We are a disregarded entity for federal and state income tax purposes. Our taxable income or loss, which may vary substantially from the net income or loss reported on our Consolidated Statements of Operations, is included in the consolidated federal income tax return of Cheniere. TheAccordingly, no provision or liability for federal or state income taxes taxes payableis included in the accompanying Consolidated Financial Statements.
Pursuant to the accounts agreement entered into with the collateral trustee for the benefit of our debt holders, we are required to deposit all cash received into reserve accounts controlled by the collateral trustee. The usage or withdrawal of such cash is restricted to the payment of liabilities related to the Liquefaction Project and other restricted payments.
|
| | | | | | | | | | | | | | | | |
| | | 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 |
|
| | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | March 31, 2023 | | December 31, 2022 |
| | | Carrying
Amount | | Estimated
Fair Value | | Carrying
Amount | | Estimated
Fair Value |
| Senior notes — Level 2 (1) | | $ | 4,387 | | | $ | 4,210 | | | $ | 5,283 | | | $ | 5,014 | |
| Senior notes — Level 3 (2) | | 1,971 | | | 1,853 | | | 1,971 | | | 1,738 | |
| | | | | | | | |
| | | | | | | | |
(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.
| |
(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. |
(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.
CHENIERE CORPUS CHRISTI HOLDINGS, LLC AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—CONTINUED
(unaudited)
NOTE 7—RELATED PARTY TRANSACTIONS9—REVENUES
The following table represents a disaggregation of revenue earned (in millions):
| | | | | | | | | | | | | | | | | | | | |
| | | | Three Months Ended March 31, |
| | | | | | 2023 | | 2022 | | |
| Revenues from contracts with customers | | | | | | | | | | |
| LNG revenues | | | | | | $ | 1,098 | | | $ | 1,329 | | | |
| LNG revenues—affiliate | | | | | | 555 | | | 671 | | | |
| Total revenues from contracts with customers | | | | | | 1,653 | | | 2,000 | | | |
| Net derivative loss (1) | | | | | | (5) | | | (5) | | | |
| Total revenues | | | | | | $ | 1,648 | | | $ | 1,995 | | | |
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):
| | | | | | | | | | | | | | |
| | |
| | March 31, | | December 31, |
| | 2023 | | 2022 |
| Contract assets, net of current expected credit losses | | $ | 154 | | | $ | 144 | |
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):
| | | | | | | | | | |
| | |
| | Three Months Ended March 31, 2023 | | |
| Deferred revenue, beginning of period | | $ | 76 | | | |
| Cash received but not yet recognized in revenue | | 76 | | | |
| Revenue recognized from prior period deferral | | (76) | | | |
| Deferred revenue, end of period | | $ | 76 | | | |
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:
| | | | | | | | | | | | | | | | | | | | | | | | | | |
| | March 31, 2023 | | December 31, 2022 |
| | Unsatisfied Transaction Price (in billions) | | Weighted Average Recognition Timing (years) (1) | | Unsatisfied Transaction Price (in billions) | | Weighted Average Recognition Timing (years) (1) |
| LNG revenues | | $ | 50.5 | | | 10 | | $ | 50.9 | | | 10 |
| LNG revenues—affiliate | | 1.2 | | | 9 | | 1.2 | | | 8 |
| Total revenues | | $ | 51.7 | | | | | $ | 52.1 | | | |
(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 had $16.6 million and $7.1 million due to affiliates and zero and $0.6 millionhave elected the following exemptions which omit certain potential future sources of other non-current liabilities—affiliate as of September 30, 2017 and December 31, 2016, respectively, under agreements with affiliates, as described below.revenue from the table above:
LNG Sale and Purchase Agreements
CCL has two fixed price 20-year SPAs with Cheniere Marketing International LLP (“Cheniere Marketing UK”). Under(1)We omit from the first SPA (the “Amended Cheniere Marketing Foundation SPA”), Cheniere Marketing UK will purchase LNG from CCL for a price consistingtable above all performance obligations that are part of a fixed feecontract that has an original expected duration of $3.50 per MMBtu (a portionone 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 whicha single performance obligation when that performance obligation qualifies as a series. The amount of revenue from variable fees that is subject to annual adjustment for inflation) of LNG plus a variable fee equal to 115%not included in the transaction price will vary based on the future prices of Henry Hub per MMBtu of LNG. At Cheniere Marketing UK’s option, which has not been exercised yet,throughout the Amended Cheniere Marketing Foundation SPA commences uponcontract terms, to 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 UKextent customers elect 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 commercialtake delivery of their LNG, from Train 1 and (3) any excess LNG produced by the Liquefaction Facility 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. 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.
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. Prioradjustments to the substantial completionconsumer price index. Certain of each Train of the Liquefaction Facility, 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, CCL will pay, in addition to the reimbursement of operating expenses, a fixed monthly fee of $125,000 (indexed for inflation) for services 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. 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 and other services required to operate and maintain the Liquefaction Facility. Prior to the substantial completion of each Train of the Liquefaction Facility, 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, CCL will pay, in addition to the reimbursement of operating expenses, a fixed monthly fee of $125,000 (indexed for inflation) for services 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 andour
CHENIERE CORPUS CHRISTI HOLDINGS, LLC AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—CONTINUED
(unaudited)
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. Additionally, we have excluded variable consideration related to contracts where there is uncertainty that one or both of the parties will achieve certain milestones. Approximately 55% and 64% of our LNG revenues from contracts included in the table above during the three months ended March 31, 2023 and 2022, respectively, were related to variable consideration received from customers. Approximately 83% of our LNG revenues—affiliate from contracts included in the table above during the three months ended March 31, 2023 were related to variable consideration received from customers. Noneof our LNG revenues—affiliates from the contract included in the table above were related to variable consideration received from customers during the three months ended March 31, 2022.
