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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
    QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 2021
or
    TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
 For the transition period from            to            
Commission file number 001-33366
Cheniere Energy Partners, L.P.
(Exact name of registrant as specified in its charter)
Delaware 20-5913059
(State or other jurisdiction of incorporation or organization) (I.R.S. Employer Identification No.)
700 Milam Street, Suite 1900
Houston, Texas 77002
(Address of principal executive offices) (Zip Code)
(713) 375-5000
(Registrant’s telephone number, including area code)
Securities registered pursuant to Section 12(b) of the Act: 
Title of each class Trading Symbol Name of each exchange on which registered
Common Units Representing Limited Partner Interests CQP NYSE American
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.  Yes    No
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).  Yes     No 
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
Large accelerated filer Accelerated filer
Non-accelerated filer Smaller reporting company
Emerging growth company
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).  Yes ☐    No 
As of July 30, 2021, the registrant had 484,024,123 common units outstanding.




CHENIERE ENERGY PARTNERS, L.P.
TABLE OF CONTENTS

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i



DEFINITIONS
As used in this quarterly report, the terms listed below have the following meanings: 

Common Industry and Other Terms
Bcf billion cubic feet
Bcf/d billion cubic feet per day
Bcf/yr billion cubic feet per year
Bcfe billion cubic feet equivalent
DOE U.S. Department of Energy
EPC engineering, procurement and construction
FERC Federal Energy Regulatory Commission
FTA countries countries with which the United States has a free trade agreement providing for national treatment for trade in natural gas
GAAP generally accepted accounting principles in the United States
Henry Hub the final settlement price (in USD per MMBtu) for the New York Mercantile Exchange’s Henry Hub natural gas futures contract for the month in which a relevant cargo’s delivery window is scheduled to begin
LIBOR London Interbank Offered Rate
LNG liquefied natural gas, a product of natural gas that, through a refrigeration process, has been cooled to a liquid state, which occupies a volume that is approximately 1/600th of its gaseous state
MMBtu million British thermal units; one British thermal unit measures the amount of energy required to raise the temperature of one pound of water by one degree Fahrenheit
mtpa million tonnes per annum
non-FTA countries countries with which the United States does not have a free trade agreement providing for national treatment for trade in natural gas and with which trade is permitted
SEC U.S. Securities and Exchange Commission
SPA LNG sale and purchase agreement
TBtu
trillion British thermal units; one British thermal unit measures the amount of energy required to raise the temperature of one pound of water by one degree Fahrenheit
Train an industrial facility comprised of a series of refrigerant compressor loops used to cool natural gas into LNG
TUA terminal use agreement




1



Abbreviated Legal Entity Structure

The following diagram depicts our abbreviated legal entity structure as of June 30, 2021, including our ownership of certain subsidiaries, and the references to these entities used in this quarterly report:
CQP-20210630_G1.JPG
Unless the context requires otherwise, references to “Cheniere Partners,” “the Partnership,” “we,” “us” and “our” refer to Cheniere Energy Partners, L.P. and its consolidated subsidiaries, including SPLNG, SPL and CTPL. 



2




PART I.     FINANCIAL INFORMATION

ITEM 1.    CONSOLIDATED FINANCIAL STATEMENTS
CHENIERE ENERGY PARTNERS, L.P. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
(in millions, except per unit data)
(unaudited)
Three Months Ended June 30, Six Months Ended June 30,
2021 2020 2021 2020
Revenues
LNG revenues $ 1,597  $ 1,332  $ 3,266  $ 2,781 
LNG revenues—affiliate 211  61  425  249 
Regasification revenues 67  68  134  135 
Other revenues 14  27  23 
Total revenues 1,889  1,470  3,852  3,188 
Operating costs and expenses  
Cost of sales (excluding items shown separately below) 888  398  1,836  1,097 
Cost of sales—affiliate 12  54 
Cost of sales—related party —  — 
Operating and maintenance expense 168  165  317  317 
Operating and maintenance expense—affiliate 35  48  69  81 
Operating and maintenance expense—related party 12  —  22  — 
Development expense —  — 
General and administrative expense 10 
General and administrative expense—affiliate 21  24  42  49 
Depreciation and amortization expense 138  138  277  276 
Impairment expense and loss on disposal of assets — 
Total operating costs and expenses 1,285  786  2,630  1,840 
Income from operations 604  684  1,222  1,348 
Other income (expense)  
Interest expense, net of capitalized interest (209) (236) (426) (470)
Loss on modification or extinguishment of debt —  (42) (54) (43)
Other income, net —  —  — 
Total other expense (209) (278) (480) (507)
Net income $ 395  $ 406  $ 742  $ 841 
Basic and diluted net income per common unit $ 0.73  $ 0.78  $ 1.38  $ 1.62 
Weighted average number of common units outstanding used for basic and diluted net income per common unit calculation 484.0  348.6  484.0  348.6 

The accompanying notes are an integral part of these consolidated financial statements.

3


CHENIERE ENERGY PARTNERS, L.P. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(in millions, except unit data)
June 30, December 31,
2021 2020
ASSETS (unaudited)  
Current assets    
Cash and cash equivalents $ 1,239  $ 1,210 
Restricted cash 65  97 
Accounts and other receivables, net of current expected credit losses 285  318 
Accounts receivable—affiliate 65  184 
Advances to affiliate 154  144 
Inventory 116  107 
Current derivative assets 23  14 
Other current assets 97  61 
Other current assets—affiliate — 
Total current assets 2,045  2,135 
Property, plant and equipment, net of accumulated depreciation 16,789  16,723 
Operating lease assets, net of accumulated amortization 95  99 
Debt issuance costs, net of accumulated amortization 14  17 
Derivative assets 21  11 
Other non-current assets, net 159  160 
Total assets $ 19,123  $ 19,145 
LIABILITIES AND PARTNERS’ EQUITY    
Current liabilities
Accounts payable $ 16  $ 12 
Accrued liabilities 649  658 
Accrued liabilities—related party
Current debt, net of discount and debt issuance costs 654  — 
Due to affiliates 38  53 
Deferred revenue 105  137 
Deferred revenue—affiliate 11 
Current operating lease liabilities
Current derivative liabilities 21  11 
Total current liabilities 1,506  883 
Long-term debt, net of premium, discount and debt issuance costs 16,935  17,580 
Operating lease liabilities 87  90 
Derivative liabilities 35 
Other non-current liabilities — 
Other non-current liabilities—affiliate 16  17 
Partners’ equity
Common unitholders’ interest (484.0 million units issued and outstanding at both June 30, 2021 and December 31, 2020)
805  714 
General partner’s interest (2% interest with 9.9 million units issued and outstanding at June 30, 2021 and December 31, 2020)
(234) (175)
Total partners’ equity 571  539 
Total liabilities and partners’ equity $ 19,123  $ 19,145 
The accompanying notes are an integral part of these consolidated financial statements.

4


CHENIERE ENERGY PARTNERS, L.P. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF PARTNERS’ EQUITY
(in millions)
(unaudited)
Three and Six Months Ended June 30, 2021
Common Unitholders’ Interest Subordinated Unitholder’s Interest General Partner’s Interest Total Partners’ Equity
Units Amount Units Amount Units Amount
Balance at December 31, 2020 484.0  $ 714  —  $ —  9.9  $ (175) $ 539 
Net income —  340  —  —  —  347 
Distributions
Common units, $0.655/unit
—  (316) —  —  —  —  (316)
General partner units —  —  —  —  —  (35) (35)
Balance at March 31, 2021 484.0  738  —  —  9.9  (203) 535 
Net income —  387  —  —  —  395 
Distributions
Common units, $0.660/unit
—  (320) —  —  —  —  (320)
General partner units —  —  —  —  —  (39) (39)
Balance at June 30, 2021 484.0  $ 805  —  $ —  9.9  $ (234) $ 571 

Three and Six Months Ended June 30, 2020
Common Unitholders’ Interest Subordinated Unitholder’s Interest General Partner’s Interest Total Partners’ Equity
Units Amount Units Amount Units Amount
Balance at December 31, 2019 348.6  $ 1,792  135.4  $ (996) 9.9  $ (81) $ 715 
Net income —  307  —  119  —  435 
Distributions
Common units, $0.630/unit
—  (220) —  —  —  —  (220)
Subordinated units, $0.630/unit
—  —  —  (85) —  —  (85)
General partner units —  —  —  —  —  (25) (25)
Balance at March 31, 2020 348.6  1,879  135.4  (962) 9.9  (97) 820 
Net income —  287  —  111  —  406 
Distributions
Common units, $0.640/unit
—  (223) —  —  —  —  (223)
Subordinated units, $0.640/unit
—  —  —  (86) —  —  (86)
General partner units —  —  —  —  —  (29) (29)
Balance at June 30, 2020 348.6  $ 1,943  135.4  $ (937) 9.9  $ (118) $ 888 

The accompanying notes are an integral part of these consolidated financial statements.

