01—Abstract
Summary
Summary of the 10-K filed February 26, 2010. Cited figures are marked; the original filing is the authoritative source.
Cheniere Energy Partners, L.P.
(CQP) is a Delaware limited partnership that owns and operates the Sabine Pass LNG receiving terminal in western Cameron Parish, Louisiana. Construction was substantially completed in the third quarter of 2009, and as of December 31, 2009 the terminal had reached full operability with approximately 4.0 Bcf/d of regasification capacity and 16.9 Bcf of LNG storage, within budget. Substantially all of its anticipated 2010 revenue depends on this single asset, and the terminal's entire capacity is reserved under three long-term terminal use agreements (TUAs): Total and Chevron each pay about $125 milliona per year for 20 years, and Cheniere Marketing, an affiliate, pays about $250 million per year through at least September 30, 2028.
For 2009, the partnership reported total revenue of $416.8 millionb and net income of $186.9 million, compared with a net loss of $78.3 million in 2008. Cash provided by operating activities was $234.3 million, and distributions to owners totaled $280.7 million. Cheniere Marketing's TUA payments and Cheniere's guarantee carry the most credit risk: the filing describes Cheniere Marketing as having limited capital and no credit rating, and Cheniere as rated CCC+ by Standard & Poor's.
Long-term debt of $2.2 billionc, consisting of Senior Notes, is secured by the terminal, and the filing says Sabine Pass LNG may distribute cash to the partnership only after meeting restrictive indenture conditions, including a 2:1 fixed charge coverage test. The quarterly distribution on common units is $0.425 per unit, unchanged across 2008 and 2009, and a distribution for the quarter ended December 31, 2009 was paid on February 12, 2010.
Subordinated units will convert to common units only after the subordination period ends, which the filing expects no sooner than the distribution for the quarter ending March 31, 2012. Cheniere owns about 90.6%d of the partnership, and the partnership has no employees, relying on its general partner and Cheniere affiliates for personnel and services.
02—Key points
Key Highlights
- Sabine Pass LNG receiving terminal reached full operability in 2009 with approximately 4.0 Bcf/d of regasification capacity and 16.9 Bcf of LNG storage, and construction was completed within budget.
- All regasification capacity is contracted under three TUAs: Total (about 1.0 Bcf/d, about $125 million per year), Chevron (about 1.0 Bcf/d, about $125 million per year), and Cheniere Marketing (about 2.0 Bcf/d, about $250 million per year through at least September 30, 2028).
- 2009 total revenue was $416.8 million, up from $15.0 million in 2008, and net income was $186.9 million versus a net loss of $78.3 million in 2008.
- Cash provided by operating activities was $234.3 million in 2009, and distributions to owners were $280.7 million.
- Long-term debt was $2.2 billion as of December 31, 2009, mainly the $550.0 million 7¼% Senior Secured Notes due 2013 and $1,633.0 million of 7½% Senior Secured Notes due 2016, net of discount.
- Cheniere Marketing has limited capital and no credit rating, and its parent Cheniere is rated CCC+ by Standard & Poor's, which the filing identifies as the main counterparty risk to distributions.
- The quarterly common unit distribution was $0.425 in every quarter of 2008 and 2009, and subordinated units will not convert to common units until the subordination period ends, which the filing expects no sooner than the distribution for the quarter ending March 31, 2012.
03—One dollar
04—Financials
Financial Highlights
Figures from 10-KFY2009filed February 26, 2010Financial Statements
| Revenue | $416.79M |
| R&D Expenses | $0 |
| Operating Expenses | $88.87M |
| Operating Income | $327.92M |
| Interest Expense | $147.20M |
| Net Income | $186.91M |
| EPS (Basic) | $1.13 |
05—Questions
Frequently Asked Questions
How much of the terminal's capacity is contracted, and who are the customers?
The entire approximately 4.0 Bcf/d of regasification capacity is contracted under three 20-year firm commitment TUAs. Total and Chevron each reserved about 1.0 Bcf/d, and Cheniere Marketing, an affiliate of Cheniere, reserved the remaining 2.0 Bcf/d. Each customer must make its full capacity reservation payments whether or not it uses the reserved capacity.
What is the main credit risk for unitholders?
The filing identifies Cheniere Marketing, which has limited capital, no credit rating, and a TUA obligation of about $250 million per year. Cheniere guarantees those obligations and holds a CCC+ rating from Standard & Poor's. The filing states that Cheniere Marketing and Cheniere have a higher risk of being financially unable to perform than Total or Chevron, and says that if Cheniere Marketing cannot pay, Sabine Pass LNG may be unable to make the restricted distributions the partnership depends on.
What restricts the partnership's ability to pay distributions?
The partnership depends on distributions from Sabine Pass LNG, which the Sabine Pass Indenture restricts. Sabine Pass LNG must fund an operating account, interest and debt service reserves, and satisfy a 2:1 fixed charge coverage ratio test before distributing. The filing estimates that consolidated cash flow must exceed about $375 million to meet that test. In 2009, Sabine Pass LNG distributed $295.7 million to the partnership.
How did the partnership perform financially in 2009 compared with 2008?
Revenue rose from $15.0 million in 2008 to $416.8 million in 2009, mainly from TUA revenue beginning with Cheniere Marketing in October 2008 and with Total and Chevron in April and July 2009. Net income was $186.9 million, compared with a net loss of $78.3 million in 2008. The filing attributes the change mainly to these TUA revenues, partly offset by higher depreciation, operating costs and interest expense.
When might the subordinated units convert to common units?
The subordinated units, all held by Cheniere subsidiaries, will convert one-for-one into common units when the subordination period ends. The period can end after a distribution for any quarter ending on or after June 30, 2010, once the partnership meets the distribution and surplus tests in its partnership agreement. The filing says that based on current projections, the earliest this may occur is after the distribution for the quarter ending March 31, 2012.
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