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TMCNet:  SUNCOKE ENERGY PARTNERS, L.P. - 10-K - Management's Discussion and Analysis of Financial Condition and Results of Operations

[February 28, 2014]

SUNCOKE ENERGY PARTNERS, L.P. - 10-K - Management's Discussion and Analysis of Financial Condition and Results of Operations

(Edgar Glimpses Via Acquire Media NewsEdge) You should read the following discussion of the historical financial condition and results of operations in conjunction with our historical Combined Financial Statements and accompanying notes. Among other things, those financial statements include more detailed information regarding the basis of presentation for the following information. The financial statements have been prepared in accordance with accounting principles generally accepted in the United States ("GAAP").


This Annual Report on Form 10-K contains certain forward-looking statements of expected future developments. This discussion contains forward-looking statements about our business, operations and industry that involve risks and uncertainties, such as statements regarding our plans, objectives, expectations and intentions. Our future results and financial condition may differ materially from those we currently anticipate as a result of the factors we describe under "Cautionary Statement Concerning Forward-Looking Statements" and "Risk Factors." The following discussion assumes that our business was operated as a separate entity prior to its inception. The entities that own our cokemaking facilities have been acquired as a reorganization of entities under common control and have therefore been recorded at historical cost. The Combined Financial Statements for periods prior to the IPO are the results of SunCoke Energy Partners' Predecessor (the "Predecessor") and were prepared using SunCoke Energy, Inc.'s ("SunCoke") historical basis in the assets and liabilities of SunCoke's Haverhill Coke Company LLC ("Haverhill") and Middletown Coke Company, LLC ("Middletown") cokemaking facilities and include all revenues, costs, assets and liabilities attributed to the Predecessor after the elimination of all intercompany accounts and transactions. These statements reflect significant assumptions and allocations and include all expenses allocable to our business, but may not be indicative of those that would have been achieved had we operated as a separate public entity for all periods presented or of future results. The Consolidated Financial Statements for the period after the IPO pertain to the operations of the Partnership.

Overview SunCoke Energy Partners, L.P., (the "Partnership", "we", "our", and "us") is a Delaware limited partnership formed in July 2012 whose primary business is manufacturing coke used in the blast furnace production of steel. On January 24, 2013, we completed the initial public offering of our common units representing limited partner interests, which we refer to as our IPO. In connection with our IPO, we acquired from SunCoke a 65 percent interest in each of our Haverhill and Middletown cokemaking facilities and related assets held by Haverhill and Middletown. SunCoke owns the remaining 35 percent interest in each of Haverhill and Middletown. SunCoke, through its subsidiary, owns a 55.9 percent partnership interest in us and all of our incentive distribution rights, and indirectly owns and controls our general partner, which holds a 2.0 percent general partner interest in us.

Coke is a principal raw material in the blast furnace steelmaking process. Coke is generally produced by heating metallurgical coal in a refractory oven, which releases certain volatile components from the coal, thus transforming the coal into coke. Our cokemaking ovens utilize efficient, modern heat recovery technology designed to combust the coal's volatile components liberated during the cokemaking process and use the resulting heat to create steam or electricity for sale. This differs from by-product cokemaking which seeks to repurpose the coal's liberated volatile components for other uses. We believe that heat recovery technology has several advantages over the alternative by-product cokemaking process, including producing higher quality coke, using waste heat to generate steam or electricity for sale and reducing environmental impact. We license this advanced heat recovery cokemaking process from SunCoke.

The first phase of our Haverhill facility, or Haverhill 1, includes steam generation facilities which use hot flue gas from the cokemaking process to produce steam. The steam is sold to a third-party pursuant to a steam supply and purchase agreement. Our Middletown facility and the second phase of our Haverhill facility, or Haverhill 2, include cogeneration plants that use the hot flue gas created by the cokemaking process to generate electricity. The electricity is either sold into the regional power market or to AK Steel both pursuant to energy sales agreements.

Our business strategy has evolved to include the expansion of our operations into adjacent business lines within the steelmaking value chain. During 2013, we expanded our operations into coal handling and blending services through two acquisitions. On August 30, 2013, the Partnership completed its acquisition of Lakeshore Coal Handling Corporation ("Lake Terminal"). Located in East Chicago, Indiana, Lake Terminal provides coal handling and blending services to our Indiana Harbor cokemaking operations. On October 1, 2013, the Partnership acquired Kanawha River Terminals ("KRT"). KRT is a leading metallurgical and thermal coal blending and handling terminal service provider with collective capacity to blend and transload 30 million tons of coal annually through its operations in West Virginia and Kentucky.

36-------------------------------------------------------------------------------- Table of Contents Further, we are exploring opportunities for entry into the ferrous segments of the steel value chain, such as iron ore concentration and pelletizing and direct reduced iron production ("DRI"). Concentrating and pelletizing are processes that prepare iron ore for use in a blast furnace as part of the integrated steelmaking process and result in a more efficient blast furnace steelmaking process. The current capacity for both concentrating and pelletizing of iron ore in the United States ("U.S.") and Canada is in excess of 230 million tons and we believe acquisitions of existing facilities could potentially provide an attractive avenue for growth. DRI, an alternative method of ironmaking is used today in conventional blast furnaces and electric arc furnaces. The capital investment required to build DRI plants is low compared to integrated steel plants and operating costs can be favorable if low cost energy supplies are available. DRI is successfully manufactured in various parts of the world through either natural gas or coal-based technology. Currently, there is only one DRI operation in the U.S., but we believe demand for additional DRI capacity in the U.S. may grow by approximately 5 million tons, driven in part by the available supply of low cost natural gas as a reducing agent.

Organized in Delaware in July 2012, and headquartered in Lisle, Illinois, we are a master limited partnership whose common units, representing limited partnership interests, were first listed for trading on the New York Stock Exchange ("NYSE") in January 2013 under the symbol "SXCP." 2013 Key Financial Results • Total revenues in 2013 decreased 7.1 percent to $687.3 million primarily due to the pass-through of lower coal prices in our Domestic Coke segment. The effect of lower coal prices was slightly offset by our new Coal Logistics segment, which contributed $12.5 million of revenue. Net income attributable to unitholders was $58.6 million in 2013. Net income of the Predecessor in 2012 is not comparable due to the non-controlling interest in the Partnership subsequent to the IPO.

• Adjusted EBITDA was $155.2 million in 2013 compared to $127.4 million in 2012 and Adjusted EBITDA per ton in our Domestic Coke operations was $87.73 in 2013, improved from $72.47 in 2012. The improvements in Adjusted EBITDA and Adjusted EBITDA per ton were due primarily to improved coal-to-coke yields and higher operating cost recovery.

Additionally, the Coal Logistics segment contributed $4.7 million to Adjusted EBITDA during 2013.

• Cash generated from operating activities was $130.3 million in 2013 compared to $95.8 million in 2012. The increase was primarily attributable to the increased contribution of earnings.

Our Focus in 2013 For the Partnership, 2013 was a year of strong execution. Our 2013 strategies and accomplishments were as follows: • Completed our initial public offering • Sustained momentum established at our cokemaking facilities through continued focus on operational excellence, including safety and environmental stewardship.

• Achieved growth through acquisitions • Initiated the environmental remediation project related to the Haverhill consent decree Completed our initial public offering On January 23, 2013, in anticipation of the closing of the IPO, we entered into a contribution agreement with Sun Coal & Coke, a subsidiary of SunCoke, and our general partner (the "Contribution Agreement"). Pursuant to the Contribution Agreement, upon the closing of the IPO on January 24, 2013, Sun Coal & Coke contributed to us an interest in each of Haverhill and Middletown which resulted in our owning a 65 percent interest in each of Haverhill and Middletown. In exchange, our general partner continued to hold a 2 percent general partner interest in us and we issued to our general partner incentive distribution rights ("IDRs") in us. We also issued to Sun Coal & Coke 2,209,697 common units and 15,709,697 subordinated units. The 35 percent interest in each of Haverhill and Middletown retained by Sun Coal & Coke is recorded as a noncontrolling interest of the Partnership. In conjunction with the closing of the IPO, we sold 13,500,000 common units, representing a 42.1 percent partnership interest, to the public at an initial public offering price of $19.00 per common unit.

