At any time prior to January 1, 2027, we may redeem all or a part of the 2027 CCH Senior Notes at a redemption price equal to the “make-whole” price set forth in the CCH Indenture, plus accrued and unpaid interest, if any, to the date of redemption. We also may at any time on or after January 1, 2027 through the maturity date of June 30, 2027, redeem the 2027 CCH Senior Notes, in whole or in part, at a redemption price equal to 100% of the principal amount of the 2027 CCH Senior Notes to be redeemed, plus accrued and unpaid interest, if any, to the date of redemption.
In connection with the closing of the sale of the 2027 CCH Senior Notes, we and the Guarantors entered into a registration rights agreement (the “CCH Registration Rights Agreement”). Under the CCH Registration Rights Agreement, we and the Guarantors have agreed, and any future guarantors of the 2027 CCH Senior Notes will agree, to use commercially reasonable efforts to file with the SEC and cause to become effective a registration statement relating to an offer to exchange any and all of the 2027 CCH Senior Notes for a like aggregate principal amount of our debt securities with terms identical in all material respects to the 2027 CCH 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 May 19, 2017. Under specified circumstances, we and the Guarantors have also agreed, and any future guarantors of the 2027 CCH Senior Notes will also agree, to use commercially reasonable efforts to cause to become effective a shelf registration statement relating to resales of the 2027 CCH Senior Notes. We will be obligated to pay additional interest on the 2027 CCH Senior Notes if we fail to comply with our obligation to register them within the specified time period.
Contents
CHENIERE CORPUS CHRISTI HOLDINGS, LLC AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—CONTINUED
(unaudited)
Consolidated Balance Sheets Presentation
Credit Facilities
Below is a summary (in thousands)The following table shows the fair value of our credit facilitiesderivatives outstanding as of September 30, 2017:
|
| | | | | | | | |
| | 2015 CCH Credit Facility | | CCH Working Capital Facility |
Original facility size | | $ | 8,403,714 |
| | $ | 350,000 |
|
Outstanding balance | | 2,150,737 |
| | — |
|
Commitments terminated | | 3,832,263 |
| | — |
|
Letters of credit issued | | — |
| | 162,503 |
|
Available commitment | | $ | 2,420,714 |
| | $ | 187,497 |
|
| | | | |
Interest rate | | LIBOR plus 2.25% or base rate plus 1.25% (1) | | LIBOR plus 1.50% - 2.00% or base rate plus 0.50% - 1.00% |
Maturity date | | Earlier of May 13, 2022 or second anniversary of CCL Trains 1 and 2 completion date | | December 14, 2021, with various terms for underlying loans |
on a gross and net basis (in millions) for our derivative instruments that are presented on a net basis on our Consolidated Balance Sheets: | | | | | | | | | |
(1) | There is a 0.25% step-up for both LIBOR and base rate loans following the completion | | | | | Liquefaction Supply Derivatives |
| | | |
As of Trains 1 and 2June 30, 2022 | | | | | | |
Gross assets | | | | | | $ | 151 | |
Offsetting amounts | | | | | | (13) | |
Net assets | | | | | | $ | 138 | |
| | | | | | |
Gross liabilities | | | | | | $ | (5,485) | |
Offsetting amounts | | | | | | 368 | |
Net liabilities | | | | | | $ | (5,117) | |
| | | | | | |
As of the Liquefaction Project as defined in the common terms agreement.December 31, 2021 | | | | | | |
Gross assets | | | | | | $ | 76 | |
Offsetting amounts | | | | | | (22) | |
Net assets | | | | | | $ | 54 | |
| | | | | | |
Gross liabilities | | | | | | $ | (1,295) | |
Offsetting amounts | | | | | | 29 | |
Net liabilities | | | | | | $ | (1,266) | |
Interest Expense
Total interest expenseNOTE 8—ACCRUED LIABILITIES
Accrued liabilities consisted of the following (in thousands)millions):
| | | | | | | | | | | | | | |
| | |
| | June 30, | | December 31, |
| | 2022 | | 2021 |
Natural gas purchases | | $ | 716 | | | $ | 531 | |
Interest costs and related debt fees | | 8 | | | 7 | |
Liquefaction Project costs | | 41 | | | 43 | |
Other accrued liabilities | | 31 | | | 50 | |
Total accrued liabilities | | $ | 796 | | | $ | 631 | |
|
| | | | | | | | | | | | | | | | |
| | Three Months Ended September 30, | | Nine Months Ended September 30, |
| | 2017 | | 2016 | | 2017 | | 2016 |
Total interest cost | | $ | 95,204 |
| | $ | 61,649 |
| | $ | 263,560 |
| | $ | 154,404 |
|
Capitalized interest, including amounts capitalized as an Allowance for Funds Used During Construction | | (95,204 | ) | | (61,649 | ) | | (263,560 | ) | | (154,404 | ) |
Total interest expense, net | | $ | — |
| | $ | — |
| | $ | — |
| | $ | — |
|
Fair Value Disclosures
The following table (in thousands) shows the carrying amount and estimated fair valueTable of our debt: |
| | | | | | | | | | | | | | | | |
| | September 30, 2017 | | December 31, 2016 |
| | Carrying Amount | | Estimated Fair Value | | Carrying Amount | | Estimated Fair Value |
Senior notes (1) | | $ | 4,250,000 |
| | $ | 4,583,750 |
| | $ | 2,750,000 |
| | $ | 2,901,563 |
|
Credit facilities (2) | | 2,150,737 |
| | 2,150,737 |
| | 2,380,788 |
| | 2,380,788 |
|
| |
(1) | Includes 2024 CCH Senior Notes, 2025 CCH Senior Notes and 2027 CCH Senior Notes (collectively, the “CCH Senior Notes”). The Level 2 estimated fair value was based on quotes obtained from broker-dealers or market makers of the CCH Senior Notes and other similar instruments. |
| |
(2) | Includes 2015 CCH Credit Facility and CCH Working Capital Facility. 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. |
Contents
CHENIERE CORPUS CHRISTI HOLDINGS, LLC AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—CONTINUED
(unaudited)
NOTE 7—9—DEBT
Debt consisted of the following (in millions):
| | | | | | | | | | | | | | |
| | |
| | June 30, | | December 31, |
| | 2022 | | 2021 |
Senior Secured Notes: | | | | |
7.000% due 2024 | | $ | 1,250 | | | $ | 1,250 | |
5.875% due 2025 | | 1,500 | | | 1,500 | |
5.125% due 2027 | | 1,500 | | | 1,500 | |
3.700% due 2029 | | 1,500 | | | 1,500 | |
3.72% weighted average rate due 2039 | | 2,721 | | | 2,721 | |
Total Senior Secured Notes | | 8,471 | | | 8,471 | |
CCH Credit Facility | | 779 | | | 1,728 | |
CCH Working Capital Facility) (1) | | — | | | 250 | |
Total debt | | 9,250 | | | 10,449 | |
| | | | |
Current portion of long-term debt | | — | | | (117) | |
Short-term debt | | — | | | (250) | |
Unamortized discount and debt issuance costs, net | | (82) | | | (96) | |
Total long-term debt, net of discount and debt issuance costs | | $ | 9,168 | | | $ | 9,986 | |
(1)The CCH Working Capital Facility is classified as short-term debt.
Credit Facilities
Below is a summary of our credit facilities outstanding as of June 30, 2022 (in millions):
| | | | | | | | | | | | | | |
| | CCH Credit Facility (1) | | CCH Working Capital Facility (1) |
Total facility size | | $ | 4,039 | | | $ | 1,500 | |
| | | | |
Less: | | | | |
Outstanding balance | | 779 | | | — | |
| | | | |
Letters of credit issued | | — | | | 276 | |
Available commitment | | $ | 3,260 | | | $ | 1,224 | |
| | | | |
Priority ranking | | Senior secured | | Senior secured |
Interest rate on available balance | | SOFR plus credit spread adjustment of 0.1% , plus margin of 1.5% or base rate plus 0.5% | | SOFR plus credit spread adjustment of 0.1%, plus margin of 1.0% - 1.5% or base rate plus applicable margin |
Weighted average interest rate of outstanding balance | | 3.13% | | n/a |
Commitment fees on undrawn balance | | 0.53% | | 0.18% |
Maturity date | | (2) | | June 15, 2027 |
(1)In June 2022, we amended and restated the CCH Credit Facility and CCH Working Capital Facility resulting in $20 million of debt extinguishment and modification costs to, among other things, (1) provide incremental commitments of $3.7 billion and $300 million for the CCH Credit Facility and the CCH Working Capital Facility, respectively, in connection with the FID with respect to the Corpus Christi Stage 3 Project, (2) extend the maturity, (3) update the indexed interest rate to SOFR and (4) make certain other changes to the terms and conditions of each existing facility.
(2)The CCH Credit Facility matures the earlier of June 15, 2029 or two years after the substantial completion of the last Train of the Corpus Christi Stage 3 Project.
CHENIERE CORPUS CHRISTI HOLDINGS, LLC AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—CONTINUED
(unaudited)
Restrictive Debt Covenants
The indentures governing our senior notes and other agreements underlying our debt contain customary terms and events of default and certain covenants that, among other things, may limit us and our restricted subsidiaries’ ability to make certain investments or pay dividends or distributions.
As of June 30, 2022, we were in compliance with all covenants related to our debt agreements.
Interest Expense
Total interest expense, net of capitalized interest consisted of the following (in millions):
| | | | | | | | | | | | | | | | | | | | | | | | | |
| Three Months Ended June 30, | | Six Months Ended June 30, |
| 2022 | | 2021 | | 2022 | | 2021 | | |
Total interest cost | $ | 118 | | | $ | 118 | | | $ | 237 | | | $ | 237 | | | |
Capitalized interest, including amounts capitalized as an allowance for funds used during construction | (2) | | | — | | | (3) | | | (26) | | | |
Total interest expense, net of capitalized interest | $ | 116 | | | $ | 118 | | | $ | 234 | | | $ | 211 | | | |
Fair Value Disclosures
The following table shows the carrying amount and estimated fair value of our debt (in millions):
| | | | | | | | | | | | | | | | | | | | | | | | | | |
| | June 30, 2022 | | December 31, 2021 |
| | Carrying Amount | | Estimated Fair Value | | Carrying Amount | | Estimated Fair Value |
Senior notes — Level 2 (1) | | $ | 6,500 | | | $ | 6,291 | | | $ | 6,500 | | | $ | 7,095 | |
Senior notes — Level 3 (2) | | 1,971 | | | 1,865 | | | 1,971 | | | 2,227 | |
| | | | | | | | |
| | | | | | | | |
(1)The Level 2 estimated fair value was based on quotes obtained from broker-dealers or market makers of these senior notes and other similar instruments.
(2)The Level 3 estimated fair value was calculated based on inputs that are observable in the market or that could be derived from, or corroborated with, observable market data, including interest rates based on debt issued by parties with comparable credit ratings to us and inputs that are not observable in the market.
The estimated fair value of our credit facilities approximates the principal amount outstanding because the interest rates are variable and reflective of market rates and the debt may be repaid, in full or in part, at any time without penalty.
NOTE 10—REVENUES FROM CONTRACTS WITH CUSTOMERS
The following table represents a disaggregation of revenue earned from contracts with customers (in millions):
| | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | Three Months Ended June 30, | | Six Months Ended June 30, |
| | 2022 | | 2021 | | 2022 | | 2021 | | |
LNG revenues | | $ | 1,595 | | | $ | 827 | | | $ | 2,924 | | | $ | 1,441 | | | |
LNG revenues—affiliate | | 763 | | | 331 | | | 1,434 | | | 599 | | | |
Total revenues from customers | | 2,358 | | | 1,158 | | | 4,358 | | | 2,040 | | | |
Net derivative gain (loss) (1) | | 12 | | | (1) | | | 7 | | | — | | | |
Total revenues | | $ | 2,370 | | | $ | 1,157 | | | $ | 4,365 | | | $ | 2,040 | | | |
CHENIERE CORPUS CHRISTI HOLDINGS, LLC AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—CONTINUED
(unaudited)
Contract Assets and Liabilities
The following table shows our contract assets, net of current expected credit losses, which are classified as other current assets and other non-current assets, net on our Consolidated Balance Sheets (in millions):
| | | | | | | | | | | | | | |
| | |
| | June 30, | | December 31, |
| | 2022 | | 2021 |
Contract assets, net of current expected credit losses | | $ | 125 | | | $ | 104 | |
The following table reflects the changes in our contract liabilities, which we classify as other non-current liabilities on our Consolidated Balance Sheets (in millions):
| | | | | | | | | | |
| | |
| | Six Months Ended June 30, 2022 | | |
Deferred revenue, beginning of period | | $ | 35 | | | |
Cash received but not yet recognized in revenue | | 56 | | | |
Revenue recognized from prior period deferral | | (35) | | | |
Deferred revenue, end of period | | $ | 56 | | | |
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:
| | | | | | | | | | | | | | | | | | | | | | | | | | |
| | June 30, 2022 | | December 31, 2021 |
| | Unsatisfied Transaction Price (in billions) | | Weighted Average Recognition Timing (years) (1) | | Unsatisfied Transaction Price (in billions) | | Weighted Average Recognition Timing (years) (1) |
LNG revenues | | $ | 49.2 | | | 11 | | $ | 31.7 | | | 9 |
LNG revenues—affiliate | | 1.3 | | | 8 | | 1.1 | | | 10 |
Total revenues | | $ | 50.5 | | | | | $ | 32.8 | | | |
(1)The weighted average recognition timing represents an estimate of the number of years during which we shall have recognized half of the unsatisfied transaction price.
We have elected the following exemptions which omit certain potential future sources of revenue from the table above:
(1)We omit from the table above all performance obligations that are part of a contract that has an original expected duration of one year or less.
(2)The table above excludes substantially all variable consideration under our SPAs. 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 72% and 49% of our LNG revenues from contracts included in the table above during the three months ended June 30, 2022 and 2021, respectively, and approximately 68% and 48% of our LNG revenues from contracts included in the table above during the six months ended June 30, 2022 and 2021, respectively, were related to variable consideration received from customers. None of our LNG revenues—affiliates from the contract included in the table above were related to variable consideration received from customers during the three and six months ended June 30, 2022 and 2021.
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.