5


CHENIERE ENERGY PARTNERS, L.P. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(in millions)
(unaudited)
  Six Months Ended June 30,
2021 2020
Cash flows from operating activities    
Net income $ 742  $ 841 
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization expense 277  276 
Amortization of debt issuance costs, premium and discount 15  17 
Loss on modification or extinguishment of debt 54  43 
Total gains on derivatives, net (54) (29)
Net cash provided by settlement of derivative instruments 18 
Impairment expense and loss on disposal of assets
Other
Changes in operating assets and liabilities:
Accounts and other receivables, net of current expected credit losses 32 
Accounts receivable—affiliate 119  103 
Advances to affiliate 14 
Inventory (9) 14 
Accounts payable and accrued liabilities (48) (242)
Due to affiliates (13) (8)
Deferred revenue (32) (133)
Other, net (49) (40)
Other, net—affiliate (3)
Net cash provided by operating activities 1,075  874 
Cash flows from investing activities    
Property, plant and equipment (316) (581)
Net cash used in investing activities (316) (581)
Cash flows from financing activities    
Proceeds from issuances of debt 1,500  1,995 
Repayments of debt (1,500) (2,000)
Debt issuance and other financing costs (20) (34)
Debt extinguishment costs (40) (39)
Distributions to owners (710) (668)
Other (1)
Net cash used in financing activities (762) (747)
Net decrease in cash, cash equivalents and restricted cash (3) (454)
Cash, cash equivalents and restricted cash—beginning of period 1,307  1,962 
Cash, cash equivalents and restricted cash—end of period $ 1,304  $ 1,508 

Balances per Consolidated Balance Sheets:
June 30,
2021
Cash and cash equivalents $ 1,239 
Restricted cash 65 
Total cash, cash equivalents and restricted cash $ 1,304 

The accompanying notes are an integral part of these consolidated financial statements.

6


CHENIERE ENERGY PARTNERS, L.P. AND SUBSIDIARIES 
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(unaudited)


NOTE 1—NATURE OF OPERATIONS AND BASIS OF PRESENTATION

The Sabine Pass LNG terminal is located in Cameron Parish, Louisiana, and has natural gas liquefaction facilities consisting of five operational natural gas liquefaction Trains and one additional Train under construction that is expected to be substantially completed in the first half of 2022, for a total production capacity of approximately 30 mtpa of LNG (the “Liquefaction Project”). The Sabine Pass LNG terminal also has operational regasification facilities that include five LNG storage tanks, vaporizers and two marine berths, with an additional marine berth that is under construction. We also own a 94-mile pipeline through our subsidiary, CTPL, that interconnects the Sabine Pass LNG terminal with a number of large interstate pipelines (the “Creole Trail Pipeline”).

Basis of Presentation

The accompanying unaudited Consolidated Financial Statements of Cheniere Partners have been prepared in accordance with GAAP for interim financial information and with Rule 10-01 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by GAAP for complete financial statements and should be read in conjunction with the Consolidated Financial Statements and accompanying notes included in our annual report on Form 10-K for the fiscal year ended December 31, 2020.

Results of operations for the three and six months ended June 30, 2021 are not necessarily indicative of the results of operations that will be realized for the year ending December 31, 2021.

We are not subject to either federal or state income tax, as our partners are taxed individually on their allocable share of our taxable income. Accordingly, no provision or liability for federal or state income taxes is included in the accompanying Consolidated Financial Statements.

Recent Accounting Standards

In March 2020, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2020-04, Reference Rate Reform (Topic 848): Facilitation of the Effects of Reference Rate Reform on Financial Reporting. This guidance primarily provides temporary optional expedients which simplify the accounting for contract modifications to existing debt agreements expected to arise from the market transition from LIBOR to alternative reference rates. The optional expedients were available to be used upon issuance of this guidance but we have not yet applied the guidance because we have not yet modified any of our existing contracts for reference rate reform. Once we apply an optional expedient to a modified contract and adopt this standard, the guidance will be applied to all subsequent applicable contract modifications until December 31, 2022, at which time the optional expedients are no longer available.

NOTE 2—UNITHOLDERS’ EQUITY
 
The common units represent limited partner interests in us. The holders of the units are entitled to participate in partnership distributions and exercise the rights and privileges available to limited partners under our partnership agreement. Our partnership agreement requires that, within 45 days after the end of each quarter, we distribute all of our available cash (as defined in our partnership agreement). Generally, our available cash is our cash on hand at the end of a quarter less the amount of any reserves established by our general partner. All distributions paid to date have been made from accumulated operating surplus as defined in the partnership agreement.

Although common unitholders are not obligated to fund losses of the Partnership, its capital account, which would be considered in allocating the net assets of the Partnership were it to be liquidated, continues to share in losses.

The general partner interest is entitled to at least 2% of all distributions made by us. In addition, the general partner holds incentive distribution rights (“IDRs”), which allow the general partner to receive a higher percentage of quarterly distributions of available cash from operating surplus as additional target levels are met, but may transfer these rights separately from its general partner interest. The higher percentages range from 15% to 50%, inclusive of the general partner interest.
 
7


CHENIERE ENERGY PARTNERS, L.P. AND SUBSIDIARIES 
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—CONTINUED
(unaudited)
As of June 30, 2021, our total securities beneficially owned in the form of common units were held 48.6% by Cheniere, 41.4% by CQP Target Holdco L.L.C. (“CQP Target Holdco”) and other affiliates of The Blackstone Group Inc. (“Blackstone”) and Brookfield Asset Management Inc. (“Brookfield”) and 8.0% by the public. All of our 2% general partner interest was held by Cheniere. CQP Target Holdco’s equity interests are 50.00% owned by BIP Chinook Holdco L.L.C., an affiliate of Blackstone and 50.00% owned by BIF IV Cypress Aggregator (Delaware) LLC, an affiliate of Brookfield. The ownership of CQP Target Holdco, Blackstone and Brookfield are based on their most recent filings with the SEC.

NOTE 3—RESTRICTED CASH
 
Restricted cash consists of funds that are contractually or legally restricted as to usage or withdrawal and have been presented separately from cash and cash equivalents on our Consolidated Balance Sheets. As of June 30, 2021 and December 31, 2020, we had $65 million and $97 million of restricted cash, respectively.

Pursuant to the accounts agreement entered into with the collateral trustee for the benefit of SPL’s debt holders, SPL is required to deposit all cash received into reserve accounts controlled by the collateral trustee.  The usage or withdrawal of such cash is restricted to the payment of liabilities related to the Liquefaction Project and other restricted payments.

NOTE 4—ACCOUNTS AND OTHER RECEIVABLES, NET OF CURRENT EXPECTED CREDIT LOSSES

As of June 30, 2021 and December 31, 2020, accounts and other receivables, net of current expected credit losses consisted of the following (in millions):
June 30, December 31,
2021 2020
SPL trade receivable $ 264  $ 300 
Other accounts receivable 21  18 
Total accounts and other receivables, net of current expected credit losses $ 285  $ 318 

NOTE 5—INVENTORY

As of June 30, 2021 and December 31, 2020, inventory consisted of the following (in millions):
June 30, December 31,
2021 2020
Materials $ 81  $ 81 
LNG
Natural gas 25  17 
Other
Total inventory $ 116  $ 107 

NOTE 6—PROPERTY, PLANT AND EQUIPMENT, NET OF ACCUMULATED DEPRECIATION
 
As of June 30, 2021 and December 31, 2020, property, plant and equipment, net of accumulated depreciation consisted of the following (in millions):
June 30, December 31,
2021 2020
LNG terminal    
LNG terminal and interconnecting pipeline facilities $ 16,941  $ 16,908 
LNG terminal construction-in-process 2,463  2,154 
Accumulated depreciation (2,620) (2,344)
Total LNG terminal, net of accumulated depreciation 16,784  16,718 
Fixed assets    
Fixed assets 30  29 
Accumulated depreciation (25) (24)
Total fixed assets, net of accumulated depreciation
Property, plant and equipment, net of accumulated depreciation $ 16,789  $ 16,723 
8


CHENIERE ENERGY PARTNERS, L.P. AND SUBSIDIARIES 
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—CONTINUED
(unaudited)
The following table shows depreciation expense during the three and six months ended June 30, 2021 and 2020 (in millions):
Three Months Ended June 30, Six Months Ended June 30,
2021 2020 2021 2020
Depreciation expense $ 137  $ 137  $ 275  $ 274 

NOTE 7—DERIVATIVE INSTRUMENTS

We have entered into commodity derivatives consisting of natural gas supply contracts for the commissioning and operation of the Liquefaction Project (“Physical Liquefaction Supply Derivatives”) and associated economic hedges (“Financial Liquefaction Supply Derivatives,” and collectively with the Physical Liquefaction Supply Derivatives, the “Liquefaction Supply Derivatives”).