Sustained momentum established at our cokemaking facilities through continued focus on operational excellence, including safety and environmental stewardship, at all facilities.

During 2013, our cokemaking business maintained its momentum, again exceeding 100 percent capacity utilization. Adjusted EBITDA from our cokemaking operations increased $27.8 million to $155.2 million in 2013 with Adjusted EBITDA per ton of $88, up $15 from 2012. Operating our cokemaking facilities reliably and at low cost, while producing consistently high quality coke, is critical to maintaining the satisfaction of existing customers and our ability to grow with new and existing 37-------------------------------------------------------------------------------- Table of Contents customers. We have continued to achieve reliable and cost-efficient operation of our facilities through the SunCoke Way, a standardized processes, procedures and management system incorporating best practices. Consistent implementation of the SunCoke Way as well as a better understanding of cokemaking sciences have improved our efficiencies, resulting in better yields, and enabling us to achieve the flexibility required to execute opportunistic spot sales of approximately 26 thousand tons to a third customer during 2013. We also remained committed to maintaining a safe work environment and ensuring strict compliance with applicable laws and regulations.

Achieved growth through acquisitions On August 30, 2013, we completed the acquisition of the assets and business operations of Lakeshore Coal Handling Corporation ("Lakeshore"), now called SunCoke Lake Terminal LLC ("Lake Terminal") for $28.6 million. Prior to the acquisition, the entity that owns SunCoke's Indiana Harbor cokemaking operations was a customer of Lakeshore and held the purchase rights to Lakeshore.

Concurrent with the closing of the transaction, we paid $1.8 million to DTE Energy Company, the third party investor owning a 15 percent interest in the entity that owns Indiana Harbor, in consideration for assigning its share of the Lake Terminal buyout rights to us. We recognized this payment in selling, general, and administrative expenses on the Combined and Consolidated Statement of Income during the period. Adjusted EBITDA from Lake Terminal subsequent to the acquisition date was approximately $2.5 million.

Located in East Chicago, Indiana, Lake Terminal has and will continue to provide coal handling and blending services to SunCoke's Indiana Harbor cokemaking operations. In September 2013, Lake Terminal and Indiana Harbor entered into a new 10-year contract with terms equivalent to those of an arm's-length transaction.

On October 1, 2013, we completed the acquisition of Kanawha River Terminals LLC ("KRT") for $84.7 million, utilizing $44.7 million of available cash and $40.0 million of borrowings under our existing revolving credit facility. KRT is a leading metallurgical and thermal coal blending and handling terminal service provider in West Virginia and Kentucky with the collective capacity to blend and transload more than 30 million tons of coal annually. KRT has and will continue to provide coal handling and blending services to third party customers as well as the Partnership's Middletown cokemaking operations and certain other SunCoke facilities under contract with terms equivalent to those of an arm's-length transaction. Adjusted EBITDA from KRT subsequent to the acquisition date was approximately $2.2 million.

Lake Terminal and KRT do not take possession of coal but instead generate revenues by providing coal handling and blending services to their customers on a fee per ton basis. The results of these acquisitions have been included in the Combined and Consolidated Financial Statements and Coal Logistics segment since the acquisition dates.

Initiated the environmental remediation project related to the Haverhill consent decree We have undertaken capital projects to improve the reliability of the energy recovery systems and enhance environmental performance at our Haverhill cokemaking facilities in response to Notices of Violations received from the EPA. Prior to our formation, SunCoke spent $5.0 million related to these projects. The Partnership spent $27.0 million during 2013 and expects to spend approximately $36 million and $11 million in 2014 and 2015, respectively. Any amounts that we spend on these projects exceeding the $67.0 million in proceeds we retained from the Partnership offering will be reimbursed by SunCoke.

Spending for these projects depends on the timing and finality of the settlement. During 2013, SunCoke finalized penalty negotiations with regulators and have lodged a Consent Decree in federal district court that is undergoing review. Any potential penalties for alleged past violations will be paid by SunCoke.

Our Focus and Outlook for 2014 In 2014, our primary focus will be to: • Sustain high-level of operating performance in our Domestic Coke operations • Pursue growth opportunities in cokemaking, coal logistics and a potential entry into the ferrous value chain • Work with SunCoke on potential dropdown transactions Sustain high-level of operating performance in our Domestic Coke operations Given our strong operating performance in 2013, we expect our cokemaking operations to maintain their positive momentum and produce approximately 1.8 million tons of coke. We expect to achieve Adjusted EBITDA per ton of $83 to $87 at our cokemaking operations in 2014.

In 2014, we will continue our work to improve the reliability of the energy recovery systems and enhance environmental performance at our Haverhill cokemaking facilities. We expect to successfully complete the execution of the environmental remediation project at Haverhill 2 during 2014 and Haverhill 1 during 2015.

38-------------------------------------------------------------------------------- Table of Contents Pursue growth opportunities in cokemaking, coal logistics and a potential entry into the ferrous value chain During 2014, we will continue to explore selective opportunities to acquire existing cokemaking assets in the U.S. and Canada. In addition, SunCoke expects to finalize the permitting of a potential new coke facility in Kentucky and will seek long-term customer commitments for a majority of the facility's capacity prior to commencing construction. Under the omnibus agreement, we have the right to purchase this facility once it becomes operational.

We also plan to actively pursue opportunities to expand our coal logistics business, leveraging the management and operations expertise acquired with these businesses. Our coal logistics facilities are operating below capacity, and we will seek to secure additional volumes from existing and new customers to fully utilize these facilities. In addition, we will pursue acquisitions of third-party assets that can expand our footprint in attractive and complementary segments of the coal logistics market.

In 2013, we received a favorable IRS private letter ruling for the concentrating and pelletizing of iron ore, and we will continue to pursue opportunities for entry into the ferrous market in 2014. In iron ore concentrating, various crushing, grinding and enriching processes separate iron-bearing particles from waste material to produce a concentrate of specific iron content. In pelletizing, a thermal treatment process forms iron ore concentrate into pellets which are then used in a blast furnace as part of the integrated steelmaking process. Iron ore pellets allow air to flow between the pellets, resulting in a more efficient blast furnace steelmaking process. The current capacity for both concentrating and pelletizing of iron ore in the U.S. and Canada is in excess of 230 million tons and we believe acquisitions of existing facilities could potentially provide an attractive avenue for growth.

DRI, an alternative method of ironmaking, has been developed to overcome some of the economic and operating challenges of conventional blast furnaces. DRI is predominantly used as a replacement for steel scrap or pig iron in the electric arc furnace steelmaking process. The capital investment required to build DRI plants is low compared to integrated steel plants and operating costs can be favorable if low cost energy supplies are available. DRI is successfully manufactured in various parts of the world through either natural gas or coal-based technology. Currently, there is only one DRI operation in the U.S., but we believe demand for additional DRI capacity in the U.S. may grow by approximately 5 million tons, driven in part by the available supply of low cost natural gas as a reducing agent. We have requested a private letter ruling for DRI and will pursue opportunities in the DRI market if we receive a favorable ruling.

Work with SunCoke on potential dropdown transactions Prior to January 18, 2014, SunCoke was subject to a series of limitations and restrictions on restructuring activities as a result of its tax free spin-off from Sunoco. With the expiration of these restrictions, we are evaluating, with SunCoke, the potential dropdown of all of SunCoke's remaining domestic cokemaking assets to the Partnership over time. We are also considering the appropriate capital structure for the Partnership to facilitate its financing of any dropdown transactions and have engaged key financial advisors. Upon receiving any formal offer from SunCoke pursuant to the omnibus agreement, we will engage the Conflicts Committee of our Board of Directors to evaluate these opportunities Items Impacting Comparability • Coal Logistics. On August 30, 2013 and October 1, 2013, the Partnership acquired Lake Terminal and KRT, respectively. Prior to the acquisition of Lake Terminal, the entity that owns SunCoke's Indiana Harbor cokemaking operations was a customer of Lakeshore and held the purchase rights to Lakeshore. Concurrent with the closing of the transaction, the Partnership paid $1.8 million to DTE Energy Company, the third party investor owning a 15 percent interest in the entity that owns Indiana Harbor, in consideration for assigning its share of the Lake Terminal buyout rights to the Partnership. The Partnership recognized this payment in selling, general, and administrative expenses on the Consolidated Statement of Income during the period. The results of these newly acquired facilities have been included in the Combined and Consolidated Financial Statements since the dates of acquisition and are presented in the new Coal Logistics segment. Coal Logistics reported revenues of $13.6 million, of which $1.1 million are intercompany revenues, Adjusted EBITDA of $4.7 million and Adjusted EBITDA per ton of $1.24 for the year ended December 30, 2013.

