CHENIERE ENERGY, INC. Information Regarding Forward-Looking Statements This quarterly report contains certain statements that are, or may be deemed to be, "forward-looking statements" within the meaning of Section 27A of the Securities Act of 1933, as amended (the "Securities Act"), and Section 21E of the Securities Exchange Act of 1934, as amended (the "Exchange Act"). All statements, other than statements of historical or present facts or conditions, included herein or incorporated herein by reference are "forward-looking statements." Included among "forward-looking statements" are, among other things: •statements that we expect to commence or complete construction of our proposed LNG terminals, liquefaction facilities, pipeline facilities or other projects, or any expansions or portions thereof, by certain dates, or at all; •statements regarding future levels of domestic and international natural gas production, supply or consumption or future levels of LNG imports into or exports fromNorth America and other countries worldwide or purchases of natural gas, regardless of the source of such information, or the transportation or other infrastructure or demand for and prices related to natural gas, LNG or other hydrocarbon products; •statements regarding any financing transactions or arrangements, or our ability to enter into such transactions; •statements regarding the amount and timing of share repurchases; •statements relating to the construction of our Trains and pipelines, including statements concerning the engagement of any EPC contractor or other contractor and the anticipated terms and provisions of any agreement with any EPC or other contractor, and anticipated costs related thereto; •statements regarding any SPA or other agreement to be entered into or performed substantially in the future, including any revenues anticipated to be received and the anticipated timing thereof, and statements regarding the amounts of total LNG regasification, natural gas liquefaction or storage capacities that are, or may become, subject to contracts; •statements regarding counterparties to our commercial contracts, construction contracts, and other contracts; •statements regarding our planned development and construction of additional Trains or pipelines, including the financing of such Trains or pipelines; •statements that our Trains, when completed, will have certain characteristics, including amounts of liquefaction capacities; •statements regarding our business strategy, our strengths, our business and operation plans or any other plans, forecasts, projections, or objectives, including anticipated revenues, capital expenditures, maintenance and operating costs and cash flows, any or all of which are subject to change; •statements regarding legislative, governmental, regulatory, administrative or other public body actions, approvals, requirements, permits, applications, filings, investigations, proceedings or decisions; •statements regarding our anticipated LNG and natural gas marketing activities; •statements regarding the outbreak of COVID-19 and its impact on our business and operating results, including any customers not taking delivery of LNG cargoes, the ongoing credit worthiness of our contractual counterparties, any disruptions in our operations or construction of our Trains and the health and safety of our employees, and on our customers, the global economy and the demand for LNG; and •any other statements that relate to non-historical or future information. All of these types of statements, other than statements of historical or present facts or conditions, are forward-looking statements. In some cases, forward-looking statements can be identified by terminology such as "may," "will," "could," "should," "achieve," "anticipate," "believe," "contemplate," "continue," "estimate," "expect," "intend," "plan," "potential," "predict," "project," "pursue," "target," the negative of such terms or other comparable terminology. The forward-looking statements contained in this quarterly report are largely based on our expectations, which reflect estimates and assumptions made by our management. These estimates and assumptions reflect our best judgment based on currently known market conditions and other factors. Although we believe that such estimates are reasonable, they are inherently uncertain and involve 30 -------------------------------------------------------------------------------- a number of risks and uncertainties beyond our control. In addition, assumptions may prove to be inaccurate. We caution that the forward-looking statements contained in this quarterly report are not guarantees of future performance and that such statements may not be realized or the forward-looking statements or events may not occur. Actual results may differ materially from those anticipated or implied in forward-looking statements as a result of a variety of factors described in this quarterly report and in the other reports and other information that we file with theSEC , including those discussed under "Risk Factors" in our annual report on Form 10-K for the fiscal year ended December 31, 2019 and our quarterly report on Form 10-Q for the quarterly period ended March, 31, 2020 . All forward-looking statements attributable to us or persons acting on our behalf are expressly qualified in their entirety by these risk factors. These forward-looking statements speak only as of the date made, and other than as required by law, we undertake no obligation to update or revise any forward-looking statement or provide reasons why actual results may differ, whether as a result of new information, future events or otherwise.
Introduction
The following discussion and analysis presents management's view of our business, financial condition and overall performance and should be read in conjunction with our Consolidated Financial Statements and the accompanying notes. This information is intended to provide investors with an understanding of our past performance, current financial condition and outlook for the future. Our discussion and analysis includes the following subjects: •Overview of Business •Overview of Significant Events •Impact of COVID-19 and Market Environment •Liquidity and Capital Resources •Results of Operations •Off-Balance Sheet Arrangements •Summary of Critical Accounting Estimates •Recent Accounting Standards
Overview of Business
Cheniere, aDelaware corporation, is aHouston -based energy infrastructure company primarily engaged in LNG-related businesses. We provide clean, secure and affordable LNG to integrated energy companies, utilities and energy trading companies around the world. We aspire to conduct our business in a safe and responsible manner, delivering a reliable, competitive and integrated source of LNG to our customers. We own and operate theSabine Pass LNG terminal inLouisiana , one of the largest LNG production facilities in the world, through our ownership interest in and management agreements withCheniere Partners , which is a publicly traded limited partnership that we created in 2007. As ofSeptember 30, 2020 , we owned 100% of the general partner interest and 48.6% of the limited partner interest inCheniere Partners . We also own and operate the Corpus Christi LNG terminal inTexas , which is wholly owned by us. TheSabine Pass LNG terminal is located inCameron Parish, Louisiana , on theSabine-Neches Waterway less than four miles from theGulf Coast .Cheniere Partners , through its subsidiary SPL, is currently operating five natural gas liquefaction Trains and is constructing one additional Train for a total production capacity of approximately 30 mtpa of LNG (the "SPL Project ") at theSabine Pass LNG terminal. TheSabine Pass LNG terminal has operational regasification facilities owned byCheniere Partners' subsidiary, SPLNG, that include pre-existing infrastructure of five LNG storage tanks with aggregate capacity of approximately 17 Bcfe, two existing marine berths and one under construction that can each accommodate vessels with nominal capacity of up to 266,000 cubic meters and vaporizers with regasification capacity of approximately 4 Bcf/d.Cheniere Partners also owns a 94-mile pipeline through its subsidiary, CTPL, that interconnects theSabine Pass LNG terminal with a number of large interstate pipelines. We also own the Corpus Christi LNG terminal nearCorpus Christi, Texas , and are currently operating two Trains and one additional Train is undergoing commissioning for a total production capacity of approximately 15 mtpa of LNG. Additionally, we are operating a 23-mile natural gas supply pipeline that interconnects the Corpus Christi LNG terminal with several interstate and intrastate natural gas pipelines (the "Corpus Christi Pipeline" and together with the Trains, the "CCL Project ") through our subsidiaries CCL and CCP, respectively.The CCL Project , once fully constructed, will contain three 31 --------------------------------------------------------------------------------
LNG storage tanks with aggregate capacity of approximately 10 Bcfe and two marine berths that can each accommodate vessels with nominal capacity of up to 266,000 cubic meters.
We have contracted approximately 85% of the total production capacity from theSPL Project and theCCL Project (collectively, the "Liquefaction Projects") on a term basis. This includes volumes contracted under SPAs in which the customers are required to pay a fixed fee with respect to the contracted volumes irrespective of their election to cancel or suspend deliveries of LNG cargoes, as well as volumes contracted under integrated production marketing ("IPM") gas supply agreements. Additionally, separate from theCCH Group , we are developing an expansion of the Corpus Christi LNG terminal adjacent to theCCL Project ("Corpus Christi Stage 3") through our subsidiary CCL Stage III for up to seven midscale Trains with an expected total production capacity of approximately 10 mtpa of LNG. We received approval fromFERC inNovember 2019 to site, construct and operate the expansion project. We remain focused on operational excellence and customer satisfaction. Increasing demand of LNG has allowed us to expand our liquefaction infrastructure in a financially disciplined manner. We hold significant land positions at both theSabine Pass LNG terminal and the Corpus Christi LNG terminal which provide opportunity for further liquefaction capacity expansion. The development of these sites or other projects, including infrastructure projects in support of natural gas supply and LNG demand, will require, among other things, acceptable commercial and financing arrangements before we can make a final investment decision ("FID").
Overview of Significant Events
Our significant events sinceJanuary 1, 2020 and through the filing date of this Form 10-Q include the following: Strategic •InApril 2020 ,Midship Pipeline Company, LLC ("Midship Pipeline"), in which we have an equity investment, placed into service the Midship natural gas pipeline and related compression and interconnect facilities. Operational •As ofOctober 31, 2020 , more than 1,250 cumulative LNG cargoes totaling over 85 million tonnes of LNG have been produced, loaded and exported from the Liquefaction Projects. •InOctober 2020 , feed gas was introduced to Train 3 of theCCL Project . Financial •We completed the following debt transactions: •In line with our previously announced capital allocation priorities, we prepaid$100 million of outstanding borrowings under the$2.695 billion delayed draw term loan credit agreement (the "Cheniere Term Loan Facility") inSeptember 2020 with available cash and redeemed$300 million of the 11.0% Convertible Senior Secured Notes due 2025 (the "2025 CCH HoldCo II Convertible Senior Notes") inMarch 2020 with available cash. •InSeptember 2020 , we issued an aggregate principal amount of$2.0 billion of 4.625% Senior Secured Notes due 2028 (the "2028 Cheniere Senior Secured Notes"). The net proceeds were used to prepay approximately$2.0 billion of the outstanding indebtedness of the Cheniere Term Loan Facility. •InAugust 2020 , CCH issued an aggregate principal amount of approximately$769 million of 3.52% Senior Secured Notes due 2039 (the "3.52% CCH Senior Secured Notes"). The net proceeds of these notes were used to repay a portion of the outstanding borrowings under the CCH Credit Facility, pay costs associated with certain interest rate derivative instruments that were settled and pay certain fees, costs and expenses incurred in connection with these transactions. •InJune 2020 , we entered into the Cheniere Term Loan Facility with original commitments of$2.62 billion , which inJuly 2020 was subsequently increased to$2.695 billion . InJuly 2020 , borrowings under the Cheniere Term Loan Facility were used to (1) redeem the remaining outstanding principal amount of the 2025 CCH HoldCo II Convertible Senior Notes, subsequent to the$300 million redemption inMarch 2020 , 32 -------------------------------------------------------------------------------- pursuant to the amended and restated note purchase agreement for the 2025 CCH HoldCo II Convertible Senior Notes which allowed CCH HoldCo II to redeem the outstanding notes with cash at a price of$1,080 per$1,000 principal amount, (2) repurchase$844 million in aggregate principal amount of outstanding 4.875% Convertible Unsecured Notes due 2021 (the "2021 Cheniere Convertible Unsecured Notes") at individually negotiated prices from a small number of investors and (3) pay the related fees and expenses. The remaining available commitments under the Cheniere Term Loan Facility of$372 million are expected to be used to repay and/or repurchase a portion of the remaining outstanding principal amount of the 2021 Cheniere Convertible Unsecured Notes and for the payment of related fees and expenses. •InMay 2020 , SPL issued an aggregate principal amount of$2.0 billion of 4.500% Senior Secured Notes due 2030 (the "2030 SPL Senior Notes"). Net proceeds of the offering, along with available cash, were used to redeem all of SPL's outstanding 5.625% Senior Secured Notes due 2021 (the "2021 SPL Senior Notes"). •InMarch 2020 , SPL entered into a$1.2 billion Working Capital Revolving Credit and Letter of Credit Reimbursement Agreement (the "2020SPL Working Capital Facility"), which refinanced its previous working capital facility, reduced the interest rate and extended the maturity date toMarch 2025 . •InMay 2020 , the date of first commercial delivery was reached under the 20-year SPAs with PT Pertamina (Persero ),Naturgy LNG GOM, Limited ,Woodside Energy Trading Singapore Pte Ltd , Iberdrola, S.A. and Électricité deFrance, S.A. relating to Train 2 of theCCL Project . •InSeptember 2020 , Moody's Investors Service ("Moody's") assigned first time ratings of Ba3 and S&P Global Ratings assigned first time ratings of BB to our 2028 Cheniere Senior Secured Notes. •InAugust 2020 , Moody's upgraded its rating of CCH's senior secured debt from Ba1 (Positive Outlook) to Baa3.
