Docoh
Loading...

Cheniere Corpus Christi

     
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
     
FORM 10-Q
     
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 2020
or
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
 For the transition period from            to            
Commission file number 333-215435
Cheniere Corpus Christi Holdings, LLC 
(Exact name of registrant as specified in its charter)
     
Delaware47-1929160
(State or other jurisdiction of incorporation or organization)(I.R.S. Employer Identification No.)
700 Milam Street, Suite 1900
Houston, Texas 77002
(Address of principal executive offices) (Zip Code)
(713) 375-5000
(Registrant’s telephone number, including area code)
     
Securities registered pursuant to Section 12(b) of the Act:
Title of each classTrading SymbolName of each exchange on which registered
NoneNoneNone
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.    Yes     No
Note: The registrant is a voluntary filer not subject to the filing requirements of Sections 13 or 15(d) of the Securities Exchange Act of 1934. However, the registrant has filed all reports required pursuant to Sections 13 or 15(d) during the preceding 12 months as if the registrant was subject to such filing requirements.
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).    Yes No
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
 Large accelerated filer Accelerated filer
 Non-accelerated filer Smaller reporting company
    Emerging growth company
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).    Yes    No 
Indicate the number of shares outstanding of the issuer’s classes of common stock, as of the latest practicable date:    Not applicable
     



CHENIERE CORPUS CHRISTI HOLDINGS, LLC
TABLE OF CONTENTS





i


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

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

1


Abbreviated Legal Entity Structure

The following diagram depicts our abbreviated legal entity structure as of March 31, 2020, including our ownership of certain subsidiaries, and the references to these entities used in this quarterly report:
image6a20.jpg
Unless the context requires otherwise, references to “CCH,” the “Company,” “we,” “us,” and “our” refer to Cheniere Corpus Christi Holdings, LLC and its consolidated subsidiaries.

2


PART I.FINANCIAL INFORMATION
ITEM 1.CONSOLIDATED FINANCIAL STATEMENTS
CHENIERE CORPUS CHRISTI HOLDINGS, LLC AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(in millions)




  March 31, December 31,
  2020 2019
ASSETS (unaudited)  
Current assets    
Cash and cash equivalents $
 $
Restricted cash 94
 80
Accounts and other receivables 74
 58
Accounts receivable—affiliate 50
 57
Advances to affiliate 93
 115
Inventory 67
 69
Derivative assets 96
 74
Derivative assets—related party 4
 3
Other current assets 12
 15
Total current assets 490
 471
     
Property, plant and equipment, net 12,513
 12,507
Debt issuance and deferred financing costs, net 13
 15
Non-current derivative assets 199
 61
Non-current derivative assets—related party 2
 2
Other non-current assets, net 53
 56
Total assets $13,270
 $13,112
     
LIABILITIES AND MEMBER’S EQUITY    
Current liabilities    
Accounts payable $8
 $7
Accrued liabilities 244
 370
Accrued liabilities—related party 7
 3
Current debt 141
 
Due to affiliates 18
 27
Derivative liabilities 191
 46
Other current liabilities 1
 
Other current liabilities—affiliate 1
 1
Total current liabilities 611
 454
     
Long-term debt, net 10,099
 10,093
Non-current derivative liabilities 184
 135
Other non-current liabilities 9
 11
Other non-current liabilities—affiliate 
 1
     
Member’s equity 2,367
 2,418
Total liabilities and member’s equity $13,270
 $13,112


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

3


CHENIERE CORPUS CHRISTI HOLDINGS, LLC AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(in millions)
(unaudited)


 Three Months Ended March 31,
 2020 2019
Revenues   
LNG revenues$343
 $13
LNG revenues—affiliate190
 93
Total revenues533
 106
    
Operating costs and expenses   
Cost of sales (excluding items shown separately below)49
 59
Cost of sales—affiliate6
 
Cost of sales—related party23
 10
Operating and maintenance expense89
 32
Operating and maintenance expense—affiliate20
 5
General and administrative expense2
 2
General and administrative expense—affiliate5
 1
Depreciation and amortization expense84
 22
Total operating costs and expenses278
 131
    
Income (loss) from operations255
 (25)
    
Other income (expense)   
Interest expense, net of capitalized interest(99) (12)
Interest rate derivative loss, net(208) (35)
Other income, net1
 1
Total other expense(306) (46)
    
Net loss$(51) $(71)




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

4


CHENIERE CORPUS CHRISTI HOLDINGS, LLC AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF MEMBER’S EQUITY
(in millions)
(unaudited)




Three Months Ended March 31, 2020   
 Cheniere CCH HoldCo I, LLC 
Total Members
Equity
Balance at December 31, 2019$2,418
 $2,418
Net loss(51) (51)
Balance at March 31, 2020$2,367
 $2,367

Three Months Ended March 31, 2019   
 Cheniere CCH HoldCo I, LLC 
Total Members
Equity
Balance at December 31, 2018$2,081
 $2,081
Net loss(71) (71)
Balance at March 31, 2019$2,010
 $2,010


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

5


CHENIERE CORPUS CHRISTI HOLDINGS, LLC AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(in millions)
(unaudited)


 Three Months Ended March 31,
 2020 2019
Cash flows from operating activities   
Net loss$(51) $(71)
Adjustments to reconcile net loss to net cash used in operating activities:   
Depreciation and amortization expense84
 22
Amortization of discount and debt issuance costs5
 1
Total losses on derivatives, net37
 26
Total losses (gains) on derivatives, net—related party(1) 2
Net cash provided by (used for) settlement of derivative instruments(3) 2
Changes in operating assets and liabilities:   
Accounts receivable(16) (16)
Accounts receivable—affiliate7
 (44)
Advances to affiliate22
 (27)
Inventory2
 (29)
Accounts payable and accrued liabilities16
 98
Accrued liabilities—related party5
 5
Due to affiliates(3) 1
Other, net(9) 8
Other, net—affiliate(1) 
Net cash provided by (used in) operating activities94
 (22)
    
Cash flows from investing activities 
  
Property, plant and equipment, net(220) (370)
Other(1) (2)
Net cash used in investing activities(221) (372)
    
Cash flows from financing activities 
  
Proceeds from issuances of debt141
 692
Repayments of debt
 (369)
Net cash provided by financing activities141
 323
    
Net increase (decrease) in cash, cash equivalents and restricted cash14
 (71)
Cash, cash equivalents and restricted cash—beginning of period80
 289
Cash, cash equivalents and restricted cash—end of period$94
 $218

Balances per Consolidated Balance Sheet:
 March 31,
 2020
Cash and cash equivalents$
Restricted cash94
Total cash, cash equivalents and restricted cash$94




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

6


CHENIERE CORPUS CHRISTI HOLDINGS, LLC AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(unaudited)




NOTE 1—NATURE OF OPERATIONS AND BASIS OF PRESENTATION
  
We are operating and constructing a natural gas liquefaction and export facility (the “Liquefaction Facilities”) and operating a 23-mile natural gas supply pipeline that interconnects the Corpus Christi LNG terminal with several interstate and intrastate natural gas pipelines (the “Corpus Christi Pipeline” and together with the Liquefaction Facilities, the “Liquefaction Project”) near Corpus Christi, Texas, through our subsidiaries CCL and CCP, respectively. We are currently operating 2 Trains and are constructing 1 additional Train for a total production capacity of approximately 15 mtpa of LNG. The Liquefaction Project, once fully constructed, will contain 3 LNG storage tanks and 2 marine berths.

Basis of Presentation

The accompanying unaudited Consolidated Financial Statements of CCH have been prepared in accordance with GAAP for interim financial information and with Rule 10-01 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by GAAP for complete financial statements and should be read in conjunction with the Consolidated Financial Statements and accompanying notes included in our annual report on Form 10-K for the year ended December 31, 2019. In our opinion, all adjustments, consisting only of normal recurring adjustments necessary for a fair presentation, have been included.

Results of operations for the three months ended March 31, 2020 are not necessarily indicative of the results of operations that will be realized for the year ending December 31, 2020.

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. Accordingly, no provision or liability for federal or state income taxes is included in the accompanying Consolidated Financial Statements.

Recent Accounting Standards

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

NOTE 2—RESTRICTED CASH

Restricted cash consists of funds that are contractually or legally restricted as to usage or withdrawal and have been presented separately from cash and cash equivalents on our Consolidated Balance Sheets. As of March 31, 2020 and December 31, 2019, we had $94 million and $80 million of current restricted cash, respectively.

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.


7


CHENIERE CORPUS CHRISTI HOLDINGS, LLC AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—CONTINUED
(unaudited)

NOTE 3—ACCOUNTS AND OTHER RECEIVABLES

As of March 31, 2020 and December 31, 2019, accounts and other receivables consisted of the following (in millions):
  March 31, December 31,
  2020 2019
Trade receivable $56
 $44
Other accounts receivable 18
 14
Total accounts and other receivables $74
 $58


NOTE 4—INVENTORY

As of March 31, 2020 and December 31, 2019, inventory consisted of the following (in millions):
  March 31, December 31,
  2020 2019
Natural gas $3
 $7
LNG 4
 6
Materials and other 60
 56
Total inventory $67
 $69


NOTE 5—PROPERTY, PLANT AND EQUIPMENT
 
As of March 31, 2020 and December 31, 2019, property, plant and equipment, net consisted of the following (in millions):
  March 31, December 31,
  2020 2019
LNG terminal costs    
LNG terminal and interconnecting pipeline facilities $10,028
 $10,027
LNG site and related costs 276
 276
LNG terminal construction-in-process 2,512
 2,425
Accumulated depreciation (316) (232)
Total LNG terminal costs, net 12,500
 12,496
Fixed assets    
Fixed assets 22
 19
Accumulated depreciation (9) (8)
Total fixed assets, net 13
 11
Property, plant and equipment, net $12,513
 $12,507
 

Depreciation expense was $84 million and $22 million during the three months ended March 31, 2020 and 2019, respectively.

We realized offsets to LNG terminal costs of $74 million during the three months ended March 31, 2019 that were related to the sale of commissioning cargoes because these amounts were earned or loaded prior to the start of commercial operations of the Liquefaction Project, during the testing phase for its construction. We did 0t realize any offsets to LNG terminal costs during the three months ended March 31, 2020.

