UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

☒    QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended June 30, 2023

or

☐    TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

 For the transition period from            to            

Commission file number 001-33366

Cheniere Energy Partners, L.P.

(Exact name of registrant as specified in its charter)

Delaware			20-5913059
(State or other jurisdiction of incorporation or organization)			(I.R.S. Employer Identification No.)

700 Milam Street, Suite 1900

Houston, Texas 77002

(Address of principal executive offices) (Zip Code)

(713) 375-5000

(Registrant’s telephone number, including area code)

Securities registered pursuant to Section 12(b) of the Act: 

Title of each class			Trading Symbol			Name of each exchange on which registered
Common Units Representing Limited Partner Interests			CQP			NYSE American

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.  Yes ☒   No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).  Yes  ☒   No  ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer

☒

Accelerated filer

☐

Non-accelerated filer

☐

Smaller reporting company

☐

Emerging growth company

☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).  Yes ☐    No ☒

As of July 27, 2023, the registrant had 484,036,123 common units outstanding.

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CHENIERE ENERGY PARTNERS, L.P.

TABLE OF CONTENTS

			Definitions			1
Part I. Financial Information
Item 1.			Consolidated Financial Statements			3
			Consolidated Statements of Income			3
			Consolidated Balance Sheets			4
			Consolidated Statements of Partners’ Equity (Deficit)			5
			Consolidated Statements of Cash Flows			6
			Notes to Consolidated Financial Statements			7
			Note 1—Nature of Operations and Basis of Presentation			7
			Note 2—Unitholders’ Equity			8
			Note 3—Restricted Cash and Cash Equivalents			8
			Note 4—Trade and Other Receivables, Net of Current Expected Credit Losses			8
			Note 5—Inventory			8
			Note 6—Property, Plant and Equipment, Net of Accumulated Depreciation			9
			Note 7—Derivative Instruments			9
			Note 8—Accrued Liabilities			12
			Note 9—Debt			13
			Note 10—Revenues			15
			Note 11—Related Party Transactions			17
			Note 12—Net Income per Common Unit			18
			Note 13—Customer Concentration			20
			Note 14—Supplemental Cash Flow Information			20
Item 2.			Management’s Discussion and Analysis of Financial Condition and Results of Operations			21
Item 3.			Quantitative and Qualitative Disclosures about Market Risk			30
Item 4.			Controls and Procedures			30
Part II. Other Information
Item 1.			Legal Proceedings			32
Item 1A.			Risk Factors			32
Item 5.			Other Information			32
Item 6.			Exhibits			33
			Signatures			34

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DEFINITIONS

As used in this quarterly report, the terms listed below have the following meanings: 

Common Industry and Other Terms

ASU						Accounting Standards Update
Bcf						billion cubic feet
Bcf/d						billion cubic feet per day
Bcf/yr						billion cubic feet per year
Bcfe						billion cubic feet equivalent
DOE						U.S. Department of Energy
EPC						engineering, procurement and construction
FASB						Financial Accounting Standards Board
FERC						Federal Energy Regulatory Commission
FTA countries						countries with which the United States has a free trade agreement providing for national treatment for trade in natural gas
GAAP						generally accepted accounting principles in the United States
Henry Hub						the final settlement price (in USD per MMBtu) for the New York Mercantile Exchange’s Henry Hub natural gas futures contract for the month in which a relevant cargo’s delivery window is scheduled to begin
IPM agreements						integrated production marketing agreements in which the gas producer sells to us gas on a global LNG index price, less a fixed liquefaction fee, shipping and other costs
LIBOR						London Interbank Offered Rate
LNG						liquefied natural gas, a product of natural gas that, through a refrigeration process, has been cooled to a liquid state, which occupies a volume that is approximately 1/600th of its gaseous state
MMBtu						million British thermal units; one British thermal unit measures the amount of energy required to raise the temperature of one pound of water by one degree Fahrenheit
mtpa						million tonnes per annum
non-FTA countries						countries with which the United States does not have a free trade agreement providing for national treatment for trade in natural gas and with which trade is permitted
SEC						U.S. Securities and Exchange Commission
SOFR						Secured Overnight Financing Rate
SPA						LNG sale and purchase agreement
TBtu						trillion British thermal units; one British thermal unit measures the amount of energy required to raise the temperature of one pound of water by one degree Fahrenheit
Train						an industrial facility comprised of a series of refrigerant compressor loops used to cool natural gas into LNG
TUA						terminal use agreement

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Abbreviated Legal Entity Structure

The following diagram depicts our abbreviated legal entity structure as of June 30, 2023, including our ownership of certain subsidiaries, and the references to these entities used in this quarterly report:

Unless the context requires otherwise, references to “CQP,” “the Partnership,” “we,” “us” and “our” refer to Cheniere Energy Partners, L.P. and its consolidated subsidiaries. 

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PART I.     FINANCIAL INFORMATION

ITEM I.     CONSOLIDATED FINANCIAL STATEMENTS

CHENIERE ENERGY PARTNERS, L.P. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF INCOME

(in millions, except per unit data)

(unaudited)

						Three Months Ended June 30,												Six Months Ended June 30,
						2023						2022						2023						2022
Revenues
LNG revenues						$	1,415					$	2,959					$	3,521					$	5,447
LNG revenues—affiliate						469						1,135						1,230						1,892
LNG revenues—related party						—						4						—						4
Regasification revenues						33						68						67						136
Other revenues						16						15						32						30
Total revenues						1,933						4,181						4,850						7,509
Operating costs and expenses (recoveries)
Cost of sales (excluding items shown separately below)						603						3,144						916						5,706
Cost of sales—affiliate						1						57						18						62
Cost of sales—related party						—						1						—						1
Operating and maintenance expense						263						191						469						361
Operating and maintenance expense—affiliate						38						41						82						79
Operating and maintenance expense—related party						14						15						30						27
General and administrative expense (recovery)						3						(3)						6						—
General and administrative expense—affiliate						24						24						46						47
Depreciation and amortization expense						167						156						334						309
Other						2						—						2						—
Total operating costs and expenses						1,115						3,626						1,903						6,592
Income from operations						818						555						2,947						917
Other income (expense)
Interest expense, net of capitalized interest						(207)						(216)						(415)						(419)
Loss on modification or extinguishment of debt						(2)						—						(2)						—
Other income, net						13						3						27						3
Total other expense						(196)						(213)						(390)						(416)
Net income						$	622					$	342					$	2,557					$	501
Basic and diluted net income per common unit (1)						$	0.84					$	0.25					$	4.35					$	0.13
Weighted average basic and diluted number of common units outstanding						484.0						484.0						484.0						484.0

(1)In computing basic and diluted net income per common unit, net income is reduced by the amount of undistributed net income allocated to participating securities other than common units, as required under the two-class method. See Note 12—Net Income per Common Unit.

The accompanying notes are an integral part of these consolidated financial statements.

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CHENIERE ENERGY PARTNERS, L.P. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

(in millions, except unit data)

						June 30,						December 31,
						2023						2022
ASSETS						(unaudited)
Current assets
Cash and cash equivalents						$	1,834					$	904
Restricted cash and cash equivalents						241						92
Trade and other receivables, net of current expected credit losses						189						627
Trade receivables—affiliate						134						551
Advances to affiliate						154						177
Inventory						130						160
Current derivative assets						32						24
Margin deposits						3						35
Other current assets						75						50
Other current assets—affiliate						1						—
Total current assets						2,793						2,620
Property, plant and equipment, net of accumulated depreciation						16,463						16,725
Operating lease assets						85						89
Debt issuance costs, net of accumulated amortization						18						8
Derivative assets						29						28
Other non-current assets, net						169						163
Total assets						$	19,557					$	19,633
LIABILITIES AND PARTNERS’ DEFICIT
Current liabilities
Accounts payable						$	60					$	32
Accrued liabilities						556						1,378
Accrued liabilities—related party						5						6
Current debt, net of discount and debt issuance costs						1,796						—
Due to affiliates						38						74
Deferred revenue						97						144
Deferred revenue—affiliate						—						3
Current operating lease liabilities						10						10
Current derivative liabilities						366						769
Other current liabilities						4						5
Total current liabilities						2,932						2,421
Long-term debt, net of premium, discount and debt issuance costs						15,595						16,198
Operating lease liabilities						75						80
Finance lease liabilities						16						18
Derivative liabilities						1,936						3,024
Other non-current liabilities						26						—
Other non-current liabilities—affiliate						23						23
Partners’ deficit
Common unitholders’ interest (484.0 million units issued and outstanding at both June 30, 2023 and December 31, 2022)						372						(1,118)
General partner’s interest (2% interest with 9.9 million units issued and outstanding at both June 30, 2023 and December 31, 2022)						(1,418)						(1,013)
Total partners’ deficit						(1,046)						(2,131)
Total liabilities and partners’ deficit						$	19,557					$	19,633

The accompanying notes are an integral part of these consolidated financial statements.

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CHENIERE ENERGY PARTNERS, L.P. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF PARTNERS’ EQUITY (DEFICIT)

(in millions)

(unaudited)

Three and Six Months Ended June 30, 2023
			Common Unitholders’ Interest																								General Partner’s Interest												Total Partners’ Deficit
			Units						Amount																																	Units						Amount
Balance at December 31, 2022			484.0						$	(1,118)																													9.9						$	(1,013)					$	(2,131)
Net income			—						1,897																														—						38						1,935
Distributions
Common units, $1.070/unit			—						(518)																														—						—						(518)
General partner units			—						—																														—						(236)						(236)
Balance at March 31, 2023			484.0						261																														9.9						(1,211)						(950)
Net income			—						610																														—						12						622
Distributions
Common units, $1.03/unit			—						(499)																														—						—						(499)
General partner units			—						—																														—						(219)						(219)
Balance at June 30, 2023			484.0						$	372																													9.9						$	(1,418)					$	(1,046)

Three and Six Months Ended June 30, 2022
			Common Unitholders’ Interest																								General Partner’s Interest												Total Partners’ Equity (Deficit)
			Units						Amount																																	Units						Amount
Balance at December 31, 2021			484.0						$	1,024																													9.9						$	(306)					$	718
Net income			—						157																														—						2						159
Novated IPM agreement (see Note 14)			—						(2,712)																														—						—						(2,712)
Distributions
Common units, $0.700/unit			—						(339)																														—						—						(339)
General partner units			—						—																														—						(56)						(56)
Balance at March 31, 2022			484.0						(1,870)																														9.9						(360)						(2,230)
Net income			—						335																														—						7						342
Distributions
Common units, $1.05/unit			—						(508)																														—						—						(508)
General partner units			—						—																														—						(229)						(229)
Balance at June 30, 2022			484.0						$	(2,043)																													9.9						$	(582)					$	(2,625)

The accompanying notes are an integral part of these consolidated financial statements.

