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The Sabine Pass LNG terminal is located in Cameron Parish, Louisiana, on the Sabine-Neches Waterway less than four miles from the Gulf Coast. Through our subsidiary, SPL, we are currently operating five natural gas liquefaction Trains and are constructing one additional Train for a total production capacity of approximately 30 mtpa of LNG (the “Liquefaction Project”) at the Sabine Pass LNG terminal. Through our subsidiary, SPLNG, we own and operate regasification facilities at the Sabine Pass LNG terminal, which includes pre-existing infrastructure of five LNG storage tanks, two marine berths and vaporizers. We also own a 94-mile pipeline through our subsidiary, CTPL, that interconnects the Sabine Pass LNG terminal with a number of large interstate pipelines (the “Creole Trail Pipeline”).

Basis of Presentation

The accompanying unaudited Consolidated Financial Statements of Cheniere Partners have been prepared in accordance with GAAP for interim financial information and with Rule 10-01 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by GAAP for complete financial statements and should be read in conjunction with the Consolidated Financial Statements and accompanying notes included in our annual report on Form 10-K for the year ended December 31, 2019.

Results of operations for the three months ended March 31, 2020 are not necessarily indicative of the results of operations that will be realized for the year ending December 31, 2020.

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

Recent Accounting Standards

In March 2020, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2020-04, Reference Rate Reform (Topic 848): Facilitation of the Effects of Reference Rate Reform on Financial Reporting. This guidance primarily provides temporary optional expedients which simplify the accounting for contract modifications to existing debt agreements expected to arise from the market transition from LIBOR to alternative reference rates. The optional expedients were available to be used upon issuance of this guidance but we have not yet applied the guidance because we have not yet modified any of our existing contracts for reference rate reform. Once we apply an optional expedient to a modified contract and adopt this standard, the guidance will be applied to all subsequent applicable contract modifications until December 31, 2022, at which time the optional expedients are no longer available.

 

The common units and subordinated units represent limited partner interests in us. The holders of the units are entitled to participate in partnership distributions and exercise the rights and privileges available to limited partners under our partnership agreement. Our partnership agreement requires that, within 45 days after the end of each quarter, we distribute all of our available cash (as defined in our partnership agreement). Generally, our available cash is our cash on hand at the end of a quarter less the amount of any reserves established by our general partner. All distributions paid to date have been made from accumulated operating surplus as defined in the partnership agreement.

The holders of common units have the right to receive initial quarterly distributions of $0.425 per common unit, plus any arrearages thereon, before any distribution is made to the holders of the subordinated units. The holders of subordinated units will receive distributions only to the extent we have available cash above the initial quarterly distribution requirement for our common unitholders and general partner and certain reserves.  Subordinated units will convert into common units on a one-for-one basis when we meet financial tests specified in the partnership agreement. Although common and subordinated unitholders are not obligated to fund losses of the Partnership, their capital accounts, which would be considered in allocating the net assets of the Partnership were it to be liquidated, continue to share in losses.

The general partner interest is entitled to at least 2% of all distributions made by us. In addition, the general partner holds incentive distribution rights (“IDRs”), which allow the general partner to receive a higher percentage of quarterly distributions of

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available cash from operating surplus after the initial quarterly distributions have been achieved and as additional target levels are met, but may transfer these rights separately from its general partner interest. The higher percentages range from 15% to 50%, inclusive of the general partner interest.

 

 

Restricted cash consists of funds that are contractually or legally restricted as to usage or withdrawal and have been presented separately from cash and cash equivalents on our Consolidated Balance Sheets. As of March 31, 2020 and December 31, 2019, we had $109 million and $181 million of current restricted cash, respectively.

As of March 31, 2020 and December 31, 2019, accounts and other receivables consisted of the following (in millions):

		March 31,				December 31,
		2020				2019
SPL trade receivable		$	248			$	283
Other accounts receivable		11				14
Total accounts and other receivables		$	259			$	297

As of March 31, 2020 and December 31, 2019, inventory consisted of the following (in millions):

		March 31,				December 31,
		2020				2019
Natural gas		$	11			$	9
LNG		7				27
Materials and other		80				80
Total inventory		$	98			$	116

 

As of March 31, 2020 and December 31, 2019, property, plant and equipment, net consisted of the following (in millions):

		March 31,				December 31,
		2020				2019
LNG terminal costs
LNG terminal and interconnecting pipeline facilities		$	16,917			$	16,894
LNG terminal construction-in-process		1,495				1,275
Accumulated depreciation		(1,943		)		(1,807		)
Total LNG terminal costs, net		16,469				16,362
Fixed assets
Fixed assets		29				27
Accumulated depreciation		(22		)		(21		)
Total fixed assets, net		7				6
Property, plant and equipment, net		$	16,476			$	16,368

 

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Depreciation expense was $137 million and $113 million during the three months ended March 31, 2020 and 2019, respectively.

We realized offsets to LNG terminal costs of $48 million during the three months ended March 31, 2019 that were related to the sale of commissioning cargoes because these amounts were earned or loaded prior to the start of commercial operations of the respective Trains of the Liquefaction Project, during the testing phase for its construction. We did not realize any offsets to LNG terminal costs during the three months ended March 31, 2020.

