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ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934
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TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934
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Delaware
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35-2451470
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(State of or other jurisdiction of
incorporation or organization)
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(I.R.S. Employer
Identification No.)
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1011 Warrenville Road, Suite 600
Lisle, Illinois
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60532
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(Address of principal executive offices)
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(zip code)
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Title of Each Class
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Name of Each Exchange on which Registered
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Common units representing limited partner interests
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New York Stock Exchange
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Large accelerated filer
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¨
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Accelerated filer
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ý
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Non-accelerated filer
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o
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Smaller reporting company
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¨
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Emerging growth company
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¨
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PART I
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Item 1.
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Item 1A.
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Item 1B.
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Item 2.
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Item 3.
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Item 4.
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PART II
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Item 5.
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Item 6.
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Item 7.
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Item 7A.
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Item 8.
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Item 9.
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Item 9A.
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Item 9B.
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PART III
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Item 10.
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Item 11.
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Item 12.
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Item 13.
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Item 14.
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PART IV
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Item 15.
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Item 1.
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Business
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Facility
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Location
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Coke Customer
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Year of
Start Up
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Contract
Expiration
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Number of
Coke Ovens
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Annual Cokemaking Nameplate
Capacity
(thousands of tons)
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Use of Waste Heat
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Haverhill I
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Franklin Furnace, Ohio
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AM USA
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2005
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December 2020
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100
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550
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Process steam
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Haverhill II
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Franklin Furnace, Ohio
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AK Steel
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2008
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December 2021
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100
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550
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Power generation
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Middletown
(1)
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Middletown, Ohio
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AK Steel
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2011
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December 2032
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100
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550
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Power generation
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Granite City
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Granite City,
Illinois |
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U.S. Steel
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2009
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December 2025
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120
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650
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Steam for power generation
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Total
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420
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2,300
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(1)
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Cokemaking nameplate capacity represents stated capacity for the production of blast furnace coke. Middletown production and sales volumes are based on “run of oven” capacity, which includes both blast furnace coke and small coke. Using the stated capacity, Middletown nameplate capacity on a “run of oven” basis is approximately
578 thousand
tons per year.
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Permitting Process for Cokemaking Facilities.
The permitting process for our cokemaking facilities is administered by the individual states. However, the main requirements for obtaining environmental construction and operating permits are found in the federal regulations. Once all requirements are satisfied, a state or local agency produces an initial draft permit. Generally, the facility reviews and comments on the initial draft. After accepting or rejecting the facility’s comments, the agency typically publishes a notice regarding the issuance of the draft permit and makes the permit and supporting documents available for public review and comment. A public hearing may be scheduled, and the EPA also has the opportunity to comment on the draft permit. The state or local agency responds to comments on the draft permit and may make revisions before a final construction permit is issued. A construction permit allows construction and commencement of operations of the facility and is generally valid for at least 18 months. Generally, construction commences during this period, while many states allow this period to be extended in certain situations. A facility's operating permit may be a state operating permit or a Title V operating permit.
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Air Quality.
Our cokemaking facilities employ MACT standards designed to limit emissions of certain hazardous air pollutants. Specific MACT standards apply to door leaks, charging, oven pressure, pushing and quenching. Certain MACT standards for new cokemaking facilities were developed using test data from SunCoke's Jewell cokemaking facility located in Vansant, Virginia. Under applicable federal air quality regulations, permitting requirements may differ among facilities, depending upon whether the cokemaking facility will be located in an “attainment” area—i.e., one that meets the national ambient air quality standards (“NAAQS”) for certain pollutants, or in a “non-attainment” or "unclassifiable" area. The status of an area may change over time as new NAAQS standards are adopted, resulting in an area change from one status or classification to another. In an attainment area, the facility must install air pollution control equipment or employ BACT. In a non-attainment area, the facility must install air pollution control equipment or employ procedures that meet LAER standards. LAER standards are the most stringent emission limitation achieved in practice by existing facilities. Unlike the BACT analysis, cost is generally not considered as part of a LAER analysis, and emissions in a non-attainment area must be offset by emission reductions obtained from other sources.
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Stringent NAAQS for ambient nitrogen dioxide and sulfur dioxide went into effect in 2010. In July 2013, the EPA identified or "designated" as non-attainment 29 areas in 16 states where monitored air quality showed violations of the 2010 1-hour SO2 NAAQS. In August 2015, the EPA finalized a new rulemaking to assist in implementation of the primary 1-hour SO2 NAAQS that requires either additional monitoring, or modeling of ambient air SO2 levels in various areas including where certain of our facilities are located. By July 2016, states subject to this rulemaking were required to provide the EPA with either a modeling approach using existing emissions data, or a plan to undertake ambient air monitoring for SO2 to begin in 2017. For states that choose to install ambient air SO2 monitoring stations, after three years of data has been collected, or sometime in 2020, the EPA will evaluate this data relative to the appropriate attainment designation for the areas under the 1-hour SO2 NAAQS. For states that chose to model, designations were made by December 2017. This rulemaking required certain of our facilities to undertake this ambient air monitoring or modeling. In December 2017, EPA issued a final designation of attainment or unclassifiable for all areas where our facilities are located. These designations mean that no future action is required for the facilities with respect to SO2 emissions at this time. However, legal challenges to these designations are possible. If redesignated, we may be required to install additional pollution controls and incur greater costs of operating at those of our facilities located in areas that EPA determines to be non-attainment with the 1-hour SO2 NAAQS based on its evaluation of this data. In 2012, a NAAQS for fine particulate matter, or PM 2.5, went into effect. In January 2015, the area where the Granite City facility is located were designated unclassifiable for PM 2.5, and the area where the Haverhill facilities are located were designated unclassifiable/attainment for PM 2.5. In April 2015, the area where the Middletown facility is located was designated unclassifiable/attainment for PM 2.5. In November 2015, the EPA revised the existing NAAQS for ground level ozone to make the standard more stringent. In January 2018, EPA designated the area where the Haverhill facility is located as attainment/unclassifiable for ozone. In June 2018, EPA designated the areas where the Granite City and Middletown facilities are located as marginal nonattainment for ozone. Nonattainment designations under the new standards and any future more stringent standard for ozone have two impacts on permitting: (1) demonstrating compliance with the standard using dispersion modeling from a new facility will be more difficult; and (2) facilities operating in areas that become non-attainment areas due to the application of new standards may be required to install Reasonably Available Control Technology (“RACT”). A number of states have filed or joined suits to challenge the EPA’s new standard in court. While we are not able to determine the extent to which this new standard will impact our business at this time, it does have the potential to have a material impact on our operations and cost structure.
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The EPA adopted a rule in 2010 requiring a new facility that is a major source of greenhouse gases (“GHGs”) to install equipment or employ BACT procedures. Currently, there is little information on what may be acceptable as BACT to control GHGs (primarily carbon dioxide from our facilities), but the database and additional guidance may be enhanced in the future.
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Several states have additional requirements and standards other than those in the federal statutes and regulations. Many states have lists of “air toxics” with emission limitations determined by dispersion modeling. States also often have specific regulations that deal with visible emissions, odors and nuisance. In some cases, the state delegates some or all of these functions to local agencies.
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Wastewater and Stormwater.
Our heat recovery cokemaking technology does not produce wastewater as is typically associated with by-product cokemaking. Our cokemaking facilities, in some cases, have wastewater discharge and stormwater permits.
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Waste.
The primary solid waste product from our heat recovery cokemaking technology is calcium sulfate from flue gas desulfurization, which is generally taken to a solid waste landfill. The solid material from periodic cleaning of heat recovery steam generators has been disposed of as hazardous waste. On the whole, our heat recovery cokemaking process does not generate substantial quantities of hazardous waste.
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U.S. Endangered Species Act.
The U.S. Endangered Species Act and certain counterpart state regulations are intended to protect species whose populations allow for categorization as either endangered or threatened. With respect to permitting additional cokemaking facilities, protection of endangered or threatened species may have the effect of prohibiting, limiting the extent of or placing permitting conditions on soil removal, road building and other activities in areas containing the affected species. Based on the species that have been designated as endangered or threatened on our properties and the current application of these laws and regulations, we do not believe that they are likely to have a material adverse effect on our operations.
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Permitting Process for Certain Coal Terminals.
Certain coal terminal operations in West Virginia and Kentucky have state-issued surface mining permits. The permit application process is initiated by collecting baseline data to adequately characterize, assess and model the pre-terminal environmental condition of the permit area, including soil and rock structures, cultural resources, soils, surface and ground water hydrology, and existing use. The permit application includes the coal terminal operations plan and reclamation plan, documents defining ownership and agreements pertaining to coal, minerals, oil and gas, water rights, rights of way and surface land and documents required by the Office of Surface Mining Reclamation and Enforcement’s (“OSM’s”) Applicant Violator System. Once a permit application is submitted to the regulatory agency, it goes through a completeness and technical review before a public notice and comment period. Regulatory authorities have considerable discretion in the timing of the permit issuance and the public has the right to comment on and otherwise engage in the permitting process, including through public hearings and intervention in the courts. SMCRA mine permits also take a significant period of time to be transferred.
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Bonding Requirements for Coal Terminals with Surface Mining Permits.
Before a surface mining permit is issued in West Virginia, a mine operator must submit a bond or other form of financial security to guarantee the payment and performance of certain long-term mine closure and reclamation obligations. The costs of these bonds or other forms of financial security have fluctuated in recent years and the market terms of surety bonds related to surface mining permits generally have become less favorable to terminal operators and others with such permits. These and other changes in the terms of such bonds have been accompanied, at times, by a decrease in the number of companies willing to issue surety bonds. As of
December 31, 2018
, we have posted
$0.3 million
in surety bonds for our West Virginia and Louisiana coal terminal operations.
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Clean Air Act.
The Clean Air Act and similar state laws and regulations affect our cokemaking operations, primarily through permitting and/or emissions control requirements relating to particulate matter (“PM”) and sulfur dioxide (“SO2”) and MACT standards. The Clean Air Act air emissions programs that may affect our operations, directly or indirectly, include, but are not limited to: the Acid Rain Program; NAAQS implementation for SO2, PM and nitrogen oxides (“NOx”), lead ozone and carbon monoxide; GHG rules; the Clean Air Interstate Rule; MACT emissions limits for hazardous air pollutants; the Regional Haze Program; New Source Performance Standards (“NSPS”); and New Source Review. The Clean Air Act requires, among other things, the regulation of hazardous air pollutants through the development and promulgation of various industry-specific MACT standards. Our cokemaking facilities are subject to two categories of MACT standards. The first category applies to pushing and quenching. The second category applies to emissions from charging and coke oven doors. The EPA is required to make a risk-based determination for pushing and quenching emissions and determine whether additional emissions reductions are necessary. In 2016, EPA issued a request for information and testing to our cokemaking facilities and other companies as part of its residual risk and technology review of the MACT standard for pushing and quenching, and a technology review of the MACT standard for coke ovens and charging emissions. Testing was conducted by our cokemaking facilities in 2017, but the EPA has yet to publish or propose any residual risk standards; therefore, the impact of potential additional EPA regulation in this area cannot be estimated at this time.
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Terminal Operations.
Our terminal operations located along waterways and the Gulf of Mexico are also governed by permitting requirements under the CWA and CAA. These terminals are subject to U.S. Coast Guard regulations and comparable state statutes regarding design, installation, construction, and management. Many such terminals owned and operated by other entities that are also used to transport coal and petcoke, including for export, have been pursued by environmental interest groups for alleged violations of their permits’ requirements, or have seen their efforts to obtain or renew such permits contested by such groups. While we believe that our operations are in material compliance with these permits, it is possible that such challenges or claims will be made against our operations in the future. Moreover, our terminal operations may be affected by the impacts of additional regulation on petcoke or on the mining of all types of coal and use of thermal coal for fuel, which is restricting supply in some markets and may reduce the volumes of coal that our terminals manage.
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Federal Energy Regulatory Commission.
The Federal Energy Regulatory Commission (“FERC”) regulates the sales of electricity from our Haverhill and Middletown facilities, including the implementation of the Federal Power Act (“FPA”) and the Public Utility Regulatory Policies Act of 1978 (“PURPA”). The nature of the operations of the Haverhill and Middletown facilities makes each facility a qualifying facility under PURPA, which exempts the facilities and the Partnership from certain regulatory burdens, including the Public Utility Holding Company Act of 2005 (“PUHCA”), limited provisions of the FPA, and certain state laws and
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Clean Water Act of 1972.
Although our cokemaking facilities generally do not have water discharge permits, the Clean Water Act (“CWA”) may affect our operations by requiring water quality standards generally and through the National Pollutant Discharge Elimination System (“NPDES”). Regular monitoring, reporting requirements and performance standards are requirements of NPDES permits that govern the discharge of pollutants into water. Discharges must either meet state water quality standards or be authorized through available regulatory processes such as alternate standards or variances. Additionally, through the CWA Section 401 certification program, states have approval authority over federal permits or licenses that might result in a discharge to their waters. Similarly, for permitting or any future water intake and/or discharge projects, our facilities could be subject to the Army Corps of Engineers Section 404 permitting process.
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Resource Conservation and Recovery Act.
We may generate wastes, including “solid” wastes and “hazardous” wastes that are subject to the Resource Conservation and Recovery Act (“RCRA”) and comparable state statutes, although certain mining and mineral beneficiation wastes and certain wastes derived from the combustion of coal currently are exempt from regulation as hazardous wastes under RCRA. The EPA has limited the disposal options for certain wastes that are designated as hazardous wastes under RCRA. Furthermore, it is possible that certain wastes generated by our operations that currently are exempt from regulation as hazardous wastes may in the future be designated as hazardous wastes, and therefore be subject to more rigorous and costly management, disposal and clean-up requirements. Certain of our wastes are also subject to Department of Transportation regulations for shipping of materials.
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Climate Change Legislation and Regulations.
Our facilities are presently subject to the GHG reporting rule, which obligates us to report annual emissions of GHGs. The EPA also finalized a rule in 2010 requiring a new facility that is a major source of GHGs to install equipment or employ BACT procedures. In 2014, the Supreme Court issued an opinion holding that although EPA may not treat GHGs as a pollutant for the purpose of determining whether a source must obtain a PSD or Title V permit, EPA may continue to require GHG limitations in permits for sources classified as major based on their emission of other pollutants. Currently there is little information as to what may constitute BACT for GHG in most industries. Under this rule, certain modifications to our facilities could subject us to the additional permitting and other obligations relative to emissions of GHGs under the New Source Review/Prevention of Significant Deterioration ("NSR/PSD") and Title V programs of the Clean Air Act based on whether the facility triggered NSR/PSD because of emissions of another pollutant such as SO2, NOx, PM, ozone or lead. The EPA has engaged in rulemaking to regulate GHG emissions from existing and new coal fired power plants, and we expect continued legal challenges to this rulemaking and any future rulemaking for other industries. For instance, in August 2015, the EPA issued its final Clean Power Plan rules establishing carbon pollution standards for power plants. In February 2016, the U.S. Supreme Court granted a stay of the implementation of the Clean Power Plan before the U.S. Court of Appeals for the District of Columbia (“D.C. Circuit”) issued a decision on the rule. By its terms, this stay will remain in effect throughout the pendency of the appeals process including at the D.C. Circuit and the Supreme Court through any certiorari petition that may be granted. In October 2017, the EPA proposed to repeal the Clean Power Plan ("CPP") although the final outcome of this proposal and the pending litigation regarding the CPP is uncertain at this time. In connection with this proposed repeal, EPA issued an Advanced Notice of Proposed Rulemaking ("ANPRM") in December 2017 regarding emission guidelines to limit GHG emissions from existing electric utility generating units. The ANPRM seeks comment regarding what the EPA should include in a potential new, existing source regulation of GHG emissions under the Clean Air Act that the EPA may propose. On October 9, 2018, the U.S. Supreme Court rejected any further challenges to the decision to repeal the Clean Power Plan. Although EPA proposed the Affordable Clean Energy (“ACE”) rule as a replacement for the CPP in August 2018, the ACE rule has not yet been finalized.
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Mine Improvement and New Emergency Response Act of 2006.
The Mine Improvement and New Emergency Response Act of 2006 (the “Miner Act”), has increased significantly the enforcement of safety and health standards and imposed safety and health standards on all aspects of mining operations. There also has been a significant increase in the dollar penalties assessed for citations issued.
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Safety.
Our facilities are subject to regulation by the Occupational Safety and Health Administration (OSHA) of the United States Department of Labor and other agencies with standards designed to ensure worker safety. As noted above, we have consistently operated within the top quartiles for OSHA’s recordable injury rates as measured and reported by the American Coke and Coal Chemicals Institute.
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Security.
CMT is subject to regulation by the U.S. Coast Guard pursuant to the Maritime Transportation Security Act. We have an internal inspection program designed to monitor and ensure compliance by CMT with these requirements. We believe that we are in material compliance with all applicable laws and regulations regarding the security of the facility.
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Comprehensive Environmental Response, Compensation, and Liability Act.
Under the Comprehensive Environmental Response, Compensation, and Liability Act (“CERCLA”), also known as Superfund, and similar state laws, responsibility for the entire cost of clean-up of a contaminated site, as well as natural resource damages, can be imposed upon current or former site owners or operators, or upon any party who released one or more designated “hazardous substances” at the site, regardless of the lawfulness of the original activities that led to the contamination. In the course of our operations we may have generated and may generate wastes that fall within CERCLA’s definition of hazardous substances. We also may be an owner or operator of facilities at which hazardous substances have been released by previous owners or operators. Under CERCLA, we may be responsible for all or part of the costs of cleaning up facilities at which such substances have been released and for natural resource damages. We also must comply with reporting requirements under the Emergency Planning and Community Right-to-Know Act and the Toxic Substances Control Act.
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Item 1A.
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Risk Factors
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the parties may be liable for fees or expenses to one another under the terms and conditions of the Merger Agreement;
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there may be negative reactions from the financial markets due to the fact that current prices of our common units and SunCoke's common stock may reflect a market assumption that the proposed Simplification Transaction will be completed; and
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the attention of management will have been diverted to the proposed Simplification Transaction rather than their own operations and pursuit of other opportunities that could have been beneficial to their respective businesses.
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changes in our or SunCoke’s business, operations and prospects;
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changes in market assessments of our or SunCoke’s business, operations and prospects;
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changes in market assessments of the likelihood that the proposed Simplification Transaction will be completed;
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interest rates, commodity prices, general market, industry and economic conditions and other factors generally affecting the price of our common units or SunCoke's common stock; and
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federal, state and local legislation, governmental regulation and legal developments in the businesses in which we and SunCoke operate.