We may enter into contracts to sell LNG that are conditioned upon one or both of the parties achieving certain milestones such as reaching FID on a certain liquefaction Train, obtaining financing or achieving substantial completion of a Train and any related facilities. These contracts are considered completed contracts for revenue recognition purposes and are included in the transaction price above when the conditions are considered probable of being met.
NOTE 10—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 March 31, |
| | | | | 2023 | | 2022 | | |
| LNG revenues—affiliate | | | | | | | | | |
| Cheniere Marketing Agreements (1) | | | | | $ | 555 | | | $ | 665 | | | |
| Contracts for Sale and Purchase of Natural Gas and LNG (2) | | | | | — | | | 6 | | | |
| Total LNG revenues—affiliate | | | | | 555 | | | 671 | | | |
| | | | | | | | | | |
| | | | | | | | | | |
| | | | | | | | | |
| | | | | | | | | |
| Cost of sales—affiliate | | | | | | | | | |
| Contracts for Sale and Purchase of Natural Gas and LNG (2) | | | | | 15 | | | 12 | | | |
| | | | | | | | | |
| | | | | | | | | |
| | | | | | | | | |
| | | | | | | | | |
| | | | | | | | | |
| | | | | | | | | |
| | | | | | | | | |
| | | | | | | | | |
| Operating and maintenance expense—affiliate | | | | | | | | | |
| Services Agreements (3) | | | | | 30 | | | 30 | | | |
| | | | | | | | | |
| | | | | | | | | |
| | | | | | | | | |
| | | | | | | | | |
| Operating and maintenance expense—related party | | | | | | | | | |
| Natural Gas Transportation Agreements (4) | | | | | 2 | | | 2 | | | |
| | | | | | | | | |
| | | | | | | | | |
| | | | | | | | | |
| | | | | | | | | |
| General and administrative expense—affiliate | | | | | | | | | |
| Services Agreements (3) | | | | | 12 | | | 8 | | | |
(1)CCL primarily sells LNG to Cheniere Marketing International LLP (“Cheniere Marketing”), a wholly owned subsidiary of Cheniere, under SPAs and a letter agreement at a price equal to 115% of Henry Hub plus a fixed fee, except for SPAs associated with IPM agreements for which pricing is linked to international natural gas prices. In addition, CCL has an arrangement with subsidiaries of Cheniere to provide the ability, in limited circumstances, to potentially fulfill commitments to LNG buyers in the event operational conditions impact operations at either the Sabine Pass or Corpus Christi liquefaction facilities. The purchase price for such cargoes would be the greater of: (a) 115% of the applicable natural gas feedstock purchase price or (b) an FOB U.S. Gulf Coast LNG market price. As of March 31, 2023 and December 31, 2022, CCL had $157 million and $223 million of trade receivables—affiliate, respectively, under these agreements with Cheniere Marketing.
(2)CCL has an agreement with Sabine Pass Liquefaction, LLC (“SPL”) 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. As of March 31, 2023 and December 31, 2022, CCL had zero and $16 million of accounts receivable—affiliate, respectively, under these agreements with SPL.
CHENIERE CORPUS CHRISTI HOLDINGS, LLC AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—CONTINUED
(unaudited)
materials, overseeing contractors(3)We do not have employees and otherthus our subsidiaries have various services agreements with affiliates of Cheniere in the ordinary course of business, including services required to construct, 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 constructionLiquefaction Project, and operation of the Liquefaction Facility, 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 Facility and obtaining insurance.administrative services. Prior to the substantial completion of each Train of the Liquefaction Facility, no monthly fee payment is required except forProject, our payments under the services agreements are primarily based on a cost reimbursement of expenses. After substantialstructure, and following the completion of each Train, CCL will pay,our payments include a fixed monthly fee (indexed for inflation) per mtpa in addition to the reimbursement of costs. As of March 31, 2023 and December 31, 2022, we had $93 million and $132 million of advances to affiliates, respectively, under the services agreements. The non-reimbursement amounts incurred under these agreements are recorded in general and administrative expense—affiliate.
(4)CCL is party to natural gas transportation agreements with a related expenses, a monthly fee equal to 3% of the capital expenditures incurredparty in the previous month and a fixed monthly feeordinary course of $375,000 for services with respect to such Train.
CCP has an 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.
Lease Agreements
CCL has agreements with Cheniere Land Holdings, LLC (“Cheniere Land Holdings”) to lease approximately 60 acres of land owned by Cheniere Land Holdings for the Liquefaction Facility. The total annual lease payment, paid in advance upon 30 days of the effective date of the respective leases, is $0.4 million, and the terms of the agreements range from three to five years. We recorded $0.1 million and $0.2 million of lease expense related to these 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 right to construct, install and operate a natural gas pipeline on land owned by Cheniere Land Holdings. CCP had made a one-time payment of $0.3 million to Cheniere Land Holdings for the permanent easement of this land as of December 31, 2016.
Dredge Material Disposal Agreement
CCL has a dredge material disposal agreement with Cheniere Land Holdings that terminates in 2025 which grants CCL permission to use land owned by Cheniere Land Holdings for the deposit of dredge material from the construction and maintenanceoperation of the Liquefaction Facility. Under the termsProject. CCL had accrued liabilities—related party of the agreement, CCL will pay Cheniere Land Holdings $0.50 per cubic yard$1 million as of dredge material deposits upboth March 31, 2023 and December 31, 2022 with this related party.
