

But importantly, the production slows down during that period and, therefore, it has the effect on the top line, if you will, on the revenue line. .

Got it.

And how much inventory is held on hand? Is there some sort of a cushion between production and sales? Or is it production right to the rail car and then it's gone?.

Yes. It kind of maxes around the 150,000 to 200,000 tons of inventory so on a 4 million ton a year kind of run rate. That's kind of the max that they can physically handle in an inventory cushion. .

Okay. And then last question on big picture on soda ash demand. It looks like exports have gone up high single digits in the last few years.

What's the outlook for that market globally? And is that coming from general consumption growth? Or is it from taking market share from other synthetic plants that have been idled or just other natural sources that aren't as in the money?.

I think it's really primarily driven by increasing demand out of the developing economies. The vast majority of the export sales are into like Latin and South America and into then Asia x China.

Given the logistical advantage that it has, the exports occur, everything is taken by rail up to either Portland or Port Arthur, Texas and then they're put on marine vessel for distribution to international market. So it's really not -- it's not a market share game, it's really supporting demand growth.

And clearly, given the production cost advantage of being natural and the logistical cost advantage to being able to access the ports and get to the logical Americas and China -- I mean Asia x China from a logistical advantage point of view, this is the clear market parameters which guarantee or support the fact that we're able to sell 100% of our product for the last 7 years.

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That's helpful. And then, sorry, one more question. It looks like -- I believe, this is an auction deal. Do have any color on the auction process? I mean this is obviously not a midstream deal so -- and they have excluded many of the MLPs.

I'm just curious if you have any color on who many of the potential bidders were, if you have any insight in if any other MLPs are looking? And then lastly, it looks like you paid, what, for MLP land is a pretty compelling EBITDA multiple, especially relative to the lack of volatility in the cash flows which it seems a little -- seems pretty good relative to that.

Was that due to a lack of bidders? I'm just kind of curious if you could talk about the ultimate price paid there. .

Well, I mean we think it's a better value proposition in paying 70x forward for something in Permania. But notwithstanding that, I don't know that we have that much insight into other people in the overall process.

It was a reasonably active process but there is due to -- I think if you look at some of the color that Tronox actually put out in their press release and that's -- their symbol is TROX, that they gave some color around the process and the decision to go with us. And we're very excited that the process ended up with us being the acquirer.

We're very excited about it. .

And your next question comes from the line of [ Samil Fibel ] with Seaport Global Securities. .

Congratulations on the transaction. A couple of questions from me. So I think you guys addressed the revenue stability in this business.

I was wondering if you could talk a little bit about the cost inputs in the business, are there kind of any major kind of commodity-sensitive costs in there? Or is it mainly labor-intensive process?.

I think that the power costs are significant, order of magnitude 20% to 30% of the total variable operating expense.

So -- but it's actually, given this location in Wyoming from a natural gas pricing point of view as well as a purchase power point of view, it's got fairly attractive -- or it's got access to fairly attractively priced energy, both in the net gas as well as power. So that's kind of -- that's the main driver.

And then top of it, it's obviously fairly labor-intensive and but also kind of mechanically intensive especially around the actual mining of it. The processing/refining of the trona is in mammoth world class topside facilities. .

Okay, got it.

And then do you kind of -- Tronox has been typically hedging the power costs also in conjunction with the price contracts they have, I assume?.

Yes, they do have the ability to lock in that with derivative-type instruments to kind of make sure that they smooth out the volatility in that significant cost component relative to their annual kind of price redeterminations. .

Okay.

And then in terms of the nature of the business, is there any tax leakage from the cash flows that you will get out of this business? Or is it all MLP-qualifying assets?.

Well, there's a few nonqualified activities but we have evaluated it on a consolidated basis, and we are very comfortable that the percentage of qualified activities is well above 90% on a go-forward basis. There are other existing MLPs which are, in essence, competitors to this.

And so I think that it has a very -- past precedent [ in the way it produces -- they are ] of the service [ side]. .

Okay. Got it.