NOTE 6—DERIVATIVE INSTRUMENTS
 
We have entered into the following derivative instruments that are reported at fair value:
interest rate swaps (“CCH Interest Rate Derivatives”) to hedge the exposure to volatility in a portion of the floating-rate interest payments on our amended and restated credit facility (the “CCH Credit Facility”) and to hedge against changes in interest rates that could impact anticipated future issuance of debt, which is anticipated by the end of 2020 (“CCH Interest Rate Forward Start Derivatives” and, collectively with the CCH Interest Rate Derivatives, the “Interest Rate Derivatives”) and

8


CHENIERE CORPUS CHRISTI HOLDINGS, LLC AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—CONTINUED
(unaudited)

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

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

The following table shows the fair value of our derivative instruments that are required to be measured at fair value on a recurring basis as of March 31, 2020 and December 31, 2019, which are classified as derivative assets, derivative assets—related party, non-current derivative assets, non-current derivative assets—related party, derivative liabilities or non-current derivative liabilities in our Consolidated Balance Sheets (in millions):
 Fair Value Measurements as of
 March 31, 2020 December 31, 2019
 
Quoted Prices in Active Markets
(Level 1)
 
Significant Other Observable Inputs
(Level 2)
 
Significant Unobservable Inputs
(Level 3)
 Total 
Quoted Prices in Active Markets
(Level 1)
 
Significant Other Observable Inputs
(Level 2)
 
Significant Unobservable Inputs
(Level 3)
 Total
CCH Interest Rate Derivatives liability$
 $(197) $
 $(197) $
 $(81) $
 $(81)
CCH Interest Rate Forward Start Derivatives liability
 (92) 
 (92) 
 (8) 
 (8)
Liquefaction Supply Derivatives asset2
 11
 202
 215
 3
 10
 35
 48


We value our Interest Rate Derivatives using an income-based approach, utilizing observable inputs to the valuation model including interest rate curves, risk adjusted discount rates, credit spreads and other relevant data. We value our Liquefaction Supply Derivatives using a market-based approach incorporating present value techniques, as needed, using observable commodity price curves, when available, and other relevant data.
 
The fair value of our Physical Liquefaction Supply Derivatives is predominantly driven by observable and unobservable market commodity prices and, as applicable to our natural gas supply contracts, our assessment of the associated events deriving fair value, including evaluating whether the respective market is available as pipeline infrastructure is developed. The fair value of our Physical Liquefaction Supply Derivatives incorporates risk premiums related to the satisfaction of conditions precedent, such as completion and placement into service of relevant pipeline infrastructure to accommodate marketable physical gas flow. As of March 31, 2020 and December 31, 2019, some of our Physical Liquefaction Supply Derivatives existed within markets for which the pipeline infrastructure was under development to accommodate marketable physical gas flow.

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

9


CHENIERE CORPUS CHRISTI HOLDINGS, LLC AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—CONTINUED
(unaudited)

The Level 3 fair value measurements of natural gas positions within our Physical Liquefaction Supply Derivatives could be materially impacted by a significant change in certain natural gas prices. The following table includes quantitative information for the unobservable inputs for our Level 3 Physical Liquefaction Supply Derivatives as of March 31, 2020:
  
Net Fair Value Asset
(in millions)
 Valuation Approach Significant Unobservable Input Range of Significant Unobservable Inputs / Weighted Average (1)
Physical Liquefaction Supply Derivatives $202 Market approach incorporating present value techniques Henry Hub basis spread $(0.619) - $0.050 / (0.065)
    Option pricing model International LNG pricing spread, relative to Henry Hub (2) 48% - 144% / 96%

 
(1)    Unobservable inputs were weighted by the relative fair value of the instruments.
(2)     Spread contemplates U.S. dollar-denominated pricing.    

Increases or decreases in basis or pricing spreads, in isolation, would decrease or increase, respectively, the fair value of our Physical Liquefaction Supply Derivatives.
The following table shows the changes in the fair value of our Level 3 Physical Liquefaction Supply Derivatives, including those with related parties, during the three months ended March 31, 2020 and 2019 (in millions):
 Three Months Ended March 31,
 2020 2019
Balance, beginning of period$35
 $(4)
Realized and mark-to-market gains:   
Included in cost of sales164
 3
Purchases and settlements:   
Purchases1
 1
Settlements3
 3
Transfers out of Level 3 (1)(1) (1)
Balance, end of period$202
 $2
Change in unrealized gains relating to instruments still held at end of period$164
 $3

 
    
(1)Transferred to Level 2 as a result of observable market for the underlying natural gas purchase agreements.

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


10


CHENIERE CORPUS CHRISTI HOLDINGS, LLC AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—CONTINUED
(unaudited)

Interest Rate Derivatives

As of March 31, 2020, we had the following Interest Rate Derivatives outstanding:
  Notional Amounts        
  March 31, 2020 December 31, 2019 Effective Date Maturity Date Weighted Average Fixed Interest Rate Paid Variable Interest Rate Received
CCH Interest Rate Derivatives $4.7 billion $4.5 billion 
May 20, 2015
 
May 31, 2022
 2.30% One-month LIBOR
CCH Interest Rate Forward Start Derivatives $750 million $750 million 
September 30, 2020
 
December 31, 2030
 2.06% Three-month LIBOR


The following table shows the fair value and location of our Interest Rate Derivatives on our Consolidated Balance Sheets (in millions):
 March 31, 2020 December 31, 2019
 CCH Interest Rate Derivatives CCH Interest Rate Forward Start Derivatives Total CCH Interest Rate Derivatives CCH Interest Rate Forward Start Derivatives Total
Consolidated Balance Sheet Location           
Derivative liabilities$(92) $(92) $(184) $(32) $(8) $(40)
Non-current derivative liabilities(105) 
 (105) (49) 
 (49)
Total derivative liabilities$(197)
$(92)
$(289)
$(81)
$(8)
$(89)


The following table shows the changes in the fair value and settlements of our Interest Rate Derivatives recorded in interest rate derivative loss, net on our Consolidated Statements of Operations during the three months ended March 31, 2020 and 2019 (in millions):
 Three Months Ended March 31,
 2020 2019
CCH Interest Rate Derivatives loss$(123) $(35)
CCH Interest Rate Forward Start Derivatives loss(85) 

Liquefaction Supply Derivatives

CCL has entered into primarily index-based physical natural gas supply contracts and associated economic hedges to purchase natural gas for the commissioning and operation of the Liquefaction Project. The remaining terms of the physical natural gas supply contracts range up to 10 years, some of which commence upon the satisfaction of certain conditions precedent.

The forward notional for our Liquefaction Supply Derivatives was approximately 3,395 TBtu and 3,153 TBtu as of March 31, 2020 and December 31, 2019, respectively, of which 106 TBtu and 120 TBtu, respectively, were for a natural gas supply contract CCL has with a related party.


11


CHENIERE CORPUS CHRISTI HOLDINGS, LLC AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—CONTINUED
(unaudited)

The following table shows the fair value and location of our Liquefaction Supply Derivatives on our Consolidated Balance Sheets (in millions):
  Fair Value Measurements as of (1)
Consolidated Balance Sheet Location March 31, 2020 December 31, 2019
Derivative assets $96
 $74
Derivative assets—related party 4
 3
Non-current derivative assets 199
 61
Non-current derivative assets—related party 2
 2
Total derivative assets 301

140
     
Derivative liabilities (7) (6)
Non-current derivative liabilities (79) (86)
Total derivative liabilities (86) (92)
     
Derivative asset, net $215
 $48

 
(1)Does not include collateral posted with counterparties by us of $5 million for such contracts, which are included in other current assets in our Consolidated Balance Sheets as of both March 31, 2020 and December 31, 2019.

The following table shows the changes in the fair value, settlements and location of our Liquefaction Supply Derivatives recorded on our Consolidated Statements of Operations during the three months ended March 31, 2020 and 2019 (in millions):
  Three Months Ended March 31,
 Consolidated Statements of Operations Location (1)2020 2019
Liquefaction Supply Derivatives gainLNG revenues$
 $1
Liquefaction Supply Derivatives gainCost of sales171
 8
Liquefaction Supply Derivatives gain (loss)Cost of sales—related party1
 (2)
 
(1)Does not include the realized value associated with derivative instruments that settle through physical delivery. Fair value fluctuations associated with commodity derivative activities are classified and presented consistently with the item economically hedged and the nature and intent of the derivative instrument.

Consolidated Balance Sheet Presentation

Our derivative instruments are presented on a net basis on our Consolidated Balance Sheets as described above. The following table shows the fair value of our derivatives outstanding on a gross and net basis (in millions):
  Gross Amounts Recognized Gross Amounts Offset in the Consolidated Balance Sheets Net Amounts Presented in the Consolidated Balance Sheets
Offsetting Derivative Assets (Liabilities)   
As of March 31, 2020      
CCH Interest Rate Derivatives $(197) $
 $(197)
CCH Interest Rate Forward Start Derivatives (92) 
 (92)
Liquefaction Supply Derivatives 314
 (13) 301
Liquefaction Supply Derivatives (89) 3
 (86)
As of December 31, 2019      
CCH Interest Rate Derivatives $(81) $
 $(81)
CCH Interest Rate Forward Start Derivatives (8) 
 (8)
Liquefaction Supply Derivatives 145
 (5) 140
Liquefaction Supply Derivatives (98) 6
 (92)



12


CHENIERE CORPUS CHRISTI HOLDINGS, LLC AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—CONTINUED
(unaudited)

NOTE 7—OTHER NON-CURRENT ASSETS

As of March 31, 2020 and December 31, 2019, other non-current assets, net consisted of the following (in millions):
  March 31, December 31,
  2020 2019
Advances and other asset conveyances to third parties to support LNG terminal $19
 $19
Operating lease assets 7
 7
Tax-related payments and receivables 3
 3
Information technology service prepayments 3
 3
Advances made under EPC and non-EPC contracts 
 14
Other 21
 10
Total other non-current assets, net $53
 $56


NOTE 8—ACCRUED LIABILITIES
 
As of March 31, 2020 and December 31, 2019, accrued liabilities consisted of the following (in millions): 
  March 31, December 31,
  2020 2019
Interest costs and related debt fees $99
 $8
Accrued natural gas purchases 86
 132
Liquefaction Project costs 38
 192
Other 21
 38
Total accrued liabilities $244
 $370