CHENIERE CORPUS CHRISTI HOLDINGS, LLC AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—CONTINUED
(unaudited)
NOTE 11—RELATED PARTY TRANSACTIONS
Below is a summary of our related party transactions as reported on our Consolidated Statements of Operations (in millions):
| | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Three Months Ended June 30, | | Six Months Ended June 30, |
| 2022 | | 2021 | | 2022 | | 2021 | | |
LNG revenues—affiliate | | | | | | | | | |
Cheniere Marketing Agreements | $ | 707 | | | $ | 319 | | | $ | 1,372 | | | $ | 579 | | | |
Contracts for Sale and Purchase of Natural Gas and LNG | 56 | | | 12 | | | 62 | | | 20 | | | |
Total LNG revenues—affiliate | 763 | | | 331 | | | 1,434 | | | 599 | | | |
| | | | | | | | | | |
| | | | | | | | | | |
| | | | | | | | | |
| | | | | | | | | |
Cost of sales—affiliate | | | | | | | | | |
Contracts for Sale and Purchase of Natural Gas and LNG | 36 | | | 2 | | | 48 | | | 6 | | | |
Cheniere Marketing Agreements | — | | | — | | | — | | | 31 | | | |
Total cost of sales—affiliate | 36 | | | 2 | | | 48 | | | 37 | | | |
| | | | | | | | | |
Cost of sales—related party | | | | | | | | | |
Natural Gas Supply Agreement (1) | — | | | 36 | | | — | | | 71 | | | |
| | | | | | | | | |
| | | | | | | | | |
| | | | | | | | | |
Operating and maintenance expense—affiliate | | | | | | | | | |
Services Agreements | 28 | | | 28 | | | 58 | | | 52 | | | |
| | | | | | | | | |
| | | | | | | | | |
| | | | | | | | | |
| | | | | | | | | |
Operating and maintenance expense—related party | | | | | | | | | |
Natural Gas Transportation Agreements | 3 | | | 3 | | | 5 | | | 5 | | | |
| | | | | | | | | |
| | | | | | | | | |
| | | | | | | | | |
| | | | | | | | | |
General and administrative expense—affiliate | | | | | | | | | |
Services Agreements | 8 | | | 7 | | | 16 | | | 12 | | | |
(1)Includes amounts recorded related to natural gas supply contracts that we had with a related party. This agreement ceased to be considered a related party agreement during 2021, as discussed below.
We had $16.6$28 million and $7.1$35 million due to affiliates and zero and $0.6 million of other non-current liabilities—affiliate as of SeptemberJune 30, 20172022 and December 31, 2016,2021, respectively, under agreements with affiliates, as described below.
LNG Sale and PurchaseCheniere Marketing Agreements
Cheniere Marketing SPA
CCL has twoan amended and restated fixed price 20-year SPAsSPA with Cheniere Marketing International LLP (“Cheniere Marketing UK”). Under the first SPA (the “Amended Cheniere Marketing Foundation SPA”Marketing”), Cheniere Marketing UK will purchase LNG from CCL for a price consistingwholly owned subsidiary of a fixed fee of $3.50 per MMBtu (a portion of which is subject to annual adjustment for inflation) of LNG plus a variable fee equal to 115% of Henry Hub per MMBtu of LNG. At Cheniere, Marketing UK’s option, which has not been exercised yet, the Amended Cheniere Marketing Foundation SPA commences upon the date of first commercial delivery for Train 2 and includes an annual contract quantity of 40 TBtu of LNG. The second SPA (the “Cheniere Marketing Base SPA”) with a term of 20 years which allows Cheniere Marketing UK to purchase, at its option, (1) up to a cumulative total of 150 TBtu of LNG within the commissioning periods for Trains 1 through 3 (2) any LNG produced from the end of the commissioning period for Train 1 until the date of first commercial delivery of LNG from Train 1 and (3)(2) any excess LNG produced by the Liquefaction FacilityProject that is not committed to customers under third-party SPAs or to Cheniere Marketing UK under the Amended Cheniere Marketing Foundation SPA, as determined by CCL in each contract year, in each case for a price consisting of a fixed fee of $3.00 per MMBtu of LNG plus a variable fee equal to 115% of Henry Hub per MMBtu of LNG.third party SPAs. Under the Cheniere Marketing Base SPA, Cheniere Marketing UK may, without charge, elect to suspend deliveries of cargoes (other than commissioning cargoes) scheduled for any month under the applicable annual delivery program by providing specified notice in advance. Additionally, CCL has: (1) a fixed price SPA with a term through 2043 with Cheniere Marketing which allows them to purchase volumes of approximately 15 TBtu per annum of LNG and (2) an SPA with Cheniere Marketing for approximately 44 TBtu of LNG with a maximum term up to 2026 associated with the integrated production marketing gas supply agreement between CCL and EOG Resources, Inc. As of June 30, 2022 and December 31, 2021, CCL had $294 million and $314 million of accounts receivable—affiliate, respectively, under these agreements with Cheniere Marketing.
In association with an IPM agreement between CCL and ARC Resources U.S. Corp, CCL entered into an SPA in June 2022 with Cheniere Marketing to sell Cheniere Marketing approximately 44 TBtu per annum of LNG at a price linked to the Platts Japan Korea Marker (“JKM”), for a term of 15 years commencing with commercial operations of Train 7 of the Corpus Christi Stage 3 Project.
CHENIERE CORPUS CHRISTI HOLDINGS, LLC AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—CONTINUED
(unaudited)
Cheniere Marketing Letter Agreement
CCL has a letter agreement with Cheniere Marketing for the sale of up to 48 cargoes scheduled to be delivered between 2023 and 2025 at a price equal to 115% of Henry Hub plus $1.97 per MMBtu.
Facility Swap Agreement
We have entered into an arrangement with subsidiaries of Cheniere to provide the ability, in limited circumstances, to potentially fulfill commitments to LNG buyers in the event operational conditions impact operations at either the Sabine Pass or Corpus Christi liquefaction facilities. The purchase price for such cargoes would be (i) 115% of the applicable natural gas feedstock purchase price or (ii) a free-on-board U.S. Gulf Coast LNG market price, whichever is greater.
Services Agreements
We recorded aggregate expenses from affiliates on our Consolidated Statements of Operations of $1.7 million and $0.3 million during the three months ended September 30, 2017 and 2016, respectively, and $2.2 million and $0.5 million for the nine months ended September 30, 2017 and 2016, respectively, under the services agreements below.
Gas and Power Supply Services Agreement (“G&P Agreement”)
CCL has a G&P Agreement with Cheniere Energy Shared Services, Inc. (“Shared Services”), a wholly owned subsidiary of Cheniere, pursuant to which Shared Services will manage the gas and power procurement requirements of CCL. The services include, among other services, exercising the day-to-day management of CCL’s natural gas and power supply requirements, negotiating agreements on CCL’s behalf and providing other administrative services. Prior to the substantial completion of each Train of the Liquefaction Facility,Project, no monthly fee payment is required except for reimbursement of operating expenses. After substantial completion of each Train of the Liquefaction Facility, for services performed while the Liquefaction Facility is operational,Project, CCL will pay, in addition to the reimbursement of operatingrelated expenses, a fixed monthly fee of $125,000$30,000 (indexed for inflation) per mtpa for services performed with respect to such Train.
Operation and Maintenance Agreements (“O&M Agreements”)
CCL has an O&M Agreement (“CCL O&M Agreement”) with Cheniere LNG O&M Services, LLC (“O&M Services”), a wholly owned subsidiary of Cheniere, pursuant to which CCL receives all of the necessary services required to construct, operate and maintain the Liquefaction Facility.Project. The services to be provided include, among other services, preparing and maintaining staffing plans, identifying and arranging for procurement of equipment and materials, overseeing contractors, administering various agreements, information technology services and other services required to operate and maintain the Liquefaction Facility.Project. Prior to the substantial completion of each Train of the Liquefaction Facility,Project, no monthly fee payment is required except for reimbursement of operating expenses. After substantial completion of each Train of the Liquefaction Facility, for services performed while the Liquefaction Facility is operational,Project, CCL will pay, in addition to the reimbursement of operatingrelated expenses, a fixed monthly fee of $125,000$53,000 (indexed for inflation) per mtpa for services performed with respect to such Train.
CCP has an O&M Agreement (“CCP O&M Agreement”) with O&M Services pursuant to which CCP receives all of the necessary services required to construct, operate and maintain the Corpus Christi Pipeline. The services to be provided include, among other services, preparing and maintaining staffing plans, identifying and arranging for procurement of equipment and
CHENIERE CORPUS CHRISTI HOLDINGS, LLC AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—CONTINUED
(unaudited)
materials, overseeing contractors, information technology services and other services required to operate and maintain the Corpus Christi Pipeline. CCP is required to reimburse O&M Services for all operating expenses incurred on behalf of CCP.
Management Services Agreements (“MSAs”)
CCL has an MSA with Shared Services pursuant to which Shared Services manages the construction and operation of the Liquefaction Facility,Project, excluding those matters provided for under the G&P Agreement and the CCL O&M Agreement. The services include, among other services, exercising the day-to-day management of CCL’s affairs and business, managing CCL’s regulatory matters, preparing status reports, providing contract administration services for all contracts associated with the Liquefaction FacilityProject and obtaining insurance. Prior to the substantial completion of each Train of the Liquefaction Facility,Project, no monthly fee payment is required except for reimbursement of expenses. After substantial completion of each Train, CCL will pay, in addition to the reimbursement of related expenses, a monthly fee equal to 3% of the capital expenditures incurred in the previous month and a fixed monthly fee of $375,000$157,000 (adjusted for inflation) per mtpa for services performed with respect to such Train.
CHENIERE CORPUS CHRISTI HOLDINGS, LLC AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—CONTINUED
(unaudited)
CCP has ana MSA with Shared Services pursuant to which Shared Services manages CCP’s operations and business, excluding those matters provided for under the CCP O&M Agreement. The services include, among other services, exercising the day-to-day management of CCP’s affairs and business, managing CCP’s regulatory matters, preparing status reports, providing contract administration services for all contracts associated with the Corpus Christi Pipeline and obtaining insurance. CCP is required to reimburse Shared Services for the aggregate of all costs and expenses incurred in the course of performing the services under the MSA.
Shipping Services Agreement (“SSA”)
Lease
In June 2022, CCL executed an SSA with Cheniere Marketing pursuant to which Cheniere Marketing will provide certain shipping and transportation-related services associated with CCL’s LNG sale and purchase agreement with a third party under delivery ex-ship terms, which commences upon substantial completion of the third Train of the Corpus Christi Stage 3 Project.
Natural Gas Supply Agreement
CCL was party to a natural gas supply agreement with a related party in the ordinary course of business, to obtain a fixed minimum daily volume of feed gas for the operation of the Liquefaction Project. The related party entity was acquired by a non-related party on November 1, 2021, therefore, as of such date, this agreement ceased to be considered a related party agreement.
Natural Gas Transportation Agreements
Agreements with Related Party
CCL is party to natural gas transportation agreements with a related party in the ordinary course of business for the operation of the Liquefaction Project, for a period of 10 years which began in May 2020. Cheniere accounts for its investment in this related party as an equity method investment. CCL recorded accrued liabilities—related party of $1 million as of both June 30, 2022 and December 31, 2021 with this related party.
Contracts for Sale and Purchase of Natural Gas and LNG
CCL has an agreement with Sabine Pass Liquefaction, LLC that allows the parties to sell and purchase natural gas with each other. Natural gas purchased under this agreement is initially recorded as inventory and then to cost of sales—affiliate upon its sale, except for purchases related to commissioning activities which are capitalized as LNG terminal construction-in-process. Natural gas sold under this agreement is recorded as LNG revenues—affiliate.
CCL also has an agreement with Midship Pipeline Company, LLC that allows them to sell and purchase natural gas with each other.
Land Agreements
Rental Agreements
CCL has agreements with Cheniere Land Holdings, LLC (“Cheniere Land Holdings”), a wholly owned subsidiary of Cheniere, to lease approximately 60 acres ofrent the land owned by Cheniere Land Holdings for the Liquefaction Facility.Project. The total annual leaserental payment is $0.6 million with terms through 2031.
Easement Agreements
CCL has agreements with Cheniere Land Holdings which grant CCL easements on land owned by Cheniere Land Holdings for the Liquefaction Project. The total annual payment for easement agreements is $0.1 million, excluding any previously paid in advance upon 30 days of the effective date of the respective leases, is $0.4 million,one-time payments, and the terms of the agreements range from three to five years. We recorded $0.1 million and $0.2 million
CHENIERE CORPUS CHRISTI HOLDINGS, LLC AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—CONTINUED
(unaudited)
Master License Agreements
CCL has agreements as operating and maintenance expense—affiliate for the three and nine months ended September 30, 2017, respectively, and $11,000 of expense during each of the three and nine months ended September 30, 2016. As of September 30, 2017, we had $0.3 million of prepaid expense related to this agreement in other current assets—affiliate.
In September 2016, CCP entered into a pipeline right of way easement agreement with Cheniere Land Holdings granting CCP the rightwhich grant CCL licenses to construct, install and operate a natural gas pipeline onenter certain land owned by Cheniere Land Holdings. CCP had made a one-time payment of $0.3 million to Cheniere Land Holdings for the permanent easementLiquefaction Project. The aggregate annual payment for these agreements is $1 million, commencing January 2022 through completion of this land as of December 31, 2016.
construction at the Liquefaction Project, subject to early termination.
Dredge Material Disposal Agreement
CCL has a dredge material disposal agreement with Cheniere Land Holdings that terminates in 20252042 which grants CCL permission to use land owned by Cheniere Land Holdings for the deposit of dredge material from the construction and maintenance of the Liquefaction Facility.Project. Under the terms of the agreement, CCL will pay Cheniere Land Holdings $0.50 per cubic yard of dredge material deposits up to 5.0 million cubic yards.yards and $4.62 per cubic yard for any quantities above that.
Tug Hosting Agreement
In February 2017, CCL entered intohas a tug hosting agreement with Corpus Christi Tug Services, LLC (“Tug Services”), a wholly owned subsidiary of Cheniere, to provide certain marine structures, support services and access necessary at the Liquefaction FacilityProject for Tug Services to provide its customers with tug boat and marine services. Tug Services is required to reimburse CCL for any third party costs incurred by CCL in connection with providing the goods and services.