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geological, hydrologic, or other conditions that may cause damage to infrastructure or personnel;
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fire, explosion, or other major incident causing injury to personnel and/or equipment, that causes a cessation, or significant curtailment, of all or part of our cokemaking or logics operations at a site for a period of time;
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processing and plant equipment failures, operating hazards and unexpected maintenance problems affecting our cokemaking or logistics operations, or our customers;
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adverse weather and natural disasters, such as severe winds, heavy rains or snow, flooding, extreme temperatures and other natural events affecting our cokemaking or logistics operations, transportation, or our customers; and
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possible legal challenges to the renewal of key permits, which may lead to their renewal on terms that restrict our cokemaking or logistics operations, or impose additional costs on us.
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Cokemaking operations
: Historically, coke has been used as a main input in the production of steel in blast furnaces. However, some blast furnace operators have relied upon natural gas, pulverized coal, and/or other coke substitutes. Many steelmakers also are exploring alternatives to blast furnace technology that require less or no use of coke. For example, electric arc furnace technology is a commercially proven process widely
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Logistics business
: Decreased throughput and utilization of our logistics assets could result indirectly due to competition in the electrical power generation business from abundant and relatively inexpensive supplies of natural gas displacing thermal coal as a fuel for electrical power generation by utility companies. In addition, competition in the steel industry from processes such as electric arc furnaces, or blast furnace injection of pulverized coal or natural gas, may reduce the demand for metallurgical coals processed through our logistics facilities. In the future, additional coal handling facilities and terminals with rail and/or barge access may be constructed in the Eastern U.S. Such additional facilities could compete directly with us in specific markets now served by our logistics business. Certain coal mining companies and independent terminal operators in some areas may compete directly with our logistics facilities. In some markets, trucks may competitively deliver mined coal to certain shorter-haul destinations, resulting in reduced utilization of existing terminal capacity.
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making it more difficult for us to satisfy our obligations with respect to the notes and our other debt;
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limiting our ability to obtain additional financing to fund future working capital, capital expenditures, acquisitions or other general corporate requirements;
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requiring a substantial portion of our cash flows to be dedicated to debt service payments instead of other purposes, thereby reducing the amount of cash flows available for the payment of dividends, working capital, capital expenditures, acquisitions and other general corporate purposes;
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increasing our vulnerability to general adverse economic and industry conditions;
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exposing us to the risk of increased interest rates as certain of our borrowings, including borrowings under the credit facilities, are at variable rates of interest;
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limiting our flexibility in planning for and reacting to changes in the industry in which we compete;
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placing us at a competitive disadvantage to other, less leveraged competitors; and
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increasing our cost of borrowing.
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a significant portion of our cash flows could be used to service our indebtedness;
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a high level of debt would increase our vulnerability to general adverse economic and industry conditions;
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the covenants contained in the agreements governing our outstanding indebtedness will limit our ability to borrow additional funds, dispose of assets, pay distributions and make certain investments;
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a high level of debt may place us at a competitive disadvantage compared to our competitors that are less leveraged, and therefore may be able to take advantage of opportunities that our indebtedness would prevent us from pursuing;
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our debt covenants may also affect our flexibility in planning for, and reacting to, changes in the economy and our industry; and
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a high level of debt may impair our ability to obtain additional financing in the future for working capital, capital expenditures, acquisitions, distributions or for general corporate or other purposes.
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Thermal coal demand
: may be impacted by changes in the energy consumption pattern of industrial consumers, electricity generators and residential users, as well as weather conditions and extreme temperatures. The amount of thermal coal consumed for electric power generation is affected primarily by the overall demand for electricity, the availability, quality and price of competing fuels for power generation, and governmental regulation. For example, over the past few years, production of natural gas in the U.S. has increased dramatically, which has resulted in lower natural-gas prices. As a result of sustained low natural gas prices, coal-fuel generation plants have been displaced by natural-gas fueled generation plants. In addition,
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Metallurgical coal demand
: may be impacted adversely by economic downturns resulting in decreased demand for steel and an overall decline in steel production. A decline in blast furnace production of steel may reduce the demand for furnace coke, an intermediate product made from metallurgical coal. Decreased demand for metallurgical coal also may result from increased steel industry utilization of processes that do not use, or reduce the need for, furnace coke, such as electric arc furnaces, or blast furnace injection of pulverized coal or natural gas.
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severe financial hardship or bankruptcy of one or more of our major customers, or the occurrence of other events affecting our ability to collect payments from our customers, including our customers’ default;
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volatility and cyclical downturns in the steel industry and other industries in which our customers and/or suppliers operate;
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the exercise by AK Steel of its early termination rights under its coke sales agreement and its energy sales agreement at the Haverhill facility;
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our sponsor’s inability to perform under the omnibus agreement;
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age of, and changes in the reliability, efficiency and capacity of the various equipment and operating facilities used in our cokemaking operations and/or our logistics business, and in the operations of our major customers, business partners and/or suppliers;
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the cost of environmental remediation projects at our cokemaking operations and our logistics facilities;
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changes in the expected operating levels of our assets;
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our ability to meet minimum volume requirements, coal-to-coke yield standards and coke quality requirements in our coke sales agreements;
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our ability to enter into new, or renew existing, long-term agreements for the supply of coke to domestic steel producers under terms similar to, or more favorable than, those currently in place;
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our ability to enter into new, or renew existing, agreements for the sale of steam and electricity generated by our facilities under terms similar to, or more favorable than, those currently in place;
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our ability to enter into new, or renew existing, agreements for coal handling, mixing, storage, terminalling, transloading and/or transportation services at our logistics facilities, under terms similar to, or more favorable than, those currently in place;
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changes in the marketplace that may adversely affect the supply of, and demand for, our coke and/or our logistics services, including increased exports of coke from other countries and increasing competition from alternative steelmaking and cokemaking technologies that have the potential to reduce or eliminate the use of coke;
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our relationships with, and other conditions affecting, our customers and/or suppliers;
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changes in levels of production, production capacity, pricing and/or margins for coke and/or coal;
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our ability to secure new coal supply and/or logistics agreements or to renew existing agreements;
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variation in availability, quality and supply of metallurgical coal used in the cokemaking process, including as a result of nonperformance by our suppliers;
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effects of railroad, barge, truck and other transportation performance and costs, including any transportation disruptions;
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cost of labor and other risks related to employees and workplace safety;
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effects of adverse events relating to the operation of our facilities and to the transportation and storage of hazardous materials (including equipment malfunction, explosions, fires, spills, and the effects of severe weather conditions and extreme temperatures);
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changes in product specifications for the coke that we produce, or the coals that we mix;
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changes in credit terms required by our suppliers;
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changes in insurance markets and the level, types and costs of coverage available, and the financial ability of our insurers to meet their obligations;
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changes in, or new, statutes, regulations or governmental policies by federal, state and local authorities with respect to protection of the environment;
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•
|
changes in, or new, statutes, regulations or governmental policies by federal authorities with respect to the sale of electric energy from the Haverhill and Middletown facilities;
|
•
|
proposed or final changes in accounting and/or tax methodologies, laws, regulations, rules, or policies, or their interpretations, including those affecting inventories, leases, equity compensation, income, or other matters;
|
•
|
changes in tax laws or their interpretations, including the adoption of proposed rules governing whether a partnership such as ours would be treated as a corporation for federal income tax purposes;
|
•
|
nonperformance or force majeure by, or disputes with or changes in contract terms with, major customers, suppliers, dealers, distributors or other business partners; and
|
•
|
changes in, or new, statutes, regulations, governmental policies and taxes, or their interpretations.
|
•
|
the level of capital expenditures we make;
|
•
|
the cost of acquisitions;
|
•
|
our debt service requirements and other liabilities;
|
•
|
fluctuations in our working capital needs;
|
•
|
our ability to borrow funds and access capital markets;
|
•
|
restrictions contained in debt agreements to which we are a party; and
|
•
|
the amount of cash reserves established by our general partner.
|
•
|
our general partner is allowed to take into account the interests of parties other than us, such as our sponsor, in exercising certain rights under our partnership agreement, which has the effect of limiting its duty to our unitholders;
|
•
|
neither our partnership agreement nor any other agreement requires our sponsor to pursue a business strategy that favors us;
|
•
|
our partnership agreement replaces the fiduciary duties that would otherwise be owed by our general partner with contractual standards governing its duties, limits our general partner’s liabilities and restricts the remedies available to our unitholders for actions that, without such limitations, might constitute breaches of fiduciary duty;
|
•
|
except in limited circumstances, our general partner has the power and authority to conduct our business without unitholder approval;
|
•
|
our general partner determines the amount and timing of asset purchases and sales, borrowings, issuances of additional partnership securities and the level of reserves, each of which can affect the amount of cash that is distributed to our unitholders;
|
•
|
our general partner determines the amount and timing of any capital expenditure and whether a capital expenditure is classified as an ongoing capital expenditure, which reduces operating surplus, or a replacement capital expenditure, which does not reduce operating surplus. This determination can affect the amount of cash that is distributed to our unitholders which, in turn, may affect the ability of the subordinated units to convert;
|
•
|
our general partner may cause us to borrow funds in order to permit the payment of cash distributions, even if the purpose or effect of the borrowing is to make IDRs;
|
•
|
our partnership agreement permits us to distribute up to $26.5 million as operating surplus, even if it is generated from asset sales, non-working capital borrowings or other sources that would otherwise constitute capital surplus. This cash may be used to fund distributions on our subordinated units or the IDRs;
|
•
|
our general partner determines which costs incurred by it and its affiliates are reimbursable by us;
|
•
|
our partnership agreement does not restrict our general partner from causing us to pay it or its affiliates for any services rendered to us or entering into additional contractual arrangements with its affiliates on our behalf;
|
•
|
our general partner intends to limit its liability regarding our contractual and other obligations;
|
•
|
our general partner may exercise its right to call and purchase common units if it and its affiliates own more than 80 percent of the common units;
|
•
|
our general partner controls the enforcement of obligations that it and its affiliates owe to us;
|
•
|
our general partner decides whether to retain separate counsel, accountants or others to perform services for us; and
|
•
|
our general partner may elect to cause us to issue common units to it in connection with a resetting of the target distribution levels related to our general partner’s IDR without the approval of the conflicts committee of the Board of Directors of our general partner or the unitholders. This election may result in lower distributions to the common unitholders in certain situations.
|
•
|
how to allocate business opportunities among us and its affiliates;
|
•
|
whether to exercise its call right;
|
•
|
how to exercise its voting rights with respect to the units it owns;
|
•
|
whether to exercise its registration rights;
|
•
|
whether to elect to reset target distribution levels; and
|
•
|
whether or not to consent to any merger or consolidation of the partnership or amendment to the partnership agreement.
|
•
|
whenever our general partner makes a determination or takes, or declines to take, any action in its capacity as our general partner, it must do so in good faith, and will not be subject to any other standard imposed by our partnership agreement, or any law, rule or regulation, or at equity;
|
•
|
our general partner will not have any liability to us or our unitholders for decisions made in its capacity as a general partner so long as it acted in good faith, meaning that it believed that the decision was in the best interest of our partnership;
|
•
|
our general partner and its officers and directors will not be liable for monetary damages to us or our limited partners resulting from any act or omission unless there has been a final and non-appealable judgment entered by a court of competent jurisdiction determining that our general partner or its officers and directors, as the case may be, acted in bad faith or, in the case of a criminal matter, acted with knowledge that the conduct was criminal; and
|
•
|
our general partner will not be in breach of its obligations under the partnership agreement or its duties to us or our limited partners if a transaction with an affiliate, or the resolution of a conflict of interest, is:
|
•
|
approved by the conflicts committee of the Board of Directors of our general partner, although our general partner is not obligated to seek such approval; or
|
•
|
approved by the vote of a majority of the outstanding common units, excluding any common units owned by our general partner and its affiliates.
|
•
|
our existing unitholders’ proportionate ownership interest in us will decrease;
|
•
|
the amount of earnings per unit may decrease;
|
•
|
because a lower percentage of total outstanding units will be subordinated units, the risk that a shortfall in the payment of the minimum quarterly distribution will be borne by our common unitholders will increase;
|
•
|
the ratio of taxable income to distributions may increase;
|
•
|
the relative voting strength of each previously outstanding unit may be diminished; and
|
•
|
the market price of the common units may decline.
|
•
|
we were conducting business in a state but had not complied with that particular state’s partnership statute; or
|
•
|
your right to act with other unitholders to remove or replace the general partner, to approve some amendments to our partnership agreement or to take other actions under our partnership agreement constitute “control” of our business.
|
Item 1B.
|
Unresolved Staff Comments
|
Item 2.
|
Properties
|
•
|
Approximately 400 acres in Franklin Furnace (Scioto County), Ohio, at and around the area where the Haverhill cokemaking facility (both first and second phases) is located.
|
•
|
Approximately 250 acres in Middletown (Butler County), Ohio near AK Steel’s Middletown Works facility, on which the Middletown cokemaking facility is located.
|
•
|
Approximately 41 acres in Granite City (Madison County), Illinois, adjacent to the U.S. Steel Granite City Works facility, on which the Granite City cokemaking facility is located. Upon the earlier of ceasing production at the facility or the end of 2044, U.S. Steel has the right to repurchase the property, including the facility, at the fair market value of the land. Alternatively, U.S. Steel may require us to demolish and remove the facility and remediate the site to original condition upon exercise of its option to repurchase the land.
|
•
|
Approximately 180 acres in Ceredo (Wayne County), West Virginia on which KRT has two terminals for its mixing and/or handling services along the Ohio and Big Sandy Rivers.
|
•
|
Approximately 174 acres in Convent (St. James Parish), Louisiana, on which CMT is located.
|
•
|
Approximately 45 acres of land located in East Chicago (Lake County), Indiana, through a sublease from SunCoke to Lake Terminal for the coal handling and mixing facilities that service SunCoke's Indiana Harbor cokemaking facility. The leased property is inside ArcelorMittal’s Indiana Harbor Works facility and is part of an enterprise zone.
|
•
|
Approximately 25 acres in Belle (Kanawha County), West Virginia on which KRT has a terminal for its mixing and/or handling services along the Kanawha River.
|
Item 3.
|
Legal Proceedings
|
Item 4.
|
Mine Safety Disclosures
|
Item 5.
|
Market for Registrant’s Common Equity, Related Stockholders Matters and Issuer Purchases of Equity Securities
|
Item 6.
|
Selected Financial Data
|
|
Years Ended December 31,
|
||||||||||||||||||
|
2018
(1)
|
|
2017
(1)
|
|
2016
(1)
|
|
2015
(1)
|
|
2014
|
||||||||||
|
(Dollars in millions, except per unit amounts)
|
||||||||||||||||||
Operating Results:
|
|
|
|
|
|
|
|
|
|
||||||||||
Total revenues
|
$
|
892.1
|
|
|
$
|
845.6
|
|
|
$
|
779.7
|
|
|
$
|
838.5
|
|
|
$
|
873.0
|
|
Operating income
|
$
|
117.2
|
|
|
$
|
142.8
|
|
|
$
|
146.1
|
|
|
$
|
137.2
|
|
|
$
|
135.1
|
|
Net income (loss)
(2)
|
$
|
59.4
|
|
|
$
|
(17.5
|
)
|
|
$
|
121.4
|
|
|
$
|
92.2
|
|
|
$
|
87.5
|
|
Net income (loss) attributable to SunCoke Energy Partners, L.P.
|
57.5
|
|
|
(18.1
|
)
|
|
$
|
119.1
|
|
|
$
|
85.4
|
|
|
$
|
56.0
|
|
||
Net income (loss) per common unit (basic and diluted)
|
$
|
1.22
|
|
|
$
|
(0.54
|
)
|
|
$
|
2.07
|
|
|
$
|
1.92
|
|
|
$
|
1.58
|
|
Net income per subordinated unit (basic and diluted)
(3)
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
1.71
|
|
|
$
|
1.43
|
|
Distributions declared per unit
|
$
|
1.6000
|
|
|
$
|
2.3760
|
|
|
$
|
2.3760
|
|
|
$
|
2.2888
|
|
|
$
|
2.0175
|
|
Balance Sheet Data (at period end):
|
|
|
|
|
|
|
|
|
|
||||||||||
Total assets
|
$
|
1,619.1
|
|
|
$
|
1,641.4
|
|
|
$
|
1,696.0
|
|
|
$
|
1,768.9
|
|
|
$
|
1,417.0
|
|
Long-term debt and financing obligation
|
$
|
793.3
|
|
|
$
|
818.4
|
|
|
$
|
805.7
|
|
|
$
|
894.5
|
|
|
$
|
399.0
|
|
(1)
|
The results of CMT have been included in the consolidated financial statements since it was acquired on August 12, 2015. CMT added the following:
|
|
|
Years Ended December 31,
|
||||||||||||||
|
|
2018
|
|
2017
|
|
2016
|
|
2015
|
||||||||
|
|
(Dollars in millions)
|
||||||||||||||
Combined assets
|
|
$
|
370.9
|
|
|
$
|
394.6
|
|
|
$
|
411.7
|
|
|
$
|
426.1
|
|
Revenues
|
|
$
|
81.3
|
|
|
$
|
71.1
|
|
|
$
|
62.7
|
|
|
$
|
28.6
|
|
Operating income
|
|
$
|
40.2
|
|
|
$
|
42.3
|
|
|
$
|
46.5
|
|
|
$
|
18.4
|
|
(2)
|
In 2017, as a result of the Final Regulations on qualifying income and the new Tax Legislation, the Partnership recorded deferred income tax expense, net of $79.8 million. See
Note 6
to our consolidated financial statements.
|
(3)
|
Upon payment of the cash distribution for the fourth quarter of 2015, the financial requirements for the conversion of all subordinated units were satisfied. As a result, the 15,709,697 subordinated units converted into common units on a one-for-one basis. For purpose of calculating net income per unit, the conversion of the subordinated units is deemed to have occurred on January 1, 2016.
|
Item 7.
|
Management’s Discussion and Analysis of Financial Condition and Results of Operations
|
|
Year Ended December 31,
|
||
|
2018
|
||
|
(Dollars in millions)
|
||
Net income attributable to SunCoke Energy Partners, L.P.
|
57.5
|
|
|
Net cash provided by operating activities
|
$
|
162.8
|
|
Adjusted EBITDA attributable to SunCoke Energy Partners, L.P.
|
$
|
209.4
|
|
•
|
Financial objectives.
