01—Abstract
Summary
Summary of the 10-K filed February 22, 2013. Cited figures are marked; the original filing is the authoritative source.
Cheniere Energy Partners, L.P.
(NYSE MKT: CQP) reported a net loss of $150.1 milliona for 2012, compared with a net loss of $31.0 million in 2011, as it moved into the construction phase of its Sabine Pass Liquefaction Project. Revenues were $264.3 million in 2012 versus $283.8 million in 2011, and income from operations fell to $63.5 million from $144.6 million. Operating cash flow was negative at $26.2 million.
The partnership's existing business is the Sabine Pass LNG regasification terminal, where roughly 4.0 Bcf/d of capacity is fully contracted under terminal use agreements with Total, Chevron and Sabine Pass Liquefaction. The company states it does not expect to receive cash flows from operations under any SPA until the end of 2015 at the earliest. Funding for construction was substantially completed in 2012 and early 2013.
The partnership sold 133.3 million Class B units for $2.0 billionb in gross proceeds, closed a $3.6 billion Liquefaction Credit Facility, and issued $420.0 million of 6.50% notes due 2020 by Sabine Pass LNG. In February 2013 Sabine Pass Liquefaction issued $1.5 billion of 5.625% notes due 2021. Long-term debt, net of discount, was $2.17 billion at December 31, 2012.
Train 1 and Train 2 were 18% complete as of December 31, 2012, with Bechtel EPC contract prices of $3.97 billionc for Trains 1 and 2 and $3.77 billion for Trains 3 and 4. For investors, the key issues are execution and financing risk.
The filing states that Train 1 is expected to produce LNG as early as the end of 2015, that construction cost estimates for Trains 1 and 2 are $4.5 billion to $5.0 billiond before financing costs, and that the partnership has not paid distributions on its subordinated units since the quarter ended March 31, 2010. Customer contracts supply approximately $2.6 billion of annual fixed fees once all five SPAs commence, but those fees depend on the customers' continued performance and on the trains being completed on schedule.
02—Key points
Key Highlights
- Net loss of $150.1 million in 2012, versus $31.0 million in 2011; operating cash flow was negative $26.2 million.
- Total revenues were $264.3 million in 2012, down from $283.8 million in 2011, mainly due to lower LNG cargo export loading fee revenue and lower VCRA revenue.
- Sold 133.3 million Class B units to Blackstone and Cheniere at $15.00 per unit, with net proceeds of $1,887.3 million in 2012, to fund the equity portion of the Liquefaction Project.
- Five long-term SPAs with BG, Gas Natural Fenosa, KOGAS, GAIL and Total cover about 182.5 million MMBtu annually per train, with aggregate fixed fees of approximately $2.6 billion per year.
- Construction of Train 1 and Train 2 is underway under a $3.97 billion Bechtel EPC contract; the filing expects Train 1 to produce LNG as early as the end of 2015.
- Long-term debt, net of discount, was $2.17 billion at December 31, 2012, and rose to about $3.7 billion after the February 2013 issuance of $1.5 billion of 5.625% notes due 2021.
- Distributions of $0.425 per common unit per quarter continue, but the subordinated units have received no distributions since the quarter ended March 31, 2010.
03—One dollar
04—Financials
Financial Highlights
Figures from 10-KFY2012filed February 22, 2013Financial Statements
FY2012 against FY2011
| Line item | FY2012FY2011 | Change |
|---|---|---|
| Revenue | $264.50M$283.89M | −6.8% |
| R&D Expenses | $37.56M$32.45M | +15.8% |
| Operating Expenses | $226.25M$161.80M | +39.8% |
| Operating Income | $38.24M$122.08M | −68.7% |
| Interest Expense | $171.65M$173.59M | −1.1% |
| Net Income | -$175.43M-$53.56M | −227.5% |
| EPS (Basic) | $0.27$1.23 | −78.0% |
| Shares Outstanding (Basic) | 33.47M27.91M | +19.9% |
05—Questions
Frequently Asked Questions
When will Cheniere Energy Partners begin generating operating cash flow from the Liquefaction Project?
The filing states that the partnership does not expect to begin receiving cash flows from operations under any SPA until the end of 2015 at the earliest, when Train 1 is anticipated to achieve initial LNG production.
How is the Liquefaction Project being financed?
Financing comes from the sale of Class B units for $2.0 billion in gross proceeds, the $3.6 billion Liquefaction Credit Facility, the $1.5 billion Sabine Liquefaction Notes issued in February 2013, and cash flows under the SPAs once they start. The filing also notes that Train 3 and Train 4 will need additional financing and a positive final investment decision.
Is the regasification business at Sabine Pass LNG generating revenue today?
Yes. About 4.0 Bcf/d of regasification capacity is reserved under long-term terminal use agreements, and the filing states that this capacity is fully contracted, with fixed monthly capacity payments whether or not customers use the terminal. Total and Chevron each pay about $125 million per year, and Sabine Pass Liquefaction pays about $250 million per year.
What are the main risks to the distributions paid to common unitholders?
The filing states that the partnership is not currently generating sufficient operating surplus to cover the initial quarterly distribution on all units and intends to use accumulated operating surplus to fund the gap. Debt agreements at Sabine Pass LNG and Sabine Pass Liquefaction restrict distributions to the partnership, and cost overruns or delays in the Trains could reduce cash available for distribution.
What is the status of the regulatory approvals for the project?
The FERC issued final orders in 2012 authorizing siting, construction and operation of Trains 1 through 4, and the DOE approved exports to both FTA and non-FTA countries. The filing notes that an October 2012 FERC amendment application requires additional NEPA review, and that the Title V and PSD air permits were expected to be revised in the first quarter of 2013.
06—Continue