State Tax Sharing Agreements
CCL hasand CCP each have a state tax sharing agreement with Cheniere. Under this agreement,these agreements, Cheniere has agreed to prepare and file all state and local tax returns which CCLeach of the entities and Cheniere are required to file on a combined basis and to timely pay the combined state and local tax liability. If Cheniere, in its sole discretion, demands payment, CCLeach of the respective entities will pay to Cheniere an amount equal to the state and local tax that CCLeach of the entities would be required to pay if CCL’sits state and local tax liability were calculated on a separate company basis. To date, there have been no state and local tax payments demanded by Cheniere under the tax sharing agreements. The agreements for both CCL and CCP were effective for tax returns due on or after May 2015.
NOTE 12—CUSTOMER CONCENTRATION
The following table shows external customers with revenues of 10% or greater of total revenues from external customers and external customers with trade and other receivables, net of current expected credit losses and contract assets, net of current expected credit losses balances of 10% or greater of total trade and other receivables, net of current expected credit losses from external customers and contract assets, net of current expected credit losses from external customers, respectively:
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | Percentage of Total Revenues from External Customers | | Percentage of Trade and Other Receivables, Net and Contract Assets, Net from External Customers |
| | | | | | |
| | Three Months Ended June 30, | | Six Months Ended June 30, | | | | June 30, | | December 31, |
| | 2022 | | 2021 | | 2022 | | 2021 | | | | 2022 | | 2021 |
Customer A | | 20% | | 23% | | 22% | | 23% | | | | * | | * |
Customer B | | 15% | | 17% | | 14% | | 19% | | | | * | | * |
Customer C | | 14% | | 14% | | 13% | | 16% | | | | * | | * |
Customer D | | * | | * | | * | | * | | | | 28% | | 31% |
Customer E | | * | | * | | * | | * | | | | * | | 11% |
| | | | | | | | | | | | | | |
* Less than 10%
CHENIERE CORPUS CHRISTI HOLDINGS, LLC AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—CONTINUED
(unaudited)
There have been no state and local taxes paid by Cheniere for which Cheniere could have demanded payment from CCL under this agreement; therefore, Cheniere has not demanded any such payments from CCL. The agreement is effective for tax returns due on or after May 2015.
CCP has a state tax sharing agreement with Cheniere. Under this agreement, Cheniere has agreed to prepare and file all state and local tax returns which CCP and Cheniere are required to file on a combined basis and to timely pay the combined state and local tax liability. If Cheniere, in its sole discretion, demands payment, CCP will pay to Cheniere an amount equal to the state and local tax that CCP would be required to pay if CCP’s state and local tax liability were calculated on a separate company basis. There have been no state and local taxes paid by Cheniere for which Cheniere could have demanded payment from CCP under this agreement; therefore, Cheniere has not demanded any such payments from CCP. The agreement is effective for tax returns due on or after May 2015.
Equity Contribution Agreement
We have an equity contribution agreement with Cheniere pursuant to which Cheniere has agreed to provide, directly or indirectly, at our request based on reaching specified milestones of the Liquefaction Project, cash contributions up to approximately $2.6 billion for Stage 1. As of September 30, 2017, we have received $1.8 billion in contributions from Cheniere under this agreement.
NOTE 8—13—SUPPLEMENTAL CASH FLOW INFORMATION
The following table provides supplemental disclosure of cash flow information (in millions):
| | | | | | | | | | | | | |
| Six Months Ended June 30, |
| 2022 | | 2021 | | |
Cash paid during the period for interest on debt, net of amounts capitalized | $ | 222 | | | $ | 199 | | | |
Non-cash contributions from affiliates for conveyance of assets | 7 | | | — | | | |
Right-of-use assets obtained in exchange for new operating lease liabilities | 3 | | | — | | | |
Non-cash investing activity: | | | | | |
Contributions of property, plant and equipment in exchange for other non-current assets | 17 | | | — | | | |
| | | | | |
The balance in property, plant and equipment, net of accumulated depreciation funded with accounts payable and accrued liabilities (including affiliate) was $194.2$6 million and $213.8$28 million as of SeptemberJune 30, 20172022 and 2016,2021, respectively.
CHENIERE CORPUS CHRISTI HOLDINGS, LLC AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—CONTINUED
(unaudited)
NOTE 9—RECENT ACCOUNTING STANDARDS
The following table provides a brief descriptionWe recorded $1.5 billion of recent accounting standards that had not been adopted bycontribution in our Statement of Member’s Equity (Deficit) during the Company as of Septemberquarter ended June 30, 2017:
|
| | | | | | |
Standard | | Description | | Expected Date of Adoption | | Effect on our Consolidated Financial Statements or Other Significant Matters |
ASU 2014-09, Revenue from Contracts with Customers (Topic 606), and subsequent amendments thereto
| | This standard provides a single, comprehensive revenue recognition model which replaces and supersedes most existing revenue recognition guidance and requires an entity2022 related to recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. The standard requires that the costs to obtain and fulfill contracts with customers should be recognized as assets and amortized to match the pattern of transfer of goods or services to the customer if expected to be recoverable. The standard also requires enhanced disclosures. This guidance may be adopted either retrospectively to each prior reporting period presented subject to allowable practical expedients (“full retrospective approach”) or as a cumulative-effect adjustment as of the date of adoption (“modified retrospective approach”). | | January 1, 2018 | | We continue to evaluate the effect of this standard on our Consolidated Financial Statements. We plan to adopt this standard using the full retrospective approach. Preliminarily, we do not anticipate that the adoption will have a material impact upon our revenues. Furthermore, we routinely enter into new contracts and we cannot predict with certainty whether the accounting for any future contract under the new standard would result in a significant change from existing guidance. Because this assessment is preliminary and the accounting for revenue recognition is subject to significant judgment, this conclusion could change as we finalize our assessment. |
ASU 2016-02, Leases (Topic 842)
| | This standard requires a lessee to recognize leases on its balance sheet by recording a lease liability representing the obligation to make future lease payments and a right-of-use asset representing the right to use the underlying asset for the lease term. A lessee is permitted to make an election not to recognize lease assets and liabilities for leases with a term of 12 months or less. The standard also modifies the definition of a lease and requires expanded disclosures. This guidance may be early adopted, and must be adopted using a modified retrospective approach with certain available practical expedients. | | January 1, 2019
| | We continue to evaluate the effect of this standard on our Consolidated Financial Statements. Preliminarily, we expect that the requirement to recognize all leases on our Consolidated Balance Sheets will be a significant change from current practice but will not have a material impact upon our Consolidated Balance Sheets. Because this assessment is preliminary and the accounting for leases is subject to significant judgment, this conclusion could change as we finalize our assessment. We have not yet determined the impact of the adoption of this standard upon our results of operations or cash flows, whether we will elect to early adopt this standard or which, if any, practical expedients we will elect upon transition. |
ASU 2016-16, Income Taxes (Topic 740): Intra-Entity Transfers of Assets Other Than Inventory
| | This standard requires the immediate recognition of the tax consequences of intercompany asset transfers other than inventory. This guidance may be early adopted, but only at the beginning of an annual period, and must be adopted using a modified retrospective approach. | | January 1, 2018
| | We are currently evaluating the impact of the provisions of this guidance on our Consolidated Financial Statements and related disclosures. |
CHENIERE CORPUS CHRISTI HOLDINGS, LLC AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—CONTINUED
(unaudited)
NOTE 10—SUPPLEMENTAL GUARANTOR INFORMATION
Our CCH Senior Notes are jointly and severally guaranteed by our subsidiaries, CCL, CCP and CCP GP (each a “Guarantor” and collectively, the “Guarantors”). These guarantees are full and unconditional, subject to certain customary release provisions including (1) the sale, exchange, disposition or transfer (by merger, consolidation or otherwise)contribution of the capital stock or all or substantially allCCL Stage III entity to us from Cheniere on June 15, 2022, with such contribution representing a non-cash financing activity. See Note 2—CCL Stage III Contribution and Merger for further discussion.
The following is condensed consolidating financial information for CCH (“Parent Issuer”) and the Guarantors. We did not have any non-guarantor subsidiaries as of September 30, 2017.
|
| | | | | | | | | | | | | | | |
Condensed Consolidating Balance Sheet |
September 30, 2017 |
(in thousands) |
| | | | | | | |
| Parent Issuer | | Guarantors | | Eliminations | | Consolidated |
ASSETS | | | | | | | |
Current assets | | | | | | | |
Cash and cash equivalents | $ | — |
| | $ | — |
| | $ | — |
| | $ | — |
|
Restricted cash | 116,513 |
| | — |
| | — |
| | 116,513 |
|
Advances to affiliate | — |
| | 10,600 |
| | — |
| | 10,600 |
|
Other current assets | 317 |
| | 847 |
| | — |
| | 1,164 |
|
Other current assets—affiliate | — |
| | 280 |
| | (1 | ) | | 279 |
|
Total current assets | 116,830 |
| | 11,727 |
| | (1 | ) | | 128,556 |
|
| | | | | | | |
Property, plant and equipment, net | 558,367 |
| | 7,276,443 |
| | — |
| | 7,834,810 |
|
Debt issuance and deferred financing costs, net | 103,879 |
| | — |
| | — |
| | 103,879 |
|
Investments in subsidiaries | 7,312,131 |
| | — |
| | (7,312,131 | ) | | — |
|
Other non-current assets, net | — |
| | 37,545 |
| | — |
| | 37,545 |
|
Total assets | $ | 8,091,207 |
| | $ | 7,325,715 |
| | $ | (7,312,132 | ) | | $ | 8,104,790 |
|
| | | | | | | |
LIABILITIES AND MEMBER’S EQUITY | | | | | | | |
Current liabilities | | | | | | | |
Accounts payable | $ | 68 |
| | $ | 7,508 |
| | $ | — |
| | $ | 7,576 |
|
Accrued liabilities | 73,018 |
| | 105,647 |
| | — |
| | 178,665 |
|
Due to affiliates | — |
| | 16,578 |
| | — |
| | 16,578 |
|
Derivative liabilities | 30,099 |
| | — |
| | — |
| | 30,099 |
|
Total current liabilities | 103,185 |
| | 129,733 |
| | — |
| | 232,918 |
|
| | | | | | | |
Long-term debt, net | 6,333,804 |
| | — |
| | — |
| | 6,333,804 |
|
Non-current derivative liabilities | 49,231 |
| | — |
| | — |
| | 49,231 |
|
Deferred tax liability | — |
| | 3,677 |
| | (3,677 | ) | | — |
|
| | | | | | | |
Member’s equity | 1,604,987 |
| | 7,192,305 |
| | (7,308,455 | ) | | 1,488,837 |
|
Total liabilities and member’s equity | $ | 8,091,207 |
| | $ | 7,325,715 |
| | $ | (7,312,132 | ) | | $ | 8,104,790 |
|
ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
CHENIERE CORPUS CHRISTI HOLDINGS, LLC AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—CONTINUED
(unaudited)
|
| | | | | | | | | | | | | | | |
Condensed Consolidating Balance Sheet |
December 31, 2016 |
(in thousands) |
| | | | | | | |
| Parent Issuer | | Guarantors | | Eliminations | | Consolidated |
ASSETS | | | | | | | |
Current assets | | | | | | | |
Cash and cash equivalents | $ | — |
| | $ | — |
| | $ | — |
| | $ | — |
|
Restricted cash | 197,201 |
| | — |
| | — |
| | 197,201 |
|
Advances to affiliate | — |
| | 20,108 |
| | — |
| | 20,108 |
|
Other current assets | 152 |
| | 37,043 |
| | — |
| | 37,195 |
|
Other current assets—affiliate | — |
| | 142 |
| | (1 | ) | | 141 |
|
Total current assets | 197,353 |
| | 57,293 |
| | (1 | ) | | 254,645 |
|
| | | | | | | |
Non-current restricted cash | 73,339 |
| | — |
| | — |
| | 73,339 |
|
Property, plant and equipment, net | 306,342 |
| | 5,770,330 |
| | — |
| | 6,076,672 |
|
Debt issuance and deferred financing costs, net | 155,847 |
| | — |
| | — |
| | 155,847 |
|
Investments in subsidiaries | 5,927,833 |
| | — |
| | (5,927,833 | ) | | — |
|
Non-current advances under long-term contracts | — |
| | 46,398 |
| | — |
| | 46,398 |
|
Other non-current assets, net | 50 |
| | 29,497 |
| | — |
| | 29,547 |
|
Total assets | $ | 6,660,764 |
| | $ | 5,903,518 |
| | $ | (5,927,834 | ) | | $ | 6,636,448 |
|
| | | | | | | |
LIABILITIES AND MEMBER’S EQUITY | | | | | | | |
Current liabilities | | | | | | | |
Accounts payable | $ | 332 |
| | $ | 8,788 |
| | $ | — |
| | $ | 9,120 |
|
Accrued liabilities | 61,328 |
| | 76,320 |
| | — |
| | 137,648 |
|
Due to affiliates | — |
| | 7,050 |
| | — |
| | 7,050 |
|
Derivative liabilities | 43,383 |
| | — |
| | — |
| | 43,383 |
|
Total current liabilities | 105,043 |
| | 92,158 |
| | — |
| | 197,201 |
|
| | | | | | | |
Long-term debt, net | 5,081,715 |
| | — |
| | — |
| | 5,081,715 |
|
Non-current derivative liabilities | 43,105 |
| | — |
| | — |
| | 43,105 |
|
Other non-current liabilities—affiliate | — |
| | 618 |
| | — |
| | 618 |
|
| | | | | | | |
Member’s equity | 1,430,901 |
| | 5,810,742 |
| | (5,927,834 | ) | | 1,313,809 |
|
Total liabilities and member’s equity | $ | 6,660,764 |
| | $ | 5,903,518 |
| | $ | (5,927,834 | ) | | $ | 6,636,448 |
|