We recognize our derivative instruments as either assets or liabilities and measure those instruments at fair value. None of our derivative instruments are designated as cash flow or fair value hedging instruments, and changes in fair value are recorded within our Consolidated Statements of Income to the extent not utilized for the commissioning process, in which case it is capitalized.

The following table shows the fair value of our derivative instruments that are required to be measured at fair value on a recurring basis as of June 30, 2021 and December 31, 2020 (in millions):
Fair Value Measurements as of
June 30, 2021 December 31, 2020
Quoted Prices in Active Markets
(Level 1)
Significant Other Observable Inputs
(Level 2)
Significant Unobservable Inputs
(Level 3)
Total Quoted Prices in Active Markets
(Level 1)
Significant Other Observable Inputs
(Level 2)
Significant Unobservable Inputs
(Level 3)
Total
Liquefaction Supply Derivatives asset (liability) $ (11) $ (7) $ 33  $ 15  $ $ (1) $ (21) $ (21)

We value our Liquefaction Supply Derivatives using a market-based approach incorporating present value techniques, as needed, using observable commodity price curves, when available, and other relevant data.

The fair value of our Physical Liquefaction Supply Derivatives is predominantly driven by observable and unobservable market commodity prices and, as applicable to our natural gas supply contracts, our assessment of the associated events deriving fair value, including evaluating whether the respective market is available as pipeline infrastructure is developed. The fair value of our Physical Liquefaction Supply Derivatives incorporates risk premiums related to the satisfaction of conditions precedent, such as completion and placement into service of relevant pipeline infrastructure to accommodate marketable physical gas flow. As of June 30, 2021 and December 31, 2020, some of our Physical Liquefaction Supply Derivatives existed within markets for which the pipeline infrastructure was under development to accommodate marketable physical gas flow.

We include a portion of our Physical Liquefaction Supply Derivatives as Level 3 within the valuation hierarchy as the fair value is developed through the use of internal models which incorporate significant unobservable inputs. In instances where observable data is unavailable, consideration is given to the assumptions that market participants would use in valuing the asset or liability. This includes assumptions about market risks, such as future prices of energy units for unobservable periods, liquidity, volatility and contract duration.

9


CHENIERE ENERGY PARTNERS, L.P. AND SUBSIDIARIES 
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—CONTINUED
(unaudited)
The Level 3 fair value measurements of natural gas positions within our Physical Liquefaction Supply Derivatives could be materially impacted by a significant change in certain natural gas prices. The following table includes quantitative information for the unobservable inputs for our Level 3 Physical Liquefaction Supply Derivatives as of June 30, 2021:
Net Fair Value Asset
(in millions)
Valuation Approach Significant Unobservable Input Range of Significant Unobservable Inputs / Weighted Average (1)
Physical Liquefaction Supply Derivatives $33 Market approach incorporating present value techniques Henry Hub basis spread
$(0.350) - $0.190 / $0.007
(1)    Unobservable inputs were weighted by the relative fair value of the instruments.

Increases or decreases in basis, in isolation, would decrease or increase, respectively, the fair value of our Physical Liquefaction Supply Derivatives.

The following table shows the changes in the fair value of our Level 3 Physical Liquefaction Supply Derivatives during the three and six months ended June 30, 2021 and 2020 (in millions):
Three Months Ended June 30, Six Months Ended June 30,
2021 2020 2021 2020
Balance, beginning of period $ (36) $ 49  $ (21) $ 24 
Realized and mark-to-market gains:
Included in cost of sales 67  58  32 
Purchases and settlements:
Purchases (1) —  — 
Settlements (1) (4) (6)
Transfers into Level 3, net (1) —  —  — 
Balance, end of period $ 33  $ 51  $ 33  $ 51 
Change in unrealized gains relating to instruments still held at end of period $ 67  $ $ 58  $ 32 
(1)    Transferred into Level 3 as a result of unobservable market, or out of Level 3 as a result of observable market for the underlying natural gas purchase agreements.

All counterparty derivative contracts provide for the unconditional right of set-off in the event of default. We have elected to report derivative assets and liabilities arising from our derivative contracts with the same counterparty on a net basis. The use of derivative instruments exposes us to counterparty credit risk, or the risk that a counterparty will be unable to meet its commitments in instances when our derivative instruments are in an asset position. Additionally, counterparties are at risk that we will be unable to meet our commitments in instances where our derivative instruments are in a liability position. We incorporate both our own nonperformance risk and the respective counterparty’s nonperformance risk in fair value measurements. In adjusting the fair value of our derivative contracts for the effect of nonperformance risk, we have considered the impact of any applicable credit enhancements, such as collateral postings, set-off rights and guarantees.

Liquefaction Supply Derivatives

SPL has entered into primarily index-based physical natural gas supply contracts and associated economic hedges to purchase natural gas for the commissioning and operation of the Liquefaction Project. The remaining terms of the physical natural gas supply contracts range up to 10 years, some of which commence upon the satisfaction of certain events or states of affairs. The terms of the Financial Liquefaction Supply Derivatives range up to approximately three years.

The notional natural gas position of our Liquefaction Supply Derivatives was approximately 5,078 TBtu and 4,970 TBtu as of June 30, 2021 and December 31, 2020, respectively, of which 91 TBtu for each of the periods were for a natural gas supply contract that SPL has with a related party.

10


CHENIERE ENERGY PARTNERS, L.P. AND SUBSIDIARIES 
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—CONTINUED
(unaudited)
Fair Value and Location of Derivative Assets and Liabilities on the Consolidated Balance Sheets

The following table shows the fair value and location of our Liquefaction Supply Derivatives on our Consolidated Balance Sheets (in millions):
Fair Value Measurements as of (1)
Consolidated Balance Sheets Location June 30, 2021 December 31, 2020
Current derivative assets $ 23  $ 14 
Derivative assets 21  11 
Total derivative assets 44  25 
Current derivative liabilities (21) (11)
Derivative liabilities (8) (35)
Total derivative liabilities (29) (46)
Derivative asset (liability), net $ 15  $ (21)
(1)    Does not include collateral posted with counterparties by us of $16 million and $4 million, which are included in other current assets in our Consolidated Balance Sheets as of June 30, 2021 and December 31, 2020, respectively. Includes a natural gas supply contract that SPL has with a related party, which had a fair value of zero as of both June 30, 2021 and December 31, 2020.

The following table shows the gain (loss) from changes in the fair value, settlements and location of our Liquefaction Supply Derivatives recorded on our Consolidated Statements of Income during the three and six months ended June 30, 2021 and 2020 (in millions):
 Consolidated Statements of Income Location (1) Three Months Ended June 30, Six Months Ended June 30,
2021 2020 2021 2020
LNG revenues $ —  $ (4) $ —  $ (4)
Cost of sales 56  12  54  33 
(1)    Does not include the realized value associated with derivative instruments that settle through physical delivery. Fair value fluctuations associated with commodity derivative activities are classified and presented consistently with the item economically hedged and the nature and intent of the derivative instrument.

11


CHENIERE ENERGY PARTNERS, L.P. AND SUBSIDIARIES 
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—CONTINUED
(unaudited)
Consolidated Balance Sheets Presentation

Our derivative instruments are presented on a net basis on our Consolidated Balance Sheets as described above. The following table shows the fair value of our derivatives outstanding on a gross and net basis (in millions):
Liquefaction Supply Derivatives
As of June 30, 2021
Gross assets $ 46 
Offsetting amounts (2)
Net assets $ 44 
Gross liabilities $ (33)
Offsetting amounts
Net liabilities $ (29)
As of December 31, 2020
Gross assets $ 69 
Offsetting amounts (44)
Net assets $ 25 
Gross liabilities $ (48)
Offsetting amounts
Net liabilities $ (46)

NOTE 8—OTHER NON-CURRENT ASSETS, NET

As of June 30, 2021 and December 31, 2020, other non-current assets, net consisted of the following (in millions):
June 30, December 31,
2021 2020
Advances made to municipalities for water system enhancements $ 82  $ 84 
Advances and other asset conveyances to third parties to support LNG terminal 33  33 
Advances made under EPC and non-EPC contracts
Tax-related prepayments and receivables 16  17 
Information technology service prepayments
Other 21  11 
Total other non-current assets, net $ 159  $ 160 

NOTE 9—ACCRUED LIABILITIES
 
As of June 30, 2021 and December 31, 2020, accrued liabilities consisted of the following (in millions):
June 30, December 31,
2021 2020
Interest costs and related debt fees $ 201  $ 203 
Accrued natural gas purchases 310  374 
LNG terminal and related pipeline costs 116  71 
Other accrued liabilities 22  10 
Total accrued liabilities $ 649  $ 658 

12


CHENIERE ENERGY PARTNERS, L.P. AND SUBSIDIARIES 
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—CONTINUED
(unaudited)
NOTE 10—DEBT
 
