UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
☒QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 20202021
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 001-16383
CHENIERE ENERGY, INC.
(Exact name of registrant as specified in its charter) |
| | | | |
Delaware | 95-4352386 |
(State or other jurisdiction of incorporation or organization) | (I.R.S. Employer Identification No.) |
700 Milam Street,, Suite 1900
Houston,, Texas77002
(Address of principal executive offices) (Zip Code)
(713) (713) 375-5000
(Registrant’s telephone number, including area code) Securities registered pursuant to Section 12(b) of the Act:
|
| | | | | | | |
Title of each class | Trading Symbol | Name of each exchange on which registered |
Common Stock, $ 0.003 par value | LNG | NYSE American |
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
|
| | | | | | | | | | | | | | | | |
| Large accelerated filer | ☒ | | Accelerated filer | ☐ |
| Non-accelerated filer | ☐ | | Smaller reporting company | ☐ |
| | | | Emerging growth company | ☐ |
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒
As of July 31, 2020,30, 2021, the issuer had 252,252,909253,606,918 shares of Common Stock outstanding.
CHENIERE ENERGY, INC.
TABLE OF CONTENTS
DEFINITIONS
As used in this quarterly report, the terms listed below have the following meanings:
Common Industry and Other Terms
|
| | | | | | | |
Bcf | | billion cubic feet |
Bcf/d | | billion cubic feet per day |
Bcf/yr | | billion cubic feet per year |
Bcfe | | billion cubic feet equivalent |
DOE | | U.S. Department of Energy |
EPC | | engineering, procurement and construction |
FERC | | Federal Energy Regulatory Commission |
FTA countries | | countries with which the United States has a free trade agreement providing for national treatment for trade in natural gas |
GAAP | | generally accepted accounting principles in the United States |
Henry Hub | | the final settlement price (in USD per MMBtu) for the New York Mercantile Exchange’s Henry Hub natural gas futures contract for the month in which a relevant cargo’s delivery window is scheduled to begin |
LIBOR | | London Interbank Offered Rate |
LNG | | liquefied natural gas, a product of natural gas that, through a refrigeration process, has been cooled to a liquid state, which occupies a volume that is approximately 1/600th of its gaseous state |
MMBtu | | million British thermal units, anunits; one British thermal unit measures the amount of energy unitrequired to raise the temperature of one pound of water by one degree Fahrenheit |
mtpa | | million tonnes per annum |
| | |
non-FTA countries | | countries with which the United States does not have a free trade agreement providing for national treatment for trade in natural gas and with which trade is permitted |
SEC | | U.S. Securities and Exchange Commission |
SPA | | LNG sale and purchase agreement |
TBtu | | trillion British thermal units, anunits; one British thermal unit measures the amount of energy unitrequired to raise the temperature of one pound of water by one degree Fahrenheit |
Train | | an industrial facility comprised of a series of refrigerant compressor loops used to cool natural gas into LNG |
TUA | | terminal use agreement |
Abbreviated Legal Entity Structure
The following diagram depicts our abbreviated legal entity structure as of June 30, 2020,2021, including our ownership of certain subsidiaries, and the references to these entities used in this quarterly report:
Unless the context requires otherwise, references to “Cheniere,” the “Company,” “we,” “us” and “our” refer to Cheniere Energy, Inc. and its consolidated subsidiaries, including our publicly traded subsidiary, Cheniere Partners.
Unless the context requires otherwise, references to the “CCH Group” refer to CCH HoldCo II, CCH HoldCo I, CCH, CCL and CCP, collectively.
| |
PART I. | FINANCIAL INFORMATION |
PART I. FINANCIAL INFORMATION
| |
ITEM 1. | CONSOLIDATED FINANCIAL STATEMENTS |
ITEM 1. CONSOLIDATED FINANCIAL STATEMENTS
CHENIERE ENERGY, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS (1)STATEMENTS OF OPERATIONS
(in millions, except per share data)
(unaudited)
|
| | | | | | | |
| June 30, | | December 31, |
| 2020 | | 2019 |
ASSETS | (unaudited) | | |
Current assets | | | |
Cash and cash equivalents | $ | 2,039 |
| | $ | 2,474 |
|
Restricted cash | 505 |
| | 520 |
|
Accounts and other receivables, net | 646 |
| | 491 |
|
Inventory | 207 |
| | 312 |
|
Derivative assets | 284 |
| | 323 |
|
Other current assets | 146 |
| | 92 |
|
Total current assets | 3,827 |
| | 4,212 |
|
| | | |
Property, plant and equipment, net | 29,950 |
| | 29,673 |
|
Operating lease assets, net | 520 |
| | 439 |
|
Non-current derivative assets | 589 |
| | 174 |
|
Goodwill | 77 |
| | 77 |
|
Deferred tax assets | 337 |
| | 529 |
|
Other non-current assets, net | 546 |
| | 388 |
|
Total assets | $ | 35,846 |
| | $ | 35,492 |
|
| | | |
LIABILITIES AND STOCKHOLDERS’ EQUITY | | | |
Current liabilities | |
| | |
|
Accounts payable | $ | 26 |
| | $ | 66 |
|
Accrued liabilities | 735 |
| | 1,281 |
|
Current debt | 237 |
| | — |
|
Deferred revenue | 23 |
| | 161 |
|
Current operating lease liabilities | 179 |
| | 236 |
|
Derivative liabilities | 239 |
| | 117 |
|
Other current liabilities | 25 |
| | 13 |
|
Total current liabilities | 1,464 |
| | 1,874 |
|
| | | |
Long-term debt, net | 30,807 |
| | 30,774 |
|
Non-current operating lease liabilities | 347 |
| | 189 |
|
Non-current finance lease liabilities | 58 |
| | 58 |
|
Non-current derivative liabilities | 161 |
| | 151 |
|
Other non-current liabilities | 13 |
| | 11 |
|
| | | |
Commitments and contingencies (see Note 17) |
|
| |
|
|
| | | |
Stockholders’ equity | |
| | |
|
Preferred stock, $0.0001 par value, 5.0 million shares authorized, none issued | — |
| | — |
|
Common stock, $0.003 par value, 480.0 million shares authorized | | | |
Issued: 272.9 million shares at June 30, 2020 and 270.7 million shares at December 31, 2019 |
|
| |
|
|
Outstanding: 252.2 million shares at June 30, 2020 and 253.6 million shares at December 31, 2019 | 1 |
| | 1 |
|
Treasury stock: 20.7 million shares and 17.1 million shares at June 30, 2020 and December 31, 2019, respectively, at cost | (870 | ) | | (674 | ) |
Additional paid-in-capital | 4,227 |
| | 4,167 |
|
Accumulated deficit | (2,936 | ) | | (3,508 | ) |
Total stockholders’ equity (deficit) | 422 |
| | (14 | ) |
Non-controlling interest | 2,574 |
| | 2,449 |
|
Total equity | 2,996 |
| | 2,435 |
|
Total liabilities and stockholders’ equity | $ | 35,846 |
| | $ | 35,492 |
|
| | | | | | | | | | | | | | | | | | | | | | | | | |
| Three Months Ended June 30, | | Six Months Ended June 30, |
| 2021 | | 2020 | | 2021 | | 2020 | | |
Revenues | | | | | | | | | |
LNG revenues | $ | 2,913 | | | $ | 2,295 | | | $ | 5,912 | | | $ | 4,863 | | | |
Regasification revenues | 67 | | | 68 | | | 134 | | | 135 | | | |
Other revenues | 37 | | | 39 | | | 61 | | | 113 | | | |
| | | | | | | | | |
Total revenues | 3,017 | | | 2,402 | | | 6,107 | | | 5,111 | | | |
| | | | | | | | | |
Operating costs and expenses | | | | | | | | | |
Cost of sales (excluding items shown separately below) | 2,154 | | | 803 | | | 3,540 | | | 1,527 | | | |
| | | | | | | | | |
Operating and maintenance expense | 385 | | | 355 | | | 707 | | | 671 | | | |
Development expense | 2 | | | 1 | | | 3 | | | 5 | | | |
Selling, general and administrative expense | 73 | | | 73 | | | 154 | | | 154 | | | |
Depreciation and amortization expense | 258 | | | 233 | | | 494 | | | 466 | | | |
| | | | | | | | | |
Impairment expense and loss (gain) on disposal of assets | (1) | | | 0 | | | (1) | | | 5 | | | |
| | | | | | | | | |
| | | | | | | | | |
Total operating costs and expenses | 2,871 | | | 1,465 | | | 4,897 | | | 2,828 | | | |
| | | | | | | | | |
Income from operations | 146 | | | 937 | | | 1,210 | | | 2,283 | | | |
| | | | | | | | | |
Other income (expense) | | | | | | | | | |
Interest expense, net of capitalized interest | (368) | | | (407) | | | (724) | | | (819) | | | |
Loss on modification or extinguishment of debt | (4) | | | (43) | | | (59) | | | (44) | | | |
Interest rate derivative loss, net | (2) | | | (25) | | | (1) | | | (233) | | | |
Other income, net | 4 | | | 5 | | | 10 | | | 14 | | | |
Total other expense | (370) | | | (470) | | | (774) | | | (1,082) | | | |
| | | | | | | | | |
Income (loss) before income taxes and non-controlling interest | (224) | | | 467 | | | 436 | | | 1,201 | | | |
Less: income tax provision (benefit) | (93) | | | 63 | | | (4) | | | 194 | | | |
Net income (loss) | (131) | | | 404 | | | 440 | | | 1,007 | | | |
Less: net income attributable to non-controlling interest | 198 | | | 207 | | | 376 | | | 435 | | | |
Net income (loss) attributable to common stockholders | $ | (329) | | | $ | 197 | | | $ | 64 | | | $ | 572 | | | |
| | | | | | | | | |
Net income (loss) per share attributable to common stockholders—basic (1) | $ | (1.30) | | | $ | 0.78 | | | $ | 0.25 | | | $ | 2.27 | | | |
Net income (loss) per share attributable to common stockholders—diluted (1) | $ | (1.30) | | | $ | 0.78 | | | $ | 0.25 | | | $ | 2.26 | | | |
| | | | | | | | | |
Weighted average number of common shares outstanding—basic | 253.5 | | | 252.1 | | | 253.2 | | | 252.6 | | | |
Weighted average number of common shares outstanding—diluted | 253.5 | | | 252.4 | | | 254.7 | | | 253.3 | | | |
| |
(1) | (1) Earnings per share in the table may not recalculate exactly due to rounding because it is calculated based on whole numbers, not the rounded numbers presented. Amounts presented include balances held by our consolidated variable interest entity (“VIE”), Cheniere Partners, as further discussed in Note 8— Non-controlling Interest and Variable Interest Entity. As of June 30, 2020, total assets and liabilities of Cheniere Partners, which are included in our Consolidated Balance Sheets, were $18.9 billion and $18.1 billion, respectively, including $1.3 billion of cash and cash equivalents and $0.2 billion of restricted cash. |
The accompanying notes are an integral part of these consolidated financial statements.
3
CHENIERE ENERGY, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONSBALANCE SHEETS (1)
(in millions, except per share data)
(unaudited)
|
| | | | | | | | | | | | | | | |
| Three Months Ended June 30, | | Six Months Ended June 30, |
| 2020 | | 2019 | | 2020 | | 2019 |
Revenues | | | | | | | |
LNG revenues | $ | 2,295 |
| | $ | 2,173 |
| | $ | 4,863 |
| | $ | 4,316 |
|
Regasification revenues | 68 |
| | 67 |
| | 135 |
| | 133 |
|
Other revenues | 39 |
| | 52 |
| | 113 |
| | 104 |
|
Total revenues | 2,402 |
| | 2,292 |
| | 5,111 |
| | 4,553 |
|
| | | | | | | |
Operating costs and expenses | | | | | | | |
Cost of sales (excluding items shown separately below) | 803 |
| | 1,277 |
| | 1,527 |
| | 2,491 |
|
Operating and maintenance expense | 355 |
| | 295 |
| | 671 |
| | 516 |
|
Development expense | 1 |
| | 3 |
| | 5 |
| | 4 |
|
Selling, general and administrative expense | 73 |
| | 77 |
| | 154 |
| | 150 |
|
Depreciation and amortization expense | 233 |
| | 204 |
| | 466 |
| | 348 |
|
Impairment expense and loss on disposal of assets | — |
| | 4 |
| | 5 |
| | 6 |
|
Total operating costs and expenses | 1,465 |
| | 1,860 |
| | 2,828 |
| | 3,515 |
|
| | | | | | | |
Income from operations | 937 |
| | 432 |
| | 2,283 |
| | 1,038 |
|
| | | | | | | |
Other income (expense) | | | | | | | |
Interest expense, net of capitalized interest | (407 | ) | | (372 | ) | | (819 | ) | | (619 | ) |
Loss on modification or extinguishment of debt | (43 | ) | | — |
| | (44 | ) | | — |
|
Interest rate derivative loss, net | (25 | ) | | (74 | ) | | (233 | ) | | (109 | ) |
Other income, net | 5 |
| | 16 |
| | 14 |
| | 32 |
|
Total other expense | (470 | ) | | (430 | ) | | (1,082 | ) | | (696 | ) |
| | | | | | | |
Income before income taxes and non-controlling interest | 467 |
|
| 2 |
|
| 1,201 |
|
| 342 |
|
Income tax provision | (63 | ) |
| — |
|
| (194 | ) |
| (3 | ) |
Net income | 404 |
|
| 2 |
|
| 1,007 |
|
| 339 |
|
Less: net income attributable to non-controlling interest | 207 |
|
| 116 |
|
| 435 |
|
| 312 |
|
Net income (loss) attributable to common stockholders | $ | 197 |
|
| $ | (114 | ) |
| $ | 572 |
|
| $ | 27 |
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income (loss) per share attributable to common stockholders—basic (1) | $ | 0.78 |
|
| $ | (0.44 | ) |
| $ | 2.27 |
|
| $ | 0.11 |
|
Net income (loss) per share attributable to common stockholders—diluted (1) | $ | 0.78 |
| | $ | (0.44 | ) | | $ | 2.26 |
| | $ | 0.11 |
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted average number of common shares outstanding—basic | 252.1 |
| | 257.4 |
| | 252.6 |
| | 257.3 |
|
Weighted average number of common shares outstanding—diluted | 252.4 |
| | 257.4 |
| | 253.3 |
| | 258.6 |
|
| | | | | | | | | | | |
| |
| June 30, | | December 31, |
| 2021 | | 2020 |
ASSETS | (unaudited) | | |
Current assets | | | |
Cash and cash equivalents | $ | 1,806 | | | $ | 1,628 | |
Restricted cash | 424 | | | 449 | |
Accounts and other receivables, net of current expected credit losses | 613 | | | 647 | |
| | | |
Inventory | 363 | | | 292 | |
Current derivative assets | 178 | | | 32 | |
Other current assets | 281 | | | 121 | |
Total current assets | 3,665 | | | 3,169 | |
| | | |
| | | |
Property, plant and equipment, net of accumulated depreciation | 30,288 | | | 30,421 | |
Operating lease assets | 1,698 | | | 759 | |
| | | |
Derivative assets | 96 | | | 376 | |
Goodwill | 77 | | | 77 | |
Deferred tax assets | 497 | | | 489 | |
Other non-current assets, net | 431 | | | 406 | |
Total assets | $ | 36,752 | | | $ | 35,697 | |
| | | |
LIABILITIES AND STOCKHOLDERS’ EQUITY | | | |
Current liabilities | | | |
Accounts payable | $ | 83 | | | $ | 35 | |
Accrued liabilities | 1,197 | | | 1,175 | |
| | | |
Current debt, net of discount and debt issuance costs | 949 | | | 372 | |
Deferred revenue | 105 | | | 138 | |
Current operating lease liabilities | 365 | | | 161 | |
Current derivative liabilities | 822 | | | 313 | |
Other current liabilities | 5 | | | 2 | |
Total current liabilities | 3,526 | | | 2,196 | |
| | | |
Long-term debt, net of premium, discount and debt issuance costs | 29,327 | | | 30,471 | |
Operating lease liabilities | 1,332 | | | 597 | |
Finance lease liabilities | 57 | | | 57 | |
| | | |
Derivative liabilities | 145 | | | 151 | |
Other non-current liabilities | 8 | | | 7 | |
| | | |
| | | |
| | | |
Stockholders’ equity | | | |
Preferred stock, $0.0001 par value, 5.0 million shares authorized, NaN issued | 0 | | | 0 | |
Common stock, $0.003 par value, 480.0 million shares authorized; 275.0 million shares and 273.1 million shares issued at June 30, 2021 and December 31, 2020, respectively | 1 | | | 1 | |
| | | |
| | | |
| | | |
Treasury stock: 21.4 million shares and 20.8 million shares at June 30, 2021 and December 31, 2020, respectively, at cost | (915) | | | (872) | |
Additional paid-in-capital | 4,337 | | | 4,273 | |
Accumulated deficit | (3,529) | | | (3,593) | |
Total stockholders' deficit | (106) | | | (191) | |
Non-controlling interest | 2,463 | | | 2,409 | |
Total equity | 2,357 | | | 2,218 | |
Total liabilities and stockholders’ equity | $ | 36,752 | | | $ | 35,697 | |
| |
(1) | Earnings per share in the table may not recalculate exactly due to rounding because it is calculated based on whole numbers, not the rounded numbers presented. |
(1) Amounts presented include balances held by our consolidated variable interest entity (“VIE”), Cheniere Partners, as further discussed in Note 8— Non-controlling Interest and Variable Interest Entity. As of June 30, 2021, total assets and liabilities of Cheniere Partners, which are included in our Consolidated Balance Sheets, were $18.9 billion and $18.5 billion, respectively, including $1.2 billion of cash and cash equivalents and $0.1 billion of restricted cash.
The accompanying notes are an integral part of these consolidated financial statements.
4
CHENIERE ENERGY, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY
(in millions)
(unaudited)
| | Three and Six Months Ended June 30, 2020 | | | | | | | | | | | | | | | | |
Three and Six Months Ended June 30, 2021 | | Three and Six Months Ended June 30, 2021 | |
| Total Stockholders’ Equity | | | | | Total Stockholders’ Equity | |
| Common Stock | | Treasury Stock | | Additional Paid-in Capital | | Accumulated Deficit | | Non-controlling Interest | | Total Equity | | Common Stock | | Treasury Stock | | Additional Paid-in Capital | | Accumulated Deficit | | Non-controlling Interest | | Total Equity |
| Shares | | Par Value Amount | | Shares | | Amount | | | Shares | | Par Value Amount | | Shares | | Amount | |
Balance at December 31, 2019 | 253.6 |
|
| $ | 1 |
|
| 17.1 |
|
| $ | (674 | ) |
| $ | 4,167 |
|
| $ | (3,508 | ) |
| $ | 2,449 |
|
| $ | 2,435 |
| |
| Balance at December 31, 2020 | | Balance at December 31, 2020 | 252.3 | | | $ | 1 | | | 20.8 | | | $ | (872) | | | $ | 4,273 | | | $ | (3,593) | | | $ | 2,409 | | | $ | 2,218 | |
Vesting of restricted stock units and performance stock units | 2.1 |
| | — |
| | — |
| | — |
| | — |
| | — |
| | — |
| | — |
| Vesting of restricted stock units and performance stock units | 1.8 | | | 0 | | | 0 | | | 0 | | | 0 | | | 0 | | | 0 | | | 0 | |
Share-based compensation | — |
| | — |
| | — |
| | — |
| | 29 |
| | — |
| | — |
| | 29 |
| Share-based compensation | — | | | 0 | | | — | | | 0 | | | 33 | | | 0 | | | 0 | | | 33 | |
Issued shares withheld from employees related to share-based compensation, at cost | (0.7 | ) | | — |
| | 0.7 |
| | (39 | ) | | — |
| | — |
| | — |
| | (39 | ) | Issued shares withheld from employees related to share-based compensation, at cost | (0.6) | | | 0 | | | 0.6 | | | (42) | | | 0 | | | 0 | | | 0 | | | (42) | |
Shares repurchased, at cost | (2.9 | ) | | — |
| | 2.9 |
| | (155 | ) | | — |
| | — |
| | — |
| | (155 | ) | |
| Net income attributable to non-controlling interest | — |
| | — |
| | — |
| | — |
| | — |
| | — |
| | 228 |
| | 228 |
| Net income attributable to non-controlling interest | — | | | 0 | | | — | | | 0 | | | 0 | | | 0 | | | 178 | | | 178 | |
Distributions and dividends to non-controlling interest | — |
| | — |
| | — |
| | — |
| | — |
| | — |
| | (154 | ) | | (154 | ) | |
Distributions to non-controlling interest | | Distributions to non-controlling interest | — | | | 0 | | | — | | | 0 | | | 0 | | | 0 | | | (160) | | | (160) | |
Net income | — |
| | — |
| | — |
| | — |
| | — |
| | 375 |
| | — |
| | 375 |
| Net income | — | | | 0 | | | — | | | 0 | | | 0 | | | 393 | | | 0 | | | 393 | |
Balance at March 31, 2020 | 252.1 |
| | 1 |
| | 20.7 |
| | (868 | ) | | 4,196 |
| | (3,133 | ) | | 2,523 |
| | 2,719 |
| |
Balance at March 31, 2021 | | Balance at March 31, 2021 | 253.5 | | | 1 | | | 21.4 | | | (914) | | | 4,306 | | | (3,200) | | | 2,427 | | | 2,620 | |
| Vesting of restricted stock units and performance stock units | 0.1 |
| | — |
| | — |
| | — |
| | — |
| | — |
| | — |
| | — |
| Vesting of restricted stock units and performance stock units | 0.1 | | | 0 | | | 0 | | | 0 | | | 0 | | | 0 | | | 0 | | | 0 | |
Share-based compensation | — |
| | — |
| | — |
| | — |
| | 31 |
| | — |
| | — |
| | 31 |
| Share-based compensation | — | | | 0 | | | — | | | 0 | | | 31 | | | 0 | | | 0 | | | 31 | |
Issued shares withheld from employees related to share-based compensation, at cost | — |
| | — |
| | — |
| | (2 | ) | | — |
| | — |
| | — |
| | (2 | ) | Issued shares withheld from employees related to share-based compensation, at cost | 0 | | | 0 | | | 0 | | | (1) | | | 0 | | | 0 | | | 0 | | | (1) | |
| Net income attributable to non-controlling interest | — |
| | — |
| | — |
| | — |
| | — |
| | — |
| | 207 |
| | 207 |
| Net income attributable to non-controlling interest | — | | | 0 | | | — | | | 0 | | | 0 | | | 0 | | | 198 | | | 198 | |
Distributions and dividends to non-controlling interest | — |
| | — |
| | — |
| | — |
| | — |
| | — |
| | (156 | ) | | (156 | ) | |
Net income | — |
| | — |
| | — |
| | — |
| | — |
| | 197 |
| | — |
| | 197 |
| |
Balance at June 30, 2020 | 252.2 |
| | $ | 1 |
| | 20.7 |
| | $ | (870 | ) | | $ | 4,227 |
| | $ | (2,936 | ) | | $ | 2,574 |
| | $ | 2,996 |
| |
| Distributions to non-controlling interest | | Distributions to non-controlling interest | — | | | 0 | | | — | | | 0 | | | 0 | | | 0 | | | (162) | | | (162) | |
Net loss | | Net loss | — | | | 0 | | | — | | | 0 | | | 0 | | | (329) | | | 0 | | | (329) | |
Balance at June 30, 2021 | | Balance at June 30, 2021 | 253.6 | | | $ | 1 | | | 21.4 | | | $ | (915) | | | $ | 4,337 | | | $ | (3,529) | | | $ | 2,463 | | | $ | 2,357 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Three and Six Months Ended June 30, 2020 | | | | | | | | | | | | | | | |
| Total Stockholders’ Equity | | | |
| Common Stock | | Treasury Stock | | Additional Paid-in Capital | | Accumulated Deficit | | Non-controlling Interest | | Total Equity |
| Shares | | Par Value Amount | | Shares | | Amount | | | | |
Balance at December 31, 2019 | 253.6 | | | $ | 1 | | | 17.1 | | | $ | (674) | | | $ | 4,167 | | | $ | (3,508) | | | $ | 2,449 | | | $ | 2,435 | |
Vesting of restricted stock units and performance stock units | 2.1 | | | 0 | | | 0 | | | 0 | | | 0 | | | 0 | | | 0 | | | 0 | |
Share-based compensation | — | | | 0 | | | — | | | 0 | | | 29 | | | 0 | | | 0 | | | 29 | |
Issued shares withheld from employees related to share-based compensation, at cost | (0.7) | | | 0 | | | 0.7 | | | (39) | | | 0 | | | 0 | | | 0 | | | (39) | |
Shares repurchased, at cost | (2.9) | | | 0 | | | 2.9 | | | (155) | | | 0 | | | 0 | | | 0 | | | (155) | |
Net income attributable to non-controlling interest | — | | | 0 | | | — | | | 0 | | | 0 | | | 0 | | | 228 | | | 228 | |
Distributions to non-controlling interest | — | | | 0 | | | — | | | 0 | | | 0 | | | 0 | | | (154) | | | (154) | |
Net income | — | | | 0 | | | — | | | 0 | | | 0 | | | 375 | | | 0 | | | 375 | |
Balance at March 31, 2020 | 252.1 | | | 1 | | | 20.7 | | | (868) | | | 4,196 | | | (3,133) | | | 2,523 | | | 2,719 | |
Vesting of restricted stock units and performance stock units | 0.1 | | | 0 | | | 0 | | | 0 | | | 0 | | | 0 | | | 0 | | | 0 | |
Share-based compensation | — | | | 0 | | | — | | | 0 | | | 31 | | | 0 | | | 0 | | | 31 | |
Issued shares withheld from employees related to share-based compensation, at cost | 0 | | | 0 | | | 0 | | | (2) | | | 0 | | | 0 | | | 0 | | | (2) | |
| | | | | | | | | | | | | | | |
Net income attributable to non-controlling interest | — | | | 0 | | | — | | | 0 | | | 0 | | | 0 | | | 207 | | | 207 | |
| | | | | | | | | | | | | | | |
Distributions and dividends to non-controlling interest | — | | | 0 | | | — | | | 0 | | | 0 | | | 0 | | | (156) | | | (156) | |
Net income | — | | | 0 | | | — | | | 0 | | | 0 | | | 197 | | | 0 | | | 197 | |
Balance at June 30, 2020 | 252.2 | | | $ | 1 | | | 20.7 | | | $ | (870) | | | $ | 4,227 | | | $ | (2,936) | | | $ | 2,574 | | | $ | 2,996 | |
| | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | |
The accompanying notes are an integral part of these consolidated financial statements.
5
CHENIERE ENERGY, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY—CONTINUEDCASH FLOWS
(in millions)
(unaudited)
| | | | | | | | | | | | | |
| Six Months Ended June 30, |
| | | |
| 2021 | | 2020 | | |
Cash flows from operating activities | | | | | |
Net income | $ | 440 | | | $ | 1,007 | | | |
Adjustments to reconcile net income to net cash provided by operating activities: | | | | | |
Depreciation and amortization expense | 494 | | | 466 | | | |
Share-based compensation expense | 63 | | | 57 | | | |
Non-cash interest expense | 14 | | | 34 | | | |
Amortization of debt issuance costs, premium and discount | 40 | | | 70 | | | |
Reduction of right-of-use assets | 172 | | | 166 | | | |
Loss on modification or extinguishment of debt | 59 | | | 44 | | | |
Total losses (gains) on derivatives, net | 748 | | | (361) | | | |
Net cash provided by (used for) settlement of derivative instruments | (111) | | | 117 | | | |
Impairment expense and loss (gain) on disposal of assets | (1) | | | 5 | | | |
Impairment expense and loss (income) on equity method investments | (8) | | | 1 | | | |
Deferred taxes | (7) | | | 192 | | | |
Repayment of paid-in-kind interest related to repurchase of convertible notes | (190) | | | 0 | | | |
| | | | | |
Changes in operating assets and liabilities: | | | | | |
Accounts and other receivables, net of current expected credit losses | 33 | | | (155) | | | |
| | | | | |
Inventory | (66) | | | 104 | | | |
Other current assets | (163) | | | (37) | | | |
Accounts payable and accrued liabilities | 88 | | | (369) | | | |
| | | | | |
Deferred revenue | (33) | | | (138) | | | |
Operating lease liabilities | (173) | | | (145) | | | |
| | | | | |
Other, net | (26) | | | (30) | | | |
Net cash provided by operating activities | 1,373 | | | 1,028 | | | |
| | | | | |
Cash flows from investing activities | | | | | |
Property, plant and equipment | (440) | | | (983) | | | |
Proceeds from sale of fixed assets | 68 | | | 0 | | | |
Investment in equity method investment | 0 | | | (100) | | | |
Other | (11) | | | (7) | | | |
Net cash used in investing activities | (383) | | | (1,090) | | | |
| | | | | |
Cash flows from financing activities | | | | | |
Proceeds from issuances of debt | 2,184 | | | 2,597 | | | |
Repayments of debt | (2,603) | | | (2,380) | | | |
Debt issuance and other financing costs | (20) | | | (59) | | | |
Debt modification or extinguishment costs | (41) | | | (40) | | | |
| | | | | |
Distributions to non-controlling interest | (322) | | | (310) | | | |
Payments related to tax withholdings for share-based compensation | (43) | | | (41) | | | |
Repurchase of common stock | 0 | | | (155) | | | |
Other | 8 | | | 0 | | | |
Net cash used in financing activities | (837) | | | (388) | | | |
| | | | | |
Net increase (decrease) in cash, cash equivalents and restricted cash | 153 | | | (450) | | | |
Cash, cash equivalents and restricted cash—beginning of period | 2,077 | | | 2,994 | | | |
Cash, cash equivalents and restricted cash—end of period | $ | 2,230 | | | $ | 2,544 | | | |
|
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Three and Six Months Ended June 30, 2019 | | | | | | | | | | | | | | | |
| Total Stockholders’ Equity | | | |
| Common Stock | | Treasury Stock | | Additional Paid-in Capital | | Accumulated Deficit | | Non-controlling Interest | | Total Equity |
| Shares | | Par Value Amount | | Shares | | Amount | | | | |
Balance at December 31, 2018 | 257.0 |
| | $ | 1 |
| | 12.8 |
| | $ | (406 | ) | | $ | 4,035 |
| | $ | (4,156 | ) | | $ | 2,455 |
| | $ | 1,929 |
|
Vesting of restricted stock units | 0.6 |
| | — |
| | — |
| | — |
| | — |
| | — |
| | — |
| | — |
|
Share-based compensation | — |
| | — |
| | — |
| | — |
| | 28 |
| | — |
| | — |
| | 28 |
|
Issued shares withheld from employees related to share-based compensation, at cost | (0.2 | ) | | — |
| | 0.2 |
| | (12 | ) | | — |
| | — |
| | — |
| | (12 | ) |
Net income attributable to non-controlling interest | — |
| | — |
| | — |
| | — |
| | — |
| | — |
| | 196 |
| | 196 |
|
Distributions and dividends to non-controlling interest | — |
| | — |
| | — |
| | — |
| | — |
| | — |
| | (144 | ) | | (144 | ) |
Net income | — |
| | — |
| | — |
| | — |
| | — |
| | 141 |
| | — |
| | 141 |
|
Balance at March 31, 2019 | 257.4 |
| | 1 |
| | 13.0 |
| | (418 | ) | | 4,063 |
| | (4,015 | ) | | 2,507 |
| | 2,138 |
|
Vesting of restricted stock units | 0.1 |
| | — |
| | — |
| | — |
| | — |
| | — |
| | — |
| | — |
|
Share-based compensation | — |
| | — |
| | — |
| | — |
| | 33 |
| | — |
| | — |
| | 33 |
|
Issued shares withheld from employees related to share-based compensation, at cost | — |
| | — |
| | — |
| | (2 | ) | | — |
| | — |
| | — |
| | (2 | ) |
Shares repurchased, at cost | — |
| | — |
| | — |
| | (3 | ) | | — |
| | — |
| | — |
| | (3 | ) |
Net income attributable to non-controlling interest | — |
| | — |
| | — |
| | — |
| | — |
| | — |
| | 116 |
| | 116 |
|
Equity portion of convertible notes, net | — |
| | — |
| | — |
| | — |
| | 1 |
| | — |
| | — |
| | 1 |
|
Distributions and dividends to non-controlling interest | — |
| | — |
| | — |
| | — |
| | — |
| | — |
| | (146 | ) | | (146 | ) |
Net loss | — |
| | — |
| | — |
| | — |
| | — |
| | (114 | ) | | — |
| | (114 | ) |
Balance at June 30, 2019 | 257.5 |
| | $ | 1 |
| | 13.0 |
| | $ | (423 | ) | | $ | 4,097 |
| | $ | (4,129 | ) | | $ | 2,477 |
| | $ | 2,023 |
|
Balances per Consolidated Balance Sheets:
| | | | | | | |
| June 30, |
| 2021 | | |
Cash and cash equivalents | $ | 1,806 | | | |
Restricted cash | 424 | | | |
| | | |
Total cash, cash equivalents and restricted cash | $ | 2,230 | | | |
The accompanying notes are an integral part of these consolidated financial statements.
6
CHENIERE ENERGY, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(in millions)
(unaudited)
|
| | | | | | | |
| Six Months Ended June 30, |
| 2020 | | 2019 |
Cash flows from operating activities | | | |
Net income | $ | 1,007 |
| | $ | 339 |
|
Adjustments to reconcile net income to net cash provided by operating activities: | | | |
Depreciation and amortization expense | 466 |
| | 348 |
|
Share-based compensation expense | 57 |
| | 61 |
|
Non-cash interest expense | 34 |
| | 93 |
|
Amortization of debt issuance costs, premium and discount | 70 |
| | 44 |
|
Non-cash operating lease costs | 166 |
| | 158 |
|
Loss on modification or extinguishment of debt | 44 |
| | — |
|
Total gains on derivatives, net | (361 | ) | | (147 | ) |
Net cash provided by settlement of derivative instruments | 117 |
| | 62 |
|
Impairment expense and loss on disposal of assets | 5 |
| | 6 |
|
Impairment or loss on equity method investments | 1 |
| | 2 |
|
Deferred taxes | 192 |
| | — |
|
Changes in operating assets and liabilities: | | | |
Accounts and other receivables, net | (155 | ) | | 59 |
|
Inventory | 104 |
| | 33 |
|
Other current assets | (37 | ) | | (46 | ) |
Accounts payable and accrued liabilities | (369 | ) | | (80 | ) |
Deferred revenue | (138 | ) | | (2 | ) |
Operating lease liabilities | (145 | ) | | (163 | ) |
Other, net | (30 | ) | | (7 | ) |
Net cash provided by operating activities | 1,028 |
| | 760 |
|
| | | |
Cash flows from investing activities | | | |
Property, plant and equipment, net | (983 | ) | | (1,508 | ) |
Investment in equity method investment | (100 | ) | | (34 | ) |
Other | (7 | ) | | — |
|
Net cash used in investing activities | (1,090 | ) | | (1,542 | ) |
| | | |
Cash flows from financing activities | | | |
Proceeds from issuances of debt | 2,597 |
| | 2,021 |
|
Repayments of debt | (2,380 | ) | | (630 | ) |
Debt issuance and other financing costs | (59 | ) | | (20 | ) |
Debt extinguishment costs | (40 | ) | | — |
|
Distributions and dividends to non-controlling interest | (310 | ) | | (290 | ) |
Payments related to tax withholdings for share-based compensation | (41 | ) | | (14 | ) |
Repurchase of common stock | (155 | ) | | (3 | ) |
Other | — |
| | 2 |
|
Net cash provided by (used in) financing activities | (388 | ) | | 1,066 |
|
| | | |
Net increase (decrease) in cash, cash equivalents and restricted cash | (450 | ) | | 284 |
|
Cash, cash equivalents and restricted cash—beginning of period | 2,994 |
| | 3,156 |
|
Cash, cash equivalents and restricted cash—end of period | $ | 2,544 |
| | $ | 3,440 |
|
Balances per Consolidated Balance Sheet:
|
| | | |
| June 30, |
| 2020 |
Cash and cash equivalents | $ | 2,039 |
|
Restricted cash | 505 |
|
Total cash, cash equivalents and restricted cash | $ | 2,544 |
|
The accompanying notes are an integral part of these consolidated financial statements.
7
CHENIERE ENERGY, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(unaudited)
NOTE 1—NATURE OF OPERATIONS AND BASIS OF PRESENTATION
We are operating and constructingoperate 2 natural gas liquefaction and export facilities at Sabine Pass and Corpus Christi. TheChristi (respectively, the “Sabine Pass LNG Terminal” and “Corpus Christi LNG Terminal”).
