CHENIERE ENERGY, INC. Information Regarding Forward-Looking Statements This quarterly report contains certain statements that are, or may be deemed to be, "forward-looking statements" within the meaning of Section 27A of the Securities Act of 1933, as amended (the "Securities Act"), and Section 21E of the Securities Exchange Act of 1934, as amended (the "Exchange Act"). All statements, other than statements of historical or present facts or conditions, included herein or incorporated herein by reference are "forward-looking statements." Included among "forward-looking statements" are, among other things: •statements that we expect to commence or complete construction of our proposed LNG terminals, liquefaction facilities, pipeline facilities or other projects, or any expansions or portions thereof, by certain dates, or at all; •statements regarding future levels of domestic and international natural gas production, supply or consumption or future levels of LNG imports into or exports fromNorth America and other countries worldwide or purchases of natural gas, regardless of the source of such information, or the transportation or other infrastructure or demand for and prices related to natural gas, LNG or other hydrocarbon products; •statements regarding any financing transactions or arrangements, or our ability to enter into such transactions; •statements regarding the amount and timing of share repurchases; •statements relating to the construction of our Trains and pipelines, including statements concerning the engagement of any EPC contractor or other contractor and the anticipated terms and provisions of any agreement with any EPC or other contractor, and anticipated costs related thereto; •statements regarding any SPA or other agreement to be entered into or performed substantially in the future, including any revenues anticipated to be received and the anticipated timing thereof, and statements regarding the amounts of total LNG regasification, natural gas liquefaction or storage capacities that are, or may become, subject to contracts; •statements regarding counterparties to our commercial contracts, construction contracts and other contracts; •statements regarding our planned development and construction of additional Trains or pipelines, including the financing of such Trains or pipelines; •statements that our Trains, when completed, will have certain characteristics, including amounts of liquefaction capacities; •statements regarding our business strategy, our strengths, our business and operation plans or any other plans, forecasts, projections, or objectives, including anticipated revenues, capital expenditures, maintenance and operating costs and cash flows, any or all of which are subject to change; •statements regarding legislative, governmental, regulatory, administrative or other public body actions, approvals, requirements, permits, applications, filings, investigations, proceedings or decisions; •statements regarding our anticipated LNG and natural gas marketing activities; •statements regarding the outbreak of COVID-19 and its impact on our business and operating results, including any customers not taking delivery of LNG cargoes, the ongoing credit worthiness of our contractual counterparties, any disruptions in our operations or construction of our Trains and the health and safety of our employees, and on our customers, the global economy and the demand for LNG; and •any other statements that relate to non-historical or future information. All of these types of statements, other than statements of historical or present facts or conditions, are forward-looking statements. In some cases, forward-looking statements can be identified by terminology such as "may," "will," "could," "should," "achieve," "anticipate," "believe," "contemplate," "continue," "estimate," "expect," "intend," "plan," "potential," "predict," "project," "pursue," "target," the negative of such terms or other comparable terminology. The forward-looking statements contained in this quarterly report are largely based on our expectations, which reflect estimates and assumptions made by our management. These estimates and assumptions reflect our best judgment based on currently known market conditions and other factors. Although we believe that such estimates are reasonable, they are inherently uncertain and involve 29 -------------------------------------------------------------------------------- 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 theSEC , including those discussed under "Risk Factors" in our annual report on Form 10-K for the fiscal year endedDecember 31, 2020 . All forward-looking statements attributable to us or persons acting on our behalf are expressly qualified in their entirety by these risk factors. These forward-looking statements speak only as of the date made, and other than as required by law, we undertake no obligation to update or revise any forward-looking statement or provide reasons why actual results may differ, whether as a result of new information, future events or otherwise.
Introduction
The following discussion and analysis presents management's view of our business, financial condition and overall performance and should be read in conjunction with our Consolidated Financial Statements and the accompanying notes. This information is intended to provide investors with an understanding of our past performance, current financial condition and outlook for the future. Our discussion and analysis includes the following subjects: • Overview of Business • Overview of Significant Events • Results of Operations • Liquidity and Capital Resources • Off-Balance Sheet Arrangements • Summary of Critical Accounting Estimates • Recent Accounting Standards
Overview of Business
Cheniere, aDelaware corporation, is aHouston -based energy infrastructure company primarily engaged in LNG-related businesses. We provide clean, secure and affordable LNG to integrated energy companies, utilities and energy trading companies around the world. We aspire to conduct our business in a safe and responsible manner, delivering a reliable, competitive and integrated source of LNG to our customers. We own and operate theSabine Pass LNG terminal inLouisiana , one of the largest LNG production facilities in the world, through our ownership interest in and management agreements withCheniere Partners , which is a publicly traded limited partnership that we created in 2007. As ofJune 30, 2021 , we owned 100% of the general partner interest and 48.6% of the limited partner interest inCheniere Partners . We also own and operate the Corpus Christi LNG terminal inTexas , which is wholly owned by us.Cheniere Partners owns theSabine Pass LNG terminal located inCameron Parish, Louisiana , which has natural gas liquefaction facilities consisting of five operational natural gas liquefaction Trains and one additional Train under construction that is expected to be substantially completed in the first half of 2022, for a total production capacity of approximately 30 mtpa of LNG (the "SPL Project "). TheSabine Pass LNG terminal also has operational regasification facilities that include five LNG storage tanks with aggregate capacity of approximately 17 Bcfe, two existing marine berths and one under construction that can each accommodate vessels with nominal capacity of up to 266,000 cubic meters and vaporizers with regasification capacity of approximately 4 Bcf/d.Cheniere Partners also owns a 94-mile pipeline through its subsidiary, CTPL, that interconnects theSabine Pass LNG terminal with a number of large interstate pipelines. We also own the Corpus Christi LNG terminal nearCorpus Christi, Texas , and currently operate three Trains for a total production capacity of approximately 15 mtpa of LNG. Additionally, we operate a 23-mile natural gas supply pipeline that interconnects the Corpus Christi LNG terminal with several interstate and intrastate natural gas pipelines (the "Corpus Christi Pipeline" and together with the Trains, the "CCL Project ") through our subsidiaries CCL and CCP, respectively, as part of theCCH Group .The CCL Project also contains three LNG storage tanks with aggregate capacity of approximately 10 Bcfe and two marine berths that can each accommodate vessels with nominal capacity of up to 266,000 cubic meters. 30 -------------------------------------------------------------------------------- We have contracted approximately 85% of the total production capacity from theSPL Project and theCCL Project (collectively, the "Liquefaction Projects") on a term basis, with approximately 17 years of weighted average remaining life as ofJune 30, 2021 . This includes volumes contracted under SPAs in which the customers are required to pay a fixed fee with respect to the contracted volumes irrespective of their election to cancel or suspend deliveries of LNG cargoes, as well as a portion of volumes contracted under integrated production marketing ("IPM") gas supply agreements. Additionally, separate from theCCH Group , we are developing an expansion of the Corpus Christi LNG terminal adjacent to theCCL Project ("Corpus Christi Stage 3") through our subsidiary CCL Stage III for up to seven midscale Trains with an expected total production capacity of approximately 10 mtpa of LNG. We received approval fromFERC inNovember 2019 to site, construct and operate the expansion project. CCL Stage III has entered into various IPM gas supply agreements. We remain focused on operational excellence and customer satisfaction. Increasing demand for LNG has allowed us to expand our liquefaction infrastructure in a financially disciplined manner. We have increased available liquefaction capacity at our Liquefaction Projects as a result of debottlenecking and other optimization projects. We hold significant land positions at both theSabine Pass LNG terminal and the Corpus Christi LNG terminal which provide opportunity for further liquefaction capacity expansion. The development of these sites or other projects, including infrastructure projects in support of natural gas supply and LNG demand, will require, among other things, acceptable commercial and financing arrangements before we can make a final investment decision ("FID"). Additionally, we are committed to the responsible and proactive management of our most important environmental, social and governance ("ESG") impacts, risks and opportunities. We published our 2020 Corporate Responsibility ("CR") report, which details our strategy and progress on ESG issues, as well as our efforts on integrating climate considerations into our business strategy and taking a leadership position on increased environmental transparency, including conducting a climate scenario analysis and our plan to provide LNG customers with Cargo Emission Tags. Our CR report is available at cheniere.com/IMPACT.