As of June 30, 2021 and December 31, 2020, our debt consisted of the following (in millions):
June 30, December 31,
2021 2020
Long-term debt:
SPL — 4.200% to 6.25% senior secured notes due between March 2022 and September 2037 and working capital facility (“2020 SPL Working Capital Facility”)
$ 12,994  $ 13,650 
Cheniere Partners — 4.000% to 5.625% senior notes due between October 2025 and March 2031 and credit facilities (“2019 CQP Credit Facilities”)
4,100  4,100 
Unamortized premium, discount and debt issuance costs, net of accumulated amortization (159) (170)
Total long-term debt, net of premium, discount and debt issuance costs 16,935  17,580 
Current debt:
SPL — current portion of 6.25% senior secured notes due March 2022 (“2022 SPL Senior Notes”) (1)
656  — 
Unamortized discount and debt issuance costs, net of accumulated amortization (2) — 
Total current debt, net of discount and debt issuance costs 654  — 
Total debt, net of premium, discount and debt issuance costs $ 17,589  $ 17,580 
(1)A portion of the 2022 SPL Senior Notes is categorized as long-term debt because the proceeds from the expected series of sales of approximately $347 million aggregate principal amount of senior secured notes due 2037, expected to be issued in the second half of 2021, subject to customary closing conditions, will be used to strategically refinance a portion of 2022 SPL Senior Notes and pay related fees, costs and expenses.

Issuances and Redemptions

The following table shows the issuances and redemptions of long-term debt during the six months ended June 30, 2021 (in millions):
Issuances Principal Amount Issued
Cheniere Partners — 4.000% Senior Notes due 2031 (the “2031 CQP Senior Notes”) (1)
$ 1,500 
Redemptions Principal Amount Redeemed
Cheniere Partners — 5.250% Senior Notes due 2025 (the “2025 CQP Senior Notes”) (1)
$ 1,500 
(1)Proceeds of the 2031 CQP Senior Notes, together with cash on hand, were used to redeem all of our outstanding 2025 CQP Senior Notes, resulting in the recognition of debt extinguishment costs of $54 million for the six months ended June 30, 2021 relating to the payment of early redemption fees and write off of unamortized debt premium and issuance costs.

13


CHENIERE ENERGY PARTNERS, L.P. AND SUBSIDIARIES 
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—CONTINUED
(unaudited)
Credit Facilities

Below is a summary of our credit facilities outstanding as of June 30, 2021 (in millions):
2020 SPL Working Capital Facility (1) 2019 CQP Credit Facilities
Original facility size $ 1,200  $ 1,500 
Less:
Outstanding balance —  — 
Commitments prepaid or terminated —  750 
Letters of credit issued 396  — 
Available commitment $ 804  $ 750 
Priority ranking Senior secured Senior secured
Interest rate on available balance
LIBOR plus 1.125% - 1.750% or base rate plus 0.125% - 0.750%
LIBOR plus 1.25% - 2.125% or base rate plus 0.25% - 1.125%
Weighted average interest rate of outstanding balance n/a n/a
Maturity date March 19, 2025 May 29, 2024
(1)The 2020 SPL Working Capital Facility contains customary conditions precedent for extensions of credit, as well as customary affirmative and negative covenants. SPL pays a commitment fee equal to an annual rate of 0.1% to 0.3% (depending on the then-current rating of SPL), which accrues on the daily amount of the total commitment less the sum of (1) the outstanding principal amount of loans, (2) letters of credit issued and (3) the outstanding principal amount of swing line loans.

Restrictive Debt Covenants

The indentures governing our senior notes and other agreements underlying our debt contain customary terms and events of default and certain covenants that, among other things, may limit us and our restricted subsidiaries’ ability to make certain investments or pay dividends or distributions.

As of June 30, 2021, we and SPL were in compliance with all covenants related to our respective debt agreements.

Interest Expense

Total interest expense, net of capitalized interest consisted of the following (in millions):
Three Months Ended June 30, Six Months Ended June 30,
2021 2020 2021 2020
Total interest cost $ 241  $ 259  $ 488  $ 513 
Capitalized interest (32) (23) (62) (43)
Total interest expense, net of capitalized interest $ 209  $ 236  $ 426  $ 470 

14


CHENIERE ENERGY PARTNERS, L.P. AND SUBSIDIARIES 
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—CONTINUED
(unaudited)
Fair Value Disclosures

The following table shows the carrying amount and estimated fair value of our debt (in millions):
June 30, 2021 December 31, 2020
  Carrying
Amount
Estimated
Fair Value
Carrying
Amount
Estimated
Fair Value
Senior notes — Level 2 (1) $ 16,950  $ 18,849  $ 16,950  $ 19,113 
Senior notes — Level 3 (2) 800  1,008 800  1,036 
Credit facilities — Level 3 (3) —  —  —  — 
(1)The Level 2 estimated fair value was based on quotes obtained from broker-dealers or market makers of these senior notes and other similar instruments.
(2)The Level 3 estimated fair value was calculated based on inputs that are observable in the market or that could be derived from, or corroborated with, observable market data, including interest rates based on debt issued by parties with comparable credit ratings to us and inputs that are not observable in the market.
(3)The Level 3 estimated fair value approximates the principal amount because the interest rates are variable and reflective of market rates and the debt may be repaid, in full or in part, at any time without penalty. 

NOTE 11—REVENUES FROM CONTRACTS WITH CUSTOMERS

The following table represents a disaggregation of revenue earned from contracts with customers during the three and six months ended June 30, 2021 and 2020 (in millions):
Three Months Ended June 30, Six Months Ended June 30,
2021 2020 2021 2020
LNG revenues (1) $ 1,597  $ 1,336  $ 3,266  $ 2,785 
LNG revenues—affiliate 211  61  425  249 
Regasification revenues 67  68  134  135 
Other revenues 14  27  23 
Total revenues from customers 1,889  1,474  3,852  3,192 
Net derivative loss (2) —  (4) —  (4)
Total revenues $ 1,889  $ 1,470  $ 3,852  $ 3,188 
(1)LNG revenues include revenues for LNG cargoes in which our customers exercised their contractual right to not take delivery but remained obligated to pay fixed fees irrespective of such election. During the three and six months ended June 30, 2020, we recognized $388 million and $404 million, respectively, in LNG revenues associated with LNG cargoes for which customers notified us that they would not take delivery, of which $244 million would have been recognized subsequent to June 30, 2020 had the cargoes been lifted pursuant to the delivery schedules with the customers. LNG revenues during the three months ended June 30, 2020 excluded $16 million that would have otherwise been recognized during the quarter if the cargoes were lifted pursuant to the delivery schedules with the customers. We did not have revenues associated with LNG cargoes for which customers notified us that they would not take delivery during the three and six months ended June 30, 2021. Revenue is generally recognized upon receipt of irrevocable notice that a customer will not take delivery because our customers have no contractual right to take delivery of such LNG cargo in future periods and our performance obligations with respect to such LNG cargo have been satisfied.
(2)See Note 7—Derivative Instruments for additional information about our derivatives.

15


CHENIERE ENERGY PARTNERS, L.P. AND SUBSIDIARIES 
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—CONTINUED
(unaudited)
Contract Assets

The following table shows our contract assets, net of current expected credit losses, which are classified as other current assets and other non-current assets, net on our Consolidated Balance Sheets (in millions):
June 30, December 31,
2021 2020
Contract assets, net of current expected credit losses $ $ — 

Contract assets represent our right to consideration for transferring goods or services to the customer under the terms of a sales contract when the associated consideration is not yet due. Changes in contract assets during the six months ended June 30, 2021 were primarily attributable to revenue recognized due to the delivery of LNG under certain SPAs for which the associated consideration was not yet due.

Deferred Revenue Reconciliation

The following table reflects the changes in our contract liabilities, which we classify as deferred revenue on our Consolidated Balance Sheets (in millions):
Six Months Ended June 30, 2021
Deferred revenue, beginning of period $ 137 
Cash received but not yet recognized in revenue 105 
Revenue recognized from prior period deferral (137)
Deferred revenue, end of period $ 105 

The following table reflects the changes in our contract liabilities to affiliate, which we classify as deferred revenue—affiliate on our Consolidated Balance Sheets (in millions):
Six Months Ended June 30, 2021
Deferred revenue—affiliate, beginning of period $
Cash received but not yet recognized in revenue 11 
Revenue recognized from prior period deferral (1)
Deferred revenue—affiliate, end of period $ 11 

Transaction Price Allocated to Future Performance Obligations

Because many of our sales contracts have long-term durations, we are contractually entitled to significant future consideration which we have not yet recognized as revenue. The following table discloses the aggregate amount of the transaction price that is allocated to performance obligations that have not yet been satisfied as of June 30, 2021 and December 31, 2020:
June 30, 2021 December 31, 2020
Unsatisfied
Transaction Price
(in billions)
Weighted Average Recognition Timing (years) (1) Unsatisfied
Transaction Price
(in billions)
Weighted Average Recognition Timing (years) (1)
LNG revenues $ 50.7  9 $ 52.1  9
LNG revenues—affiliate 0.2  3 0.1  1
Regasification revenues 2.0  4 2.1  5
Total revenues $ 52.9  $ 54.3 
(1)    The weighted average recognition timing represents an estimate of the number of years during which we shall have recognized half of the unsatisfied transaction price.