Cheniere Partners owns the Sabine Pass LNG terminal isTerminal located in Cameron Parish, Louisiana, on the Sabine-Neches Waterway less than four miles from the Gulf Coast. Cheniere Partners, through its subsidiary SPL, is currently operatingwhich has natural gas liquefaction facilities consisting of 5 operational natural gas liquefaction Trains and is constructing 1 additional Train under construction that is expected to be substantially completed in the first half of 2022, for a total production capacity of approximately 30 mtpa of LNG (the “SPL Project”) at the Sabine Pass LNG terminal.. The Sabine Pass LNG terminalTerminal also has operational regasification facilities owned by Cheniere Partners’ subsidiary, SPLNG, that include pre-existing infrastructure of 5 LNG storage tanks, vaporizers and 2 marine berths, and vaporizers andwith an additional marine berth that is under construction. Cheniere Partners also owns a 94-mile pipeline that interconnects the Sabine Pass LNG terminalTerminal with a number of large interstate pipelines (the “Creole Trail Pipeline”) through its subsidiary, CTPL. As of June 30, 2020,2021, we owned 100% of the general partner interest and 48.6% of the limited partner interest in Cheniere Partners.
The Corpus Christi LNG terminalTerminal is located near Corpus Christi, Texas and is operated and constructed by our subsidiary, CCL.Texas. We are currently operating 2operate 3 Trains, and 1 additional Train is undergoing commissioning for a total production capacity of approximately 15 mtpa of LNG. We also operateown a 23-mile natural gas supply pipeline that interconnects the Corpus Christi LNG terminalTerminal with several interstate and intrastate natural gas pipelines (the “Corpus Christi Pipeline” and together with the Trains, the “CCL Project”) through our subsidiary CCP.CCP, as part of the CCH Group. The CCL Project once fully constructed, will containalso contains 3 LNG storage tanks and 2 marine berths.
Additionally, separate from the CCH Group, we are developing an expansion of the Corpus Christi LNG terminalTerminal adjacent to the CCL Project (“Corpus Christi Stage 3”) through our subsidiary CCL Stage III, for up to 7 midscale Trains with an expected total production capacity of approximately 10 mtpa of LNG. We received approval from FERC in November 2019 to site, construct and operate the expansion project.
We remain focused on operational excellence and customer satisfaction. Increasing demand offor LNG has allowed us to expand our liquefaction infrastructure in a financially disciplined manner. We have increased available liquefaction capacity at the SPL Project and the CCL Project (collectively, the “Liquefaction Projects”) as a result of debottlenecking and other optimization projects. We hold significant land positions at both the Sabine Pass LNG terminalTerminal and the Corpus Christi LNG terminalTerminal which provide opportunity for further liquefaction capacity expansion. The development of these sites 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 final investment decision (“FID”).
Basis of Presentation
The accompanying unaudited Consolidated Financial Statements of Cheniere have been prepared in accordance with GAAP for interim financial information and with Rule 10-01 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by GAAP for complete financial statements and should be read in conjunction with the Consolidated Financial Statements and accompanying notes included in our annual report on Form 10-K for the fiscal year ended December 31, 2019.2020 In our opinion, all adjustments, consisting only of normal recurring adjustments necessary for a fair presentation, have been included..
Results of operations for the three and six months ended June 30, 20202021 are not necessarily indicative of the results of operations that will be realized for the year ending December 31, 2020.2021.
Recent Accounting Standards
In MarchAugust 2020, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2020-06, Debt—Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging—Contracts in Entity’s Own Equity (Subtopic 815-40): Accounting for Convertible Instruments and Contracts in an Entity’s Own Equity. This guidance simplifies the accounting for convertible instruments primarily by eliminating the existing cash conversion and beneficial conversion models within Subtopic 470-20, which will result in fewer embedded conversion options being accounted for separately from the debt host. The guidance also amends and simplifies the calculation of earnings per share relating to convertible instruments. This guidance is effective for annual periods beginning after December 15, 2021, including interim periods within that reporting period, with earlier adoption permitted for fiscal years beginning after December 15, 2020, including interim periods within that reporting period, using either a full or modified retrospective approach. We plan to adopt
CHENIERE ENERGY, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—CONTINUED
(unaudited)
this guidance on January 1, 2022 using the modified retrospective approach. Preliminarily, we anticipate the adoption of ASU 2020-06 will primarily result in the reclassification of the previously bifurcated equity component associated with the 4.25% Convertible Senior Notes due 2045 (the “2045 Cheniere Convertible Senior Notes”) to debt as a result of the elimination of the cash conversion model. We currently estimate that the reclassification of the $194 million equity component will result in an approximate $190 million increase in the carrying value of our 2045 Cheniere Convertible Senior Notes, with the difference primarily impacting retained earnings as of January 1, 2022. We continue to evaluate the impact of the provisions of this guidance on our Consolidated Financial Statements and related disclosures. See Note 10—Debt for further discussion on the 2045 Cheniere Convertible Senior Notes.
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 agreementscontracts expected to arise from the market transition from LIBOR to alternative reference rates. We have various credit facilities and interest rate swaps indexed to LIBOR, as further described in Note 6—Derivative Instruments and Note 10—Debt. The optional expedients were available to be used upon issuance of this guidance but we have not yet applied the guidance because we have not yet modified any of our existing contracts for reference rate reform. Once we apply an optional expedient to a modified contract and adopt this standard, the guidance will be applied to all subsequent applicable contract modifications until December 31, 2022, at which time the optional expedients are no longer available.
CHENIERE ENERGY, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—CONTINUED
(unaudited)
NOTE 2—RESTRICTED CASH
Restricted cash consists of funds that are contractually or legally restricted as to usage or withdrawal and have been presented separately from cash and cash equivalents on our Consolidated Balance Sheets. As of June 30, 20202021 and December 31, 2019,2020, restricted cash consisted of the following (in millions):
| | | | | | | | | | | | | | |
| | |
| | June 30, | | December 31, |
| | 2021 | | 2020 |
Restricted cash | | | | |
SPL Project | | $ | 65 | | | $ | 97 | |
| | | | |
CCL Project | | 122 | | | 70 | |
Cash held by our subsidiaries that is restricted to Cheniere | | 237 | | | 282 | |
Total restricted cash | | $ | 424 | | | $ | 449 | |
| | | | |
| | | | |
| | | | |
| | | | |
| | | | |
| | | | |
|
| | | | | | | | |
| | June 30, | | December 31, |
| | 2020 | | 2019 |
Current restricted cash | | | | |
SPL Project | | $ | 167 |
| | $ | 181 |
|
CCL Project | | 101 |
| | 80 |
|
Cash held by our subsidiaries restricted to Cheniere | | 237 |
| | 259 |
|
Total current restricted cash | | $ | 505 |
| | $ | 520 |
|
Pursuant to the accounts agreements entered into with the collateral trustees for the benefit of SPL’s debt holders and CCH’s debt holders, SPL and CCH are required to deposit all cash received into reserve accounts controlled by the collateral trustees. The usage or withdrawal of such cash is restricted to the payment of liabilities related to the SPL Project and the CCL Project (collectively, the “Liquefaction Projects”)Liquefaction Projects and other restricted payments. The majority of the cash held by our subsidiaries that is restricted to Cheniere relates to advance funding for operation and construction needs of the Liquefaction Projects.
NOTE 3—ACCOUNTS AND OTHER RECEIVABLES, NET OF CURRENT EXPECTED CREDIT LOSSES
As of June 30, 20202021 and December 31, 2019,2020, accounts and other receivables, net of current expected credit losses consisted of the following (in millions):
| | | | | | | | | | | | | | |
| | |
| | June 30, | | December 31, |
| | 2021 | | 2020 |
Trade receivables | | | | |
SPL and CCL | | $ | 405 | | | $ | 482 | |
| | | | |
Cheniere Marketing | | 123 | | | 113 | |
Other accounts receivable, net of current expected credit losses | | 85 | | | 52 | |
| | | | |
Total accounts and other receivables, net of current expected credit losses | | $ | 613 | | | $ | 647 | |
|
| | | | | | | | |
| | June 30, | | December 31, |
| | 2020 | | 2019 |
Trade receivables | | | | |
SPL and CCL | | $ | 467 |
| | $ | 328 |
|
Cheniere Marketing | | 41 |
| | 113 |
|
Other accounts receivable | | 138 |
| | 50 |
|
Total accounts and other receivables, net | | $ | 646 |
| | $ | 491 |
|
NOTE 4—INVENTORY
As of June 30, 2020 and December 31, 2019, inventory consisted of the following (in millions):
|
| | | | | | | | |
| | June 30, | | December 31, |
| | 2020 | | 2019 |
Natural gas | | $ | 18 |
| | $ | 16 |
|
LNG | | 24 |
| | 67 |
|
LNG in-transit | | 21 |
| | 93 |
|
Materials and other | | 144 |
| | 136 |
|
Total inventory | | $ | 207 |
| | $ | 312 |
|
CHENIERE ENERGY, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—CONTINUED
(unaudited)
NOTE 4—INVENTORY
NOTE 5—PROPERTY, PLANT AND EQUIPMENT
As of June 30, 20202021 and December 31, 2019, property, plant and equipment, net2020, inventory consisted of the following (in millions):
| | | | | | | | | | | | | | |
| | |
| | June 30, | | December 31, |
| | 2021 | | 2020 |
Materials | | $ | 162 | | | $ | 150 | |
LNG in-transit | | 102 | | | 88 | |
LNG | | 61 | | | 27 | |
Natural gas | | 36 | | | 26 | |
Other | | 2 | | | 1 | |
Total inventory | | $ | 363 | | | $ | 292 | |
|
| | | | | | | | |
| | June 30, | | December 31, |
| | 2020 | | 2019 |
LNG terminal costs | | | | |
LNG terminal and interconnecting pipeline facilities | | $ | 27,453 |
| | $ | 27,305 |
|
LNG site and related costs | | 322 |
| | 322 |
|
LNG terminal construction-in-process | | 4,484 |
| | 3,903 |
|
Accumulated depreciation | | (2,494 | ) | | (2,049 | ) |
Total LNG terminal costs, net | | 29,765 |
| | 29,481 |
|
Fixed assets and other | | |
| | |
|
Computer and office equipment | | 24 |
| | 23 |
|
Furniture and fixtures | | 19 |
| | 22 |
|
Computer software | | 114 |
| | 110 |
|
Leasehold improvements | | 43 |
| | 42 |
|
Land | | 59 |
| | 59 |
|
Other | | 25 |
| | 21 |
|
Accumulated depreciation | | (154 | ) | | (141 | ) |
Total fixed assets and other, net | | 130 |
| | 136 |
|
Assets under finance lease | | | | |
Tug vessels | | 60 |
| | 60 |
|
Accumulated depreciation | | (5 | ) | | (4 | ) |
Total assets under finance lease, net | | 55 |
| | 56 |
|
Property, plant and equipment, net | | $ | 29,950 |
| | $ | 29,673 |
|
DepreciationNOTE 5—PROPERTY, PLANT AND EQUIPMENT, NET OF ACCUMULATED DEPRECIATION
As of June 30, 2021 and December 31, 2020, property, plant and equipment, net of accumulated depreciation consisted of the following (in millions):
| | | | | | | | | | | | | | |
| | |
| | June 30, | | December 31, |
| | 2021 | | 2020 |
LNG terminal | | | | |
LNG terminal and interconnecting pipeline facilities | | $ | 30,598 | | | $ | 27,475 | |
LNG site and related costs | | 343 | | | 324 | |
LNG terminal construction-in-process | | 2,650 | | | 5,378 | |
Accumulated depreciation | | (3,413) | | | (2,935) | |
Total LNG terminal, net of accumulated depreciation | | 30,178 | | | 30,242 | |
Fixed assets and other | | | | |
Computer and office equipment | | 27 | | | 25 | |
Furniture and fixtures | | 20 | | | 19 | |
Computer software | | 120 | | | 117 | |
Leasehold improvements | | 45 | | | 45 | |
Land | | 1 | | | 59 | |
Other | | 20 | | | 25 | |
Accumulated depreciation | | (175) | | | (164) | |
Total fixed assets and other, net of accumulated depreciation | | 58 | | | 126 | |
Assets under finance lease | | | | |
Tug vessels | | 60 | | | 60 | |
Accumulated depreciation | | (8) | | | (7) | |
Total assets under finance lease, net of accumulated depreciation | | 52 | | | 53 | |
Property, plant and equipment, net of accumulated depreciation | | $ | 30,288 | | | $ | 30,421 | |
The following table shows depreciation expense was $231 million and $203 millionoffsets to LNG terminal costs during the three months ended June 30, 2020 and 2019, respectively, and $463 million and $346 million during the six months ended June 30, 2021 and 2020 and 2019, respectively.(in millions):
| | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | Three Months Ended June 30, | | Six Months Ended June 30, |
| | 2021 | | 2020 | | 2021 | | 2020 | | |
Depreciation expense | | $ | 258 | | | $ | 231 | | | $ | 492 | | | $ | 463 | | | |
Offsets to LNG terminal costs (1) | | 36 | | | 0 | | | 227 | | | 0 | | | |
(1) We realizedrecognize offsets to LNG terminal costs of $202 million during the six months ended June 30, 2019 that were 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 Projects during the testing phase for its construction. We did 0t realize any offsets to LNG terminal costs during the three and six months ended June 30, 2020 and the three months ended June 30, 2019.
CHENIERE ENERGY, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—CONTINUED
(unaudited)
NOTE 6—DERIVATIVE INSTRUMENTS
We have entered into the following derivative instruments that are reported at fair value:
•interest rate swaps (“CCH Interest Rate Derivatives”) to hedge the exposure to volatility in a portion of the floating-rate interest payments on CCH’s amended and restated credit facility (the “CCH Credit Facility”) and previously, to hedge against changes in interest rates that could impact anticipated future issuance of debt by CCH (“CCH Interest Rate Forward Start Derivatives” and, collectively with the CCH Interest Rate Derivatives, the “Interest Rate Derivatives”);
•commodity derivatives consisting of natural gas supply contracts for the commissioning and operation of the Liquefaction Projects and potential future development of Corpus Christi Stage 3 (“Physical Liquefaction Supply Derivatives”) and associated economic hedges (collectively,(“Financial Liquefaction Supply Derivatives,” and collectively with the Physical Liquefaction Supply Derivatives, the “Liquefaction Supply Derivatives”);
•physical derivatives consisting of liquified natural gas contracts in which we have contractual net settlement (“Physical LNG Trading Derivatives”) and financial derivatives to hedge the exposure to the commodity markets in which we have contractual arrangements to purchase or sell physical LNG (“LNG(collectively, “LNG Trading Derivatives”); and
•foreign currency exchange (“FX”) contracts to hedge exposure to currency risk associated with cash flows denominated in currencies other than United States dollar (“FX Derivatives”), associated with both LNG Trading Derivatives and operations in countries outside of the United States (“FX Derivatives”).States.
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.process, in which case it is capitalized.
CHENIERE ENERGY, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—CONTINUED
(unaudited)
The following table shows the fair value of our derivative instruments that are required to be measured at fair value on a recurring basis as of June 30, 20202021 and December 31, 2019, which are classified as derivative assets, non-current derivative assets, derivative liabilities or non-current derivative liabilities in our Consolidated Balance Sheets2020 (in millions):
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Fair Value Measurements as of |
| June 30, 2021 | | December 31, 2020 |
| Quoted Prices in Active Markets (Level 1) | | Significant Other Observable Inputs (Level 2) | | Significant Unobservable Inputs (Level 3) | | Total | | Quoted Prices in Active Markets (Level 1) | | Significant Other Observable Inputs (Level 2) | | Significant Unobservable Inputs (Level 3) | | Total |
CCH Interest Rate Derivatives liability | $ | 0 | | | $ | (91) | | | $ | 0 | | | $ | (91) | | | $ | 0 | | | $ | (140) | | | $ | 0 | | | $ | (140) | |
| | | | | | | | | | | | | | | |
Liquefaction Supply Derivatives asset (liability) | (7) | | | 4 | | | (194) | | | (197) | | | 5 | | | (6) | | | 241 | | | 240 | |
LNG Trading Derivatives asset (liability) | 20 | | | (226) | | | (195) | | | (401) | | | (3) | | | (131) | | | 0 | | | (134) | |
FX Derivatives liability | 0 | | | (4) | | | 0 | | | (4) | | | 0 | | | (22) | | | 0 | | | (22) | |
| | | | | | | | | | | | | | | |
|
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Fair Value Measurements as of |
| June 30, 2020 | | December 31, 2019 |
| 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 |
CCH Interest Rate Derivatives liability | $ | — |
| | $ | (191 | ) | | $ | — |
| | $ | (191 | ) | | $ | — |
| | $ | (81 | ) | | $ | — |
| | $ | (81 | ) |
CCH Interest Rate Forward Start Derivatives liability | — |
| | (102 | ) | | — |
| | (102 | ) | | — |
| | (8 | ) | | — |
| | (8 | ) |
Liquefaction Supply Derivatives asset (liability) | 11 |
| | (1 | ) | | 590 |
| | 600 |
| | 5 |
| | 6 |
| | 138 |
| | 149 |
|
LNG Trading Derivatives asset (liability) | (2 | ) | | 153 |
| | — |
| | 151 |
| | — |
| | 165 |
| | — |
| | 165 |
|
FX Derivatives asset | — |
| | 15 |
| | — |
| | 15 |
| | — |
| | 4 |
| | — |
| | 4 |
|
We value our Interest Rate Derivatives using an income-based approach utilizing observable inputs to the valuation model including interest rate curves, risk adjusted discount rates, credit spreads and other relevant data. We value our LNG Trading Derivatives and 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. We value our FX Derivatives with a market approach using observable FX rates and other relevant data.
The fair value of our Physical Liquefaction Supply Derivatives isand LNG Trading Derivatives are predominantly driven by observable and unobservable market commodity prices and, as applicable to our natural gas supply contracts, our assessment of the associated events deriving fair value, including evaluating whether the respective market is available as pipeline infrastructure is developed. The fair value of our Physical Liquefaction Supply Derivatives incorporates risk premiums related to the satisfaction of conditions precedent, such as completion and placement into service of relevant pipeline infrastructure to accommodate marketable physical gas flow. As of June 30, 20202021 and December 31, 2019,2020, some of our Physical Liquefaction
CHENIERE ENERGY, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—CONTINUED
(unaudited)
Supply Derivatives existed within markets for which the pipeline infrastructure was under development to accommodate marketable physical gas flow.
We include our Physical LNG Trading Derivatives and a portion of our Physical Liquefaction Supply Derivatives as Level 3 within the valuation hierarchy as the fair value is developed through the use of internal models which incorporate significant unobservable inputs. In instances where observable data is unavailable, consideration is given to the assumptions that market participants would use in valuing the asset or liability. This includes assumptions about market risks, such as future prices of energy units for unobservable periods, liquidity, volatility and contract duration.
The Level 3 fair value measurements of our Physical LNG Trading Derivatives and the 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 and Physical LNG Trading Derivatives as of June 30, 2020:2021:
|
| | | | | | | | | | | | | | | | | | | | | | | | | |
| | Net Fair Value Asset Liability (in millions) | | Valuation Approach | | Significant Unobservable Input | | Range of Significant Unobservable Inputs / Weighted Average (1) |
Physical Liquefaction Supply Derivatives | | $590(194) | | Market approach incorporating present value techniques | | Henry Hub basis spread | | $(0.546)(0.573) - $0.172$0.385 / $(0.023)$(0.009) |
| | | | Option pricing model | | International LNG pricing spread, relative to Henry Hub (2) | | 46%137% - 171%297% / 126%175% |
Physical LNG Trading Derivatives | | $(195) | | Market approach incorporating present value techniques | | International LNG pricing spread, relative to Henry Hub or TTF, as applicable (2) | | $(3.108) - $7.078 / $5.161 |
| |
(1) | Unobservable inputs were weighted by the relative fair value of the instruments. |
| |
(2) | Spread contemplates U.S. dollar-denominated pricing. |
(1)Unobservable inputs were weighted by the relative fair value of the instruments.
(2)Spread contemplates U.S. dollar-denominated pricing.
CHENIERE ENERGY, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—CONTINUED
(unaudited)
Increases or decreases in basis or pricing spreads, in isolation, would decrease or increase, respectively, the fair value of our Physical LNG Trading Derivatives and our Physical Liquefaction Supply Derivatives.
The following table shows the changes in the fair value of our Level 3 Physical LNG Trading Derivatives and Physical Liquefaction Supply Derivatives during the three and six months ended June 30, 20202021 and 20192020 (in millions):
| | | | Three Months Ended June 30, | | Six Months Ended June 30, | | Three Months Ended June 30, | | Six Months Ended June 30, |
| | 2020 | | 2019 | | 2020 | | 2019 | | 2021 | | 2020 | | 2021 | | 2020 | |
Balance, beginning of period | | $ | 674 |
| | $ | 31 |
| | $ | 138 |
| | $ | (29 | ) | Balance, beginning of period | | $ | 131 | | | $ | 674 | | | $ | 241 | | | $ | 138 | | |
Realized and mark-to-market gains: | | | | | | | | | |
Realized and mark-to-market gains (losses): | | Realized and mark-to-market gains (losses): | | |
Included in cost of sales | | (84 | ) | | 7 |
| | 452 |
| | 23 |
| Included in cost of sales | | (464) | | | (84) | | | (471) | | | 452 | | |
| Purchases and settlements: | | | | | | | | | Purchases and settlements: | | |
Purchases | | (4 | ) | | 50 |
| | (3 | ) | | 50 |
| Purchases | | (58) | | | (4) | | | (187) | | | (3) | | |
Settlements | | 1 |
| | 1 |
| | (1 | ) | | 45 |
| Settlements | | 2 | | | 1 | | | 28 | | | (1) | | |
Transfers into Level 3, net (1) | | 3 |
| | — |
| | 4 |
| | — |
| Transfers into Level 3, net (1) | | 0 | | | 3 | | | 0 | | | 4 | | |
Balance, end of period | | $ | 590 |
| | $ | 89 |
| | $ | 590 |
| | $ | 89 |
| Balance, end of period | | $ | (389) | | | $ | 590 | | | $ | (389) | | | $ | 590 | | |
Change in unrealized gains (losses) relating to instruments still held at end of period | | $ | (84 | ) | | $ | 7 |
| | $ | 452 |
| | $ | 23 |
| Change in unrealized gains (losses) relating to instruments still held at end of period | | $ | (464) | | | $ | (84) | | | $ | (471) | | | $ | 452 | | |
| |
(1) | Transferred into Level 3 as a result of unobservable market, or out of Level 3 as a result of observable market, for the underlying natural gas purchase agreements. |
(1)Transferred into Level 3 as a result of unobservable market for the underlying natural gas purchase agreements.
Derivative assets and liabilities arising from our derivative contracts with the same counterparty are reported on a net basis, as all
All counterparty derivative contracts provide for the unconditional right of set-off in the event of default. We have elected to report derivative assets and liabilities arising from our derivative contracts with the same counterparty on a net basis. The use of derivative instruments exposes us to counterparty credit risk, or the risk that a counterparty will be unable to meet its commitments in instances when our derivative instruments are in an asset position. Additionally, counterparties are at risk that we will be unable to meet our commitments in instances where our derivative instruments are in a liability position. We
CHENIERE ENERGY, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—CONTINUED
(unaudited)
incorporate both our own nonperformance risk and the respective counterparty’s nonperformance risk in fair value measurements. In adjusting the fair value of our derivative contracts for the effect of nonperformance risk, we have considered the impact of any applicable credit enhancements, such as collateral postings, set-off rights and guarantees.
Interest Rate Derivatives
CCH has entered into interest rate swaps to protect against volatility of future cash flows and hedge a portion of the variable interest payments on the CCH Credit Facility. CCH previously also had interest rate swaps to hedge against changes in interest rates that could impact the anticipated future issuance of debt. In August 2020, we settled the outstanding CCH Interest Rate Forward Start Derivatives.
As of June 30, 2020,2021, we had the following Interest Rate Derivatives outstanding:
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | Notional Amounts | | | | | | |
| | June 30, 2021 | | December 31, 2020 | | Latest Maturity Date | | Weighted Average Fixed Interest Rate Paid | | Variable Interest Rate Received |
| | | | | | | | | | |
| | | | | | | | | | |
| | Notional Amounts | | | | | | |
| | June 30, 2020 | | December 31, 2019 | | Term | | Weighted Average Fixed Interest Rate Paid | | Variable Interest Rate Received |
CCH Interest Rate Derivatives | | $4.74.6 billion | | $4.54.6 billion | | May 31, 2022 (1) | | 2.30% | | One-month LIBOR |
CCH Interest Rate Forward Start Derivatives | | $250 million |
| $250 million |
| September 30, 2020 (2) |
| 2.05% |
| Three-month LIBOR |
CCH Interest Rate Forward Start Derivatives | | $500 million |
| $500 million |
| December 31, 2020 (2) |
| 2.06% |
| Three-month LIBOR |
| | | | | | | | |
(1) | Represents the maturity date. |
| | | | | | | | |
(2) | Represents the effective date. These forward start derivatives have terms of 10 years with a mandatory termination date consistent with the effective date. |
CHENIERE ENERGY, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—CONTINUED
(unaudited)
The following table shows the fair value and location of the Interest Rate Derivatives on our Consolidated Balance Sheets (in millions):
|
| | | | | | | | | | | | | | | | | | | | | | | |
| June 30, 2020 | | December 31, 2019 |
| CCH Interest Rate Derivatives | | CCH Interest Rate Forward Start Derivatives | | Total | | CCH Interest Rate Derivatives | | CCH Interest Rate Forward Start Derivatives | | Total |
Consolidated Balance Sheets Location | | | | | | | | | | | |
Derivative liabilities | $ | (100 | ) | | $ | (102 | ) | | $ | (202 | ) | | $ | (32 | ) | | $ | (8 | ) | | $ | (40 | ) |
Non-current derivative liabilities | (91 | ) | | — |
| | (91 | ) | | (49 | ) | | — |
| | (49 | ) |
Total derivative liabilities | $ | (191 | ) |
| $ | (102 | ) |
| $ | (293 | ) |
| $ | (81 | ) |
| $ | (8 | ) |
| $ | (89 | ) |
The following table shows thegain (loss) from changes in the fair value and settlements of our Interest Rate Derivatives recorded in interest rate derivative loss, net on our Consolidated Statements of Operations during the three and six months ended June 30, 20202021 and 20192020 (in millions):
| | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | Three Months Ended June 30, | | Six Months Ended June 30, |
| | 2021 | | 2020 | | 2021 | | 2020 | | |
CCH Interest Rate Derivatives | | $ | (2) | | | $ | (15) | | | $ | (1) | | | $ | (138) | | | |
CCH Interest Rate Forward Start Derivatives | | 0 | | | (10) | | | 0 | | | (95) | | | |
| | | | | | | | | | |
| | | | | | | | | | |
|
| | | | | | | | | | | | | | | | |
| | Three Months Ended June 30, | | Six Months Ended June 30, |
| | 2020 | | 2019 | | 2020 | | 2019 |
CCH Interest Rate Derivatives loss | | $ | (15 | ) | | $ | (67 | ) | | $ | (138 | ) | | $ | (102 | ) |
CCH Interest Rate Forward Start Derivatives loss | | (10 | ) | | (7 | ) | | (95 | ) | | (7 | ) |
Commodity Derivatives
SPL, CCL and CCL Stage III have entered into physical natural gas supply contracts and associated economic hedges, including those associated with our integrated production marketing (“IPM”) transactions, to purchase natural gas for the commissioning and operation of the Liquefaction Projects and potential future development of Corpus Christi Stage 3, respectively, which are primarily indexed to the natural gas market and international LNG indices. The remaining terms of the index-based physical natural gas supply contracts range up to approximately 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.
Commencing in first quarter of 2021, we have entered into physical LNG transactions that provide for contractual net settlement. Such transactions are accounted for as LNG Trading Derivatives, and are designed to economically hedge exposure to the commodity markets in which we sell LNG. We have entered into, and may from time to time enter into, financial LNG Trading Derivatives in the form of swaps, forwards, options or futures to economically hedge exposure to the commodity markets in which we have contractual arrangements to purchase or sell physical LNG. We have entered intofutures. The terms of LNG Trading Derivatives range up to secure a fixed price position to minimize future cash flow variability associated with LNG purchase and sale transactions.approximately two years.
The following table shows the fair value and locationnotional amounts of our Liquefaction Supply Derivatives and LNG Trading Derivatives (collectively, “Commodity Derivatives”) on our Consolidated Balance Sheets (in millions, except notional amount):
|
| | | | | | | | | | | | | | | | | | | | | | | |
| June 30, 2020 | | December 31, 2019 |
| Liquefaction Supply Derivatives (1) | | LNG Trading Derivatives (2) | | Total | | Liquefaction Supply Derivatives (1) | | LNG Trading Derivatives (2) | | Total |
Consolidated Balance Sheets Location | | | | | | | | | | | |
Derivative assets | $ | 133 |
| | $ | 138 |
| | $ | 271 |
| | $ | 93 |
| | $ | 225 |
| | $ | 318 |
|
Non-current derivative assets | 564 |
| | 23 |
| | 587 |
| | 174 |
| | — |
| | 174 |
|
Total derivative assets | 697 |
| | 161 |
| | 858 |
| | 267 |
| | 225 |
| | 492 |
|
| | | | | | | | | | | |
Derivative liabilities | (27 | ) | | (10 | ) | | (37 | ) | | (16 | ) | | (60 | ) | | (76 | ) |
Non-current derivative liabilities | (70 | ) | | — |
| | (70 | ) | | (102 | ) | | — |
| | (102 | ) |
Total derivative liabilities | (97 | ) | | (10 | ) | | (107 | ) | | (118 | ) | | (60 | ) | | (178 | ) |
| | | | | | | | | | | |
Derivative asset, net | $ | 600 |
| | $ | 151 |
| | $ | 751 |
| | $ | 149 |
| | $ | 165 |
| | $ | 314 |
|
| | | | | | | | | | | |
Notional amount, net (in TBtu) (3) | 10,264 |
| | 19 |
| | | | 9,177 |
| | 4 |
| | |
| | | | | | | | | | | | | | | | | | | | | | | |
| June 30, 2021 | | December 31, 2020 |
| Liquefaction Supply Derivatives | | LNG Trading Derivatives | | Liquefaction Supply Derivatives | | LNG Trading Derivatives |
Notional amount, net (in TBtu) (1) | 10,631 | | | 14 | | | 10,483 | | | 20 | |
| | | | | | | |
| |
(1) | Does not include collateral posted with counterparties by us of $2 million and $7 million for such contracts, which are included in other current assets in our Consolidated Balance Sheets as of June 30, 2020 and December 31, 2019, respectively. Includes derivative assets of $5 million and $3 million as of June 30, 2020 and December 31, 2019, |
CHENIERE ENERGY, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—CONTINUED
(unaudited)
respectively, and non-current assets of $2 million as of both June 30, 2020 and December 31, 2019 for natural gas supply contracts that SPL and CCL have with related parties.
| |
(2) | Does not include collateral posted with counterparties by us of $17 million and $5 million deposited for such contracts, which are included in other current assets in our Consolidated Balance Sheets as of June 30, 2020 and December 31, 2019, respectively. |
| |
(3) | Includes 182 TBtu and 120 TBtu as of June 30, 2020 and December 31, 2019, respectively, for natural gas supply contracts that SPL and CCL have with related parties. |
The following table shows the gain (loss) from changes in the fair value, settlements and location of our Commodity Derivatives recorded on our Consolidated Statements of Operations during the three and six months ended June 30, 20202021 and 20192020 (in millions):
|
| | | | | | | | | | | | | | | | | |
| Consolidated Statements of Operations Location (1) | | Three Months Ended June 30, | | Six Months Ended June 30, |
| | 2020 | | 2019 | | 2020 | | 2019 |
LNG Trading Derivatives gain (loss) | LNG revenues | | $ | (34 | ) | | $ | 94 |
| | $ | 106 |
| | $ | 158 |
|
LNG Trading Derivatives gain (loss) | Cost of sales | | 34 |
| | (51 | ) | | — |
| | (51 | ) |
Liquefaction Supply Derivatives gain (loss) (2) | LNG revenues | | (13 | ) | | (1 | ) | | (14 | ) | | 1 |
|
Liquefaction Supply Derivatives gain (loss) (2)(3) | Cost of sales | | (62 | ) | | 57 |
| | 475 |
| | 139 |
|
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Consolidated Statements of Operations Location (1) | | Three Months Ended June 30, | | Six Months Ended June 30, |
| | 2021 | | 2020 | | 2021 | | 2020 | | |
| | | | | | | | | | | |
LNG Trading Derivatives | LNG revenues | | $ | (379) | | | $ | (34) | | | $ | (441) | | | $ | 106 | | | |
LNG Trading Derivatives | Cost of sales | | 53 | | | 34 | | | 81 | | | 0 | | | |
Liquefaction Supply Derivatives (2) | LNG revenues | | 0 | | | (13) | | | 1 | | | (14) | | | |
Liquefaction Supply Derivatives (2) | Cost of sales | | (341) | | | (62) | | | (404) | | | 475 | | | |
| | | | | | | | | | | |
| | | | | | | | | | | |
(1) 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.
| |
(1) | 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. |
| |
(2) | (2) Does not include the realized value associated with derivative instruments that settle through physical delivery. |
| |
(3) | CCL recorded $25 million and $24 million in cost of sales under a natural gas supply contract with a related party during the three months ended June 30, 2020 and 2019, respectively, including $1 million of Liquefaction Supply Derivatives gain and $1 million of Liquefaction Supply Derivatives loss, respectively. During the six months ended June 30, 2020 and 2019, CCL recorded $48 million and $36 million in cost of sales under a natural gas supply contract with a related party, respectively, including $2 million of Liquefaction Supply Derivatives gain and $3 million of Liquefaction Supply Derivatives loss, respectively. As of June 30, 2020 and December 31, 2019, $8 million and $3 million, respectively, were included in accrued liabilities related to this contract. |
FX Derivatives
Cheniere Marketing has entered into FX Derivatives to protect against the volatility in future cash flows attributable to changes in international currency exchange rates. The FX Derivatives economically hedge the foreign currency exposure arising from cash flows expended for both physical and financial LNG transactions.
transactions that are denominated in a currency other than the United States dollar. The following table shows the fair value and locationterms of our FX Derivatives on our Consolidated Balance Sheets (in millions):range up to approximately one year.
|
| | | | | | | | | |
| | | Fair Value Measurements as of |
| Consolidated Balance Sheets Location | | June 30, 2020 | | December 31, 2019 |
FX Derivatives | Derivative assets | | $ | 13 |
| | $ | 5 |
|
FX Derivatives | Non-current derivative assets | | 2 |
| | — |
|
FX Derivatives | Derivative liabilities | | — |
| | (1 | ) |
The total notional amount of our FX Derivatives was $146$267 million and $827$786 million as of June 30, 20202021 and December 31, 2019,2020, respectively.