Net income attributable to SunCoke Energy Partners, L.P. in 2018 was
$57.5 million
. We delivered Adjusted EBITDA attributable to SunCoke Energy Partners, L.P. of
$209.4 million
, slightly below our guidance range of
$210 million
to
$215 million
, and generated
$162.8 million
of operating cash flow, above our revised guidance of between
$140 million
and
$150 million
. Domestic Coke contributed Adjusted EBITDA of
$157.5 million
, and Logistics delivered Adjusted EBITDA of
$71.6 million
, reflecting the highest annual volumes in CMT’s history.
|
•
|
Achieved de-leveraging goals.
We achieved our objective to pay down $25 million on the Partnership Revolver in 2018 and continue to maintain our focus on strengthening our balance sheet and reducing debt in 2019.
|
•
|
Leveraged CMT capabilities to further diversify customer and product mix.
We continued to further diversify the product mix by handling petroleum coke, aggregates and liquids, and we remain focused on adding additional dry bulk products to grow the terminal. In 2018, we moved approximately one million merchant tons of bulk products through CMT.
|
•
|
Delivered operational excellence and optimized our asset base.
We continued to improve operational performance across both our coke and logistics businesses, which was reflected by the increase in volumes in both segments during 2018. We encountered operational challenges at our Granite City facility during 2018, which included an extended outage and a machinery fire. As part of the extended outage, we completed various upgrades on our heat recovery steam generators and flue gas desulfurization system in order to improve the long-term reliability and operational performance of these assets. These necessary upgrades will better position Granite City for long-term success. We also made significant progress on our environmental remediation project at Granite City and expect the project to be completed by the middle of 2019.
|
•
|
Achieve financial objectives.
We expect to deliver Adjusted EBITDA attributable to the Partnership of between
$215 million
and
$225 million
and operating cash flow of between
$145 million
and
$160 million
. Significant operational improvements at Granite City and solid ongoing operations across the remaining Domestic Coke fleet are expected to contribute to the growth in Adjusted EBITDA.
|
•
|
Continue to pay down debt and strengthen the balance sheet.
We remain committed to continuing to strengthen the balance sheet and plan to allocate excess cash flow, after distributions, towards reducing debt, which will maximize long-term value for all unitholders.
|
•
|
Deliver operational excellence and optimize our asset base.
We remain focused on further improving operational performance across both our coke and logistics businesses, as well as successfully executing on our 2019 capital plan. We expect operational improvements at Granite City to generate an increase in production and higher energy revenues as well as lower operating and maintenance costs. We also continue to work to secure further new business and diversify our customer base.
|
•
|
Debt Activities.
During 2017, the Partnership refinanced its debt obligations and amended and restated the Partnership Revolver, resulting in a loss on extinguishment of debt on the Consolidated Statement of Operations of
$20.0 million
.
|
•
|
Tax Rulings.
|
◦
|
IRS Final Regulations on Qualifying Income.
In January 2017, the IRS announced its decision to exclude cokemaking as a qualifying income generating activity in its final regulations (the "Final Regulations") issued under section 7704(d)(1)(E) of the Internal Revenue Code relating to the qualifying income exception for publicly traded partnerships. Subsequent to the 10-year transition period, certain cokemaking entities in the Partnership will become taxable as corporations. As a result of the qualifying income exception discussed above, the Partnership recorded deferred income tax expense of $148.6 million
related to its changes in its projected deferred tax liability associated with projected book to tax differences at the end of the 10-year transition period
. The Partnership recorded a deferred tax benefit of $3.6 million in 2018 as a result of current period additions and changes in estimated useful lives of certain assets. See
Note 6
to our consolidated financial statements.
|
◦
|
Tax Legislation.
On December 22, 2017, the Tax Cuts and Jobs Act (“Tax Legislation”) was enacted. The Tax Legislation significantly revised the U.S. corporate income tax structure, including lowering corporate income tax rates.
As a result, the Partnership recorded an income tax benefit of
$68.8 million
for the remeasurement of its U.S. deferred income tax liabilities, reversing a portion of the
deferred income tax expense recorded from the Final Regulations in the first quarter of 2017.
|
|
Years Ended December 31,
|
|
Increase (Decrease)
|
||||||||||||||||
|
2018
|
|
2017
|
|
2016
|
|
2018 vs. 2017
|
|
2017 vs. 2016
|
||||||||||
|
(Dollars in millions)
|
||||||||||||||||||
Revenues
|
|
|
|
|
|
|
|
|
|
||||||||||
Sales and other operating revenue
|
$
|
892.1
|
|
|
$
|
845.6
|
|
|
$
|
779.7
|
|
|
$
|
46.5
|
|
|
$
|
65.9
|
|
Costs and operating expenses
|
|
|
|
|
|
|
|
|
|
||||||||||
Cost of products sold and operating expenses
|
648.9
|
|
|
586.7
|
|
|
517.2
|
|
|
62.2
|
|
|
69.5
|
|
|||||
Selling, general and administrative expenses
|
33.6
|
|
|
32.5
|
|
|
38.7
|
|
|
1.1
|
|
|
(6.2
|
)
|
|||||
Depreciation and amortization expense
|
92.4
|
|
|
83.6
|
|
|
77.7
|
|
|
8.8
|
|
|
5.9
|
|
|||||
Total costs and operating expenses
|
774.9
|
|
|
702.8
|
|
|
633.6
|
|
|
72.1
|
|
|
69.2
|
|
|||||
Operating income
|
117.2
|
|
|
142.8
|
|
|
146.1
|
|
|
(25.6
|
)
|
|
(3.3
|
)
|
|||||
Interest expense, net
(1)
|
59.4
|
|
|
56.4
|
|
|
47.7
|
|
|
3.0
|
|
|
8.7
|
|
|||||
Loss (gain) on extinguishment of debt, net
(1)
|
—
|
|
|
20.0
|
|
|
(25.0
|
)
|
|
(20.0
|
)
|
|
45.0
|
|
|||||
Income before income tax expense (benefit)
|
57.8
|
|
|
66.4
|
|
|
123.4
|
|
|
(8.6
|
)
|
|
(57.0
|
)
|
|||||
Income tax (benefit) expense
(1)
|
(1.6
|
)
|
|
83.9
|
|
|
2.0
|
|
|
(85.5
|
)
|
|
81.9
|
|
|||||
Net income (loss)
|
$
|
59.4
|
|
|
$
|
(17.5
|
)
|
|
$
|
121.4
|
|
|
$
|
76.9
|
|
|
$
|
(138.9
|
)
|
Less: Net income attributable to noncontrolling interests
|
1.9
|
|
|
0.6
|
|
|
2.3
|
|
|
1.3
|
|
|
(1.7
|
)
|
|||||
Net income (loss) attributable to SunCoke Energy Partners, L.P.
|
$
|
57.5
|
|
|
$
|
(18.1
|
)
|
|
$
|
119.1
|
|
|
$
|
75.6
|
|
|
$
|
(137.2
|
)
|
(1)
|
See year-over-year changes described in "Items Impacting Comparability."
|
•
|
Domestic Coke consists of our Haverhill facility, located in Franklin Furnace, Ohio, our Middletown facility, located in Middletown, Ohio, and our Granite City facility, located in Granite City, Illinois.
|
•
|
Logistics consists of Convent Marine Terminal ("CMT"), located in Convent, Louisiana, Kanawha River Terminal ("KRT"), located in Ceredo and Belle, West Virginia, and SunCoke Lake Terminal ("Lake Terminal"), located in East Chicago, Indiana. Lake Terminal is located adjacent to SunCoke's Indiana Harbor cokemaking facility.
|
|
Years Ended December 31,
|
|
Increase (Decrease)
|
||||||||||||||||
|
2018
|
|
2017
|
|
2016
|
|
2018 vs. 2017
|
|
2017 vs. 2016
|
||||||||||
|
(Dollars in millions, except per ton amounts)
|
||||||||||||||||||
Sales and other operating revenue:
|
|
|
|
|
|
|
|
|
|
||||||||||
Domestic Coke
|
$
|
776.7
|
|
|
$
|
739.7
|
|
|
$
|
681.8
|
|
|
$
|
37.0
|
|
|
$
|
57.9
|
|
Logistics
|
115.4
|
|
|
105.9
|
|
|
97.9
|
|
|
9.5
|
|
|
8.0
|
|
|||||
Logistics intersegment sales
|
6.9
|
|
|
6.5
|
|
|
6.1
|
|
|
0.4
|
|
|
0.4
|
|
|||||
Elimination of intersegment sales
|
(6.9
|
)
|
|
(6.5
|
)
|
|
(6.1
|
)
|
|
(0.4
|
)
|
|
(0.4
|
)
|
|||||
Total
|
$
|
892.1
|
|
|
$
|
845.6
|
|
|
$
|
779.7
|
|
|
$
|
46.5
|
|
|
$
|
65.9
|
|
Adjusted EBITDA
(1)
:
|
|
|
|
|
|
|
|
|
|
||||||||||
Domestic Coke
|
$
|
157.5
|
|
|
$
|
170.3
|
|
|
$
|
167.0
|
|
|
$
|
(12.8
|
)
|
|
$
|
3.3
|
|
Logistics
|
71.6
|
|
|
69.7
|
|
|
63.2
|
|
|
1.9
|
|
|
6.5
|
|
|||||
Corporate and Other
|
(16.6
|
)
|
|
(15.3
|
)
|
|
(17.2
|
)
|
|
(1.3
|
)
|
|
1.9
|
|
|||||
Total
|
$
|
212.5
|
|
|
$
|
224.7
|
|
|
$
|
213.0
|
|
|
$
|
(12.2
|
)
|
|
$
|
11.7
|
|
Coke Operating Data:
|
|
|
|
|
|
|
|
|
|
||||||||||
Domestic Coke capacity utilization (%)
|
101
|
|
|
101
|
|
|
101
|
|
|
—
|
|
|
—
|
|
|||||
Domestic Coke production volumes (thousands of tons)
|
2,332
|
|
|
2,313
|
|
|
2,334
|
|
|
19
|
|
|
(21
|
)
|
|||||
Domestic Coke sales volumes (thousands of tons)
|
2,344
|
|
|
2,298
|
|
|
2,336
|
|
|
46
|
|
|
(38
|
)
|
|||||
Domestic Coke Adjusted EBITDA per ton
(2)
|
$
|
67.19
|
|
|
$
|
74.11
|
|
|
$
|
71.49
|
|
|
$
|
(6.92
|
)
|
|
$
|
2.62
|
|
Logistics Operating Data:
|
|
|
|
|
|
|
|
|
|
||||||||||
Tons handled (thousands of tons)
(3)
|
25,499
|
|
|
20,546
|
|
|
17,469
|
|
|
4,953
|
|
|
3,077
|
|
|||||
CMT take-or-pay shortfall tons (thousands of tons)
(4)
|
220
|
|
|
2,918
|
|
|
6,076
|
|
|
(2,698
|
)
|
|
(3,158
|
)
|
(1)
|
See
Note 15
in our consolidated financial statements for both the definition of Adjusted EBITDA and the reconciliations from GAAP to the non-GAAP measurement for the years ended December 31, 2018, 2017 and 2016.
|
(2)
|
Reflects Domestic Coke Adjusted EBITDA divided by Domestic Coke sales volumes.
|
(3)
|
Reflects inbound tons handled during the period.
|
(4)
|
Reflects tons billed under take-or-pay contracts where services were not performed.
|
|
Sales and other operating revenue
|
|
Adjusted EBITDA
|
||||||||||||
|
2018 vs. 2017
|
|
2017 vs. 2016
|
|
2018 vs. 2017
|
|
2017 vs. 2016
|
||||||||
|
(Dollars in millions)
|
||||||||||||||
Beginning
|
$
|
739.7
|
|
|
$
|
681.8
|
|
|
$
|
170.3
|
|
|
$
|
167.0
|
|
Volumes
(1)
|
6.2
|
|
|
(4.3
|
)
|
|
(4.7
|
)
|
|
3.6
|
|
||||
Coal cost recovery and yields
(2)
|
34.3
|
|
|
61.6
|
|
|
4.7
|
|
|
0.1
|
|
||||
Operating and maintenance costs
(3)
|
3.2
|
|
|
0.2
|
|
|
(7.8
|
)
|
|
(5.5
|
)
|
||||
Energy and other
(4)
|
(6.7
|
)
|
|
0.4
|
|
|
(5.0
|
)
|
|
5.1
|
|
||||
Ending
|
$
|
776.7
|
|
|
$
|
739.7
|
|
|
$
|
157.5
|
|
|
$
|
170.3
|
|
(1)
|
In 2017, volumes were negatively impacted by a decrease in volumes to AK Steel, for which AK Steel provided make whole payments. In 2018, these volumes to AK Steel increased, benefiting revenue with minimal impact on Adjusted EBITDA as the Partnership is made whole on volume shortfalls. Partly offsetting this benefit were lower volumes at Granite City.
|
(2)
|
Revenues and the impact of coal-to-coke yields on Adjusted EBITDA move directionally with changes in coal prices, which increased in both 2018 and 2017 as compared to the prior year periods. Additionally, in 2017, certain coal costs were under-recovered as a result of unfulfilled coal supply commitments by on of our coal suppliers.
|
(3)
|
The timing and scope of outage work negatively impacted Adjusted EBITDA by $6.6 million in 2018.
|
(4)
|
The decrease in energy in 2018 as compared to 2017 was primarily driven by our extended Granite City outage and the impact a machinery fire had on energy production. The improvement in 2017 as compared to 2016 was driven by the impact of a turbine failure at our Haverhill facility in October 2016, which was fully restored in January 2017. This turbine failure adversely affected energy production in 2016, although the impact was partially mitigated by insurance recoveries.
|
|
Sales and other operating revenue, inclusive of intersegment sales
|
|
Adjusted EBITDA
|
||||||||||||
|
2018 vs. 2017
|
|
2017 vs. 2016
|
|
2018 vs. 2017
|
|
2017 vs. 2016
|
||||||||
|
(Dollars in millions)
|
||||||||||||||
Beginning
|
$
|
112.4
|
|
|
$
|
104.0
|
|
|
$
|
69.7
|
|
|
$
|
63.2
|
|
Transloading volumes
(1)
|
9.2
|
|
|
3.2
|
|
|
3.4
|
|
|
2.5
|
|
||||
Price/margin impact of mix in transloading services
|
1.7
|
|
|
2.4
|
|
|
1.7
|
|
|
2.4
|
|
||||
Operating and maintenance costs and other
(2)
|
(1.0
|
)
|
|
2.8
|
|
|
(3.2
|
)
|
|
1.6
|
|
||||
Ending
|
$
|
122.3
|
|
|
$
|
112.4
|
|
|
$
|
71.6
|
|
|
$
|
69.7
|
|
(1)
|
CMT achieved record volumes in 2017, which further increased in 2018. Volumes were 12.2 million tons, 8.0 million tons and 4.3 million tons in 2018, 2017 and 2016, respectively.
|
(2)
|
In 2018, the Mississippi River experienced near-historic water levels, which negatively impacted Adjusted EBITDA during 2018 as compared to 2017.
|
|
Years Ended December 31,
|
||||||||||
|
2018
|
|
2017
|
|
2016
|
||||||
|
(Dollars in millions)
|
||||||||||
Net cash provided by operating activities
|
$
|
162.8
|
|
|
$
|
136.7
|
|
|
$
|
183.6
|
|
Net cash used in investing activities
|
(60.6
|
)
|
|
(39.0
|
)
|
|
(35.0
|
)
|
|||
Net cash used in financing activities
|
(96.2
|
)
|
|
(133.4
|
)
|
|
(172.6
|
)
|
|||
Net increase (decrease) in cash, cash equivalents and restricted cash
|
$
|
6.0
|
|
|
$
|
(35.7
|
)
|
|
$
|
(24.0
|
)
|
•
|
Ongoing capital expenditures required to maintain equipment reliability, ensure the integrity and safety of our coke ovens and steam generators and to comply with environmental regulations. Ongoing capital expenditures are made to replace partially or fully depreciated assets in order to maintain the existing operating capacity of the assets and/or to extend their useful lives and also include new equipment that improves the efficiency, reliability or effectiveness of existing assets. Ongoing capital expenditures do not include normal repairs and maintenance expenses, which are expensed as incurred;
|
•
|
Environmental remediation project expenditures required to implement design changes to ensure that our existing facilities operate in accordance with existing environmental permits; and
|
•
|
Expansion capital expenditures to acquire and/or construct complementary assets to grow our business and to expand existing facilities as well as capital expenditures made to enable the renewal of a coke sales agreement and/or logistics service agreement and on which we expect to earn a reasonable return.
|
|
Years Ended December 31,
|
||||||||||
|
2018
|
|
2017
|
|
2016
|
||||||
|
(Dollars in millions)
|
||||||||||
Ongoing capital
|
$
|
30.2
|
|
|
$
|
18.2
|
|
|
$
|
15.8
|
|
Environmental remediation project
(1)
|
29.8
|
|
|
19.4
|
|
|
7.8
|
|
|||
Expansion capital
(2)
|
0.8
|
|
|
1.4
|
|
|
13.5
|
|
|||
Total
|
$
|
60.8
|
|
|
$
|
39.0
|
|
|
$
|
37.1
|
|
(1)
|
Includes
$3.2 million
,
$1.1 million
and
$2.7 million
of capitalized interest in connection with the gas sharing projects for the years ended
December 31, 2018
,
2017
and
2016
, respectively.
|
(2)
|
Primarily consists of capital expenditures for the ship loader expansion project funded with cash withheld in conjunction with the acquisition of CMT. Additionally, this includes capitalized interest of $2.3 million for the year ended December 31, 2016.