16


CHENIERE ENERGY PARTNERS, L.P. AND SUBSIDIARIES 
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—CONTINUED
(unaudited)
We have elected the following exemptions which omit certain potential future sources of revenue from the table above:
(1)We omit from the table above all performance obligations that are part of a contract that has an original expected duration of one year or less.
(2)The table above excludes substantially all variable consideration under our SPAs and TUAs. We omit from the table above all variable consideration that is allocated entirely to a wholly unsatisfied performance obligation or to a wholly unsatisfied promise to transfer a distinct good or service that forms part of a single performance obligation when that performance obligation qualifies as a series. The amount of revenue from variable fees that is not included in the transaction price will vary based on the future prices of Henry Hub throughout the contract terms, to the extent customers elect to take delivery of their LNG, and adjustments to the consumer price index. Certain of our contracts contain additional variable consideration based on the outcome of contingent events and the movement of various indexes. We have not included such variable consideration in the transaction price to the extent the consideration is considered constrained due to the uncertainty of ultimate pricing and receipt. Approximately 55% and 29% of our LNG revenues from contracts included in the table above during the three months ended June 30, 2021 and 2020, respectively, and approximately 53% and 37% of our LNG revenues from contracts included in the table above during the six months ended June 30, 2021 and 2020, respectively, were related to variable consideration received from customers. Approximately 91% and 100% of our LNG revenues—affiliate from contracts included in the table above during both the three and six months ended June 30, 2021 and 2020, respectively, were related to variable consideration received from customers. During each of the three and six months ended June 30, 2021, approximately 5% of our regasification revenues were related to variable consideration received from customers and during each of the three and six months ended June 30, 2020, approximately 6% of our regasification revenues were related to variable consideration received from customers.

We may enter into contracts to sell LNG that are conditioned upon one or both of the parties achieving certain milestones such as reaching a final investment decision on a certain liquefaction Train, obtaining financing or achieving substantial completion of a Train and any related facilities. These contracts are considered completed contracts for revenue recognition purposes and are included in the transaction price above when the conditions are considered probable of being met.

17


CHENIERE ENERGY PARTNERS, L.P. AND SUBSIDIARIES 
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—CONTINUED
(unaudited)
NOTE 12—RELATED PARTY TRANSACTIONS
 
Below is a summary of our related party transactions as reported on our Consolidated Statements of Income for the three and six months ended June 30, 2021 and 2020 (in millions):
Three Months Ended June 30, Six Months Ended June 30,
2021 2020 2021 2020
LNG revenues—affiliate
Cheniere Marketing Agreements $ 209  $ 59  $ 419  $ 241 
Contracts for Sale and Purchase of Natural Gas and LNG
Total LNG revenues—affiliate 211  61  425  249 
Cost of sales—affiliate
Cheniere Marketing Agreements —  —  34  — 
Contracts for Sale and Purchase of Natural Gas and LNG 12  20 
Total cost of sales—affiliate 12  54 
Cost of sales—related party
Natural Gas Transportation and Storage Agreements —  — 
Operating and maintenance expense—affiliate
Services Agreements 35  48  69  81 
Operating and maintenance expense—related party
Natural Gas Transportation and Storage Agreements 12  —  22  — 
General and administrative expense—affiliate
Services Agreements 21  24  42  49 

As of June 30, 2021 and December 31, 2020, we had $65 million and $184 million, respectively, of accounts receivable—affiliate under the agreements described below.

Cheniere Marketing Agreements

Cheniere Marketing SPA

Cheniere Marketing has an SPA (“Base SPA”) with SPL to purchase, at Cheniere Marketing’s option, any LNG produced by SPL in excess of that required for other customers at a price of 115% of Henry Hub plus $3.00 per MMBtu of LNG.

In May 2019, SPL and Cheniere Marketing entered into an amendment to the Base SPA to remove certain conditions related to the sale of LNG from Trains 5 and 6 of the Liquefaction Project and provide that cargoes rejected by Cheniere Marketing under the Base SPA can be sold by SPL to Cheniere Marketing at a contract price equal to a portion of the estimated net profits from the sale of such cargo.

Cheniere Marketing Master SPA

SPL has an agreement with Cheniere Marketing that allows the parties to sell and purchase LNG with each other by executing and delivering confirmations under this agreement. SPL executed a confirmation with Cheniere Marketing that obligated Cheniere Marketing in certain circumstances to buy LNG cargoes produced during the period while Bechtel Oil, Gas and Chemicals, Inc. (“Bechtel”) had control of, and was commissioning, Train 5 of the Liquefaction Project.

Cheniere Marketing Letter Agreements

In February 2021, SPL and Cheniere Marketing entered into a letter agreement for the sale of up to 31 cargoes to be delivered between 2021 and 2026 at a price of 115% of Henry Hub plus $1.72 per MMBtu.
18


CHENIERE ENERGY PARTNERS, L.P. AND SUBSIDIARIES 
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—CONTINUED
(unaudited)
In December 2020, SPL and Cheniere Marketing entered into a letter agreement for the sale of up to 30 cargoes scheduled for delivery in 2021 at a price of 115% of Henry Hub plus $0.728 per MMBtu.

In December 2019, SPL and Cheniere Marketing entered into a letter agreement for the sale of up to 43 cargoes that were delivered in 2020 at a price of 115% of Henry Hub plus $1.67 per MMBtu.

Facility Swap Agreement

In August 2020, SPL entered into an arrangement with subsidiaries of Cheniere to provide the ability, in limited circumstances, to potentially fulfill commitments to LNG buyers in the event operational conditions impact operations at either the Sabine Pass or Corpus Christi liquefaction facilities. The purchase price for such cargoes would be (i) 115% of the applicable natural gas feedstock purchase price or (ii) a free-on-board U.S. Gulf Coast LNG market price, whichever is greater.

Natural Gas Transportation and Storage Agreements
SPL is party to various natural gas transportation and storage agreements and CTPL is party to an operational balancing agreement with a related party in the ordinary course of business for the operation of the Liquefaction Project, with initial primary terms of up to 10 years with extension rights. This related party is partially owned by Brookfield, who indirectly acquired a portion of our limited partner interests in September 2020 through its purchase of a portion of CQP Target Holdco’s equity interests. We recorded operating and maintenance expense—related party of $12 million and $22 million and cost of sales—related party of $1 million and $1 million during the three and six months ended June 30, 2021, respectively, and accrued liabilities—related party of $4 million as of both June 30, 2021 and December 31, 2020 with this related party.

Services Agreements

As of June 30, 2021 and December 31, 2020, we had $154 million and $144 million of advances to affiliates, respectively, under the services agreements described below. The non-reimbursement amounts incurred under these agreements are recorded in general and administrative expense—affiliate.

Cheniere Partners Services Agreement

We have a services agreement with Cheniere Terminals, a subsidiary of Cheniere, pursuant to which Cheniere Terminals is entitled to a quarterly non-accountable overhead reimbursement charge of $3 million (adjusted for inflation) for the provision of various general and administrative services for our benefit. In addition, Cheniere Terminals is entitled to reimbursement for all audit, tax, legal and finance fees incurred by Cheniere Terminals that are necessary to perform the services under the agreement.

Cheniere Investments Information Technology Services Agreement

Cheniere Investments has an information technology services agreement with Cheniere, pursuant to which Cheniere Investments’ subsidiaries receive certain information technology services. On a quarterly basis, the various entities receiving the benefit are invoiced by Cheniere Investments according to the cost allocation percentages set forth in the agreement. In addition, Cheniere is entitled to reimbursement for all costs incurred by Cheniere that are necessary to perform the services under the agreement.

19


CHENIERE ENERGY PARTNERS, L.P. AND SUBSIDIARIES 
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—CONTINUED
(unaudited)
SPLNG O&M Agreement

SPLNG has a long-term operation and maintenance agreement (the “SPLNG O&M Agreement”) with Cheniere Investments pursuant to which SPLNG receives all necessary services required to operate and maintain the Sabine Pass LNG receiving terminal. SPLNG pays a fixed monthly fee of $130,000 (indexed for inflation) under the SPLNG O&M Agreement and the cost of a bonus equal to 50% of the salary component of labor costs in certain circumstances to be agreed upon between SPLNG and Cheniere Investments at the beginning of each operating year. In addition, SPLNG is required to reimburse Cheniere Investments for its operating expenses, which consist primarily of labor expenses. Cheniere Investments provides the services required under the SPLNG O&M Agreement pursuant to a secondment agreement with a wholly owned subsidiary of Cheniere. All payments received by Cheniere Investments under the SPLNG O&M Agreement are required to be remitted to such subsidiary.

