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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 September 30, 2022
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)
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Delaware |
20-5913059 |
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(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:
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Title of each class |
Trading Symbol |
Name of each exchange on which registered |
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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.
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Large accelerated filer |
☒ |
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Accelerated filer |
☐ |
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Non-accelerated filer |
☐ |
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Smaller reporting company |
☐ |
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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 October 31, 2022, the registrant had 484,031,623 common
units outstanding.
CHENIERE ENERGY PARTNERS, L.P.
TABLE OF CONTENTS
DEFINITIONS
As used in this quarterly report, the terms listed below have the
following meanings:
Common Industry and Other Terms
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ASU |
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Accounting Standards Update |
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Bcf |
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billion cubic feet |
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Bcf/d |
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billion cubic feet per day |
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Bcf/yr |
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billion cubic feet per year |
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Bcfe |
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billion cubic feet equivalent |
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DOE |
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U.S. Department of Energy |
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EPC |
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engineering, procurement and construction |
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FASB |
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Financial Accounting Standards Board |
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FERC |
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Federal Energy Regulatory Commission |
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FTA countries |
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countries with which the United States has a free trade agreement
providing for national treatment for trade in natural
gas |
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GAAP |
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generally accepted accounting principles in the United
States |
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Henry Hub |
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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 |
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IPM agreements |
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integrated production marketing agreements in which the gas
producer sells to us gas on a global LNG index price, less a fixed
liquefaction fee, shipping and other costs |
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LIBOR |
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London Interbank Offered Rate |
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LNG |
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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 |
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MMBtu |
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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 |
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mtpa |
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million tonnes per annum |
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non-FTA countries |
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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 |
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SEC |
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U.S. Securities and Exchange Commission |
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SPA |
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LNG sale and purchase agreement |
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TBtu |
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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
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Train |
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an industrial facility comprised of a series of refrigerant
compressor loops used to cool natural gas into LNG |
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TUA |
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terminal use agreement |
Abbreviated Legal Entity Structure
The following diagram depicts our abbreviated legal entity
structure as of September 30, 2022, including our ownership of
certain subsidiaries, and the references to these entities used in
this quarterly report:
Unless the context requires otherwise, references to “CQP,” “the
Partnership,” “we,” “us” and “our” refer to Cheniere Energy
Partners, L.P. and its consolidated subsidiaries, including SPLNG,
SPL and CTPL.
PART I. FINANCIAL INFORMATION
ITEM 1. CONSOLIDATED FINANCIAL
STATEMENTS
CHENIERE ENERGY PARTNERS, L.P. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(in millions, except per unit data)
(unaudited)
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Three Months Ended September 30, |
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Nine Months Ended September 30, |
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2022 |
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2021 |
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2022 |
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2021 |
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Revenues |
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LNG revenues |
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$ |
3,130 |
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$ |
1,791 |
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$ |
8,577 |
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$ |
5,057 |
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LNG revenues—affiliate |
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1,376 |
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453 |
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3,268 |
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878 |
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LNG revenues—related party |
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— |
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— |
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4 |
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— |
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Regasification revenues |
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455 |
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68 |
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591 |
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202 |
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Other revenues |
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15 |
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12 |
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45 |
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39 |
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|
|
Total revenues |
|
4,976 |
|
|
2,324 |
|
|
12,485 |
|
|
6,176 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating costs and expenses |
|
|
|
|
|
|
|
|
|
|
|
Cost of sales (excluding items shown separately below) |
|
4,739 |
|
|
1,342 |
|
|
10,445 |
|
|
3,178 |
|
|
|
|
Cost of sales—affiliate |
|
104 |
|
|
8 |
|
|
166 |
|
|
62 |
|
|
|
|
Cost of sales—related party |
|
— |
|
|
— |
|
|
1 |
|
|
1 |
|
|
|
|
Operating and maintenance expense |
|
189 |
|
|
148 |
|
|
550 |
|
|
465 |
|
|
|
|
Operating and maintenance expense—affiliate |
|
39 |
|
|
34 |
|
|
118 |
|
|
103 |
|
|
|
|
Operating and maintenance expense—related party |
|
18 |
|
|
12 |
|
|
45 |
|
|
34 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
General and administrative expense |
|
3 |
|
|
2 |
|
|
3 |
|
|
7 |
|
|
|
|
General and administrative expense—affiliate |
|
23 |
|
|
22 |
|
|
70 |
|
|
64 |
|
|
|
|
Depreciation and amortization expense |
|
160 |
|
|
140 |
|
|
469 |
|
|
417 |
|
|
|
|
Other |
|
— |
|
|
— |
|
|
— |
|
|
7 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total operating costs and expenses |
|
5,275 |
|
|
1,708 |
|
|
11,867 |
|
|
4,338 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income (loss) from operations |
|
(299) |
|
|
616 |
|
|
618 |
|
|
1,838 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other income (expense) |
|
|
|
|
|
|
|
|
|
|
|
Interest expense, net of capitalized interest |
|
(222) |
|
|
(210) |
|
|
(641) |
|
|
(636) |
|
|
|
|
Loss on modification or extinguishment of debt |
|
— |
|
|
(27) |
|
|
— |
|
|
(81) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other income, net |
|
7 |
|
|
2 |
|
|
10 |
|
|
2 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total other expense |
|
(215) |
|
|
(235) |
|
|
(631) |
|
|
(715) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income (loss) |
|
$ |
(514) |
|
|
$ |
381 |
|
|
$ |
(13) |
|
|
$ |
