Propylene partnership
1 Apr 2003
Sunoco has signed a definitive agreement with Equistar Chemicals, a joint venture between the Lyondell Chemical Company and Millennium Chemicals, to form a new limited partnership involving Equistar's La Porte, TX ethylene facility.
In connection with this partnership, Equistar and the partnership will enter into a 700 million pounds-per-year, 15-year propylene supply contract with Sunoco (500 million pounds will be from the La Porte partnership and an additional 200 million pounds based on a long-term contract.)
The majority of Sunoco's purchases will be priced on a cost-based formula that includes a fixed discount. Equistar will continue to manage and operate the La Porte facility for the partnership. Sunoco will also be purchasing Equistar's Bayport polypropylene facility at Pasadena, TX which has an annual capacity of 400 million pounds.
Sunoco will pay a total consideration of $190 million plus the value of the polypropylene inventory to purchase the Bayport facility and form the partnership.
Sunoco currently operates an 800 million pounds-per-year polypropylene plant at La Porte, TX, as well as polypropylene facilities at Neal, WV and Marcus Hook, PA. The acquisition enhances Sunoco's position as one of the largest North American polypropylene producers, with an operational capacity of 2.5 billion pounds.
This transaction is expected to be immediately accretive to earnings and cash flow. It is expected to close, subject to certain conditions, by March 31, 2003.