Impact of COVID-19 and Market Environment
The business environment in which we operate has been impacted by the recent downturn in the energy market as well as the outbreak of COVID-19 and its progression into a pandemic inMarch 2020 . As a result of these developments, our growth estimates for LNG in 2020 have moderated from previous expectations. Annual LNG demand grew by approximately 13% in 2019 to approximately 360 mtpa. In a report published in the month ofApril 2020 , IHS Markit projected LNG demand in 2020 to reach 363 mtpa, down from a pre-COVID-19 estimate of approximately 377 mtpa. This implies a year-over-year rate of growth of below 1% in 2020 compared to an implied pre-COVID-19 year-over-year growth estimate of approximately 5%. While worldwide demand increased by approximately 3% during the nine months endedSeptember 30, 2020 compared to the comparable period of 2019, we continue to be cautiously optimistic on the outlook. Global economic indicators point to a start of a recovery in some parts of the world but risks from second waves of infections and re-instatement of lockdowns could exert bearish pressures on the market. LNG importers had to cope with strict virus containment measures throughout the first and second quarters of 2020, which negatively impacted gas and LNG demand and resulted in many buyers having to resort to extraordinary measures to manage LNG supply purchases and contractual commitments. Some of these measures included cargo deferrals and cancellations. As the market started to rebalance and storage inventories started to normalize, prices today have recovered from their second quarter lows. As an example, the Dutch Title Transfer Facility ("TTF"), a virtual trading point for natural gas inthe Netherlands , settled October at$4.23 /MMBtu, which is$3.09 /MMBtu higher than theJune 2020 settlement. The Japan Korea Marker ("JKM"), an LNG benchmark price assessment for spot physical cargoes delivered ex-ship into certain key markets inAsia , settled October at$4.31 /MMBtu, which is$2.25 /MMBtu higher than its July price posting. The number of LNG cargoes for which customers have notified us that they will not take delivery have reduced from this summer, a sign that the market is continuing to adjust and rebalance towards equilibrium. We do not expect these events to have a material adverse impact on our forecasted financial results for 2020, due to the highly contracted nature of our business and the fact that customers continue to be obligated to pay fixed fees for cargoes in relation to which they have exercised their contractual right to cancel. As such, during the three and nine months endedSeptember 30, 2020 , we recognized$171 million and$932 million , respectively, in revenues associated with LNG cargoes for which customers have notified us that they will not take delivery, of which$47 million would have otherwise been recognized subsequent toSeptember 30, 2020 , if the cargoes were lifted pursuant to the delivery schedules with the customers. LNG revenues during the three months endedSeptember 30, 2020 excluded$458 million in prior period cancellations that would have otherwise been recognized during the quarter if the cargoes were lifted pursuant to the delivery schedules with the customers. We experienced decreased revenues during the three months endedSeptember 30, 2020 because we recognized accelerated revenues associated with LNG cargoes that were scheduled for delivery during the current quarter in the prior quarter, when the customers notified us that they will not take delivery of such cargoes. 33 -------------------------------------------------------------------------------- In addition, in response to the COVID-19 pandemic, we have modified certain business and workforce practices to protect the safety and welfare of our employees who continue to work at our facilities and offices worldwide, as well as implemented certain mitigation efforts to ensure business continuity. InMarch 2020 , we began consulting with a medical advisor, and implemented social distancing through revised shift schedules, work from home policies and designated remote work locations where appropriate, restricted non-essential business travel and began requiring self-screening for employees and contractors. InApril 2020 , we began providing temporary housing for our workforce for our facilities, implemented temperature testing, incorporated medical and social workers to support employees, enforced prior self-isolation and screening for temporary housing and implemented marine operations with zero contact during loading activities. These measures have resulted in increased costs. While response measures continue to evolve and in most cases have moderated or ceased, we expect to incur incremental operating costs associated with business continuity and protection of our workforce until the risks associated with the pandemic diminish. We have incurred approximately$6 million and$68 million of such costs during the three and nine months endedSeptember 30, 2020 , respectively. Liquidity and Capital Resources Although results are consolidated for financial reporting, SPL,Cheniere Partners ,CCH Group and Cheniere operate with independent capital structures. Our capital requirements include capital and investment expenditures, repayment of long-term debt and repurchase of our shares. We expect the cash needs for at least the next twelve months will be met for each of these independent capital structures as follows: •SPL through project debt and borrowings, operating cash flows and equity contributions fromCheniere Partners ; •Cheniere Partners through operating cash flows from SPLNG, SPL and CTPL and debt or equity offerings; •CCH Group through operating cash flows from CCL and CCP, project debt and borrowings and equity contributions from Cheniere; and •Cheniere through existing unrestricted cash, debt and equity offerings by us or our subsidiaries, operating cash flows, borrowings, services fees from our subsidiaries and distributions from our investment inCheniere Partners .
The following table provides a summary of our liquidity position at
September 30, December 31,
2020 2019
Cash and cash equivalents (1) $ 2,091 $ 2,474
Restricted cash designated for the following purposes:
SPL Project 157 181
CCL Project 145 80
Other 220 259
Available commitments under the following credit facilities:
- 786
2020 SPL Working Capital Facility 787 -
CQP Credit Facilities executed in 2019 ("2019 CQP Credit Facilities")
750 750
766 729
$1.25 billion Cheniere Revolving Credit Facility ("Cheniere
Revolving Credit Facility") 693 665
Cheniere Term Loan Facility 372 -
(1) Amounts presented include balances held by our consolidated variable
interest entity ("VIE"), Cheniere Partners, as discussed in Note
8-Non-controlling Interest and Variable Interest Entity of our Notes to
Consolidated Financial Statements. As of September 30, 2020 and December 31,
2019 , assets of Cheniere Partners , which are included in our Consolidated
Balance Sheets, included $1.3 billion and $1.8 billion , respectively, of cash
and cash equivalents.
For additional information regarding our debt agreements, see Note 11-Debt
of our Notes to Consolidated Financial Statements in our annual report on Form
10-K for the fiscal year ended December 31, 2019 .
34
--------------------------------------------------------------------------------Liquefaction Facilities
The SPL Project is one of the largest LNG production facilities in the world. ThroughCheniere Partners , we are currently operating five Trains and two marine berths at theSPL Project , and are constructing one additional Train. We have received authorization from theFERC to site, construct and operate Trains 1 through 6, as well as for the construction of a third marine berth. We have achieved substantial completion of the first five Trains of theSPL Project and commenced commercial operating activities for each Train at various times starting inMay 2016 . The following table summarizes the project completion and construction status of Train 6 of theSPL Project as ofSeptember 30, 2020 : SPL Train 6 Overall project completion percentage 70.9% Completion percentage of: Engineering 97.8% Procurement 98.2% Subcontract work 48.0% Construction 34.6% Date of expected substantial completion 2H 2022 The following orders have been issued by theDOE authorizing the export of domestically produced LNG by vessel from theSabine Pass LNG terminal: •Trains 1 through 4-FTA countries and non-FTA countries throughDecember 31, 2050 , in an amount up to a combined total of the equivalent of 16 mtpa (approximately 803 Bcf/yr of natural gas). •Trains 1 through 4-FTA countries and non-FTA countries throughDecember 31, 2050 , in an amount up to a combined total of the equivalent of approximately 203 Bcf/yr of natural gas (approximately 4 mtpa). •Trains 5 and 6-FTA countries and non-FTA countries throughDecember 31, 2050 , in an amount up to a combined total of 503.3 Bcf/yr of natural gas (approximately 10 mtpa). TheDOE issued an order authorizing SPL to export domestically produced LNG by vessel from theSabine Pass LNG terminal to FTA countries and non-FTA countries over a two-year period commencingJanuary 2020 , in an aggregate amount up to the equivalent of 600 Bcf of natural gas (however, exports under this order, when combined with exports under the orders above, may not exceed 1,509 Bcf/yr). An application was filed inSeptember 2019 seeking authorization to make additional exports from theSPL Project to FTA countries for a 25-year term and to non-FTA countries for a 20-year term in an amount up to the equivalent of approximately 153 Bcf/yr of natural gas, for a totalSPL Project export capacity of approximately 1,662 Bcf/yr. The terms of the authorizations are requested to commence on the date of first commercial export from theSPL Project of the volumes contemplated in the application. InApril 2020 , theDOE issued an order authorizing SPL to export to FTA countries related to this application, for which the term was subsequently extended throughDecember 31, 2050 , but has not yet issued an order authorizing SPL to export to non-FTA countries for the corresponding LNG volume. A corresponding application for authorization to increase the total LNG production capacity of theSPL Project from the currently authorized level to approximately 1,662 Bcf/yr was also submitted to theFERC and is currently pending. Customers SPL has entered into fixed price long-term SPAs generally with terms of 20 years (plus extension rights) and with a weighted average remaining contract length of approximately 17 years (plus extension rights) with eight third parties for Trains 1 through 6 of theSPL Project . Under these SPAs, the customers will purchase LNG from SPL 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 approximately 115% ofHenry Hub . The customers may elect to cancel or suspend deliveries of LNG cargoes, with advance notice as governed by each respective SPA, in which case the customers would still be required to pay the fixed fee with respect to the contracted volumes that are not delivered as a result of such cancellation or suspension. We refer to the fee component that is applicable regardless of a cancellation or suspension of LNG cargo deliveries under the SPAs as the fixed fee component of the price under SPL's SPAs. We refer to the fee 35 -------------------------------------------------------------------------------- component that is applicable only in connection with LNG cargo deliveries as the variable fee component of the price under SPL's SPAs. The variable fees under SPL's SPAs were generally sized at the time of entry into each SPA with the intent to cover the costs of gas purchases and transportation and liquefaction fuel to produce the LNG to be sold under each such SPA. The SPAs and contracted volumes to be made available under the SPAs are not tied to a specific Train; however, the term of each SPA generally commences upon the date of first commercial delivery of a specified Train. In aggregate, the annual fixed fee portion to be paid by the third-party SPA customers is approximately$2.9 billion for Trains 1 through 5. After giving effect to an SPA that Cheniere has committed to provide to SPL, the annual fixed fee portion to be paid by the third-party SPA customers would increase to at least$3.3 billion , which is expected to occur upon the date of first commercial delivery of Train 6. In addition,Cheniere Marketing has an agreement with SPL to purchase, atCheniere Marketing's option, any LNG produced by SPL in excess of that required for other customers. See Marketing section for additional information regarding agreements entered into byCheniere Marketing . Natural Gas Transportation, Storage and Supply To ensure SPL is able to transport adequate natural gas feedstock to theSabine Pass LNG terminal, it has entered into transportation precedent and other agreements to secure firm pipeline transportation capacity with CTPL and third-party pipeline companies. SPL has entered into firm storage services agreements with third parties to assist in managing variability in natural gas needs for theSPL Project . SPL has also entered into enabling agreements and long-term natural gas supply contracts with third parties in order to secure natural gas feedstock for theSPL Project . As ofSeptember 30, 2020 , SPL had secured up to approximately 5,051 TBtu of natural gas feedstock through long-term and short-term natural gas supply contracts with remaining terms that range up to 10 years, a portion of which is subject to conditions precedent.
