Cheniere Energy Partners, L.P. — Q1 2021 Form 10-Q
Reporting period: Three months ended March 31, 2021; comparative period is Q1 2020. The Partnership operates the Sabine Pass LNG terminal and pipeline. Five liquefaction trains were operating; Train 6 was under construction and expected to be substantially complete in the first half of 2022.
Financial performance
| Metric | Q1 2021 | Q1 2020 | Change |
|---|---|---|---|
| Total revenue | $1.963 billion | $1.718 billion | +$245 million |
| Income from operations | $618 million | $664 million | -$46 million |
| Net income | $347 million | $435 million | -$88 million |
| Net income per common unit | $0.64 | $0.84 | -$0.20 |
| Operating margin | 31.5% | 38.6% | Lower |
| Net margin | 17.7% | 25.3% | Lower |
| Net cash from operations | $588 million | $535 million | +$53 million |
| Capital expenditures, cash basis | $146 million | $317 million | -$171 million |
LNG revenues were $1.669 billion, up $220 million; affiliate LNG revenues were $214 million, up $26 million. LNG volumes recognized as revenue were 325 TBtu versus 327 TBtu. Cost of sales, including affiliate costs, rose to $990 million from $699 million, primarily reflecting higher natural gas feedstock prices and affiliate cargo purchases to meet customer commitments during operational constraints. Interest expense, net of capitalized interest, declined to $217 million from $234 million.
Balance sheet, liquidity and distributions
- At March 31, 2021, cash and cash equivalents were $1.219 billion, restricted cash was $123 million, and total debt was $17.582 billion. Debt was $17.580 billion at December 31, 2020; $850 million was classified as current, including the 2022 SPL notes.
- Available commitments were $1.537 billion: $787 million under SPL’s working capital facility and $750 million under the CQP credit facilities. No borrowings were outstanding under these facilities; $413 million of letters of credit were issued under the SPL facility.
- Partners’ equity was $535 million. Operating cash flow exceeded cash capital expenditures, while financing cash use included $351 million of owner distributions.
- The Partnership paid a $0.655-per-common-unit distribution in February for Q4 2020 and declared $0.660 per common unit for Q1 2021, payable May 14, 2021. Distribution amounts also included payments to the general partner and incentive distribution rights holders.
Material changes, outlook and risks
- Net income declined despite higher revenue, mainly because of lower margins from higher feedstock costs and less volume sold, the absence of Q1 2020 commodity-derivative gains, and a $54 million debt extinguishment loss. The 2020 period also included $16 million of revenue from customers electing not to take cargoes; there was no comparable revenue in Q1 2021.
- In March, the Partnership issued $1.5 billion of 4.000% notes due 2031 and redeemed $1.5 billion of 5.250% notes due 2025. The refinancing produced $54 million of extinguishment costs. SPL also entered an agreement to issue approximately $147 million of 2.95% notes due 2037 in the second half of 2021, with proceeds expected to refinance part of the 2022 notes.
- Train 6 was 83.0% complete at March 31, 2021; $2.0 billion had been incurred under its approximately $2.5 billion EPC contract, which includes the third marine berth. Management stated that anticipated capital, operating and debt-service needs for Trains 1–6 were expected to be met through borrowings, available credit, operating cash flows and contributions from Cheniere.
- Long-term LNG contracts provide fixed-fee revenue even when customers cancel or suspend deliveries, while variable fees depend in part on natural gas prices and customer delivery elections. Contracted future transaction price was $53.7 billion, with estimated weighted-average recognition timing varying by revenue category; the amount excludes substantially all variable consideration.
- Key exposures include natural gas prices and derivative valuation. The net fair-value liability on liquefaction supply derivatives was $43 million, including a $36 million Level 3 liability. A modeled 10% commodity-price change would change derivative fair value by $3 million at quarter-end.
- Customer concentration was significant: four customers each represented at least 10% of Q1 external revenue, with the largest at 27%. Management reported compliance with debt covenants, effective disclosure controls, no material change in legal proceedings or risk factors, and no material off-balance-sheet arrangements. Fitch and S&P outlooks were changed to positive during or after the quarter.
Important facts for investors to verify
- Train 6 completion timing, remaining construction costs, and the expected contribution from the third berth.
- Whether the planned $147 million SPL refinancing closes as expected and how the remaining 2022 debt maturity is addressed.
- Whether higher feedstock costs, operating constraints, and derivative fair-value movements continue to pressure margins and earnings.
- Customer concentration, delivery elections, and counterparty performance under long-term SPAs and affiliate arrangements.
- Cash available for future distributions after construction spending, debt service, reserves, and covenant requirements.