• Middletown Cokemaking Operations. We commenced operations at our Middletown, Ohio cokemaking facility in October 2011 and reached full production in the first quarter of 2012. The Middletown cokemaking facility produced 617 thousand tons, 602 thousand tons and 68 thousand tons of coke for the years ended December 31, 2013, 2012, and 2011, respectively. The Middletown cokemaking facility also contributed $263.1 million, $289.0 million, and $28.7 million of revenue and $78.3 million, $59.9 million, and ($0.3) million of Adjusted EBITDA for the years ended December 31, 2013, 2012, and 2011, respectively. Middletown revenue and Adjusted EBITDA for the year ended December 31, 2013 benefited from increased operating cost recovery of $6.3 million 39-------------------------------------------------------------------------------- Table of Contents due to the change from a fixed operating fee per ton to a budgeted amount per ton based on the expected full recovery of operational and maintenance costs.

Unreimbursed costs of $10.0 million, of which $4.0 million related to start-up activities in the first quarter of 2012, are included in the results of operations for the year ended December 31, 2012.

• Corporate Support Services. We incurred allocated expenses of $16.7 million, $20.8 million and $16.5 million in 2013, 2012 and 2011, respectively. These allocated costs are for services provided to us by SunCoke. SunCoke centrally provides engineering, operations, procurement and information technology support to its facilities. In addition, allocated costs include legal, accounting, tax, treasury, insurance, employee benefit costs, communications and human resources.

For periods subsequent to the IPO, corporate allocations were recorded based upon the omnibus agreement. As such, allocated costs in the periods presented are not comparable.

• Interest Expense, net. The Predecessor periods include $225.0 million of term loan debt ("Term Loan") and debt related issuance costs that were allocated to us by SunCoke. Concurrent with the IPO, we issued $150.0 million in senior notes ("Partnership Notes") with an interest rate of 7.375 percent and repaid the Term Loan allocated from SunCoke.

Interest expense, net was $15.4 million, $10.3 million and $4.7 million for 2013, 2012 and 2011, respectively. The year ended December 31, 2013 was impacted by $3.7 million of debt restructuring costs. The remaining increase of $1.4 million was primarily due to higher interest rates and commitment fees associated with our debt, partially offset by lower debt balances. The increase in interest expense, net in 2012 as compared to 2011 was due to the timing of debt issuances in the second half of 2011.

The increase in interest expense in 2012 compared to 2011 is primarily due to SunCoke allocating $225.0 million of debt and related debt issuance costs to us, which was effective July 26, 2011.

• Income Taxes. The historical Combined Financial Statements of our predecessor include U.S. federal income tax expenses calculated on a theoretical separate-return basis. Following our IPO, we do not pay federal income taxes on the operating income generated by our subsidiaries. Earnings from our Middletown operations, however, are subject to a local income tax which was reflected in the current period. In conjunction with the contribution of the 65 percent interest in Haverhill and Middletown upon the closing of the IPO, all deferred tax assets and liabilities were eliminated through equity.

• Noncontrolling Interest. At the closing of the IPO, we acquired a 65 percent interest in each of two entities that own the Haverhill and Middletown facilities with SunCoke continuing to hold the remaining 35 percent interest. As a result, our distributable cash flow will not include distributions on SunCoke's interest in these entities and SunCoke's retained interest is recorded as noncontrolling interest in our Consolidated Financial Statements. For the year ended December 31, 2013, net income attributable to noncontrolling interest was $40.8 million. The Predecessor's Combined Financial Statements include the results of 100 percent of Haverhill and Middletown.

• AK Steel Middletown Outage. SunCoke cooperated with AK Steel on its projected second half of 2013 coke needs after a blast furnace outage at their Middletown plant in the second quarter of 2013. Specifically, due to this outage, SunCoke agreed to manage production at our Haverhill cokemaking facility to be consistent with annual contract maximums and to temporarily scale back coke production at our Middletown facility to name plate capacity levels in the second half of 2013. Our omnibus agreement with SunCoke, our general partner, requires that SunCoke make us whole for any adverse effects from this outage.

Based on actual production levels, SunCoke, through the general partner, made capital contributions of $0.9 million to us as a result of lower production at our Middletown facility.

40-------------------------------------------------------------------------------- Table of Contents Results of Operations The following table sets forth amounts from the Combined and Consolidated Statements of Operations and other operating data for the years ended December 31, 2013, 2012 and 2011.

Years Ended December 31, 2013 2012 2011 (Dollars in millions) Revenues Sales and other operating revenue $ 687.3 $ 740.2 $ 449.8 Costs and Operating Expenses Cost of products sold and operating expenses 510.1 593.5 367.2 Selling, general and administrative expenses 21.4 22.0 25.7 Depreciation and amortization expense 33.0 33.2 18.6 Total costs and operating expenses 564.5 648.7 411.5 Operating income 122.8 91.5 38.3 Interest expense 15.4 10.3 4.7 Income before income tax expense 107.4 81.2 33.6 Income tax expense 4.5 24.4 2.8 Net income $ 102.9 $ 56.8 $ 30.8 Less: Net income attributable to noncontrolling interests 40.8 Net income attributable to SunCoke Energy Partners, L.P./ Predecessor 62.1 Less: Predecessor net income prior to initial public offering on January 24, 2013 3.5 Net income attributable to SunCoke Energy Partners, L.P.

subsequent to initial public offering $ 58.6 Year Ended December 31, 2013 compared to Year Ended December 31, 2012 Revenues. Our total revenues, net of sales discounts, decreased $52.9 million, or 7.1 percent, to $687.3 million for the year ended December 31, 2013 compared to $740.2 million for the corresponding period of 2012. The decrease was primarily due to the pass-through of lower coal prices in our Domestic Coke segment. The effect of lower coal prices was slightly offset by an increase in energy revenues of $3.1 million as well as our new Coal Logistics segment, which contributed $12.5 million of revenue.

Costs and Operating Expenses. Total operating expenses decreased $84.2 million, or 13.0 percent, to $564.5 million for the year ended December 31, 2013 compared to $648.7 million for the corresponding period of 2012. The decreases in cost of products sold and operating expenses were driven primarily by reduced coal costs in our Domestic Coke segment. These decreases were partially offset by acquisition related and public company costs. Additionally, our Coal Logistics segment incurred costs of $10.7 million.

Interest Expense. Interest expense was $15.4 million for the year ended December 31, 2013 compared to $10.3 million for the corresponding period of 2012. Comparability between periods is impacted by the financing activities discussed previously.

Income Taxes. Income tax expense decreased $19.9 million to $4.5 million for the year ended December 31, 2013 compared to $24.4 million for the corresponding period of 2012. The periods are not comparable as, following the IPO, the Partnership was not subject to federal or state income taxes. Earnings from our Middletown operations, however, are subject to a local income tax which was reflected in the current period.

Noncontrolling Interest. Income attributable to noncontrolling interest was $40.8 million for the year ended December 31, 2013. Concurrent with the IPO, SunCoke contributed 65 percent of the Haverhill and Middletown cokemaking facilities, retaining the remaining 35 percent which represents the Partnership's noncontrolling interest. During 2013, prior to the IPO, the Predecessor had earnings of $3.5 million included in the Partnership's net income for the year.

