SunCoke Energy Partners LP (SXCP) CEO Discusses Q2 2013 Results - Earnings Call Transcript

Jul.25.13 | About: SunCoke Energy (SXCP)

SunCoke Energy Partners (NYSE:SXCP)

Q2 2013 Earnings Call

July 25, 2013 10:00 AM ET

Executives

Ryan Osterholm - IR

Mark Newman - SVP and CFO

Fritz Henderson - Chairman and CEO

Analysts

Garrett Nelson - BB&T Capital Partner

Derek Hernandez - Brean Murray, Carret & Co.

Operator

Welcome to SunCoke Energy Second Quarter 2013 Earnings Conference Call. My name is Adrian and I'll be your operator for today's call. (Operator Instructions). I'll now turn the call over to Ryan Osterholm. Ryan Osterholm you may begin.

Ryan Osterholm

Thank you, good morning everyone. Thank you for joining us on SunCoke Energy and SunCoke Energy Partners Second Quarter 2013 Earnings Conference Call. With me are Fritz Henderson, our Chairman and Chief Executive Officer; and Mark Newman, our Senior Vice President and Chief Financial Officer. Following the remarks made by management the call will be open for Q&A; this conference call is being webcast live on the Investor Relations section of our website, at www.suncoke.com and www.sxcpartners.com. There will be a replay available on our website, if we don't get to your question during the call please call our Investor Relations department at 630-824-1907, now before I turn over the call to Fritz let me remind you that the various remarks we make about future expectations constitute forward-looking statements and the cautionary language regarding forward-looking statements in our SEC filings apply to the remarks on our call today. These documents are available on our website as are reconciliations of any non-GAAP measures discussed on this call. Now I’d like to turn over the call to Fritz.

Fritz Henderson

Thanks, good morning. On chart 3 there's a quick update of second quarter milestones. On the operating side of the business we had another solid domestic quarter in terms of both profitability and EBITDA per ton. We did achieve additional reductions in coal cash production costs so we're hitting our targets; we're actually ahead of our targets for coal cash production costs. And then finally we did file the consent decree related to environmental projects at (inaudible) Haverhill in line with our expectations. So number of things happening in the operating side of the business which were positive.

On the building core or growing the business we continue to execute on our Indiana Harbor refurbishment project, the one coke plant that we had in the quarter that was actually was lower production was Indiana Harbor, part of that is that we're in the process of refurbishing that plant while we run it. We're about 40% complete with the project. We are seeing improved production in the ovens that are completed in line with our expectations and we expect the oven repairs, which is, I'll call it three quarters of the project to be complete by the end of the year. There are other parts of that project which we'll move into early next year but that project is right on schedule.

And they we are making progress on our contract renewal with ArcelorMittal in Indiana Harbor, nothing new to report today, but we remain highly confident that we'll reach a reasonable outcome and extend that agreement. So that's what's going on in terms of building our domestic core.

And then finally in terms of expanding our footprint we did in the quarter launch our Visa-SunCoke joint venture. My CFO, Mark Newman reminds me that a year ago in the second quarter call we announced that our board had approved with us proceeding with formation of an MLP, so a year later we think about it, we took the company, we took the MLP SXCP public in January. We are just recently announcing our first distribution increase and this is our first acquisition, Lake Shore Coal Handling Corporation. So a good progress in terms of what we're doing to grow SunCoke Energy Partners. And we did request a private letter ruling on qualifying income status of iron ore processing in the quarter. So we continue to make progress in terms of building the business.

In terms of the results in the quarter on page four, earnings per share at $0.08 reflects does reflect the challenging coal environment, while we're in line with our expectations for coal it's still down year-to-year, so the coal business continues to have a negative influence in both EBITDA and EPS. We did also reflect some accelerated depreciation expense in Indiana Harbor as we complete that project and then finally the income that we now attribute to SXCP public shareholders.

