$6.70
$31.00
bear $6.70
base $23.40
bull $31.00
margin of safety $11.00
market price* $20.80
Westlake Chemical Partners owns a 22.8% interest in Westlake Chemical OpCo, which runs three ethylene plants (two at Lake Charles, Louisiana, one at Calvert City, Kentucky, about 3.7 billion pounds a year of capacity) and a 200-mile ethylene pipeline from Mont Belvieu to Longview, Texas. Westlake Corporation owns the other 77.2% of OpCo and about 40% of the partnership's units. Unitholders therefore own a slice of the plants, after paying the partnership's own interest bill (about $400 million borrowed from Westlake, all due in 2027). How the money is made. Westlake buys at least 95% of the plants' planned output under an Ethylene Sales Agreement. The price covers feedstock, operating costs, maintenance capital spending and turnaround (major overhaul) costs, plus a fixed $0.10 per pound margin. Sales swing with feedstock prices (from $967 million in 2020 to $1.59 billion in 2022 and $1.17 billion in 2025), but the margin does not, so earnings per unit are steady and do not grow. The agreement has run since 2014 and was renewed on October 28, 2025 through December 31, 2027. Either side can end it on 12 months' notice, and about 89% of 2025 sales went to Westlake, so the business depends on one customer that is also its majority owner. What we measured. We started from cash from operations, removed swings in receivables and payables, and deducted maintenance capital spending (growth spending was small; we separated it using the average spending-to-sales ratio). The partnership pays no stock compensation. Overhaul costs, which are capitalized and show up in operating cash flow, were kept in as a real cost because they recur every five to eight years per plant. We then took the unitholders' share: 22.8% of the plants' earnings, less the partnership's own interest and corporate costs. Ownership stepped up to 22.8% only on January 1, 2019, so we use 2019 onward. Owner earnings per unit were about $2.18 (2019), $2.29 (2020), $1.77 (2021), $2.36 (2022), $1.77 (2023), $2.04 (2024) and $0.92 (2025). The median, $2.04, is our starting level; it spans years with both heavy and light overhauls. It sits close to the $1.89 annual distribution. 2025 needs an explanation. Owner earnings fell about 55% from 2024 because capitalized overhaul spending jumped to $125 million from $23 million in 2024 (2021 was similar at $131 million, and 2021 was also weak). Under the Westlake contract the price includes a five-year average of overhaul and maintenance costs, so the cost is recovered over time rather than lost. We therefore start the base case at the median level rather than the 2025 dip. We did not find any other explanation for the drop, and the cash-flow statement reconciles to reported net income within about 0.2% in every year we checked. Base case, about $23 per unit. Owner earnings stay at about $2.04 per unit with no growth for 20 years, then nothing. What supports 20 years: twelve years of annual renewals, 50-year site leases for the Lake Charles and Calvert City land, integration of these plants with Westlake's own downstream production, and Westlake's ownership of most of OpCo. We credit no growth: the margin is fixed per pound, there is no announced expansion, and none is contracted. We give no value beyond year 20 because we cannot name what keeps the earnings going. Bull case, about $31 per unit. Owner earnings of about $2.25 per unit for 30 years, the average of the best years on record (2020 and 2022). That requires the partnership's identified levers to work: Westlake takes production above the planned volume (it has an option to buy up to 95% of any excess), and overhaul costs stay light. It also assumes the plants keep running for 30 years on maintenance spending covered by the price formula. Bear case, about $7 per unit. Owner earnings of about $1.77 per unit, the low of 2021 and 2023, for 10 years, after which the earnings stop. The partnership's roughly $11 per unit of debt (about $400 million) comes due at that point and is deducted at its present value. This reflects a single customer that can give 12 months' notice, and leverage that stays on the partnership's own books while the earnings belong 77% to Westlake. We saw no notice of termination and no sign that one is coming; the bear case is built from the existence of the right and the concentration, not from a forecast. Margin-of-safety price of $11 per unit. Because the earnings depend on one counterparty, come from a rolling one-year contract with no growth, and carry debt due in 2027, the margin-of-safety price is set about 50% below our base value. From $11, the base case's flat owner earnings of about $2.04 imply roughly an 18% yield. What would make this wrong. Westlake terminating or repricing the agreement (a lower fixed margin), overhaul costs staying at 2025 levels rather than reverting, or the $400 million debt being refinanced at much higher interest would each lower our estimate. A larger or renegotiated margin, which the partnership has said it may seek, is not counted because nothing is agreed.