NOTE 9—DEBT

As of March 31, 2020 and December 31, 2019, our debt consisted of the following (in millions): 
  March 31, December 31,
  2020 2019
Long-term debt    
7.000% Senior Secured Notes due 2024 (“2024 CCH Senior Notes”) $1,250
 $1,250
5.875% Senior Secured Notes due 2025 (“2025 CCH Senior Notes”) 1,500
 1,500
5.125% Senior Secured Notes due 2027 (“2027 CCH Senior Notes”) 1,500
 1,500
4.80% Senior Secured Notes due 2039 (“4.80% CCH Senior Notes”) 727
 727
3.925% Senior Secured Notes due 2039 (“3.925% CCH Senior Notes”) 475
 475
3.700% Senior Secured Notes due 2029 (“2029 CCH Senior Notes”) 1,500
 1,500
CCH Credit Facility 3,283
 3,283
Unamortized debt issuance costs (136) (142)
Total long-term debt, net 10,099

10,093
     
Current debt    
$1.2 billion CCH Working Capital Facility (“CCH Working Capital Facility”) 141
 
Total debt, net $10,240
 $10,093



13


CHENIERE CORPUS CHRISTI HOLDINGS, LLC AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—CONTINUED
(unaudited)

Credit Facilities

Below is a summary of our credit facilities outstanding as of March 31, 2020 (in millions):
  CCH Credit Facility CCH Working Capital Facility
Original facility size $8,404
 $350
Incremental commitments 1,566
 850
Less:    
Outstanding balance 3,283
 141
Commitments terminated 6,687
 
Letters of credit issued 
 399
Available commitment $
 $660
     
Interest rate on available balance LIBOR plus 1.75% or base rate plus 0.75% LIBOR plus 1.25% - 1.75% or base rate plus 0.25% - 0.75%
Weighted average interest rate of outstanding balance 2.74% 2.77%
Maturity date 
June 30, 2024
 
June 29, 2023


Restrictive Debt Covenants

As of March 31, 2020, we were in compliance with all covenants related to our debt agreements.

Interest Expense

Total interest expense consisted of the following (in millions):
 Three Months Ended March 31,
 2020 2019
Total interest cost$129
 $133
Capitalized interest, including amounts capitalized as an Allowance for Funds Used During Construction(30) (121)
Total interest expense, net$99

$12


Fair Value Disclosures

The following table shows the carrying amount and estimated fair value of our debt (in millions):
  March 31, 2020 December 31, 2019
  Carrying
Amount
 Estimated
Fair Value
 Carrying
Amount
 Estimated
Fair Value
Senior notes (1) $5,750
 $5,043
 $5,750
 $6,329
4.80% CCH Senior Notes (2) 727
 594
 727
 830
3.925% CCH Senior Notes (2) 475
 350
 475
 495
Credit facilities (3) 3,424
 3,424
 3,283
 3,283
 
(1)Includes 2024 CCH Senior Notes, 2025 CCH Senior Notes, 2027 CCH Senior Notes and 2029 CCH Senior Notes. The Level 2 estimated fair value was based on quotes obtained from broker-dealers or market makers of these senior notes and other similar instruments.
(2)The Level 3 estimated fair value was calculated based on inputs that are observable in the market or that could be derived from, or corroborated with, observable market data, including interest rates based on debt issued by parties with comparable credit ratings to us and inputs that are not observable in the market. 
(3)Includes 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.


14


CHENIERE CORPUS CHRISTI HOLDINGS, LLC AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—CONTINUED
(unaudited)

NOTE 10—REVENUES FROM CONTRACTS WITH CUSTOMERS

The following table represents a disaggregation of revenue earned from contracts with customers during the three months ended March 31, 2020 and 2019 (in millions):
  Three Months Ended March 31,
  2020 2019
LNG revenues (1) $343
 $12
LNG revenues—affiliate 190
 93
Total revenues from customers 533
 105
Net derivative gains (2) 
 1
Total revenues $533
 $106
 
(1)LNG revenues include revenues for LNG cargoes in which our customers exercised their contractual right to not take delivery but remained obligated to pay fixed fees irrespective of such election. If contractually the customer cannot make up unexercised quantities in future periods, our performance obligation with respect to declined volumes is satisfied, and revenue associated with any unexercised quantities is generally recognized upon notice of customer cancellation.
(2)    See Note 6—Derivative Instruments for additional information about our derivatives.

Contract Assets and Liabilities

The following table shows our contract assets, which are classified as other non-current assets, net on our Consolidated Balance Sheets (in millions):
  March 31, December 31,
  2020 2019
Contract assets $12
 $

Contract assets represent our right to consideration for transferring goods or services to the customer under the terms of a sales contract when the associated consideration is not yet due.

Transaction Price Allocated to Future Performance Obligations

Because many of our sales contracts have long-term durations, we are contractually entitled to significant future consideration which we have not yet recognized as revenue. The following table discloses the aggregate amount of the transaction price that is allocated to performance obligations that have not yet been satisfied as of March 31, 2020 and December 31, 2019:
  March 31, 2020 December 31, 2019
  Unsatisfied
Transaction Price
(in billions)
 Weighted Average Recognition Timing (years) (1) Unsatisfied
Transaction Price
(in billions)
 Weighted Average Recognition Timing (years) (1)
LNG revenues $33.4
 11 $33.6
 11
LNG revenues—affiliate 1.0
 13 1.0
 13
Total revenues $34.4
   $34.6
  
 
    
(1)The weighted average recognition timing represents an estimate of the number of years during which we shall have recognized half of the unsatisfied transaction price.

We have elected the following exemptions which omit certain potential future sources of revenue from the table above:
(1)We omit from the table above all performance obligations that are part of a contract that has an original expected duration of one year or less.
(2)The table above excludes substantially all variable consideration under our SPAs. We omit from the table above all variable consideration that is allocated entirely to a wholly unsatisfied performance obligation or to a wholly unsatisfied promise to transfer a distinct good or service that forms part of a single performance obligation when that performance

15


CHENIERE CORPUS CHRISTI HOLDINGS, LLC AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—CONTINUED
(unaudited)

obligation qualifies as a series. The amount of revenue from variable fees that is not included in the transaction price will vary based on the future prices of Henry Hub throughout the contract terms, to the extent customers elect to take delivery of their LNG, and adjustments to the consumer price index. Certain of our contracts contain additional variable consideration based on the outcome of contingent events and the movement of various indexes. We have not included such variable consideration in the transaction price to the extent the consideration is considered constrained due to the uncertainty of ultimate pricing and receipt. Approximately 36% and 100% during the three months ended March 31, 2020 and 2019, respectively, of our LNG revenues were related to variable consideration received from customers. All of our LNG revenues—affiliate were related to variable consideration received from customers during the three months ended March 31, 2020 and 2019.

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

NOTE 11—RELATED PARTY TRANSACTIONS

Below is a summary of our related party transactions as reported on our Consolidated Statements of Operations for the three months ended March 31, 2020 and 2019 (in millions):
 Three Months Ended March 31,
 2020 2019
LNG revenues—affiliate   
Cheniere Marketing Agreements$190
 $93
    
Cost of sales—affiliate   
Contracts for Sale and Purchase of Natural Gas and LNG6
 
    
Cost of sales—related party   
Natural Gas Supply Agreement23
 10
    
Operating and maintenance expense—affiliate   
Services Agreements20
 5
    
General and administrative expense—affiliate   
Services Agreements5
 1


We had $18 million and $27 million due to affiliates as of March 31, 2020 and December 31, 2019, respectively, under agreements with affiliates, as described below.

Cheniere Marketing Agreements

CCL has a fixed price SPA with Cheniere Marketing (the “Cheniere Marketing Base SPA”) with a term of 20 years which allows Cheniere Marketing 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 and (2) any excess LNG produced by the Liquefaction Facilities that is not committed to customers under third-party SPAs. Under the Cheniere Marketing Base SPA, Cheniere Marketing may, without charge, elect to suspend deliveries of cargoes (other than commissioning cargoes) scheduled for any month under the applicable annual delivery program by providing specified notice in advance. Additionally, CCL has: (1) a fixed price SPA with an approximate term of 23 years with Cheniere Marketing which allows them to purchase volumes of approximately 15 TBtu per annum of LNG and (2) an SPA for 0.85 mtpa of LNG with a term of up to seven years associated with the integrated production marketing gas supply agreement between CCL and EOG Resources, Inc. As of March 31, 2020 and December 31, 2019, CCL had $50 million and $57 million of accounts receivable—affiliate, respectively, under these agreements.


16


CHENIERE CORPUS CHRISTI HOLDINGS, LLC AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—CONTINUED
(unaudited)

Services Agreements

Gas and Power Supply Services Agreement (“G&P Agreement”)

CCL has a G&P Agreement with Cheniere Energy Shared Services, Inc. (“Shared Services”), a wholly owned subsidiary of Cheniere, pursuant to which Shared Services will manage the gas and power procurement requirements of CCL. The services include, among other services, exercising the day-to-day management of CCL’s natural gas and power supply requirements, negotiating agreements on CCL’s behalf and providing other administrative services. Prior to the substantial completion of each Train of the Liquefaction Facilities, no monthly fee payment is required except for reimbursement of operating expenses. After substantial completion of each Train of the Liquefaction Facilities, for services performed while the Liquefaction Facilities 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 Facilities. The services to be provided include, among other services, preparing and maintaining staffing plans, identifying and arranging for procurement of equipment and materials, overseeing contractors, administering various agreements, information technology services and other services required to operate and maintain the Liquefaction Facilities. Prior to the substantial completion of each Train of the Liquefaction Facilities, no monthly fee payment is required except for reimbursement of operating expenses. After substantial completion of each Train of the Liquefaction Facilities, for services performed while the Liquefaction Facilities 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 and materials, overseeing contractors, information technology services and other services required to operate and maintain the Corpus Christi Pipeline. CCP is required to reimburse O&M Services for all operating expenses incurred on behalf of CCP.