We ended the quarter with almost $350 million of cash, 115 million (inaudible) SXCP with a virtually undrawn revolvers, actually two of them, so we're well positioned we think to take advantage of growth opportunities, and then finally in terms of EBITDA, we today would affirm our guidance with respect to 2013, the guidance has between $205-230 million of EBITDA and $0.30-$0.55 in terms of EPS.

We did and are cooperating with AK Steel and we have more to say about this later in the presentation, on the coke needs in light of the recent blast furnace outage we've taken a number of measures but none of them are, expect to have a minimal effect on SXC going forward. At this point let me turn it over to Mark.

Mark Newman

Thanks Fritz. As Fritz said, I would characterize this as a solid quarter which is line with our full year guidance and expectations, on the revenue front we were down by about 12.4% really reflecting the lower coal price in the pass-through on our coke agreements and on flat coke sales. Our coal sales volumes are up quite a bit in the quarter reflecting higher production and purchase coal. But frankly this is overwhelmed by a fairly dramatic drop in coal prices $53 per ton year-over-year which really is the primary driver of our year-over-year decline in adjusted EBITDA.

As Fritz mentioned our domestic coke business performed well. We do have a small contribution in this quarter from India, the India JV which I will talk about later and then finally on the EPS front, our EPS declined $0.24 to $0.08 per share really reflecting the impact of coal on our adjusted EBITDA and the income attributable to SXC unit holders as well as the accelerated depreciation at Indiana Harbor, I’ll talk more about that later.

Turning to chart six, we have the adjusted EBITDA bridge of 52.4 million in the quarter compared to 66.8 million a year ago. as you see our coke business is essentially flat with the negative impact of Indiana Harbor being compensated by really strong production and yield at Middletown and Haverhill, we also recorded 0.8 million of adjusted EBITDA related to our India JV and we’ll talk more about India later.

Coal is down by 11.9 million, again primarily reflecting price but again as Fritz mentioned we had fairly strong cash cost improvement in the quarter, we’ll explain more about what we are doing there later.

Finally in corp. cost we’re down year-over-year about 3.1 million, I would say first off we’re comparing to a fairly light Q2 last year and the cost that we incurred in this quarter really primarily relates to the MLP cost, higher incentive comp and some legal cost as well as IT spending that we made a conscious decision to do this year. Net-net I would say our expectation on corporate cost is slightly up for the full year really in line with the MLP and higher incentive comp cost.

On the EPS bridge EBITDA accounted for $0.20 of the $0.24 reduction on a year-over-year basis. Indiana Harbor accelerated depreciation accounted for $0.04. Our full year guidance still remains at approximately $0.14 so we would expect lower impact from Indiana Harbor accelerated depreciation in the second half and then finally net income attributable to non-controlling interest both the MLP and Indiana Harbor represent about $0.08 and then our taxes are better on account of the lower earnings and the higher non-controlling interest.

When we look at SXC liquidity, we have almost 350 million in cash on a consolidated basis and almost 250 million in combined revolving credit facility capacity at both SXC and SXCP. If you look in the quarter, we had a fairly significant favorable working capital you will recall that in Q1 we received a payment from a customer one-day late so we essentially moved the Q1 payment into Q2 which we received, we also received the cash payment of the Brazilian dividend of 9.5 million which we accrued last Q4. We also show a favorable interest payable in the quarter as you know on both the SXC and SXCP notes.

Our payments are in Q1 and Q3 and we accrued interest, so that’s favorable in the quarter but that will unwind in Q3. On CapEx you will notice we spent 30.9 million, this is very similar to what we spent in Q1 and again Indiana Harbor where the refurbishment is well on the way is the primary drive for the increase CapEx year-over-year. We will talk more about the full year CapEx and actually there is a schedule in the appendix that lays that out in pretty good detail.

Turning to our domestic coke business summary on page 9 and this is another quarter of consistent earnings of adjusted EBITDA of $57 per ton in line with our guidance of $55 to $60 of EBITDA per ton.