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CHENIERE ENERGY PARTNERS, L.P. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

(in millions)

(unaudited)

			Six Months Ended June 30,
			2023						2022
Cash flows from operating activities
Net income			$	2,557					$	501
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization expense			334						309
Amortization of debt issuance costs, premium and discount			15						15
Loss on modification or extinguishment of debt			2						—
Total losses (gains) on derivative instruments, net			(1,502)						819
Net cash provided by (used for) settlement of derivative instruments			2						(37)
Other			11						16
Changes in operating assets and liabilities:
Trade and other receivables			450						(208)
Trade receivables—affiliate			417						(269)
Advances to affiliate			21						7
Inventory			30						4
Margin deposits			32						2
Accounts payable and accrued liabilities			(739)						491
Accrued liabilities—related party			(2)						2
Due to affiliates			(34)						5
Total deferred revenue			(21)						(28)
Other, net			(31)						(41)
Other, net—affiliate			(4)						(2)
Net cash provided by operating activities			1,538						1,586
Cash flows from investing activities
Property, plant and equipment, net			(149)						(239)
Other			(6)						—
Net cash used in investing activities			(155)						(239)
Cash flows from financing activities
Proceeds from issuances of debt			1,397						—
Redemptions and repayments of debt			(200)						—
Debt issuance and other financing costs			(27)						—
Debt extinguishment costs			(1)						—
Distributions			(1,472)						(1,132)
Other			(1)						—
Net cash used in financing activities			(304)						(1,132)
Net increase in cash, cash equivalents and restricted cash and cash equivalents			1,079						215
Cash, cash equivalents and restricted cash and cash equivalents—beginning of period			996						974
Cash, cash equivalents and restricted cash and cash equivalents—end of period			$	2,075					$	1,189

Balances per Consolidated Balance Sheet:

			June 30,
			2023
Cash and cash equivalents			$	1,834
Restricted cash and cash equivalents			241
Total cash, cash equivalents and restricted cash and cash equivalents			$	2,075

The accompanying notes are an integral part of these consolidated financial statements.

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CHENIERE ENERGY PARTNERS, L.P. AND SUBSIDIARIES 

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(unaudited)

NOTE 1—NATURE OF OPERATIONS AND BASIS OF PRESENTATION

We own the natural gas liquefaction and export facility located in Cameron Parish, Louisiana at Sabine Pass (the “Sabine Pass LNG Terminal”) which has six operational Trains, for a total production capacity of approximately 30 mtpa of LNG (the “Liquefaction Project”). The Sabine Pass LNG Terminal also has operational regasification facilities that include five LNG storage tanks, vaporizers and three marine berths. Additionally, the Sabine Pass LNG Terminal includes a 94-mile pipeline owned by our subsidiary, CTPL, that interconnects the Sabine Pass LNG Terminal with a number of large interstate and intrastate pipelines (the “Creole Trail Pipeline”).

We have increased available liquefaction capacity at our Liquefaction Project as a result of debottlenecking and other optimization projects. We hold a significant land position at the Sabine Pass LNG Terminal, which provides opportunity for further liquefaction capacity expansion. In May 2023, certain of our subsidiaries entered the pre-filing review process with the FERC under the National Environmental Policy Act for an expansion adjacent to the Liquefaction Project consisting of up to three Trains with an expected total production capacity of approximately 20 mtpa of LNG. The development of this site or other projects, including infrastructure projects in support of natural gas supply and LNG demand, will require, among other things, acceptable commercial and financing arrangements before we make a positive final investment decision.

We do not have employees and thus we and our subsidiaries have various services agreements with affiliates of Cheniere in the ordinary course of business, including services required to construct, operate and maintain the Liquefaction Project, and administrative services. See Note 11—Related Party Transactions for additional details of the activity under these services agreements during the three and six months ended June 30, 2023 and 2022.

As of June 30, 2023, Cheniere owned 48.6% of our limited partner interest in the form of 239.9 million of our common units. Cheniere also owns 100% of our general partner interest and our incentive distribution rights (“IDRs”).

Basis of Presentation

The accompanying unaudited Consolidated Financial Statements of CQP have been prepared in accordance with GAAP for interim financial information and in accordance with Rule 10-01 of Regulation S-X and reflect all normal recurring adjustments which are, in the opinion of management, necessary for a fair statement of the financial results for the interim periods presented. Accordingly, they do not include all of the information and footnotes required by GAAP for complete financial statements and should be read in conjunction with the Consolidated Financial Statements and accompanying notes included in our annual report on Form 10-K for the fiscal year ended December 31, 2022.

Results of operations for the three and six months ended June 30, 2023 are not necessarily indicative of the results of operations that will be realized for the year ending December 31, 2023.

We are not subject to either federal or state income tax, as our partners are taxed individually on their allocable share of our taxable income.

Recent Accounting Standards

ASU 2020-04

In March 2020, the FASB issued ASU 2020-04, Reference Rate Reform (Topic 848): Facilitation of the Effects of Reference Rate Reform on Financial Reporting. This guidance primarily provides temporary optional expedients which simplify the accounting for contract modifications to existing debt agreements expected to arise from the market transition from LIBOR to alternative reference rates. The temporary optional expedients under the standard became effective March 12, 2020 and will be available until December 31, 2024 following a subsequent amendment to the standard.

As further detailed in Note 9—Debt, our existing credit facilities include a variable interest rate indexed to SOFR, incorporated through replacements of previous credit facilities subsequent to the effective date of ASU 2020-04. We elected to apply the optional expedients as applicable to certain replaced facilities; however, the impact of applying the optional expedients was not material, and the transition to SOFR did not have a material impact on our cash flows.

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CHENIERE ENERGY PARTNERS, L.P. AND SUBSIDIARIES 

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—CONTINUED

(unaudited)

NOTE 2—UNITHOLDERS’ EQUITY

 

The common units represent limited partner interests in us, which entitle the unitholders to participate in partnership distributions and exercise the rights and privileges available to limited partners under our partnership agreement. Although common unitholders are not obligated to fund losses of the Partnership, their capital account, which would be considered in allocating the net assets of the Partnership were it to be liquidated, continues to share in losses.

The general partner interest is entitled to at least 2% of all distributions made by us. In addition, the general partner holds IDRs, which allow the general partner to receive a higher percentage of quarterly distributions of available cash from operating surplus as additional target levels are met, but may transfer these rights separately from its general partner interest. The higher percentages range from 15% to 50%, inclusive of the general partner interest.

Our partnership agreement requires that, within 45 days after the end of each quarter, we distribute all of our available cash (as defined in our partnership agreement). Generally, our available cash is our cash on hand at the end of a quarter less the amount of any reserves established by our general partner. All distributions we have paid to date have been made from accumulated operating surplus as defined in the partnership agreement.

As of June 30, 2023, our total securities beneficially owned in the form of common units were held 48.6% by Cheniere, 41.5% by CQP Target Holdco L.L.C. (“CQP Target Holdco”) and other affiliates of Blackstone Inc. (“Blackstone”) and Brookfield Asset Management Inc. (“Brookfield”) and 7.9% by the public. All of our 2% general partner interest was held by Cheniere. CQP Target Holdco’s equity interests are 50.0% owned by BIP Chinook Holdco L.L.C., an affiliate of Blackstone, and 50.0% owned by BIF IV Cypress Aggregator (Delaware) LLC, an affiliate of Brookfield. The ownership of CQP Target Holdco, Blackstone and Brookfield are based on their most recent filings with the SEC.

NOTE 3—RESTRICTED CASH AND CASH EQUIVALENTS

 

Pursuant to the accounts agreement entered into with the collateral trustee for the benefit of SPL’s debt holders, SPL is required to deposit all cash received into reserve accounts controlled by the collateral trustee. The usage or withdrawal of such cash is restricted to the payment of liabilities related to the Liquefaction Project and other restricted payments.

As of June 30, 2023 and December 31, 2022, we had $241 million and $92 million of restricted cash and cash equivalents, respectively, as required under the above agreement.

NOTE 4—TRADE AND OTHER RECEIVABLES, NET OF CURRENT EXPECTED CREDIT LOSSES

Trade and other receivables, net of current expected credit losses consisted of the following (in millions):

						June 30,						December 31,
						2023						2022
Trade receivables						$	158					$	603
Other receivables						31						24
Total trade and other receivables, net of current expected credit losses						$	189					$	627

NOTE 5—INVENTORY

Inventory consisted of the following (in millions):

						June 30,						December 31,
						2023						2022
Materials						$	101					$	103
LNG						8						27
Natural gas						19						28
Other						2						2
Total inventory						$	130					$	160

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CHENIERE ENERGY PARTNERS, L.P. AND SUBSIDIARIES 

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—CONTINUED

(unaudited)

NOTE 6—PROPERTY, PLANT AND EQUIPMENT, NET OF ACCUMULATED DEPRECIATION

 

Property, plant and equipment, net of accumulated depreciation consisted of the following (in millions):

						June 30,						December 31,
						2023						2022
LNG terminal
Terminal and interconnecting pipeline facilities						$	20,131					$	20,072
Construction-in-process						149						140
Accumulated depreciation						(3,840)						(3,512)
Total LNG terminal, net of accumulated depreciation						16,440						16,700
Fixed assets
Fixed assets						29						29
Accumulated depreciation						(25)						(25)
Total fixed assets, net of accumulated depreciation						4						4
Assets under finance leases
Tug vessels						23						23
Accumulated depreciation						(4)						(2)
Total assets under finance lease, net of accumulated depreciation						19						21
Property, plant and equipment, net of accumulated depreciation						$	16,463					$	16,725

The following table shows depreciation expense and offsets to LNG terminal costs (in millions):

						Three Months Ended June 30,												Six Months Ended June 30,
						2023						2022						2023						2022
Depreciation expense						$	166					$	155					$	331					$	307
Offsets to LNG terminal costs (1)						—						—						—						148

(1)We recognize offsets to LNG terminal costs related to the sale of commissioning cargoes because these amounts were earned or loaded prior to the start of commercial operations of the respective Trains of the Liquefaction Project during the testing phase for its construction.

NOTE 7—DERIVATIVE INSTRUMENTS

SPL has commodity derivatives consisting of natural gas supply contracts, including those under the IPM agreement, for the operation of the Liquefaction Project and associated economic hedges (collectively, “Liquefaction Supply Derivatives”).

We recognize SPL’s derivative instruments as either assets or liabilities and measure those instruments at fair value. None of SPL’s derivative instruments are designated as cash flow or fair value hedging instruments, and changes in fair value are recorded within our Consolidated Statements of Income to the extent not utilized for the commissioning process, in which case such changes are capitalized.