Management Services Agreements (“MSAs”)

CCL has a MSA with Shared Services pursuant to which Shared Services manages the construction and operation of the Liquefaction Facilities, 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 Facilities and obtaining insurance. Prior to the substantial completion of each Train of the Liquefaction Facilities, no monthly fee payment is required except for reimbursement of expenses. After substantial completion of each Train, CCL will pay, in addition to the reimbursement of related expenses, a monthly fee equal to 3% of the capital expenditures incurred in the previous month and a fixed monthly fee of $375,000 for services with respect to such Train.

CCP has a 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.

Natural Gas Supply Agreement

CCL has entered into a natural gas supply contract to obtain feed gas for the operation of the Liquefaction Project through March 2022 with a related party in the ordinary course of business. CCL recorded $23 million and $10 million in cost of sales—related party under this contract during the three months ended March 31, 2020 and 2019, respectively. Of this amount, $7 million and $3 million was included in accrued liabilities—related party as of March 31, 2020 and December 31, 2019, respectively. CCL

17


CHENIERE CORPUS CHRISTI HOLDINGS, LLC AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—CONTINUED
(unaudited)

also has recorded derivative assets—related party of $4 million and $3 million and non-current derivative assets—related party of $2 million as of both March 31, 2020 and December 31, 2019, respectively, related to this contract.

Agreements with Midship Pipeline

CCL has entered into a transportation precedent agreement and a negotiated rate agreement with Midship Pipeline Company, LLC (“Midship Pipeline”) to secure firm pipeline transportation capacity for a period of 10 years following commencement of the approximately 200-mile natural gas pipeline project which Midship Pipeline is constructing. In March 2020, we along with CCL, entered into a guaranty agreement whereby we will absolutely and irrevocably guarantee CCL’s obligation under the transportation precedent agreement with Midship Pipeline.

Natural Gas Transportation Agreement

Cheniere Corpus Christi Liquefaction Stage III, LLC, a wholly owned subsidiary of Cheniere, has a transportation precedent agreement with CCP to secure firm pipeline transportation capacity for the transportation of natural gas feedstock to the expansion of the Corpus Christi LNG terminal it is constructing adjacent to the Liquefaction Project. The agreement will have a primary term of 20 years from the service commencement date with right to extend the term for two successive five-year terms.
Contracts for Sale and Purchase of Natural Gas and LNG

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

CCL also has an agreement with Midship Pipeline that allows them to sell and purchase natural gas with each other. CCL did 0t have any transactions under this agreement during the three months ended March 31, 2020 and 2019.

Land Agreements

Lease Agreements

CCL has agreements with Cheniere Land Holdings, LLC (“Cheniere Land Holdings”), a wholly owned subsidiary of Cheniere, to lease the land owned by Cheniere Land Holdings for the Liquefaction Facilities. The total annual lease payment is $1 million, and the terms of the agreements range from three to five years.

Easement Agreements

CCL has agreements with Cheniere Land Holdings which grant CCL easements on land owned by Cheniere Land Holdings for the Liquefaction Facilities. The total annual payment for easement agreements is $0.1 million, excluding any previously paid one-time payments, and the terms of the agreements range from three to five years.

Dredge Material Disposal Agreement

CCL has a dredge material disposal agreement with Cheniere Land Holdings that terminates in 2042 which grants CCL permission to use land owned by Cheniere Land Holdings for the deposit of dredge material from the construction and maintenance of the Liquefaction Facilities. Under the terms of the agreement, CCL will pay Cheniere Land Holdings $0.50 per cubic yard of dredge material deposits up to 5.0 million cubic yards and $4.62 per cubic yard for any quantities above that.


18


CHENIERE CORPUS CHRISTI HOLDINGS, LLC AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—CONTINUED
(unaudited)

Tug Hosting Agreement

In February 2017, CCL entered into a tug hosting agreement with Corpus Christi Tug Services, LLC (“Tug Services”), a wholly owned subsidiary of Cheniere, to provide certain marine structures, support services and access necessary at the Liquefaction Facilities 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 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 CCL 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, CCL will pay to Cheniere an amount equal to the state and local tax that CCL would be required to pay if CCL’s state and local tax liability were calculated on a separate company basis. There have been 0 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 0 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 Agreements

Equity Contribution Agreement

In May 2018, we amended and restated the existing equity contribution agreement with Cheniere (the “Equity Contribution Agreement”) pursuant to which Cheniere agreed to provide cash contributions up to approximately $1.1 billion, not including $2.0 billion previously contributed under the original equity contribution agreement. As of March 31, 2020, we have received $558 million in contributions under the Equity Contribution Agreement and Cheniere has posted $365 million of letters of credit on our behalf. Cheniere is only required to make additional contributions under the Equity Contribution Agreement after the commitments under the CCH Credit Facility have been reduced to 0 and to the extent cash flows from operations of the Liquefaction Project are unavailable for Liquefaction Project costs.

Early Works Equity Contribution Agreement

In conjunction with the amendment and restatement of the Equity Contribution Agreement, we terminated the early works equity contribution agreement with Cheniere entered into in December 2017. Prior to termination in May 2018, we had received $250 million in contributions from Cheniere under the early works equity contribution agreement.


19


CHENIERE CORPUS CHRISTI HOLDINGS, LLC AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—CONTINUED
(unaudited)

NOTE 12—CUSTOMER CONCENTRATION
  
The following table shows customers with revenues of 10% or greater of total revenues from external customers and customers with accounts receivable balances of 10% or greater of total accounts receivable from external customers:
  Percentage of Total Revenues from External Customers Percentage of Accounts Receivable from External Customers
  Three Months Ended March 31, March 31, December 31,
  2020 2019 2020 2019
Customer A 52%
—% 42% 38%
Customer B 15%
—% —% —%
Customer C 12% —% —% 39%
Customer D 12% —% —% —%
Customer E —% —% 18% —%
Customer F —% —% 16% —%


NOTE 13—SUPPLEMENTAL CASH FLOW INFORMATION

The following table provides supplemental disclosure of cash flow information (in millions):
 Three Months Ended March 31,
 2020 2019
Cash paid during the period for interest, net of amounts capitalized$24
 $


The balance in property, plant and equipment, net funded with accounts payable and accrued liabilities (including affiliate) was $41 million and $221 million as of March 31, 2020 and 2019, respectively.

NOTE 14—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 indentures governing each of the CCH Senior Notes (the “CCH Indentures”), (3) upon the legal defeasance or covenant defeasance or discharge of obligations under the CCH Indentures and (4) the release and discharge of the Guarantors pursuant to the Common Security and Account Agreement. See Note 9—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 March 31, 2020.


20


CHENIERE CORPUS CHRISTI HOLDINGS, LLC AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—CONTINUED
(unaudited)

Condensed Consolidating Balance Sheet
March 31, 2020
(in millions)
        
 Parent Issuer Guarantors Eliminations Consolidated
ASSETS       
Current assets       
Cash and cash equivalents$
 $
 $
 $
Restricted cash80
 14
 
 94
Accounts and other receivables
 74
 
 74
Accounts receivable—affiliate
 50
 
 50
Advances to affiliate
 93
 
 93
Inventory
 67
 
 67
Derivative assets
 96
 
 96
Derivative assets—related party
 4
 
 4
Other current assets
 12
 
 12
Total current assets80
 410
 
 490
        
Property, plant and equipment, net1,351
 11,162
 
 12,513
Debt issuance and deferred financing costs, net13
 
 
 13
Non-current derivative assets
 199
 
 199
Non-current derivative assets—related party
 2
 
 2
Investments in subsidiaries11,316
 
 (11,316) 
Other non-current assets, net1
 52
 
 53
Total assets$12,761
 $11,825
 $(11,316) $13,270
        
LIABILITIES AND MEMBER’S EQUITY       
Current liabilities       
Accounts payable$
 $8
 $
 $8
Accrued liabilities100
 144
 
 244
Accrued liabilities—related party
 7
 
 7
Current debt141
 
 
 141
Due to affiliates
 18
 
 18
Derivative liabilities184
 7
 
 191
Other current liabilities
 1
 
 1
Other current liabilities—affiliate
 1
 
 1
Total current liabilities425
 186
 
 611
        
Long-term debt, net10,099
 
 
 10,099
Non-current derivative liabilities105
 79
 
 184
Other non-current liabilities
 9
 
 9
        
Member’s equity2,132
 11,551
 (11,316) 2,367
Total liabilities and member’s equity$12,761
 $11,825
 $(11,316) $13,270


21


CHENIERE CORPUS CHRISTI HOLDINGS, LLC AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—CONTINUED
(unaudited)

Condensed Consolidating Balance Sheet
December 31, 2019
(in millions)
        
 Parent Issuer Guarantors Eliminations Consolidated
ASSETS       
Current assets       
Cash and cash equivalents$
 $
 $
 $
Restricted cash69
 11
 
 80
Accounts and other receivables
 58
 
 58
Accounts receivable—affiliate
 57
 
 57
Advances to affiliate
 115
 
 115
Inventory
 69
 
 69
Derivative assets
 74
 
 74
Derivative assets—related party
 3
 
 3
Other current assets
 15
 
 15
Total current assets69
 402
 
 471
        
Property, plant and equipment, net1,331
 11,176
 
 12,507
Debt issuance and deferred financing costs, net15
 
 
 15
Non-current derivative assets
 61
 
 61
Non-current derivative assets—related party
 2
 
 2
Investments in subsidiaries11,224
 
 (11,224) 
Other non-current assets, net
 56
 
 56
Total assets$12,639
 $11,697
 $(11,224) $13,112
        
LIABILITIES AND MEMBER’S EQUITY       
Current liabilities       
Accounts payable$
 $7
 $
 $7
Accrued liabilities9
 361
 
 370
Accrued liabilities—related party
 3
 
 3
Due to affiliates1
 26
 
 27
Derivative liabilities40
 6
 
 46
Other current liabilities—affiliate
 1
 
 1
Total current liabilities50
 404
 
 454
        
Long-term debt, net10,093
 
 
 10,093
Non-current derivative liabilities49
 86
 
 135
Other non-current liabilities
 11
 
 11
Other non-current liabilities—affiliate
 1
 
 1
        
Member’s equity2,447
 11,195
 (11,224) 2,418
Total liabilities and member’s equity$12,639
 $11,697
 $(11,224) $13,112