We have entered into commodity derivatives consisting of natural gas supply contracts for the commissioning and operation of the Liquefaction Project (“Physical Liquefaction Supply Derivatives”) and associated economic hedges (collectively, the “Liquefaction Supply Derivatives”).

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

The following table shows the fair value of our derivative instruments that are required to be measured at fair value on a recurring basis as of March 31, 2020 and December 31, 2019, which are classified as derivative assets, non-current derivative assets, derivative liabilities or non-current derivative liabilities in our Consolidated Balance Sheets (in millions).

	Fair Value Measurements as of
	March 31, 2020																December 31, 2019
	Quoted Prices in Active Markets (Level 1)				Significant Other Observable Inputs (Level 2)				Significant Unobservable Inputs (Level 3)				Total				Quoted Prices in Active Markets (Level 1)				Significant Other Observable Inputs (Level 2)				Significant Unobservable Inputs (Level 3)				Total
Liquefaction Supply Derivatives asset (liability)	$	(1	)		$	(8	)		$	49			$	40			$	3			$	(3	)		$	24			$	24

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

The fair value of our Physical Liquefaction Supply Derivatives is predominantly driven by observable and unobservable market commodity prices and, as applicable to our natural gas supply contracts, our assessment of the associated events deriving fair value, including evaluating whether the respective market is available as pipeline infrastructure is developed. The fair value of our Physical Liquefaction Supply Derivatives incorporates risk premiums related to the satisfaction of conditions precedent, such as completion and placement into service of relevant pipeline infrastructure to accommodate marketable physical gas flow. As of March 31, 2020 and December 31, 2019, some of our Physical Liquefaction Supply Derivatives existed within markets for which the pipeline infrastructure was under development to accommodate marketable physical gas flow.

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

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The Level 3 fair value measurements of natural gas positions within our Physical Liquefaction Supply Derivatives could be materially impacted by a significant change in certain natural gas prices. The following table includes quantitative information for the unobservable inputs for our Level 3 Physical Liquefaction Supply Derivatives as of March 31, 2020:

		Net Fair Value Asset (in millions)		Valuation Approach		Significant Unobservable Input		Range of Significant Unobservable Inputs / Weighted Average (1)
Physical Liquefaction Supply Derivatives		$49		Market approach incorporating present value techniques		Henry Hub basis spread		$(0.380) - $0.054 / 0.007

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

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

The following table shows the changes in the fair value of our Level 3 Physical Liquefaction Supply Derivatives during the three months ended March 31, 2020 and 2019 (in millions):

		Three Months Ended March 31,
		2020				2019
Balance, beginning of period		$	24			$	(25	)
Realized and mark-to-market gains:
Included in cost of sales		25				9
Purchases and settlements:
Purchases		1				—
Settlements		(3		)		45
Transfers out of Level 3 (1)		2				—
Balance, end of period		$	49			$	29
Change in unrealized gains relating to instruments still held at end of period		$	25			$	9

(1)    Transferred to Level 2 as a result of observable market for the underlying natural gas purchase agreements.

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

Liquefaction Supply Derivatives

SPL has entered into primarily index-based physical natural gas supply contracts and associated economic hedges to purchase natural gas for the commissioning and operation of the Liquefaction Project. The remaining terms of the physical natural gas supply contracts range up to 10 years, some of which commence upon the satisfaction of certain events or states of affairs.

The notional natural gas position of our Liquefaction Supply Derivatives was approximately 5,231 TBtu and 3,663 TBtu as of March 31, 2020 and December 31, 2019, respectively, of which 91 TBtu and zero TBtu, respectively, were for a natural gas supply contract that SPL has with a related party.

 

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

		Fair Value Measurements as of (1)
Consolidated Balance Sheet Location		March 31, 2020				December 31, 2019
Derivative assets		$	13			$	17
Non-current derivative assets		41				32
Total derivative assets		54				49
Derivative liabilities		(12		)		(9		)
Non-current derivative liabilities		(2		)		(16		)
Total derivative liabilities		(14		)		(25		)
Derivative asset, net		$	40			$	24

(1)	Does not include collateral posted with counterparties by us of $6 million and $2 million for such contracts, which are included in other current assets in our Consolidated Balance Sheets as of March 31, 2020 and December 31, 2019, respectively. Includes a natural gas supply contract that SPL has with a related party, which had a fair value of zero as of March 31, 2020.

