1161154--2/26/2008--SUNOCO_LOGISTICS_PARTNERS

related topics

{debt, indebtedness, cash}

{gas, price, oil}

{tax, income, asset}

{stock, price, operating}

{investment, property, distribution}

{operation, natural, condition}

{cost, regulation, environmental}

{customer, product, revenue}

{capital, credit, financial}

{acquisition, growth, future}

{financial, litigation, operation}

{cost, contract, operation}

RISKS RELATED TO OUR BUSINESS We may not be able to generate sufficient cash from operations to allow us to make the required payments to our debt holders or to pay quarterly distributions. We depend upon Sunoco for a substantial portion of the crude oil and refined products transported on our pipelines and handled at our terminals, and our crude oil sales. Sunoco s obligations to us under the pipelines and terminals storage and throughput agreements and other arrangements may be reduced or suspended in some circumstances. If Sunoco satisfies only its minimum obligations to us under, or if we are unable to renew or extend the pipelines and terminals storage and throughput agreements, it could materially and adversely affect our financial condition, results of operations, or cash flows. If Sunoco underutilizes the Partnership s refined product terminals or the Marcus Hook Tank Farm, it could materially and adversely affect our financial condition, results of operations, or cash flows. A sustained decrease in demand for refined products in the markets served by our pipelines and terminals could materially and adversely affect our financial condition, results of operations, or cash flows. A material decrease in crude oil available for transport through our Western Pipeline System could materially and adversely affect our financial position, results of operations, or cash flows. Any reduction in the capability of, or the allocations to, our shippers in interconnecting, third-party pipelines would cause a reduction of volumes transported in our pipelines and through our terminals. If we are unable to complete capital projects at their expected costs and/or in a timely manner, or if the market conditions assumed in our project economics deteriorate, our financial condition, results of operations, or cash flows could be affected materially and adversely. Potential future acquisitions and expansions, if any, may increase substantially the level of our indebtedness and contingent liabilities, and we may be unable to integrate them effectively into our existing operations. Our operations are subject to operational hazards and unforeseen interruptions for which we may not be adequately insured. We are exposed to the credit and other counterparty risk of our customers in the ordinary course of our business. Competition with respect to our operating segments could ultimately lead to lower levels of profits and could materially and adversely affect our financial condition, results of operations, or cash flows. Mergers among our customers and competitors could result in lower volumes being shipped on our pipelines or products stored in or distributed through our terminals, or reduced crude oil marketing margins or volumes. Rate regulation may not allow us to recover the full amount of increases in our costs. A successful challenge to our rates could materially and adversely affect our financial condition, results of operations, or cash flows. Our operations are subject to federal, state, and local laws and regulations relating to environmental protection and operational safety that could require substantial expenditures. Our business is subject to federal, state and local laws and regulations that govern the product quality specifications of the petroleum products that we store and transport. Terrorist attacks aimed at our facilities could adversely affect our business. Due to our lack of asset diversification, adverse developments in our businesses could materially and adversely affect our financial condition, results of operations, or cash flows. RISKS RELATED TO OUR PARTNERSHIP STRUCTURE Our general partner s discretion in determining the level of cash reserves may adversely affect our ability to make cash distributions to our unitholders. Even if unitholders are dissatisfied, they cannot remove our general partner without its consent, which could lower the trading price of the common units. The control of our general partner may be transferred to a third party without unitholder consent. Sunoco and its affiliates have conflicts of interest and limited fiduciary responsibilities, which may permit them to favor their own interests to the detriment of our unitholders. We are a holding company. We conduct our operations through our subsidiaries and depend on cash flow from our subsidiaries to service our debt obligations. Our general partner may cause us to borrow funds in order to make cash distributions, even where the purpose or effect of the borrowing benefits the general partner or its affiliates. Our general partner has a limited call right that may require our unitholders to sell their common units at an undesirable time or price. We may issue additional common units without unitholder approval, which would dilute our unitholders ownership interests. Sunoco and its affiliates may engage in limited competition with us. A unitholder may not have limited liability if a state or federal court finds that we are not in compliance with the applicable statutes or that unitholder action constitutes control of our business. RISKS RELATED TO OUR DEBT Restrictions in our debt agreements and in Sunoco s debt agreements may prevent us from engaging in some beneficial transactions or paying distributions to unitholders. We could incur a substantial amount of debt in the future, which could prevent us from fulfilling our debt obligations. Rising short-term interest rates could increase our financing costs and reduce the amount of cash we generate. A down-grading in Sunoco s credit rating could result in a down-grading in our credit rating, which could adversely affect our ability to obtain financing. TAX RISKS TO OUR COMMON UNIT HOLDERS Our tax treatment depends on our status as a partnership for federal income tax purposes, as well as our not being subject to entity level taxation by individual states. If the Internal Revenue Service, or IRS, treats us as a corporation or we become subject to entity level taxation for state tax purposes, it would substantially reduce the amount of cash available for distribution to unitholders. The sale or exchange of 50 percent or more of our capital and profit interests during any twelve-month period will result in our termination as a partnership for federal income tax purposes. Our unitholders may be required to pay taxes on their share of our income even if they do not receive any cash distributions from us. Tax gain or loss on disposition of our limited partner units could be more or less than expected. Tax-exempt entities and foreign persons face unique tax issues from owning our common units that may result in adverse tax consequences to them. Our unitholders will likely be subject to state and local taxes and return filing requirements in states where they do not live as a result of investing in our limited partner units.

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1161154--2/26/2008--SUNOCO_LOGISTICS_PARTNERS_LP