CHENIERE ENERGY, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—CONTINUED
(unaudited)
The following table shows the gain (loss) from changes in the fair value, settlements and location of our FX Derivatives recorded on our Consolidated Statements of Operations during the three and six months ended June 30, 20202021 and 20192020 (in millions):
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Consolidated Statements of Operations Location | | Three Months Ended June 30, | | Six Months Ended June 30, |
| | 2021 | | 2020 | | 2021 | | 2020 | | |
FX Derivatives | LNG revenues | | $ | (5) | | | $ | 2 | | | $ | 16 | | | $ | 27 | | | |
| | | | | | | | | | | |
|
| | | | | | | | | | | | | | | | | |
| | | Three Months Ended June 30, | | Six Months Ended June 30, |
| Consolidated Statements of Operations Location | | 2020 | | 2019 | | 2020 | | 2019 |
FX Derivatives gain | LNG revenues | | $ | 2 |
| | $ | — |
| | $ | 27 |
| | $ | 9 |
|
CHENIERE ENERGY, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—CONTINUED
(unaudited)
Fair Value and Location of Derivative Assets and Liabilities on the Consolidated Balance Sheets
The following table shows the fair value and location of our derivative instruments on our Consolidated Balance Sheets (in millions):
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| June 30, 2021 |
| CCH Interest Rate Derivatives | | | | Liquefaction Supply Derivatives (1) | | LNG Trading Derivatives (2) | | FX Derivatives | | Total |
Consolidated Balance Sheets Location | | | | | | | | | | | |
Current derivative assets | $ | 0 | | | | | $ | 53 | | | $ | 119 | | | $ | 6 | | | $ | 178 | |
Derivative assets | 0 | | | | | 96 | | | 0 | | | 0 | | | 96 | |
Total derivative assets | 0 | | | | | 149 | | | 119 | | | 6 | | | 274 | |
| | | | | | | | | | | |
Current derivative liabilities | (91) | | | | | (201) | | | (520) | | | (10) | | | (822) | |
Derivative liabilities | 0 | | | | | (145) | | | 0 | | | 0 | | | (145) | |
Total derivative liabilities | (91) | | | | | (346) | | | (520) | | | (10) | | | (967) | |
| | | | | | | | | | | |
Derivative liability, net | $ | (91) | | | | | $ | (197) | | | $ | (401) | | | $ | (4) | | | $ | (693) | |
| | | | | | | | | | | |
| December 31, 2020 |
| CCH Interest Rate Derivatives | | | | Liquefaction Supply Derivatives (1) | | LNG Trading Derivatives (2) | | FX Derivatives | | Total |
Consolidated Balance Sheets Location | | | | | | | | | | | |
Current derivative assets | $ | 0 | | | | | $ | 27 | | | $ | 0 | | | $ | 5 | | | $ | 32 | |
Derivative assets | 0 | | | | | 376 | | | 0 | | | 0 | | | 376 | |
Total derivative assets | 0 | | | | | 403 | | | 0 | | | 5 | | | 408 | |
| | | | | | | | | | | |
Current derivative liabilities | (100) | | | | | (54) | | | (134) | | | (25) | | | (313) | |
Derivative liabilities | (40) | | | | | (109) | | | 0 | | | (2) | | | (151) | |
Total derivative liabilities | (140) | | | | | (163) | | | (134) | | | (27) | | | (464) | |
| | | | | | | | | | | |
Derivative asset (liability), net | $ | (140) | | | | | $ | 240 | | | $ | (134) | | | $ | (22) | | | $ | (56) | |
(1) Does not include collateral posted with counterparties by us of $22 million and $9 million, which are included in other current assets in our Consolidated Balance Sheets as of June 30, 2021 and December 31, 2020, respectively. Includes derivative assets for natural gas supply contracts that SPL and CCL have with related parties. See Note 13—Related Party Transactions. (2) Does not include collateral posted with counterparties by us of $1 million and $7 million, which are included in other current assets in our Consolidated Balance Sheets as of June 30, 2021 and December 31, 2020, respectively.
CHENIERE ENERGY, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—CONTINUED
(unaudited)
Consolidated Balance Sheets Presentation
Our derivative instruments are presented on a net basis on our Consolidated Balance Sheets as described above. The following table shows the fair value of our derivatives outstanding on a gross and net basis (in millions):
| | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | CCH Interest Rate Derivatives | | | | Liquefaction Supply Derivatives | | LNG Trading Derivatives | | FX Derivatives |
| | | | | |
As of June 30, 2021 | | | | | | | | | | |
Gross assets | | $ | 0 | | | | | $ | 203 | | | $ | 131 | | | $ | 9 | |
Offsetting amounts | | 0 | | | | | (54) | | | (12) | | | (3) | |
Net assets | | $ | 0 | | | | | $ | 149 | | | $ | 119 | | | $ | 6 | |
| | | | | | | | | | |
Gross liabilities | | $ | (91) | | | | | $ | (401) | | | $ | (614) | | | $ | (37) | |
Offsetting amounts | | 0 | | | | | 55 | | | 94 | | | 27 | |
Net liabilities | | $ | (91) | | | | | $ | (346) | | | $ | (520) | | | $ | (10) | |
| | | | | | | | | | |
As of December 31, 2020 | | | | | | | | | | |
Gross assets | | $ | 0 | | | | | $ | 452 | | | $ | 0 | | | $ | 6 | |
Offsetting amounts | | 0 | | | | | (49) | | | 0 | | | (1) | |
Net assets | | $ | 0 | | | | | $ | 403 | | | $ | 0 | | | $ | 5 | |
| | | | | | | | | | |
Gross liabilities | | $ | (140) | | | | | $ | (184) | | | $ | (163) | | | $ | (62) | |
Offsetting amounts | | 0 | | | | | 21 | | | 29 | | | 35 | |
Net liabilities | | $ | (140) | | | | | $ | (163) | | | $ | (134) | | | $ | (27) | |
| | | | | | | | | | |
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|
| | | | | | | | | | | | |
| | Gross Amounts Recognized | | Gross Amounts Offset in the Consolidated Balance Sheets | | Net Amounts Presented in the Consolidated Balance Sheets |
Offsetting Derivative Assets (Liabilities) | | | |
As of June 30, 2020 | | | | | | |
CCH Interest Rate Derivatives | | $ | (191 | ) | | $ | — |
| | $ | (191 | ) |
CCH Interest Rate Forward Start Derivatives | | (102 | ) | | — |
| | (102 | ) |
Liquefaction Supply Derivatives | | 715 |
| | (18 | ) | | 697 |
|
Liquefaction Supply Derivatives | | (102 | ) | | 5 |
| | (97 | ) |
LNG Trading Derivatives | | 163 |
| | (2 | ) | | 161 |
|
LNG Trading Derivatives | | (21 | ) | | 11 |
| | (10 | ) |
FX Derivatives | | 22 |
| | (7 | ) | | 15 |
|
As of December 31, 2019 | | | | | |
|
|
CCH Interest Rate Derivatives | | $ | (81 | ) | | $ | — |
| | $ | (81 | ) |
CCH Interest Rate Forward Start Derivatives | | (8 | ) | | — |
| | (8 | ) |
Liquefaction Supply Derivatives | | 281 |
| | (14 | ) | | 267 |
|
Liquefaction Supply Derivatives | | (126 | ) | | 8 |
| | (118 | ) |
LNG Trading Derivatives | | 229 |
| | (4 | ) | | 225 |
|
LNG Trading Derivatives | | (60 | ) | | — |
| | (60 | ) |
FX Derivatives | | 9 |
| | (4 | ) | | 5 |
|
FX Derivatives | | (6 | ) | | 5 |
| | (1 | ) |
NOTE 7—OTHER NON-CURRENT ASSETS, NET
As of June 30, 20202021 and December 31, 2019,2020, other non-current assets, net consisted of the following (in millions):
| | | | | | | | | | | | | | |
| | |
| | June 30, | | December 31, |
| | 2021 | | 2020 |
Contract assets, net of current expected credit losses | | $ | 105 | | | $ | 80 | |
Advances made to municipalities for water system enhancements | | 82 | | | 84 | |
Equity method investments | | 88 | | | 81 | |
Advances and other asset conveyances to third parties to support LNG terminals | | 69 | | | 60 | |
Debt issuance costs and debt discount, net of accumulated amortization | | 30 | | | 42 | |
Advances made under EPC and non-EPC contracts | | 2 | | | 9 | |
Advance tax-related payments and receivables | | 18 | | | 20 | |
Other | | 37 | | | 30 | |
Total other non-current assets, net | | $ | 431 | | | $ | 406 | |
|
| | | | | | | | |
| | June 30, | | December 31, |
| | 2020 | | 2019 |
Advances made to municipalities for water system enhancements | | $ | 86 |
| | $ | 87 |
|
Advances and other asset conveyances to third parties to support LNG terminals | | 61 |
| | 55 |
|
Advances made under EPC and non-EPC contracts | | 6 |
| | 29 |
|
Equity method investments | | 206 |
| | 108 |
|
Debt issuance costs and debt discount, net | | 86 |
| | 45 |
|
Tax-related payments and receivables | | 20 |
| | 20 |
|
Contract assets, net | | 58 |
| | 18 |
|
Other | | 23 |
| | 26 |
|
Total other non-current assets, net | | $ | 546 |
| | $ | 388 |
|
Equity Method Investments
OurAs of June 30, 2021, our equity method investments consistinvestment consists of interests in privately-held companies. In 2017, we acquired an equityour interest in Midship Holdings, LLC (“Midship Holdings”), which manages the business and affairs of Midship Pipeline Company, LLC (“Midship Pipeline”), which we account for. Midship Pipeline is currently operating an approximately 200-mile natural gas pipeline project (the “Midship Project”) that connects production in the Anadarko Basin to Gulf Coast markets. The Midship Project commenced operations in April 2020.
Our investment in Midship Holdings, net of impairment losses, was $88 million and $80 million as
an equity method investment. See Note 8—Other Non-Current Assetsof our Notes to Consolidated Financial Statements in our annual report on Form 10-K for the fiscal year endedJune 30, 2021 and December 31, 2019 for further information.2020, respectively.
CHENIERE ENERGY, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—CONTINUED
(unaudited)
Our investment in Midship Holdings, net of impairment losses, was $205 million and $105 million at June 30, 2020 and December 31, 2019, respectively.
Cheniere LNG O&M Services, LLC (“O&M Services”), our wholly owned subsidiary, provides the development, construction, operation and maintenance services associated with the Midship Project pursuant to agreements in which O&M Services receives an agreed upon fee and reimbursement of costs incurred. O&M Services recorded $3 million during both the three months ended June 30, 2020 and 2019 and $6 million and $7 million in the six months ended June 30, 2020 and 2019, respectively, of other revenues and $2 million and $3 million of accounts receivable as of June 30, 2020 and December 31, 2019, respectively, for services provided to Midship Pipeline under these agreements. CCL has entered into a transportation precedent agreement and a negotiated rate agreement with Midship Pipeline to secure firm pipeline transportation capacity for a period of 10 years commencing May 2020. CCL recorded $2 million in operating and maintenance expense during both the three and six months ended June 30, 2020 and $1 million of accounts payable as of June 30, 2020 under this agreement. In March 2020, CCH and CCL entered into a guaranty agreement whereby CCH absolutely and irrevocably guarantees CCL’s obligation under the transportation precedent agreement with Midship Pipeline.
NOTE 8—NON-CONTROLLING INTEREST AND VARIABLE INTEREST ENTITY
We own a 48.6% limited partner interest in Cheniere Partners in the form of 104.5239.9 million common units and 135.4 million subordinated units, with the remaining non-controlling limited partner interest held by The Blackstone CQP Holdco LP (“Blackstone CQP Holdco”)Group Inc., Brookfield Asset Management Inc. and the public. We also own 100% of the general partner interest and the incentive distribution rights in Cheniere Partners. Cheniere Partners is accounted for as a consolidated variable interest entity.VIE. See Note 9—Non-Controlling Interest and Variable Interest Entity of our Notes to Consolidated Financial Statements in our annual report on Form 10-K for the fiscal year ended December 31, 20192020 for further information.
The following table presents the summarized assets and liabilities (in millions) of Cheniere Partners, our consolidated VIE, which are included in our Consolidated Balance Sheets.Sheets as of June 30, 2021 and December 31, 2020. The assets in the table below may only be used to settle obligations of Cheniere Partners. In addition, there is no recourse to us for the consolidated VIE’s liabilities. The assets and liabilities in the table below include third-party assets and liabilities of Cheniere Partners only and exclude intercompany balances that eliminate in consolidation.
| | | | | | | | | | | | | | |
| | |
| | June 30, | | December 31, |
| | 2021 | | 2020 |
ASSETS | | | | |
Current assets | | | | |
Cash and cash equivalents | | $ | 1,239 | | | $ | 1,210 | |
Restricted cash | | 65 | | | 97 | |
Accounts and other receivables, net of current expected credit losses | | 285 | | | 318 | |
Other current assets | | 236 | | | 182 | |
Total current assets | | 1,825 | | | 1,807 | |
| | | | |
| | | | |
Property, plant and equipment, net of accumulated depreciation | | 16,789 | | | 16,723 | |
Other non-current assets, net | | 289 | | | 287 | |
| | | | |
Total assets | | $ | 18,903 | | | $ | 18,817 | |
| | | | |
LIABILITIES | | | | |
Current liabilities | | | | |
| | | | |
Accrued liabilities | | $ | 649 | | | $ | 658 | |
Current debt, net of premium, discount and debt issuance costs | | 654 | | | 0 | |
Other current liabilities | | 154 | | | 171 | |
| | | | |
Total current liabilities | | 1,457 | | | 829 | |
| | | | |
Long-term debt, net of premium, discount and debt issuance costs | | 16,935 | | | 17,580 | |
| | | | |
Other non-current liabilities | | 95 | | | 126 | |
Total liabilities | | $ | 18,487 | | | $ | 18,535 | |
| | | | |
| | | | |
| | | | |
| | | | |
| | | | |
|
| | | | | | | | |
| | June 30, | | December 31, |
| | 2020 | | 2019 |
ASSETS | | | | |
Current assets | | | | |
Cash and cash equivalents | | $ | 1,341 |
| | $ | 1,781 |
|
Restricted cash | | 167 |
| | 181 |
|
Accounts and other receivables, net | | 291 |
| | 297 |
|
Other current assets | | 221 |
| | 184 |
|
Total current assets | | 2,020 |
| | 2,443 |
|
| | | | |
Property, plant and equipment, net | | 16,584 |
| | 16,368 |
|
Other non-current assets, net | | 310 |
| | 309 |
|
Total assets | | $ | 18,914 |
| | $ | 19,120 |
|
| | | | |
LIABILITIES | | | | |
Current liabilities | | | | |
Accrued liabilities | | $ | 410 |
| | $ | 709 |
|
Other current liabilities | | 47 |
| | 210 |
|
Total current liabilities | | 457 |
| | 919 |
|
| | | | |
Long-term debt, net | | 17,566 |
| | 17,579 |
|
Other non-current liabilities | | 92 |
| | 104 |
|
Total liabilities | | $ | 18,115 |
| | $ | 18,602 |
|
NOTE 9—ACCRUED LIABILITIES As of June 30, 2021 and December 31, 2020, accrued liabilities consisted of the following (in millions):
| | | | | | | | | | | | | | |
| | |
| | June 30, | | December 31, |
| | 2021 | | 2020 |
Interest costs and related debt fees | | $ | 236 | | | $ | 245 | |
Accrued natural gas purchases | | 559 | | | 576 | |
LNG terminals and related pipeline costs | | 169 | | | 147 | |
Compensation and benefits | | 69 | | | 123 | |
Accrued LNG inventory | | 49 | | | 4 | |
Other accrued liabilities | | 115 | | | 80 | |
Total accrued liabilities | | $ | 1,197 | | | $ | 1,175 | |
CHENIERE ENERGY, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—CONTINUED
(unaudited)
NOTE 9—ACCRUED LIABILITIES10—DEBT
As of June 30, 20202021 and December 31, 2019, accrued liabilities2020, our debt consisted of the following (in millions):
| | | | | | | | | | | | | | |
| | |
| | June 30, | | December 31, |
| | 2021 | | 2020 |
Long-term debt: | | | | |
| | | | |
| | | | |
| | | | |
| | | | |
| | | | |
| | | | |
| | | | |
| | | | |
| | | | |
| | | | |
| | | | |
SPL — 4.200% to 6.25% senior secured notes due between March 2022 and September 2037 and working capital facility (“2020 SPL Working Capital Facility”) | | $ | 12,994 | | | $ | 13,650 | |
| | | | |
| | | | |
| | | | |
| | | | |
| | | | |
| | | | |
Cheniere Partners — 4.000% to 5.625% senior notes due between October 2025 and March 2031 and credit facilities (“2019 CQP Credit Facilities”) | | 4,100 | | | 4,100 | |
| | | | |
| | | | |
| | | | |
| | | | |
| | | | |
| | | | |
| | | | |
| | | | |
| | | | |
CCH — 3.52% to 7.000% senior secured notes due between June 2024 and December 2039 and CCH Credit Facility | | 10,216 | | | 10,217 | |
| | | | |
| | | | |
| | | | |
| | | | |
| | | | |
| | | | |
| | | | |
Cheniere — 4.625% senior secured notes due October 2028 (the “2028 Cheniere Senior Notes”), convertible notes, revolving credit facility (“Cheniere Revolving Credit Facility”) and term loan facility (“Cheniere Term Loan Facility”) | | 2,625 | | | 3,145 | |
Unamortized premium, discount and debt issuance costs, net of accumulated amortization | | (608) | | | (641) | |
Total long-term debt, net of premium, discount and debt issuance costs | | 29,327 | | | 30,471 | |
| | | | |
Current debt: | | | | |
SPL — current portion of 6.25% senior secured notes due March 2022 (“2022 SPL Senior Notes”) (1) | | 656 | | | 0 | |
| | | | |
CCH — $1.2 billion CCH working capital facility (“CCH Working Capital Facility”) and current portion of CCH Credit Facility | | 132 | | | 271 | |
Cheniere Marketing — trade finance facilities and letter of credit facility | | 30 | | | 0 | |
Cheniere — current portion of the 4.875% convertible unsecured notes due May 2021 (“2021 Cheniere Convertible Notes”) and Cheniere Revolving Credit Facility (2) | | 134 | | | 104 | |
Unamortized discount and debt issuance costs, net of accumulated amortization | | (3) | | | (3) | |
Total current debt, net of discount and debt issuance costs | | 949 | | | 372 | |
| | | | |
Total debt, net of premium, discount and debt issuance costs | | $ | 30,276 | | | $ | 30,843 | |
|
| | | | | | | | |
| | June 30, | | December 31, |
| | 2020 | | 2019 |
Interest costs and related debt fees | | $ | 249 |
| | $ | 293 |
|
Accrued natural gas purchases | | 202 |
| | 460 |
|
LNG terminals and related pipeline costs | | 108 |
| | 327 |
|
Compensation and benefits | | 57 |
| | 115 |
|
Accrued LNG inventory | | 11 |
| | 6 |
|
Other accrued liabilities | | 108 |
| | 80 |
|
Total accrued liabilities | | $ | 735 |
| | $ | 1,281 |
|
(1)A portion of the 2022 SPL Senior Notes is categorized as long-term debt because the proceeds from the expected series of sales of approximately $347 million aggregate principal amount of senior secured notes due 2037, expected to be issued in the second half of 2021, subject to customary closing conditions, will be used to strategically refinance a portion of 2022 SPL Senior Notes and pay related fees, costs and expenses.
(2) The outstanding balance under the Cheniere Revolving Credit Facility as of June 30, 2021 was repaid in July 2021 and is categorized as short-term debt.
CHENIERE ENERGY, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—CONTINUED
(unaudited)
Issuances, Redemptions and Repayments
NOTE 10—DEBT
AsThe following table shows the issuances, redemptions and repayments of long-term debt during the six months ended June 30, 2020 and December 31, 2019, our debt consisted2021 (in millions):
| | | | | | | | |
Issuances | | Principal Amount Issued |
Three Months Ended March 31, 2021 | | |
Cheniere Partners — 4.000% Senior Notes due 2031 (the “2031 CQP Senior Notes”) (1) | | $ | 1,500 | |
| | |
Three Months Ended June 30, 2021 | | |
Cheniere — Cheniere Term Loan Facility (2) | | 220 | |
Cheniere — Cheniere Revolving Credit Facility | | 134 | |
Six Months Ended June 30, 2021 total | | $ | 1,854 | |
| | |
Redemptions and Repayments | | Principal Amount Redeemed/Repaid |
Three Months Ended March 31, 2021 | | |
Cheniere Partners — 5.250% Senior Notes due 2025 (the “2025 CQP Senior Notes”) (1) | | $ | 1,500 | |
Cheniere — Cheniere Term Loan Facility (3) | | 148 | |
| | |
Three Months Ended June 30, 2021 | | |
Cheniere — 2021 Cheniere Convertible Notes (2) | | 476 | |
Cheniere — Cheniere Term Loan Facility (3) | | 220 | |
Six Months Ended June 30, 2021 total | | $ | 2,344 | |
(1)Proceeds of the following (in millions):
|
| | | | | | | | |
| | June 30, | | December 31, |
| | 2020 | | 2019 |
Long-term debt: | | | | |
SPL | | | | |
5.625% Senior Secured Notes due 2021 (“2021 SPL Senior Notes”) | | $ | — |
| | $ | 2,000 |
|
6.25% Senior Secured Notes due 2022 (“2022 SPL Senior Notes”) | | 1,000 |
| | 1,000 |
|
5.625% Senior Secured Notes due 2023 (“2023 SPL Senior Notes”) | | 1,500 |
| | 1,500 |
|
5.75% Senior Secured Notes due 2024 (“2024 SPL Senior Notes”) | | 2,000 |
| | 2,000 |
|
5.625% Senior Secured Notes due 2025 (“2025 SPL Senior Notes”) | | 2,000 |
| | 2,000 |
|
5.875% Senior Secured Notes due 2026 (“2026 SPL Senior Notes”) | | 1,500 |
| | 1,500 |
|
5.00% Senior Secured Notes due 2027 (“2027 SPL Senior Notes”) | | 1,500 |
| | 1,500 |
|
4.200% Senior Secured Notes due 2028 (“2028 SPL Senior Notes”) | | 1,350 |
| | 1,350 |
|
4.500% Senior Secured Notes due 2030 (“2030 SPL Senior Notes”) | | 2,000 |
| | — |
|
5.00% Senior Secured Notes due 2037 (“2037 SPL Senior Notes”) | | 800 |
| | 800 |
|
$1.2 billion SPL Working Capital Facility executed in 2020 (“2020 SPL Working Capital Facility”) | | — |
| | — |
|
Cheniere Partners | | | | |
5.250% Senior Notes due 2025 (“2025 CQP Senior Notes”) | | 1,500 |
| | 1,500 |
|
5.625% Senior Notes due 2026 (“2026 CQP Senior Notes”) | | 1,100 |
| | 1,100 |
|
4.500% Senior Notes due 2029 (“2029 CQP Senior Notes”) | | 1,500 |
| | 1,500 |
|
CQP Credit Facilities executed in 2019 (“2019 CQP Credit Facilities”) | | — |
| | — |
|
CCH | | | | |
7.000% Senior Secured Notes due 2024 (“2024 CCH Senior Notes”) | | 1,250 |
| | 1,250 |
|
5.875% Senior Secured Notes due 2025 (“2025 CCH Senior Notes”) | | 1,500 |
| | 1,500 |
|
5.125% Senior Secured Notes due 2027 (“2027 CCH Senior Notes”) | | 1,500 |
| | 1,500 |
|
3.700% Senior Secured Notes due 2029 (“2029 CCH Senior Notes”) | | 1,500 |
| | 1,500 |
|
4.80% Senior Secured Notes due 2039 (“4.80% CCH Senior Notes”) | | 727 |
| | 727 |
|
3.925% Senior Secured Notes due 2039 (“3.925% CCH Senior Notes”) | | 475 |
| | 475 |
|
CCH Credit Facility | | 3,283 |
| | 3,283 |
|
CCH HoldCo II | | | | |
11.0% Convertible Senior Secured Notes due 2025 (“2025 CCH HoldCo II Convertible Senior Notes”) | | 1,278 |
| | 1,578 |
|
Cheniere | | | | |
4.875% Convertible Unsecured Notes due 2021 (“2021 Cheniere Convertible Unsecured Notes”) | | 1,216 |
| | 1,278 |
|
4.25% Convertible Senior Notes due 2045 (“2045 Cheniere Convertible Senior Notes”) | | 625 |
| | 625 |
|
$1.25 billion Cheniere Revolving Credit Facility (“Cheniere Revolving Credit Facility”) | | 375 |
| | — |
|
$2.62 billion Cheniere Term Loan Credit Agreement (“Cheniere Term Loan Facility”) | | — |
| | — |
|
Unamortized premium, discount and debt issuance costs, net | | (672 | ) | | (692 | ) |
Total long-term debt, net | | 30,807 |
|
| 30,774 |
|
| | | | |
Current debt: | | | | |
2021 Cheniere Convertible Unsecured Notes | | 93 |
| | — |
|
$1.2 billion SPL Working Capital Facility executed in 2015 (“2015 SPL Working Capital Facility”) | | — |
| | — |
|
$1.2 billion CCH Working Capital Facility (“CCH Working Capital Facility”) | | 141 |
| | — |
|
Cheniere Marketing trade finance facilities | | 6 |
| | — |
|
Unamortized premium, discount and debt issuance costs, net | | (3 | ) | | — |
|
Total current debt | | 237 |
|
| — |
|
| | | | |
Total debt, net | | $ | 31,044 |
|
| $ | 30,774 |
|
CHENIERE ENERGY, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—CONTINUED
(unaudited)
2020 Material Debt Activities
Cheniere Term Loan Facility
In June 2020, we entered into the $2.62 billion delayed draw Cheniere Term Loan Facility, which was subsequently increased to $2.695 billion in July 2020. In July 2020, borrowings under the Cheniere Term Loan Facility were used to (1) redeem the remaining outstanding principal amount of the 2025 CCH HoldCo II Convertible2031 CQP Senior Notes, subsequent to the $300 million redemption in March 2020, pursuant to the amended and restated note purchase agreement for the 2025 CCH HoldCo II Convertible Senior Notes which allowed CCH HoldCo II to redeem the outstanding notes with cash at a price of $1,080 per $1,000 principal amount, (2) repurchase $844 million in aggregate principal amount of outstanding 2021 Cheniere Convertible Unsecured Notes at individually negotiated prices from a small number of investors and (3) pay the related fees and expenses. The remaining borrowings under the Cheniere Term Loan Facility are expected to be used to repay and/or repurchase a portion of the remaining principal amount of the 2021 Cheniere Convertible Unsecured Notes and for the payment of related fees and expenses.
Loans under the Cheniere Term Loan Facility accrue interest at a variable rate per annum equal to LIBOR or the base rate plus the applicable margin. The applicable margin for LIBOR and base rate loans range from (1) 2.00% to 2.75% and 1.00% to 1.75% per annum, respectively, in the first year (2) 2.50% to 3.25% and 1.50% to 2.25% per annum, respectively, in the second year and (3) 3.00% to 3.75% and 2.00% to 2.75% per annum, respectively, in the third year until maturity, in each case, based on the credit ratings then in effect assigned to loans under the Cheniere Term Loan Facility. Interest on LIBOR loans is due and payable at the end of each LIBOR period, and interest on base rate loans is due and payable at the end of each calendar quarter.
We will pay a commitment fee equal to 30% of the margin for LIBOR loans multiplied by the average daily amount of undrawn commitments. If the Cheniere Term Loan Facility is still outstanding on the first anniversary of the Closing Date, as defined by the credit agreement, we will pay duration fees in an amount equal to 0.25% of the aggregate amount of commitments as of July 10, 2020, which was the date the loans were first borrowed under the Cheniere Term Loan Facility (the “Payment Date”). Furthermore, if the Cheniere Term Loan Facility is still outstanding on the second anniversary of the Closing Date, as defined by the credit agreement, we will pay 0.50% of the aggregate amount of commitments as of the Payment Date. Annual administrative fees must also be paid to the administrative agent for the Cheniere Term Loan Facility.
The Cheniere Term Loan Facility matures on June 18, 2023. Subject to customary exceptions, we are required to make mandatory prepayments with respect to the Cheniere Term Loan Facility using the net proceeds of certain events on a pro rata basis and on terms consistent with required prepayments under the Cheniere Revolving Credit Facility. Loans under the Cheniere Term Loan Facility may be voluntarily prepaid, in whole or in part, at any time, without premium or penalty. Borrowings under the Cheniere Term Loan Facility are subject to customary conditions precedent. The Cheniere Term Loan Facility includes representations, warranties, affirmative and negative covenants and events of default customary for companies like us with lenders of the type participating in the Cheniere Term Loan Facility and consistent with the equivalent provisions contained in the Cheniere Revolving Credit Facility.
The Cheniere Term Loan Facility is secured by a first priority security interest (subject to permitted liens and other customary exceptions) on a pari passu basis with the Cheniere Revolving Credit Facility in substantially all of our assets and equity interests in direct subsidiaries (other than certain excluded subsidiaries). Upon redemption of the 2025 CCH HoldCo II Convertible Senior Notes in July 2020, the equity interests in CCH HoldCo II were pledged as collateral to secure the obligations under the Cheniere Revolving Credit Facility and the Cheniere Term Loan Facility.
2030 SPL Senior Notes
In May 2020, SPL issued an aggregate principal amount of $2.0 billion of the 2030 SPL Senior Notes. The proceeds of the notes, alongtogether with cash on hand, were used to redeem all of SPL’sCQP’s outstanding 2021 SPL2025 CQP Senior Notes, resulting in the recognition of debt extinguishment costs of $43$54 million for the three and six months ended June 30, 20202021 relating to the payment of early redemption fees and write off of unamortized debt premium and issuance costs.
(2)In May 2021, the 2021 Cheniere Convertible Notes were repaid using a combination of borrowings under the Cheniere Term Loan Facility and cash on hand upon the maturity date at par value.
The 2030 SPL Senior Notes mature on May 15, 2030 and accrue interest at a fixed rate(3)As of 4.500% per annum, which is payable semi-annuallyJune 30, 2021, the remaining commitments under the Cheniere Term Loan Facility were terminated in cash in arrears. The 2030 SPL Senior Notes are governed by the same base indenture (the “SPL Indenture”) as all other series of the SPL senior notes (collectively, the “SPL Senior Notes”), except for the 2037 SPL Senior Notes, and are further governed by the Eighth Supplemental Indenture and the Eleventh Supplemental Indenture (togetheraccordance with the SPL Indenture,credit agreement, resulting in $4 million of loss on extinguishment of debt.
CHENIERE ENERGY, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—CONTINUED
(unaudited)
Credit Facilities
the “2030 SPL Notes Indenture”). The 2030 SPL Notes Indenture contains customary terms and events
Below is a summary of default and certain covenants that, among other things, limit SPL’s ability and the abilityour credit facilities outstanding as of SPL’s restricted subsidiaries to incur additional indebtedness or issue preferred stock, make certain investments or pay dividends or distributions, June 30, 2021 (in millions):
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | 2020 SPL Working Capital Facility (1) | | 2019 CQP Credit Facilities | | CCH Credit Facility | | CCH Working Capital Facility | | Cheniere Revolving Credit Facility | | |
Original facility size | | | | | | | | $ | 1,200 | | | $ | 1,500 | | | $ | 8,404 | | | $ | 350 | | | $ | 750 | | | |
Incremental commitments | | | | | | | | 0 | | | 0 | | | 1,566 | | | 850 | | | 500 | | | |
Less: | | | | | | | | | | | | | | | | | | |
Outstanding balance | | | | | | | | 0 | | | 0 | | | 2,627 | | | 0 | | | 134 | | | |
Commitments prepaid or terminated | | | | | | | | 0 | | | 750 | | | 7,343 | | | 0 | | | 0 | | | |
Letters of credit issued | | | | | | | | 396 | | | 0 | | | 0 | | | 293 | | | 0 | | | |
Available commitment | | | | | | | | $ | 804 | | | $ | 750 | | | $ | 0 | | | $ | 907 | | | $ | 1,116 | | | |
| | | | | | | | | | | | | | | | | | |
Priority ranking | | | | | | | | Senior secured | | Senior secured | | Senior secured | | 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% | | LIBOR plus 1.75% or base rate plus 0.75% | | LIBOR plus 1.25% - 1.75% or base rate plus 0.25% - 0.75% | | LIBOR plus 1.75% - 2.50% or base rate plus 0.75% - 1.50% | | |
Weighted average interest rate of outstanding balance | | | | | | | | n/a | | n/a | | 1.85% | | n/a | | 1.82% | | |
Maturity date | | | | | | | | March 19, 2025 | | May 29, 2024 | | June 30, 2024 | | June 29, 2023 | | December 13, 2022 | | |
(1)transfer assets, including capital stock of SPL’s restricted subsidiaries, restrict dividends or other payments by restricted subsidiaries, incur liens, sell assets, enter into transactions with affiliates and consolidate, merge or sell, lease or otherwise dispose of all or substantially all of SPL’s assets and enter into certain LNG sales contracts.
The 2030 SPL Senior Notes are SPL’s senior secured obligation, ranking equally in right of payment with its other existing and future unsubordinated debt and senior to any of its future subordinated debt.
At any time prior to November 15, 2029, SPL may redeem all or a part of the 2030 SPL Senior Notes at a redemption price equal to the ‘make-whole’ price set forth in the Eleventh Supplemental Indenture, plus accrued and unpaid interest, if any, to the date of redemption. SPL may also, at any time on or after November 15, 2029, redeem the 2030 SPL Senior Notes, in whole or in part, at a redemption price equal to 100% of the principal amount of the 2030 SPL Senior Notes to be redeemed, plus accrued and unpaid interest, if any, to the date of redemption.
In connection with the closing of the 2030 SPL Senior Notes offering, SPL entered into a registration rights agreement (the “SPL Registration Rights Agreement”). Under the SPL Registration Rights Agreement, SPL and any future guarantors of the 2030 SPL Senior Notes, have agreed to file with the SEC and cause to become effective a registration statement relating to an offer to exchange any and all of the 2030 SPL Senior Notes for a like aggregate principal amount of debt securities of SPL with terms identical in all material respects to the 2030 SPL Senior Notes sought to be exchanged (other than with respect to restrictions on transfer or to any increase in annual interest rate) within 360 days after the notes issuance date of May 8, 2020. Under specified circumstances, SPL has agreed to cause to become effective a shelf registration statement relating to resales of the 2030 SPL Senior Notes. SPL will be obligated to pay additional interest on the 2030 SPL Senior Notes if it fails to comply with its obligations to register the 2030 SPL Senior Notes within the specified time period.
2020 SPL Working Capital Facility
In March 2020, SPL entered into the 2020 SPL Working Capital Facility with aggregate commitments of $1.2 billion, which replaced the 2015 SPL Working Capital Facility. The 2020 SPL Working Capital Facility is intended to be usedcontains customary conditions precedent for loans to SPL (“SPL Revolving Loans”), swing line loans to SPL (“SPL Swing Line Loans”) and the issuance of lettersextensions of credit, on behalf of SPL, primarily for (1) the refinancing of the 2015 SPL Working Capital Facility, (2) feesas well as customary affirmative and expenses related to the 2020 SPL Working Capital Facility, (3) SPL and its future subsidiaries’ gas purchase obligations and (4) SPL and certain of its future subsidiaries’ general corporate purposes. SPL may, from time to time, request increases in the commitments under the 2020 SPL Working Capital Facility of up to $800 million.
Loans under the 2020 SPL Working Capital Facility accrue interest at a variable rate per annum equal to LIBOR or the base rate (equal to the highest of the senior facility agent’s published prime rate, the federal funds rate, as published by the Federal Reserve Bank of New York, plus 0.50% and one month LIBOR plus 1%), plus the applicable margin. The applicable margin for LIBOR loans under the 2020 SPL Working Capital Facility is 1.125% to 1.750% per annum (depending on the then-current rating of SPL), and the applicable margin for base rate loans under the 2020 SPL Working Capital Facility is 0.125% to 0.750% per annum (depending on the then-current rating of SPL). Interest on LIBOR loans is due and payable at the end of each applicable LIBOR period, and interest on base rate loans is due and payable at the end of each fiscal quarter. Interest on loans deemed to be made in connection with a draw upon a letter of credit is due and payable on the date the loan becomes due.
negative covenants. SPL pays a commitment fee equal to an annual rate of 0.1% to 0.3% (depending on the then-current rating of SPL), which accrues on the daily amount of the total commitment less the sum of (1) the outstanding principal amount of SPL Revolving Loans,loans, (2) letters of credit issued and (3) the outstanding principal amount of SPL Swing Line Loans. If draws are made uponswing line loans.
Convertible Notes
Below is a lettersummary of credit issued underour convertible notes outstanding as of June 30, 2021 (in millions):
| | | | | | | | | | | | |
| | | | | | 2045 Cheniere Convertible Senior Notes |
| | | | | | |
| | | | | | |
| | | | | | |
Aggregate original principal | | | | | | $ | 625 | |
| | | | | | |
Debt component, net of discount and debt issuance costs | | | | | | $ | 319 | |
Equity component | | | | | | $ | 194 | |
Interest payment method | | | | | | Cash |
Conversion by us (1) | | | | | | (2) |
Conversion by holders (1) | | | | | | (3) |
Conversion basis | | | | | | Cash and/or stock |
Conversion value in excess of principal | | | | | | $ | 0 | |
Maturity date | | | | | | March 15, 2045 |
Contractual interest rate | | | | | | 4.25 | % |
Effective interest rate (4) | | | | | | 9.4 | % |
Remaining debt discount and debt issuance costs amortization period (5) | | | | | | 23.7 years |
(1)Conversion is subject to various limitations and conditions, which have not been met as of the 2020 SPL Working Capital Facility and SPL does not elect for such drawbalance sheet date.