1,123 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic and diluted net income (loss) per common unit (1) |
|
$ |
(1.49) |
|
|
$ |
0.69 |
|
|
$ |
(1.36) |
|
|
$ |
2.07 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted average basic and diluted number of common units
outstanding |
|
484.0 |
|
|
484.0 |
|
|
484.0 |
|
|
484.0 |
|
|
|
(1)In
computing basic and diluted net income (loss) per common unit, net
income (loss) is reduced by the amount of undistributed net income
(loss) allocated to participating securities other than common
units, as required under the two-class method. See
Note
12—Net
Income (Loss)
per Unit.
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)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
September 30, |
|
December 31, |
|
|
2022 |
|
2021 |
|
ASSETS |
|
(unaudited) |
|
|
|
Current assets |
|
|
|
|
|
Cash and cash equivalents |
|
$ |
988 |
|
|
$ |
876 |
|
|
Restricted cash and cash equivalents |
|
195 |
|
|
98 |
|
|
Trade and other receivables, net of current expected credit
losses |
|
805 |
|
|
580 |
|
|
Accounts receivable—affiliate |
|
447 |
|
|
232 |
|
|
Accounts receivable—related party |
|
— |
|
|
1 |
|
|
Advances to affiliate |
|
150 |
|
|
141 |
|
|
Inventory |
|
241 |
|
|
176 |
|
|
Current derivative assets |
|
27 |
|
|
21 |
|
|
Margin deposits |
|
59 |
|
|
7 |
|
|
Contract assets |
|
387 |
|
|
— |
|
|
Other current assets |
|
74 |
|
|
80 |
|
|
|
|
|
|
|
Total current assets |
|
3,373 |
|
|
2,212 |
|
|
|
|
|
|
|
|
|
|
|
|
|
Property, plant and equipment, net of accumulated
depreciation |
|
16,827 |
|
|
16,830 |
|
|
Operating lease assets |
|
91 |
|
|
98 |
|
|
Debt issuance costs, net of accumulated amortization |
|
9 |
|
|
12 |
|
|
Derivative assets |
|
33 |
|
|
33 |
|
|
Other non-current assets, net |
|
167 |
|
|
173 |
|
|
|
|
|
|
|
Total assets |
|
$ |
20,500 |
|
|
$ |
19,358 |
|
|
|
|
|
|
|
|
LIABILITIES AND PARTNERS’ EQUITY (DEFICIT) |
|
|
|
|
|
Current liabilities |
|
|
|
|
|
Accounts payable |
|
$ |
31 |
|
|
$ |
21 |
|
|
Accrued liabilities |
|
1,657 |
|
|
1,073 |
|
|
Accrued liabilities—related party |
|
8 |
|
|
4 |
|
|
Current debt, net of discount and debt issuance costs |
|
1,498 |
|
|
— |
|
|
Due to affiliates |
|
56 |
|
|
67 |
|
|
Deferred revenue |
|
162 |
|
|
155 |
|
|
Deferred revenue—affiliate |
|
1 |
|
|
1 |
|
|
Current operating lease liabilities |
|
9 |
|
|
8 |
|
|
Current derivative liabilities |
|
1,157 |
|
|
16 |
|
|
Other current liabilities |
|
4 |
|
|
— |
|
|
Total current liabilities |
|
4,583 |
|
|
1,345 |
|
|
|
|
|
|
|
|
Long-term debt, net of premium, discount and debt issuance
costs |
|
15,699 |
|
|
17,177 |
|
|
|
|
|
|
|
Operating lease liabilities |
|
82 |
|
|
89 |
|
|
Finance lease liabilities |
|
18 |
|
|
— |
|
|
Derivative liabilities |
|
3,981 |
|
|
11 |
|
|
|
|
|
|
|
Other non-current liabilities—affiliate |
|
21 |
|
|
18 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Partners’ equity (deficit) |
|
|
|
|
|
Common unitholders’ interest (484.0 million units issued and
outstanding at both September 30, 2022 and December 31,
2021)
|
|
(3,059) |
|
|
1,024 |
|
|
|
|
|
|
|
General partner’s interest (2% interest with 9.9 million units
issued and outstanding at September 30, 2022 and December 31,
2021)
|
|
(825) |
|
|
(306) |
|
|
Total partners’ equity (deficit) |
|
(3,884) |
|
|
718 |
|
|
Total liabilities and partners’ equity (deficit) |
|
$ |
20,500 |
|
|
$ |
19,358 |
|
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 (DEFICIT)
(in millions)
(unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three and Nine Months Ended September 30, 2022 |
|
Common Unitholders’ Interest |
|
|
|
|
|
General Partner’s Interest |
|
Total Partners’ Equity (Deficit) |
|
Units |
|
Amount |
|
|
|
|
|
|
|
|
|
Units |
|
Amount |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at December 31, 2021 |
484.0 |
|
|
$ |
1,024 |
|
|
|
|
|
|
|
|
|
|
9.9 |
|
|
$ |
(306) |
|
|
$ |
718 |
|
|
Net income |
— |
|
|
157 |
|
|
|
|
|
|
|
|
|
|
— |
|
|
2 |
|
|
159 |
|
Novated IPM agreement (see
Note
14)
|
— |
|
|
(2,712) |
|
|
|
|
|
|
|
|
|
|
— |
|
|
— |
|
|
(2,712) |
|
|
Distributions |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Common units, $0.700/unit
|
— |
|
|
(339) |
|
|
|
|
|
|
|
|
|
|
— |
|
|
— |
|
|
(339) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
General partner units |
— |
|
|
— |
|
|
|
|
|
|
|
|
|
|
— |
|
|
(56) |
|
|
(56) |
|
|
Balance at March 31, 2022 |
484.0 |
|
|
(1,870) |
|
|
|
|
|
|
|
|
|
|
9.9 |
|
|
(360) |
|
|
(2,230) |
|
|
Net income |
— |
|
|
335 |
|
|
|
|
|
|
|
|
|
|
— |
|
|
7 |
|
|
342 |
|
|
Distributions |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Common units, $1.05/unit
|
— |
|
|
(508) |
|
|
|
|
|
|
|
|
|
|
— |
|
|
— |
|
|
(508) |
|
|
General partner units |
— |
|
|
— |
|
|
|
|
|
|
|
|
|
|
— |
|
|
(229) |
|
|
(229) |
|
|
Balance at June 30, 2022 |
484.0 |
|
|
(2,043) |
|
|
|
|
|
|
|
|
|
|
9.9 |
|
|
(582) |
|
|
(2,625) |
|
|
Net loss |
— |
|
|
(503) |
|
|
|
|
|
|
|
|
|
|
— |
|
|
(11) |
|
|
(514) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Distributions |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Common units, $1.06/unit
|
— |
|
|
(513) |
|
|
|
|
|
|
|
|
|
|
— |
|
|
— |
|
|
(513) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
General partner units |
— |
|
|
— |
|
|
|
|
|
|
|
|
|
|
— |
|
|
(232) |
|
|
(232) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at September 30, 2022 |
484.0 |
|
|
$ |
(3,059) |
|
|
|
|
|
|
|
|
|
|
9.9 |
|
|
$ |
(825) |
|
|
$ |
(3,884) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three and Nine Months Ended September 30, 2021 |
|
Common Unitholders’ Interest |
|
|
|
|
|
General Partner’s Interest |
|
Total Partners’ Equity |
|
Units |
|
Amount |
|
|
|
|
|
|
|
|
|
Units |
|
Amount |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at December 31, 2020 |
484.0 |
|
|
$ |
714 |
|
|
|
|
|
|
|
|
|
|
9.9 |
|
|
$ |
(175) |
|
|
$ |
539 |
|
|
Net income |
— |
|
|
340 |
|
|
|
|
|
|
|
|
|
|
— |
|
|
7 |
|
|
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 |
|
|
|
|
|
|
|
|
|
|
— |
|
|
8 |
|
|
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 |
|
|
Net income |
— |
|
|
373 |
|
|
|
|
|
|
|
|
|
|
— |
|
|
8 |
|
|
381 |
|
|
Distributions |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Common units, $0.665/unit
|
— |
|
|
(322) |
|
|
|
|
|
|
|
|
|
|
— |
|
|
— |
|
|
(322) |
|
|
General partner units |
— |
|
|
— |
|
|
|
|
|
|
|
|
|
|
— |
|
|
(41) |
|
|
(41) |
|
|
Balance at September 30, 2021 |
484.0 |
|
|
$ |
856 |
|
|
|
|
|
|
|
|
|
|
9.9 |
|
|
$ |
(267) |
|
|
$ |
589 |
|
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)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Nine Months Ended September 30, |
|
2022 |
|
2021 |
|
|
|
Cash flows from operating activities |
|
|
|
|
|
|
Net income (loss) |
$ |
(13) |
|
|
$ |
1,123 |
|
|
|
|
Adjustments to reconcile net income (loss) to net cash provided by
operating activities: |
|
|
|
|
|
|
Depreciation and amortization expense |
469 |
|
|
417 |
|
|
|
|
Amortization of debt issuance costs, premium and
discount |
22 |
|
|
22 |
|
|
|
|
Loss on modification or extinguishment of debt |
— |
|
|
81 |
|
|
|
|
Total losses (gains) on derivative instruments, net |
2,447 |
|
|
(64) |
|
|
|
|
|
|
|
|
|
|
Net cash provided by (used for) settlement of derivative
instruments |
(54) |
|
|
10 |
|
|
|
|
|
|
|
|
|
|
Other |
28 |
|
|
19 |
|
|
|
|
|
|
|
|
|
|
Changes in operating assets and liabilities: |
|
|
|
|
|
|
Trade and other receivables, net of current expected credit
losses |
(290) |
|
|
(41) |
|
|
|
|
Accounts receivable—affiliate |
(231) |
|
|
(13) |
|
|
|
|
|
|
|
|
|
|
Advances to affiliate |
(10) |
|
|
11 |
|
|
|
|
Inventory |
(67) |
|
|
(26) |
|
|
|
|
Margin deposits |
(52) |
|
|
(25) |
|
|
|
|
Contract assets |
(387) |
|
|
— |
|
|
|
|
Accounts payable and accrued liabilities |
592 |
|
|
165 |
|
|
|
|
Accrued liabilities—related party |
5 |
|
|
1 |
|
|
|
|
Due to affiliates |
2 |
|
|
(6) |
|
|
|
|
Deferred revenue |
6 |
|
|
29 |
|
|
|
|
Other, net |
(30) |
|
|
(37) |
|
|
|
|
Other, net—affiliate |
5 |
|
|
1 |
|
|
|
|
Net cash provided by operating activities |
2,442 |
|
|
1,667 |
|
|
|
|
|
|
|
|
|
|
|
Cash flows from investing activities |
|
|
|
|
|
|
Property, plant and equipment |
(356) |
|
|
(495) |
|
|
|
|
|
|
|
|
|
|
Net cash used in investing activities |
(356) |
|
|
(495) |
|
|
|
|
|
|
|
|
|
|
|
Cash flows from financing activities |
|
|
|
|
|
|
Proceeds from issuances of debt |
— |
|
|
2,700 |
|
|
|
|
Redemptions and repayments of debt |
— |
|
|
(2,172) |
|
|
|
|
Debt issuance and other financing costs |
— |
|
|
(35) |
|
|
|
|
Debt extinguishment costs |
— |
|
|
(61) |
|
|
|
|
|
|
|
|
|
|
Distributions |
(1,877) |
|
|
(1,073) |
|
|
|
|
Other |
— |
|
|
8 |
|
|
|
|
Net cash used in financing activities |
(1,877) |
|
|
(633) |
|
|
|
|
|
|
|
|
|
|
|
Net increase in cash, cash equivalents and restricted cash and cash
equivalents |
209 |
|
|
539 |
|
|
|
|
Cash, cash equivalents and restricted cash and cash
equivalents—beginning of period |
974 |
|
|
1,307 |
|
|
|
|
Cash, cash equivalents and restricted cash and cash equivalents—end
of period |
$ |
1,183 |
|
|
$ |
1,846 |
|
|
|
Balances per Consolidated Balance Sheet:
|
|
|
|
|
|
|
|
|
September 30, |
|
2022 |
|
|
|
Cash and cash equivalents |
$ |
988 |
|
|
|
|
Restricted cash and cash equivalents |
195 |
|
|
|
|
|
|
|
|
Total cash, cash equivalents and restricted cash and cash
equivalents |
$ |
1,183 |
|
|
|
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
We own the natural gas liquefaction and export facility located in
Cameron Parish, Louisiana at Sabine Pass (the “Sabine Pass LNG
Terminal”) which has six operational Trains, with Train 6 having
achieved substantial completion on February 4, 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 three marine berths, with
the third berth having achieved substantial completion on October
27, 2022.