We had $26 million and $43 million due to 5.0 million cubic yards.affiliates as of March 31, 2023 and December 31, 2022, respectively, under agreements with affiliates as described above.
Disclosure of future consideration under revenue contracts with affiliates is included in Note 9—Revenues. Tug Hosting AgreementOther Agreements
In February 2017, CCL entered into a tug hosting agreement with Corpus Christi Tug Services, LLC (“Tug Services”) to provide certain marine structures, support services and access necessary at the Liquefaction Facility 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.
Equity Contribution Agreements
We have equity contribution agreements with Cheniere and certain of its subsidiaries (the “Equity Contribution Agreements”) pursuant to which Cheniere agreed to contribute any of CCH’s Senior Secured Notes that Cheniere has repurchased to CCH. During the three months ended March 31, 2023, Cheniere repurchased a total of $398 million of the outstanding principal amount of CCH’s Senior Secured Notes due 2027, 2029 and 2039 on the open market, which were immediately contributed under the Equity Contribution Agreements to us from Cheniere and cancelled by us.
Arrangement with ADCC Pipeline, LLC
In June 2022, Cheniere acquired a 30% equity interest in ADCC Pipeline, LLC and its wholly owned subsidiary (collectively, “ADCC Pipeline”) through its wholly owned subsidiary Cheniere ADCC Investments, LLC. ADCC Pipeline will develop, construct and operate an approximately 42-mile natural gas pipeline project (the “ADCC Pipeline Project”) connecting the Agua Dulce natural gas hub to the CCL Project. CCL is party to a natural gas transportation agreement with ADCC Pipeline for the operation of the CCL Project, with an initial term of 20 years with extension rights, which will commence upon the completion of the ADCC Pipeline Project.
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—11—CUSTOMER CONCENTRATION
The concentration of our customer credit risk in excess of 10% or greater of total revenues and/or trade and other receivables was as follows:
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | Percentage of Total Revenues from External Customers | | Percentage of Trade and Other Receivables, Net and Contract Assets, Net from External Customers |
| | | | | | |
| | | | Three Months Ended March 31, | | | | March 31, | | December 31, |
| | | | | | 2023 | | 2022 | | | | 2023 | | 2022 |
| Customer A | | | | | | 23% | | 26% | | | | * | | 17% |
| Customer B | | | | | | 14% | | 14% | | | | * | | * |
| Customer C | | | | | | 15% | | 12% | | | | * | | * |
| Customer D | | | | | | * | | * | | | | 48% | | 33% |
| Customer E | | | | | | * | | * | | | | 11% | | * |
| | | | | | | | | | | | | | |
| | | | | | | | | | | | | | |
* Less than 10%
NOTE 12—SUPPLEMENTAL CASH FLOW INFORMATION
The balance in property, plant and equipment, net funded with accounts payable and accrued liabilities (including affiliate) was $194.2 million and $213.8 million, asfollowing table provides supplemental disclosure of September 30, 2017 and 2016, respectively.cash flow information (in millions):
| | | | | | | | | | | | | |
| Three Months Ended March 31, |
| 2023 | | 2022 | | |
| Cash paid during the period for interest on debt, net of amounts capitalized | $ | 115 | | | $ | 11 | | | |
| | | | | |
| | | | | |
| Non-cash investing activity: | | | | | |
| Unpaid purchases of property, plant and equipment | 38 | | | 18 | | | |
| | | | | |
| | | | | |
| Non-cash financing activity: | | | | | |
Cancellation of CCH Senior Secured Notes contributed to us from Cheniere (see Note 8) | 398 | | | — | | | |
| | | | | |
CHENIERE CORPUS CHRISTI HOLDINGS, LLC AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—CONTINUED
(unaudited)
ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
NOTE 9—RECENT ACCOUNTING STANDARDS
The following table provides a brief description of recent accounting standards that had not been adopted by the Company as of September 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 entity 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) of the capital stock or all or substantially all of the assets of the Guarantors, (2) the designation of the Guarantor as an “unrestricted subsidiary” in accordance with the CCH Indenture, (3) upon the legal defeasance or covenant defeasance or discharge of obligations under the CCH Indenture and (4) the release and discharge of the Guarantors pursuant to the Common Security and Account Agreement. See Note 6—Debt for additional information regarding the CCH Senior Notes.
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 |
|
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 regarding our expected receipt of cash distributions from our subsidiaries;
•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; 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, 2022. 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 10.110 Bcfe and two marine berths that can each accommodate vessels with nominal capacity of up to 266,000 cubic meters. The Liquefaction Project is being developed in stages. The first stage (“Stage 1”) includes Trains 1 and 2, two LNG storage tanks, one complete marine berth and a second partial berth and allAdditionally, we are constructing an expansion of the Liquefaction Project’s necessary infrastructure facilities. The second stageCorpus Christi LNG Terminal (the “Corpus Christi Stage 3 Project”) for up to seven midscale Trains with an expected total production capacity of over 10 mtpa of LNG. In June 2022, Cheniere’s board of directors (the “Board”) made a positive FID with respect to the Corpus Christi Stage 3 Project and issued a full notice to proceed with construction to Bechtel Energy Inc. (“Stage 2”Bechtel”) includes Train 3, one LNG storage tankeffective June 16, 2022.
We also own and the completion of the second partial berth. The Liquefaction Project also includesoperate through CCP 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”). Stage 1 and together with the Corpus Christi LNG Terminal and the Corpus Christi PipelineStage 3 Project, the “Liquefaction Project”).