On the production front you will notice that we are down slightly year-over-year. again this is primarily driven by Indiana Harbor. Interestingly Indiana Harbor is up this quarter versus Q1 but still down year-over-year as a result of the refurbishment and their production volumes are partially offset by both Haverhill and Middletown which are helping us well on the EBITDA side.

Based on our first half production, as you will see later, we are expecting full year production to still remain as slightly above 4.3 million tons even with some of the actions that we are taking related to AK Steel which I will talk about later.

We thought it would be helpful on chart 10 to provide a little more detail as to what we have done with AK Steel as a result of their recent blast furnace outage. As Fritz mentioned earlier, we are reaffirming our full year adjusted EBITDA EPS guidance to the impact to us is quite minimal. Specifically the actions that we’ve taken is that we will manage production at Haverhill 2, to be consistent with the annual contract maximum that are in the Haverhill 2 contract. That’s really a right that AK Steel has to enforce those contracts maximum.

At Middletown where there is no specific contract maximum in the contract. what we have agreed to do is to run second half production in line with the name plate capacity. And we also will provide temporary extension of payment terms on December production at Middletown of about 50,000 tons. So this will result in $20 million of receivables from AK being pushed from 2013 into early 2014. The impact, again we reaffirm guidance, but the impact that we will see quite frankly is at the Middletown, first on payment terms what we have agreed to do for the omnibus agreement is for the additional payment terms to be provided by SXC SunCoke energy and it will not impact the MLP.

Further we are estimating today that the impact to the MLP would be approximately $2 million, again this is all related to the reduction of about 20,000 tons at Middletown. And so based on this estimate the MLP would be made whole to the tune of this amount. We will actually calculate this amount on an actual basis as we go from quarter to quarter. But our estimate today is approximately $2 million and again this relates to the 65% of Middletown that is owned by the MLP. I would just remind our listeners as well that 58% of SXCP is owned by SXC. Still a lot of these funds will ultimately come back to the parent company.

On India Coke, this is a new segment that we have added. We now have a Brazilian Coke and an India Coke segment. We achieved EBITDA of $0.8 million, and this really represents the results from March 18 to May 31. We will report our India JV earnings one month in arrears. So this again represents through May 31, where we earned $0.8 million and achieved approximately $31 of EBITDA per ton. I would say we are off to a bumpy start in our JV. There is both market factors affecting India, relating to iron ore mining restrictions as well as a weak coke market in part due to imports of Chinese coke.

And then we’ve also had some JV startup issues primarily around putting trade financing in place which has led to certain delays and challenges on inbound coal imports. We expect that these difficulties will continue with us through Q3 and our focus today is really on stabilizing coal supply and ensuring we have good operational execution at the JV with our partner VISA Steel.

In addition to the $0.8 million of adjusted EBITDA, this will show up on our income statement as an equity loss of $0.2 million, reflecting our share of the JV’s earnings, depreciation, interest and taxes.

Switching gears into coal mining. Coal mining continues to be a drag on our year-over-year earnings comparison, but we're really encouraged by the continued progress from actions that we announced to investors at our Investor Day in Q4. And you will see the fairly dramatic change in our cost from the time we met with you in Q4 when we had overall cash cost of $144 per ton.

Our Q3 EBITDA as I mentioned earlier is down 11.9 million, driven by $53 per ton decline in price, and then partially offset by $19 per ton reduction in cash cost. Our focus is really on the cost side and if you noticed, while the year-over-year comparison is fairly bleak, if you look at our Q1 adjusted EBITDA to where we're today and take into account that prices are down roughly $13 per ton, since Q1. I think we take certainly some comfort in our ability to moderate our losses in our coal business based on improvement in our cash costs year-to-date.