And could you remind us in terms of leverage covenants, how do they change with this transaction over the next few quarters, if they change anything significantly?.

Well, on a pro forma basis and we put this on our little 9-page or panel prospectus on our -- that we provided a link to that's on our website this morning. But on a pro forma basis, it knocks about 0.4 of a turn out of our leverage ratio. [ It's ] pro forma for [ 630 ] and adds about 0.15 turns on our coverage ratio.

So it is immediately accretive and significantly deleveraging on a standalone basis. .

And in terms of your credit facility covenants.

Do they bump-up over the next few quarters because of the major transaction?.

No, we don't have the step-up anymore. I think through the second quarter of 2018, overall covenant is 5.75%, and then it drops down to 5.5% thereafter. .

Okay. Got it. And then I think on the presentation you said that you guys would be doing a $550 million bond offering. Any parts on the term of that offering? Do you -- I mean, considering that this business is a little like -- it seems like you have a 5-year kind of visibility on this business.

I'm just kind of curious how do you think about that term?.

I would anticipate that kind of the sweet spot or the belly of the curve, probably a 2025 maturity is what we would be targeting, just because that kind of conveniently lines up with our everything else. We've worked very hard, as you are aware we have a 21 and 22, 23 and a 24. The 21s are actually callable at this point.

My guess is, and it's subject to market conditions, where we think the most efficient execution is probably looking at an 8, 8.5 years issuance at this point. .

And your next question comes from the line of Eric Genco with Citi. .

I just had a couple of quick questions. I know kind of looking at the presentation, you have some production volume numbers in there.

I was just curious from an economic sensitivity standpoint, how this business typically performs in an economic downturn? What sort of delta do you see sort of peak and trough in a recessionary environment volumetrically?.

The volumes have been very flat coming out of the macroeconomic tsunami of the Great Recession. I think in 2009 -- I will get that number for comparison purposes. Look, we'll circle back with you. I mean obviously, that was the litmus test of how bad it gets in the worst operating environment this generation has seen. .

Sure, no problem.

And thinking about this, do your sales -- the pie charts on Slide 9, do your sales kind of mirror the same geography breakdown that you give there? Or is that sort of an industry-wide?.

That's pretty industry-wide. .

So what would you say the concentration of your sales looks like in comparison to that?.

That's pretty spot on to -- proportional to what our sales are. .

Okay, all right. So that is comparable. .

Yes. .

I'm just trying to think -- the other is -- one of the other questions I had, if you -- you've talked a little about synthetic versus the natural. And in the presentation you talked about some of the cost advantages of natural.

Can you expand more on that? Maybe talk a bit about -- I read a few things online that there's some plants coming on maybe or there's some capacity coming on in Turkey and there's some debate with China as to what level of reserves they may have.

Can you just talk us through how you get comfortable there and maybe some of the relative cost of advantage of natural?.

Natural, as a general proposition, is 50% to 60% cost advantage relative to synthetic. There is some anticipated incremental natural production coming on in Turkey, which it will be cost advantaged relative to the synthetic and it has a significant logistical advantage to the European markets.

So we would anticipate that the vast majority of the incremental natural would find a home, so to speak, and compete -- economically competing with the synthetic production in Europe. The U.S. is long because it happens to be blessed with the Green River deposits as well as a much smaller deposit in California, in [ Ceres Valley ]. So the U.S.

is a net exporter. And the cost advantage that you have and, again, taking into account the logistical, what you compete with at the margin if it's for market share, is synthetic production at almost twice the cost but it can be located closer to the consumer.

So the combination of production cost and logistical cost is really what determines market share because, as I said, with the worldwide demand going 600,000 to 700,000 tons approximately per year, within 2 or 3 years of 100% -- without any kind of market share whatsoever, that 100% of the incremental natural production is anticipated to come out of Turkey will find a home just from incremental growing worldwide demand.

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Okay. That's helpful.

I'm just trying to think -- and then I think you said 56 million tons a year, was that right in terms of the size of the market? Is there a percentage breakdown between natural and synthetic that we should be thinking about?.