The following table shows the fair value of the derivative instruments that are required to be measured at fair value on a recurring basis (in millions):

			Fair Value Measurements as of
			June 30, 2023																								December 31, 2022
			Quoted Prices in Active Markets (Level 1)						Significant Other Observable Inputs (Level 2)						Significant Unobservable Inputs (Level 3)						Total						Quoted Prices in Active Markets (Level 1)						Significant Other Observable Inputs (Level 2)						Significant Unobservable Inputs (Level 3)						Total
Liquefaction Supply Derivatives asset (liability)			$	10					$	4					$	(2,255)					$	(2,241)					$	(12)					$	(10)					$	(3,719)					$	(3,741)

We value the Liquefaction Supply Derivatives using a market or option-based approach incorporating present value techniques, as needed, using observable commodity price curves, when available, and other relevant data.

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CHENIERE ENERGY PARTNERS, L.P. AND SUBSIDIARIES 

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—CONTINUED

(unaudited)

The fair value of the Liquefaction Supply Derivatives is predominantly driven by observable and unobservable market commodity prices and, as applicable to our natural gas supply contracts, our assessment of the associated events deriving fair value including, but not limited to, evaluation of whether the respective market exists from the perspective of market participants as infrastructure is developed.

We include a significant portion of the Liquefaction Supply Derivatives as Level 3 within the valuation hierarchy as the fair value is developed through the use of internal models which incorporate significant unobservable inputs. In instances where observable data is unavailable, consideration is given to the assumptions that market participants would use in valuing the asset or liability. This includes assumptions about market risks, such as future prices of energy units for unobservable periods, liquidity and volatility.

The Level 3 fair value measurements of the natural gas positions within the Liquefaction Supply Derivatives could be materially impacted by a significant change in certain natural gas and international LNG prices. The following table includes quantitative information for the unobservable inputs for the Level 3 Liquefaction Supply Derivatives as of June 30, 2023:

Net Fair Value Liability (in millions)

Valuation Approach

Significant Unobservable Input

Range of Significant Unobservable Inputs / Weighted Average (1)

Liquefaction Supply Derivatives

$(2,255)

Market approach incorporating present value techniques

Henry Hub basis spread

$(1.733) - $0.585 / $(0.002)

Option pricing model

International LNG pricing spread, relative to Henry Hub (2)

119% - 484% / 224%

(1)Unobservable inputs were weighted by the relative fair value of the instruments.

(2)Spread contemplates U.S. dollar-denominated pricing.

Increases or decreases in basis or pricing spreads, in isolation, would decrease or increase, respectively, the fair value of the Liquefaction Supply Derivatives.

The following table shows the changes in the fair value of the Level 3 Liquefaction Supply Derivatives (in millions):

						Three Months Ended June 30,												Six Months Ended June 30,
						2023						2022						2023						2022
Balance, beginning of period						$	(2,502)					$	(3,162)					$	(3,719)					$	38
Realized and change in fair value gains (losses) included in net income (1):
Included in cost of sales, existing deals (2)						173						(309)						1,116						63
Included in cost of sales, new deals (3)						3						—						5						—
Purchases and settlements:
Purchases (4)						—						8						—						(3,549)
Settlements (5)						71						7						340						(8)
Transfers in and/or out of level 3
Transfers out of level 3 (6)						—						—						3						—
Balance, end of period						$	(2,255)					$	(3,456)					$	(2,255)					$	(3,456)
Favorable (unfavorable) changes in fair value relating to instruments still held at the end of the period						$	176					$	(309)					$	1,121					$	63

(1)Does not include the realized value associated with derivative instruments that settle through physical delivery, as settlement is equal to contractually fixed price from trade date multiplied by contractual volume.  See settlements line item in this table.

(2)Impact to earnings on deals that existed at the beginning of the period and continue to exist at the end of the period.

(3)Impact to earnings on deals that were entered into during the reporting period and continue to exist at the end of the period.

(4)Includes any day one gain (loss) recognized during the reporting period on deals that were entered into during the reporting period which continue to exist at the end of the period, in addition to any derivative contracts acquired from

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CHENIERE ENERGY PARTNERS, L.P. AND SUBSIDIARIES 

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—CONTINUED

(unaudited)

entities at a value other than zero on acquisition date, such as derivatives assigned or novated during the reporting period and continuing to exist at the end of the period.

(5)Roll-off in the current period of amounts recognized in our Consolidated Balance Sheets at the end of the previous period due to settlement of the underlying instruments in the current period.

(6)Transferred out of Level 3 as a result of observable market for the underlying natural gas purchase agreements.

All counterparty derivative contracts provide for the unconditional right of set-off in the event of default. We have elected to report derivative assets and liabilities arising from those derivative contracts with the same counterparty and the unconditional contractual right of set-off on a net basis. The use of derivative instruments exposes SPL to counterparty credit risk, or the risk that a counterparty will be unable to meet its commitments, in instances when the derivative instruments are in an asset position. Additionally, counterparties are at risk that SPL will be unable to meet its commitments in instances where the derivative instruments are in a liability position. We incorporate both SPL’s nonperformance risk and the respective counterparty’s nonperformance risk in fair value measurements depending on the position of the derivative. In adjusting the fair value of the derivative contracts for the effect of nonperformance risk, we have considered the impact of any applicable credit enhancements, such as collateral postings, set-off rights and guarantees.

Liquefaction Supply Derivatives

SPL holds Liquefaction Supply Derivatives which are primarily indexed to the natural gas market and international LNG indices. The terms of the Liquefaction Supply Derivatives range up to approximately 15 years, some of which commence upon the satisfaction of certain events or states of affairs.

The forward notional amount for the Liquefaction Supply Derivatives was approximately 5,831 TBtu and 5,972 TBtu as of June 30, 2023 and December 31, 2022, respectively, excluding notional amounts associated with extension options that were uncertain to be taken as of June 30, 2023.

The following table shows the effect and location of the Liquefaction Supply Derivatives recorded on our Consolidated Statements of Income (in millions):

						Gain (Loss) Recognized in Consolidated Statements of Income
Consolidated Statements of Income Location (1)						Three Months Ended June 30,												Six Months Ended June 30,
						2023						2022						2023						2022
LNG revenues						$	—					$	4					$	—					$	4
Cost of sales						242						(298)						1,502						(823)

(1)Does not include the realized value associated with Liquefaction Supply Derivatives that settle through physical delivery. Fair value fluctuations associated with commodity derivative activities are classified and presented consistently with the item economically hedged and the nature and intent of the derivative instrument.

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CHENIERE ENERGY PARTNERS, L.P. AND SUBSIDIARIES 

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—CONTINUED

(unaudited)

Fair Value and Location of Derivative Assets and Liabilities on the Consolidated Balance Sheets

The following table shows the fair value and location of the Liquefaction Supply Derivatives on our Consolidated Balance Sheets (in millions):

						Fair Value Measurements as of (1)
Consolidated Balance Sheets Location						June 30, 2023																		December 31, 2022
Current derivative assets						$	32																	$	24
Derivative assets						29																		28
Total derivative assets						61																		52
Current derivative liabilities						(366)																		(769)
Derivative liabilities						(1,936)																		(3,024)
Total derivative liabilities						(2,302)																		(3,793)
Derivative liability, net						$	(2,241)																	$	(3,741)

(1)Does not include collateral posted with counterparties by us of $3 million and $35 million as of June 30, 2023 and December 31, 2022, respectively, which are included in margin deposits on our Consolidated Balance Sheets.

Consolidated Balance Sheets Presentation

The following table shows the fair value of the derivatives outstanding on a gross and net basis (in millions) for the derivative instruments that are presented on a net basis on our Consolidated Balance Sheets:

						Liquefaction Supply Derivatives
						June 30, 2023						December 31, 2022
Gross assets						$	68					$	57
Offsetting amounts						(7)						(5)
Net assets						$	61					$	52
Gross liabilities						$	(2,325)					$	(3,814)
Offsetting amounts						23						21
Net liabilities						$	(2,302)					$	(3,793)

NOTE 8—ACCRUED LIABILITIES

 

Accrued liabilities consisted of the following (in millions):

						June 30,						December 31,
						2023						2022
Natural gas purchases						$	241					$	1,017
Interest costs and related debt fees						181						218
LNG terminal and related pipeline costs						105						137
Other accrued liabilities						29						6
Total accrued liabilities						$	556					$	1,378

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CHENIERE ENERGY PARTNERS, L.P. AND SUBSIDIARIES 

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—CONTINUED

(unaudited)

NOTE 9—DEBT

Debt consisted of the following (in millions):

						June 30,						December 31,
						2023						2022
SPL:
Senior Secured Notes:
5.75% due 2024 (the “2024 SPL Senior Notes”) (1)						$	1,800					$	2,000
5.625% due 2025						2,000						2,000
5.875% due 2026						1,500						1,500
5.00% due 2027						1,500						1,500
4.200% due 2028						1,350						1,350
4.500% due 2030						2,000						2,000
4.746% weighted average rate due 2037						1,782						1,782
Total SPL Senior Secured Notes						11,932						12,132
Working capital revolving credit and letter of credit reimbursement agreement (the “SPL Working Capital Facility”)						—						—
Revolving credit and guaranty agreement (the “SPL Revolving Credit Facility”)						—						—
Total debt - SPL						11,932						12,132
CQP:
Senior Notes:
4.500% due 2029						1,500						1,500
4.000% due 2031						1,500						1,500
3.25% due 2032						1,200						1,200
5.95% due 2033 (the “2033 CQP Senior Notes”)						1,400						—
Total CQP Senior Notes						5,600						4,200
Credit facilities (the “CQP Credit Facilities”)						—						—
Revolving credit and guaranty agreement (the “CQP Revolving Credit Facility”)						—						—
Total debt - CQP						5,600						4,200
Total debt						17,532						16,332
Current portion of long-term debt						(1,796)						—
Long-term portion of unamortized premium, discount and debt issuance costs, net						(141)						(134)
Total long-term debt, net of premium, discount and debt issuance costs						$	15,595					$	16,198

(1)In July 2023, SPL redeemed $1.4 billion aggregate principal amount outstanding of the 2024 SPL Senior Notes using contributed proceeds from the 2033 CQP Senior Notes and cash on hand.