Looking at our full year guidance on coal we expect based on our first half performance and the work that we're doing on the cost side that we will be in line with our full year guidance. And it is probably a little early to speculate about 2014, but obviously prices will be down from what we will record in 2013. But with the work that we have ahead of us on the cost reduction side, our view today is that our 2014 outlook will be consistent with 2013.

Turning to chart 13 our full year guidance. As Fritz mentioned at the beginning of the call adjusted EBITDA, EPS and production all remain unchanged. We're making really two changes to our full year guidance; one cash flow from operations reflecting the 20 million of receivables that will be removed into 2014. And then finally on capital expenditures and investments we intend to spend more than we had originally guided to, primarily as the result of the Lakeshore acquisition, and they were also increasing our spend in this calendar year related to the environmental remediation at Haverhill and Granite City as a result of the progress that we've made on a consent decree there.

Then turning to chart 15, I’d like to talk little bit about SunCoke Energy Partners. I described this as another great quarter at SXCP; we reported net income attributable to SXCP of 15.8 million or $0.49 per unit. Really driven by strong production at Middletown and Haverhill and resulting higher coke sales, improved yield and improved operating and maintenance costs recovery at our Middletown entity. We reported adjusted EBITDA per ton of $81 compared to $69 a year ago.

I also wanted to mention too that as Fritz mentioned that at the beginning of the call that we're continuing to work and execute against our growth strategy. we've announced the acquisition of Lakeshore that will result in roughly (Audio Gap).

We reported 18.7 million in the quarter. as Fritz mentioned we announced our first increase of distributions yesterday, a 2.4% increase over the minimum quarterly distribution to 0.4225 per unit. That will result in a 13.5 million payment which will be paid on August 30 to holders of record on August 15.

As we look out towards the rest of the year, our expectation as we communicated in Q1, is that there will be further increases in our distributions up to 7% increase over the MQD by our Q4 payment which will be made in February of 2014.

I’ll just remind our listeners that this outlook does not include any impact related to the Lakeshore acquisition, and we will talk more about that when that transaction has been closed.

SXCP liquidity position on page 17 is strong, roughly 116 million of cash and 100 million of undrawn revolver, nothing really significant to report in terms of the elements that drove cash flow in the quarter. I will mention that the CapEx year-to-date the ongoing CapEx year-to-date has been about 3 million, and this is at the 100% level. Our forecast for the full year is approximately 13 million or 8.5 million at the MLT level, the 65% level. So our expectation is that CapEx will pick in the second half, and obviously when we close the Lakeshore acquisition that will also have an impact on our liquidity.

Our full year outlook is on chart 18. We are leaving the full year guidance unchanged. We obviously have had a very strong first half. In the second half, we’ll have the impact of AK enforcing contract maximums at Haverhill. We also have some outages planned in Q3 at Haverhill, which we have included in our full year forecast.

I'll just highlight one change that we’ve made to this chart. The adjusted EBITDA attributable to SXCP, the very first line in the chart, now includes the estimated 2.5 million of public company cost that used to be reflected below that line. And we received comments from a few investors that they thought it should be in the first line, which it is now. But essentially our guidance for the full year remains unchanged.

So with that, I’ll turn it over to Fritz to wrap up the call.

Fritz Henderson

Thank you Mark. Page 20, we’re sitting here halfway through 2013, outlines the second half priority for 2013 where we’re trying to accomplished following the similar structure on operations, domestic growth and extending our footprint on operations, much of the same in terms of what we’ve seen in the first half I paid particular attention to what we’re doing in our mining business to continue to drive down cash cost and position ourselves with the right kind of strategic flexibilities to move in the next year and then executing against our environmental project with Haverhill Granite City remains very high priority for us.

In terms of domestic growth, I’ve already touched on Indiana Harbor, both for proration to plan as well as reaching a reasonable agreement with Arsenal Metal on the contract renewal and also receiving a reasonable return on capital we’re spending there as I said before highly accomplished that we’ll get done.