We also own
a 94-mile pipeline through our subsidiary, CTPL, that interconnects
the Sabine Pass LNG Terminal with a number of large interstate and
intrastate pipelines (the “Creole Trail Pipeline”).
We have increased available liquefaction capacity at our
Liquefaction Project as a result of debottlenecking and other
optimization projects. We hold a significant land position at the
Sabine Pass LNG Terminal, which provides opportunity for further
liquefaction capacity expansion. The development of this site or
other projects, including infrastructure projects in support of
natural gas supply and LNG demand, will require, among other
things, acceptable commercial and financing arrangements before we
make a positive final investment decision.
As of September 30, 2022, Cheniere owned 48.6% of our limited
partner interest in the form of 239.9 million of our common
units. Cheniere also owns 100% of our general partner interest and
our incentive distribution rights (“IDRs”).
Basis of Presentation
The accompanying unaudited Consolidated Financial Statements of CQP
have been prepared in accordance with GAAP for interim financial
information and in accordance with Rule 10-01 of Regulation S-X and
reflect all normal recurring adjustments which are, in the opinion
of management, necessary for a fair statement of the financial
results for the interim periods presented. 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,
2021.
Results of operations for the three and nine months ended September
30, 2022 are not necessarily indicative of the results of
operations that will be realized for the year ending December 31,
2022.
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.
Recent Accounting Standards
ASU 2020-04
In March 2020, the FASB issued 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 standard
is effective from March 12, 2020 to December 31, 2022. We have not
yet applied the optional expedients available under the standard
because we have not yet modified any of our existing contracts
indexed to LIBOR, mainly our credit facilities as further described
in
Note
9—Debt,
for reference rate reform. However, we do not expect the impact of
applying the optional expedients to any future contract
modifications to be material, and we do not expect the transition
to a replacement rate index to have a material impact on our future
cash flows.
NOTE 2—UNITHOLDERS’ EQUITY
The common units represent limited partner interests in us, which
entitle the unitholders to participate in partnership distributions
and exercise the rights and privileges available to limited
partners under our partnership agreement. Although common
unitholders are not obligated to fund losses of the Partnership,
their capital account, which would be considered in allocating the
net assets of the Partnership were it to be liquidated, continues
to share in losses.
CHENIERE ENERGY PARTNERS, L.P. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—CONTINUED
(unaudited)
The general partner interest is entitled to at least 2% of all
distributions made by us. In addition, the general partner holds
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.
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
we have paid to date have been made from accumulated operating
surplus as defined in the partnership agreement.
As of September 30, 2022, 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 Blackstone 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 50.0% owned by BIP Chinook Holdco L.L.C., an
affiliate of Blackstone, and 50.0% 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 AND CASH EQUIVALENTS
Restricted cash and cash equivalents consist of funds that are
contractually or legally restricted as to usage or withdrawal. As
of September 30, 2022 and December 31, 2021, we had $195 million
and $98 million of restricted cash and cash equivalents,
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—TRADE AND OTHER RECEIVABLES, NET OF CURRENT EXPECTED CREDIT
LOSSES
Trade and other receivables, net of current expected credit losses
consisted of the following (in millions):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
September 30, |
|
December 31, |
|
|
2022 |
|
2021 |
|
Trade receivables |
|
$ |
761 |
|
|
$ |
546 |
|
|
Other receivables |
|
44 |
|
|
34 |
|
|
Total trade and other receivables, net of current expected credit
losses |
|
$ |
805 |
|
|
$ |
580 |
|
NOTE 5—INVENTORY
Inventory consisted of the following (in millions):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
September 30, |
|
December 31, |
|
|
2022 |
|
2021 |
|
Materials |
|
$ |
100 |
|
|
$ |
86 |
|
|
LNG |
|
107 |
|
|
45 |
|
|
Natural gas |
|
32 |
|
|
43 |
|
|
Other |
|
2 |
|
|
2 |
|
|
Total inventory |
|
$ |
241 |
|
|
$ |
176 |
|
CHENIERE ENERGY PARTNERS, L.P. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—CONTINUED
(unaudited)
NOTE 6—PROPERTY, PLANT AND EQUIPMENT, NET OF ACCUMULATED
DEPRECIATION
Property, plant and equipment, net of accumulated depreciation
consisted of the following (in millions):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
September 30, |
|
December 31, |
|
|
2022 |
|
2021 |
|
LNG terminal |
|
|
|
|
|
Terminal and interconnecting pipeline facilities |
|
$ |
19,459 |
|
|
$ |
16,973 |
|
|
|
|
|
|
|
Construction-in-process |
|
699 |
|
|
2,746 |
|
|
Accumulated depreciation |
|
(3,356) |
|
|
(2,893) |
|
|
Total LNG terminal, net of accumulated depreciation |
|
16,802 |
|
|
16,826 |
|
|
Fixed assets |
|
|
|
|
|
Fixed assets |
|
29 |
|
|
29 |
|
|
Accumulated depreciation |
|
(26) |
|
|
(25) |
|
|
Total fixed assets, net of accumulated depreciation |
|
3 |
|
|
4 |
|
|
Assets under finance lease |
|
|
|
|
|
Tug vessels |
|
23 |
|
|
— |
|
|
Accumulated depreciation |
|
(1) |
|
|
— |
|
|
Total assets under finance lease, net of accumulated
depreciation |
|
22 |
|
|
— |
|
|
Property, plant and equipment, net of accumulated
depreciation |
|
$ |
16,827 |
|
|
$ |
16,830 |
|
The following table shows depreciation expense and offsets to LNG
terminal costs (in millions):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended September 30, |
|
Nine Months Ended September 30, |
|
|
2022 |
|
2021 |
|
2022 |
|
2021 |
|
|
|
Depreciation expense |
|
$ |
158 |
|
|
$ |
139 |
|
|
$ |
465 |
|
|
$ |
414 |
|
|
|
|
Offsets to LNG terminal costs (1) |
|
— |
|
|
— |
|
|
148 |
|
|
— |
|
|
|
(1)We
recognize offsets to LNG terminal costs related to the sale of
commissioning cargoes because these amounts were earned or loaded
prior to the start of commercial operations of the respective
Trains of the Liquefaction Project during the testing phase for its
construction.
NOTE 7—DERIVATIVE INSTRUMENTS
We have entered into commodity derivatives consisting of natural
gas supply contracts, including those under SPL’s IPM agreement,
for the 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 Operations to the extent not
utilized for the commissioning process, in which case such changes
are 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 (in millions):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fair Value Measurements as of |
|
September 30, 2022 |
|
December 31, 2021 |
|
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) |
$ |
(30) |
|
|
$ |
(24) |
|
|
$ |
(5,024) |
|
|
$ |
(5,078) |
|
|
$ |
2 |
|
|
$ |
(13) |
|
|
$ |
38 |
|
|
$ |
27 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
We value our Liquefaction Supply Derivatives using a market or
option-based approach incorporating present value techniques, as
needed, using observable commodity price curves, when available,
and other relevant data.
CHENIERE ENERGY PARTNERS, L.P. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—CONTINUED
(unaudited)
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, but not limited to, evaluation of whether the
respective market exists from the perspective of market
participants as infrastructure is developed.
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
and volatility.
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 and
international LNG prices. The following table includes quantitative
information for the unobservable inputs for our Level 3 Physical
Liquefaction Supply Derivatives as of September 30,
2022:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net Fair Value Liability
(in millions) |
|
Valuation Approach |
|
Significant Unobservable Input |
|
Range of Significant Unobservable Inputs / Weighted Average
(1) |
|
Physical Liquefaction Supply Derivatives |
|
$(5,024) |
|
Market approach incorporating present value techniques |
|
Henry Hub basis spread |
|
$(2.495) - $0.677 / $(0.028)
|
|
|
|
|
|
Option pricing model |
|
International LNG pricing spread, relative to Henry Hub
(2) |
|
91% - 865% / 243%
|
(1)Unobservable
inputs were weighted by the relative fair value of the
instruments.
(2)Spread
contemplates U.S. dollar-denominated pricing.