|
|
|
|
Payment Due Dates
|
||||||||||||||||
|
Total
|
|
2019
|
|
2020-2021
|
|
2022-2023
|
|
Thereafter
|
||||||||||
|
(Dollars in millions)
|
||||||||||||||||||
Total borrowings:
(1)
|
|
|
|
|
|
|
|
|
|
||||||||||
Principal
|
$
|
815.1
|
|
|
$
|
2.8
|
|
|
$
|
7.3
|
|
|
$
|
105.0
|
|
|
$
|
700.0
|
|
Interest
|
359.1
|
|
|
58.6
|
|
|
116.7
|
|
|
107.2
|
|
|
76.6
|
|
|||||
Operating leases
(2)
|
1.5
|
|
|
1.1
|
|
|
0.3
|
|
|
0.1
|
|
|
—
|
|
|||||
Purchase obligations:
|
|
|
|
|
|
|
|
|
|
||||||||||
Coal
(3)
|
434.0
|
|
|
434.0
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|||||
Transportation and coal handling
(4)
|
89.1
|
|
|
23.6
|
|
|
26.2
|
|
|
12.9
|
|
|
26.4
|
|
|||||
Other
(5)
|
7.1
|
|
|
2.4
|
|
|
2.0
|
|
|
1.8
|
|
|
0.9
|
|
|||||
Total
|
$
|
1,705.9
|
|
|
$
|
522.5
|
|
|
$
|
152.5
|
|
|
$
|
227.0
|
|
|
$
|
803.9
|
|
(1)
|
At
December 31, 2018
, debt consists of
$700.0 million
of Partnership Notes,
$105.0 million
of Partnership Revolver and
$10.1 million
of Partnership Financing Obligation. Projected interest costs on variable rate instruments were calculated using market rates at
December 31, 2018
.
|
(2)
|
Our operating leases include leases for office space, land, locomotives, office equipment and other property and equipment. Operating leases include all operating leases that have initial noncancelable terms in excess of one year.
|
(3)
|
Certain coal procurement contracts included in the table above were not executed at
December 31, 2018
. We estimate these contracts to be approximately
$68 million
of purchase obligations in 2019 and expect these to be finalized in the first quarter of
2019
.
|
(4)
|
Transportation and coal handling services consist primarily of railroad and terminal services attributable to delivery and handling of coke sales. Long-term commitments generally relate to locations for which limited transportation options exist and match the length of the related coke sales agreement.
|
(5)
|
Primarily represents open purchase orders for materials, supplies and services.
|
|
|
2019
|
||||||
|
|
Low
|
|
High
|
||||
|
|
(Dollars in millions)
|
||||||
Net Income
|
|
$
|
46
|
|
|
$
|
61
|
|
Add:
|
|
|
|
|
||||
Depreciation and amortization expense
|
|
110
|
|
|
105
|
|
||
Interest expense
|
|
60
|
|
|
60
|
|
||
Income tax expense
|
|
2
|
|
|
3
|
|
||
Adjusted EBITDA
|
|
$
|
218
|
|
|
$
|
229
|
|
Subtract:
|
|
|
|
|
||||
Adjusted EBITDA attributable to noncontrolling interest
(1)
|
|
3
|
|
|
4
|
|
||
Adjusted EBITDA attributable to SunCoke Energy Partners, L.P.
|
|
$
|
215
|
|
|
$
|
225
|
|
|
|
|
|
|
||||
|
|
|
|
|
||||
|
|
2019
|
||||||
|
|
Low
|
|
High
|
||||
|
|
(Dollars in millions)
|
||||||
Net cash provided by operating activities
|
|
$
|
145
|
|
|
$
|
160
|
|
Add:
|
|
|
|
|
||||
Cash interest paid
|
|
60
|
|
|
60
|
|
||
Cash income taxes paid
|
|
2
|
|
|
3
|
|
||
Changes in working capital and other
|
|
11
|
|
|
6
|
|
||
Adjusted EBITDA
|
|
$
|
218
|
|
|
$
|
229
|
|
Subtract:
|
|
|
|
|
||||
Adjusted EBITDA attributable to noncontrolling interest
(1)
|
|
3
|
|
|
4
|
|
||
Adjusted EBITDA attributable to SunCoke Energy Partners, L.P.
|
|
$
|
215
|
|
|
$
|
225
|
|
|
|
|
|
|
(1)
|
Reflects net income attributable to noncontrolling interest adjusted for noncontrolling interest's share of interest, taxes, depreciation and amortization.
|
•
|
changes in levels of production, production capacity, pricing and/or margins for coal and coke;
|
•
|
variation in availability, quality and supply of metallurgical coal used in the cokemaking process, including as a result of non-performance by our suppliers;
|
•
|
changes in the marketplace that may affect our logistics business, including the supply and demand for thermal and metallurgical coals;
|
•
|
changes in the marketplace that may affect our cokemaking business, including the supply and demand for our coke, as well as increased imports of coke from foreign producers;
|
•
|
competition from alternative steelmaking and other technologies that have the potential to reduce or eliminate the use of coke;
|
•
|
our dependence on, relationships with, and other conditions affecting, our customers;
|
•
|
our dependence on, relationships with, and other conditions affecting, our suppliers;
|
•
|
severe financial hardship or bankruptcy of one or more of our major customers, or the occurrence of a customer default or other event affecting our ability to collect payments from our customers;
|
•
|
volatility and cyclical downturns in the coal market, in the carbon steel industry, and other industries in which our customers and/or suppliers operate;
|
•
|
our ability to repair aging coke ovens to maintain operational performance;
|
•
|
our ability to enter into new, or renew existing, long-term agreements upon favorable terms for the sale of coke steam, or electric power, or for coal handling services (including transportation, storage and mixing);
|
•
|
our ability to identify acquisitions, execute them under favorable terms and integrate them into our existing business operations;
|
•
|
our ability to realize expected benefits from investments and acquisitions;
|
•
|
our ability to consummate investments under favorable terms, including with respect to existing cokemaking facilities, which may utilize by-product technology, in the U.S. and Canada, and integrate them into our existing businesses and have them perform at anticipated levels;
|
•
|
our ability to develop, design, permit, construct, start up or operate new cokemaking facilities in the U.S.;
|
•
|
our ability to successfully implement our growth strategy;
|
•
|
age of, and changes in the reliability, efficiency and capacity of the various equipment and operating facilities used in our cokemaking and/or logistics operations, and in the operations of our major customers, business partners and/or suppliers;
|
•
|
changes in the expected operating levels of our assets;
|
•
|
our ability to meet minimum volume requirements, coal-to-coke yield standards and coke quality standards in our coke sales agreements;
|
•
|
changes in the level of capital expenditures or operating expenses, including any changes in the level of environmental capital, operating or remediation expenditures;
|
•
|
our ability to service our outstanding indebtedness;
|
•
|
our ability to comply with the restrictions imposed by our financing arrangements;
|
•
|
our ability to comply with applicable federal, state or local laws and regulations, including, but not limited to, those relating to environmental matters;
|
•
|
nonperformance or force majeure by, or disputes with, or changes in contract terms with, major customers, suppliers, dealers, distributors or other business partners;
|
•
|
availability of skilled employees for our cokemaking and/or logistics operations, and other workplace factors;
|
•
|
effects of railroad, barge, truck and other transportation performance and costs, including any transportation disruptions;
|
•
|
effects of adverse events relating to the operation of our facilities and to the transportation and storage of hazardous materials or regulated media (including equipment malfunction, explosions, fires, spills, impoundment failure and the effects of severe weather conditions);
|
•
|
effects of adverse events relating to the business or commercial operations of our customers and/or suppliers;
|
•
|
disruption in our information technology infrastructure and/or loss of our ability to securely store, maintain, or transmit data due to security breach by hackers, employee error or malfeasance, terrorist attack, power loss, telecommunications failure or other events;
|
•
|
our ability to enter into joint ventures and other similar arrangements under favorable terms;
|
•
|
our ability to consummate assets sales, other divestitures and strategic restructuring in a timely manner upon favorable terms, and/or realize the anticipated benefits from such actions;
|
•
|
changes in the availability and cost of equity and debt financing;
|
•
|
impacts on our liquidity and ability to raise capital as a result of changes in the credit ratings assigned to our indebtedness;
|
•
|
changes in credit terms required by our suppliers;
|
•
|
risks related to labor relations and workplace safety;
|
•
|
proposed or final changes in existing, or new, statutes, regulations, rules, governmental policies and taxes, or their interpretations, including those relating to environmental matters and taxes;
|
•
|
the existence of hazardous substances or other environmental contamination on property owned or used by us;
|
•
|
receipt of required permits and other regulatory approvals and compliance with contractual obligations in connection with our cokemaking and /or logistics operations;
|
•
|
risks related to environmental compliance;
|
•
|
claims of noncompliance with any statutory or regulatory requirements;
|
•
|
the accuracy of our estimates of any necessary reclamation and/or remediation activities;
|
•
|
proposed or final changes in accounting and/or tax methodologies, laws, regulations, rules, or policies, or their interpretations, including those affecting inventories, leases, income, or other matters;
|
•
|
our indebtedness and certain covenants in our debt documents;
|
•
|
changes in product specifications for the coke that we produce or the coals that we mix, store and transport;
|
•
|
changes in insurance markets impacting costs and the level and types of coverage available, and the financial ability of our insurers to meet their obligations;
|
•
|
inadequate protection of our intellectual property rights; and
|
•
|
effects of geologic conditions, weather, natural disasters and other inherent risks beyond our control.
|
Item 7A.
|
Quantitative and Qualitative Disclosures About Market Risk
|
Item 8.
|
Financial Statements and Supplementary Data
|
|
Page
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Years Ended December 31,
|
||||||||||
|
|
2018
|
|
2017
|
|
2016
|
||||||
|
|
(Dollars and units in millions, except per unit amounts)
|
||||||||||
Revenues
|
|
|
|
|
|
|
||||||
Sales and other operating revenue
|
|
$
|
892.1
|
|
|
$
|
845.6
|
|
|
$
|
779.7
|
|
Costs and operating expenses
|
|
|
|
|
|
|
||||||
Cost of products sold and operating expenses
|
|
648.9
|
|
|
586.7
|
|
|
517.2
|
|
|||
Selling, general and administrative expenses
|
|
33.6
|
|
|
32.5
|
|
|
38.7
|
|
|||
Depreciation and amortization expense
|
|
92.4
|
|
|
83.6
|
|
|
77.7
|
|
|||
Total costs and operating expenses
|
|
774.9
|
|
|
702.8
|
|
|
633.6
|
|
|||
Operating income
|
|
117.2
|
|
|
142.8
|
|
|
146.1
|
|
|||
Interest expense, net
|
|
59.4
|
|
|
56.4
|
|
|
47.7
|
|
|||
Loss (gain) on extinguishment of debt, net
|
|
—
|
|
|
20.0
|
|
|
(25.0
|
)
|
|||
Income before income tax (benefit) expense
|
|
57.8
|
|
|
66.4
|
|
|
123.4
|
|
|||
Income tax (benefit) expense
|
|
(1.6
|
)
|
|
83.9
|
|
|
2.0
|
|
|||
Net income (loss)
|
|
59.4
|
|
|
(17.5
|
)
|
|
121.4
|
|
|||
Less: Net income attributable to noncontrolling interests
|
|
1.9
|
|
|
0.6
|
|
|
2.3
|
|
|||
Net income (loss) attributable to SunCoke Energy Partners, L.P.
|
|
57.5
|
|
|
(18.1
|
)
|
|
119.1
|
|
|||
|
|
|
|
|
|
|
||||||
General partner's interest in net income
|
|
$
|
1.2
|
|
|
$
|
7.1
|
|
|
$
|
23.6
|
|
Limited partners' interest in net income (loss)
|
|
$
|
56.3
|
|
|
$
|
(25.2
|
)
|
|
$
|
95.5
|
|
Net income (loss) per common unit (basic and diluted)
|
|
$
|
1.22
|
|
|
$
|
(0.54
|
)
|
|
$
|
2.07
|
|
Weighted average common units outstanding (basic and diluted)
|
|
46.2
|
|
|
46.2
|
|
|
46.2
|
|
|
|
December 31,
|
||||||
|
|
2018
|
|
2017
|
||||
|
|
(Dollars in millions)
|
||||||
Assets
|
|
|
||||||
Cash and cash equivalents
|
|
$
|
12.6
|
|
|
$
|
6.6
|
|
Receivables
|
|
48.8
|
|
|
42.2
|
|
||
Receivables from affiliates, net
|
|
3.1
|
|
|
5.7
|
|
||
Inventories
|
|
79.0
|
|
|
79.4
|
|
||
Other current assets
|
|
1.0
|
|
|
1.9
|
|
||
Total current assets
|
|
144.5
|
|
|
135.8
|
|
||
Properties, plants and equipment (net of accumulated depreciation of $499.9 million, and $423.1 million at December 31, 2018 and 2017, respectively)
|
|
1,245.1
|
|
|
1,265.6
|
|
||
Goodwill
|
|
73.5
|
|
|
73.5
|
|
||
Other intangible assets
|
|
155.8
|
|
|
166.2
|
|
||
Deferred charges and other assets
|
|
0.2
|
|
|
0.3
|
|
||
Total assets
|
|
$
|
1,619.1
|
|
|
$
|
1,641.4
|
|
Liabilities and Equity
|
|
|
|
|
||||
Accounts payable
|
|
$
|
68.8
|
|
|
$
|
54.9
|
|
Accrued liabilities
|
|
13.5
|
|
|
14.6
|
|
||
Deferred revenue
|
|
3.0
|
|
|
1.7
|
|
||
Current portion of long-term debt and financing obligation
|
|
2.8
|
|
|
2.6
|
|
||
Interest payable
|
|
3.2
|
|
|
4.0
|
|
||
Total current liabilities
|
|
91.3
|
|
|
77.8
|
|
||
Long-term debt and financing obligation
|
|
793.3
|
|
|
818.4
|
|
||
Deferred income taxes
|
|
115.7
|
|
|
119.2
|
|
||
Other deferred credits and liabilities
|
|
12.1
|
|
|
10.1
|
|
||
Total liabilities
|
|
1,012.4
|
|
|
1,025.5
|
|
||
Equity
|
|
|
|
|
||||
Held by public:
|
|
|
|
|
||||
Common units 17,727,249, and 17,958,420 units issued at December 31, 2018 and 2017, respectively)
|
|
194.1
|
|
|
207.0
|
|
||
Held by parent:
|
|
|
|
|
|
|
||
Common units 28,499,899 and 28,268,728 units issued at December 31, 2018 and 2017, respectively)
|
|
351.6
|
|
|
365.4
|
|
||
General partner's interest
|
|
49.3
|
|
|
31.2
|
|
||
Partners’ capital attributable to SunCoke Energy Partners, L.P.
|
|
595.0
|
|
|
603.6
|
|
||
Noncontrolling interest
|
|
11.7
|
|
|
12.3
|
|
||
Total equity
|
|
606.7
|
|
|
615.9
|
|
||
Total liabilities and equity
|
|
$
|
1,619.1
|
|
|
$
|
1,641.4
|
|
|
|
Years Ended December 31,
|
||||||||||
|
|
2018
|
|
2017
|
|
2016
|
||||||
|
|
(Dollars in millions)
|
||||||||||
Cash Flows from Operating Activities:
|
|
|
|
|
|
|
||||||
Net income (loss)
|
|
$
|
59.4
|
|
|
$
|
(17.5
|
)
|
|
$
|
121.4
|
|
Adjustments to reconcile net income (loss) to net cash provided by operating activities:
|
|
|
|
|
|
|
||||||
Depreciation and amortization expense
|
|
92.4
|
|
|
83.6
|
|
|
77.7
|
|
|||
Deferred income tax (benefit) expense
|
|
(3.5
|
)
|
|
81.3
|
|
|
(0.1
|
)
|
|||
Loss (gain) on extinguishment of debt
|
|
—
|
|
|
20.0
|
|
|
(25.0
|
)
|
|||
Changes in working capital pertaining to operating activities:
|
|
|
|
|
|
|
||||||
Receivables
|
|
(6.6
|
)
|
|
(2.5
|
)
|
|
0.3
|
|
|||
Receivables from affiliates, net
|
|
2.6
|
|
|
(9.0
|
)
|
|
4.7
|
|
|||
Inventories
|
|
0.4
|
|
|
(12.5
|
)
|
|
10.2
|
|
|||
Accounts payable
|
|
13.2
|
|
|
3.1
|
|
|
2.3
|
|
|||
Accrued liabilities
|
|
(0.9
|
)
|
|
2.7
|
|
|
0.5
|
|
|||
Deferred revenue
|
|
1.3
|
|
|
(0.8
|
)
|
|
0.4
|
|
|||
Interest payable
|
|
(0.8
|
)
|
|
(10.7
|
)
|
|
(2.8
|
)
|
|||
Other
|
|
5.3
|
|
|
(1.0
|
)
|
|
(6.0
|
)
|
|||
Net cash provided by operating activities
|
|
162.8
|
|
|
136.7
|
|
|
183.6
|
|
|||
Cash Flows from Investing Activities:
|
|
|
|
|
|
|
||||||
Capital expenditures
|
|
(60.8
|
)
|
|
(39.0
|
)
|
|
(37.1
|
)
|
|||
Other investing activities
|
|
0.2
|
|
|
—
|
|
|
2.1
|
|
|||
Net cash used in investing activities
|
|
(60.6
|
)
|
|
(39.0
|
)
|
|
(35.0
|
)
|
|||
Cash Flows from Financing Activities:
|
|
|
|
|
|
|
||||||
Proceeds from issuance of common units, net of offering costs
|
|
—
|
|
|
—
|
|
|
—
|
|
|||
Proceeds from issuance of long-term debt
|
|
—
|
|
|
693.7
|
|
|
—
|
|
|||
Repayment of long-term debt
|
|
—
|
|
|
(644.9
|
)
|
|
(66.1
|
)
|
|||
Debt issuance costs
|
|
—
|
|
|
(15.8
|
)
|
|
(0.2
|
)
|
|||
Proceeds from revolving credit facility
|
|
179.5
|
|
|
350.0
|
|
|
28.0
|
|
|||
Repayment of revolving credit facility
|
|
(204.5
|
)
|
|
(392.0
|
)
|
|
(38.0
|
)
|
|||
Proceeds from financing obligation
|
|
—
|
|
|
—
|
|
|
16.2
|
|
|||
Repayment of financing obligation
|
|
(2.6
|
)
|
|
(2.5
|
)
|
|
(1.0
|
)
|
|||
Distributions to unitholders (public and parent)
|
|
(86.1
|
)
|
|
(119.2
|
)
|
|
(116.4
|
)
|
|||
Distributions to noncontrolling interest (SunCoke Energy, Inc.)