Our long-term customer arrangements form the foundation of our business and provide us with significant, stable, long-term cash flows. We have contracted most of our anticipated production capacity under SPAs, in which our customers are currentlygenerally required to pay a fixed fee with respect to the contracted volumes irrespective of their election to cancel or suspend deliveries of LNG cargoes, and under construction,IPM agreements, in which the gas producer sells natural gas to us on a global LNG index price, less a fixed liquefaction fee, shipping and Trainother costs. Through our SPAs and IPM agreements, we have contracted
approximately 88% of the total anticipated production capacity from the Liquefaction Project with approximately 18 years of weighted average remaining life as of March 31, 2023.
We remain focused on safety, operational excellence and customer satisfaction. Increasing demand for LNG has allowed us to expand our liquefaction infrastructure in a financially disciplined manner. We have increased available liquefaction capacity at our Liquefaction Project as a result of debottlenecking and other optimization projects. We hold a significant land position at the Corpus Christi LNG Terminal, which provides opportunity for further liquefaction capacity expansion. In March 2023, CCL and another subsidiary of Cheniere submitted an application with the FERC under the Natural Gas Act (“NGA”) for an expansion adjacent to the Liquefaction Project consisting of two midscale Trains with an expected total production capacity of approximately 3 mtpa of LNG (the “Midscale Trains 8 & 9 Project”). The development of the Midscale Trains 8 & 9 Project or other projects, including infrastructure projects in support of natural gas supply and LNG demand, will require, among other things, acceptable commercial and financing arrangements before a positive FID is being commercializedmade.
Additionally, we are committed to the responsible and has all necessary regulatory approvalsproactive management of our most important environmental, social and governance (“ESG”) impacts, risks and opportunities. In 2022, Cheniere published Acting Today, Securing Tomorrow, its third Corporate Responsibility (“CR”) report, which details Cheniere’s approach and progress on ESG issues, including its collaboration with natural gas midstream companies, technology providers and leading academic institutions on life-cycle assessment (“LCA”) models, quantification, monitoring, reporting and verification (“QMRV”) of greenhouse gas emissions and other research and development projects. Cheniere also co-founded and sponsored the Energy Emissions Modeling and Data Lab (“EEMDL”), a multidisciplinary research and education initiative led by the University of Texas at Austin in place.collaboration with Colorado State University and the Colorado School of Mines. In addition, Cheniere commenced providing Cargo Emissions Tags (“CE Tags”) to our long-term customers in June 2022 and joined the Oil and Gas Methane Partnership (“OGMP”) 2.0, the United Nations Environment Programme’s (“UNEP”) flagship oil and gas methane emissions reporting and mitigation initiative, in October 2022. Cheniere’s CR report is available at cheniere.com/our-responsibility/reporting-center. Information on Cheniere’s website, including the CR report, is not incorporated by reference into this Quarterly Report on Form 10-Q.
Overview of Significant Events
Our significant accomplishmentsevents since January 1, 20172023 and through the filing date of this Form 10-Q include our issuancethe following:
Strategic
•In March 2023, CCL and another subsidiary of Cheniere submitted an aggregateapplication with the FERC under the NGA for the Midscale Trains 8 & 9 Project.
Operational
•As of April 26, 2023, over 700 cumulative LNG cargoes totaling over 48 million tonnes of LNG have been produced, loaded and exported from the Liquefaction Project.
Financial
•In January 2023, we redeemed with cash on hand the remaining $498 million outstanding principal amount of $1.5 billion of 5.125%our 7.000% Senior Secured Notes due 20272024 (the “2027“2024 CCH Senior Notes”).
Results of Operations
| | | | | | | | | | | | | | | | | | | | | |
| | | Three Months Ended March 31, |
| (in millions) | | | | | 2023 | | 2022 | | Variance |
| Revenues | | | | | | | | | |
| LNG revenues | | | | | $ | 1,093 | | | $ | 1,324 | | | $ | (231) | |
| LNG revenues—affiliate | | | | | 555 | | | 671 | | | (116) | |
| | | | | | | | | |
| Total revenues | | | | | 1,648 | | | 1,995 | | | (347) | |
| | | | | | | | | |
| Operating costs and expenses (recovery) | | | | | | | | | |
| Cost (recovery) of sales (excluding items shown separately below) | | | | | (2,540) | | | 2,341 | | | (4,881) | |
| Cost of sales—affiliate | | | | | 15 | | | 12 | | | 3 | |
| | | | | | | | | |
| Operating and maintenance expense | | | | | 116 | | | 113 | | | 3 | |
| Operating and maintenance expense—affiliate | | | | | 30 | | | 30 | | | — | |
| Operating and maintenance expense—related party | | | | | 2 | | | 2 | | | — | |
| | | | | | | | | |
| | | | | | | | | |
| General and administrative expense | | | | | 2 | | | 2 | | | — | |
| General and administrative expense—affiliate | | | | | 12 | | | 8 | | | 4 | |
| Depreciation and amortization expense | | | | | 112 | | | 110 | | | 2 | |
| | | | | | | | | |
| Total operating costs and expenses (recovery) | | | | | (2,251) | | | 2,618 | | | (4,869) | |
| | | | | | | | | |
| Income (loss) from operations | | | | | 3,899 | | | (623) | | | 4,522 | |
| | | | | | | | | |
| Other income (expense) | | | | | | | | | |
| Interest expense, net of capitalized interest | | | | | (63) | | | (118) | | | 55 | |
| Loss on modification or extinguishment of debt | | | | | (10) | | | (2) | | | (8) | |
| Interest rate derivative gain, net | | | | | — | | | 3 | | | (3) | |
| Other income, net | | | | | 3 | | | — | | | 3 | |
| Total other expense | | | | | (70) | | | (117) | | | 47 | |
| | | | | | | | | |
| | | | | | | | | |
| | | | | | | | | |
| | | | | | | | | |
| Net income (loss) | | | | | $ | 3,829 | | | $ | (740) | | | $ | 4,569 | |
Operational volumes loaded and recognized from the Liquefaction Project
| | | | | | | | | | | | | | | | | |
| | | Three Months Ended March 31, | | |
| (in TBtu) | | | | | 2023 | | 2022 | | |
| Volumes loaded during the current period | | | | | 200 | | | 200 | | | |
| Volumes loaded during the prior period but recognized during the current period | | | | | 3 | | | — | | | |
| | | | | | | | | |
| Total volumes recognized in the current period | | | | | 203 | | | 200 | | | |
Net proceedsincome (loss)
Substantially all of the offeringfavorable variance of approximately $1.4$4.6 billion after deducting commissions, feesfor the three months ended March 31, 2023 as compared to the same period of 2022 was attributable to favorable changes in fair value and expensessettlements of derivatives of $4.5 billion between the years, of which $3.7 billion related to non-cash favorable changes in fair value of our IPM agreements where we procure natural gas at a price indexed to international gas prices.