Overview of Significant Events
Our significant events sinceJanuary 1, 2021 and through the filing date of this Form 10-Q include the following: Strategic •InJuly 2021 , CCL Stage III entered into an IPM gas supply agreement withTourmaline Oil Marketing Corp. to purchase 140,000 MMBtu per day of natural gas at a price based on the Platts Japan Korea Marker ("JKM"), for a term of approximately 15 years beginning in early 2023. •OnJuly 1, 2021 , the board of directors of the Company (the "Board") appointed Mses.Patricia K. Collawn andLorraine Mitchelmore to serve as members of the Board.Ms. Collawn was appointed to the Audit Committee and the Compensation Committee of the Board, andMs. Mitchelmore was appointed to the Audit Committee and theGovernance and Nominating Committee of the Board. •Our subsidiaries entered into SPAs with multiple counterparties for portfolio volumes aggregating approximately 12 million tonnes of LNG to be delivered between 2021 and 2032. Operational •As ofJuly 31, 2021 , approximately 1,675 cumulative LNG cargoes totaling approximately 115 million tonnes of LNG have been produced, loaded and exported from the Liquefaction Projects. •OnMarch 26, 2021 , substantial completion of Train 3 of theCCL Project was achieved. Financial •We completed the following financing transactions: •During 2021, SPL entered into a series of note purchase agreements for the sale of approximately$347 million aggregate principal amount of Senior Secured Notes due 2037 (the "2037 SPL Private Placement Senior Secured Notes") on a private placement basis. The 2037 SPL Private Placement Senior Secured Notes are expected to be issued in the second half of 2021, subject to customary closing conditions, and the net proceeds will be used to strategically refinance a portion of SPL's outstanding 6.25% SPL Senior Secured 31 -------------------------------------------------------------------------------- Notes due 2022 and pay related fees, costs and expenses. The 2037 SPL Private Placement Senior Secured Notes will be fully amortizing, with a weighted average life of over 10 years. •InMarch 2021 ,Cheniere Partners issued an aggregate principal amount of approximately$1.5 billion of 4.000% Senior Notes due 2031 (the "2031 CQP Senior Notes"). The net proceeds of the 2031 CQP Senior Notes, along with cash on hand, were used to refinance the 5.250% Senior Notes due 2025 (the "2025 CQP Senior Notes") and to pay fees and expenses in connection with the refinancing. •During the six months endedJune 30, 2021 , in line with our previously announced capital allocation priorities, we fully repaid the$624 million of total outstanding indebtedness under Cheniere's term loan facility ("Cheniere Term Loan Facility") and Cheniere's 4.875% convertible notes dueMay 2021 ("2021 Cheniere Convertible Notes") with$500 million of available cash and the remainder from borrowings under the Cheniere Revolving Credit Facility. •InJanuary 2021 , the term commenced onCheniere Marketing International LLP's 25 year SPA withCPC Corporation ,Taiwan . •InFebruary 2021 , Fitch Ratings ("Fitch") changed the outlook of SPL's senior secured notes rating to positive from stable and the outlook ofCheniere Partners' long-term issuer default rating and senior unsecured notes rating to positive from stable. •InApril 2021 ,S&P Global Ratings changed the outlook ofCheniere and Cheniere Partners' ratings to positive from negative.
Results of Operations
The following charts summarize the total revenues and total LNG volumes loaded from our Liquefaction Projects (including both operational and commissioning volumes) during the six months endedJune 30, 2021 and 2020:
[[Image Removed: lng-20210630_g3.jpg]][[Image Removed: lng-20210630_g4.jpg]]
The following table summarizes the volumes of operational and commissioning LNG cargoes that were loaded from the Liquefaction Projects, which were recognized on our Consolidated Financial Statements during the three and six months endedJune 30, 2021 : Three Months Ended June 30, 2021 Six Months Ended June 30, 2021 (in TBtu) Operational Commissioning Operational Commissioning Volumes loaded during the current period 499 - 947
28
Volumes loaded during the prior period but
recognized during the current period 32 6 26 3
Less: volumes loaded during the current
period and in transit at the end of the
period (23) - (23) -
Total volumes recognized in the current
period 508 6 950 31
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Net income attributable to common stockholders
Three Months Ended June 30, Six Months Ended June 30,
(in millions, except per share data) 2021 2020 Change 2021 2020 Change
Net income (loss) attributable to common
stockholders $ (329) $ 197
(1.30) 0.78 (2.08) 0.25 2.27 (2.02)
Net income (loss) per share attributable
to common stockholders-diluted (1.30) 0.78 (2.08) 0.25 2.26 (2.01)
Net income attributable to common stockholders decreased by $526 million and
$508 million during the three and six months ended June 30, 2021 , respectively,
from the comparable periods in 2020, primarily as a result of a $472 million and
$886 million increase in derivative-related after-tax losses attributable to
common stockholders for the three and six months ended June 30, 2021 ,
respectively. The derivative-related losses in the three and six months ended
June 30, 2021 were mainly the result of $674 million and $748 million ,
respectively, of pre-tax derivative losses, primarily on our commodity
derivatives as a result of unfavorable shifts in international forward commodity
curves. Additionally, during the three months ended June 30, 2021 compared to
the comparable period in 2020, margins declined due to the non-recurrence,
during the three months ended June 30, 2021 , of accelerated revenues recognized
from LNG cargoes for which customers notified us that they would not take
delivery, which were partially offset by increased revenue on increased volume
of LNG delivered. During the six months ended June 30, 2021 , the decrease in net
income attributable to common stockholders due to losses in derivatives was
partially offset by increased commodity margins per MMBtu on volumes delivered,
due to both increased revenue per MMBtu and volumes delivered, as well as higher
than normal contributions from LNG and natural gas portfolio optimization
activities due to significant volatility in LNG and natural gas markets during
the six months ended June 30, 2021 . This was partially offset by the
non-recurrence, during the six months ended June 30, 2021 , of accelerated
revenues recognized from LNG cargoes for which customers notified us that they
would not take delivery.
We enter into derivative instruments to manage our exposure to (1) changing
interest rates, (2) commodity-related marketing and price risks, including those
associated with our IPM transactions, and (3) foreign exchange volatility.
Derivative instruments are reported at fair value on our Consolidated Financial
Statements. In some cases, the underlying transactions being economically hedged
are accounted for under the accrual method of accounting, whereby revenues and
expenses are recognized only upon delivery, receipt or realization of the
underlying transaction. Because the recognition of derivative instruments at
fair value has the effect of recognizing gains or losses relating to future
period exposure, use of derivative instruments may increase the volatility of
our results of operations based on changes in market pricing, counterparty
credit risk and other relevant factors.
Revenues
Three Months Ended June 30, Six Months Ended June 30,
(in millions) 2021 2020 Change 2021 2020 Change
LNG revenues $ 2,913 $ 2,295 $ 618 $ 5,912 $ 4,863 $ 1,049
Regasification revenues 67 68 (1) 134 135 (1)
Other revenues 37 39 (2) 61 113 (52)
Total revenues $ 3,017 $ 2,402 $ 615 $ 6,107 $ 5,111 $ 996
Total revenues increased during the three and six months ended June 30, 2021
from the comparable periods in 2020, primarily as a result of increased revenues
per MMBtu and higher volume of LNG delivered between the periods due to the
non-recurrence of notification by our customers to not take delivery of
scheduled LNG during the three and six months ended June 30, 2021 . Revenues per
MMBtu of LNG was higher due to improved market prices recognized by our
integrated marketing function and as a result of variable fees that are received
in addition to fixed fees when the customers take delivery of the cargo as
opposed to exercising their contractual right to not take delivery. During the
three and six months ended June 30, 2020 , we recognized $708 million and
$761 million , respectively, in LNG revenues associated with LNG cargoes for
which customers notified us that they would not take delivery, of which
$458 million would have been recognized subsequent to June 30, 2020 had the
cargoes been lifted pursuant to the delivery schedules with the customers. LNG
revenues during the three months ended June 30, 2020 and six months ended June
30, 2021 excluded $53 million and $38 million , respectively, that would have
otherwise been recognized during the quarter if the cargoes were lifted pursuant
to the delivery schedules with the
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customers. We did not have revenues associated with LNG cargoes for which
customers notified us that they would not take delivery during the three and six
months ended June 30, 2021 .
Prior to substantial completion of a Train, amounts received from the sale of
commissioning cargoes from that Train are offset against LNG terminal
construction-in-process, because these amounts are earned or loaded during the
testing phase for the construction of that Train. During the three and six
months ended June 30, 2021 , we realized offsets to LNG terminal costs of $36
million and $227 million , corresponding to 6 and 31 TBtu, respectively, that
were related to the sale of commissioning cargoes from the Liquefaction
Projects. We did not realize any offsets to LNG terminal costs during the three
and six months ended June 30, 2020 .
Also included in LNG revenues are sales of certain unutilized natural gas
procured for the liquefaction process and gains and losses from derivative
instruments, which include the realized value associated with a portion of
derivative instruments that settle through physical delivery. We recognized
revenues (offsets to revenues) of $(340) million and $61 million during the
three months ended June 30, 2021 and 2020, respectively, and $(276) million and
$273 million during the six months ended June 30, 2021 and 2020, respectively,
related to these transactions.
We expect our LNG revenues to increase in the future with Train 3 of the
The following table presents the components of LNG revenues and the corresponding LNG volumes sold:
Three Months Ended June 30, Six Months Ended June 30,
2021 2020 2021 2020
LNG revenues (in millions): LNG from the Liquefaction Projects sold under third party long-term agreements (1)
$ 2,482 $ 1,244 $ 4,801 $ 3,151 LNG from the Liquefaction Projects sold by our integrated marketing function under short-term agreements 683 150 1,202 475 LNG procured from third parties 88 132 185 203
LNG revenues associated with cargoes not delivered per customer notification (2)
- 708 - 761
Other revenues and net derivative gains (losses) (340) 61 (276) 273
Total LNG revenues $ 2,913 $
2,295
Volumes delivered as LNG revenues (in TBtu): LNG from the Liquefaction Projects sold under third party long-term agreements (1)
403 253 784 619
LNG from the Liquefaction Projects sold by our
integrated marketing function under short-term
agreements 105 52 166 145
LNG procured from third parties 14 34 28 48
Total volumes delivered as LNG revenues 522 339 978 812
(1) Long-term agreements include agreements with an initial tenure of 12
months or more.