Increases or decreases in basis or pricing spreads, 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 (in
millions):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended September 30, |
|
|
Nine Months Ended September 30, |
|
|
2022 |
|
2021 |
|
|
|
2022 |
|
2021 |
|
Balance, beginning of period |
|
$ |
(3,456) |
|
|
$ |
33 |
|
|
|
|
$ |
38 |
|
|
$ |
(21) |
|
|
Realized and mark-to-market gains (losses): |
|
|
|
|
|
|
|
|
|
|
|
Included in cost of sales |
|
(1,545) |
|
|
25 |
|
|
|
|
(155) |
|
|
79 |
|
|
Purchases and settlements: |
|
|
|
|
|
|
|
|
|
|
|
Purchases (1) |
|
3 |
|
|
4 |
|
|
|
|
(4,896) |
|
|
6 |
|
|
Settlements |
|
(24) |
|
|
(3) |
|
|
|
|
(11) |
|
|
(5) |
|
|
Transfers out of Level 3, net (2) |
|
(2) |
|
|
— |
|
|
|
|
— |
|
|
— |
|
|
Balance, end of period |
|
$ |
(5,024) |
|
|
$ |
59 |
|
|
|
|
$ |
(5,024) |
|
|
$ |
59 |
|
|
Change in unrealized gains (losses) relating to instruments still
held at end of period |
|
$ |
(1,545) |
|
|
$ |
25 |
|
|
|
|
$ |
(155) |
|
|
$ |
79 |
|
(2)Transferred
out of Level 3 as a result of unobservable 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 and the unconditional
contractual right of set-off 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
CHENIERE ENERGY PARTNERS, L.P. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—CONTINUED
(unaudited)
counterparty’s nonperformance risk in fair value measurements
depending on the position of the derivative. 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 holds Liquefaction Supply Derivatives which are primarily
indexed to the natural gas market and international LNG indices.
The remaining minimum terms of the Physical Liquefaction Supply
Derivatives range up to 15 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 forward notional amount for our Liquefaction Supply Derivatives
was approximately 5,220 TBtu and 5,194 TBtu as of September 30,
2022 and December 31, 2021, respectively, excluding notional
amounts associated with extension options that were uncertain to be
taken as of September 30, 2022.
The following table shows the effect and location of our
Liquefaction Supply Derivatives recorded on our Consolidated
Statements of Operations (in millions):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gain (Loss) Recognized in Consolidated Statements of
Operations
|
|
Consolidated Statements of Operations Location
(1)
|
|
Three Months Ended September 30, |
|
Nine Months Ended September 30, |
|
2022 |
|
2021 |
|
2022 |
|
2021 |
|
|
|
LNG revenues |
|
$ |
(3) |
|
|
$ |
— |
|
|
$ |
1 |
|
|
$ |
— |
|
|
|
|
Cost of sales |
|
(1,625) |
|
|
10 |
|
|
(2,448) |
|
|
64 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(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.
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 |
|
September 30, 2022 |
|
|
|
|
|
December 31, 2021 |
|
|
|
|
|
Current derivative assets |
|
$ |
27 |
|
|
|
|
|
|
$ |
21 |
|
|
|
|
|
|
Derivative assets |
|
33 |
|
|
|
|
|
|
33 |
|
|
|
|
|
|
Total derivative assets |
|
60 |
|
|
|
|
|
|
54 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Current derivative liabilities |
|
(1,157) |
|
|
|
|
|
|
(16) |
|
|
|
|
|
|
Derivative liabilities |
|
(3,981) |
|
|
|
|
|
|
(11) |
|
|
|
|
|
|
Total derivative liabilities |
|
(5,138) |
|
|
|
|
|
|
(27) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Derivative asset (liability), net |
|
$ |
(5,078) |
|
|
|
|
|
|
$ |
27 |
|
|
|
|
|
(1)Does
not include collateral posted with counterparties by us of $59
million and $7 million, as of September 30, 2022 and December
31, 2021, respectively, which are included in other current assets
in our Consolidated Balance Sheets.
CHENIERE ENERGY PARTNERS, L.P. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—CONTINUED
(unaudited)
Consolidated Balance Sheets Presentation
The following table shows the fair value of our derivatives
outstanding on a gross and net basis (in millions) for our
derivative instruments that are presented on a net basis on our
Consolidated Balance Sheets:
|
|
|
|
|
|
|
|
|
|
|
Liquefaction Supply Derivatives
|
|
As of September 30, 2022 |
|
|
|
Gross assets |
|
$ |
67 |
|
|
Offsetting amounts |
|
(7) |
|
|
Net assets |
|
$ |
60 |
|
|
|
|
|
|
Gross liabilities |
|
$ |
(5,158) |
|
|
Offsetting amounts |
|
20 |
|
|
Net liabilities |
|
$ |
(5,138) |
|
|
|
|
|
|
As of December 31, 2021 |
|
|
|
Gross assets |
|
$ |
79 |
|
|
Offsetting amounts |
|
(25) |
|
|
Net assets |
|
$ |
54 |
|
|
|
|
|
|
Gross liabilities |
|
$ |
(33) |
|
|
Offsetting amounts |
|
6 |
|
|
Net liabilities |
|
$ |
(27) |
|
NOTE 8—ACCRUED LIABILITIES
Accrued liabilities consisted of the following (in
millions):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
September 30, |
|
December 31, |
|
|
2022 |
|
2021 |
|
Natural gas purchases |
|
$ |
1,259 |
|
|
$ |
786 |
|
|
Interest costs and related debt fees |
|
201 |
|
|
180 |
|
|
LNG terminal and related pipeline costs |
|
172 |
|
|
101 |
|
|
Other accrued liabilities |
|
25 |
|
|
6 |
|
|
Total accrued liabilities |
|
$ |
1,657 |
|
|
$ |
1,073 |
|
CHENIERE ENERGY PARTNERS, L.P. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—CONTINUED
(unaudited)
NOTE 9—DEBT
Debt consisted of the following (in millions):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
September 30, |
|
December 31, |
|
|
2022 |
|
2021 |
|
SPL: |
|
|
|
|
|
Senior Secured Notes: |
|
|
|
|
|
|
|
|
|
|
5.625% due 2023 (the “2023 SPL Senior Notes”) (1)
|
|
$ |
1,500 |
|
|
$ |
1,500 |
|
|
5.75% due 2024
|
|
2,000 |
|
|
2,000 |
|
|
5.625% due 2025
|
|
2,000 |
|
|
2,000 |
|
|
5.875% due 2026
|
|
1,500 |
|
|
1,500 |
|
|
5.00% due 2027
|
|
1,500 |
|
|
1,500 |
|
|
4.200% due 2028
|
|
1,350 |
|
|
1,350 |
|
|
4.500% due 2030
|
|
2,000 |
|
|
2,000 |
|
|
4.27% weighted average rate due 2037
|
|
1,282 |
|
|
1,282 |
|
|
Total SPL Senior Secured Notes |
|
13,132 |
|
|
13,132 |
|
|
Working capital revolving credit and letter of credit reimbursement
agreement (the “SPL Working Capital Facility”)
|
|
— |
|
|
— |
|
|
Total debt - SPL |
|
13,132 |
|
|
13,132 |
|
|
|
|
|
|
|
|
CQP: |
|
|
|
|
|
Senior Notes: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
4.500% due 2029
|
|
1,500 |
|
|
1,500 |
|
|
4.000% due 2031
|
|
1,500 |
|
|
1,500 |
|
|
3.25% due 2032
|
|
1,200 |
|
|
1,200 |
|
|
Total CQP Senior Notes |
|
4,200 |
|
|
4,200 |
|
|
Credit facilities (the “CQP Credit Facilities”)
|
|
— |
|
|
— |
|
|
Total debt - CQP |
|
4,200 |
|
|
4,200 |
|
|
Total debt |
|
17,332 |
|
|
17,332 |
|
|
|
|
|
|
|
|
|
|
|
|
|
Short-term debt |
|
(1,498) |
|
|
— |
|
|
Unamortized premium, discount and debt issuance costs,
net |
|
(135) |
|
|
(155) |
|
|
Total long-term debt, net of premium, discount and debt issuance
costs |
|
$ |
15,699 |
|
|
$ |
17,177 |
|
(1)In
October 2022, $300 million of the 2023 SPL Senior Notes were
redeemed. As of September 30, 2022, the entire amount of the 2023
SPL Senior Notes was classified as short-term debt.
