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What changed in Cheniere Energy Partners, L.P.'s 10-K — 2022 vs 2023

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Paragraph-level year-over-year comparison of Cheniere Energy Partners, L.P.'s 2022 and 2023 10-K annual filings, covering the Business, Risk Factors, Legal Proceedings, Cybersecurity, MD&A and Market Risk sections. Every new, removed and edited paragraph is highlighted side-by-side so you can see exactly what management changed in the 2023 report.

+216 added−227 removedSource: 10-K (2024-02-22) vs 10-K (2023-02-23)

Top changes in Cheniere Energy Partners, L.P.'s 2023 10-K

216 paragraphs added · 227 removed · 161 edited across 6 sections

Item 1A. Risk Factors

Risk Factors — what could go wrong, per management

65 edited+8 added−6 removed138 unchanged
Biggest changeWhile we believe we can continue to mitigate any significant adverse impact to our employees and 18 Table of Contents operations at our critical facilities related to the virus in its current form, the outbreak of a more potent variant or another infectious disease in the future at one or more of our facilities could adversely affect our operations.
Biggest changeWhile we believe we can continue to mitigate any significant adverse impact to our employees and operations at our critical facilities related to the virus in its current form, the outbreak of a more potent variant or another infectious disease in the future at one or more of our facilities could adversely affect our operations. 18 Table of Contents Risks Relating to Regulations Failure to obtain and maintain approvals and permits from governmental and regulatory agencies with respect to the design, construction and operation of our facilities, the development and operation of our pipeline and the export of LNG could impede operations and construction and could have a material adverse effect on our business, contracts, financial condition, operating results, cash flow, liquidity and prospects.
Adverse trends or developments affecting any of these factors could result in decreases in the price of LNG and/or natural gas, which could materially and adversely affect the performance of our customers, and could have a material adverse effect on our business, contracts, financial condition, operating results, cash flow, liquidity and prospects.
Adverse trends or developments affecting any of these factors could result in decreases in the price of LNG and/or natural gas, which could materially and adversely affect our LNG business and the performance of our customers, and could have a material adverse effect on our business, contracts, financial condition, operating results, cash flow, liquidity and prospects.
In addition, certain laws and regulations authorize regulators having jurisdiction over the construction and operation of our LNG terminal, docks and pipeline, including FERC, PHMSA, EPA and United States Coast Guard, to issue regulatory enforcement actions, which may restrict or limit operations or increase compliance or operating costs.
In addition, certain laws and regulations authorize regulators having jurisdiction over the construction and operation of our LNG terminal, docks and pipeline, including FERC, PHMSA, EPA and the United States Coast Guard, to issue regulatory enforcement actions, which may restrict or limit operations or increase compliance or operating costs.
Natural gas and LNG prices have been, and are likely to continue to be, volatile and subject to wide fluctuations in response to one or more of the following factors: • competitive liquefaction capacity in North America; • insufficient or oversupply of natural gas liquefaction or receiving capacity worldwide; 16 Table of Contents • insufficient LNG tanker capacity; • weather conditions, including temperature volatility resulting from climate change, and extreme weather events may lead to unexpected distortion in the balance of international LNG supply and demand; • reduced demand and lower prices for natural gas; • increased natural gas production deliverable by pipelines, which could suppress demand for LNG; • decreased oil and natural gas exploration activities which may decrease the production of natural gas, including as a result of any potential ban on production of natural gas through hydraulic fracturing; • cost improvements that allow competitors to provide natural gas liquefaction capabilities at reduced prices; • changes in supplies of, and prices for, alternative energy sources which may reduce the demand for natural gas; • changes in regulatory, tax or other governmental policies regarding imported LNG, natural gas or alternative energy sources, which may reduce the demand for imported LNG and/or natural gas; • political conditions in customer regions; • sudden decreases in demand for LNG as a result of natural disasters or public health crises, including the occurrence of a pandemic, and other catastrophic events; • adverse relative demand for LNG compared to other markets, which may decrease LNG imports from North America; and • cyclical trends in general business and economic conditions that cause changes in the demand for natural gas.
Natural gas and LNG prices have been, and are likely to continue to be, volatile and subject to wide fluctuations in response to one or more of the following factors: • competitive liquefaction capacity in North America; • insufficient or oversupply of natural gas liquefaction or receiving capacity worldwide; • insufficient LNG tanker capacity; • weather conditions, including temperature volatility resulting from climate change, and extreme weather events may lead to unexpected distortion in the balance of international LNG supply and demand; • reduced demand and lower prices for natural gas; • increased natural gas production deliverable by pipelines, which could suppress demand for LNG; • decreased oil and natural gas exploration activities which may decrease the production of natural gas, including as a result of any potential ban on production of natural gas through hydraulic fracturing; 16 Table of Contents • cost improvements that allow competitors to provide natural gas liquefaction capabilities at reduced prices; • changes in supplies of, and prices for, alternative energy sources which may reduce the demand for natural gas; • changes in regulatory, tax or other governmental policies regarding imported LNG, natural gas or alternative energy sources, which may reduce the demand for imported LNG and/or natural gas; • political conditions in customer regions; • sudden decreases in demand for LNG as a result of natural disasters or public health crises, including the occurrence of a pandemic, and other catastrophic events; • adverse relative demand for LNG compared to other markets, which may decrease LNG exports from North America; and • cyclical trends in general business and economic conditions that cause changes in the demand for natural gas.
In addition, Cheniere is currently operating three Trains at a natural gas liquefaction facility near Corpus Christi, Texas and CCL has entered into fixed price SPAs with third-parties for the sale of LNG from this natural gas liquefaction facility, and may continue to enter in commercial arrangements with respect to this liquefaction facility that might otherwise have been entered into with respect to any future Trains.
In addition, Cheniere is currently operating three Trains at a natural gas liquefaction facility near Corpus Christi, Texas and CCL has entered into fixed price SPAs with third-parties for the sale of LNG from this natural gas liquefaction facility, and may continue to enter in commercial arrangements with respect to this liquefaction facility that might otherwise have been entered into with respect to any of our future Trains.
A shortage in the labor pool of skilled workers, remoteness of our site locations, or other general inflationary pressures, changes in applicable laws and regulations or labor disputes could make it more difficult to attract and retain qualified personnel and could require an increase in the wage and benefits packages that are offered, thereby increasing our operating costs.
A shortage in the labor pool of skilled workers, remoteness of our site locations, general inflationary pressures, changes in applicable laws and regulations or labor disputes could make it more difficult to attract and retain qualified personnel and could require an increase in the wage and benefits packages that are offered, thereby increasing our operating costs.
Violation of these laws and regulations could lead to substantial liabilities, compliance orders, fines and penalties, difficulty obtaining or maintaining permits from regulatory agencies or to capital expenditures that could have a material adverse effect on our business, contracts, financial condition, operating results, cash flow, liquidity and prospects.
Violation of these laws and regulations could lead to substantial liabilities, compliance orders, fines and penalties, difficulty obtaining and maintaining permits from regulatory agencies or increased capital expenditures that could have a material adverse effect on our business, contracts, financial condition, operating results, cash flow, liquidity and prospects.
Additional risks and uncertainties not currently known to us, or that we currently deem to be immaterial, may also impair or adversely affect our business, contracts, financial condition, operating results, cash flows, liquidity and prospects.
Additional risks and uncertainties not currently known to us, or that we currently deem to be immaterial, may also adversely affect our business, contracts, financial condition, operating results, cash flows, liquidity and prospects.
Cheniere’s directors and officers have a fiduciary duty to make these decisions in favor of the owners of Cheniere, which may be contrary to our interests: • our general partner controls the interpretation and enforcement of contractual obligations between us, on the one hand, and Cheniere, on the other hand, including provisions governing administrative services and acquisitions; 21 Table of Contents • our general partner is allowed to take into account the interests of parties other than us, such as Cheniere and its affiliates, in resolving conflicts of interest, which has the effect of limiting its fiduciary duty to us and our unitholders; • our general partner has limited its liability and reduced its fiduciary duties under the partnership agreement, while also restricting the remedies available to our unitholders for actions that, without these limitations, might constitute breaches of fiduciary duty; • Cheniere is not limited in its ability to compete with us.
Cheniere’s directors and officers have a fiduciary duty to make these decisions in favor of the owners of Cheniere, which may be contrary to our interests: • our general partner controls the interpretation and enforcement of contractual obligations between us, on the one hand, and Cheniere, on the other hand, including provisions governing administrative services and acquisitions; • our general partner is allowed to take into account the interests of parties other than us, such as Cheniere and its affiliates, in resolving conflicts of interest, which has the effect of limiting its fiduciary duty to us and our unitholders; • our general partner has limited its liability and reduced its fiduciary duties under the partnership agreement, while also restricting the remedies available to our unitholders for actions that, without these limitations, might constitute breaches of fiduciary duty; • Cheniere is not limited in its ability to compete with us.
Total expenditures related to environmental and similar laws and governmental regulations, including capital expenditures, were immaterial to our Consolidated Financial Statements for the years ended December 31, 2022 and 2021.
Total expenditures related to environmental and similar laws and governmental regulations, including capital expenditures, were immaterial to our Consolidated Financial Statements for the years ended December 31, 2023, 2022 and 2021.
Our subsidiaries’ inability to pay distributions to us or to incur additional indebtedness as a result of the foregoing restrictions in the agreements governing their indebtedness may inhibit our ability to pay or increase distributions to our unitholders, which could have a material adverse effect on our business, contracts, financial condition, operating results, cash flow, liquidity and prospects.
Our subsidiaries’ inability to pay distributions to us as a result of the foregoing restrictions in the agreements governing their indebtedness may inhibit our ability to pay or increase distributions to our unitholders, which could have a material adverse effect on our business, contracts, financial condition, operating results, cash flow, liquidity and prospects.
Our risk is in part mitigated by the diversification of our natural gas supply and transport across suppliers and pipelines, and regionally across basins, and additionally, we have provisions within our supplier contracts that provide certain protections against non-performance. Further, provisions within our SPAs provide certain protection against force majeure events.
Our risk is in part mitigated by the diversification of our natural gas supply and transportation across suppliers and pipelines, and regionally across basins, and additionally, we have provisions within our supplier contracts that provide certain protections against non-performance. Further, provisions within our SPAs provide certain protection against force majeure events.
If any pipeline connection were to become unavailable for current or future volumes of natural gas due to repairs, damage to the facility, lack of capacity, failure to replace contracted firm pipeline transportation capacity on economic terms, or any other reason, our ability to receive natural gas volumes to produce LNG or to continue 15 Table of Contents shipping natural gas from producing regions or to end markets could be adversely impacted.
If any pipeline connection were to become unavailable for current or future volumes of natural gas due to repairs, damage to the facility, lack of capacity, failure to replace contracted firm pipeline transportation capacity on economic terms, or any other reason, our ability to receive natural gas volumes to produce LNG or to continue shipping natural gas from producing regions or to end markets could be adversely impacted.
Management’s Discussion and Analysis of Financial Condition and Results of Operations, our net income for the year ended December 31, 2022 includes $1.1 billion of losses resulting from changes in fair values of our derivatives, of which substantially all of such losses were related to commodity derivative instruments indexed to international LNG prices, mainly our IPM agreement.
Management’s Discussion and Analysis of Financial Condition and Results of Operations, our net income for the year ended December 31, 2022 included $1.1 billion of losses resulting from changes in the fair values of our derivatives, of which substantially all of such losses were related to commodity derivative instruments indexed to international LNG prices, mainly our IPM agreement in force.
In addition to restrictions on the ability of us and SPL to make distributions or incur additional indebtedness, the agreements governing their indebtedness also contain various other covenants that may prevent them from engaging in beneficial transactions, including limitations on their ability to: • make certain investments; • purchase, redeem or retire equity interests; • issue preferred stock; • sell or transfer assets; • incur liens; • enter into transactions with affiliates; • consolidate, merge, sell or lease all or substantially all of its assets; and • enter into sale and leaseback transactions.
In addition to restrictions on the ability of us and SPL to make distributions or incur additional indebtedness, the agreements governing SPL’s indebtedness also contain various other covenants that may prevent them from engaging in beneficial transactions, including limitations on their ability to: • make certain investments; 14 Table of Contents • purchase, redeem or retire equity interests; • issue preferred stock; • sell or transfer assets; • incur liens; • enter into transactions with affiliates; • consolidate, merge, sell or lease all or substantially all of its assets; and • enter into sale and leaseback transactions.
Any increase in our operating costs could materially and adversely affect our business, contracts, financial condition, operating results, cash flow, liquidity and prospects. Our general partner and its affiliates have conflicts of interest and limited fiduciary duties, which may permit them to favor their own interests to the detriment of us and our unitholders.
Any increase in our operating costs could materially and adversely affect our business, contracts, financial condition, operating results, cash flow, liquidity and prospects. 21 Table of Contents Our general partner and its affiliates have conflicts of interest and limited fiduciary duties, which may permit them to favor their own interests to the detriment of us and our unitholders.