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CHENIERE ENERGY PARTNERS, L.P. AND SUBSIDIARIES 

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—CONTINUED

(unaudited)

Credit Facilities

Below is a summary of our credit facilities outstanding as of June 30, 2023 (in millions):

												SPL Revolving Credit Facility (1)						CQP Revolving Credit Facility (1)
Total facility size												$	1,000					$	1,000
Less:
Outstanding balance												—						—
Letters of credit issued												329						—
Available commitment												$	671					$	1,000
Priority ranking												Senior secured						Senior unsecured
Interest rate on available balance (2)												SOFR plus credit spread adjustment of 0.1%, plus margin of 1.0% - 1.75% or base rate plus 0.0% - 0.75%						SOFR plus credit spread adjustment of 0.1%, plus margin of 1.125% - 2.0% or base rate plus 0.125% - 1.0%
Commitment fees on undrawn balance (2)												0.075% - 0.30%						0.10% - 0.30%
Maturity date												June 23, 2028						June 23, 2028

(1)In June 2023, we and SPL refinanced and replaced the CQP Credit Facilities and the SPL Working Capital Facility with the CQP Revolving Credit Facility and the SPL Revolving Credit Facility, respectively, resulting in extended maturity dates, revised borrowing capacities, reduced rate of interest and commitment fees applicable thereunder and certain other changes to terms and conditions.

(2)The margin on the interest rate and the commitment fees is subject to change based on the applicable entity’s credit rating.

The refinancing and the replacement of the CQP Credit Facilities and the SPL Working Capital Facility resulted in an aggregate of $1 million of debt extinguishment and modification costs.

Restrictive Debt Covenants

The indentures governing our senior notes and other agreements underlying our debt contain customary terms and events of default and certain covenants that, among other things, may limit us and our restricted subsidiaries’ ability to make certain investments or pay dividends or distributions. SPL is restricted from making distributions under agreements governing its indebtedness generally until, among other requirements, appropriate reserves have been established for debt service using cash or letters of credit and a historical debt service coverage ratio and projected debt service coverage ratio of at least 1.25:1.00 is satisfied.

As of June 30, 2023, we and SPL were in compliance with all covenants related to our respective debt agreements.

Interest Expense

Total interest expense, net of capitalized interest, consisted of the following (in millions):

						Three Months Ended June 30,												Six Months Ended June 30,
						2023						2022						2023						2022
Total interest cost						$	209					$	223					$	419					$	447
Capitalized interest						(2)						(7)						(4)						(28)
Total interest expense, net of capitalized interest						$	207					$	216					$	415					$	419

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CHENIERE ENERGY PARTNERS, L.P. AND SUBSIDIARIES 

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—CONTINUED

(unaudited)

Fair Value Disclosures

The following table shows the carrying amount and estimated fair value of our senior notes (in millions):

						June 30, 2023												December 31, 2022
						Carrying Amount						Estimated Fair Value (1)						Carrying Amount						Estimated Fair Value (1)
Senior notes						$	17,532					$	16,748					$	16,332					$	15,386

(1)As of both June 30, 2023 and December 31, 2022, $1.2 billion of the fair value of our senior notes included an illiquidity adjustment which qualified as a Level 3 fair value measurement. The remainder of our senior notes are classified as Level 2, based on prices derived from trades or indicative bids of the instruments or instruments with similar terms, maturities and credit standing.

The estimated fair value of our credit facilities approximates the principal amount outstanding because the interest rates are variable and reflective of market rates and the debt may be repaid, in full or in part, at any time without penalty.

NOTE 10—REVENUES

The following table represents a disaggregation of revenue earned (in millions):

						Three Months Ended June 30,												Six Months Ended June 30,
						2023						2022						2023						2022
Revenues from contracts with customers
LNG revenues						$	1,415					$	2,955					$	3,521					$	5,443
LNG revenues—affiliate						469						1,135						1,230						1,892
LNG revenues—related party						—						4						—						4
Regasification revenues						33						68						67						136
Other revenues						16						15						32						30
Total revenues from contracts with customers						1,933						4,177						4,850						7,505
Net derivative gain (1)						—						4						—						4
Total revenues						$	1,933					$	4,181					$	4,850					$	7,509

(1)See Note 7—Derivative Instruments for additional information about our derivatives.

Contract Assets and Liabilities

The following table shows our contract assets, net of current expected credit losses, which are classified as other current assets and other non-current assets, net on our Consolidated Balance Sheets (in millions):

						June 30,						December 31,
						2023						2022
Contract assets, net of current expected credit losses						$	1					$	1

The following table reflects the changes in our contract liabilities, which we classify as deferred revenue and other non-current liabilities on our Consolidated Balance Sheets (in millions):

						Six Months Ended June 30, 2023
Deferred revenue, beginning of period						$	144
Cash received but not yet recognized in revenue						123
Revenue recognized from prior period deferral						(144)
Deferred revenue, end of period						$	123

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CHENIERE ENERGY PARTNERS, L.P. AND SUBSIDIARIES 

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—CONTINUED

(unaudited)

The following table reflects the changes in our contract liabilities to affiliate, which we classify as deferred revenue—affiliate and other non-current liabilities—affiliate on our Consolidated Balance Sheets (in millions):

						Six Months Ended June 30, 2023
Deferred revenue—affiliate, beginning of period						$	8
Cash received but not yet recognized in revenue						5
Revenue recognized from prior period deferral						(8)
Deferred revenue—affiliate, end of period						$	5

Transaction Price Allocated to Future Performance Obligations

Because many of our sales contracts have long-term durations, we are contractually entitled to significant future consideration which we have not yet recognized as revenue. The following table discloses the aggregate amount of the transaction price that is allocated to performance obligations that have not yet been satisfied:

						June 30, 2023												December 31, 2022
						Unsatisfied Transaction Price (in billions)						Weighted Average Recognition Timing (years) (1)						Unsatisfied Transaction Price (in billions)						Weighted Average Recognition Timing (years) (1)
LNG revenues						$	49.2					8						$	50.8					8
LNG revenues—affiliate						1.6						2						2.0						2
Regasification revenues						0.7						3						0.8						4
Total revenues						$	51.5											$	53.6

(1)The weighted average recognition timing represents an estimate of the number of years during which we shall have recognized half of the unsatisfied transaction price.

We have elected the following exemptions which omit certain potential future sources of revenue from the table above:

(1)We omit from the table above all performance obligations that are part of a contract that has an original expected duration of one year or less.

(2)The table above excludes substantially all variable consideration under our SPAs and TUAs. We omit from the table above all variable consideration that is allocated entirely to a wholly unsatisfied performance obligation or to a wholly unsatisfied promise to transfer a distinct good or service that forms part of a single performance obligation when that performance obligation qualifies as a series. The amount of revenue from variable fees that is not included in the transaction price will vary based on the future prices of Henry Hub throughout the contract terms, to the extent customers elect to take delivery of their LNG, and adjustments to the consumer price index. Certain of our contracts contain additional variable consideration based on the outcome of contingent events and the movement of various indexes. We have not included such variable consideration in the transaction price to the extent the consideration is considered constrained due to the uncertainty of ultimate pricing and receipt. Approximately 49% and 75% of our LNG revenues from contracts included in the table above during the three months ended June 30, 2023 and 2022, respectively, and approximately 57% and 72% of our LNG revenues from contracts included in the table above during the six months ended June 30, 2023 and 2022, respectively, were related to variable consideration received from customers. Approximately 66% and 100% of our LNG revenues—affiliate from contracts included in the table above during the three months ended June 30, 2023 and 2022, respectively, and approximately 70% and 100% of our LNG revenues—affiliate from contracts included in the table above during the six months ended June 30, 2023 and 2022, respectively, were related to variable consideration received from customers. During the three and six months ended June 30, 2023, approximately 7% of our regasification revenues were related to variable consideration received from customers and during the three and six months ended June 30, 2022, approximately 6% of our regasification revenues were related to variable consideration received from customers.

We may enter into contracts to sell LNG that are conditioned upon one or both of the parties achieving certain milestones such as reaching a final investment decision on a certain liquefaction Train, obtaining financing or achieving substantial completion of a Train and any related facilities. These contracts are considered completed contracts for revenue recognition purposes and are included in the transaction price above when the conditions are considered probable of being met.

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CHENIERE ENERGY PARTNERS, L.P. AND SUBSIDIARIES 

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—CONTINUED

(unaudited)

NOTE 11—RELATED PARTY TRANSACTIONS

 

Below is a summary of our transactions with our affiliates and other related parties, all in the ordinary course of business, as reported on our Consolidated Statements of Income (in millions):

						Three Months Ended June 30,												Six Months Ended June 30,
						2023						2022						2023						2022
LNG revenues—affiliate
SPAs and Letter Agreements with Cheniere Marketing						$	468					$	1,100					$	1,229					$	1,845
Contracts for Sale and Purchase of Natural Gas and LNG with other affiliates						1						35						1						47
Total LNG revenues—affiliate						469						1,135						1,230						1,892
LNG revenues—related party
Natural Gas Transportation and Storage Agreements (1)						—						4						—						4
Cost of sales—affiliate
Contracts for Sale and Purchase of Natural Gas and LNG						1						57						18						62
Cost of sales—related party
Natural Gas Transportation and Storage Agreements (1)						—						1						—						1
Operating and maintenance expense—affiliate
Services Agreements (see Note 1)						38						41						82						79
Operating and maintenance expense—related party
Natural Gas Transportation and Storage Agreements (1)						14						15						30						27
General and administrative expense—affiliate
Services Agreements (see Note 1)						24						24						46						47

(1)This related party is partially owned by Brookfield, who indirectly owns a portion of our limited partner interests.

Other Agreements

Terminal Marine Services Agreement

In connection with its tug boat lease, Tug Services entered into an agreement with Cheniere Terminals to provide its LNG cargo vessels with tug boat and marine services at the Sabine Pass LNG Terminal. The agreement also provides that Tug Services shall contingently pay Cheniere Terminals a portion of its future revenues. Tug Services distributed $2 million and $4 million during the three months ended June 30, 2023 and 2022, respectively, and $4 million and $5 million during the six months ended June 30, 2023 and 2022, respectively, to Cheniere Terminals, which is recognized as part of the distributions to our general partner interest holders on our Consolidated Statements of Partners’ Equity (Deficit).