Construction
SPL entered into lump sum turnkey contracts withBechtel Oil, Gas and Chemicals, Inc. ("Bechtel") for the engineering, procurement and construction of Trains 1 through 6 of theSPL Project , under which Bechtel charges a lump sum for all work performed and generally bears project cost, schedule and performance risks unless certain specified events occur, in which case Bechtel may cause SPL to enter into a change order, or SPL agrees with Bechtel to a change order. The total contract price of the EPC contract for Train 6 of theSPL Project is approximately$2.5 billion , including estimated costs for the third marine berth that is currently under construction. As ofSeptember 30, 2020 , we have incurred$1.8 billion under this contract.
Regasification Facilities
TheSabine Pass LNG terminal has operational regasification capacity of approximately 4 Bcf/d and aggregate LNG storage capacity of approximately 17 Bcfe. Approximately 2 Bcf/d of the regasification capacity at theSabine Pass LNG terminal has been reserved under two long-term third-party TUAs, under which SPLNG's customers are required to pay fixed monthly fees, whether or not they use the LNG terminal. Each ofTotal Gas & Power North America, Inc. ("Total") andChevron U.S.A. Inc. ("Chevron") has reserved approximately 1 Bcf/d of regasification capacity and is obligated to make monthly capacity payments to SPLNG aggregating approximately$125 million annually, prior to inflation adjustments, for 20 years that commenced in 2009. Total S.A. has guaranteed Total's obligations under its TUA up to$2.5 billion , subject to certain exceptions, and Chevron Corporation has guaranteedChevron's obligations under its TUA up to 80% of the fees payable byChevron . The remaining approximately 2 Bcf/d of capacity has been reserved under a TUA by SPL. SPL is obligated to make monthly capacity payments to SPLNG aggregating approximately$250 million annually, prior to inflation adjustments, continuing until at leastMay 2036 . SPL entered into a partial TUA assignment agreement with Total, whereby upon substantial completion of Train 5 of theSPL Project , SPL gained access to substantially all of Total's capacity and other services provided under Total's TUA with SPLNG. This agreement provides SPL with additional berthing and storage capacity at theSabine Pass LNG terminal that may be used to provide increased flexibility in managing LNG cargo loading and unloading activity, permit SPL to more flexibly manage its LNG storage capacity and accommodate the development of Train 6. Notwithstanding any arrangements between Total and SPL, payments required to be made by Total to SPLNG will continue to be made by Total 36 -------------------------------------------------------------------------------- to SPLNG in accordance with its TUA. During each of the three months endedSeptember 30, 2020 and 2019, SPL recorded$32 million as operating and maintenance expense under this partial TUA assignment agreement. During the nine months endedSeptember 30, 2020 and 2019, SPL recorded$97 million and$72 million , respectively, as operating and maintenance expense under this partial TUA assignment agreement.
Under each of these TUAs, SPLNG is entitled to retain 2% of the LNG delivered to
the
Capital Resources
We currently expect that SPL's capital resources requirements with respect to theSPL Project will be financed through project debt and borrowings, cash flows under the SPAs and equity contributions fromCheniere Partners . We believe that with the net proceeds of borrowings, available commitments under the 2020 SPL Working Capital Facility, 2019 CQP Credit Facilities, cash flows from operations and equity contributions fromCheniere Partners , SPL will have adequate financial resources available to meet its currently anticipated capital, operating and debt service requirements with respect to Trains 1 through 6 of theSPL Project . Additionally, SPLNG generates cash flows from the TUAs, as discussed above. The following table provides a summary of our capital resources from borrowings and available commitments for theSabine Pass LNG Terminal , excluding equity contributions to our subsidiaries and cash flows from operations (as described in Sources and Uses of Cash), atSeptember 30, 2020 andDecember 31, 2019 (in millions): September 30, December 31, 2020 2019 Senior notes (1)$ 17,750 $ 17,750 Credit facilities outstanding balance (2) - - Letters of credit issued (3) 413 414 Available commitments under credit facilities (3) 1,537 1,536 Total capital resources from borrowings and available commitments (4)$ 19,700 $ 19,700 (1) Includes SPL's 2021 SPL Senior Notes, 6.25% Senior Secured Notes due 2022, 5.625% Senior Secured Notes due 2023, 5.75% Senior Secured Notes due 2024, 5.625% Senior Secured Notes due 2025, 5.875% Senior Secured Notes due 2026 (the "2026 SPL Senior Notes"), 5.00% Senior Secured Notes due 2027 (the "2027 SPL Senior Notes"), 4.200% Senior Secured Notes due 2028 (the "2028 SPL Senior Notes"), 2030 SPL Senior Notes and 5.00% Senior Secured Notes due 2037 (the "2037 SPL Senior Notes") (collectively, the "SPL Senior Notes"), as well asCheniere Partners' $1.5 billion of 5.250% Senior Notes due 2025 (the "2025 CQP Senior Notes"),$1.1 billion of 5.625% Senior Notes due 2026 (the "2026 CQP Senior Notes") and the 4.500% Senior Notes due 2029 (the "2029 CQP Senior Notes") (collectively, the "CQP Senior Notes"). (2) Includes outstanding balances under the 2015 SPL Working Capital Facility, 2020 SPL Working Capital Facility and 2019 CQP Credit Facilities, inclusive of any portion of the 2020 SPL Working Capital Facility and 2019 CQP Credit Facilities that may be used for general corporate purposes. (3) Consists of 2015 SPL Working Capital Facility, 2020SPL Working Capital Facility and 2019 CQP Credit Facilities. (4) Does not include equity contributions that may be available from Cheniere's borrowings and available cash and cash equivalents. For additional information regarding our debt agreements related to the Sabine Pass LNG Terminal, see Note 11-Debt of our Notes to Consolidated Financial Statements in our annual report on Form 10-K for the fiscal year endedDecember 31, 2019 . SPL Senior Notes The SPL Senior Notes are governed by a common indenture (the "SPL Indenture") and the terms of the 2037 SPL Senior Notes are governed by a separate indenture (the "2037 SPL Senior Notes Indenture"). Both the SPL Indenture and the 2037 SPL Senior Notes Indenture contain terms and events of default and certain covenants that, among other things, limit SPL's ability and the ability of SPL's restricted subsidiaries to incur additional indebtedness or issue preferred stock, make certain investments or pay dividends or distributions on capital stock or subordinated indebtedness or purchase, redeem or retire capital stock, sell or transfer assets, including capital stock of SPL's restricted subsidiaries, restrict dividends or other payments by 37 -------------------------------------------------------------------------------- restricted subsidiaries, incur liens, enter into transactions with affiliates, dissolve, liquidate, consolidate, merge, sell or lease all or substantially all of SPL's assets and enter into certain LNG sales contracts. Subject to permitted liens, the SPL Senior Notes are secured on a pari passu first-priority basis by a security interest in all of the membership interests in SPL and substantially all of SPL's assets. SPL may not make any distributions until, among other requirements, deposits are made into debt service reserve accounts as required and a debt service coverage ratio test of 1.25:1.00 is satisfied. At any time prior to three months before the respective dates of maturity for each series of the SPL Senior Notes (except for the 2026 SPL Senior Notes, 2027 SPL Senior Notes, 2028 SPL Senior Notes, 2030 SPL Senior Notes and 2037 SPL Senior Notes, in which case the time period is six months before the respective dates of maturity), SPL may redeem all or part of such series of the SPL Senior Notes at a redemption price equal to the 'make-whole' price (except for the 2037 SPL Senior Notes, in which case the redemption price is equal to the "optional redemption" price) set forth in the respective indentures governing the SPL Senior Notes, plus accrued and unpaid interest, if any, to the date of redemption. SPL may also, at any time within three months of the respective maturity dates for each series of the SPL Senior Notes (except for the 2026 SPL Senior Notes, 2027 SPL Senior Notes, 2028 SPL Senior Notes, 2030 SPL Senior Notes and 2037 SPL Senior Notes, in which case the time period is within six months of the respective dates of maturity), redeem all or part of such series of the SPL Senior Notes at a redemption price equal to 100% of the principal amount of such series of the SPL Senior Notes to be redeemed, plus accrued and unpaid interest, if any, to the date of redemption. Both the 2037 SPL Senior Notes Indenture and the SPL Indenture include restrictive covenants. SPL may incur additional indebtedness in the future, including by issuing additional notes, and such indebtedness could be at higher interest rates and have different maturity dates and more restrictive covenants than the current outstanding indebtedness of SPL, including the SPL Senior Notes and the 2020 SPL Working Capital Facility. Under the 2037 SPL Senior Notes Indenture and the SPL Indenture, SPL may not make any distributions until, among other requirements, deposits are made into debt service reserve accounts as required and a debt service reserve ratio test of 1.25:1.00 is satisfied. Semi-annual principal payments for the 2037 SPL Senior Notes are due onMarch 15 andSeptember 15 of each year beginningSeptember 15, 2025 and are fully amortizing according to a fixed sculpted amortization schedule.
2015 SPL Working Capital Facility
In
2020 SPL Working Capital Facility
InMarch 2020 , SPL entered into the 2020 SPL Working Capital Facility with aggregate commitments of$1.2 billion , which replaced the 2015 SPL Working Capital Facility. The 2020 SPL Working Capital Facility is intended to be used for loans to SPL, swing line loans to SPL and the issuance of letters of credit on behalf of SPL, primarily for (1) the refinancing of the 2015 SPL Working Capital Facility, (2) fees and expenses related to the 2020SPL Working Capital Facility, (3) SPL and its future subsidiaries' gas purchase obligations and (4) SPL and certain of its future subsidiaries' general corporate purposes. SPL may, from time to time, request increases in the commitments under the 2020 SPL Working Capital Facility of up to$800 million . As ofSeptember 30, 2020 , SPL had$787 million of available commitments,$413 million aggregate amount of issued letters of credit and no outstanding borrowings under the 2020 SPL Working Capital Facility.