The following table shows the changes in the fair value, settlements and location of our Liquefaction Supply Derivatives recorded on our Consolidated Statements of Income during the three months ended March 31, 2020 and 2019 (in millions):

			Three Months Ended March 31,
	Consolidated Statement of Income Location (1)		2020				2019
Liquefaction Supply Derivatives gain	LNG revenues		$	—			$	1
Liquefaction Supply Derivatives gain	Cost of sales		21				76

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

Consolidated Balance Sheet Presentation

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

		Gross Amounts Recognized				Gross Amounts Offset in the Consolidated Balance Sheets				Net Amounts Presented in the Consolidated Balance Sheets
Offsetting Derivative Assets (Liabilities)
As of March 31, 2020
Liquefaction Supply Derivatives		$	56			$	(2	)		$	54
Liquefaction Supply Derivatives		(15		)		1				(14		)
As of December 31, 2019
Liquefaction Supply Derivatives		$	51			$	(2	)		$	49
Liquefaction Supply Derivatives		(27		)		2				(25		)

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As of March 31, 2020 and December 31, 2019, other non-current assets, net consisted of the following (in millions):

		March 31,				December 31,
		2020				2019
Advances made to municipalities for water system enhancements		$	86			$	87
Advances and other asset conveyances to third parties to support LNG terminal		35				35
Tax-related prepayments and receivables		17				17
Information technology service prepayments		5				6
Advances made under EPC and non-EPC contracts		7				15
Other		6				8
Total other non-current assets, net		$	156			$	168

 

As of March 31, 2020 and December 31, 2019, accrued liabilities consisted of the following (in millions):

		March 31,				December 31,
		2020				2019
Interest costs and related debt fees		$	251			$	241
Accrued natural gas purchases		224				325
LNG terminal and related pipeline costs		81				135
Other accrued liabilities		13				8
Total accrued liabilities		$	569			$	709

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As of March 31, 2020 and December 31, 2019, our debt consisted of the following (in millions):

		March 31,				December 31,
		2020				2019
Long-term debt:
SPL
5.625% Senior Secured Notes due 2021 (“2021 SPL Senior Notes”)		$	—			$	2,000
6.25% Senior Secured Notes due 2022 (“2022 SPL Senior Notes”)		1,000				1,000
5.625% Senior Secured Notes due 2023 (“2023 SPL Senior Notes”)		1,500				1,500
5.75% Senior Secured Notes due 2024 (“2024 SPL Senior Notes”)		2,000				2,000
5.625% Senior Secured Notes due 2025 (“2025 SPL Senior Notes”)		2,000				2,000
5.875% Senior Secured Notes due 2026 (“2026 SPL Senior Notes”)		1,500				1,500
5.00% Senior Secured Notes due 2027 (“2027 SPL Senior Notes”)		1,500				1,500
4.200% Senior Secured Notes due 2028 (“2028 SPL Senior Notes”)		1,350				1,350
5.00% Senior Secured Notes due 2037 (“2037 SPL Senior Notes”)		800				800
$1.2 billion SPL Working Capital Facility executed in 2020 (“2020 SPL Working Capital Facility”)		—				—
Cheniere Partners
5.250% Senior Notes due 2025 (“2025 CQP Senior Notes”)		1,500				1,500
5.625% Senior Notes due 2026 (“2026 CQP Senior Notes”)		1,100				1,100
4.500% Senior Notes due 2029 (“2029 CQP Senior Notes”)		1,500				1,500
CQP Credit Facilities executed in 2019 (“2019 CQP Credit Facilities”)		—				—
Unamortized premium, discount and debt issuance costs, net		(159		)		(171		)
Total long-term debt, net		15,591				17,579
Current debt:
2021 SPL Senior Notes		2,000				—
$1.2 billion SPL Working Capital Facility executed in 2015 (“2015 SPL Working Capital Facility”)		—				—
Unamortized premium, discount and debt issuance costs, net		(4		)		—
Total current debt		1,996				—
Total debt, net		$	17,587			$	17,579

2020 Material Debt Activities

2020 SPL Working Capital Facility

In March 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 (“SPL Revolving Loans”), swing line loans to SPL (“SPL Swing Line Loans”) 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 2020 SPL Working Capital Facility, (3) SPL’s 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.

Loans under the 2020 SPL Working Capital Facility accrue interest at a variable rate per annum equal to LIBOR or the base rate (equal to the highest of the senior facility agent’s published prime rate, the federal funds rate, as published by the Federal Reserve Bank of New York, plus 0.50% and one month LIBOR plus 0.50%), plus the applicable margin. The applicable margin for LIBOR loans under the 2020 SPL Working Capital Facility is 1.125% to 1.750% per annum (depending on the then-current rating of SPL), and the applicable margin for base rate loans under the 2020 SPL Working Capital Facility is 0.125% to 0.750% per annum (depending on the then-current rating of SPL). Interest on LIBOR loans is due and payable at the end of each applicable LIBOR period, and interest on base rate loans is due and payable at the end of each fiscal quarter.

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SPL pays a commitment fee equal to an annual rate of 0.1% to 0.3% (depending on the then-current rating of SPL), which accrues on the daily amount of the total commitment less the sum of (1) the outstanding principal amount of SPL Revolving Loans, (2) letters of credit issued and (3) the outstanding principal amount of SPL Swing Line Loans. If draws are made upon a letter of credit issued under the 2020 SPL Working Capital Facility and SPL does not elect for such draw to be deemed an SPL LC Loan (an “SPL LC Draw”), SPL is required to pay the full amount of the SPL LC Draw on or prior to noon eastern time on the business day of the SPL LC Draw. An SPL LC Draw accrues interest at the base rate plus the applicable margin. As of March 31, 2020, no SPL LC Draws had been made upon any letters of credit issued under the 2020 SPL Working Capital Facility.

