1、2012 annual reportmaximizing yields2277 Plaza Drive,Suite 500Sugar Land,Texas www.cvrP63708cvrD1R1.indd 15/13/13 7:51 AMCVR Partners,LP is a growth-oriented limited partnership focused on producing nitrogen fertilizer to help serve the needs of a growing population.Our company uses state-of-the-art
2、technologies to produce urea ammonium nitrate(UAN)and ammonia fertilizer products.We are committed to enhancing unitholder value and running safe and environmentally conscientious operations.Our facility,located in Coffeyville,Kansas,is the only such operation in North America that uses a petroleum
3、coke gasification process for feedstock purposes.The facility includes a 1,225 ton-per-day ammonia unit,a 3,000 ton-per-day UAN unit,and a dual-train gasifier complex having a capacity of 84 million standard cubic feet per day of hydrogen.In 2012,we produced 643,800 tons of UAN and 124,600 tons of a
4、mmonia available for sale.CVR Partners common units are traded on the New York Stock Exchange under the ticker symbol“UAN.”CVR Energy owns the general partner of CVR Partners and a majority of the common units representing limited partner interests of CVR Partners.partnership profileCORPORATE OFFICE
5、SCVR Partners,LP2277 Plaza Drive,Suite 500Sugar Land,Texas 77479Additional copies of CVR Partners annual report on Form 10-K,which is filed with the Securities and Exchange Commission(SEC),are available upon request and may be obtained by writing to Investor Relations at the Corporate Offices.In add
6、ition,all company filings with the SEC,including the 10-K,may be accessed via the Internet at www.CVRP.EXCHANGE LISTINGCVR Partners,LPs common units are listed on the New York Stock Exchange under the ticker symbol“UAN.”INdEPENdENT AUdITORSKPMG LLPHouston,TexasTRANSFER AGENT ANd REGISTRARAmerican St
7、ock Transfer&Trust Company,LLC6201 15th AvenueBrooklyn,N.Y.112191-800-937-Correspondence or questions concerning common unit holdings,transfers,lost certificates,distributions,or address or registration changes should be directed to American Stock Transfer&Trust Company.ENVIRONMENTAL RESPONSIBILITYT
8、he paper used for the cover and narrative pages of this annual report contains 20%post-consumer fiber,is Forest Stewardship Council certified and was made with Green-e Certified Manufacturing.The paper used for the financial section of this annual report contains a minimum of 30%post-consumer fiber.
9、EXECUTIVE OFFICERSJohn J.Lipinski Executive ChairmanByron R.Kelley Chief Executive Officer and PresidentStanley A.Riemann Chief Operating OfficerSusan M.Ball Chief Financial Officer and TreasurerEdmund S.Gross Senior Vice President,General Counsel and SecretaryRandal T.Maffett Executive Vice Preside
10、nt,Business DevelopmentChristopher G.Swanberg Vice President,Environmental,Health and SafetydIRECTORSJohn J.Lipinski Chairman of the Board of Directors and Executive ChairmanByron R.Kelley Chief Executive Officer and PresidentStanley A.Riemann Chief Operating OfficerSungHwan Cho Chief Financial Offi
11、cer of Icahn Enterprises G.P.,Inc.Donna R.Ecton Founder,Chairman and Chief Executive Officer of EEI Inc.,and Director of Body Central Corp.Frank M.Muller,Jr.Founder and President of Toby Enterprises,Chairman of Topaz Technologies,Ltd.,and Former Chairman and Chief Executive Officer of TenX Technolog
12、y,Inc.Daniel A.Ninivaggi President and Chief Executive of Icahn Enterprises L.P.and Icahn Enterprises G.P.,Inc.Mark A.Pytosh Chief Financial Officer of CCS CorporationCROXSON Design partnership information63708cvrD1R1.indd 25/13/13 7:50 AMFinancial&Operating Data 2012(1)20112010(1)Financial ResultsN
13、et sales$302.3$302.9$180.5 Operating income$115.8$136.2$20.4 Net income$112.2$132.4$33.3 Adjusted EBITDA(2)$148.2$162.6$52.6 Balance sheet Data(3)Cash and cash equivalents$127.8$237.0$42.7 Working capital$116.6$229.4$27.1 Total assets$623.0$659.3$452.2 Total debt,including current portion$125.0$125.
14、0$-Partners capital$446.2$489.5$402.2 Key OpeRating statisticsProduction(000s tons)Ammonia(gross produced)(4)390.0 411.2 392.7 Ammonia(net available for sale)(4)124.6 116.8 155.6 UAN 643.8 714.1 578.3 Sales(000s tons)Ammonia 127.8 112.8 164.7 UAN 643.5 709.3 580.7 Total 771.3 822.1 745.4 Product pri
15、ce(plant gate)(dollars per ton)(5)Ammonia$613$579$361 UAN$303$284$179 On-stream factors(6)Gasifier 92.6%99.0%89.0%Ammonia 91.1%97.7%87.7%UAN 86.4%95.5%80.8%(3)Presented as of December 31.(4)The gross tons produced for ammonia represent the total ammonia produced,including ammonia produced that was u
16、pgraded into UAN.The net tons available for sale represent the ammonia available for sale that was not upgraded into UAN.(5)Plant gate price per ton represents net sales less freight revenue and hydrogen revenue divided by product sales volume in tons in the reporting period.Plant gate price per ton
17、 is shown in order to provide a pricing measure that is comparable across the fertilizer industry.(6)On-stream factor is the total number of hours operated divided by the total number of hours in the reporting period and is a measure of operating efficiency.Excluding the impact of the third party ai
18、r separation unit outage and the major scheduled turnaround,the on-stream factors for the year ended December 21,2012 would have been 98.1%for gasifier,97.1%for ammonia and 92.8%for UAN.Excluding the impact of the third party air separation unit outage,the on-stream factors for the year ended Decemb
19、er 31,2011 would have been 99.2%for gasifier,98.0%for ammonia and 95.7%for UAN.Excluding the impact of the third party air separation unit outage,the rupture of the high-pressure UAN vessel and the major scheduled turnaround,the on-stream factors for the year ended December 31,2010 would have been 9
20、7.6%for gasifier,96.8%for ammonia and 96.1%for UAN.(In$U.S.millions,unless otherwise noted)(1)Includes scheduled major plant turnaround(occurs every two years).(2)Adjusted EBITDA is a non-GAAP measure defined as net income before interest expense,net,interest income,income tax expense,depreciation a
21、nd amortization expense,the impact of share-based compensation,and,where applicable,major scheduled turnaround expense and loss on disposition of assets.Management believes Adjusted EBITDA enables investors to better assess the comparability of operating results and the partnerships liquidity.The fo
22、llowing is a reconciliation of net income to Adjusted EBITDA.(in$US millions)201220112010Net income$112.2$132.4$33.3 Add:Interest expense,net 3.8 4.0 -Interest income(0.2)-(13.1)Income tax expense 0.1 -Depreciation and amortization 20.7 18.9 18.5 EBITDA$136.6$155.3$38.7 Share-based compensation 6.8
23、7.3 9.0 Major scheduled turnaround expense 4.8 -3.5 Loss on disposition of assets-1.4 Adjusted EBITDA$148.2$162.6$52.6 0163708cvrD2R1.nar.indd 15/7/13 11:27 AM0263708cvrD2R1.nar.indd 25/10/13 11:07 AMDuring 2012 we capitalized on solid industry fundamentals that favorably position the partnership fo
24、r future success.Complementing our efforts to maximize cash flow for the benefit of our unitholders,we also made significant capital investments designed to materially grow our business.Our employees at all levels of the organization drove our success in 2012.Our marketing team leveraged the positiv
25、e market dynamics to maximize the selling prices of our products.Even more important,our operations team posted another record year of no lost time accidents.Their dedication,hard work and strict focus on safety resulted in continued high on-stream rates for our plant during the year.The combination
26、 of operations and marketing excellence resulted in strong financial results for 2012,including net sales of$302.3 million,Adjusted EBITDA*of$148.2 million and net income of$112.2 million.Our financial success resulted in the payment of cash distributions of$1.81 per common unit for the year ended D
27、ecember 31,2012.A major highlight of 2012 was the continued construction of our approximately$130 million project designed to increase our urea ammonium nitrate,or UAN,production capacity by approximately 50 percent.By the end of the year,we reached the important milestone of mechanical completion a
28、s all machinery and equipment was installed and related infrastructure in place.The expanded plant was brought online in the first quarter of 2013 and has met or exceeded expected production rates.As such,we are now able to further benefit from UANs price premium compared to ammonia on a nitrogen co
29、ntent basis.Similar to historical tO Our unithOlDers CVR PaRtneRs suCCess in 2012 was an imPRessiVe follow-uP to ouR outstanding 2011 inauguRal yeaR.*A non-GAAP measure reconciled to 2012 net income on page 1 of this report.0363708cvrD2R1.nar.indd 35/7/13 11:27 AM0463708cvrD2R1.nar.indd 45/10/13 11:
30、09 AMtrends,we expect this price relationship to continue given that UAN is typically easier for the customer to store,handle and apply than ammonia.Another highpoint of 2012 was our construction of a two million gallon storage terminal at Phillipsburg,Kansas.This important asset addition affords us
31、 the flexibility to store a portion of our production during periods of lower pricing and then sell it during peak pricing periods,thereby capturing an increased margin.Over the next several years,we plan to build and lease additional storage and distribution facilities located near farming communit
32、ies across the Midwest.Supporting our strategy to expand our sales mix into higher margin products,in 2012 we also expanded our Diesel Exhaust Fluid,or DEF,market.DEF is injected into the catalytic converters of certain diesel engine vehicles to meet NOX standards introduced in 2010.We produce DEF t
33、hrough a process of blending urea liquor and demineralized water.Just as UAN has historically priced at a premium to ammonia,DEF typically prices at a premium to UAN.During this past year we also made progress in our strategic initiative to further expand the partnership through the acquisition and/
34、or development of fertilizer and agricultural-related assets.In addition to looking at a number of specific prospects,our wide-ranging efforts in 2012 included a thorough industry evaluation that helped us more narrowly define the growth opportunities that we believe will ideally complement our curr
35、ent business.This work has continued into 2013 and we remain focused on capitalizing on our substantial efforts as soon as prudently sales(In U.S.millions)(Unaudited)$350300 250200150100500$175150 1251007550250$22.1$180.5$302.9$302.3$163.4$266.6$273.5$22.4n Maintenance capitaln aDJUsteD eBitDa less
36、Maintenance capitalaDJUsteD eBiDta*(In U.S.millions)(Unaudited)$162.6$52.6$43.7$156.4$140.5$148.2*A non-GAAP measure reconciled to 2012 net income on page 1 of this report.2010(1)20112012(1)2010(1)20112012(1)n sales net plant gaten Freight in revenUen hyDrogen revenUe$14.2$0.1(1)Includes scheduled m
37、ajor plant turnaround(occurs every two years).$17.0$6.40563708cvrD2R1.nar.indd 55/7/13 12:00 PM0663708cvrD2R1.nar.indd 65/13/13 7:57 AMAs we look to the future,it is our expectation that the positive industry fundamentals we saw in 2011 and 2012 will continue.The historically low year-end corn inven
38、tory level as a result of the extensive drought in the Midwest during 2012 indicates at least 95 million acres of corn will be planted in the spring of 2013.This bodes well for nitrogen fertilizer producers like us as nitrogen is the primary determinant of yield and must be substantially replenished
39、 in the soil each year.Combined with no scheduled turnaround requirements for our plant this year,our recently completed UAN expansion,and the positive impact from the partial settlement we reached related to our disputed property tax payments,we are positioned to grow cash available for distributio
40、n in 2013 by between 19 and 35 percent as compared to the 2012 full year.I certainly expect that accordingly,2013 will be another year of continued maximization of yields for our unitholders and customers.As always,we remain committed to enhancing value for all of our unitholders and are very apprec
41、iative of your support.With kindest regards,Byron R.KelleyChief Executive Officer&PresidentU.S.corn planted and yieldSMILLIONS OF ACRESBUSHELS PER ACRE19901991199219931994199519961997199819992000200120022003200420052006200720082009201020112012*1801501209060300100806040200plantedyieldSource:U.S.Depar
42、tment of Agriculture(USDA)*2012 yields were impacted by extreme drought in key corn growing regions in the U.S.0763708cvrD2R1.nar.indd 75/7/13 11:59 AM0863708cvrD2R1.nar.indd 85/10/13 11:10 AMinDustrY/Business DiscussiOn ReCent ComPletion of a Plant exPansion PRojeCt inCReased uan PRoduCtion CaPaCit
43、y by neaRly 50%.a strong and stable industryWhile nitrogen,phosphate and potassium are all essential nutrients required for plant growth,nitrogen remains the most crucial as it determines crop vigor,color and,most importantly,yield.Nitrogen fertilizer consumption in the United States is principally
44、driven by global demand for three crops corn,wheat and cotton with corn being the largest consumer of nitrogen fertilizer in total and on a per acre basis.During 2012,97 million acres of corn were planted in the United States the largest crop planting since 1937.However,due to the devastating drough
45、t experienced throughout much of the Midwest and other key growing areas,only 87 million acres at an average of 123 bushels per acre were harvested.Fortunately,through a combination of crop insurance and higher corn prices,U.S.farmers were collectively able to weather the drought-related impact and
46、were well positioned financially as they moved into the 2013 planting season.A further impact of the drought in 2012 was the resulting U.S.Department of Agriculture,or USDA,projected year-end stocks-to-use corn inventory level of less than 7 percent,the second lowest level in approximately 50 years.