The 2020 SPL Working Capital Facility matures on
The 2020 SPL Working Capital Facility contains customary conditions precedent
for extensions of credit, as well as customary affirmative and negative
covenants. SPL is restricted from making certain distributions under agreements
governing its indebtedness generally until, among other requirements,
satisfaction of a 12-month forward-looking and backward-looking 1.25:1.00 debt
service reserve ratio test. The obligations of SPL under the 2020 SPL Working
Capital Facility are secured by substantially all of the assets of SPL as well
as a pledge of all of the membership interests in SPL and certain future
subsidiaries of SPL on a pari passu basis by a first priority lien with the SPL
Senior Notes.
38
--------------------------------------------------------------------------------CQP Senior Notes
The CQP Senior Notes are jointly and severally guaranteed by each ofCheniere Partners' subsidiaries other than SPL and, subject to certain conditions governing its guarantee,Sabine Pass LP (each a "Guarantor" and collectively, the "CQP Guarantors"). The CQP Senior Notes are governed by the same base indenture (the "CQP Base Indenture"). The 2025 CQP Senior Notes are further governed by the First Supplemental Indenture, the 2026 CQP Senior Notes are further governed by the Second Supplemental Indenture and the 2029 CQP Senior Notes are further governed by the Third Supplemental Indenture. The indentures governing the CQP Senior Notes contain terms and events of default and certain covenants that, among other things, limit the ability ofCheniere Partners and the CQP Guarantors to incur liens and sell assets, enter into transactions with affiliates, enter into sale-leaseback transactions and consolidate, merge or sell, lease or otherwise dispose of all or substantially all of the applicable entity's properties or assets. At any time prior toOctober 1, 2020 for the 2025 CQP Senior Notes,October 1, 2021 for the 2026 CQP Senior Notes andOctober 1, 2024 for the 2029 CQP Senior Notes,Cheniere Partners may redeem all or a part of the applicable CQP Senior Notes at a redemption price equal to 100% of the aggregate principal amount of the CQP Senior Notes redeemed, plus the "applicable premium" set forth in the respective indentures governing the CQP Senior Notes, plus accrued and unpaid interest, if any, to the date of redemption. In addition, at any time prior toOctober 1, 2020 for the 2025 CQP Senior Notes,October 1, 2021 for the 2026 CQP Senior Notes andOctober 1, 2024 for the 2029 CQP Senior Notes,Cheniere Partners may redeem up to 35% of the aggregate principal amount of the CQP Senior Notes with an amount of cash not greater than the net cash proceeds from certain equity offerings at a redemption price equal to 105.250% of the aggregate principal amount of the 2025 CQP Senior Notes, 105.625% of the aggregate principal amount of the 2026 CQP Senior Notes and 104.5% of the aggregate principal amount of the 2029 CQP Senior Notes redeemed, plus accrued and unpaid interest, if any, to the date of redemption.Cheniere Partners also may at any time on or afterOctober 1, 2020 through the maturity date ofOctober 1, 2025 for the 2025 CQP Senior Notes,October 1, 2021 through the maturity date ofOctober 1, 2026 for the 2026 CQP Senior Notes andOctober 1, 2024 through the maturity date ofOctober 1, 2029 for the 2029 CQP Senior Notes, redeem the CQP Senior Notes, in whole or in part, at the redemption prices set forth in the respective indentures governing the CQP Senior Notes. The CQP Senior Notes areCheniere Partners' senior obligations, ranking equally in right of payment withCheniere Partners' other existing and future unsubordinated debt and senior to any of its future subordinated debt. In the event that the aggregate amount ofCheniere Partners' secured indebtedness and the secured indebtedness of the CQP Guarantors (other than the CQP Senior Notes or any other series of notes issued under the CQP Base Indenture) outstanding at any one time exceeds the greater of (1)$1.5 billion and (2) 10% of net tangible assets, the CQP Senior Notes will be secured to the same extent as such obligations under the 2019 CQP Credit Facilities. The obligations under the 2019 CQP Credit Facilities are secured on a first-priority basis (subject to permitted encumbrances) with liens on substantially all the existing and future tangible and intangible assets and rights ofCheniere Partners and the CQP Guarantors and equity interests in the CQP Guarantors (except, in each case, for certain excluded properties set forth in the 2019 CQP Credit Facilities). The liens securing the CQP Senior Notes, if applicable, will be shared equally and ratably (subject to permitted liens) with the holders of other senior secured obligations, which include the 2019 CQP Credit Facilities obligations and any future additional senior secured debt obligations.
2019 CQP Credit Facilities
InMay 2019 ,Cheniere Partners entered into the 2019 CQP Credit Facilities, which consisted of the$750 million term loan ("CQP Term Facility"), which was prepaid and terminated upon issuance of the 2029 CQP Senior Notes inSeptember 2019 , and the$750 million revolving credit facility ("CQP Revolving Facility"). Borrowings under the 2019 CQP Credit Facilities will be used to fund the development and construction of Train 6 of theSPL Project and for general corporate purposes, subject to a sublimit, and the 2019 CQP Credit Facilities are also available for the issuance of letters of credit. As of bothSeptember 30, 2020 andDecember 31, 2019 ,Cheniere Partners had$750 million of available commitments and no letters of credit issued or loans outstanding under the 2019 CQP Credit Facilities. The 2019 CQP Credit Facilities mature onMay 29, 2024 . Any outstanding balance may be repaid, in whole or in part, at any time without premium or penalty, except for interest rate breakage costs. The 2019 CQP Credit Facilities contain conditions precedent for extensions of credit, as well as customary affirmative and negative covenants, and limitCheniere Partners' ability to make restricted payments, including distributions, to once per fiscal quarter and one true-up per fiscal quarter as long as certain conditions are satisfied. 39 -------------------------------------------------------------------------------- The 2019 CQP Credit Facilities are unconditionally guaranteed and secured by a first priority lien (subject to permitted encumbrances) on substantially all ofCheniere Partners' and the CQP Guarantors' existing and future tangible and intangible assets and rights and equity interests in the CQP Guarantors (except, in each case, for certain excluded properties set forth in the 2019 CQP Credit Facilities).Corpus Christi LNG Terminal Liquefaction Facilities We are currently operating two Trains and one marine berth at theCCL Project , commissioning one additional Train and constructing an additional marine berth. We have received authorization from theFERC to site, construct and operate Trains 1 through 3 of theCCL Project . We completed construction of Trains 1 and 2 of theCCL Project and commenced commercial operating activities inFebruary 2019 andAugust 2019 , respectively. The following table summarizes the project completion and construction status of Train 3 of theCCL Project , including the related infrastructure, as ofSeptember 30, 2020 : CCL Train 3 Overall project completion percentage 96.7% Completion percentage of: Engineering 100.0% Procurement 100.0% Subcontract work 98.2% Construction 91.1% Expected date of substantial completion 1Q 2021 Separate from theCCH Group , we are also developing Corpus Christi Stage 3 through our subsidiary CCL Stage III, adjacent to theCCL Project . We received approval fromFERC inNovember 2019 to site, construct and operate seven midscale Trains with an expected total production capacity of approximately 10 mtpa of LNG. The following orders have been issued by theDOE authorizing the export of domestically produced LNG by vessel from the Corpus Christi LNG terminal: •CCL Project-FTA countries and non-FTA countries throughDecember 31, 2050 , up to a combined total of the equivalent of 767 Bcf/yr (approximately 15 mtpa) of natural gas. •Corpus Christi Stage 3-FTA countries and non-FTA countries throughDecember 31, 2050 in an amount equivalent to 582.14 Bcf/yr (approximately 11 mtpa) of natural gas. An application was filed inSeptember 2019 to authorize additional exports from theCCL Project to FTA countries for a 25-year term and to non-FTA countries for a 20-year term in an amount up to the equivalent of approximately 108 Bcf/yr of natural gas, for a totalCCL Project export of 875.16 Bcf/yr. The terms of the authorizations are requested to commence on the date of first commercial export from theCCL Project of the volumes contemplated in the application. InApril 2020 , theDOE issued an order authorizing CCL to export to FTA countries related to this application, for which the term was subsequently extended throughDecember 31, 2050 , but has not yet issued an order authorizing CCL to export to non-FTA countries for the corresponding LNG volume. A corresponding application for authorization to increase the total LNG production capacity of theCCL Project from the currently authorized level to approximately 875.16 Bcf/yr was also submitted to theFERC and is currently pending.
Customers
CCL has entered into fixed price long-term SPAs generally with terms of 20 years (plus extension rights) and with a weighted average remaining contract length of approximately 19 years (plus extension rights) with nine third parties for Trains 1 through 3 of theCCL Project . Under these SPAs, the customers will purchase LNG from CCL on a 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 equal to approximately 115% ofHenry Hub . The customers may elect to cancel or suspend deliveries of LNG cargoes, with advance notice as governed by each respective SPA, in which case the customers would still be required to pay the fixed fee with respect to the contracted volumes that are not delivered as a result of such cancellation or suspension. We refer to the fee component that is applicable regardless of a cancellation or suspension of LNG cargo deliveries under the 40 -------------------------------------------------------------------------------- SPAs as the fixed fee component of the price under our SPAs. We refer to the fee component that is applicable only in connection with LNG cargo deliveries as the variable fee component of the price under our SPAs. The variable fee under CCL's SPAs entered into in connection with the development of theCCL Project was sized at the time of entry into each SPA with the intent to cover the costs of gas purchases and transportation and liquefaction fuel to produce the LNG to be sold under each such SPA. The SPAs and contracted volumes to be made available under the SPAs are not tied to a specific Train; however, the term of each SPA generally commences upon the date of first commercial delivery for the applicable Train, as specified in each SPA. In aggregate, the minimum annual fixed fee portion to be paid by the third-party SPA customers is approximately$1.4 billion for Trains 1 and 2 and further increasing to approximately$1.8 billion following the substantial completion of Train 3 of theCCL Project . In addition,Cheniere Marketing has agreements with CCL to purchase: (1) approximately 15 TBtu per annum of LNG with an approximate term of 23 years, (2) any LNG produced by CCL in excess of that required for other customers atCheniere Marketing's option and (3) approximately 44 TBtu of LNG with a term of up to seven years associated with the IPM gas supply agreement between CCL and EOG. See Marketing section for additional information regarding agreements entered into byCheniere Marketing .