(2)Redeemable at any time at a redemption price payable in cash equal to be deemed an SPL LC Loan (an “SPL LC Draw”), SPL is required to pay the fullaccreted amount of the SPL LC Draw on or prior to noon eastern time on the business day$625 million aggregate principal amount of the SPL LC Draw. An SPL LC Draw accrues2045 Cheniere Convertible Senior Notes to be redeemed, plus accrued and unpaid interest, atif any, to such redemption date.
(3)Prior to December 15, 2044, convertible only under certain circumstances as specified in the baseindenture; thereafter, holders may convert their notes regardless of these circumstances. The conversion rate plus the applicable margin. Aswill initially equal 7.2265 shares of June 30, 2020, 0 SPL LC Draws had been made upon any letters of credit issued under the 2020 SPL Working Capital Facility.
The 2020 SPL Working Capital Facility matures on March 19, 2025, but may be extended with consentour common stock per $1,000 principal amount of the lenders. The 2020 SPL Working Capital Facility provides for mandatory prepayments under customary circumstances.2045 Cheniere Convertible Senior Notes,
CHENIERE ENERGY, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—CONTINUED
(unaudited)
which corresponds to an initial conversion price of approximately $138.38 per share of our common stock (subject to adjustment upon the occurrence of certain specified events).
The 2020 SPL Working Capital Facility contains customary conditions precedent for extensions of credit, as well as customary affirmative and negative covenants. SPL is restricted from making certain distributions under agreements governing its indebtedness generally until, among other requirements, satisfaction of a 12-month forward-looking and backward-looking 1.25:1.00 debt service reserve ratio test. The obligations of SPL under(4)Rate to accrete the 2020 SPL Working Capital Facility are secured by substantially alldiscounted carrying value of the assets of SPL as well as a pledge of all of the membership interests in SPL and certain future subsidiaries of SPL on a pari passu basis by a first priority lien with the SPL Senior Notes.
Credit Facilities
Below is a summary of our credit facilities outstanding as of June 30, 2020 (in millions):
|
| | | | | | | | | | | | | | | | | | | | | | | | |
| | 2020 SPL Working Capital Facility | | 2019 CQP Credit Facilities | | CCH Credit Facility | | CCH Working Capital Facility | | Cheniere Revolving Credit Facility | | Cheniere Term Loan Facility (1) |
Original facility size | | $ | 1,200 |
| | $ | 1,500 |
| | $ | 8,404 |
| | $ | 350 |
| | $ | 750 |
| | $ | 2,620 |
|
Incremental commitments | | — |
| | — |
| | 1,566 |
| | 850 |
| | 500 |
| | — |
|
Less: | | | | | | | | | | | | |
Outstanding balance | | — |
| | — |
| | 3,283 |
| | 141 |
| | 375 |
| | — |
|
Commitments prepaid or terminated | | — |
| | 750 |
| | 6,687 |
| | — |
| | — |
| | — |
|
Letters of credit issued | | 409 |
| | — |
| | — |
| | 392 |
| | 313 |
| | — |
|
Available commitment | | $ | 791 |
|
| $ | 750 |
|
| $ | — |
|
| $ | 667 |
| | $ | 562 |
| | $ | 2,620 |
|
| | | | | | | | | | | | |
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% | | LIBOR plus 1.75% or base rate plus 0.75% | | LIBOR plus 1.25% - 1.75% or base rate plus 0.25% - 0.75% | | LIBOR plus 1.75% - 2.50% or base rate plus 0.75% - 1.50% | | (2) |
Weighted average interest rate of outstanding balance | | n/a | | n/a | | 1.93% | | 1.43% | | 1.93% | | n/a |
Maturity date | | March 19, 2025 | | May 29, 2024 | | June 30, 2024 | | June 29, 2023 | | December 13, 2022 | | June 18, 2023 |
| |
(1) | In July 2020, we received incremental commitments of $75 million and borrowed $2,323 million under the Cheniere Term Loan Facility, which reduced the available commitment to $372 million following these transactions. |
| |
(2) | LIBOR plus (1) 2.00% to 2.75% per annum in the first year, (2) 2.50% to 3.25% per annum in the second year and (3) 3.00% to 3.75% per annum in the third year until maturity, or base rate plus (1) 1.00% to 1.75% per annum in the first year, (2) 1.50% to 2.25% per annum in the second year and (3) 2.00% to 2.75% per annum in the third year until maturity. |
CHENIERE ENERGY, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—CONTINUED
(unaudited)
Convertible Notes
Below is a summary of our convertible notes outstanding as of June 30, 2020 (in millions):to the face value over the remaining amortization period.
(5)We amortize any debt discount and debt issuance costs using the effective interest over the period through contractual maturity. |
| | | | | | | | | | | | |
| | 2021 Cheniere Convertible Unsecured Notes (1) | | 2025 CCH HoldCo II Convertible Senior Notes | | 2045 Cheniere Convertible Senior Notes |
Aggregate original principal | | $ | 1,000 |
| | $ | 1,000 |
| | $ | 625 |
|
Add: interest paid-in-kind | | 309 |
| | 578 |
| | — |
|
Less: aggregate principal redeemed | | — |
| | (300 | ) | | — |
|
Aggregate remaining principal | | $ | 1,309 |
| | $ | 1,278 |
| | $ | 625 |
|
| | | | | | |
Debt component, net of discount and debt issuance costs | | $ | 1,271 |
| | $ | 1,264 |
| | $ | 316 |
|
Equity component | | $ | 211 |
| | $ | — |
| | $ | 194 |
|
Interest payment method | | Paid-in-kind |
| | Paid-in-kind / cash (2) |
| | Cash |
|
Conversion by us (3) | | — |
| | (4) |
| | (5) |
|
Conversion by holders (3) | | (6) |
| | (4) |
| | (7) |
|
Conversion basis | | Cash and/or stock |
| | Cash and/or stock |
| | Cash and/or stock |
|
Conversion value in excess of principal | | $ | — |
| | n/a |
| | $ | — |
|
Maturity date | | May 28, 2021 |
| | May 13, 2025 |
| | March 15, 2045 |
|
Contractual interest rate | | 4.875 | % | | 11.0 | % | | 4.25 | % |
Effective interest rate (8) | | 8.1 | % | | 15.6 | % | | 9.4 | % |
Remaining debt discount and debt issuance costs amortization period (9) | | 0.9 years |
| | 0.3 years |
| | 24.7 years |
|
| |
(1) | In July 2020, we subsequently repurchased $844 million in aggregate principal amount of outstanding notes at individually negotiated prices from a small number of investors. The aggregate remaining principal after this repurchase was $465 million, which exceeded the remaining commitments under the Cheniere Term Loan Facility by $93 million. As such, $93 million has been reflected as current debt on our Consolidated Balance Sheet as of June 30, 2020. |
| |
(2) | Prior to the substantial completion of Train 2 of the CCL Project in August 2019, interest was paid entirely in kind. Following substantial completion, the interest has been paid in cash; however, a portion of the interest may, in the future, be paid in kind under certain specified circumstances. |
| |
(3) | Conversion is subject to various limitations and conditions. |
| |
(4) | Convertible into cash or stock at our option on or after March 1, 2020 until September 2, 2020, and into stock upon conversion notice by us or note holders after September 2, 2020, provided that our market capitalization is not less than $10.0 billion (“Eligible Conversion Date”). The conversion price for stock is the lower of (1) a 10% discount to the average of the daily volume-weighted average price (“VWAP”) of our common stock for the 90 trading day period prior to the date notice is provided, and (2) a 10% discount to the closing price of our common stock on the trading day preceding the date notice is provided. The conversion price for cash is $1,080 per $1,000 principal amount of the notes. We redeemed an aggregate outstanding principal amount of $300 million in March 2020 and redeemed the remaining outstanding principal amount in July 2020, both with cash. |
| |
(5) | Redeemable at any time after March 15, 2020 at a redemption price payable in cash equal to the accreted amount of the 2045 Cheniere Convertible Senior Notes to be redeemed, plus accrued and unpaid interest, if any, to such redemption date. |
| |
(6) | Initially convertible at $93.64 (subject to adjustment upon the occurrence of certain specified events), provided that the closing price of our common stock is greater than or equal to the conversion price on the conversion date. |
| |
(7) | Prior to December 15, 2044, convertible only under certain circumstances as specified in the indenture; thereafter, holders may convert their notes regardless of these circumstances. The conversion rate will initially equal 7.2265 shares of our common stock per $1,000 principal amount of the 2045 Cheniere Convertible Senior Notes, which corresponds to an initial conversion price of approximately $138.38 per share of our common stock (subject to adjustment upon the occurrence of certain specified events). |
CHENIERE ENERGY, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—CONTINUED
(unaudited)
| |
(8) | Rate to accrete the discounted carrying value of the convertible notes to the face value over the remaining amortization period. |
| |
(9) | We amortize any debt discount and debt issuance costs using the effective interest over the period through contractual maturity except for the 2025 CCH HoldCo II Convertible Senior Notes, which are amortized through the date they are first convertible by holders into our common stock. |
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, our subsidiaries’ and its restricted subsidiaries’ ability to make certain investments or pay dividends or distributions.
As of June 30, 2020,2021, each of our issuers was in compliance with all covenants related to their respective debt agreements.
Interest Expense
Total interest expense, net of capitalized interest, including interest expense related to our convertible notes, consisted of the following (in millions):
| | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | Three Months Ended June 30, | | Six Months Ended June 30, |
| | 2021 | | 2020 | | 2021 | | 2020 | | |
Interest cost on convertible notes: | | | | | | | | | | |
Interest per contractual rate | | $ | 11 | | | $ | 57 | | | $ | 23 | | | $ | 120 | | | |
Amortization of debt discount | | 3 | | | 20 | | | 8 | | | 34 | | | |
Amortization of debt issuance costs | | 0 | | | 4 | | | 0 | | | 7 | | | |
Total interest cost related to convertible notes | | 14 | | | 81 | | | 31 | | | 161 | | | |
Interest cost on debt and finance leases excluding convertible notes | | 387 | | | 388 | | | 787 | | | 779 | | | |
Total interest cost | | 401 | | | 469 | | | 818 | | | 940 | | | |
Capitalized interest | | (33) | | | (62) | | | (94) | | | (121) | | | |
Total interest expense, net of capitalized interest | | $ | 368 | | | $ | 407 | | | $ | 724 | | | $ | 819 | | | |
|
| | | | | | | | | | | | | | | | |
| | Three Months Ended June 30, | | Six Months Ended June 30, |
| | 2020 | | 2019 | | 2020 | | 2019 |
Interest cost on convertible notes: | | | | | | | | |
Interest per contractual rate | | $ | 57 |
| | $ | 64 |
| | $ | 120 |
| | $ | 126 |
|
Amortization of debt discount | | 20 |
| | 9 |
| | 34 |
| | 19 |
|
Amortization of debt issuance costs | | 4 |
| | 3 |
| | 7 |
| | 6 |
|
Total interest cost related to convertible notes | | 81 |
|
| 76 |
|
| 161 |
|
| 151 |
|
Interest cost on debt and finance leases excluding convertible notes | | 388 |
| | 382 |
| | 779 |
|
| 755 |
|
Total interest cost | | 469 |
| | 458 |
| | 940 |
| | 906 |
|
Capitalized interest | | (62 | ) | | (86 | ) | | (121 | ) | | (287 | ) |
Total interest expense, net of capitalized interest | | $ | 407 |
|
| $ | 372 |
|
| $ | 819 |
| | $ | 619 |
|
Fair Value Disclosures
The following table shows the carrying amount and estimated fair value of our debt (in millions):
|
| | | | | | | | | | | | | | | | |
| | June 30, 2020 | | December 31, 2019 |
| | Carrying Amount | | Estimated Fair Value | | Carrying Amount | | Estimated Fair Value |
Senior notes (1) | | $ | 22,700 |
| | $ | 24,698 |
| | $ | 22,700 |
| | $ | 24,650 |
|
2037 SPL Senior Notes (2) | | 800 |
| | 948 |
| | 800 |
| | 934 |
|
4.80% CCH Senior Notes (2) | | 727 |
| | 841 |
| | 727 |
| | 830 |
|
3.925% CCH Senior Notes (2) | | 475 |
| | 502 |
| | 475 |
| | 495 |
|
Credit facilities (3) | | 3,805 |
| | 3,805 |
| | 3,283 |
| | 3,283 |
|
2021 Cheniere Convertible Unsecured Notes (2) | | 1,309 |
| | 1,332 |
| | 1,278 |
| | 1,312 |
|
2025 CCH HoldCo II Convertible Senior Notes (2) | | 1,278 |
| | 1,495 |
| | 1,578 |
| | 1,807 |
|
2045 Cheniere Convertible Senior Notes (4) | | 625 |
| | 394 |
| | 625 |
| | 498 |
|
| | | | | | | | | | | | | | | | | | | | | | | | | | |
| | June 30, 2021 | | December 31, 2020 |
| | Carrying Amount | | Estimated Fair Value | | Carrying Amount | | Estimated Fair Value |
Senior notes — Level 2 (1) | | $ | 24,700 | | | $ | 27,503 | | | $ | 24,700 | | | $ | 27,897 | |
Senior notes — Level 3 (2) | | 2,771 | | | 3,350 | | | 2,771 | | | 3,423 | |
Credit facilities — Level 3 (3) | | 2,791 | | | 2,791 | | | 2,915 | | | 2,915 | |
2021 Cheniere Convertible Notes — Level 3 (2) | | 0 | | | 0 | | | 476 | | | 480 | |
| | | | | | | | |
2045 Cheniere Convertible Senior Notes — Level 1 (4) | | 625 | | | 527 | | | 625 | | | 496 | |
| |
(1) | Includes (1) the SPL Senior Notes except the 2037 SPL Senior Notes, (2) all series of the CQP senior notes including the 2025 CQP Senior Notes, 2026 CQP Senior Notes and 2029 CQP Senior Notes and (3) the CCH senior notes sold on a private placement basis in reliance on Section 4(a)(2) of the Securities Act and Rule 144A and Regulation S thereunder including the 2024 CCH Senior Notes, 2025 CCH Senior Notes, 2027 CCH Senior Notes and 2029 CCH Senior Notes. 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 our stock price and interest rates based on debt issued by parties with comparable credit ratings to us and inputs that are not observable in the market. |
| |
(3) | Includes 2015 SPL Working Capital Facility, 2020 SPL Working Capital Facility, 2019 CQP Credit Facilities, CCH Credit Facility, CCH Working Capital Facility, Cheniere Revolving Credit Facility, Cheniere Term Loan Facility and Cheniere |
(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.
CHENIERE ENERGY, INC. AND SUBSIDIARIES(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 our stock price and interest rates based on debt issued by parties with comparable credit ratings to us and inputs that are not observable in the market.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—CONTINUED
(unaudited)
Marketing trade finance facilities. (3)The Level 3 estimated fair value approximates the principal amount because the interest rates are variable and reflective of market rates and the debt may be repaid, in full or in part, at any time without penalty.
| |
(4) | The Level 1 estimated fair value was based on unadjusted quoted prices in active markets for identical liabilities that we had the ability to access at the measurement date. |
(4)The Level 1 estimated fair value was based on unadjusted quoted prices in active markets for identical liabilities that we had the ability to access at the measurement date.
CHENIERE ENERGY, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—CONTINUED
(unaudited)
NOTE 11—LEASES
Our leased assets consist primarily of (1) LNG vessel time charters (“vessel charters”), (2) and additionally include tug vessels, (3) office space and facilities and (4) land sites, allsites. All of whichour leases are classified as operating leases except for our tug vessels atsupporting the Corpus Christi LNG terminal,Terminal, which are classified as finance leases.
The following table shows the classification and location of our right-of-use assets and lease liabilities on our Consolidated Balance Sheets (in millions):
| | | | | | | | | | | | | | | | | |
| | | |
| | | June 30, | | December 31, |
| Consolidated Balance Sheets Location | | 2021 | | 2020 |
Right-of-use assets—Operating | Operating lease assets | | $ | 1,698 | | | $ | 759 | |
Right-of-use assets—Financing | Property, plant and equipment, net of accumulated depreciation | | 52 | | | 53 | |
Total right-of-use assets | | | $ | 1,750 | | | $ | 812 | |
| | | | | |
Current operating lease liabilities | Current operating lease liabilities | | $ | 365 | | | $ | 161 | |
Current finance lease liabilities | Other current liabilities | | 2 | | | 2 | |
Non-current operating lease liabilities | Operating lease liabilities | | 1,332 | | | 597 | |
Non-current finance lease liabilities | Finance lease liabilities | | 57 | | | 57 | |
Total lease liabilities | | | $ | 1,756 | | | $ | 817 | |
|
| | | | | | | | | |
| Consolidated Balance Sheets Location | | June 30, 2020 | | December 31, 2019 |
Right-of-use assets—Operating | Operating lease assets, net | | $ | 520 |
| | $ | 439 |
|
Right-of-use assets—Financing | Property, plant and equipment, net | | 55 |
| | 56 |
|
Total right-of-use assets | | | $ | 575 |
| | $ | 495 |
|
| | | | | |
Current operating lease liabilities | Current operating lease liabilities | | $ | 179 |
| | $ | 236 |
|
Current finance lease liabilities | Other current liabilities | | 1 |
| | 1 |
|
Non-current operating lease liabilities | Non-current operating lease liabilities | | 347 |
| | 189 |
|
Non-current finance lease liabilities | Non-current finance lease liabilities | | 58 |
| | 58 |
|
Total lease liabilities | | | $ | 585 |
| | $ | 484 |
|
The following table shows the classification and location of our lease costcosts on our Consolidated Statements of Operations (in millions):
|
| | | | | | | | | | | | | | | | | |
| Consolidated Statements of Operations Location | | Three Months Ended June 30, | | Six Months Ended June 30, |
| | 2020 | | 2019 | | 2020 | | 2019 |
Operating lease cost (1) | Operating costs and expenses (2) | | $ | 98 |
| | $ | 140 |
| | $ | 239 |
| | $ | 277 |
|
Finance lease cost: | | | | | | |
|
| | |
Amortization of right-of-use assets | Depreciation and amortization expense | | 1 |
| | 1 |
| | 2 |
| | 2 |
|
Interest on lease liabilities | Interest expense, net of capitalized interest | | 3 |
| | 3 |
| | 5 |
| | 5 |
|
Total lease cost | | | $ | 102 |
| | $ | 144 |
| | $ | 246 |
| | $ | 284 |
|
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Consolidated Statements of Operations Location | | Three Months Ended June 30, | | Six Months Ended June 30, |
| | 2021 | | 2020 | | 2021 | | 2020 | | |
Operating lease cost (a) | Operating costs and expenses (1) | | $ | 145 | | | $ | 98 | | | $ | 296 | | | $ | 239 | | | |
Finance lease cost: | | | | | | | | | | | |
Amortization of right-of-use assets | Depreciation and amortization expense | | 1 | | | 1 | | | 2 | | | 2 | | | |
Interest on lease liabilities | Interest expense, net of capitalized interest | | 3 | | | 3 | | | 5 | | | 5 | | | |
| | | | | | | | | | | |
Total lease cost | | | $ | 149 | | | $ | 102 | | | $ | 303 | | | $ | 246 | | | |
| | | | | | | | | | | |
(a) Included in operating lease cost: | | | | | | | | | | | |
Short-term lease costs | | | $ | 30 | | | $ | 16 | | | $ | 81 | | | $ | 51 | | | |
Variable lease costs | | | 11 | | | 4 | | | 13 | | | 9 | | | |
| |
(1) | Includes short-term lease costs of $16 million and $46 million during the three months ended June 30, 2020 and 2019, respectively, and $51 million and $93 million during the six months ended June 30, 2020 and 2019, respectively. Also includes variable lease costs paid to the lessor of $4 million and $8 million during the three months ended June 30, 2020 and 2019, respectively, and $9 million and $13 million during the six months ended June 30, 2020 and 2019, respectively. |
| |
(2) | Presented in cost of sales, operating and maintenance expense or selling, general and administrative expense consistent with the nature of the asset under lease. |
(1) Presented in cost of sales, operating and maintenance expense or selling, general and administrative expense consistent with the nature of the asset under lease.
CHENIERE ENERGY, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—CONTINUED
(unaudited)
Future annual minimum lease payments for operating and finance leases as of June 30, 20202021 are as follows (in millions):
|
| | | | | | | |
Years Ending December 31, | Operating Leases (1) | | Finance Leases |
2020 | $ | 135 |
| | $ | 5 |
|
2021 | 121 |
| | 10 |
|
2022 | 85 |
| | 10 |
|
2023 | 71 |
| | 10 |
|
2024 | 71 |
| | 10 |
|
Thereafter | 221 |
| | 136 |
|
Total lease payments | 704 |
| | 181 |
|
Less: Interest | (178 | ) | | (122 | ) |
Present value of lease liabilities | $ | 526 |
| | $ | 59 |
|
| | | | | | | | | | | |
Years Ending December 31, | Operating Leases (1) | | Finance Leases |
2021 | $ | 227 | | | $ | 5 | |
2022 | 397 | | | 10 | |
2023 | 358 | | | 10 | |
2024 | 313 | | | 10 | |
2025 | 213 | | | 10 | |
Thereafter | 448 | | | 127 | |
Total lease payments | 1,956 | | | 172 | |
Less: Interest | (259) | | | (113) | |
Present value of lease liabilities | $ | 1,697 | | | $ | 59 | |
| |
(1) | Does not include $1.7 billion of legally binding minimum lease payments primarily for vessel charters which were executed as of June 30, 2020 but will commence in future period primarily in the next two years and have fixed minimum lease terms of up to seven years. |
(1) Does not include $984 million of legally binding minimum lease payments primarily for vessel charters which were executed as of June 30, 2021 but will commence in future periods primarily in the next year and have fixed minimum lease terms of up to seven years.
The following table shows the weighted-average remaining lease term and the weighted-average discount rate for our operating leases and finance leases:
|
| | | | | | | |
| June 30, 2020 | | December 31, 2019 |
| Operating Leases | | Finance Leases | | Operating Leases | | Finance Leases |
Weighted-average remaining lease term (in years) | 8.6 | | 18.2 | | 8.4 | | 18.7 |
Weighted-average discount rate (1) | 7.4% | | 16.2% | | 5.2% | | 16.2% |
| | | | | | | | | | | | | | | | | | | | | | | |
| June 30, 2021 | | December 31, 2020 |
| Operating Leases | | Finance Leases | | Operating Leases | | Finance Leases |
Weighted-average remaining lease term (in years) | 6.4 | | 17.2 | | 8.2 | | 17.7 |
Weighted-average discount rate (1) | 4.1% | | 16.2% | | 5.4% | | 16.2% |
| |
(1) | The finance leases commenced prior to the adoption of the current leasing standard under GAAP. In accordance with previous accounting guidance, the implied rate is based on the fair value of the underlying assets. |
(1)The finance leases commenced prior to the adoption of the current leasing standard under GAAP. In accordance with previous accounting guidance, the implied rate is based on the fair value of the underlying assets.
The following table includes other quantitative information for our operating and finance leases (in millions):
| | | | | | | | | | | | | |
| Six Months Ended June 30, |
| 2021 | | 2020 | | |
Cash paid for amounts included in the measurement of lease liabilities: | | | | | |
Operating cash flows used in operating leases | $ | 201 | | | $ | 157 | | | |
Operating cash flows used in finance leases | 5 | | | 5 | | | |
| | | | | |
Right-of-use assets obtained in exchange for operating lease liabilities | 1,112 | | | 246 | | | |
|
| | | | | | | |
| Six Months Ended June 30, |
| 2020 | | 2019 |
Cash paid for amounts included in the measurement of lease liabilities: | | | |
Operating cash flows from operating leases | $ | 157 |
| | $ | 174 |
|
Operating cash flows from finance leases | 5 |
| | 5 |
|
Right-of-use assets obtained in exchange for new operating lease liabilities | 246 |
| | 106 |
|
LNG Vessel Subcharters
From time to time, we sublease certain LNG vessels under charter to third parties while retaining our existing obligation to the original lessor. As of June 30, 20202021 and December 31, 2019,2020, we had $1$4 million and $9 million0, respectively, in future minimum sublease payments to be received from LNG vessel subcharters, respectively, which will be recognized entirely within 2020. We recognized $23 million and $31 million ofsubcharters. The following table shows the sublease income including $8 million and $5 million of variable lease payments, during the three months ended June 30, 2020 and 2019, respectively,recognized in other revenues on our Consolidated Statements of Operations. We recognized $75 million and $68 million of sublease income, including $23 million and $10 million of variable lease payments, during the six months ended June 30, 2020 and 2019, respectively, in other revenues on our Consolidated Statements of Operations.Operations (in millions):
| | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | Three Months Ended June 30, | | Six Months Ended June 30, |
| | 2021 | | 2020 | | 2021 | | 2020 | | |
Fixed income | | $ | 8 | | | $ | 15 | | | $ | 11 | | | $ | 52 | | | |
Variable income | | 5 | | | 8 | | | 6 | | | 23 | | | |
Total sublease income | | $ | 13 | | | $ | 23 | | | $ | 17 | | | $ | 75 | | | |
CHENIERE ENERGY, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—CONTINUED
(unaudited)
NOTE 12—REVENUES FROM CONTRACTS WITH CUSTOMERS
The following table represents a disaggregation of revenue earned from contracts with customers during the three and six months ended June 30, 20202021 and 20192020 (in millions):
|
| | | | | | | | | | | | | | | | |
| | Three Months Ended June 30, | | Six Months Ended June 30, |
| | 2020 | | 2019 | | 2020 | | 2019 |
LNG revenues (1) | | $ | 2,340 |
| | $ | 2,080 |
| | $ | 4,744 |
| | $ | 4,147 |
|
Regasification revenues | | 68 |
| | 67 |
| | 135 |
| | 133 |
|
Other revenues | | 16 |
| | 21 |
| | 38 |
| | 36 |
|
Total revenues from customers | | 2,424 |
| | 2,168 |
| | 4,917 |
| | 4,316 |
|
Net derivative gains (losses) (2) | | (45 | ) | | 93 |
| | 119 |
| | 169 |
|
Other (3) | | 23 |
| | 31 |
| | 75 |
| | 68 |
|
Total revenues | | $ | 2,402 |
| | $ | 2,292 |
| | $ | 5,111 |
| | $ | 4,553 |
|
| | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | Three Months Ended June 30, | | Six Months Ended June 30, |
| | 2021 | | 2020 | | 2021 | | 2020 | | |
LNG revenues (1) | | $ | 3,297 | | | $ | 2,340 | | | $ | 6,336 | | | $ | 4,744 | | | |
Regasification revenues | | 67 | | | 68 | | | 134 | | | 135 | | | |
Other revenues | | 24 | | | 16 | | | 44 | | | 38 | | | |
| | | | | | | | | | |
Total revenues from customers | | 3,388 | | | 2,424 | | | 6,514 | | | 4,917 | | | |
Net derivative gain (loss) (2) | | (384) | | | (45) | | | (424) | | | 119 | | | |
Other (3) | | 13 | | | 23 | | | 17 | | | 75 | | | |
Total revenues | | $ | 3,017 | | | $ | 2,402 | | | $ | 6,107 | | | $ | 5,111 | | | |
| |
(1) | (1) LNG revenues include revenues for LNG cargoes in which our customers exercised their contractual right to not take delivery but remained obligated to pay fixed fees irrespective of such election. During the three and six months ended June 30, 2020, we recognized $708 million and $761 million, respectively, in LNG revenues associated with LNG cargoes for which customers notified us that they would not take delivery, of which $458 million would have been recognized subsequent to June 30, 2020 had the cargoes in which our customers exercised their contractual right to not take delivery but remained obligated to pay fixed fees irrespective of such election. LNG revenues during the three and six months ended June 30, 2020 included $708 million and $761 million, respectively, in revenues associated with LNG cargoes for which customers have notified us that they will not take delivery, of which $458 million would have otherwise been recognized subsequent to June 30, 2020, if the cargoes were lifted pursuant to the delivery schedules with the customers. LNG revenues during the three months ended June 30, 2020 and six months ended June 30, 2021 excluded $53 million and $38 million, respectively, that would have otherwise been recognized during the quarter if the cargoes were lifted pursuant to the delivery schedules with the customers. We did 0t have revenues associated with LNG cargoes for which customers notified us that they would not take delivery during the three and six months ended June 30, 2021. Revenue is generally recognized upon receipt of irrevocable notice that a customer will not take delivery because our customers have no contractual right to take delivery of such LNG cargo in future periods and our performance obligations with respect to such LNG cargo have been satisfied. (3) Includes revenues from LNG vessel subcharters. See Note 11—Leases for additional information about our subleases.
|
| |
(3) | Includes revenues from LNG vessel subcharters. See Note 11—Leases for additional information about our subleases. |
Contract Assets and Liabilities
The following table shows our contract assets, net of current expected credit losses, which are classified as other current assets and other non-current assets, net on our Consolidated Balance Sheets (in millions):
| | | | | | | | | | | | | | |
| | |
| | June 30, | | December 31, |
| | 2021 | | 2020 |
Contract assets, net of current expected credit losses | | $ | 109 | | | $ | 80 | |
|
| | | | | | | | |
| | June 30, | | December 31, |
| | 2020 | | 2019 |
Contract assets, net | | $ | 58 |
| | $ | 18 |
|
Contract assets represent our right to consideration for transferring goods or services to the customer under the terms of a sales contract when the associated consideration is not yet due. Changes in contract assets during the six months ended June 30, 20202021 were primarily attributable to revenue recognized due to the delivery of LNG under certain SPAs for which the associated consideration was not yet due.
The following table reflects the changes in our contract liabilities, which we classify as deferred revenue on our Consolidated Balance Sheets (in millions):
| | | | | | | | | | |
| | |
| | Six Months Ended June 30, 2021 | | |
Deferred revenue, beginning of period | | $ | 138 | | | |
Cash received but not yet recognized in revenue | | 105 | | | |
Revenue recognized from prior period deferral | | (138) | | | |
Deferred revenue, end of period | | $ | 105 | | | |
|
| | | | |
| | Six Months Ended June 30, 2020 |
Deferred revenues, beginning of period | | $ | 161 |
|
Cash received but not yet recognized | | 23 |
|
Revenue recognized from prior period deferral | | (161 | ) |
Deferred revenues, end of period | | $ | 23 |
|
CHENIERE ENERGY, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—CONTINUED
(unaudited)
Transaction Price Allocated to Future Performance Obligations
Because many of our sales contracts have long-term durations, we are contractually entitled to significant future consideration which we have not yet recognized as revenue. The following table discloses the aggregate amount of the transaction price that is allocated to performance obligations that have not yet been satisfied as of June 30, 20202021 and December 31, 2019:2020:
|
| | | | | | | | | | | | |
| | June 30, 2020 | | December 31, 2019 |
| | Unsatisfied Transaction Price (in billions) | | Weighted Average Recognition Timing (years) (1) | | Unsatisfied Transaction Price (in billions) | | Weighted Average Recognition Timing (years) (1) |
LNG revenues | | $ | 103.7 |
| | 10 | | $ | 106.4 |
| | 11 |
Regasification revenues | | 2.3 |
| | 5 | | 2.4 |
| | 5 |
Total revenues | | $ | 106.0 |
| |
| | $ | 108.8 |
| | |
| | | | | | | | | | | | | | | | | | | | | | | | | | |
| | June 30, 2021 | | December 31, 2020 |
| | Unsatisfied Transaction Price (in billions) | | Weighted Average Recognition Timing (years) (1) | | Unsatisfied Transaction Price (in billions) | | Weighted Average Recognition Timing (years) (1) |
LNG revenues | | $ | 101.1 | | | 10 | | $ | 102.3 | | | 10 |
Regasification revenues | | 2.0 | | | 4 | | 2.1 | | | 5 |
Total revenues | | $ | 103.1 | | | | | $ | 104.4 | | | |
| |
(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. |
(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 delivery 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 26% and 52% of our LNG revenues from contracts included in the table above during the three months ended June 30, 2020 and 2019, respectively, and approximately 34% and 55% of our LNG revenues from contracts included in the table above during the six months ended June 30, 2020 and 2019, respectively, were related to variable consideration received from customers. During each of the three and six months ended June 30, 2020 and 2019, approximately 3% of our regasification revenues were related to variable consideration received from customers. |
(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 53% and 26% of our LNG revenues from contracts included in the table above during the three months ended June 30, 2021 and 2020, respectively, and approximately 52% and 34% of our LNG revenues from contracts included in the table above during the six months ended June 30, 2021 and 2020, respectively, were related to variable consideration received from customers. During each of the three and six months ended June 30, 2021, approximately 5% of our regasification revenues were related to variable consideration received from customers and during each of the three and six months ended June 30, 2020, approximately 6% of our regasification revenues were related to variable consideration received from customers.
We may enter into contracts to sell LNG that are conditioned upon one or both of the parties achieving certain milestones such as reaching FID 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.
NOTE 13—RELATED PARTY TRANSACTIONS
Natural Gas Supply Agreements
SPL and CCL are party to natural gas supply agreements with related parties in the ordinary course of business, to obtain a fixed minimum daily volume of feed gas for the operation of the Liquefaction Projects. These related parties are partially owned by The Blackstone Group Inc., who also partially owns Cheniere Partners’ limited partner interests.
CHENIERE ENERGY, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—CONTINUED
(unaudited)
SPL Natural Gas Supply Agreement
The term of the SPL agreement is for five years, which can commence no earlier than November 1, 2021 and no later than November 1, 2022, following the achievement of contractually-defined conditions precedent. As of both June 30, 2021 and December 31, 2020, the notional amount for this agreement was 91 TBtu and had a fair value of 0.
CCL Natural Gas Supply Agreement
The term of the CCL agreement extends through March 2022. Under this agreement, CCL recorded $13 million in accrued liabilities, as of both June 30, 2021 and December 31, 2020.
The Liquefaction Supply Derivatives related to this agreement are recorded on our Consolidated Balance Sheets as follows (in millions, except notional amount):
| | | | | | | | | | | |
| |
| June 30, | | December 31, |
| 2021 | | 2020 |
Current derivative assets | $ | 4 | | | $ | 3 | |
Derivative assets | 7 | | | 1 | |
| | | |
Notional amount (in TBtu) | 132 | | | 60 | |
We recorded the following amounts on our Consolidated Statements of Operations during the three and six months ended June 30, 2021 and 2020 related to this agreement (in millions):
| | | | | | | | | | | | | | | | | | | | | | | | | |
| Three Months Ended June 30, | | Six Months Ended June 30, |
| 2021 | | 2020 | | 2021 | | 2020 | | |
Cost of sales (a) | $ | 36 | | | $ | 25 | | | $ | 71 | | | $ | 48 | | | |
| | | | | | | | | |
(a) Included in costs of sales: | | | | | | | | | |
Liquefaction Supply Derivative gain | $ | 6 | | | $ | 1 | | | $ | 7 | | | $ | 2 | | | |
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 SPL Project, with initial primary terms of up to 10 years with extension rights. This related party is partially owned by Brookfield Asset Management, Inc., who indirectly acquired a portion of Cheniere Partners’ limited partner interests in September 2020. We recorded operating and maintenance expense of $12 million and $22 million and cost of sales of $1 million and $1 million during the three and six months ended June 30, 2021, respectively, and accrued liabilities of $4 million as of both June 30, 2021 and December 31, 2020 with this related party.
Operation and Maintenance Service Agreements
Cheniere LNG O&M Services, LLC (“O&M Services”), our wholly owned subsidiary, provides the development, construction, operation and maintenance services to Midship Pipeline pursuant to agreements in which O&M Services receives an agreed upon fee and reimbursement of costs incurred. O&M Services recorded $1 million and $3 million in the three months ended June 30, 2021 and 2020, respectively, and $3 million and $6 million in the six months ended June 30, 2021 and 2020, respectively, of other revenues and $1 million and $2 million of accounts receivable as of June 30, 2021 and December 31, 2020, respectively, for services provided to Midship Pipeline under these agreements.
