LyondellBasell Industries N.V. | 2013 | FY | 3


9.       Equity Investments

Our PO joint ventures, which are also accounted for using the equity method of accounting, are discussed in Note 8 to the accompanying Consolidated Financial Statements and are, therefore, not included in the following discussion.

Our remaining direct and indirect equity investments are as follows at December 31:

 

Percent of Ownership 2013 2012
Basell Orlen Polyolefins Sp. Z.o.o. 50.00% 50.00%
PolyPacific Pty. Ltd. 50.00% 50.00%
SunAllomer Ltd. 50.00% 50.00%
Saudi Polyolefins Company 25.00% 25.00%
Saudi Ethylene & Polyethylene Company Ltd. 25.00% 25.00%
Al-Waha Petrochemicals Ltd. 20.95% 20.95%
PolyMirae Co. Ltd. 42.59% 42.59%
HMC Polymers Company Ltd. 28.56% 28.56%
Indelpro S.A. de C.V. 49.00% 49.00%
Ningbo ZRCC Lyondell Chemical Co. Ltd. 26.65% 26.65%
Ningbo ZRCC Lyondell Chemical Marketing Co. 50.00% 50.00%
Nihon Oxirane Company 0.00% 40.00%
NOC Asia Ltd. 40.00% 40.00%
Geosel 27.00% 27.00%
 
 

In December 2013, we sold our 40% interest in Nihon Oxirane Company. We recognized a $16 million loss in connection with this sale, which is reflected in our Consolidated Statements of Income in Other income (expense), net.

 

The changes in our equity investments are as follows:

 

  Year Ended December 31,
Millions of dollars2013 2012
Beginning balance$1,583 $1,559
Investee net income 213  143
Impairment recognized by investor (10)  0
 Income from equity investments 203  143
       
Distribution of earnings (186)  (147)
Contributions to joint ventures 1  8
Divestiture (18)  0
Currency exchange effects 16  11
Other 30  9
Ending balance$1,629 $1,583
 
 

In connection with the sale of our interest in Nihon Oxirane Company, we and our joint venture partner revised the terms of the agreement governing our NOC Asia Ltd. joint venture. Under the new terms of the agreement, our participation in the joint venture is limited to a finite period. To determine whether the change in terms of the agreement gave rise to an impairment of our investment, we assessed the fair value of the investment by using discounted cash flows. The assessment concluded that the excess of carrying value of the investment over its fair value was other than temporary, resulting in the impairment charge indicated above.

 

The subsidiary that holds the Company's equity interest in Al-Waha Petrochemicals Ltd. has a minority shareholder, which holds 16.21% of its equity. The equity interest held by the minority shareholder can be called by the Company or can be put to the Company by the minority interest shareholder at any time. The price of the call option is the nominal value of the shares (initial $18 million investment) plus accrued interest based on LIBOR plus 40 basis points, less paid dividends. The price of the put option is €1 plus the minority shareholder's undistributed pro-rata earnings. As of December 31, 2013 and 2012, the put would have a minimal redemption amount and the call could be redeemed for $22 million and $21 million, respectively, the value of the initial investment plus accrued interest.

Summarized balance sheet information and our share of our investments accounted for under the equity method are as follows at December 31:

 

    2013 2012
       Company     Company
Millions of dollars 100% Share 100% Share
Current assets $3,049 $1,032 $3,923 $1,387
Noncurrent assets  5,930  1,929  6,341  1,781
 Total assets  8,979  2,961  10,264  3,168
Current liabilities  2,152  755  2,973  1,030
Noncurrent liabilities  2,366  643  2,205  615
 Net assets $4,461 $1,563 $5,086 $1,523
 
 

Summarized income statement information and our share of our investments accounted for under the equity method are set forth below:

 

     Year Ended December 31,
     2013 2012 2011
        Company    Company    Company
Millions of dollars100% Share 100% Share 100% Share
Revenues$11,017 $3,565 $10,961 $3,650 $14,960 $4,915
Cost of sales (9,526)  (3,152)  (9,916)  (3,328)  (13,335)  (4,441)
  Gross profit 1,491  413  1,045  322  1,625  474
Net operating expenses (246)  (83)  (258)  (91)  (375)  (131)
  Operating income 1,245  330  787  231  1,250  343
Interest income 5  2  6  3  12  4
Interest expense (97)  (75)  (306)  (76)  (260)  (71)
Foreign currency translation (2)  (1)  74  21  (6)  (6)
Other income (expense), net 25  7  (9)  (2)  3  1
  Income before income taxes 1,176  263  552  177  999  271
Provision for income taxes (229)  (50)  (101)  (34)  (201)  (55)
  Net income$947 $213 $451 $143 $798 $216
       
       

The difference between our carrying value and the underlying equity in the net assets of our equity investments are assigned to the investment's assets and liabilities based on an analysis of the factors giving rise to the basis difference. The amortization of the basis difference is included in Income from equity investments in the Consolidated Statement of Income.


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