Natural Gas Transportation, Storage and Supply
To ensure CCL is able to transport adequate natural gas feedstock to the Corpus Christi LNG terminal, it has entered into transportation precedent agreements to secure firm pipeline transportation capacity with CCP and certain third-party pipeline companies. CCL has entered into a firm storage services agreement with a third party to assist in managing variability in natural gas needs for theCCL Project . CCL has also entered into enabling agreements and long-term natural gas supply contracts with third parties, and will continue to enter into such agreements, in order to secure natural gas feedstock for theCCL Project . As ofSeptember 30, 2020 , CCL had secured up to approximately 3,026 TBtu of natural gas feedstock through long-term natural gas supply contracts with remaining terms that range up to 11 years, a portion of which is subject to the achievement of certain project milestones and other conditions precedent. CCL Stage III has also entered into long-term natural gas supply contracts with third parties, and anticipates continuing to enter into such agreements, in order to secure natural gas feedstock for Corpus Christi Stage 3. As ofSeptember 30, 2020 , CCL Stage III had secured up to approximately 2,361 TBtu of natural gas feedstock through long-term natural gas supply contracts with remaining terms that range up to approximately 15 years, which is subject to the achievement of certain project milestones and other conditions precedent. A portion of the natural gas feedstock transactions for CCL and CCL Stage III are IPM transactions, in which the natural gas producers are paid based on a global gas market price less a fixed liquefaction fee and certain costs incurred by us. Construction
CCL entered into separate lump sum turnkey contracts with Bechtel for the
engineering, procurement and construction of Trains 1 through 3 of the
The total contract price of the EPC contract for Train 3, which is currently undergoing commissioning, is approximately$2.4 billion , reflecting amounts incurred under change orders throughSeptember 30, 2020 . As ofSeptember 30, 2020 , we have incurred$2.3 billion under this contract.
Final Investment Decision for Corpus Christi Stage 3
FID for Corpus Christi Stage 3 will be subject to, among other things, entering
into an EPC contract, obtaining additional commercial support for the project
and securing the necessary financing arrangements.
41
--------------------------------------------------------------------------------Pipeline Facilities
InNovember 2019 , theFERC authorized CCP to construct and operate the pipeline for Corpus Christi Stage 3. The pipeline will be designed to transport 1.5 Bcf/d of natural gas feedstock required by Corpus Christi Stage 3 from the existing regional natural gas pipeline grid.
Capital Resources
The CCH Group expects to finance the construction costs of theCCL Project from one or more of the following: operating cash flows from CCL and CCP, project debt and equity contributions from Cheniere. The following table provides a summary of the capital resources of theCCH Group from borrowings and available commitments for theCCL Project , excluding equity contributions from Cheniere, atSeptember 30, 2020 andDecember 31, 2019 (in millions): September 30, December 31, 2020 2019 Senior notes (1)$ 7,721 $ 6,952 2025 CCH HoldCo II Convertible Senior Notes (2) - 1,000 Credit facilities outstanding balance (3) 2,768 3,283 Letters of credit issued (3) 293 471 Available commitments under credit facilities (3) 766 729 Total capital resources from borrowings and available commitments (4)$ 11,548 $ 12,435 (1) Includes CCH's 7.000% Senior Secured Notes due 2024, 5.875% Senior Secured Notes due 2025, 5.125% Senior Secured Notes due 2027, 3.700% Senior Secured Notes due 2029, 4.80% Senior Secured Notes due 2039, 3.925% Senior Secured Notes due 2039 and 3.52% CCH Senior Secured Notes (collectively, the "CCH Senior Notes"). (2) Aggregate original principal amount before debt discount and debt issuance costs and interest paid-in-kind. (3) Includes CCH's amended and restated credit facility ("CCH Credit Facility") and CCH Working Capital Facility. (4) Does not include equity contributions that may be available from Cheniere's borrowings and available cash and cash equivalents.
2025 CCH HoldCo II Convertible Senior Notes
InMay 2015 , CCH HoldCo II issued$1.0 billion aggregate principal amount of the 2025 CCH HoldCo II Convertible Senior Notes on a private placement basis. InMay 2018 , the amended and restated note purchase agreement under which the 2025 CCH HoldCo II Convertible Senior Notes were issued was subsequently amended in connection with commercialization and financing of Train 3 of theCCL Project and to provide the note holders with certain prepayment rights related thereto consistent with those under the CCH Credit Facility. InFebruary 2020 , the amended and restated note purchase agreement for the 2025 CCH HoldCo II Convertible Senior Notes was further amended to allow CCH HoldCo II the option to redeem all or a portion of the outstanding notes with cash at a price of$1,080 per$1,000 principal amount, at the time of any CCH HoldCo II- or noteholder-initiated conversion throughSeptember 2, 2020 . InMarch 2020 , CCH HoldCo II redeemed an aggregate outstanding principal amount of$300 million and inJuly 2020 , redeemed the remaining outstanding principal amount with borrowings under the Cheniere Term Loan Facility.
CCH Senior Notes
The CCH Senior Notes are jointly and severally guaranteed by CCH's subsidiaries, CCL,CCP and Corpus Christi Pipeline GP, LLC (each a "CCH Guarantor" and collectively, the "CCH Guarantors"). The indentures governing the CCH Senior Notes contain customary terms and events of default and certain covenants that, among other things, limit CCH's ability and the ability of CCH's restricted subsidiaries to: incur additional indebtedness or issue preferred stock; make certain investments or pay dividends or distributions on membership interests or subordinated indebtedness or purchase, redeem or retire membership interests; sell or transfer assets, including membership or partnership interests of CCH's restricted subsidiaries; restrict dividends or other payments by restricted subsidiaries to CCH or any of CCH's restricted subsidiaries; incur liens; enter into transactions with affiliates; dissolve, liquidate, consolidate, merge, sell or lease all or substantially all of the properties or assets of CCH and its restricted subsidiaries taken as a whole; or permit any CCH Guarantor to dissolve, 42 -------------------------------------------------------------------------------- liquidate, consolidate, merge, sell or lease all or substantially all of its properties and assets. The covenants included in the respective indentures that govern the CCH Senior Notes are subject to a number of important limitations and exceptions. The CCH Senior Notes are CCH's senior secured obligations, ranking senior in right of payment to any and all of CCH's future indebtedness that is subordinated to the CCH Senior Notes and equal in right of payment with CCH's other existing and future indebtedness that is senior and secured by the same collateral securing the CCH Senior Notes. The CCH Senior Notes are secured by a first-priority security interest in substantially all of CCH's and the CCH Guarantors' assets. At any time prior to six months before the respective dates of maturity for each of the CCH Senior Notes, CCH may redeem all or part of such series of the CCH Senior Notes at a redemption price equal to the "make-whole" price set forth in the appropriate indenture, plus accrued and unpaid interest, if any, to the date of redemption. At any time within six months of the respective dates of maturity for each of the CCH Senior Notes, CCH may redeem all or part of such series of the CCH Senior Notes, in whole or in part, at a redemption price equal to 100% of the principal amount of the CCH Senior Notes to be redeemed, plus accrued and unpaid interest, if any, to the date of redemption. CCH Credit Facility InMay 2018 , CCH amended and restated the CCH Credit Facility to increase total commitments under the CCH Credit Facility from$4.6 billion to$6.1 billion . The obligations of CCH under the CCH Credit Facility are secured by a first priority lien on substantially all of the assets of CCH and its subsidiaries and by a pledge by CCH HoldCo I of its limited liability company interests in CCH. There were no available commitments under the CCH Credit Facility as of bothSeptember 30, 2020 andDecember 31, 2019 . CCH had$2.6 billion and$3.3 billion of loans outstanding under the CCH Credit Facility as ofSeptember 30, 2020 andDecember 31, 2019 , respectively. The CCH Credit Facility matures onJune 30, 2024 , with principal payments due quarterly commencing on the earlier of (1) the first quarterly payment date occurring more than three calendar months following the completion of theCCL Project as defined in the common terms agreement and (2) a set date determined by reference to the date under which a certain LNG buyer linked to the last Train of theCCL Project to become operational is entitled to terminate its SPA for failure to achieve the date of first commercial delivery for that agreement. Scheduled repayments will be based upon a 19-year tailored amortization, commencing the first full quarter after the completion of Trains 1 through 3 and designed to achieve a minimum projected fixed debt service coverage ratio of 1.50:1. Under the CCH Credit Facility, CCH is required to hedge not less than 65% of the variable interest rate exposure of its senior secured debt. CCH is restricted from making certain distributions under agreements governing its indebtedness generally until, among other requirements, the completion of the construction of Trains 1 through 3 of theCCL Project , funding of a debt service reserve account equal to six months of debt service and achieving a historical debt service coverage ratio and fixed projected debt service coverage ratio of at least 1.25:1.00.
CCH Working Capital Facility
InJune 2018 , CCH amended and restated the CCH Working Capital Facility to increase total commitments under the CCH Working Capital Facility from$350 million to$1.2 billion . The CCH Working Capital Facility is intended to be used for loans to CCH ("CCH Working Capital Loans") and the issuance of letters of credit on behalf of CCH for certain working capital requirements related to developing and operating theCCL Project and for related business purposes. Loans under the CCH Working Capital Facility are guaranteed by the CCH Guarantors. CCH may, from time to time, request increases in the commitments under the CCH Working Capital Facility of up to the maximum allowed for working capital under the Common Terms Agreement that was entered into concurrently with the CCH Credit Facility. As ofSeptember 30, 2020 andDecember 31, 2019 , CCH had$766 million and$729 million of available commitments,$293 million and$471 million aggregate amount of issued letters of credit and$141 million and zero of loans outstanding under the CCH Working Capital Facility, respectively. The CCH Working Capital Facility matures onJune 29, 2023 , and CCH may prepay the CCH Working Capital Loans and loans made in connection with a draw upon any letter of credit ("CCH LC Loans") at any time without premium or penalty upon three business days' notice and may re-borrow at any time. CCH LC Loans have a term of up to one year. CCH is required to reduce the aggregate outstanding principal amount of all CCH Working Capital Loans to zero for a period of five consecutive business days at least once each year. 43 -------------------------------------------------------------------------------- The CCH Working Capital Facility contains conditions precedent for extensions of credit, as well as customary affirmative and negative covenants. The obligations of CCH under the CCH Working Capital Facility are secured by substantially all of the assets of CCH and the CCH Guarantors as well as all of the membership interests in CCH and each of the CCH Guarantors on a pari passu basis with the CCH Senior Notes and the CCH Credit Facility.
Cheniere
Senior Notes
InSeptember 2020 , we issued an aggregate principal amount of$2.0 billion of 2028 Cheniere Senior Secured Notes, the proceeds of which were used to prepay a portion of the outstanding indebtedness under the Cheniere Term Loan Facility and to pay related fees and expenses. The associated indentures ("Cheniere Indenture") contain customary terms and events of default and certain covenants that, among other things, limit our ability to create liens or other encumbrances, enter into sale-leaseback transactions and merge or consolidate with other entities or sell all or substantially all of our assets. The Cheniere Indenture covenants are subject to a number of important limitations and exceptions. At any time prior toOctober 15, 2023 , we may redeem all or a part of the 2028 Cheniere Senior Secured Notes at a redemption price equal to 100% of the aggregate principal amount thereof, plus the "applicable premium" and accrued and unpaid interest, if any, to but not including the date of redemption. We also may, at any time prior toOctober 15, 2023 , redeem up to 40% of the aggregate principal amount of the 2028 Cheniere Senior Secured Notes with an amount of cash not greater than the net cash proceeds from certain equity offerings at a redemption price equal to 104.625% of the aggregate principal amount of the notes being redeemed, plus accrued and unpaid interest, if any, to but not including, the date of redemption. At any time on or afterOctober 15, 2023 through the maturity date ofOctober 15, 2028 , we may redeem all or part of the 2028 Cheniere Senior Secured Notes at the redemption prices described in the Cheniere Indenture. The 2028 Cheniere Senior Secured Notes are our general senior obligations and rank senior in right of payment to all of our future obligations that are, by their terms, expressly subordinated in right of payment to the 2028 Cheniere Senior Secured Notes and equally in right of payment with all of our other existing and future unsubordinated indebtedness. The 2028 Cheniere Senior Secured Notes will initially be secured on a first-priority basis by a lien on substantially all of our assets and equity interests in our direct subsidiaries (other than certain excluded subsidiaries) (the "Collateral"), which liens will rank pari passu with the liens securing the Cheniere Revolving Credit Facility and Cheniere Term Loan Facility. The 2028 Cheniere Senior Secured Notes will remain secured as long as (1) there are any obligations or undrawn commitments outstanding under the Cheniere Term Loan Facility that are secured by liens on the Collateral or (2) the outstanding aggregate principal amount of our secured indebtedness exceeds$1.25 billion . As ofSeptember 30, 2020 , the 2028 Cheniere Senior Secured Notes are not guaranteed by any of our subsidiaries. In the future, the 2028 Cheniere Senior Secured Notes will be guaranteed by our subsidiaries who guarantee our other material indebtedness.