41-------------------------------------------------------------------------------- Table of Contents Year Ended December 31, 2012 compared to December 31, 2011 Revenues. Our total revenues, net of sales discounts, increased $290.4 million, or 64.6 percent, to $740.2 million for the year ended December 31, 2012 compared to $449.8 million for the corresponding period of 2011. Total revenues include energy revenues of $41.4 million and $27.8 million for the year ended December 31, 2012 and 2011, respectively. The increase in total revenues was primarily due to the start-up of operations at our Middletown facility, which contributed $260.3 million to the increase. The Haverhill facility contributed the remaining $30.1 million of the increase. Increased volumes at Haverhill of approximately 27 thousand tons, or 2.4 percent, contributed $8.8 million to the increase in revenues, while the pass-through of higher coal costs contributed an additional $14.9 million. Additionally, $11.7 million of the increase was primarily attributable to the pass-through of higher transportation costs offset by decreased energy revenues of $5.4 million primarily due to decreased pricing.

Costs and Operating Expenses. Total operating expenses increased $237.2 million, or 57.6 percent, to $648.7 million for the year ended December 31, 2012 compared to $411.5 million for the corresponding period of 2011. The increase was primarily attributable to the start-up of operations at our Middletown facility, which contributed $212.3 million to the increase. Higher coal and transportation costs at our Haverhill facility contributed an additional $25.4 million to the increase. Selling, general and administrative expenses at Haverhill increased $0.7 million while depreciation expense increased $2.2 million. The increase in depreciation expense is primarily due to accelerated depreciation on certain assets due to a change in their estimated useful lives. These increases were partially offset by cost decreases of $3.4 million, primarily related to a favorable comparison to the prior year period which included costs associated with the relocation of SunCoke's corporate headquarters.

Interest Expense. Interest expense was $10.3 million for the year ended December 31, 2012 compared to $4.7 million for the corresponding period of 2011.

Comparability between periods is impacted by the financing activities discussed previously.

Income Taxes. Income tax expense increased $21.6 million to $24.4 million for the year ended December 31, 2012 compared to $2.8 million for the corresponding period of 2011. Our effective tax rate was 30.0 percent and 8.3 percent in 2012 and 2011, respectively. Our effective tax rate, excluding tax credits, was 37.4 percent for the year ended December 31, 2012 compared to 35.5 percent for the corresponding period of 2011. Our effective tax rate, excluding the items referenced above, increased as a result of return-to-provision adjustments recorded during the year. Nonconventional fuel tax credits decreased $4.3 million to $4.8 million for the year ended December 31, 2012 from $9.1 million in the same period of 2011 due to the expiration of the nonconventional fuel tax credits at our Haverhill 2 facility on June 30, 2012.

Results of Reportable Business Segments We report our business results through two segments: • Domestic Coke consists of our Haverhill and Middletown cokemaking and heat recovery operations located in Franklin Furnace, Ohio and Middletown, Ohio, respectively.

• Coal Logistics consists of our coal handling and blending service operations in East Chicago, Indiana; Ceredo, West Virginia; Belle, West Virginia; and Catlettsburg, Kentucky.

Prior to the third quarter of 2013, Domestic Coke was the Partnership's only reportable segment. During the third and fourth quarters of 2013 the Partnership completed the acquisition of Lake Terminal and KRT, providing coal handling and blending services. The results of Lake Terminal and KRT are presented in the new Coal Logistics segment below.

Our coke sales agreements in our Domestic Coke segment contain highly similar contract provisions. Specifically, each agreement includes: • Take-or-Pay Provisions. Substantially all of our coke sales at our cokemaking facilities are under take-or-pay contracts that require us to produce the contracted volumes of coke and require the customer to purchase such volumes of coke up to a specified tonnage maximum or pay the contract price for any tonnage they elect not to take. As a result, our ability to produce the contracted coke volume and performance by our customers are key determinants of our profitability. We generally do not have significant spot coke sales since our capacity is consumed by long-term contracts; accordingly, spot prices for coke do not generally affect our revenues.

• Coal Cost Component with Pass-Through Provisions. The largest cost component of our coke is the cost of purchased coal, including any transportation or handling costs. Under the contracts at our cokemaking facilities coal costs are a pass-through component of the coke price, provided that we realize certain targeted coal-to-coke yields. When targeted coal-to-coke yields are achieved, the price of coal is not a significant determining factor in the profitability of these facilities, although it does affect our revenue and cost of sales for these facilities in approximately equal amounts. However, to the extent that the actual coal-to-coke yields are less than the contractual standard, we are responsible for the cost of the excess coal used in the cokemaking process.

42-------------------------------------------------------------------------------- Table of Contents Conversely, to the extent our actual coal-to-coke yields are higher than the contractual standard, we realize gains. As coal prices decline, the benefits associated with favorable coal-to-coke yields also decline.

• Operating Cost Component with Pass-Through or Inflation Adjustment Provisions. Our coke prices include an operating cost component.

Operating costs under two of our coke sales agreements are passed through to the respective customers subject to an annually negotiated budget in some cases subject to a cap annually adjusted for inflation, and we share any difference in costs from the budgeted amounts with our customers. Under our one other coke sales agreements, the operating cost component for our coke sales are fixed subject to an annual adjustment based on an inflation index. Accordingly, actual operating costs can have a significant impact on the profitability of all our domestic cokemaking facilities.

• Fixed Fee Component. Our coke prices also include a per ton fixed fee component for each ton of coke sold to the customer and is determined at the time the coke sales agreement is signed and is effective for the term of each sales agreement. The fixed fee is intended to provide an adequate return on invested capital and may differ based on investment levels and other considerations. The actual return on invested capital at any facility is based on the fixed fee per ton and favorable or unfavorable performance on pass-through cost items.

• Tax Component. Our coke sales agreements also contain provisions that generally permit the pass-through of all applicable taxes (other than income taxes) related to the production of coke at our facilities.

• Coke Transportation Cost Component. Where we deliver coke to our customers via rail, our coke sales agreements also contain provisions that permit the pass-through of all applicable transportation costs related to the transportation of coke to our customers.

Coal Logistics revenues are derived from services provided to steel, coke (including some of our and SunCoke's domestic cokemaking facilities) and electric utility customers. Services provided to our cokemaking facilities are provided under contract with terms equivalent to those of an arm's-length transaction. We do not take possession of coal but instead act as intermediaries between coal producers and coal end users by providing transloading, storage and blending services to our customers on a per ton basis. Revenues are recognized when services are provided as defined by customer contracts.

Corporate and other expenses that can be identified with a segment have been included as deductions in determining operating results of our business segments, and the remaining expenses have been included in Corporate and Other.

Management believes Adjusted EBITDA is an important measure of operating performance and is used as the primary basis for the Chief Operating Decision Maker ("CODM") to evaluate the performance of each of our reportable segments.

Adjusted EBITDA should not be considered a substitute for the reported results prepared in accordance with GAAP. See "Non-GAAP Financial Measures" near the end of this Item.

43-------------------------------------------------------------------------------- Table of Contents Segment Operating Data The following tables set forth the sales and other operating revenues and Adjusted EBITDA of our segments and other financial and operating data for the years ended December 31, 2013, 2012 and 2011: Years Ended December 31, 2013 2012 2011 (Dollars in millions) Sales and other operating revenues: (Predecessor) (Predecessor) Domestic Coke $ 674.8 $ 740.2 $ 449.8 Coal Logistics 12.5 - - Coal Logistics intersegment sales 1.1 - - Elimination of intersegment sales (1.1 ) - - Total $ 687.3 $ 740.2 $ 449.8 Adjusted EBITDA(1): Domestic Coke $ 157.3 $ 127.4 $ 61.9 Coal Logistics 4.7 - - Corporate and Other (2) (6.8 ) - - Total $ 155.2 $ 127.4 $ 61.9 Coke Operating Data: Domestic Coke capacity utilization (%)(3) 108 107 102 Domestic Coke production volumes (thousands of tons)(4) 1,790 1,766 1,192 Domestic Coke sales volumes (thousands of tons)(5) 1,793 1,758 1,203 Domestic Coke Adjusted EBITDA per ton(6) $ 87.73 $ 72.47 $ 51.45 Coal Logistics Operating Data: Tons handled (thousands of tons) 3,785 - - Coal Logistics Adjusted EBITDA per ton handled(7) $ 1.24 - - (1) See definition of Adjusted EBITDA and reconciliation to GAAP at the end of this Item.

