01—Abstract
Summary
Summary of the 10-K filed February 21, 2018. Cited figures are marked; the original filing is the authoritative source.
Cheniere Energy Partners, L.P.
(NYSE American: CQP) reported net income of $490 milliona for 2017, compared with net losses of $171 million in 2016 and $319 million in 2015, on total revenues of $4.30 billion (2016: $1.10 billion). Revenue growth was driven by the start of operations at Trains 1 through 4 of the Liquefaction Project at the Sabine Pass LNG terminal, with LNG revenues of $2.64 billion plus $1.39 billion from affiliates. Operating cash flow was $977 million, and distributions paid to unitholders totaled $294 million.
The company had zero cash and cash equivalents at year-end, $1.6 billionb of current restricted cash, and $16.2 billion of total debt outstanding before discounts, premiums and issuance costs. The filing describes the company's dependence on long-term fixed-fee contracts: six fixed-price SPAs with terms of at least 20 years cover roughly 80% to 95% of expected adjusted nominal capacity of Trains 1 through 5, and annual fixed fees are approximately $2.9 billion once Train 5 starts. Train 5 was 83.1% complete at December 31, 2017, with expected substantial completion in 1H 2019.
Train 6 has all necessary regulatory approvals, but the company says it will need significant additional funding, and a final investment decision depends on an EPC contract, commercial arrangements and financing. Total expected capital costs for Trains 1 through 5 are $12.5 billion to $13.5 billionc before financing costs.
Key risks highlighted include concentration in a single facility, reliance on counterparties such as BG, Gas Natural Fenosa and KOGAS, which accounted for 39%, 27% and 23% of third-party revenues respectively, and significant refinancing needs, with $1.1 billiond maturing in 2020 and $2.0 billion in 2021. The filing also discloses a PHMSA Corrective Action Order issued in February 2018 following a minor LNG leak, an open LDEQ compliance matter, and a pending JMCB lawsuit challenging an ITE tax contract, which management views as remote in terms of material adverse effect.
02—Key points
Key Highlights
- Net income of $490 million in 2017, versus net losses of $171 million in 2016 and $319 million in 2015
- Total revenues of $4.30 billion in 2017, up from $1.10 billion in 2016, as Trains 1 through 4 began operating
- Trains 1 through 4 achieved substantial completion; Train 5 was 83.1% complete at December 31, 2017, with expected substantial completion in 1H 2019
- Six fixed-price SPAs with terms of at least 20 years cover about 80% to 95% of expected adjusted nominal capacity of Trains 1 through 5, with annual fixed fees of approximately $2.9 billion upon Train 5 first commercial delivery
- Total debt of $16.2 billion at December 31, 2017, with zero cash and cash equivalents and $1.6 billion of current restricted cash
- Operating cash flow of $977 million in 2017, and $294 million of distributions paid to unitholders
- Train 6 is being commercialized and has all necessary regulatory approvals, but an FID requires an EPC contract, commercial arrangements and adequate financing
03—One dollar
Follow one dollar
Of each $1.00 of revenue in FY2017, Cheniere Energy Partners kept $0.11.
- Revenue$4.30B100.0%
- Cost of revenue−$2.32B53.9%
- Gross profit$1.98B46.1%
- Operating costs−$828.0M19.2%
- Operating income$1.16B26.9%
- Interest, other & tax−$666.0M15.5%
- Net income$490.0M11.4%
Where FY2017 revenue went
$4.30B- Cost of revenue: $2.32B, 54% of revenue
- Other operating costs: $825.0M, 19% of revenue
- Interest, other & tax: $666.0M, 15% of revenue
- Net income: $490.0M, 11% of revenue
- R&D: $3.0M, 0.1% of revenue
Kept 11% as net income
Full revenue history →04—Financials
Financial Highlights
Figures from 10-KFY2017filed February 21, 2018Financial Statements
FY2017 against FY2016
| Line item | FY2017FY2016 | Change |
|---|---|---|
| Revenue | $4.30B$1.10B | +291.3% |
| Cost of Revenue | $2.32B$410.00M | +465.9% |
| Gross Profit | $1.98B$690.00M | +187.5% |
| R&D Expenses | $3.00M$0 | — |
| Operating Expenses | $3.15B$850.00M | +270.4% |
| Operating Income | $1.16B$250.00M | +362.4% |
| Interest Expense | $614.00M$357.00M | +72.0% |
| Net Income | $490.00M-$171.00M | +386.5% |
| EPS (Basic) | $-1.32$-0.20 | −560.0% |
| Shares Outstanding (Basic) | 178.50M57.10M | +212.6% |
05—Questions
Frequently Asked Questions
How did Cheniere Energy Partners' financial performance change in 2017?
The partnership reported net income of $490 million in 2017, compared with a net loss of $171 million in 2016. Total revenues rose to $4.30 billion from $1.10 billion, primarily because Trains 1 through 4 of the Liquefaction Project began operating. Interest expense, net of capitalized interest, increased to $614 million.
What are the main sources of revenue for the partnership?
Revenue comes mainly from LNG sales under long-term SPAs, reported as LNG revenues of $2.64 billion and LNG revenues from affiliates of $1.39 billion in 2017. Regasification revenues from TUAs at the Sabine Pass LNG terminal were $260 million. Under the SPAs, customers pay a fixed fee plus a variable fee of approximately 115% of Henry Hub.
How concentrated are the partnership's customers?
Three customers accounted for more than 10% of third-party revenues in 2017: BG at 39%, Gas Natural Fenosa at 27% and KOGAS at 23%. In 2016, BG alone represented 52%. The filing also discloses that the partnership depends on a single facility, the Sabine Pass LNG terminal, for substantially all of its anticipated 2018 revenue.
What is the outlook for Train 5 and Train 6?
Train 5 was 83.1% complete at December 31, 2017, with expected substantial completion in 1H 2019, and its EPC contract price is approximately $3.1 billion. Train 6 has all necessary regulatory approvals, but the partnership will need significant additional funding and says it will contemplate an FID only after entering an EPC contract, entering acceptable commercial arrangements and obtaining adequate financing.
What debt maturities and refinancing risks should investors consider?
Total debt was $16.2 billion at December 31, 2017. The filing states that $1.1 billion matures in 2020, $2.0 billion in 2021, $1.0 billion in 2022 and $11.3 billion between 2023 and 2028. The partnership notes it anticipates incurring additional debt to finance Train 6 and that refinancing terms will depend on its contracted cash flows.
06—Continue