The work continues in terms of permitting our next U.S. plant. As we’ve mentioned before, we thought that, we think that the permit for this plant would likely to receive early next year, might be late this year, but much more likely early next year. And then we continue to evaluate cokemaking acquisitions in U.S. and Canada. Finally, in terms of expanding our footprint, our job is to build our presence in India and execute a venture. Continue to evaluate adjacent business lines and business opportunities and work within our two capital structures, if you will, to efficiently allocate capital to optimize growth.

Speaking to growth, page 21, our North American growth strategy, we separate up to in cokemaking, coal handling and processing and status or iron ore processing. And cokemaking it's both about looking in opportunities that we… where customers that might be able to use the coke then we will produce our new plant as well as evaluating coke acquisitions of existing byproduct. There has been number of discussions with number of different parties which are in process but nothing new to report nor would I expect actually that anything here would close in 2013.

On coke handling there are things that can close in 2013. So, we’ve already talked about Lakeshore. We continue to look at opportunities here. We’ve initiated discussion with potential parties. And then finally on iron ore processing, we have, as I mentioned, really a front requested a private letter ruling with qualifying status, a qualifying income status of certain activities in this area, we are interested in potential greenfield, there are opportunities and evaluating that and the focus in this area is to engage with customers in developing opportunities which might, which our preference would be to develop strategies that would put us in a position of deploying capital in a totaling effective business model. With that wrap it up, happy to take questions.

Question-and-Answer Session

Operator

Thank you. We will now begin the question-and-answer session. (Operator Instructions) and we have Garrett Nelson from BB&T Capital Partner on line with question, please go ahead.

Garrett Nelson - BB&T Capital Partner

I know you restrict in terms of what you can talk about regarding your strategic plan following exploration of the Sunoco tax sharing agreement in January but could you discuss what some of your options might be and how you might be able to further unlock value for shareholders of the C Corp and MLP?

Fritz Henderson

So, Garrett, you actually asked me to answer the question to a degree already in terms of the restrictions, yes we do have certain restrictions, for the benefit of the folks on the phone call, the restrictions it’s a two year tax sharing agreement, that tax sharing agreement expires January of next year, after that we have flexibility to consider additional activities, we have been asked about future drop downs, we have no plans for future drop downs but beyond January of next year we could consider those. We have received lots of questions about coal, the truth is today our focus on coal is to optimize our cost position and do all the things we can do to maximize our strategic flexibility but again, post that that exploration we are flexible, we are able to do things with the coal business that we think are in the best interest of shareholders. Those would be too that we received a lot of questions on and so I think if we look at January 14, is not very far away and January 18 actually, January of 2014, it’s not that far away. So I would say, our focus today is really on operational excellence and we'll leave that for 2014.

Garrett Nelson - BB&T Capital Partner

Okay and then I just want to clarify that the 2013 guidance for SXCP on slide 18 does not include the Lakeshore acquisition in that the EBITDA and distributional cash flow numbers would be higher if doing so all else equal.

Fritz Henderson

Correct, incorrect?

Unidentified Company Representative

It’s correct.

Operator

(Operator Instructions) and then we have Lucas Pipes from Brean Capital on line with the question, please go ahead.

Derek Hernandez - Brean Murray, Carret & Co.

Hello, gentlemen. This is Derek Hernandez for Lucas Pipes this morning. First of all, I want to ask about how the contract negotiations with ArcelorMittal are continuing?

Unidentified Company Representative

So they are continuing. The contract expires at the end of third quarter. There has been dialogue with ArcelorMittal really dating back to the fourth quarter last year. We are obviously doing this while refurbishing the plant and while running the plant, I would characterize the dialogue is very constructive, we are highly confident we will reach a mutually acceptable outcome. At this point if you look at it, we are their principal source of the coke for the most important asset. There are our entire uptake for an extremely important asset for us, so it’s a situation where I think both sides have an incentive to reach a reasonable outcome and I fully expect that we will reach that outcome in the third quarter and it will be a reasonable agreement for both parties.