These impacts could materially and adversely affect our business, contracts, financial condition, operating results, cash flow and liquidity. Outbreaks of infectious diseases, such as the outbreak of COVID-19, at our facilities could adversely affect our operations.
These impacts could materially and adversely affect our business, contracts, financial condition, operating results, cash flow and liquidity. Outbreaks of infectious diseases, such as COVID-19, at our facilities could adversely affect our operations.
As an operator, we are required to: • perform ongoing assessments of pipeline safety and compliance; • identify and characterize applicable threats to pipeline segments that could impact a high consequence area; • improve data collection, integration and analysis; 20 Table of Contents • repair and remediate the pipeline as necessary; and • implement preventative and mitigating actions.
As an operator, we are required to: • perform ongoing assessments of pipeline safety and compliance; • identify and characterize applicable threats to pipeline segments that could impact a high consequence area; • improve data collection, integration and analysis; • repair and remediate the pipeline as necessary; and • implement preventative and mitigating actions.
Our future results and liquidity are substantially dependent upon performance by our customers to make payments under long-term contracts. As of December 31, 2022, we had SPAs with terms of 10 or more years with a total of 11 different third party customers.
Our future results and liquidity are substantially dependent upon performance by our customers to make payments under long-term contracts. As of December 31, 2023, we had SPAs with initial terms of 10 or more years with a total of 11 different third party customers.
Our efforts to manage commodity and financial risks through derivative instruments, including our IPM agreement, could adversely affect our earnings reported under GAAP and affect our liquidity. We use derivative instruments to manage commodity, currency and financial market risks.
Our efforts to manage commodity and financial risks through derivative instruments, including our IPM agreements, could adversely affect our earnings reported under GAAP and our liquidity. We use derivative instruments to manage commodity, currency and financial market risks.
As described in Market Factors and Compe tition , it is expected that global demand for natural gas and LNG will continue to increase as nations seek more abundant, reliable and environmentally cleaner fuel alternatives to alternative fossil fuel energy sources such as oil and coal.
As described in Market Factors and Competition , it is expected that global demand for natural gas and LNG will continue to increase as nations seek more abundant, reliable and environmentally cleaner fuel alternatives to alternative fossil fuel energy sources such as oil and coal.
Any significant impediment to the ability to continue to secure long term commercial contracts or deliver LNG from the United States could have a material adverse effect on our customers and on our business, contracts, financial condition, operating results, cash flow, liquidity and prospects. We face competition based upon the international market price for LNG.
Any significant impediment to the ability to continue to secure long term commercial contracts or deliver LNG from the United States could have a material adverse effect on our customers and on our business, contracts, financial condition, operating results, cash flow, liquidity and prospects. 17 Table of Contents We face competition based upon the international market price for LNG.
As of December 31, 2022 and 2021, we had collateral posted with counterparties by us of $35 million and $7 million, respectively, which are included in margin deposits in our Consolidated Balance Sheets. Restrictions in agreements governing our subsidiaries’ indebtedness may prevent our subsidiaries from engaging in certain beneficial transactions, which could materially and adversely affect us.
As of December 31, 2023 and 2022, we had collateral posted with counterparties by us of zero and $35 million, respectively, which are included in margin deposits in our Consolidated Balance Sheets. Restrictions in agreements governing our subsidiaries’ indebtedness may prevent our subsidiaries from engaging in certain beneficial transactions, which could materially and adversely affect us.
Revised, reinterpreted or additional laws and regulations that result in increased compliance costs or additional operating or construction costs and restrictions could have a material adverse effect on our business, contracts, financial condition, operating results, cash flow, liquidity and prospects. Pipeline safety and compliance programs and repairs may impose significant costs and liabilities on us.
Revised, reinterpreted or additional laws and regulations that result in increased compliance, operating or construction costs or restrictions could have a material adverse effect on our business, contracts, financial condition, operating results, cash flow, liquidity and prospects. 20 Table of Contents Pipeline safety and compliance programs and repairs may impose significant costs and liabilities on us.
Our ability to refinance our indebtedness will depend on our ability to access additional project financing as well as the debt and equity capital markets.
Our ability to fund our capital expenditures and refinance our indebtedness will depend on our ability to access additional project financing as well as the debt and equity capital markets.
The design, construction and operation of interstate natural gas pipelines, our LNG terminal, including the Liquefaction Project, and other facilities, as well as the import and export of LNG and the purchase and transportation of natural gas, are highly regulated activities.
The design, construction and operation of interstate natural gas pipelines, our LNG terminal, including the Liquefaction Project, the SPL Expansion Project and other facilities, as well as the export of LNG and the purchase and transportation of natural gas, are highly regulated activities.
Our partnership agreement also contains provisions limiting the ability of unitholders to call meetings or to acquire 23 Table of Contents information about our operations, as well as other provisions limiting the unitholders’ ability to influence the manner or direction of management.
Our partnership agreement also contains provisions limiting the ability of unitholders to call meetings or to acquire information about our operations, as well as other provisions limiting the unitholders’ ability to influence the manner or direction of management.
The success of our business plan is dependent, in part, on the extent to which LNG can, for significant periods and in significant volumes, be supplied from North America and delivered to international markets at a lower cost than the cost of alternative energy sources.
The success of our business plan is dependent, in part, on the extent to which LNG can, for significant periods and in significant volumes, be supplied from the United States and delivered to international markets at a lower cost than the cost of alternative energy sources.
Our business is and will be subject to extensive federal, state and local laws, rules and regulations applicable to our construction and operation activities relating to, among other things, air quality, water quality, waste management, natural 19 Table of Contents resources and health and safety.
Our business is and will be subject to extensive federal, state and local laws, rules and regulations applicable to our construction and operation activities relating to, among other things, air quality, water quality, waste management, natural resources and health and safety.
In addition, changes in our general partner’s senior management or other key personnel could affect our business results. As of December 31, 2022, Cheniere and its subsidiaries had 1,551 full-time employees, including 517 employees who directly supported the Sabine Pass LNG Terminal operations.
In addition, changes in our general partner’s senior management or other key personnel could affect our business results. As of December 31, 2023, Cheniere and its subsidiaries had 1,605 full-time employees, including 501 employees who directly supported the Sabine Pass LNG Terminal operations.
While certain contractual provisions in our SPAs can limit the potential impact of disruptions, and historical indirect losses incurred by us as a result of disruptions to our third party supply of natural gas have not been material, any significant disruption to our natural gas supply where we may not be protected could result in a substantial reduction in our revenues under our long-term SPAs or other customer arrangements, which could have a material adverse effect on our business, contracts, financial condition, operating results, cash flow, liquidity and prospects.
While certain contractual provisions in our SPAs can limit the potential impact of disruptions, and historical indirect losses incurred by us as a result of disruptions to our third party supply of natural gas have not been material, any significant disruption to our natural gas supply where we may not be protected could result in a substantial reduction in our revenues under our long-term SPAs or other customer arrangements, which could have a material adverse effect on our business, contracts, financial condition, operating results, cash flow, liquidity and prospects. 15 Table of Contents We may not be able to purchase or receive physical delivery of sufficient natural gas to satisfy our delivery obligations under the SPAs, which could have a material adverse effect on us.
Our facilities at the Sabine Pass LNG Terminal are critical infrastructure and continued to operate during the COVID-19 pandemic through our implementation of workplace controls and pandemic risk reduction measures. While the COVID-19 pandemic, including the Delta and Omicron variants, has had no adverse impact on our on-going operations, the risk of future variants is unknown.
Our facilities at the Sabine Pass LNG Terminal are critical infrastructure and continued to operate during the COVID-19 pandemic through our implementation of workplace controls and pandemic risk reduction measures. While the COVID-19 pandemic, including subsequent variants, had no adverse impact on our on-going operations, the risk of future variants and other infectious diseases is unknown.
As of December 31, 2022, Cheniere owned 239,872,502 of our common units. We also filed a registration statement for the resale of 202,450,687 common units owned by Blackstone and its affiliates in 2017. Any sales of these units could have an adverse impact on the price of our common units.
As of December 31, 2023, Cheniere owned approximately 239.9 million of our common units. We also filed a registration statement for the resale of 202,450,687 common units owned by Blackstone and its affiliates in 2017. Any sales of these units could have an adverse impact on the price of our common units.
Owners and operators of lean remix gas-fired turbines and diffusion flame gas-fired turbines at major sources of HAP that were installed after January 14, 2003 were required to comply with NESHAP Subpart YYYY by March 9, 2022.
Owners and operators of lean remix gas-fired turbines and diffusion flame gas-fired turbines at major sources of HAP that were installed after January 14, 2003 were required to comply with NESHAP Subpart YYYY by March 9, 2022 and demonstrate initial compliance with those requirements by September 5, 2022.
The determination of cumulative net income is complex and unclear in certain respects, and we intend to treat all of our distributions as being in excess of our cumulative net income for such purposes and subject to the additional 10% withholding tax.
We intend to treat all of our distributions as being in excess of our cumulative net income for such purposes and subject to the additional 10% withholding tax.
Tax gain or loss on the disposition of our common units could be different than expected. If our unitholders sell any of their common units, they will recognize gain or loss equal to the difference between the amount realized and their tax basis in those common units.
If our unitholders sell any of their common units, they will recognize gain or loss equal to the difference between the amount realized and their tax basis in those common units.
A variety of factors beyond our control could impact the availability or cost of capital, including domestic or international economic conditions, increases in key benchmark interest rates and/or credit spreads, the adoption of new or amended banking or capital market laws or regulations and the repricing of market risks and volatility in capital and financial markets.
A variety of factors beyond our control could impact the availability or cost of capital, including domestic or international economic conditions, increases in key benchmark interest rates and/or credit spreads, the adoption of new or amended banking or capital market laws or regulations, lending institutions’ evolving policies on financing businesses linked to fossil fuels and the repricing of market risks and volatility in capital and financial markets.
Although no fines or penalties have been imposed on us to date, should we fail to comply with applicable statutes and the Office of Pipeline Safety’s rules and related regulations and orders, we could be subject to significant penalties and fines, which for certain violations can aggregate up to as high as $2.6 million.
Should we fail to comply with applicable statutes and the Office of Pipeline Safety’s rules and related regulations and orders, we could be subject to significant penalties and fines, which for certain violations can aggregate up to as high as $2.7 million.
As of December 31, 2022, we had $904 million of cash and cash equivalents, $92 million of restricted cash and cash equivalents, a total of $1.6 billion of available commitments under our credit facilities and $16.3 billion of total debt outstanding on a consolidated basis (before unamortized premium, discount and debt issuance costs).
As of December 31, 2023, we had, on a consolidated basis, $575 million of cash and cash equivalents, $56 million of restricted cash and cash equivalents, a total of $1.7 billion of available commitments under our credit facilities and $16.0 billion of total debt outstanding (before unamortized discount and debt issuance costs).
Additionally, our partnership agreement restricts unitholders’ voting rights by providing that any units held by a person that owns 20% or more of any class of units then outstanding, other than our general partner and its affiliates, their transferees and persons who acquired such units with the prior approval of the board of directors of our general partner, cannot vote on any matter.
Cheniere owns 48.6% of our outstanding common units, but it is contractually prohibited from voting our units that it holds in favor of the removal of our general partner. 23 Table of Contents Additionally, our partnership agreement restricts unitholders’ voting rights by providing that any units held by a person that owns 20% or more of any class of units then outstanding, other than our general partner and its affiliates, their transferees and persons who acquired such units with the prior approval of the board of directors of our general partner, cannot vote on any matter.
Further, the IRA includes a charge on methane emissions above certain emissions thresholds employing empirical emissions data that will apply to our facilities beginning in calendar year 2024.
Further, the IRA includes a charge on methane emissions above certain emissions thresholds employing empirical emissions data that will apply to our facilities beginning in calendar year 2024. In January 2024, the EPA issued a proposed rule to impose and collect the methane emissions charge authorized under the IRA.
We are currently in compliance with such conditions; however, failure to comply or our inability to obtain and maintain existing or newly imposed approvals and permits, filings, which may arise due to factors outside of our control such as a U.S. government disruption or shutdown, political opposition or local community resistance to the siting of LNG facilities due to safety, environmental or security concerns, could impede the operation and construction of our infrastructure.
Failure to comply with or our inability to obtain and maintain existing or newly imposed approvals, permits and filings that may arise due to factors outside of our control such as a U.S. government disruption or shutdown, political opposition or local community resistance to our operations could impede the operation and construction of our infrastructure.
For example, 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 debt service coverage ratio of 1.25:1.00 is satisfied.
The agreements governing our subsidiaries’ indebtedness restrict payments that our subsidiaries can make to us in certain events. For example, SPL is restricted from making distributions under agreements governing its indebtedness generally unless, among other requirements, appropriate reserves have been established for debt service using cash or letters of credit and a debt service coverage ratio of 1.25:1.00 is satisfied.