|
|
(2.5
|
)
|
|
(2.7
|
)
|
|
(3.5
|
)
|
|||
Capital contributions from SunCoke
|
|
20.0
|
|
|
—
|
|
|
8.4
|
|
|||
Net cash used in financing activities
|
|
(96.2
|
)
|
|
(133.4
|
)
|
|
(172.6
|
)
|
|||
Net increase (decrease) in cash and cash equivalents and restricted cash
|
|
6.0
|
|
|
(35.7
|
)
|
|
(24.0
|
)
|
|||
Cash, cash equivalents and restricted cash at beginning of year
|
|
6.6
|
|
|
42.3
|
|
|
66.3
|
|
|||
Cash, cash equivalents and restricted cash at end of year
|
|
$
|
12.6
|
|
|
$
|
6.6
|
|
|
$
|
42.3
|
|
Supplemental Disclosure of Cash Flow Information
|
|
|
|
|
|
|
||||||
Interest paid, net of capitalized interest of $3.2 million, $1.1 million and $5.0 million, respectively
|
|
$
|
56.9
|
|
|
$
|
64.5
|
|
|
$
|
49.0
|
|
Income taxes paid
|
|
$
|
2.9
|
|
|
$
|
1.4
|
|
|
$
|
1.5
|
|
|
|
Common - Public
|
|
Common - SunCoke
|
|
Subordinated
- SunCoke |
|
General Partner - SunCoke
|
|
Non- controlling Interest
|
|
Total
|
||||||||||||
|
(Dollars in millions)
|
|||||||||||||||||||||||
At December 31, 2015
|
|
$
|
300.0
|
|
|
$
|
211.0
|
|
|
$
|
203.3
|
|
|
$
|
15.1
|
|
|
$
|
15.6
|
|
|
$
|
745.0
|
|
Partnership net income
|
|
46.1
|
|
|
49.4
|
|
|
—
|
|
|
23.6
|
|
|
2.3
|
|
|
121.4
|
|
||||||
Conversion of subordinated units to common units
|
|
—
|
|
|
203.3
|
|
|
(203.3
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
||||||
Distribution to unitholders, net of unit issuances
|
|
(49.2
|
)
|
|
(60.4
|
)
|
|
—
|
|
|
(8.0
|
)
|
|
—
|
|
|
(117.6
|
)
|
||||||
Distribution to noncontrolling interest
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(3.5
|
)
|
|
(3.5
|
)
|
||||||
SunCoke capital contributions
|
|
—
|
|
|
7.0
|
|
|
—
|
|
|
1.4
|
|
|
—
|
|
|
8.4
|
|
||||||
At December 31, 2016
|
|
$
|
296.9
|
|
|
$
|
410.3
|
|
|
$
|
—
|
|
|
$
|
32.1
|
|
|
$
|
14.4
|
|
|
$
|
753.7
|
|
Partnership net (loss) income
|
|
(13.5
|
)
|
|
(11.7
|
)
|
|
—
|
|
|
7.1
|
|
|
0.6
|
|
|
(17.5
|
)
|
||||||
Distribution to unitholders, net of unit issuances
|
|
(46.8
|
)
|
|
(62.8
|
)
|
|
—
|
|
|
(8.0
|
)
|
|
—
|
|
|
(117.6
|
)
|
||||||
Public units acquired by SunCoke
|
|
(29.6
|
)
|
|
29.6
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
||||||
Distribution to noncontrolling interest
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(2.7
|
)
|
|
(2.7
|
)
|
||||||
At December 31, 2017
|
|
$
|
207.0
|
|
|
$
|
365.4
|
|
|
$
|
—
|
|
|
$
|
31.2
|
|
|
$
|
12.3
|
|
|
$
|
615.9
|
|
Partnership net income
|
|
21.7
|
|
|
34.6
|
|
|
—
|
|
|
1.2
|
|
|
1.9
|
|
|
59.4
|
|
||||||
Distribution to unitholders
|
|
(31.9
|
)
|
|
(51.1
|
)
|
|
—
|
|
|
(3.1
|
)
|
|
—
|
|
|
(86.1
|
)
|
||||||
Distributions to noncontrolling interest
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(2.5
|
)
|
|
(2.5
|
)
|
||||||
Public units acquired by SunCoke
|
|
(2.7
|
)
|
|
2.7
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
||||||
SunCoke capital contributions
|
|
—
|
|
|
—
|
|
|
—
|
|
|
20.0
|
|
|
—
|
|
|
20.0
|
|
||||||
At December 31, 2018
|
|
$
|
194.1
|
|
|
$
|
351.6
|
|
|
$
|
—
|
|
|
$
|
49.3
|
|
|
$
|
11.7
|
|
|
$
|
606.7
|
|
|
|
Years ended December 31,
|
|||||||||||||||||||
|
|
2018
|
|
2017
|
|
2016
|
|||||||||||||||
|
|
Sales and other operating revenue
|
|
Percent of Partnership sales and other operating revenue
|
|
Sales and other operating revenue
|
|
Percent of Partnership sales and other operating revenue
|
|
Sales and other operating revenue
|
|
Percent of Partnership sales and other operating revenue
|
|||||||||
|
|
(Dollars in millions)
|
|||||||||||||||||||
AM USA
(1)
|
|
$
|
171.9
|
|
|
19.3
|
%
|
|
$
|
182.4
|
|
|
21.6
|
%
|
|
$
|
142.5
|
|
|
18.3
|
%
|
AK Steel
(1)
|
|
$
|
377.9
|
|
|
42.4
|
%
|
|
$
|
331.3
|
|
|
39.2
|
%
|
|
$
|
350.0
|
|
|
44.9
|
%
|
U.S. Steel
(2)
|
|
$
|
206.8
|
|
|
23.2
|
%
|
|
$
|
214.1
|
|
|
25.3
|
%
|
|
$
|
185.3
|
|
|
23.8
|
%
|
|
|
Years ended December 31,
|
||||||||||
|
|
2018
|
|
2017
|
|
2016
|
||||||
|
|
(Dollars in millions)
|
||||||||||
Sales and other operating revenue
|
|
$
|
62.5
|
|
|
$
|
57.8
|
|
|
$
|
53.5
|
|
Percent of Partnership sales and other operating revenue
|
|
7.0
|
%
|
|
6.8
|
%
|
|
6.9
|
%
|
|||
Percent of Logistics segment sales and other operating revenue, including intersegment sales
|
|
51.1
|
%
|
|
51.4
|
%
|
|
51.4
|
%
|
|
December 31,
|
||||||
|
2018
|
|
2017
|
||||
|
(Dollars in millions)
|
||||||
Murray and Foresight
|
$
|
3.2
|
|
|
$
|
9.7
|
|
|
|
Total Quarterly Distribution Per Unit Amount
|
|
Marginal Percentage
Interest in Distributions |
||||||
|
Unitholders
|
|
General Partner
|
|||||||
First Target Distribution
|
|
up to $0.412500
|
|
98
|
%
|
|
2
|
%
|
||
Second Target Distribution
|
|
above $0.474375
|
|
up to $0.515625
|
|
85
|
%
|
|
15
|
%
|
Third Target Distribution
|
|
above $0.515625
|
|
up to $0.618750
|
|
75
|
%
|
|
25
|
%
|
Thereafter
|
|
above $0.618750
|
|
50
|
%
|
|
50
|
%
|
Earned in Quarter Ended
|
|
Total Quarterly Distribution Per Unit
|
|
Total Cash Distribution, including general partner's IDRs
|
|
Date of Distribution
|
|
Unitholders Record Date
|
||||
|
|
|
|
(Dollars in millions)
|
|
|
|
|
||||
December 31, 2017
|
|
$
|
0.5940
|
|
|
$
|
29.5
|
|
|
March 1, 2018
|
|
February 15, 2018
|
March 31, 2018
|
|
$
|
0.4000
|
|
|
$
|
18.9
|
|
|
June 1, 2018
|
|
May 15, 2018
|
June 30, 2018
|
|
$
|
0.4000
|
|
|
$
|
18.9
|
|
|
September 4, 2018
|
|
August 15, 2018
|
September 30, 2018
|
|
$
|
0.4000
|
|
|
$
|
18.9
|
|
|
December 3, 2018
|
|
November 15, 2018
|
December 31, 2018
(1)
|
|
$
|
0.4000
|
|
|
$
|
18.9
|
|
|
March 1, 2019
|
|
February 15, 2019
|
(1)
|
On
January 28, 2019
, our Board of Directors declared a cash distribution of
$0.4000
per unit. The distribution will be paid on
March 1, 2019
, to unitholders of record on
February 15, 2019
.
|
|
|
Years Ended December 31,
|
||||||||||
|
|
2018
|
|
2017
|
|
2016
|
||||||
|
|
(Dollars in millions)
|
||||||||||
Net income (loss) attributable to SunCoke Energy Partners L.P.
|
|
$
|
57.5
|
|
|
$
|
(18.1
|
)
|
|
$
|
119.1
|
|
Less: Expense allocated to Common - SunCoke
(1)
|
|
—
|
|
|
—
|
|
|
(7.0
|
)
|
|||
Net income (loss) attributable to partners
|
|
57.5
|
|
|
(18.1
|
)
|
|
126.1
|
|
|||
General partner's incentive distribution rights
|
|
—
|
|
|
7.5
|
|
|
21.0
|
|
|||
Net income (loss) attributable to partners, excluding incentive distribution rights
|
|
57.5
|
|
|
(25.6
|
)
|
|
105.1
|
|
|||
General partner's ownership interest
|
|
2.0
|
%
|
|
2.0
|
%
|
|
2.0
|
%
|
|||
General partner's allocated interest in net income (loss)
(2)
|
|
1.2
|
|
|
(0.4
|
)
|
|
2.6
|
|
|||
General partner's incentive distribution rights
|
|
—
|
|
|
7.5
|
|
|
21.0
|
|
|||
Total general partner's interest in net income
|
|
$
|
1.2
|
|
|
$
|
7.1
|
|
|
$
|
23.6
|
|
Common - public unitholder's interest in net income (loss)
|
|
$
|
21.6
|
|
|
$
|
(13.5
|
)
|
|
$
|
46.1
|
|
Common - SunCoke interest in net income (loss):
|
|
|
|
|
|
|
||||||
Common - SunCoke interest in net income (loss)
|
|
34.7
|
|
|
(11.7
|
)
|
|
56.4
|
|
|||
Expenses allocated to Common - SunCoke
(1)
|
|
—
|
|
|
—
|
|
|
(7.0
|
)
|
|||
Total common - SunCoke interest in net income (loss)
|
|
34.7
|
|
|
(11.7
|
)
|
|
49.4
|
|
|||
Total limited partners' interest in net income (loss)
|
|
$
|
56.3
|
|
|
$
|
(25.2
|
)
|
|
$
|
95.5
|
|
(1)
|
Per the amended partnership agreement, expenses paid on behalf of the Partnership are to be allocated entirely to the partner who paid them. During the first quarter of
2016
, SunCoke paid
$7.0 million
of allocated corporate costs on behalf of the Partnership and will not seek reimbursement for those costs. See
Note 3
. These expenses are recorded as a direct reduction to SunCoke's interest in net income for the year ended December 31,
2016
.
|
(2)
|
Our net income is allocated to the general partner and limited partners in accordance with their respective partnership percentages, after giving effect to priority income allocations for incentive distributions, if any, to our general partner, pursuant to our partnership agreement. The table above represents a simplified presentation of the calculation, and therefore, amounts may not recalculate precisely.
|
|
|
Years Ended December 31,
|
||||||||||
|
|
2018
|
|
2017
|
|
2016
|
||||||
|
|
(Dollars in millions, except per unit amounts)
|
||||||||||
Net income (loss) attributable to SunCoke Energy Partners L.P.
|
|
$
|
57.5
|
|
|
$
|
(18.1
|
)
|
|
$
|
119.1
|
|
Less: Expense allocated to Common - SunCoke
(1)
|
|
—
|
|
|
—
|
|
|
(7.0
|
)
|
|||
Net income (loss) attributable to all partners
|
|
57.5
|
|
|
(18.1
|
)
|
|
126.1
|
|
|||
General partner's distributions (including zero, $5.6 million and $5.6 million of cash incentive distribution rights declared, respectively)
|
|
1.6
|
|
|
8.0
|
|
|
8.0
|
|
|||
Limited partners' distributions on common units
|
|
73.8
|
|
|
109.8
|
|
|
109.8
|
|
|||
Distributions (greater than) less than earnings
|
|
(17.9
|
)
|
|
(135.9
|
)
|
|
8.3
|
|
|||
General partner's earnings:
|
|
|
|
|
|
|
||||||
Distributions (including zero, $5.6 million and $5.6 million of cash incentive distribution rights declared, respectively)
|
|
1.6
|
|
|
8.0
|
|
|
8.0
|
|
|||
Allocation of distributions (greater than) less than earnings
|
|
(0.4
|
)
|
|
(0.9
|
)
|
|
15.6
|
|
|||
Total general partner's earnings
|
|
1.2
|
|
|
7.1
|
|
|
23.6
|
|
|||
Limited partners' earnings on common units:
|
|
|
|
|
|
|
||||||
Distributions
|
|
73.8
|
|
|
109.8
|
|
|
109.8
|
|
|||
Expenses allocated to Common - SunCoke
|
|
—
|
|
|
—
|
|
|
(7.0
|
)
|
|||
Allocation of distributions (greater than) less than earnings
|
|
(17.5
|
)
|
|
(135.0
|
)
|
|
(7.3
|
)
|
|||
Total limited partners' earnings on common units
|
|
56.3
|
|
|
(25.2
|
)
|
|
95.5
|
|
|||
Weighted average limited partner units outstanding:
|
|
|
|
|
|
|
||||||
Common - basic and diluted
|
|
46.2
|
|
|
46.2
|
|
|
46.2
|
|
|||
Net income per limited partner unit:
|
|
|
|
|
|
|
||||||
Common - basic and diluted
|
|
$
|
1.22
|
|
|
$
|
(0.54
|
)
|
|
$
|
2.07
|
|
(1)
|
Per the amended partnership agreement, expenses paid on behalf of the Partnership are to be allocated entirely to the partner who paid them. During the first quarter of
2016
, SunCoke paid
$7.0 million
of allocated corporate costs on behalf of the Partnership and will not seek reimbursement for those costs. See
Note 3
. These expenses are recorded as a direct reduction to SunCoke's interest in net income for the year ended December 31,
2016
.
|
|
|
Common - Public
|
|
Common - SunCoke
|
|
Total Common
|
|
Subordinated - SunCoke
|
||||
At December 31, 2015
|
|
20,787,744
|
|
|
9,705,999
|
|
|
30,493,743
|
|
|
15,709,697
|
|
Units issued to directors
|
|
12,437
|
|
|
—
|
|
|
12,437
|
|
|
—
|
|
Conversion of subordinate units to common units
(1)
|
|
—
|
|
|
15,709,697
|
|
|
15,709,697
|
|
|
(15,709,697
|
)
|
At December 31, 2016
|
|
20,800,181
|
|
|
25,415,696
|
|
|
46,215,877
|
|
|
—
|
|
Units issued to directors
|
|
11,271
|
|
|
—
|
|
|
11,271
|
|
|
—
|
|
Common units acquired by SunCoke
|
|
(2,853,032
|
)
|
|
2,853,032
|
|
|
—
|
|
|
—
|
|
At December 31, 2017
|
|
17,958,420
|
|
|
28,268,728
|
|
|
46,227,148
|
|
|
—
|
|
Common Units acquired by SunCoke
|
|
(231,171
|
)
|
|
231,171
|
|
|
—
|
|
|
—
|
|
At December 31, 2018
|
|
17,727,249
|
|
|
28,499,899
|
|
|
46,227,148
|
|
|
—
|
|
(1)
|
Upon payment of the cash distribution for the fourth quarter of 2015, the financial requirements for the conversion of all subordinated units were satisfied. As a result, the
15,709,697
subordinated units converted into common units on a one-for-one basis in 2016.
|
|
|
Years Ended December 31,
|
||||||||||
|
|
2018
|
|
2017
|
|
2016
|
||||||
|
|
(Dollars in millions)
|
||||||||||
Current tax expense:
|
|
|
|
|
|
|
||||||
U.S. federal
|
|
$
|
0.7
|
|
|
$
|
1.7
|
|
|
$
|
2.1
|
|
U.S. state and local
|
|
1.2
|
|
|
0.9
|
|
|
—
|
|
|||
Total current tax expense
|
|
1.9
|
|
|
2.6
|
|
|
2.1
|
|
|||
|
|
|
|
|
|
|
||||||
Deferred tax (benefit) expense:
|
|
|
|
|
|
|
||||||
U.S. federal
|
|
(3.4
|
)
|
|
72.5
|
|
|
(1.1
|
)
|
|||
U.S. state and local
|
|
(0.1
|
)
|
|
8.8
|
|
|
1.0
|
|
|||
Total deferred tax (benefit) expense
|
|
(3.5
|
)
|
|
81.3
|
|
|
(0.1
|
)
|
|||
Total
|
|
$
|
(1.6
|
)
|
|
$
|
83.9
|
|
|
$
|
2.0
|
|
|
|
Years Ended December 31,
|
|||||||||||||||||||
|
|
2018
|
|
2017
|
|
2016
|
|||||||||||||||
|
|
(Dollars in millions)
|
|||||||||||||||||||
Income tax expense at U.S. statutory rate
|
|
$
|
12.1
|
|
|
21.0
|
%
|
|
$
|
23.3
|
|
|
35.0
|
%
|
|
$
|
43.2
|
|
|
35.0
|
%
|
(Reduction) increase in income taxes resulting from:
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||
Impact of Final Regulations
(1)
|
|
(3.6
|
)
|
|
(6.2
|
)%
|
|
148.6
|
|
|
223.5
|
%
|
|
—
|
|
|
—
|
%
|
|||
Impact of Tax Legislation
(2)
|
|
—
|
|
|
—
|
%
|
|
(68.8
|
)
|
|
(103.1
|
)%
|
|
—
|
|
|
—
|
%
|
|||
Partnership income not subject to tax
|
|
(11.2
|
)
|
|
(19.4
|
)%
|
|
(21.8
|
)
|
|
(32.8
|
)%
|
|
(42.2
|
)
|
|
(34.1
|
)%
|
|||
State and local tax for Middletown and Granite City operations
|
|
1.1
|
|
|
1.8
|
%
|
|
2.6
|
|
|
3.7
|
%
|
|
1.2
|
|
|
0.9
|
%
|
|||
Other
|
|
—
|
|
|
—
|
%
|
|
—
|
|
|
—
|
%
|
|
(0.2
|
)
|
|
(0.2
|
)%
|
|||
Total tax provision
|
|
$
|
(1.6
|
)
|
|
(2.8
|
)%
|
|
$
|
83.9
|
|
|
126.3
|
%
|
|
$
|
2.0
|
|
|
1.6
|
%
|
(1)
|
As a result of the Final Regulations discussed above, the Partnership recorded a deferred income tax benefit of
$3.6 million
and
$148.6 million
related to its changes in its projected deferred tax liability associated with projected book to tax differences at the end of the 10-year transition period
in 2018 and 2017, respectively. The benefit recorded in 2018 was driven by current period additions and changes in estimated useful lives of certain assets.
|
(2)
|
On December 22, 2017, the Tax Legislation was enacted. The Tax Legislation significantly revised the U.S. corporate income tax structure, including lowering corporate income tax rates.