Convertible Notes
InNovember 2014 , we issued an aggregate principal amount of$1.0 billion of the 2021 Cheniere Convertible Unsecured Notes. The 2021 Cheniere Convertible Unsecured Notes are convertible at the option of the holder into our common stock at the then applicable conversion rate, provided that the closing price of our common stock is greater than or equal to the conversion price on the date of conversion. InJuly 2020 , we repurchased$844 million in aggregate principal amount of the outstanding 2021 Cheniere Convertible Unsecured Notes at individually negotiated prices from a small number of investors. InMarch 2015 , we issued$625 million aggregate principal amount of 4.25% Convertible Senior Notes due 2045 (the "2045 Cheniere Convertible Senior Notes"). We have the right, at our option, at any time afterMarch 15, 2020 , to redeem all or any part of the 2045 Cheniere Convertible Senior Notes at a redemption price equal to the accreted amount of the 2045 Cheniere Convertible Senior Notes to be redeemed, plus accrued and unpaid interest, if any, to such redemption date. We have the option to satisfy the conversion obligation for the 2021 Cheniere Convertible Unsecured Notes and the 2045 Cheniere Convertible Senior Notes with cash, common stock or a combination thereof. 44 --------------------------------------------------------------------------------
Cheniere Revolving Credit Facility
InDecember 2018 , we amended and restated the Cheniere Revolving Credit Facility to increase total commitments under the Cheniere Revolving Credit Facility from$750 million to$1.25 billion . The Cheniere Revolving Credit Facility is intended to fund, through loans and letters of credit, equity capital contributions to CCH HoldCo II and its subsidiaries for the development of theCCL Project and, provided that certain conditions are met, for general corporate purposes. As ofSeptember 30, 2020 andDecember 31, 2019 , we had$693 million and$665 million of available commitments,$182 million and$585 million aggregate amount of issued letters of credit and$375 million and zero of loans outstanding under the Cheniere Revolving Credit Facility, respectively. The Cheniere Revolving Credit Facility matures onDecember 13, 2022 and contains representations, warranties and affirmative and negative covenants customary for companies like us with lenders of the type participating in the Cheniere Revolving Credit Facility that limit our ability to make restricted payments, including distributions, unless certain conditions are satisfied, as well as limitations on indebtedness, guarantees, hedging, liens, investments and affiliate transactions. Under the Cheniere Revolving Credit Facility, we are required to ensure that the sum of our unrestricted cash and the amount of undrawn commitments under the Cheniere Revolving Credit Facility is at least equal to the lesser of (1) 20% of the commitments under the Cheniere Revolving Credit Facility and (2)$200 million (the "Liquidity Covenant"). However, at any time that the aggregate principal amount of outstanding loans plus drawn and unreimbursed letters of credit under the Cheniere Revolving Credit Facility is greater than 30% of aggregate commitments under the Cheniere Revolving Credit Facility, the Liquidity Covenant will not apply and we will instead be governed by a quarterly non-consolidated leverage ratio covenant not to exceed 5.75:1.00 (the "Springing Leverage Covenant").
The Cheniere Revolving Credit Facility is secured by a first priority security interest (subject to permitted liens and other customary exceptions) in substantially all of our assets, including our interests in our direct subsidiaries (excluding CCH HoldCo II and certain other subsidiaries).
Cheniere Term Loan Facility
InJune 2020 , we entered into the Cheniere Term Loan Facility, which was subsequently increased to$2.695 billion inJuly 2020 . InJuly 2020 , borrowings under the Cheniere Term Loan Facility were used to (1) redeem the outstanding principal amount of the 2025 CCH HoldCo II Convertible Senior Notes, (2) repurchase$844 million in aggregate principal amount of outstanding 2021 Cheniere Convertible Unsecured Notes at individually negotiated prices from a small number of investors and (3) pay the related fees and expenses. The remaining commitments under the Cheniere Term Loan Facility are expected to be used to repay and/or repurchase a portion of the remaining principal amount of the 2021 Cheniere Convertible Unsecured Notes and for the payment of related fees and expenses. InSeptember 2020 , we prepaid approximately$2.1 billion of the outstanding indebtedness of the Cheniere Term Loan Facility with net proceeds from the 2028 Cheniere Senior Secured Notes and available cash. As ofSeptember 30, 2020 , we had$372 million of available commitments and$248 million of loans outstanding under the Cheniere Term Loan Facility. The Cheniere Term Loan Facility matures onJune 18, 2023 . Loans under the Cheniere Term Loan Facility may be voluntarily prepaid, in whole or in part, at any time, without premium or penalty. Borrowings under the Cheniere Term Loan Facility are subject to customary conditions precedent. The Cheniere Term Loan Facility includes representations, warranties, affirmative and negative covenants and events of default customary for companies like us with lenders of the type participating in the Cheniere Term Loan Facility and consistent with the equivalent provisions contained in the Cheniere Revolving Credit Facility. The Cheniere Term Loan Facility is secured by a first priority security interest (subject to permitted liens and other customary exceptions) on a pari passu basis with the Cheniere Revolving Credit Facility in substantially all of our assets and equity interests in direct subsidiaries (other than certain excluded subsidiaries). Upon redemption of the 2025 CCH HoldCo II Convertible Senior Notes inJuly 2020 , the equity interests in CCH HoldCo II were pledged as collateral to secure the obligations under the Cheniere Revolving Credit Facility and the Cheniere Term Loan Facility.
Cash Receipts from Subsidiaries
Our ownership interest in theSabine Pass LNG terminal is held throughCheniere Partners . As ofSeptember 30, 2020 , we owned a 48.6% limited partner interest inCheniere Partners in the form of 239.9 million common units. InJuly 2020 , the 45 -------------------------------------------------------------------------------- financial tests required for conversion ofCheniere Partners' subordinated units, all of which were held by us, were met under the terms ofCheniere Partners' partnership agreement and effectiveAugust 17, 2020 , the first business day following the payment of the quarterly distribution, all ofCheniere Partners' subordinated units were automatically converted into common units on a one-for-one basis and the subordination period was terminated. We also own 100% of the general partner interest and the incentive distribution rights inCheniere Partners . We are eligible to receive quarterly equity distributions fromCheniere Partners related to our ownership interests and our incentive distribution rights. We also receive fees for providing management services to some of our subsidiaries. We received$83 million and$79 million in total service fees from these subsidiaries during the each of the nine months endedSeptember 30, 2020 and 2019, respectively. Share Repurchase Program OnJune 3, 2019 , we announced that our Board of Directors ("Board") authorized a 3-year,$1.0 billion share repurchase program. During the nine months endedSeptember 30, 2020 , we repurchased an aggregate of 2.9 million shares of our common stock for$155 million , for a weighted average price per share of$53.88 . During the nine months endedSeptember 30, 2019 , we repurchased an aggregate of 2.5 million shares of our common stock for$159 million , for a weighted average price per share of$63.09 . As ofSeptember 30, 2020 , we had up to$596 million of the share repurchase program available. Under the share repurchase program, repurchases can be made from time to time using a variety of methods, which may include open market purchases, privately negotiated transactions or otherwise, all in accordance with the rules of theSEC and other applicable legal requirements. The timing and amount of any shares of our common stock that are repurchased under the share repurchase program will be determined by our management based on market conditions and other factors. The share repurchase program does not obligate us to acquire any particular amount of common stock, and may be modified, suspended or discontinued at any time or from time to time at our discretion. Marketing We market and sell LNG produced by the Liquefaction Projects that is not required for other customers through our integrated marketing function. We have, and continue to develop, a portfolio of long-, medium- and short-term SPAs to transport and unload commercial LNG cargoes to locations worldwide. These volumes are expected to be primarily sourced by LNG produced by the Liquefaction Projects but supplemented by volumes procured from other locations worldwide, as needed. As ofSeptember 30, 2020 , we have sold or have options to sell approximately 4,747 TBtu of LNG to be delivered to customers between 2020 and 2045. The cargoes have been sold either on a FOB basis (delivered to the customer at theSabine Pass LNG terminal or the Corpus Christi LNG terminal, as applicable) or a delivered at terminal ("DAT") basis (delivered to the customer at their LNG receiving terminal). We have chartered LNG vessels to be utilized for cargoes sold on a DAT basis. In addition, we have entered into a long-term agreement to sell LNG cargoes on a DAT basis that is conditioned upon the buyer achieving certain milestones.Cheniere Marketing entered into uncommitted trade finance facilities with available commitments of$254 million as ofSeptember 30, 2020 , primarily to be used for the purchase and sale of LNG for ultimate resale in the course of its operations. The finance facilities are intended to be used for advances, guarantees or the issuance of letters of credit or standby letters of credit on behalf ofCheniere Marketing . As ofSeptember 30, 2020 andDecember 31, 2019 ,Cheniere Marketing had$21 million and$41 million , respectively, in standby letters of credit and guarantees outstanding under the finance facilities. As ofSeptember 30, 2020 andDecember 31, 2019 , there were no loans outstanding under the finance facilities.Cheniere Marketing pays interest or fees on utilized commitments.