NOTE 14—INCOME TAXES
We recorded an income tax benefit of $93 million and $4 million during the three and six months ended June 30, 2021, respectively, and an income tax provision of $63 million and 0$194 million during the three months ended June 30, 2020 and 2019, respectively, and an income tax provision of $194 million and $3 million during the six months ended June 30, 2020, and 2019, respectively. The effective tax raterates for the three and six months ended June 30, 2021 were 41.5% and (0.9)%, respectively, and do not bear a customary relationship to statutory income tax rates due to a combination of factors including income
CHENIERE ENERGY, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—CONTINUED
(unaudited)
allocated to non-controlling interest that is not taxable to Cheniere and a $58 million discrete tax benefit related to releasing a portion of our valuation allowance caused by a change in tax law allowing for indefinite Louisiana net operating loss (“NOL”) carryover. The effective tax rates for the three and six months ended June 30, 2020 waswere 13.5% and 16.2%, respectively, which were lower than the 21% federal statutory tax rate primarily due to income allocated to non-controlling interest that is not taxable to Cheniere. The effective tax rate decreased for the three months ended June 30, 2020 from the six months ended June 30, 2020 due to an additional tax expense ofCheniere, partially offset by a $38 million recorded during the first quarter related to a one-time discrete eventtax expense related to an internal tax restructuring. The effective tax rate for the three and six months ended June 30, 2019 was 0% and 0.9%, which are lower than the 21% federal statutory rate primarily due to maintaining a valuation allowance against our federal and state net deferred tax assets.
CHENIERE ENERGY, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—CONTINUED
(unaudited)
NOTE 14—15—SHARE-BASED COMPENSATION
We have granted restricted stock shares, restricted stock units, performance stock units and phantom units to employees and non-employee directors under the 2011 Incentive Plan, as amended (the “2011 Plan”), the 2015 Employee Inducement Incentive Plan and the 2020 Incentive Plan that was approved by our shareholders in May 2020.
Plan. For the six months ended June 30, 2020,2021, we granted 1.21.5 million restricted stock units and 0.3 million performance stock units at target performance under the 20112020 Plan to certain employees. Additionally, 0.2 million incremental shares of our common stock were issued based on performance results from previously-granted performance stock unit awards.
Restricted stock units are stock awards that vest over a service period of three years and entitle the holder to receive shares of our common stock upon vesting, subject to restrictions on transfer and to a risk of forfeiture if the recipient terminates employment with us prior to the lapse of the restrictions. Performance stock units provide for cliff vesting after a period of three years with payouts based on metrics dependent upon market and performance achieved over the defined performance period from January 1, 2020 through December 31, 2022 compared to pre-established performance targets. The settlement amounts of the awards are based on market and performance metrics which include cumulative distributable cash flow per share, and in certain circumstances, absolute total shareholder return (“ATSR”) of our common stock. Where applicable, the compensation for performance stock units is based on fair value assigned to the market metric of ATSR using a Monte Carlo model upon grant, which remains constant through the vesting period, and a performance metric, which will vary due to changing estimates regarding the expected achievement of the performance metric of cumulative distributable cash flow per share. The number of shares that may be earned at the end of the vesting period ranges from 0% up to 300% of the target award amount. Both restricted stock units and performance stock units will be settled in Cheniere common stock (on a one-for-one basis) and are classified as equity awards, however, a portion of the performance stock units granted in 2021 will partially settle in cash, subject to individual limits. The portion of performance stock units expected to settle in Cheniere common stock (on a one-for-one basis) are classified as equity awards and the portion of performance stock units expected to settle in cash are classified as liability awards.
Total share-based compensation consisted of the following (in millions):
| | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | Three Months Ended June 30, | | Six Months Ended June 30, |
| | 2021 | | 2020 | | 2021 | | 2020 | | |
Share-based compensation costs, pre-tax: | | | | | | | | | | |
Equity awards | | $ | 31 | | | $ | 31 | | | $ | 64 | | | $ | 60 | | | |
Liability awards | | 1 | | | 1 | | | 2 | | | 1 | | | |
Total share-based compensation | | 32 | | | 32 | | | 66 | | | 61 | | | |
Capitalized share-based compensation | | (1) | | | (3) | | | (3) | | | (4) | | | |
Total share-based compensation expense | | $ | 31 | | | $ | 29 | | | $ | 63 | | | $ | 57 | | | |
Tax benefit associated with share-based compensation expense | | $ | 1 | | | $ | 1 | | | $ | 27 | | | $ | 19 | | | |
|
| | | | | | | | | | | | | | | | |
| | Three Months Ended June 30, | | Six Months Ended June 30, |
| | 2020 | | 2019 | | 2020 | | 2019 |
Share-based compensation costs, pre-tax: | | | | | | | | |
Equity awards | | $ | 31 |
| | $ | 32 |
| | $ | 60 |
| | $ | 61 |
|
Liability awards | | 1 |
| | 2 |
| | 1 |
| | 5 |
|
Total share-based compensation | | 32 |
|
| 34 |
|
| 61 |
| | 66 |
|
Capitalized share-based compensation | | (3 | ) | | (1 | ) | | (4 | ) | | (5 | ) |
Total share-based compensation expense | | $ | 29 |
|
| $ | 33 |
|
| $ | 57 |
| | $ | 61 |
|
Tax benefit associated with share-based compensation expense | | $ | 1 |
| | $ | — |
| | $ | 19 |
| | $ | 1 |
|
NOTE 15—16—NET INCOME (LOSS) PER SHARE ATTRIBUTABLE TO COMMON STOCKHOLDERS
Basic net income (loss) per share attributable to common stockholders (“EPS”) excludes dilution and is computed by dividing net income (loss) attributable to common stockholders by the weighted average number of common shares outstanding during the period. Diluted EPS reflects potential dilution and is computed by dividing net income (loss) attributable to common stockholders by the weighted average number of common shares outstanding during the period increased by the number of additional common shares that would have been outstanding if the potential common shares had been issued. The dilutive effect of unvested stock is calculated using the treasury-stock method and the dilutive effect of convertible securities is calculated using the if-converted method.
CHENIERE ENERGY, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—CONTINUED
(unaudited)
The following table reconciles basic and diluted weighted average common shares outstanding for the three and six months ended June 30, 20202021 and 20192020 (in millions, except per share data):
| | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | Three Months Ended June 30, | | Six Months Ended June 30, |
| | 2021 | | 2020 | | 2021 | | 2020 | | |
Net income (loss) attributable to common stockholders | | $ | (329) | | | $ | 197 | | | $ | 64 | | | $ | 572 | | | |
| | | | | | | | | | |
Weighted average common shares outstanding: | | | | | | | | | | |
Basic | | 253.5 | | | 252.1 | | | 253.2 | | | 252.6 | | | |
Dilutive unvested stock | | 0 | | | 0.3 | | | 1.5 | | | 0.7 | | | |
| | | | | | | | | | |
Diluted | | 253.5 | | | 252.4 | | | 254.7 | | | 253.3 | | | |
| | | | | | | | | | |
Net income (loss) per share attributable to common stockholders—basic (1) | | $ | (1.30) | | | $ | 0.78 | | | $ | 0.25 | | | $ | 2.27 | | | |
Net income (loss) per share attributable to common stockholders—diluted (1) | | $ | (1.30) | | | $ | 0.78 | | | $ | 0.25 | | | $ | 2.26 | | | |
|
| | | | | | | | | | | | | | | | |
| | Three Months Ended June 30, | | Six Months Ended June 30, |
| | 2020 | | 2019 | | 2020 | | 2019 |
Weighted average common shares outstanding: | | | | | | | | |
Basic | | 252.1 |
| | 257.4 |
| | 252.6 |
| | 257.3 |
|
Dilutive unvested stock | | 0.3 |
| | — |
| | 0.7 |
| | 1.3 |
|
Diluted | | 252.4 |
| | 257.4 |
| | 253.3 |
| | 258.6 |
|
| | | | | | | | |
Basic net income (loss) per share attributable to common stockholders | | $ | 0.78 |
| | $ | (0.44 | ) | | $ | 2.27 |
| | $ | 0.11 |
|
Diluted net income (loss) per share attributable to common stockholders | | $ | 0.78 |
| | $ | (0.44 | ) | | $ | 2.26 |
| | $ | 0.11 |
|
(1) Earnings per share in the table may not recalculate exactly due to rounding because it is calculated based on whole numbers, not the rounded numbers presented.
Potentially dilutive securities that were not included in the diluted net income (loss) per share computations because their effects would have been anti-dilutive were as follows (in millions):
|
| | | | | | | | | | | | |
| | Three Months Ended June 30, | | Six Months Ended June 30, |
| | 2020 | | 2019 | | 2020 | | 2019 |
Unvested stock (1) | | 2.8 |
| | 3.8 |
| | 2.5 |
| | 3.8 |
|
Convertible notes | |
|
| |
|
| | | | |
2021 Cheniere Convertible Unsecured Notes (2) | | — |
| | 13.3 |
| | — |
| | 13.3 |
|
2025 CCH HoldCo II Convertible Senior Notes (3) | | — |
| | — |
| | — |
| | — |
|
2045 Cheniere Convertible Senior Notes | | 4.5 |
| | 4.5 |
| | 4.5 |
| | 4.5 |
|
Total potentially dilutive common shares | | 7.3 |
| | 21.6 |
| | 7.0 |
| | 21.6 |
|
| | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | Three Months Ended June 30, | | Six Months Ended June 30, |
| | 2021 | | 2020 | | 2021 | | 2020 | | |
Unvested stock (1) | | 1.5 | | | 2.8 | | | 0 | | | 2.5 | | | |
| | | | | | | | | | |
| | | | | | | | | | |
| | | | | | | | | | |
2045 Cheniere Convertible Senior Notes | | 4.5 | | | 4.5 | | | 4.5 | | | 4.5 | | | |
Total potentially dilutive common shares | | 6.0 | | | 7.3 | | | 4.5 | | | 7.0 | | | |
(1)Includes the impact of unvested shares containing performance conditions to the extent that the underlying performance conditions are satisfied based on actual results as of the respective dates.
NOTE 17—CUSTOMER CONCENTRATION
The following table shows external customers with revenues of 10% or greater of total revenues from external customers and external customers with accounts receivable, net of current expected credit losses and contract assets, net of current expected credit losses balances of 10% or greater of total accounts receivable, net of current expected credit losses and contract assets, net of current expected credit losses from external customers:
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | Percentage of Total Revenues from External Customers | | Percentage of Accounts Receivable, Net and Contract Assets, Net from External Customers |
| | Three Months Ended June 30, | | Six Months Ended June 30, | | June 30, | | December 31, |
| | | | | | |
| | 2021 | | 2020 | | 2021 | | 2020 | | | | 2021 | | 2020 |
Customer A | | 14% | | 15% | | 15% | | 15% | | | | * | | 14% |
Customer B | | 12% | | 12% | | 12% | | 10% | | | | * | | 12% |
Customer C | | * | | 10% | | 11% | | * | | | | * | | * |
| | | | | | | | | | | | | | |
| | | | | | | | | | | | | | |
| | | | | | | | | | | | | | |
| | | | | | | | | | | | | | |
| | | | | | | | | | | | | | |
| |
(1) | Does not include 0.7 million shares for each of the three and six months ended June 30, 2020 and 0.6 million shares for each of the three and six months ended June 30, 2019, respectively, of unvested stock because the performance conditions had not yet been satisfied as of the respective dates. |
| |
(2) | Since we have the intent and ability to settle the remaining outstanding principal amount of the 2021 Cheniere Convertible Unsecured Notes in cash and the excess conversion premium (the “conversion spread”) in either cash or shares, the treasury stock method was applied for calculating any potential dilutive effect of the conversion spread on net income per share for the three and six months ended June 30, 2020. However, since the average market price of our common stock did not exceed the conversion price of our 2021 Cheniere Convertible Unsecured Notes, the conversion spread was excluded from the computation of diluted net income per share for the three and six months ended June 30, 2020. |
| |
(3) | Since we had the intent and ability to settle the principal amount and the premium upon redemption of the 2025 CCH HoldCo II Convertible Senior Notes in cash, as previously described in Note 10—Debt, the 2025 CCH HoldCo II Convertible Senior Notes were not included in the computation of net income per share for the three and six months ended June 30, 2020. There were no shares related to the conversion of the 2025 CCH HoldCo II Convertible Senior Notes included in the computation of diluted net income (loss) per share for the three and six months ended June 30, 2019, because the substantive non-market based contingencies underlying the eligible conversion date were not met as of June 30, 2019. |
CHENIERE ENERGY, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—CONTINUED
(unaudited)
NOTE 16—SHARE REPURCHASE PROGRAM
On June 3, 2019, we announced that our Board of Directors (“Board”) authorized a 3-year, $1.0 billion share repurchase program. The following table presents information with respect to repurchases of common stock during the three and six months ended June 30, 2020 and 2019:
|
| | | | | | | | | | | | | | | |
| Three Months Ended June 30, | | Six Months Ended June 30, |
| 2020 | | 2019 | | 2020 | | 2019 |
Aggregate common stock repurchased | — |
| | 44,600 |
| | 2,875,376 |
| | 44,600 |
|
Weighted average price paid per share | $ | — |
| | $ | 68.30 |
| | $ | 53.88 |
| | $ | 68.30 |
|
Total amount paid (in millions) | $ | — |
| | $ | 3 |
| | $ | 155 |
| | $ | 3 |
|
As of June 30, 2020, we had up to $596 million of the share repurchase program available. Under the share repurchase program, repurchases can be made from time to time using a variety of methods, which may include open market purchases, privately negotiated transactions or otherwise, all in accordance with the rules of the SEC and other applicable legal requirements. The timing and amount of any shares of our common stock that are repurchased under the share repurchase program will be determined by our management based on market conditions and other factors. The share repurchase program does not obligate us to acquire any particular amount of common stock, and may be modified, suspended or discontinued at any time or from time to time at our discretion.
NOTE 17—COMMITMENTS AND CONTINGENCIES
We have various contractual obligations which are recorded as liabilities in our Consolidated Financial Statements. Other items, such as certain purchase commitments and other executed contracts which do not meet the definition of a liability as of June 30, 2020, are not recognized as liabilities but require disclosures in our Consolidated Financial Statements.
Environmental and Regulatory Matters
Our LNG terminals and pipelines are subject to extensive regulation under federal, state and local statutes, rules, regulations and laws. These laws require that we engage in consultations with appropriate federal and state agencies and that we obtain and maintain applicable permits and other authorizations. Failure to comply with such laws could result in legal proceedings, which may include substantial penalties. We believe that, based on currently known information, compliance with these laws and regulations will not have a material adverse effect on our results of operations, financial condition or cash flows.
Legal Proceedings
We are, and may in the future be, involved as a party to various legal proceedings, which are incidental to the ordinary course of business. We regularly analyze current information and, as necessary, provide accruals for probable liabilities on the eventual disposition of these matters. While the results of these litigation matters and claims cannot be predicted with certainty, we believe the reasonably possible losses from such matters, individually and in the aggregate, are not material. Additionally, we believe the probable final outcome of such matters will not have a material adverse effect on our consolidated results of operations, financial position or cash flows.
CHENIERE ENERGY, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—CONTINUED
(unaudited)
NOTE 18—CUSTOMER CONCENTRATION
The following table shows customers with revenues of 10% or greater of total revenues from external customers and customers with accounts receivable, net and contract assets, net balances of 10% or greater of total accounts receivable, net and contract assets, net from external customers:
|
| | | | | | | | | | | |
| Percentage of Total Revenues from External Customers | | Percentage of Accounts Receivable, Net and Contract Assets, Net from External Customers |
| Three Months Ended June 30, | | Six Months Ended June 30, | | June 30, | | December 31, |
| 2020 | | 2019 | | 2020 | | 2019 | | 2020 | | 2019 |
Customer A | 15% | | 17% | | 15% | | 18% | | * | | 12% |
Customer B | 12% | | 11% | | 10% | | 11% | | * | | * |
Customer C | 10% | | 11% | | * | | 12% | | 11% | | 13% |
Customer D | * | | 12% | | * | | 13% | | * | | * |
Customer E | * | | * | | * | | * | | 10% | | * |
* Less than 10%
NOTE 19—SUPPLEMENTAL CASH FLOW INFORMATION
The following table provides supplemental disclosure of cash flow information (in millions):
| | | | | | | | | | | | | | | | |
| | Six Months Ended June 30, |
| | 2021 | | 2020 | | |
Cash paid during the period for interest on debt, net of amounts capitalized | | $ | 675 | | | $ | 750 | | | |
Cash paid for income taxes, net of refunds | | 1 | | | 1 | | | |
| | | | | | |
| | | | | | |
| | | | | | |
| | | | | | |
|
| | | | | | | | |
| | Six Months Ended June 30, |
| | 2020 | | 2019 |
Cash paid during the period for interest on debt, net of amounts capitalized | | $ | 750 |
| | $ | 271 |
|
Cash paid for income taxes | | 1 |
| | 20 |
|
The balance in property, plant and equipment, net of accumulated depreciation funded with accounts payable and accrued liabilities was $222$264 million and $958$222 million as of June 30, 20202021 and 2019,2020, respectively.
| |
ITEM 2. | MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS |
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 that we expect to commence or complete construction of our proposed LNG terminals, liquefaction facilities, pipeline facilities or other projects, or any expansions or portions thereof, by certain dates, or at all;
•statements regarding future levels of domestic and international natural gas production, supply or consumption or future levels of LNG imports into or exports from North America and other countries worldwide or purchases of natural gas, regardless of the source of such information, or the transportation or other infrastructure or demand for and prices related to natural gas, LNG or other hydrocarbon products;
•statements regarding any financing transactions or arrangements, or our ability to enter into such transactions;
•statements regarding the amount and timing of share repurchases;
•statements relating to the construction of our Trains and pipelines, 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 or pipelines, including the financing of such Trains or pipelines;
•statements that our Trains, when completed, will have certain characteristics, including amounts of liquefaction capacities;
•statements regarding our business strategy, our strengths, our business and operation plans or any other plans, forecasts, projections, or objectives, including anticipated revenues, capital expenditures, maintenance and operating costs and cash flows, any or all of which are subject to change;
•statements regarding legislative, governmental, regulatory, administrative or other public body actions, approvals, requirements, permits, applications, filings, investigations, proceedings or decisions;
•statements regarding our anticipated LNG and natural gas marketing activities;
•statements regarding the outbreak of COVID-19 and its impact on our business and operating results, including any customers not taking delivery of LNG cargoes, the ongoing credit worthiness of our contractual counterparties, any disruptions in our operations or construction of our Trains and the health and safety of our employees, and on our customers, the global economy and the demand for LNG; and
| |
• | •any other statements that relate to non-historical or future information. |
All of these types of statements, other than statements of historical or present facts or conditions, are forward-looking statements. In some cases, forward-looking statements can be identified by terminology such as “may,” “will,” “could,” “should,” “achieve,” “anticipate,” “believe,” “contemplate,” “continue,” “estimate,” “expect,” “intend,” “plan,” “potential,” “predict,” “project,” “pursue,” “target,” the negative of such terms or other comparable terminology. The forward-looking statements contained in this quarterly report are largely based on our expectations, which reflect estimates and assumptions made by our management. These estimates and assumptions reflect our best judgment based on currently known market conditions and other factors. Although we believe that such estimates are reasonable, they are inherently uncertain and involve
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, 20192020 and our quarterly report on Form 10-Q for the quarterly period ended March, 31, 2020. All forward-looking statements attributable to us or persons acting on our behalf are expressly qualified in their entirety by these risk factors. These forward-looking statements speak only as of the date made, and other than as required by law, we undertake no obligation to update or revise any forward-looking statement or provide reasons why actual results may differ, whether as a result of new information, future events or otherwise.
Introduction
The following discussion and analysis presents management’s view of our business, financial condition and overall performance and should be read in conjunction with our Consolidated Financial Statements and the accompanying notes. This information is intended to provide investors with an understanding of our past performance, current financial condition and outlook for the future. Our discussion and analysis includes the following subjects:
Results of Operations
Overview of Business
Cheniere, a Delaware corporation, is a Houston-based energy infrastructure company primarily engaged in LNG-related businesses. 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. We own and operate the Sabine Pass LNG terminal in Louisiana, one of the largest LNG production facilities in the world, through our ownership interest in and management agreements with Cheniere Partners, which is a publicly traded limited partnership that we created in 2007. As of June 30, 2020,2021, we owned 100% of the general partner interest and 48.6% of the limited partner interest in Cheniere Partners. We also own and operate the Corpus Christi LNG terminal in Texas, which is wholly owned by us.
TheCheniere Partners owns the Sabine Pass LNG terminal is located in Cameron Parish, Louisiana, on the Sabine-Neches Waterway less than four miles from the Gulf Coast. Cheniere Partners, through its subsidiary SPL, is currently operatingwhich has natural gas liquefaction facilities consisting of five operational natural gas liquefaction Trains and is constructing one additional Train under construction that is expected to be substantially completed in the first half of 2022, for a total production capacity of approximately 30 mtpa of LNG (the “SPL Project”) at the Sabine Pass LNG terminal.. The Sabine Pass LNG terminal also has operational regasification facilities owned by Cheniere Partners’ subsidiary, SPLNG, that include pre-existing infrastructure of five LNG storage tanks with aggregate capacity of approximately 17 Bcfe, two existing marine berths and one under construction that can each accommodate vessels with nominal capacity of up to 266,000 cubic meters and vaporizers with regasification capacity of approximately 4 Bcf/d. Cheniere Partners also owns a 94-mile pipeline through its subsidiary, CTPL, that interconnects the Sabine Pass LNG terminal with a number of large interstate pipelines.
We also own the Corpus Christi LNG terminal near Corpus Christi, Texas, and are currently operating twooperate three Trains and one additional Train is undergoing commissioning for a total production capacity of approximately 15 mtpa of LNG. Additionally, we are operatingoperate a 23-mile natural gas supply pipeline that interconnects the Corpus Christi LNG terminal with several interstate and intrastate natural gas pipelines (the “Corpus Christi Pipeline” and together with the Trains, the “CCL Project”) through our subsidiaries CCL and CCP, respectively.respectively, as part of the CCH Group. The CCL Project once fully constructed, will containalso contains three LNG storage tanks with
aggregate capacity of approximately 10 Bcfe and two marine berths that can each accommodate vessels with nominal capacity of up to 266,000 cubic meters.
We have contracted approximately 85% of the total production capacity from the SPL Project and the CCL Project (collectively, the “Liquefaction Projects”) on a term basis.basis, with approximately 17 years of weighted average remaining life as of June 30, 2021. This includes volumes contracted under SPAs in which the customers are required to pay a fixed fee with respect to the contracted volumes irrespective of their election to cancel or suspend deliveries of LNG cargoes, as well as a portion of volumes contracted under integrated production marketing (“IPM”) gas supply agreements.
Additionally, separate from the CCH Group, we are developing an expansion of the Corpus Christi LNG terminal adjacent to the CCL Project (“Corpus Christi Stage 3”) through our subsidiary CCL Stage III for up to seven midscale Trains with an expected total production capacity of approximately 10 mtpa of LNG. We received approval from FERC in November 2019 to site, construct and operate the expansion project. CCL Stage III has entered into various IPM gas supply agreements.
We remain focused on operational excellence and customer satisfaction. Increasing demand offor LNG has allowed us to expand our liquefaction infrastructure in a financially disciplined manner. We have increased available liquefaction capacity at our Liquefaction Projects as a result of debottlenecking and other optimization projects. We hold significant land positions at both the Sabine Pass LNG terminal and the Corpus Christi LNG terminal which provide opportunity for further liquefaction capacity expansion. The development of these sites 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 can make a final investment decision (“FID”).
Additionally, we are committed to the responsible and proactive management of our most important environmental, social and governance (“ESG”) impacts, risks and opportunities. We published our 2020 Corporate Responsibility (“CR”) report, which details our strategy and progress on ESG issues, as well as our efforts on integrating climate considerations into our business strategy and taking a leadership position on increased environmental transparency, including conducting a climate scenario analysis and our plan to provide LNG customers with Cargo Emission Tags. Our CR report is available at cheniere.com/IMPACT.
Overview of Significant Events
Our significant events since January 1, 20202021 and through the filing date of this Form 10-Q include the following:
Strategic
•In April 2020, Midship Pipeline Company, LLC, in which we haveJuly 2021, CCL Stage III entered into an equity investment, placed into service the MidshipIPM gas supply agreement with Tourmaline Oil Marketing Corp. to purchase 140,000 MMBtu per day of natural gas pipelineat a price based on the Platts Japan Korea Marker (“JKM”), for a term of approximately 15 years beginning in early 2023.
•On July 1, 2021, the board of directors of the Company (the “Board”) appointed Mses. Patricia K. Collawn and related compressionLorraine Mitchelmore to serve as members of the Board. Ms. Collawn was appointed to the Audit Committee and interconnect facilities.the Compensation Committee of the Board, and Ms. Mitchelmore was appointed to the Audit Committee and the Governance and Nominating Committee of the Board.
•Our subsidiaries entered into SPAs with multiple counterparties for portfolio volumes aggregating approximately 12 million tonnes of LNG to be delivered between 2021 and 2032.
Operational
•As of July 31, 2020, more than 1,1752021, approximately 1,675 cumulative LNG cargoes totaling over 80approximately 115 million tonnes of LNG have been produced, loaded and exported from the Liquefaction Projects.
•On March 26, 2021, substantial completion of Train 3 of the CCL Project was achieved.
Financial
•We completed the following debtfinancing transactions:
| |
◦ | In June 2020, we entered into the $2.62 billion delayed draw term loan credit agreement (the “Cheniere Term Loan Facility”), which in July 2020 was subsequently increased to $2.695 billion. In July 2020, borrowings under the Cheniere Term Loan Facility were used to (1) redeem the remaining outstanding principal amount of the 11.0% Convertible Senior Secured Notes due 2025 (the “2025 CCH HoldCo II Convertible Senior Notes”), subsequent to the $300 million redemption in March 2020, pursuant to the amended and restated note purchase agreement for the 2025 CCH HoldCo II Convertible Senior Notes which allowed CCH HoldCo II to redeem the outstanding notes with cash at a price of $1,080 per $1,000 principal amount, (2) repurchase $844 million in aggregate principal amount of outstanding 4.875% Convertible Unsecured Notes due 2021 (the “2021 Cheniere Convertible Unsecured Notes”) at individually negotiated prices from a small number of investors and (3) pay the related fees and expenses. The remaining borrowings under the Cheniere Term Loan Facility are expected to be used to repay and/or repurchase a portion of the remaining outstanding principal amount of the 2021 Cheniere Convertible Unsecured Notes and for the payment of related fees and expenses. |
| |
◦ | In May 2020, SPL issued an aggregate principal amount of $2.0 billion of 4.500% Senior Secured Notes due 2030 (the “2030 SPL Senior Notes”). Net proceeds of the offering, along with cash on hand, were used to redeem all of SPL’s outstanding 5.625% Senior Notes due 2021 (the “2021 SPL Senior Notes”). |
| |
◦ | In March 2020, SPL entered into a $1.2 billion Working Capital Revolving Credit and Letter of Credit Reimbursement Agreement (the “2020 SPL Working Capital Facility”), which refinanced its previous working capital facility, reduced the interest rate and extended the maturity date to March 2025. |
◦During 2021, SPL entered into a series of note purchase agreements for the sale of approximately $347 million aggregate principal amount of Senior Secured Notes due 2037 (the “2037 SPL Private Placement Senior Secured Notes”) on a private placement basis. The 2037 SPL Private Placement Senior Secured Notes are expected to be issued in the second half of 2021, subject to customary closing conditions, and the net proceeds will be used to strategically refinance a portion of SPL’s outstanding 6.25% SPL Senior Secured
Notes due 2022 and pay related fees, costs and expenses. The 2037 SPL Private Placement Senior Secured Notes will be fully amortizing, with a weighted average life of over 10 years.
◦In March 2021, Cheniere Partners issued an aggregate principal amount of approximately $1.5 billion of 4.000% Senior Notes due 2031 (the “2031 CQP Senior Notes”). The net proceeds of the 2031 CQP Senior Notes, along with cash on hand, were used to refinance the 5.250% Senior Notes due 2025 (the “2025 CQP Senior Notes”) and to pay fees and expenses in connection with the refinancing.
•During the six months ended June 30, 2021, in line with our previously announced capital allocation priorities, we fully repaid the $624 million of total outstanding indebtedness under Cheniere’s term loan facility (“Cheniere Term Loan Facility”) and Cheniere’s 4.875% convertible notes due May 2020,2021 (“2021 Cheniere Convertible Notes”) with $500 million of available cash and the date of first commercial delivery was reachedremainder from borrowings under the 20-year SPAsCheniere Revolving Credit Facility.
•In January 2021, the term commenced on Cheniere Marketing International LLP’s 25 year SPA with PT Pertamina (Persero), Naturgy LNG GOM, Limited, Woodside Energy Trading Singapore Pte Ltd, Iberdrola, S.A. and Électricité de France, S.A. relating to Train 2CPC Corporation, Taiwan.
•In February 2021, Fitch Ratings (“Fitch”) changed the outlook of the CCL Project.
In August 2020, Moody’s Investors Service upgraded its rating of CCH’sSPL’s senior secured debtnotes rating to positive from Ba1 (Positive Outlook)stable and the outlook of Cheniere Partners’ long-term issuer default rating and senior unsecured notes rating to Baa3.
Impact of COVID-19 and Market Environment
positive from stable.
•In April 2021, S&P Global Ratings changed the outlook of Cheniere and Cheniere Partners’ ratings to positive from negative.
Results of Operations
The business environment in which we operate has been impacted byfollowing charts summarize the recent downturn in the energy market as well as the outbreak of COVID-19total revenues and its progression into a pandemic in March 2020. As a result of these developments,total LNG volumes loaded from our growth estimates for LNG in 2020 have moderated from previous expectations. Annual LNG demand grew by approximately 13% in 2019 to approximately 360 mtpa. In a report published in the month of April 2020, IHS Markit projected LNG demand in 2020 to reach 363 mtpa, down from a pre-COVID-19 estimate of approximately 377 mtpa. This implies a year-over-year rate of growth of below 1% in 2020 compared to an implied pre-COVID-19 year-over-year growth estimate of approximately 5%. While worldwide demand increased by approximately 5%Liquefaction Projects (including both operational and commissioning volumes) during the six months ended June 30, 2020 compared2021 and 2020:
The following table summarizes the volumes of operational and commissioning LNG cargoes that were loaded from the Liquefaction Projects, which were recognized on our Consolidated Financial Statements during the three and six months ended June 30, 2021:
| | | | | | | | | | | | | | | | | | | | | | | |
| Three Months Ended June 30, 2021 | | Six Months Ended June 30, 2021 |
(in TBtu) | Operational | | Commissioning | | Operational | | Commissioning |
Volumes loaded during the current period | 499 | | | — | | | 947 | | | 28 | |
Volumes loaded during the prior period but recognized during the current period | 32 | | | 6 | | | 26 | | | 3 | |
Less: volumes loaded during the current period and in transit at the end of the period | (23) | | | — | | | (23) | | | — | |
Total volumes recognized in the current period | 508 | | | 6 | | | 950 | | | 31 | |
Net income attributable to common stockholders
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Three Months Ended June 30, | | Six Months Ended June 30, |
(in millions, except per share data) | 2021 | | 2020 | | Change | | 2021 | | 2020 | | Change | | | | |
Net income (loss) attributable to common stockholders | $ | (329) | | | $ | 197 | | | $ | (526) | | | $ | 64 | | | $ | 572 | | | $ | (508) | | | | | |
Net income (loss) per share attributable to common stockholders—basic | (1.30) | | | 0.78 | | | (2.08) | | | 0.25 | | | 2.27 | | | (2.02) | | | | | |
Net income (loss) per share attributable to common stockholders—diluted | (1.30) | | | 0.78 | | | (2.08) | | | 0.25 | | | 2.26 | | | (2.01) | | | | | |
Net income attributable to common stockholders decreased by $526 million and $508 million during the three and six months ended June 30, 2021, respectively, from the comparable periodperiods in 2020, primarily as a result of 2019, we expecta $472 million and $886 million increase in derivative-related after-tax losses attributable to potentially see year-over-year declines in some futurecommon stockholders for the three and six months as reduced economic activity affects LNG demand and high storage inventory levels reduce the need for imports.ended June 30, 2021, respectively. The robust LNG supply additions over the past several years, along with warmer winters and now strict virus containment measures, have exerted downward pressure on global gas prices. As an example, the Dutch Title Transfer Facility (“TTF”), a virtual trading point for natural gasderivative-related losses in the Netherlands, averaged $1.76three and six months ended June 30, 2021 were mainly the result of $674 million and $748 million, respectively, of pre-tax derivative losses, primarily on our commodity derivatives as a result of unfavorable shifts in international forward commodity curves. Additionally, during the three months ended June 30, 2020, 60% lower than2021 compared to the comparable period of 2019, whilein 2020, margins declined due to the Japan Korean Marker (“JKM”), an LNG benchmark price assessment for spot physical cargoes delivered ex-ship into certain key markets in Asia, averaged $2.68non-recurrence, during the three months ended June 30, 2020, 50% lower than the comparable period2021, of 2019. As a result of the weaker LNG market environment, as well as customer-specific variables, we have recently experienced an increase in the number ofaccelerated revenues recognized from LNG cargoes for which customers have notified us that they willwould not take delivery, which were partially offset by increased revenue on increased volume of LNG delivered. During the six months ended June 30, 2021, the decrease in net income attributable to common stockholders due to losses in derivatives was partially offset by increased commodity margins per MMBtu on volumes delivered, due to both increased revenue per MMBtu and volumes delivered, as well as higher than normal contributions from LNG and natural gas portfolio optimization activities due to significant volatility in LNG and natural gas markets during the six months ended June 30, 2021. This was partially offset by the non-recurrence, during the six months ended June 30, 2021, of accelerated revenues recognized from LNG cargoes for which customers notified us that they would not take delivery. While this may impact
We enter into derivative instruments to manage our expected LNG production, we do not expect itexposure to have a material adverse impact(1) changing interest rates, (2) commodity-related marketing and price risks, including those associated with our IPM transactions, and (3) foreign exchange volatility. Derivative instruments are reported at fair value on our forecasted financialConsolidated Financial Statements. In some cases, the underlying transactions being economically hedged are accounted for under the accrual method of accounting, whereby revenues and expenses are recognized only upon delivery, receipt or realization of the underlying transaction. Because the recognition of derivative instruments at fair value has the effect of recognizing gains or losses relating to future period exposure, use of derivative instruments may increase the volatility of our results forof operations based on changes in market pricing, counterparty credit risk and other relevant factors.
Revenues
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Three Months Ended June 30, | | Six Months Ended June 30, |
(in millions) | 2021 | | 2020 | | Change | | 2021 | | 2020 | | Change | | | | |
LNG revenues | $ | 2,913 | | | $ | 2,295 | | | $ | 618 | | | $ | 5,912 | | | $ | 4,863 | | | $ | 1,049 | | | | | |
Regasification revenues | 67 | | | 68 | | | (1) | | | 134 | | | 135 | | | (1) | | | | | |
Other revenues | 37 | | | 39 | | | (2) | | | 61 | | | 113 | | | (52) | | | | | |
| | | | | | | | | | | | | | | |
Total revenues | $ | 3,017 | | | $ | 2,402 | | | $ | 615 | | | $ | 6,107 | | | $ | 5,111 | | | $ | 996 | | | | | |
Total revenues increased during the three and six months ended June 30, 2021 from the comparable periods in 2020, primarily as a result of increased revenues per MMBtu and higher volume of LNG delivered between the periods due to the highly contracted naturenon-recurrence of notification by our businesscustomers to not take delivery of scheduled LNG during the three and the factsix months ended June 30, 2021. Revenues per MMBtu of LNG was higher due to improved market prices recognized by our integrated marketing function and as a result of variable fees that customers continueare received in addition to be obligated to pay fixed fees for cargoes in relationwhen the customers take delivery of the cargo as opposed to which they have exercisedexercising their contractual right to cancel. As such, duringnot take delivery. During the three and six months ended June 30, 2020, we recognized $708 million and $761 million, respectively, in LNG revenues associated with LNG cargoes for which customers have notified us that they willwould not take delivery, of which $458 million would have otherwise been recognized subsequent to June 30, 2020 had the cargoes been lifted pursuant to the delivery schedules with the customers. LNG revenues during the three months ended June 30, 2020 and six months ended June 30, 2021 excluded $53 million and $38 million, respectively, that would have otherwise been recognized during the quarter if the cargoes were lifted pursuant to the delivery schedules with the customers.
In addition, in responsecustomers. We did not have revenues associated with LNG cargoes for which customers notified us that they would not take delivery during the three and six months ended June 30, 2021.
Prior to substantial completion of a Train, amounts received from the sale of commissioning cargoes from that Train are offset against LNG terminal construction-in-process, because these amounts are earned or loaded during the testing phase for the construction of that Train. During the three and six months ended June 30, 2021, we realized offsets to LNG terminal costs of $36 million and $227 million, corresponding to 6 and 31 TBtu, respectively, that were related to the COVID-19 pandemic, we have modifiedsale of commissioning cargoes from the Liquefaction Projects. We did not realize any offsets to LNG terminal costs during the three and six months ended June 30, 2020.