47、To help replenish corn inventory to more historical levels,the USDA currently estimates that 97 million acres of corn will be planted during the spring of 2013.During the last five years,corn prices in Illinois have averaged$5.05 per bushel,an increase of 100 percent above the average price of$2.52
48、per bushel during the preceding five years.Over this same period,the five year average Southern Plains ammonia price increased 61 percent from$338 per ton to$543 per ton and the five 0963708cvrD2R1.nar.indd 95/7/13 11:27 AM$2.60876543210*As of March 20,2013.Source:Capital IQ,USDA Note:Fixed Costs in
49、clude labor,machinery,land,taxes,insurance,and other Avg.%ToTAl of CosTn Other Variable COStS 13%n Seed aNd ChemiCalS 18%n Fixed COStS 48%n FertilizerS 21%Input Costs&prICes/Bushel($)U.S.Farmer tOtal iNpUt COStS2003200420052006200720082009201020112012$1,0009008007006005004003002001000U.S.NitrOgeN Fe
50、rtilizer priCeSSource:green markets data;FerteconammONia-SOUtherN plaiNS(SpOt)UaN-SOUtherN plaiNS(SpOt)$per ton$3.10$3.53$0.44$0.51$1.50$0.65$3.68$0.97$0.50$0.59$1.62$0.37$0.84$0.68$1.64$3.74$4.33$0.46$0.53$0.76$0.82$0.70$0.96$1.83$2.0230 day:$7.3212 mONth:$5.76Corn fuTures PriCes*$0.36$0.47$0.42$1.
51、35$0.58$2.97$0.42$0.49$1.48 20052006200720082009201020111063708cvrD2R1.nar.indd 105/7/13 12:00 PMyear average Southern Plains UAN price increased 64 percent from$191 per ton to$313 per ton.On a macro basis,world grain demand increased 6 percent from 2008 to 2012 leading to tight grain supplies.At ex
52、isting grain prices and prices implied by futures markets,we expect a continued robust demand for fertilizers.As we look beyond 2013,there are a number of key elements that we believe should sustain strong corn and fertilizer prices over the long term.The worlds population is expected to grow by mor
53、e than 30 percent by the year 2050.As the global population grows,more food is required from decreasing farm land per capita.We also expect to see a continued shift to more protein-rich diets as income per capita increases in emerging and developing markets.This higher demand for beef,poultry and po
54、rk is expected to drive a growing demand for grain feed.And finally,government ethanol mandates have significantly increased the demand for corn production in the United States.To meet this growing food and grain demand,increased yields per acre from available land will be required.Our Unique Positi
55、onWe derive substantially all of our revenue from the production and sale of nitrogen fertilizers,while many of our larger competitors are meaningfully diversified into other crop nutrients.Nitrogen fertilizer production is a higher margin,growing business with more stable demand as compared to the
56、production of potash and phosphate.The convenience of UAN,a nitrogen solutions fertilizer,has led to an estimated 16 percent increase in its consumption in 1163708cvrD2R1.nar.indd 115/10/13 11:10 AMaDDitional shipMents east oF the MississippitxoKarnMMoWiMnnDsDMtWycoUtaznvcaneiailKsoriDWastrategicall
57、Y lOcateD assets anD lOgistics 2012 tons solD By staten100,000+n 10,000 TO 100,000n UP TO 10,000 Year 2012 Total Tons Sold 771,000CORPORATE HEADqUARTERSFERTIlIzER PlANTDISTRIBUTION TERMINAlRAIl DISTRIBUTION1263708cvrD2R1.nar.indd 125/7/13 11:27 AMthe United States from 2000 through 2012,while ammoni
58、a fertilizer consumption decreased by an estimated 6 percent over the same period,according to data supplied by Blue,Johnson&Associates.Unlike ammonia and urea,UAN can be applied throughout the growing season and in tandem with pesticides and herbicides,providing farmers with flexibility and cost sa
59、vings.As a result of these factors,UAN has historically commanded a premium price to urea and ammonia on a nitrogen equivalent basis.Our recently completed UAN plant expansion places us in a strong position to capitalize on the price premium afforded to UAN.Prior to the expansion,our facility had th
60、e capacity to convert approximately 70 percent of our ammonia production to UAN.Today we have the ability to convert 100 percent of our ammonia production,resulting in an annual UAN production increase from approximately 675,000 tons to over one million tons.This approximate 50 percent increase in p
61、roduction along with the premium price we expect to receive for UAN is anticipated to drive a significant increase in cash available for distribution.Our plant location provides a strategic advantage on a number of fronts as compared to competitors on the U.S.Gulf Coast.As we are firmly situated in
62、the U.S.Corn Belt,we sell our products in the higher margin agricultural market compared to the lower margin industrial market.In addition,we estimate that we have a$15 per UAN ton transportation cost advantage over U.S.Gulf Coast plants and imports.Finally,for most of the facilities located on the
63、U.S.global fertilizer consumptionn nitrogenn phosphaten potash population(mid-year)1972-2011 nitrogen cagr 2.7%population in billionsmillions of metric tonnes1972197319741975197619771978197919801981198219831984198519861987198819891990199119921993199419951996199719981999200020012002200320042005200620
64、072008200920102011source:International Fertilizer Industry Association;U.S.Bureau of the Census,International Data Base8765432102001501005001363708cvrD2R1.nar.indd 135/7/13 12:00 PM1463708cvrD2R1.nar.indd 145/10/13 11:10 AMGulf Coast,barging is an important form of transportation that has historical
65、ly delivered a large portion of their product into the U.S.Farm Belt.As our product has historically only been transported by truck and rail,we are not exposed to the risk of low waterway levels restricting product load size or navigation by barges.For example,the severe drought conditions experienc
66、ed this past year resulted in increased transportation costs as barges were forced to carry smaller load sizes on many of the river systems leading into and out of the U.S.Farm Belt.We also operate the only nitrogen fertilizer production facility in North America that uses pet coke gasification to p
67、roduce nitrogen fertilizer.This unique production methodology keeps the majority of our costs fixed and relatively stable,which allows us to benefit directly from increases in nitrogen fertilizer prices.Over the past several years,more than 70 percent of the pet coke consumed by our plant was produc
68、ed and supplied by CVR Refinings adjacent crude oil refinery pursuant to a renewable long-term agreement.The remaining pet coke has come from third parties and is readily available to us.In contrast,substantially all of our nitrogen fertilizer competitors use natural gas as their primary raw materia
69、l feedstock(with natural gas constituting approximately 85 percent to 90 percent of their total production costs,based on historical data)and are therefore heavily impacted by changes in natural gas prices.This contributed to a historical competitive cost advantage for our facility.Although we did e
70、xperience a window when this advantage dissipated in 2012,today we are once again seeing natural gas prices accelerate,thereby restoring our competitive cost advantage.an eye for growthIn 2012 we successfully executed on a number of strategic initiatives designed to provide growth in cash flow for t
71、he long-term benefit of our unitholders.In addition to significant progress on our recently completed UAN plant expansion,we constructed a two million gallon storage terminal at Phillipsburg,Kansas,that provides us the ability to store a portion of our production to take advantage of the historical
72、price arbitrage associated with higher spring fertilizer pricing compared to other periods of the year.We plan to replicate this opportunity in other under-served farming communities in the U.S.Corn Belt,thereby driving incremental growth in distributable cash flow over the next several years.156370
73、8cvrD2R1.nar.indd 155/7/13 11:27 AMIn addition to our facility expansion and distribution optimization efforts,during 2012 we expanded our presence in the fast-growing and higher margin Diesel Exhaust Fluid,or DEF,market.The Engine Manufacturers Association,or EMA,estimates the demand for DEF in 201
74、0 was 50 million gallons.EMA expects DEF demand to rise to 750 million gallons in 2015 and 1.3 billion gallons in 2019 a remarkable increase of approximately 25 times as compared to estimated 2010 levels.We are solidly positioned to further capitalize on this growing market.Based on our estimation o
75、f available market share,we anticipate we could increase our DEF production from approximately 7,000 tons per year currently to more than 84,000 tons annually by 2016.Similar to what we have done successfully in the past,we continue to focus on improving the operating efficiency of our plant in orde
76、r to incrementally increase production and/or reduce operating expenses.There are a number of initiatives currently under evaluation that could provide opportunities for future capital investment.In addition,as technologies evolve and improve in the chemical processing industry,we anticipate there w
77、ill be additional efficiency initiatives that we will aggressively pursue.Complementing these internal growth efforts,we continue to evaluate opportunities to materially expand our business over the longer-term by acquiring existing assets and developing new facilities.An underlying premise remains
78、that we only invest capital in projects that offer an appropriate risk-adjusted rate of return and,most importantly,are immediately accretive to cash available for distribution.Our experienced development team supported by a strong balance sheet with minimum debt levels ideally positions the partner
79、ship to quickly capitalize on growth opportunities as they become available.1663708cvrD2R1.nar.indd 165/7/13 11:27 AMUNITED STATES SECURITIES AND EXCHANGE COMMISSIONWashington,D.C.20549Form 10-K(Mark One)?ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d)OF THESECURITIES EXCHANGE ACT OF 1934For the fisca
80、l year ended December 31,2012OR?TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)OF THESECURITIES EXCHANGE ACT OF 1934For the transition period from to.Commission file number:001-35120CVR Partners,LP(Exact name of registrant as specified in its charter)Delaware56-2677689(State or other jurisdiction
81、of(I.R.S.Employerincorporation or organization)Identification No.)2277 Plaza Drive,Suite 500Sugar Land,Texas77479(Address of principal executive offices)(Zip Code)(281)207-3200(Registrants telephone number,including area code)Securities registered pursuant to Section 12(b)of the Act:Title of Each Cl
82、assName of each exchange on which registeredCommon units representing limited partner interestsNew York Stock ExchangeSecurities registered pursuant to section 12(g)of the Act:NoneIndicate by check mark if the registrant is a well-known seasoned issuer,as defined in Rule 405 of the SecuritiesAct.Yes
83、?No?Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d)of theAct.Yes?No?Indicate by check mark whether the registrant(1)has filed all reports required to be filed by Section 13 or 15(d)of the SecuritiesExchange Act of 1934 during the prece
84、ding 12 months(or for such shorter period that the registrant was required to file such reports),and(2)has been subject to such filing requirements for the past 90 days.Yes?No?.Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site,if any,ever
85、yInteractive Data File required to be submitted and posted pursuant to Rule 405 or Regulation S-T(232.405 of this chapter)during thepreceding 12 months(or for such shorter period that the registrant was required to submit and post such files).Yes?No?.Indicate by check mark if disclosure of delinquen
86、t filers pursuant to Item 405 of Regulation S-K(229.405 of this chapter)is notcontained herein,and will not be contained,to the best of registrants knowledge,in definitive proxy or information statementsincorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K.?Indic
87、ate by check mark whether the registrant is a large accelerated filer,an accelerated filer,a non-accelerated filer,or a smallerreporting company.See the definitions of large accelerated filer,accelerated filer and smaller reporting company in Rule 12b-2 ofthe Exchange Act.Large accelerated filer?Acc
88、elerated filer?Non-accelerated filer?Smaller reporting company?(Do not check if a smaller reporting company)Indicate by check mark whether the registrant is a shell company(as defined in Rule 12b-2 of the ExchangeAct).Yes?No?The aggregate market value of the voting and non-voting common equity held