SPLNG MSA

SPLNG has a long-term management services agreement (the “SPLNG MSA”) with Cheniere Terminals, pursuant to which Cheniere Terminals manages the operation of the Sabine Pass LNG receiving terminal, excluding those matters provided for under the SPLNG O&M Agreement. SPLNG pays a monthly fixed fee of $520,000 (indexed for inflation) under the SPLNG MSA.

SPL O&M Agreement

SPL has an operation and maintenance agreement (the “SPL O&M Agreement”) with Cheniere Investments pursuant to which SPL receives all of the necessary services required to construct, operate and maintain the Liquefaction Project. Before each Train of the Liquefaction Project is operational, the services to be provided include, among other services, obtaining governmental approvals on behalf of SPL, preparing an operating plan for certain periods, obtaining insurance, preparing staffing plans and preparing status reports. After each Train is operational, the services include all necessary services required to operate and maintain the Train. Prior to the substantial completion of each Train of the Liquefaction Project, in addition to reimbursement of operating expenses, SPL is required to pay a monthly fee equal to 0.6% of the capital expenditures incurred in the previous month. After substantial completion of each Train, for services performed while the Train is operational, SPL will pay, in addition to the reimbursement of operating expenses, a fixed monthly fee of $83,333 (indexed for inflation) for services with respect to the Train. Cheniere Investments provides the services required under the SPL O&M Agreement pursuant to a secondment agreement with a wholly owned subsidiary of Cheniere. All payments received by Cheniere Investments under the SPL O&M Agreement are required to be remitted to such subsidiary.

SPL MSA

SPL has a management services agreement (the “SPL MSA”) with Cheniere Terminals pursuant to which Cheniere Terminals manages the construction and operation of the Liquefaction Project, excluding those matters provided for under the SPL O&M Agreement. The services include, among other services, exercising the day-to-day management of SPL’s affairs and business, managing SPL’s regulatory matters, managing bank and brokerage accounts and financial books and records of SPL’s business and operations, entering into financial derivatives on SPL’s behalf and providing contract administration services for all contracts associated with the Liquefaction Project. Prior to the substantial completion of each Train of the Liquefaction Project, SPL pays a monthly fee equal to 2.4% of the capital expenditures incurred in the previous month. After substantial completion of each Train, SPL will pay a fixed monthly fee of $541,667 (indexed for inflation) for services with respect to such Train.

CTPL O&M Agreement

CTPL has an amended long-term operation and maintenance agreement (the “CTPL O&M Agreement”) with Cheniere Investments pursuant to which CTPL receives all necessary services required to operate and maintain the Creole Trail Pipeline. CTPL is required to reimburse Cheniere Investments for its operating expenses, which consist primarily of labor expenses. Cheniere Investments provides the services required under the CTPL O&M Agreement pursuant to a secondment agreement with a wholly owned subsidiary of Cheniere. All payments received by Cheniere Investments under the CTPL O&M Agreement are required to be remitted to such subsidiary.

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CHENIERE ENERGY PARTNERS, L.P. AND SUBSIDIARIES 
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—CONTINUED
(unaudited)
CTPL MSA

CTPL has a management services agreement (the “CTPL MSA”) with Cheniere Terminals pursuant to which Cheniere Terminals manages the operations and business of the Creole Trail Pipeline, excluding those matters provided for under the CTPL O&M Agreement. The services include, among other services, exercising the day-to-day management of CTPL’s affairs and business, managing CTPL’s regulatory matters, managing bank and brokerage accounts and financial books and records of CTPL’s business and operations, providing contract administration services for all contracts associated with the Creole Trail Pipeline and obtaining insurance. CTPL is required to reimburse Cheniere Terminals for the aggregate of all costs and expenses incurred in the course of performing the services under the CTPL MSA.
Natural Gas Supply Agreement

SPL is party to a natural gas supply agreement with a related party in the ordinary course of business, to obtain a fixed minimum daily volume of feed gas for the operation of the Liquefaction Project. This related party is partially owned by Blackstone, who also partially owns our limited partner interests. The term of the agreement is for five years, which can commence no earlier than November 1, 2021 and no later than November 1, 2022, following the achievement of contractually-defined conditions precedent.

Agreement to Fund SPLNG’s Cooperative Endeavor Agreements
 
SPLNG has executed Cooperative Endeavor Agreements (“CEAs”) with various Cameron Parish, Louisiana taxing authorities that allowed them to collect certain advanced payments of annual ad valorem taxes from SPLNG from 2007 through 2016. This initiative represented an aggregate commitment of $25 million over 10 years in order to aid in their reconstruction efforts following Hurricane Rita. In exchange for SPLNG’s advance payments of annual ad valorem taxes, Cameron Parish shall grant SPLNG a dollar-for-dollar credit against future ad valorem taxes to be levied against the Sabine Pass LNG terminal as early as 2019. Beginning in September 2007, SPLNG entered into various agreements with Cheniere Marketing, pursuant to which Cheniere Marketing would pay SPLNG additional TUA revenues equal to any and all amounts payable by SPLNG to the Cameron Parish taxing authorities under the CEAs. In exchange for such amounts received as TUA revenues from Cheniere Marketing, SPLNG will make payments to Cheniere Marketing equal to the dollar-for-dollar credit applied to the ad valorem tax levied against the Sabine Pass LNG terminal in the given year.

On a consolidated basis, these advance tax payments were recorded to other non-current assets, and payments from Cheniere Marketing that SPLNG utilized to make the ad valorem tax payments were recorded as obligations. We had $2 million in due to affiliates as of both June 30, 2021 and December 31, 2020 and $16 million and $17 million of other non-current liabilities—affiliate as of June 30, 2021 and December 31, 2020, respectively, from these payments received from Cheniere Marketing.

Contracts for Sale and Purchase of Natural Gas and LNG
 
SPLNG is able to sell and purchase natural gas and LNG under agreements with Cheniere Marketing. Under these agreements, SPLNG purchases natural gas or LNG from Cheniere Marketing at a sales price equal to the actual purchase price paid by Cheniere Marketing to suppliers of the natural gas or LNG, plus any third-party costs incurred by Cheniere Marketing with respect to the receipt, purchase and delivery of natural gas or LNG to the Sabine Pass LNG terminal.

SPL has an agreement with CCL that allows them to sell and purchase natural gas from each other. Natural gas purchased under this agreement is initially recorded as inventory and then to cost of sales—affiliate upon its sale, except for purchases related to commissioning activities which are capitalized as LNG terminal construction-in-process. Natural gas sold under this agreement is recorded as LNG revenues—affiliate.

Terminal Marine Services Agreement

In connection with its tug boat lease, Tug Services entered into an agreement with Cheniere Terminals to provide its LNG cargo vessels with tug boat and marine services at the Sabine Pass LNG terminal. The agreement also provides that Tug Services shall contingently pay Cheniere Terminals a portion of its future revenues. Accordingly, Tug Services distributed $3 million and $2 million during the three months ended June 30, 2021 and 2020, respectively, and $4 million and $3 million
21


CHENIERE ENERGY PARTNERS, L.P. AND SUBSIDIARIES 
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—CONTINUED
(unaudited)
during the six months ended June 30, 2021 and 2020, respectively, to Cheniere Terminals, which is recognized as part of the distributions to our general partner interest holders on our Consolidated Statements of Partners’ Equity.

LNG Terminal Export Agreement

SPLNG and Cheniere Marketing have an LNG terminal export agreement that provides Cheniere Marketing the ability to export LNG from the Sabine Pass LNG terminal.  SPLNG did not record any revenues associated with this agreement during the three and six months ended June 30, 2021 and 2020.

State Tax Sharing Agreements

SPLNG has a state tax sharing agreement with Cheniere.  Under this agreement, Cheniere has agreed to prepare and file all state and local tax returns which SPLNG and Cheniere are required to file on a combined basis and to timely pay the combined state and local tax liability. If Cheniere, in its sole discretion, demands payment, SPLNG will pay to Cheniere an amount equal to the state and local tax that SPLNG would be required to pay if its state and local tax liability were calculated on a separate company basis. There have been no state and local taxes paid by Cheniere for which Cheniere could have demanded payment from SPLNG under this agreement; therefore, Cheniere has not demanded any such payments from SPLNG. The agreement is effective for tax returns due on or after January 1, 2008.

SPL has a state tax sharing agreement with Cheniere. Under this agreement, Cheniere has agreed to prepare and file all state and local tax returns which SPL and Cheniere are required to file on a combined basis and to timely pay the combined state and local tax liability. If Cheniere, in its sole discretion, demands payment, SPL will pay to Cheniere an amount equal to the state and local tax that SPL would be required to pay if SPL’s state and local tax liability were calculated on a separate company basis. There have been no state and local taxes paid by Cheniere for which Cheniere could have demanded payment from SPL under this agreement; therefore, Cheniere has not demanded any such payments from SPL. The agreement is effective for tax returns due on or after August 2012.