Credit Facilities
Below is a summary of our credit facilities outstanding as of
September 30, 2022 (in millions):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
SPL Working Capital Facility
|
|
CQP Credit Facilities
|
|
|
Total facility size |
|
|
|
$ |
1,200 |
|
|
$ |
750 |
|
|
|
Less: |
|
|
|
|
|
|
|
|
Outstanding balance |
|
|
|
— |
|
|
— |
|
|
|
|
|
|
|
|
|
|
|
Letters of credit issued |
|
|
|
363 |
|
|
— |
|
|
|
Available commitment |
|
|
|
$ |
837 |
|
|
$ |
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%
|
|
|
|
|
|
|
|
|
|
|
Commitment fees on undrawn balance |
|
|
|
0.15% |
|
0.49% |
|
|
Maturity date |
|
|
|
March 19, 2025 |
|
May 29, 2024 |
|
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
CHENIERE ENERGY PARTNERS, L.P. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—CONTINUED
(unaudited)
investments or pay dividends or distributions. We and SPL are
restricted from making distributions under agreements governing our
and SPL’s indebtedness generally until, among other requirements,
deposits are made into any required debt service reserve accounts
and a historical debt service coverage ratio and projected debt
service coverage ratio of at least 1.25:1.00 is
satisfied.
As of September 30, 2022, 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 September 30, |
|
Nine Months Ended September 30, |
|
|
2022 |
|
2021 |
|
2022 |
|
2021 |
|
|
|
Total interest cost |
|
$ |
231 |
|
|
$ |
244 |
|
|
$ |
678 |
|
|
$ |
732 |
|
|
|
|
Capitalized interest |
|
(9) |
|
|
(34) |
|
|
(37) |
|
|
(96) |
|
|
|
|
Total interest expense, net of capitalized interest |
|
$ |
222 |
|
|
$ |
210 |
|
|
$ |
641 |
|
|
$ |
636 |
|
|
|
Fair Value Disclosures
The following table shows the carrying amount and estimated fair
value of our debt (in millions):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
September 30, 2022 |
|
December 31, 2021 |
|
|
|
Carrying
Amount |
|
Estimated
Fair Value |
|
Carrying
Amount |
|
Estimated
Fair Value |
|
Senior notes — Level 2 (1) |
|
$ |
16,050 |
|
|
$ |
15,036 |
|
|
$ |
16,050 |
|
|
$ |
17,496 |
|
|
Senior notes — Level 3 (2) |
|
1,282 |
|
|
1,119 |
|
|
1,282 |
|
|
1,466 |
|
|
|
|
|
|
|
|
|
|
(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.
The estimated fair value of our credit facilities approximates the
principal amount outstanding 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 10—REVENUES
The following table represents a disaggregation of revenue earned
(in millions):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended September 30, |
|
|
Nine Months Ended September 30, |
|
|
2022 |
|
2021 |
|
|
|
2022 |
|
2021 |
|
Revenues from contracts with customers |
|
|
|
|
|
|
|
|
|
|
|
LNG revenues |
|
$ |
3,133 |
|
|
$ |
1,791 |
|
|
|
|
$ |
8,576 |
|
|
$ |
5,057 |
|
|
LNG revenues—affiliate |
|
1,376 |
|
|
453 |
|
|
|
|
3,268 |
|
|
878 |
|
|
LNG revenues—related party |
|
— |
|
|
— |
|
|
|
|
4 |
|
|
— |
|
|
Regasification revenues |
|
455 |
|
|
68 |
|
|
|
|
591 |
|
|
202 |
|
|
Other revenues |
|
15 |
|
|
12 |
|
|
|
|
45 |
|
|
39 |
|
|
|
|
|
|
|
|
|
|
|
|
|
Total revenues from contracts with customers |
|
4,979 |
|
|
2,324 |
|
|
|
|
12,484 |
|
|
6,176 |
|
|
Net derivative gain (loss) (1) |
|
(3) |
|
|
— |
|
|
|
|
1 |
|
|
— |
|
|
Total revenues |
|
$ |
4,976 |
|
|
$ |
2,324 |
|
|
|
|
$ |
12,485 |
|
|
$ |
6,176 |
|
CHENIERE ENERGY PARTNERS, L.P. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—CONTINUED
(unaudited)
Contract Assets and Liabilities
The following table shows our contract assets, net of current
expected credit losses, which are classified as contract assets and
other non-current assets, net on our Consolidated Balance Sheets
(in millions):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
September 30, |
|
December 31, |
|
|
2022 |
|
2021 |
|
Contract assets, net of current expected credit losses |
|
$ |
388 |
|
|
$ |
1 |
|
The following table reflects the changes in our contract
liabilities, which we classify as deferred revenue on our
Consolidated Balance Sheets (in millions):
|
|
|
|
|
|
|
|
|
|
|
Nine Months Ended September 30, 2022 |
|
|
|
|
Deferred revenue, beginning of period |
|
$ |
155 |
|
|
Cash received but not yet recognized in revenue |
|
162 |
|
|
Revenue recognized from prior period deferral |
|
(155) |
|
|
Deferred revenue, end of period |
|
$ |
162 |
|
The following table reflects the changes in our contract
liabilities to affiliate, which we classify as deferred
revenue—affiliate and other non-current liabilities—affiliate on
our Consolidated Balance Sheets (in millions):
|
|
|
|
|
|
|
|
|
|
|
Nine Months Ended September 30, 2022 |
|
|
|
|
Deferred revenue—affiliate, beginning of period |
|
$ |
3 |
|
|
Cash received but not yet recognized in revenue |
|
6 |
|
|
Revenue recognized from prior year end deferral |
|
(3) |
|
|
Deferred revenue—affiliate, end of period |
|
$ |
6 |
|
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:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
September 30, 2022 |
|
December 31, 2021 |
|
|
Unsatisfied
Transaction Price
(in billions) |
|
Weighted Average Recognition Timing (years) (1) |
|
Unsatisfied
Transaction Price
(in billions) |
|
Weighted Average Recognition Timing (years) (1) |
|
LNG revenues |
|
$ |
51.6 |
|
|
8 |
|
$ |
49.3 |
|
|
9 |
|
LNG revenues—affiliate |
|
2.0 |
|
|
2 |
|
2.1 |
|
|
3 |
|
Regasification revenues |
|
1.6 |
|
|
2 |
|
1.9 |
|
|
4 |
|
Total revenues |
|
$ |
55.2 |
|
|
|
|
$ |
53.3 |
|
|
|
(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.
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 78% and
63% of our LNG revenues from contracts included in the table above
during the three
CHENIERE ENERGY PARTNERS, L.P. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—CONTINUED
(unaudited)
months ended September 30, 2022 and 2021, respectively, and
approximately 74% and 56% of our LNG revenues from contracts
included in the table above during the nine months ended September
30, 2022 and 2021, respectively, were related to variable
consideration received from customers. Approximately 77% and 96% of
our LNG revenues—affiliate from contracts included in the table
above during the three months ended September 30, 2022 and 2021,
respectively, and approximately 76% and 94% of our LNG
revenues—affiliate from contracts included in the table above
during the nine months ended September 30, 2022 and 2021,
respectively, were related to variable consideration received from
customers. During the three and nine months ended September 30,
2022, approximately 1% and 2%, respectively, of our regasification
revenues were related to variable consideration received from
customers, and during each of the three and nine months ended
September 30, 2021, approximately 5% 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.
Termination Agreement with Chevron
In June 2022, Chevron U.S.A. Inc. (“Chevron”) entered into an
agreement with SPLNG providing for the early termination of the TUA
and an associated terminal marine services agreement between the
parties and their affiliates for a lump sum fee of
$765 million (the “Termination Fee”). Obligations pursuant to
the TUA and associated agreement, including Chevron’s obligation to
pay SPLNG capacity payments totaling $125 million annually
(adjusted for inflation) from 2023 through 2029, will terminate
upon the later of SPLNG’s receipt of the Termination Fee or
December 31, 2022. The termination agreement became effective on
July 6, 2022. We have allocated the $765 million Termination
Fee to the terminated commitments, with $796 million in cash
inflows allocable to the termination of the TUA, which we are
recognizing ratably over the July 6, 2022 to December 31, 2022
period as regasification revenues on our Consolidated Statements of
Operations, and an offsetting $31 million in cash outflows
allocable to the extinguishment of other remaining obligations we
have to Chevron, which will be recognized upon receipt of the
Termination Fee as a loss on extinguishment of debt on our
Consolidated Statements of Operations. As of September 30, 2022, we
recorded contract assets of $387 million related to the
termination of the TUA.