Corporate and Other Activities
We are required to maintain corporate and general and administrative functions to serve our business activities described above. The development of our sites or other projects, including infrastructure projects in support of natural gas supply and LNG demand, will require, among other things, acceptable commercial and financing arrangements before we make an FID. We have made an equity investment inMidship Holdings, LLC ("Midship Holdings "), which manages the business and affairs of Midship Pipeline. Midship Pipeline operates theMidship Project with current capacity of up to 1.1 million Dekatherms per day that connects new gas production in theAnadarko Basin toGulf Coast markets, including markets serving the Liquefaction Projects.The Midship Project was placed in service inApril 2020 . 46 --------------------------------------------------------------------------------
Restrictive Debt Covenants
As of
LIBOR
The use of LIBOR is expected to be phased out by the end of 2021. It is currently unclear whether LIBOR will be utilized beyond that date or whether it will be replaced by a particular rate. We intend to continue working with our lenders and counterparties to pursue any amendments to our debt and derivative agreements that are currently subject to LIBOR and will continue to monitor, assess and plan for the phase out of LIBOR. Sources and Uses of Cash The following table summarizes the sources and uses of our cash, cash equivalents and restricted cash for the nine months endedSeptember 30, 2020 and 2019 (in millions). The table presents capital expenditures on a cash basis; therefore, these amounts differ from the amounts of capital expenditures, including accruals, which are referred to elsewhere in this report. Additional discussion of these items follows the table. Nine Months Ended September 30, 2020 2019 Operating cash flows $ 765$ 1,092 Investing cash flows (1,545) (2,658) Financing cash flows 399 1,527 Net decrease in cash, cash equivalents and restricted cash (381) (39)
Cash, cash equivalents and restricted cash-beginning of period
2,994 3,156
Cash, cash equivalents and restricted cash-end of period $ 2,613
Operating Cash Flows Our operating cash net inflows during the nine months endedSeptember 30, 2020 and 2019 were$765 million and$1,092 million , respectively. The$327 million decrease in operating cash inflows in 2020 compared to 2019 was primarily related to repayment of paid-in-kind interest related to the repurchase of the 2025 CCH HoldCo II Convertible Senior Notes and a portion of the 2021 Cheniere Convertible Unsecured Notes, which was offset by the increased net income that was primarily due to additional LNG volume available to be sold from additional Trains that have reached substantial completion between the periods, a portion of which the customers elected not to take delivery but were required to pay a fixed fee with respect to the contracted volumes.
Investing Cash Flows
Investing cash net outflows during the nine months endedSeptember 30, 2020 and 2019 were$1,545 million and$2,658 million , respectively, and were primarily used to fund the construction costs for the Liquefaction Projects. These costs are capitalized as construction-in-process until achievement of substantial completion. Additionally, we invested$100 million and$70 million inMidship Holdings , our equity method investment, during the nine months endedSeptember 30, 2020 and 2019, respectively.
Financing Cash Flows
Financing cash net outflows during the nine months endedSeptember 30, 2020 were$399 million , primarily as a result of: •issuance of an aggregate principal amount of$2.0 billion of the 2030 SPL Senior Notes, which along with cash on hand was used to redeem all of the outstanding 2021 SPL Senior Notes; 47 -------------------------------------------------------------------------------- •$2.3 billion of borrowings under the Cheniere Term Loan Facility, which were used to redeem the outstanding principal amount of$1.0 billion of the 2025 CCH HoldCo II Convertible Senior Notes and repurchase$513 million principal amount of the 2021 Cheniere Convertible Unsecured Notes; •issuance of an aggregate principal amount of$2.0 billion of the 2028 Cheniere Senior Secured Notes, which along with available cash, were used to prepay the$2.1 billion outstanding indebtedness of the Cheniere Term Loan Facility; •issuance of an aggregate principal amount of$769 million of the 3.52% CCH Senior Secured Notes, which the proceeds were partly used to repay a portion of the outstanding borrowings under the CCH Credit Facility; •$455 million of borrowings and$80 million of repayments under the Cheniere Revolving Credit Facility; •$141 million of borrowings and$656 million of repayments under the CCH Working Capital Facility; •$124 million of debt issuance costs primarily related to up-front fees paid upon the closing of the above transactions; •$468 million of distributions to non-controlling interest byCheniere Partners ; •$155 million paid to repurchase approximately 3 million shares of our common stock under the share repurchase program; •$43 million paid for tax withholdings for share-based compensation; and •$170 million of debt modification or extinguishment costs related to the above transactions. Financing cash net inflows during the nine months endedSeptember 30, 2019 were$1,527 million , primarily as a result of: •issuance of an aggregate principal amount of$1.5 billion of the 2029 CQP Senior Notes, which was used to prepay the outstanding balance of the term loan under the 2019 CQP Credit Facilities; •$982 million of borrowings and$797 million of repayments under the CCH Credit Facility; •$730 million of borrowings and repayments under the 2019 CQP Credit Facilities; •issuance of an aggregate principal of$727 million of the 4.80% CCH Senior Notes, which was used to prepay a portion of the outstanding balance of the CCH Credit Facility; •$481 million of borrowings and$649 million in repayments under the CCH Working Capital Facility; •$439 million of distributions to non-controlling interest byCheniere Partners ; •$159 million paid to repurchase our common stock under the share repurchase program; •$61 million of net repayments related to ourCheniere Marketing trade financing facilities; •$38 million of debt issuance costs primarily related to up-front fees paid upon the closing of the 2019 CQP Credit Facilities, 2029 CQP Senior Notes and the 4.80% CCH Senior Notes; and •$19 million paid for tax withholdings for share-based compensation. 48 --------------------------------------------------------------------------------
Results of Operations
The following charts summarize the number of Trains that were in operation during the year endedDecember 31, 2019 and the nine months endedSeptember 30, 2020 and total revenues and total LNG volumes loaded from our Liquefaction Projects (including both operational and commissioning volumes) during the nine months endedSeptember 30, 2020 and 2019: [[Image Removed: lng-20200930_g3.jpg]]
[[Image Removed: lng-20200930_g4.jpg]][[Image Removed: lng-20200930_g5.jpg]]
The following table summarizes the volumes of operational and commissioning LNG cargoes that were loaded from the Liquefaction Projects, which were recognized on our Consolidated Financial Statements during the three and nine months endedSeptember 30, 2020 : Three Months Ended September 30, 2020 Nine Months Ended September 30, 2020 (in TBtu) Operational Commissioning Operational Commissioning Volumes loaded during the current period 187 - 920
-
Volumes loaded during the prior period but recognized during the current period 2 - 33
-
Less: volumes loaded during the current period and in transit at the end of the period (21) - (21)
-
Total volumes recognized in the
current period 168 - 932 -
49-------------------------------------------------------------------------------- Our consolidated net loss attributable to common stockholders was$463 million , or$1.84 per share (basic and diluted), for the three months endedSeptember 30, 2020 , compared to$318 million , or$1.25 per share (basic and diluted), in the three months endedSeptember 30, 2019 . This$145 million increase in net loss attributable to common stockholders in 2020 was primarily attributable to the impact of prior period elections by our long-term SPA customers to exercise their contractual right to not take delivery of LNG cargoes that were scheduled to be delivered this quarter. Additionally, net loss attributable to common stockholders increased due to losses on modification or extinguishment of debt from refinancing activities to address near-term maturities and higher cost debt and from increased loss on equity method investments, partially offset by (1) increased net loss attributable to non-controlling interest, (2) reduction in interest rate derivative losses, (3) increased income tax benefit and (4) decreased interest expense, net of capitalized interest. Our consolidated net income attributable to common stockholders was$109 million , or$0.43 per share (basic and diluted), for the nine months endedSeptember 30, 2020 , compared to net loss attributable to common stockholders of$291 million , or$1.13 per share (basic and diluted), in the nine months endedSeptember 30, 2019 . This$400 million increase in net income attributable to common stockholders in 2020 was primarily attributable to additional LNG volume available to be sold from additional Trains that have reached substantial completion between the periods, a portion of which the customers elected not to take delivery but were required to pay a fixed fee with respect to the contracted volumes, and increased gains from commodity derivatives to secure natural gas feedstock for the Liquefaction Projects, partially offset by increases in (1) loss on modification or extinguishment of debt from refinancing activities of higher cost debt, (2) operating and maintenance expense, (3) interest expense, net of capitalized interest, (4) depreciation and amortization expense, (5) income tax provision and (6) increased loss on equity method investments. We enter into derivative instruments to manage our exposure to (1) changing interest rates, (2) commodity-related marketing and price risks and (3) foreign exchange volatility. Derivative instruments are reported at fair value on our Consolidated Financial Statements. In some cases, the underlying transactions economically hedged receive accrual accounting treatment, whereby revenues and expenses are recognized only upon delivery, receipt or realization of the underlying transaction. Because the recognition of derivative instruments at fair value has the effect of recognizing gains or losses relating to future period exposure, use of derivative instruments may increase the volatility of our results of operations based on changes in market pricing, counterparty credit risk and other relevant factors. Revenues Three Months Ended September 30, Nine Months Ended September 30, (in millions) 2020 2019 Change 2020 2019 Change LNG revenues$ 1,373 $ 2,059 $ (686) $ 6,236 $ 6,375 $ (139) Regasification revenues 67 66 1 202 199 3 Other revenues 20 45 (25) 133 149 (16) Total revenues$ 1,460 $ 2,170 $ (710) $ 6,571 $ 6,723 $ (152) Total revenues decreased during the three months endedSeptember 30, 2020 from the three months endedSeptember 30, 2019 , primarily as a result of decreased volumes recognized as revenues between the periods due to LNG cargoes for which customers have notified us that they will not take delivery, although this decrease was partially offset by the revenues associated with LNG cargoes for which customers have notified us that they will not take delivery. Total revenues decreased during the nine months endedSeptember 30, 2020 from the nine months endedSeptember 30, 2019 , primarily as a result of decreased revenues recognized by our integrated marketing function due to the recent downturn in the energy market. LNG revenues during the three and nine months endedSeptember 30, 2020 included$171 million and$932 million , respectively, in revenues associated with LNG cargoes for which customers have notified us that they will not take delivery, of which$47 million would have otherwise been recognized subsequent toSeptember 30, 2020 , if the cargoes were lifted pursuant to the delivery schedules with the customers. LNG revenues during the three months endedSeptember 30, 2020 excluded$458 million in prior period cancellations that would have otherwise been recognized during the quarter if the cargoes were lifted pursuant to the delivery schedules with the customers. We experienced decreased revenues during the three months endedSeptember 30, 2020 because we recognized accelerated revenues associated with LNG cargoes that were scheduled for delivery during the current quarter in the prior quarter, when the customers notified us that they will not take delivery of such cargoes. We expect our LNG revenues to increase in the future upon Train 3 of theCCL Project and Train 6 of theSPL Project becoming operational. 50 -------------------------------------------------------------------------------- Prior to substantial completion of a Train, amounts received from the sale of commissioning cargoes from that Train are offset against LNG terminal construction-in-process, because these amounts are earned or loaded during the testing phase for the construction of that Train. We realized offsets to LNG terminal costs of$99 million corresponding to 23 TBtu of LNG in the three months endedSeptember 30, 2019 and$301 million corresponding to 51 TBtu of LNG in the nine months endedSeptember 30, 2019 that were related to the sale of commissioning cargoes from the Liquefaction Projects. We did not realize any offsets to LNG terminal costs during the three and nine months endedSeptember 30, 2020 . Also included in LNG revenues are sale of unutilized natural gas procured for the liquefaction process, gains and losses from derivative instruments, which include the realized value associated with a portion of derivative instruments that settle through physical delivery, and revenues from arrangements in which we financially settled previously-scheduled LNG cargo sales without physical delivery. We recognized revenues of$272 million and$134 million during the three months endedSeptember 30, 2020 and 2019, respectively, and$545 million and$451 million during the nine months endedSeptember 30, 2020 and 2019, respectively, related to these transactions.