The 2020 SPL Working Capital Facility matures on March 19, 2025, but may be extended with consent of the lenders. The 2020 SPL Working Capital Facility provides for mandatory prepayments under customary circumstances.

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.

Credit Facilities

Below is a summary of our credit facilities outstanding as of March 31, 2020 (in millions):

		2020 SPL Working Capital Facility				2019 CQP Credit Facilities
Original facility size		$	1,200			$	1,500
Less:
Outstanding balance		—				—
Commitments prepaid or terminated		—				750
Letters of credit issued		414				—
Available commitment		$	786			$	750
Interest rate on available balance		LIBOR plus 1.125% - 1.750% or base rate plus 0.125% - 0.750%				LIBOR plus 1.25% - 2.125% or base rate plus 0.25% - 1.125%
Weighted average interest rate of outstanding balance		n/a				n/a
Maturity date		March 19, 2025				May 29, 2024

Restrictive Debt Covenants

As of March 31, 2020, we and SPL were in compliance with all covenants related to our respective debt agreements.

Interest Expense

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

		Three Months Ended March 31,
		2020				2019
Total interest cost		$	254			$	235
Capitalized interest		(20		)		(48		)
Total interest expense, net		$	234			$	187

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Fair Value Disclosures

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

		March 31, 2020								December 31, 2019
		Carrying Amount				Estimated Fair Value				Carrying Amount				Estimated Fair Value
Senior notes (1)		$	16,950			$	15,762			$	16,950			$	18,320
2037 SPL Senior Notes (2)		800				709				800				934
Credit facilities (3)		—				—				—				—

(1)	Includes the SPL Senior Notes except the 2037 SPL Senior Notes and the CQP Senior Notes. The Level 2 estimated fair value was based on quotes obtained from broker-dealers or market makers of these senior notes and other similar instruments.

(2)	The Level 3 estimated fair value was calculated based on inputs that are observable in the market or that could be derived from, or corroborated with, observable market data, including our stock price and interest rates based on debt issued by parties with comparable credit ratings to us and inputs that are not observable in the market.

(3)	Includes 2015 SPL Working Capital Facility, 2020 SPL Working Capital Facility and 2019 CQP Credit Facilities. The Level 3 estimated fair value approximates the principal amount because the interest rates are variable and reflective of market rates and the debt may be repaid, in full or in part, at any time without penalty.

The following table represents a disaggregation of revenue earned from contracts with customers during the three months ended March 31, 2020 and 2019 (in millions):

		Three Months Ended March 31,
		2020				2019
LNG revenues (1)		$	1,449			$	1,366
LNG revenues—affiliate		188				305
Regasification revenues		67				66
Other revenues		14				11
Total revenues from customers		1,718				1,748
Net derivative gains (2)		—				1
Total revenues		$	1,718			$	1,749

(1)

LNG revenues include revenues for LNG cargoes in which our customers exercised their contractual right to not take delivery but remained obligated to pay fixed fees irrespective of such election. If contractually the customer cannot make up unexercised quantities in future periods, our performance obligation with respect to declined volumes is satisfied, and revenue associated with any unexercised quantities is generally recognized upon notice of customer cancellation.

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

Deferred Revenue Reconciliation

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

		Three Months Ended March 31, 2020
Deferred revenues, beginning of period		$	155
Cash received but not yet recognized		94
Revenue recognized from prior period deferral		(155		)
Deferred revenues, end of period		$	94

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Transaction Price Allocated to Future Performance Obligations

Because many of our sales contracts have long-term durations, we are contractually entitled to significant future consideration which we have not yet recognized as revenue. The following table discloses the aggregate amount of the transaction price that is allocated to performance obligations that have not yet been satisfied as of March 31, 2020 and December 31, 2019:

		March 31, 2020						December 31, 2019
		Unsatisfied Transaction Price (in billions)				Weighted Average Recognition Timing (years) (1)		Unsatisfied Transaction Price (in billions)				Weighted Average Recognition Timing (years) (1)
LNG revenues (2)		$	54.2			10		$	55.0			10
Regasification revenues		2.3				5		2.4				5
Total revenues		$	56.5					$	57.4

    

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

(2)	Includes future consideration from agreement contractually assigned to SPL from Cheniere Marketing.

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

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

(2)

The table above excludes substantially all variable consideration under our SPAs and TUAs. We omit from the table above all variable consideration that is allocated entirely to a wholly unsatisfied performance obligation or to a wholly unsatisfied promise to transfer a distinct good or service that forms part of a single performance obligation when that performance obligation qualifies as a series. The amount of revenue from variable fees that is not included in the transaction price will vary based on the future prices of Henry Hub throughout the contract terms, to the extent customers elect to take delivery of their LNG, and adjustments to the consumer price index. Certain of our contracts contain additional variable consideration based on the outcome of contingent events and the movement of various indexes. We have not included such variable consideration in the transaction price to the extent the consideration is considered constrained due to the uncertainty of ultimate pricing and receipt. Approximately 44% and 58% of our LNG revenues from contracts with a duration of over one year during the three months ended March 31, 2020 and 2019, respectively, were related to variable consideration received from customers. During each of the three months ended March 31, 2020 and 2019, approximately 3% of our regasification revenues were related to variable consideration received from customers. All of our LNG revenues—affiliate were related to variable consideration received from customers during each of the three months ended March 31, 2020 and 2019.