(2) There were no Corporate and other costs in 2012 and 2011 as these periods were prior to the formation the Partnership. The predecessor results reflect our combined carve-out financial statements, which include all expenses allocable to our business within Domestic Coke.

(3) Periods prior to 2012 exclude capacity utilization for Middletown, which commenced operations in October 2011.

(4) Includes Middletown production volumes of 617 thousand tons, 602 thousand tons and 68 thousand tons in 2013, 2012 and 2011, respectively.

(5) Includes Middletown sales volumes of 617 thousand tons, 597 thousand tons and 68 thousand tons from 2013, 2012 and 2011, respectively.

(6) Reflects Domestic Coke Adjusted EBITDA divided by Domestic Coke sales volumes.

(7) Reflects Coal Logistics Adjusted EBITDA divided by Coal Logistics tons handled.

Analysis of Segment Results Year Ended December 31, 2013 compared to Year Ended December 31, 2012 Domestic Coke Sales and Other Operating Revenue Sales and other operating revenue decreased $65.4 million, or 8.8 percent, to $674.8 million in 2013 compared to $740.2 million in 2012. The decrease was due primarily to the pass-through of lower coal costs at our Domestic Coke segment, which decreased revenues by approximately $91.6 million. The effect of lower coal costs were partially offset by slightly higher volumes, which contributed $14.5 million in additional revenues over the prior year period, of which a portion are attributable to a fourth customer. Increased operating expense recovery of $8.0 million, primarily attributable to the change from a fixed operating fee per ton to a budgeted amount per ton based on the full recovery of expected operating maintenance costs at our Middletown facility, further increased revenues. The remaining increase of $3.7 million was due primarily to higher energy revenues as compared to the prior year period.

44-------------------------------------------------------------------------------- Table of Contents Adjusted EBITDA Domestic Coke Adjusted EBITDA increased $29.9 million, or 23.5 percent, to $157.3 million in 2013 compared to $127.4 million in 2012. Improved coal-to-coke yields increased Adjusted EBITDA by $6.9 million over the prior year period while higher volumes of 35 thousand tons increased Adjusted EBITDA by $3.0 million. Adjusted EBITDA was further increased $12.2 million due primarily to higher operating cost recovery at Middletown related to the change from a fixed operating fee per ton to a budgeted amount per ton based on the expected full recovery of operational and maintenance costs, as well as lower non-reimbursable costs as a result of start up costs incurred in 2012. The remaining increase of $7.8 million was due primarily to a favorable comparison to the prior year, which included higher allocation of corporate costs, as well as increased energy revenues in 2013 compared to the prior year period.

Depreciation and amortization expense, which was not included in segment profitability, decreased $2.0 million, to $31.2 million in 2013 from $33.2 million in 2012, primarily due to accelerated depreciation at our Haverhill facility in the prior year period of $2.1 million.

Coal Logistics Lake Terminal and KRT were acquired on August 30, 2013 and October 1, 2013, respectively. Inclusive of intersegment sales, sales and other operating revenue on 3,785 thousand tons of coal handled were $13.6 million and Adjusted EBITDA was $4.7 million in 2013.

Depreciation expense, which was not included in segment profitability, was $1.8 million during 2013.

Corporate and Other Corporate expenses were $6.8 million in 2013 and included costs to operate as a public company as well as acquisition related costs, including the $1.8 million payment to DTE concurrent with the acquisition of Lake Terminal. The prior year results were not comparable as the Partnership did not exist.

Year Ended December 31, 2012 compared to Year Ended December 31, 2011 Domestic Coke Sales and Other Operating Revenue Sales and other operating revenue increased $290.4 million, or 64.6 percent, to $740.2 million in 2012 compared to $449.8 million in 2011. The increase in total revenues was primarily due to the start-up of operations at our Middletown facility, which contributed $260.3 million to the increase. The Haverhill facility contributed the remaining $30.1 million of the increase. Increased volumes at Haverhill of approximately 27 thousand tons, or 2.4 percent, contributed $8.8 million to the increase in revenues, while the pass-through of higher coal costs contributed an additional $14.9 million. Additionally, $11.7 million of the increase was primarily attributable to the pass-through of higher transportation costs offset by decreased energy revenues of $5.4 million primarily due to decreased pricing.

Adjusted EBITDA Domestic Coke Adjusted EBITDA increased $65.5 million, or 105.8 percent, to $127.4 million in 2012 compared to $61.9 million in 2011. The increase in Adjusted EBITDA was due to the start-up of operations at our Middletown facility, which contributed $60.2 million to the increase. The remaining increase $5.3 million related to slightly higher volumes and improved coal-to-coke yields at our Haverhill facility.

Depreciation and amortization expense, which was not included in segment profitability, increased $14.6 million, to $33.2 million in 2012 from $18.6 million in 2011, primarily due to a full year of depreciation expense taken at the Middletown facility.

45-------------------------------------------------------------------------------- Table of Contents Liquidity and Capital Resources Prior to the IPO, our operations were funded with cash from our operations and funding from SunCoke. Our cash receipts were deposited in SunCoke's bank accounts and cash disbursements were made from those accounts. Consequently, our historical financial statements for periods prior to the IPO have reflected no cash balances. Cash transactions processed on our behalf by SunCoke were reflected in parent net equity as intercompany advances between us and SunCoke.

We completed our IPO on January 24, 2013 and now maintain our own bank accounts.

Our sources of liquidity include the retention of approximately $118.0 million of the proceeds from our IPO, our concurrent offering of senior notes, cash generated from operations, borrowings under our revolving credit facility and, from time to time, debt and equity offerings. We operate in a capital-intensive industry, and our primary liquidity needs are to finance the replacement of partially or fully depreciated assets and other capital expenditures, service our debt, fund investments, fund working capital, maintain cash reserves and pay distributions. We believe our current resources, including the potential borrowings under our revolving credit facility discussed below, are sufficient to meet our working capital requirements for our current business for the foreseeable future. Because it is our intent to distribute at least the minimum quarterly distribution on all of our units on a quarterly basis, we expect that we will rely upon external financing sources, including bank borrowings and the issuance of debt and equity securities, to fund acquisitions and other expansion capital expenditures.

Concurrent with the closing of our IPO, we issued approximately $150.0 million aggregate principal amount of senior notes ("Partnership Notes"). During the year ended December 31, 2013, proceeds from the issuance of the Partnership Notes were $146.3 million, net of $3.7 million of issuance costs. We also entered into a $100.0 million revolving credit facility. We incurred issuance costs of $2.2 million in conjunction with entering into our new revolving credit facility. This credit facility was amended on August 28, 2013, increasing the total aggregate commitments from lenders to $150.0 million and now providing for up to $100.0 million uncommitted incremental revolving capacity, subject to the satisfaction of certain conditions. We paid $0.9 million in fees related to the credit facility amendment. The fees have been included in deferred charges and other assets in the Combined and Consolidated Balance Sheet, which will be amortized over the life of the facility. On October 1, 2013, we borrowed $40.0 million against the credit facility for the purchase of KRT. In addition to the $40.0 million borrowing, the credit facility had letters of credit outstanding of $0.7 million, leaving $109.3 million available as of December 31, 2013.