(2) LNG revenues include revenues with no corresponding volumes due to revenues
attributable to LNG cargoes for which customers notified us that they would not
take delivery.
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Operating costs and expenses
Three Months Ended June 30, Six Months Ended June 30,
(in millions) 2021 2020 Change 2021 2020 Change
Cost of sales $ 2,154 $ 803 $ 1,351 $ 3,540 $ 1,527 $ 2,013
Operating and maintenance expense 385 355 30 707 671 36
Development expense 2 1 1 3 5 (2)
Selling, general and
administrative expense 73 73 - 154 154 -
Depreciation and amortization
expense 258 233 25 494 466 28
Impairment expense and loss (gain)
on disposal of assets (1) - (1) (1) 5 (6)
Total operating costs and expenses $ 2,871 $ 1,465 $ 1,406 $ 4,897 $ 2,828 $ 2,069
Our total operating costs and expenses increased during the three and six months
ended June 30, 2021 from the comparable periods in 2020, primarily as a result
of increased cost of sales.
Cost of sales includes costs incurred directly for the production and delivery
of LNG from the Liquefaction Projects, to the extent those costs are not
utilized for the commissioning process. Cost of sales increased during the three
and six months ended June 30, 2021 from the comparable 2020 periods, primarily
due to increased pricing of natural gas feedstock and increased volume of LNG
produced, as well as unfavorable changes in our commodity derivatives to secure
natural gas feedstock for the Liquefaction Projects driven by unfavorable shifts
in international forward commodity curves. Partially offsetting these increases
were decreases in net costs associated with the sale of certain unutilized
natural gas procured for the liquefaction process and a portion of derivative
instruments that settle through physical delivery. Cost of sales also includes
port and canal fees, variable transportation and storage costs, net of margins
from the sale of natural gas procured for the liquefaction process and other
costs to convert natural gas into LNG.
We expect our operating costs and expenses to generally increase in the future
upon Train 6 of the SPL Project achieving substantial completion, although we
expect certain costs will not proportionally increase with the number of
operational Trains as cost efficiencies will be realized.
Other expense (income)
Three Months Ended June 30, Six Months Ended June 30,
(in millions) 2021 2020 Change 2021 2020 Change
Interest expense, net of
capitalized interest $ 368 $ 407 $ (39) $ 724 $ 819 $ (95)
Loss on modification or
extinguishment of debt 4 43 (39) 59 44 15
Interest rate derivative loss, net 2 25 (23) 1 233 (232)
Other income, net (4) (5) 1 (10) (14) 4
Total other expense $ 370 $ 470 $ (100) $ 774 $ 1,082 $ (308)
Interest expense, net of capitalized interest, decreased during the three and
six months ended June 30, 2021 from the comparable 2020 periods as a result of
lower interest costs as a result of refinancing higher cost debt. During the
three months ended June 30, 2021 and 2020, we incurred $401 million and $469
million of total interest cost, respectively, of which we capitalized $33
million and $62 million , respectively, which was primarily related to interest
costs incurred for the construction of the Liquefaction Projects. During the six
months ended June 30, 2021 and 2020, we incurred $818 million and $940 million
of total interest cost, respectively, of which we capitalized $94 million and
$121 million , respectively, which was primarily related to interest costs
incurred for the construction of the Liquefaction Projects.
Loss on modification or extinguishment of debt decreased during the three months
ended June 30, 2021 and increased during the six months ended June 30, 2021 from
the respective comparable periods in 2020. During the three months ended June
30, 2021 , we recognized $4 million of debt extinguishment costs relating to the
termination of the Cheniere Term Loan Facility and in the six months ended June
30, 2021 , we further recognized $54 million of debt extinguishment costs
relating to the payment of early redemption fees and premiums and write off of
unamortized debt issuance costs with the redemption of the 2025 CQP Senior
Notes. Loss on modification or extinguishment of debt recognized in 2020 was
primarily attributable to $43 million of debt extinguishment costs relating to
the payment of early redemption fees and write off of unamortized debt premiums
and issuance costs associated with the 5.625% Senior Secured Notes due 2021
("2021 SPL Senior Notes").
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Interest rate derivative loss, net decreased during the three and six months
ended June 30, 2021 compared to the comparable 2020 periods, primarily due to a
favorable shift in the long-term forward LIBOR curve between the periods and the
settlement of certain outstanding derivatives in August 2020 .
Income tax provision (benefit)
Three Months Ended June 30, Six Months Ended June 30,
(in millions) 2021 2020 Change 2021 2020 Change
Income (loss) before income taxes
and non-controlling interest $ (224) $ 467 $ (691) $ 436 $ 1,201 $ (765)
Income tax provision (benefit) (93) 63 (156) (4) 194 (198)
Effective tax rate 41.5 % 13.5 % (0.9) % 16.2 %
The effective tax rates for the three and six months ended June 30, 2021 were
41.5% and (0.9)%, respectively, and do not bear a customary relationship to
statutory income tax rates due to a combination of factors including income
allocated to non-controlling interest that is not taxable to Cheniere and a
$58 million discrete tax benefit related to releasing a portion of our valuation
allowance caused by a change in tax law allowing for indefinite Louisiana net
operating loss ("NOL") carryover. The effective tax rates for the three and six
months ended June 30, 2020 were 13.5% and 16.2%, respectively, which were lower
than the 21% federal statutory tax rate primarily due to income allocated to
non-controlling interest that is not taxable to Cheniere, partially offset by a
$38 million discrete tax expense related to an internal restructuring. Our
effective tax rate may continue to experience volatility prospectively due to
variability in our pre-tax and taxable earnings and the proportion of such
earnings attributable to non-controlling interests.
Net income attributable to non-controlling interest
Three Months Ended June 30, Six Months Ended June 30,
(in millions) 2021 2020 Change 2021 2020 Change
Net income attributable to
non-controlling interest $ 198 $ 207 $ (9) $ 376 $ 435 $ (59)
Net income attributable to non-controlling interest decreased during the three
and six months ended June 30, 2021 from the three and six months ended June 30,
2020 primarily due to a decrease in consolidated net income recognized by
Cheniere Partners , which decreased from $406 million in the three months ended
June 30, 2020 to $395 million in the three months ended June 30, 2021 and
decreased from $841 million in the six months ended June 30, 2020 to $742
million in the six months ended June 30, 2021 .