For certain of these instruments, in the absence of actively quoted market prices and pricing information from external sources, the value of these financial instruments involves management’s judgment or use of estimates.
For certain of these instruments, in the absence of actively quoted market prices and pricing information from external sources, the value of these financial instruments involves management’s judgment or use of estimates. Changes in the underlying assumptions or use of alternative valuation methods could affect the reported fair value of these contracts.
Risks Relating to Our Financial Matters Our existing level of cash resources and significant debt could cause us to have inadequate liquidity and could materially and adversely affect our business, contracts, financial condition, operating results, cash flow, liquidity and prospects.
Risks Relating to Our Financial Matters An inability to source capital to supplement our available cash resources and existing revolving credit facilities could cause us to have inadequate liquidity and could materially and adversely affect our business, contracts, financial condition, operating results, cash flow, liquidity and prospects.
Such valuations are primarily valued based on estimated forward commodity prices and are more susceptible to variability particularly when markets are volatile. As described in Results of Operations in Item 7.
Such valuations are primarily valued based on estimated forward commodity prices and are more susceptible to variability particularly when markets are volatile, which could have a significant adverse effect on our earnings reported under GAAP. For example, as described in Results of Operations in Item 7.
Some of these sources of energy may be available at a lower cost than LNG from the Liquefaction Project in certain markets.
Some of these sources of energy may be available at a lower cost than LNG from the Liquefaction Project in certain markets. The cost of LNG supplies from the United States, including the Liquefaction Project, may also be impacted by an increase in natural gas prices in the United States.
The supply of natural gas to our Liquefaction Project to meet our LNG production requirements timely and at sufficient quantities is critical to our operations and the fulfillment of our customer contracts.
Under the SPAs with our customers, we are required to make available to them a specified amount of LNG at specified times. The supply of natural gas to our Liquefaction Project to meet our LNG production requirements timely and at sufficient quantities is critical to our operations and the fulfillment of our customer contracts.
Non-U.S. unitholders should consult their tax advisors regarding the impact of these rules on an investment in our common units. Our unitholders will likely be subject to state and local taxes and return filing requirements as a result of an investment in our common units.
Our unitholders will likely be subject to state and local taxes and return filing requirements as a result of an investment in our common units.
In the event Cheniere favors its interests over our interests, we may have less available cash to make distributions on our units than we otherwise would have if Cheniere had favored our interests. 22 Table of Contents Risks Relating to an Investment in Us and Our Common Units Our partnership agreement limits our general partner’s fiduciary duties to our unitholders and restricts the remedies available to our unitholders for actions taken by our general partner that might otherwise constitute breaches of fiduciary duty.
Risks Relating to an Investment in Us and Our Common Units Our partnership agreement limits our general partner’s fiduciary duties to our unitholders and restricts the remedies available to our unitholders for actions taken by our general partner that might otherwise constitute breaches of fiduciary duty.
Our unitholders are required to pay any U.S. federal income taxes on their share of our taxable income irrespective of whether they receive cash distributions from us. Unitholders may not receive cash distributions from us equal to their share of our taxable income or even equal to the actual tax liability attributable to their share of our taxable income.
Our unitholders are required to pay any U.S. federal income taxes and, in some cases, state and local income taxes, on their share of our taxable income irrespective of whether they receive cash distributions from us.
Changes in the underlying assumptions or use of alternative valuation methods could affect the reported fair value of these contracts. 14 Table of Contents In addition, our liquidity may be adversely impacted by the cash margin requirements of the commodities exchanges or the failure of a counterparty to perform in accordance with a contract.
In addition, our liquidity may be adversely impacted by the cash margin requirements of the commodities exchanges or the failure of a counterparty to perform in accordance with a contract.
SPL and CQP operate with independent capital structures as further detailed in Note 11—Debt of our Notes to Consolidated Financial Statements. We incur, and will incur, significant interest expense relating to financing the assets at the Sabine Pass LNG Terminal.
SPL and CQP operate with independent capital structures as further detailed in Note 11—Debt of our Notes to Consolidated Financial Statements.
Additionally, our long-term SPAs entitle the customer to terminate their contractual obligations upon the occurrence of certain events which include, but are not limited to: (1) if we fail to make available specified scheduled cargo quantities; (2) delays in the commencement of commercial operations; and (3) under the majority of our SPAs upon the occurrence of certain events of force majeure.
While substantially all of our long-term third party customer arrangements are executed with a creditworthy parent company or secured by a parent company guarantee or other form of collateral, we are nonetheless exposed to credit risk in the event of a customer default that requires us to seek recourse. 13 Table of Contents Additionally, our long-term SPAs entitle the customer to terminate their contractual obligations upon the occurrence of certain events which include, but are not limited to: (1) if we fail to make available specified scheduled cargo quantities; (2) delays in the commencement of commercial operations; and (3) under the majority of our SPAs, upon the occurrence of certain events of force majeure.
The Treasury regulations further provide that these rules will generally not apply to transfers of, or distributions on, interests in a publicly traded partnership occurring before January 1, 2023, and after that date, if effected through a broker, the obligation to withhold is imposed on the transferor’s broker.
For transfers of, or distributions on, interests in a publicly traded partnership occurring before January 1, 2023, and after that date, if effected through a broker, the obligation to withhold is imposed on the transferor’s broker. Non-U.S. unitholders should consult their tax advisors regarding the impact of these rules on an investment in our common units.
We currently account for our derivatives at fair value, with immediate recognition of changes in the fair value in earnings, other than certain derivatives for which we have elected to apply accrual accounting, as described in Note 3 —Summary of Significant Accounting Policies of our Notes to Consolidated Financial Statements.
The extent of our derivative position at any given time depends on our assessments of the markets for these commodities and related exposures. We currently account for our derivatives at fair value, with immediate recognition of changes in the fair value in earnings, as described in Note 3—Summary of Significant Accounting Policies of our Notes to Consolidated Financial Statements.
We expect that there will be additional agreements or arrangements with Cheniere and its affiliates, including future interconnection, natural gas balancing and storage agreements with one or more Cheniere-affiliated natural gas pipelines, services agreements, as well as other agreements and arrangements that cannot now be anticipated.
We have or will have numerous contracts and commercial arrangements with Cheniere and its affiliates, including future SPAs, transportation, interconnection, marketing and gas balancing arrangements, as well as servicing and other agreements and arrangements that cannot now be anticipated.
Under the EPAct, the FERC has civil penalty authority under the NGA and the NGPA to impose penalties for current violations of up to $1.4 million per day for each violation. Although the FERC has not imposed fines or penalties on us to date, we are exposed to substantial penalties and fines if we fail to comply with such regulations.
Under the EPAct, the FERC has civil penalty authority under the NGA and the NGPA to impose penalties for current violations of up to $1.5 million per day for each violation.
If any of the lenders in the syndicates backing these facilities was unable to perform on its commitments, we may need to seek replacement financing, which may not be available as needed, or may be available in more limited amounts or on more expensive or otherwise unfavorable terms. 13 Table of Contents Our ability to generate cash is substantially dependent upon the performance by customers under long-term contracts that we have entered into, and we could be materially and adversely affected if any significant customer fails to perform its contractual obligations for any reason.
Our ability to generate cash is substantially dependent upon the performance by customers under long-term contracts that we have entered into, and we could be materially and adversely affected if any significant customer fails to perform its contractual obligations for any reason.
If we were to lose these rights or be required to relocate our pipelines, our business could be materially and adversely affected. Authorizations obtained from the FERC, DOE and other federal and state regulatory agencies contain ongoing conditions that we must comply with.
Authorizations obtained from the FERC, DOE and other federal and state regulatory agencies contain ongoing conditions that we must comply with.
To date, the DOE has also issued orders under Section 4 of the NGA authorizing SPL to export domestically produced LNG. Additionally, we hold certificates under Section 7(c) of the NGA that grant us land use rights relating to the situation of our pipeline on land owned by third parties.
Additionally, we hold certificates under Section 7(c) of the NGA that grant us land use rights relating to the situation of our pipeline on land owned by third parties. If we were to lose these rights or be required to relocate our pipelines, our business could be materially and adversely affected.
The following are some of the important factors that could affect our financial performance or could cause actual results to differ materially from estimates or expectations contained in our forward-looking statements. We may encounter risks in addition to those described below.
The following are some of the important factors that should be considered when investing in us, as such risk factors could adversely affect our business, financial condition, results of operations or cash flows or have other adverse impacts and could cause actual results to differ materially from estimates or expectations contained in our forward-looking statements.
Existing and future safety, environmental and similar laws and governmental regulations could result in increased compliance costs or additional operating costs or construction costs and restrictions.
Although the FERC has not imposed fines or penalties on us to date, we are exposed to substantial penalties and fines if we fail to comply with such regulations. 19 Table of Contents Existing and future safety, environmental and similar laws and governmental regulations could result in increased compliance costs or additional operating costs or construction costs and restrictions.
In those circumstances where additional contracts with Cheniere and its affiliates may be necessary or desirable, additional conflicts of interest may be involved.
In those circumstances where additional contracts with Cheniere and its affiliates may be necessary or desirable, additional conflicts of interest may be involved. 22 Table of Contents In the event Cheniere favors its interests over our interests, we may have less available cash to make distributions on our units than we otherwise would have if Cheniere had favored our interests.
The cost of LNG supplies from the United States, including the Liquefaction Project, may also be impacted by an increase in natural gas prices in the United States. 17 Table of Contents As described in Market Factors and Competition , we have contracted through our SPAs and IPM agreements approximately 85% of the total production capacity from the Liquefaction Project with approximately 15 years of weighted average remaining life as of December 31, 2022.
As described in Market Factors and Competition , we have contracted through our SPAs and IPM agreement approximately 85% of the total anticipated production from the Liquefaction Project with approximately 14 years of weighted average remaining life as of December 31, 2023, excluding volumes that are contractually subject to additional liquefaction capacity beyond what is currently in construction or operation.
Removed
While substantially all of our long-term third party customer arrangements are executed with a creditworthy parent company or secured by a parent company guarantee or other form of collateral, we are nonetheless exposed to credit risk in the event of a customer default that requires us to seek recourse.
Added
We incur, and will incur, significant interest expense relating to financing the assets at the Sabine Pass LNG Terminal, and we anticipate drawing on current committed facilities and/or incurring additional debt to finance the construction of the SPL Expansion Project if a positive FID is made.
Removed
The agreements governing our subsidiaries’ indebtedness restrict payments that our subsidiaries can make to us in certain events and limit the indebtedness that our subsidiaries can incur.
Added
If any of the lenders in the syndicates backing these facilities was unable to perform on its commitments, we may need to seek replacement financing, which may not be available as needed, or may be available in more limited amounts or on more expensive or otherwise unfavorable terms.
Removed
The extent of our derivative position at any given time depends on our assessments of the markets for these commodities and related exposures.
Added
In May 2023, certain of our subsidiaries entered the pre-filing review process with the FERC under the NEPA for the SPL Expansion Project. To date, the DOE has also issued orders under Section 4 of the NGA authorizing SPL to export domestically produced LNG.
Removed
We may not be able to purchase or receive physical delivery of sufficient natural gas to satisfy our delivery obligations under the SPAs, which could have a material adverse effect on us. Under the SPAs with our customers, we are required to make available to them a specified amount of LNG at specified times.
Added
In January 2024, the Biden Administration announced a temporary pause on pending decisions on exports of LNG to non-FTA countries until the DOE can update the underlying analyses for authorizations. We do not believe such a pause will have a material adverse effect on our business, contracts, financial condition, operating results, cash flow, or liquidity.
Removed
Risks Relating to Regulations Failure to obtain and maintain approvals and permits from governmental and regulatory agencies with respect to the design, construction and operation of our facilities, the development and operation of our pipeline and the export of LNG could impede operations and construction and could have a material adverse effect on us.
Added
We have no projects pending non-FTA export approval with the DOE at this time, although we would anticipate seeking non-FTA export authorization from the DOE on the SPL Expansion Project in the future, having entered the pre-filing review process with the FERC in May 2023.
Removed
Cheniere owns 48.6% of our outstanding common units, but it is contractually prohibited from voting our units that it holds in favor of the removal of our general partner.
Added
On December 2, 2023, the EPA issued final rules to reduce methane and volatile organic compounds ( “VOC” ) emissions from new, existing and modified emission sources in the oil and gas sector. These regulations will require monitoring of methane and VOC emissions at our compressor stations.
Added
In addition, we are also subject to increased competition for skilled workers from new entrants to the LNG market.
Added
Unitholders may not receive cash distributions from us equal to their share of our taxable income or even equal to the actual tax liability attributable to their share of our taxable income. Tax gain or loss on the disposition of our common units could be different than expected.

