01—Abstract
Summary
Summary of the 10-K filed February 21, 2014. Cited figures are marked; the original filing is the authoritative source.
Cheniere Energy Partners, L.P.
(NYSE MKT: CQP) reported a 2013 net loss of $258.1 milliona, compared with $175.4 million in 2012, as it develops the Sabine Pass Liquefaction Project. The partnership's existing business is its Sabine Pass LNG regasification terminal, with approximately 4.0 Bcf/d of regasification capacity fully contracted under two long-term third-party terminal use agreements (Total and Chevron, each about $125 million annually) and a 2.0 Bcf/d agreement held by Sabine Pass Liquefaction (about $250 million annually). Train 1 is expected to produce LNG as early as late 2015, and Trains 1 through 4 are estimated to cost between $9.0 billion and $10.0 billion before financing costs.
Overall, the partnership's future cash flows depend on completing construction on schedule, since it expects no significant operating cash flow under the SPAs until late 2015 at the earliest. Total debt outstanding was $6.6 billionb at December 31, 2013 (before discounts and premiums), up from $2.2 billion at year-end 2012. Much of the increase came from Sabine Pass Liquefaction senior notes and credit facilities, plus a $400.0 million CTPL credit facility used to fund the Creole Trail Pipeline modifications.
Cash and cash equivalents were $351.0 millionc, with $1,252.7 million of restricted cash held for specific project and debt-service purposes. Operating cash flow was $35.7 million in 2013 compared with negative $37.7 million in 2012.
Investors should note that the partnership has not been profitable historically, has not paid distributions on its subordinated units since the quarter ended March 31, 2010, and pays a common unit distribution of $0.425d per quarter that management indicates is not fully covered by current operating surplus. Its general partner and affiliates have significant conflicts of interest, and Cheniere affiliates hold a substantial stake in the partnership, which adds to unitholder risk until the Liquefaction Project generates cash flow.
02—Key points
Key Highlights
- Net loss of $258.1 million in 2013 versus $175.4 million in 2012; loss from operations of $32.7 million compared with income of $38.2 million in 2012.
- Total debt outstanding of $6.6 billion at December 31, 2013 (before discounts and premiums), including $4.0 billion of Sabine Pass Liquefaction senior notes issued in 2013 and a $400.0 million CTPL credit facility.
- Trains 1 through 4 of the Liquefaction Project are approximately 54% (Trains 1 and 2) and 20% (Trains 3 and 4) complete, ahead of contractual schedule; Train 1 is expected to produce LNG as early as late 2015.
- Long-term SPAs with six customers total roughly $2.3 billion in annual fixed fees for Trains 1 through 4, rising to $2.9 billion if Train 5 receives a positive final investment decision.
- Sabine Pass LNG's regasification capacity of approximately 4.0 Bcf/d is fully contracted under terminal use agreements that require fixed monthly capacity payments whether or not the capacity is used.
- Quarterly common unit distribution of $0.425 was paid through 2013, but no distributions have been paid on subordinated units since the quarter ended March 31, 2010.
- Cash and cash equivalents of $351.0 million at year end, plus $1,252.7 million of restricted cash designated for the Liquefaction Project, CTPL and interest payments.
03—One dollar
04—Financials
Financial Highlights
Figures from 10-KFY2013filed February 21, 2014Financial Statements
FY2013 against FY2012
| Line item | FY2013FY2012 | Change |
|---|---|---|
| Revenue | $268.19M$264.50M | +1.4% |
| R&D Expenses | $11.32M$37.56M | −69.9% |
| Operating Expenses | $300.22M$226.25M | +32.7% |
| Operating Income | -$32.03M$38.24M | −183.7% |
| Interest Expense | $178.40M$171.65M | +3.9% |
| Net Income | -$258.12M-$175.43M | −47.1% |
| EPS (Basic) | $-0.03$0.27 | −111.1% |
| Shares Outstanding (Basic) | 54.23M33.47M | +62.0% |
05—Questions
Frequently Asked Questions
Why did the partnership report a larger net loss in 2013?
The filing attributes the increase primarily to a $131.6 million loss on early extinguishment of debt, $129.8 million of affiliate general and administrative expense (up from $61.1 million), and higher operating and maintenance expense. These were partly offset by an $83.4 million derivative gain and lower development expense.
When will the partnership begin generating significant cash flow?
The partnership states it does not expect to receive significant cash flows from operations under any SPA until late 2015 at the earliest, when Train 1 is expected to produce LNG. Current cash flows come mainly from the terminal use agreements with Total and Chevron and from Sabine Pass Liquefaction's capacity payments.
Is the partnership able to fully cover its common unit distributions?
Not currently. The filing states that the partnership is not generating sufficient operating surplus each quarter to pay the initial quarterly distribution on all common units and intends to use accumulated operating surplus to fund the gap. Until Trains 1 and 2 commence commercial operations, distributions will depend mainly on cash from existing operations.
What are the main risks tied to the Liquefaction Project?
Key risks include cost overruns and construction delays under the lump sum turnkey contracts with Bechtel, the need for significant additional financing for Trains 5 and 6, the possibility that customers terminate SPAs if conditions precedent are not met by June 30, 2015, and the need to obtain and maintain regulatory approvals.
How concentrated is the partnership's revenue base?
The filing states that substantially all anticipated 2014 revenue will depend on one facility, the Sabine Pass LNG terminal in southern Louisiana. Its revenue also depends on long-term contracts with a limited set of counterparties, including Total, Chevron and the SPA customers listed in the filing.
06—Continue