Liquidity and Capital Resources
Although results are consolidated for financial reporting, SPL,Cheniere Partners ,CCH Group and Cheniere operate with independent capital structures. Our capital requirements include capital and investment expenditures, repayment of long-term debt and repurchase of our shares. We expect the cash needs for at least the next twelve months will be met for each of these independent capital structures as follows: •SPL through operating cash flows, project debt and borrowings and equity contributions fromCheniere Partners ; •Cheniere Partners through operating cash flows from SPLNG, SPL and CTPL, debt or equity offerings and borrowings; •CCH Group through operating cash flows from CCL and CCP, project debt and borrowings and equity contributions from Cheniere; and •Cheniere through existing unrestricted cash, debt and equity offerings by us or our subsidiaries, operating cash flows, borrowings, services fees from our subsidiaries and distributions from our investment inCheniere Partners . 36 --------------------------------------------------------------------------------
The following table provides a summary of our liquidity position at
June 30, December 31,
2021 2020
Cash and cash equivalents (1) $ 1,806 $ 1,628
Restricted cash designated for the following purposes:
SPL Project 65 97
CCL Project 122 70
Other 237 282Available commitments under the following credit facilities:
787
CQP Credit Facilities executed in 2019 ("2019 CQP Credit Facilities")
750 750
907 767
$1.25 billion Cheniere Revolving Credit Facility ("Cheniere
Revolving Credit Facility") 1,116 1,126
Cheniere Term Loan Facility - 372
(1) Amounts presented include balances held by our consolidated variable
interest entity ("VIE"),
Liquefaction Facilities
The SPL Project is one of the largest LNG production facilities in the world. ThroughCheniere Partners , we are currently operating five Trains and two marine berths at theSPL Project , and are constructing one additional Train that is expected to be substantially completed in the first half of 2022, and a third marine berth. We have achieved substantial completion of the first five Trains of theSPL Project and commenced commercial operating activities for each Train at various times starting inMay 2016 . The following table summarizes the project completion and construction status of Train 6 of theSPL Project as ofJune 30, 2021 : SPL Train 6 Overall project completion percentage 89.6% Completion percentage of: Engineering 99.7% Procurement 99.9% Subcontract work 70.2% Construction 79.3% Date of expected substantial completion 1H 2022 TheDOE has issued three orders authorizing the export of domestically produced LNG by vessel from theSabine Pass LNG terminal to FTA countries and non-FTA countries throughDecember 31, 2050 , up to a combined total equivalent of approximately 1,509.3 Bcf/yr (approximately 30 mtpa) of natural gas. InDecember 2020 , theDOE announced a new policy in which it would no longer issue short-term export authorizations separately from long-term authorizations. Accordingly, theDOE amended each of SPL's long-term authorizations to include short-term export authority, and vacated the short-term orders. An application was filed inSeptember 2019 seeking authorization to make additional exports from theSPL Project to FTA countries for a 25-year term and to non-FTA countries for a 20-year term in an amount up to the equivalent of approximately 153 Bcf/yr of natural gas, for a totalSPL Project export capacity of approximately 1,662 Bcf/yr. The terms of the authorizations are requested to commence on the date of first commercial export from theSPL Project of the volumes contemplated in the application. InApril 2020 , theDOE issued an order authorizing SPL to export to FTA countries related to this application, for which the term was subsequently extended throughDecember 31, 2050 , but has not yet issued an order authorizing SPL to export to non-FTA countries for the corresponding LNG volume. A corresponding application for 37 --------------------------------------------------------------------------------
authorization to increase the total LNG production capacity of the
Customers
SPL has entered into fixed price long-term SPAs generally with terms of 20 years (plus extension rights) and with a weighted average remaining contract length of approximately 17 years (plus extension rights) for Trains 1 through 6 of theSPL Project . Under these SPAs, the customers will purchase LNG from SPL for a price consisting of a fixed fee per MMBtu of LNG (a portion of which is subject to annual adjustment for inflation) plus a variable fee per MMBtu of LNG generally equal to approximately 115% ofHenry Hub . The customers may elect to cancel or suspend deliveries of LNG cargoes, with advance notice as governed by each respective SPA, in which case the customers would still be required to pay the fixed fee with respect to the contracted volumes that are not delivered as a result of such cancellation or suspension. We refer to the fee component that is applicable regardless of a cancellation or suspension of LNG cargo deliveries under the SPAs as the fixed fee component of the price under SPL's SPAs. We refer to the fee component that is applicable only in connection with LNG cargo deliveries as the variable fee component of the price under SPL's SPAs. The variable fees under SPL's SPAs were generally sized at the time of entry into each SPA with the intent to cover the costs of gas purchases and transportation and liquefaction fuel to produce the LNG to be sold under each such SPA. The SPAs and contracted volumes to be made available under the SPAs are not tied to a specific Train; however, the term of each SPA generally commences upon the date of first commercial delivery of a specified Train. In aggregate, the annual fixed fee portion to be paid by the third-party SPA customers is approximately$2.9 billion for Trains 1 through 5. After giving effect to an SPA that Cheniere has committed to provide to SPL and upon the date of first commercial delivery of Train 6, the annual fixed fee portion to be paid by the third-party SPA customers is expected to increase to at least$3.3 billion . In addition, Cheniere Marketing has an agreement with SPL to purchase, at Cheniere Marketing's option, any LNG produced by SPL in excess of that required for other customers. See Marketing section for additional information regarding agreements entered into by Cheniere Marketing.
Natural Gas Transportation, Storage and Supply
To ensure SPL is able to transport adequate natural gas feedstock to theSabine Pass LNG terminal, it has entered into transportation precedent and other agreements to secure firm pipeline transportation capacity with CTPL and third-party pipeline companies. SPL has entered into firm storage services agreements with third parties to assist in managing variability in natural gas needs for theSPL Project . SPL has also entered into enabling agreements and long-term natural gas supply contracts with third parties in order to secure natural gas feedstock for theSPL Project . As ofJune 30, 2021 , SPL had secured up to approximately 5,025 TBtu of natural gas feedstock through long-term and short-term natural gas supply contracts with remaining terms that range up to 10 years, a portion of which is subject to conditions precedent.
Construction
SPL entered into lump sum turnkey contracts withBechtel Oil, Gas and Chemicals, Inc. ("Bechtel") for the engineering, procurement and construction of Trains 1 through 6 of theSPL Project , under which Bechtel charges a lump sum for all work performed and generally bears project cost, schedule and performance risks unless certain specified events occur, in which case Bechtel may cause SPL to enter into a change order, or SPL agrees with Bechtel to a change order. The total contract price of the EPC contract for Train 6 of theSPL Project is approximately$2.5 billion , including estimated costs for the third marine berth that is currently under construction. As ofJune 30, 2021 , we have incurred$2.1 billion under this contract. Regasification Facilities TheSabine Pass LNG terminal has operational regasification capacity of approximately 4 Bcf/d and aggregate LNG storage capacity of approximately 17 Bcfe. Approximately 2 Bcf/d of the regasification capacity at theSabine Pass LNG terminal has been reserved under two long-term third-party TUAs, under which SPLNG's customers are required to pay fixed monthly fees, whether or not they use the LNG terminal. Each ofTotal Gas & Power North America, Inc. ("Total") and 38 --------------------------------------------------------------------------------Chevron U.S.A. Inc. ("Chevron") has reserved approximately 1 Bcf/d of regasification capacity and is obligated to make monthly capacity payments to SPLNG aggregating approximately$125 million annually, prior to inflation adjustments, for 20 years that commenced in 2009. Total S.A. has guaranteed Total's obligations under its TUA up to$2.5 billion , subject to certain exceptions, and Chevron Corporation has guaranteedChevron's obligations under its TUA up to 80% of the fees payable byChevron . The remaining approximately 2 Bcf/d of capacity has been reserved under a TUA by SPL. SPL is obligated to make monthly capacity payments to SPLNG aggregating approximately$250 million annually, prior to inflation adjustments, continuing until at leastMay 2036 . SPL entered into a partial TUA assignment agreement with Total, whereby upon substantial completion of Train 5 of theSPL Project , SPL gained access to substantially all of Total's capacity and other services provided under Total's TUA with SPLNG. This agreement provides SPL with additional berthing and storage capacity at theSabine Pass LNG terminal that may be used to provide increased flexibility in managing LNG cargo loading and unloading activity, permit SPL to more flexibly manage its LNG storage capacity and accommodate the development of Train 6. Notwithstanding any arrangements between Total and SPL, payments required to be made by Total to SPLNG will continue to be made by Total to SPLNG in accordance with its TUA. During each of the three months endedJune 30, 2021 and 2020, SPL recorded$33 million , and during each of the six months endedJune 30, 2021 and 2020, SPL recorded$65 million , as operating and maintenance expense under this partial TUA assignment agreement.