Item 3. Legal Proceedings

Legal Proceedings — active lawsuits and investigations

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Biggest changeCertain of our subsidiaries continue to work with LDEQ to resolve the matters identified in the Compliance Order. We do not expect that any ultimate sanction will have a material adverse impact on our financial results.
Biggest changeWe do not expect that any ultimate penalty will have a material adverse impact on our financial results.
Removed
LDEQ Matter Certain of our subsidiaries are in discussions with the LDEQ to resolve self-reported deviations arising from operation of the Sabine Pass LNG Terminal and the commissioning of the Liquefaction Project, and relating to certain requirements under its Title V Permit.
Added
LDEQ Matter Certain of our subsidiaries are in discussions with the LDEQ to resolve alleged non-compliance with national emission standards for formaldehyde from combustion turbines at the Sabine Pass LNG Terminal. The allegations are identified in a Consolidated Compliance Order and Notice of Potential Penalty, Tracking No.
Removed
The matter involves deviations self-reported to LDEQ pursuant to the Title V Permit and covering the time period from January 1, 2012 through March 25, 2016. On April 11, 2016, certain of our subsidiaries received a Consolidated Compliance Order and Notice of Potential Penalty (the “Compliance Order”) from LDEQ covering deviations self-reported during that time period.
Added
AE-CN-22-00833 (the “ 2023 Compliance Order” ) issued by the LDEQ on April 12, 2023. In August 2004, the EPA stayed the application of the emission standard to combustion turbines such as those at the Sabine Pass LNG Terminal.
Removed
PHMSA Matter In February 2018, the PHMSA issued a Corrective Action Order (the “CAO”) to SPL in connection with a minor LNG leak from one tank and minor vapor release from a second tank at the Sabine Pass LNG Terminal (the “2018 SPL tank incident”).
Added
In March 2022, the EPA lifted the stay, and in June 2022 our subsidiaries petitioned the EPA and LDEQ for approval of additional operating parameters to demonstrate compliance with the emission limitation. The petition remains pending.
Removed
These two tanks have been taken out of operational service while we conduct analysis, repair and remediation. On April 20, 2018, SPL and PHMSA executed a Consent Agreement and Order (the “Consent Order”) that replaces and supersedes the CAO.
Added
Our subsidiaries continue to work with the LDEQ to resolve the matters identified in the 2023 Compliance Order, including the petition pending with the EPA. As of December 2023, our subsidiaries have filed test results with the LDEQ indicating that all 44 turbines meet the relevant compliance standard.
Removed
On July 9, 2019, PHMSA and FERC issued a joint letter setting out operating conditions required to be met prior to SPL returning the tanks to service.
Removed
In July 2021, PHMSA issued a Notice of Probable Violation (“NOPV”) and Proposed Civil Penalty to SPL alleging violations of federal pipeline safety regulations relating to the 2018 SPL tank incident and proposing civil penalties totaling $2,214,900. On September 16, 2021, PHMSA issued an Amended NOPV that reduced the proposed penalty to $1,458,200.
Removed
On October 12, 2021, SPL responded to the Amended NOPV, electing not to contest the alleged violations in the Amended NOPV and electing to pay the proposed reduced penalty.
Removed
PHMSA notified SPL in a letter dated November 9, 2021 that the case was considered “closed.” SPL continues to coordinate with PHMSA and FERC to address the matters relating to the 2018 SPL tank incident, including repair approach and related analysis. One tank has been placed back into operational service.
Removed
We do not expect that the Consent Order and related analysis, repair and remediation or resolution of the NOPV will have a material adverse impact on our financial results or operations.

Item 4. Mine Safety Disclosures

Mine Safety Disclosures — required of mining issuers

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Biggest changeITEM 4. MINE SAFETY DISCLOSURE Not applicable. 28 Table of Contents PART II ITEM 5. MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED UNITHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES Our common units began trading on the NYSE American under the symbol “CQP” commencing with our initial public offering on March 21, 2007.
Biggest changeMARKET FOR REGISTRANT’S COMMON EQUITY, RELATED UNITHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES Our common units trade on the New York Stock Exchange under the symbol “CQP”, and previously traded on the NYSE American or its predecessors under the symbol “CQP” from our initial public offering on March 21, 2007 through February 3, 2024.
As of February 17, 2023, we had 484.0 million common units outstanding held by 9 record owners. We consider cash distributions to unitholders on a quarterly basis, although there is no assurance as to the future cash distributions since they are dependent upon future earnings, cash flows, capital requirements, financial condition and other factors.
As of February 16, 2024, we had 484.0 million common units outstanding held by 10 record owners. We consider cash distributions to unitholders on a quarterly basis, although there is no assurance as to the future cash distributions since they are dependent upon future earnings, cash flows, capital requirements, financial condition and other factors.
Removed
The 2019 CQP Credit Facilities described in Item 7. Management’s Discussion and Analysis of Financial Conditions and Results of Operations may also limit our ability to make distributions. Upon the closing of our initial public offering, Cheniere received 135.4 million subordinated units.
Added
ITEM 4. MINE SAFETY DISCLOSURE Not applicable. 29 Table of Contents PART II ITEM 5.
Removed
In July 2020, the board of directors of our general partner confirmed and approved that, following the distribution with respect to the three months ended June 30, 2020, the financial tests required for conversion of our subordinated units had been met under the terms of the partnership agreement.
Removed
Accordingly, effective August 17, 2020, the first business day following the payment of the distribution, all of our subordinated units were automatically converted into common units on a one-for-one basis and the subordination period was terminated.

Item 5. Market for Registrant's Common Equity

Market for Common Equity — stock, dividends, buybacks

3 edited+0 added−3 removed6 unchanged
Biggest changeThe compensation for Christian Grindal was established by Cheniere in accordance with its compensation practices applicable to employees with comparable qualifications and responsibilities and holding similar positions, without the involvement of Corey Grindal. 93 Table of Contents Independent Directors Because we are a limited partnership, the NYSE American does not require our general partner’s board of directors to be composed of a majority of directors who meet the criteria for independence required by NYSE American.
Biggest changeIndependent Directors Because we are a limited partnership, the NYSE American does not require our general partner’s board of directors to be composed of a majority of directors who meet the criteria for independence required by NYSE American. The board of our general partner has determined that Messrs.
In addition, pursuant to our Code of Business Conduct and Ethics approved by the board of directors of our general partner, the directors, officers and employees of our general partner are expected to bring to the attention of the Compliance Officer any conflict or potential conflict of interest.
In addition, pursuant to our Code of Business Conduct and Ethics approved by the board of directors of our general partner, the directors, officers and employees of our general partner are expected to bring to the attention of the Compliance 93 Table of Contents Officer any conflict or potential conflict of interest.
The board of our general partner has determined that Messrs. Ball, McCain, Pagano and Richard are independent directors in accordance with the following NYSE American independence standards.
Ball, McCain, Pagano and Richard are independent directors in accordance with the following NYSE American independence standards.
Removed
Employment of Director’s Family Member Corey Grindal’s son, Christian Grindal, is a non-executive employee of Cheniere who earned aggregate cash compensation of approximately $165,000 for fiscal year 2022, consisting of base salary, cash bonus and certain relocation and associated transportation allowances, in addition to receiving equity compensation consisting of restricted stock unit (“RSU”) awards with a grant date fair value of $11,584.
Removed
Christian Grindal is expected to earn aggregate cash compensation of approximately $140,000 to $150,000 for fiscal year 2023, consisting of base salary, cash bonus and transportation allowances, in addition to receiving equity compensation consisting of RSU awards with an expected intended value of $16,960.
Removed
In addition, Christian Grindal received in 2022 and is eligible to receive in 2023 other customary employee benefits.