Also included in LNG revenues are sales of certain businessunutilized natural gas procured for the liquefaction process and workforce practicesgains and losses from derivative instruments, which include the realized value associated with a portion of derivative instruments that settle through physical delivery. We recognized revenues (offsets to protectrevenues) of $(340) million and $61 million during the safetythree months ended June 30, 2021 and welfare2020, respectively, and $(276) million and $273 million during the six months ended June 30, 2021 and 2020, respectively, related to these transactions.
We expect our LNG revenues to increase in the future with Train 3 of our employees who continuethe CCL Project now fully operational and upon Train 6 of the SPL Project becoming operational.
The following table presents the components of LNG revenues and the corresponding LNG volumes sold:
| | | | | | | | | | | | | | | | | | | | | | | | | |
| Three Months Ended June 30, | | Six Months Ended June 30, |
| 2021 | | 2020 | | 2021 | | 2020 | | |
LNG revenues (in millions): | | | | | | | | | |
LNG from the Liquefaction Projects sold under third party long-term agreements (1) | $ | 2,482 | | | $ | 1,244 | | | $ | 4,801 | | | $ | 3,151 | | | |
LNG from the Liquefaction Projects sold by our integrated marketing function under short-term agreements | 683 | | | 150 | | | 1,202 | | | 475 | | | |
LNG procured from third parties | 88 | | | 132 | | | 185 | | | 203 | | | |
LNG revenues associated with cargoes not delivered per customer notification (2) | — | | | 708 | | | — | | | 761 | | | |
Other revenues and net derivative gains (losses) | (340) | | | 61 | | | (276) | | | 273 | | | |
Total LNG revenues | $ | 2,913 | | | $ | 2,295 | | | $ | 5,912 | | | $ | 4,863 | | | |
| | | | | | | | | |
Volumes delivered as LNG revenues (in TBtu): | | | | | | | | | |
LNG from the Liquefaction Projects sold under third party long-term agreements (1) | 403 | | | 253 | | | 784 | | | 619 | | | |
LNG from the Liquefaction Projects sold by our integrated marketing function under short-term agreements | 105 | | | 52 | | | 166 | | | 145 | | | |
LNG procured from third parties | 14 | | | 34 | | | 28 | | | 48 | | | |
Total volumes delivered as LNG revenues | 522 | | | 339 | | | 978 | | | 812 | | | |
| | | | | | | | | |
| | | | | | | | | |
(1) Long-term agreements include agreements with an initial tenure of 12 months or more.
(2) LNG revenues include revenues with no corresponding volumes due to work at our facilitiesrevenues attributable to LNG cargoes for which customers notified us that they would not take delivery.
Operating costs and offices worldwide,expenses
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Three Months Ended June 30, | | Six Months Ended June 30, |
(in millions) | 2021 | | 2020 | | Change | | 2021 | | 2020 | | Change | | | | |
Cost of sales | $ | 2,154 | | | $ | 803 | | | $ | 1,351 | | | $ | 3,540 | | | $ | 1,527 | | | $ | 2,013 | | | | | |
| | | | | | | | | | | | | | | |
Operating and maintenance expense | 385 | | | 355 | | | 30 | | | 707 | | | 671 | | | 36 | | | | | |
Development expense | 2 | | | 1 | | | 1 | | | 3 | | | 5 | | | (2) | | | | | |
Selling, general and administrative expense | 73 | | | 73 | | | — | | | 154 | | | 154 | | | — | | | | | |
Depreciation and amortization expense | 258 | | | 233 | | | 25 | | | 494 | | | 466 | | | 28 | | | | | |
| | | | | | | | | | | | | | | |
Impairment expense and loss (gain) on disposal of assets | (1) | | | — | | | (1) | | | (1) | | | 5 | | | (6) | | | | | |
| | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | |
Total operating costs and expenses | $ | 2,871 | | | $ | 1,465 | | | $ | 1,406 | | | $ | 4,897 | | | $ | 2,828 | | | $ | 2,069 | | | | | |
| | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | |
Our total operating costs and expenses increased during the three and six months ended June 30, 2021 from the comparable periods in 2020, primarily as a result of increased cost of sales.
Cost of sales includes costs incurred directly for the production and delivery of LNG from the Liquefaction Projects, to the extent those costs are not utilized for the commissioning process. Cost of sales increased during the three and six months ended June 30, 2021 from the comparable 2020 periods, primarily due to increased pricing of natural gas feedstock and increased volume of LNG produced, as well as implemented certain mitigation effortsunfavorable changes in our commodity derivatives to ensure business continuity. In March 2020, we began consulting with a medical advisor, and implemented social distancing through revised shift schedules, work from home policies and designated remote work locations where appropriate, restricted non-essential business travel and began requiring self-screeningsecure natural gas feedstock for employees and contractors. In April 2020, we began providing temporary housing for our workforce for our facilities, implemented temperature testing, incorporated medical and social workers to support employees, enforced prior self-isolation and screening for temporary housing and implemented marine operations with zero contact during loading activities. These measures have resultedthe Liquefaction Projects driven by unfavorable shifts in increased costs. While response measures continue to evolve andinternational forward commodity curves. Partially offsetting these increases were decreases in certain cases moderate, we expect to incur incremental operatingnet costs associated with business continuitythe sale of certain unutilized natural gas procured for the liquefaction process and protectiona portion of derivative instruments that settle through physical delivery. Cost of sales also includes port and canal fees, variable transportation and storage costs, net of margins from the sale of natural gas procured for the liquefaction process and other costs to convert natural gas into LNG.
We expect our workforce untiloperating costs and expenses to generally increase in the risksfuture upon Train 6 of the SPL Project achieving substantial completion, although we expect certain costs will not proportionally increase with the number of operational Trains as cost efficiencies will be realized.
Other expense (income)
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Three Months Ended June 30, | | Six Months Ended June 30, |
(in millions) | 2021 | | 2020 | | Change | | 2021 | | 2020 | | Change | | | | |
Interest expense, net of capitalized interest | $ | 368 | | | $ | 407 | | | $ | (39) | | | $ | 724 | | | $ | 819 | | | $ | (95) | | | | | |
Loss on modification or extinguishment of debt | 4 | | | 43 | | | (39) | | | 59 | | | 44 | | | 15 | | | | | |
Interest rate derivative loss, net | 2 | | | 25 | | | (23) | | | 1 | | | 233 | | | (232) | | | | | |
Other income, net | (4) | | | (5) | | | 1 | | | (10) | | | (14) | | | 4 | | | | | |
Total other expense | $ | 370 | | | $ | 470 | | | $ | (100) | | | $ | 774 | | | $ | 1,082 | | | $ | (308) | | | | | |
Interest expense, net of capitalized interest, decreased during the three and six months ended June 30, 2021 from the comparable 2020 periods as a result of lower interest costs as a result of refinancing higher cost debt. During the three months ended June 30, 2021 and 2020, we incurred $401 million and $469 million of total interest cost, respectively, of which we capitalized $33 million and $62 million, respectively, which was primarily related to interest costs incurred for the construction of the Liquefaction Projects. During the six months ended June 30, 2021 and 2020, we incurred $818 million and $940 million of total interest cost, respectively, of which we capitalized $94 million and $121 million, respectively, which was primarily related to interest costs incurred for the construction of the Liquefaction Projects.
Loss on modification or extinguishment of debt decreased during the three months ended June 30, 2021 and increased during the six months ended June 30, 2021 from the respective comparable periods in 2020. During the three months ended June 30, 2021, we recognized $4 million of debt extinguishment costs relating to the termination of the Cheniere Term Loan Facility and in the six months ended June 30, 2021, we further recognized $54 million of debt extinguishment costs relating to the payment of early redemption fees and premiums and write off of unamortized debt issuance costs with the redemption of the 2025 CQP Senior Notes. Loss on modification or extinguishment of debt recognized in 2020 was primarily attributable to $43 million of debt extinguishment costs relating to the payment of early redemption fees and write off of unamortized debt premiums and issuance costs associated with the pandemic diminish. As5.625% Senior Secured Notes due 2021 (“2021 SPL Senior Notes”).
Interest rate derivative loss, net decreased during the three and six months ended June 30, 2021 compared to the comparable 2020 periods, primarily due to a favorable shift in the long-term forward LIBOR curve between the periods and the settlement of certain outstanding derivatives in August 2020.
Income tax provision (benefit)
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Three Months Ended June 30, | | Six Months Ended June 30, |
(in millions) | 2021 | | 2020 | | Change | | 2021 | | 2020 | | Change | | | | |
Income (loss) before income taxes and non-controlling interest | $ | (224) | | | $ | 467 | | | $ | (691) | | | $ | 436 | | | $ | 1,201 | | | $ | (765) | | | | | |
Income tax provision (benefit) | (93) | | | 63 | | | (156) | | | (4) | | | 194 | | | (198) | | | | | |
Effective tax rate | 41.5 | % | | 13.5 | % | | | | (0.9) | % | | 16.2 | % | | | | | | |
The effective tax rates for the three and six months ended June 30, 2021 were 41.5% and (0.9)%, respectively, and do not bear a customary relationship to statutory income tax rates due to a combination of factors including income allocated to non-controlling interest that is not taxable to Cheniere and a $58 million discrete tax benefit related to releasing a portion of our valuation allowance caused by a change in tax law allowing for indefinite Louisiana net operating loss (“NOL”) carryover. The effective tax rates for the three and six months ended June 30, 2020 we have incurred approximately $62were 13.5% and 16.2%, respectively, which were lower than the 21% federal statutory tax rate primarily due to income allocated to non-controlling interest that is not taxable to Cheniere, partially offset by a $38 million discrete tax expense related to an internal restructuring. Our effective tax rate may continue to experience volatility prospectively due to variability in our pre-tax and taxable earnings and the proportion of such costs.earnings attributable to non-controlling interests.
Net income attributable to non-controlling interest | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Three Months Ended June 30, | | Six Months Ended June 30, |
(in millions) | 2021 | | 2020 | | Change | | 2021 | | 2020 | | Change | | | | |
Net income attributable to non-controlling interest | $ | 198 | | | $ | 207 | | | $ | (9) | | | $ | 376 | | | $ | 435 | | | $ | (59) | | | | | |
Net income attributable to non-controlling interest decreased during the three and six months ended June 30, 2021 from the three and six months ended June 30, 2020 primarily due to a decrease in consolidated net income recognized by Cheniere Partners, which decreased from $406 million in the three months ended June 30, 2020 to $395 million in the three months ended June 30, 2021 and decreased from $841 million in the six months ended June 30, 2020 to $742 million in the six months ended June 30, 2021.
Liquidity and Capital Resources
Although results are consolidated for financial reporting, SPL, Cheniere Partners, CCH Group and Cheniere operate with independent capital structures. Our capital requirements include capital and investment expenditures, repayment of long-term debt and repurchase of our shares. We expect the cash needs for at least the next twelve months will be met for each of these independent capital structures as follows:
•SPL through operating cash flows, project debt and borrowings operating cash flows and equity contributions from Cheniere Partners;
•Cheniere Partners through operating cash flows from SPLNG, SPL and CTPL, and debt or equity offerings;offerings and borrowings;
•CCH Group through operating cash flows from CCL and CCP, project debt and borrowings and equity contributions from Cheniere; and
•Cheniere through existing unrestricted cash, debt and equity offerings by us or our subsidiaries, operating cash flows, borrowings, services fees from our subsidiaries and distributions from our investment in Cheniere Partners.
The following table provides a summary of our liquidity position at June 30, 20202021 and December 31, 20192020 (in millions):
|
| | | | | | | |
| June 30, | | December 31, |
| 2020 | | 2019 |
Cash and cash equivalents (1) | $ | 2,039 |
| | $ | 2,474 |
|
Restricted cash designated for the following purposes: | | | |
SPL Project | 167 |
| | 181 |
|
CCL Project | 101 |
| | 80 |
|
Other | 237 |
| | 259 |
|
Available commitments under the following credit facilities: | | | |
$1.2 billion Amended and Restated SPL Working Capital Facility (“2015 SPL Working Capital Facility”) | — |
| | 786 |
|
2020 SPL Working Capital Facility | 791 |
| | — |
|
CQP Credit Facilities executed in 2019 (“2019 CQP Credit Facilities”) | 750 |
| | 750 |
|
$1.2 billion CCH Working Capital Facility (“CCH Working Capital Facility”) | 667 |
| | 729 |
|
$1.25 billion Cheniere Revolving Credit Facility (“Cheniere Revolving Credit Facility”) | 562 |
| | 665 |
|
Cheniere Term Loan Facility (2) | 2,620 |
| | — |
|
| | | | | | | | | | | |
| |
| June 30, | | December 31, |
| 2021 | | 2020 |
Cash and cash equivalents (1) | $ | 1,806 | | | $ | 1,628 | |
Restricted cash designated for the following purposes: | | | |
| | | |
SPL Project | 65 | | | 97 | |
| | | |
| | | |
CCL Project | 122 | | | 70 | |
Other | 237 | | | 282 | |
Available commitments under the following credit facilities: | | | |
| | | |
$1.2 billion Working Capital Revolving Credit and Letter of Credit Reimbursement Agreement (the “2020 SPL Working Capital Facility”) | 804 | | | 787 | |
CQP Credit Facilities executed in 2019 (“2019 CQP Credit Facilities”) | 750 | | | 750 | |
| | | |
| | | |
$1.2 billion CCH Working Capital Facility (“CCH Working Capital Facility”) | 907 | | | 767 | |
$1.25 billion Cheniere Revolving Credit Facility (“Cheniere Revolving Credit Facility”) | 1,116 | | | 1,126 | |
Cheniere Term Loan Facility | — | | | 372 | |
| |
(1) | Amounts presented include balances held by our consolidated variable interest entity (“VIE”), Cheniere Partners, as discussed in Note 8—Non-controlling Interest and Variable Interest Entity of our Notes to Consolidated Financial Statements. As of June 30, 2020 and December 31, 2019, assets of Cheniere Partners, which are included in our Consolidated Balance Sheets, included $1.3 billion and $1.8 billion, respectively, of cash and cash equivalents. |
| |
(2) | In July 2020, we received incremental commitments of $75 million and borrowed $2,323 million under the Cheniere Term Loan Facility, which reduced the available commitment to $372 million following these transactions. |
For additional information regarding(1) Amounts presented include balances held by our debt agreements, seeconsolidated variable interest entity (“VIE”), Cheniere Partners, as discussed in Note 10—Debt8—Non-controlling Interest and Variable Interest Entity of our Notes to Consolidated Financial Statements in this quarterly reportStatements. As of both June 30, 2021 and Note 11—DebtDecember 31, 2020, assets of our Notes to Consolidated Financial StatementsCheniere Partners, which are included in our annual report on Form 10-K for the fiscal year ended December 31, 2019.Consolidated Balance Sheets, included $1.2 billion of cash and cash equivalents.
Sabine Pass LNG Terminal
Liquefaction Facilities
The SPL Project is one of the largest LNG production facilities in the world. Through Cheniere Partners, we are currently operating five Trains and two marine berths at the SPL Project. We have received authorization fromProject, and are constructing one additional Train that is expected to be substantially completed in the FERC to site, constructfirst half of 2022, and operate Trains 1 through 6, as well as for the construction of a third marine berth. We have achieved substantial completion of the first five Trains of the SPL Project and commenced commercial operating activities for each Train at various times starting in May 2016. The following table summarizes the project completion and construction status of Train 6 of the SPL Project as of June 30, 2020:
|
| | | | | | | | | | |
| | SPL Train 6 |
Overall project completion percentage | | 63.9%89.6% |
Completion percentage of: | |
|
Engineering | | 96.5%99.7% |
Procurement | | 91.1%99.9% |
Subcontract work | | 44.3%70.2% |
Construction | | 25.3%79.3% |
Date of expected substantial completion | | 2H1H 2022 |
The followingDOE has issued three orders have been issued by the DOE authorizing the export of domestically produced LNG by vessel from the Sabine Pass LNG terminal:
Trains 1 through 4—FTA countries for a 30-year term, which commenced in May 2016, and non-FTA countries for a 20-year term, which commenced in June 2016, in an amount up to a combined total of the equivalent of 16 mtpa (approximately 803 Bcf/yr of natural gas).
Trains 1 through 4—FTA countries for a 25-year term and non-FTA countries for a 20-year term, both of which commenced in December 2018, in an amount up to a combined total of the equivalent of approximately 203 Bcf/yr of natural gas (approximately 4 mtpa).
Trains 5 and 6—FTA countries and non-FTA countries for a 20-year term, which partially commenced in June 2019 and the remainder commenced in September 2019, in an amount up to a combined total of 503.3 Bcf/yr of natural gas (approximately 10 mtpa).
In each case, the terms of these authorizations began on the earlier of the date of first export thereunder or the date specified in the particular order. In addition, SPL received an order providing for a three-year makeup period with respect to each of the non-FTA orders for LNG volumes SPL was authorized but unable to export during any portion of the initial 20-year export period of such order.
The DOE issued an order authorizing SPL to export domestically produced LNG by vessel from the Sabine Pass LNG terminal to FTA countries and non-FTA countries over a two-year period commencing January 2020, in an aggregate amountthrough December 31, 2050, up to thea combined total equivalent of 600 Bcfapproximately 1,509.3 Bcf/yr (approximately 30 mtpa) of natural gas (however, exports under this order, when combined with exports undergas.
In December 2020, the orders above, may not exceed 1,509 Bcf/yr).DOE announced a new policy in which it would no longer issue short-term export authorizations separately from long-term authorizations. Accordingly, the DOE amended each of SPL’s long-term authorizations to include short-term export authority, and vacated the short-term orders.
An application was filed in September 2019 seeking authorization to make additional exports from the SPL Project to FTA countries for a 25-year term and to non-FTA countries for a 20-year term in an amount up to the equivalent of approximately 153 Bcf/yr of natural gas, for a total SPL Project export capacity of approximately 1,662 Bcf/yr. The terms of the authorizations are requested to commence on the date of first commercial export from the SPL Project of the volumes contemplated in the application. In April 2020, the DOE issued an order authorizing SPL to export to FTA countries related to this application, for which the term was subsequently extended through December 31, 2050, but has not yet issued an order authorizing SPL to export to non-FTA countries for the corresponding LNG volume. A corresponding application for
authorization to increase the total LNG production capacity of the SPL Project from the currently authorized level to approximately 1,662 Bcf/yr was also submitted to the FERC and is currently pending.
Customers
SPL has entered into fixed price long-term SPAs generally with terms of 20 years (plus extension rights) and with eight third partiesa weighted average remaining contract length of approximately 17 years (plus extension rights) for Trains 1 through 6 of the SPL Project. Under these SPAs, the customers will purchase LNG from SPL on a free on board (“FOB”) basis for a price consisting of a fixed fee per MMBtu of LNG (a portion of which is subject to annual adjustment for inflation) plus a variable fee per MMBtu of LNG generally equal to approximately 115% of Henry Hub. The customers may elect to cancel or suspend deliveries of LNG cargoes, with advance notice as governed by each respective SPA, in which case the customers would still be required to pay the fixed fee with respect to the contracted volumes that are not delivered as a result of such cancellation or suspension. We refer to the fee component that is applicable regardless of a cancellation or suspension of LNG cargo deliveries under the SPAs as the fixed fee component of the price under SPL’s SPAs. We refer to the fee component that is applicable only in connection with LNG cargo deliveries as the variable fee component of the price under SPL’s SPAs. The variable fees under SPL’s SPAs were generally sized at the time of entry into each SPA with the intent to cover the costs of gas purchases and transportation and liquefaction fuel to produce the LNG to be sold under each such SPA. The SPAs and contracted volumes to be made available under the SPAs are not tied to a specific Train; however, the term of each SPA generally commences upon the date of first commercial delivery of a specified Train.
In aggregate, the annual fixed fee portion to be paid by the third-party SPA customers is approximately $2.9 billion for Trains 1 through 5. After giving effect to an SPA that Cheniere has committed to provide to SPL byand upon the enddate of 2020,first commercial delivery of Train 6, the annual fixed fee portion to be paid by the third-party SPA customers wouldis expected to increase to at least $3.3 billion, which is expected to occur upon the date of first commercial delivery of Train 6.billion.
In addition, Cheniere Marketing has an agreement with SPL to purchase, at Cheniere Marketing’s option, any LNG produced by SPL in excess of that required for other customers. See Marketing section for additional information regarding agreements entered into by Cheniere Marketing.
Natural Gas Transportation, Storage and Supply
To ensure SPL is able to transport adequate natural gas feedstock to the Sabine Pass LNG terminal, it has entered into transportation precedent and other agreements to secure firm pipeline transportation capacity with CTPL and third-party pipeline companies. SPL has entered into firm storage services agreements with third parties to assist in managing variability in natural gas needs for the SPL Project. SPL has also entered into enabling agreements and long-term natural gas supply contracts with third parties in order to secure natural gas feedstock for the SPL Project. As of June 30, 2020,2021, SPL had secured up to approximately 4,8555,025 TBtu of natural gas feedstock through long-term and short-term natural gas supply contracts with remaining terms that range up to 910 years, a portion of which is subject to conditions precedent.
Construction
SPL entered into lump sum turnkey contracts with Bechtel Oil, Gas and Chemicals, Inc. (“Bechtel”) for the engineering, procurement and construction of Trains 1 through 6 of the SPL Project, under which Bechtel charges a lump sum for all work performed and generally bears project cost, schedule and performance risks unless certain specified events occur, in which case Bechtel may cause SPL to enter into a change order, or SPL agrees with Bechtel to a change order.
The total contract price of the EPC contract for Train 6 of the SPL Project is approximately $2.5 billion, including estimated costs for the third marine berth that is currently under construction. As of June 30, 2020,2021, we have incurred $1.6$2.1 billion under this contract.
Regasification Facilities
The Sabine Pass LNG terminal has operational regasification capacity of approximately 4 Bcf/d and aggregate LNG storage capacity of approximately 17 Bcfe. Approximately 2 Bcf/d of the regasification capacity at the Sabine Pass LNG terminal has been reserved under two long-term third-party TUAs, under which SPLNG’s customers are required to pay fixed monthly fees, whether or not they use the LNG terminal. Each of Total Gas & Power North America, Inc. (“Total”) and
Chevron U.S.A. Inc. (“Chevron”) has reserved approximately 1 Bcf/d of regasification capacity and is obligated to make monthly capacity payments to SPLNG aggregating approximately $125 million annually, prior to inflation adjustments, for 20 years that commenced in 2009. Total S.A. has guaranteed Total’s obligations under its TUA up to $2.5 billion, subject to certain exceptions, and Chevron Corporation has guaranteed Chevron’s obligations under its TUA up to 80% of the fees payable by Chevron.
The remaining approximately 2 Bcf/d of capacity has been reserved under a TUA by SPL. SPL is obligated to make monthly capacity payments to SPLNG aggregating approximately $250 million annually, prior to inflation adjustments, continuing until at least May 2036. SPL entered into a partial TUA assignment agreement with Total, whereby upon substantial completion of Train 5 of the SPL Project, SPL gained access to substantially all of Total’s capacity and other services provided under Total’s TUA with SPLNG. This agreement provides SPL with additional berthing and storage capacity at the Sabine Pass LNG terminal that may be used to provide increased flexibility in managing LNG cargo loading and unloading activity, permit SPL to more flexibly manage its LNG storage capacity and accommodate the development of Train 6. Notwithstanding any arrangements between Total and SPL, payments required to be made by Total to SPLNG will continue to be made by Total to SPLNG in accordance with its TUA. During each of the three months ended June 30, 20202021 and 2019,2020, SPL recorded $33 million, and $32 million, respectively, and during each of the six months ended June 30, 20202021 and 2019,2020, SPL recorded $65 million, and $40 million, respectively, as operating and maintenance expense under this partial TUA assignment agreement.
Under each of these TUAs, SPLNG is entitled to retain 2% of the LNG delivered to the Sabine Pass LNG terminal.
Capital Resources
We currently expect that SPL’s capital resources requirements with respect to the SPL Project will be financed through project debt and borrowings, cash flows under the SPAs and equity contributions from Cheniere Partners. We believe that with the net proceeds of borrowings, available commitments under the 2020 SPL Working Capital Facility and 2019 CQP Credit Facilities, cash flows from operations and equity contributions from Cheniere Partners, SPL will have adequate financial resources available to meet its currently anticipated capital, operating and debt service requirements with respect to Trains 1 through 6 of the SPL Project. Additionally, SPLNG generates cash flows from the TUAs, as discussed above.
The following table provides a summary of our capital resources from borrowings and available commitments for the Sabine Pass LNG Terminal,terminal, excluding equity contributions to our subsidiaries and cash flows from operations (as described in Sources and Uses of Cash), at June 30, 20202021 and December 31, 20192020 (in millions):
|
| | | | | | | | |
| | June 30, | | December 31, |
| | 2020 | | 2019 |
Senior notes (1) | | $ | 17,750 |
| | $ | 17,750 |
|
Credit facilities outstanding balance (2) | | — |
| | — |
|
Letters of credit issued (3) | | 409 |
| | 414 |
|
Available commitments under credit facilities (3) | | 1,541 |
| | 1,536 |
|
Total capital resources from borrowings and available commitments (4) | | $ | 19,700 |
| | $ | 19,700 |
|
| | | | | | | | | | | | | | |
| | June 30, | | December 31, |
| | |
| | 2021 | | 2020 |
Senior notes (1) | | $ | 17,750 | | | $ | 17,750 | |
| | | | |
Letters of credit issued (2) | | 396 | | | 413 | |
Available commitments under credit facilities (2) | | 1,554 | | | 1,537 | |
Total capital resources from borrowings and available commitments (3) | | $ | 19,700 | | | $ | 19,700 | |
| |
(1) | Includes SPL’s 2021 SPL Senior Notes, 6.25% Senior Secured Notes due 2022, 5.625% Senior Secured Notes due 2023, 5.75% Senior Secured Notes due 2024, 5.625% Senior Secured Notes due 2025, 5.875% Senior Secured Notes due 2026 (the “2026 SPL Senior Notes”), 5.00% Senior Secured Notes due 2027 (the “2027 SPL Senior Notes”), 4.200% Senior Secured Notes due 2028 (the “2028 SPL Senior Notes”), 2030 SPL Senior Notes and 5.00% Senior Secured Notes due 2037 (the “2037 SPL Senior Notes”) (collectively, the “SPL Senior Notes”), as well as Cheniere Partners’ $1.5 billion of 5.250% Senior Notes due 2025 (the “2025 CQP Senior Notes”), $1.1 billion of 5.625% Senior Notes due 2026 (the “2026 CQP Senior Notes”) and the 4.500% Senior Notes due 2029 (the “2029 CQP Senior Notes”) (collectively, the “CQP Senior Notes”). |
| |
(2) | Includes outstanding balances under the 2015 SPL Working Capital Facility, 2020 SPL Working Capital Facility and 2019 CQP Credit Facilities, inclusive of any portion of the 2020 SPL Working Capital Facility and 2019 CQP Credit Facilities that may be used for general corporate purposes. |
| |
(3) | Consists of 2015 SPL Working Capital Facility, 2020 SPL Working Capital Facility and 2019 CQP Credit Facilities. |
| |
(4) | (1) Includes SPL’s 6.25% Senior Secured Notes due 2022, 5.625% Senior Secured Notes due 2023, 5.75% Senior Secured Notes due 2024, 5.625% Senior Secured Notes due 2025, 5.875% Senior Secured Notes due 2026 (the “2026 SPL Senior Notes”), 5.00% Senior Secured Notes due 2027 (the “2027 SPL Senior Notes”), 4.200% Senior Secured Notes due 2028 (the “2028 SPL Senior Notes”), 4.500% Senior Secured Notes due 2030 (the “2030 SPL Senior Notes”) and 5.00% Senior Secured Notes due 2037 (the “2037 SPL Senior Notes”) (collectively, the “SPL Senior Notes”), as well as the 2025 CQP Senior Notes, $1.1 billion of 5.625% Senior Notes due 2026 (the “2026 CQP Senior Notes”), the 4.500% Senior Notes due 2029 (the “2029 CQP Senior Notes”) and the 2031 CQP Senior Notes (collectively, the “CQP Senior Notes”). (2) Consists of 2020 SPL Working Capital Facility and 2019 CQP Credit Facilities. (3) Does not include equity contributions that may be available from Cheniere’s borrowings and available cash and cash equivalents. |
For additional information regarding our debt agreements related to the Sabine Pass LNG Terminal, see Note 10—Debt of our Notes to Consolidated Financial Statements in this quarterly report and Note 11—Debt of our Notes to Consolidated Financial Statements in our annual report on Form 10-K for the fiscal year ended December 31, 2019.
SPL Senior Notes
In May 2020, SPL issued an aggregate principal amount of $2.0 billion of the 2030 SPL Senior Notes. The 2030 SPL Senior Notes accrue interest at a fixed rate of 4.500% per annum, which is payable semi-annually in cash in arrears.
The SPL Senior Notes are governed by a common indenture (the “SPL Indenture”) and the terms of the 2037 SPL Senior Notes are governed by a separate indenture (the “2037 SPL Senior Notes Indenture”). Both the SPL Indenture and the 2037 SPL Senior Notes Indenture contain terms and events of default and certain covenants that, among other things, limit SPL’s ability and the ability of SPL’s restricted subsidiaries to incur additional indebtedness or issue preferred stock, make certain investments or pay dividends or distributions on capital stock or subordinated indebtedness or purchase, redeem or retire capital stock, sell or transfer assets, including capital stock of SPL’s restricted subsidiaries, restrict dividends or other payments by restricted subsidiaries, incur liens, enter into transactions with affiliates, dissolve, liquidate, consolidate, merge, sell or lease all or substantially all of SPL’s assets and enter into certain LNG sales contracts. Subject to permitted liens, the SPL Senior Notes are secured on a pari passu first-priority basis by a security interest in all of the membership interests in SPL and substantially all of SPL’s assets. SPL may not make any distributions until, among other requirements, deposits are made into debt service reserve accounts as required and a debt service coverage ratio test of 1.25:1.00 is satisfied.
At any time prior to three months before the respective dates of maturity for each series of the SPL Senior Notes (except for the 2026 SPL Senior Notes, 2027 SPL Senior Notes, 2028 SPL Senior Notes, 2030 SPL Senior Notes and 2037 SPL Senior Notes, in which case the time period is six months before the respective dates of maturity), SPL may redeem all or part of such series of the SPL Senior Notes at a redemption price equal to the ‘make-whole’ price (except for the 2037 SPL Senior Notes, in which case the redemption price is equal to the “optional redemption” price) set forth in the respective indentures governing the SPL Senior Notes, plus accrued and unpaid interest, if any, to the date of redemption. SPL may also, at any time within three
months of the respective maturity dates for each series of the SPL Senior Notes (except for the 2026 SPL Senior Notes, 2027 SPL Senior Notes, 2028 SPL Senior Notes, 2030 SPL Senior Notes and 2037 SPL Senior Notes, in which case the time period is within six months of the respective dates of maturity), redeem all or part of such series of the SPL Senior Notes at a redemption price equal to 100% of the principal amount of such series of the SPL Senior Notes to be redeemed, plus accrued and unpaid interest, if any, to the date of redemption.
Both the 2037 SPL Senior Notes Indenture and the SPL Indenture include restrictive covenants. SPL may incur additional indebtedness in the future, including by issuing additional notes, and such indebtedness could be at higher interest rates and have different maturity dates and more restrictive covenants than the current outstanding indebtedness of SPL, including the SPL Senior Notes and the 2020 SPL Working Capital Facility. Under the 2037 SPL Senior Notes Indenture and the SPL Indenture, SPL may not make any distributions until, among other requirements, deposits are made into debt service reserve accounts as required and a debt service coverage ratio test of 1.25:1.00 is satisfied. Semi-annual principal payments for the 2037 SPL Senior Notes are due on March 15 and September 15 of each year beginning September 15, 2025 and are fully amortizing according to a fixed sculpted amortization schedule.
In connection with the closing of the 2030 SPL Senior Notes offering,During 2021, SPL entered into a registration rights agreement (the “SPL Registration Rights Agreement”). Underseries of note purchase agreements for the SPL Registration Rights Agreement, SPL and any future guarantorssale of the 2030 SPL Senior Notes, have agreed to file with the SEC and cause to become effective a registration statement relating to an offer to exchange any and all of the 2030 SPL Senior Notes for a likeapproximately $347 million aggregate principal amount of debt securitiesthe 2037 SPL Private Placement Senior Secured Notes on a private placement basis. The 2037 SPL Private Placement Senior Secured Notes are expected to be issued in the second half of SPL with terms identical in all material respects2021, subject to customary closing conditions, and the 2030net proceeds will be used to strategically refinance a portion of SPL’s outstanding 6.25% SPL Senior Secured Notes sought to be exchanged (other than with respect to restrictions on transfer or to any increase in annual interest rate) within 360 days after the notes issuance date of May 8, 2020. Under specified circumstances,due 2022 and pay related fees, costs and expenses. The 2037 SPL has agreed to cause to become effective a shelf registration statement relating to resales of the 2030 SPLPrivate Placement Senior Notes. SPLSecured Notes will be obligated to pay additional interest on the 2030 SPL Senior Notes if it fails to complyfully amortizing, with its obligations to register the 2030 SPL Senior Notes within the specified time period.
a weighted average life of over 10 years.
2015 SPL Working Capital Facility
In March 2020, SPL terminated the remaining commitments under the 2015 SPL Working Capital Facility. As of December 31, 2019, SPL had $786 million of available commitments, $414 million aggregate amount of issued letters of credit and no outstanding borrowings under the 2015 SPL Working Capital Facility.
2020 SPL Working Capital Facility
In March 2020, SPL entered into the 2020 SPL Working Capital Facility with aggregate commitments of $1.2 billion, which replaced the 2015$1.2 billion Amended and Restated SPL Working Capital Facility.Facility (the “2015 SPL Working Capital Facility”). The 2020 SPL Working Capital Facility is intended to be used for loans to SPL, swing line loans to SPL and the issuance of letters of credit on behalf of SPL, primarily for (1) the refinancing of the 2015 SPL Working Capital Facility, (2) fees and expenses related to the 2020 SPL Working Capital Facility, (3) SPL and its future subsidiaries’ gas purchase obligations and (4) SPL and certain of its future subsidiaries’ general corporate purposes. SPL may, from time to time, request increases in the commitments under the 2020 SPL Working Capital Facility of up to $800 million. As of June 30, 2021 and December 31, 2020, SPL had $791$804 million and $787 million of available commitments $409and $396 million and $413 million aggregate amount of issued letters of credit, respectively. As of both June 30, 2021 and December 31, 2020, SPL had no outstanding borrowings under the 2020 SPL Working Capital Facility.
The 2020 SPL Working Capital Facility matures on March 19, 2025, but may be extended with consent of the lenders. The 2020 SPL Working Capital Facility provides for mandatory prepayments under customary circumstances.
The 2020 SPL Working Capital Facility contains customary conditions precedent for extensions of credit, as well as customary affirmative and negative covenants. SPL is restricted from making certain distributions under agreements governing its indebtedness generally until, among other requirements, satisfaction of a 12-month forward-looking and backward-looking 1.25:1.00 debt service reserve ratio test. The obligations of SPL under the 2020 SPL Working Capital Facility are secured by substantially all of the assets of SPL as well as a pledge of all of the membership interests in SPL and certain future subsidiaries of SPL on a pari passu basis by a first priority lien with the SPL Senior Notes.
Cheniere Partners
CQP Senior Notes
The CQP Senior Notes are jointly and severally guaranteed by each of Cheniere Partners’ subsidiaries other than SPL and, subject to certain conditions governing its guarantee, Sabine Pass LP (each a “Guarantor” and collectively, the “CQP Guarantors”). The CQP Senior Notes are governed by the same base indenture (the “CQP Base Indenture”). The 2025 CQP Senior Notes are further governed by the First Supplemental Indenture, the 2026 CQP Senior Notes are further governed by the Second Supplemental Indenture, and the 2029 CQP Senior Notes are further governed by the Third Supplemental Indenture and the 2031 CQP Senior Notes are further governed by the Fifth Supplemental Indenture. The indentures governing the CQP Senior Notes contain terms and events of default and certain covenants that, among other things, limit the ability of Cheniere Partners and the CQP Guarantors to incur liens and sell assets, enter into transactions with affiliates, enter into sale-leaseback transactions and consolidate, merge or sell, lease or otherwise dispose of all or substantially all of the applicable entity’s properties or assets.