In accordance with our partnership agreement, on April 23, 2013, we declared a quarterly cash distribution totaling $9.8 million, or $0.3071 per unit. In calculating this distribution, the minimum quarterly distribution was adjusted to reflect the period beginning on January 24, 2013, the closing date of the IPO, through March 31, 2013. This distribution was paid on May 31, 2013 to unitholders of record on May 15, 2013. There were no distributions declared or paid prior to this distribution. On July 23, 2013, the Partnership, in accordance with the partnership agreement, declared a quarterly cash distribution totaling $13.5 million, or $0.4225 per unit. The distribution was paid on August 30, 2013 to unitholders of record on August 15, 2013. On October 22, 2013, the Partnership, in accordance with the partnership agreement, declared a quarterly cash distribution totaling $13.9 million, or $0.4325 per unit. The distribution was paid on November 29, 2013 to unitholders of record on November 15, 2013. On January 27, 2014, the Partnership, in accordance with the partnership agreement, declared a quarterly cash distribution totaling $15.2 million, or $0.4750 per unit. The distribution will be paid on February 28, 2014 to unitholders of record on February 14, 2014.

Because we intend to distribute substantially all of our cash available for distribution, our growth may not be as fast as the growth of businesses that reinvest their available cash to expand ongoing operations. Moreover, our future growth may be slower than our historical growth. We expect that we will, in large part, rely upon external financing sources, including bank borrowings and issuances of debt and equity securities, to fund acquisitions and expansion capital expenditures. To the extent we are unable to finance growth externally, our cash distribution policy could significantly impair our ability to grow. To the extent we issue additional units in connection with any acquisitions or expansion capital expenditures, the payment of distributions on those additional units may increase the risk that we will be unable to maintain or increase our per unit distribution level. The incurrence of additional debt by us would result in increased interest expense, which in turn may also affect the amount of cash that we have available to distribute to our unitholders.

46-------------------------------------------------------------------------------- Table of Contents The following table sets forth a summary of the net cash provided by (used in) operating, investing and financing activities for the years ended December 31, 2013, 2012 and 2011: Years Ended December 31, 2013 2012 2011 (Predecessor) (Predecessor) (Dollars in millions)Net cash provided by operating activities $ 130.3 $ 95.8 $ 23.5 Net cash used in investing activities (154.8 ) (17.5 ) (175.7 ) Net cash provided by (used in) financing activities 70.8 (78.3 ) 152.2 Net increase in cash and cash equivalents $ 46.3 $ - $ - Cash Provided by Operating Activities Net cash provided by operating activities increased by $34.5 million to $130.3 million for the year ended December 31, 2013 as compared to the corresponding period in 2012. The increase was primarily attributable to stronger operational performance and working capital improvements in the current year. The improved working capital is primarily related to the timing of accounts payable, partially offset by the build-up of accounts receivable related to sales subsequent to the IPO as SunCoke did not contribute $39.6 million of Predecessor accounts receivable to the Partnership and the settlement of the liability for sales discounts at our Haverhill facility.

Net cash provided by operating activities increased by $72.3 million to $95.8 million for the year ended December 31, 2012 as compared to the corresponding period in 2011. The increase was primarily attributable to the contribution of the Middletown operations in 2012.

Cash Used in Investing Activities Cash used in investing activities increased by $137.3 million to $154.8 million for the year ended December 31, 2013 as compared to the corresponding period in 2012. The increase was primarily attributable to the acquisitions of KRT for $84.7 million and Lake Terminal for $28.6 million. The current year also includes $22.8 million of higher environmental remediation project expenditures, which was funded using proceeds from the Partnership offering.

Cash used in investing activities decreased by $158.2 million to $17.5 million for the year ended December 31, 2012 as compared to the corresponding period in 2011. The decrease was primarily attributable to an absence of capital expenditures associated with the construction of the Middletown facility in 2012. Environmental remediation project expenditures of $4.5 million was included in 2012.

Cash Provided by (Used in) Financing Activities The Predecessor's operations were funded with cash from our operations and funding from SunCoke. As a result, none of SunCoke's cash has been assigned to us in the Combined Financial Statements prior to the IPO and the changes in cash flow from operating and investing activities are currently the only impacts on our cash flow from financing activities for those periods. Transfers of cash to and from SunCoke's financing and cash management program are reflected as a component of parent net equity on the Combined Balance Sheets and directly impact the Predecessor's cash flow from financing activities. Following our IPO, we maintain our own bank accounts.

Net cash (used in) provided by financing activities changed by $149.1 million to $70.8 million of net cash provided by financing activities for the year ended December 31, 2013 as compared to $78.3 million of net cash used in financing activities in the corresponding period in 2012. In 2013, we received net proceeds of $231.8 million from the issuance of 13,500,000 common units in SunCoke Energy Partners, L.P., $150.0 million from the issuance of the Partnership Notes and $40.0 million borrowings from our revolver. These increases were partially offset by the repayment of $225.0 million of our term loan, debt issuance costs of $6.8 million and distributions of $82.9 million to SunCoke, $33.1 million to reimburse SunCoke for expenditures made during the two-year period prior to the IPO for the expansion and improvement of certain assets and $49.8 million of distributions from earnings of Haverhill and Middletown subsequent to the IPO. Distributions to unitholders of $37.2 million further offset the increase.

Net cash (used in) provided by financing activities decreased by $230.5 million to $(78.3) million used in financing activities for the year ended December 31, 2012 from $152.2 million provided by financing activities for the same prior year period. The change is due to a decreased contribution from SunCoke in 2012.

47-------------------------------------------------------------------------------- Table of Contents Capital Requirements and Expenditures Our cokemaking operations are capital intensive, requiring significant investment to upgrade or enhance existing operations and to meet environmental and operational regulations. The level of future capital expenditures will depend on various factors, including market conditions and customer requirements, and may differ from current or anticipated levels. Material changes in capital expenditure levels may impact financial results, including but not limited to the amount of depreciation, interest expense and repair and maintenance expense.

Our capital requirements have consisted, and are expected to consist, primarily of: • ongoing capital expenditures required to maintain equipment reliability, ensure the integrity and safety of our coke ovens and steam generators and comply with environmental regulations; • environmental remediation project expenditures required to implement design changes to ensure that our existing facilities operate in accordance with existing environmental permits; and • expansion capital expenditures to acquire and/or construct complementary assets to grow our business and to expand existing facilities as well as capital expenditures made to enable the renewal of a coke sales agreement and on which we expect to earn a reasonable return.

The following table summarizes ongoing, environmental remediation project and expansion capital expenditures: Years Ended December 31, 2013 2012 2011 (Dollars in millions) Ongoing capital $ 14.2 $ 13.0 $ 6.3 Environmental remediation project 27.3 4.5 - Expansion capital (1) Middletown - - 169.4 Total $ 41.5 $ 17.5 $ 175.7 (1) Excludes the acquisition of Lake Terminal and KRT.

Our capital expenditures for 2014 are expected to be approximately $53 million, of which ongoing capital expenditures are anticipated to be approximately $17 million. Ongoing capital expenditures are capital expenditures made to replace partially of fully depreciated assets in order to maintain the existing operating capacity of the assets and/or extend their useful lives. Ongoing capital expenditures also include new equipment that improves the efficiency, reliability or effectiveness of existing assets. Ongoing capital expenditures do not include normal repairs and maintenance expenses, which are expensed as incurred.

The EPA and state regulators have issued Notices of Violations ("NOVs") for the Haverhill cokemaking facility which stem from alleged violations of air operating permits for this facility. SunCoke is currently working in a cooperative manner with the EPA to address the allegations and has lodged a consent degree in federal district court that is undergoing review. Settlement may require payment of a penalty for alleged past violations as well as the capital projects underway to improve the reliability of the energy recovery systems and enhance environmental performance at the Haverhill facility. We retained $67.0 million in proceeds from the Partnership offering for these environmental remediation projects to comply with the expected terms of a consent decree. Spending for these projects depends on the timing and finality of the settlement. Pursuant to the omnibus agreement as described in "Part III.

Item 13. Certain Relationships and Related Transactions, and Director Independence-Agreements Entered Into with Affiliates in Connection with our Initial Public Offering-Omnibus Agreement," any amounts that we spend on these projects in excess of the $67.0 million will be reimbursed by SunCoke. Prior to our formation, SunCoke spent approximately $5 million related to these projects.

The Partnership spent approximately $27 million during 2013 and expects to spend approximately $36 million and $11 million in 2014 and 2015, respectively. Any potential penalties for alleged past violations will be paid by SunCoke.