Item 7. Management's Discussion & Analysis

Management's Discussion & Analysis (MD&A) — revenue / margin commentary

88 edited+42 added−45 removed26 unchanged
Biggest changeConsequently, we believe we are well positioned to help meet the needs of our international LNG customers to overcome their supply shortages. 32 Table of Contents Results of Operations Year Ended December 31, (in millions, except per unit data) 2022 2021 Variance Revenues LNG revenues $ 11,507 $ 7,639 $ 3,868 LNG revenues—affiliate 4,568 1,472 3,096 LNG revenues—related party — 1 (1) Regasification revenues 1,068 269 799 Other revenues 63 53 10 Total revenues 17,206 9,434 7,772 Operating costs and expenses Cost of sales (excluding items shown separately below) 11,887 5,290 6,597 Cost of sales—affiliate 213 84 129 Cost of sales—related party — 17 (17) Operating and maintenance expense 757 635 122 Operating and maintenance expense—affiliate 166 142 24 Operating and maintenance expense—related party 72 46 26 General and administrative expense 5 9 (4) General and administrative expense—affiliate 92 85 7 Depreciation and amortization expense 634 557 77 Other — 11 (11) Other—affiliate — 1 (1) Total operating costs and expenses 13,826 6,877 6,949 Income from operations 3,380 2,557 823 Other income (expense) Interest expense, net of capitalized interest (870) (831) (39) Loss on modification or extinguishment of debt (33) (101) 68 Other income, net 21 3 18 Other income—affiliate — 2 (2) Total other expense (882) (927) 45 Net income $ 2,498 $ 1,630 $ 868 Basic and diluted net income per common unit $ 3.27 $ 3.00 $ 0.27 Operational volumes loaded and recognized from the Liquefaction Project Year Ended December 31, 2022 2021 Variance LNG volumes loaded and recognized as revenues (in TBtu) (1) 1,520 1,288 232 (1) The year ended December 31, 2021 includes eight TBtu that were loaded at our affiliate’s facility.
Biggest changeConsequently, we believe we are well positioned to help meet the increased demand of our international LNG customers to overcome their supply shortages. 33 Table of Content Results of Operations Year Ended December 31, (in millions, except per unit data) 2023 2022 Variance Revenues LNG revenues $ 6,991 $ 11,507 $ (4,516) LNG revenues—affiliate 2,475 4,568 (2,093) Regasification revenues 135 1,068 (933) Other revenues 63 63 — Total revenues 9,664 17,206 (7,542) Operating costs and expenses Cost of sales (excluding items shown separately below) 2,721 11,887 (9,166) Cost of sales—affiliate 22 213 (191) Operating and maintenance expense 879 757 122 Operating and maintenance expense—affiliate 166 166 — Operating and maintenance expense—related party 62 72 (10) General and administrative expense 10 5 5 General and administrative expense—affiliate 89 92 (3) Depreciation and amortization expense 672 634 38 Other 6 — 6 Other—affiliate 1 — 1 Total operating costs and expenses 4,628 13,826 (9,198) Income from operations 5,036 3,380 1,656 Other income (expense) Interest expense, net of capitalized interest (823) (870) 47 Loss on modification or extinguishment of debt (6) (33) 27 Interest and dividend income 46 21 25 Other income, net 1 — 1 Total other expense (782) (882) 100 Net income $ 4,254 $ 2,498 $ 1,756 Basic and diluted net income per common unit $ 6.95 $ 3.27 $ 3.68 Volumes loaded and recognized from the Liquefaction Project Year Ended December 31, 2023 2022 Variance LNG volumes loaded and recognized as revenues (in TBtu) 1,536 1,520 16 34 Table of Content Net income The increase of $1.8 billion in net income between the years ended December 31, 2023 and 2022 was primarily attributable to the favorable variance of $3.2 billion from changes in fair value and settlements of derivatives.
However, such claims to the assets of the Non-Guarantors would be subordinated to the any claims by the Non-Guarantors’ creditors, including trade creditors.
However, such claims to the assets of the Non-Guarantors would be subordinated to any claims by the Non-Guarantors’ creditors, including trade creditors.
While our IPM agreement is not a revenue contract for accounting purposes, the payment structure for the purchase of natural gas under the IPM agreement generates a take-or-pay style fixed liquefaction fee, assuming that LNG produced from the natural gas feedstock is subsequently sold at a price approximating the global LNG market price paid for the natural gas feedstock purchase.
While our IPM agreement is not a revenue contract for accounting purposes, the payment structure for the purchase of natural gas under the IPM agreement generates a take-or-pay style fixed liquefaction fee, assuming that LNG produced from the natural gas feedstock is subsequently sold at a price approximating the global gas market price paid for the natural gas feedstock purchase.
As further described in the LNG Revenues section above, the pricing structure of our SPA arrangements with our customers incorporates a variable fee per MMBtu of LNG generally equal to 115% of Henry Hub, which is paid upon delivery, thus limiting our net exposure to future increases in natural gas prices.
As further described in the LNG Revenues section above, the pricing structure of our SPA arrangements with our customers often incorporates a variable fee per MMBtu of LNG generally equal to 115% of Henry Hub, which is paid upon delivery, thus limiting our net exposure to future increases in natural gas prices.
In the long term, we expect to meet our cash requirements 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.
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.
The pricing structure of our SPA arrangements with our customers incorporates a variable fee per MMBtu of LNG generally equal to 115% of Henry Hub, which is paid upon delivery, thus limiting our net exposure to future increases in natural gas prices.
The pricing structure of many of our SPA arrangements with our customers incorporates a variable fee per MMBtu of LNG generally equal to 115% of Henry Hub, which is paid upon delivery, thus limiting our net exposure to future increases in natural gas prices.
This future consideration is in most cases not yet legally due to us and was not reflected on our Consolidated Balance Sheets as of December 31, 2022. In addition, a significant portion of this future consideration is subject to variability as discussed more specifically below. We anticipate that this consideration will be available to meet liquidity needs in the future.
This future consideration is, in most cases, not yet legally due to us and was not reflected on our Consolidated Balance Sheets as of December 31, 2023. In addition, a significant portion of this future consideration is subject to variability as discussed more specifically below. We anticipate that this consideration will be available to meet liquidity needs in the future.
(3) LNG revenues (variable fees, including affiliate) reflect the assumption that customers elect to take delivery of all cargoes made available under the contract. LNG revenues (variable fees, including affiliate) are based on estimated forward prices and basis spreads as of December 31, 2022.
(3) LNG revenues (variable fees, including affiliate) reflect the assumption that customers elect to take delivery of all cargoes made available under the contract. LNG revenues (variable fees, including affiliate) are based on estimated forward prices and basis spreads as of December 31, 2023.
Fixed fees are fees that are due to us regardless of whether a customer exercises their contractual right to not take delivery of an LNG cargo under the contract. Variable fees are receivable only in connection with LNG cargoes that are delivered.
Fixed fees are fees that are due to us regardless of whether a customer exercises, in certain instances, their contractual right to not take delivery of an LNG cargo under the contract. Variable fees are receivable only in connection with LNG cargoes that are delivered.
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 34 Table of Contents market pricing, counterparty credit risk and other relevant factors that may be outside our control, notwithstanding the operational intent to mitigate risk exposure over time.
Notwithstanding the operational intent to mitigate risk exposure over time, 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, the 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.
Our discussion and analysis includes the following subjects: • Overview • Overview of Significant Events • Market Environment • Results of Operations • Liquidity and Capital Resources • Summary of Critical Accounting Estimates • Recent Accounting Standards Overview We are a limited partnership formed by Cheniere to provide clean, secure and affordable LNG to integrated energy companies, utilities and energy trading companies around the world.
Our discussion and analysis includes the following subjects: • Overview • Overview of Significant Events • M arket Environment • Results of Operations • Liquidity and Capital Resources • Summary of Critical Accounting Estimates • Recent Accounting Standards Overview We are a limited partnership formed by Cheniere to provide clean, secure and affordable LNG to integrated energy companies, utilities and energy trading companies around the world.
To ensure that we are able to transport natural gas feedstock to the Sabine Pass LNG Terminal, we have entered into firm pipeline transportation and other agreements to secure firm pipeline transportation capacity from third party pipeline companies.
To ensure that we are able to transport natural gas feedstock to the Sabine Pass LNG Terminal, we have entered into firm pipeline transportation and other agreements to secure firm pipeline transportation capacity from third party interstate and intrastate pipeline companies.
The variable fees under our SPAs were generally sized with the intention to cover the costs of gas purchases and variable transportation and liquefaction fuel to produce the LNG to be sold under each such SPA. In aggregate, the annual fixed fee portion to be paid by the third party SPA customers is approximately $3.4 billion for the Liquefaction Project.
The variable fees under our SPAs were generally sized with the intention to cover the costs of gas purchases, transportation and liquefaction fuel consumed to produce the LNG to be sold under each such SPA. In aggregate, the annual fixed fee portion to be paid by the third party SPA customers is approximately $3.4 billion.
See Note 11 —Debt of our Notes to Consolidated Financial Statements for additional information on our credit facilities and other debt instruments. Our liquidity position subsequent to December 31, 2022 will be driven by future sources of liquidity and future cash requirements as further discussed below under the caption Future Sources and Uses of Liquidity .
See Note 11 —Debt of our Notes to Consolidated Financial Statements for additional information on our credit facilities and other debt instruments. Our liquidity position subsequent to December 31, 2023 will be driven by future sources of liquidity and future cash requirements as further discussed under the caption Future Sources and Uses of Liquidity .
Quantitative and Qualitative Disclosures About Market Risk for further analysis of the sensitivity of the fair value of our derivatives to hypothetical changes in underlying prices. Recent Accounting Standards For a summary of recently issued accounting standards, see Note 3—Summary of Significant Accounting Policies of our Notes to Consolidated Financial Statements. 44 Table of Contents
Quantitative and Qualitative Disclosures About Market Risk for further analysis of the sensitivity of the fair value of our derivatives to hypothetical changes in underlying prices. Recent Accounting Standards For a summary of recently issued accounting standards, see Note 3—Summary of Significant Accounting Policies of our Notes to Consolidated Financial Statements.
Notwithstanding the restrictions noted above, we believe that sufficient flexibility exists to enable each independent capital structure to meet its currently anticipated cash requirements.
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 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.
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 another guarantee that resulted in the creation of its guarantee of the CQP Senior Notes and (4) upon the legal defeasance or satisfaction and discharge of obligations under the indenture governing the CQP Senior Notes.
Discussion of 2020 items and variance drivers between the year ended December 31, 2021 as compared to December 31, 2020 are not included herein and can be found in “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in our annual report on Form 10-K for t he fiscal year ended December 31, 2021 .
Discussion of 2021 items and variance drivers between the year ended December 31, 2022 as compared to December 31, 2021 are not included herein and can be found in “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in our annual report on Form 10-K for the fiscal year ended December 31, 2022 .
There is a possibility that the entire guarantee may be set aside, in which case the entire liability may be extinguished. 36 Table of Contents 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.
There is a possibility that the entire guarantee may be set aside, in which case the entire liability may be extinguished. 37 Table of Content 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.