Under each of these TUAs, SPLNG is entitled to retain 2% of the LNG delivered to
the
Capital Resources
We currently expect that SPL's capital resources requirements with respect to theSPL Project will be financed through project debt and borrowings, cash flows under the SPAs and equity contributions fromCheniere Partners . We believe that with the net proceeds of borrowings, available commitments under the 2020 SPL Working Capital Facility and 2019 CQP Credit Facilities, cash flows from operations and equity contributions fromCheniere Partners , SPL will have adequate financial resources available to meet its currently anticipated capital, operating and debt service requirements with respect to Trains 1 through 6 of theSPL Project . Additionally, SPLNG generates cash flows from the TUAs, as discussed above. The following table provides a summary of our capital resources from borrowings and available commitments for theSabine Pass LNG terminal, excluding equity contributions to our subsidiaries and cash flows from operations (as described in Sources and Uses of Cash), atJune 30, 2021 andDecember 31, 2020 (in millions): June 30, December 31, 2021 2020 Senior notes (1)$ 17,750 $ 17,750 Letters of credit issued (2) 396 413 Available commitments under credit facilities (2) 1,554 1,537 Total capital resources from borrowings and available commitments (3)$ 19,700 $ 19,700 (1) Includes SPL's 6.25% Senior Secured Notes due 2022, 5.625% Senior Secured Notes due 2023, 5.75% Senior Secured Notes due 2024, 5.625% Senior Secured Notes due 2025, 5.875% Senior Secured Notes due 2026 (the "2026 SPL Senior Notes"), 5.00% Senior Secured Notes due 2027 (the "2027 SPL Senior Notes"), 4.200% Senior Secured Notes due 2028 (the "2028 SPL Senior Notes"), 4.500% Senior Secured Notes due 2030 (the "2030 SPL Senior Notes") and 5.00% Senior Secured Notes due 2037 (the "2037 SPL Senior Notes") (collectively, the "SPL Senior Notes"), as well as the 2025 CQP Senior Notes,$1.1 billion of 5.625% Senior Notes due 2026 (the "2026 CQP Senior Notes"), the 4.500% Senior Notes due 2029 (the "2029 CQP Senior Notes") and the 2031 CQP Senior Notes (collectively, the "CQP Senior Notes"). (2) Consists of 2020 SPL Working Capital Facility and 2019 CQP Credit Facilities. (3) Does not include equity contributions that may be available from Cheniere's borrowings and available cash and cash equivalents. 39 --------------------------------------------------------------------------------
SPL Senior Notes
The SPL Senior Notes are governed by a common indenture (the "SPL Indenture") and the terms of the 2037 SPL Senior Notes are governed by a separate indenture (the "2037 SPL Senior Notes Indenture"). Both the SPL Indenture and the 2037 SPL Senior Notes Indenture contain terms and events of default and certain covenants that, among other things, limit SPL's ability and the ability of SPL's restricted subsidiaries to incur additional indebtedness or issue preferred stock, make certain investments or pay dividends or distributions on capital stock or subordinated indebtedness or purchase, redeem or retire capital stock, sell or transfer assets, including capital stock of SPL's restricted subsidiaries, restrict dividends or other payments by restricted subsidiaries, incur liens, enter into transactions with affiliates, dissolve, liquidate, consolidate, merge, sell or lease all or substantially all of SPL's assets and enter into certain LNG sales contracts. Subject to permitted liens, the SPL Senior Notes are secured on a pari passu first-priority basis by a security interest in all of the membership interests in SPL and substantially all of SPL's assets. SPL may not make any distributions until, among other requirements, deposits are made into debt service reserve accounts as required and a debt service coverage ratio test of 1.25:1.00 is satisfied. At any time prior to three months before the respective dates of maturity for each series of the SPL Senior Notes (except for the 2026 SPL Senior Notes, 2027 SPL Senior Notes, 2028 SPL Senior Notes, 2030 SPL Senior Notes and 2037 SPL Senior Notes, in which case the time period is six months before the respective dates of maturity), SPL may redeem all or part of such series of the SPL Senior Notes at a redemption price equal to the 'make-whole' price (except for the 2037 SPL Senior Notes, in which case the redemption price is equal to the "optional redemption" price) set forth in the respective indentures governing the SPL Senior Notes, plus accrued and unpaid interest, if any, to the date of redemption. SPL may also, at any time within three months of the respective maturity dates for each series of the SPL Senior Notes (except for the 2026 SPL Senior Notes, 2027 SPL Senior Notes, 2028 SPL Senior Notes, 2030 SPL Senior Notes and 2037 SPL Senior Notes, in which case the time period is within six months of the respective dates of maturity), redeem all or part of such series of the SPL Senior Notes at a redemption price equal to 100% of the principal amount of such series of the SPL Senior Notes to be redeemed, plus accrued and unpaid interest, if any, to the date of redemption. SPL may incur additional indebtedness in the future, including by issuing additional notes, and such indebtedness could be at higher interest rates and have different maturity dates and more restrictive covenants than the current outstanding indebtedness of SPL, including the SPL Senior Notes and the 2020 SPL Working Capital Facility. Semi-annual principal payments for the 2037 SPL Senior Notes are due onMarch 15 andSeptember 15 of each year beginningSeptember 15, 2025 and are fully amortizing according to a fixed sculpted amortization schedule. During 2021, SPL entered into a series of note purchase agreements for the sale of approximately$347 million aggregate principal amount of the 2037 SPL Private Placement Senior Secured Notes on a private placement basis. The 2037 SPL Private Placement Senior Secured Notes are expected to be issued in the second half of 2021, subject to customary closing conditions, and the net proceeds will be used to strategically refinance a portion of SPL's outstanding 6.25% SPL Senior Secured Notes due 2022 and pay related fees, costs and expenses. The 2037 SPL Private Placement Senior Secured Notes will be fully amortizing, with a weighted average life of over 10 years.
2020 SPL Working Capital Facility
InMarch 2020 , SPL entered into the 2020 SPL Working Capital Facility with aggregate commitments of$1.2 billion , which replaced the$1.2 billion Amended and Restated SPL Working Capital Facility (the "2015SPL Working Capital Facility"). The 2020 SPL Working Capital Facility is intended to be used for loans to SPL, swing line loans to SPL and the issuance of letters of credit on behalf of SPL, primarily for (1) the refinancing of the 2015SPL Working Capital Facility, (2) fees and expenses related to the 2020SPL Working Capital Facility, (3) SPL and its future subsidiaries' gas purchase obligations and (4) SPL and certain of its future subsidiaries' general corporate purposes. SPL may, from time to time, request increases in the commitments under the 2020 SPL Working Capital Facility of up to$800 million . As ofJune 30, 2021 andDecember 31, 2020 , SPL had$804 million and$787 million of available commitments and$396 million and$413 million aggregate amount of issued letters of credit, respectively. As of bothJune 30, 2021 andDecember 31, 2020 , SPL had no outstanding borrowings under the 2020 SPL Working Capital Facility.
The 2020 SPL Working Capital Facility matures on
40
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The 2020 SPL Working Capital Facility contains customary conditions precedent
for extensions of credit, as well as customary affirmative and negative
covenants. SPL is restricted from making certain distributions under agreements
governing its indebtedness generally until, among other requirements,
satisfaction of a 12-month forward-looking and backward-looking 1.25:1.00 debt
service reserve ratio test. The obligations of SPL under the 2020 SPL Working
Capital Facility are secured by substantially all of the assets of SPL as well
as a pledge of all of the membership interests in SPL and certain future
subsidiaries of SPL on a pari passu basis by a first priority lien with the SPL
Senior Notes.
Cheniere Partners
CQP Senior Notes
The CQP Senior Notes are jointly and severally guaranteed by each of Cheniere
Partners' subsidiaries other than SPL and, subject to certain conditions
governing its guarantee, Sabine Pass LP (each a "Guarantor" and collectively,
the "CQP Guarantors"). The CQP Senior Notes are governed by the same base
indenture (the "CQP Base Indenture"). The 2026 CQP Senior Notes are further
governed by the Second Supplemental Indenture, the 2029 CQP Senior Notes are
further governed by the Third Supplemental Indenture and the 2031 CQP Senior
Notes are further governed by the Fifth Supplemental Indenture. The indentures
governing the CQP Senior Notes contain terms and events of default and certain
covenants that, among other things, limit the ability of Cheniere Partners and
the CQP Guarantors to incur liens and sell assets, enter into transactions with
affiliates, enter into sale-leaseback transactions and consolidate, merge or
sell, lease or otherwise dispose of all or substantially all of the applicable
entity's properties or assets.
At any time prior to October 1, 2021 for the 2026 CQP Senior Notes, October 1,
2024 for the 2029 CQP Senior Notes and March 1, 2026 for the 2031 CQP Senior
Notes, Cheniere Partners may redeem all or a part of the applicable CQP Senior
Notes at a redemption price equal to 100% of the aggregate principal amount of
the CQP Senior Notes redeemed, plus the "applicable premium" set forth in the
respective indentures governing the CQP Senior Notes, plus accrued and unpaid
interest, if any, to the date of redemption. In addition, at any time prior to
October 1, 2021 for the 2026 CQP Senior Notes, October 1, 2024 for the 2029 CQP
Senior Notes and March 1, 2024 for the 2031 CQP Senior Notes, Cheniere Partners
may redeem up to 35% of the aggregate principal amount of the CQP Senior Notes
with an amount of cash not greater than the net cash proceeds from certain
equity offerings at a redemption price equal to 105.625% of the aggregate
principal amount of the 2026 CQP Senior Notes, 104.5% of the aggregate principal
amount of the 2029 CQP Senior Notes and 104.000% of the aggregate principal
amount of the 2031 CQP Senior Notes redeemed, plus accrued and unpaid interest,
if any, to the date of redemption. Cheniere Partners also may at any time on or
after October 1, 2021 through the maturity date of October 1, 2026 for the 2026
CQP Senior Notes, October 1, 2024 through the maturity date of October 1, 2029
for the 2029 CQP Senior Notes and March 1, 2026 through the maturity date of
March 1, 2031 for the 2031 CQP Senior Notes, redeem the CQP Senior Notes, in
whole or in part, at the redemption prices set forth in the respective
indentures governing the CQP Senior Notes.
The CQP Senior Notes are Cheniere Partners' senior obligations, ranking equally
in right of payment with Cheniere Partners' other existing and future
unsubordinated debt and senior to any of its future subordinated debt. In the
event that the aggregate amount of Cheniere Partners' secured indebtedness and
the secured indebtedness of the CQP Guarantors (other than the CQP Senior
Notes or any other series of notes issued under the CQP Base Indenture)
outstanding at any one time exceeds the greater of (1) $1.5 billion and
(2) 10% of net tangible assets, the CQP Senior Notes will be secured to the same
extent as such obligations under the 2019 CQP Credit Facilities. The obligations
under the 2019 CQP Credit Facilities are secured on a first-priority basis
(subject to permitted encumbrances) with liens on substantially all the existing
and future tangible and intangible assets and rights of Cheniere Partners and
the CQP Guarantors and equity interests in the CQP Guarantors (except, in each
case, for certain excluded properties set forth in the 2019 CQP Credit
Facilities). The liens securing the CQP Senior Notes, if applicable, will be
shared equally and ratably (subject to permitted liens) with the holders of
other senior secured obligations, which include the 2019 CQP Credit Facilities
obligations and any future additional senior secured debt obligations.