22


CHENIERE CORPUS CHRISTI HOLDINGS, LLC AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—CONTINUED
(unaudited)

Condensed Consolidating Statement of Operations
Three Months Ended March 31, 2020
(in millions)
        
 Parent Issuer Guarantors Eliminations Consolidated
        
Revenues       
LNG revenues$
 $343
 $
 $343
LNG revenues—affiliate
 190
 
 190
Total revenues

533



533
        
Operating costs and expenses       
Cost of sales (excluding items shown separately below)
 49
 
 49
Cost of sales—affiliate
 6
 
 6
Cost of sales—related party
 23
 
 23
Operating and maintenance expense
 89
 
 89
Operating and maintenance expense—affiliate
 20
 
 20
General and administrative expense1
 1
 
 2
General and administrative expense—affiliate
 5
 
 5
Depreciation and amortization expense9
 75
 
 84
Total operating costs and expenses10
 268
 
 278
        
Income (loss) from operations(10)
265



255
        
Other income (expense)       
Interest expense, net of capitalized interest(99) 
 
 (99)
Interest rate derivative loss, net(208) 
 
 (208)
Other income, net1
 
 
 1
Total other expense(306) 
 
 (306)
        
Net income (loss)$(316) $265
 $
 $(51)


23


CHENIERE CORPUS CHRISTI HOLDINGS, LLC AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—CONTINUED
(unaudited)

Condensed Consolidating Statement of Operations
Three Months Ended March 31, 2019
(in millions)
        
 Parent Issuer Guarantors Eliminations Consolidated
        
Revenues
 
 
 

LNG revenues$
 $13
 $
 $13
LNG revenues—affiliate
 93
 
 93
Total revenues
 106
 
 106
        
Operating costs and expenses       
Cost of sales (excluding items shown separately below)
 59
 
 59
Cost of sales—related party
 10
 
 10
Operating and maintenance expense
 32
 
 32
Operating and maintenance expense—affiliate
 5
 
 5
General and administrative expense1
 1
 
 2
General and administrative expense—affiliate
 1
 
 1
Depreciation and amortization expense1
 21
 
 22
Total operating costs and expenses2
 129
 
 131
        
Loss from operations(2) (23) 
 (25)
        
Other income (expense)       
Interest expense, net of capitalized interest(12) 
 
 (12)
Interest rate derivative loss, net(35) 
 
 (35)
Other income, net1
 
 
 1
Total other expense(46) 
 
 (46)
        
Net loss$(48) $(23) $
 $(71)




24


CHENIERE CORPUS CHRISTI HOLDINGS, LLC AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—CONTINUED
(unaudited)

Condensed Consolidating Statement of Cash Flows
Three Months Ended March 31, 2020
(in millions)
        
 Parent Issuer Guarantors Eliminations Consolidated
Cash flows provided by operating activities$159
 $125
 $(190) $94
        
Cash flows from investing activities       
Property, plant and equipment, net(7) (213) 
 (220)
Investments in subsidiaries(664) 
 664
 
Distributions received from affiliates382
 
 (382) 
Other
 (1) 
 (1)
Net cash used in investing activities(289) (214) 282
 (221)
        
Cash flows from financing activities       
Proceeds from issuances of debt141
 
 
 141
Capital contributions
 664
 (664) 
Distributions
 (572) 572
 
Net cash provided by financing activities141
 92
 (92) 141
        
Net increase in cash, cash equivalents and restricted cash11
 3
 
 14
Cash, cash equivalents and restricted cash—beginning of period69
 11
 
 80
Cash, cash equivalents and restricted cash—end of period$80
 $14
 $
 $94



Balances per Condensed Consolidating Balance Sheet:
 March 31, 2020
 Parent Issuer Guarantors Eliminations Consolidated
Cash and cash equivalents$
 $
 $
 $
Restricted cash80
 14
 
 94
Total cash, cash equivalents and restricted cash$80
 $14
 $
 $94


25


CHENIERE CORPUS CHRISTI HOLDINGS, LLC AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—CONTINUED
(unaudited)

Condensed Consolidating Statement of Cash Flows
Three Months Ended March 31, 2019
(in millions)
        
 Parent Issuer Guarantors Eliminations Consolidated
Cash flows used in operating activities$
 $(19) $(3) $(22)
        
Cash flows from investing activities       
Property, plant and equipment, net(55) (315) 
 (370)
Investments in subsidiaries(561) 
 561
 
Distributions received from affiliates219
 
 (219) 
Other
 (2) 
 (2)
Net cash used in investing activities(397) (317) 342
 (372)
        
Cash flows from financing activities       
Proceeds from issuances of debt692
 
 
 692
Repayments of debt(369) 
 
 (369)
Capital contributions
 561
 (561) 
Distributions
 (222) 222
 
Net cash provided by financing activities323
 339
 (339) 323
        
Net increase (decrease) in cash, cash equivalents and restricted cash(74) 3
 
 (71)
Cash, cash equivalents and restricted cash—beginning of period282
 7
 
 289
Cash, cash equivalents and restricted cash—end of period$208
 $10
 $
 $218



26


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

Information Regarding Forward-Looking Statements
This quarterly report contains certain statements that are, or may be deemed to be, “forward-looking statements��� within the meaning of Section 27A of the Securities Act of 1933, as amended (the “Securities Act”), and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”). All statements, other than statements of historical or present facts or conditions, included herein or incorporated herein by reference are “forward-looking statements.” Included among “forward-looking statements” are, among other things:
statements that we expect to commence or complete construction of our proposed LNG terminal, liquefaction facilities, pipeline facilities or other projects, or any expansions or portions thereof, by certain dates, or at all; 
statements regarding future levels of domestic and international natural gas production, supply or consumption or future levels of LNG imports into or exports from North America and other countries worldwide or purchases of natural gas, regardless of the source of such information, or the transportation or other infrastructure or demand for and prices related to natural gas, LNG or other hydrocarbon products;
statements regarding any financing transactions or arrangements, or our ability to enter into such transactions;
statements relating to the construction of our Trains 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 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 pipelines, including the financing of such Trains and pipelines;
statements that our Trains, when completed, will have certain characteristics, including amounts of liquefaction capacities;
statements regarding our business strategy, our strengths, our business and operation plans or any other plans, forecasts, projections, or objectives, including anticipated revenues, capital expenditures, maintenance and operating costs and cash flows, any or all of which are subject to change;
statements regarding legislative, governmental, regulatory, administrative or other public body actions, approvals, requirements, permits, applications, filings, investigations, proceedings or decisions;
statements regarding the outbreak of COVID-19 and its impact on our business and operating results, including any customers not taking delivery of LNG cargoes, the ongoing credit worthiness of our contractual counterparties, any disruptions in our operations or construction of our Trains and the health and safety of Cheniere’s employees, and on our customers, the global economy and the demand for LNG; and
any other statements that relate to non-historical or future information.
All of these types of statements, other than statements of historical or present facts or conditions, are forward-looking statements. In some cases, forward-looking statements can be identified by terminology such as “may,” “will,” “could,” “should,” “achieve,” “anticipate,” “believe,” “contemplate,” “continue,” “estimate,” “expect,” “intend,” “plan,” “potential,” “predict,” “project,” “pursue,” “target,” the negative of such terms or other comparable terminology. The forward-looking statements contained in this quarterly report are largely based on our expectations, which reflect estimates and assumptions made by our management. These estimates and assumptions reflect our best judgment based on currently known market conditions and other factors. Although we believe that such estimates are reasonable, they are inherently uncertain and involve a number of risks and uncertainties beyond our control. In addition, assumptions may prove to be inaccurate. We caution that the forward-looking statements contained in this quarterly report are not guarantees of future performance and that such statements may not be realized or the forward-looking statements or events may not occur. Actual results may differ materially from those anticipated or implied in forward-looking statements as a result of a variety of factors described in this quarterly report and in the other reports and other information that we file with the SEC, including those discussed under “Risk Factors” in our annual report on Form 10-K for the year ended December 31, 2019. All forward-looking statements attributable to us or persons acting on our behalf are expressly

27


qualified in their entirety by these risk factors. These forward-looking statements speak only as of the date made, and other than as required by law, we undertake no obligation to update or revise any forward-looking statement or provide reasons why actual results may differ, whether as a result of new information, future events or otherwise.

Introduction
 
The following discussion and analysis presents management’s view of our business, financial condition and overall performance and should be read in conjunction with our Consolidated Financial Statements and the accompanying notes. This information is intended to provide investors with an understanding of our past performance, current financial condition and outlook for the future. Our discussion and analysis includes the following subjects: 
Overview of Business 
Overview of Significant Events 
Impact of COVID-19 and Market Environment
Liquidity and Capital Resources
Results of Operations 
Off-Balance Sheet Arrangements  
Summary of Critical Accounting Estimates 
Recent Accounting Standards

Overview of Business

We are operating and constructing a natural gas liquefaction and export facility (the “Liquefaction Facilities”) and operating a 23-mile natural gas supply pipeline that interconnects the Corpus Christi LNG terminal with several interstate and intrastate natural gas pipelines (the “Corpus Christi Pipeline” and together with the Liquefaction Facilities, the “Liquefaction Project”) near Corpus Christi, Texas, through our subsidiaries CCL and CCP, respectively.

We are currently operating two Trains and are constructing one additional Train for a total production capacity of approximately 15 mtpa of LNG. The Liquefaction Project, once fully constructed, will contain three LNG storage tanks with aggregate capacity of approximately 10 Bcfe and two marine berths that can each accommodate vessels with nominal capacity of up to 266,000 cubic meters.

Overview of Significant Events

Our significant events since January 1, 2020 and through the filing date of this Form 10-Q include the following:
Operational
As of April 27, 2020, 140 cumulative LNG cargoes totaling approximately 10 million tonnes of LNG have been produced, loaded and exported from the Liquefaction Project.

