01—Abstract
Summary
Summary of the 10-K filed February 20, 2015. Cited figures are marked; the original filing is the authoritative source.
Cheniere Energy Partners, L.P.
(NYSE MKT: CQP) reported a 2014 net loss of $410.0 milliona, compared with $258.1 million in 2013 and $175.4 million in 2012, as it continued to build the Liquefaction Project at the Sabine Pass LNG terminal in Louisiana. Revenues were essentially flat at $268.7 million, while total operating expenses were $269.6 million, leaving a loss from operations of $0.9 million. The loss was driven mainly by a $118.0 million derivative loss, net, and a $114.3 million loss on early extinguishment of debt.
The company states it has no employees and relies on Cheniere affiliates for management, and that substantially all of its anticipated 2015 revenue will depend on the single Sabine Pass LNG facility. The company's near-term value rests on the Liquefaction Project. As of December 31, 2014, overall completion was approximately 81%b for Trains 1 and 2 and 54% for Trains 3 and 4, which the filing describes as ahead of the contractual schedule.
Train 1 is expected to produce LNG as early as late 2015. Sabine Pass Liquefaction has fixed-fee, 20-year SPAs that the filing says equate to approximately $2.3 billionc annually for Trains 1 through 4. Total expected capital costs for Trains 1 through 4 are estimated at $9.0 to $10.0 billion before financing costs.
Total debt was $9.0 billiond on a consolidated basis at year-end 2014, and cash flow from the project is not expected until late 2015 at the earliest. For unitholders, the filing notes that the $0.425 quarterly distribution on common units continued, but the partnership's distributions are only partly covered by operating surplus until Trains 1 and 2 begin commercial operations, which the filing does not expect before at least 2016.
Subordinated units have received no distributions since the quarter ended March 31, 2010. Management also states that Train 5 and Train 6 require significant additional funding, and that Total and Centrica SPAs may be terminated if conditions precedent, including a final investment decision on Train 5, are not met by June 30, 2015.
02—Key points
Key Highlights
- Net loss widened to $410.0 million in 2014 from $258.1 million in 2013, mainly due to a $118.0 million derivative loss, net, versus a $83.4 million gain in 2013, and a $114.3 million loss on early extinguishment of debt.
- Revenues were $268.7 million in 2014 versus $268.2 million in 2013; loss from operations was $0.9 million compared with $32.7 million in 2013.
- Trains 1 and 2 were about 81% complete and Trains 3 and 4 about 54% complete as of December 31, 2014, which the filing describes as ahead of the contractual schedule; Train 1 is expected to produce LNG as early as late 2015.
- Sabine Pass Liquefaction's SPAs carry fixed fees of approximately $2.3 billion annually for Trains 1 through 4, rising to $2.9 billion if Train 5 proceeds, with the filing citing a June 30, 2015 deadline for conditions precedent in the Total and Centrica SPAs.
- Total debt was $9.0 billion on a consolidated basis at December 31, 2014, including $2.0 billion of 5.75% 2024 Sabine Pass Liquefaction Senior Notes issued in May 2014.
- Total expected capital costs for Trains 1 through 4 are estimated at $9.0 to $10.0 billion before financing costs, or $12.0 to $13.0 billion after financing costs.
- Common unitholders received $0.425 per unit in each quarter of 2014; subordinated units have received no distributions since the quarter ended March 31, 2010, and the filing says Train 1 and 2 commercial operations are not expected before at least 2016.
03—One dollar
04—Financials
Financial Highlights
Figures from 10-KFY2014filed February 20, 2015Financial Statements
FY2014 against FY2013
| Line item | FY2014FY2013 | Change |
|---|---|---|
| Revenue | $268.70M$268.19M | +0.2% |
| Cost of Revenue | -$342K— | — |
| Gross Profit | $269.04M— | — |
| R&D Expenses | $9.32M$11.32M | −17.7% |
| Operating Expenses | $268.18M$300.22M | −10.7% |
| Operating Income | $515K-$32.03M | +101.6% |
| Interest Expense | $177.03M$178.40M | −0.8% |
| Net Income | -$410.04M-$258.12M | −58.9% |
| EPS (Basic) | $-0.89$-0.03 | −2866.7% |
| Shares Outstanding (Basic) | 57.08M54.23M | +5.2% |
05—Questions
Frequently Asked Questions
Why did the net loss increase in 2014?
The filing attributes the increase in net loss of $151.9 million to decreased derivative gain, net, which fell $201.5 million, mainly because long-term LIBOR decreased in 2014 and because of early settlement of interest rate swaps in May 2014. This was partly offset by a $28.5 million decrease in general and administrative expense—affiliate and a $17.2 million decrease in loss on early extinguishment of debt.
When is the Liquefaction Project expected to generate cash flow?
The filing states that Train 1 is anticipated to produce LNG as early as late 2015, and Trains 2, 3 and 4 are expected to commence operations on a staggered basis thereafter. The company currently expects to generate cash flow from the Liquefaction Project by late 2015 and states it will not begin to receive significant cash flows until late 2015 at the earliest.
Can the partnership keep paying distributions on common units?
The filing says the partnership is not currently generating sufficient operating surplus each quarter to pay the initial quarterly distribution on all units, and it intends to use accumulated operating surplus to fund the $0.425 quarterly distribution. It says it may not have sufficient operating surplus to continue paying that distribution before Trains 1 and 2 commence commercial operations, which it does not expect until at least 2016. Distributions to subordinated units have not been paid since the quarter ended March 31, 2010.
What are the main risks to the Liquefaction Project?
The filing highlights cost overruns and construction delays, the company's lack of prior experience building liquefaction facilities, and dependence on Bechtel and other contractors. It also notes the need for substantial additional financing for Trains 5 and 6, possible termination of the Total and Centrica SPAs if conditions precedent are not met by June 30, 2015, and the need for pending FERC and DOE approvals, including DOE non-FTA export authorizations that remain pending.
How concentrated is the company's business?
The filing states that substantially all of its anticipated 2015 revenue will depend on the Sabine Pass LNG regasification facilities in southern Louisiana. It also notes that its two TUAs with Total and Chevron, which provide substantially all of current operating cash flows, expire in 2029 unless extended, and that the company has no employees, relying instead on Cheniere affiliates for management services.
06—Continue