Cooperative Endeavor Agreements (“CEAs”)

SPLNG has executed CEAs with various Cameron Parish, Louisiana taxing authorities that allowed them to collect certain advanced payments of annual ad valorem taxes from SPLNG from 2007 through 2016. This initiative represented an aggregate commitment of $25 million over 10 years in order to aid in their reconstruction efforts following Hurricane Rita. In exchange for SPLNG’s advance payments of annual ad valorem taxes, Cameron Parish shall grant SPLNG a dollar-for-dollar credit against future ad valorem taxes to be levied against the Sabine Pass LNG Terminal as early as 2019. In 2018, SPLNG entered into a Memorandum of Understanding, which forgave $7 million of the dollar-for-dollar credits, and in 2022, an agreement was reached to defer the commencement of the dollar-for-dollar credits until 2027. As of both June 30, 2023 and December 31, 2022, we had $17 million of amounts associated with dollar-for-dollar credits due on advance tax payments to the taxing authorities recorded to other non-current assets on our Consolidated Balance Sheets. Beginning in September 2007, SPLNG entered into various agreements with Cheniere Marketing, pursuant to which Cheniere Marketing would pay SPLNG

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CHENIERE ENERGY PARTNERS, L.P. AND SUBSIDIARIES 

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—CONTINUED

(unaudited)

additional TUA revenues equal to any and all amounts payable by SPLNG to the Cameron Parish taxing authorities under the CEAs. In exchange for such amounts received as TUA revenues from Cheniere Marketing, SPLNG will make payments to Cheniere Marketing equal to the dollar-for-dollar credit applied to the ad valorem tax levied against the Sabine Pass LNG Terminal. We had $17 million of other non-current liabilities—affiliate as of both June 30, 2023 and December 31, 2022 from these payments received from Cheniere Marketing.

NOTE 12—NET INCOME PER COMMON UNIT

 

Net income per common unit for a given period is based on the distributions that we declare to the common unitholders with respect to the period plus an allocation of undistributed net income (loss) based on provisions of the partnership agreement, divided by the weighted average number of common units outstanding. Distributions declared by us during the period are presented on the Consolidated Statements of Partners’ Equity (Deficit). On July 28, 2023, we declared a cash distribution of $1.03 per common unit to unitholders of record as of August 7, 2023 and the related general partner distribution to be paid on August 14, 2023 with respect to the three months ended June 30, 2023. These distributions consist of a base amount of $0.775 per unit and a variable amount of $0.255 per unit.

The two-class method dictates that net income for a period be reduced by the amount of available cash that will be distributed with respect to that period and that any residual amount representing undistributed net income be allocated to common unitholders and other participating unitholders to the extent that each unit may share in net income as if all of the net income for the period had been distributed in accordance with the partnership agreement. Undistributed income is allocated to participating securities based on the distribution waterfall for available cash specified in the partnership agreement. Undistributed losses (including those resulting from distributions in excess of net income) are allocated to common units and other participating securities on a pro rata basis based on provisions of the partnership agreement. Distributions are treated as distributed earnings in the computation of earnings per common unit even though cash distributions are not necessarily derived from current or prior period earnings.

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CHENIERE ENERGY PARTNERS, L.P. AND SUBSIDIARIES 

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—CONTINUED

(unaudited)

The following table provides a reconciliation of net income and the allocation of net income to the common units, the subordinated units, the general partner units and IDRs for purposes of computing basic and diluted net income per unit (in millions, except per unit data).

						Total						Limited Partner Common Units																		General Partner Units						IDR
Three Months Ended June 30, 2023
Net income						$	622
Declared distributions						714						498																		15						201
Assumed allocation of undistributed net loss (1)						$	(92)					(91)																		(1)						—
Assumed allocation of net income												$	407																	$	14					$	201
Weighted average units outstanding												484.0
Basic and diluted net income per unit												$	0.84
Three Months Ended June 30, 2022
Net income						$	342
Declared distributions						743						513																		15						215
Assumed allocation of undistributed net loss (1)						$	(401)					(393)																		(8)						—
Assumed allocation of net income												$	120																	$	7					$	215
Weighted average units outstanding												484.0
Basic and diluted net income per unit												$	0.25
Six Months Ended June 30, 2023
Net income						$	2,557
Declared distributions						1,428						997																		29						402
Assumed allocation of undistributed net income (1)						$	1,129					1,106																		23						—
Assumed allocation of net income												$	2,103																	$	52					$	402
Weighted average units outstanding												484.0
Basic and diluted net income per unit												$	4.35
Six Months Ended June 30, 2022
Net income						$	501
Declared distributions						1,476						1,021																		30						425
Assumed allocation of undistributed net loss (1)						$	(975)					(955)																		(20)						—
Assumed allocation of net income												$	66																	$	10					$	425
Weighted average units outstanding												484.0
Basic and diluted net income per unit (2)												$	0.13

(1)Under our partnership agreement, the IDRs participate in net income only to the extent of the amount of cash distributions actually declared, thereby excluding the IDRs from participating in undistributed net income (loss).

(2)Basic and diluted net income per unit in the table may not recalculate exactly due to rounding because it is calculated based on whole numbers, not the rounded numbers presented.

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CHENIERE ENERGY PARTNERS, L.P. AND SUBSIDIARIES 

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—CONTINUED

(unaudited)

NOTE 13—CUSTOMER CONCENTRATION

  

The concentration of our customer credit risk in excess of 10% of total revenues and/or trade and other receivables, net of current expected credit losses and contract assets, net of current expected credit losses was as follows:

						Percentage of Total Revenues from External Customers																								Percentage of Trade and Other Receivables, Net and Contract Assets, Net from External Customers
						Three Months Ended June 30,												Six Months Ended June 30,												June 30,						December 31,
						2023						2022						2023						2022												2023						2022
Customer A						24%						23%						26%						26%												15%						27%
Customer B						15%						18%						15%						16%												10%						18%
Customer C						15%						18%						16%						18%												11%						*
Customer D						14%						16%						15%						15%												13%						18%
Customer E						12%						14%						11%						13%												11%						*
Customer F						*						*						*						*												—%						13%
Customer G						*						—%						*						—%												10%						—%
Customer H						*						—%						*						—%												14%						—%

* Less than 10%

NOTE 14—SUPPLEMENTAL CASH FLOW INFORMATION

 

The following table provides supplemental disclosure of cash flow information (in millions):

			Six Months Ended June 30,
			2023						2022
Cash paid during the period for interest on debt, net of amounts capitalized			$	432					$	377
Non-cash investing activity:
Unpaid purchases of property, plant and equipment, net			17						161

Novation of IPM Agreement from Corpus Christi Liquefaction Stage III, LLC (“CCL Stage III”)

In March 2022, in connection with a prior commitment from Cheniere to collateralize financing for Train 6 of the Liquefaction Project, SPL and CCL Stage III, formerly a wholly owned direct subsidiary of Cheniere that merged with and into CCL, entered into an agreement to assign to SPL an IPM agreement to purchase 140,000 MMBtu per day of natural gas at a price based on the Platts Japan Korea Marker (“JKM”), for a term of approximately 15 years beginning in early 2023. The transaction was accounted for as a transfer between entities under common control, which required us to recognize the obligations assumed at the historical basis of Cheniere. Upon the transfer, which occurred on March 15, 2022, we recognized $2.7 billion in distributions to Cheniere’s common unitholder interest within our Consolidated Statements of Partners’ Equity (Deficit) based on our assumption of current derivative liabilities and derivative liabilities of $142 million and $2.6 billion, respectively, which represented a non-cash financing activity.

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ITEM 2.    MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Information Regarding Forward-Looking Statements

This quarterly report contains certain statements that are, or may be deemed to be, “forward-looking statements.” All statements, other than statements of historical or present facts or conditions, included herein or incorporated herein by reference are “forward-looking statements.” Included among “forward-looking statements” are, among other things:

•statements regarding our ability to pay distributions to our unitholders; 

•statements regarding our expected receipt of cash distributions from SPLNG, SPL or CTPL; 

•statements that we expect to commence or complete construction of our proposed LNG terminal, liquefaction facility, pipeline facility or other projects, or any expansions or portions thereof, by certain dates, or at all;

•statements regarding future levels of domestic and international natural gas production, supply or consumption or future levels of LNG imports into or exports from North America and other countries worldwide or purchases of natural gas, regardless of the source of such information, or the transportation or other infrastructure or demand for and prices related to natural gas, LNG or other hydrocarbon products;

•statements regarding any financing transactions or arrangements, or our ability to enter into such transactions;

•statements regarding our future sources of liquidity and cash requirements;

•statements relating to the construction of our Trains, including statements concerning the engagement of any EPC contractor or other contractor and the anticipated terms and provisions of any agreement with any EPC or other contractor, and anticipated costs related thereto;

•statements regarding any SPA or other agreement to be entered into or performed substantially in the future, including any revenues anticipated to be received and the anticipated timing thereof, and statements regarding the amounts of total LNG regasification, natural gas liquefaction or storage capacities that are, or may become, subject to contracts;

•statements regarding counterparties to our commercial contracts, construction contracts and other contracts;

•statements regarding our planned development and construction of additional Trains, including the financing of such Trains;

•statements that our Trains, when completed, will have certain characteristics, including amounts of liquefaction capacities;

•statements regarding our business strategy, our strengths, our business and operation plans or any other plans, forecasts, projections, or objectives, including anticipated revenues, capital expenditures, maintenance and operating costs and cash flows, any or all of which are subject to change;

•statements regarding legislative, governmental, regulatory, administrative or other public body actions, approvals, requirements, permits, applications, filings, investigations, proceedings or decisions; and

•any other statements that relate to non-historical or future information.

All of these types of statements, other than statements of historical or present facts or conditions, are forward-looking statements. In some cases, forward-looking statements can be identified by terminology such as “may,” “will,” “could,” “should,” “achieve,” “anticipate,” “believe,” “contemplate,” “continue,” “estimate,” “expect,” “intend,” “plan,” “potential,” “predict,” “project,” “pursue,” “target,” the negative of such terms or other comparable terminology. The forward-looking statements contained in this quarterly report are largely based on our expectations, which reflect estimates and assumptions made by our management. These estimates and assumptions reflect our best judgment based on currently known market conditions and other factors. Although we believe that such estimates are reasonable, they are inherently uncertain and involve a number of risks and uncertainties beyond our control. In addition, assumptions may prove to be inaccurate. We caution that the forward-looking statements contained in this quarterly report are not guarantees of future performance and that such statements may not be realized or the forward-looking statements or events may not occur. Actual results may differ materially from those anticipated or implied in forward-looking statements as a result of a variety of factors described in this quarterly report and in the other reports and other information that we file with the SEC, including those discussed under “Risk Factors”

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in our annual report on Form 10-K for the fiscal year ended December 31, 2022. All forward-looking statements attributable to us or persons acting on our behalf are expressly qualified in their entirety by these risk factors. These forward-looking statements speak only as of the date made, and other than as required by law, we undertake no obligation to update or revise any forward-looking statement or provide reasons why actual results may differ, whether as a result of new information, future events or otherwise.

Introduction

 

The following discussion and analysis presents management’s view of our business, financial condition and overall performance and should be read in conjunction with our Consolidated Financial Statements and the accompanying notes. This information is intended to provide investors with an understanding of our past performance, current financial condition and outlook for the future.