89、by non-affiliates of the registrant computed basedon the New York Stock Exchange closing price on June 29,2012(the last business day of the registrants second fiscal quarter)was$526,206,748.Indicate the number of units outstanding of each of the registrants classes of common units,as of the latest p
90、racticable date.Common units held by each executive officer and director and by each entity or person that,to the registrants knowledge,owned10%or more of the registrants outstanding common units as of June 29,2012 have been excluded from this number in that thesepersons may be deemed affiliates of
91、the registrant.This determination of possible affiliate status is not necessarily a conclusivedetermination for other purposes.ClassOutstanding at February 25,2013Common unit representing limited partner interests73,065,143 unitsTABLE OF CONTENTSPagePART IItem 1.Business.5Item 1A.Risk Factors.15Item
92、 1B.Unresolved Staff Comments.45Item 2.Properties.45Item 3.Legal Proceedings.46Item 4.Mine Safety Disclosures.46PART IIItem 5.Market For Registrants Common Equity,Related Unitholder Matters and IssuerPurchases of Equity Securities.47Item 6.Selected Financial Data.50Item 7.Managements Discussion and
93、Analysis of Financial Condition and Results ofOperations.55Item 7A.Quantitative and Qualitative Disclosures About Market Risk.83Item 8.Financial Statements and Supplementary Data.84Item 9.Changes in and Disagreements With Accountants on Accounting and FinancialDisclosure.129Item 9A.Controls and Proc
94、edures.129Item 9B.Other Information.129PART IIIItem 10.Directors,Executive Officers and Corporate Governance.130Item 11.Executive Compensation.138Item 12.Security Ownership of Certain Beneficial Owners and Management and RelatedUnitholder Matters.163Item 13.Certain Relationships and Related Transact
95、ions,and Director Independence.166Item 14.Principal Accounting Fees and Services.179PART IVItem 15.Exhibits,Financial Statement Schedules.1811GLOSSARY OF SELECTED TERMSThe following are definitions of certain terms used in this Annual Report on Form 10-K for theyear ended December 31,2012(this Repor
96、t).ammonia.Ammonia is a direct application fertilizer and is primarily usedas a building block for other nitrogen products for industrialapplications and finished fertilizer products.Blue Johnson.Blue,Johnson&Associates,Inc.capacity.Capacity is defined as the throughput a process unit is capableof s
97、ustaining,either on a calendar or stream day basis.Thethroughput may be expressed in terms of maximumsustainable,nameplate or economic capacity.The maximumsustainable or nameplate capacities may not be the mosteconomical.The economic capacity is the throughput thatgenerally provides the greatest eco
98、nomic benefit based onconsiderations such as feedstock costs,product values anddownstream unit constraints.catalyst.A substance that alters,accelerates,or instigates chemicalchanges,but is neither produced,consumed nor altered in theprocess.Coffeyville Resources or CRLLC.Coffeyville Resources,LLC,th
99、e subsidiary of CVR Energywhich directly owns our general partner and 50,920,000common units,or approximately 70%of our common mon units.Common units representing limited partner interests of CVRPartners,LP.corn belt.The primary corn producing region of the United States,which includes Illinois,Indi
100、ana,Iowa,Minnesota,Missouri,Nebraska,Ohio and Wisconsin.CVR Energy.CVR Energy,Inc.,a publicly traded company listed on theNew York Stock Exchange under the ticker symbol CVI,which indirectly owns our general partner and the commonunits owned by CRLLC.CVR Refining.CVR Refining,LP,a publicly traded li
101、mited partnership listedon the New York Stock Exchange under the ticker symbolCVRR,which currently operates a 115,000 bpd oil refineryin Coffeyville,Kansas,a 70,000 bpd oil refinery inWynnewood,Oklahoma and ancillary businesses.ethanol.A clear,colorless,flammable oxygenated hydrocarbon.Ethanolis typ
102、ically produced chemically from ethylene,or biologicallyfrom fermentation of various sugars from carbohydrates foundin agricultural crops and cellulosic residues from crops orwood.It is used in the United States as a gasoline octaneenhancer and oxygenate.2farm belt.Refers to the states of Illinois,I
103、ndiana,Iowa,Kansas,Minnesota,Missouri,Nebraska,North Dakota,Ohio,Oklahoma,South Dakota,Texas and Wisconsin.feedstocks.Petroleum products,such as crude oil and natural gas liquids,that are processed and blended into refined products,such asgasoline,diesel fuel and jet fuel,which are produced by arefi
104、nery.general partner.CVR GP,LLC,our general partner,which is a wholly-ownedsubsidiary of Coffeyville Resources.Initial Public Offering.The initial public offering of CVR Partners,LP common unitsthat closed on April 13,2011.MMbtu.One million British thermal units:a measure of energy.OneBtu of heat is
105、 required to raise the temperature of one poundof water one degree Fahrenheit.MSCF.One thousand standard cubic feet,a customary gasmeasurement.NYSE.The New York Stock Exchange.on-stream.Measurement of the reliability of the gasification,ammoniaand UAN units,defined as the total number of hours opera
106、tedby each unit divided by the total number of hours in thereporting period.OSHA.Federal Occupational Safety and Health Act.pet coke.Petroleum coke a coal-like substance that is producedduring the refining process.plant gate price.The unit price of fertilizer,in dollars per ton,offered on adelivered
107、 basis,and excluding shipment costs.prepaid sales.Represents customer payments under contracts to guarantee aprice and supply of fertilizer in quantities expected to bedelivered in the next twelve months.Revenue is not recordedfor such sales until the product is considered delivered.Prepaid sales ar
108、e also referred to as deferred revenue.recordable incident.An injury,as defined by OSHA.All work-related deaths andillnesses,and those work-related injuries which result in loss ofconsciousness,restriction of work or motion,transfer toanother job,or require medical treatment beyond first aid.slag.A
109、glasslike substance removed from the gasifier containing themetal impurities originally present in pet coke.slurry.A byproduct of the fluid catalytic cracking process that is soldfor further processing or blending with fuel oil.spot market.A market in which commodities are bought and sold for cashan
110、d delivered immediately.3syngas.Synthesized gas a mixture of gases(largely carbonmonoxide and hydrogen)that results from gasifyingcarbonaceous feedstock such as pet coke.throughput.The volume processed through a unit.ton.One ton is equal to 2,000 pounds.turnaround.A periodically required standard pr
111、ocedure to refurbish andmaintain a facility that involves the shutdown and inspectionof major processing units.UAN.UAN is an aqueous solution of urea and ammonium nitrateused as a fertilizer.wheat belt.The primary wheat producing region of the United States,which includes Oklahoma,Kansas,North Dakot
112、a,SouthDakota and Texas.4PART IItem 1.BusinessOverviewCVR Partners,LP(CVR Partners,the Partnership,we,us,or our)is a Delawarelimited partnership formed by CVR Energy to own,operate and grow our nitrogen fertilizer business.Strategically located adjacent to CVR Refinings refinery in Coffeyville,Kansa
113、s,our nitrogen fertilizermanufacturing facility is the only operation in North America that utilizes a petroleum coke,or petcoke,gasification process to produce nitrogen fertilizer.We produce and distribute nitrogen fertilizer products,which are used primarily by farmers toimprove the yield and qual
114、ity of their crops.Our principal products are ammonia and UAN.Theseproducts are manufactured at our facility in Coffeyville,Kansas.Our product sales are heavily weightedtoward UAN and all of our products are sold on a wholesale basis.Our facility includes a 1,225 ton-per-day ammonia unit,a 2,025 ton
115、-per-day UAN unit and agasifier complex with built-in redundancy having a capacity of 84 million standard cubic feet per day ofhydrogen.We upgrade a majority of the ammonia we produce to higher margin UAN fertilizer,anaqueous solution of urea and ammonium nitrate which has historically commanded a p
116、remium priceover ammonia.In 2012,we produced 390,017 tons of ammonia,of which approximately 68%wasupgraded into 643,813 tons of UAN.We are expanding our existing asset base and utilizing the experience of our and CVR Energysmanagement teams to execute our growth strategy,which includes expanding pro
117、duction of UAN andacquiring and building additional infrastructure and production assets.A significant two-year plantexpansion designed to increase our UAN production capacity by 400,000 tons per year,orapproximately 50%,was completed in February and is scheduled to be at full operating rates in Mar
118、ch2013.CVR Energy,which indirectly owns our general partner and approximately 70%of ouroutstanding common units,also indirectly owns the general partner and 81.3%of the common units ofCVR Refining.CVR Refining currently operates a 115,000 bpd oil refinery in Coffeyville,Kansas,a70,000 bpd oil refine
119、ry in Wynnewood,Oklahoma,and ancillary businesses.The primary raw material feedstock utilized in our nitrogen fertilizer production process is petcoke,which is produced during the crude oil refining process.In contrast,substantially all of ournitrogen fertilizer competitors use natural gas as their
120、primary raw material feedstock.Historically,petcoke has been less expensive than natural gas on a per ton of fertilizer produced basis and pet cokeprices have been more stable when compared to natural gas prices.We believe our nitrogen fertilizerbusiness has historically been a lower cost producer a
121、nd marketer of ammonia and UAN fertilizers inNorth America.During the past five years,over 70%of the pet coke consumed by our plant wasproduced and supplied by CVR Refinings Coffeyville crude oil refinery pursuant to a renewablelong-term agreement.We generated net sales of$302.3 million,$302.9 milli
122、on and$180.5 million and net income of$112.2 million,$132.4 million and$33.3 million for the years ended December 31,2012,2011 and 2010,respectively.527FEB201317013549Organizational Structure and Related OwnershipThe following chart illustrates our organizational structure.PublicCVR Energy,Inc.(NYSE
123、:CVI)Coffeyville Resources,LLCCVR Partners,LP(NYSE:UAN)Coffeyville ResourcesNitrogen Fertilizers,LLCNon-economic general partner interestCVR Partners FertilizerBusinessCVR RefiningRefinery BusinessCommonUnits30.3%CommonUnits69.7%CVR GP,LLCCVR Refining GP,LLCCVR Refining,LP(NYSE:CVRR)PublicandAffilia
124、tesCommonUnits18.7%Non-economic general partner interestCommon Units81.3%Raw Material SupplyThe nitrogen fertilizer facilitys primary input is pet coke.Pet coke is produced as a byproduct of arefinerys coker unit process.In order to refine heavy or sour crude oil,which are lower in cost andmore prev
125、alent than higher quality crude oil,refiners use coker units,which enables refiners to furtherupgrade heavy crude oil.Our fertilizer plant is located in Coffeyville,Kansas,which is part of theMidwest pet coke market.The Midwest pet coke market is not subject to the same level of pet cokeprice variab
126、ility as is the Texas Gulf Coast pet coke market,where daily production exceeds 40,000 tonsper day.Our average daily pet coke demand from 2010-2012 was approximately 1,400 tons per day.Given the fact that the majority of our third-party pet coke suppliers are located in the Midwest,ourgeographic loc
127、ation gives us(and our similarly located competitors)a transportation cost advantageover our U.S.Gulf Coast market competitors.During the past five years,over 70%of our pet coke requirements on average were supplied byCVR Refinings adjacent crude oil refinery,pursuant to a renewable long-term agreem
128、ent.Historicallywe have obtained the remainder of our pet coke requirements from third parties such as otherMidwestern refineries or pet coke brokers at spot-prices.During 2012,the Partnership entered a petcoke supply agreement with HollyFrontier Corporation.The initial term ends in December 2013 an
129、d issubject to renewal.If necessary,the gasifier can also operate on low grade coal as an alternative,which6provides an additional raw material source.There are significant supplies of low grade coal within a60-mile radius of our nitrogen fertilizer plant.Linde LLC(Linde)owns,operates,and maintains