2019 CQP Credit Facilities
Cheniere Partners has a$750 million revolving credit facility under the 2019 CQP Credit Facilities. Borrowings under the 2019 CQP Credit Facilities will be used to fund the development and construction of Train 6 of theSPL Project and for general corporate purposes, subject to a sublimit, and the 2019 CQP Credit Facilities are also available for the issuance of letters of credit. As of bothJune 30, 2021 andDecember 31, 2020 ,Cheniere Partners had$750 million of available commitments and no letters of credit issued or loans outstanding under the 2019 CQP Credit Facilities. 41 -------------------------------------------------------------------------------- The 2019 CQP Credit Facilities mature onMay 29, 2024 . Any outstanding balance may be repaid, in whole or in part, at any time without premium or penalty, except for interest rate breakage costs. The 2019 CQP Credit Facilities contain conditions precedent for extensions of credit, as well as customary affirmative and negative covenants, and limitCheniere Partners' ability to make restricted payments, including distributions, to once per fiscal quarter and one true-up per fiscal quarter as long as certain conditions are satisfied. The 2019 CQP Credit Facilities are unconditionally guaranteed and secured by a first priority lien (subject to permitted encumbrances) on substantially all ofCheniere Partners' and the CQP Guarantors' existing and future tangible and intangible assets and rights and equity interests in the CQP Guarantors (except, in each case, for certain excluded properties set forth in the 2019 CQP Credit Facilities).Corpus Christi LNG Terminal Liquefaction Facilities
We are currently operating three Trains and two marine berths at the
Separate from theCCH Group , we are also developing Corpus Christi Stage 3 through our subsidiary CCL Stage III, adjacent to theCCL Project . We received approval fromFERC inNovember 2019 to site, construct and operate seven midscale Trains with an expected total production capacity of approximately 10 mtpa of LNG. The following orders have been issued by theDOE authorizing the export of domestically produced LNG by vessel from the Corpus Christi LNG terminal: •CCL Project-FTA countries and non-FTA countries throughDecember 31, 2050 , up to a combined total of the equivalent of 767 Bcf/yr (approximately 15 mtpa) of natural gas. •Corpus Christi Stage 3-FTA countries and non-FTA countries throughDecember 31, 2050 in an amount equivalent to 582.14 Bcf/yr (approximately 11 mtpa) of natural gas. InDecember 2020 , theDOE announced a new policy in which it would no longer issue short-term export authorizations separately from long-term authorizations. Accordingly, theDOE amended each of CCL's long-term authorizations to include short-term export authority, and vacated the short-term orders. An application was filed inSeptember 2019 to authorize additional exports from theCCL 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 totalCCL Project export of 875.16 Bcf/yr. The terms of the authorizations are requested to commence on the date of first commercial export from theCCL Project of the volumes contemplated in the application. InApril 2020 , theDOE issued an order authorizing CCL to export to FTA countries related to this application, for which the term was subsequently extended throughDecember 31, 2050 , but has not yet issued an order authorizing CCL to export to non-FTA countries for the corresponding LNG volume. A corresponding application for authorization to increase the total LNG production capacity of theCCL Project from the currently authorized level to approximately 875.16 Bcf/yr was also submitted to theFERC and is currently pending.
Customers
CCL has entered into fixed price long-term SPAs generally with terms of 20 years (plus extension rights) and with a weighted average remaining contract length of approximately 18 years (plus extension rights) for Trains 1 through 3 of theCCL Project . Under these SPAs, the customers will purchase LNG from CCL on a free on board ("FOB") basis for a price consisting of a fixed fee per MMBtu of LNG (a portion of which is subject to annual adjustment for inflation) plus a variable fee per MMBtu of LNG equal to approximately 115% ofHenry 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 42 -------------------------------------------------------------------------------- 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 theCCL Project was sized at the time of entry into each SPA with the intent to cover the costs of gas purchases and transportation and liquefaction fuel to produce the LNG to be sold under each such SPA. The SPAs and contracted volumes to be made available under the SPAs are not tied to a specific Train; however, the term of each SPA generally commences upon the date of first commercial delivery for the applicable Train, as specified in each SPA. In aggregate, the minimum annual fixed fee portion to be paid by the third-party SPA customers is approximately$1.8 billion for Trains 1 through 3. In addition, Cheniere Marketing has agreements with CCL to purchase: (1) approximately 15 TBtu per annum of LNG with a term through 2043, (2) any LNG produced by CCL in excess of that required for other customers at Cheniere Marketing's option and (3) approximately 44 TBtu of LNG with a maximum term up to 2026 associated with the IPM gas supply agreement betweenCCL and EOG Resources, Inc. See Marketing section for additional information regarding agreements entered into by Cheniere Marketing.
Natural Gas Transportation, Storage and Supply
To ensure CCL is able to transport adequate natural gas feedstock to the Corpus Christi LNG terminal, it has entered into transportation precedent agreements to secure firm pipeline transportation capacity with CCP and certain third-party pipeline companies. CCL has entered into a firm storage services agreement with a third party to assist in managing variability in natural gas needs for theCCL 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 theCCL Project . As ofJune 30, 2021 , CCL had secured up to approximately 2,980 TBtu of natural gas feedstock through long-term natural gas supply contracts with remaining terms that range up to 10 years, a portion of which is subject to the achievement of certain project milestones and other conditions precedent. CCL Stage III has also entered into long-term natural gas supply contracts with third parties, and anticipates continuing to enter into such agreements, in order to secure natural gas feedstock for Corpus Christi Stage 3. As ofJune 30, 2021 , CCL Stage III had secured up to approximately 2,361 TBtu of natural gas feedstock through long-term natural gas supply contracts with remaining terms that range up to approximately 15 years, which is subject to the achievement of certain project milestones and other conditions precedent. A portion of the natural gas feedstock transactions for CCL and CCL Stage III are IPM transactions, in which the natural gas producers are paid based on a global gas market price less a fixed liquefaction fee and certain costs incurred by us. Construction
CCL entered into separate lump sum turnkey contracts with Bechtel for the
engineering, procurement and construction of Trains 1 through 3 of the
Final Investment Decision for Corpus Christi Stage 3
FID for Corpus Christi Stage 3 will be subject to, among other things, entering into an EPC contract, obtaining additional commercial support for the project and securing the necessary financing arrangements.
Pipeline Facilities
InNovember 2019 , theFERC authorized CCP to construct and operate the pipeline for Corpus Christi Stage 3. The pipeline will be designed to transport 1.5 Bcf/d of natural gas feedstock required by Corpus Christi Stage 3 from the existing regional natural gas pipeline grid. 43 --------------------------------------------------------------------------------
Capital Resources
The following table provides a summary of the capital resources of theCCH Group from borrowings and available commitments for theCCL Project , excluding equity contributions from Cheniere, atJune 30, 2021 andDecember 31, 2020 (in millions): June 30, December 31, 2021 2020 Senior notes (1)$ 7,721 $ 7,721 Credit facilities outstanding balance (2) 2,627 2,767 Letters of credit issued (2) 293 293 Available commitments under credit facilities (2) 907 767 Total capital resources from borrowings and available commitments (3)$ 11,548 $ 11,548 (1) Includes CCH's 7.000% Senior Secured Notes due 2024, 5.875% Senior Secured Notes due 2025, 5.125% Senior Secured Notes due 2027, 3.700% Senior Secured Notes due 2029, 4.80% Senior Secured Notes due 2039, 3.925% Senior Secured Notes due 2039 and 3.52% CCH Senior Secured Notes (collectively, the "CCH Senior Notes"). (2) Includes CCH's amended and restated credit facility (the "CCH Credit Facility") and the CCH Working Capital Facility. (3) Does not include equity contributions that may be available from Cheniere's borrowings and available cash and cash equivalents.
CCH Senior Notes
The CCH Senior Notes are jointly and severally guaranteed by CCH's subsidiaries, CCL,CCP and Corpus Christi Pipeline GP, LLC (each a "CCH Guarantor" and collectively, the "CCH Guarantors"). The indentures governing the CCH Senior Notes contain customary terms and events of default and certain covenants that, among other things, limit CCH's ability and the ability of CCH's restricted subsidiaries to: incur additional indebtedness or issue preferred stock; make certain investments or pay dividends or distributions on membership interests or subordinated indebtedness or purchase, redeem or retire membership interests; sell or transfer assets, including membership or partnership interests of CCH's restricted subsidiaries; restrict dividends or other payments by restricted subsidiaries to CCH or any of CCH's restricted subsidiaries; incur liens; enter into transactions with affiliates; dissolve, liquidate, consolidate, merge, sell or lease all or substantially all of the properties or assets of CCH and its restricted subsidiaries taken as a whole; or permit any CCH Guarantor to dissolve, liquidate, consolidate, merge, sell or lease all or substantially all of its properties and assets. The covenants included in the respective indentures that govern the CCH Senior Notes are subject to a number of important limitations and exceptions. The CCH Senior Notes are CCH's senior secured obligations, ranking senior in right of payment to any and all of CCH's future indebtedness that is subordinated to the CCH Senior Notes and equal in right of payment with CCH's other existing and future indebtedness that is senior and secured by the same collateral securing the CCH Senior Notes. The CCH Senior Notes are secured by a first-priority security interest in substantially all of CCH's and the CCH Guarantors' assets. At any time prior to six months before the respective dates of maturity for each of the CCH Senior Notes, CCH may redeem all or part of such series of the CCH Senior Notes at a redemption price equal to the "make-whole" price set forth in the appropriate indenture, plus accrued and unpaid interest, if any, to the date of redemption. At any time within six months of the respective dates of maturity for each of the CCH Senior Notes, CCH may redeem all or part of such series of the CCH Senior Notes, in whole or in part, at a redemption price equal to 100% of the principal amount of the CCH Senior Notes to be redeemed, plus accrued and unpaid interest, if any, to the date of redemption.