Our discussion and analysis includes the following subjects: 

•Overview 

•Overview of Significant Events

•Results of Operations 

•Liquidity and Capital Resources 

•Summary of Critical Accounting Estimates

•Recent Accounting Standards

 

Overview

We are a publicly traded Delaware limited partnership formed in 2006 by Cheniere. We provide clean, secure and affordable LNG to integrated energy companies, utilities and energy trading companies around the world. We aspire to conduct our business in a safe and responsible manner, delivering a reliable, competitive and integrated source of LNG to our customers.

LNG is natural gas (methane) in liquid form. The LNG we produce is shipped all over the world, turned back into natural gas (called “regasification”) and then transported via pipeline to homes and businesses and used as an energy source that is essential for heating, cooking, other industrial uses and back up for intermittent energy sources. Natural gas is a cleaner-burning, abundant and affordable source of energy. When LNG is converted back to natural gas, it can be used instead of coal, which reduces the amount of pollution traditionally produced from burning fossil fuels, like sulfur dioxide and particulate matter that enters the air we breathe. Additionally, compared to coal, it produces significantly fewer carbon emissions. By liquefying natural gas, we are able to reduce its volume by 600 times so that we can load it onto special LNG carriers designed to keep the LNG cold and in liquid form for efficient transport overseas.

We own a natural gas liquefaction and export facility located in Cameron Parish, Louisiana at Sabine Pass (the “Sabine Pass LNG Terminal”), one of the largest LNG production facilities in the world, which has six operational Trains, for a total production capacity of approximately 30 mtpa of LNG (the “Liquefaction Project”). The Sabine Pass LNG Terminal also has three marine berths, two of which can accommodate vessels with nominal capacity of up to 266,000 cubic meters and the third berth which can accommodate vessels with nominal capacity of up to 200,000 cubic meters, operational regasification facilities that include five LNG storage tanks with aggregate capacity of approximately 17 Bcfe and vaporizers with regasification capacity of approximately 4 Bcf/d. We also own a 94-mile pipeline through our subsidiary, CTPL, that interconnects our facilities to several interstate and intrastate pipelines (the “Creole Trail Pipeline”).

Our long-term customer arrangements form the foundation of our business and provide us with significant, stable, long-term cash flows. We have contracted most of our anticipated production capacity under SPAs, in which our customers are generally required to pay a fixed fee with respect to the contracted volumes irrespective of their election to cancel or suspend deliveries of LNG cargoes, and under an IPM agreement, in which the gas producer sells natural gas to us on a global LNG index price, less a fixed liquefaction fee, shipping and other costs. Through our SPAs and IPM agreement, we have contracted approximately 85% of the total production capacity from the Liquefaction Project with approximately 15 years of weighted average remaining life as of June 30, 2023.

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We remain focused on safety, operational excellence and customer satisfaction. Increasing demand for LNG has allowed us to expand our liquefaction infrastructure in a financially disciplined manner. We have increased available liquefaction capacity at our Liquefaction Project as a result of debottlenecking and other optimization projects. We hold a significant land position at the Sabine Pass LNG Terminal, which provides opportunity for further liquefaction capacity expansion. In May 2023, certain of our subsidiaries entered the pre-filing review process with the FERC under the National Environmental Policy Act (“NEPA”) for an expansion adjacent to the Liquefaction Project consisting of up to three Trains with an expected total production capacity of approximately 20 mtpa of LNG (the “SPL Expansion Project”). The development of this site or other projects, including infrastructure projects in support of natural gas supply and LNG demand, will require, among other things, acceptable commercial and financing arrangements before we make a positive final investment decision.

Additionally, we are committed to the responsible and proactive management of our most important environmental, social and governance (“ESG”) impacts, risks and opportunities. In 2022, Cheniere published Acting Today, Securing Tomorrow, its third Corporate Responsibility (“CR”) report, which details its approach and progress on ESG issues, including its collaboration with natural gas midstream companies, technology providers and leading academic institutions on life-cycle assessment (“LCA”) models, quantification, monitoring, reporting and verification (“QMRV”) of greenhouse gas emissions and other research and development projects. Cheniere also co-founded and sponsored the Energy Emissions Modeling and Data Lab (“EEMDL”), a multidisciplinary research and education initiative led by the University of Texas at Austin in collaboration with Colorado State University and the Colorado School of Mines. In addition, Cheniere commenced providing Cargo Emissions Tags (“CE Tags”) to our long-term customers in June 2022 and joined the Oil and Gas Methane Partnership (“OGMP”) 2.0, the United Nations Environment Programme’s (“UNEP”) flagship oil and gas methane emissions reporting and mitigation initiative, in October 2022. Cheniere’s CR report is available at cheniere.com/our-responsibility/reporting-center. Information on Cheniere’s website, including the CR report, is not incorporated by reference into this Quarterly Report on Form 10-Q.

Overview of Significant Events

Our significant events since January 1, 2023 and through the filing date of this Form 10-Q include the following:  

Strategic

•In May 2023, certain of our subsidiaries entered the pre-filing review process with the FERC under the NEPA for the SPL Expansion Project, and in April 2023, one of our subsidiaries executed a contract with Bechtel Energy Inc. to provide the front end engineering and design work on the project.

•On January 2, 2023, Corey Grindal, formerly Executive Vice President, Worldwide Trading, was promoted to Executive Vice President and Chief Operating Officer of Cheniere Energy Partners GP, LLC (“Cheniere GP”).

Operational

•As of July 27, 2023, over 2,150 cumulative LNG cargoes totaling approximately 150 million tonnes of LNG have been produced, loaded and exported from the Liquefaction Project.

Financial

•On July 28, 2023, with respect to the second quarter of 2023, we declared a cash distribution of $1.03 per common unit to unitholders of record as of August 7, 2023 and the related general partner distribution to be paid on August 14, 2023. These distributions consist of a base amount of $0.775 per unit and a variable amount of $0.255 per unit.

•In June 2023, we entered into a $1.0 billion Senior Unsecured Revolving Credit and Guaranty Agreement (the “CQP Revolving Credit Facility”), and SPL entered into a $1.0 billion Senior Secured Revolving Credit and Guaranty Agreement (the “SPL Revolving Credit Facility”). The CQP Revolving Credit Facility and SPL Revolving Credit Facility each refinanced and replaced the respective existing credit facilities to, among other things, (1) extend the maturity date thereunder, (2) reduce the rate of interest and commitment fees applicable thereunder and (3) make certain other changes to the terms and conditions of the prior credit facilities.

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•In June 2023, we issued $1.4 billion aggregate principal amount of 5.95% Senior Notes due 2033 (the “2033 CQP Senior Notes”). Using contributed proceeds from the 2033 CQP Senior Notes together with cash on hand, SPL redeemed $1.4 billion of its 5.75% Senior Secured Notes due 2024 (the “2024 SPL Senior Notes”) in July 2023.

•In February 2023, S&P Global Ratings upgraded its issuer credit rating of SPL from BBB to BBB+ with a stable outlook.

Results of Operations

			Three Months Ended June 30,																		Six Months Ended June 30,
(in millions, except per unit data)			2023						2022						Variance						2023						2022						Variance
Revenues
LNG revenues			$	1,415					$	2,959					$	(1,544)					$	3,521					$	5,447					$	(1,926)
LNG revenues—affiliate			469						1,135						(666)						1,230						1,892						(662)
LNG revenues—related party			—						4						(4)						—						4						(4)
Regasification revenues			33						68						(35)						67						136						(69)
Other revenues			16						15						1						32						30						2
Total revenues			1,933						4,181						(2,248)						4,850						7,509						(2,659)
Operating costs and expenses (recoveries)
Cost of sales (excluding items shown separately below)			603						3,144						(2,541)						916						5,706						(4,790)
Cost of sales—affiliate			1						57						(56)						18						62						(44)
Cost of sales—related party			—						1						(1)						—						1						(1)
Operating and maintenance expense			263						191						72						469						361						108
Operating and maintenance expense—affiliate			38						41						(3)						82						79						3
Operating and maintenance expense—related party			14						15						(1)						30						27						3
General and administrative expense (recovery)			3						(3)						6						6						—						6
General and administrative expense—affiliate			24						24						—						46						47						(1)
Depreciation and amortization expense			167						156						11						334						309						25
Other			2						—						2						2						—						2
Total operating costs and expenses			1,115						3,626						(2,511)						1,903						6,592						(4,689)
Income from operations			818						555						263						2,947						917						2,030
Other income (expense)
Interest expense, net of capitalized interest			(207)						(216)						9						(415)						(419)						4
Loss on modification or extinguishment of debt			(2)						—						(2)						(2)						—						(2)
Other income, net			13						3						10						27						3						24
Total other expense			(196)						(213)						17						(390)						(416)						26
Net income			$	622					$	342					$	280					$	2,557					$	501					$	2,056
Basic and diluted net income per common unit			$	0.84					$	0.25					$	0.59					$	4.35					$	0.13					$	4.22

Operational volumes loaded and recognized from the Liquefaction Project

			Three Months Ended June 30,																		Six Months Ended June 30,
			2023						2022						Variance						2023						2022												Variance
LNG volumes loaded and recognized as revenues (in TBtu)			353						375						(22)						756						747												9

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Net income

The increases of $280 million and $2.1 billion for the three and six months ended June 30, 2023, respectively, as compared to the same periods of 2022, were attributable to the favorable variances of $536 million and $2.3 billion from changes in fair value and settlements of derivatives in the three and six months ended June 30, 2023, respectively, as compared to the same periods of 2022. During the three and six months ended June 30, 2023, we recognized gains of $187 million and $1.2 billion, respectively, due to non-cash favorable changes in fair value of the IPM agreement with Tourmaline Oil Marketing Corp. (“Tourmaline IPM agreement”) as a result of continued moderation of international gas price volatility and declines in international forward commodity curves, as compared to losses of $431 million and $862 million in the three and six months ended June 30, 2022, respectively, following the assignment to SPL from Corpus Christi Liquefaction Stage III, LLC (“CCL Stage III”) in March 2022. The 2022 losses following the assignment were primarily attributed to SPL’s lower credit risk profile relative to that of CCL Stage III, resulting in a higher derivative liability given reduced risk of SPL’s own nonperformance and unfavorable shifts in the international forward commodity curve. The increases were partially offset by a reduction in LNG revenues, net of cost of sales and excluding the effect of derivatives (as further described above), of $152 million and $78 million for the three and six months ended June 30, 2023, respectively, as compared to the same periods of 2022, which was attributable to lower margins on LNG delivered. The remaining offsetting variance is primarily attributable to a decrease in our regasification revenues primarily as a result of the termination one of our TUA agreements in December 2022.