130、the air separation plant that provides contractvolumes of oxygen,nitrogen,and compressed dry air to our gasifiers for a monthly fee.We provide andpay for all utilities required for operation of the air separation plant.The air separation plant has notexperienced any long-term operating problems;howe
131、ver,CVR Energy maintains,for our benefit,contingent business interruption insurance with a$107.0 million limit for any interruption that results ina loss of production from an insured peril.The agreement with Linde provides that if our requirementsfor liquid or gaseous oxygen,liquid or gaseous nitro
132、gen or clean dry air exceed specified instantaneousflow rates by at least 10%,we can solicit bids from Linde and third parties to supply our incrementalproduct needs.We are required to provide notice to Linde of the approximate quantity of excessproduct that we will need and the approximate date by
133、which we will need it;we and Linde will thenjointly develop a request for proposal for soliciting bids from third parties and Linde.The biddingprocedures may be limited under specified circumstances.The agreement with Linde expires in 2020.We import start-up steam for the nitrogen fertilizer plant f
134、rom CVR Refinings adjacent crude oilrefinery,and then export steam back to the crude oil refinery once all of our units are in service.Wehave entered into a feedstock and shared services agreement with a subsidiary of CVR Refining,whichregulates,among other things,the import and export of start-up s
135、team between the adjacent refineryand the nitrogen fertilizer plant.Monthly charges and credits are recorded with the steam valued at thenatural gas price for the month.Production ProcessOur nitrogen fertilizer plant was built in 2000 with two separate gasifiers to provide redundancyand reliability.
136、It uses a gasification process licensed from an affiliate of the General Electric Company(General Electric),to convert pet coke to high purity hydrogen for a subsequent conversion toammonia.The nitrogen fertilizer plant is capable of processing approximately 1,400 tons per day of petcoke from CVR Re
137、finings crude oil refinery and third-party sources and converting it intoapproximately 1,200 tons per day of ammonia.A majority of the ammonia is converted toapproximately 2,000 tons per day of UAN.Typically 0.41 tons of ammonia are required to produce oneton of UAN.Pet coke is first ground and blen
138、ded with water and a fluxant(a mixture of fly ash and sand)toform a slurry that is then pumped into the partial oxidation gasifier.The slurry is then contacted withoxygen from an air separation unit.Partial oxidation reactions take place and the synthesis gas,orsyngas,consisting predominantly of hyd
139、rogen and carbon monoxide,is formed.The mineral residuefrom the slurry is a molten slag(a glasslike substance containing the metal impurities originally presentin pet coke)and flows along with the syngas into a quench chamber.The syngas and slag are rapidlycooled and the syngas is separated from the
140、 slag.Slag becomes a byproduct of the process.The syngas is scrubbed and saturated with moisture.Thesyngas next flows through a shift unit where the carbon monoxide in the syngas is reacted with themoisture to form hydrogen and CO2.The heat from this reaction generates saturated steam.This steamis c
141、ombined with steam produced in the ammonia unit and the excess steam not consumed by theprocess is sent to the adjacent crude oil refinery.After additional heat recovery,the high-pressure syngas is cooled and processed in the acid gasremoval unit.The syngas is then fed to a pressure swing absorption
142、,or PSA,unit,where the remainingimpurities are extracted.The PSA unit reduces residual carbon monoxide and CO2 levels to tracelevels,and the moisture-free,high-purity hydrogen is sent directly to the ammonia synthesis loop.7The hydrogen is reacted with nitrogen from the air separation unit in the am
143、monia unit to formthe ammonia product.A large portion of the ammonia is converted to UAN.In 2012,we produced390,017 tons of ammonia,of which approximately 68%was upgraded into 643,813 tons of UAN.We schedule and provide routine maintenance to our critical equipment using our ownmaintenance technicia
144、ns.Pursuant to a technical services agreement with General Electric,whichlicenses the gasification technology to us,General Electric provides technical advice and technologicalupdates from their ongoing research as well as other licensees operating experiences.The pet cokegasification process is lic
145、ensed from General Electric pursuant to a perpetual license agreement that isfully paid.The license grants us perpetual rights to use the pet coke gasification process on specifiedterms and conditions.Distribution,Sales and MarketingThe primary geographic markets for our fertilizer products are Kans
146、as,Missouri,Nebraska,Iowa,Illinois,Colorado and Texas.We market the ammonia products to industrial and agricultural customersand the UAN products to agricultural customers.The demand for nitrogen fertilizers occurs duringthree key periods.The highest level of ammonia demand is traditionally in the s
147、pring pre-plant season,from March through May.The second-highest period of demand occurs during fall pre-plant in lateOctober and November.The summer wheat pre-plant occurs in August and September.In addition,smaller quantities of ammonia are sold in the off-season to fill available storage at the d
148、ealer level.Ammonia and UAN are distributed by truck or by railcar.If delivered by truck,products are soldon a freight-on-board basis,and freight is normally arranged by the customer.We lease and own a fleetof railcars for use in product delivery,and also negotiate with distributors that have their
149、own leasedrailcars to utilize these assets to deliver products.We operate two truck loading and four rail loadingracks for each of ammonia and UAN,with an additional four rail loading racks for UAN.We own allof the truck and rail loading equipment at our nitrogen fertilizer facility.We utilize a two
150、 million gallonUAN storage tank and related truck and rail car load-out facilities located in Phillipsburg,Kansas.Theproperty that this terminal was constructed on is owned by a subsidiary of CVR Refining,CoffeyvilleResources Terminal,LLC,which operates the terminal.The purpose of the UAN terminal i
151、s todistribute approximately 20,000 tons of UAN fertilizer annually.The UAN terminal is complete and iscurrently operational.We market agricultural products to destinations that produce strong margins.The UAN market isprimarily located near the Union Pacific Railroad lines or destinations that can b
152、e supplied by truck.The ammonia market is primarily located near the Burlington Northern Santa Fe or Kansas CitySouthern Railroad lines or destinations that can be supplied by truck.By securing this business directly,we reduce our dependence on distributors serving the same customer base,which enabl
153、es us to capturea larger margin and allows us to better control our product distribution.Most of the agricultural salesare made on a competitive spot basis.We also offer products on a prepay basis for in-season demand.The heavy in-season demand periods are spring and fall in the corn belt and summer
154、 in the wheat belt.The corn belt is the primary corn producing region of the United States,which includes Illinois,Indiana,Iowa,Minnesota,Missouri,Nebraska,Ohio and Wisconsin.The wheat belt is the primarywheat producing region of the United States,which includes Kansas,North Dakota,Oklahoma,SouthDak
155、ota and Texas.Some of the industrial sales are spot sales,but most are on annual or multiyearcontracts.We use forward sales of our fertilizer products to optimize our asset utilization,planning processand production scheduling.These sales are made by offering customers the opportunity to purchasepro
156、duct on a forward basis at prices and delivery dates that we propose.We use this program tovarying degrees during the year and between years depending on market conditions.We have theflexibility to decrease or increase forward sales depending on our view as to whether price8environments will be incr
157、easing or decreasing.Fixing the selling prices of our products months inadvance of their ultimate delivery to customers typically causes our reported selling prices and marginsto differ from spot market prices and margins available at the time of shipment.As of December 31,2012,we have sold forward
158、6,740 tons of ammonia at an average netback of$700 and 229,213 tons ofUAN at an average netback of$298 for shipment over the next six months.As of December 31,2012,$1.0 million of our forward sales are prepaid sales,which means we received payment for such productin advance of delivery.Cash received
159、 as a result of prepayments is recognized as deferred revenue onour balance sheet upon receipt;revenue and resultant net income and EBITDA are recorded as theproduct is actually delivered.CustomersWe sell ammonia to agricultural and industrial customers.Based upon a three-year average,wehave sold ap
160、proximately 87%of the ammonia we produce to agricultural customers primarily located inthe mid-continent area between North Texas and Canada,and approximately 13%to industrialcustomers.Agricultural customers include distributors such as MFA,United Suppliers,Inc.,BrandtConsolidated Inc.,Gavilon Ferti
161、lizer,LLC,Transammonia,Inc.,Agri Services of Brunswick,LLC,Interchem,and CHS Inc.Industrial customers include Tessenderlo Kerley,Inc.,National CooperativeRefinery Association,and Dyno Nobel,Inc.We sell UAN products to retailers and distributors.Giventhe nature of our business,and consistent with ind
162、ustry practice,we do not have long-term minimumpurchase contracts with any of our customers.For the year ended December 31,2012,the top five ammonia customers in the aggregaterepresented 63%of our ammonia sales,and the top five UAN customers in the aggregate represented38.7%of our total UAN sales.Ou
163、r top two fertilizer customers on a consolidated basis,GavilonFertilizer,LLC and United Suppliers,Inc.accounted for approximately 10.5%and 9.8%,respectively ofour net sales.CompetitionWe have experienced and expect to continue to meet significant levels of competition from currentand potential compe
164、titors,many of whom have significantly greater financial and other resources.SeeRisk Factors Risks Related to Our Business Nitrogen fertilizer products are global commodities,and we face intense competition from other nitrogen fertilizer producers.Competition in our industry is dominated by price co
165、nsiderations.However,during the spring andfall application seasons,farming activities intensify and delivery capacity is a significant competitivefactor.We maintain a large fleet of leased and owned rail cars and seasonally adjust inventory toenhance our manufacturing and distribution operations.Our
166、 major competitors include Agrium,Koch Nitrogen,Potash Corporation and CF Industries.Domestic competition is intense due to customers sophisticated buying tendencies and productionstrategies that focus on cost and service.Also,foreign competition exists from producers of fertilizerproducts manufactu
167、red in countries with lower cost natural gas supplies.In certain cases,foreignproducers of fertilizer who export to the United States may be subsidized by their respectivegovernments.Based on Blue Johnson data regarding total U.S.use of UAN and ammonia,we estimate that ourUAN production in 2012 repr
168、esented approximately 5%of the total U.S.UAN use and that the netammonia produced and marketed at our facility represented less than 1%of the total U.S.ammoniause.9SeasonalityBecause we primarily sell agricultural commodity products,our business is exposed to seasonalfluctuations in demand for nitro
169、gen fertilizer products in the agricultural industry.As a result,wetypically generate greater net sales in the first half of the calendar year,which we refer to as theplanting season,and our net sales tend to be lower during the second half of each calendar year,whichwe refer to as the fill season.I
170、n addition,the demand for fertilizers is affected by the aggregate cropplanting decisions and fertilizer application rate decisions of individual farmers who make plantingdecisions based largely on the prospective profitability of a harvest.The specific varieties and amountsof fertilizer they apply