We include contracts with unsatisfied conditions precedent if the conditions are currently expected to be met. (3) Pricing of natural gas supply agreements is based on estimated forward prices and basis spreads as of December 31, 2022. Pricing of our IPM agreement is based on global gas market prices less fixed liquefaction fees and certain costs incurred by us.
We include contracts with unsatisfied contractual conditions if the conditions are currently expected to be met. (3) Pricing of natural gas supply agreements is based on estimated forward prices and basis spreads as of December 31, 2023. Pricing of our IPM agreements is based on global gas market prices less fixed liquefaction fees and certain costs incurred by us.
Our long-term customer arrangements form the foundation of our business and provide us with significant, stable, long-term cash flows.
Business and Prop erties , our long-term customer arrangements form the foundation of our business and provide us with significant, stable, long-term cash flows.
Because our general partner has no employees, it relies on subsidiaries of Cheniere to provide the personnel necessary to allow it to meet its management obligations to us, SPLNG, SPL and CTPL. As of December 31, 2022, Cheniere and its subsidiaries had 1,551 full-time employees, including 517 employees who directly supported the Sabine Pass LNG Terminal operations.
Because our general partner has no employees, it relies on subsidiaries of Cheniere to provide the personnel necessary to allow it to meet its management obligations to us, SPLNG, SPL and CTPL. As of December 31, 2023, Cheniere and its subsidiaries had 1,605 full-time employees, including 501 employees who directly supported the Sabine Pass LNG Terminal operations.
As of December 31, 2022, we have secured approximately 84% of the natural gas supply required to support the total forecasted production capacity of the Liquefaction Project during 2023. Natural gas supply secured decreases as a percentage of forecasted production capacity beyond 2023.
As of December 31, 2023, we have secured approximately 77% of the natural gas supply required to support the total forecasted production capacity of the Liquefaction Project during 2024. Natural gas supply secured decreases as a percentage of forecasted production capacity beyond 2024.
Additional Future Cash Requirements for Operations and Capital Expenditures Corporate Activities We rely on our general partner to manage all aspects of the development, construction, operation and maintenance of the Sabine Pass LNG Terminal and the Liquefaction Project and to conduct our business.
Additional Future Cash Requirements for Operations and Capital Expenditures Operational Services We rely on our general partner to manage all aspects of the development, construction, operation and maintenance of the Sabine Pass LNG Terminal and to conduct our business.
Natural gas supply is generally secured on an indexed pricing basis, with title transfer occurring upon receipt of the commodity.
Natural gas supply is generally secured on an indexed pricing basis plus a fixed fee, with title transfer occurring upon receipt of the commodity.
Additionally, we are not aware of any specific adverse direct or indirect effects of the war on our supply chain.
Additionally, we are not aware of any specific adverse direct or indirect effects of the Russia-Ukraine war or the Israel-Hamas war on our supply chain.
The associated 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 2022 loss following the assignment was 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 shifts in the international forward commodity curve.
Capital Expenditures Although we do not currently have any material capital expenditures under executed contracts, we expect to incur ongoing capital expenditures to maintain our facilities and other assets, as well as to optimize our existing assets and purchase new assets that are intended to grow our productive capacity.
Capital Expenditures Although we do not currently have any material capital expenditures under executed contracts, we expect to incur ongoing capital expenditures to maintain our facilities and other assets, as well as to optimize our existing assets and purchase new assets that are intended to grow our productive capacity. See Financially Disciplined Growth section for further discussion.
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.
In addition, SPL’s operating costs are managed by subsidiaries of Cheniere under affiliate agreements, which may require SPL to advance cash to the respective affiliates; 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.
The following table summarizes our estimate of material cash requirements for operations and capital expenditures under executed contracts as of December 31, 2022 (in billions): Estimated Payments Due Under Executed Contracts by Period (1) 2023 2024 - 2027 Thereafter Total Purchase obligations (2): Natural gas supply agreements (3) $ 6.4 $ 12.7 $ 7.3 $ 26.4 Natural gas transportation and storage service agreements (4) 0.3 1.1 2.3 3.7 Other purchase obligations (5) 0.3 0.9 1.2 2.4 Leases (6) — 0.1 0.1 0.2 Total $ 7.0 $ 14.8 $ 10.9 $ 32.7 (1) Agreements in force as of December 31, 2022 that have terms dependent on project milestone dates are based on the estimated dates as of December 31, 2022.
The following table summarizes our estimate of material cash requirements for operations related to our core operations under executed contracts as of December 31, 2023 (in billions): Estimated Payments Due Under Executed Contracts by Period (1) 2024 2025 - 2028 Thereafter Total Purchase obligations (2): Natural gas supply agreements (3) $ 3.5 $ 10.0 $ 5.2 $ 18.7 Natural gas transportation and storage service agreements (4) 0.3 0.9 2.3 3.5 Other purchase obligations (5) 0.2 0.9 1.1 2.2 Leases (6) — 0.1 0.1 0.2 Total $ 4.0 $ 11.9 $ 8.7 $ 24.6 (1) Agreements in force as of December 31, 2023 that have terms dependent on project milestone dates are based on the estimated dates as of December 31, 2023.
The estimated fair value of level 3 derivatives recognized in our Consolidated Balance Sheets as of December 31, 2022 and 2021 amounted to an asset (liability) of $(3.7) billion and $38 million, respectively, consisting entirely of physical liquefaction supply derivatives.
The estimated fair value of level 3 derivatives recognized in our Consolidated Balance Sheets as of December 31, 2023 and 2022 amounted to a liability of $1.7 billion and $3.7 billion, respectively, consisting entirely of physical liquefaction supply derivatives.
Business and Properties, will provide a foundation for additional growth in our business in the future.
Business and Properties, will provide a foundation for additional growth in our portfolio of customer contracts in the future.
See Financially Disciplined Growth section for further discussion. 40 Table of Contents Leases We have entered into leases for the use of tug vessels and land sites. A discussion of our lease obligations can be found in Note 12—Leases of our Notes to Consolidated Financial Statements.
Leases We have entered into leases for the use of tug vessels and land sites. A discussion of our lease obligations can be found in Note 12—Leases of our Notes to Consolidated Financial Statements.
Changes in facts and circumstances or additional information may result in revised estimates, and actual results may differ from these estimates. Management considers the following to be its most critical accounting estimates that involve significant judgment.
Management evaluates its estimates and related assumptions regularly, including those related to the valuation of derivative instruments. Changes in facts and circumstances or additional information may result in revised estimates, and actual results may differ from these estimates. Management considers the following to be its most critical accounting estimates that involve significant judgment.
The following provides a summary of distributions paid by us during the years ended December 31, 2022 and 2021: Total Distribution (in millions) Date Paid Period Covered by Distribution Distribution Per Common Unit Common Units General Partner Units Incentive Distribution Rights November 14, 2022 July 1 - September 30, 2022 $ 1.070 $ 518 $ 15 $ 220 August 12, 2022 April 1 - June 30, 2022 1.060 513 15 215 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 November 12, 2021 July 1 - September 30, 2021 $ 0.680 $ 329 $ 8 $ 39 August 13, 2021 April 1 - June 30, 2021 0.665 322 7 32 May 14, 2021 January 1 - March 31, 2021 0.660 320 7 30 February 12, 2021 October 1 - December 31, 2020 0.655 316 7 27 In addition, Tug Services distributed $12 million and $9 million during the years ended December 31, 2022 and 2021, 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.
All distributions paid to date have been made from accumulated operating surplus. 44 Table of Content The following provides a summary of distributions paid by us during the years ended December 31, 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 November 14, 2023 July 1 - September 30, 2023 $ 1.030 $ 499 $ 14 $ 201 August 14, 2023 April 1 - June 30, 2023 1.030 499 14 201 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 November 14, 2022 July 1 - September 30, 2022 $ 1.070 $ 518 $ 15 $ 220 August 12, 2022 April 1 - June 30, 2022 1.060 513 15 215 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 $13 million and $12 million during the years ended December 31, 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.
A discussion of revenues under our SPAs can be found in Note 13—Revenues of our Notes to Consolidated Financial Statements. 38 Table of Contents In addition to the third party SPAs discussed above, SPL has executed agreements with Cheniere Marketing under SPAs and letter agreements at a price equal to 115% of Henry Hub plus a fixed fee, except for an SPA associated with an IPM agreement for which pricing is linked to international natural gas prices.
In addition to the third party SPAs discussed above, SPL has executed agreements with Cheniere Marketing under SPAs and letter agreements at a price equal to 115% of Henry Hub plus a fixed fee, except for an SPA associated with an IPM agreement for which pricing is linked to international natural gas prices.
Notwithstanding any arrangements between TotalEnergies and SPL, payments required to be made by TotalEnergies to SPLNG will continue to be made by TotalEnergies to SPLNG in accordance with its TUA.
Notwithstanding any arrangements between TotalEnergies and SPL, payments required to be made by TotalEnergies to SPLNG will continue to be made by TotalEnergies to SPLNG in accordance with its TUA and we continue to recognize the payments received from TotalEnergies as revenue.
Provided below are the changes in fair value from valuation of instruments valued through the use of internal models which incorporate significant unobservable inputs for the years ended December 31, 2022 and 2021 (in millions), which entirely consisted of physical liquefaction supply derivatives.
Such valuations are more susceptible to variability particularly when markets are volatile. Provided below are the changes in fair value from valuation of instruments valued through the use of internal models which incorporate significant unobservable inputs for the years ended December 31, 2023 and 2022 (in millions), which entirely consisted of physical liquefaction supply derivatives.
Under the SPAs, the customers purchase LNG on a free on board (“FOB”) basis for a price consisting of a fixed fee per MMBtu of LNG (a portion of which is subject to annual adjustment for inflation) plus a variable fee per MMBtu of LNG generally equal to 115% of Henry Hub.
Under the SPAs, the customers purchase LNG on an FOB basis (delivered to the customer at the Sabine Pass LNG Terminal) generally for a price consisting of a fixed fee per MMBtu of LNG (a portion of which is subject to annual adjustment for inflation) plus a variable fee per MMBtu of LNG generally equal to 115% of Henry Hub.
Fair Value of Level 3 Physical Liquefaction Supply Derivatives All derivative instruments are recorded at fair value, other than certain derivatives for which we have elected to apply accrual accounting, as described in Note 3 —Summary of Significant Accounting Policies of our Notes to Consolidated Financial Statements.
Fair Value of Level 3 Physical Liquefaction Supply Derivatives All of our derivative instruments are recorded at fair value, as described in Note 3—Summary of Significant Accounting Policies of our Notes to Consolidated Financial Statements.
Revised Capital Allocation Plan In September 2022, the board of directors of Cheniere approved a revised long-term capital allocation plan, which may involve the repayment, redemption or repurchase, on the open market or otherwise, of debt, including senior notes of CQP and SPL.
Capital Allocation Plan In September 2022, the board of directors of Cheniere approved a revised long-term capital allocation plan, which may involve the repayment, redemption or repurchase, on the open market or otherwise, of debt, including senior notes of CQP and SPL. 43 Table of Content 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).
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.
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.
Despite the global impacts of the Russia / Ukraine war, we do not believe we have significant exposure to adverse direct or indirect impacts of the war, as we do not conduct business in Russia and refrain from business dealings with Russian entities.
