01—Abstract
Summary
Summary of the 10-K filed March 3, 2011. Cited figures are marked; the original filing is the authoritative source.
Cheniere Energy Partners, L.P.
(NYSE Amex: CQP) reports results for 2010 from its Sabine Pass LNG terminal in western Cameron Parish, Louisiana. Net income was $107.6 milliona in 2010, down from $186.9 million in 2009, primarily because the Cheniere Marketing TUA was assigned to Cheniere Energy Investments effective July 1, 2010. Revenues were $399.3 million (2009: $416.8 million), and total expenses were $118.5 million.
Cash and cash equivalents fell to $53.3 millionb at year-end, and total partners' deficit was $536.0 million. Operating cash flow decreased $130.2 million year over year, and the company did not pay distributions on subordinated units for quarters ending on or after June 30, 2010, though the common unit distribution remained $0.425 per quarter. The terminal's approximately 4.0 Bcf/d of regasification capacity is fully contracted under three 20-year TUAs: Total and Chevron each pay about $125 million per year, and Cheniere Investments pays about $250 million per year through at least September 30, 2028.
The company is pursuing a liquefaction project to convert the terminal to bi-directional service, with up to four LNG Trains of about 4.0 mtpa each, potential export as early as 2015, and eight non-binding MOUs covering up to 9.8 mtpa. The FERC application was filed in January 2011, and estimated construction costs are approximately $400c per metric ton before financing costs. Final investment decision has not been made.
Investors should note the company's dependence on Sabine Pass LNG distributions, which are restricted by the Sabine Pass Indenture (including a 2:1 fixed charge coverage test), and on Cheniere Marketing and Cheniere, which the filing describes as having a high risk of being financially unable to perform under the VCRA. Senior Notes totaling $2,215.5 milliond are due in 2013 ($550.0 million) and 2016 ($1,665.5 million). Cheniere owns about 89% of the partnership's equity securities.
02—Key points
Key Highlights
- Net income of $107.6 million in 2010, down from $186.9 million in 2009, mainly due to the July 1, 2010 TUA assignment from Cheniere Marketing to Cheniere Energy Investments.
- Total revenues of $399.3 million in 2010 versus $416.8 million in 2009; operating cash flow of $104.1 million versus $234.3 million.
- Sabine Pass LNG terminal has about 4.0 Bcf/d of regasification capacity, fully contracted under three 20-year firm TUAs (Total and Chevron about $125 million per year each; Cheniere Investments about $250 million per year through at least September 30, 2028).
- No distributions paid on subordinated units for quarters ending June 30, 2010 onward; common unit distribution of $0.425 per quarter continued, with the $0.425 distribution for Q4 2010 paid February 14, 2011.
- Proposed liquefaction project of up to four LNG Trains (about 4.0 mtpa each), with LNG export possibly commencing as early as 2015; eight non-binding MOUs total up to 9.8 mtpa; FERC application filed January 2011; no final investment decision yet.
- Senior Notes of $2,215.5 million outstanding, with $550.0 million due 2013 and $1,665.5 million due 2016; annual cash interest of $164.8 million in 2011.
- Distributions from Sabine Pass LNG to the partnership were $374.8 million in 2010, and these are subject to restrictions under the Sabine Pass Indenture, including a 2:1 fixed charge coverage ratio test.
03—One dollar
04—Financials
Financial Highlights
Figures from 10-KFY2010filed March 3, 2011Financial Statements
FY2010 against FY2009
| Line item | FY2010FY2009 | Change |
|---|---|---|
| Revenue | $399.28M$416.79M | −4.2% |
| R&D Expenses | $8.74M$0 | — |
| Operating Expenses | $118.48M$88.87M | +33.3% |
| Operating Income | $280.80M$327.92M | −14.4% |
| Interest Expense | $174.02M$147.20M | +18.2% |
| Net Income | $107.57M$186.91M | −42.4% |
| EPS (Basic) | $1.70$1.13 | +50.4% |
| Shares Outstanding (Basic) | 26.42M— | — |
05—Questions
Frequently Asked Questions
Why did net income decline in 2010?
The filing attributes the $79.3 million decrease in net income primarily to the TUA assignment from Cheniere Marketing to Cheniere Energy Investments effective July 1, 2010, which eliminated affiliate revenue from consolidation. Higher interest expense, depreciation, operating expense and development expense related to the proposed liquefaction project also contributed.
Is the quarterly distribution to common unitholders secure?
The filing states that the company distributes all available cash quarterly and that the common unit distribution was $0.425 per quarter throughout 2010, with the Q4 2010 distribution paid February 14, 2011. However, the filing says future distributions depend on earnings, cash flows and other factors, and that Sabine Pass LNG's ability to make distributions to the partnership is restricted by the Sabine Pass Indenture. Distributions on subordinated units were suspended for quarters from June 30, 2010 onward.
What are the main risks to the company's cash flow?
The filing identifies dependence on the Total and Chevron TUAs, which provide substantially all current operating cash flows, and on Cheniere Marketing and Cheniere performing under the VCRA. The filing states that Cheniere Marketing and Cheniere have a high risk of being financially unable to perform their VCRA obligations. Cheniere Investments has not commercialized its reserved capacity, and the Sabine Pass Indenture's fixed charge coverage test may limit distributions to the partnership.
What is the status of the liquefaction project?
The company initiated the project in June 2010 to convert the terminal to bi-directional service. Sabine Pass Liquefaction received DOE authorization in September 2010 to export up to 16 mtpa to Free Trade Agreement countries, filed a FERC application in January 2011, and engaged Bechtel for front-end engineering. The company has not entered into definitive customer agreements; eight non-binding MOUs cover up to 9.8 mtpa. A final investment decision will depend on commercial arrangements, regulatory authorization and adequate financing.
How is the company's debt structured?
Sabine Pass LNG has $2,215.5 million of Senior Secured Notes outstanding: $550.0 million of 7¼% notes due 2013 and $1,665.5 million of 7½% notes due 2016. The notes are secured by substantially all of Sabine Pass LNG's operating assets and equity interests. The indenture restricts distributions and additional indebtedness, and the company will need to refinance or satisfy the notes at or before maturity.
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