CTPL has a state tax sharing agreement with Cheniere. Under this agreement, Cheniere has agreed to prepare and file all state and local tax returns which CTPL and Cheniere are required to file on a combined basis and to timely pay the combined state and local tax liability. If Cheniere, in its sole discretion, demands payment, CTPL will pay to Cheniere an amount equal to the state and local tax that CTPL would be required to pay if CTPL’s state and local tax liability were calculated on a separate company basis. There have been no state and local taxes paid by Cheniere for which Cheniere could have demanded payment from CTPL under this agreement; therefore, Cheniere has not demanded any such payments from CTPL. The agreement is effective for tax returns due on or after May 2013.

NOTE 13—NET INCOME PER COMMON UNIT
 
Net income per common unit for a given period is based on the distributions that will be made to the unitholders with respect to the period plus an allocation of undistributed net income based on provisions of the partnership agreement, divided by the weighted average number of common units outstanding. Distributions paid by us are presented on the Consolidated Statements of Partners’ Equity. On July 27, 2021, we declared a $0.665 distribution per common unit and the related distribution to our general partner and IDR holders that will be paid on August 13, 2021 to unitholders of record as of August 6, 2021 for the period from April 1, 2021 to June 30, 2021.

The two-class method dictates that net income for a period be reduced by the amount of available cash that will be distributed with respect to that period and that any residual amount representing undistributed net income to be allocated to common unitholders and other participating unitholders to the extent that each unit may share in net income as if all of the net income for the period had been distributed in accordance with the partnership agreement. Undistributed income is allocated to participating securities based on the distribution waterfall for available cash specified in the partnership agreement. Undistributed losses (including those resulting from distributions in excess of net income) are allocated to common units and other participating securities on a pro rata basis based on provisions of the partnership agreement. Distributions are treated as distributed earnings in the computation of earnings per common unit even though cash distributions are not necessarily derived from current or prior period earnings.

22


CHENIERE ENERGY PARTNERS, L.P. AND SUBSIDIARIES 
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—CONTINUED
(unaudited)
The following table provides a reconciliation of net income and the allocation of net income to the common units, the subordinated units, the general partner units and IDRs for purposes of computing basic and diluted net income per unit (in millions, except per unit data).
  Limited Partner Units
  Total Common Units Subordinated Units General Partner Units IDR
Three Months Ended June 30, 2021
Net income $ 395 
Declared distributions 361  322  —  32 
Assumed allocation of undistributed net income (1) $ 34  33  —  — 
Assumed allocation of net income $ 355  $ —  $ $ 32 
Weighted average units outstanding 484.0  — 
Basic and diluted net income per unit $ 0.73  $ — 
Three Months Ended June 30, 2020
Net income $ 406 
Declared distributions 341  225  87  22 
Assumed allocation of undistributed net income (1) $ 65  46  18  — 
Assumed allocation of net income $ 271  $ 105  $ $ 22 
Weighted average units outstanding 348.6  135.4 
Basic and diluted net income per unit $ 0.78  $ 0.78 
Six Months Ended June 30, 2021
Net income $ 742 
Declared distributions 716  641  —  14  61 
Assumed allocation of undistributed net income (1) $ 26  25  —  — 
Assumed allocation of net income $ 666  $ —  $ 15  $ 61 
Weighted average units outstanding 484.0  — 
Basic and diluted net income per unit $ 1.38  $ — 
Six Months Ended June 30, 2020
Net income $ 841 
Declared distributions 678  448  174  14  42 
Assumed allocation of undistributed net income (1) $ 163  115  45  — 
Assumed allocation of net income $ 563  $ 219  $ 17  $ 42 
Weighted average units outstanding 348.6  135.4 
Basic and diluted net income per unit $ 1.62  $ 1.62 
(1)Under our partnership agreement, the IDRs participate in net income only to the extent of the amount of cash distributions actually declared, thereby excluding the IDRs from participating in undistributed net income.
23


CHENIERE ENERGY PARTNERS, L.P. AND SUBSIDIARIES 
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—CONTINUED
(unaudited)
NOTE 14—CUSTOMER CONCENTRATION
  
The following table shows external customers with revenues of 10% or greater of total revenues from external customers and external customers with accounts receivable, net of current expected credit losses and contract assets, net of current expected credit losses balances of 10% or greater of total accounts receivable, net of current expected credit losses and contract assets, net of current expected credit losses from external customers:
Percentage of Total Revenues from External Customers Percentage of Accounts Receivable, Net and Contract Assets, Net from External Customers
Three Months Ended June 30, Six Months Ended June 30, June 30, December 31,
2021 2020 2021 2020 2021 2020
Customer A 26% 25% 27% 26% 24% 31%
Customer B 16% 15% 16% 15% 16% 21%
Customer C 17% 17% 18% 16% 16% *
Customer D 18% 16% 16% 16% 17% 22%
Customer E 12% 11% 12% 11% * *
* Less than 10%

NOTE 15—SUPPLEMENTAL CASH FLOW INFORMATION
 
The following table provides supplemental disclosure of cash flow information (in millions):
Six Months Ended June 30,
2021 2020
Cash paid during the period for interest on debt, net of amounts capitalized $ 410  $ 483 

The balance in property, plant and equipment, net of accumulated depreciation funded with accounts payable and accrued liabilities (including affiliate) was $252 million and $208 million as of June 30, 2021 and 2020, respectively.

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ITEM 2.    MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Information Regarding Forward-Looking Statements
This quarterly report contains certain statements that are, or may be deemed to be, “forward-looking statements” within the meaning of Section 27A of the Securities Act of 1933, as amended (the “Securities Act”), and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”). All statements, other than statements of historical or present facts or conditions, included herein or incorporated herein by reference are “forward-looking statements.” Included among “forward-looking statements” are, among other things:
statements regarding our ability to pay distributions to our unitholders; 
statements regarding our expected receipt of cash distributions from SPLNG, SPL or CTPL; 
statements that we expect to commence or complete construction of our proposed LNG terminals, liquefaction facilities, pipeline facilities or other projects, or any expansions or portions thereof, by certain dates, or at all;
statements regarding future levels of domestic and international natural gas production, supply or consumption or future levels of LNG imports into or exports from North America and other countries worldwide or purchases of natural gas, regardless of the source of such information, or the transportation or other infrastructure or demand for and prices related to natural gas, LNG or other hydrocarbon products;
statements regarding any financing transactions or arrangements, or our ability to enter into such transactions;
statements relating to the construction of our Trains, including statements concerning the engagement of any EPC contractor or other contractor and the anticipated terms and provisions of any agreement with any EPC or other contractor, and anticipated costs related thereto;
statements regarding any SPA or other agreement to be entered into or performed substantially in the future, including any revenues anticipated to be received and the anticipated timing thereof, and statements regarding the amounts of total LNG regasification, natural gas liquefaction or storage capacities that are, or may become, subject to contracts;
statements regarding counterparties to our commercial contracts, construction contracts and other contracts;
statements regarding our planned development and construction of additional Trains, including the financing of such Trains;
statements that our Trains, when completed, will have certain characteristics, including amounts of liquefaction capacities;
statements regarding our business strategy, our strengths, our business and operation plans or any other plans, forecasts, projections, or objectives, including anticipated revenues, capital expenditures, maintenance and operating costs and cash flows, any or all of which are subject to change;
statements regarding legislative, governmental, regulatory, administrative or other public body actions, approvals, requirements, permits, applications, filings, investigations, proceedings or decisions;
statements regarding the outbreak of COVID-19 and its impact on our business and operating results, including any customers not taking delivery of LNG cargoes, the ongoing credit worthiness of our contractual counterparties, any disruptions in our operations or construction of our Trains and the health and safety of Cheniere’s employees, and on our customers, the global economy and the demand for LNG; and
any other statements that relate to non-historical or future information.
All of these types of statements, other than statements of historical or present facts or conditions, are forward-looking statements. In some cases, forward-looking statements can be identified by terminology such as “may,” “will,” “could,” “should,” “achieve,” “anticipate,” “believe,” “contemplate,” “continue,” “estimate,” “expect,” “intend,” “plan,” “potential,” “predict,” “project,” “pursue,” “target,” the negative of such terms or other comparable terminology. The forward-looking statements contained in this quarterly report are largely based on our expectations, which reflect estimates and assumptions made by our management. These estimates and assumptions reflect our best judgment based on currently known market conditions and other factors. Although we believe that such estimates are reasonable, they are inherently uncertain and involve
25


a number of risks and uncertainties beyond our control. In addition, assumptions may prove to be inaccurate. We caution that the forward-looking statements contained in this quarterly report are not guarantees of future performance and that such statements may not be realized or the forward-looking statements or events may not occur. Actual results may differ materially from those anticipated or implied in forward-looking statements as a result of a variety of factors described in this quarterly report and in the other reports and other information that we file with the SEC, including those discussed under “Risk Factors” in our annual report on Form 10-K for the fiscal year ended December 31, 2020. All forward-looking statements attributable to us or persons acting on our behalf are expressly qualified in their entirety by these risk factors. These forward-looking statements speak only as of the date made, and other than as required by law, we undertake no obligation to update or revise any forward-looking statement or provide reasons why actual results may differ, whether as a result of new information, future events or otherwise.