48-------------------------------------------------------------------------------- Table of Contents Contractual Obligations The following table summarizes our significant contractual obligations as of December 31, 2013: Payment Due Dates Total 2014 2015-2016 2017-2018 Thereafter (Dollars in millions) Total Debt: Principal $ 190.0 $ 40.0 $ - $ - $ 150.0 Interest 70.5 12.5 23.4 22.8 11.8 Operating leases(1) 3.7 1.7 1.7 0.2 0.1Purchase obligations: Coal 251.2 251.2 - - - Transportation and coal handling(2) 146.2 13.0 25.4 27.0 80.8 Total $ 661.6 $ 318.4 $ 50.5 $ 50.0 $ 242.7 (1) Our operating leases include leases for office space, land, locomotives, office equipment and other property and equipment. Operating leases include all operating leases that have initial noncancelable terms in excess of one year.

(2) Transportation and coal handling services consist primarily of railroad and terminal services attributable to delivery and handling of coke sales.

Long-term commitments generally relate to locations for which limited transportation options exist and match the length of the related coke sales agreement.

A purchase obligation is an enforceable and legally binding agreement to purchase goods or services that specifies significant terms, including: fixed or minimum quantities to be purchased; fixed, minimum or variable price provisions; and the approximate timing of the transaction. Our principal purchase obligations in the ordinary course of business consist of coal and transportation and coal handling services, including railroad services. Our coal purchase obligations are generally for terms of one or two years and are based on fixed prices. These purchase obligations generally include fixed or minimum volume requirements. Transportation and coal handling obligations also typically include required minimum volume commitments and are for long-term agreements.

The purchase obligation amounts in the table above are based on the minimum quantities or services to be purchased at estimated prices to be paid based on current market conditions. Accordingly, the actual amounts may vary significantly from the estimates included in the table.

Off-Balance Sheet Arrangements We do not have any off-balance sheet arrangements.

Impact of Inflation Although the impact of inflation has slowed in recent years, it is still a factor in the U.S. economy and may increase the cost to acquire or replace properties, plants, and equipment and may increase the costs of labor and supplies. To the extent permitted by competition, regulation and existing agreements, we have generally passed along increased costs to our customers in the form of higher fees and we expect to continue this practice.

Critical Accounting Policies The discussion and analysis of our financial condition and results of operations are based upon the Combined and Consolidated Financial Statements of SunCoke Energy Partners, L.P., which have been prepared in accordance with accounting principles generally accepted in the U.S. The preparation of these financial statements requires the use of estimates and assumptions that affect the reported amounts of assets, liabilities, revenues and expenses and related disclosure of contingent assets and liabilities. Certain accounting policies involve judgments and uncertainties to such an extent that there is a reasonable likelihood that materially different amounts could have been reported under different conditions, or if different assumptions had been used. Estimates and assumptions are evaluated on a regular basis. We and our predecessor base our respective estimates on historical experience and various other assumptions that are believed to be reasonable under the circumstances, the results of which are not readily apparent from other sources. Actual results may differ from estimates and assumptions used in preparation of the Combined and Consolidated Financial Statements.

With the closing of our IPO, the historical Combined Financial Statements of SunCoke Energy Partners Predecessor became the Consolidated Financial Statements of SunCoke Energy Partners, L.P. Consequently, the critical accounting policies and estimates of our predecessor are the critical accounting policies and estimates of SunCoke Energy Partners, L.P. We believe these accounting policies reflect the more significant estimates and assumptions used in preparation of financial statements.

49-------------------------------------------------------------------------------- Table of Contents Please read Note 2 to the SunCoke Energy Partners, L.P. audited historical Combined and Consolidated Financial Statements for a discussion of additional accounting policies, estimates and judgments made by its management.

Properties, Plants and Equipment The cost of plants and equipment is generally depreciated on a straight-line basis over the estimated useful lives of the assets. Useful lives of assets which are depreciated on a straight-line basis are based on historical experience and are adjusted when changes in the expected physical life of the asset, its planned use, technological advances, or other factors show that a different life would be more appropriate. Changes in useful lives that do not result in the impairment of an asset are recognized prospectively.

Normal repairs and maintenance costs are expensed as incurred. Amounts incurred that extend an asset's useful life, increase its productivity or add production capacity are capitalized. Direct costs, such as outside labor, materials, internal payroll and benefit costs, incurred during the construction of a new facility are capitalized; indirect costs are not capitalized. Repairs and maintenance costs, which are generally reimbursed as part of the pass-through nature of our contracts, were $35.2 million, $33.5 million and $23.6 million for the years ended December 31, 2013, 2012 and 2011, respectively.

Long-lived assets, other than those held for sale, are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of the assets may not be recoverable. Such events and circumstances include, among other factors: operating losses; unused capacity; market value declines; changes in the expected physical life of an asset; technological developments resulting in obsolescence; changes in demand for our products or in end-use goods manufactured by others utilizing our products as raw materials; changes in our business plans or those of our major customers, suppliers or other business partners; changes in competition and competitive practices; uncertainties associated with the U.S. and world economies; changes in the expected level of capital, operating or environmental remediation project expenditures; and changes in governmental regulations or actions. Additional factors impacting the economic viability of long-lived assets are described under "Cautionary Statement Concerning Forward-Looking Statements." A long-lived asset that is not held for sale is considered to be impaired when the undiscounted net cash flows expected to be generated by the asset are less than its carrying amount. Such estimated future cash flows are highly subjective and are based on numerous assumptions about future operations and market conditions. The impairment recognized is the amount by which the carrying amount exceeds the fair market value of the impaired asset. It is also difficult to precisely estimate fair market value because quoted market prices for our long-lived assets may not be readily available. Therefore, fair market value is generally based on the present values of estimated future cash flows using discount rates commensurate with the risks associated with the assets being reviewed for impairment. We have had no significant asset impairments during the years ended December 31, 2013, 2012 and 2011.

Recent Accounting Standards There are no recently issued accounting standards which are not yet effective that we believe would materially impact our financial statements.

Non-GAAP Financial Measures In addition to the GAAP results provided in the Annual Report on Form 10-K, we have provided a non-GAAP financial measure, Adjusted EBITDA. Reconciliation from GAAP to the non-GAAP measurement is presented below.

Our management, as well as certain investors, use this non-GAAP measure to analyze our current and expected future financial performance. This measure is not in accordance with, or a substitute for, GAAP and may be different from, or inconsistent with, non-GAAP financial measures used by other companies.

Adjusted EBITDA. Adjusted EBITDA represents earnings before interest, taxes, depreciation ("EBITDA"), adjusted for sales discounts. EBITDA reflects sales discounts included as a reduction in sales and other operating revenue. The sales discounts represent the sharing with customers of a portion of nonconventional fuel tax credits, which reduce our income tax expense. However, we believe our Adjusted EBITDA would be inappropriately penalized if these discounts were treated as a reduction of EBITDA since they represent sharing of a tax benefit that is not included in EBITDA. Accordingly, in computing Adjusted EBITDA, we have added back these sales discounts. EBITDA and Adjusted EBITDA do not represent and should not be considered alternatives to net income or operating income under GAAP and may not be comparable to other similarly titled measures in other businesses.

Management believes Adjusted EBITDA is an important measure of the operating performance of the Partnership's net assets and provides useful information to investors because it highlights trends in our business that may not otherwise be apparent when relying solely on GAAP measures and because it eliminates items that have less bearing on our operating 50-------------------------------------------------------------------------------- Table of Contents performance. Adjusted EBITDA is a measure of operating performance that is not defined by GAAP, does not represent and should not be considered a substitute for net income as determined in accordance with GAAP. Calculations of Adjusted EBITDA may not be comparable to those reported by other companies.

Set forth below is additional detail as to how we use Adjusted EBITDA as a measure of operating performance, as well as a discussion of the limitations of Adjusted EBITDA as an analytical tool.

Operating Performance. Our management uses Adjusted EBITDA in a number of ways to assess our combined financial and operating performance, and we believe this measure is helpful to management in identifying trends in our performance.