The following is an additional discussion of the significant variance drivers of the change in net income (loss) by line item:
Revenues. $347 million decrease between comparable periods primarily attributable to:
•$366 million decrease due to lower pricing per MMBtu from decreased Henry Hub pricing; which was offset by
•$28 million increase due to slightly higher volumes of LNG delivered between the periods, which increased 6 TBtu or 3%.
Operating costs and provisioning for incremental interest requiredexpenses. $4.9 billion favorable variance between comparable periods primarily attributable to:
•$4.4 billion favorable variance from changes in fair value of derivatives included in cost of sales, from $1.0 billion of losses in the three months ended March 31, 2022 to $3.4 billionof gains in the three months ended March 31, 2023, primarily due to decreased international gas prices resulting in non-cash favorable changes in fair value of our commodity derivatives indexed to such prices and, to a lesser extent, an increase in forward notional amount of derivatives due to agreements contributed to us upon the merger of Corpus Christ Liquefaction Stage III, LLC with and into CCL in June 2022; and
•$416 million decrease in cost of sales excluding the effect of derivative changes described above, primarily as a result of $409 million in decreased cost of natural gas feedstock largely due to lower U.S. natural gas prices and partially offset by increased volume of LNG delivered, as discussed above under the 2027caption Revenues.
Other income (expense). $47 million decrease in total other income (expense) between comparable periods primarily attributable to:
•$55 million decrease in interest expense, net of capitalized interest, as a result of lower debt balances due to repayment of debt and lower interest costs due to refinancing higher cost debt, as further described under Financing Cash Flows in Sources and Uses of Cash within Liquidity and Capital Resources. Additionally, the decrease in interest expense, net of capitalized interest is due to a higher portion of total interest costs eligible for capitalization following the issuance of full notice to proceed to Bechtel on the Corpus Christi Stage 3 Project in 2022; partially offset by •$8 million increase in loss on modification or extinguishment of debt primarily due to premiums paid for the early redemption of the 2024 CCH Senior Notes during construction, were usedthe three months ended March 31, 2023.
Significant factors affecting our results of operations
Below are significant factors that affect our results of operations.
Gains and losses on derivative instruments
Derivative instruments, which in addition to prepay a portionmanaging 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. For commodity derivative instruments related to our IPM agreements, 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 outstanding borrowings underunderlying 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 facility (the “2015 CCH Credit Facility”).risk and other relevant factors that may be outside of our control, notwithstanding the operational intent to mitigate risk exposure over time.
Commissioning cargoes
Prior to substantial completion of a Train, amounts received from the sale of commissioning cargoes from that Train are offset against LNG terminal construction-in-process, because these amounts are earned or loaded during the testing phase for the construction of that Train. We did not record any offsets to LNG terminal costs during the three months ended March 31, 2023 and 2022.
Liquidity and Capital Resources
The 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 meet our cash requirements using operating cash flows and available liquidity, consisting of restricted cash and cash equivalents and available commitments under our credit facilities. Additionally, we expect to meet our long term cash requirements by using operating cash flows and other future potential sources of liquidity, which may include debt offerings. The table (in thousands)below provides a summary of our available liquidity position at September 30, 2017(in millions). Future material sources of liquidity are discussed below.
| | | | | | | |
| March 31, 2023 | | |
| |
| | | |
| | | |
| | | |
| Restricted cash and cash equivalents designated for the Liquefaction Project | $ | 93 | | | |
| Available commitments under our credit facilities (1): | | | |
| CCH Credit Facility | 3,260 | | | |
| CCH Working Capital Facility | 1,338 | | | |
| Total available commitments under our credit facilities | 4,598 | | | |
| | | |
| Total available liquidity | $ | 4,691 | | | |
(1)Available commitments represent total commitments less loans outstanding and Decemberletters of credit issued under each of our credit facilities as of March 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 |
|
For additional information regarding our debt agreements, see 2023. See Note 6—8—Debt of our Notes to Consolidated Financial Statements in this quarterly reportfor additional information on our credit facilities and Note 7—Debtother debt instruments.