Derek Hernandez - Brean Murray, Carret & Co.

Okay very good and then moving over to your coal mining business, can I see correctly that your full year cost guidance is still 130 per tones?

Unidentified Company Representative

No, that’s not correct. What we said is that our full year guidance was 130, but now running close to under 120 and so I think what we believe is that as more work that we can do there to further improve that so I think what we are highlighting is the fact that we already passed our full year guidance that we gave back in December based on actions that we have taken in the first half.

Derek Hernandez - Brean Murray, Carret & Co.

Right and do you have any update to that guidance yet?

Unidentified Company Representative

We don’t have at this point I think what we are indicating today is based on the improvements that we believe we can achieve in cash cost, that even if there are declines in coal prices going into ’14 that we would expect ’14 to look very similar to 2013. So we are not at this point ready to commit to our full year cash cost number.

Operator

And we have Nathan Littlewood from Credit Suisse online with a question. please go ahead.

Nathan Littlewood - Credit Suisse

Thank you for the opportunity. listen I just had a follow-up question on these coal cash costs. I was hoping to understand a little better how these cost reductions have been achieved. Are you playing with strip ratios, material movements or what’s going on there?

Fritz Henderson

So let me talk about what we have done on the cost side and then what we have done on the productivity side. the cost side Nathan, you might recall in the first quarter we took some actions in reduction and force which reduced our man power by 20% and both including time tracked employees as well as full time employees. Even with that frankly our production has increased. And so what we have seen is even with the reduced man power that we have continued to improve our advancement per ship and our productivity per person to a pretty significant degree. so cost reduction on that side man power we have seen a pretty significant reduction in cost on maintenance and repair. we have embarked on a refurbishment program for underground equipment about two years ago which is largely at this point completed and what we have seen as a follow through with a significant lower maintenance and repair cost. So on the numerator side if you will in terms of cost we have seen absolute reductions in cost. We also had lower royalty cost because prices have been down. we have seen some lower transportation cost. but the big issues have been man power and maintenance.

On the denominator side what we have is continued improvement in advancement and in productivity. we have not seen improvement in yield and part of this is just due because we have continued to face challenging geological conditions but we have seen good productivity in terms of the man power particularly two years ago we had a high percentage of our work with virtual RedHat today we have virtually no RedHat and they are fully trained and productive.

Last point I would make is we made some investments in our prep plant to improve the organic efficiency of the prep plant including putting in a new circuit and that’s also proven to be beneficial for us. so I would say we have made progress in both the numerator and the denominator side and I would say it’s been faster than what we have thought what we have entered this year so we are confident that we could do even more.

Nathan Littlewood - Credit Suisse

So, I mean it sounds like you are sort of managing this asset for margin and there is more cost that can be taken out in order to protect that margin. should we assume that those cost reductions would stick or if we saw a recovering coal prices are those costs likely to fall than back up?

Fritz Henderson

I would say what we are trying to do which is managing for margin, actually we have a negative margin, so what we are trying to do out there is get our self back, it gets close to breakeven as possible, we put our guidance up for this year we said between zero and negative 15, we are quite confident being able to operate in that range I prefer to be a zero than negative 15 but obviously year-to-date we are not there yet. we can continue to do more work and we can do plan on it. if prices were to rise you would see increases in royalties but we don’t think we would be given back any of the other factors we have seen in terms of productivity or cost reduction.

Operator

And we have Sam Dubinsky from Wells Fargo online with a question. please go ahead.

Sam Dubinsky - Wells Fargo Securities

Very good I believe Mittal stated publicly that they are closing down their Dofasco coke plant in 2015. does this have any positive implications for you?

Fritz Henderson

They are closing down one of the batteries and in fact they did confirm that. I think what I would say Sam is that we have talked a number of times about our ability to grow based upon coke plants from existing customers or new customers wearing out. so this is another example of a very old coke plant where they are decommissioning a portion, it’s not all the batteries, but it’s a pretty significant battery there. so it’s really playing out and what we thought in terms of what might happen with coke plants as they come out of production which is why we continue to do the work to permit a new plant.