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

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Below is a summary of our related party transactions as reported on our Consolidated Statements of Income for the three months ended March 31, 2020 and 2019 (in millions):

		Three Months Ended March 31,
		2020				2019
LNG revenues—affiliate
Cheniere Marketing Agreements		$	182			$	305
Contracts for Sale and Purchase of Natural Gas and LNG		6				—
Total LNG revenues—affiliate		188				305
Operating and maintenance expense—affiliate
Services Agreements		33				29
General and administrative expense—affiliate
Services Agreements		25				21

As of March 31, 2020 and December 31, 2019, we had $38 million and $105 million, respectively, of accounts receivable—affiliate, under the agreements described below.

Terminal Use Agreement

SPL obtained approximately 2 Bcf/d of regasification capacity and other liquefaction support services under a TUA with SPLNG as a result of an assignment in July 2012 by Cheniere Investments of its rights, title and interest under its TUA with SPLNG. SPL is obligated to make monthly capacity payments to SPLNG aggregating approximately $250 million per year (the “TUA Fees”), continuing until at least May 2036.

In connection with this TUA, SPL is required to pay for a portion of the cost (primarily LNG inventory) to maintain the cryogenic readiness of the regasification facilities at the Sabine Pass LNG terminal, which is recorded as operating and maintenance expense on our Consolidated Statements of Income.

Cheniere Marketing Agreements

Cheniere Marketing SPA

Cheniere Marketing has an SPA (“Base SPA”) with SPL to purchase, at Cheniere Marketing’s option, any LNG produced by SPL in excess of that required for other customers at a price of 115% of Henry Hub plus $3.00 per MMBtu of LNG.

In May 2019, SPL and Cheniere Marketing entered into an amendment to the Base SPA to remove certain conditions related to the sale of LNG from Trains 5 and 6 of the Liquefaction Project and provide that cargoes rejected by Cheniere Marketing under the Base SPA can be sold by SPL to Cheniere Marketing at a contract price equal to a portion of the estimated net profits from the sale of such cargo.

Cheniere Marketing Master SPA

SPL has an agreement with Cheniere Marketing that allows the parties to sell and purchase LNG with each other by executing and delivering confirmations under this agreement. SPL executed a confirmation with Cheniere Marketing that obligated Cheniere Marketing in certain circumstances to buy LNG cargoes produced during the period while Bechtel Oil, Gas and Chemicals, Inc. (“Bechtel”) had control of, and was commissioning, Train 5 of the Liquefaction Project.

Cheniere Marketing Letter Agreements

In December 2019, SPL and Cheniere Marketing entered into a letter agreement for the sale of up to 43 cargoes scheduled for delivery in 2020 at a price of 115% of Henry Hub plus $1.67 per MMBtu.

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Services Agreements

As of March 31, 2020 and December 31, 2019, we had $146 million and $158 million of advances to affiliates, respectively, under the services agreements described below. The non-reimbursement amounts incurred under these agreements are recorded in general and administrative expense—affiliate.

Cheniere Partners Services Agreement

We have a services agreement with Cheniere Terminals, a subsidiary of Cheniere, pursuant to which Cheniere Terminals is entitled to a quarterly non-accountable overhead reimbursement charge of $3 million (adjusted for inflation) for the provision of various general and administrative services for our benefit. In addition, Cheniere Terminals is entitled to reimbursement for all audit, tax, legal and finance fees incurred by Cheniere Terminals that are necessary to perform the services under the agreement.

Cheniere Investments Information Technology Services Agreement

Cheniere Investments has an information technology services agreement with Cheniere, pursuant to which Cheniere Investments’ subsidiaries receive certain information technology services. On a quarterly basis, the various entities receiving the benefit are invoiced by Cheniere Investments according to the cost allocation percentages set forth in the agreement. In addition, Cheniere is entitled to reimbursement for all costs incurred by Cheniere that are necessary to perform the services under the agreement.

SPLNG O&M Agreement

SPLNG has a long-term operation and maintenance agreement (the “SPLNG O&M Agreement”) with Cheniere Investments pursuant to which SPLNG receives all necessary services required to operate and maintain the Sabine Pass LNG receiving terminal. SPLNG pays a fixed monthly fee of $130,000 (indexed for inflation) under the SPLNG O&M Agreement and the cost of a bonus equal to 50% of the salary component of labor costs in certain circumstances to be agreed upon between SPLNG and Cheniere Investments at the beginning of each operating year. In addition, SPLNG is required to reimburse Cheniere Investments for its operating expenses, which consist primarily of labor expenses. Cheniere Investments provides the services required under the SPLNG O&M Agreement pursuant to a secondment agreement with a wholly owned subsidiary of Cheniere. All payments received by Cheniere Investments under the SPLNG O&M Agreement are required to be remitted to such subsidiary.

 

SPLNG MSA

SPLNG has a long-term management services agreement (the “SPLNG MSA”) with Cheniere Terminals, pursuant to which Cheniere Terminals manages the operation of the Sabine Pass LNG receiving terminal, excluding those matters provided for under the SPLNG O&M Agreement. SPLNG pays a monthly fixed fee of $520,000 (indexed for inflation) under the SPLNG MSA.