Our liquidity position subsequent to March 31, 2023 will be driven by future sources of liquidity 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. For further discussion of our Notes to Consolidatedfuture sources and Combined Financial Statementsuses of liquidity, see the liquidity and capital resources disclosures 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, 2022.
Liquefaction FacilitiesSupplemental Guarantor Information
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 authorization 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 as of September 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 |
The DOE has authorized the export of domestically produced LNG by vessel from the Corpus Christi LNG terminal to FTA countries for a 25-year term and to non-FTA countries for a 20-year term up to a combined total of the equivalent of 767 Bcf/yr (approximately 15 mtpa) of natural gas. A party to the proceeding requested a rehearing of the authorization to non-FTA countries, which was denied by the DOE in May 2016. 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 countries5.875% Senior Secured Notes due 2025, 5.125% Senior Secured Notes due 2027, 3.700% Senior Secured Notes due 2029 and the DOE order denying the request for rehearingseries of the same. The CourtSenior Secured Notes due 2039 with weighted average rate 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
CCL has entered into seven fixed price, 20-year SPAs with extension rights with six third parties to make available an aggregate amount of 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 0.8 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 a price consisting of a fixed fee of $3.50 per MMBtu of LNG (a portion of which is subject to annual adjustment for inflation) plus 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 SPAs and contracted volumes to be made available under the SPAs are not tied to a specific Train; however, the term of each SPA commences upon the start of operations of a specified Train.
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 a positive FID with respect to Stage 2 of the Liquefaction Project, with the applicable fixed fees starting from the date of first commercial delivery from the applicable Train. These fixed fees equal approximately $550 million, $846 million and $140 million for each of Trains 1 through 3, respectively.
In addition, CCL has entered into two fixed price 20-year SPAs with Cheniere Marketing International LLP (“Cheniere Marketing UK”). Under the first SPA (the “Amended Cheniere Marketing Foundation SPA”), Cheniere Marketing UK will purchase LNG from CCL for a price consisting of a fixed fee of $3.50 (a portion of which is subject to annual adjustment for inflation) per MMBtu 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”) 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) any excess LNG produced by the Liquefaction Facility 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. 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 into a firm storage services agreement with a third party to assist in managing volatility in natural gas needs for the Liquefaction Project. CCL has also entered into enabling agreements and long-term natural gas supply contracts with third parties, and will continue to enter into such agreements, in order to secure natural gas feedstock for the Liquefaction Project. We expect to enter into gas supply contracts under these enabling agreements as and when required for the Liquefaction Project. As of September 30, 2017, CCL has secured up to approximately 362 TBtu of natural gas feedstock through long-term natural gas supply contracts.
Construction
CCL entered into separate lump sum turnkey contracts with Bechtel Oil, Gas and Chemicals, Inc. (“Bechtel”) for the engineering, procurement and construction of Stages 1 and 2 of the Liquefaction Project under which Bechtel charges a lump sum for all work performed 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 September 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 Project from the existing regional natural gas pipeline grid. The construction of the Corpus Christi Pipeline commenced in January 2017 and is nearing completion.
Final Investment Decision on Stage 2
We will contemplate making an FID to commence construction of Stage 2 of the Liquefaction Project based upon, among other things, entering into acceptable commercial arrangements and obtaining adequate financing to construct the facility.
Capital Resources
We expect to finance the construction costs of the Liquefaction Project from one or more of the following: project debt and borrowings, operating cash flow from CCL and CCP and equity contributions from Cheniere. The following table (in thousands) 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 |
|
| |
(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 Notes3.788% (collectively, the “CCH Senior Notes”). |
| |
(2) | Includes 2015 CCH Credit Facility and CCH Working Capital Facility. |
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 Notes 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 atagainst the Guarantors may be limited under the U.S. Bankruptcy Code or federal or state fraudulent transfer or conveyance law. Each guarantee contains a redemption price equalprovision intended to limit the Guarantor’s liability to the “make-whole” price set forthmaximum amount that it could incur without causing the incurrence of obligations under its guarantee to be a fraudulent conveyance or transfer under U.S. federal or state law. However, there can be no assurance as to what standard a court will apply in the CCH Indenture, plus accrued and unpaid interest, if any, to the date of redemption. We also may at any time within six monthsmaking a determination of the respective dates of maturity for each seriesmaximum liability of the CCH Senior Notes, redeem all or part of such series ofGuarantors. Moreover, this provision may not be effective to protect the CCH Senior Notes,guarantee from being voided under fraudulent conveyance laws. There is a possibility that the entire guarantee may be set aside, in whole or in part, at a redemption price equal to 100% ofwhich case the principal amount of the CCH Senior Notes toentire liability may be redeemed, plus accrued and unpaid interest, if any, to the date of redemption.extinguished.
2015 CCH Credit Facility
In May 2015, we entered into the 2015 CCH Credit Facility. Our obligations under the 2015 CCH Credit Facility are secured by a first priority lien on substantially all of our assetsSummarized financial information about us and the assetsGuarantors as a group is omitted herein because such information would not be materially different from our Consolidated Financial Statements.