The following is an additional discussion of the significant variance drivers of the change in net income by line item:

Revenues

The $2.2 billion and $2.7 billion decreases between the three and six months ended June 30, 2023, respectively, as compared to the same periods of 2022, were primarily attributable to:

•$2.1 billion and $2.6 billion decreases between the three and six months ended June 30, 2023, respectively, as compared to the same periods of 2022 due to lower pricing per MMBtu, from decreased Henry Hub pricing; and

•$35 million and $69 million decreases in regasification revenues between the three and six months ended June 30, 2023, respectively, as compared to the same periods of 2022 due to the termination of revenue recognized with one of our TUA agreements in December 2022.

Operating costs and expenses

The $2.5 billion and $4.7 billion decreases between the three and six months ended June 30, 2023, respectively, as compared to the same periods of 2022, were primarily attributable to:

•$500 million and $2.3 billion favorable variances between the three and six months ended June 30, 2023, respectively, as compared to the same periods of 2022, from changes in fair value of derivatives included in cost of sales, from losses of $270 million and $786 million in the three and six months ended June 30, 2022, respectively, to gains of $230 million and $1.5 billion in the three and six months ended June 30, 2023, respectively, primarily due to decreased international gas prices resulting in non-cash favorable changes in fair value of our commodity derivatives indexed to such prices, specifically associated with the Tourmaline IPM agreement as discussed above under Net income; and

•$2.0 billion and $2.5 billion decreases between the three and six months ended June 30, 2023, respectively, as compared to the same periods of 2022, from decreased cost of natural gas feedstock, substantially all of which was due to lower U.S. natural gas prices.

The favorable variances were partially offset by increases in operating and maintenance expense of $72 million and $108 million for the three and six months ended June 30, 2023, respectively, as compared to the same periods of 2022. For the three months ended June 30, 2023, increases in operating and maintenance expense were primarily due to the completion of planned large-scale maintenance activities on two trains at the Liquefaction Project during June 2023. Further contributing to the increase in operating and maintenance expense during the six months ended June 30, 2023 was other third party service and maintenance contract costs and natural gas transportation and storage capacity demand charges.

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Significant factors affecting our results of operations

Below are significant factors that affect our results of operations.

Gains and losses on derivative instruments

Derivative instruments are utilized to manage our exposure to commodity-related marketing and price risks and are reported at fair value on our Consolidated Financial Statements. For commodity derivative instruments related to our IPM agreement, the underlying LNG sales being economically hedged are accounted for under the accrual method of accounting, whereby revenues expected to be derived from the future LNG sales are recognized only upon delivery or realization of the underlying transaction. Because the recognition of derivative instruments at fair value has the effect of recognizing gains or losses relating to future period exposure, and given the significant volumes, long-term duration and volatility in price basis for certain of our derivative contracts, use of derivative instruments may result in continued volatility of our results of operations based on changes in market pricing, counterparty credit risk and other relevant factors that may be outside of our control, notwithstanding the operational intent to mitigate risk exposure over time.

Commissioning cargoes

Prior to substantial completion of a Train, amounts received from the sale of commissioning cargoes from that Train are offset against LNG terminal construction-in-process, because these amounts are earned or loaded during the testing phase for the construction of that Train. During the six months ended June 30, 2022, we realized offsets to LNG terminal costs of $148 million corresponding to 13 TBtu attributable to the sale of commissioning cargoes from Train 6 of the Liquefaction Project. We did not have any commissioning cargoes during the three months ended June 30, 2022 or the three and six months ended June 30, 2023.

Liquidity and Capital Resources

 

The following information describes our ability to generate and obtain adequate amounts of cash to meet our requirements in the short term and the long term. In the short term, we expect to meet our cash requirements using operating cash flows and available liquidity, consisting of cash and cash equivalents, restricted cash and cash equivalents and available commitments under our credit facilities. Additionally, we expect to meet our long term cash requirements by using operating cash flows and other future potential sources of liquidity, which may include debt offerings by us or our subsidiaries and equity offerings by us. The table below provides a summary of our available liquidity (in millions). Future material sources of liquidity are discussed below.

			June 30, 2023
Cash and cash equivalents			$	1,834
Restricted cash and cash equivalents designated for the Liquefaction Project			241
Available commitments under our credit facilities (1):
SPL Revolving Credit Facility			671
CQP Revolving Credit Facility			1,000
Total available commitments under our credit facilities			1,671
Total available liquidity			$	3,746

(1)Available commitments represent total commitments less loans outstanding and letters of credit issued under each of our credit facilities as of June 30, 2023. See Note 9—Debt of our Notes to Consolidated Financial Statements for additional information on our credit facilities and other debt instruments.

Our liquidity position subsequent to June 30, 2023 will be driven by future sources of liquidity and future cash requirements. Future sources of liquidity are expected to be composed of (1) cash receipts from executed contracts, under which we are contractually entitled to future consideration, and (2) additional sources of liquidity, from which we expect to receive cash although the cash is not underpinned by executed contracts. Future cash requirements are expected to be composed of (1) cash payments under executed contracts, under which we are contractually obligated to make payments, and (2) additional cash requirements, under which we expect to make payments although we are not contractually obligated to make the payments under executed contracts. For further discussion of our future sources and uses of liquidity, see the liquidity and capital resources disclosures in our annual report on Form 10-K for the fiscal year ended December 31, 2022.

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Although our sources and uses of cash are presented below from a consolidated standpoint, we and our subsidiary SPL operate with independent capital structures. Certain restrictions under debt instruments executed by SPL limit its ability to distribute cash, including the following:

•SPL is required to deposit all cash received into restricted cash and cash equivalents accounts under certain of their debt agreements. The usage or withdrawal of such cash is restricted to the payment of liabilities related to the Liquefaction Project and other restricted payments. In addition, SPL’s operating expenses are managed by subsidiaries of Cheniere under affiliate agreements, which may require SPL to advance cash to the respective affiliates, however the cash remains restricted to CQP for operation and construction of the Liquefaction Project; and

•SPL is restricted by affirmative and negative covenants included in certain of its debt agreements in its ability to make certain payments, including distributions, unless specific requirements are satisfied.

Despite the restrictions noted above, we believe that sufficient flexibility exists to enable each independent capital structure to meet its currently anticipated cash requirements. The sources of liquidity at SPL primarily fund the cash requirements of SPL, and any remaining liquidity not subject to restriction, as supplemented by liquidity provided by SPLNG, is available to enable CQP to meet its cash requirements.

Supplemental Guarantor Information

The $1.5 billion of 4.500% Senior Notes due 2029, $1.5 billion of 4.000% Senior Notes due 2031 (the “2031 CQP Senior Notes”), $1.2 billion of 3.25% Senior Notes due 2032, and the 2033 CQP Senior Notes (collectively, the “CQP Senior Notes”) are jointly and severally guaranteed by each of our subsidiaries other than SPL and, subject to certain conditions governing its guarantee, Sabine Pass LP (each a “Guarantor” and collectively, the “CQP Guarantors”).

The CQP Guarantors’ guarantees are full and unconditional, subject to certain release provisions including (1) the sale, disposition or transfer (by merger, consolidation or otherwise) of the capital stock or all or substantially all of the assets of the CQP Guarantors, (2) upon the liquidation or dissolution of a Guarantor, (3) following the release of a Guarantor from its guarantee obligations and (4) upon the legal defeasance or satisfaction and discharge of obligations under the indenture governing the CQP Senior Notes. In the event of a default in payment of the principal or interest by us, whether at maturity of the CQP Senior Notes or by declaration of acceleration, call for redemption or otherwise, legal proceedings may be instituted against the CQP Guarantors to enforce the guarantee.

The rights of holders of the CQP Senior Notes against the CQP Guarantors may be limited under the U.S. Bankruptcy Code or state fraudulent transfer or conveyance law. Each guarantee contains a provision intended to limit the Guarantor’s liability to the maximum amount that it could incur without causing the incurrence of obligations under its guarantee to be a fraudulent conveyance or transfer under U.S. federal or state law. However, there can be no assurance as to what standard a court will apply in making a determination of the maximum liability of the CQP Guarantors. Moreover, this provision may not be effective to protect the guarantee from being voided under fraudulent conveyance laws. There is a possibility that the entire guarantee may be set aside, in which case the entire liability may be extinguished.

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The following tables include summarized financial information of CQP (the “Parent Issuer”), and the CQP Guarantors (together with the Parent Issuer, the “Obligor Group”) on a combined basis. Investments in and equity in the earnings of SPL and, subject to certain conditions governing its guarantee, Sabine Pass LP (collectively with SPL, the “Non-Guarantors”), which are not currently members of the Obligor Group, have been excluded. Intercompany balances and transactions between entities in the Obligor Group have been eliminated. Although the creditors of the Obligor Group have no claim against the Non-Guarantors, the Obligor Group may gain access to the assets of the Non-Guarantors upon bankruptcy, liquidation or reorganization of the Non-Guarantors due to its investment in these entities. However, such claims to the assets of the Non-Guarantors would be subordinated to any claims by the Non-Guarantors’ creditors, including trade creditors.

Summarized Balance Sheets (in millions)						June 30,						December 31,
						2023						2022
ASSETS
Current assets
Cash and cash equivalents						$	1,834					$	904
Accounts receivable from Non-Guarantors						35						55
Other current assets						39						40
Current assets—affiliate						153						171
Total current assets						2,061						1,170
Property, plant and equipment, net of accumulated depreciation						2,918						2,946
Other non-current assets, net						113						109
Total assets						$	5,092					$	4,225
LIABILITIES
Current liabilities
Due to affiliates						$	160					$	193
Deferred revenue from Non-Guarantors						22						24
Other current liabilities						123						95
Other current liabilities from Non-Guarantors						—						2
Total current liabilities						305						314
Long-term debt, net of premium, discount and debt issuance costs						5,539						4,159
Finance lease liabilities						15						18
Other non-current liabilities						71						78
Non-current liabilities—affiliate						18						18
Total liabilities						$	5,948					$	4,587

Summarized Statement of Income (in millions)						Six Months Ended June 30, 2023
Revenues						$	99
Revenues from Non-Guarantors						276
Total revenues						375
Operating costs and expenses						120
Operating costs and expenses—affiliate						104
Total operating costs and expenses						224
Income from operations						151
Net income						76

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Sources and Uses of Cash

The following table summarizes the sources and uses of our cash, cash equivalents and restricted cash and cash equivalents (in millions). The table presents capital expenditures on a cash basis; therefore, these amounts differ from the amounts of capital expenditures, including accruals, which are referred to elsewhere in this report. Additional discussion of these items follows the table. 