Adjusted EBITDA helps management identify controllable expenses and make decisions designed to help us meet our current financial goals and optimize our financial performance while neutralizing the impact of capital structure on financial results. Accordingly, we believe this metric measures our financial performance based on operational factors that management can impact in the short-term, namely our cost structure and expenses.

Limitations. Other companies may calculate Adjusted EBITDA differently than we do, limiting its usefulness as a comparative measure. Adjusted EBITDA also has limitations as an analytical tool and should not be considered in isolation or as a substitute for an analysis of our results as reported under GAAP. Some of these limitations include that Adjusted EBITDA: • does not reflect our cash expenditures, or future requirements, for capital expenditures or contractual commitments; • does not reflect changes in, or cash requirements for, working capital needs; • does not reflect our interest expense, or the cash requirements necessary to service interest on or principal payments of our debt; • does not reflect certain other non-cash income and expenses; • excludes income taxes that may represent a reduction in available cash; and • includes net income attributable to noncontrolling interests.

We explain Adjusted EBITDA and reconcile this non-GAAP financial measure to our net income, which is its most directly comparable financial measure calculated and presented in accordance with GAAP.

Below is a reconciliation of Adjusted EBITDA to its closest GAAP measure: Years Ended December 30, 2013 2012 2011 Predecessor Predecessor (Dollars in millions)Adjusted EBITDA attributable to Predecessor/SunCoke Energy Partners, L.P.

$ 103.5 $ 127.4 $ 61.9 Add: Adjusted EBITDA attributable to noncontrolling interest (1) 51.7 - - Adjusted EBITDA $ 155.2 $ 127.4 $ 61.9 Subtract: Depreciation and amortization expense 33.0 33.2 18.6 Interest expense, net 15.4 10.3 4.7 Income tax expense 4.5 24.4 2.8 Sales discounts provided to customers due to sharing of nonconventional fuel tax credits (2) (0.6 ) 2.7 5.0 Net income $ 102.9 $ 56.8 $ 30.8 (1) Reflects net income attributable to noncontrolling interest adjusted for noncontrolling interest share of interest, taxes and depreciation.

(2) At December 31, 2012, we had $12.4 million in accrued sales discounts to be paid to a customer at our Haverhill facility. During the first quarter of 2013, we settled this obligation for $11.8 million which resulted in a gain of $0.6 million. This gain is recorded in sales and other operating revenue on our Combined and Consolidated Statement of Income.

51-------------------------------------------------------------------------------- Table of Contents CAUTIONARY STATEMENT CONCERNING FORWARD-LOOKING STATEMENTS We have made forward-looking statements in this Annual Report on Form 10-K, including, among others, in the sections entitled "Business," "Risk Factors" and "Management's Discussion and Analysis of Financial Condition and Results of Operations." Such forward-looking statements are based on management's beliefs and assumptions and on information currently available. Forward-looking statements include the information concerning our possible or assumed future results of operations, business strategies, financing plans, competitive position, potential growth opportunities, potential operating performance, the effects of competition and the effects of future legislation or regulations.

Forward-looking statements include all statements that are not historical facts and may be identified by the use of forward-looking terminology such as the words "believe," "expect," "plan," "intend," "anticipate," "estimate," "predict," "potential," "continue," "may," "will," "should" or the negative of these terms or similar expressions. In particular, statements in this Annual Report on Form 10-K concerning future distributions are subject to approval by our Board of Directors and will be based upon circumstances then existing.

Forward-looking statements involve risks, uncertainties and assumptions. Actual results may differ materially from those expressed in these forward-looking statements. You should not put undue reliance on any forward-looking statements.

We do not have any intention or obligation to update any forward-looking statement (or its associated cautionary language), whether as a result of new information or future events, after the date of this Annual Report on Form 10-K, except as required by applicable law.

The risk factors discussed in "Risk Factors" could cause our results to differ materially from those expressed in forward-looking statements. There also may be other risks that we are unable to predict at this time. Such risks and uncertainties include, without limitation: • changes in levels of production, production capacity, pricing and/or margins for coal and coke; • variation in availability, quality and supply of metallurgical coal used in the cokemaking process, including as a result of non-performance by our suppliers; • changes in the marketplace that may affect our coal logistics business, including the supply and demand for thermal and metallurgical coals; • change in the marketplace that may affect our cokemaking business, including the supply and demand for our coke, as well as increased imports of coke from foreign producers; • competition from alternative steelmaking and other technologies that have the potential to reduce or eliminate the use of coke; • our dependence on, relationships with, and other conditions affecting, our customers; • severe financial hardship or bankruptcy of one or more of our major customers, or the occurrence of a customer default or other event affecting our ability to collect payments from our customers; • volatility and cyclical downturns the coal market in the carbon steel industry and other industries in which our customers operate; • our ability to enter into new, or renew existing, agreements upon favorable terms for the supply of coke to steel producers, or for the use of our coal logistics services; • our ability to identify acquisitions, execute them under favorable terms and integrate them into our existing business operations; • our ability to realize expected benefits from investments and acquisitions; • our ability to consummate investments under favorable terms, including with respect to existing cokemaking facilities, which may utilize by-product technology, in the U.S. and Canada, and integrate them into our existing businesses and have them perform at anticipated levels; • our ability to develop, design, permit, construct, start up or operate new cokemaking facilities in the U.S.; • our ability to successfully implement our growth strategy; • age of, and changes in the reliability, efficiency and capacity of the various equipment and operating facilities used in our cokemaking and/or coal logistics operations, and in the operations of our major customers, business partners and/or suppliers; • changes in the expected operating levels of our assets; • our ability to meet minimum volume requirements, coal-to-coke yield standards and coke quality standards in our coke sales agreements; 52 -------------------------------------------------------------------------------- Table of Contents • changes in the level of capital expenditures or operating expenses, including any changes in the level of environmental capital, operating or remediation expenditures; • our ability to service our outstanding indebtedness; • our ability to comply with the restrictions imposed by our financing arrangements; • nonperformance or force majeure by, or disputes with, or changes in contract terms with, major customers, suppliers, dealers, distributors or other business partners; • availability of skilled employees for our cokemaking and/or coal logistics operations, and other workplace factors; • effects of railroad, barge, truck and other transportation performance and costs, including any transportation disruptions; • effects of adverse events relating to the operation of our facilities and to the transportation and storage of hazardous materials (including equipment malfunction, explosions, fires, spills, and the effects of severe weather conditions); • our ability to enter into joint ventures and other similar arrangements under favorable terms; • changes in the availability and cost of equity and debt financing; • impact on our liquidity and ability to raise capital as a result of changes in the credit ratings assigned to our indebtedness; • changes in credit terms required by our suppliers; • risks related to labor relations and workplace safety; • changes in, or new, statutes, regulations, rules, governmental policies and taxes, or their interpretations, including those relating to environmental matters; • the existence of hazardous substances or other environmental contamination on property owned or used by us; • receipt of regulatory approvals and compliance with contractual obligations required in connection with our operations; • claims of noncompliance with any statutory and regulatory requirements; • the accuracy of our estimates of any necessary reclamation and/or remediation activities; • changes in the status of, or initiation of new litigation, arbitration, or other proceedings to which we are a party or liability resulting from such litigation, arbitration, or other proceedings; • historical combined and consolidated financial data may not be reliable indicator of future results; • public company costs; • our indebtedness and certain covenants in our debt documents; • changes in product specifications for the coke that we produce or the coals that we blend, store and transport; • changes in insurance markets impacting costs and the level and types of coverage available, and the financial ability of our insurers to meet their obligations; • changes in accounting rules and/or tax laws or their interpretations, including the method of accounting for inventories, leases and/or pensions; • changes in financial markets impacting pension expense and funding requirements; and • effects of geologic conditions, weather, natural disasters and other inherent risks beyond our control.

The factors identified above are believed to be important factors, but not necessarily all of the important factors, that could cause actual results to differ materially from those expressed in any forward-looking statement made by us. Other factors not discussed herein could also have material adverse effects on us. All forward-looking statements included in this Annual Report on Form 10-K are expressly qualified in their entirety by the foregoing cautionary statements.

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