Introduction
 
The following discussion and analysis presents management’s view of our business, financial condition and overall performance and should be read in conjunction with our Consolidated Financial Statements and the accompanying notes. This information is intended to provide investors with an understanding of our past performance, current financial condition and outlook for the future. Our discussion and analysis includes the following subjects: 
 
Overview of Business
 
We are a publicly traded Delaware limited partnership formed by Cheniere in 2006. We provide clean, secure and affordable LNG to integrated energy companies, utilities and energy trading companies around the world. We aspire to conduct our business in a safe and responsible manner, delivering a reliable, competitive and integrated source of LNG to our customers.

The Sabine Pass LNG terminal, one of the largest LNG production facilities in the world, is located in Cameron Parish, Louisiana, and has natural gas liquefaction facilities consisting of five operational natural gas liquefaction Trains and one additional Train under construction that is expected to be substantially completed in the first half of 2022, for a total production capacity of approximately 30 mtpa of LNG (the “Liquefaction Project”). The Sabine Pass LNG terminal also has operational regasification facilities that include five LNG storage tanks with aggregate capacity of approximately 17 Bcfe, two existing marine berths and one under construction that can each accommodate vessels with nominal capacity of up to 266,000 cubic meters and vaporizers with regasification capacity of approximately 4 Bcf/d. We also own a 94-mile pipeline through our subsidiary, CTPL, that interconnects the Sabine Pass LNG terminal with a number of large interstate pipelines.

Additionally, we are committed to the responsible and proactive management of our most important environmental, social and governance (“ESG”) impacts, risks and opportunities. Cheniere published its 2020 Corporate Responsibility (“CR”) report, which details our strategy and progress on ESG issues, as well as our efforts on integrating climate considerations into our business strategy and taking a leadership position on increased environmental transparency, including conducting a climate scenario analysis and our plan to provide LNG customers with Cargo Emission Tags. Cheniere’s CR report is available at cheniere.com/IMPACT.

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Overview of Significant Events

Our significant events since January 1, 2021 and through the filing date of this Form 10-Q include the following:  
Operational
As of July 31, 2021, approximately 1,350 cumulative LNG cargoes totaling over 90 million tonnes of LNG have been produced, loaded and exported from the Liquefaction Project.
Financial
We completed the following financing transactions:
During 2021, SPL entered into a series of note purchase agreements for the sale of approximately $347 million aggregate principal amount of Senior Secured Notes due 2037 (the “2037 SPL Private Placement Senior Secured Notes”) on a private placement basis. The 2037 SPL Private Placement Senior Secured Notes are expected to be issued in the second half of 2021, subject to customary closing conditions, and the net proceeds will be used to strategically refinance a portion of SPL’s outstanding 6.25% SPL Senior Secured Notes due 2022 and pay related fees, costs and expenses. The 2037 SPL Private Placement Senior Secured Notes will be fully amortizing, with a weighted average life of over 10 years.
In March 2021, Cheniere Partners issued an aggregate principal amount of approximately $1.5 billion of 4.000% Senior Notes due 2031 (the “2031 CQP Senior Notes”). The net proceeds of the 2031 CQP Senior Notes, along with cash on hand, were used to refinance the 5.250% Senior Notes due 2025 (the “2025 CQP Senior Notes”) and to pay fees and expenses in connection with the refinancing.
In February 2021, Fitch Ratings (“Fitch”) changed the outlook of SPL’s senior secured notes rating to positive from stable and the outlook of our long-term issuer default rating and senior unsecured notes rating to positive from stable.
In April 2021, S&P Global Ratings changed the outlook on our ratings to positive from negative.

Results of Operations

The following charts summarize the total revenues and total LNG volumes loaded from our Liquefaction Project (including both operational and commissioning volumes) during the six months ended June 30, 2021 and 2020:
CQP-20210630_G2.JPG CQP-20210630_G3.JPG
(1)
The six months ended June 30, 2021 excludes eight TBtu that were loaded at our affiliate’s facility.

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Net income
Three Months Ended June 30, Six Months Ended June 30,
(in millions, except per share data) 2021 2020 Change 2021 2020 Change
Net income $ 395  $ 406  $ (11) $ 742  $ 841  $ (99)
Basic and diluted net income per common unit 0.73  0.78  (0.05) 1.38  1.62  (0.24)

Net income decreased by $11 million during the three months ended June 30, 2021 from the comparable period in 2020, primarily as a result of decreased margins due to the non-recurrence, during the three months ended June 30, 2021, of accelerated revenues recognized from LNG cargoes for which customers notified us that they would not take delivery, which were partially offset by increased revenue from increased volume of LNG delivered between the periods, decreased loss on modification or extinguishment of debt and decreased interest expense, net of capitalized interest.

Net income decreased by $99 million during the six months ended June 30, 2021 from the comparable period in 2020, primarily as a result of decreased margins due to the non-recurrence, during the six months ended June 30, 2021, of accelerated revenues recognized from LNG cargoes for which customers notified us that they would not take delivery, which were partially offset by increased revenue from increased volume of LNG delivered between the periods. In addition to decreased margins, net income also decreased due to increased loss on extinguishment of debt, which was partially offset by decreased interest expense, net of capitalized interest.

We enter into derivative instruments to manage our exposure to commodity-related marketing and price risk. Derivative instruments are reported at fair value on our Consolidated Financial Statements. In some cases, the underlying transactions being economically hedged are accounted for under the accrual method of accounting, whereby revenues and expenses are recognized only upon delivery, receipt or realization of the underlying transaction. Because the recognition of derivative instruments at fair value has the effect of recognizing gains or losses relating to future period exposure, use of derivative instruments may increase the volatility of our results of operations based on changes in market pricing, counterparty credit risk and other relevant factors.

Revenues
Three Months Ended June 30, Six Months Ended June 30,
(in millions, except volumes) 2021 2020 Change 2021 2020 Change
LNG revenues $ 1,597  $ 1,332  $ 265  $ 3,266  $ 2,781  $ 485 
LNG revenues—affiliate 211  61  150  425  249  176 
Regasification revenues 67  68  (1) 134  135  (1)
Other revenues 14  27  23 
Total revenues $ 1,889  $ 1,470  $ 419  $ 3,852  $ 3,188  $ 664 
LNG volumes recognized as revenues (in TBtu) (1) 313  207  106  638  534  104 
(1)    Excludes volume associated with cargoes for which customers notified us that they would not take delivery. During the six months ended June 30, 2021, includes eight TBtu that were loaded at our affiliate’s facility.

Total revenues increased $419 million and $664 million during the three and six months ended June 30, 2021, respectively, from the comparable periods in 2020, primarily as a result of increased revenues per MMBtu and higher volume of LNG delivered between the periods due to the delivery of all available volume of LNG during the three and six months ended June 30, 2021. During the three and six months ended June 30, 2020, we recognized $388 million and $404 million, respectively, in LNG revenues associated with LNG cargoes for which customers notified us that they would not take delivery, of which $244 million would have been recognized subsequent to June 30, 2020 had the cargoes been lifted pursuant to the delivery schedules with the customers. LNG revenues during the three months ended June 30, 2020 excluded $16 million that would have otherwise been recognized during the quarter if the cargoes were lifted pursuant to the delivery schedules with the customers. We did not have revenues associated with LNG cargoes for which customers notified us that they would not take delivery during the three and six months ended June 30, 2021.

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Also included in LNG revenues are sales of certain unutilized natural gas procured for the liquefaction process and gains and losses from derivative instruments, which include the realized value associated with a portion of derivative instruments that settle through physical delivery. We recognized revenues of $12 million and $41 million during the three months ended June 30, 2021 and 2020, respectively, and $60 million and $81 million during the six months ended June 30, 2021 and 2020, respectively, related to these transactions.

Operating costs and expenses
Three Months Ended June 30, Six Months Ended June 30,
(in millions) 2021 2020 Change 2021 2020 Change
Cost of sales $ 888  $ 398  $ 490  $ 1,836  $ 1,097  $ 739 
Cost of sales—affiliate 12  54  49 
Cost of sales—related party —  — 
Operating and maintenance expense 168  165  317  317  — 
Operating and maintenance expense—affiliate 35  48  (13) 69  81  (12)
Operating and maintenance expense—related party 12  —  12  22  —  22 
Development expense —  —