CHENIERE ENERGY PARTNERS, L.P. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—CONTINUED
(unaudited)
NOTE 11—RELATED PARTY TRANSACTIONS
Below is a summary of our related party transactions as reported on
our Consolidated Statements of Operations (in
millions):
|
|
|
|
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|
|
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|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended September 30, |
|
Nine Months Ended September 30, |
|
2022 |
|
2021 |
|
2022 |
|
2021 |
|
|
|
LNG revenues—affiliate |
|
|
|
|
|
|
|
|
|
|
Cheniere Marketing Agreements |
$ |
1,328 |
|
|
$ |
441 |
|
|
$ |
3,173 |
|
|
$ |
860 |
|
|
|
|
Contracts for Sale and Purchase of Natural Gas and LNG |
48 |
|
|
12 |
|
|
95 |
|
|
18 |
|
|
|
|
Total LNG revenues—affiliate |
1,376 |
|
|
453 |
|
|
3,268 |
|
|
878 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
LNG revenues—related party |
|
|
|
|
|
|
|
|
|
|
Natural Gas Transportation and Storage Agreements |
— |
|
|
— |
|
|
4 |
|
|
— |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cost of sales—affiliate |
|
|
|
|
|
|
|
|
|
|
Cheniere Marketing Agreements |
— |
|
|
— |
|
|
— |
|
|
34 |
|
|
|
|
Contracts for Sale and Purchase of Natural Gas and LNG |
104 |
|
|
8 |
|
|
166 |
|
|
28 |
|
|
|
|
Total cost of sales—affiliate |
104 |
|
|
8 |
|
|
166 |
|
|
62 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cost of sales—related party |
|
|
|
|
|
|
|
|
|
|
Natural Gas Transportation and Storage Agreements |
— |
|
|
— |
|
|
1 |
|
|
1 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating and maintenance expense—affiliate |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Services Agreements |
39 |
|
|
34 |
|
|
118 |
|
|
103 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating and maintenance expense—related party |
|
|
|
|
|
|
|
|
|
|
Natural Gas Transportation and Storage Agreements |
18 |
|
|
12 |
|
|
45 |
|
|
34 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
General and administrative expense—affiliate |
|
|
|
|
|
|
|
|
|
|
Services Agreements |
23 |
|
|
22 |
|
|
70 |
|
|
64 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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|
|
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|
|
As of September 30, 2022 and December 31, 2021, we had $447 million
and $232 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. The Base SPA was subsequently amended
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.
Cheniere Marketing Letter Agreements
In May 2022, SPL and Cheniere Marketing entered into a letter
agreement for the sale of up to 32 TBtu of LNG to be delivered
between 2023 and 2025 at a price of 115% of Henry Hub plus $3.00
per MMBtu.
CHENIERE ENERGY PARTNERS, L.P. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—CONTINUED
(unaudited)
Cheniere Marketing has letter agreements with SPL to purchase up to
306 cargoes of LNG to be delivered between 2022 and 2027 at a
weighted average price of $1.95 plus 115% of Henry
Hub.
SPL and Cheniere Marketing had a letter agreement for the sale of
up to 30 cargoes of LNG that were delivered in 2021 at a price of
115% of Henry Hub plus $0.728 per MMBtu.
Facility Swap Agreement
SPL has 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 (1) 115% of the applicable natural gas feedstock purchase price
or (2) 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 accrued liabilities—related party of $8 million and
$4 million as of September 30, 2022 and December 31, 2021,
respectively, with this related party.
Services Agreements
As of September 30, 2022 and December 31, 2021, we had $150 million
and $141 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.
CQP Services Agreement
We have a services agreement with Cheniere Terminals 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 through 2042. 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.
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 through 2029. 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.
CHENIERE ENERGY PARTNERS, L.P. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—CONTINUED
(unaudited)
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) through 2029 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 necessary services required to operate and maintain
the Liquefaction Project. After each Train of the Liquefaction
Project 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 is required to 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 through 2042.
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
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 is required to pay a monthly fee equal to 2.4% of the
capital expenditures incurred in the previous month. After
substantial completion of each Train, SPL is required to pay a
fixed monthly fee of $541,667 (indexed for inflation) for services
with respect to such Train through 2042.
CTPL O&M Agreement
CTPL has a 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.
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.
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
CHENIERE ENERGY PARTNERS, L.P. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—CONTINUED
(unaudited)
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 $3 million and $2 million in
due to affiliates as of September 30, 2022 and December 31, 2021,
respectively, and $15 million of other non-current
liabilities—affiliate as of both September 30, 2022 and December
31, 2021, 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 Corpus Christi Liquefaction, LLC (“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. Tug
Services distributed $2 million during each of the three
months ended September 30, 2022 and 2021 and $7 million and
$6 million during the nine months ended September 30, 2022 and
2021, 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
(Deficit).
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 nine
months ended September 30, 2022 and 2021.
State Tax Sharing Agreements
SPLNG, SPL and CTPL each have a state tax sharing agreement with
Cheniere. Under these agreements, Cheniere has agreed to
prepare and file all state and local tax returns which each of the
entities 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, each of the
respective entities will pay to Cheniere an amount equal to the
state and local tax that each of the entities would be required to
pay if its state and local tax liability were calculated on a
separate company basis. To date, there have been no state
and local tax payments demanded by Cheniere under the tax sharing
agreements. The agreements for SPLNG, SPL and CTPL are effective
for tax returns due on or after January 2008, August 2012 and May
2013, respectively.
CHENIERE ENERGY PARTNERS, L.P. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—CONTINUED
(unaudited)
NOTE 12—NET INCOME (LOSS) PER COMMON UNIT
Net income (loss) per common unit for a given period is based on
the distributions that will be made to the common unitholders with
respect to the period plus an allocation of undistributed net
income (loss) 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 (Deficit). On October 24, 2022, we
declared a cash distribution of $1.070 per common unit to
unitholders of record as of November 3, 2022 and the related
general partner distribution to be paid on November 14, 2022. These
distributions consist of a base amount of $0.775 per unit and a
variable amount of $0.295 per unit.
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 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.
CHENIERE ENERGY PARTNERS, L.P. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—CONTINUED
(unaudited)
The following table provides a reconciliation of net income (loss)
and the allocation of net income (loss) to the common units, the
subordinated units, the general partner units and IDRs for purposes
of computing basic and diluted net income (loss) per unit (in
millions, except per unit data).
|
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|
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|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total |
|
Limited Partner Common Units |
|
|
|
|
|
General Partner Units |
|
IDR |
|
Three Months Ended September 30, 2022 |
|
|
|
|
|
|
|
|
|
|
|
|
|
Net loss |
|
$ |
(514) |
|
|
|
|
|
|
|
|
|
|
|
|
Declared distributions |
|
753 |
|
|
518 |
|
|
|
|
|
|
15 |
|
|
220 |
|
|
Assumed allocation of undistributed net loss (1) |
|
$ |
(1,267) |
|
|
(1,242) |
|
|
|
|
|
|
(25) |
|
|
— |
|
|
Assumed allocation of net loss |
|
|
|
$ |
(724) |
|
|
|
|
|
|
$ |
(10) |
|
|
$ |
220 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted average units outstanding |
|
|
|
484.0 |
|
|
|
|
|
|
|
|
|
|
Basic and diluted net loss per unit (2) |
|
|
|
$ |
(1.49) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended September 30, 2021 |
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income |
|
$ |
381 |
|
|
|
|
|
|
|
|
|
|
|
|
Declared distributions |
|
375 |
|
|
329 |
|
|
|
|
|
|
8 |
|
|
38 |
|
|
Assumed allocation of undistributed net income (1) |
|
$ |
6 |
|
|
6 |
|
|
|
|
|
|
— |
|
|
— |
|
|
Assumed allocation of net income |
|
|
|
$ |
335 |
|
|
|
|
|
|
$ |
8 |
|
|
$ |
38 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted average units outstanding |
|
|
|
484.0 |
|
|
|
|
|
|
|
|
|
|
Basic and diluted net income per unit |
|
|
|
$ |
0.69 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Nine Months Ended September 30, 2022 |
|
|
|
|
|
|
|
|
|
|
|
|
|
Net loss |
|
$ |
(13) |
|
|
|
|
|
|
|
|
|
|
|
|
Declared distributions |
|
2,229 |
|
|
1,539 |
|
|
|
|
|
|
45 |
|
|
645 |
|
|
Assumed allocation of undistributed net loss (1) |
|
$ |
(2,242) |
|
|
(2,197) |
|
|
|
|
|
|
(45) |
|
|
— |
|
|
Assumed allocation of net loss |
|
|
|
$ |
(658) |
|
|
|
|
|
|
$ |
— |
|
|
$ |
645 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted average units outstanding |
|
|
|
484.0 |
|
|
|
|
|
|
|
|
|
|
Basic and diluted net loss per unit |
|
|
|
$ |
(1.36) |
|
|
|
|
|
|
|
|
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|
|
|
|
|
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|
|
|
Nine Months Ended September 30, 2021 |
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income |
|
$ |
1,123 |
|
|
|
|
|
|
|
|
|
|
|
|
Declared distributions |
|
1,091 |
|
|
970 |
|
|
|
|
|
|
22 |
|
|
99 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Assumed allocation of undistributed net income (1) |
|
$ |
32 |
|
|
31 |
|
|
|
|
|
|
1 |
|
|
— |
|
|
Assumed allocation of net income |
|
|
|
$ |
1,001 |
|
|
|
|
|
|
$ |
23 |
|
|
$ |
99 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted average units outstanding |
|
|
|
484.0 |
|
|
|
|
|
|
|
|
|
|
Basic and diluted net income per unit |
|
|
|
$ |
2.07 |
|
|
|
|
|
|
|
|
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|
(1)Under
our partnership agreement, the IDRs participate in net income
(loss) only to the extent of the amount of cash distributions
actually declared, thereby excluding the IDRs from participating in
undistributed net income (loss).