As a result, the Partnership recorded an income tax benefit of
$68.8 million
for the remeasurement of its U.S. deferred income tax liabilities, reversing a portion of the
deferred income tax expense recorded from the Final Regulations in the first quarter of 2017.
|
|
|
December 31,
|
||||||
|
|
2018
|
|
2017
|
||||
|
|
(Dollars in millions)
|
||||||
Deferred tax assets
|
|
$
|
—
|
|
|
$
|
—
|
|
Deferred tax liabilities:
|
|
|
|
|
||||
Properties, plants and equipment
|
|
(114.7
|
)
|
|
(118.4
|
)
|
||
Other liabilities
|
|
(1.0
|
)
|
|
(0.8
|
)
|
||
Total deferred tax liabilities
|
|
(115.7
|
)
|
|
(119.2
|
)
|
||
Net deferred tax liability
|
|
$
|
(115.7
|
)
|
|
$
|
(119.2
|
)
|
|
December 31,
|
||||||
|
2018
|
|
2017
|
||||
|
(Dollars in millions)
|
||||||
Coal
|
$
|
40.3
|
|
|
$
|
41.0
|
|
Coke
|
6.4
|
|
|
9.5
|
|
||
Materials, supplies, and other
|
32.3
|
|
|
28.9
|
|
||
Total inventories
|
$
|
79.0
|
|
|
$
|
79.4
|
|
|
December 31,
|
||||||
|
2018
|
|
2017
|
||||
|
(Dollars in millions)
|
||||||
Coke and energy plant, machinery and equipment
(1)
|
$
|
1,367.3
|
|
|
$
|
1,339.9
|
|
Logistics plant, machinery and equipment
|
210.8
|
|
|
208.6
|
|
||
Land and land improvements
|
96.9
|
|
|
95.9
|
|
||
Construction-in-progress
|
63.6
|
|
|
38.4
|
|
||
Other
|
6.4
|
|
|
5.9
|
|
||
Gross investment, at cost
|
$
|
1,745.0
|
|
|
$
|
1,688.7
|
|
Less: accumulated depreciation
(1)
|
(499.9
|
)
|
|
(423.1
|
)
|
||
Total properties, plant and equipment, net
|
$
|
1,245.1
|
|
|
$
|
1,265.6
|
|
(1)
|
Includes assets, consisting mainly of coke and energy plant, machinery and equipment, with a gross investment totaling
$877.1 million
and
$835.0 million
and accumulated depreciation of
$231.8 million
and
$196.6 million
at
December 31, 2018
and 2017, respectively, which are subject to long-term contracts to sell coke and are deemed to contain operating leases. Upon adoption of ASC 842, "Leases",
in 2019, these contracts will no longer be deemed to contain operating leases.
|
|
Logistics
|
||
|
(Dollars in millions)
|
||
Balance at December 31, 2018 and 2017
|
$
|
73.5
|
|
|
|
|
December 31, 2018
|
|
December 31, 2017
|
||||||||||||||||||||
|
Weighted - Average Remaining Amortization Years
|
|
Gross Carrying Amount
|
|
Accumulated Amortization
|
|
Net
|
|
Gross Carrying Amount
|
|
Accumulated Amortization
|
|
Net
|
||||||||||||
|
|
|
(Dollars in millions)
|
||||||||||||||||||||||
Customer contracts
|
4
|
|
$
|
24.0
|
|
|
$
|
11.0
|
|
|
$
|
13.0
|
|
|
$
|
24.0
|
|
|
$
|
7.8
|
|
|
$
|
16.2
|
|
Customer relationships
|
13
|
|
28.7
|
|
|
7.5
|
|
|
21.2
|
|
|
28.7
|
|
|
5.7
|
|
|
23.0
|
|
||||||
Permits
|
24
|
|
139.0
|
|
|
17.4
|
|
|
121.6
|
|
|
139.0
|
|
|
12.2
|
|
|
126.8
|
|
||||||
Trade name
|
-
|
|
1.2
|
|
|
1.2
|
|
|
—
|
|
|
1.2
|
|
|
1.0
|
|
|
0.2
|
|
||||||
Total
|
|
|
$
|
192.9
|
|
|
$
|
37.1
|
|
|
$
|
155.8
|
|
|
$
|
192.9
|
|
|
$
|
26.7
|
|
|
$
|
166.2
|
|
|
December 31,
|
||||||
|
2018
|
|
2017
|
||||
|
(Dollars in millions)
|
||||||
7.500 percent senior notes, due 2025 ("Partnership Notes")
|
$
|
700.0
|
|
|
$
|
700.0
|
|
Revolving credit facility, due 2022 ("Partnership Revolver")
|
105.0
|
|
|
130.0
|
|
||
5.82 percent financing obligation, due 2021 ("Partnership Financing Obligation")
|
10.1
|
|
|
12.7
|
|
||
Total borrowings
|
$
|
815.1
|
|
|
$
|
842.7
|
|
Discount
|
(5.4
|
)
|
|
(5.9
|
)
|
||
Debt issuance costs
|
(13.6
|
)
|
|
(15.8
|
)
|
||
Total debt and financing obligation
|
$
|
796.1
|
|
|
$
|
821.0
|
|
Less: current portion of long-term debt and financing obligation
|
2.8
|
|
|
2.6
|
|
||
Total long-term debt and financing obligation
|
$
|
793.3
|
|
|
$
|
818.4
|
|
(1)
|
Assumes the Partnership Financing Obligation early buyout option is exercised in 2020.
|
|
|
Minimum
Rental Payments |
||
Year ending December 31:
|
|
(Dollars in millions)
|
||
2019
|
|
$
|
1.1
|
|
2020
|
|
0.2
|
|
|
2021
|
|
0.1
|
|
|
2022
|
|
0.1
|
|
|
2023
|
|
—
|
|
|
2024-Thereafter
|
|
—
|
|
|
Total
|
|
$
|
1.5
|
|
•
|
Level 1—inputs to the valuation methodology are quoted prices (unadjusted) for an identical asset or liability in an active market.
|
•
|
Level 2—inputs to the valuation methodology include quoted prices for a similar asset or liability in an active market or model-derived valuations in which all significant inputs are observable for substantially the full term of the asset or liability.
|
•
|
Level 3—inputs to the valuation methodology are unobservable and significant to the fair value measurement of the asset or liability.
|
|
|
2018
|
|
2017
|
||||
|
|
(Dollars in millions)
|
||||||
Beginning balance at December 31, 2017 and 2016, respectively
|
|
$
|
1.7
|
|
|
$
|
2.5
|
|
Reclassification of the beginning contract liabilities to revenue, as a result of performance obligation satisfied
|
|
(1.4
|
)
|
|
(2.1
|
)
|
||
Billings in excess of services performed, not recognized as revenue
|
|
2.7
|
|
|
1.3
|
|
||
Ending balance at December 31, 2018 and 2017, respectively
|
|
$
|
3.0
|
|
|
$
|
1.7
|
|
|
|
Years Ended December 31,
|
|||||||
|
|
2018
|
|
2017
|
|
2016
|
|||
|
|
(Dollars in millions)
|
|||||||
Sales and other operating revenue:
|
|
|
|
|
|
|
|||
Cokemaking
|
|
720.6
|
|
|
686.9
|
|
|
623.6
|
|
Energy
|
|
49.7
|
|
|
52.7
|
|
|
53.7
|
|
Logistics
|
|
114.4
|
|
|
102.6
|
|
|
96.3
|
|
Other
|
|
7.4
|
|
|
3.4
|
|
|
6.1
|
|
Sales and other operating revenue
|
|
892.1
|
|
|
845.6
|
|
|
779.7
|
|
|
|
Years Ended December 31,
|
||||||||||
|
|
2018
|
|
2017
|
|
2016
|
||||||
|
|
(Dollars in millions)
|
||||||||||
Sales and other operating revenue:
|
|
|
|
|
|
|
||||||
Domestic Coke
|
|
$
|
776.7
|
|
|
$
|
739.7
|
|
|
$
|
681.8
|
|
Logistics
|
|
115.4
|
|
|
105.9
|
|
|
97.9
|
|
|||
Logistics intersegment sales
|
|
6.9
|
|
|
6.5
|
|
|
6.1
|
|
|||
Elimination of intersegment sales
|
|
(6.9
|
)
|
|
(6.5
|
)
|
|
(6.1
|
)
|
|||
Total sales and other operating revenue
|
|
$
|
892.1
|
|
|
$
|
845.6
|
|
|
$
|
779.7
|
|
Adjusted EBITDA:
|
|
|
|
|
|
|
||||||
Domestic Coke
|
|
$
|
157.5
|
|
|
$
|
170.3
|
|
|
$
|
167.0
|
|
Logistics
|
|
71.6
|
|
|
69.7
|
|
|
63.2
|
|
|||
Corporate and Other
|
|
(16.6
|
)
|
|
(15.3
|
)
|
|
(17.2
|
)
|
|||
Total Adjusted EBITDA
|
|
$
|
212.5
|
|
|
$
|
224.7
|
|
|
$
|
213.0
|
|
Depreciation and amortization expense:
|
|
|
|
|
|
|
||||||
Domestic Coke
(1)
|
|
$
|
68.1
|
|
|
$
|
59.9
|
|
|
$
|
53.4
|
|
Logistics
|
|
24.3
|
|
|
23.7
|
|
|
24.3
|
|
|||
Total depreciation and amortization expense
|
|
$
|
92.4
|
|
|
$
|
83.6
|
|
|
$
|
77.7
|
|
Capital expenditures:
|
|
|
|
|
|
|
||||||
Domestic Coke
|
|
$
|
57.2
|
|
|
$
|
35.0
|
|
|
$
|
22.1
|
|
Logistics
|
|
3.6
|
|
|
4.0
|
|
|
15.0
|
|
|||
Total capital expenditures
|
|
$
|
60.8
|
|
|
$
|
39.0
|
|
|
$
|
37.1
|
|
(1)
|
We revised the estimated useful lives of certain assets in our Domestic Coke segment, primarily as a result of plans to replace major components of certain heat recovery steam generators with upgraded materials and design, resulting in additional depreciation of
$9.2 million
, or
$0.20
per common unit, during the year ended December 31, 2018.
|
|
|
December 31,
|
||||||
|
|
2018
|
|
2017
|
||||
|
|
(Dollars in millions)
|
||||||
Segment assets:
|
|
|
|
|
||||
Domestic Coke
|
|
$
|
1,158.4
|
|
|
$
|
1,151.4
|
|
Logistics
|
|
458.7
|
|
|
489.8
|
|
||
Corporate and Other
|
|
2.0
|
|
|
0.2
|
|
||
Total Assets
|
|
$
|
1,619.1
|
|
|
$
|
1,641.4
|
|
•
|
does not reflect our cash expenditures, or future requirements, for capital expenditures or contractual commitments
;
|
•
|
does not reflect items such as depreciation and amortization;
|
•
|
does not reflect changes in, or cash requirements for, working capital needs;
|
•
|
does not reflect our interest expense, or the cash requirements necessary to service interest on or principal payments of our debt;
|
•
|
does not reflect certain other non-cash income and expenses;
|
•
|
excludes income taxes that may represent a reduction in available cash; and
|
•
|
includes net income attributable to noncontrolling interests.
|
|
|
Years Ended December 31,
|
||||||||||
|
|
2018
|
|
2017
|
|
2016
|
||||||
|
|
(Dollars in millions)
|
||||||||||
Net income (loss)
|
|
$
|
59.4
|
|
|
$
|
(17.5
|
)
|
|
$
|
121.4
|
|
Add:
|
|
|
|
|
|
|
||||||
Depreciation and amortization expense
|
|
92.4
|
|
|
83.6
|
|
|
77.7
|
|
|||
Interest expense, net
|
|
59.4
|
|
|
56.4
|
|
|
47.7
|
|
|||
Loss (gain) on extinguishment of debt
|
|
—
|
|
|
20.0
|
|
|
(25.0
|
)
|
|||
Income tax (benefit) expense
|
|
(1.6
|
)
|
|
83.9
|
|
|
2.0
|
|
|||
Contingent consideration adjustments
(1)
|
|
2.5
|
|
|
(1.7
|
)
|
|
(10.1
|
)
|
|||
Transaction Costs
|
|
0.4
|
|
|
—
|
|
|
—
|
|
|||
Non-cash reversal of acquired contractual obligations
(2)
|
|
—
|
|
|
—
|
|
|
(0.7
|
)
|
|||
Adjusted EBITDA
(3)
|
|
$
|
212.5
|
|
|
$
|
224.7
|
|
|
$
|
213.0
|
|
Subtract:
|
|
|
|
|
|
|
||||||
Adjusted EBITDA attributable to noncontrolling interest
(5)
|
|
3.1
|
|
|
3.4
|
|
|
3.3
|
|
|||
Adjusted EBITDA attributable to SunCoke Energy Partners, L.P.
|
|
$
|
209.4
|
|
|
$
|
221.3
|
|
|
$
|
209.7
|
|
|
|
Years Ended December 31,
|
||||||||||
|
|
2018
|
|
2017
|
|
2016
|
||||||
|
|
(Dollars in millions)
|
||||||||||
Net cash provided by operating activities
|
|
$
|
162.8
|
|
|
$
|
136.7
|
|
|
$
|
183.6
|
|
Add:
|
|
|
|
|
|
|
||||||
Cash interest paid, net of capitalized interest
|
|
56.9
|
|
|
64.5
|
|
|
49.0
|
|
|||
Cash taxes paid
|
|
2.9
|
|
|
1.4
|
|
|
1.5
|
|
|||
Changes in working capital
|
|
(10.0
|
)
|
|
19.0
|
|
|
(17.8
|
)
|
|||
Contingent consideration adjustments
(1)
|
|
2.5
|
|
|
(1.7
|
)
|
|
(10.1
|
)
|
|||
Transaction Costs
|
|
0.4
|
|
|
—
|
|
|
—
|
|
|||
Non-cash reversal of acquired contractual obligation
(2)
|
|
—
|
|
|
—
|
|
|
(0.7
|
)
|
|||
Other adjustments to reconcile cash (used in) provided by operating activities to Adjusted EBITDA
|
|
(3.0
|
)
|
|
4.8
|
|
|
7.5
|
|
|||
Adjusted EBITDA
|
|
$
|
212.5
|
|
|
$
|
224.7
|
|
|
$
|
213.0
|
|
Subtract:
|
|
|
|
|
|
|
||||||
Adjusted EBITDA attributable to noncontrolling interest
(3)
|
|
3.1
|
|
|
3.4
|
|
|
3.3
|
|
|||
Adjusted EBITDA attributable to SunCoke Energy Partners, L.P.
|
|
$
|
209.4
|
|
|
$
|
221.3
|
|
|
$
|
209.7
|
|
(1)
|
As a result of changes in the fair value of the contingent consideration liability, the Partnership recognized expense of
$2.5 million
in 2018 and benefits of
$1.7 million
and
$10.1 million
during and 2017 and 2016, respectively. See
Note 13
.
|
(2)
|
In association with the acquisition of CMT, we assumed certain performance obligations under existing contracts and recorded liabilities related to such obligations. In 2016, the final acquired contractual performance obligations expired without the customer requiring performance. Therefore, the Partnership reversed the liability as we no longer have any obligations under the contracts.
|
(3)
|
Reflects net income attributable to noncontrolling interest adjusted for noncontrolling interest's share of interest, taxes, income, and depreciation and amortization.
|
|
2018
|
|
2017
|
||||||||||||||||||||||||||||
|
First
Quarter
|
|
Second
Quarter
|
|
Third
Quarter
|
|
Fourth
Quarter
(1)
|
|
First
Quarter
(2)
|
|
Second
Quarter
(3)
|
|
Third
Quarter
|
|
Fourth
Quarter
(1)(4)
|
||||||||||||||||
|
(Dollars in millions, except per unit amounts)
|
||||||||||||||||||||||||||||||
Sales and other operating revenue
|
$
|
214.8
|
|
|
$
|
228.6
|
|
|
$
|
224.1
|
|
|
$
|
224.6
|
|
|
$
|
195.6
|
|
|
$
|
200.6
|
|
|
$
|
214.0
|
|
|
$
|
235.4
|
|
Gross profit
(5)
|
$
|
36.2
|
|
|
$
|
43.4
|
|
|
$
|
38.8
|
|
|
$
|
32.4
|
|
|
$
|
38.6
|
|
|
$
|
29.7
|
|
|
$
|
47.6
|
|
|
$
|
59.4
|
|
Net income (loss)
|
$
|
15.7
|
|
|
$
|
19.4
|
|
|
$
|
15.7
|
|
|
$
|
11.6
|
|
|
$
|
(131.7
|
)
|
|
$
|
(12.5
|
)
|
|
$
|
23.3
|
|
|
$
|
103.4
|
|
Net income (loss) attributable to SunCoke Energy Partners, L.P.
|
$
|
15.3
|
|
|
$
|
18.8
|
|
|
$
|
15.3
|
|
|
$
|
11.2
|
|
|
$
|
(129.3
|
)
|
|
$
|
(12.9
|
)
|
|
$
|
22.6
|
|
|
$
|
101.5
|
|
Net income (loss) per common unit (basic and diluted)
(6)
|
$
|
0.32
|
|
|
$
|
0.40
|
|
|
$
|
0.32
|
|
|
$
|
0.24
|
|
|
$
|
(2.77
|
)
|
|
$
|
(0.30
|
)
|
|
$
|
0.45
|
|
|
$
|
0.65
|
|
Cash distribution per unit paid during period
|
$
|
0.5940
|
|
|
$
|
0.4000
|
|
|
$
|
0.4000
|
|
|
$
|
0.4000
|
|
|
$
|
0.5940
|
|
|
$
|
0.5940
|
|
|
$
|
0.5940
|
|
|
$
|
0.5940
|
|
(1)
|
The Partnership recognized deferred revenue from Logistics take-or-pay billings for minimum volume shortfalls of
$16.4 million
into revenue in the fourth quarter of 2017. As a result of the increase in tons handled throughout 2018, there were no shortfalls to be recognized during fourth quarter.