CHENIERE CORPUS CHRISTI HOLDINGS, LLC AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—CONTINUED
(unaudited)
|
| | | | | | | | | | | | | | | |
Condensed Consolidating Statement of Operations |
Three Months Ended September 30, 2017 |
(in thousands) |
| | | | | | | |
| Parent Issuer | | Guarantors | | Eliminations | | Consolidated |
| | | | | | | |
Revenues | $ | — |
| | $ | — |
| | $ | — |
| | $ | — |
|
| | | | | | | |
Expenses | | | | | | | |
Operating and maintenance expense | — |
| | 533 |
| | — |
| | 533 |
|
Operating and maintenance expense—affiliate | — |
| | 1,516 |
| | (12 | ) | | 1,504 |
|
Development expense | — |
| | 82 |
| | — |
| | 82 |
|
General and administrative expense | 192 |
| | 669 |
| | — |
| | 861 |
|
General and administrative expense—affiliate | — |
| | 289 |
| | — |
| | 289 |
|
Depreciation and amortization expense | — |
| | 248 |
| | — |
| | 248 |
|
Impairment expense and loss on disposal of assets | — |
| | 2,059 |
| | — |
| | 2,059 |
|
Total expenses | 192 |
| | 5,396 |
| | (12 | ) | | 5,576 |
|
| | | | | | | |
Loss from operations | (192 | ) | | (5,396 | ) | | 12 |
| | (5,576 | ) |
| | | | | | | |
Other income (expense) | | | | | | | |
Derivative loss, net | (2,906 | ) | | — |
| | — |
| | (2,906 | ) |
Other income (expense) | (97 | ) | | 3,722 |
| | (3,720 | ) | | (95 | ) |
Other income—affiliate | — |
| | 12 |
| | (12 | ) | | — |
|
Total other income (expense) | (3,003 | ) | | 3,734 |
| | (3,732 | ) | | (3,001 | ) |
| | | | | | | |
Loss before income taxes | (3,195 | ) | | (1,662 | ) | | (3,720 | ) | | (8,577 | ) |
Income tax provision | — |
| | (3,677 | ) | | 3,677 |
| | — |
|
Net loss | $ | (3,195 | ) | | $ | (5,339 | ) | | $ | (43 | ) | | $ | (8,577 | ) |
CHENIERE CORPUS CHRISTI HOLDINGS, LLC AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—CONTINUED
(unaudited)
|
| | | | | | | | | | | | | | | |
Condensed Consolidating Statement of Operations |
Three Months Ended September 30, 2016 |
(in thousands) |
| | | | | | | |
| Parent Issuer | | Guarantors | | Eliminations | | Consolidated |
| | | | | | | |
Revenues | $ | — |
| | $ | — |
| | $ | — |
| | $ | — |
|
| | | | | | | |
Expenses | | | | | | | |
Operating and maintenance expense | — |
| | 338 |
| | — |
| | 338 |
|
Operating and maintenance expense recovery —affiliate | — |
| | (3 | ) | | — |
| | (3 | ) |
Development expense | — |
| | 77 |
| | — |
| | 77 |
|
Development expense—affiliate | — |
| | 86 |
| | — |
| | 86 |
|
General and administrative expense | 120 |
| | 946 |
| | — |
| | 1,066 |
|
General and administrative expense—affiliate | — |
| | 180 |
| | — |
| | 180 |
|
Depreciation and amortization expense | — |
| | 65 |
| | — |
| | 65 |
|
Total expenses | 120 |
| | 1,689 |
| | — |
| | 1,809 |
|
| | | | | | | |
Loss from operations | (120 | ) | | (1,689 | ) | | — |
| | (1,809 | ) |
| | | | | | | |
Other income (expense) | | | | | | | |
Derivative gain, net | 20,113 |
| | — |
| | — |
| | 20,113 |
|
Other income (expense) | (76 | ) | | 2 |
| | — |
| | (74 | ) |
Total other income | 20,037 |
| | 2 |
| | — |
| | 20,039 |
|
| | | | | | | |
Net income (loss) | $ | 19,917 |
| | $ | (1,687 | ) | | $ | — |
| | $ | 18,230 |
|
CHENIERE CORPUS CHRISTI HOLDINGS, LLC AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—CONTINUED
(unaudited)
|
| | | | | | | | | | | | | | | |
Condensed Consolidating Statement of Operations |
Nine Months Ended September 30, 2017 |
(in thousands) |
| | | | | | | |
| Parent Issuer | | Guarantors | | Eliminations | | Consolidated |
| | | | | | | |
Revenues | $ | — |
| | $ | — |
| | $ | — |
| | $ | — |
|
| | | | | | | |
Expenses | | | | | | | |
Operating and maintenance expense | — |
| | 2,097 |
| | — |
| | 2,097 |
|
Operating and maintenance expense—affiliate | — |
| | 1,665 |
| | (12 | ) | | 1,653 |
|
Development expense | — |
| | 497 |
| | — |
| | 497 |
|
Development expense—affiliate | — |
| | 8 |
| | — |
| | 8 |
|
General and administrative expense | 832 |
| | 2,992 |
| | — |
| | 3,824 |
|
General and administrative expense—affiliate | — |
| | 753 |
| | — |
| | 753 |
|
Depreciation and amortization expense | — |
| | 537 |
| | — |
| | 537 |
|
Impairment expense and loss on disposal of assets | — |
| | 2,064 |
| | — |
| | 2,064 |
|
Total expenses | 832 |
| | 10,613 |
| | (12 | ) | | 11,433 |
|
| | | | | | | |
Loss from operations | (832 | ) | | (10,613 | ) | | 12 |
| | (11,433 | ) |
| | | | | | | |
Other income (expense) | | | | | | | |
Loss on early extinguishment of debt | (32,480 | ) | | — |
| | — |
| | (32,480 | ) |
Derivative loss, net | (35,002 | ) | | — |
| | — |
| | (35,002 | ) |
Other income (expense) | (182 | ) | | 11,540 |
| | (11,535 | ) | | (177 | ) |
Other income—affiliate | — |
| | 12 |
| | (12 | ) | | — |
|
Total other income (expense) | (67,664 | ) | | 11,552 |
| | (11,547 | ) | | (67,659 | ) |
| | | | | | | |
Income (loss) before income taxes | (68,496 | ) | | 939 |
| | (11,535 | ) | | (79,092 | ) |
Income tax provision | — |
| | (3,677 | ) | | 3,677 |
| | — |
|
| | | | | | | |
Net income (loss) | $ | (68,496 | ) | | $ | (2,738 | ) | | $ | (7,858 | ) | | $ | (79,092 | ) |
CHENIERE CORPUS CHRISTI HOLDINGS, LLC AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—CONTINUED
(unaudited)
|
| | | | | | | | | | | | | | | |
Condensed Consolidating Statement of Operations |
Nine Months Ended September 30, 2016 |
(in thousands) |
| | | | | | | |
| Parent Issuer | | Guarantors | | Eliminations | | Consolidated |
| | | | | | | |
Revenues | $ | — |
| | $ | — |
| | $ | — |
| | $ | — |
|
| | | | | | | |
Expenses | | | | | | | |
Operating and maintenance expense | — |
| | 875 |
| | — |
| | 875 |
|
Operating and maintenance expense—affiliate | — |
| | 17 |
| | — |
| | 17 |
|
Development expense recovery | — |
| | (107 | ) | | — |
| | (107 | ) |
Development expense recovery—affiliate | — |
| | (34 | ) | | — |
| | (34 | ) |
General and administrative expense | 454 |
| | 2,389 |
| | — |
| | 2,843 |
|
General and administrative expense—affiliate | — |
| | 471 |
| | — |
| | 471 |
|
Depreciation and amortization expense | — |
| | 149 |
| | — |
| | 149 |
|
Total expenses | 454 |
| | 3,760 |
| | — |
| | 4,214 |
|
| | | | | | | |
Loss from operations | (454 | ) | | (3,760 | ) | | — |
| | (4,214 | ) |
| | | | | | | |
Other income (expense) | | | | | | | |
Loss on early extinguishment of debt | (29,011 | ) | | — |
| | — |
| | (29,011 | ) |
Derivative loss, net | (215,940 | ) | | — |
| | — |
| | (215,940 | ) |
Other income (expense) | (79 | ) | | 5 |
| | — |
| | (74 | ) |
Total other income (expense) | (245,030 | ) | | 5 |
| | — |
| | (245,025 | ) |
| | | | | | | |
Net loss | $ | (245,484 | ) | | $ | (3,755 | ) | | $ | — |
| | $ | (249,239 | ) |
CHENIERE CORPUS CHRISTI HOLDINGS, LLC AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—CONTINUED
(unaudited)
|
| | | | | | | | | | | | | | | |
Condensed Consolidating Statement of Cash Flows |
Nine Months Ended September 30, 2017 |
(in thousands) |
| | | | | | | |
| Parent Issuer | | Guarantors | | Eliminations | | Consolidated |
Cash flows from operating activities | | | | | | | |
Net income (loss) | $ | (68,496 | ) | | $ | (2,738 | ) | | $ | (7,858 | ) | | $ | (79,092 | ) |
Adjustments to reconcile net income (loss) to net cash used in operating activities: | | | | | | | |
Depreciation and amortization expense | — |
| | 537 |
| | — |
| | 537 |
|
Allowance for funds used during construction | — |
| | (11,535 | ) | | 11,535 |
| | — |
|
Deferred income taxes | — |
| | 3,677 |
| | (3,677 | ) | | — |
|
Loss on early extinguishment of debt | 32,480 |
| | — |
| | — |
| | 32,480 |
|
Total losses (gains) on derivatives, net | 35,002 |
| | (295 | ) | | — |
| | 34,707 |
|
Net cash used for settlement of derivative instruments | (42,160 | ) | | — |
| | — |
| | (42,160 | ) |
Impairment expense and loss on disposal of assets | — |
| | 2,064 |
| | — |
| | 2,064 |
|
Changes in operating assets and liabilities: | | | | | | | |
Accounts payable and accrued liabilities | 22 |
| | 473 |
| | — |
| | 495 |
|
Due to affiliates | — |
| | 1,176 |
| | — |
| | 1,176 |
|
Other, net | (163 | ) | | (869 | ) | | — |
| | (1,032 | ) |
Other, net—affiliate | — |
| | (756 | ) | | — |
| | (756 | ) |
Net cash used in operating activities | (43,315 | ) | | (8,266 | ) | | — |
| | (51,581 | ) |
| | | | | | | |
Cash flows from investing activities | | | | | | | |
Property, plant and equipment, net | (227,143 | ) | | (1,402,030 | ) | | — |
| | (1,629,173 | ) |
Investments in subsidiaries | (1,384,301 | ) | | — |
| | 1,384,301 |
| | — |
|
Other | — |
| | 25,995 |
| | — |
| | 25,995 |
|
Net cash used in investing activities | (1,611,444 | ) | | (1,376,035 | ) | | 1,384,301 |
| | (1,603,178 | ) |
| | | | | | | |
Cash flows from financing activities | | | | | | | |
Proceeds from issuances of debt | 2,706,000 |
| | — |
| | — |
| | 2,706,000 |
|
Repayments of debt | (1,436,050 | ) | | — |
| | — |
| | (1,436,050 | ) |
Debt issuance and deferred financing costs | (23,309 | ) | | — |
| | — |
| | (23,309 | ) |
Capital contributions | 254,120 |
| | 1,384,458 |
| | (1,384,458 | ) | | 254,120 |
|
Distributions | — |
| | (157 | ) | | 157 |
| | — |
|
Other | (29 | ) | | — |
| | — |
| | (29 | ) |
Net cash provided by financing activities | 1,500,732 |
| | 1,384,301 |
| | (1,384,301 | ) | | 1,500,732 |
|
| | | | | | | |
Net decrease in cash, cash equivalents and restricted cash | (154,027 | ) | | — |
| | — |
| | (154,027 | ) |
Cash, cash equivalents and restricted cash—beginning of period | 270,540 |
| | — |
| | — |
| | 270,540 |
|
Cash, cash equivalents and restricted cash—end of period | $ | 116,513 |
| | $ | — |
| | $ | — |
| | $ | 116,513 |
|
CHENIERE CORPUS CHRISTI HOLDINGS, LLC AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—CONTINUED
(unaudited)
|
| | | | | | | | | | | | | | | |
Condensed Consolidating Statement of Cash Flows |
Nine Months Ended September 30, 2016 |
(in thousands) |
| | | | | | | |
| Parent Issuer | | Guarantors | | Eliminations | | Consolidated |
Cash flows from operating activities | | | | | | | |
Net loss | $ | (245,484 | ) | | $ | (3,755 | ) | | $ | — |
| | $ | (249,239 | ) |
Adjustments to reconcile net loss to net cash used in operating activities: | | | | | | | |
Depreciation and amortization expense | — |
| | 149 |
| | — |
| | 149 |
|
Loss on early extinguishment of debt | 29,011 |
| | — |
| | — |
| | 29,011 |
|
Total losses on derivatives, net | 215,940 |
| | — |
| | — |
| | 215,940 |
|
Net cash used for settlement of derivative instruments | (23,400 | ) | | — |
| | — |
| | (23,400 | ) |
Changes in operating assets and liabilities: | | | | | | | |
Accounts payable and accrued liabilities | 134 |
| | (223 | ) | | — |
| | (89 | ) |
Due to affiliates | — |
| | (214 | ) | | — |
| | (214 | ) |
Other, net | (247 | ) | | (878 | ) | | — |
| | (1,125 | ) |
Other, net—affiliate | — |
| | 154 |
| | — |
| | 154 |
|
Net cash used in operating activities | (24,046 | ) | | (4,767 | ) | | — |
| | (28,813 | ) |
| | | | | | | |
Cash flows from investing activities | | | | | | | |
Property, plant and equipment, net | (95,340 | ) | | (1,478,583 | ) | | — |
| | (1,573,923 | ) |
Investments in subsidiaries | (1,527,712 | ) | | — |
| | 1,527,712 |
| | — |
|
Other | — |
| | (44,362 | ) | | — |
| | (44,362 | ) |
Net cash used in investing activities | (1,623,052 | ) | | (1,522,945 | ) | | 1,527,712 |
| | (1,618,285 | ) |
| | | | | | | |
Cash flows from financing activities | | | | | | | |
Proceeds from issuances of debt | 2,871,000 |
| | — |
| | — |
| | 2,871,000 |
|
Repayments of debt | (1,050,660 | ) | | — |
| | — |
| | (1,050,660 | ) |
Debt issuance and deferred financing costs | (27,282 | ) | | — |
| | — |
| | (27,282 | ) |
Capital contributions | 92 |
| | 1,527,712 |
| | (1,527,712 | ) | | 92 |
|
Other | (10 | ) | | — |
| | — |
| | (10 | ) |
Net cash provided by financing activities | 1,793,140 |
| | 1,527,712 |
| | (1,527,712 | ) | | 1,793,140 |
|
| | | | | | | |
Net increase in cash, cash equivalents and restricted cash | 146,042 |
| | — |
| | — |
| | 146,042 |
|
Cash, cash equivalents and restricted cash—beginning of period | 46,770 |
| | — |
| | — |
| | 46,770 |
|
Cash, cash equivalents and restricted cash—end of period | $ | 192,812 |
| | $ | — |
| | $ | — |
| | $ | 192,812 |
|
| |
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.”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 terminal, liquefaction facilities,facility, pipeline facilitiesfacility or other projects, or any expansions or portions thereof, by certain dates, or at all;
•statements regarding future levels of domestic and international natural gas production, supply or consumption or future levels of LNG imports into or exports from North America and other countries worldwide or purchases of natural gas, regardless of the source of such information, or the transportation or other infrastructure or demand for and prices related to natural gas, LNG or other hydrocarbon products;
•statements regarding any financing transactions or arrangements, or our ability to enter into such transactions;
•statements regarding our future sources of liquidity and cash requirements;
•statements relating to the construction of our Trains and pipeline, including statements concerning the engagement of any EPC contractor or other contractor and the anticipated terms and provisions of any agreement with any such 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 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 and pipeline,pipelines, including the financing of such Trains;Trains and 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 the COVID-19 pandemic and its impact on our business and operating results, including any customers not taking delivery of LNG cargoes, the ongoing creditworthiness of our contractual counterparties, any disruptions in our operations or construction of our Trains and the health and safety of Cheniere’s employees, and on our customers, the global economy and the demand for LNG; and
•any other statements that relate to non-historical or future information.
