01—Abstract
Summary
Summary of the 10-K filed February 23, 2023. Cited figures are marked; the original filing is the authoritative source.
Cheniere Energy Partners, L.P.
(CQP) is a Delaware limited partnership formed in 2006 by Cheniere that provides LNG to integrated energy companies, utilities and energy trading companies. Its core asset is the Sabine Pass LNG Terminal in Cameron Parish, Louisiana, with six operational Trains (Train 6 reached substantial completion on February 4, 2022), roughly 30 mtpa of operational production capacity, three marine berths (third berth substantially completed October 27, 2022), about 4 Bcf/d of regasification capacity, and a 94-mile Creole Trail Pipeline. The partnership has contracted approximately 85%a of Liquefaction Project capacity under SPAs and an IPM agreement, with approximately 15 years of weighted average remaining life as of December 31, 2022.
For 2022, total revenues were $17.206 billionb (versus $9.434 billion in 2021) and net income was $2.498 billion (versus $1.630 billion). Results were aided by a $765 million lump sum fee from Chevron for early termination of its regasification agreement, but were offset by $1.1 billion of net losses from changes in fair value of derivatives, mainly related to the IPM agreement assigned to SPL in March 2022. Partners' equity moved to a deficit of $(2.131) billion at year-end, largely reflecting the $2.7 billion non-cash distribution recognized on the novation of that IPM agreement.
Operating cash flow was $4.149 billionc, and cash and cash equivalents were $904 million at December 31, 2022. Debt totaled $16.3 billion, and the company reported that it and SPL were in compliance with covenants.
Credit ratings were upgraded during 2022, with CQP's S&P rating moving to investment grade (BBB). Distributions declared for 2022 totaled $4.25d per common unit, and a distribution of $1.07 per unit was declared on January 27, 2023.
02—Key points
Key Highlights
- Total revenues rose to $17.206 billion in 2022 from $9.434 billion in 2021, and net income rose to $2.498 billion from $1.630 billion.
- A $765 million lump sum termination fee from Chevron, related to early termination of its TUA effective July 2022, contributed to 2022 results.
- Derivative losses of $1.1 billion in 2022 were mainly tied to the IPM agreement assigned to SPL, with $757 million of losses on the Tourmaline IPM derivative liability after its March 2022 assignment.
- Approximately 85% of Liquefaction Project production capacity is contracted, with about 15 years of weighted average remaining life as of December 31, 2022.
- Total debt was $16.3 billion at year-end 2022, and cash and cash equivalents were $904 million, with $1.6 billion of available credit facility commitments.
- Partners' equity was a deficit of $(2.131) billion at December 31, 2022, following a $2.712 billion novated IPM agreement charge to equity and $2.635 billion in distributions paid during 2022.
- Declared a distribution of $1.07 per common unit on January 27, 2023, with 2022 declared distributions totaling $4.25 per common unit.
03—One dollar
04—Financials
Financial Highlights
Figures from 10-KFY2022filed February 23, 2023Financial Statements
FY2022 against FY2021
| Line item | FY2022FY2021 | Change |
|---|---|---|
| Revenue | $17.21B$9.43B | +82.4% |
| Operating Expenses | $13.83B$6.88B | +101.0% |
| Operating Income | $3.38B$2.56B | +32.2% |
| Interest Expense | $870.00M$831.00M | +4.7% |
| Net Income | $2.50B$1.63B | +53.3% |
05—Questions
Frequently Asked Questions
How much of the Sabine Pass Liquefaction Project's capacity is contracted, and for how long?
Through its SPAs and IPM agreement, the partnership has contracted approximately 85% of the total production capacity from the Liquefaction Project, with approximately 15 years of weighted average remaining life as of December 31, 2022.
What drove the increase in net income in 2022?
Net income increased $868 million to $2.498 billion, primarily due to higher LNG revenues net of cost of sales (about $1.4 billion, roughly half from higher Henry Hub-indexed margins and half from increased volumes, partly due to the Train 6 Completion) and the $765 million Chevron termination fee. These were partially offset by a $1.2 billion unfavorable variance in derivative losses.
Why did partners' equity turn into a deficit?
Partners' equity fell to a deficit of $(2.131) billion at December 31, 2022, from $718 million in 2021. The main drivers were a $2.712 billion charge for the novated IPM agreement, which was recognized as a distribution to Cheniere's common unitholder interest, and $2.635 billion of cash distributions, partly offset by net income of $2.498 billion.
What are the main risks related to the partnership's debt and liquidity?
The partnership had $16.3 billion of total debt outstanding at December 31, 2022, and relies on access to project financing and capital markets to refinance it. SPL's debt agreements restrict distributions until reserves are established and a 1.25:1.00 debt service coverage ratio is met. Some borrowings are indexed to LIBOR, which is expected to be phased out in 2023.
What is the partnership's distribution policy?
The partnership's partnership agreement requires it to distribute all available cash quarterly, within 45 days after the end of each quarter. For 2022 it declared aggregate distributions of $4.25 per common unit, and on January 27, 2023, it declared a $1.07 per common unit distribution, consisting of a $0.775 base amount and a $0.295 variable amount.
06—Continue