171、depend on factors like crop prices,farmers current liquidity,soil conditions,weather patterns and the types of crops planted.Environmental MattersOur business is subject to extensive and frequently changing federal,state and local,environmental,health and safety laws and regulations governing the em
172、ission and release of hazardoussubstances into the environment,the treatment and discharge of waste water and the storage,handling,use and transportation of our nitrogen fertilizer products.These laws and regulations,their underlyingregulatory requirements and the enforcement thereof impact us by im
173、posing:restrictions on operations or the need to install enhanced or additional controls;the need to obtain and comply with permits and authorizations;liability for the investigation and remediation of contaminated soil and groundwater at currentand former facilities(if any)and off-site waste dispos
174、al locations;and specifications for the products we market,primarily UAN and ammonia.Our operations require numerous permits and authorizations.Failure to comply with these permitsor environmental laws and regulations generally could result in fines,penalties or other sanctions or arevocation of our
175、 permits.In addition,the laws and regulations to which we are subject are oftenevolving and many of them have become more stringent or have become subject to more stringentinterpretation or enforcement by federal and state agencies.The ultimate impact on our business ofcomplying with existing laws a
176、nd regulations is not always clearly known or determinable due in part tothe fact that our operations may change over time and certain implementing regulations for laws,suchas the federal Clean Air Act,have not yet been finalized,are under governmental or judicial review orare being revised.These la
177、ws and regulations could result in increased capital,operating andcompliance costs or result in delays or limits to our operations or growth while attempting to obtainrequired permits.The principal environmental risks associated with our business are outlined below.The Federal Clean Air ActThe feder
178、al Clean Air Act and its implementing regulations,as well as the corresponding statelaws and regulations that regulate emissions of pollutants into the air,affect us through the federalClean Air Acts permitting requirements and emission control requirements relating to specific airpollutants,as well
179、 as the requirement to maintain a risk management program to help preventaccidental releases of certain substances.Some or all of the standards promulgated pursuant to thefederal Clean Air Act,or any future promulgations of standards,may require the installation ofcontrols or changes to our nitrogen
180、 fertilizer facility in order to comply.If new controls or changes tooperations are needed,the costs could be significant.In addition,failure to comply with therequirements of the federal Clean Air Act and its implementing regulations could result in fines,penalties or other sanctions.10The regulati
181、on of air emissions under the federal Clean Air Act requires that we obtain variousconstruction and operating permits and incur capital expenditures for the installation of certain airpollution control devices at our operations.Various regulations specific to our operations have beenimplemented,such
182、 as National Emission Standard for Hazardous Air Pollutants,New SourcePerformance Standards and New Source Review.We have incurred,and expect to continue to have tomake substantial capital expenditures to attain or maintain compliance with these and other airemission regulations that have been promu
183、lgated or may be promulgated or revised in the future.TheU.S.Environmental Protection Agency(the EPA)recently finalized revisions to the New SourcePerformance Standards for nitric acid plants.We do not expect to incur capital expenditures or anysignificant additional operational expenses associated
184、with the revised standards.Release ReportingThe release of hazardous substances or extremely hazardous substances into the environment issubject to release reporting requirements under federal and state environmental laws.We periodicallyexperience releases of hazardous or extremely hazardous substan
185、ces from our equipment.Weexperienced more significant releases in August 2007 due to the failure of a high pressure pump and inAugust and September 2010 due to a heat exchanger leak and a UAN vessel rupture.Our facilityperiodically has excess emission events from flaring and other planned and unplan
186、ned startup,shutdown and malfunction events.Such releases are reported to the EPA and relevant state and localagencies.From time to time,the EPA has conducted inspections and issued information requests to uswith respect to our compliance with release reporting requirements under the ComprehensiveEn
187、vironmental Response,Compensation and Liability Act(CERCLA)and the Emergency Planningand Community Right-to-Know Act.If we fail to properly report a release,or if the release violates thelaw or our permits,it could cause us to become the subject of a governmental enforcement action orthird-party cla
188、ims.Government enforcement or third-party claims relating to releases of hazardous orextremely hazardous substances could result in significant expenditures and liability.Greenhouse Gas EmissionsVarious regulatory and legislative measures to address greenhouse gas emissions(including carbondioxide,o
189、r CO2,methane and nitrous oxides)are in different phases of implementation or discussion.In the aftermath of its 2009 endangerment finding that greenhouse gas emissions pose a threat tohuman health and welfare,the EPA has begun to regulate greenhouse gas emissions under theauthority granted to it un
190、der the federal Clean Air Act.In October 2009,the EPA finalized a rulerequiring certain large emitters of greenhouse gases to inventory and report their greenhouse gasemissions to the EPA.In accordance with the rule,we have begun monitoring and reportinggreenhouse gas emissions from our nitrogen fer
191、tilizer plant.In May 2010,the EPA finalized theGreenhouse Gas Tailoring Rule,which establishes new greenhouse gas emissions thresholds thatdetermine when stationary sources,such as our nitrogen fertilizer plant,must obtain permits under theNew Source Review/Prevention of Significant Deterioration,or
192、 PSD,and Title V programs of thefederal Clean Air Act.In cases where a new source is constructed or an existing major sourceundergoes a major modification,the facility is required to undergo PSD review and evaluate andimplement or install best available control technology,or BACT,for its greenhouse
193、gas emissions.Phase-in permit requirements began for the largest stationary sources in 2011.A major modification atour nitrogen fertilizer plant,subject to the PSD or Title V permitting process after July 2011,whichresults in a significant expansion of production at our nitrogen fertilizer plant and
194、 a significant increasein greenhouse gas emissions,may require us to install BACT for our greenhouse gas emissions as partof the permitting process.We do not currently believe that any currently anticipated projects at ournitrogen fertilizer plant will result in a significant increase in greenhouse
195、gas emissions triggering theneed to install BACT controls.11During a State of the Union address in February 2013,President Obama indicated that the UnitedStates would take action to address climate change.At the federal legislative level,this could meanCongressional passage of legislation adopting s
196、ome form of federal mandatory greenhouse gas emissionreduction,such as a nationwide cap-and-trade program,does not appear likely at this time,although itcould be adopted at a future date.It is also possible that Congress may pass alternative climate changebills that do not mandate a nationwide cap-a
197、nd-trade program and instead focus on promotingrenewable energy and energy efficiency.In addition to potential federal legislation,a number of states have adopted regional greenhousegas initiatives to reduce CO2 and other greenhouse gas emissions.In 2007,a group of Midwest states,including Kansas(wh
198、ere our nitrogen fertilizer facility is located),formed the Midwestern GreenhouseGas Reduction Accord,which calls for the development of a cap-and-trade system to controlgreenhouse gas emissions and for the inventory of such emissions.However,the individual states thathave signed on to the accord mu
199、st adopt laws or regulations implementing the trading scheme before itbecomes effective,and it is unclear whether Kansas still intend to do so.Alternatively,the EPA may take further steps to regulate GHG emissions.The implementation ofEPA regulations and/or the passage of federal or state climate ch
200、ange legislation will likely result inincreased costs to(i)operate and maintain our facilities,(ii)install new emission controls on ourfacilities and(iii)administer and manage any greenhouse gas emissions program.Increased costsassociated with compliance with any future legislation or regulation of
201、greenhouse gas emissions,if itoccurs,may have a material adverse effect on our results of operations,financial condition and abilityto make cash distributions.In addition,climate change legislation and regulations may result in increased costs not only forour business but also for agricultural produ
202、cers that utilize our fertilizer products,thereby potentiallydecreasing demand for our fertilizer products.Decreased demand for our fertilizer products may have amaterial adverse effect on our results of operations,financial condition and ability to make cashdistributions.Environmental RemediationUn
203、der CERCLA,the Resource Conservation and Recovery Act(RCRA),and related state laws,certain persons may be liable for the release or threatened release of hazardous substances.Thesepersons can include the current owner or operator of property where a release or threatened releaseoccurred,any persons
204、who owned or operated the property when the release occurred,and any personswho disposed of,or arranged for the transportation or disposal of,hazardous substances at acontaminated property.Liability under CERCLA is strict,and,under certain circumstances,joint andseveral,so that any responsible party
205、 may be held liable for the entire cost of investigating andremediating the release of hazardous substances.As is the case with all companies engaged in similarindustries,we face potential exposure from future claims and lawsuits involving environmental matters,including soil and water contamination
206、,personal injury or property damage allegedly caused byhazardous substances that we manufactured,handled,used,stored,transported,spilled,disposed of orreleased.We cannot assure you that we will not become involved in future proceedings related to ourrelease of hazardous or extremely hazardous substa
207、nces or that,if we were held responsible fordamages in any existing or future proceedings,such costs would be covered by insurance or would notbe material.Environmental InsuranceWe are covered by CVR Energys premises pollution liability insurance policies with an aggregatelimit of$50.0 million per p
208、ollution condition,subject to a self-insured retention of$5.0 million.Thepolicies include business interruption coverage,subject to a 10-day waiting period deductible.This12insurance expires on July 1,2013.The policies insure specific covered locations,including our nitrogenfertilizer facility.The p
209、olicies insure(i)claims,remediation costs,and associated legal defense expensesfor pollution conditions at,or migrating from,a covered location,and(ii)the transportation risksassociated with moving waste from a covered location to any location for unloading or depositingwaste.The policies cover any
210、claim made during the policy period as long as the pollution conditionsgiving rise to the claim commenced on or after March 3,2004.The premises pollution liability policiescontain exclusions,conditions,and limitations that could apply to a particular pollution condition claim,and there can be no ass
211、urance such claim will be adequately insured for all potential damages.In addition to the premises pollution liability insurance policies,we benefit from casualty insurancepolicies maintained by CVR Energy having an aggregate and occurrence limit of$150.0 million,subjectto a self-insured retention o