LNG capacity in 2023, and we anticipate that a portion of these contracts will support our future growth. Despite the global impacts of the Russia-Ukraine war, we do not believe we have significant exposure to adverse direct or indirect impacts of the war, as we do not conduct business in Russia and refrain from business dealings with Russian entities.
The following table summarizes our estimate of future material sources of liquidity to be received from executed contracts as of December 31, 2022 (in billions): Estimated Revenues Under Executed Contracts by Period (1) 2023 2024 - 2027 Thereafter Total LNG revenues (fixed fees) (2) $ 3.7 $ 14.7 $ 34.4 $ 52.8 LNG revenues (variable fees) (2) (3) 8.1 30.6 69.9 108.6 Regasification revenues 0.1 0.5 0.2 0.8 Total $ 11.9 $ 45.8 $ 104.5 $ 162.2 (1) Agreements in force as of December 31, 2022 that have terms dependent on project milestone dates are based on the estimated dates as of December 31, 2022.
The following table summarizes our estimate of future material sources of liquidity to be received from executed SPAs as of December 31, 2023 (in billions): Estimated Revenues Under Executed SPAs by Period (1) (2) 2024 2025 - 2028 Thereafter Total LNG revenues (fixed fees) $ 3.9 $ 14.1 $ 31.0 $ 49.0 LNG revenues (variable fees) (3) 5.1 24.4 60.1 89.6 Total $ 9.0 $ 38.5 $ 91.1 $ 138.6 (1) Agreements in force as of December 31, 2023 that have terms dependent on project milestone dates are based on the estimated dates as of December 31, 2023.
For commodity derivative instruments related to our IPM agreement assigned to us during the year ended December 31, 2022 as described further in Overview of Significant Events , 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.
For commodity derivative instruments related to our IPM agreements, 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.
The purchase price for such cargoes would be (i) 115% of the applicable natural gas feedstock purchase price or (ii) a free-on-board U.S. Gulf Coast LNG market price, whichever is greater. Regasification Revenues SPLNG has a long-term, third party TUA with TotalEnergies Gas & Power North America, Inc.
The purchase price for such cargoes would be (i) 115% of the applicable natural gas feedstock purchase price or (ii) a free-on-board U.S. Gulf Coast LNG market price, whichever is greater.
On January 27, 2023, we declared a cash distribution of $1.07 per common unit to unitholders of record as of 31 Table of Contents February 6, 2023 and the related general partner distribution that was paid on February 14, 2023.
On January 26, 2024, with respect to the fourth quarter of 2023, we declared a cash distribution of $1.035 per common unit to unitholders of record as of February 7, 2024 and the related general partner distribution that was paid on February 14, 2024.
Operating costs and expenses . $6.9 billion increase between comparable periods primarily attributable to: • $5.5 billion increase in cost of sales excluding the effect of derivative losses described below, primarily as a result of $5.4 billion in increased cost of natural gas feedstock largely due to higher U.S. natural gas prices and, to a lesser extent, from increased volume of natural gas liquified and delivered as LNG, as discussed above under the caption Revenues ; and • $1.2 billion unfavorable variance in derivative losses from changes in fair value and settlements included in cost of sales, from $32 million derivative gain in the year ended December 31, 2021 to $1.2 billion derivative loss in the year ended December 31, 2022, primarily due to non-cash unfavorable changes in fair value of our commodity derivatives that are attributed to positions indexed to international gas prices, specifically associated with the Tourmaline IPM agreement that was assigned to us as discussed in Net income above.
Operating costs and expenses The $9.2 billion decrease in operating costs and expenses between the years ended December 31, 2023 and 2022 was primarily attributable to: • $6.1 billion decrease in cost of sales excluding the effect of derivative changes described below, primarily as a result of $6.0 billion decrease in cost of natural gas feedstock largely due to lower U.S. natural gas prices; and • $3.2 billion favorable variance from changes in fair value and settlements of derivatives included in cost of sales, from a loss of $1.2 billion in the year ended December 31, 2022 to a gain of $2.1 billion in the year ended December 31, 2023, 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.
During the years ended December 31, 2022 and 2021, we realized offsets to LNG terminal costs of $148 million and $105 million, respectively, corresponding to 13 TBtu and 12 TBtu, respectively, that were related to the sale of commissioning cargoes from Train 6 of the Liquefaction Project.
During the year ended December 31, 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 year ended December 31, 2023.
Additional Future Sources of Liquidity Available Commitments under Credit Facilities As of December 31, 2022, we had $1.6 billion in available commitments under our credit facilities, subject to compliance with the applicable covenants, to potentially meet liquidity needs. Our credit facilities mature between 2024 and 2025.
Available Commitments under Credit Facilities As of December 31, 2023, we had $1.7 billion in available commitments under our credit facilities, as detailed earlier in the table summarizing our available liquidity, subject to compliance with the applicable covenants, to potentially meet liquidity needs. Our credit facilities mature in 2028.
Natural Gas Supply, Transportation and Storage Service Agreements We have secured natural gas feedstock for the Sabine Pass LNG Terminal through long-term natural gas supply and an IPM agreement. Under our IPM agreement, we pay for natural gas feedstock based on global gas market prices less fixed liquefaction fees and certain costs incurred by us.
Under our IPM agreement, we pay for natural gas feedstock based on global gas market prices less fixed liquefaction fees and certain costs incurred by us.
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. 35 Table of Contents 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”) and $1.2 billion of 3.25% Senior Notes due 2032 (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”).
Supplemental Guarantor Information The 2033 CQP Senior Notes are jointly and severally guaranteed by each of our current and future subsidiaries who guarantee the CQP Revolving Credit Facility and the $1.5 billion of 4.500% Senior Notes due 2029, $1.5 billion of 4.000% Senior Notes due 2031 and $1.2 billion of 3.25% Senior Notes due 2032 (together with the 2033 CQP Senior Notes, 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” ).
Investing Cash Flows Cash outflows for property, plant and equipment were primarily for the construction costs for Train 6 of the Liquefaction Project, which achieved substantial completion on February 4, 2022. 42 Table of Contents Financing Cash Flows Our financing cash net outflows during the years ended December 31, 2022 and 2021 were $3.7 billion and $2.0 billion, respectively.
Cash outflows for property, plant and equipment during the year ended December 31, 2022 were primarily related to the construction costs for Train 6 of the Liquefaction Project, which achieved substantial completion on February 4, 2022.
The following table summarizes our estimate of material cash requirements for financing under executed contracts as of December 31, 2022 (in billions): Estimated Payments Due Under Executed Contracts by Period (1) 2023 2024 - 2027 Thereafter Total Debt (2) $ — $ 7.2 $ 9.1 $ 16.3 Interest payments (2) 0.8 2.3 1.2 4.3 Total $ 0.8 $ 9.5 $ 10.3 $ 20.6 (1) The estimates above reflect management’s assumptions and currently known market conditions and other factors as of December 31, 2022.
The following table summarizes our estimate of material cash requirements for financing under executed contracts as of December 31, 2023 (in billions): Estimated Payments Due Under Executed Contracts by Period (1) 2024 2025 - 2028 Thereafter Total Debt $ 0.3 $ 6.7 $ 9.0 $ 16.0 Interest payments 0.9 2.2 1.2 4.3 Total $ 1.2 $ 8.9 $ 10.2 $ 20.3 (1) Debt and interest payments are based on the total debt balance, scheduled contractual maturities and fixed or estimated forward interest rates in effect at December 31, 2023.
We expect that any potential future expansion at the Sabine Pass LNG Terminal would increase cash requirements to support expanded operations, although expansion could be designed to leverage shared infrastructure to reduce the incremental costs of any potential expansion.
We expect that the SPL Expansion Project and any further expansion at the Sabine Pass LNG Terminal would increase cash requirements to support expanded operations, although expansion may be designed to leverage shared infrastructure to reduce the incremental costs of any potential expansion. 42 Table of Content Future Cash Requirements for Financing under Executed Contracts We are committed to make future cash payments for financing pursuant to certain of our contracts.
For additional discussion of the assignment of the IPM agreement, see Note 1 8 —Supplemental Cash Flow Information of our Notes to Consolidated Financial Statements.
See Note 1 3 —Revenues of our Notes to Consolidated Financial Statements for additional information on the termination agreement.
On January 27, 2023, we declared a cash distribution of $1.07 per common unit to unitholders of record as of February 6, 2023 and the related general partner distribution that was paid on February 14, 2023. These distributions consist of a base amount of $0.775 per unit and a variable amount of $0.295 per unit.
On January 26, 2024, with respect to the fourth quarter of 2023, we declared a cash distribution of $1.035 per common unit to unitholders of record as of February 7, 2024 and the related general partner distribution that was paid on February 14, 2024.
December 31, 2022 Cash and cash equivalents $ 904 Restricted cash and cash equivalents designated for the Liquefaction Project 92 Available commitments under our credit facilities (1): SPL’s Working capital revolving credit and letter of credit reimbursement agreement 872 CQP’s credit facilities 750 Total available commitments under our credit facilities 1,622 Total available liquidity $ 2,618 (1) Available commitments represent total commitments less loans outstanding and letters of credit issued under each of our credit facilities as of December 31, 2022.
December 31, 2023 Cash and cash equivalents $ 575 Restricted cash and cash equivalents designated for the Liquefaction Project 56 Available commitments under our credit facilities (1): SPL Revolving Credit Facility 720 CQP Revolving Credit Facility 1,000 Total available commitments under our credit facilities 1,720 Total available liquidity $ 2,351 (1) Available commitments represent total commitments less loans outstanding and letters of credit issued under each of our credit facilities as of December 31, 2023.
The timing of revenue recognition under GAAP may not align with cash receipts, although we do not consider the timing difference to be material. The estimates above reflect management’s assumptions and currently known market conditions and other factors as of December 31, 2022.
The timing of revenue recognition under GAAP may not align with cash receipts, although we do not consider the timing difference to be material.
Payments made by SPL to TotalEnergies under this partial TUA assignment agreement are included in other purchase obligations in the Future Cash Requirements for Operations and Capital Expenditures under Executed Contracts table below. Full discussion of the partial TUA assignment and SPLNG’s TUA agreements can be found in Note 13—Revenues of our Notes to Consolidated Financial Statements.
Costs incurred by SPL to TotalEnergies under this partial TUA assignment agreement are recognized in operating and maintenance expense. Full discussion of the partial TUA assignment and SPLNG’s revenues under the TUA agreements can be found in Note 13—Revenues of our Notes to Consolidated Financial Statements.
Year Ended December 31, 2022 2021 Favorable (unfavorable) changes in fair value relating to instruments still held at the end of the period $ (1,032) $ 74 The unfavorable change in unrealized loss on instruments held at December 31, 2022 is primarily attributed to the assignment of an IPM agreement to SPL in March 2022, which is valued based on estimated forward international LNG commodity curves.
Year Ended December 31, 2023 2022 Favorable (unfavorable) changes in fair value relating to instruments still held at the end of the period $ 1,318 $ (1,032) The changes in fair value on instruments held at the end of both years are primarily attributed to a significant variance in the estimated and observable forward international LNG commodity prices on our IPM agreement during the years ended December 31, 2023 and 2022.
LNG Revenues 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 December 31, 2022.
Through our SPAs and IPM agreement, we have contracted approximately 85% of the total anticipated production from the Liquefaction Project with approximately 14 years of weighted average remaining life as of December 31, 2023, excluding volumes that are contractually subject to additional liquefaction capacity beyond what is currently in construction or operation.
We had $328 million aggregate amount of issued letters of credit under our credit facilities as of December 31, 2022. Additional Future Cash Requirements for Financing CQP Distribution 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).