At any time prior to October 1, 2020 for the 2025 CQP Senior Notes, October 1, 2021 for the 2026 CQP Senior Notes, and October 1, 2024 for the 2029 CQP Senior Notes and March 1, 2026 for the 2031 CQP Senior Notes, Cheniere Partners may redeem all or a part of the applicable CQP Senior Notes at a redemption price equal to 100% of the aggregate principal amount of the CQP Senior Notes redeemed, plus the “applicable premium” set forth in the respective indentures governing the CQP Senior Notes, plus accrued and unpaid interest, if any, to the date of redemption. In addition, at any time prior to October 1, 2020 for the 2025 CQP Senior Notes, October 1, 2021 for the 2026 CQP Senior Notes, and October 1, 2024 for the 2029 CQP Senior Notes and March 1, 2024 for the 2031 CQP Senior Notes, Cheniere Partners may redeem up to 35% of the aggregate principal amount of the CQP Senior Notes with an amount of cash not greater than the net cash proceeds from certain equity offerings at a redemption price equal to 105.250% of the aggregate principal amount of the 2025 CQP Senior Notes, 105.625% of the aggregate principal amount of the 2026 CQP Senior Notes, and 104.5% of the aggregate principal amount of the 2029 CQP Senior Notes and 104.000% of the aggregate principal amount of the 2031 CQP Senior Notes redeemed, plus accrued and unpaid interest, if any, to the date of redemption. Cheniere Partners also may at any time on or after October 1, 2020 through the maturity date of October 1, 2025 for the 2025 CQP Senior Notes, October 1, 2021 through the maturity date of October 1, 2026 for the 2026 CQP Senior Notes, and October 1, 2024 through the maturity date of October 1, 2029 for the 2029 CQP Senior Notes and March 1, 2026 through the maturity date of March 1, 2031 for the 2031 CQP Senior Notes, redeem the CQP Senior Notes, in whole or in part, at the redemption prices set forth in the respective indentures governing the CQP Senior Notes.
The CQP Senior Notes are Cheniere Partners’ senior obligations, ranking equally in right of payment with Cheniere Partners’ other existing and future unsubordinated debt and senior to any of its future subordinated debt. In the event that the aggregate amount of Cheniere Partners’ secured indebtedness and the secured indebtedness of the CQP Guarantors (other than the CQP Senior Notes or any other series of notes issued under the CQP Base Indenture) outstanding at any one time exceeds the greater of (1) $1.5 billion and (2) 10% of net tangible assets, the CQP Senior Notes will be secured to the same extent as such obligations under the 2019 CQP Credit Facilities. The obligations under the 2019 CQP Credit Facilities are secured on a first-priority basis (subject to permitted encumbrances) with liens on substantially all the existing and future tangible and intangible assets and rights of Cheniere Partners and the CQP Guarantors and equity interests in the CQP Guarantors (except, in each case, for certain excluded properties set forth in the 2019 CQP Credit Facilities). The liens securing the CQP Senior Notes, if applicable, will be shared equally and ratably (subject to permitted liens) with the holders of other senior secured obligations, which include the 2019 CQP Credit Facilities obligations and any future additional senior secured debt obligations.
2019 CQP Credit Facilities
In May 2019, Cheniere Partners entered into the 2019 CQP Credit Facilities, which consisted of the $750 million term loan (“CQP Term Facility”), which was prepaid and terminated upon issuance of the 2029 CQP Senior Notes in September 2019, and thehas a $750 million revolving credit facility (“under the 2019 CQP Revolving Facility”).Credit Facilities. Borrowings under the 2019 CQP Credit Facilities will be used to fund the development and construction of Train 6 of the SPL Project and for general corporate purposes, subject to a sublimit, and the 2019 CQP Credit Facilities are also available for the issuance of letters of credit. As of both June 30, 20202021 and December 31, 2019,2020, Cheniere Partners had $750 million of available commitments and no letters of credit issued or loans outstanding under the 2019 CQP Credit Facilities.
The 2019 CQP Credit Facilities mature on May 29, 2024. Any outstanding balance may be repaid, in whole or in part, at any time without premium or penalty, except for interest rate breakage costs. The 2019 CQP Credit Facilities contain conditions precedent for extensions of credit, as well as customary affirmative and negative covenants, and limit Cheniere Partners’ ability to make restricted payments, including distributions, to once per fiscal quarter and one true-up per fiscal quarter as long as certain conditions are satisfied.
The 2019 CQP Credit Facilities are unconditionally guaranteed and secured by a first priority lien (subject to permitted encumbrances) on substantially all of Cheniere Partners’ and the CQP Guarantors’ existing and future tangible and intangible assets and rights and equity interests in the CQP Guarantors (except, in each case, for certain excluded properties set forth in the 2019 CQP Credit Facilities).
Corpus Christi LNG Terminal
Liquefaction Facilities
We are currently operating twothree Trains and onetwo marine berthberths at the CCL Project, commissioning one additional Train and constructing an additional marine berth. We have received authorization from the FERC to site, construct and operate Trains 1 through 3 of the CCL Project. We completed construction of Trains 1, 2 and 23 of the CCL Project and commenced commercial operating activities in February 2019, and August 2019 respectively. The following table summarizes the project completion and construction status of Train 3 of the CCL Project, including the related infrastructure, as of June 30, 2020:March 2021, respectively.
|
| | | |
| | CCL Train 3 |
Overall project completion percentage | | 90.5% |
Completion percentage of: | | |
Engineering | | 100.0% |
Procurement | | 100.0% |
Subcontract work | | 83.2% |
Construction | | 77.5% |
Expected date of substantial completion | | 1H 2021 |
Separate from the CCH Group, we are also developing Corpus Christi Stage 3 through our subsidiary CCL Stage III, adjacent to the CCL Project. We received approval from FERC in November 2019 to site, construct and operate seven midscale Trains with an expected total production capacity of approximately 10 mtpa of LNG.
The following orders have been issued by the DOE authorizing the export of domestically produced LNG by vessel from the Corpus Christi LNG terminal:
•CCL Project—FTA countries for a 25-year term and to non-FTA countries for a 20-year term, both of which commenced in June 2019,through December 31, 2050, up to a combined total of the equivalent of 767 Bcf/yr (approximately 15 mtpa) of natural gas.
•Corpus Christi Stage 3—FTA countries for a 25-year term and to non-FTA countries for a 20-year termthrough December 31, 2050 in an amount equivalent to 582.14 Bcf/yr (approximately 11 mtpa) of natural gas.
In December 2020, the DOE announced a new policy in which it would no longer issue short-term export authorizations separately from long-term authorizations. Accordingly, the DOE amended each case,of CCL’s long-term authorizations to include short-term export authority, and vacated the terms of these authorizations begin on the earlier of the date of first export thereunder or the date specified in the particular order, which ranges from seven to 10 years from the date the order was issued.short-term orders.
An application was filed in September 2019 to authorize additional exports from the CCL Project to FTA countries for a 25-year term and to non-FTA countries for a 20-year term in an amount up to the equivalent of approximately 108 Bcf/yr of natural gas, for a total CCL Project export of 875.16 Bcf/yr. The terms of the authorizations are requested to commence on the date of first commercial export from the CCL Project of the volumes contemplated in the application. DOE’s authorization forIn April 2020, the DOE issued an order authorizing CCL to export to FTA countries has been granted. The DOErelated to this application, for which the term was subsequently extended through December 31, 2050, but has not yet issued an order authorizing CCL to export to non-FTA countries for the corresponding LNG volume. A corresponding application for authorization to increase the total LNG production capacity of the CCL Project from the currently authorized level to approximately 875.16 Bcf/yr was also submitted to the FERC and is currently pending before the DOE.pending.
Customers
CCL has entered into fixed price long-term SPAs generally with terms of 20 years (plus extension rights) and with nine third partiesa weighted average remaining contract length of approximately 18 years (plus extension rights) for Trains 1 through 3 of the CCL Project. Under these SPAs, the customers will purchase LNG from CCL on a FOBfree on board (“FOB”) basis for a price consisting of a fixed fee per MMBtu of LNG (a portion of which is subject to annual adjustment for inflation) plus a variable fee per MMBtu of LNG equal to approximately 115% of Henry Hub. The customers may elect to cancel or suspend deliveries of LNG cargoes, with advance notice as governed by each respective SPA, in which case the customers would still be required to pay the fixed fee with respect to the contracted volumes that are not delivered as a result of such cancellation or suspension. We refer to the fee component that is applicable regardless of a cancellation or suspension of LNG cargo deliveries under the SPAs as the fixed fee component of the price under our SPAs. We refer to the fee component that is applicable only in
connection with LNG cargo deliveries as the variable fee component of the price under our SPAs. The variable fee under CCL’s
SPAs entered into in connection with the development of the CCL Project was sized at the time of entry into each SPA with the intent to cover the costs of gas purchases and transportation and liquefaction fuel to produce the LNG to be sold under each such SPA. The SPAs and contracted volumes to be made available under the SPAs are not tied to a specific Train; however, the term of each SPA generally commences upon the date of first commercial delivery for the applicable Train, as specified in each SPA.
In aggregate, the minimum annual fixed fee portion to be paid by the third-party SPA customers is approximately $1.4$1.8 billion for Trains 1 and 2 and further increasing to approximately $1.8 billion following the substantial completion of Train 3 of the CCL Project.through 3.
In addition, Cheniere Marketing has agreements with CCL to purchase: (1) approximately 15 TBtu per annum of LNG with an approximatea term of 23 years,through 2043, (2) any LNG produced by CCL in excess of that required for other customers at Cheniere Marketing’s option and (3) approximately 44 TBtu of LNG with a maximum term of up to seven years2026 associated with the IPM gas supply agreement between CCL and EOG.EOG Resources, Inc. See Marketing section for additional information regarding agreements entered into by Cheniere Marketing.
Natural Gas Transportation, Storage and Supply
To ensure CCL is able to transport adequate natural gas feedstock to the Corpus Christi LNG terminal, it has entered into transportation precedent agreements to secure firm pipeline transportation capacity with CCP and certain third-party pipeline companies. CCL has entered into a firm storage services agreement with a third party to assist in managing variability in natural gas needs for the CCL Project. CCL has also entered into enabling agreements and long-term natural gas supply contracts with third parties, and will continue to enter into such agreements, in order to secure natural gas feedstock for the CCL Project. As of June 30, 2020,2021, CCL had secured up to approximately 2,9352,980 TBtu of natural gas feedstock through long-term natural gas supply contracts with remaining terms that range up to 10 years, a portion of which is subject to the achievement of certain project milestones and other conditions precedent.
CCL Stage III has also entered into long-term natural gas supply contracts with third parties, and anticipates continuing to enter into such agreements, in order to secure natural gas feedstock for Corpus Christi Stage 3. As of June 30, 2020,2021, CCL Stage III had secured up to approximately 2,361 TBtu of natural gas feedstock through long-term natural gas supply contracts with remaining terms that range up to approximately 15 years, which is subject to the achievement of certain project milestones and other conditions precedent.
A portion of the natural gas feedstock transactions for CCL and CCL Stage III are IPM transactions, in which the natural gas producers are paid based on a global gas market price less a fixed liquefaction fee and certain costs incurred by us.
Construction
CCL entered into separate lump sum turnkey contracts with Bechtel for the engineering, procurement and construction of Trains 1 through 3 of the CCL Project under which Bechtel chargescharged a lump sum for all work performed and generally bearsbore project cost, schedule and performance risks unless certain specified events occur,occurred, in which case Bechtel may causehave caused CCL to enter into a change order, or CCL agreesagreed with Bechtel to a change order.
The total contract price of the EPC contract for Train 3, which is currently under construction, is approximately $2.4 billion, reflecting amounts incurred under change orders through June 30, 2020. As of June 30, 2020, we have incurred $2.2 billion under this contract.
Final Investment Decision for Corpus Christi Stage 3
FID for Corpus Christi Stage 3 will be subject to, among other things, entering into an EPC contract, obtaining additional commercial support for the project and securing the necessary financing arrangements.
Pipeline Facilities
In November 2019, the FERC authorized CCP to construct and operate the pipeline for Corpus Christi Stage 3. The pipeline will be designed to transport 1.5 Bcf/d of natural gas feedstock required by Corpus Christi Stage 3 from the existing regional natural gas pipeline grid.
Capital Resources
The CCH Group expects to finance the construction costs of the CCL Project from one or more of the following: operating cash flows from CCL and CCP, project debt and equity contributions from Cheniere. The following table provides a summary of the capital resources of the CCH Group from borrowings and available commitments for the CCL Project, excluding equity contributions from Cheniere, at June 30, 20202021 and December 31, 20192020 (in millions):
|
| | | | | | | | |
| | June 30, | | December 31, |
| | 2020 | | 2019 |
Senior notes (1) | | $ | 6,952 |
| | $ | 6,952 |
|
11.0% Convertible Senior Secured Notes due 2025 (2) | | 700 |
| | 1,000 |
|
Credit facilities outstanding balance (3) | | 3,424 |
| | 3,283 |
|
Letters of credit issued (3) | | 392 |
| | 471 |
|
Available commitments under credit facilities (3) | | 667 |
| | 729 |
|
Total capital resources from borrowings and available commitments (4) | | $ | 12,135 |
| | $ | 12,435 |
|
| | | | | | | | | | | | | | |
| | |
| | June 30, | | December 31, |
| | 2021 | | 2020 |
Senior notes (1) | | $ | 7,721 | | | $ | 7,721 | |
| | | | |
Credit facilities outstanding balance (2) | | 2,627 | | | 2,767 | |
Letters of credit issued (2) | | 293 | | | 293 | |
Available commitments under credit facilities (2) | | 907 | | | 767 | |
Total capital resources from borrowings and available commitments (3) | | $ | 11,548 | | | $ | 11,548 | |
| |
(1) | (1) Includes CCH’s 7.000% Senior Secured Notes due 2024, 5.875% Senior Secured Notes due 2025, 5.125% Senior Secured Notes due 2027, 3.700% Senior Secured Notes due 2029, 4.80% Senior Secured Notes due 2039, 3.925% Senior Secured Notes due 2039 and 3.52% CCH Senior Secured Notes (collectively, the “CCH Senior Notes”). (2) Includes CCH’s 7.000% Senior Secured Notes due 2024 (the “2024 CCH Senior Notes”), 5.875% Senior Secured Notes due 2025 (the “2025 CCH Senior Notes”), 5.125% Senior Secured Notes due 2027 (the “2027 CCH Senior Notes”), 3.700% Senior Secured Notes due 2029 (the “2029 CCH Senior Notes”), 4.80% Senior Secured Notes due 2039 (the “4.80% CCH Senior Notes”) and 3.925% Senior Secured Notes due 2039 (the “3.925% CCH Senior Notes”) (collectively, the “CCH Senior Notes”). |
| |
(2) | Aggregate original principal amount before debt discount and debt issuance costs and interest paid-in-kind. |
| |
(3) | Includes CCH’s amended and restated credit facility (“CCH Credit Facility”) and CCH Working Capital Facility. |
| |
(4) | Does not include equity contributions that may be available from Cheniere’s borrowings and available cash and cash equivalents. |
2025 CCH HoldCo II Convertible Senior Notes
In May 2015, CCH HoldCo II issued $1.0 billion aggregate principal amount of the 2025 CCH HoldCo II Convertible Senior Notes on a private placement basis. The 2025 CCH HoldCo II Convertible Senior Notes were convertible at the option of CCH HoldCo II or the holders on or after March 1, 2020 and September 1, 2020, respectively, provided the total market capitalization of Cheniere at that time was not less than $10.0 billion and certain other conditions were satisfied. CCH HoldCo II was restricted from making distributions to Cheniere under agreements governing its indebtedness generally until, among other requirements, a historical debt service coverage ratio and a projected fixed debt service coverage ratio of 1.20:1.00 were achieved. The 2025 CCH HoldCo II Convertible Senior Notes were secured by a pledge by us of 100% of the equity interests in CCH HoldCo II, and a pledge by CCH HoldCo II of 100% of the equity interests in CCH HoldCo I. In addition, the 2025 CCH HoldCo II Convertible Senior Notes were secured by a security interest in the account into which all distributions from CCH HoldCo I to CCH HoldCo II must be deposited.
In May 2018, the amended and restated note purchase agreement under which the 2025 CCH HoldCo II Convertible Senior Notes were issued was subsequently amended in connection with commercializationcredit facility (the “CCH Credit Facility”) and financing of Train 3 of the CCL Project and to provide the note holders with certain prepayment rights related thereto consistent with those under the CCH Credit Facility. In February 2020, the amended and restated note purchase agreement for the 2025 CCH HoldCo II Convertible Senior Notes was further amended to allow CCH HoldCo II the option to redeem all or a portion of the outstanding notes with cash at a price of $1,080 per $1,000 principal amount, at the time of any CCH HoldCo II- or noteholder-initiated conversion through September 2, 2020. In March 2020, CCH HoldCo II redeemed an aggregate outstanding principal amount of $300 million and in July 2020, redeemed the remaining outstanding principal amount with borrowings under the Cheniere Term LoanWorking Capital Facility.
(3) Does not include equity contributions that may be available from Cheniere’s borrowings and available cash and cash equivalents.
CCH Senior Notes
The CCH Senior Notes are jointly and severally guaranteed by CCH’s subsidiaries, CCL, CCP and Corpus Christi Pipeline GP, LLC (each a “CCH Guarantor” and collectively, the “CCH Guarantors”). The indentures governing the CCH Senior Notes contain customary terms and events of default and certain covenants that, among other things, limit CCH’s ability and the ability of CCH’s restricted subsidiaries to: incur additional indebtedness or issue preferred stock; make certain investments or pay dividends
or distributions on membership interests or subordinated indebtedness or purchase, redeem or retire membership interests; sell or transfer assets, including membership or partnership interests of CCH’s restricted subsidiaries; restrict dividends or other payments by restricted subsidiaries to CCH or any of CCH’s restricted subsidiaries; incur liens; enter into transactions with affiliates; dissolve, liquidate, consolidate, merge, sell or lease all or substantially all of the properties or assets of CCH and its restricted subsidiaries taken as a whole; or permit any CCH Guarantor to dissolve, liquidate, consolidate, merge, sell or lease all or substantially all of its properties and assets. The covenants included in the respective indentures that govern the CCH Senior Notes are subject to a number of important limitations and exceptions.
The CCH Senior Notes are CCH’s senior secured obligations, ranking senior in right of payment to any and all of CCH’s future indebtedness that is subordinated to the CCH Senior Notes and equal in right of payment with CCH’s other existing and future indebtedness that is senior and secured by the same collateral securing the CCH Senior Notes. The CCH Senior Notes are secured by a first-priority security interest in substantially all of CCH’s and the CCH Guarantors’ assets.
At any time prior to six months before the respective dates of maturity for each of the CCH Senior Notes, CCH may redeem all or part of such series of the CCH Senior Notes at a redemption price equal to the “make-whole” price set forth in the appropriate indenture, plus accrued and unpaid interest, if any, to the date of redemption. At any time within six months of the respective dates of maturity for each of the CCH Senior Notes, CCH may redeem all or part of such series of the CCH Senior Notes, in whole or in part, at a redemption price equal to 100% of the principal amount of the CCH Senior Notes to be redeemed, plus accrued and unpaid interest, if any, to the date of redemption.
CCH Credit Facility
In May 2018, CCH amended and restated the CCH Credit Facility to increasehas total commitments under the CCH Credit Facility from $4.6 billion toof $6.1 billion. The obligations of CCH under the CCH Credit Facility are secured by a first priority lien on substantially all of the assets of CCH and its subsidiaries and by a pledge by CCH HoldCo I of its limited liability company interests in CCH. As of both June 30, 20202021 and December 31, 2019,2020, CCH had no available commitments and $3.3$2.6 billion of loans outstanding under the CCH Credit Facility.
The CCH Credit Facility matures on June 30, 2024, with principal payments due quarterly commencing on the earlier of (1) the first quarterly payment date occurring more than three calendar months following the completion of the CCL Project as defined in the common terms agreement and (2) a set date determined by reference to the date under which a certain LNG buyer linked to the last Train of the CCL Project to become operational is entitled to terminate its SPA for failure to achieve the date of first commercial delivery for that agreement. Scheduled repayments will be based upon a 19-year tailored amortization, commencing the first full quarter after the completion of Trains 1 through 3 and designed to achieve a minimum projected fixed debt service coverage ratio of 1.50:1.
Under the CCH Credit Facility, CCH is required to hedge not less than 65% of the variable interest rate exposure of its senior secured debt. CCH is restricted from making certain distributions under agreements governing its indebtedness generally until, among other requirements, the completion of the construction of Trains 1 through 3 of the CCL Project, funding of a debt service reserve account equal to six months of debt service and achieving a historical debt service coverage ratio and fixed projected debt service coverage ratio of at least 1.25:1.00.
CCH Working Capital Facility
In June 2018, CCH amended and restated the CCH Working Capital Facility to increasehas total commitments under the CCH Working Capital Facility from $350 million toof $1.2 billion. The CCH Working Capital Facility is intended to be used for loans to CCH (“CCH Working Capital Loans”) and the issuance of letters of credit on behalf of CCH for certain working capital requirements related to developing and operating the CCL Project and for related business purposes. Loans under the CCH Working Capital Facility are guaranteed by the CCH Guarantors. CCH may, from time to time, request increases in the commitments under the CCH Working Capital Facility of up to the maximum allowed for working capital under the Common Terms Agreement that was entered into concurrently with the CCH Credit Facility. As of June 30, 20202021 and December 31, 2019,2020, CCH had $667$907 million and $729$767 million of available commitments $392 million and $471 million aggregate amount of issued letters of credit and $141 million and zero and $140 million of loans outstanding under the CCH Working Capital Facility, respectively. CCH had $293 million aggregate amount of issued letters of credit under the CCH Working Capital Facility as of both June 30, 2021 and December 31, 2020.
The CCH Working Capital Facility matures on June 29, 2023, and CCH may prepay the CCH Working Capital Loans and loans made in connection with a draw upon any letter of credit (“CCH LC Loans”) at any time without premium or penalty upon
three business days’ notice and may re-borrow at any time. CCH LC Loans have a term of up to one year. CCH is required to reduce the aggregate outstanding principal amount of all CCH Working Capital Loans to zero for a period of five consecutive business days at least once each year.
The CCH Working Capital Facility contains conditions precedent for extensions of credit, as well as customary affirmative and negative covenants. The obligations of CCH under the CCH Working Capital Facility are secured by substantially all of the assets of CCH and the CCH Guarantors as well as all of the membership interests in CCH and each of the CCH Guarantors on a pari passu basis with the CCH Senior Notes and the CCH Credit Facility.
Cheniere
ConvertibleSenior Notes
In November 2014, we issuedWe have an aggregate principal amount of $1.0$2.0 billion of the 20214.625% Senior Secured Notes due 2028 (the “2028 Cheniere Convertible Unsecured Notes. The 2021 Cheniere Convertible Unsecured Notes are convertible atSenior Notes”), the optionproceeds of which were used to prepay a portion of the holderoutstanding indebtedness under the Cheniere Term Loan Facility and to pay related fees and expenses. The associated indentures (“Cheniere Indenture”) contain customary terms and events of default and certain covenants that, among other things, limit our ability to create liens or other encumbrances, enter into our common stock at the then applicable conversion rate, provided that the closing pricesale-leaseback transactions and merge or consolidate with other entities or sell all or substantially all of our common stock is greater thanassets. The Cheniere Indenture covenants are subject to a number of important limitations and exceptions.
At any time prior to October 15, 2023, we may redeem all or a part of the 2028 Cheniere Senior Notes at a redemption price equal to 100% of the conversion price onaggregate principal amount thereof, plus the “applicable premium” and accrued and unpaid interest, if any, to but not including the date of conversion.redemption. We also may, at any time prior to October 15, 2023, redeem up to 40% of the aggregate principal amount of the 2028 Cheniere Senior Notes with an amount of cash not greater than the net cash proceeds from certain equity offerings at a redemption price equal to 104.625% of the aggregate principal amount of the notes being redeemed, plus accrued and unpaid interest, if any, to but not including, the date of redemption. At any time on or after October 15, 2023 through the maturity date of October 15, 2028, we may redeem all or part of the 2028 Cheniere Senior Notes at the redemption prices described in the Cheniere Indenture.
The 2028 Cheniere Senior Notes are our general senior obligations and rank senior in right of payment to all of our future obligations that are, by their terms, expressly subordinated in right of payment to the 2028 Cheniere Senior Notes and equally in right of payment with all of our other existing and future unsubordinated indebtedness. The 2028 Cheniere Senior Notes became unsecured in June 2021 concurrent with the repayment of all outstanding obligations under the Cheniere Term Loan Facility and may, in certain instances become secured in the future in connection with the incurrence of additional secured indebtedness by us. When required, the 2028 Cheniere Senior Notes will be secured on a first-priority basis by a lien on substantially all of our assets and equity interests in our direct subsidiaries (other than certain excluded subsidiaries), which liens rank pari passu with the liens securing the Cheniere Revolving Credit Facility. As of June 30, 2021, the 2028 Cheniere Senior Notes are not guaranteed by any of our subsidiaries. In March 2015, we issuedthe future, the 2028 Cheniere Senior Notes will be guaranteed by our subsidiaries who guarantee our other material indebtedness.
Convertible Notes
We have $625 million aggregate principal amount of unsecured4.25% Convertible Senior Notes due 2045 (the “2045 Cheniere Convertible Senior Notes.Notes”). We have the right, at our option, at any time after March 15, 2020, to redeem all or any part of the 2045 Cheniere Convertible Senior Notes at a redemption price equal to the accreted amount of the 2045 Cheniere Convertible Senior Notes to be redeemed, plus accrued and unpaid interest, if any, to such redemption date. Prior to December 15, 2044, the 2045 Cheniere Convertible Senior Notes are convertible only under certain circumstances as specified in the indenture; thereafter, holders may convert their notes regardless of these circumstances. The conversion rate will initially equal 7.2265 shares of our common stock per $1,000 principal amount of the 2045 Cheniere Convertible Senior Notes, which corresponds to an initial conversion price of approximately $138.38 per share of our common stock (subject to adjustment upon the occurrence of certain specified events).
We have the option to satisfy the conversion obligation for the 2021 Cheniere Convertible Unsecured Notes and the 2045 Cheniere Convertible Senior Notes with cash, common stock or a combination thereof. In July 2020, we repurchased $844 million in aggregate principal amount of the outstanding 2021 Cheniere Convertible Unsecured Notes at individually negotiated prices from a small number of investors.
Cheniere Revolving Credit Facility
In December 2018, we amended and restated the Cheniere Revolving Credit Facility to increaseWe have total commitments under the Cheniere Revolving Credit Facility from $750 million toof $1.25 billion. The Cheniere Revolving Credit Facility is intended to fund, through loans and letters of credit, equity capital contributions to CCH HoldCo II and its subsidiaries for the development of the CCL Project and, provided that certain conditions are met, for general corporate purposes. As of both June 30, 20202021 and December 31, 2019,2020, we had $562 million and $665 million$1.1 billion of available commitments $313and $134 million and $585zero, respectively, of loans outstanding under the Cheniere Revolving Credit Facility. We had zero and $124 million aggregate amount of issued letters of credit and $375 million and zero of loans outstanding under the Cheniere Revolving Credit Facility as of June 30, 2021 and December 31, 2020, respectively. In July 2021, the outstanding balance under the Cheniere Revolving Credit Facility was repaid.
The Cheniere Revolving Credit Facility matures on December 13, 2022 and contains representations, warranties and affirmative and negative covenants customary for companies like us with lenders of the type participating in the Cheniere Revolving Credit Facility that limit our ability to make restricted payments, including distributions, unless certain conditions are satisfied, as well as limitations on indebtedness, guarantees, hedging, liens, investments and affiliate transactions. Under the Cheniere Revolving Credit Facility, we are required to ensure that the sum of our unrestricted cash and the amount of undrawn commitments under the Cheniere Revolving Credit Facility is at least equal to the lesser of (1) 20% of the commitments under the Cheniere Revolving Credit Facility and (2) $200 million (the “Liquidity Covenant”). However, at any time that the aggregate principal amount of outstanding loans plus drawn and unreimbursed letters of credit under the Cheniere Revolving Credit Facility is greater than 30% of aggregate commitments under the Cheniere Revolving Credit Facility, the Liquidity Covenant will not apply and we will instead be governed by a quarterly non-consolidated leverage ratio covenant not to exceed 5.75:1.00 (the “Springing Leverage Covenant”).
The Cheniere Revolving Credit Facility is secured by a first priority security interest (subject to permitted liens and other customary exceptions) in substantially all of our assets, including our interests in our direct subsidiaries (excluding CCH HoldCo II and certain other subsidiaries).
Cheniere Term Loan Facility
In June 2020, we entered into the Cheniere Term Loan Facility, which was subsequently increased to $2.695 billion in July 2020. In July 2020, borrowings under the Cheniere Term Loan Facility were used to (1) redeem the remaining outstanding principal amount of the 2025 CCH HoldCo II Convertible Senior Notes, (2) repurchase $844 million in aggregate principal amount of outstanding 2021 Cheniere Convertible Unsecured Notes at individually negotiated prices from a small number of investors and
(3) pay the related fees and expenses. The remaining borrowings under the Cheniere Term Loan Facility are expected to be used to repay and/or repurchase a portion of the remaining principal amount of the 2021 Cheniere Convertible Unsecured Notes and for the payment of related fees and expenses. As of June 30, 2020, we had $2.6 billion of available commitments and no letters of credit issued or loans outstanding under the Cheniere Term Loan Facility. Subsequent to the borrowings in July 2020, we had $372 million of available commitments under the Cheniere Term Loan Facility.
The Cheniere Term Loan Facility matures on June 18, 2023. Loans under the Cheniere Term Loan Facility may be voluntarily prepaid, in whole or in part, at any time, without premium or penalty. Borrowings under the Cheniere Term Loan Facility are subject to customary conditions precedent. The Cheniere Term Loan Facility includes representations, warranties, affirmative and negative covenants and events of default customary for companies like us with lenders of the type participating in the Cheniere Term Loan Facility and consistent with the equivalent provisions contained in the Cheniere Revolving Credit Facility.
The Cheniere Term Loan Facility is secured by a first priority security interest (subject to permitted liens and other customary exceptions) on a pari passu basis with the Cheniere Revolving Credit Facility in substantially all of our assets and equity interests in direct subsidiaries (other than certain excluded subsidiaries). Upon redemption of the 2025 CCH HoldCo II Convertible Senior Notes in July 2020, the equity interests in CCH HoldCo II were pledged as collateral to secure the obligations under the Cheniere Revolving Credit Facility and the Cheniere Term Loan Facility.
Cash Receipts from Subsidiaries
Our ownership interest in the Sabine Pass LNG terminal is held through Cheniere Partners. As of June 30, 2020,2021, we owned a 48.6% limited partner interest in Cheniere Partners in the form of 104.5239.9 million common units and 135.4 million subordinated units. We also own 100% of the general partner interest and the incentive distribution rights in Cheniere Partners. We are eligible to receive quarterly equity distributions from Cheniere Partners related to our ownership interests and our incentive distribution rights.
We also receive fees for providing management services to some of our subsidiaries. We received $53$57 million and $36$53 million in total service fees from these subsidiaries during the each of the six months ended June 30, 20202021 and 2019,2020, respectively.
Share Repurchase Program
On June 3, 2019, we announced that our Board of Directors (“Board”) authorized a 3-year, $1.0 billion share repurchase program. During the six months ended June 30, 2020, we repurchased an aggregate of 2.9 million shares of our common stock for $155 million, for a weighted average price per share of $53.88. DuringWe did not make any repurchases during the three months ended June 30, 2021 and 2020 or the six months ended June 30, 2019, we repurchased an aggregate of 44,600 shares of our common stock for $3 million, for a weighted average price per share of $68.30.2021. As of June 30, 2020,2021, we had up to $596 million of the share repurchase program available. Under the share repurchase program, repurchases can be made from time to time using a variety of methods, which may include open market purchases, privately negotiated transactions or otherwise, all in accordance with the rules of the SEC and other applicable legal requirements. The timing and amount of any shares of our common stock that are repurchased under the share repurchase program will be determined by our management based on market conditions and other factors. The share repurchase program does not obligate us to acquire any particular amount of common stock, and may be modified, suspended or discontinued at any time or from time to time at our discretion.
Marketing
We market and sell LNG produced by the Liquefaction Projects that is not required for other customers through our integrated marketing function. We have, and continue to develop, a portfolio of long-, medium- and short-term SPAs to transport and unload commercial LNG cargoes to locations worldwide. These volumes are expected to be primarily sourced by LNG produced by the Liquefaction Projects but supplemented by volumes procured from other locations worldwide, as needed. As of June 30, 2020,2021, we have sold or have options to sell approximately 4,7465,002 TBtu of LNG to be delivered to customers between 20202021 and 2045.2045, including volume from an SPA Cheniere Marketing has committed to provide to SPL. The cargoes have been sold either on a FOB basis (delivered to the customer at the Sabine Pass LNG terminal or the Corpus Christi LNG terminal, as applicable) or a delivered at terminal (“DAT”) basis (delivered to the customer at their specified LNG receiving terminal). We have chartered LNG vessels to be utilized for cargoes sold on a DAT basis. In addition, we have entered into a long-term agreement to sell LNG cargoes on a DAT basis that is conditioned upon the buyer achieving certain milestones.
Cheniere Marketing entered intohas uncommitted trade finance facilities with available commitmentscredit of $209$240 million as of June 30, 2020,2021, primarily to be used for the purchase and sale of LNG for ultimate resale in the course of its operations. The finance facilities are intended to be used for advances, guarantees or the issuance of letters of credit or standby letters of credit on behalf of Cheniere Marketing. As of June 30, 20202021 and December 31, 2019,2020, Cheniere Marketing had $10$5 million and $41$34 million, respectively, in standby letters of credit and guarantees outstanding under the finance facilities. As of June 30, 20202021 and December 31, 2019, Cheniere Marketing had $62020, there were $30 million and zero respectively, of loans outstanding, respectively, under the finance facilities. Cheniere Marketing pays interest or fees on utilized commitments.
Cheniere Marketing also has an uncommitted letter of credit facility with no available credit as of June 30, 2021, for the issuance of letters of credit in the course of its operations. As of June 30, 2021, Cheniere Marketing had $35 million of letters of credit issued under the facility. Cheniere Marketing pays fees on utilized commitments.
Corporate and Other Activities
We are required to maintain corporate and general and administrative functions to serve our business activities described above. The development of our sites 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 an FID.
We have made an equity investment in Midship Holdings, LLC (“Midship Holdings”), which manages the business and affairs of Midship Pipeline.Pipeline Company, LLC (“the Midship Pipeline”). Midship Pipeline operates the Midship Project with current capacity of up to 1.1 million Dekatherms per day that connects new gas production in the Anadarko Basin to Gulf Coast markets, including markets serving the Liquefaction Projects. The Midship Project was placed in service in April 2020.
Restrictive Debt Covenants
As of June 30, 2020,2021, each of our issuers was in compliance with all covenants related to their respective debt agreements.
LIBOR
The use of LIBOR is expected to be phased out by the end of 2021.June 2023. It is currently unclear whether LIBOR will be utilized beyond that date or whether it will be replaced by a particular rate. We intend to continue to workworking with our lenders and counterparties to pursue any amendments to our debt and derivative agreements that are currently subject to LIBOR following LIBOR cessation and will continue to monitor, assess and plan for the phase out of LIBOR.