212、f$2.0 million.This insurance provides coverage for claims involvingpollutants where the discharge is sudden and accidental and first commenced at a specific day and timeduring the policy period.Coverage under the casualty insurance policies for pollution does not apply todamages at or within our ins
213、ured premises.The pollution coverage provided in the casualty insurancepolicies contains exclusions,definitions,conditions and limitations that could apply to a particularpollution claim,and there can be no assurance such claim will be adequately insured for all potentialdamages.Safety,Health and Se
214、curity MattersWe are subject to a number of federal and state laws and regulations related to safety,includingOSHA,and comparable state statutes,the purpose of which are to protect the health and safety ofworkers.We also are subject to OSHA Process Safety Management regulations,which are designed to
215、prevent or minimize the consequences of catastrophic releases of toxic,reactive,flammable or explosivechemicals.We operate a comprehensive safety,health and security program,with participation by employeesat all levels of the organization.We have developed comprehensive safety programs aimed atpreve
216、nting OSHA recordable incidents.Despite our efforts to achieve excellence in our safety andhealth performance,there can be no assurances that there will not be accidents resulting in injuries oreven fatalities.We routinely audit our programs and consider improvements in our managementsystems.Process
217、 Safety Management.We maintain a process safety management,or PSM,program.Thisprogram is designed to address all aspects of OSHA guidelines for developing and maintaining acomprehensive process safety management program.We will continue to audit our programs andconsider improvements in our managemen
218、t systems and equipment.Emergency Planning and Response.We have an emergency response plan that describes theorganization,responsibilities and plans for responding to emergencies in our facility.This plan iscommunicated to local regulatory and community groups.We have on-site warning siren systems a
219、ndpersonal radios.We will continue to audit our programs and consider improvements in ourmanagement systems and equipment.EmployeesAs of December 31,2012,we had 134 direct employees.These employees operate our facilities atthe nitrogen fertilizer plant level and are directly employed and compensated
220、 by us.These employeesare covered by health insurance,disability and retirement plans established by CVR Energy.None ofour employees are unionized,and we believe that our relationship with our employees is good.13We also rely on the services of employees of CVR Energy in the operation of our busines
221、spursuant to a services agreement among us,CVR Energy and our general partner.CVR Energyprovides us with the following services under the agreement,among others:services from CVR Energys employees in capacities equivalent to the capacities of corporateexecutive officers,including chief operating off
222、icer,chief financial officer,general counsel,andvice president for environmental,health and safety,except that those who serve in suchcapacities under the agreement serve us on a shared,part-time basis only,unless we and CVREnergy agree otherwise;administrative and professional services,including le
223、gal,accounting,human resources,insurance,tax,credit,finance,government affairs and regulatory affairs;management of our property and the property of our operating subsidiary in the ordinary courseof business;recommendations on capital raising activities,including the issuance of debt or equity inter
224、ests,the entry into credit facilities and other capital market transactions;managing or overseeing litigation and administrative or regulatory proceedings,establishingappropriate insurance policies,and providing safety and environmental advice;recommending the payment of distributions;and managing o
225、r providing advice for other projects as may be agreed by CVR Energy and ourgeneral partner from time to time.For more information on this services agreement,see Certain Relationships and RelatedTransactions,and Director Independence Agreements with CVR Energy and CVR Refining Services Agreement.Ava
226、ilable InformationOur website address is .Our annual reports on Form 10-K,quarterly reportson Form 10-Q,current reports on Form 8-K,and all amendments to those reports,are available free ofcharge through our website under Investor Relations,as soon as reasonably practicable after theelectronic filin
227、g of these reports is made with the Securities and Exchange Commission(the SEC).Inaddition,our Corporate Governance Guidelines,Codes of Ethics and the Charter of the AuditCommittee and the Compensation Committee of the Board of Directors of our general partner areavailable on our website.These guide
228、lines,policies and charters are also available in print withoutcharge to any unitholder requesting them.Trademarks,Trade Names and Service MarksThis Report may include our and our affiliates trademarks,including Coffeyville Resources,theCoffeyville Resources logo,the CVR Partners,LP logo,the CVR Ref
229、ining,LP logo and the CVREnergy,Inc.logo,each of which is registered or for which we are applying for federal registration withthe United States Patent and Trademark Office.This Report may also contain trademarks,servicemarks,copyrights and trade names of other companies.14Item 1A.Risk FactorsYou sh
230、ould carefully consider each of the following risks together with the other information containedin this Report and all of the information set forth in our filings with the SEC.If any of the following risksand uncertainties develops into an actual event,our business,financial condition,cash flows or
231、 results ofoperations could be materially adversely affected.In that case,we might not be able to pay distributions onour common units,the trading price of our common units could decline,and you could lose all or part ofyour investment.Although many of our business risks are comparable to those face
232、d by a corporationengaged in a similar business,limited partner interests are inherently different from the capital stock of acorporation and involve additional risks described below.Risks Related to Our BusinessWe may not have sufficient available cash to pay any quarterly distribution on our commo
233、n units.Furthermore,we are not required to make distributions to holders of our common units on a quarterlybasis or otherwise,and may elect to distribute less than all of our available cash.We may not have sufficient available cash each quarter to enable us to pay any distributions to ourcommon unit
234、holders.Furthermore,our partnership agreement does not require us to pay distributionson a quarterly basis or otherwise.Although our general partners current policy is to distribute all ofour available cash on a quarterly basis,the board of directors of our general partner may at any time,for any re
235、ason,change this policy or decide not to pay cash distributions on a quarterly basis or otherbasis.The amount of cash we will be able to distribute on our common units principally depends onthe amount of cash we generate from our operations,which is directly dependent upon the operatingmargins we ge
236、nerate,which have been volatile historically.Our operating margins are significantlyaffected by the market-driven UAN and ammonia prices we are able to charge our customers and ourpet coke-based gasification production costs,as well as seasonality,weather conditions,governmentalregulation,unschedule
237、d maintenance or downtime at our facilities and global and domestic demand fornitrogen fertilizer products,among other factors.In addition:The amount of distributions we pay,if any,and the decision to make any distribution at all willbe determined by the board of directors of our general partner,who
238、se interests may differ fromthose of our common unitholders.Our general partner has limited fiduciary and contractualduties,which may permit it to favor its own interests or the interests of CVR Energy to thedetriment of our common unitholders.Our credit facility,and any credit facility or other deb
239、t instruments we enter into in the future,may limit the distributions that we can make.Our credit facility provides that we can makedistributions to holders of our common units,but only if we are in compliance with our leverageratio and interest coverage ratio covenants on a pro forma basis after gi
240、ving effect to anydistribution,and there is no default or event of default under the facility.In addition,any futurecredit facility may contain other financial tests and covenants that we must satisfy.Any failure tocomply with these tests and covenants could result in the lenders prohibiting distrib
241、utions by us.The actual amount of available cash depends on numerous factors,some of which are beyondour control,including UAN and ammonia prices,our operating costs,global and domesticdemand for nitrogen fertilizer products,fluctuations in our working capital needs,and theamount of fees and expense
242、s incurred by us.15The amount of our quarterly cash distributions,if any,will vary significantly both quarterly and annuallyand will be directly dependent on the performance of our business.Unlike most publicly tradedpartnerships,we do not have a minimum quarterly distribution or employ structures i
243、ntended to consistentlymaintain or increase distributions over time.We expect our business performance will be more seasonal and volatile,and our cash flows will beless stable,than the business performance and cash flows of most publicly traded partnerships.As aresult,our quarterly cash distribution
244、s will be volatile and are expected to vary quarterly and annually.Unlike most publicly traded partnerships,we do not have a minimum quarterly distribution or employstructures intended to consistently maintain or increase distributions over time.The amount of ourquarterly cash distributions will be
245、directly dependent on the performance of our business,which hasbeen volatile historically as a result of volatile nitrogen fertilizer and natural gas prices,and seasonaland global fluctuations in demand for nitrogen fertilizer products.Because our quarterly distributionswill be subject to significan
246、t fluctuations,future quarterly distributions paid to our unitholders will varysignificantly from quarter to quarter and may be zero.Given the seasonal nature of our business,weexpect that our unitholders will have direct exposure to fluctuations in the price of nitrogen fertilizers.The board of dir
247、ectors of our general partner may modify or revoke our cash distribution policy at any timeat its discretion.Our partnership agreement does not require us to make any distributions at all.Our general partners current policy is to distribute all of the available cash we generate eachquarter to unitho
248、lders of record on a pro rata basis.However,the board may change such policy at anytime at its discretion and could elect not to make distributions for one or more quarters.Ourpartnership agreement does not require us to make any distributions at all.Any modification orrevocation of our cash distrib
249、ution policy could substantially reduce or eliminate the amounts ofdistributions to our unitholders.The nitrogen fertilizer business is,and nitrogen fertilizer prices are,cyclical and highly volatile and haveexperienced substantial downturns in the past.Cycles in demand and pricing could potentially
250、 expose us tosignificant fluctuations in our operating and financial results,and expose you to substantial volatility in ourquarterly cash distributions and material reductions in the trading price of our common units.We are exposed to fluctuations in nitrogen fertilizer demand in the agricultural i
251、ndustry.Thesefluctuations historically have had and could in the future have significant effects on prices across allnitrogen fertilizer products and,in turn,our financial condition,cash flows and results of operations,which could result in significant volatility or material reductions in the price
252、of our common units or aninability to make quarterly cash distributions on our common units.Nitrogen fertilizer products are commodities,the price of which can be highly volatile.The price ofnitrogen fertilizer products depend on a number of factors,including general economic conditions,cyclical tre