SPL O&M Agreement

SPL has an operation and maintenance agreement (the “SPL O&M Agreement”) with Cheniere Investments pursuant to which SPL receives all of the necessary services required to construct, operate and maintain the Liquefaction Project. Before each Train of the Liquefaction Project is operational, the services to be provided include, among other services, obtaining governmental approvals on behalf of SPL, preparing an operating plan for certain periods, obtaining insurance, preparing staffing plans and preparing status reports. After each Train is operational, the services include all necessary services required to operate and maintain the Train. Prior to the substantial completion of each Train of the Liquefaction Project, in addition to reimbursement of operating expenses, SPL is required to pay a monthly fee equal to 0.6% of the capital expenditures incurred in the previous month. After substantial completion of each Train, for services performed while the Train is operational, SPL will pay, in addition to the reimbursement of operating expenses, a fixed monthly fee of $83,333 (indexed for inflation) for services with respect to the Train. Cheniere Investments provides the services required under the SPL O&M Agreement pursuant to a secondment agreement with a wholly owned subsidiary of Cheniere. All payments received by Cheniere Investments under the SPL O&M Agreement are required to be remitted to such subsidiary.

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SPL MSA

SPL has a management services agreement (the “SPL MSA”) with Cheniere Terminals pursuant to which Cheniere Terminals manages the construction and operation of the Liquefaction Project, excluding those matters provided for under the SPL O&M Agreement. The services include, among other services, exercising the day-to-day management of SPL’s affairs and business, managing SPL’s regulatory matters, managing bank and brokerage accounts and financial books and records of SPL’s business and operations, entering into financial derivatives on SPL’s behalf and providing contract administration services for all contracts associated with the Liquefaction Project. Prior to the substantial completion of each Train of the Liquefaction Project, SPL pays a monthly fee equal to 2.4% of the capital expenditures incurred in the previous month. After substantial completion of each Train, SPL will pay a fixed monthly fee of $541,667 (indexed for inflation) for services with respect to such Train.

CTPL O&M Agreement

CTPL has an amended long-term operation and maintenance agreement (the “CTPL O&M Agreement”) with Cheniere Investments pursuant to which CTPL receives all necessary services required to operate and maintain the Creole Trail Pipeline. CTPL is required to reimburse Cheniere Investments for its operating expenses, which consist primarily of labor expenses. Cheniere Investments provides the services required under the CTPL O&M Agreement pursuant to a secondment agreement with a wholly owned subsidiary of Cheniere. All payments received by Cheniere Investments under the CTPL O&M Agreement are required to be remitted to such subsidiary.

 

Natural Gas Supply Agreement

SPL has entered into a natural gas supply contract to obtain feed gas for the operation of the Liquefaction Project with a related party in the ordinary course of business. The term of the agreement is for five years, which can commence no earlier than November 1, 2021 and no later than November 1, 2022, following the achievement of contractually-defined conditions precedent. SPL did not have any deliveries under this contract during the three months ended March 31, 2020 and 2019.

Agreement to Fund SPLNG’s Cooperative Endeavor Agreements

 

SPLNG has executed Cooperative Endeavor Agreements (“CEAs”) with various Cameron Parish, Louisiana taxing authorities that allowed them to collect certain annual property tax payments from SPLNG from 2007 through 2016. This initiative represented an aggregate commitment of $25 million over 10 years in order to aid in their reconstruction efforts following Hurricane Rita. In exchange for SPLNG’s advance payments of annual ad valorem taxes, Cameron Parish may grant SPLNG a dollar-for-dollar credit against future ad valorem taxes to be levied against the Sabine Pass LNG terminal as early as 2019. Beginning in September 2007, SPLNG entered into various agreements with Cheniere Marketing, pursuant to which Cheniere Marketing would pay SPLNG additional TUA revenues equal to any and all amounts payable by SPLNG to the Cameron Parish taxing authorities under the CEAs. In exchange for such amounts received as TUA revenues from Cheniere Marketing, SPLNG will make payments to Cheniere Marketing equal to ad valorem tax levied on our LNG terminal in the year the Cameron Parish dollar-for-dollar credit is applied.

On a consolidated basis, these advance tax payments were recorded to other non-current assets, and payments from Cheniere Marketing that SPLNG utilized to make the ad valorem tax payments were recorded as obligations. We had $3 million and $2 million in due to affiliates and $19 million and $20 million of other non-current liabilities—affiliate resulting from these payments received from Cheniere Marketing as of March 31, 2020 and December 31, 2019, respectively.

Contracts for Sale and Purchase of Natural Gas and LNG

 

SPLNG is able to sell and purchase natural gas and LNG under agreements with Cheniere Marketing. Under these agreements, SPLNG purchases natural gas or LNG from Cheniere Marketing at a sales price equal to the actual purchase price paid by Cheniere Marketing to suppliers of the natural gas or LNG, plus any third-party costs incurred by Cheniere Marketing with respect to the receipt, purchase and delivery of natural gas or LNG to the Sabine Pass LNG terminal.

