01—Abstract
Summary
Summary of the 10-K/A filed March 1, 2013. Cited figures are marked; the original filing is the authoritative source.
This excerpt from Cheniere Energy, Inc.'s annual report (Item 9B and Part IV) covers financing and contract developments at its LNG project subsidiaries rather than consolidated financial results, so it contains no revenue, earnings, or cash flow figures.
Its primary disclosures are two senior secured note offerings. Sabine Pass LNG, L.P. closed $420 milliona of 6.5% Senior Secured Notes due 2020 on October 16, 2012. Sabine Pass Liquefaction, LLC, a subsidiary of Cheniere Energy Partners, closed $1.5 billion of 5.625% Senior Secured Notes due 2021 on February 1, 2013.
Both were sold in private placements under Rule 144A and are secured obligations, with registration rights agreements requiring exchange offers. The 2021 notes give the project a significant new source of long-term debt financing for the Sabine Pass Liquefaction facility. The filing also discloses amendments to two LNG sale and purchase agreements.
On February 18, 2013, Sabine Pass Liquefaction amended its SPAs with KOGAS and GAIL. The amendments align the first commercial delivery dates for Train 3 (KOGAS) and Train 4 (GAIL) with the EPC contract completion schedules. They also extend the deadline for satisfying conditions precedent, including regulatory approvals, financing, and final investment decisions, from June 30, 2013 to December 31, 2013.
This shows that the company is advancing toward final investment decisions on the additional trains, though the timing has moved out. The filing notes that Cheniere did not engage in any Iran-related transactions in 2012 under Section 13(r) of the Exchange Act. It also discloses, without independent verification, activities of Blackstone portfolio companies that may be deemed affiliates because Blackstone owns roughly 30%b of Cheniere Energy Partners.
Note that Part IV refers to 'Amendment No. 1,' so this excerpt may come from an amended filing rather than the original March 1, 2013 10-K. Investors should confirm the filing version and review the full financial statements for operating and balance sheet performance.
02—Key points
Key Highlights
- Sabine Pass LNG closed $420 million of 6.5% Senior Secured Notes due November 2020 on October 16, 2012, sold under Rule 144A and Regulation S.
- Sabine Pass Liquefaction, LLC closed $1.5 billion of 5.625% Senior Secured Notes due February 2021 on February 1, 2013, a major new source of project financing.
- The 2021 notes are senior secured obligations, with a make-whole redemption before November 1, 2020, and par redemption thereafter.
- Amendments dated February 18, 2013 to the KOGAS and GAIL LNG SPAs align first commercial delivery dates for Trains 3 and 4 with EPC completion schedules.
- The deadline for satisfying conditions precedent for Trains 3 and 4 (including final investment decisions and financing) was extended from June 30, 2013 to December 31, 2013.
- Cheniere reported no Iran-related transactions in 2012, but disclosed unverified Iran-related activities of Blackstone portfolio companies that may be deemed affiliates through Blackstone's roughly 30% stake in Cheniere Energy Partners.
- The excerpt contains no consolidated financial results; Part IV references 'Amendment No. 1,' so the filing version should be confirmed.
03—One dollar
04—Financials
Financial Highlights
Figures from 10-K/AFY2012filed March 1, 2013Financial Statements
FY2012 against FY2011
| Line item | FY2012FY2011 | Change |
|---|---|---|
| Revenue | $266.22M$290.44M | −8.3% |
| R&D Expenses | $66.11M$40.80M | +62.0% |
| Operating Expenses | $342.05M$232.30M | +47.2% |
| Operating Income | -$75.83M$58.15M | −230.4% |
| Interest Expense | $200.81M$259.39M | −22.6% |
| Net Income | -$332.78M-$198.76M | −67.4% |
| EPS (Basic) | $-1.83$-2.60 | +29.6% |
| Shares Outstanding (Basic) | 181.77M76.48M | +137.7% |
05—Questions
Frequently Asked Questions
How much new debt did Cheniere's LNG subsidiaries raise, and on what terms?
Sabine Pass LNG raised $420 million of 6.5% senior secured notes due 2020 in October 2012. Sabine Pass Liquefaction raised $1.5 billion of 5.625% senior secured notes due 2021 in February 2013. Both are secured by project assets, pay interest semi-annually, and are not guaranteed by the parent company. Holders have registration rights for exchange offers.
Why does the 2021 note issuance matter to investors?
The $1.5 billion offering provides long-term financing for the Sabine Pass Liquefaction project, which is building liquefaction capacity. The 5.625% coupon is lower than the 6.5% rate on the 2020 notes, which may indicate improved credit terms for the project. Investors should weigh the added leverage at the project level against the project's contracted revenue profile.
What changed in the KOGAS and GAIL supply agreements?
The amendments, dated February 18, 2013, align delivery start dates with EPC completion schedules: first commercial delivery from Train 3 under the KOGAS SPA and from Train 4 under the GAIL SPA. The deadline for conditions precedent, including financing and final investment decisions, moved from June 30, 2013 to December 31, 2013. This gives the project more time but signals that the final investment decisions for these trains are not yet complete.
Does the filing disclose any sanctions-related risk?
Cheniere states that it had no transactions with Iran or Iran-related parties in 2012. It also discloses, without independent verification, that Blackstone portfolio companies, which may be affiliates through Blackstone's roughly 30% stake in Cheniere Energy Partners, had limited Iran-related business. Those activities were described as discontinued or exempt from sanctions or licensed by OFAC. Investors should monitor this for reputational or compliance risk.
06—Continue