Corpus Christi Stage 3 Project
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 aftertable summarizes the project completion and designed to achieve a minimum projected fixed debt service coverage ratioconstruction status 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 is intended to be used for loans (“CCH Working Capital Loans”), 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 up to the maximum allowed under the Common Terms Agreement that was entered into concurrently with the 2015 CCH Credit Facility. We did not have any amounts outstanding under the CCH Working Capital Facility 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 made in connection with a draw upon any letter of credit (“CCH LC Loans”) at any time without premium or penalty upon three business days’ notice and may re-borrow at any time. CCH LC Loans have a term of up to one year. CCH Swing Line Loans terminate upon the earliest of (1) the maturity date or earlier termination of the CCH Working Capital Facility, (2) the date that is 15 days after such CCH Swing Line Loan is made 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 all of our membership interests and each of the Guarantors on a pari passu basis with the CCH Senior Notes and the 2015 CCH Credit Facility.
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 tierStage 3 Project as 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.31, 2023:
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| Overall project completion percentage | | 28.7% |
| Completion percentage of: | | |
| Engineering | | 49.5% |
| Procurement | | 41.8% |
| Subcontract work | | 37.1% |
| Construction | | 3.4% |
| Date of expected substantial completion | | 2H 2025 - 1H 2027 |
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.
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| | Three Months Ended March 31, |
| | 2023 | | 2022 | | |
| | | | | | |
| Net cash provided by operating activities | | $ | 482 | | | $ | 453 | | | |
| Net cash used in investing activities | | (606) | | | (45) | | | |
| Net cash used in financing activities | | (521) | | | (402) | | | |
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| Net increase (decrease) in restricted cash and cash equivalents | | $ | (645) | | | $ | 6 | | | |
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| | 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 |
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| Net increase (decrease) in cash, cash equivalents and restricted cash | (154,027 | ) | | 146,042 |
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| Cash, cash equivalents and restricted cash—beginning of period | 270,540 |
| | 46,770 |
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| Cash, cash equivalents and restricted cash—end of period | $ | 116,513 |
| | $ | 192,812 |
|
Operating Cash Flows
OperatingOur operating cash outflowsnet inflows during the ninethree months ended September 30, 2017March 31, 2023 and 20162022 were $51.6$482 million and $28.8$453 million, respectively. The increase in operating cash outflows in 2017 compared to 2016$29 millionfavorable variance between the periods was primarily related to increasedlower cash usedoutflows for settlementnatural gas feedstock, partially offset by an unfavorable variance due to lower cash receipts from the sale of derivative instruments.LNG cargoes, both primarily due to lower U.S. natural gas prices. This favorable variance was partially offset by an unfavorable variance due to timing of cash receipts and payments.
Investing Cash Flows
InvestingOur investing cash net outflows during each ofin both years primarily were for the nine months ended September 30, 2017 and 2016 were $1.6 billion and are primarily used to fund the construction costs for Stage 1 of the Liquefaction Project. These costs are capitalized as construction-in-process until achievement of substantial completion. In addition to cash outflows for construction costs for the Liquefaction 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.
Financing Cash Flows
Financing cash inflows during the nine months ended September 30, 2017 were $1.5 billion, primarily as a result of:
$1.2 billion of borrowings under 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 million of debt issuance and deferred financing costs related to up-front fees paid upon the closing of these transactions; and
$254.1 million of equity contributions from Cheniere.
Financing cash inflows during the nine months ended September 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; and
$27.3 million of debt issuance costs related to up-front fees paid upon the closing of these transactions.
Results of Operations
Our consolidated net loss was $8.6 million in the three months ended September 30, 2017, compared to net income of $18.2 million in the three months ended September 30, 2016. This $26.8The $561 million increase in net loss in 20172023 compared to 2022 was primarily a result of increased derivative loss, net associated with interest rate derivative activity.
Our consolidated net loss was $79.1 million in the nine months ended September 30, 2017, compareddue 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.
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 | $ | — |
| | $ | — |
| | $ | — |
| | $ | — |
| | $ | — |
| | $ | — |
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| Operating and maintenance expense | 533 |
| | 338 |
| | 195 |
| | 2,097 |
| | 875 |
| | 1,222 |
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| Operating and maintenance expense (recovery)—affiliate | 1,504 |
| | (3 | ) | | 1,507 |
| | 1,653 |
| | 17 |
| | 1,636 |
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| Development expense (recovery) | 82 |
| | 77 |
| | 5 |
| | 497 |
| | (107 | ) | | 604 |
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| Development expense (recovery)—affiliate | — |
| | 86 |
| | (86 | ) | | 8 |
| | (34 | ) | | 42 |
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| General and administrative expense | 861 |
| | 1,066 |
| | (205 | ) | | 3,824 |
| | 2,843 |
| | 981 |
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| General and administrative expense—affiliate | 289 |
| | 180 |
| | 109 |
| | 753 |
| | 471 |
| | 282 |
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| Depreciation and amortization expense | 248 |
| | 65 |
| | 183 |
| | 537 |
| | 149 |
| | 388 |
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| Impairment expense and loss on disposal of assets | 2,059 |
| | — |
| | 2,059 |
| | 2,064 |
| | — |
| | 2,064 |
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| 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)
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| | 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 |
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| Derivative loss (gain), net | 2,906 |
| | (20,113 | ) | | 23,019 |
| | 35,002 |
| | 215,940 |
| | (180,938 | ) |
| Other expense | 95 |
| | 74 |
| | 21 |
| | 177 |
| | 74 |
| | 103 |
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| Total other expense (income) | $ | 3,001 |
| | $ | (20,039 | ) | | $ | 23,040 |
| | $ | 67,659 |
| | $ | 245,025 |
| | $ | (177,366 | ) |
Derivative loss, net increased from a net gainspend during the three months ended September 30, 2016March 31, 2023 related to a net lossconstruction work performed by Bechtel for the Corpus Christi Stage 3 Project following the issuance of full notice to proceed to Bechtel in June 2022. We expect our capital expenditures to increase in future periods as construction work progresses on the Corpus Christi Stage 3 Project.