CCH Credit Facility
CCH has total commitments under the CCH Credit Facility of$6.1 billion . The obligations of CCH under the CCH Credit Facility are secured by a first priority lien on substantially all of the assets of CCH and its subsidiaries and by a pledge by CCH HoldCo I of its limited liability company interests in CCH. As of bothJune 30, 2021 andDecember 31, 2020 , CCH had no available commitments and$2.6 billion of loans outstanding under the CCH Credit Facility. 44 -------------------------------------------------------------------------------- The CCH Credit Facility matures onJune 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 theCCL 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 theCCL Project to become operational is entitled to terminate its SPA for failure to achieve the date of first commercial delivery for that agreement. Scheduled repayments will be based upon a 19-year tailored amortization, commencing the first full quarter after the completion of Trains 1 through 3 and designed to achieve a minimum projected fixed debt service coverage ratio of 1.50:1. Under the CCH Credit Facility, CCH is required to hedge not less than 65% of the variable interest rate exposure of its senior secured debt. CCH is restricted from making certain distributions under agreements governing its indebtedness generally until, among other requirements, the completion of the construction of Trains 1 through 3 of theCCL 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
CCH has total commitments under the CCH Working Capital Facility of$1.2 billion . The CCH Working Capital Facility is intended to be used for loans to CCH ("CCH Working Capital Loans") and the issuance of letters of credit on behalf of CCH for certain working capital requirements related to developing and operating theCCL Project and for related business purposes. Loans under the CCH Working Capital Facility are guaranteed by the CCH Guarantors. CCH may, from time to time, request increases in the commitments under theCCH 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 ofJune 30, 2021 andDecember 31, 2020 , CCH had$907 million and$767 million of available commitments and zero and$140 million of loans outstanding under the CCH Working Capital Facility, respectively. CCH had$293 million aggregate amount of issued letters of credit under the CCH Working Capital Facility as of bothJune 30, 2021 andDecember 31, 2020 . The CCH Working Capital Facility matures onJune 29, 2023 , and CCH may prepay the CCH Working Capital Loans and loans made in connection with a draw upon any letter of credit ("CCH LC Loans") at any time without premium or penalty upon three business days' notice and may re-borrow at any time. CCH LC Loans have a term of up to one year. CCH is required to reduce the aggregate outstanding principal amount of all CCH Working Capital Loans to zero for a period of five consecutive business days at least once each year. The CCH Working Capital Facility contains conditions precedent for extensions of credit, as well as customary affirmative and negative covenants. The obligations of CCH under the CCH Working Capital Facility are secured by substantially all of the assets of CCH and the CCH Guarantors as well as all of the membership interests in CCH and each of the CCH Guarantors on a pari passu basis with the CCH Senior Notes and the CCH Credit Facility.
Cheniere
Senior Notes
We have an aggregate principal amount of$2.0 billion of the 4.625% Senior Secured Notes due 2028 (the "2028 Cheniere Senior Notes"), the proceeds of which were used to prepay a portion of the outstanding indebtedness under the Cheniere Term Loan Facility and to pay related fees and expenses. The associated indentures ("Cheniere Indenture") contain customary terms and events of default and certain covenants that, among other things, limit our ability to create liens or other encumbrances, enter into sale-leaseback transactions and merge or consolidate with other entities or sell all or substantially all of our assets. The Cheniere Indenture covenants are subject to a number of important limitations and exceptions. At any time prior toOctober 15, 2023 , we may redeem all or a part of the 2028 Cheniere Senior Notes at a redemption price equal to 100% of the aggregate principal amount thereof, plus the "applicable premium" and accrued and unpaid interest, if any, to but not including the date of redemption. We also may, at any time prior toOctober 15, 2023 , redeem up to 40% of the aggregate principal amount of the 2028 Cheniere Senior Notes with an amount of cash not greater than the net cash proceeds from certain equity offerings at a redemption price equal to 104.625% of the aggregate principal amount of the notes being redeemed, plus accrued and unpaid interest, if any, to but not including, the date of redemption. At any time on or afterOctober 15, 2023 through the maturity date ofOctober 15, 2028 , we may redeem all or part of the 2028 Cheniere Senior Notes at the redemption prices described in the Cheniere Indenture. 45 -------------------------------------------------------------------------------- The 2028 Cheniere Senior Notes are our general senior obligations and rank senior in right of payment to all of our future obligations that are, by their terms, expressly subordinated in right of payment to the 2028 Cheniere Senior Notes and equally in right of payment with all of our other existing and future unsubordinated indebtedness. The 2028 Cheniere Senior Notes became unsecured inJune 2021 concurrent with the repayment of all outstanding obligations under the Cheniere Term Loan Facility and may, in certain instances become secured in the future in connection with the incurrence of additional secured indebtedness by us. When required, the 2028 Cheniere Senior Notes will be secured on a first-priority basis by a lien on substantially all of our assets and equity interests in our direct subsidiaries (other than certain excluded subsidiaries), which liens rank pari passu with the liens securing the Cheniere Revolving Credit Facility. As ofJune 30, 2021 , the 2028 Cheniere Senior Notes are not guaranteed by any of our subsidiaries. In the future, the 2028 Cheniere Senior Notes will be guaranteed by our subsidiaries who guarantee our other material indebtedness. Convertible Notes We have$625 million aggregate principal amount of 4.25% Convertible Senior Notes due 2045 (the "2045 Cheniere Convertible Senior Notes"). We have the right, at our option, at any time afterMarch 15, 2020 , to redeem all or any part of the 2045 Cheniere Convertible Senior Notes at a redemption price equal to the accreted amount of the 2045 Cheniere Convertible Senior Notes to be redeemed, plus accrued and unpaid interest, if any, to such redemption date. Prior toDecember 15, 2044 , the 2045 Cheniere Convertible Senior Notes are convertible only under certain circumstances as specified in the indenture; thereafter, holders may convert their notes regardless of these circumstances. The conversion rate will initially equal 7.2265 shares of our common stock per$1,000 principal amount of the 2045 Cheniere Convertible Senior Notes, which corresponds to an initial conversion price of approximately$138.38 per share of our common stock (subject to adjustment upon the occurrence of certain specified events).
We have the option to satisfy the conversion obligation for the 2045 Cheniere Convertible Senior Notes with cash, common stock or a combination thereof.
Cheniere Revolving Credit Facility
We have total commitments under the Cheniere Revolving Credit Facility of$1.25 billion . The Cheniere Revolving Credit Facility is intended to fund, through loans and letters of credit, equity capital contributions to CCH HoldCo II and its subsidiaries for the development of theCCL Project and, provided that certain conditions are met, for general corporate purposes. As of bothJune 30, 2021 andDecember 31, 2020 , we had$1.1 billion of available commitments and$134 million and zero, respectively, of loans outstanding under the Cheniere Revolving Credit Facility. We had zero and$124 million aggregate amount of issued letters of credit under the Cheniere Revolving Credit Facility as ofJune 30, 2021 andDecember 31, 2020 , respectively. InJuly 2021 , the outstanding balance under the Cheniere Revolving Credit Facility was repaid. The Cheniere Revolving Credit Facility matures onDecember 13, 2022 and contains representations, warranties and affirmative and negative covenants customary for companies like us with lenders of the type participating in the Cheniere Revolving Credit Facility that limit our ability to make restricted payments, including distributions, unless certain conditions are satisfied, as well as limitations on indebtedness, guarantees, hedging, liens, investments and affiliate transactions. Under the Cheniere Revolving Credit Facility, we are required to ensure that the sum of our unrestricted cash and the amount of undrawn commitments under the Cheniere Revolving Credit Facility is at least equal to the lesser of (1) 20% of the commitments under the Cheniere Revolving Credit Facility and (2)$200 million (the "Liquidity Covenant"). However, at any time that the aggregate principal amount of outstanding loans plus drawn and unreimbursed letters of credit under the Cheniere Revolving Credit Facility is greater than 30% of aggregate commitments under the Cheniere Revolving Credit Facility, the Liquidity Covenant will not apply and we will instead be governed by a quarterly non-consolidated leverage ratio covenant not to exceed 5.75:1.00 (the "Springing Leverage Covenant").
The Cheniere Revolving Credit Facility is secured by a first priority security interest (subject to permitted liens and other customary exceptions) in substantially all of our assets, including our interests in our direct subsidiaries (excluding CCH HoldCo II and certain other subsidiaries).
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--------------------------------------------------------------------------------Cash Receipts from Subsidiaries
Our ownership interest in theSabine Pass LNG terminal is held throughCheniere Partners . As ofJune 30, 2021 , we owned a 48.6% limited partner interest inCheniere Partners in the form of 239.9 million common units. We also own 100% of the general partner interest and the incentive distribution rights inCheniere Partners . We are eligible to receive quarterly equity distributions fromCheniere Partners related to our ownership interests and our incentive distribution rights.
