Cheniere Energy, Inc. — 2015 Form 10-K
Business context and reporting period. This annual report covers the fiscal year ended December 31, 2015; quarterly figures below identify the fourth quarter. Cheniere develops and operates LNG infrastructure and markets LNG and natural gas. Its principal projects were the Sabine Pass liquefaction project in Louisiana and the Corpus Christi project in Texas. The existing Sabine Pass terminal generated most revenue from regasification capacity fees; it produced its first LNG from Train 1 in February 2016, after year-end.
Financial performance and position
| Metric | 2015 | 2014 |
|---|---|---|
| Revenue | $270.9 million | $268.0 million |
| Operating loss | $449.3 million | $272.2 million |
| Net loss attributable to common stockholders | $975.1 million; $4.30 per share | $547.9 million; $2.44 per share |
| Net cash used in operating activities | $265.6 million | $124.1 million |
| Cash and cash equivalents at year-end | $1.201 billion | $1.748 billion |
| Restricted cash at year-end, current and non-current | $535.1 million | $1.033 billion |
| Total assets | $19.020 billion | $12.574 billion |
- Year-end debt principal was approximately $17.3 billion; reported debt net of discounts and premiums was $16.8 billion, including $1.676 billion of current debt. The filing’s debt schedule shows $1.681 billion of principal payments due in 2016.
- Current assets were $1.783 billion and current liabilities $2.188 billion. Restricted cash is contractually limited and should not be treated as freely available liquidity.
- Cash capital expenditures for property, plant and equipment were $6.853 billion in 2015. Total interest cost was $997.5 million, of which $675.3 million was capitalized and deferred.
- Fourth-quarter 2015 revenue was $68.4 million; operating loss was $241.1 million and net loss attributable to common stockholders was $291.1 million, or $1.28 per share.
Material changes versus the prior comparable period
- Revenue increased modestly, by $2.9 million, while common-stockholder net loss widened by $427.2 million and operating cash outflow increased by $141.5 million.
- Management attributed the larger loss principally to higher net interest expense, higher general and administrative expense, impairment charges, derivative losses and debt-extinguishment losses. General and administrative expense rose to $423.9 million from $323.7 million, including accelerated share-based compensation related to employee terminations.
- Interest expense net of capitalized interest increased to $322.1 million from $181.2 million, amid increased borrowing. 2015 impairment expense was $91.3 million, including charges related to a Gulf Coast liquid-hydrocarbon export development project and a loan to Parallax Enterprises.
- Property, plant and equipment increased to $16.194 billion from $9.247 billion, reflecting heavy project construction. Debt net increased to $16.804 billion from $9.806 billion.
Outlook, management commentary and risks
- At year-end, Sabine Pass Trains 1 and 2 were 97.4% complete; Trains 3 and 4 were 79.5% complete; Train 5 was 14.9% complete. Management said construction was ahead of contractual schedules, expected Train 2 to produce LNG as early as mid-2016, and anticipated Trains 3–5 to start in stages thereafter.
- Corpus Christi Stage 1 was 29.2% complete at year-end. Management expected Train 1 to produce LNG as early as late 2018 and Train 2 several months later. The Corpus Christi pipeline construction was planned to begin in 2016.
- Most planned output from Sabine Pass Trains 1–5 and Corpus Christi Trains 1–2 was covered by 20-year SPAs. Sabine Pass third-party contracts covered about 19.75 mtpa, with approximately $2.9 billion in annual fixed fees once applicable trains operate; Corpus Christi contracts covered about 7.7 mtpa for Trains 1–2, with approximately $1.4 billion in annual fixed fees when operating. Contract fees generally remain payable if customers suspend or cancel cargoes, subject to contract terms and termination rights.
- Estimated capital costs for Sabine Pass Trains 1–5 were $12.5–$13.5 billion before financing costs and $17–$18 billion including financing costs. Corpus Christi Stage 1 was estimated at $9–$10 billion before financing costs and $11–$12 billion including financing costs. These are estimates and remain exposed to change orders, delays and other cost risks.
- Train 6 at Sabine Pass and Corpus Christi Stage 2 remained subject to final investment decisions, acceptable commercial arrangements and adequate financing. In January 2016, Cheniere Partners engaged arrangers to structure up to approximately $2.8 billion of secured credit facilities for planned debt refinancing and related uses; this was an arrangement process, not confirmation of completed financing.
- Key risks include substantial debt and continuing negative operating cash flow; dependence on project completion and customer/counterparty performance; potential cost overruns and schedule delays; market, commodity-price and interest-rate exposure; restricted subsidiary cash and debt covenants; and regulatory approvals. Certain DOE non-FTA export authorizations faced rehearing requests or pending applications, and court challenges to project FERC orders remained pending.
- Management reported no pending legal matters expected to have a material impact on consolidated results, financial position or cash flows. The company had not historically been profitable or generated positive operating cash flow and said meaningful future cash generation depended on successful, timely project completion. It did not anticipate common-stock cash dividends in the foreseeable future.
Important facts for investors to verify
- Actual commissioning, commercial operation dates and production performance for Sabine Pass Trains 1–5 and Corpus Christi Stage 1, versus management’s schedules.
- Updated project-cost estimates, remaining construction commitments, change orders and the availability and terms of financing, including the proposed 2016 refinancing.
- Liquidity available at each subsidiary, restrictions on moving cash within the corporate structure, near-term debt maturities and compliance with debt-service and distribution covenants.
- SPA and TUA conditions, termination provisions, customer credit quality, and whether fixed-fee payments begin as expected when trains enter commercial operation.
- Resolution of export authorization rehearings and pending applications, FERC litigation, and any resulting effect on construction, exports or project economics.
- Derivative valuations and cash settlements, the basis for 2015 impairment charges, and potential dilution from convertible securities.