Sources and Uses of Cash
The following table summarizes the sources and uses of our cash, cash equivalents and restricted cash for the six months ended June 30, 20202021 and 20192020 (in millions). The table presents capital expenditures on a cash basis; therefore, these amounts differ from the amounts of capital expenditures, including accruals, which are referred to elsewhere in this report. Additional discussion of these items follows the table.
| | | | | | | | | | | | | |
| Six Months Ended June 30, |
| 2021 | | 2020 | | |
Sources of cash, cash equivalents and restricted cash: | | | | | |
Net cash provided by operating activities | $ | 1,373 | | | $ | 1,028 | | | |
Proceeds from sale of fixed assets | 68 | | | — | | | |
Proceeds from issuances of debt | 2,184 | | | 2,597 | | | |
Other | 8 | | | — | | | |
| $ | 3,633 | | | $ | 3,625 | | | |
Uses of cash, cash equivalents and restricted cash: | | | | | |
Property, plant and equipment | $ | (440) | | | $ | (983) | | | |
Investment in equity method investment | — | | | (100) | | | |
Repayments of debt | (2,603) | | | (2,380) | | | |
Debt issuance and other financing costs | (20) | | | (59) | | | |
Debt modification or extinguishment costs | (41) | | | (40) | | | |
| | | | | |
Distributions to non-controlling interest | (322) | | | (310) | | | |
Payments related to tax withholdings for share-based compensation | (43) | | | (41) | | | |
Repurchase of common stock | — | | | (155) | | | |
Other | (11) | | | (7) | | | |
| (3,480) | | | (4,075) | | | |
Net increase (decrease) in cash, cash equivalents and restricted cash | $ | 153 | | | $ | (450) | | | |
|
| | | | | | | |
| Six Months Ended June 30, |
| 2020 | | 2019 |
Operating cash flows | $ | 1,028 |
| | $ | 760 |
|
Investing cash flows | (1,090 | ) | | (1,542 | ) |
Financing cash flows | (388 | ) | | 1,066 |
|
| | | |
Net increase (decrease) in cash, cash equivalents and restricted cash | (450 | ) |
| 284 |
|
Cash, cash equivalents and restricted cash—beginning of period | 2,994 |
| | 3,156 |
|
Cash, cash equivalents and restricted cash—end of period | $ | 2,544 |
| | $ | 3,440 |
|
Operating Cash Flows
Our operating cash net inflows during the six months ended June 30, 2021 and 2020 and 2019 were $1,028$1,373 million and $760$1,028 million, respectively. The $268$345 million increase in operating cash inflows in 20202021 compared to 20192020 was primarily related to increased revenues related to LNG cargoes for which customers have notified us that they will not take delivery andcash receipts from the sale of LNG cargoes due to higher revenue per MMBtu and higher volume of LNG delivered, as a result of the additional Trains that were operating at the Liquefaction Projectswell as from higher than normal contributions from LNG and natural gas portfolio optimization activities due to significant volatility in 2020.
Investing Cash Flows
Investing cash net outflowsLNG and natural gas markets during the six months ended June 30, 20202021. Partially offsetting these operating cash inflows were higher operating cash outflows due to higher natural gas feedstock costs and 2019payment of paid-in-kind interest on our convertible notes.
Proceeds from Sale of Fixed Assets
During the six months ended June 30, 2021, we received proceeds from the sale of fixed assets of $68 million from divestment of non-core land holdings.
Proceeds from Issuance of Debt, Repayments of Debt, Debt Issuance and Other Financing Costs and Debt Modification or Extinguishment Costs
During the six months ended June 30, 2021, Cheniere Partners issued an aggregate principal amount of $1.5 billion of the 2031 CQP Senior Notes and incurred $20 million of debt issuance costs related to this issuance. The proceeds from this issuance, together with cash on hand, were $1,090 million and $1,542 million, respectively, and were primarily used to fundredeem all of the constructionoutstanding 2025 CQP Senior Notes, and Cheniere Partners paid $40 million of debt extinguishment costs, formainly related to premiums associated with this redemption. Additionally, in line with our previously announced capital allocation priorities, we repaid $624 million of total outstanding indebtedness under the Liquefaction Projects. TheseCheniere Term Loan Facility and 2021 Cheniere Convertible Notes with $500 million of available cash and the remainder from borrowings under the Cheniere Revolving Credit Facility. We paid $2 million of debt extinguishment costs are capitalized as construction-in-process until achievementa result of substantial completion.the repayment of the 2021 Cheniere Convertible Notes. Additionally, we investednet repayments of $100 million and $34 million in Midship Holdings,were made on our equity method investment,credit facilities during the six months ended June 30, 2020 and 2019, respectively.2021.
Financing Cash Flows
Financing cash net outflows duringDuring the six months ended June 30, 2020, were $388 million, primarily as a result of:
issuance ofSPL issued an aggregate principal amount of $2.0 billion of the 2030 SPL Senior Notes, which along with cash on hand was used to redeem all of the outstanding 2021 SPL Senior Notes.
$455 million During the six months ended June 30, 2020, borrowings of borrowings and $80 million of repayments$0.6 billion under our credit facilities were used to redeem the Cheniere Revolving Credit Facility;
$141 million of borrowings under the CCH Working Capital Facility;
$300 million partial redemption of the11% Convertible Senior Secured Notes due 2025 (the “2025 CCH HoldCo II Convertible Senior Notes;
$310 million of distributionsNotes”), to non-controlling interest by Cheniere Partners;
$155 million paid to repurchase approximately 3 million shares offund our common stock under the share repurchase program;
$59working capital requirements or for general corporate purposes. We incurred $59 million of debt issuance costs primarily related to up-front fees paid upon the closing of the 2020 SPL Working Capital Facility and 2030 SPL Senior Notes and premiums paid for partially redeeming the 2025 CCH HoldCo II Convertible Senior Notes;
$41Notes. We incurred $40 million paid for tax withholdings for share-based compensation; and
| |
• | $40 million of debt extinguishment costs primarily related to the redemption of the 2021 SPL Senior Notes.
|
Financing cash net inflows during the six months ended June 30, 2019 were $1,066 million, primarily as a result of:
$982 million of borrowings under the CCH Credit Facility;
$649 million of borrowings under the 2019 CQP Credit Facilities;
$390 million of borrowings and $558 million in repayments under the CCH Working Capital Facility;
$290 million of distributions to non-controlling interest by Cheniere Partners;
$72 million of net repayments related to our Cheniere Marketing trade financing facilities;
$20 million of debt issuance costs primarily related to the up-front fees paid upon the closingredemption of the 2019 CQP Credit Facilities;2021 SPL Senior Notes.
Property, Plant and Equipment
$14 million paid
Cash outflows for tax withholdingsproperty, plant and equipment were primarily for share-based compensation.the construction costs for the Liquefaction Projects. These costs are capitalized as construction-in-process until achievement of substantial completion.
Distributions to Non-controlling Interest
Results of Operations
We own a 48.6% limited partner interest in Cheniere Partners, with the remaining non-controlling interest held by The following charts summarize the number of Trains that were in operation during the year ended December 31, 2019Blackstone Group Inc., Brookfield Asset Management Inc. and the six months ended June 30, 2020 and total revenues and total LNG volumes loaded from our Liquefaction Projects (including both operational and commissioning volumes) during the six months ended June 30, 2020 and 2019:
The following table summarizes the volumes of operational and commissioning LNG cargoes that were loaded from the Liquefaction Projects, which were recognized on our Consolidated Financial Statementspublic, to whom Cheniere Partners paid distributions during the three and six months ended June 30, 2020:2021 and 2020.
|
| | | | | | | | | | | |
| Three Months Ended June 30, 2020 | | Six Months Ended June 30, 2020 |
(in TBtu) | Operational | | Commissioning | | Operational | | Commissioning |
Volumes loaded during the current period | 278 |
| | — |
| | 733 |
| | — |
|
Volumes loaded during the prior period but recognized during the current period | 29 |
| | — |
| | 33 |
| | — |
|
Less: volumes loaded during the current period and in transit at the end of the period | (2 | ) | | — |
| | (2 | ) | | — |
|
Total volumes recognized in the current period | 305 |
| | — |
| | 764 |
| | — |
|
Repurchase of Common Stock
Our consolidated net income attributable to common stockholders was $197 million, or $0.78 per share (basic and diluted), in the three months ended June 30, 2020, compared to net loss attributable to common stockholders of $114 million, or $0.44 per
share (basic and diluted), in the three months ended June 30, 2019. This $311 million increase in net income attributable to common stockholders in 2020 was primarily attributable to accelerated revenues recognized from canceled cargoes for which customers have notified us that they will not take delivery, partially offset by increases in (1) net income attributable to non-controlling interest, (2) income tax provision, (3) operating and maintenance expense, (4) loss on modification or extinguishment of debt, (5) interest expense, net of amounts capitalized and (6) depreciation and amortization expense.
Our consolidated net income attributable to common stockholders was $572 million, or $2.27 per share—basic and $2.26 per share—diluted, in the six months ended June 30, 2020, compared to net income attributable to common stockholders of $27 million, or $0.11 per share (basic and diluted), in the six months ended June 30, 2019. This $545 million increase in net income attributable to common stockholders in 2020 was primarily attributable to accelerated revenues recognized from canceled cargoes for which customers have notified us that they will not take delivery and increased gains from commodity derivatives to secure natural gas feedstock for the Liquefaction Projects, partially offset by increases in (1) interest expense, net of amounts capitalized, (2) income tax provision, (3) operating and maintenance expense, (4) interest rate derivative loss, net, (5) net income attributable to non-controlling interest, (6) depreciation and amortization expense and (7) loss on modification or extinguishment of debt.
We enter into derivative instruments to manage our exposure to (1) changing interest rates, (2) commodity-related marketing and price risks and (3) foreign exchange volatility. Derivative instruments are reported at fair value on our Consolidated Financial Statements. In some cases, the underlying transactions economically hedged receive accrual accounting treatment, whereby revenues and expenses are recognized only upon delivery, receipt or realization of the underlying transaction. Because the recognition of derivative instruments at fair value has the effect of recognizing gains or losses relating to future period exposure, use of derivative instruments may increase the volatility of our results of operations based on changes in market pricing, counterparty credit risk and other relevant factors.
Revenues
|
| | | | | | | | | | | | | | | | | | | | | | | |
| Three Months Ended June 30, | | Six Months Ended June 30, |
(in millions) | 2020 | | 2019 | | Change | | 2020 | | 2019 | | Change |
LNG revenues | $ | 2,295 |
| | $ | 2,173 |
| | $ | 122 |
| | $ | 4,863 |
| | $ | 4,316 |
| | $ | 547 |
|
Regasification revenues | 68 |
| | 67 |
| | 1 |
| | 135 |
| | 133 |
| | 2 |
|
Other revenues | 39 |
| | 52 |
| | (13 | ) | | 113 |
| | 104 |
| | 9 |
|
Total revenues | $ | 2,402 |
|
| $ | 2,292 |
|
| $ | 110 |
|
| $ | 5,111 |
|
| $ | 4,553 |
|
| $ | 558 |
|
LNG revenues during the three and six months ended June 30, 2020 increased from the comparable period in 2019 primarily due to $708 million and $761 million, respectively, in revenues associated with LNG cargoes for which customers have notified us that they will not take delivery, of which $458 million would have otherwise been recognized subsequent to June 30, 2020, if the cargoes were lifted pursuant to the delivery schedules with the customers. LNG revenues during the three months ended June 30, 2020 excluded $53 million that would have otherwise been recognized during the quarter if the cargoes were lifted pursuant to the delivery schedules with the customers. During the three months ended June 30, 2020, the accelerated revenues recognized were partially offset by decreased revenues per MMBtu and decreased volume recognized as revenues. During the six months ended June 30, 2020, LNG revenues also increased as a resultwe paid $155 million to repurchase approximately 2.9 million shares of increased volume recognized as revenues due to increased Trainsour common stock under the share repurchase program. There were no share repurchases paid in operation over the comparable period, partially offset by decreased revenues per MMBtu. As we have recognized accelerated revenues associated with LNG cargoes for which customers have notified us that they will not take delivery, we may expect decreased revenues in future periods for which the deliveries would have occurred. We expect our LNG revenues to increase in the future upon Train 3 of the CCL Project and Train 6 of the SPL Project becoming operational.
Prior to substantial completion of a Train, amounts received from the sale of commissioning cargoes from that Train are offset against LNG terminal construction-in-process, because these amounts are earned or loaded during the testing phase for the construction of that Train. During the six months ended June 30, 2019, we realized offsets to LNG terminal costs of $202 million corresponding to 28 TBtu of LNG that were related to the sale of commissioning cargoes from the Liquefaction Projects. We did not realize any offsets to LNG terminal costs during the three months ended June 30, 2019 and the three and six months ended June 30, 2020.
Also included in LNG revenues are gains and losses from derivative instruments and the sale of unutilized natural gas procured for the liquefaction process. We recognized revenues of $62 million and $183 million during the three months ended June 30, 2020 and 2019, respectively, and $273 million and $317 millioncash during the six months ended June 30, 2020 and 2019, respectively, related to derivative instruments and other revenues from these transactions.
The following table presents the components of LNG revenues and the corresponding LNG volumes sold:
|
| | | | | | | | | | | | | | | |
| Three Months Ended June 30, | | Six Months Ended June 30, |
| 2020 | | 2019 | | 2020 | | 2019 |
LNG revenues (in millions): | | | | | | | |
LNG from the Liquefaction Projects sold under third party long-term agreements (1) | $ | 1,244 |
| | $ | 1,393 |
| | $ | 3,151 |
| | $ | 2,910 |
|
LNG from the Liquefaction Projects sold by our integrated marketing function under short-term agreements | 150 |
| | 566 |
| | 475 |
| | 905 |
|
LNG procured from third parties | 132 |
| | 31 |
| | 203 |
| | 184 |
|
LNG revenues associated with cargoes not delivered per customer notification (2) | 707 |
| | — |
| | 761 |
| | — |
|
Other revenues and derivative gains | 62 |
| | 183 |
| | 273 |
| | 317 |
|
Total LNG revenues | $ | 2,295 |
| | $ | 2,173 |
| | $ | 4,863 |
| | $ | 4,316 |
|
| | | | | | | |
Volumes delivered as LNG revenues (in TBtu): | | | | | | | |
LNG from the Liquefaction Projects sold under third party long-term agreements (1) | 253 |
| | 241 |
| | 619 |
| | 477 |
|
LNG from the Liquefaction Projects sold by our integrated marketing function under short-term agreements | 52 |
| | 111 |
| | 145 |
| | 157 |
|
LNG procured from third parties | 34 |
| | 5 |
| | 48 |
| | 23 |
|
Total volumes delivered as LNG revenues | 339 |
| | 357 |
| | 812 |
| | 657 |
|
| |
(1) | Long-term agreements include agreements with a tenure of 12 months or more. |
| |
(2) | LNG revenues include revenues with no corresponding volumes attributable to LNG cargoes for which customers have notified us that they will not take delivery. |
Operating costs and expenses
|
| | | | | | | | | | | | | | | | | | | | | | | |
| Three Months Ended June 30, | | Six Months Ended June 30, |
(in millions) | 2020 | | 2019 | | Change | | 2020 | | 2019 | | Change |
Cost of sales | $ | 803 |
| | $ | 1,277 |
| | $ | (474 | ) | | $ | 1,527 |
| | $ | 2,491 |
| | $ | (964 | ) |
Operating and maintenance expense | 355 |
| | 295 |
| | 60 |
| | 671 |
| | 516 |
| | 155 |
|
Development expense | 1 |
| | 3 |
| | (2 | ) | | 5 |
| | 4 |
| | 1 |
|
Selling, general and administrative expense | 73 |
| | 77 |
| | (4 | ) | | 154 |
| | 150 |
| | 4 |
|
Depreciation and amortization expense | 233 |
| | 204 |
| | 29 |
| | 466 |
| | 348 |
| | 118 |
|
Impairment expense and loss on disposal of assets | — |
| | 4 |
| | (4 | ) | | 5 |
| | 6 |
| | (1 | ) |
Total operating costs and expenses | $ | 1,465 |
| | $ | 1,860 |
| | $ | (395 | ) | | $ | 2,828 |
| | $ | 3,515 |
| | $ | (687 | ) |
Our total operating costs and expenses decreased during the three and six months ended June 30, 2020 from the three and six months ended June 30, 2019, primarily as a result of decreased cost of sales, partially offset by increased operating and maintenance expense and depreciation and amortization expense from additional operating Trains between the periods.
Cost of sales includes costs incurred directly for the production and delivery of LNG from the Liquefaction Projects, to the extent those costs are not utilized for the commissioning process. Cost of sales decreased during the three and six months ended June 30, 2020 from the three and six months ended June 30, 2019, primarily due to a decrease in the cost of natural gas feedstock between the periods. This decrease during the six months ended June 30, 2020 was partially offset by increased volumes and an increase in derivative gains from an increase in fair value of the commodity derivatives to secure natural gas feedstock for the Liquefaction Projects, primarily due to a favorable shift in long-term forward prices relative to our hedged position. Cost of sales also includes vessel charter costs, port and canal fees, variable transportation and storage costs and the sale of natural gas procured for the liquefaction process and other costs to convert natural gas into LNG.
2021.
Operating and maintenance expense primarily includes costs associated with operating and maintaining the Liquefaction Projects. Additionally, operating and maintenance expense includes costs incurred in response to the COVID-19 pandemic, as further described earlier in Impact of COVID-19 and Market Environment. Excluding the costs incurred in response to the COVID-19 pandemic, operating and maintenance expense (including affiliates) did not materially change between the three months ended June 30, 2020 and 2019 due to comparable volume of LNG sold between the periods, and increased during the six months
ended June 30, 2020 from the six months ended June 30, 2019, primarily due to increased natural gas transportation and storage capacity demand charges from additional Trains operating at the Liquefaction Projects between the periods and increased TUA reservation charges due to Total under the partial TUA assignment agreement.
Depreciation and amortization expense increased during the three and six months ended June 30, 2020 from the three and six months ended June 30, 2019 as a result of an increased number of operational Trains, as the related assets began depreciating upon reaching substantial completion.
We expect our operating costs and expenses to generally increase in the future upon Train 3 of the CCL Project and Train 6 of the SPL Project achieving substantial completion, although we expect certain costs will not proportionally increase with the number of operational Trains as cost efficiencies will be realized.
Other expense (income)
|
| | | | | | | | | | | | | | | | | | | | | | | |
| Three Months Ended June 30, | | Six Months Ended June 30, |
(in millions) | 2020 | | 2019 | | Change | | 2020 | | 2019 | | Change |
Interest expense, net of capitalized interest | $ | 407 |
| | $ | 372 |
| | $ | 35 |
| | $ | 819 |
| | $ | 619 |
| | $ | 200 |
|
Loss on modification or extinguishment of debt | 43 |
| | — |
| | 43 |
| | 44 |
| | — |
| | 44 |
|
Interest rate derivative loss, net | 25 |
| | 74 |
| | (49 | ) | | 233 |
| | 109 |
| | 124 |
|
Other income, net | (5 | ) | | (16 | ) | | 11 |
| | (14 | ) | | (32 | ) | | 18 |
|
Total other expense | $ | 470 |
| | $ | 430 |
| | $ | 40 |
| | $ | 1,082 |
| | $ | 696 |
| | $ | 386 |
|
Interest expense, net of capitalized interest, increased during the three and six months ended June 30, 2020 from the three and six months ended June 30, 2019 primarily as a result of a decrease in the portion of total interest costs that is eligible for capitalization as additional Trains of the Liquefaction Projects completed construction between the periods. During the three months ended June 30, 2020 and 2019, we incurred $469 million and $458 million of total interest cost, respectively, of which we capitalized $62 million and $86 million, respectively, which was primarily related to interest costs incurred to construct the remaining assets of the Liquefaction Projects. During the six months ended June 30, 2020 and 2019, we incurred $940 million and $906 million of total interest cost, respectively, of which we capitalized $121 million and $287 million, respectively, which was primarily related to interest costs incurred to construct the remaining assets of the Liquefaction Projects.
Loss on modification or extinguishment of debt increased during the three and six months ended June 30, 2020 from the comparable periods in 2019. Loss on modification or extinguishment of debt recognized in 2020 was attributable to $43 million of debt extinguishment costs relating to the payment of early redemption fees and write off of unamortized debt premiums and issuance costs associated with the early redemption of the 2021 SPL Senior Notes. As a result of the redemption of the remaining outstanding principal amount of the 2025 CCH HoldCo II Convertible Senior Notes and partial repurchase of the 2021 Cheniere Convertible Unsecured Notes in July 2020, we expect loss on modification or extinguishment of debt to increase in the third quarter of 2020.
Interest rate derivative loss, net decreased during the three months ended June 30, 2020 compared to the three months ended June 30, 2019, primarily due to a favorable shift in the long-term forward LIBOR curve between the periods. Interest rate derivative loss, net increased during the six months ended June 30, 2020 compared to the six months ended June 30, 2019, primarily due to an unfavorable shift in the long-term forward LIBOR curve between the periods.
Other income, net increased during the three and six months ended June 30, 2020 compared to the three and six months ended June 30, 2019, primarily due to an increase in interest income earned on our cash and cash equivalents and restricted cash.
Income tax provision
|
| | | | | | | | | | | | | | | | | | | | | | | |
| Three Months Ended June 30, | | Six Months Ended June 30, |
(in millions) | 2020 | | 2019 | | Change | | 2020 | | 2019 | | Change |
Income before income taxes and non-controlling interest | $ | 467 |
| | $ | 2 |
| | $ | 465 |
| | $ | 1,201 |
| | $ | 342 |
| | $ | 859 |
|
Income tax provision | (63 | ) | | — |
| | (63 | ) | | (194 | ) | | (3 | ) | | (191 | ) |
Effective tax rate | 13.5 | % | | — | % | | | | 16.2 | % | | 0.9 | % | | |
The effective tax rates for the three and six months ended June 30, 2020 were lower than the 21% federal statutory rate primarily due to income allocated to non-controlling interest that is not taxable to Cheniere. The effective tax rate decreased for
the three months ended June 30, 2020 from the six months ended June 30, 2020 due to an additional tax expense of $38 million recorded during the first quarter related to a one-time discrete event related to an internal tax restructuring. The effective tax rate for the three and six months ended June 30, 2019 is lower than the 21% federal statutory rate primarily due to maintaining a valuation allowance against our federal deferred tax assets.
On July 28, 2020, the U.S. Department of the Treasury released final regulations and proposed regulations providing guidance on the business interest expense limitation under Section 163(j) of the Internal Revenue Code. We are currently in the process of evaluating the effect of these regulations on our Consolidated Financial Statements and related disclosures.
Net income attributable to non-controlling interest
|
| | | | | | | | | | | | | | | | | | | | | | | |
| Three Months Ended June 30, | | Six Months Ended June 30, |
(in millions) | 2020 | | 2019 | | Change | | 2020 | | 2019 | | Change |
Net income attributable to non-controlling interest | $ | 207 |
| | $ | 116 |
| | $ | 91 |
| | $ | 435 |
| | $ | 312 |
| | $ | 123 |
|
Net income attributable to non-controlling interest increased during the three and six months ended June 30, 2020 from the three and six months ended June 30, 2019 primarily due to an increase in consolidated net income recognized by Cheniere Partners. The consolidated net income recognized by Cheniere Partners increased from $232 million in the three months ended June 30, 2019 to $406 million in the three months ended June 30, 2020 and increased from $617 million in the six months ended June 30, 2019 to $841 million in the six months ended June 30, 2020. The increase during the periods was primarily a result of accelerated revenues recognized from canceled cargoes for which customers have notified us that they will not take delivery, partially offset by increases in (1) interest expense, net of capitalized interest, (2) loss on modification or extinguishment of debt, (3) operating and maintenance expense and (4) depreciation and amortization expense.
Off-Balance Sheet Arrangements
As of June 30, 2020,2021, we had no transactions that met the definition of off-balance sheet arrangements that may have a current or future material effect on our consolidated financial position or operating results.
Summary of Critical Accounting Estimates
The preparation of our Consolidated Financial Statements in conformity with GAAP requires management to make certain estimates and assumptions that affect the amounts reported in the Consolidated Financial Statements and the accompanying notes. There have been no significant changes to our critical accounting estimates from those disclosed in our annual report on Form 10-K for the fiscal year ended December 31, 20192020.
Recent Accounting Standards
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Marketing and Trading Commodity Price Risk
We have entered into commodity derivatives consisting of natural gas supply contracts for the commissioning and operation of the SPL Project, the CCL Project and potential future development of Corpus Christi Stage 3 (“Liquefaction Supply Derivatives”). We have also entered into physical and financial derivatives to hedge the exposure to the commodity markets in which we have contractual arrangements to purchase or sell physical LNG (“LNG(collectively, “LNG Trading Derivatives”). In order to test the sensitivity of the fair value of the Liquefaction Supply Derivatives and the LNG Trading Derivatives to changes in underlying commodity prices, management modeled a 10% change in the commodity price for natural gas for each delivery location and a 10% change in the commodity price for LNG, respectively, as follows (in millions):
| | | | | | | | | | | | | | | | | | | | | | | |
| June 30, 2021 | | December 31, 2020 |
| Fair Value | | Change in Fair Value | | Fair Value | | Change in Fair Value |
Liquefaction Supply Derivatives | $ | (197) | | | $ | 246 | | | $ | 240 | | | $ | 204 | |
LNG Trading Derivatives | (401) | | | 49 | | | (134) | | | 44 | |
|
| | | | | | | | | | | | | | | |
| June 30, 2020 | | December 31, 2019 |
| Fair Value | | Change in Fair Value | | Fair Value | | Change in Fair Value |
Liquefaction Supply Derivatives | $ | 600 |
| | $ | 184 |
| | $ | 149 |
| | $ | 179 |
|
LNG Trading Derivatives | 151 |
| | 5 |
| | 165 |
| | 22 |
|
Interest Rate Risk
We are exposed to interest rate risk primarily when we incur debt related to project financing. Interest rate risk is managed in part by replacing outstanding floating-rate debt with fixed-rate debt with varying maturities. CCH has entered into interest rate swaps to hedge the exposure to volatility in a portion of the floating-rate interest payments under the CCH Credit Facility (“CCH Interest Rate Derivatives”) and to hedge against changes in interest rates that could impact anticipated future issuance of debt by CCH (“CCH Interest Rate Forward Start Derivatives”). In order to test the sensitivity of the fair value of the CCH Interest Rate Derivatives to changes in interest rates, management modeled a 10% change in the forward one-month LIBOR curve across the remaining terms of the CCH Interest Rate Derivatives and CCH Interest Rate Forward Start Derivatives as follows (in millions):
| | | | | | | | | | | | | | | | | | | | | | | |
| June 30, 2021 | | December 31, 2020 |
| Fair Value | | Change in Fair Value | | Fair Value | | Change in Fair Value |
CCH Interest Rate Derivatives | $ | (91) | | | $ | 1 | | | $ | (140) | | | $ | 1 | |
| | | | | | | |
|
| | | | | | | | | | | | | | | |
| June 30, 2020 | | December 31, 2019 |
| Fair Value | | Change in Fair Value | | Fair Value | | Change in Fair Value |
CCH Interest Rate Derivatives | $ | (191 | ) | | $ | 2 |
| | $ | (81 | ) | | $ | 19 |
|
CCH Interest Rate Forward Start Derivatives | (102 | ) | | 7 |
| | (8 | ) | | 15 |
|
Foreign Currency Exchange Risk
We have entered into foreign currency exchange (“FX”) contracts to hedge exposure to currency risk associated with operations in countries outside of the United States (“FX Derivatives”). In order to test the sensitivity of the fair value of the FX Derivatives to changes in FX rates, management modeled a 10% change in FX rate between the U.S. dollar and the applicable foreign currencies as follows (in millions):
| | | | | | | | | | | | | | | | | | | | | | | |
| June 30, 2021 | | December 31, 2020 |
| Fair Value | | Change in Fair Value | | Fair Value | | Change in Fair Value |
FX Derivatives | $ | (4) | | | $ | — | | | $ | (22) | | | $ | 2 | |
|
| | | | | | | | | | | | | | | |
| June 30, 2020 | | December 31, 2019 |
| Fair Value | | Change in Fair Value | | Fair Value | | Change in Fair Value |
FX Derivatives | $ | 15 |
| | $ | 2 |
| | $ | 4 |
| | $ | — |
|
| |
ITEM 4. | CONTROLS AND PROCEDURES |
ITEM 4. CONTROLS AND PROCEDURES
We maintain a set of disclosure controls and procedures that are designed to ensure that information required to be disclosed by us in the reports filed by us under the Exchange Act, is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms. As of the end of the period covered by this report, we evaluated, under the supervision and with the participation of our management, including our Chief Executive Officer and our Chief Financial Officer, the effectiveness of our disclosure controls and procedures pursuant to Rule 13a-15 of the Exchange Act. Based on that evaluation, our Chief Executive Officer and our Chief Financial Officer concluded that our disclosure controls and procedures are effective.
During the most recent fiscal quarter, there have been no changes in our internal control over financial reporting that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
PART II. OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
We may in the future be involved as a party to various legal proceedings, which are incidental to the ordinary course of business. We regularly analyze current information and, as necessary, provide accruals for probable liabilities on the eventual disposition of these matters. ThereOther than discussed below, there have been no material changes to the legal proceedings disclosed in our annual report on Form 10-K for the fiscal year ended December 31, 20192020.
In February 2018, the Pipeline and Hazardous Materials Safety Administration (“PHMSA”) issued a Corrective Action Order (the “CAO”) to SPL in connection with a minor LNG leak from one tank and minor vapor release from a second tank at the Sabine Pass LNG terminal. These two tanks have been taken out of operational service while we conduct analysis, repair and remediation. On April 20, 2018, SPL and PHMSA executed a Consent Agreement and Order (the “Consent Order”) that replaces and supersedes the CAO. On July 9, 2019, PHMSA and FERC issued a joint letter setting out operating conditions required to be met prior to SPL returning the tanks to service. In July 2021, PHMSA issued a Notice of Probable Violation (“NOPV”) and Proposed Civil Penalty to SPL alleging violations of federal pipeline safety regulations relating to the 2018 SPL tank incident and proposing civil penalties totaling $2,214,900. We continue to coordinate with PHMSA and FERC to address the matters relating to the February 2018 leak, including repair approach and related analysis. We do not expect that the Consent Order and related analysis, repair and remediation or resolution of the NOPV will have a material adverse impact on our financial results or operations.
ITEM 1A. RISK FACTORS
| |
ITEM 2. | UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS |
ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS
Purchase of Equity Securities by the Issuer and Affiliated Purchasers
The following table summarizes stock repurchases for the three months ended June 30, 2020:2021: |
| | | | | | | | |
Period | | Total Number of Shares Purchased (1) | | Average Price Paid Per Share (2) | | Total Number of Shares Purchased as a Part of Publicly Announced Plans | | Approximate Dollar Value of Shares That May Yet Be Purchased Under the Plans (3) |
April 1 - 30, 2020 | | 1,672 | | $33.92 | | — | | $595,952,809 |
May 1 - 31, 2020 | | 3,242 | | $43.24 | | — | | $595,952,809 |
June 1 - 30, 2020 | | — | | $— | | — | | $595,952,809 |
Total | | 4,914 | | $40.07 | | — | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | |
Period | | Total Number of Shares Purchased (1) | | Average Price Paid Per Share (2) | | Total Number of Shares Purchased as a Part of Publicly Announced Plans | | Approximate Dollar Value of Shares That May Yet Be Purchased Under the Plans (3) |
April 1 - 30, 2021 | | 4,734 | | $72.83 | | — | | $595,952,809 |
May 1 - 31, 2021 | | 2,624 | | $77.52 | | — | | $595,952,809 |
June 1 - 30, 2021 | | — | | $— | | — | | $595,952,809 |
Total | | 7,358 | | $74.50 | | — | | |
| |
(1) | (1)Includes issued shares surrendered to us by participants in our share-based compensation plans for payment of applicable tax withholdings on the vesting of share-based compensation awards. Associated shares surrendered by participants are repurchased pursuant to terms of the plan and award agreements and not as part of the publicly announced share repurchase plan. |
| |
(2) | The price paid per share was based on the average trading price of our common stock on the dates on which we repurchased the shares. |
| |
(3) | On June 3, 2019, we announced that our Board authorized a 3-year, $1 billion share repurchase program. For additional information, see Note 16—Share Repurchase Program. |
(2)The price paid per share was based on the average trading price of our common stock on the dates on which we repurchased the shares. (3)On June 3, 2019, we announced that our Board authorized a 3-year, $1 billion share repurchase program. For additional information, see Share Repurchase Program in Liquidity and Capital Resources.
ITEM 6. EXHIBITS
| | | | | | | | | |
| | |
Exhibit No. | | Description |
4.1Exhibit No. | | | | | | | |
10.110.1*† | | |
10.2 | | |
10.3† | | |
10.4† | | |
10.5† | | |
10.6† | | | | | | | |
10.2* | | Fourth Amendment to Exhibit 10.4Common Security and Account Agreement, dated as of April 1, 2021, among CCH, CCL, CCP and Corpus Christi Pipeline GP, LLC, the Senior Creditor Group Representatives, Société Générale as Intercreditor Agent for the Facility Lenders and any Hedging Banks, Société Générale as Security Trustee, and Mizuho Bank, Ltd. as Account Bank. | | | | | |
10.3* | | Sixth Amendment to the Company’s Current ReportAmended and Restated Common Terms Agreement, dated as of April 1, 2021, by and among CCH, CCL, CCP and Corpus Christi Pipeline GP, LLC, Société Générale as the Term Loan Facility Agent, The Bank of Nova Scotia as the Working Capital Facility Agent, each other Facility Agent on Form 8-K (SEC File No. 001-16383), filed on May 20, 2020)behalf of its respective Facility Lenders, and Société Générale as the Intercreditor Agent | | | | | |
10.7†10.4* | | |
10.8† | | |
10.9* | | Change orderorders to the Lump Sum Turnkey Agreement for the Engineering, Procurement and Construction of the Sabine Pass LNG Stage 4 Liquefaction Facility, dated November 7, 2018, by and between SPL and Bechtel Oil Gas and Chemicals, Inc.: (i) the Change Order CO-00018 Electrical Studies for GTG Grid Modification,CO-00043Third Berth SVT Loading Arm Spares, dated April 2, 2020,9, 2021, (ii) the Change Order CO-00019CO-00044 Third Berth - Change in 5kV Electrical Tie-In,U/G Directional Drilling & Cathodic Protection Provisional Sum Closures, dated April 30, 2020,9, 2021, (iii) the Change Order CO-00020 LNG Berth 3 LNTP No. 4,CO-00045Winter Storm Impacts, dated May 4, 2020, (iv)April 9, 2021, (iv) the Change Order CO-00021 Train 6 P1601 A/B/ Flange Changes,CO-00046 NGPL Security Provisional Sum Interim Adjustment, dated May 27, 2020 andJune 15, 2021, (v) the Change Order CO-00022 Train 6 H2S Skid Modifications to Level Transmitters & GTG Pressure Range Change on PT-573 A/B,CO-00047 80 Acres Bridge, dated June 4, 2020 |
10.10* | | Change orders to the Amended15, 2021 and Restated Fixed Price Separated Turnkey Agreement for the Engineering, Procurement and Construction of the Corpus Christi Stage 2 Liquefaction Facility, dated as of December 12, 2017, between CCL and Bechtel Oil, Gas and Chemicals, Inc.: (i)(vi) the Change Order CO-00031 Tank B Isolation of Proposed 4th In-Tank LNG Pump (Post Start-Up of Tank B) - EPC,CO-00048 AGRU Additions for Lean Solvent Overpressure, dated April June 15, 2021 2020, (ii) the Change Order CO-00032 Train 3 Thermowell Upgrades, dated April 3, 2020, (iii) the Change Order CO-00033 Tank B Rundown Line (Part 2) Development Costs, dated April 29, 2020 and (iv) the Change Order CO-00034 Train 3 UPS Modification of MV Motors, dated May 21, 2020 (Portions of this exhibit have been omitted) | | | | | |
10.11*31.1* | | |
31.1* | | | | | | | |
31.2* | | | | | | | |
32.1** | | | | | | | |
32.2** | | | | | | | |
101.INS* | | XBRL Instance Document | | | | | |
101.SCH* | | XBRL Taxonomy Extension Schema Document | | | | | |
101.CAL* | | XBRL Taxonomy Extension Calculation Linkbase Document | | | | | |
101.DEF* | | XBRL Taxonomy Extension Definition Linkbase Document |
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Exhibit No.101.LAB* | | Description |
101.LAB* | | XBRL Taxonomy Extension Labels Linkbase Document | | | | | |
101.PRE* | | XBRL Taxonomy Extension Presentation Linkbase Document | | | | | |
104* | | Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101) | | | | | |
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* | Filed herewith. |
** | Furnished herewith. |
† | Management contract or compensatory plan or arrangement. |
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
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| | CHENIERE ENERGY, INC. |
| | |
| | | |
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| | | |
| | CHENIERE ENERGY, INC. | |
| | | |
Date: | August 5, 2020 | By: | /s/ Michael J. Wortley |
Date: | August 4, 2021 | By: | Michael J. Wortley/s/ Zach Davis |
| | | ExecutiveZach Davis |
| | | Senior Vice President and Chief Financial Officer |
| | | (on behalf of the registrant and as principal financial officer) |
| | | |
Date: | August 5, 20204, 2021 | By: | /s/ Leonard E. Travis |
| | | Leonard E. Travis |
| | | Senior Vice President and Chief Accounting Officer |
| | | (on behalf of the registrant and as principal accounting officer) |