253、nds in end-user markets,supply and demand imbalances,and weather conditions,which havea greater relevance because of the seasonal nature of fertilizer application.If seasonal demand exceedsthe projections on which we base production,our customers may acquire nitrogen fertilizer productsfrom our comp
254、etitors,and our profitability will be negatively impacted.If seasonal demand is less thanwe expect,we will be left with excess inventory that will have to be stored or liquidated.Demand for nitrogen fertilizer products is dependent on demand for crop nutrients by the globalagricultural industry.Nitr
255、ogen-based fertilizers are currently in high demand,driven by a growing worldpopulation,changes in dietary habits and an expanded use of corn for the production of ethanol.Supply is affected by available capacity and operating rates,raw material costs,government policies andglobal trade.A decrease i
256、n nitrogen fertilizer prices would have a material adverse effect on ourbusiness,cash flow and ability to make distributions.16Our internally generated cash flows and other sources of liquidity may not be adequate for our capitalneeds.As a result,we may not be able to pay any cash distributions to o
257、ur unitholders and the tradingprice of our common units may be adversely impacted.If we cannot generate adequate cash flow or otherwise secure sufficient liquidity to meet ourworking capital needs or support our short-term and long-term capital requirements,we may be unableto meet our debt obligatio
258、ns,pursue our business strategies or comply with certain environmentalstandards,which would have a material adverse effect on our business and results of operations.As ofDecember 31,2012,we had cash and cash equivalents of$127.8 million and$25.0 million availableunder our credit facility.The costs a
259、ssociated with operating our nitrogen fertilizer plant are largely fixed.If nitrogen fertilizer pricesfall below a certain level,we may not generate sufficient revenue to operate profitably or cover our costs andour ability to make distributions will be adversely impacted.Unlike our competitors,whos
260、e primary costs are related to the purchase of natural gas and whosecosts are therefore largely variable,we have largely fixed costs that are not dependent on the price ofnatural gas because we use pet coke as the primary feedstock in our nitrogen fertilizer plant.As aresult of the fixed cost nature
261、 of our operations,downtime,interruptions or low productivity due toreduced demand,adverse weather conditions,equipment failure,a decrease in nitrogen fertilizer pricesor other causes can result in significant operating losses,which would have a material adverse effect onour results of operations,fi
262、nancial condition and ability to make cash distributions.Continued low natural gas prices could impact our relative competitive position when compared to othernitrogen fertilizer producers.Most nitrogen fertilizer manufacturers rely on natural gas as their primary feedstock,and the costof natural ga
263、s,which reached ten-year lows in 2012,is a large component of the total production costfor natural gas-based nitrogen fertilizer manufacturers.The dramatic increase in nitrogen fertilizerprices in recent years has not been the direct result of an increase in natural gas prices,but rather theresult o
264、f increased demand for nitrogen-based fertilizers due to historically low stocks of global grainsand a surge in the prices of corn and wheat,the primary crops in our region.This increase in demandfor nitrogen-based fertilizers has created an environment in which nitrogen fertilizer prices havediscon
265、nected from their traditional correlation with natural gas prices.Low natural gas prices benefitour competitors and disproportionately impact our operations by making us less competitive withnatural gas-based nitrogen fertilizer manufacturers.Continued low natural gas prices could impair ourability
266、to compete with other nitrogen fertilizer producers who utilize natural gas as their primaryfeedstock if nitrogen fertilizer pricing drops as a result of low natural gas prices,and therefore have amaterial adverse impact on the trading price of our common units.In addition,if low natural gas pricesi
267、n the United States were to prompt those U.S.producers who have permanently or temporarily closedproduction facilities to resume fertilizer production,this would likely contribute to a global supply/demand imbalance that could negatively affect nitrogen fertilizer prices and therefore have a materia
268、ladverse effect on our results of operations,financial condition,cash flows,and ability to make cashdistributions.Any decline in U.S.agricultural production or limitations on the use of nitrogen fertilizer for agriculturalpurposes could have a material adverse effect on the sales of nitrogen fertili
269、zer,and on our results ofoperations,financial condition and ability to make cash distributions.Conditions in the U.S.agricultural industry significantly impact our operating results.The U.S.agricultural industry can be affected by a number of factors,including weather patterns and fieldconditions,cu
270、rrent and projected grain inventories and prices,domestic and international population17changes,demand for U.S.agricultural products and U.S.and foreign policies regarding trade inagricultural products.State and federal governmental policies,including farm and biofuel subsidies and commoditysupport
271、programs,as well as the prices of fertilizer products,may also directly or indirectly influencethe number of acres planted,the mix of crops planted and the use of fertilizers for particularagricultural applications.Developments in crop technology,such as nitrogen fixation(the conversion ofatmospheri
272、c nitrogen into compounds that plants can assimilate),could also reduce the use of chemicalfertilizers and adversely affect the demand for nitrogen fertilizer.In addition,from time to time variousstate legislatures have considered limitations on the use and application of chemical fertilizers due to
273、concerns about the impact of these products on the environment.A major factor underlying the current high level of demand for our nitrogen-based fertilizer products is theproduction of ethanol.A decrease in ethanol production,an increase in ethanol imports or a shift awayfrom corn as a principal raw
274、 material used to produce ethanol could have a material adverse effect on ourresults of operations,financial condition and ability to make cash distributions.A major factor underlying the current high level of demand for our nitrogen-based fertilizerproducts is the production of ethanol in the Unite
275、d States and the use of corn in ethanol production.Ethanol production in the United States is highly dependent upon a myriad of federal statutes andregulations,and is made significantly more competitive by various federal and state incentives,mandated usage and production of ethanol pursuant to fede
276、ral renewable fuel standards(RFS)suchas E-10 and E15,gasoline blends with 10%and 15%ethanol,respectively.However,a number offactors,including the drought,the continuing food versus fuel debate and studies showing thatexpanded ethanol usage may increase the level of greenhouse gases in the environmen
277、t as well as beunsuitable for small engine use,have resulted in calls to reduce subsidies for ethanol,allow increasedethanol imports and to repeal or adopt temporary waivers of the current renewable fuel standard,anyof which could have an adverse effect on corn-based ethanol production,planted corn
278、acreage andfertilizer demand.The nations fiscal crisis also establishes a situation in which all tax incentives,treatments and credits are being reevaluated as a means to resolve the deficit situation.Therefore,ethanol incentive programs may not be renewed,or if renewed,they may be renewed on termss
279、ignificantly less favorable to ethanol producers than current incentive programs.For example,Congress allowed both the 45 cents per gallon ethanol tax credit and the 54 cents per gallon ethanolimport tariff to expire on December 31,2011.In other action,the EPAs proposed E15 RFS willcontinue to be ch
280、allenged in court and legislative action.These actions could have a material adverseeffect on ethanol production in the United States,which could have a material adverse effect on ourresults of operations,financial condition and ability to make cash distributions.Further,while most ethanol is curren
281、tly produced from corn and other raw grains,such as milo orsorghum,the current RFS federal mandate requires a portion of ethanol production and usage in theUS to come from cellulose-based biomass,such as agricultural waste,forest residue,municipal solidwaste and energy crops(plants grown for use to
282、make biofuels or directly exploited for their energycontent).The federal act to implement the RFS required oil companies to blend 250 million gallons ofcellulosic ethanol into their gasoline in 2011.The mandate doubled this amount for 2012,and by 2022it would be 16 billion gallons.Very little cellul
283、osic is available in the commercial market,and onJanuary 25,2013,the U.S.Court of Appeals for the District of Columbia ruled that the mandate needsto be revised.Congress will consider legislation to revise the cellulosic ethanol mandate.Notwithstanding the foregoing,the trend is to move to products
284、other than corn and raw grains forethanol production.If this trend is successful the demand for corn may decrease significantly,which18could reduce demand for our nitrogen fertilizer products and have a material adverse effect on ourresults of operations,financial condition and ability to make cash
285、distributions.Nitrogen fertilizer products are global commodities,and we face intense competition from other nitrogenfertilizer producers.Our business is subject to intense price competition from both U.S.and foreign sources,includingcompetitors operating in the Persian Gulf,the Asia-Pacific region,
286、the Caribbean,Russia and theUkraine.Fertilizers are global commodities,with little or no product differentiation,and customersmake their purchasing decisions principally on the basis of delivered price and availability of theproduct.Furthermore,in recent years the price of nitrogen fertilizer in the
287、 United States has beensubstantially driven by pricing in the global fertilizer market.We compete with a number of U.S.producers and producers in other countries,including state-owned and government-subsidized entities.Some competitors have greater total resources and are less dependent on earnings
288、from fertilizer sales,which makes them less vulnerable to industry downturns and better positioned to pursue new expansionand development opportunities.Competitors utilizing different corporate structures may be better ableto withstand lower cash flows than we can as a limited partnership.Our compet
289、itive position couldsuffer to the extent we are not able to expand our own resources either through investments in new orexisting operations or through acquisitions,joint ventures or partnerships.An inability to competesuccessfully could result in the loss of customers,which could adversely affect o
290、ur sales andprofitability,and our ability to make cash distributions.Adverse weather conditions during peak fertilizer application periods may have a material adverse effect onour results of operations,financial condition and ability to make cash distributions,because ouragricultural customers are g
291、eographically concentrated.Our sales of nitrogen fertilizer products to agricultural customers are concentrated in the GreatPlains and Midwest states and are seasonal in nature.For example,we generate greater net sales andoperating income in the first half of the year,which we refer to as the planti
292、ng season,compared tothe second half of the year.Accordingly,an adverse weather pattern affecting agriculture in theseregions or during the planting season could have a negative effect on fertilizer demand,which could,inturn,result in a material decline in our net sales and margins and otherwise hav
293、e a material adverseeffect on our results of operations,financial condition and ability to make cash distributions.Ourquarterly results may vary significantly from one year to the next due largely to weather-related shifts inplanting schedules and purchase patterns.In addition,given the seasonal nat