Impact of COVID-19 and Market Environment

The business environment in which we operate has been impacted by the recent downturn in the energy market as well as the outbreak of COVID-19 and its progression into a pandemic in March 2020. As a result of these developments, our growth estimates for LNG in 2020 have moderated from previous expectations. Annual LNG demand grew by 13% in 2019 to approximately 360 mtpa. In a report published in the month of April 2020, IHS Markit projected LNG demand in 2020 to reach 363 mtpa, down from a pre-COVID-19 estimate of approximately 377 mtpa. This implies a year-over-year rate of growth of approximately 0.8% in 2020 compared to the implied 4.7% pre-COVID-19 year-over-year growth estimate. While worldwide demand increased by approximately 10% during the three months ended March 31, 2020 compared to the comparable period of 2019, we expect to potentially see year-over-year declines in some future quarters as reduced economic activity affects LNG demand and high storage inventory levels reduce the need for imports. The robust LNG supply additions over the past several years, along with warmer winters and now strict virus containment measures, have exerted downward pressure on global gas prices. As an example, the

28


Dutch Title Transfer Facility (“TTF”), a virtual trading point for natural gas in the Netherlands, averaged $3.35 during the quarter ended March 31, 2020, 51% lower than the comparable period of 2019, while the Japan Korean Marker (“JKM”), an LNG benchmark price assessment for spot physical cargoes delivered ex-ship into certain key markets in Asia, averaged $4.82 during the three months ended March 31, 2020, 43% lower than the comparable period of 2019. As a result of the weaker LNG market environment, as well as customer-specific variables, we have recently experienced an increase in the number of LNG cargoes for which our customers have notified us they will not take delivery. While this may impact our expected LNG production, we do not expect it to have a material impact on our forecasted financial results for 2020, due to the highly contracted nature of our business and the fact that customers continue to be obligated to pay fixed fees for cargoes in relation to which they have exercised their contractual right to cancel. Revenue associated with canceled LNG cargoes is generally recognized upon notice of customer cancellation. During the three months ended March 31, 2020, we recognized revenue of approximately $37 million associated with canceled LNG cargoes.

In addition, in response to the COVID-19 pandemic, Cheniere has modified certain business and workforce practices to protect the safety and welfare of its employees who continue to work at its facilities and offices worldwide, as well as implemented certain mitigation efforts to ensure business continuity. In March 2020, Cheniere began consulting with a medical advisor, and implemented social distancing through revised shift schedules, work from home policies and designated remote work locations where appropriate, restricted non-essential business travel and began requiring self-screening for employees and contractors. In April 2020, Cheniere began utilizing temporary on-site housing for its workforce at our facilities, implemented temperature testing, incorporated medical and social workers to support employees, enforced prior self-isolation and screening for on-site housing and implemented marine operations with zero contact during loading activities. These measures have resulted in increased costs, which Cheniere expects to continue until the risks associated with the COVID-19 pandemic diminish. As of April 28, 2020, we have incurred approximately $13 million of such costs.

Liquidity and Capital Resources
 
The following table provides a summary of our liquidity position at March 31, 2020 and December 31, 2019 (in millions):
 March 31, December 31,
 2020 2019
Cash and cash equivalents$
 $
Restricted cash designated for the Liquefaction Project94
 80
Available commitments under the following credit facilities:   
CCH Credit Facility
 
$1.2 billion CCH Working Capital Facility (“CCH Working Capital Facility”)660
 729

Corpus Christi LNG Terminal

Liquefaction Facilities

We are currently operating two Trains and one marine berth at the Liquefaction Project and are constructing one additional Train and marine berth. We have received authorization from the FERC to site, construct and operate Trains 1 through 3 of the Liquefaction Project. We completed construction of Trains 1 and 2 of the Liquefaction Project and commenced commercial operating activities in February 2019 and August 2019, respectively. The following table summarizes the project completion and construction status of Train 3 of the Liquefaction Project, including the related infrastructure, as of March 31, 2020:
  Train 3
Overall project completion percentage 83.7%
Completion percentage of:  
Engineering 99.2%
Procurement 99.6%
Subcontract work 69.5%
Construction 63.0%
Expected date of substantial completion 1H 2021

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, both of which commenced in June 2019, up to a combined

29


total of the equivalent of 767 Bcf/yr (approximately 15 mtpa) of natural gas. The terms of each of these authorizations began on the date of first export thereunder.
An application was filed in September 2019 to authorize additional exports from the Liquefaction Project to FTA countries for a 25-year term and to non-FTA countries for a 20-year term in an amount up to the equivalent of approximately 108 Bcf/yr of natural gas, for a total Liquefaction Project export of 875.16 Bcf/yr. The terms of the authorizations are requested to commence on the date of first commercial export from the Liquefaction Project of the volumes contemplated in the application. The application is currently pending before DOE.
Customers

CCL has entered into fixed price long-term SPAs generally with terms of 20 years (plus extension rights) with nine third parties for Trains 1 through 3 of the Liquefaction Project to make available an aggregate amount of LNG that is approximately 70% of the total production capacity from these Trains. Under these SPAs, the customers will purchase LNG from CCL on a FOB basis for a price consisting of a fixed fee per MMBtu of LNG (a portion of which is subject to annual adjustment for inflation) plus a variable fee per MMBtu of LNG equal to approximately 115% of Henry Hub. The customers may elect to cancel or suspend deliveries of LNG cargoes, with advance notice as governed by each respective SPA, in which case the customers would still be required to pay the fixed fee with respect to the contracted volumes that are not delivered as a result of such cancellation or suspension. We refer to the fee component that is applicable regardless of a cancellation or suspension of LNG cargo deliveries under the SPAs as the fixed fee component of the price under our SPAs. We refer to the fee component that is applicable only in connection with LNG cargo deliveries as the variable fee component of the price under our SPAs. The variable fee under CCL’s SPAs entered into in connection with the development of the Liquefaction Project was sized at the time of entry into each SPA with the intent to cover the costs of gas purchases and transportation and liquefaction fuel to produce the LNG to be sold under each such SPA. The SPAs and contracted volumes to be made available under the SPAs are not tied to a specific Train; however, the term of each SPA generally commences upon the date of first commercial delivery for the applicable Train, as specified in each SPA.

In aggregate, the minimum fixed fee portion to be paid by the third-party SPA customers is approximately $550 million for Train 1, increasing to approximately $1.4 billion upon the date of first commercial delivery for Train 2 and further increasing to approximately $1.8 billion following the substantial completion of Train 3 of the Liquefaction Project.

In addition, Cheniere Marketing International LLP (“Cheniere Marketing”), an indirect wholly-owned subsidiary of Cheniere, has agreements with CCL to purchase: (1) 15 TBtu per annum of LNG with an approximate term of 23 years, (2) any LNG produced by CCL in excess of that required for other customers at Cheniere Marketing’s option and (3) 0.85 mtpa of LNG with a term of up to seven years associated with the IPM gas supply agreement between CCL and EOG.
Natural Gas Transportation, Storage and Supply

To ensure CCL is able to transport adequate natural gas feedstock to the Corpus Christi LNG terminal, it has entered into transportation precedent agreements to secure firm pipeline transportation capacity with CCP and certain third-party pipeline companies. CCL has entered into a firm storage services agreement with a third party to assist in managing variability in natural gas needs for the 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. As of March 31, 2020, CCL had secured up to approximately 3,182 TBtu of natural gas feedstock through long-term natural gas supply contracts with remaining terms that range up to 10 years, a portion of which is subject to the achievement of certain project milestones and other conditions precedent.

A portion of the natural gas feedstock transactions for CCL are IPM transactions, in which the natural gas producers are paid based on a global gas market price less a fixed liquefaction fee and certain costs incurred by us.

Construction

CCL entered into separate lump sum turnkey contracts with Bechtel Oil, Gas and Chemicals, Inc. (“Bechtel”) for the engineering, procurement and construction of Trains 1 through 3 of the Liquefaction Project under which Bechtel charges a lump sum for all work performed and generally bears project cost, schedule and performance risks unless certain specified events occur, in which case Bechtel may cause CCL to enter into a change order, or CCL agrees with Bechtel to a change order.

30



The total contract price of the EPC contract for Train 3, which is currently under construction, is approximately $2.4 billion, reflecting amounts incurred under change orders through March 31, 2020. As of March 31, 2020, we have incurred $2.1 billion under this contract.
Capital Resources

We expect to finance the construction costs of the Liquefaction Project from one or more of the following: operating cash flows from CCL and CCP, project debt and equity contributions from Cheniere. The following table provides a summary of our capital resources from borrowings and available commitments for the Liquefaction Project, excluding any equity contributions, at March 31, 2020 and December 31, 2019 (in millions):
  March 31, December 31,
  2020 2019
Senior notes (1) $6,952
 $6,952
Credit facilities outstanding balance (2) 3,424
 3,283
Letters of credit issued (2) 399
 471
Available commitments under credit facilities (2) 660
 729
Total capital resources from borrowings and available commitments (3) $11,435
 $11,435
 
(1)Includes 7.000% Senior Secured Notes due 2024, 5.875% Senior Secured Notes due 2025, 5.125% Senior Secured Notes due 2027, 3.700% Senior Secured Notes due 2029, 4.80% Senior Secured Notes due 2039 and 3.925% Senior Secured Notes due 2039 (collectively, the “CCH Senior Notes”).
(2)Includes CCH Credit Facility and CCH Working Capital Facility.
(3)Does not include additional borrowings or contributions by our indirect parents which may be used for the Liquefaction Project.
CCH Senior Notes

The CCH Senior Notes are jointly and severally guaranteed by our subsidiaries, CCL, CCP and CCP GP (each a “Guarantor” and collectively, the “Guarantors”). The indentures governing the CCH Senior Notes contain customary terms and events of default 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 all of the properties or assets of 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. The covenants included in the respective indentures that govern the CCH Senior Notes are subject to a number of important limitations and exceptions.

The CCH Senior Notes are our senior secured obligations, ranking senior in right of payment to any and all of our future indebtedness that is subordinated to the CCH Senior Notes and equal in right of payment with our other existing and future indebtedness that is senior and secured by the same collateral securing the CCH Senior Notes. The CCH Senior Notes are secured by a first-priority security interest in substantially all of our assets and the assets of the CCH Guarantors.

At any time prior to six months before the respective dates of maturity for each of the CCH Senior Notes, we may redeem all or part of such series of the CCH Senior Notes at a redemption price equal to the “make-whole” price set forth in the appropriate indenture, plus accrued and unpaid interest, if any, to the date of redemption. At any time within six months of the respective dates of maturity for each of the CCH Senior Notes, we may redeem all or part of such series of the CCH Senior Notes, in whole or in part, at a redemption price equal to 100% of the principal amount of the CCH Senior Notes to be redeemed, plus accrued and unpaid interest, if any, to the date of redemption.