(2)Basic
and diluted net income (loss) per unit in the table may not
recalculate exactly due to rounding because it is calculated based
on whole numbers, not the rounded numbers presented.
CHENIERE ENERGY PARTNERS, L.P. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—CONTINUED
(unaudited)
NOTE 13—CUSTOMER CONCENTRATION
The following table shows external customers with revenues of 10%
or greater of total revenues from external customers and external
customers with trade and other receivables, net of current expected
credit losses and contract assets, net of current expected credit
losses balances of 10% or greater of total trade and other
receivables, net of current expected credit losses from external
customers and contract assets, net of current expected credit
losses from external customers, respectively:
|
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|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Percentage of Total Revenues from External Customers |
|
Percentage of Trade and Other Receivables, Net and Contract Assets,
Net from External Customers |
|
|
|
|
|
|
|
|
|
Three Months Ended September 30, |
|
Nine Months Ended September 30, |
|
September 30, |
|
December 31, |
|
|
2022 |
|
2021 |
|
2022 |
|
2021 |
|
|
|
2022 |
|
2021 |
|
Customer A |
|
18% |
|
20% |
|
23% |
|
24% |
|
|
|
17% |
|
28% |
|
Customer B |
|
16% |
|
19% |
|
16% |
|
17% |
|
|
|
* |
|
17% |
|
Customer C |
|
14% |
|
18% |
|
16% |
|
18% |
|
|
|
* |
|
* |
|
Customer D |
|
16% |
|
17% |
|
16% |
|
16% |
|
|
|
13% |
|
14% |
|
Customer E |
|
* |
|
11% |
|
* |
|
11% |
|
|
|
* |
|
12% |
|
Customer F |
|
10% |
|
* |
|
* |
|
* |
|
|
|
* |
|
12% |
|
Customer G |
|
12% |
|
* |
|
* |
|
* |
|
|
|
32% |
|
— |
* Less than 10%
NOTE 14—SUPPLEMENTAL CASH FLOW INFORMATION
The following table provides supplemental disclosure of cash flow
information (in millions):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Nine Months Ended September 30, |
|
2022 |
|
2021 |
|
|
|
Cash paid during the period for interest on debt, net of amounts
capitalized |
$ |
585 |
|
|
$ |
601 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The balance in property, plant and equipment, net of accumulated
depreciation funded with accounts payable and accrued liabilities
(including affiliate) was $314 million and $233 million
as of September 30, 2022 and 2021, respectively.
Novation of IPM Agreement from Corpus Christi Liquefaction Stage
III, LLC (“CCL Stage III”)
In March 2022, in connection with a prior commitment from Cheniere
to collateralize financing for Train 6 of the Liquefaction Project,
SPL and CCL Stage III, formerly a wholly owned direct subsidiary of
Cheniere that merged with and into CCL, entered into an agreement
to assign to SPL an IPM agreement to purchase 140,000 MMBtu per day
of natural gas at a price based on the Platts Japan Korea Marker
(“JKM”), for a term of approximately 15 years beginning in early
2023. The transaction has been accounted for as a transfer between
entities under common control, which required us to recognize the
obligations assumed at the historical basis of Cheniere. Upon the
transfer, which occurred on March 15, 2022, we recognized $2.7
billion in distributions to Cheniere’s common unitholder interest
within our Consolidated Statements of Partners’ Equity (Deficit)
based on our assumption of current derivative liabilities and
derivative liabilities of $142 million and $2.6 billion,
respectively, which represented a non-cash financing
activity.
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 terminal, liquefaction facility, pipeline facility 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
regarding our future sources of liquidity and cash
requirements;
•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;
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 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,
2021.
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
We are a publicly traded Delaware limited partnership formed in
2006 by Cheniere. 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.
LNG is natural gas (methane) in liquid form. The LNG we produce is
shipped all over the world, turned back into natural gas (called
“regasification”) and then transported via pipeline to homes and
businesses and used as an energy source that is essential for
heating, cooking and other industrial uses. Natural gas is a
cleaner-burning, abundant and affordable source of energy. When LNG
is converted back to natural gas, it can be used instead of coal,
which reduces the amount of pollution traditionally produced from
burning fossil fuels, like sulfur dioxide and particulate matter
that enters the air we breathe. Additionally, compared to coal, it
produces significantly fewer carbon emissions. By liquefying
natural gas, we are able to reduce its volume by 600 times so that
we can load it onto special LNG carriers designed to keep the LNG
cold and in liquid form for efficient transport
overseas.
We own the natural gas liquefaction and export facility located in
Cameron Parish, Louisiana at Sabine Pass (the “Sabine Pass LNG
Terminal”), one of the largest LNG production facilities in the
world, which has six operational Trains, with Train 6 having
achieved substantial completion on February 4, 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, three marine berths, with the third berth having achieved
substantial completion on October 27, 2022, two of which can
accommodate vessels with nominal capacity of up to 266,000 cubic
meters and the third berth which can accommodate vessels with
nominal capacity of up to 200,000 cubic meters, and vaporizers with
total 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 and
intrastate pipelines.
Our customer arrangements provide us with significant, stable and
long-term cash flows. We contract our anticipated production
capacity under SPAs, in which our customers are generally required
to pay a fixed fee with respect to the contracted volumes
irrespective of their election to cancel or suspend deliveries of
LNG cargoes, and under IPM agreements, in which the gas producer
sells natural gas to us on a global LNG index price, less a fixed
liquefaction fee, shipping and other costs. Our
long-term customer arrangements form the foundation of our business
and provide us with significant, stable, long-term cash flows.
Through our SPAs and IPM agreements, we have contracted
approximately 85% of the total production capacity from the
Liquefaction Project with approximately 15 years of weighted
average remaining life as of September 30, 2022. In March 2022, the
DOE authorized the export of an additional 152.64 Bcf/yr of
domestically produced LNG by vessel from the Sabine Pass LNG
Terminal through December 31, 2050 to non-FTA countries, that were
previously authorized for FTA countries only. For further
discussion of the contracted future cash flows under our revenue
arrangements, see the liquidity and capital resources disclosures
in our
annual report on Form 10-K for the fiscal year ended December 31,
2021.
We remain focused on operational excellence and customer
satisfaction. Increasing demand for LNG has allowed us to expand
our liquefaction infrastructure in a financially disciplined
manner. We have increased available liquefaction capacity at our
Liquefaction Project as a result of debottlenecking and other
optimization projects. We hold a significant land position at the
Sabine Pass LNG Terminal, which provides opportunity for further
liquefaction capacity expansion. The development of this site or
other projects, including infrastructure projects in support of
natural gas supply and LNG demand, will require, among other
things, acceptable commercial and financing arrangements before we
make a positive final investment decision.
Additionally, we are committed to the responsible and proactive
management of our most important environmental, social and
governance (“ESG”) impacts, risks and opportunities. In June 2022,
Cheniere published its 2021 Corporate Responsibility (“CR”) report,
which details our approach and progress on ESG issues, including
Cheniere’s collaboration with natural gas midstream companies,
methane detection technology providers and leading academic
institutions to implement quantification, monitoring, reporting and
verification of greenhouse gas (“GHG”) emissions at natural gas
gathering, processing, transmission and storage systems specific to
our supply chain, as well as our contributions to energy security
during a critical time in history. Additionally, Cheniere commenced
providing Cargo Emissions Tags (“CE Tags”) to its long-term
customers in June 2022. The CE Tags provide customers with
estimated GHG emissions data associated with each LNG cargo
produced at the Liquefaction Project and are provided for both
free-on-board (“FOB”) and delivered ex-ship (“DES”) LNG cargoes.
Cheniere also joined the Oil and Gas Methane Partnership (“OGMP”)
2.0, the United Nations Environment Programme’s (“UNEP”) flagship
oil and gas methane emissions reporting and mitigation initiative
in October 2022. OGMP 2.0 is a comprehensive, measurement-based
reporting framework intended to improve the accuracy and
transparency of methane emissions reporting in the oil and gas
sector. Cheniere’s CR report is available at
cheniere.com/our-responsibility/reporting-center. Information on
our website, including the CR report, is not incorporated by
reference into this Quarterly Report on Form 10-Q.