All of these types of statements, other than statements of historical or present facts or conditions, are forward-looking statements. In some cases, forward-looking statements can be identified by terminology such as “may,” “will,” “could,” “should,” “expect,” “plan,” “project,” “intend,“achieve,” “anticipate,” “believe,” “contemplate,” “continue,” “estimate,” “expect,” “intend,” “plan,” “potential,” “predict,” “potential,“project,” “pursue,” “target,” “continue,” 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 registration statementannual report on Form S-4, as amended, filed with10-K for the SEC and declared effective on April 10, 2017fiscal year ended December 31, 2021. All forward-looking statements attributable to us or persons acting on our behalf are expressly qualified in their entirety by these risk factors. These forward-looking statements speak only as of the date made, and other than as required by law, we undertake no obligation to update or revise any forward-looking statement or provide reasons why actual results may differ, whether as a result of new information, future events or otherwise.
Introduction
The following discussion and analysis presents management’s view of our business, financial condition and overall performance and should be read in conjunction with our Consolidated Financial Statements and the accompanying notes. This information is intended to provide investors with an understanding of our past performance, current financial condition and outlook for the future.
Our discussion and analysis includes the following subjects:
Results of Operations
Off-Balance Sheet Arrangements
Overview of Business
We wereare a Delaware limited liability company formed in September 2014 by Cheniere. We provide clean, secure and affordable LNG to develop, construct,integrated energy companies, utilities and energy trading companies around the world. We aspire to conduct our business in a safe and responsible manner, delivering a reliable, competitive and integrated source of LNG to our customers.
LNG is natural gas (methane) in liquid form. The LNG we produce is shipped all over the world, turned back into natural gas (called “regasification”) and then transported via pipeline to homes and businesses and used as an energy source that is essential for heating, cooking and other industrial uses. Natural gas is a cleaner-burning, abundant and affordable source of energy. When LNG is converted back to natural gas, it can be used instead of coal, which reduces the amount of pollution traditionally produced from burning fossil fuels, like sulfur dioxide and particulate matter that enters the air we breathe. Additionally, compared to coal, it produces significantly fewer carbon emissions. By liquefying natural gas, we are able to reduce its volume by 600 times so that we can load it onto special LNG carriers designed to keep the LNG cold and in liquid form for efficient transport overseas.
We own and operate maintain and own a natural gas liquefaction and export facility (the “Liquefaction Facility”) and a pipeline facility (collectively, the “Liquefaction Project”) on nearly 2,000 acres of land that we own or controllocated near Corpus Christi, Texas (the “Corpus Christi LNG Terminal”) through wholly-owned subsidiaries CCL, and CCP, respectively.
The Liquefaction Project is being developedwhich has natural gas liquefaction facilities consisting of three operational Trains for
up to three Trains, with expected aggregate nominala total production capacity
which is prior to adjusting for planned maintenance, production reliability and potential overdesign, of approximately
13.515 mtpa of LNG, three LNG storage tanks
with aggregate capacity of approximately 10.1 Bcfe and two marine
berths that can each accommodate vessels with nominal capacityberths. Additionally, we are constructing an expansion of
the Corpus Christi LNG Terminal (the “Corpus Christi Stage 3 Project”) for up to
266,000 cubic meters. The Liquefactionseven midscale Trains with an expected total production capacity over 10 mtpa of LNG. Refer to Note 2—CCL Stage III Contribution and Merger for additional information on the Corpus Christi Stage 3 Project.
CCL Stage III, CCL and CCP received approval from FERC in November 2019 to site, construct and operate the Corpus Christi Stage 3 Project. In March 2022, CCL Stage III issued limited notice to proceed to Bechtel Energy Inc. (“Bechtel”) to commence early engineering, procurement and site works. In June 2022, Cheniere’s board of directors (the “Board”) made a positive FID with respect to the Corpus Christi Stage 3 Project is being developed in stages. The first stage (“and issued a full notice to proceed with construction to Bechtel effective June 16, 2022. In connection with the positive FID, CCL Stage 1”III, through which Cheniere was developing and constructing the Corpus Christi Stage 3 Project, was contributed to us from Cheniere (the “Contribution”) includes Trains 1on June 15, 2022. Immediately following the Contribution, CCL Stage III was merged with and 2, two LNG storage tanks, one complete marine berthinto CCL (the “Merger”), the surviving entity of
We also own and operate through CCP a second partial berth and all of the Liquefaction Project’s necessary infrastructure facilities. The second stage (“Stage 2”) includes Train 3, one LNG storage tank and the completion of the second partial berth. The Liquefaction Project also includes a 23-mile21.5-mile natural gas supply pipeline that will interconnectinterconnects the Corpus Christi LNG terminalTerminal with several interstate and intrastate natural gas pipelines (the “Corpus Christi Pipeline” and together with the existing operational Trains, midscale trains, storage tanks and marine berths, the “Liquefaction Project”). Stage 1
Our customer arrangements provide us with significant, stable and long-term cash flows. We contract our anticipated production capacity under SPAs, in which our customers are generally required to pay a fixed fee with respect to the Corpus Christi Pipeline are currentlycontracted volumes irrespective of their election to cancel or suspend deliveries of LNG cargoes, and under construction,IPM agreements, in which the gas producer sells to us gas on a global LNG index price, less a fixed liquefaction fee, shipping and Train 3 is being commercializedother costs. Our long-term customer arrangements form the foundation of our business and has all necessary regulatory approvals in place.
Overview of Significant Events
Ourprovide us with significant, accomplishments since January 1, 2017 and through the filing date of this Form 10-Q include our issuance of an aggregate principal amount of $1.5 billion of 5.125% Senior Secured Notes due 2027 (the “2027 CCH Senior Notes”). Net proceedsstable, long-term cash flows. We have contracted approximately 85% of the offering of approximately $1.4 billion, after deducting commissions, fees and expenses and provisioning for incremental interest required under the 2027 CCH Senior Notes during construction, were used to prepay a portion of the outstanding borrowings under our credit facility (the “2015 CCH Credit Facility”).
Liquidity and Capital Resources
The following table (in thousands) provides a summary of our liquidity position at September 30, 2017 and December 31, 2016:
|
| | | | | | | |
| September 30, | | December 31, |
| 2017 | | 2016 |
Cash and cash equivalents | $ | — |
| | $ | — |
|
Restricted cash designated for the Liquefaction Project | 116,513 |
| | 270,540 |
|
Available commitments under the following credit facilities: | | | |
2015 CCH Credit Facility | 2,420,714 |
| | 3,602,714 |
|
$350 million CCH Working Capital Facility (“CCH Working Capital Facility”) | 187,497 |
| | 350,000 |
|
Liquefaction Facilities
Liquefaction Facilities
The Liquefaction Project is being developed and constructed at the Corpus Christi LNG terminal, on nearly 2,000 acres of land that we own or control near Corpus Christi, Texas. In December 2014, we received authorizationtotal anticipated production capacity from the FERC to site, construct and operate Stages 1 and 2 of the Liquefaction Project. The following table summarizes the overall project status of Stage 1 of the Liquefaction Project with approximately 18 years of weighted average remaining life as of SeptemberJune 30, 2017:
|
| | |
| Stage 1 |
Overall project completion percentage | 72.4% |
Project completion percentage of: | |
Engineering | 100% |
Procurement | 89.4% |
Subcontract work | 49.4% |
Construction | 49.2% |
Expected date of substantial completion | Train 1 | 1H 2019 |
| Train 2 | 2H 2019 |
The2022. In March 2022, the DOE
has authorized the export
of an additional 108.16 Bcf/yr of domestically produced LNG by vessel from the Corpus Christi LNG
terminal to FTA countries for a 25-year term andTerminal through December 31, 2050 to non-FTA countries,
that were previously authorized for
a 20-year term up to a combined totalFTA countries only. For further discussion of the
equivalentcontracted future cash flows under our revenue arrangements, see the liquidity and capital resources disclosures in our annual report on Form 10-K for the fiscal year ended December 31, 2021.
We remain focused on operational excellence and customer satisfaction. Increasing demand for LNG has allowed us to expand our liquefaction infrastructure in a financially disciplined manner. We have increased available liquefaction capacity at our Liquefaction Project as a result of 767 Bcf/yr (approximately 15 mtpa)debottlenecking and other optimization projects. We hold a significant land position at the Corpus Christi LNG Terminal, which provides opportunity for further liquefaction capacity expansion. The development of these sites or other projects, including infrastructure projects in support of natural gas. A partygas supply and LNG demand, will require, among other things, acceptable commercial and financing arrangements before we make a positive FID.
Additionally, we are committed to the proceeding requestedresponsible and proactive management of our most important environmental, social and governance (“ESG”) impacts, risks and opportunities. In June 2022, Cheniere published its 2021 Corporate Responsibility (“CR”) report, which details our approach and progress on ESG issues, including Cheniere’s recently announced collaboration with natural gas midstream companies, methane detection technology providers and leading academic institutions to implement quantification, monitoring, reporting and verification of greenhouse gas emissions at natural gas gathering, processing, transmission and storage systems specific to our supply chain, as well as our contributions to energy security during a rehearingcritical time in history. Additionally, Cheniere commenced providing Cargo Emissions Tags (“CE Tags”) to its customers in June 2022. The CE Tags provide customers with estimated greenhouse gas (“GHG”) emissions data associated with each LNG cargo produced at the Liquefaction Project and are provided for both free-on-board (“FOB”) and delivered ex-ship (“DES”) LNG cargoes. Cheniere’s CR report is available at cheniere.com/our-responsibility/reporting-center. Information on our website, including the CR report, is not incorporated by reference into this Quarterly Report on Form 10-Q.
Overview of Significant Events
Our significant events since January 1, 2022 and through the authorization to non-FTA countries, which was denied byfiling date of this Form 10-Q include the DOE in May 2016. following:
Strategic
•In July 2016, the same party petitioned the U.S. Court of Appeals for the District of Columbia Circuit (the “Court of Appeals”) to review the authorization to non-FTA countries and the DOE order denying the request for rehearing of the same. The Court of Appeals denied the petition in November 2017, and the time for review of the court’s denial has not yet expired. The terms of each 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 7 to 10 years from the date the order was issued.
Customers
2022, CCL has entered into seven fixed price, 20-year SPAs with extension rights with six third parties to make available an aggregate amount ofa long-term LNG that equates to approximately 7.7 mtpa of LNG, which is approximately 86% of the expected aggregate nominal production capacity of Trains 1 and 2. The obligation to make LNG available under these SPAs commences from the date of first commercial delivery for Trains 1 and 2, as specified in each SPA. In addition, CCL has entered into one fixed price, 20-year SPA with a third party for another 0.8PTT Global LNG Company Limited (“PTTGL”), under which PTTGL has agreed to purchase 1.0 mtpa of LNG that commences with the date of first commercial delivery for Train 3. Under these eight SPAs, the customers will purchase LNG from CCL for twenty years beginning in 2026. The SPA calls for a combination of FOB and DES deliveries. The purchase price consisting offor LNG under the SPA is indexed to the Henry Hub price, plus a fixed fee of $3.50 per MMBtuliquefaction fee.
•In March 2022, CCL amended its existing long-term SPA with Engie SA (“Engie”), increasing the volume Engie has agreed to purchase from CCL to approximately 0.9 mtpa of LNG (a portion of which is subject to annual adjustment for inflation) pluson a variable fee equal to 115% of Henry Hub per MMBtu of LNG. In certain circumstances, the customers may elect to cancel or suspend deliveries of LNG cargoes, 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. The SPAsFOB basis, and contracted volumes to be made available under the SPAs are not tied to a specific Train; however,extending the term to approximately 20 years, which began in September 2021.
In aggregate, the fixed fee portion to be paid by the third-party SPA customers is approximately $1.4 billion annually for Trains 1 and 2, and $1.5 billion if we make•On June 15, 2022, Cheniere’s Board made a positive FID with respect to the Corpus Christi Stage 23 Project and issued a full notice to proceed with construction to Bechtel under the EPC contract to commence construction of the LiquefactionCorpus Christi Stage 3 Project effective June 16, 2022. In connection with the applicable fixed fees starting frompositive FID, CCL Stage III was contributed to us as and subsequently merged with and into CCL, with CCL the datesurviving company of firstthe merger and our wholly owned subsidiary. Notable contracts received by CCL in connection with the merger included the following:
◦IPM agreements held by CCL Stage III with ARC Resources U.S. Corp, EOG Resources, Inc. and Apache Corporation, with terms of approximately 15 years, aggregating approximately 65 million tonnes, approximately 40 million tonnes of which commences with commercial delivery fromoperations of certain Trains of the applicable Train. These fixed fees equal approximately $550 million, $846 million and $140 million for each of Trains 1 throughCorpus Christi Stage 3 respectively.Project (the “Transferred IPM Agreements”);
In addition, CCL has entered into two fixed price 20-year ◦SPAs withheld by Cheniere Marketing International LLP (“Cheniere Marketing UK”Marketing”). Under or its subsidiaries with Foran Energy Group, Ltd, CPC Corporation, Sinochem Group Co. Ltd. and Polskie Gornictwo Naftowe I Gazownictwo S.A. (“PGNiG”), for which CCL entered into a newly executed agreement between CCL and PGNiG taking the first SPA (the “Amendedplace of a portion of the term of the existing agreement between PGNiG and Cheniere Marketing, Foundation SPA”),aggregating approximately 105 million tonnes of LNG to be delivered through 2046; and
◦the aforementioned EPC contract with Bechtel for the Corpus Christi Stage 3 Project for a contract price of approximately $5.5 billion, subject to adjustment only by change order.