|
(2)
|
During the first quarter of 2017, the Partnership recorded
$148.6 million
of deferred income tax expense as a result of the IRS Final Regulations on qualifying income. See
Note 6
.
|
(3)
|
During the second quarter of 2017, the Partnership incurred
$19.9 million
of losses in connection with debt refinancing.
|
(4)
|
During the fourth quarter of 2017, the Partnership recorded
$68.8 million
of tax benefits as a result of the new Tax Legislation. See
Note 6
.
|
(6)
|
Net income per common unit is computed independently for each of the quarters presented. Therefore, the sum of quarterly net income per common unit information may not equal annual net income per common unit. The deferred tax liabilities recorded in the first quarter of 2017 as a result of the Final Regulations on qualifying income were revised by the new Tax Legislation, enacted in the fourth quarter of 2017. Our full year net loss per common unit calculation was impacted as a result.
|
Item 9.
|
Changes in and Disagreements with Accountants on Accounting and Financial Disclosure
|
Item 9A.
|
Controls and Procedures
|
Item 9B.
|
Other Information
|
Item 10.
|
Directors, Executive Officers and Corporate Governance
|
Name
|
|
Age
|
|
Position with Our General Partner
|
Michael G. Rippey
|
|
61
|
|
Chairman, President and Chief Executive Officer
|
Fay West
|
|
49
|
|
Senior Vice President, Chief Financial Officer and Director
|
Katherine T. Gates
|
|
42
|
|
Senior Vice President, General Counsel, Chief Compliance Officer and Director
|
P. Michael Hardesty
|
|
56
|
|
Senior Vice President, Commercial Operations, Business Development, Terminals, and International Coke and Director
|
Allison S. Lausas
|
|
39
|
|
Vice President, Finance and Controller
|
Gary P. Yeaw
|
|
61
|
|
Senior Vice President, Human Resources
|
Martha Z. Carnes
|
|
58
|
|
Director
|
John W. Somerhalder, II
|
|
62
|
|
Director
|
Alvin Bledsoe
|
|
71
|
|
Director
|
Item 11.
|
Executive Compensation
|
Name and Principal Position
(1)
|
Year
|
Salary
|
Bonus
|
Stock Awards
(2)
|
Option Awards
(3)
|
Nonequity Incentive Plan Compensation
(4)
|
Changes in Pension Value and Nonqualified Deferred Compensation Earnings
(5)
|
All other Compensation
(6)
|
Total
|
Michael G. Rippey
Chairman & CEO
|
2018
|
$408,963
|
$—
|
$—
|
$—
|
$482,168
|
$—
|
$20,133
|
$911,264
|
2017
|
33,032
|
—
|
925,201
|
209,199
|
—
|
—
|
—
|
1,167,432
|
|
Fay West
SVP & CFO
|
2018
|
431,079
|
—
|
286,230
|
67,361
|
337,922
|
—
|
75,466
|
1,198,058
|
2017
|
422,080
|
—
|
173,218
|
43,301
|
512,067
|
—
|
80,202
|
1,230,868
|
|
2016
|
384,198
|
—
|
244,940
|
32,919
|
528,348
|
—
|
17,706
|
1,208,111
|
|
P. Michael Hardesty
SVP, Commercial Ops., Bus. Dev. & Terminals
|
2018
|
235,460
|
—
|
168,888
|
39,743
|
188,376
|
—
|
68,104
|
700,571
|
2017
|
225,749
|
—
|
95,391
|
23,847
|
239,644
|
—
|
69,861
|
654,492
|
|
2016
|
215,020
|
—
|
134,896
|
18,129
|
258,734
|
—
|
40,288
|
667,067
|
|
Katherine T. Gates
SVP, Gen. Counsel & Chief Compliance Officer
|
2018
|
370,935
|
—
|
168,888
|
39,743
|
255,130
|
—
|
92,029
|
926,725
|
2017
|
355,637
|
—
|
119,238
|
29,809
|
305,616
|
—
|
90,657
|
900,957
|
|
2016
|
301,253
|
—
|
100,579
|
13,517
|
274,056
|
—
|
51,655
|
741,060
|
|
Gary P. Yeaw
SVP, Human Resources
|
2018
|
125,093
|
—
|
124,999
|
29,417
|
69,708
|
—
|
17,622
|
366,839
|
2017
|
125,093
|
—
|
78,446
|
19,608
|
94,852
|
—
|
18,609
|
336,608
|
|
2016
|
119,799
|
—
|
110,932
|
14,908
|
102,967
|
—
|
6,773
|
355,379
|
(1)
|
Name and Principal Position
. Each of our NEOs split their professional time between SunCoke and us, and all compensation paid to them is determined and paid by SunCoke. In accordance with SEC rules, a portion of the total compensation paid by SunCoke to the NEOs is allocated to the services performed for us, based on an estimate of the portion of each NEO’s compensation which was reimbursed by us to SunCoke pursuant to the terms of the omnibus agreement, and which we believe accurately reflects the amount of compensation each NEO was paid for the services provided to us. For 2016, the applicable allocation percentage was approximately 56 percent, for 2017 the applicable allocation percentage was 59 percent and for 2018 the applicable allocation percentage was approximately 62 percent.The total compensation paid by SunCoke to the NEOs in 2016, 2017 and 2018, as well as a discussion of how their compensation was determined, is disclosed in SunCoke’ 2019 Annual Meeting Proxy Statement.
|
(2)
|
Stock Awards
. The NEOs do not receive any equity awards from us. Equity awards were granted to the NEOs pursuant to the terms of the SunCoke Energy, Inc. Long-Term Performance Enhancement Plan (“
LTPEP
”), and such awards include time-based restricted common stock units and performance-based common stock units (RSUs and PSUs, respectively) of SunCoke. The amounts shown in the table are the grant date fair value for the portion of such awards attributable to us, computed in accordance with FASB ASC Topic 718. The assumptions used by SunCoke to determine the grant date fair value of these equity awards can be found in SunCoke’s Annual Report on Form 10-K for the year-ended December 31, 2018. For each NEO, the number and value of outstanding SunCoke equity awards (including unvested RSUs and PSUs) at year-end is reported in SunCoke’s 2019 Annual Meeting Proxy Statement. PSUs awarded under the LTPEP are subject to three-year “cliff” vesting and are settled in shares of
|
(3)
|
Option Awards
.
The NEO's do not receive any option awards from us. Nonqualified stock option awards and Nonqualified performance stock options awards were granted under the terms of pursuant to the terms of the SunCoke LTPEP. Amounts shown are the grant date fair value of SunCoke stock option awards attributable to us computed in accordance with FASB ASC Topic 718, excluding the effect of estimated forfeitures. The assumptions used by SunCoke to determine the grant date fair value of the option awards can be found in Note 15 Share-Based Compensation, in SunCoke’s Annual Report on Form 10-K for the year-ended December 31, 2018. Once vested, the options may be exercised to acquire shares of SunCoke’s common stock. For each NEO, the number and value of outstanding SunCoke equity awards (including unexercised stock options) at year-end is reported in SunCoke’s 2019 Annual Meeting Proxy Statement.
|
(4)
|
Non -Equity Incentive Plan
. SunCoke provides a performance-based annual cash incentive plan (the “AIP”), in which our NEOs participate. Payments under the AIP are based upon the levels of attainment of certain pre-determined financial and operating goals of SunCoke. The AIP works in conjunction with SunCoke’s Senior Executive Incentive Plan, or SEIP, which acts as an overlay to the AIP and sets a performance-based ceiling on the amounts paid under the AIP.
|
(5)
|
Change in Pension Value and Nonqualified Deferred Compensation Earnings
. SunCoke does not maintain any defined benefit pension plan, or supplemental executive retirement plan for its named executive officers, including our NEOs. However, our NEOs do participate in: (a) the SunCoke Energy, Inc. 401(k) Plan, a tax-qualified defined contribution plan available to all employees; and (b) the SunCoke Energy, Inc. Savings Restoration Plan, a nonqualified defined contribution plan for executives whose compensation exceeds IRS limits on compensation applicable to SunCoke’s 401(k) plan. For the periods presented in the table, there were no above-market, or preferential, earnings on any compensation deferred under SunCoke’s Savings Restoration Plan. Please refer to the “Nonqualified Deferred Compensation” table in SunCoke’s 2019 Proxy Statement for further details of each NEOs aggregate earnings and account balance under SunCoke’s Savings Restoration Plan.
|
(6)
|
All Other Compensation
.
Amounts shown represent payments made by SunCoke on behalf of the NEOs and attributable to us. These amounts include annual and matching contributions to SunCoke’s 401(k) and/or Savings Restoration Plan and a relocation stipend for Mr. Hardesty and Ms. Gates. None of these amounts were provided directly by us. No perquisites are disclosed because SunCoke does not provide its named executive officers (including our NEOs) with perquisites or other personal benefits such as partnership vehicles, club memberships, financial planning assistance, or tax preparation services.
|
•
|
SunCoke 401(k) Plan.
SunCoke offers all of its employees, including the NEOs, the opportunity to participate in the SunCoke 401(k) Plan, formerly known as SunCoke Energy Profit Sharing and Retirement Plan, which is a tax qualified defined contribution plan with 401(k) and profit sharing features designed primarily to help participating employees accumulate funds for retirement. Our NEOs may make elective contributions, and SunCoke makes company contributions consisting of a matching contribution equal to 100 percent of employee contributions up to 5 percent of eligible compensation and an employer contribution equal to 3 percent of eligible compensation. All NEOs are eligible to receive these contributions.
|
•
|
Savings Restoration Plan.
The Savings Restoration Plan, or SRP, is an unfunded, nonqualified deferred compensation plan administered by SunCoke and made available to participants in the SunCoke 401(k) Plan whose compensation exceeds the IRS limits on compensation that can be taken into account under that Plan ($270,000 for 2017 and $275,000 for 2018). Under the SRP, employees can make an advance election to defer on a pre-tax basis up to 50 percent of the portion of their salary and bonus that exceeds the compensation limit. Such amounts will be credited to a bookkeeping account established for each participant as of the date the amounts would otherwise have been paid to the participant. Employer contributions will be credited to the accounts of each employee who elects to defer compensation and they consist of (1) a matching contribution equal to 100 percent of the first 5 percent of compensation deferred by the participant under the SRP and (2) an additional contribution equal to 3 percent of the compensation deferred by the participant under the SRP. SunCoke Energy can also make additional discretionary contributions. Participants are fully vested in their own deferrals as well as the 3 percent employer contribution, and will vest in the employer matching contributions received for plan years and discretionary contributions in accordance with the vesting schedule in the 401(k) Plan, which provides for 100 percent vesting after three years of service. Participants can direct the investment of their bookkeeping accounts among the same investment alternatives available under the 401(k) Plan. Unless the participant elects otherwise, distributions are made in a lump sum on the first day of the seventh month following termination of employment with SunCoke (or immediately to the participant’s beneficiary in the event of the participant’s earlier death). The participant can elect, prior to his or her first year of participation, to receive a distribution in installments over two to ten years instead of a lump sum if he or she terminates due to retirement, which is defined as termination after attaining at least age 55 with combined age plus continuous years of service, equal to 65 years. In addition, a participant can elect, concurrently with the annual deferral election, to receive an in-service lump sum distribution of the amount he or she elects to defer for such year, with such payment date not earlier than three years from the end of the year in which the election is made. A participant can change the time or method of distribution in limited circumstances.
|
•
|
Special Executive Severance Plan.
SunCoke's Special Executive Severance Plan provides severance to designated executives whose employment is terminated by SunCoke other than for cause, death or disability, or who resign for good reason (as such terms are defined in the Plan) within two years following a change in control of SunCoke. Severance is generally payable in a lump sum, equal to two times the sum of the executive’s annual base salary and the greater of (i) 100 percent of the executive’s target annual incentive in effect immediately before the change in control or, if higher, employment termination date, or (ii) the average annual incentive awarded to the executive with respect to the three years ending before the change in control or, if higher, ending before the employment termination date, with the multiple depending on the executive’s position. Executives are also entitled to (x) a pro rata portion of the current year Annual Incentive at Company performance if termination occurs after the first quarter of the calendar year, (y) the continuation of medical plan benefits (including dental) at active employee rates for the benefit extension period of two years (which run concurrently with COBRA), and (z) continuation of life insurance coverage equal to one time’s the executive’s base salary and outplacement services
|
•
|
Executive Involuntary Severance Plan.
The Executive Involuntary Severance Plan provides severance to designated executives whose employment is terminated by SunCoke other than for cause (as defined in the Plan), death or disability. Severance is paid in monthly installments and ranges from one to one and half times the sum of the executive’s annual base salary and target annual incentive, depending on the executive’s position. Executives are also entitled to a prorata portion of the current year Annual Incentive at Company performance if termination occurs after the first quarter of the calendar year, the continuation of medical plan benefits (excluding dental) at active employee rates for the salary continuation period of one to one and a half years (which run concurrently with COBRA), and continuation of life insurance coverage equal to one time’s the executive’s base salary and outplacement services. Severance is subject to the execution of a release of claims against SunCoke and its affiliates, including us, at the time of termination of the executive’s employment.
|
|
Mr. Alvin Bledsoe
(1)
|
Ms. Martha Z. Carnes
|
Mr. John W. Somerhalder II
|
||||||
Annual Retainer (Cash Portion)
|
$
|
72,000
|
|
$
|
89,000
|
|
$
|
99,000
|
|
Annual Retainer (Common Unit Portion)
|
68,000
|
|
85,000
|
|
85,000
|
|
|||
SUBTOTAL (Base Retainers Only)
|
140,000
|
|
174,000
|
|
184,000
|
|
|||
|
|
|
|
||||||
Audit Committee Chair Retainer (Cash)
|
20,000
|
|
Not applicable
|
|
Not applicable
|
|
|||
Audit Committee Member Retainer (Cash)
|
Not applicable
|
|
10,000
|
|
10,000
|
|
|||
Conflicts Committee Chair Retainer (Cash)
|
Not applicable
|
|
Not applicable
|
|
24,000
|
|
|||
Conflicts Committee Member Retainer (Cash)
|
Not applicable
|
|
14,000
|
|
Not applicable
|
|
|||
TOTAL
|
$
|
160,000
|
|
$
|
198,000
|
|
$
|
218,000
|
|
(1)
|
Mr. Bledsoe also serves as an independent director on the Board of Directors of, SunCoke, where he chairs the Audit Committee, and is compensated by SunCoke Energy, Inc.
|
Name
(1)
|
|
Fees
Earned or
Paid in Cash
(2)
|
|
Unit
Awards
(3)
|
|
All Other
Compensation
(4)
|
|
Total
|
Alvin Bledsoe
|
|
$72,000
|
|
$68,000
|
|
$4,911
|
|
$144,911
|
Martha Z. Carnes
|
|
$89,000
|
|
$85,000
|
|
$2,998
|
|
$176,998
|
John W. Somerhalder, II
|
|
$99,000
|
|
$85,000
|
|
$12,999
|
|
$196,999
|
C. Scott Hobbs
(5)
|
|
$—
|
|
$—
|
|
$998,285
|
|
$998,285
|
Wayne L. Moore
(5)
|
|
$—
|
|
$—
|
|
$432,046
|
|
$432,046
|
Nancy M. Snyder
(5)
|
|
$—
|
|
$—
|
|
$738,652
|
|
$738,652
|
(1)
|
Messrs. Hobbs and Moore, and Ms. Snyder, each resigned from our general partner’s Board of Directors effective September 1, 2017, and Messrs. Bledsoe and Somerhalder, and Ms. Carnes, were appointed to our general partner’s Board of Directors effective September 1, 2017.
|
(2)
|
The amounts in this column include all retainer and meeting fees paid or deferred pursuant to the Directors’ Deferred Compensation Plan in 2018. As compensation for their time and effort spent during the fourth quarter of 2018 on the Simplification Transaction, Ms. Carnes and Mr. Somerhalder were paid $2,000 each for Conflicts Committee meeting attended in person and $1,000 for each Conflicts Committee meeting attended telephonically.
|
(3)
|
The amounts in this column represent the fair value of the common unit retainer payments made to each director in fiscal 2018 as of the date of each quarterly payment, calculated pursuant to FASB ASC Topic 718. The number of common units granted to each independent director was determined by dividing the quarterly common unit retainer payment by the average closing price of a Partnership common unit for the ten trading days preceding the payment date in 2018. Messrs. Bledsoe, and Somerhalder each deferred their respective common unit retainers into the Directors’ Deferred Compensation Plan.
|
(4)
|
The amounts shown in this column reflect the value of distribution equivalents earned on deferred compensation account balances during 2018.
|
(5)
|
On January 22, 2018, our former directors, Messrs. Hobbs and Moore, and Ms. Snyder received payment in cash for the entire balance of all deferred compensation credited to their respective deferred compensation accounts. In accordance with the terms of the Directors’ Deferred Compensation Plan, compensation deferred in the form of phantom unit credits was valued using the average closing price for our common units for the period of ten (10) trading days immediately prior to January 15, 2018. Mr. Hobbs received a cash payment of $998,285, Mr. Moore received a cash payment of $432,046, and Ms. Snyder received a cash payment of $738,652.
|
Item 12.
|
Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters
|
Name of Beneficial Owner
(1)
|
|
Common
Units
Beneficially
Owned
|
|
Percentage of
Common
Units
Beneficially
Owned
|
||
Sun Coal & Coke LLC
(2)
|
|
28,499,899
|
|
|
61.7
|
%
|
Michael G. Rippey
|
|
—
|
|
|
*
|
|
Fay West
|
|
—
|
|
|
*
|
|
P. Michael Hardesty
|
|
6,031
|
|
|
*
|
|
Gary P. Yeaw
|
|
2,500
|
|
|
*
|
|
Katherine T. Gates
|
|
—
|
|
|
*
|
|
Allison S. Lausas
|
|
300
|
|
|
*
|
|
Alvin Bledsoe
(3)
|
|
1,000
|
|
|
*
|
|
Martha Z. Carnes
|
|
1,668
|
|
|
*
|
|
John W. Somerhalder, II
(3)
|
|
—
|
|
|
*
|
|
All directors and executive officers as a group (9 people)
|
|
11,499
|
|
|
*
|
|
*
|
Less than one percent of our outstanding common units.
|
(1)
|
The business address for SunCoke Energy Partners, L.P. and each individual is 1011 Warrenville Road, Suite 600, Lisle, Illinois 60532.
|
(2)
|
Sun Coal & Coke LLC is a wholly owned direct subsidiary of SunCoke Energy, Inc., and is the sole member of our general partner.
|
(3)
|
Certain directors have elected to defer all or a portion of their compensation into phantom unit credits under the SunCoke Energy Partners, L.P. Directors’ Deferred Compensation Plan described in the section entitled “Executive Compensation-Director Compensation---Directors' Deferred Compensation Plan.” Each phantom unit credit is treated as if it were invested in common units representing limited partnership interests in the Partnership, and distribution equivalents are credited in the form of additional phantom unit credits. These phantom unit credits do not have voting rights. Such phantom unit credits ultimately will be settled in cash following termination of the director’s service on the Board, based upon the average closing price for our common units for the ten trading days on the NYSE immediately prior to the payment date. The following directors hold such phantom unit credits: Mr. Bledsoe: 6,188.31 phantom unit credits; Ms. Carnes: 5,847.96 phantom unit credits and Mr. Somerhalder: 16,723.64 phantom unit credits.
|
Name
|
|
Shares of SunCoke Energy, Inc.