SPL has an agreement with CCL that allows them to sell and purchase natural gas from each other. Natural gas purchased under this agreement is initially recorded as inventory and then to cost of sales—affiliate upon its sale, except for purchases related

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to commissioning activities which are capitalized as LNG terminal construction-in-process. Natural gas sold under this agreement is recorded as LNG revenues—affiliate.

Terminal Marine Services Agreement

In connection with its tug boat lease, Tug Services entered into an agreement with Cheniere Terminals to provide its LNG cargo vessels with tug boat and marine services at the Sabine Pass LNG terminal. The agreement also provides that Tug Services shall contingently pay Cheniere Terminals a portion of its future revenues. Accordingly, Tug Services distributed $1 million in each of the three months ended March 31, 2020 and 2019 to Cheniere Terminals, which is recognized as part of the distributions to our general partner interest holders on our Consolidated Statements of Partners’ Equity.

LNG Terminal Export Agreement

SPLNG and Cheniere Marketing have an LNG terminal export agreement that provides Cheniere Marketing the ability to export LNG from the Sabine Pass LNG terminal.  SPLNG did not record any revenues associated with this agreement during the three months ended March 31, 2020 and 2019.

State Tax Sharing Agreements

SPLNG has a state tax sharing agreement with Cheniere.  Under this agreement, Cheniere has agreed to prepare and file all state and local tax returns which SPLNG and Cheniere are required to file on a combined basis and to timely pay the combined state and local tax liability. If Cheniere, in its sole discretion, demands payment, SPLNG will pay to Cheniere an amount equal to the state and local tax that SPLNG would be required to pay if its state and local tax liability were calculated on a separate company basis. There have been no state and local taxes paid by Cheniere for which Cheniere could have demanded payment from SPLNG under this agreement; therefore, Cheniere has not demanded any such payments from SPLNG. The agreement is effective for tax returns due on or after January 1, 2008.

SPL has a state tax sharing agreement with Cheniere. Under this agreement, Cheniere has agreed to prepare and file all state and local tax returns which SPL and Cheniere are required to file on a combined basis and to timely pay the combined state and local tax liability. If Cheniere, in its sole discretion, demands payment, SPL will pay to Cheniere an amount equal to the state and local tax that SPL would be required to pay if SPL’s state and local tax liability were calculated on a separate company basis. There have been no state and local taxes paid by Cheniere for which Cheniere could have demanded payment from SPL under this agreement; therefore, Cheniere has not demanded any such payments from SPL. The agreement is effective for tax returns due on or after August 2012.

CTPL has a state tax sharing agreement with Cheniere. Under this agreement, Cheniere has agreed to prepare and file all state and local tax returns which CTPL and Cheniere are required to file on a combined basis and to timely pay the combined state and local tax liability. If Cheniere, in its sole discretion, demands payment, CTPL will pay to Cheniere an amount equal to the state and local tax that CTPL would be required to pay if CTPL’s state and local tax liability were calculated on a separate company basis. There have been no state and local taxes paid by Cheniere for which Cheniere could have demanded payment from CTPL under this agreement; therefore, Cheniere has not demanded any such payments from CTPL. The agreement is effective for tax returns due on or after May 2013.

 

Net income per common unit for a given period is based on the distributions that will be made to the unitholders with respect to the period plus an allocation of undistributed net income based on provisions of the partnership agreement, divided by the weighted average number of common units outstanding. Distributions paid by us are presented on the Consolidated Statements of Partners’ Equity. On April 27, 2020, we declared a $0.64 distribution per common unit and subordinated unit and the related distribution to our general partner and IDR holders to be paid on May 15, 2020 to unitholders of record as of May 7, 2020 for the period from January 1, 2020 to March 31, 2020.

The two-class method dictates that net income for a period be reduced by the amount of available cash that will be distributed with respect to that period and that any residual amount representing undistributed net income to be allocated to common unitholders and other participating unitholders to the extent that each unit may share in net income as if all of the net income for the period

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had been distributed in accordance with the partnership agreement. Undistributed income is allocated to participating securities based on the distribution waterfall for available cash specified in the partnership agreement. Undistributed losses (including those resulting from distributions in excess of net income) are allocated to common units and other participating securities on a pro rata basis based on provisions of the partnership agreement. Distributions are treated as distributed earnings in the computation of earnings per common unit even though cash distributions are not necessarily derived from current or prior period earnings.

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

						Limited Partner Units
		Total				Common Units				Subordinated Units				General Partner Units				IDR
Three Months Ended March 31, 2020
Net income		$	435
Declared distributions		336				223				87				6				20
Assumed allocation of undistributed net income (1)		$	99			70				27				2				—
Assumed allocation of net income						$	293			$	114			$	8			$	20
Weighted average units outstanding						348.6				135.4
Basic and diluted net income per unit						$	0.84			$	0.84
Three Months Ended March 31, 2019
Net income		$	385
Declared distributions		310				210				81				6				13
Assumed allocation of undistributed net income (1)		$	75			52				21				2				—
Assumed allocation of net income						$	262			$	102			$	8			$	13
Weighted average units outstanding						348.6				135.4
Basic and diluted net income per unit						$	0.75			$	0.75