•In June 2022, CCL and Cheniere Marketing, UK will purchasea wholly owned subsidiary of Cheniere, entered into an SPA for approximately 44 TBtu per annum of LNG fromassociated with the IPM agreement between CCL and ARC Resources U.S. Corp referenced above for a term of 15 years.
Operational
•As of July 30, 2022, approximately 550 cumulative LNG cargoes totaling over 35 million tonnes of LNG have been produced, loaded and exported from the Liquefaction Project.
Financial
•In June 2022, CCH amended and restated its term loan credit facility (the “CCH Credit Facility”) and its working capital facility (the “CCH Working Capital Facility”) to, among other things, (1) increase the commitments to approximately $4.0 billion and $1.5 billion for the CCH Credit Facility and the CCH Working Capital Facility, respectively, which are intended to fund a portion of the cost of developing, constructing and operating the Corpus Christi Stage 3 Project, (2) extend the maturity of the CCH Credit Facility to the earlier of June 15, 2029 or two years after the substantial completion of the last Train of the Corpus Christi Stage 3 Project and extend the maturity of the CCH Working Capital Facility to June 15, 2027, (3) update the indexed interest rate to SOFR and (4) make certain other changes to the terms and conditions of each existing facility.
Results of Operations
The following charts summarize the total revenues and total LNG volumes loaded (including both operational and commissioning volumes) during the six months ended June 30, 2022 and 2021:
| | | | | | | | | | | | | | | | | | | | |
| | | | | | |
| (1) | The six months ended June 30, 2021 excludes four TBtu that were loaded at our affiliate’s facility. |
Net income (loss)
Our consolidated net loss was $527 million and $1.3 billion for the three and six months ended June 30, 2022, respectively, compared to net loss of $71 million and net income of $260 million for the three and six months ended June 30, 2021, respectively. Substantially all of the decrease of $456 million and $1.5 billion during the three and six months ended June 30, 2022, respectively, was due to an increase in commodity derivatives losses from unfavorable changes in fair value and settlements of $586 million and $1.6 billion between the periods, respectively, as further described below. Included in the derivative loss incurred during both the three and six months ended June 30, 2022 was a loss incurred of $474 million associated with, and following the Contribution of, the Transferred IPM Agreements on June 15, 2022, primarily attributed to CCL’s lower credit risk profile relative to that of CCL Stage III, resulting in a higher derivative liability given reduced risk of CCL’s own nonperformance.
Substantially all derivative losses relate to the use of commodity derivative instruments indexed to international LNG prices, primarily related to our IPM agreements. While operationally we utilize commodity derivatives to mitigate price consistingvolatility for commodities procured or sold over a period of time, as a result of significant appreciation in forward international LNG commodity curves during the three and six months ended June 30, 2022, we recognized approximately $948 million and $1.7 billion, respectively, of non-cash unfavorable changes in fair value attributed to positions indexed to such prices, including the $474 million loss on the Transferred IPM Agreements in connection with the Contribution as described above.
Derivative instruments, which in addition to managing exposure to commodity-related marketing and price risks are utilized to manage exposure to changing interest rates volatility, are reported at fair value on our Consolidated Financial Statements. In some cases, the underlying LNG sales being economically hedged are accounted for under the accrual method of accounting, whereby revenues expected to be derived from the future LNG sales are recognized only upon delivery or realization of the underlying transaction. Because the recognition of derivative instruments at fair value has the effect of recognizing gains or losses relating to future period exposure, and given the significant volumes, long-term duration and volatility in price basis for certain of our derivative contracts, use of derivative instruments may result in continued volatility of our results of operations based on changes in market pricing, counterparty credit risk and other relevant factors, notwithstanding the operational intent to mitigate risk exposure over time.
As described in Overview of Significant Events, during the six months ended June 30, 2022, we entered into IPM agreements with various counterparties for approximately 105 million tonnes of LNG. We expect our net income or loss in the future to be impacted by the revenues and associated expenses related to the commencement of these agreements.
We expect our net income or loss in the future will be subject to a greater degree of volatility as a result of the Transferred IPM Agreements, which as described in Overview of Significant Events, totaled approximately 65 mtpa, with terms of approximately 15 years commencing with commercial operations of certain Trains of the Corpus Christi Stage 3 Project.
Revenues
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Three Months Ended June 30, | | Six Months Ended June 30, | | | | |
(in millions, except volumes) | 2022 | | 2021 | | Variance | | 2022 | | 2021 | | | | Variance |
LNG revenues | $ | 1,607 | | | $ | 826 | | | $ | 781 | | | $ | 2,931 | | | $ | 1,441 | | | | | $ | 1,490 | | | | | |
LNG revenues—affiliate | 763 | | | 331 | | | 432 | | | 1,434 | | | 599 | | | | | 835 | | | | | |
| | | | | | | | | | | | | | | | | |
Total revenues | $ | 2,370 | | | $ | 1,157 | | | $ | 1,213 | | | $ | 4,365 | | | $ | 2,040 | | | | | $ | 2,325 | | | | | |
| | | | | | | | | | | | | | | | | |
LNG volumes recognized as revenues (in TBtu) (1) | 189 | | | 186 | | | 3 | | | 389 | | | 348 | | | | | 41 | | | | | |
(1)During the six months ended June 30, 2021, includes four TBtu that were loaded at our affiliate’s facility.
Total revenues increased by approximately $1.2 billion and $2.3 billion during the three and six months ended June 30, 2022 from the comparable periods in 2021, respectively, primarily as a result of increased revenues per MMBtu due to appreciation in the Henry Hub index. Additionally, there were higher volumes of LNG delivered six months ended June 30, 2022 from the six months ended June 30, 2021 as a result of the additional production capacity of approximately 5 mtpa from Train 3 of the Liquefaction Project, which achieved substantial completion on March 26, 2021 (the “Train 3 Completion”).
Prior to substantial completion of a fixed feeTrain, amounts received from the sale of $3.50 (a portioncommissioning 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 which is subjectthat Train. During the six months ended June 30, 2021, we realized offsets to annual adjustment for inflation) per MMBtuLNG terminal costs of LNG plus a variable fee equal$143 million corresponding to 115% of Henry Hub per MMBtu of LNG. At Cheniere Marketing UK’s option, which has not been exercised yet, the Amended Cheniere Marketing Foundation SPA commences upon the date of first commercial
delivery for Train 2 and includes an annual contract quantity of 40 TBtu of LNG. The second SPA (the “Cheniere Marketing Base SPA”) allows Cheniere Marketing UK to purchase, at its option, (1) up to a cumulative total of 15028 TBtu of LNG withinthat were related to the sale of commissioning periodscargoes. We did not record any offsets to LNG terminal costs during the three and six months ended June 30, 2022 and the three months ended June 30, 2021.
Also included in LNG revenues are sales of certain unutilized natural gas procured for Trains 1the liquefaction process and gains and losses from certain commodity derivative instruments, which include the realized value associated with a portion of derivative instruments that settle through 3, (2) any LNG produced fromphysical delivery. We recognized revenues of $89 million and $31 million during the endthree months ended June 30, 2022 and 2021, respectively, and $105 million and $90 million during the six months ended June 30, 2022 and 2021, respectively, related to these transactions.
Operating costs and expenses
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Three Months Ended June 30, | | Six Months Ended June 30, | | | | |
(in millions) | 2022 | | 2021 | | Variance | | 2022 | | 2021 | | | | Variance |
Cost of sales | $ | 2,442 | | | $ | 799 | | | $ | 1,643 | | | $ | 4,783 | | | $ | 985 | | | | | $ | 3,798 | | | | | |
Cost of sales—affiliate | 36 | | | 2 | | | 34 | | | 48 | | | 37 | | | | | 11 | | | | | |
Cost of sales—related party | — | | | 36 | | | (36) | | | — | | | 71 | | | | | (71) | | | | | |
Operating and maintenance expense | 118 | | | 120 | | | (2) | | | 231 | | | 203 | | | | | 28 | | | | | |
Operating and maintenance expense—affiliate | 28 | | | 28 | | | — | | | 58 | | | 52 | | | | | 6 | | | | | |
Operating and maintenance expense—related party | 3 | | | 3 | | | — | | | 5 | | | 5 | | | | | — | | | | | |
Development expense | 1 | | | — | | | 1 | | | 1 | | | — | | | | | 1 | | | | | |
| | | | | | | | | | | | | | | | | |
General and administrative expense | 2 | | | 2 | | | — | | | 4 | | | 3 | | | | | 1 | | | | | |
General and administrative expense—affiliate | 8 | | | 7 | | | 1 | | | 16 | | | 12 | | | | | 4 | | | | | |
Depreciation and amortization expense | 112 | | | 110 | | | 2 | | | 222 | | | 199 | | | | | 23 | | | | | |
Other | 3 | | | 1 | | | 2 | | | 3 | | | 1 | | | | | 2 | | | | | |
Total operating costs and expenses | $ | 2,753 | | | $ | 1,108 | | | $ | 1,645 | | | $ | 5,371 | | | $ | 1,568 | | | | | $ | 3,803 | | | | | |
Total operating costs and expenses increased $1.6 billion and $3.8 billion during the commissioning periodthree and six months ended June 30, 2022, respectively, primarily as a result of increased cost of sales. Cost of sales includes costs incurred directly for Train 1 until the date of first commercialproduction and delivery of LNG from Train 1 and (3) any excess LNG produced by the Liquefaction Facility that isProject, to the extent those costs are not committedutilized for the commissioning process. Substantially all of the increase in both comparable periods was attributed to customers under third-party SPAs or to Cheniere Marketing UK underthird party cost of sales, which increased by $1.6 billion and $3.8 billion during the Amended Cheniere Marketing Foundation SPA,three and six months ended June 30, 2022 from the comparable 2021 periods, respectively, primarily as determined by CCL in each contract year, in each case for a price consistingresult of a fixed feeincreased pricing of $3.00 per MMBtu of LNG plus a variable fee equal to 115% of Henry Hub per MMBtu of LNG. Under the Cheniere Marketing Base SPA, Cheniere Marketing UK may, without charge, elect to suspend deliveries of cargoes (other than commissioning cargoes) scheduled for any month under the applicable annual delivery program by providing specified notice in advance.
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 intoas a firm storage services agreement with a third party to assist in managing volatility inresult of higher U.S. natural gas needs for the Liquefaction Project. CCL has also entered into enabling agreementsprices and long-term natural gas supply contracts with third parties,increased volume of LNG delivered and will continue to enter into such agreements,unfavorable changes in orderour commodity derivatives to secure natural gas feedstock for the Liquefaction Project. We expect to enter into gas supply contracts under these enabling agreementsProject, as discussed in Net income (loss) above.
Operating and when required formaintenance expense (including affiliate and related party) primarily includes costs associated with operating and maintaining the Liquefaction Project. As of SeptemberOperating and maintenance expense (including affiliates) also includes third party service and maintenance, insurance, regulatory costs and other operating costs. During the six months ended June 30, 2017, CCL has secured up2022, operating and maintenance expense increased from the comparable period in 2021, primarily due to approximately 362 TBtu ofincreased natural gas feedstock through long-term natural gas supply contracts.
Construction
CCL entered into separate lump sum turnkey contracts with Bechtel Oil, Gastransportation and Chemicals, Inc. (“Bechtel”)storage capacity demand charges following Train 3 Completion, as Train 3 was in operation for the engineering, procurementfull six months ended June 30, 2022 as compared to a limited number of days during the six months ended June 30, 2021.
Depreciation and constructionamortization expense increased during the six months ended June 30, 2022 from the comparable period in 2021 primarily as a result of Stages 1Train 3 Completion.
Other expense (income)
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Three Months Ended June 30, | | Six Months Ended June 30, | | | | |
(in millions) | 2022 | | 2021 | | Variance | | 2022 | | 2021 | | | | Variance |
Interest expense, net of capitalized interest | $ | 116 | | | $ | 118 | | | $ | (2) | | | $ | 234 | | | $ | 211 | | | | | $ | 23 | | | | | |
Loss on modification or extinguishment of debt | 28 | | | — | | | 28 | | | 30 | | | — | | | | | 30 | | | | | |
Interest rate derivative loss (gain), net | 1 | | | 2 | | | (1) | | | (2) | | | 1 | | | | | (3) | | | | | |
Other income, net | (1) | | | — | | | (1) | | | (1) | | | — | | | | | (1) | | | | | |
Total other expense | $ | 144 | | | $ | 120 | | | $ | 24 | | | $ | 261 | | | $ | 212 | | | | | $ | 49 | | | | | |
The changes in interest expense, net of capitalized interest increased during the three and 2six months ended June 30, 2022 compared to the comparable periods in 2021, were primarily as a result of a lower portion of total interest costs eligible for capitalization following the Train 3 Completion.
Total interest expense, net of capitalized interest consisted of the Liquefaction Project under which Bechtel charges a lump sum for all work performedfollowing (in millions):
| | | | | | | | | | | | | | | | | | | | | | | | | |
| Three Months Ended June 30, | | Six Months Ended June 30, |
| 2022 | | 2021 | | 2022 | | 2021 | | |
Total interest cost | $ | 118 | | | $ | 118 | | | $ | 237 | | | $ | 237 | | | |
Capitalized interest, including amounts capitalized as an allowance for funds used during construction | (2) | | | — | | | (3) | | | (26) | | | |
Total interest expense, net of capitalized interest | $ | 116 | | | $ | 118 | | | $ | 234 | | | $ | 211 | | | |
Loss on modification or extinguishment of debt increased during the three and generally bears project cost risk unless certain specified events occur, in which case Bechtel may cause CCL to enter into a change order, or CCL agrees with Bechtel to a change order.