We also receive fees for providing management services to some of our
subsidiaries. We received
Share Repurchase Program
OnJune 3, 2019 , we announced that our Board authorized a 3-year,$1.0 billion share repurchase program. During the six months endedJune 30, 2020 , we repurchased an aggregate of 2.9 million shares of our common stock for$155 million , for a weighted average price per share of$53.88 . We did not make any repurchases during the three months endedJune 30, 2021 and 2020 or the six months endedJune 30, 2021 . As ofJune 30, 2021 , we had$596 million of the share repurchase program available. Under the share repurchase program, repurchases can be made from time to time using a variety of methods, which may include open market purchases, privately negotiated transactions or otherwise, all in accordance with the rules of theSEC and other applicable legal requirements. The timing and amount of any shares of our common stock that are repurchased under the share repurchase program will be determined by our management based on market conditions and other factors. The share repurchase program does not obligate us to acquire any particular amount of common stock, and may be modified, suspended or discontinued at any time or from time to time at our discretion. Marketing We market and sell LNG produced by the Liquefaction Projects that is not required for other customers through our integrated marketing function. We have, and continue to develop, a portfolio of long-, medium- and short-term SPAs to transport and unload commercial LNG cargoes to locations worldwide. These volumes are expected to be primarily sourced by LNG produced by the Liquefaction Projects but supplemented by volumes procured from other locations worldwide, as needed. As ofJune 30, 2021 , we have sold or have options to sell approximately 5,002 TBtu of LNG to be delivered to customers between 2021 and 2045, including volume from an SPA Cheniere Marketing has committed to provide to SPL. The cargoes have been sold either on a FOB basis (delivered to the customer at theSabine Pass LNG terminal or the Corpus Christi LNG terminal, as applicable) or a delivered at terminal ("DAT") basis (delivered to the customer at their specified LNG receiving terminal). We have chartered LNG vessels to be utilized for cargoes sold on a DAT basis. Cheniere Marketing has uncommitted trade finance facilities with available credit of$240 million as ofJune 30, 2021 , primarily to be used for the purchase and sale of LNG for ultimate resale in the course of its operations. The finance facilities are intended to be used for advances, guarantees or the issuance of letters of credit or standby letters of credit on behalf of Cheniere Marketing. As ofJune 30, 2021 andDecember 31, 2020 , Cheniere Marketing had$5 million and$34 million , respectively, in standby letters of credit and guarantees outstanding under the finance facilities. As ofJune 30, 2021 andDecember 31, 2020 , there were$30 million and zero loans outstanding, respectively, under the finance facilities. Cheniere Marketing pays interest or fees on utilized commitments. Cheniere Marketing also has an uncommitted letter of credit facility with no available credit as ofJune 30, 2021 , for the issuance of letters of credit in the course of its operations. As ofJune 30, 2021 , Cheniere Marketing had$35 million of letters of credit issued under the facility. Cheniere Marketing pays fees on utilized commitments.
Corporate and Other Activities
We are required to maintain corporate and general and administrative functions
to serve our business activities described above. The development of our sites
or other projects, including infrastructure projects in support of natural gas
supply and LNG demand, will require, among other things, acceptable commercial
and financing arrangements before we make an FID.
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We have made an equity investment in Midship Holdings, LLC ("Midship Holdings "),
which manages the business and affairs of Midship Pipeline Company, LLC ("the
Midship Pipeline"). Midship Pipeline operates the Midship Project with current
capacity of up to 1.1 million Dekatherms per day that connects new gas
production in the Anadarko Basin to Gulf Coast markets, including markets
serving the Liquefaction Projects. The Midship Project was placed in service in
April 2020 .
Restrictive Debt Covenants
As of
LIBOR
The use of LIBOR is expected to be phased out byJune 2023 . It is currently unclear whether LIBOR will be utilized beyond that date or whether it will be replaced by a particular rate. We intend to continue working with our lenders and counterparties to pursue any amendments to our debt and derivative agreements that are currently subject to LIBOR following LIBOR cessation and will continue to monitor, assess and plan for the phase out of LIBOR. Sources and Uses of Cash The following table summarizes the sources and uses of our cash, cash equivalents and restricted cash for the six months endedJune 30, 2021 and 2020 (in millions). The table presents capital expenditures on a cash basis; therefore, these amounts differ from the amounts of capital expenditures, including accruals, which are referred to elsewhere in this report. Additional discussion of these items follows the table. Six
Months Ended
2021 2020
Sources of cash, cash equivalents and restricted cash: Net cash provided by operating activities
$ 1,373 $ 1,028 Proceeds from sale of fixed assets 68 - Proceeds from issuances of debt 2,184 2,597 Other 8 - $
3,633
$ (440) $ (983) Investment in equity method investment - (100) Repayments of debt (2,603) (2,380) Debt issuance and other financing costs (20) (59) Debt modification or extinguishment costs (41) (40) Distributions to non-controlling interest (322) (310) Payments related to tax withholdings for share-based compensation (43) (41) Repurchase of common stock - (155) Other (11) (7) (3,480) (4,075) Net increase (decrease) in cash, cash equivalents and restricted cash $ 153$ (450) Operating Cash Flows Our operating cash net inflows during the six months endedJune 30, 2021 and 2020 were$1,373 million and$1,028 million , respectively. The$345 million increase in operating cash inflows in 2021 compared to 2020 was primarily related to increased cash receipts from the sale of LNG cargoes due to higher revenue per MMBtu and higher volume of LNG delivered, as well as from higher than normal contributions from LNG and natural gas portfolio optimization activities due to significant volatility in LNG and natural gas markets during the six months endedJune 30, 2021 . Partially offsetting these operating cash inflows were higher operating cash outflows due to higher natural gas feedstock costs and payment of paid-in-kind interest on our convertible notes. 48 --------------------------------------------------------------------------------
Proceeds from Sale of Fixed Assets
During the six months ended
Proceeds from Issuance of Debt, Repayments of Debt, Debt Issuance and Other Financing Costs and Debt Modification or Extinguishment Costs
During the six months endedJune 30, 2021 ,Cheniere Partners issued an aggregate principal amount of$1.5 billion of the 2031 CQP Senior Notes and incurred$20 million of debt issuance costs related to this issuance. The proceeds from this issuance, together with cash on hand, were used to redeem all of the outstanding 2025 CQP Senior Notes, andCheniere Partners paid$40 million of debt extinguishment costs, mainly related to premiums associated with this redemption. Additionally, in line with our previously announced capital allocation priorities, we repaid$624 million of total outstanding indebtedness under the Cheniere Term Loan Facility and 2021 Cheniere Convertible Notes with$500 million of available cash and the remainder from borrowings under the Cheniere Revolving Credit Facility. We paid$2 million of debt extinguishment costs as a result of the repayment of the 2021 Cheniere Convertible Notes. Additionally, net repayments of$100 million were made on our credit facilities during the six months endedJune 30, 2021 . During the six months endedJune 30, 2020 , SPL issued an aggregate principal amount of$2.0 billion of the 2030 SPL Senior Notes, which along with cash on hand was used to redeem all of the outstanding 2021 SPL Senior Notes. During the six months endedJune 30, 2020 , borrowings of$0.6 billion under our credit facilities were used to redeem the 11% Convertible Senior Secured Notes due 2025 (the "2025 CCH HoldCo II Convertible Senior Notes"), to fund our working capital requirements or for general corporate purposes. We incurred$59 million of debt issuance costs primarily related to up-front fees paid upon the closing of the 2020 SPL Working Capital Facility and 2030 SPL Senior Notes and premiums paid for partially redeeming the 2025 CCH HoldCo II Convertible Senior Notes. We incurred$40 million of debt extinguishment costs primarily related to the redemption of the 2021 SPL Senior Notes.
Property, Plant and Equipment
Cash outflows for property, plant and equipment were primarily for the construction costs for the Liquefaction Projects. These costs are capitalized as construction-in-process until achievement of substantial completion.
Distributions to Non-controlling Interest
We own a 48.6% limited partner interest inCheniere Partners , with the remaining non-controlling interest held by The Blackstone Group Inc., Brookfield Asset Management Inc. and the public, to whomCheniere Partners paid distributions during the three and six months endedJune 30, 2021 and 2020.
Repurchase of Common Stock
During the six months endedJune 30, 2020 , we paid$155 million to repurchase approximately 2.9 million shares of our common stock under the share repurchase program. There were no share repurchases paid in cash during the six months endedJune 30, 2021 .
Off-Balance Sheet Arrangements
As of
Summary of Critical Accounting Estimates
The preparation of Consolidated Financial Statements in conformity with GAAP requires management to make certain estimates and assumptions that affect the amounts reported in the Consolidated Financial Statements and the accompanying notes. There have been no significant changes to our critical accounting estimates from those disclosed in our annual report on Form 10-K for the fiscal year endedDecember 31, 2020 . 49 --------------------------------------------------------------------------------
Recent Accounting Standards
For a summary of recently issued accounting standards, see Note 1-Nature of Operations and Basis of Presentation of our Notes to Consolidated Financial Statements.
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