Good afternoon. Thank you for standing by. Welcome to the Westlake Chemical Partners Fourth Quarter 2020 Earnings Conference Call. As a reminder, this conference is being recorded today, February 23, 2021. I would now like to turn the call over to today’s host, Jeff Holy, Westlake Chemical Partners’ Vice President and Treasurer. Sir, you may begin..

Thank you, Victor. Good afternoon, everyone, and welcome to the Westlake Chemical Partners Fourth Quarter 2020 Conference Call. I’m joined today by Albert Chao, our President and CEO; Steve Bender, our Senior Vice President and CFO and other members of our management team..

Thank you, Jeff. Good afternoon, everyone, and thank you for joining us to discuss our fourth quarter and full-year 2020 results. In this morning’s press release, we reported consolidated net income, including OpCo’s earnings of $75 million for the fourth quarter of 2020..

Thank you, Albert. And good afternoon, everyone. In this morning’s press release, we reported consolidated net income including OpCo’s earnings of $75 million on consolidated sales of 246 million for the fourth quarter of 2020. Westlake Partners’ fourth quarter 2020 net income was $15 million or $0.43 per unit.

The Partnership had distributable cash flow for the quarter of $16 million or $0.44 per unit. Fourth quarter 2020 net income for Westlake Partners was $15 million decreased by $2 million compared to fourth quarter 2019 Partnership net income of 17 million.

The decrease in net income was primarily attributable to impacts from the hurricanes and associated force majeure events, lower third-party sales volumes and increased maintenance cost.

Partially offsetting these decreases was the benefit of the $28 million buyer deficiency fee-related to the lost production that would have been sold at Westlake had the forced majeure event not occurred. I will discuss this mechanism in more detail shortly..

Thank you, Steve. We are pleased with the Partnership’s solid financial performance. The stability of our business model was well illustrated in 2020 as our ethylene sales agreement and its provisions provided us with the predictable earnings and cash flow despite hurricanes and associated unplanned production outages.

Looking into 2021, we remain optimistic about sustained demand for ethylene driven by strong demand for polyethylene and PVC produced by our parent, Westlake Chemical.

Our ethylene sales agreement that provides predictable fee-based cash flow structure from our take-or-pay contract with Westlake Chemical for 95% of OpCo’s production will continue to deliver stable and predictable cash flows..

Thank you, Albert. Before we begin taking questions, I would like to remind you that a replay of this teleconference will be available today at 3:00 p.m. Eastern Time. Victor, we will now take questions..

Thank you. Our first question is from the line of Matthew Blair from Tudor, Pickering Holt. You may begin..

Hey good morning Albert and Steve. Steve you mentioned you triggered the force majeure for the Lake Charles ethylene in Q1.

Do you think this payment will be smaller or larger than the 23 million that came in Q4?.

We expect the unit to be up and running here in the reasonable near future, and so I expect it to be smaller..

Great.

And then in yield Westlake LP has improved to 8% or so, does that make you more likely to think about restarting the drop program and resuming distribution growth?.

We will continue to look at opportunities in the marketplace and see if those opportunities from a capital flow are there and if they are attractively financially and actionable. And if there are, if they are, we will continue to assess the value proposition that a drop might bring..

Good. Thank you..

You are welcome..

And our next question to the line of Steve Byrne from Bank of America. You may begin..

Yes, thank you. Albert, you mentioned these four levers that you have for growth here, and one of them would be to add additional assets in OpCo.

And I just wanted to ask about the Lotte cracker joint venture is not an eligible asset that could be included in this in OpCo or the fact that it is a joint venture, does that preclude it?.

No, it does not preclude it, and it is an eligible asset. It is possible to take our interest in that ethylene unit and contribute that into the structure that we have. Again, it is something that we would call an acquisition when you think of the four levers of growth that we have available to us.

And as I mentioned to Matthew just a moment ago, we will continue to assess the interest in continuing to grow our distributions through added assets such as that. And if that is viable and actionable, it is something that we will consider..

Okay. Thank you..

You are welcome..

Our next question will come from the line of from (Ph). You may begin..

Good morning where you are. Thank you for taking my question. A couple of questions. First of all, from really both way to modeling analysis. You indicated that the force majeure payments, which some of the 70-odd-million that were included in the fourth quarter financial results were not actually paid until last month.

So in terms of modeling, if you look at the cash flow statement, unlike in prior years, the cash flow provided by operating activities, more or less match some of the distributions for the non-controlling interest on the unit holders in the prior year, cash provided by operating activities was significantly greater than the sum of the distributions.

Is it reasonable that doing an analysis that we should add to the net cash provided by operating activities, that 70-odd-million you got from Westlake Chemical in terms of a force majeure payment?.

Yes, it is..

Okay. Next accounting related question, if you look at the balance sheet, you have a big negative number for the general partner interest. And I’m wondering how to model that in terms of trying to figure out the total enterprise value.

Why is that such a large negative number? And is the general partner having a distribution rights that are likely to be distributed it triggered anytime soon? How should I be modeling that when I’m trying to do price-to-book and TEV-to-EBITDA?.

Yes, it simply reflects Westlake’s interest in the business. And so it receives distributions from both OpCo as well as the Partnership every quarter. So you are looking at the Partnership’s balance sheet and it simply reflects the equity interest that Westlake Chemical has in the Partnership..

If Westlake is getting a - because you have three lines, you have common unit holders publicly and privately held, and that is a large positive number. You have common unit holder, Westlake, and that is a smaller positive number.

And then you have a general partner, Westlake, and that is a big negative number, negative what didn’t change you - negative 242.5 million.

Why is that such a large negative number? When I’m trying to calculate price TEV to EBITDA, should I assign any value to the general partner interest?.

Yes. So look at the total partnership’s capital is really how you should look at the total equity value of the Partnership when you look at that. So the total equity value here is the 915 million looking at the total equity component. So it is both the non-controlling piece. So that is really how you should look at that.

And I’m happy to spend some time with you or Jeff Holly, our Treasurer, to spend some time in the model through these if you are looking at both the balance sheet or the distributable cash flows, any of those numbers. I’m happy to spend some time with you to go through the modeling questions you might have..

Okay. That is good. I will follow-up and perhaps we can set a time that is convenient for you. And just one more thing because I’m only recently invested with many of the other mass - partnerships in which I have invested over the years, when I get the K1, typically, it shows my share of the net income is a net loss.

So all the distributions count as a return of capital.

Am I likely to have as experience as an investor in Westlake Chemical Partners?.

You will have a large component of your return. It is really a function of when you chose to invest. The K1s are live now so that you can receive those online, should you choose to do that. And certainly, they have been mailed within the last few days as well. So if you are looking for the mail, it should be coming soon.

But you can also log on currently now and receive it electronically..

Okay. Well, I bought last month, so I’m not getting K1, but that is one of the advantages as you know, investing in mass - limited partnerships that often the distributions are not considered current income.

So whom should I call or e-mail able to set up a time to go over some of these modeling issues?.

You can certainly reach out to myself. This is Steve Bender, and you can send me an e-mail at sbender@westlake.com. And I will introduce you to my treasurer, Jeff Holly, and will both walk through the modeling questions that you might have..

Excellent. Thank you very much for the detailed answers to my questions..

You are welcome..

And at this time, the Q&A session has now ended. I would like to turn the call back over to Jeff Holy for any closing remarks..

Thank you again for participating in today’s call. We hope you will join us again for our next conference call to discuss our First Quarter 2021 results..

domestic caller should dial 855-859-2056. International callers may access the replay at 404-537-3406. The access code is 3925687. This will conclude today’s call. Goodbye..