Financing Cash Flows
The following table summarizes our financing activities (in millions):
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| | Three Months Ended March 31, |
| | 2023 | | 2022 |
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| Repayments of debt | | $ | (498) | | | $ | (540) | |
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| Debt extinguishment costs | | (8) | | | — | |
| Contributions | | 45 | | | 138 | |
| Distributions | | (60) | | | — | |
| Net cash used in financing activities | | $ | (521) | | | $ | (402) | |
Repayments and Related Extinguishment Costs
The following table shows the repayments of debt, including intra-quarter repayments (in millions):
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| | Three Months Ended March 31, |
| | 2023 | | 2022 | | |
| CCH Credit Facility | | $ | — | | | $ | (290) | | | |
| CCH Working Capital Facility | | — | | | (250) | | | |
| 2024 CCH Senior Notes | | (498) | | | — | | | |
| Total repayments of debt | | $ | (498) | | | $ | (540) | | | |
During the three months ended March 31, 2023 and 2022, we paid debt modification or extinguishment costs of $8 millionandzero, respectively, related to these repayments.
Capital Contributions and Distributions
During the three months ended March 31, 2023 and 2022, we received cash capital contributions of $45 million and $138 million, respectively, from Cheniere, primarily used to redeem our outstanding debt, and during the three months ended September 30, 2017 primarily dueMarch 31, 2023 and 2022, we made cash distributions of $60 million and zero, respectively, 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.Cheniere.
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
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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 intoCCL has 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):
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| March 31, 2023 | | December 31, 2022 |
| Fair Value | | Change in Fair Value | | Fair Value | | Change in Fair Value |
| Liquefaction Supply Derivatives | $ | (2,880) | | | $ | 1,368 | | | $ | (6,278) | | | $ | 1,684 | |
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| | September 30, 2017 | | December 31, 2016 |
| | Fair Value | | Change in Fair Value | | Fair Value | | Change in Fair Value |
| Liquefaction Supply Derivatives | $ | 295 |
| | $ | 34 |
| | $ | — |
| | $ | — |
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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):
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| | 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 |
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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
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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, 2022.
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ITEM 1A. | ITEM 1A. RISK FACTORS |
ITEM 6. EXHIBITS
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Exhibit No. | | Description |
10.1Exhibit No. | | Consent for Amendment to the Common Security and Account Agreement, dated September 7, 2017, among Cheniere Corpus Christi Holdings, LLC, as Company, Corpus Christi Liquefaction, LLC, Cheniere Corpus Christi Pipeline, L.P., and Corpus Christi Pipeline GP, LLC, as Guarantors, the Senior Creditor Group Representatives party thereto from time to time, Société Générale, as Intercreditor Agent and Security Trustee, and Mizuho Bank, Ltd., as Account Bank (Incorporated by reference to Exhibit 10.51 to the Company’s Registration Statement on Form S-4 (SEC File No. 333-221307), filed on November 2, 2017) | | | | | |
10.210.1* | | Consent for Amendment to the Common Terms Agreement, dated September 7, 2017, among Cheniere Corpus Christi Holdings, LLC, as Borrower, Corpus Christi Liquefaction, LLC, Cheniere Corpus Christi Pipeline, L.P., Corpus Christi Pipeline GP, LLC, as Guarantors, Société Générale, as Term Loan Facility Agent and Intercreditor Agent and any other facility agents party thereto from time to time (Incorporated by reference to Exhibit 10.52 to the Company’s Registration Statement on Form S-4 (SEC File No. 333-221307), filed on November 2, 2017) |
10.3 | | Change orders to the Fixed Price SeparatedLump Sum 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 CorpusCorpus Christi Liquefaction,Liquefaction Stage III, LLC 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/Dry Flare Expansion Loop Relocation,CO-00012Chart License Fee Provisional Sum Closure, dated August 3, 2017 andSeptember 16, 2022, (ii) the Change Order CO-00037 9% Nickel Lump Sum Conversion,CO-00013HRU Nozzles and Block Headers, dated September 21, 2022, (iii) the Change Order CO-00014Addition of Nitrogen Receiver, dated December 13, 2022, (iv) the Change Order CO-00015Package 6 Feed Gas Pipeline Interfaces, dated December 14, 2022, (v) the Change Order CO-00016Old Sherwin Building Security, dated November 23, 2022, (vi) the Change Order CO-00017Remote Monitoring Diagnostic for Mixed Refrigerant (MR) Compressors, dated December 14, 2022, (vii) the Change Order CO-00018 EFG Package #1, dated January 9, 2023, (viii) the Change Order CO-00019 Q3 2022 Commodity Price Rise and Fall (ATT MM), dated January 17, 2023, (ix) the Change Order CO-00020 ICSS Vendor Selection and EPC Warranty (Yokogawa), dated September 14, 201721, 2022 and (x) the Change Order CO-00021 Laydown Development Package, dated February 6, 2023 (Portions of this exhibit have been omittedomitted.) | | | | | |
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| 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) | | | | | |
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| * | Filed herewith. |
| ** | Furnished herewith. |
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Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
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| | CHENIERE CORPUS CHRISTI HOLDINGS, LLC |
| | | |
| Date: | May 1, 2023 | By: | /s/ Zach Davis |
| | | Zach Davis |
| | | President and Chief Financial Officer |
| | | (Principal Executive and Financial Officer) |
| | | |
| | | |
| Date: | May 1, 2023 | 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) |