31


CCH Credit Facility

In May 2018, we amended and restated the CCH Credit Facility to increase total commitments under the CCH Credit Facility from $4.6 billion to $6.1 billion. Our obligations under the CCH Credit Facility are secured by a first priority lien on substantially all of our assets and the assets of our subsidiaries and by a pledge by CCH HoldCo I of its limited liability company interests in us. As of both March 31, 2020 and December 31, 2019, we had no available commitments and $3.3 billion of loans outstanding under the CCH Credit Facility.
 
The CCH Credit Facility matures on June 30, 2024, with principal payments due quarterly commencing on the earlier of (1) the first quarterly payment date occurring more than three calendar months following the completion of the Liquefaction Project as defined in the common terms agreement and (2) a set date determined by reference to the date under which a certain LNG buyer linked to the last Train of the Liquefaction Project to become operational is entitled to terminate its SPA for failure to achieve the date of first commercial delivery for that agreement. Scheduled repayments will be based upon a 19-year tailored amortization, commencing the first full quarter after the completion of Trains 1 through 3 and designed to achieve a minimum projected fixed debt service coverage ratio of 1.50:1.

Under the CCH Credit Facility, 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 certain distributions under agreements governing our indebtedness generally until, among other requirements, the completion of the construction of Trains 1 through 3 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 June 2018, we amended and restated the CCH Working Capital Facility to increase total commitments under the CCH Working Capital Facility from $350 million to $1.2 billion. The CCH Working Capital Facility is intended to be used for loans (“CCH Working Capital Loans”) and the issuance of letters of credit for certain working capital requirements related to developing and operating the Liquefaction Project and for related business purposes. 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 for working capital under the Common Terms Agreement that was entered into concurrently with the CCH Credit Facility. As of March 31, 2020 and December 31, 2019, we had $660 million and $729 million of available commitments, $399 million and $471 million aggregate amount of issued letters of credit and $141 million and zero of loans outstanding under the CCH Working Capital Facility, respectively.

The CCH Working Capital Facility matures on June 29, 2023, and we may prepay the CCH Working Capital Loans and loans made in connection with a draw upon any letter of credit (“CCH LC Loans”) at any time without premium or penalty upon three business days’ notice and may re-borrow at any time. CCH LC Loans have a term of up to one year. 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 of our assets and the assets of the Guarantors as well as all of our membership interests and the membership interest in each of the Guarantors on a pari passu basis with the CCH Senior Notes and the CCH Credit Facility.

Equity Contribution Agreement

In May 2018, we amended and restated the existing equity contribution agreement with Cheniere (the “Equity Contribution Agreement”) pursuant to which Cheniere agreed to provide cash contributions up to approximately $1.1 billion, not including $2.0 billion previously contributed under the original equity contribution agreement. As of March 31, 2020, we have received $558 million in contributions under the Equity Contribution Agreement and Cheniere has posted $365 million of letters of credit on our behalf under its revolving credit facility. Cheniere is only required to make additional contributions under the Equity Contribution Agreement after the commitments under the CCH Credit Facility have been reduced to zero and to the extent cash flows from operations of the Liquefaction Project are unavailable for Liquefaction Project costs.

32


Early Works Equity Contribution Agreement

In conjunction with the amendment and restatement of the Equity Contribution Agreement, we terminated the early works equity contribution agreement with Cheniere entered into in December 2017. Prior to termination in May 2018, we had received $250 million in contributions from Cheniere under the early works equity contribution agreement.

Restrictive Debt Covenants

As of March 31, 2020, we were in compliance with all covenants related to our debt agreements.

LIBOR

The use of LIBOR is expected to be phased out by the end of 2021. It is currently unclear whether LIBOR will be utilized beyond that date or whether it will be replaced by a particular rate. We intend to continue to work with our lenders to pursue any amendments to our debt agreements that are currently subject to LIBOR and will continue to monitor, assess and plan for the phase out of LIBOR.

Sources and Uses of Cash

The following table summarizes the sources and uses of our cash, cash equivalents and restricted cash for the three months ended March 31, 2020 and 2019 (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. 
 Three Months Ended March 31,
 2020 2019
Operating cash flows$94
 $(22)
Investing cash flows(221) (372)
Financing cash flows141
 323
    
Net increase (decrease) in cash, cash equivalents and restricted cash14
 (71)
Cash, cash equivalents and restricted cash—beginning of period80
 289
Cash, cash equivalents and restricted cash—end of period$94
 $218
Operating Cash Flows

Operating cash flows during the three months ended March 31, 2020 and 2019 were net inflows of $94 million and net outflows of $22 million, respectively. The increase in operating cash net inflows was primarily due to increased cash receipts from the sale of LNG cargoes, as a result of the commencement of operations of Trains 1 and 2 of the Liquefaction Project in February 2019 and August 2019, respectively.

Investing Cash Flows

Investing cash net outflows during the three months ended March 31, 2020 and 2019 were $221 million and $372 million, respectively, and were primarily used to fund the construction costs for the Liquefaction Project. These costs are capitalized as construction-in-process until achievement of substantial completion.

Financing Cash Flows

Financing cash net inflows during the three months ended March 31, 2020 were $141 million as a result of borrowings under the CCH Working Capital Facility.

Financing cash net inflows during the three months ended March 31, 2019 were $323 million, primarily as a result of:
$491 million of borrowings under the CCH Credit Facility; and
$201 million of borrowings and $369 million of repayments under the CCH Working Capital Facility.

33


Results of Operations

The following charts summarize the number of Trains that were in operation during the year ended December 31, 2019 and the three months ended March 31, 2020 and total revenues and total LNG volumes loaded (including both operational and commissioning volumes) during the three months ended March 31, 2020 and 2019:
chart-c8261c933064e350b2a.jpg

chart-be969a28a19cfd29a54.jpgchart-e219e854ab3d1887c75.jpg
Our consolidated net loss was $51 million in the three months ended March 31, 2020, compared to net loss of $71 million in the three months ended March 31, 2019. This $20 million decrease in net loss in 2019 was primarily the result of increased income from operations, which was partially offset by increased interest rate derivative loss, net and interest expense, net of capitalized interest.

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


34


Revenues
 Three Months Ended March 31,
(in millions, except volumes)2020 2019 Change
LNG revenues$343
 $13
 $330
LNG revenues—affiliate190
 93
 97
Total revenues$533
 $106
 $427
      
LNG volumes recognized as revenues (in TBtu)128
 36
 92

We begin recognizing LNG revenues from the Liquefaction Project following the substantial completion and the commencement of operating activities of Trains 1 and 2 in February 2019 and August 2019, respectively. The achievement of substantial completion of these Trains resulted in additional revenue from the increased volume of LNG sold. LNG revenues during the three months ended March 31, 2020 also included $37 million in revenues attributable to LNG cargoes contractually canceled by our customers, for which revenue is generally recognized upon notice of customer cancellation. We expect our LNG revenues to increase in the future upon Train 3 of the Liquefaction Project becoming operational. Also included in LNG revenues are gains and losses from derivative instruments, which include the realized value associated with a portion of derivative instruments that settle through physical delivery and the sale of unutilized natural gas procured for the liquefaction process. We recognized revenues of $44 million and $13 million during the three months ended March 31, 2020 and 2019, respectively, related to derivative instruments and other revenues from these transactions.
 
Prior to substantial completion of a Train, amounts received from the sale of commissioning cargoes from that Train are offset against LNG terminal construction-in-process, because these amounts are earned or loaded during the testing phase for the construction of that Train. During the three months ended March 31, 2019, we realized offsets to LNG terminal costs of $74 million corresponding to 15 TBtu of LNG that were related to the sale of commissioning cargoes. We did not realize any offsets to LNG terminal costs during the three months ended March 31, 2020.

Operating costs and expenses
 Three Months Ended March 31,
(in millions)2020 2019 Change
Cost of sales$49
 $59
 $(10)
Cost of sales—affiliate6
 
 6
Cost of sales—related party23
 10
 13
Operating and maintenance expense89
 32
 57
Operating and maintenance expense—affiliate20
 5
 15
General and administrative expense2
 2
 
General and administrative expense—affiliate5
 1
 4
Depreciation and amortization expense84
 22
 62
Total operating costs and expenses$278

$131

$147

Our total operating costs and expenses increased between the three months ended March 31, 2020 and 2019, primarily as a result of the commencement of operations of Trains 1 and 2 of the Liquefaction Project in February 2019 and August 2019, respectively.

Cost of sales (including affiliate and related party) increased between the three months ended March 31, 2020 and 2019, primarily related to the increase in the volume of natural gas feedstock related to our LNG sales due to the commencement of operations at the Liquefaction Project, partially offset by an increase in fair value of the derivatives associated with economic hedges to secure natural gas feedstock for the Liquefaction Projects due to a favorable shift in long-term forward prices relative to our hedged position. Cost of sales includes costs incurred directly for the production and delivery of LNG from the Liquefaction Project, to the extent those costs are not utilized for the commissioning process.

Operating and maintenance expense primarily includes costs associated with operating and maintaining the Liquefaction Project. The increase in operating and maintenance expense (including affiliate) between the three months ended March 31, 2020 and 2019 was primarily related to increased natural gas transportation and storage capacity demand charges, increased third-party service and maintenance contract costs and increased payroll and benefit costs of operations personnel, generally as a result of the

35


commencement of operations at the Liquefaction Project. Operating and maintenance (including affiliates) also includes insurance and regulatory costs and other operating costs.
Depreciation and amortization expense increased during the three months ended March 31, 2020 from the comparable period in 2019 as a result of commencing operations of Trains 1 and 2 of the Liquefaction Project in February 2019 and August 2019, respectively.

Other expense (income)
 Three Months Ended March 31,
(in millions)2020 2019 Change
Interest expense, net of capitalized interest$99
 $12
 $87
Interest rate derivative loss, net208
 35
 173
Other income, net(1) (1) 
Total other expense$306
 $46
 $260

Interest expense, net of capitalized interest, increased between the three months ended March 31, 2020 and 2019, primarily as a result of a decrease in the portion of total interest costs that is eligible for capitalization due to the commencement of operations at the Liquefaction Project. We incurred $129 million and $133 million of total interest cost, of which we capitalized $30 million and $121 million, which was primarily related to interest costs incurred to construct the remaining assets of the Liquefaction Project during the three months ended March 31, 2020 and 2019, respectively.