294、ure of our business,weexpect that our distributions will be volatile and will vary quarterly and annually.Our business is seasonal,which may result in our carrying significant amounts of inventory and seasonalvariations in working capital.Our inability to predict future seasonal nitrogen fertilizer
295、demand accuratelymay result in excess inventory or product shortages.Our business is seasonal.Farmers tend to apply nitrogen fertilizer during two short applicationperiods,one in the spring and the other in the fall.The strongest demand for our products typicallyoccurs during the planting season.In
296、contrast,we and other nitrogen fertilizer producers generallyproduce our products throughout the year.As a result,we and our customers generally buildinventories during the low demand periods of the year in order to ensure timely product availabilityduring the peak sales seasons.The seasonality of n
297、itrogen fertilizer demand results in our sales volumesand net sales being highest during the North American spring season and our working capitalrequirements typically being highest just prior to the start of the spring season.If seasonal demand exceeds our projections,we will not have enough produc
298、t and our customersmay acquire products from our competitors,which would negatively impact our profitability.If seasonal19demand is less than we expect,we will be left with excess inventory and higher working capital andliquidity requirements.The degree of seasonality of our business can change sign
299、ificantly from year to year due toconditions in the agricultural industry and other factors.As a consequence of our seasonality,we expectthat our distributions will be volatile and will vary quarterly and annually.Our operations are dependent on third-party suppliers,including Linde,which owns an ai
300、r separation plantthat provides oxygen,nitrogen and compressed dry air to our gasifiers,and the City of Coffeyville,whichsupplies us with electricity.A deterioration in the financial condition of a third-party supplier,a mechanicalproblem with the air separation plant,or the inability of a third-par
301、ty supplier to perform in accordancewith its contractual obligations could have a material adverse effect on our results of operations,financialcondition and our ability to make cash distributions.Our operations depend in large part on the performance of third-party suppliers,including Lindefor the
302、supply of oxygen,nitrogen and compressed dry air,and the City of Coffeyville for the supply ofelectricity.With respect to Linde,our operations could be adversely affected if there were adeterioration in Lindes financial condition such that the operation of the air separation plant locatedadjacent to
303、 our nitrogen fertilizer plant was disrupted.Additionally,this air separation plant in the pasthas experienced numerous short-term interruptions,causing interruptions in our gasifier operations.With respect to electricity,in 2010 we entered into an amended and restated electric servicesagreement wit
304、h the city of Coffeyville,Kansas which gives us an option to extend the term of suchagreement through June 30,2024.Should Linde,the City of Coffeyville or any of our other third-partysuppliers fail to perform in accordance with existing contractual arrangements,our operation could beforced to halt.A
305、lternative sources of supply could be difficult to obtain.Any shutdown of ouroperations,even for a limited period,could have a material adverse effect on our results of operations,financial condition and ability to make cash distributions.Our results of operations,financial condition and ability to
306、make cash distributions may be adverselyaffected by the supply and price levels of pet coke.Failure by CVR Refining to continue to supply us withpet coke(to the extent third-party pet coke is unavailable or available only at higher prices),or CVRRefinings imposition of an obligation to provide it wi
307、th security for our payment obligations,couldnegatively impact our results of operations.Our profitability is directly affected by the price and availability of pet coke obtained from CVRRefinings Coffeyville,Kansas crude oil refinery pursuant to a long-term agreement and pet cokepurchased from thir
308、d parties,both of which vary based on market prices.Pet coke is a key raw materialused by us in the manufacture of nitrogen fertilizer products.If pet coke costs increase,we may not beable to increase our prices to recover these increased costs,because market prices for our nitrogenfertilizer produc
309、ts are not correlated with pet coke prices.Based on our current output,we obtain most(over 70%on average during the last five years)ofthe pet coke we need from CVR Refinings adjacent crude oil refinery,and procure the remainder onthe open market.The price that we pay CVR Refining for pet coke is bas
310、ed on the lesser of a pet cokeprice derived from the price we receive for UAN(subject to a UAN-based price ceiling and floor)anda pet coke index price.In most cases,the price we pay CVR Refining will be lower than the pricewhich we would otherwise pay to third parties.Pet coke prices could significa
311、ntly increase in the future.Should CVR Refining fail to perform in accordance with our existing agreement,we would need topurchase pet coke from third parties on the open market,which could negatively impact our results ofoperations to the extent third-party pet coke is unavailable or available only
312、 at higher prices.We may not be able to maintain an adequate supply of pet coke.In addition,we could experienceproduction delays or cost increases if alternative sources of supply prove to be more expensive or20difficult to obtain.We currently purchase 100%of the pet coke produced by CVR RefiningsCo
313、ffeyville refinery.Accordingly,if we increase our production,we will be more dependent on pet cokepurchases from third-party suppliers at open market prices.We entered into a pet coke supplyagreement with HollyFrontier Corporation which became effective on March 1,2012.The initial termends in Decemb
314、er 2013 and the agreement is subject to renewal.There is no assurance that we wouldbe able to purchase pet coke on comparable terms from third parties or at all.Under our pet coke agreement with CVR Refining,we may become obligated to provide securityfor our payment obligations if,in CVR Refinings s
315、ole judgment,there is a material adverse change inour financial condition or liquidity position or in our ability to pay for our pet coke purchases.SeeCertain Relationships and Related Transactions,and Director Independence Agreements with CVREnergy and CVR Refining Coke Supply Agreement.We rely on
316、third-party providers of transportation services and equipment,which subjects us to risks anduncertainties beyond our control that may have a material adverse effect on our results of operations,financial condition and ability to make distributions.We rely on railroad and trucking companies to ship
317、finished products to our customers.We alsolease railcars from railcar owners in order to ship our finished products.These transportationoperations,equipment and services are subject to various hazards,including extreme weatherconditions,work stoppages,delays,spills,derailments and other accidents an
318、d other operating hazards.These transportation operations,equipment and services are also subject to environmental,safetyand other regulatory oversight.Due to concerns related to terrorism or accidents,local,state andfederal governments could implement new regulations affecting the transportation of
319、 our finishedproducts.In addition,new regulations could be implemented affecting the equipment used to ship ourfinished products.Any delay in our ability to ship our finished products as a result of these transportation companiesfailure to operate properly,the implementation of new and more stringen
320、t regulatory requirementsaffecting transportation operations or equipment,or significant increases in the cost of these services orequipment could have a material adverse effect on our results of operations,financial condition andability to make cash distributions.Our facility faces operating hazard
321、s and interruptions,including unplanned maintenance or downtime.Wecould face potentially significant costs to the extent these hazards or interruptions cause a material declinein production and are not fully covered by our existing insurance coverage.Insurance companies thatcurrently insure companie
322、s in our industry may cease to do so,may change the coverage provided or maysubstantially increase premiums in the future.Our operations,located at a single location,are subject to significant operating hazards andinterruptions.Any significant curtailing of production at our nitrogen fertilizer plan
323、t or individual unitswithin our plant could result in materially lower levels of revenues and cash flow for the duration ofany shutdown and materially adversely impact our ability to make cash distributions.Operations at ournitrogen fertilizer plant could be curtailed or partially or completely shut
324、 down,temporarily orpermanently,as the result of a number of circumstances,most of which are not within our control,suchas:unscheduled maintenance or catastrophic events such as a major accident or fire,damage bysevere weather,flooding or other natural disaster;labor difficulties that result in a wo
325、rk stoppage or slowdown;environmental proceedings or other litigation that compel the cessation of all or a portion of theoperations at our nitrogen fertilizer plant;21 increasingly stringent environmental regulations;a disruption in the supply of pet coke to our nitrogen fertilizer plant;and a gove
326、rnmental ban or other limitation on the use of nitrogen fertilizer products,eithergenerally or specifically those manufactured at our plant.The magnitude of the effect on us of any shutdown will depend on the length of the shutdown andthe extent of the plant operations affected by the shutdown.Our p
327、lant requires a scheduledmaintenance turnaround every two years,which generally lasts up to three weeks.A major accident,fire,flood,or other event could damage our facility or the environment and the surroundingcommunity or result in injuries or loss of life.For example,the flood that occurred durin
328、g the weekendof June 30,2007 shut down our facility for approximately two weeks and required significantexpenditures to repair damaged equipment,and our UAN plant was out of service for approximatelysix weeks after the rupture of a high pressure vessel in September 2010,which had a significant impac
329、ton our revenues and cash flows for the fourth quarter of 2010.Moreover,our facility is locatedadjacent to CVR Refinings Coffeyville,Kansas refinery,and a major accident or disaster at therefinery could adversely affect our operations.Planned and unplanned maintenance could reduce ournet income,cash
330、 flow and ability to make cash distributions during the period of time that any of ourunits is not operating.Any unplanned future downtime could have a material adverse effect on ourability to make cash distributions to our unitholders.If we experience significant property damage,business interrupti
331、on,environmental claims or otherliabilities,our business could be materially adversely affected to the extent the damages or claimsexceed the amount of valid and collectible insurance available to us.We are currently insured underCVR Energys casualty,environmental,property and business interruption
332、insurance policies.Theproperty and business interruption insurance policies have a$1.25 billion limit,with a$2.5 milliondeductible for physical damage and a 45-to 60-day waiting period(depending on the insurance carrier)before losses resulting from business interruptions are recoverable.The policies
333、 also contain exclusionsand conditions that could have a materially adverse impact on our ability to receive indemnificationthereunder,as well as customary sub-limits for particular types of losses.For example,the currentproperty policy contains a specific sub-limit of$135.5 million for damage caused by flooding.We arefully exposed to all losses in excess of the applicable limits and sub-limits an
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