			Six Months Ended June 30,
			2023						2022
Net cash provided by operating activities			$	1,538					$	1,586
Net cash used in investing activities			(155)						(239)
Net cash used in financing activities			(304)						(1,132)
Net increase in cash, cash equivalents and restricted cash and cash equivalents			$	1,079					$	215

Operating Cash Flows

Our operating cash net inflows during the six months ended June 30, 2023 and 2022 were $1,538 million and $1,586 million, respectively. The $48 million decrease between the periods was primarily related to lower cash receipts from the sale of LNG cargoes which was partially offset by decreased cash outflows for natural gas feedstock, mostly due to lower U.S. natural gas prices, and decreased regasification revenues.

Investing Cash Flows

Cash outflows for property, plant and equipment during the six months ended June 30, 2023 were primarily related to optimization and other site improvement projects. Cash outflows for property, plant and equipment during the six months ended June 30, 2022 were primarily related to the construction costs for Train 6 of the Liquefaction Project, which achieved substantial completion on February 4, 2022.

Financing Cash Flows

The following table summarizes our financing activities (in millions):

						Six Months Ended June 30,
						2023						2022
Proceeds from issuances of debt						$	1,397					$	—
Redemptions and repayments of debt						(200)						—
Debt issuance and other financing costs						(27)						—
Debt extinguishment costs						(1)						—
Distributions						(1,472)						(1,132)
Other						(1)						—
Net cash used in financing activities						$	(304)					$	(1,132)

Debt Activity

During the six months ended June 30, 2023, we issued an aggregate principal amount of $1.4 billion of 2033 CQP Senior Notes. Additionally, during the six months ended June 30, 2023, we repurchased $200 million of the 2024 SPL Senior Notes in the open market.

Cash Distributions to Unitholders

 

Our partnership agreement requires that, within 45 days after the end of each quarter, we distribute all of our available cash (as defined in our partnership agreement). Our available cash is our cash on hand at the end of a quarter less the amount of any reserves established by our general partner. All distributions paid to date have been made from accumulated operating surplus.

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The following provides a summary of distributions paid by us during the six months ended June 30, 2023 and 2022:

																								Total Distribution (in millions)
Date Paid						Period Covered by Distribution						Distribution Per Common Unit												Common Units												General Partner Units						Incentive Distribution Rights
May 15, 2023						January 1 - March 31, 2023						$	1.030											$	499											$	14					$	201
February 14, 2023						October 1 - December 31, 2022						1.070												518												15						220
May 13, 2022						January 1 - March 31, 2022						1.050												508												15						210
February 14, 2022						October 1 - December 31, 2021						0.700												339												8						47

In addition, Tug Services distributed $4 million and $5 million during the six months ended June 30, 2023 and 2022, respectively, to Cheniere Terminals in accordance with their terminal marine service agreement, which is recognized as part of the distributions to the holder of our general partner interest.

On July 28, 2023, with respect to the second quarter of 2023, we declared a cash distribution of $1.03 per common unit to unitholders of record as of August 7, 2023 and the related general partner distribution to be paid on August 14, 2023. These distributions consist of a base amount of $0.775 per unit and a variable amount of $0.255 per unit.

Summary of Critical Accounting Estimates

The preparation of Consolidated Financial Statements in conformity with GAAP requires management to make certain estimates and assumptions that affect the amounts reported in the Consolidated Financial Statements and the accompanying notes. There have been no significant changes to our critical accounting estimates from those disclosed in our annual report on Form 10-K for the fiscal year ended December 31, 2022.

Recent Accounting Standards 

For a summary of recently issued accounting standards, see Note 1—Nature of Operations and Basis of Presentation of our Notes to Consolidated Financial Statements.

ITEM 3.    QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK 

Marketing and Trading Commodity Price Risk

SPL has commodity derivatives consisting of natural gas supply contracts for the operation of the Liquefaction Project (“Liquefaction Supply Derivatives”). In order to test the sensitivity of the fair value of the Liquefaction Supply Derivatives to changes in underlying commodity prices, management modeled a 10% change in the commodity price for natural gas for each delivery location as follows (in millions):

			June 30, 2023												December 31, 2022
			Fair Value						Change in Fair Value						Fair Value						Change in Fair Value
Liquefaction Supply Derivatives			$	(2,241)					$	420					$	(3,741)					$	565

See Note 7—Derivative Instruments of our Notes to Consolidated Financial Statements for additional details about the derivative instruments.

ITEM 4.     CONTROLS AND PROCEDURES

 

We maintain a set of disclosure controls and procedures that are designed to ensure that information required to be disclosed by us in the reports filed by us under Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”) is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms. As of the end of the period covered by this report, we evaluated, under the supervision and with the participation of our general partner’s management, including our general partner’s Chief Executive Officer and Chief Financial Officer, the effectiveness of our disclosure controls and procedures pursuant to Rule 13a-15 of the Exchange Act. Based on that evaluation,

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our general partner’s Chief Executive Officer and Chief Financial Officer concluded that our disclosure controls and procedures are effective.

 

During the most recent fiscal quarter, there have been no changes in our internal control over financial reporting that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting. 

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PART II.     OTHER INFORMATION

ITEM 1.    LEGAL PROCEEDINGS

We may in the future be involved as a party to various legal proceedings, which are incidental to the ordinary course of business. We regularly analyze current information and, as necessary, provide accruals for probable liabilities on the eventual disposition of these matters. There have been no material changes to the legal proceedings disclosed in our annual report on Form 10-K for the fiscal year ended December 31, 2022, except for the update presented in our quarterly report on Form 10-Q for the quarterly period ended March 31, 2023.

ITEM 1A.    RISK FACTORS

There have been no material changes from the risk factors disclosed in our annual report on Form 10-K for the fiscal year ended December 31, 2022.

ITEM 5.    OTHER INFORMATION

Rule 10b5-1 under the Exchange Act provides an affirmative defense that enables prearranged transactions in securities in a manner that avoids concerns about initiating transactions at a future date while possibly in possession of material nonpublic information. Our Insider Trading Policy permits our directors and executive officers to enter into trading plans designed to comply with Rule 10b5-1. During the three-month period ending June 30, 2023, none of our executive officers or directors adopted or terminated a Rule 10b5-1 trading plan or adopted or terminated a non-Rule 10b5-1 trading arrangement (as defined in Item 408(c) of Regulation S-K).

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ITEM 6.    EXHIBITS

Exhibit No.

Description

4.1

Eighth Supplemental Indenture, dated as of June 21, 2023, among the Partnership, the guarantors party thereto and The Bank of New York Mellon, as Trustee under the Indenture (incorporated by reference to Exhibit 4.1 to the Partnership’s Current Report on Form 8-K (SEC File No. 001-33366), filed on June 21, 2023)

10.1

Registration Rights Agreement, dated as of June 21, 2023, among the Partnership, the guarantors party thereto and Morgan Stanley & Co. LLC. (incorporated by reference to Exhibit 10.1 to the Partnership’s Current Report on Form 8-K (SEC File No. 001-33366), filed on June 21, 2023)

10.2*

Credit and Guaranty Agreement, dated as of June 23, 2023, among the Partnership, as borrower, certain subsidiaries of the Partnership, as Subsidiary Guarantors, the lenders from time to time party thereto, Société Générale, Natixis, Sumitomo Mitsui Banking Corporation, The Bank of Nova Scotia, and Wells Fargo Bank, as Issuing Banks, MUFG Bank, LTD as Administrative Agent and Coordinating Lead Arranger, and certain arrangers and other participants

10.3

Senior Revolving Credit and Guaranty Agreement, among SPL, as borrower, certain subsidiaries of SPL, The Bank of Nova Scotia, as Senior Facility Agent, Société Générale, as the Common Security Trustee, the issuing banks and lenders from time to time party thereto and other participants (incorporated by reference to Exhibit 10.46 to SPL’s Registration Statement on Form S-4 (SEC File No. 333-273238), filed on July 13, 2023)

10.4

Fourth Amended and Restated Common Terms Agreement, among SPL, as borrower, the Secured Debt Holder Group Representatives party thereto, the Secured Hedge Representatives party thereto, the Secured Gas Hedge Representatives party thereto and Société Générale, as the Common Security Trustee and the Intercreditor Agent (incorporated by reference to Exhibit 10.44 to SPL’s Registration Statement on Form S-4 (SEC File No. 333-273238), filed on July 13, 2023)

10.5*

Letter agreement regarding change from LIBOR to SOFR, dated May 18, 2023, to LNG Sale and Purchase Agreement, dated January 25, 2012, between SPL and BG Gulf Coast LNG, LLC, as amended

10.6*

Letter agreement regarding change from LIBOR to SOFR, dated June 16, 2023, to LNG Sale and Purchase Agreement, dated December 11, 2011, between SPL and GAIL (India) Limited, as amended

10.7*

Letter agreement regarding change from LIBOR to SOFR, dated June 30, 2023, to LNG Sale and Purchase Agreement, dated January 30, 2012, between SPL and Korea Gas Corporation, as amended

10.8*

Letter agreement regarding change from LIBOR to SOFR, dated June 8, 2023, to LNG Sale and Purchase Agreement, dated November 21, 2011, between SPL and Naturgy LNG GOM, Limited (assignee of Gas Natural Aprovisionamientos SDG S.A.), as amended

10.9*

Letter agreement regarding change from LIBOR to SOFR, dated June 26, 2023, to Amended and Restated LNG Sale and Purchase Agreement (FOB) between SPL and Cheniere Marketing International LLP, dated August 5, 2014, as amended

22.1

List of Issuers and Guarantor Subsidiaries (Incorporated by reference to Exhibit 22.1 to the Partnership's Annual Report on Form 10-K (SEC File No. 001-33366), filed on February 23, 2023)

31.1*

Certification by Chief Executive Officer required by Rule 13a-14(a) and 15d-14(a) under the Exchange Act

31.2*

Certification by Chief Financial Officer required by Rule 13a-14(a) and 15d-14(a) under the Exchange Act

32.1**

Certification by Chief Executive Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

32.2**

Certification by Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

101.INS*

XBRL Instance Document

101.SCH*

XBRL Taxonomy Extension Schema Document

101.CAL*

XBRL Taxonomy Extension Calculation Linkbase Document

101.DEF*

XBRL Taxonomy Extension Definition Linkbase Document

101.LAB*

XBRL Taxonomy Extension Labels Linkbase Document

101.PRE*

XBRL Taxonomy Extension Presentation Linkbase Document

104*

Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101)

*			Filed herewith.
**			Furnished herewith.

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SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

						CHENIERE ENERGY PARTNERS, L.P.
						By:			Cheniere Energy Partners GP, LLC, its general partner
Date:			August 2, 2023			By:			/s/ Zach Davis
									Zach Davis
									Executive Vice President and Chief Financial Officer
									(on behalf of the registrant and as principal financial officer)
Date:			August 2, 2023			By:			/s/ David Slack
									David Slack
									Vice President and Chief Accounting Officer
									(on behalf of the registrant and as principal accounting officer)

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