Overview of Significant Events
Our significant events since January 1, 2022 and through the filing
date of this Form 10-Q include the
following:
Strategic
•On
September 23, 2022, Corey Grindal, Executive Vice President,
Worldwide Trading and Tim Wyatt, Senior Vice President, Corporate
Development and Strategy, were appointed to the Board of Directors
of Cheniere Energy Partners GP, LLC (“Cheniere GP”). Mr. Grindal
was also appointed as Executive Vice President and Chief Operating
Officer of Cheniere GP, effective January 2, 2023.
•In
June 2022, SPL entered into an SPA with Chevron U.S.A. Inc.
(“Chevron”) to sell Chevron approximately 1.0 mtpa of LNG between
2026 and 2042.
•In
February 2022, in connection with a prior commitment from Cheniere
to collateralize financing for Train 6 of the Liquefaction
Project:
◦Cheniere
Marketing entered into agreements to novate to SPL certain SPAs
entered into with ENN LNG (Singapore) Pte Ltd. and a subsidiary of
Glencore plc, with effective dates of January 1, 2023 and February
17, 2022, respectively, aggregating approximately 21 million tonnes
of LNG to be delivered between 2023 and 2035.
◦Our
board of directors approved the entry by SPL into (1) an agreement
to novate to SPL an IPM agreement between Corpus Christi
Liquefaction Stage III, LLC (“CCL Stage III”), formerly a wholly
owned direct subsidiary of Cheniere (as purchaser) that merged with
and into Corpus Christi Liquefaction, LLC, and Tourmaline Oil
Marketing Corp., a subsidiary of Tourmaline Oil Corp (as supplier),
to purchase 140,000 MMBtu per day of natural gas at a price based
on Platts Japan Korea Marker (“JKM”), for a term of
approximately 15 years beginning in early 2023 (the “Tourmaline
IPM”) and (2) a FOB SPA with Cheniere Marketing International LLP
to sell LNG associated with the natural gas to be supplied under
the IPM agreement. The agreement to assign the Tourmaline IPM
agreement from CCL Stage III to SPL was executed and the assignment
was effective on March 15, 2022.
Operational
•As
of October 31, 2022, approximately 1,850 cumulative LNG
cargoes totaling over 125 million tonnes of LNG have been produced,
loaded and exported from the Liquefaction Project.
•On
October 27, 2022, substantial completion of the third berth at the
Sabine Pass LNG Terminal was achieved.
•On
February 4, 2022, substantial completion of Train 6 of the
Liquefaction Project was achieved (the “Train 6
Completion”).
Financial
•In
October 2022, SPL redeemed $300 million of outstanding
borrowings under its 5.625% Senior Secured Notes due 2023 (the
“2023 SPL Senior Notes”) pursuant to a notice of redemption issued
in September 2022.
•In
September 2022, Moody’s Corporation upgraded its issuer credit
ratings of CQP and SPL from Ba2 and Baa3, respectively, to Ba1 and
Baa2, respectively, with a stable outlook. Additionally in
September 2022, Fitch Ratings upgraded its issuer credit ratings of
CQP and SPL from BB+ and BBB-, respectively, to BBB- and BBB,
respectively, with a stable outlook.
•We
paid aggregate distributions of $2.81 per common unit during the
nine months ended September 30, 2022. On October 24, 2022, we
declared a cash distribution of $1.070 per common unit to
unitholders of record as of November 3, 2022 and the related
general partner distribution to be paid on November 14, 2022.
These distributions consist of a base amount of $0.775 per unit and
a variable amount of $0.295 per unit.
•In
February 2022, we announced the initiation of quarterly
distributions to be comprised of a base amount plus a variable
amount, which began with the distribution related to the first
quarter of 2022. The variable amount takes into consideration,
among other things, amounts reserved for annual debt repayment and
capital allocation goals, anticipated capital expenditures to be
funded with cash and cash reserves to provide for the proper
conduct of the business.
Results of Operations
The following charts summarize the total revenues and total LNG
volumes loaded from our Liquefaction Project during the nine months
ended September 30, 2022 and 2021:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) |
The nine months ended September 30, 2021 excludes eight TBtu under
our contracts that were loaded at our affiliate’s
facility.
|
Net income (loss)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended September 30, |
|
Nine Months Ended September 30, |
|
|
|
|
|
(in millions, except per share data) |
2022 |
|
2021 |
|
|
|
Variance |
|
2022 |
|
2021 |
|
|
|
Variance |
|
Net income (loss) |
$ |
(514) |
|
|
$ |
381 |
|
|
|
|
$ |
(895) |
|
|
$ |
(13) |
|
|
$ |
1,123 |
|
|
|
|
$ |
(1,136) |
|
|
|
|
|
|
Basic and diluted net income (loss) per common unit
|
(1.49) |
|
|
0.69 |
|
|
|
|
(2.18) |
|
|
(1.36) |
|
|
2.07 |
|
|
|
|
(3.43) |
|
|
|
|
|
The unfavorable variances of $895 million and $1.1 billion
during the three and nine months ended September 30, 2022 from the
comparable periods in 2021, respectively, were primarily a result
of losses of $1.3 billion and $2.2 billion, respectively,
on the derivative liability associated with the Tourmaline IPM
agreement following its assignment to SPL from CCL Stage III in
March 2022. See
Overview of Significant Events
for further discussion of the assignment. The associated losses
following the assignment were primarily attributed to SPL’s lower
credit risk profile relative to that of CCL Stage III, resulting in
a higher derivative liability given reduced risk of SPL’s own
nonperformance, and unfavorable shifts in the international forward
commodity curve. Partially offsetting the unfavorable variances in
both comparable periods was increased gross margin per MMBtu on LNG
delivered, due to higher margins on sales indexed to Henry Hub plus
a mark up, generally at 115%, as a result of increases in the
index, and increased volumes delivered, in part due to the Train 6
Completion. Additionally offsetting the unfavorable variances in
both comparable periods was the recognition of increased
regasification revenues from Chevron, as further described
below.
Derivative instruments are utilized to manage our exposure to
commodity-related marketing and price risks and are reported at
fair value on our Consolidated Financial Statements. For commodity
derivative instruments related to our IPM agreement novated to SPL
during the nine months ended September 30, 2022 as further
described in
Overview
of Significant Events,
the underlying LNG sales being economically hedged are accounted
for under the accrual method of accounting, whereby revenues
expected to be derived from the future LNG sales are recognized
only upon delivery 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, and given the significant volumes, long-term duration and
volatility in price basis for certain of our derivative contracts,
use of derivative instruments may result in continued volatility of
our results of operations based on changes in market pricing,
counterparty credit risk and other relevant factors,
notwithstanding the operational intent to mitigate risk exposure
over time.
In June 2022, Chevron entered into an agreement with SPLNG
providing for the early termination of the TUA and an associated
terminal marine services agreement between the parties and their
affiliates for a lump sum fee of $765 million (the
“Termination Fee”). Obligations pursuant to the TUA and associated
agreement, including Chevron’s obligation to pay SPLNG capacity
payments totaling $125 million annually (adjusted for
inflation) from 2023 through 2029, will terminate upon the later of
SPLNG’s receipt of the Termination Fee or December 31, 2022. The
termination agreement became effective on July 6, 2022. We have
allocated the $765 million Termination Fee to the terminated
commitments, with $796 million in cash inflows allocable to
the termination of the TUA, which we are recognizing ratably over
the July 6, 2022 to December 31, 2022 period as regasification
revenues on our Consolidated Statements of Operations, and an
offsetting $31 million in cash outflows allocable to the
extinguishment of other remaining obligations we have to Chevron,
which will be recognized upon receipt of the Termination Fee as a
loss on extinguishment of debt on our Consolidated Statements of
Operations.
As described in
Overview
of Significant Events,
during the nine months ended September 30, 2022, we entered into an
SPA with a counterparty for approximately 1.0 mtpa of LNG to be
delivered between 2026 and 2042. We expect our net income or loss
in the future to be impacted by the revenues and associated
expenses related to the commencement of this
agreement.
Revenues
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Three Months Ended September 30, |
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Nine Months Ended September 30, |
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(in millions, except volumes) |
2022 |
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2021 |
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Variance |
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2022 |
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2021 |
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Variance |
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LNG revenues |
$ |
3,130 |
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$ |
1,791 |
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$ |
1,339 |
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$ |
8,577 |
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$ |
5,057 |
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$ |
3,520 |
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LNG revenues—affiliate |
1,376 |
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453 |
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923 |
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3,268 |
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878 |
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2,390 |
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LNG revenues—related party |
— |
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— |
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— |
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4 |
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— |
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4 |
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Regasification revenues |
455 |
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