The total contract price of the EPC contract for Stage 1, which does not include the Corpus Christi Pipeline, is approximately $7.8 billion, reflecting amounts incurred under change orders through Septembersix months ended June 30, 2017. Total expected capital costs for Stage 1 and the Corpus Christi Pipeline are estimated to be between $9.0 billion and $10.0 billion before financing costs, and between $11.0 billion and $12.0 billion after financing costs including, in each case, estimated owner’s costs and contingencies and total expected capital costs for the Corpus Christi Pipeline of between $350 million and $400 million.
Pipeline Facilities
In December 2014, the FERC issued a certificate of public convenience and necessity under Section 7(c) of the Natural Gas Act of 1938, as amended, authorizing CCP to construct and operate the Corpus Christi Pipeline. The Corpus Christi Pipeline is designed to transport 2.25 Bcf/d of natural gas feedstock required by the Liquefaction Project2022 from the
existing regional natural gas pipeline grid. The constructioncomparable periods in 2021 due to the amount of
debt that was paid down prior to their scheduled maturities during the
Corpus Christi Pipeline commencedthree and six months ended June 30, 2022, as further described in
January 2017Liquidity and is nearing completion.Capital Resources—Sources and Uses of Cash—Financing Cash Flows.
Final Investment Decision on Stage 2
Liquidity and obtaining adequate financing to construct the facility.
Capital Resources
WeThe following information describes our ability to generate and obtain adequate amounts of cash to meet our requirements in the short term and the long term. In the short term, we expect to finance the construction costs of the Liquefaction Project from one or more of the following: project debt and borrowings,meet our cash requirements using operating cash flow from CCLflows and CCPavailable liquidity, consisting of restricted cash and equity contributions from Cheniere.cash equivalents and available commitments under our credit facilities. In the long term, we expect to meet our cash requirements using operating cash flows and other future potential sources of liquidity, which may include debt offerings. The following table (in thousands)below provides a summary of our capital resources for the Liquefaction Project, excluding any equity contributions, at September 30, 2017 and December 31, 2016:
|
| | | | | | | | |
| | September 30, | | December 31, |
| | 2017 | | 2016 |
Senior notes (1) | | $ | 4,250,000 |
| | $ | 2,750,000 |
|
Credit facilities outstanding balance (2) | | 2,150,737 |
| | 2,380,788 |
|
Letters of credit issued (2) | | 162,503 |
| | — |
|
Available commitments under credit facilities (2) | | 2,608,211 |
| | 3,952,714 |
|
Total capital resources from borrowings and available commitments | | $ | 9,171,451 |
| | $ | 9,083,502 |
|
available liquidity (in millions). | |
(1) | Includes 7.000% Senior Secured Notes due 2024 (the “2024 CCH Senior Notes”), 5.875% Senior Secured Notes due 2025 (the “2025 CCH Senior Notes”) and 2027 CCH Senior Notes (collectively, the “CCH Senior Notes”). |
| |
(2) | Includes 2015 | | |
| | | |
Restricted cash and cash equivalents designated for the Liquefaction Project | $ | 51 | | | |
Available commitments under our credit facilities (1): | | | |
CCH Credit Facility and | 3,260 | | | |
CCH Working Capital Facility.Facility | 1,224 | | | |
Total available liquidity | $ | 4,535 | | | |
For additional information regarding(1)Available commitments represent total commitments less loans outstanding and letters of credit issued under each of our debt agreements related to the Liquefaction Project, see credit facilities as of June 30, 2022. See Note 6—9—Debt of our Notes to Consolidated Financial Statements for additional information on our credit facilities and Note 7—Debtother debt instruments.
Our liquidity position subsequent to June 30, 2022 will be driven by future sources of ourliquidity and future cash requirements. Future sources of liquidity are expected to be composed of (1) cash receipts from executed contracts, under which we are contractually entitled to future consideration, and (2) additional sources of liquidity, from which we expect to receive cash although the cash is not underpinned by executed contracts. Future cash requirements are expected to be composed of (1) cash payments under executed contracts, under which we are contractually obligated to make payments, and (2) additional cash requirements, under which we expect to make payments although we are not contractually obligated to make the payments under executed contracts.
Supplemental Guarantor Information
CCH“CCH Senior Notes
In May 2017, we issued an aggregate principal amount of $1.5 billion of the 2027 CCH Senior Notes, in addition to the existing 2024 CCH Senior Notes and 2025 CCH Senior Notes. The CCH Senior NotesNotes”) are jointly and severally guaranteed by each of our consolidated subsidiaries, CCL, CCP and Corpus Christi Pipeline GP, LLC (“CCP GP”, and collectively with CCL and CCP, each(each a “Guarantor” and collectively, the “Guarantors”).
The indentureGuarantors’ guarantees are full and unconditional, subject to certain release provisions including (1) the sale, exchange, disposition or transfer (by merger, consolidation or otherwise) of all or substantially all of the capital stock or the assets of the Guarantors, (2) the designation of the Guarantor as an “unrestricted subsidiary” in accordance with the indentures governing the CCH Senior Notes (the “CCH Indenture”Indentures”) contains customary terms, (3) upon the legal defeasance or covenant defeasance or discharge of obligations under the CCH Indentures and events of default(4) the release and certain covenants that, among other things, limit our ability and the ability of our 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 our restricted subsidiaries; restrict dividends or other payments by restricted subsidiaries to us or any of our restricted subsidiaries; incur liens; enter into transactions with affiliates; dissolve, liquidate, consolidate, merge, sell or lease all or substantially alldischarge of the propertiesGuarantors pursuant to the Common Security and Account Agreement. In the event of a default in payment of the principal or assets ofinterest by us, and our restricted subsidiaries taken as a whole; or permit any Guarantor to dissolve, liquidate, consolidate, merge, sell or lease all or substantially all of its properties and assets.
At any time prior to six months before the respective dates ofwhether at maturity for each series of the CCH Senior Notes weor by declaration of acceleration, call for redemption or otherwise, legal proceedings may redeem all or partbe instituted against the Guarantors to enforce the guarantee.
The rights of such seriesholders of the CCH Senior Notes at a redemption price equal toagainst the “make-whole” price set forth in the CCH Indenture, plus accrued and unpaid interest, if any, to the date of redemption. We alsoGuarantors may at any time within six months of the respective dates of maturity for each series of the CCH Senior Notes, 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.
2015 CCH Credit Facility
In May 2015, we entered into the 2015 CCH Credit Facility. Our obligationslimited under the 2015 CCH Credit Facility are secured byU.S. Bankruptcy Code or federal or state fraudulent transfer or conveyance law. Each guarantee contains a first priority lien on substantially all of our assets and the assets of our subsidiaries and by a pledge by CCH HoldCo I of its limited liability company interests in us. As of September 30, 2017 and December 31, 2016, we had $2.4 billion and $3.6 billion of available commitments and $2.2 billion and $2.4 billion of outstanding borrowings under the 2015 CCH Credit Facility, respectively.
The principal of the loans made under the 2015 CCH Credit Facility must be repaid in quarterly installments, commencing on the earlier of (1) the first quarterly payment date occurring more than three calendar months following project completion and (2) a set date determined by reference to the date under which a certain LNG buyer linked to Train 2 of the Liquefaction Project 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 project completion and designed to achieve a minimum projected fixed debt service coverage ratio of 1.55:1.
Under the 2015 CCH Credit Facility, we are required to hedge not less than 65% of the variable interest rate exposure of our senior secured debt. We are restricted from making distributions under agreements governing our indebtedness generally until, among other requirements, the completion of the construction of Trains 1 and 2 of the Liquefaction 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 December 2016, we entered into the $350 million CCH Working Capital Facility, which isprovision intended to be used for loans (“CCH Working Capital Loans”),limit the issuance of letters of credit, as well as for swing line loans (“CCH Swing Line Loans”) for certain working capital requirements related to developing and placing into operation the Liquefaction Project. Loans under the CCH Working Capital Facility are guaranteed by the Guarantors. We may, from time to time, request increases in the commitments under the CCH Working Capital Facility of upGuarantor’s liability to the maximum allowedamount that it could incur without causing the incurrence of obligations under the Common Terms Agreement that was entered into concurrently with the 2015 CCH Credit Facility. We did not have any amounts outstandingits guarantee to be a fraudulent conveyance or transfer under the CCH Working Capital FacilityU.S. federal or state law. However, there can be no assurance as of both September 30, 2017 and December 31, 2016 and $162.5 million and zero aggregate amount of letters of credit were issued as of September 30, 2017 and December 31, 2016, respectively.
The CCH Working Capital Facility matures on December 14, 2021, and we may prepay the CCH Working Capital Loans, CCH Swing Line Loans and loans madeto what standard a court will apply in connection withmaking 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 Swing Line Loans terminate upon the earliest of (1) the maturity date or earlier terminationdetermination of the CCH Working Capital Facility, (2)maximum liability of the dateGuarantors. Moreover, this provision may not be effective to protect the guarantee from being voided under fraudulent conveyance laws. There is a possibility that is 15 days after such CCH Swing Line Loan is madethe entire guarantee may be set aside, in which case the entire liability may be extinguished.
Summarized financial information about us and (3) the first borrowing date for a CCH Working Capital Loan or CCH Swing Line Loan occurring at least four business days following the date the CCH Swing Line Loan is made. We are 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. Our obligations under the CCH Working Capital Facility are secured by substantially all our assets and the assets of the Guarantors as well as alla group is omitted herein because such information would not be materially different from our Consolidated Financial Statements.
Equity Contribution Agreement
In May 2015, we entered into an equity contribution agreement with Cheniere (the “Equity Contribution Agreement”) pursuant to which Cheniere agreed to provide tiered equity contributions of approximately $2.6 billion for Stage 1 and the Corpus Christi Pipeline. The first tier of equity funding of approximately $1.5 billion (the “First Tier Equity Funding”) was contributed to us concurrently with the closing of the 2015 CCH Credit Facility. The second tier of equity funding, up to a maximum amount of approximately $1.1 billion, will be contributed concurrently and pro rata with funding under our project financing debt starting on the date on which further disbursements of such debt would result in a senior debt to equity ratio of greater than 75/25 (the “Second Tier Pro Rata Equity Funding”). As of September 30, 2017, we have received $1.8 billion in contributions under the Equity Contribution Agreement, of which approximately $1.5 billion was the First Tier Equity Funding and approximately $0.3 billion was part of the Second Tier Pro Rata Equity Funding. On March 2, 2017, Cheniere entered into a $750 million senior secured revolving credit facility (the “CEI Revolving Credit Facility”). The proceeds of the CEI Revolving Credit Facility are available to Cheniere to back-stop its obligations under the Equity Contribution Agreement to provide the Second Tier Pro Rata Equity Funding to us and for general corporate purposes.
Sources and Uses of Cash
The following table (in thousands) summarizes the sources and uses of our restricted cash and cash equivalents and restricted cash for the nine months ended September 30, 2017 and 2016.(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, |
| | 2022 | | 2021 | | |
| | | | | | |
Net cash provided by operating activities | | $ | 742 | | | $ | 733 | | | |
Net cash used in investing activities | | (406) | | | (204) | | | |
Net cash used in financing activities | | (329) | | | (477) | | | |
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| | | | | | |
| | | | | | |
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| | | | | | |
| | | | | | |
Net increase in restricted cash and cash equivalents | | $ | 7 | | | $ | 52 | | | |
| | | | | | |
| | | | | | |
|
| | | | | | | |
| Nine Months Ended September 30, |
| 2017 | | 2016 |
Operating cash flows | $ | (51,581 | ) | | $ | (28,813 | ) |
Investing cash flows | (1,603,178 | ) | | (1,618,285 | ) |
Financing cash flows | 1,500,732 |
| | 1,793,140 |
|
| | | |
Net increase (decrease) in cash, cash equivalents and restricted cash | (154,027 | ) | | 146,042 |
|
Cash, cash equivalents and restricted cash—beginning of period | 270,540 |
| | 46,770 |
|
Cash, cash equivalents and restricted cash—end of period | $ | 116,513 |
| | $ | 192,812 |
|
Operating Cash Flows
Operating cash outflowsflows during the ninesix months ended SeptemberJune 30, 20172022 and 20162021 were $51.6$742 million and $28.8$733 million, respectively. The$9 million increase in operating cash outflows in 2017 compared to 2016between the periods was primarily related to increased cash used as working capital as a result of payment timing differences and timing of cash receipts from the sale of LNG cargoes. The increase was partially offset by a decrease in operating cash inflows due to higher costs associated with the sale of certain unutilized natural gas procured for settlement of derivative instruments.the liquefaction process during the six months ended June 30, 2022.
Investing Cash Flows
Investing cashCash outflows during each of the nine months ended September 30, 2017for property, plant and 2016equipment were $1.6 billion and are primarily used to fundfor the construction costs for Stage 1 of the Liquefaction Project. These costsProject, which are capitalized as construction-in-process until achievement of substantial completion. In additionMarch 2021, substantial completion was achieved on Train 3, and in June 2022, Cheniere’s Board issued a full notice to cash outflows forproceed with construction costs for the LiquefactionCorpus Christi Stage 3 Project we received $36.3 million during the nine months ended September 30, 2017 from the return of collateral payments previously paid for the Liquefaction Project, which was offset by $10.3 million paid for infrastructure to support the Liquefaction Project. During the nine months ended September 30, 2016, we used an additional $44.4 million primarily for infrastructure of the Liquefaction Project, which included the $36.3 million of collateral payments that were returned to us during the nine months ended September 30, 2017.Bechtel.
Financing Cash Flows
FinancingOur financing cash net outflows during the six months ended June 30, 2022 and 2021 were $329 million and $477 million, respectively. The $148 million decrease between the periods was due to an increase in cash inflows from receipts of capital contributions, net of capital distributions, of $1.3 billion, offset by an increase in net cash outflows from debt activity of $1.2 billion, each described further below.
Debt Activity
During the six months ended June 30, 2022 and 2021, total debt paid, net of issuances, was $1.2 billion and $140 million, respectively, all of which was paid prior to contractual maturity of the underlying debt. Additionally, total cash paid for debt related costs was $61 million and zero, respectively, during the ninesix months ended SeptemberJune 30, 2017 were $1.5 billion, primarily as a result of:2022 and 2021. See tables below for additional details.