The following table presents the components of LNG revenues and the corresponding LNG volumes sold:
Three Months Ended September Nine Months Ended September
30, 30,
2020 2019 2020 2019LNG revenues (in millions): LNG from the Liquefaction Projects sold under third party long-term agreements (1)
$ 780 $ 1,496 $ 3,931 $ 4,406 LNG from the Liquefaction Projects sold by our integrated marketing function under short-term agreements 65 398 540 1,303 LNG procured from third parties 85 31 288 215
LNG revenues associated with cargoes not delivered per customer notification (2)
171 - 932 -
Other revenues and derivative gains 272 134 545 451
Total LNG revenues $ 1,373 $
2,059
Volumes delivered as LNG revenues (in TBtu): LNG from the Liquefaction Projects sold under third party long-term agreements (1)
145 276 764 753
LNG from the Liquefaction Projects sold by our
integrated marketing function under short-term
agreements 23 88 168 245
LNG procured from third parties 31 8 79 31
Total volumes delivered as LNG revenues 199 372 1,011 1,029
(1) Long-term agreements include agreements with a tenure of 12 months or
more.
(2) LNG revenues include revenues with no corresponding volumes attributable to
LNG cargoes for which customers have notified us that they will not take
delivery.
Operating costs and expenses
Three Months Ended September 30, Nine Months Ended September 30,
(in millions) 2020 2019 Change 2020 2019 Change
Cost of sales $ 768 $ 1,267 $ (499) $ 2,295 $ 3,758 $ (1,463)
Operating and maintenance expense 317 308 9 988 824 164
Development expense - 2 (2) 5 6 (1)
Selling, general and
administrative expense 70 72 (2) 224 222 2
Depreciation and amortization
expense 233 213 20 699 561 138
Impairment expense and loss on
disposal of assets - 1 (1) 5 7 (2)
Total operating costs and expenses
(475)$ 4,216 $ 5,378 $ (1,162) 51
-------------------------------------------------------------------------------- Our total operating costs and expenses decreased during the three and nine months endedSeptember 30, 2020 from the three and nine months endedSeptember 30, 2019 , primarily as a result of decreased cost of sales, partially offset by increased operating and maintenance expense and depreciation and amortization expense from additional operating Trains between the periods. Cost of sales includes costs incurred directly for the production and delivery of LNG from the Liquefaction Projects, to the extent those costs are not utilized for the commissioning process. Cost of sales decreased during the three months endedSeptember 30, 2020 from the three months endedSeptember 30, 2019 , primarily due to decreased volumes of natural gas feedstock between the periods and decreased vessel charter costs. Cost of sales decreased during the nine months endedSeptember 30, 2020 from the nine months endedSeptember 30, 2019 , primary due to decreased pricing of natural gas feedstock between the periods, increased fair value of commodity derivatives to secure natural gas feedstock for the Liquefaction Projects due to favorable shifts in long-term forward prices relative to our hedged position and decreased vessel charter costs. Partially offsetting these decreases in both the three and nine months endedSeptember 30, 2020 were increases in costs associated with sale of unutilized natural gas procured for the liquefaction process and a portion of derivative instruments that settle through physical delivery. Cost of sales also includes port and canal fees, variable transportation and storage costs and the sale of natural gas procured for the liquefaction process and other costs to convert natural gas into LNG. Operating and maintenance expense primarily includes costs associated with operating and maintaining the Liquefaction Projects. Additionally, operating and maintenance expense includes costs incurred in response to the COVID-19 pandemic, as further described earlier in Impact of COVID-19 and Market Environment . Excluding the costs incurred in response to the COVID-19 pandemic, operating and maintenance expense (including affiliates) did not materially change between the three months endedSeptember 30, 2020 and 2019, and increased during the nine months endedSeptember 30, 2020 from the nine months endedSeptember 30, 2019 , primarily due to increased natural gas transportation and storage capacity demand charges, increased TUA reservation charges due to Total under the partial TUA assignment agreement and increased payroll and benefit costs from increased headcount from additional Trains operating at the Liquefaction Projects between the periods. Operating and maintenance expense also includes insurance and regulatory and other operating costs. Depreciation and amortization expense increased during the three and nine months endedSeptember 30, 2020 from the three and nine months endedSeptember 30, 2019 as a result of an increased number of operational Trains, as the related assets began depreciating upon reaching substantial completion. We expect our operating costs and expenses to generally increase in the future upon Train 3 of theCCL Project and Train 6 of theSPL Project achieving substantial completion, although we expect certain costs will not proportionally increase with the number of operational Trains as cost efficiencies will be realized. Other expense Three Months Ended September 30, Nine Months Ended September 30, (in millions) 2020 2019 Change 2020 2019 Change Interest expense, net of capitalized interest$ 355 $ 395 $ (40) $ 1,174 $ 1,014 $ 160 Loss on modification or extinguishment of debt 171 27 144 215 27 188 Interest rate derivative loss, net - 78 (78) 233 187 46 Other expense, net 129 70 59 115 38 77 Total other expense$ 655 $ 570 $ 85 $ 1,737 $ 1,266 $ 471 Interest expense, net of capitalized interest, decreased during the three months endedSeptember 30, 2020 from the comparable period in 2019 as a result of the redemption of the remaining outstanding principal amount of the 2025 CCH HoldCo II Convertible Senior Notes inJuly 2020 and the refinancing of a portion of the outstanding balance under the CCH Credit Facility and decrease in associated interest rates, partially offset by an increase in interest cost for the new senior notes issued by CCH and a decrease in the portion of total interest costs that is eligible for capitalization, as additional Trains of the Liquefaction Projects completed construction between the periods. Interest expense, net of capitalized interest, increased during the three and nine months endedSeptember 30, 2020 from the three and nine months endedSeptember 30, 2019 primarily as a result of a decrease in the portion of total interest costs that is eligible for capitalization as additional Trains of the Liquefaction Projects completed construction between the periods. During the three months endedSeptember 30, 2020 and 2019, we incurred$416 million and$468 million of total interest cost, respectively, of which we capitalized$61 million and 52 --------------------------------------------------------------------------------$73 million , respectively, which was primarily related to interest costs incurred to construct the remaining assets of the Liquefaction Projects. During both the nine months endedSeptember 30, 2020 and 2019, we incurred$1.4 billion of total interest cost which was primarily related to interest costs incurred to construct the remaining assets of the Liquefaction Projects. We capitalized$182 million and$360 million of interest during the nine months endedSeptember 30, 2020 and 2019, respectively. Loss on modification or extinguishment of debt increased during the three and nine months endedSeptember 30, 2020 from the comparable periods in 2019 due to the recognition of debt extinguishment costs resulting from (1) the redemption of the remaining outstanding principal amount of the 2025 CCH HoldCo II Convertible Senior Notes and partial repurchase of the 2021 Cheniere Convertible Unsecured Notes, (2) refinancing of the 2021 SPL Senior Notes inMay 2020 , (3) the prepayment of approximately$2.1 billion of the outstanding indebtedness of the Cheniere Term Loan Facility and (4) the prepayment of a portion of the outstanding balance of the CCH Credit Facility using proceeds from the issuance of senior notes or as part of Cheniere's capital allocation framework. Interest rate derivative loss, net decreased during the three months endedSeptember 30, 2020 compared to the three months endedSeptember 30, 2019 , primarily due to a favorable shift in the long-term forward LIBOR curve between the periods. Interest rate derivative loss, net increased during the nine months endedSeptember 30, 2020 compared to the nine months endedSeptember 30, 2019 , primarily due to an unfavorable shift in the long-term forward LIBOR curve between the periods. Other expense, net increased during the three and nine months endedSeptember 30, 2020 compared to the three and nine months endedSeptember 30, 2019 due to an increase in impairment losses recognized related to our equity method investments between the periods and a decrease in interest income earned on our cash and cash equivalents. We recognized other-than-temporary impairment losses of$129 million related to our investment inMidship Holdings during the three and nine months endedSeptember 30, 2020 . Impairment was precipitated primarily due to declining market conditions in the energy industry and customer credit risk, resulting in a reduction in the fair value of our equity interests. We recognized losses of$87 million during the three and nine months endedSeptember 30, 2019 related to our investments in certain equity method investees, includingMidship Holdings . Impairments were primarily the result of cost overruns and extended construction timelines for operating infrastructure of our investees' projects.
Income tax benefit (provision)
Three Months Ended September 30, Nine Months Ended September 30,
(in millions) 2020 2019 Change 2020 2019 Change
Income (loss) before income taxes
and non-controlling interest $ (583) $ (263) $ (320) $ 618 $ 79 $ 539
Income tax benefit (provision) 75 3 72 (119) - (119)
Effective tax rate 12.9 % 1.1 % 19.3 % - %
The effective tax rates for the three and nine months ended September 30, 2020
were lower than the 21% federal statutory rate primarily due to income allocated
to non-controlling interest that is not taxable to Cheniere. The effective tax
rate for the three months ended September 30, 2020 as compared to the nine
months ended September 30, 2020 is lower due to $38 million of tax expense
recorded discretely in the first quarter of 2020. The effective tax rate for the
three and nine months ended September 30, 2019 is lower than the 21% federal
statutory rate primarily due to maintaining a valuation allowance against our
federal deferred tax assets.
On July 28, 2020 , the U.S. Department of the Treasury released final regulations
and proposed regulations providing guidance on the business interest expense
limitation under Section 163(j) of the Internal Revenue Code. We are currently
in the process of evaluating the effect of these regulations on our Consolidated
Financial Statements and related disclosures.
53
--------------------------------------------------------------------------------Net income (loss) attributable to non-controlling interest
Three Months Ended September 30, Nine Months Ended September 30,
(in millions) 2020 2019 Change 2020 2019 Change
Net income (loss) attributable to
non-controlling interest $ (45) $ 58 Net loss attributable to non-controlling interest increased during the three months endedSeptember 30, 2020 from comparable period in 2019 due to the increase in consolidated net loss recognized byCheniere Partners , primarily as a result of decreased margins due to (1) lower volumes of LNG sold during the quarter as our SPA customers exercised their rights last quarter to cancel cargoes that were scheduled to be delivered this quarter and (2) fewer cargoes were sold toCheniere Marketing under agreements with lower margins compared to the comparable period in 2019. Net income attributable to non-controlling interest increased during the nine months endedSeptember 30, 2020 from the nine months endedSeptember 30, 2019 primarily due to an increase in consolidated net income recognized byCheniere Partners , primarily a result of increased margins due to lower pricing of natural gas feedstock, partially offset by increases in (1) interest expense, net of capitalized interest, (2) loss on modification or extinguishment of debt incurred in conjunction with the refinancing of the 2021 SPL Senior Notes and (3) depreciation and amortization expense.
Off-Balance Sheet Arrangements
As of
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. There have been no significant changes to our critical accounting estimates from those disclosed in our annual report on Form 10-K for the fiscal year endedDecember 31, 2019 .
Recent Accounting Standards
For descriptions of recently issued accounting standards, see Note 1-Nature of Operations and Basis of Presentation of our Notes to Consolidated Financial Statements.
© Edgar Online, source