Yes, that's the worldwide. I'm going to -- we have that somewhere, I don't have it at my fingertips but there's certainly... .

We can come back to that. My last one, I just wanted to -- I think during the quarter, you executed the sale of one of the deepwater gas pipelines. And I think you had mentioned in the past you were looking at some small asset sales.

Is that it? Or are there kind of other ones potentially coming that you're thinking of? And how should we think about that from a modeling standpoint?.

I think as we had intimated earlier, we were looking at a total of maybe around $75 million. We did accomplish a $32 million. So we still have some discussions going on, although there can be no assurances that we get to the finish line on another kind of same zip code, $45 to $50 million divestitures.

But as I said we can't guarantee that we'd get that accomplished. .

And your next question from the line of Michael Blum with Wells Fargo. .

I think most have been covered here.

Just one clarification, the preferred equity, is that treated as 100% equity credit by the rating agencies and by your -- in your covenant or your credit agreement?.

By our banks. It's a 100% equity. We don't know how the agencies plan on handling it. But again, it's -- there is no mandatory redemption obligation to us, and we believe it should receive 100 -- from our perspective, it's a 100% equity. .

And [Operator Instructions] And your next question comes from the line of Shneur Gershuni with UBS. .

Just to clarify Mike's question, there is no mando conversion on the preferred equity, so it's just a straight equity preferred?.

It's a perpetual convertible preferred. .

Okay, great. Just a couple of questions about the business itself.

Given the large market share that you have, what can be done to actually increase volumes or grow the business? Or should we sort of think of it as this is kind of where it's at, at this stage?.

The 4 million tons, in round terms, that have been produced over the last 3-plus, almost 4 years, is really the maximum from a volume point of view that it can currently do. There are a few, a number of identified potential debottlenecking projects that could occur.

And as I alluded to earlier, there is one significant one that would probably be a 3-year lead time at a minimum but it could actually take up the total production capacity by 700,00 tons, 800,000 tons a year at very attractive margin economics from increasing the debottlenecking in certain facilities that they currently have. .

But I mean given the economic sensitivity and the amount of market share that you have, I mean, is there room in the market for you to even add more capacity to the market?.

While certainly, again, getting back to the growing 600,000, 700,000 tons a year that we think that the market's going to need and at some point in the future, under the kind of the previous question, maybe arguably the next couple of years is when that growth is going to logically be served by the increasing production anticipated out of Turkey.

But given a 3-year lag time or lead time associated with a significant increase in capacity out of the acquired facilities then and it feels logical that the market could certainly support that in future years. .

Okay. When I sort of look at the business, it looks like it's a fairly economically sensitive business. Your slides only show performance from 2010 onwards. How much was production or sales volume down in 2009? And what is being done to sort of mitigate the economic sensitivity of this business.

I think in your prepared comments, you had talked about multiyear contracts.

Are we talking about 2- to 3-year contracts? Are we talking something more along the lines of 7 to 10 years?.

Okay. No, we were talking about contracts in the 2- to 5-year range. And if you look at the annual production on Page 10, that was about 3,500 tons in 2010. In 2009, it was about 3,200 tons due to the economic tsunami that affected it and then in 2008 it was 3,800 tons.

So it had a -- given the operating conditions worldwide, and we saw the same thing from a volumetric point of view in the sales of sodium hydro sulfide out of our refinery services business, that in ridiculously bad GDP operational environments where nobody's sure whether or not the sun's going to rise tomorrow, yes, there's some volumetric exposure.

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Okay. And just if you can, I know you have a baseline of 100 for the 2010 average revenue per ton.

Do you happen to have the number at your fingertips of what the 2009 number as well, too?.

I don't have that at my fingertips. We can follow up with that. .

And there are no further questions at this time. .

Okay. Well, thanks, everybody. And we appreciate everybody jumping on the call in a reasonably short notice. But we're very excited about it, and we look forward to talking again in the future. Thank you. .

And this concludes today's conference call. Thank you for your participation. You may now disconnect..