Sam Dubinsky - Wells Fargo Securities

That would be great and then just a follow-up on iron ore processing. how long is it going to take to a tax opinion and then once you get a tax opinion how long does it going to take to build a Greenfield plant?

Fritz Henderson

Well I would say (inaudible) rulings are generally about six months and we’ve filed earlier, so that gives you some sense of timing. And then in terms of building a plant a lot of it depends on what kind of plant you’re building but if you were to take a pellet plant for example, you are typically 12 to 18 months I think, not that we built one.

Mark Newman

We could also buy existing asset. Once we have clearance on the rulings Sam, we can include this in our M&A activity which we’re really not doing today.

Sam Dubinsky - Wells Fargo Securities

Okay, great. There were assets up for sale somewhat immediately once the tax ruling goes through…

Mark Newman

There is a lot of assets out there involved in either iron ore, extraction processing, palletizing or transporting. So, there is no shortage of assets there. What I say is until we have a ruling, we’re trying not to get ahead of ourselves there.

Operator

(Operator Instructions). And we have (inaudible) online with the question. Please go ahead.

Unidentified Analyst

On your cash flow from operations guidance of 120 million, can you kind of give some color why you are only expecting to generate 30 million in the back half of the year given that historically you have done significantly more than that?

Fritz Henderson

There are a number of items, just to see if I can remember what they are, but the Brazil dividend is certainly one. There are a number of nontraditional fuel tax credit that we payout in Q3, that’s the big one, the two really the Brazilin dividend as well as the payout of nontraditional fuel tax credit which we’ll pay in Q3 based on the timing of Sunoco filing their tax return in September.

Mark Newman

And lastly you’ve got the time of CapEx. there are three or four factors which affect cash flow. Obviously CapEx is from cash flow from operations but as we think about our normal cash cycle, Mark has already talked about the working capital related items and in our view pretty normal. I guess the last point we'd make is as we did disclose, AK we would have the $20 million affect in the fourth quarter when we proceed to offer them in terms less 50,000 tones.

Unidentified Analyst

The two items, the Brazil dividend in the nontraditional fuel tax credit is that different this year than prior year?

Fritz Henderson

Well we didn’t pay any nontraditional fuel tax credits last year, again it all ties of Sunoco. So, this year the payment, so you’ll recall it in Q1 we made a payment to AK about 12 million related to this issue and we actually paid it early.

We do have a payment to another customer of about 30 million in Q3. So, basically the recite of the dividend in the first half and the payments to our customer of about 30 million on tax credit in the second half results in a sort of a poor comparison between first half and second half.

Mark Newman

So your point is good, the dividend was the same factor last year, what it is different this year is the $30 million, last year it wasn’t paid, this year will be paid.

Unidentified Analyst

And then just on the kind of increase in CapEx seems to be related to environmental remediation. Do those numbers go up in total versus your expectations or do they just some of those numbers get pulled for it from 2004 to 2013.

Fritz Henderson

No it doesn’t go up in total. What we found is, we began to commission the project is that we started projected they have real plant, we originally thought about actually tapping the project module by module in Haverhill, there is too modules in Haverhill and what we found is opportunities to economize and be efficient by taking on more of both modules at the same time. So we’re not increasing the total project what we’re just doing is retiming. We call this as also prefunded as part of the MLP but really it’s all about being efficient in terms of how we do the preparation work at the site across two modules.

Operator

We have no further questions at this time.

Fritz Henderson

So, we’ll ramp up the call. Thanks again very much for your involvement and interest and for being shareholder in SunCoke Energy and SunCoke Energy patterns.

Operator

Thank you, ladies and gentlemen. This concludes today’s conference. Thank you for participating and you may now disconnect.

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