01—Abstract
Summary
Summary of the 10-K filed February 24, 2012. Cited figures are marked; the original filing is the authoritative source.
Cheniere Energy Partners, L.P.
(CQP) is a Delaware limited partnership formed by Cheniere Energy, Inc. Its sole operating asset is the Sabine Pass LNG terminal in Cameron Parish, Louisiana, with regasification capacity of approximately 4.0 Bcf/d and 16.9 Bcf of LNG storage. Roughly 2.0 Bcf/d of that capacity is reserved under long-term take-or-pay terminal use agreements with Total and Chevron, each paying about $125 milliona per year for 20 years, and a further 2.0 Bcf/d is held by Cheniere Investments under a TUA with payments of about $250 million per year through at least September 30, 2028. The Cheniere Investments capacity payments are eliminated on consolidation, and cash to unitholders depends on a Variable Capacity Rights Agreement with Cheniere Marketing and on Sabine Pass LNG's ability to distribute cash under the Sabine Pass Indenture.
For 2011, total revenues were $283.8 millionb, down from $399.3 million in 2010, mainly because of the July 2010 TUA assignment to Cheniere Investments. The company reported a net loss of $31.0 million, compared with net income of $107.6 million in 2010. Cash and cash equivalents were $81.4 million at year-end, against $2.2 billion of senior notes outstanding, including $550.0 million due 2013 and $1,666.0 million due 2016.
Common unit distributions were $0.425c per quarter, but no distributions have been paid on subordinated units since the quarter ended March 31, 2010. The main investment thesis rests on a planned liquefaction project at the terminal.
Sabine Pass Liquefaction has signed four LNG sale and purchase agreements covering about 89% of expected nameplate capacity, and a lump-sum turnkey EPC contract with Bechtel for LNG trains 1 and 2 at $3.9 billiond. The filing estimates total construction cost for the four trains at $9.0 billion to $10.0 billion before financing costs, and it states that financing and FERC authorization are still required before construction can proceed.
02—Key points
Key Highlights
- 2011 total revenues were $283.8 million, down from $399.3 million in 2010, reflecting the July 2010 TUA assignment to Cheniere Investments
- Net loss of $31.0 million in 2011 versus net income of $107.6 million in 2010; development expense rose to $36.5 million from $10.6 million
- Sabine Pass Liquefaction has four LNG SPAs covering about 834.0 million MMBtu per year (approximately 16 mtpa), or about 89% of expected nameplate liquefaction capacity
- Bechtel EPC contract for LNG trains 1 and 2 is priced at $3.9 billion; total cost for all four trains is estimated at $9.0 to $10.0 billion before financing costs
- Cash and cash equivalents of $81.4 million against $2.2 billion of Senior Notes, including $550.0 million maturing in 2013 and $1,666.0 million maturing in 2016
- Distributions of $0.425 per common unit were paid each quarter in 2011, but no distributions have been paid on subordinated units since the quarter ended March 31, 2010
- Cheniere owns approximately 86.8% of outstanding common and subordinated units, and Cheniere Subsidiary Holdings can block removal of the general partner
03—One dollar
04—Financials
Financial Highlights
Figures from 10-KFY2011filed February 24, 2012Financial Statements
FY2011 against FY2010
| Line item | FY2011FY2010 | Change |
|---|---|---|
| Revenue | $283.89M$399.28M | −28.9% |
| R&D Expenses | $32.45M$8.74M | +271.3% |
| Operating Expenses | $161.80M$118.48M | +36.6% |
| Operating Income | $122.08M$280.80M | −56.5% |
| Interest Expense | $173.59M$174.02M | −0.2% |
| Net Income | -$53.56M$107.57M | −149.8% |
| EPS (Basic) | $1.23$1.70 | −27.6% |
| Shares Outstanding (Basic) | 27.91M26.42M | +5.7% |
05—Questions
Frequently Asked Questions
Can CQP keep paying distributions to unitholders?
Distributions depend on Sabine Pass LNG being able to pay cash up to the partnership. The Sabine Pass Indenture requires debt service reserve funding and a 2:1 fixed charge coverage test before distributions are permitted, and the filing estimates Sabine Pass LNG's consolidated cash flow must exceed about $375 million to pass that test. Distributions on subordinated units have not been paid since the quarter ended March 31, 2010, and the filing states there is no assurance of future distributions.
What drives the decline in revenue and the swing to a net loss in 2011?
The filing attributes most of the change to the July 1, 2010 assignment of the Cheniere Marketing TUA to Cheniere Investments. Because Cheniere Investments' capacity payments are eliminated on consolidation, affiliate revenue fell and now reflects mainly tug service revenue and VCRA income. Development expense for the liquefaction project also increased, from $10.6 million to $36.5 million.
What must happen before the liquefaction project can go ahead?
The filing states that Sabine Pass Liquefaction still needs FERC authorization to site, construct and operate the facilities, along with financing and a final investment decision. The Bechtel contract requires financing for the full contract price by March 31, 2012, or Bechtel may submit change orders. Several SPA conditions precedent must be met by December 31, 2012 for BG and Gas Natural Fenosa and by June 30, 2013 for GAIL and KOGAS.
How concentrated is the partnership's revenue base?
The filing states that substantially all anticipated 2012 revenue depends on the Sabine Pass LNG terminal. Its regasification capacity is contracted to Total, Chevron and Cheniere Investments, and the Total and Chevron TUAs provide substantially all current operating cash flow. The filing also notes that the Cheniere Investments TUA is only monetized through a VCRA with Cheniere Marketing, which lacks a credit rating.
What is the ownership and governance structure?
Cheniere Energy, Inc. controls the general partner, Cheniere Energy Partners GP, LLC, and owns about 88.8% of the partnership through subsidiaries. Unitholders have limited voting rights and cannot elect the general partner's board. The general partner has no employees, and the partnership depends on Cheniere subsidiaries for personnel and services.
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