Additional Future Cash Requirements for Financing CQP Distribution Our partnership agreement requires that, within 45 days after the end of each quarter, we distribute all of our available cash, which, as defined in our partnership agreement, consists of cash on hand at the end of a quarter less the amount of any reserves established by our general partner.
Summary of Critical Accounting Estimates The preparation of our 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 43 Table of Contents accompanying notes. Management evaluates its estimates and related assumptions regularly, including those related to the valuation of derivative instruments.
These distributions consist of a base amount of $0.775 per unit and a variable amount of $0.260 per unit. Summary of Critical Accounting Estimates The preparation of our 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.
Our long-term SPA customers consist of creditworthy counterparties, with an average credit rating of A, A2 and A by S&P, Moody’s and Fitch, respectively.
Our long-term SPA customers consist of creditworthy counterparties, with an average credit rating 39 Table of Content of A, A2 and A by S&P Global Ratings, Moody’s and Fitch, respectively. A discussion of revenues under our SPAs can be found in Note 13—Revenues of our Notes to Consolidated Financial Statements.
Includes $0.4 billion under natural gas supply agreements with unsatisfied conditions precedent. (4) Includes $0.3 billion of purchase obligations to related parties under the natural gas transportation and storage service agreements.
Includes $0.8 billion under natural gas supply agreements with unsatisfied contractual conditions. (4) Includes $0.2 billion of purchase obligations to related parties under the natural gas transportation and storage service agreements. (5) Includes $1.2 billion of purchase obligations to affiliates under services agreements and payments under SPL’s partial TUA assignment agreement with TotalEnergies Gas & Power North America, Inc.
The estimates above reflect management’s assumptions and currently known market conditions and other factors as of December 31, 2022. Estimates are not guarantees of future 39 Table of Contents performance and actual results may differ materially as a result of a variety of factors described in this annual report on Form 10-K.
Estimates are not guarantees of future performance and actual results may differ materially as a result of a variety of factors described in this annual report on Form 10-K. Future Sources of Liquidity under Executed SPAs As described in Items 1. and 2.
Additionally, the valuation of certain physical liquefaction supply derivatives requires significant judgment in estimating underlying forward commodity curves due to periods of unobservability or limited liquidity. Such valuations are more susceptible to variability particularly when markets are volatile.
We may recognize changes in fair value through earnings that could be significant to our results of operations if and when such uncertainties are resolved. Additionally, the valuation of certain physical liquefaction supply derivatives requires significant judgment in estimating underlying forward commodity curves due to periods of unobservability or limited liquidity.
Undrawn commitments under our credit facilities are subject to commitment fees ranging from 0.10% to 0.638%, subject to change based on the applicable entity’s credit rating. Issued letters of credit under our credit facilities are subject to letter of credit fees ranging from 1.125% to 1.75%.
Issued letters of credit under our credit facilities are subject to letter of credit fees ranging from 1.00% to 2.00%, subject to change based on the applicable entity’s credit rating. We had $280 million aggregate amount of issued letters of credit under our credit facilities as of December 31, 2023.
Further discussion of our debt obligations, including the restrictions imposed by these arrangements, can be found in Note 11—Debt of our Notes to Consolidated Financial Statements. 41 Table of Contents Interest As of December 31, 2022, our senior notes had a weighted average contractual interest rate of 4.83%.
As of December 31, 2023, we and SPL were in compliance with all covenants related to their respective debt agreements. Further discussion of our debt obligations, including the restrictions imposed by these arrangements, can be found in Note 11—Debt of our Notes to Consolidated Financial Statements.
We paid $76 million of debt extinguishment costs related to premiums associated with this redemption. 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).
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.
Summarized Balance Sheets (in millions) December 31, 2022 2021 ASSETS Current assets Cash and cash equivalents $ 904 $ 876 Accounts receivable from Non-Guarantors 55 49 Other current assets 40 53 Current assets—affiliate 171 137 Current assets with Non-Guarantors — 1 Total current assets 1,170 1,116 Property, plant and equipment, net of accumulated depreciation 2,946 2,422 Other non-current assets, net 109 119 Total assets $ 4,225 $ 3,657 LIABILITIES Current liabilities Due to affiliates $ 193 $ 167 Deferred revenue from Non-Guarantors 24 22 Other current liabilities 95 95 Other current liabilities from Non-Guarantors 2 — Total current liabilities 314 284 Long-term debt, net of premium, discount and debt issuance costs 4,159 4,154 Finance lease liabilities 18 — Other non-current liabilities 78 87 Non-current liabilities—affiliate 18 15 Total liabilities $ 4,587 $ 4,540 Summarized Statement of Income (in millions) Year Ended December 31, 2022 Revenues $ 1,132 Revenues from Non-Guarantors 544 Total revenues 1,676 Operating costs and expenses 208 Operating costs and expenses—affiliate 203 Total operating costs and expenses 411 Income from operations 1,265 Net income 1,045 37 Table of Contents Future Sources and Uses of Liquidity Future Sources of Liquidity under Executed Contracts Because many of our sales contracts have long-term durations, we are contractually entitled to significant future consideration under our SPAs and TUAs which has not yet been recognized as revenue.
Summarized Balance Sheets (in millions) December 31, 2023 2022 ASSETS Current assets Cash and cash equivalents $ 575 $ 904 Accounts receivable from Non-Guarantors 55 55 Other current assets 39 40 Current assets—affiliate 86 171 Current assets with Non-Guarantors 1 — Total current assets 756 1,170 Property, plant and equipment, net of accumulated depreciation 2,915 2,946 Other non-current assets, net 110 109 Total assets $ 3,781 $ 4,225 LIABILITIES Current liabilities Due to affiliates $ 121 $ 193 Deferred revenue from Non-Guarantors 3 24 Other current liabilities 177 95 Other current liabilities from Non-Guarantors — 2 Total current liabilities 301 314 Long-term debt, net of premium, discount and debt issuance costs 5,542 4,159 Finance lease liabilities 14 18 Other non-current liabilities 67 78 Non-current liabilities—affiliate 18 18 Total liabilities $ 5,942 $ 4,587 Summarized Statement of Income (in millions) Year Ended December 31, 2023 Revenues $ 199 Revenues from Non-Guarantors 549 Total revenues 748 Operating costs and expenses 247 Operating costs and expenses—affiliate 188 Operating costs and expenses—Non-Guarantors 12 Total operating costs and expenses 447 Income from operations 301 Net income 105 38 Table of Content Future Sources and Uses of Liquidity The following discussion of our future sources and uses of liquidity includes estimates that reflect management’s assumptions and currently known market conditions and other factors as of December 31, 2023.
Debt As of December 31, 2022, our debt complex was comprised of senior notes with an aggregate outstanding principal balance of $16.3 billion and credit facilities with no outstanding balances. As of December 31, 2022, we and SPL were in compliance with all covenants related to their respective debt agreements.
Debt and interest payments do not contemplate repurchases, repayments and retirements that we may make prior to contractual maturity. Debt As of December 31, 2023, our debt complex was comprised of senior notes with an aggregate outstanding principal balance of $16.0 billion and credit facilities with no outstanding loan balances.
SPL is obligated to make monthly capacity payments to SPLNG aggregating approximately $250 million annually, prior to inflation adjustments, continuing until at least May 2036. SPL entered into a partial TUA assignment agreement with TotalEnergies, whereby SPL gained access to substantially all of TotalEnergies’ capacity and other services provided under TotalEnergies’ TUA with SPLNG that started in 2019.
SPL has a partial TUA assignment agreement with TotalEnergies, whereby SPL gained access to substantially all of TotalEnergies’ capacity and other services provided under TotalEnergies’ TUA with SPLNG.
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 December 31, 2022. We believe that continued global demand for natural gas and LNG, as further described in Market Factors and Competition in Items 1. and 2.
Through our SPAs and IPM agreement, we have contracted approximately 85% of the total anticipated production from the Liquefaction Project, with approximately 14 years of weighted average remaining life as of December 31, 2023, excluding volumes that are contractually subject to additional liquefaction capacity beyond what is currently in construction or operation.
Inclusive of amounts under contracts with unsatisfied conditions precedent as of December 31, 2022, we have secured up to 5,785 TBtu of natural gas feedstock through agreements with remaining terms that range up to 15 years. A discussion of our natural gas supply and IPM agreements can be found in Note 8—Derivative Instruments of our Notes to Consolidated Financial Statements.
A 41 Table of Content discussion of our natural gas supply and IPM agreements can be found in Note 8—Derivative Instruments of our Notes to Consolidated Financial Statements.
Exports from our Liquefaction Project reached 29.1 million tonnes, representing over 70% of the gain in the U.S. total for the year.
Exports from our Liquefaction Project reached approximately 30 million tonnes in aggregate, representing over 34% of total U.S. exports for the year, according to Kpler data. Global LNG demand grew by approximately 3% from 2022, adding 10.5 million tonnes to the overall market.
In instances where observable data is unavailable, consideration is given to the assumptions that market participants would use in valuing the asset or liability.
In instances where observable data is unavailable, consideration is given to the assumptions that market participants may use in valuing the asset or liability. To the extent valued using an option pricing model, we consider the future prices of energy units for unobservable periods to be a significant unobservable input to estimated net fair value.
Estimates are not guarantees of future performance and actual results may differ materially as a result of a variety of factors described in this annual report on Form 10-K. (2) LNG revenues (including $2.0 billion and $12.9 billion of fixed fees and variable fees, respectively, from affiliates) exclude revenues from contracts with original expected durations of one year or less.
(2) LNG revenues (including $1.4 billion and $7.6 billion of fixed fees and variable fees, respectively, from affiliates) exclude revenues from contracts with original expected durations of one year or less.
Certain of our leases also contain variable payments, such as inflation, which are not included above unless the contract terms require the payment of a fixed amount that is unavoidable. Payments during renewal options that are exercisable at our sole discretion are included only to the extent that the option is believed to be reasonably certain to be exercised.
( “TotalEnergies” ), as discussed in Note 13—Revenues of our Notes to Financial Statements. (6) Includes payments under operating leases and finance leases. Certain of our leases also contain variable payments, such as inflation, which are not included above unless the contract terms require in-substance fixed payments that are, in effect, unavoidable.

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Item 7A. Quantitative and Qualitative Disclosures About Market Risk

Market Risk — interest-rate, FX, commodity exposure

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Biggest changeITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK Marketing and Trading Commodity Price Risk We have entered into commodity derivatives consisting of natural gas supply contracts for the operation of the Liquefaction Project (“Liquefaction Supply Derivatives”).
Biggest changeITEM 7A. 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 (the “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): December 31, 2022 December 31, 2021 Fair Value Change in Fair Value Fair Value Change in Fair Value Liquefaction Supply Derivatives $ (3,741) $ 565 $ 27 $ 1 See Note 8 —Derivative Instruments of our Notes to Consolidated Financial Statements for additional details about our derivative instruments. 45 Table of Contents
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): December 31, 2023 December 31, 2022 Fair Value Change in Fair Value Fair Value Change in Fair Value Liquefaction Supply Derivatives $ (1,657) $ 362 $ (3,741) $ 565 See Note 8 —Derivative Instruments of our Notes to Consolidated Financial Statements for additional details about our derivative instruments. 46 Table of Contents

Other CQP 10-K year-over-year comparisons