Common Stock
|
|
Right to Acquire
Within 60 Days
After January 31,
2019
(1)
|
|
Total
|
|
Percent
of SunCoke Energy, Inc. Common Stock
Outstanding
|
Michael G. Rippey
|
|
—
|
|
24,288
|
|
24,288
|
|
*
|
Fay West
|
|
28,416
|
|
281,915
|
|
310,331
|
|
*
|
P. Michael Hardesty
(2)
|
|
75,021
|
|
166,389
|
|
241,410
|
|
*
|
Gary P. Yeaw
|
|
44,070
|
|
153,294
|
|
197,364
|
|
*
|
Katherine T. Gates
(3)
|
|
7,916
|
|
84,853
|
|
92,769
|
|
*
|
Allison S. Lausas
|
|
5,006
|
|
18,443
|
|
23,449
|
|
*
|
Alvin Bledsoe
(4)
|
|
5,934
|
|
—
|
|
5,934
|
|
*
|
Martha Z. Carnes
(5)
|
|
—
|
|
—
|
|
—
|
|
*
|
John W. Somerhalder, II
(5)
|
|
—
|
|
—
|
|
—
|
|
*
|
All directors and executive officers as a group (9 people)
|
|
166,363
|
|
729,182
|
|
895,545
|
|
*
|
*
|
Less than one percent of SunCoke's outstanding common stock.
|
(1)
|
The amounts shown in this column reflect shares of SunCoke Energy, Inc. common stock which the persons listed have the right to acquire as a result of the vesting of stock options, conversion of restricted share units, and/or settlement of performance share units at 100% of target, within 60 days after January 31, 2019 under certain plans, including the SunCoke Energy, Inc. Long-Term Performance Enhancement Plan.
|
(2)
|
Mr. Hardesty also holds 9,981 units, valued at $4.61/unit, in the SunCoke 401(k) Plan, and 8,949 units, valued at $4.90/unit, in the SunCoke Energy, Inc. Savings Restoration Plan ("SRP"). Equivalent share ownership represented by these units was derived, in each case, by multiplying the number of units held by the current value per unit, and then dividing by $11.24/common share (NYSE closing price on January 31, 2019). Thus, Mr. Hardesty’s participation in these funds represents an aggregate share equivalent position of approximately 7,995 shares of SunCoke. This position is not reflected in the data shown in the foregoing table.
|
(3)
|
Ms. Gates also holds 3,433 units in the SRP. Equivalent share ownership represented by these units was derived by multiplying the number of units held by $4.90/unit (current value), and then dividing by $11.24/common share (NYSE closing price on January 31, 2019). Thus, Ms. Gates’ participation in the SRP represents a share equivalent position of approximately 1,497 shares of SunCoke. This position is not reflected in the data shown in the foregoing table.
|
(4)
|
Mr. Bledsoe is also a director of SunCoke Energy, Inc. and he has elected to defer a portion of his compensation from SunCoke in the form of Share Units under the SunCoke Energy, Inc. Directors’ Deferred Compensation Plan. Mr. Bledsoe currently holds 67,906.49 Share Units. These Share Units are not reflected in the data shown in the foregoing table. Each Share Unit is treated as if it were invested in SunCoke common stock, and dividend equivalents (if any) are credited in the form of additional Share Units. These Share Units do not have voting rights. Such Share Units ultimately will be settled in cash (based upon a ten-day average closing price for trading
|
(5)
|
Consistent with our partnership agreement, Ms. Carnes and Mr. Somerhalder, as independent directors otherwise unaffiliated with our general partner, or SunCoke, are expected not to maintain any ownership interest in the common stock of SunCoke Energy, Inc.
|
Plan Category
|
|
(a)
Number of securities to be issued upon exercise of outstanding options, warrants and rights
|
|
(b)
Weighted-average exercise price of outstanding options warrants and rights
|
|
(c)
Number of securities remaining available for future issuance under equity compensation plans (excluding securities reflected in column (a))
|
Equity compensation plans approved by security holders
|
|
Not Applicable
|
|
Not Applicable
|
|
Not Applicable
|
Equity compensation plans not approved by security holders
|
|
Not Applicable
|
|
Not Applicable
|
|
1,554,640
|
(1)
|
The only securities issued under SunCoke Energy Partners, L.P. Long-Term Incentive Plan since the Partnership’s initial public offering have been common units issued to directors in payment of their common unit retainers. Although permitted by the terms of the Long-Term Incentive Plan, no restricted units, unit appreciation rights, unit options, or other unit-based awards convertible into common units have been granted to executive officers or directors.
|
Item 13.
|
Certain Relationships and Related Transactions, and Director Independence
|
Payments to our general partner and its affiliates
|
Under the terms of our omnibus agreement with SunCoke, our general partner and its affiliates do not receive a management fee or other compensation for its management of our partnership, but we reimburse our general partner and its affiliates for all direct and indirect expenses they incur and payments they make in providing general and administrative services on our behalf. Our partnership agreement does not set a limit on the amount of expenses for which our general partner and its affiliates may be reimbursed. Our partnership agreement provides that our general partner will determine in good faith the expenses that are allocable to us.
|
Withdrawal or removal of our general partner
|
If our general partner withdraws or is removed, its general partner interest and its IDRs will either be sold to the new general partner for cash or converted into common units, in each case for an amount equal to the fair market value of those interests.
|
Liquidation
|
Upon our liquidation, the partners, including our general partner, will be entitled to receive liquidating distributions according to their particular capital account balances.
|
Item 14.
|
Principal Accounting Fees and Services
|
|
Audit and Non-Audit Fees
|
||||||
|
2018
|
|
2017
|
||||
Audit
|
$
|
795,919
|
|
|
$
|
864,475
|
|
(1)
|
the guiding principles that must be considered by the Audit Committee in approving services to ensure that the auditor’s independence is not impaired;
|
(2)
|
describes the audit, audit-related and tax services that may be provided and the non-audit services that are prohibited; and
|
(3)
|
sets forth pre-approval requirements for all permitted services.
|
Item 15.
|
Exhibits, Financial Statement Schedules
|
(a)
|
the following documents are included with the filing of this report:
|
1
|
Consolidated financial statements
|
2
|
Financial statement schedules:
|
3
|
Exhibits:
|
Exhibit
Number
|
|
|
|
Description
|
2.1
|
|
|
||
|
|
|
|
|
2.2
|
|
|
|
|
|
|
|
|
|
2.3
|
|
|
|
|
|
|
|
|
|
3.1
|
|
|
||
|
|
|
|
|
3.2
|
|
|
||
|
|
|
|
|
3.2.1
|
|
|
|
|
|
|
|
|
|
3.2.2
|
|
|
||
|
|
|
|
|
4.1
|
|
|
||
|
|
|
|
|
10.1
|
|
|
||
|
|
|
|
|
10.1.1
|
|
|
||
10.1.2
|
|
|
||
|
|
|
|
10.2
|
|
|
||
|
|
|
|
|
|
|
|
|
|
10.3†
|
|
|
||
|
|
|
|
|
10.3.1†
|
|
|
||
|
|
|
|
|
10.3.2†
|
|
|
||
|
|
|
|
|
10.3.3†
|
|
|
||
|
|
|
|
|
10.3.4†
|
|
|
||
|
|
|
|
|
10.3.5†
|
|
|
||
|
|
|
|
|
10.3.6†
|
|
|
||
|
|
|
|
|
10.4†
|
|
|
||
|
|
|
|
|
10.4.1†
|
|
|
||
|
|
|
|
|
10.5†
|
|
|
||
|
|
|
|
|
10.5.1†
|
|
|
||
|
|
|
|
|
10.6†
|
|
|
||
|
|
|
|
|
10.6.1†
|
|
|
||
|
|
|
|
10.6.2
|
|
|
||
|
|
|
|
|
10.6.3†
|
|
|
||
|
|
|
|
|
10.7
|
|
|
||
|
|
|
|
|
10.8
|
|
|
||
|
|
|
|
|
10.9**
|
|
|
||
|
|
|
|
|
10.10**
|
|
|
||
|
|
|
|
|
10.11
|
|
|
||
|
|
|
|
|
21.1*
|
|
|
||
|
|
|
|
|
23.1*
|
|
|
||
|
|
|
|
|
24.1*
|
|
|
||
|
|
|
|
|
31.1*
|
|
|
||
|
|
|
|
|
31.2*
|
|
|
||
|
|
|
|
|
32.1*
|
|
|
||
|
|
|
|
|
32.2*
|
|
|
||
|
|
|
|
|
95.1*
|
|
|
||
|
|
|
|
|
101.INS*
|
|
|
XBRL Instance Document (filed herewith)
|
|
|
|
|
|
|
101.SCH*
|
|
|
XBRL Taxonomy Extension Schema Document (filed herewith)
|
|
|
|
|
|
|
101.CAL*
|
|
|
XBRL Taxonomy Extension Calculation Linkbase Document (filed herewith)
|
|
|
|
|
|
|
101.DEF*
|
|
|
XBRL Taxonomy Extension Definition Linkbase Document (filed herewith)
|
|
|
|
|
|
|
101.LAB*
|
|
|
XBRL Taxonomy Extension Label Linkbase Document (filed herewith)
|
|
|
|
|
|
|
101.PRE*
|
|
|
XBRL Taxonomy Extension Presentation Linkbase Document (filed herewith)
|
*
|
Provided herewith.
|
**
|
Management contract or compensatory plan or arrangement
|
†
|
Certain portions have been omitted pursuant to confidential treatment requests. Omitted information has been separately filed with the Securities and Exchange Commission.
|
SunCoke Energy Partners, L.P.
|
||
|
|
|
By:
|
|
SunCoke Energy Partners GP LLC, its general partner
|
|
|
|
By:
|
|
/s/ Fay West
|
|
|
Fay West
Senior Vice President and
Chief Financial Officer
|
Signature
|
|
Title
|
|
|
|
/s/ Michael G. Rippey*
|
|
Chairman, President and Chief Executive Officer
(Principal Executive Officer)
|
Michael G. Rippey
|
|
|
|
|
|
/s/ Fay West
|
|
Senior Vice President, Chief Financial Officer
and Director
(Principal Financial Officer)
|
Fay West
|
|
|
|
|
|
/s/ Allison S. Lausas*
|
|
Vice President, Finance and Controller
(Principal Accounting Officer)
|
Allison S. Lausas
|
|
|
|
|
|
/s/ Katherine T. Gates*
|
|
Senior Vice President, General Counsel, Chief Compliance Officer and Director
|
Katherine T. Gates
|
|
|
|
|
|
/s/ P. Michael Hardesty*
|
|
Senior Vice President, Commercial Operations, Business Development, Terminals, and International Coke and Director
|
P. Michael Hardesty
|
|
|
|
|
|
/s/ Martha Z. Carnes*
|
|
Director
|
Martha Z. Carnes
|
|
|
|
|
|
/s/ John W. Somerhalder, II*
|
|
Director
|
John W. Somerhalder, II
|
|
|
|
|
|
/s/ Alvin Bledsoe*
|
|
Director
|
Alvin Bledsoe
|
|
|
|
||
* Fay West, pursuant to powers of attorney duly executed by the above officers and directors of SunCoke Energy Partners, L.P. and filed with the SEC in Washington, D.C., hereby executes this Annual Report on Form 10-K on behalf of each of the persons named above in the capacity set forth opposite his or her name.
|
||
|
|
|
/s/ Fay West
|
|
February 15, 2019
|
Fay West
|
|
SunCoke Energy Partners, L.P.
|
|
Subsidiaries of the Registrant
|
|
|
|
Name
|
Registration
|
|
|
Haverhill Coke Company LLC (98%)*
|
DE
|
|
|
-----Haverhill Cogeneration Company LLC
|
DE
|
|
|
-----FF Farms Holdings LLC
|
DE
|
|
|
Middletown Coke Company, LLC (98%)*
|
DE
|
|
|
-----Middletown Cogeneration Company LLC
|
DE
|
|
|
Gateway Energy & Coke Company, LLC (98%)*
|
DE
|
|
|
-----Gateway Cogeneration Company LLC
|
DE
|
|
|
SunCoke Energy Partners Finance Corp.
|
DE
|
|
|
SunCoke Logistics LLC
|
DE
|
|
|
-----SunCoke Lake Terminal LLC
|
DE
|
|
|
-----Kanawha River Terminals LLC
|
DE
|
|
|
----------Marigold Dock, Inc.
|
DE
|
|
|
----------Ceredo Liquid Terminal
|
DE
|
|
|
-----Raven Energy LLC
|
DE
|
|
|
----------CMT Liquids Terminal, LLC
|
DE
|
|
|
* Remaining equity interest held indirectly by our sponsor, SunCoke Energy, Inc.
|
Mine or Operating Name/MSHA Identification Number
|
Section 104 S&S Citations (#)(2)
|
Section 104(b) Orders (#)(3)
|
Section 104(d) Citations and Orders (#)(4)
|
Section 110(b)(2) Violations (#)(5)
|
Section 107(a) Orders (#)(6)
|
Total Dollar Value of MSHA Assessments Proposed ($)(7)
|
Total Number of Mining Related Fatalities (#)
|
Received Notice of Pattern of Violations Under Section 104(e) (yes/no)(8)
|
Received Notice of Potential to Have Pattern Under Section 104(e) (yes/no)(9)
|
Legal Actions Pending as of Last Day of Period (#)(10)(11)
|
Legal Actions Initiated During Period (#)(12)
|
Legal Actions Resolved During Period (#)(13)
|
|||
Ceredo Dock / 46-09051
|
1
|
0
|
0
|
0
|
0
|
$
|
1,239
|
|
0
|
0
|
0
|
0
|
0
|
0
|
|
Quincy Dock / 46-07736
|
2
|
0
|
0
|
0
|
0
|
$
|
118
|
|
0
|
0
|
0
|
0
|
0
|
0
|
|
Belfry #5 / 15-10789
|
0
|
0
|
0
|
0
|
0
|
0
|
|
0
|
0
|
0
|
0
|
0
|
0
|
||
Total
|
3
|
0
|
0
|
0
|
0
|
$
|
1,357
|
|
0
|
0
|
0
|
0
|
0
|
0
|
(1)
|
The table does not include the following: (i) facilities which have been idle or closed unless they received a citation or order issued by MSHA, (ii) permitted mining sites where we have not begun operations or (iii) mines that are operated on our behalf by contractors who hold the MSHA numbers and have the MSHA liabilities.
|
(2)
|
Alleged violations of mandatory health or safety standards that could significantly and substantially contribute to the cause and effect of a coal or other mine safety or health hazard.
|
(3)
|
Alleged failures to totally abate a citation within the period of time specified in the citation.
|
(4)
|
Alleged unwarrantable failure (i.e., aggravated conduct constituting more than ordinary negligence) to comply with a mining safety standard or regulation.
|
(5)
|
Alleged flagrant violations issued.
|
(6)
|
Alleged conditions or practices which could reasonably be expected to cause death or serious physical harm before such condition or practice can be abated.
|
(7)
|
Amounts shown include assessments proposed during the year ended
December 31, 2018
and do not necessarily relate to the citations or orders reflected in this table. Assessments for citations or orders reflected in this table may be proposed by MSHA after
December 31, 2018
.
|
(8)
|
Alleged pattern of violations of mandatory health or safety standards that are of such nature as could have significantly and substantially contributed to the cause and effect of coal or other mine health or safety hazards.
|
(9)
|
Alleged potential to have a pattern of violations of mandatory health or safety standards that are of such nature as could have significantly and substantially contributed to the cause and effect of coal or other mine health or safety hazards.
|
(10)
|
This number reflects legal proceedings which remain pending before the Federal Mine Safety and Health Review Commission (the “FMSHRC”) as of
December 31, 2018
. The pending legal actions may relate to the citations or orders issued by MSHA during the reporting period or to citations or orders issued in prior periods. The FMSHRC has jurisdiction to hear not only challenges to citations, orders, and penalties but also certain complaints by miners. The number of “pending legal actions” reported here reflects the number of contested citations, orders, penalties or complaints which remain pending as of
December 31, 2018
.
|
(11)
|
The legal proceedings which remain pending before the FMSHRC as of
December 31, 2018
are categorized as follows in accordance with the categories established in the Procedural Rules of the FMSHRC.
|
Mine or Operating Name/MSHA Identification Number
|
Contests of Citations and Orders (#)
|
Contests of Proposed Penalties (#)
|
Complaints for Compensation (#)
|
Complaints for Discharge, Discrimination or Interference Under Section 105 (#)
|
Applications for Temporary Relief (#)
|
Appeals of Judges’ Decisions or Orders (#)
|
Ceredo Dock / 46-09051
|
0
|
0
|
0
|
0
|
0
|
0
|
Quincy Dock / 46-07736
|
0
|
0
|
0
|
0
|
0
|
0
|
Belfry #5 / 15-10789
|
0
|
0
|
0
|
0
|
0
|
0
|
Total
|
0
|
0
|
0
|
0
|
0
|
0
|
(12)
|
This number reflects legal proceedings initiated before the FMSHRC during the year ended
December 31, 2018
. The number of “initiated legal actions” reported here may not have remained pending as of
December 31, 2018
.
|
(13)
|
This number reflects legal proceedings before the FMSHRC that were resolved during the year ended
December 31, 2018
.
|