Derivative loss, net increased during the three months ended March 31, 2020 compared to the three months ended March 31, 2019, primarily due to an unfavorable shift in the long-term forward LIBOR curve between the periods.

Off-Balance Sheet Arrangements
 
As of March 31, 2020, we had no transactions that met the definition of off-balance sheet arrangements that may have a current or future material effect on our consolidated financial position or operating results. 

Summary of Critical Accounting Estimates

The preparation of our Consolidated Financial Statements in conformity with GAAP requires management to make certain estimates and assumptions that affect the amounts reported in the Consolidated Financial Statements and the accompanying notes. There have been no significant changes to our critical accounting estimates from those disclosed in our annual report on Form 10-K for the year ended December 31, 2019.

Recent Accounting Standards 

For descriptions of recently issued accounting standards, see Note 1—Nature of Operations and Basis of Presentation of our Notes to Consolidated Financial Statements.

ITEM 3.    QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
 
Marketing and Trading Commodity Price Risk

We have entered into commodity derivatives consisting of natural gas supply contracts for the commissioning and operation of the 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 millions):
 March 31, 2020 December 31, 2019
 Fair Value Change in Fair Value Fair Value Change in Fair Value
Liquefaction Supply Derivatives$215
 $38
 $48
 $63

36


Interest Rate Risk

We are exposed to interest rate risk primarily when we incur debt related to project financing. Interest rate risk is managed in part by replacing outstanding floating-rate debt with fixed-rate debt with varying maturities. We have entered into interest rate swaps to hedge the exposure to volatility in a portion of the floating-rate interest payments under the CCH Credit Facility (“CCH Interest Rate Derivatives”) and to hedge against changes in interest rates that could impact our anticipated future issuance of debt (“CCH Interest Rate Forward Start Derivatives” and, collectively with the CCH Interest Rate Derivatives, the “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 one-month LIBOR curve across the remaining terms of the Interest Rate Derivatives as follows (in millions):
 March 31, 2020 December 31, 2019
 Fair Value Change in Fair Value Fair Value Change in Fair Value
CCH Interest Rate Derivatives$(197) $4
 $(81) $19
CCH Interest Rate Forward Start Derivatives(92) 9
 (8) 15

See Note 6—Derivative Instruments for additional details about our derivative instruments.

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 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.


37


PART II.     OTHER INFORMATION

ITEM 1.
LEGAL PROCEEDINGS
 
We may in the future be involved as a party to various legal proceedings, which are incidental to the ordinary course of business. We regularly analyze current information and, as necessary, provide accruals for probable liabilities on the eventual disposition of these matters. There have been no material changes to the legal proceedings disclosed in our annual report on Form 10-K for the year ended December 31, 2019.

ITEM 1A.RISK FACTORS

The information presented below updates, and should be read in conjunction with, the risk factors disclosed in our annual report on Form 10-K for the year ended December 31, 2019. Except as presented below, there have been no material changes from the risk factors disclosed in our annual report on Form 10-K for the year ended December 31, 2019.

The outbreak of COVID-19 and volatility in the energy markets may materially and adversely affect our business, financial condition, operating results, cash flow, liquidity and prospects.

The outbreak of COVID-19 and its development into a pandemic in March 2020 have resulted in significant disruption globally. Actions taken by various governmental authorities, individuals and companies around the world to prevent the spread of COVID-19 have restricted travel, business operations, and the overall level of individual movement and in-person interaction across the globe. Additionally, recent disputes over production levels between members of the Organization of Petroleum Exporting Countries and other oil producing countries has resulted in increased volatility in oil and natural gas prices.

The extent, duration and magnitude of the COVID-19 pandemic’s effects will depend on future developments, all of which are highly uncertain and difficult to predict, including the impact of the pandemic on global and regional economies, travel, and economic activity, as well as actions taken by governments, business and individuals in response to the pandemic or any future resurgence. These developments include the impact of the COVID-19 pandemic on unemployment rates, the demand for oil and natural gas, levels of consumer confidence and the post-pandemic pace of recovery.

Many uncertainties remain with respect to the COVID-19 pandemic, and we continue to monitor the rapidly evolving situation. The COVID-19 pandemic alone or coupled with continued volatility in the energy markets may materially and adversely affect our business, financial condition, operating results, cash flow, liquidity and prospects or have the effect of heightening many of the other risks described herein and in our annual report on Form 10-K for the year ended December 31, 2019. The extent to which our business, contracts, financial condition, operating results, cash flow, liquidity and prospects are affected by the COVID-19 outbreak or volatility in the energy markets will depend on various factors beyond our control and are highly uncertain, including the duration and scope of the outbreak, decreased demand for LNG and the resulting economic effects of the outbreak of COVID-19.

Our ability to generate cash is substantially dependent upon the performance by customers under long-term contracts that we have entered into, and we could be materially and adversely affected if any significant customer fails to perform its contractual obligations for any reason.

Our future results and liquidity are substantially dependent upon performance by our customers to make payments under long-term contracts. As of March 31, 2020, we had SPAs with nine third-party customers. We are dependent on each customer’s continued willingness and ability to perform its obligations under its SPA. We are exposed to the credit risk of any guarantor of these customers’ obligations under their respective agreements in the event that we must seek recourse under a guaranty. As a result of the disruptions caused by the COVID-19 pandemic and the volatility in the energy markets, we believe we are exposed to heightened credit and performance risk of our customers. Additionally, some customers have indicated to us that COVID-19 has begun to impact their operations and/or may impact their operations in the future. Some of our SPA customers’ primary countries of business have experienced a significant number of COVID-19 cases and/or have been subject to government imposed lockdown or quarantine measures. Although we believe that impacts of the COVID-19 pandemic on LNG regasification facilities, downstream markets and broader energy demand do not constitute valid force majeure claims under our FOB LNG SPAs, if any significant customer fails to perform its obligations under its SPA, our business, contracts, financial condition, operating results, cash flow, liquidity and prospects could be materially and adversely affected, even if we were ultimately successful in seeking damages from that customer or its guarantor for a breach of the agreement.


38


Cost overruns and delays in the completion of Train 3 or any future Trains, as well as difficulties in obtaining sufficient financing to pay for such costs and delays, could have a material adverse effect on our business, contracts, financial condition, operating results, cash flow, liquidity and prospects.

The actual construction costs of Train 3 and any future Trains may be significantly higher than our current estimates as a result of many factors, including change orders under existing or future EPC contracts resulting from the occurrence of certain specified events that may give our EPC contractor the right to cause us to enter into change orders or resulting from changes with which we otherwise agree. We have already experienced increased costs due to change orders. As construction progresses, we may decide or be forced to submit change orders to our contractor that could result in longer construction periods, higher construction costs or both, including change orders to comply with existing or future environmental or other regulations.

The outbreak of COVID-19 and the resulting actions taken by governmental and regulatory authorities to prevent the spread of COVID-19 may cause a slow-down in the construction of one or more Trains. Our EPC contractor has advised us of voluntary proactive measures it is taking to protect employees and to mitigate risks associated with COVID-19, however, it has not indicated that there will be any changes to the project cost or schedule and is still performing its obligations under its EPC contract. While the construction of Train 3 is continuing, if there was a major outbreak of COVID-19 at any construction site or the implementation of restrictions by the government that prevented construction for an extended period, we could experience significant delays in the construction of one or more Trains.

Delays in the construction of one or more Trains beyond the estimated development periods, as well as change orders to our existing EPC contract or any future EPC contract related to additional Trains, could increase the cost of completion beyond the amounts that we estimate, which could require us to obtain additional sources of financing to fund our operations until the Liquefaction Project is fully constructed (which could cause further delays). Our ability to obtain financing that may be needed to provide additional funding to cover increased costs will depend, in part, on factors beyond our control. Accordingly, we may not be able to obtain financing on terms that are acceptable to us, or at all. Even if we are able to obtain financing, we may have to accept terms that are disadvantageous to us or that may have a material adverse effect on our current or future business, contracts, financial condition, operating results, cash flow, liquidity and prospects.

Outbreaks of infectious diseases, such as the outbreak of COVID-19, at our facilities could adversely affect our operations.

Federal, state and local governments have enacted various measures to try to contain the outbreak of COVID-19, such as travel bans and restrictions, quarantines, shelter-in-place orders and business shutdowns. Our facilities at the Corpus Christi LNG terminal are critical infrastructure and have continued to operate during the outbreak, which means that Cheniere must keep its employees who operate our facilities safe and minimize unnecessary risk of exposure to the virus. In response, Cheniere has taken extra precautionary measures to protect the continued safety and welfare of its employees who continue to work at our facilities and have modified certain business and workforce practices, such as implementing work from home policies where appropriate. The measures taken to prevent an outbreak at our facilities have resulted in increased costs. If a large number of Cheniere’s employees in those critical facilities were to contract COVID-19 at the same time, our operations could be adversely affected.


39


ITEM 6.EXHIBITS
Exhibit No. Description
10.1* 
31.1* 
32.1** 
101.INS* XBRL Instance Document
101.SCH* XBRL Taxonomy Extension Schema Document
101.CAL* XBRL Taxonomy Extension Calculation Linkbase Document
101.DEF* XBRL Taxonomy Extension Definition Linkbase Document
101.LAB* XBRL Taxonomy Extension Labels Linkbase Document
101.PRE* XBRL Taxonomy Extension Presentation Linkbase Document
104* Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101)
 
*Filed herewith.
**Furnished herewith.


40


SIGNATURES


Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

  CHENIERE CORPUS CHRISTI HOLDINGS, LLC
    
Date:April 29, 2020By:/s/ Michael J. Wortley
   Michael J. Wortley
   President and Chief Financial Officer
   (Principal Executive and Financial Officer)
    
Date:April 29, 2020By:/s/ Leonard E. Travis
   Leonard E. Travis
   Chief Accounting Officer
   (on behalf of the registrant and
as principal accounting officer)


41