$1.2 billion of borrowings under
Debt Issuances and Related Financing Costs
The following table shows the 2015 CCH Credit Facility;
issuance of an aggregate principal amount of $1.5 billion of the 2027 CCH Senior Notes, which was used to prepay $1.4 billion of outstanding borrowings under the 2015 CCH Credit Facility;
$24.0 million of borrowings and $24.0 million of repayments made under the CCH Working Capital Facility;
$23.3 millionissuances of debt, issuance and deferred financing costs related to up-front fees paid uponincluding intra-quarter borrowings (in millions):
| | | | | | | | | | | | | | | | |
| | Six Months Ended June 30, |
| | 2022 | | 2021 | | |
| | | | | | |
| | | | | | |
CCH Credit Facility | | $ | 440 | | | $ | — | | | |
| | | | | | |
| | | | | | |
During the closing of these transactions; and
$254.1 million of equity contributions from Cheniere.
Financing cash inflows during the ninesix months ended SeptemberJune 30, 2016 were $1.8 billion, primarily as a result of:
$1.6 billion of borrowings under the 2015 CCH Credit Facility;
issuance of an aggregate principal amount of $1.25 billion of the 2024 CCH Senior Notes, which was used to prepay $1.1 billion of outstanding borrowings under the 2015 CCH Credit Facility;2022 and
$27.3 million of 2021, we incurred debt issuance costs and other financing costs of $18 millionandzero, respectively, related to up-front fees paid upon the closingdebt issuances above and amendment of these transactions.credit facilities during the respective periods.
Our consolidated net loss was $8.6 million inDebt Repayments and Related Extinguishment Costs
The following table shows the threerepayments of debt, including intra-quarter repayments (in millions):
| | | | | | | | | | | | | | | | |
| | Six Months Ended June 30, |
| | 2022 | | 2021 | | |
CCH Credit Facility | | $ | (1,390) | | | $ | — | | | |
CCH Working Capital Facility | | (250) | | | (140) | | | |
Total repayments | | $ | (1,640) | | | $ | (140) | | | |
During the six months ended SeptemberJune 30, 2017, compared2022 and 2021, we incurred debt modification or extinguishment costs of $43 millionandzero, respectively, related to net income of $18.2 million in the threethese repayments.
Capital Contributions and Distributions
During the six months ended SeptemberJune 30, 2016. This $26.82022, we received cash capital contributions of $932 million increase in net loss in 2017 was primarily a result of increased derivative loss, net associated with interest rate derivative activity.
Our consolidated net loss was $79.1 million infrom Cheniere and during the ninesix months ended SeptemberJune 30, 2017, compared2021 we made cash distributions of $337 million to a net loss of $249.2 million in the nine months ended September 30, 2016. This $170.1 million decrease in net loss in 2017 was primarily a result of decreased derivative loss, net associated with interest rate derivative activity.Cheniere.
In August 2017, Hurricane Harvey struck the Texas and Louisiana coasts, and the Corpus Christi LNG terminal experienced a temporary suspension in construction. The terminal did not sustain significant damage, and the effects of Hurricane Harvey did not have a material impact on our Consolidated Financial Statements.
Loss from operations
|
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| Three Months Ended September 30, | | Nine Months Ended September 30, |
(in thousands) | 2017 | | 2016 | | Change | | 2017 | | 2016 | | Change |
Revenues | $ | — |
| | $ | — |
| | $ | — |
| | $ | — |
| | $ | — |
| | $ | — |
|
| | | | | | | | | | |
|
|
Operating and maintenance expense | 533 |
| | 338 |
| | 195 |
| | 2,097 |
| | 875 |
| | 1,222 |
|
Operating and maintenance expense (recovery)—affiliate | 1,504 |
| | (3 | ) | | 1,507 |
| | 1,653 |
| | 17 |
| | 1,636 |
|
Development expense (recovery) | 82 |
| | 77 |
| | 5 |
| | 497 |
| | (107 | ) | | 604 |
|
Development expense (recovery)—affiliate | — |
| | 86 |
| | (86 | ) | | 8 |
| | (34 | ) | | 42 |
|
General and administrative expense | 861 |
| | 1,066 |
| | (205 | ) | | 3,824 |
| | 2,843 |
| | 981 |
|
General and administrative expense—affiliate | 289 |
| | 180 |
| | 109 |
| | 753 |
| | 471 |
| | 282 |
|
Depreciation and amortization expense | 248 |
| | 65 |
| | 183 |
| | 537 |
| | 149 |
| | 388 |
|
Impairment expense and loss on disposal of assets | 2,059 |
| | — |
| | 2,059 |
| | 2,064 |
| | — |
| | 2,064 |
|
| | | | | | | | | | |
|
|
Loss from operations | $ | (5,576 | ) | | $ | (1,809 | ) | | $ | (3,767 | ) | | $ | (11,433 | ) | | $ | (4,214 | ) | | $ | (7,219 | ) |
Our loss from operations increased $3.8 million and $7.2 million during the three and nine months ended September 30, 2017, respectively, from the comparable periods in 2016 primarily as a result of increased expenses from increased ad valorem taxes, insurance costs, labor costs and professional fees.
Other expense (income)
|
| | | | | | | | | | | | | | | | | | | | | | | |
| Three Months Ended September 30, | | Nine Months Ended September 30, |
(in thousands) | 2017 | | 2016 | | Change | | 2017 | | 2016 | | Change |
Loss on early extinguishment of debt | $ | — |
| | $ | — |
| | $ | — |
| | $ | 32,480 |
| | $ | 29,011 |
| | $ | 3,469 |
|
Derivative loss (gain), net | 2,906 |
| | (20,113 | ) | | 23,019 |
| | 35,002 |
| | 215,940 |
| | (180,938 | ) |
Other expense | 95 |
| | 74 |
| | 21 |
| | 177 |
| | 74 |
| | 103 |
|
Total other expense (income) | $ | 3,001 |
| | $ | (20,039 | ) | | $ | 23,040 |
| | $ | 67,659 |
| | $ | 245,025 |
| | $ | (177,366 | ) |
Derivative loss, net increased from a net gain during the three months ended September 30, 2016 to a net loss during the three months ended September 30, 2017 primarily due to an unfavorable shift in the long-term forward LIBOR curve between the periods. Derivative loss, net decreased during the nine months ended September 30, 2017 compared to the nine months ended September 30, 2016 primarily due to a favorable shift in the long-term forward LIBOR curve between the periods. During the nine months ended September 30, 2017, we also recognized a $13.0 million loss in May 2017 upon the settlement of interest rate swaps associated with approximately $1.4 billion of commitments that were terminated under the 2015 CCH Credit Facility.
Off-Balance Sheet Arrangements
As of September 30, 2017, 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
Recent Accounting Standards
| |
ITEM 3. | QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK |
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 to secure natural gas feedstock for the commissioning and operation of the Liquefaction Project (“Liquefaction Supply Derivatives”). In order to test the sensitivity of the fair value of the Liquefaction Supply Derivatives to changes in underlying commodity prices, management modeled a 10% change in the commodity price for natural gas for each delivery location as follows (in thousands)millions):
| | | | | | | | | | | | | | | | | | | | | | | |
| June 30, 2022 | | December 31, 2021 |
| Fair Value | | Change in Fair Value | | Fair Value | | Change in Fair Value |
Liquefaction Supply Derivatives | $ | (4,979) | | | $ | 1,605 | | | $ | (1,212) | | | $ | 186 | |
|
| | | | | | | | | | | | | | | |
| September 30, 2017 | | December 31, 2016 |
| Fair Value | | Change in Fair Value | | Fair Value | | Change in Fair Value |
Liquefaction Supply Derivatives | $ | 295 |
| | $ | 34 |
| | $ | — |
| | $ | — |
|
Interest Rate Risk
We have entered into interest rate swaps to hedge the exposure to volatility in a portion of the floating-rate interest payments under the 2015 CCH Credit Facility (“Interest Rate Derivatives”). In order to test the sensitivity of the fair value of the Interest Rate Derivatives to changes in interest rates, management modeled a 10% change in the forward 1-month LIBOR curve across the remaining terms of the Interest Rate Derivatives as follows (in thousands):
|
| | | | | | | | | | | | | | | |
| September 30, 2017 | | December 31, 2016 |
| Fair Value | | Change in Fair Value | | Fair Value | | Change in Fair Value |
Interest Rate Derivatives | $ | (79,330 | ) | | $ | 42,638 |
| | $ | (86,488 | ) | | $ | 52,047 |
|
| |
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 voluntarily filed by us under the Securities Exchange Act, of 1934, as amended (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 President and 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 President and 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.ITEM 1.LEGAL PROCEEDINGS | 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. 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, 2021.
| |
ITEM 1A. | ITEM 1A. RISK FACTORS |
ITEM 6. EXHIBITS
| | | | | | | | | |
| | |
Exhibit No. | | Description |
10.1Exhibit No. | | Description | | | | | |
10.1 | | Consent for Amendment to the Common SecuritySecond Amended and AccountRestated Term Loan Facility Agreement, dated September 7, 2017,June 15, 2022, among Cheniere Corpus Christi Holdings, LLC, asthe Company, Corpus Christi Liquefaction, LLC, Cheniere Corpus Christi Pipeline, L.P., andCCP, Corpus Christi Pipeline GP, LLC, as Guarantors,CCL, the Senior Creditor Group Representativeslenders party thereto from time to time and Société Générale as Intercreditorthe Term Loan Facility Agent and Security Trustee, and Mizuho Bank, Ltd., as Account Bank (Incorporated by reference to Exhibit 10.5110.1 to the Company’s Registration StatementCurrent Report on Form S-48-K (SEC File No. 333-221307)333-215435), filed on November 2, 2017)June 22, 2022) | | | | | |
10.2 | | Consent for Amendment to the Common TermsSecond Amended and Restated Working Capital Facility Agreement, dated September 7, 2017,June 15, 2022, among Cheniere Corpus Christi Holdings, LLC, as Borrower, Corpus Christi Liquefaction, LLC, Cheniere Corpus Christi Pipeline, L.P.,the Company, CCP, Corpus Christi Pipeline GP, LLC, CCL, the lenders party thereto from time to time, the issuing banks party thereto from time to time, the swing line lenders party thereto from time to time, The Bank of Nova Scotia as Guarantors,Working Capital Facility Agent and Société Générale as Security Trustee (Incorporated by reference to Exhibit 10.2 to the Company’s Current Report on Form 8-K (SEC File No. 333-215435), filed on June 22, 2022) | | | | | |
10.3 | | Second Amended and Restated Common Terms Agreement, dated June 15, 2022, among the Company, CCP, Corpus Christi Pipeline GP, LLC, CCL, Société Générale, as Term Loan Facility Agent, The Bank of Nova Scotia as Working Capital Facility Agent, and Société Générale as Intercreditor Agent, and any other facility agentslenders party thereto from time to time (Incorporated(Incorporated by reference to Exhibit 10.5210.3 to the Company’s Registration StatementCurrent Report on Form S-48-K (SEC File No. 333-221307)333-215435), filed on November 2, 2017)June 22, 2022) | | | | | |
10.310.4 | | Change ordersSecond Amended and Restated Common Security and Account Agreement, dated June 15, 2022, among the Company, CCP, Corpus Christi Pipeline GP, LLC, CCL, the Senior Creditor Group Representatives, Société Générale as the Intercreditor Agent, Société Générale as Security Trustee and Mizuho Bank, Ltd as the Account Bank(Incorporated by reference to Exhibit 10.4 to the Company’s Current Report on Form 8-K (SEC File No. 333-215435), filed on June 22, 2022) | | | | | |
10.5 | | Fixed Price Separated Turnkey Agreement for the Engineering, Procurement and Construction of the Corpus Christi Liquefaction Stage 3 Project, dated March 1, Liquefaction Facility, dated as of December 6, 2013,2022, by and between Corpus Christi Liquefaction Stage III, LLC and Bechtel Energy Inc (Portions of this exhibit have been omitted) (Incorporated by reference to Exhibit 10.1 to Cheniere’s Quarterly Report on Form 10-Q (SEC File No. 001-16383), filed on May 3, 2022) | | | | | |
10.6* | | Change orders to the Lump Sum Turnkey Agreement for the Engineering, Procurement and Construction of the Corpus Christi Liquefaction Stage 3 Project, dated March 1, 2022, by and between CCL Stage III and Bechtel Oil Gas and Chemicals, Inc.: (i) the Change Order CO-00036 Security Fencing Revisions, 138kV Overhead Power Stop Work, Additional Permanent Plant Access Control System Changes, and Wet/DryCO-00001 Maintaining Elevated Ground Flare Expansion Loop Relocation,Option, dated August 3, 2017 andMarch 28, 2022, (ii) the Change Order CO-00037 9% Nickel Lump Sum Conversion,CO-00002 Package 7 Pre-Investment of Trains 8 and 9 (Without Site Work), dated September 14, 2017April 29, 2022 and (iii) the Change Order CO-00003 Modifications to Insurance Language, dated June 13, 2022 (Portions of this exhibit have been omittedomitted.) | | | | | |
10.7 | | | | | | | |
10.8 | | | | | | | |
| | | | | | | | | | | | | |
| | | | |
Exhibit No. | | Description | | | | | |
10.9 | | | | | | | |
22.1 | | | | | | | |
31.1* | | | | | | | |
32.1** | | | | | | | |
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 | | | | | |
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) | | | | | |
| | | | | |
| |
* | Filed herewith. |
** | Furnished herewith. |
| |
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.
| | | | | | | | | | | |
| | CHENIERE CORPUS CHRISTI HOLDINGS, LLC |
| | | |
Date: | August 3, 2022 | By: | /s/ Zach Davis |
| | | Zach Davis |
| | | President and Chief Financial Officer |
| | | (Principal Executive and Financial Officer) |
| | | |
| | | |
Date: | August 3, 2022 | CHENIERE CORPUS CHRISTI HOLDINGS, LLCBy: | /s/ David Slack |
| | | David Slack |
Date: | November 8, 2017 | By: | /s/ Michael J. WortleyChief Accounting Officer |
| | | Michael J. Wortley |
| | | President and Chief Financial Officer |
| | | (on behalf of the registrant and
as principal financial officer) |
| | | |
Date: | November 8, 2017 | By: | /s/ Leonard Travis |
| | | Leonard Travis |
| | | Chief Accounting Officer |
| | | (on behalf of the registrant and
as principal accounting officer) |