 

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

  

The following table shows customers with revenues of 10% or greater of total revenues from external customers and customers with accounts receivable balances of 10% or greater of total accounts receivable from external customers:

		Percentage of Total Revenues from External Customers				Percentage of Accounts Receivable from External Customers
		Three Months Ended March 31,				March 31,		December 31,
		2020		2019		2020		2019
Customer A		28%		31%		21%		21%
Customer B		15%		19%		14%		13%
Customer C		15%		19%		28%		22%
Customer D		16%		22%		14%		13%
Customer E		*		—%		*		13%
Customer F		11%		—%		14%		14%

* Less than 10%

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

	Three Months Ended March 31,
	2020				2019
Cash paid during the period for interest, net of amounts capitalized	$	211			$	185

The balance in property, plant and equipment, net funded with accounts payable and accrued liabilities (including affiliate) was $219 million and $330 million as of March 31, 2020 and 2019, respectively.

Our CQP Senior Notes are jointly and severally guaranteed by each of our subsidiaries other than SPL (the “Guarantors”) and, subject to certain conditions governing its guarantee, Sabine Pass LP (collectively with SPL, the “Non-Guarantors”). These guarantees are full and unconditional, subject to certain customary release provisions including (1) the sale, exchange, disposition or transfer (by merger, consolidation or otherwise) of the capital stock or all or substantially all of the assets of the Guarantors, (2) upon the liquidation or dissolution of a Guarantor, (3) following the release of a Guarantor from its guarantee obligations and (4) upon the legal defeasance or satisfaction and discharge of obligations under the indenture governing the CQP Senior Notes. See Note 10—Debt in this quarterly report and Note 11—Debt of our Notes to Consolidated Financial Statements in our annual report on Form 10-K for the year ended December 31, 2019 for additional information regarding the CQP Senior Notes.

The following is condensed consolidating financial information for Cheniere Partners (“Parent Issuer”), the Guarantors on a combined basis and the Non-Guarantors on a combined basis. We have accounted for investments in subsidiaries using the equity method.

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Condensed Consolidating Balance Sheet
March 31, 2020
(in millions)
	Parent Issuer				Guarantors				Non-Guarantors				Eliminations				Consolidated
ASSETS
Current assets
Cash and cash equivalents	$	1,731			$	3			$	—			$	—			$	1,734
Restricted cash	—				—				109				—				109
Accounts and other receivables	—				3				256				—				259
Accounts receivable—affiliate	—				24				38				(24		)		38
Advances to affiliate	—				128				122				(104		)		146
Inventory	—				13				85				—				98
Derivative assets	—				—				13				—				13
Other current assets	—				14				35				—				49
Other current assets—affiliate	—				2				21				(21		)		2
Total current assets	1,731				187				679				(149		)		2,448
Property, plant and equipment, net	79				2,451				13,972				(26		)		16,476
Operating lease assets, net	—				88				20				(16		)		92
Debt issuance costs, net	9				—				11				—				20
Non-current derivative assets	—				—				41				—				41
Investments in subsidiaries	3,168				718				—				(3,886		)		—
Other non-current assets, net	—				18				138				—				156
Total assets	$	4,987			$	3,462			$	14,861			$	(4,077	)		$	19,233
LIABILITIES AND PARTNERS’ EQUITY
Current liabilities
Accounts payable	$	—			$	3			$	5			$	—			$	8
Accrued liabilities	108				20				441				—				569
Current debt	—				—				1,996				—				1,996
Due to affiliates	3				120				35				(128		)		30
Deferred revenue	—				22				72				—				94
Deferred revenue—affiliate	—				21				—				(21		)		—
Current operating lease liabilities	—				6				—				—				6
Derivative liabilities	—				—				12				—				12
Total current liabilities	111				192				2,561				(149		)		2,715
Long-term debt, net	4,056				—				11,535				—				15,591
Non-current operating lease liabilities	—				81				4				—				85
Non-current derivative liabilities	—				—				2				—				2
Other non-current liabilities	—				1				—				—				1
Other non-current liabilities—affiliate	—				20				15				(16		)		19
Partners’ equity	820				3,168				744				(3,912		)		820
Total liabilities and partners’ equity	$	4,987			$	3,462			$	14,861			$	(4,077	)		$	19,233

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Condensed Consolidating Balance Sheet
December 31, 2019
(in millions)
	Parent Issuer				Guarantors				Non-Guarantors				Eliminations				Consolidated
ASSETS
Current assets
Cash and cash equivalents	$	1,778			$	3			$	—			$	—			$	1,781
Restricted cash	—				—				181				—				181
Accounts and other receivables	—				5				292				—				297
Accounts receivable—affiliate	—				43				104				(42		)		105
Advances to affiliate	—				145				133				(120		)		158
Inventory	—				13				103				—				116
Derivative assets	—				—				17				—				17
Other current assets	—				15				36				—				51
Other current assets—affiliate	—				1				22				(22		)		1
Total current assets	1,778				225				888				(184		)		2,707
Property, plant and equipment, net	79				2,454				13,861				(26		)		16,368
Operating lease assets, net	—				88				21				(15		)		94
Debt issuance costs, net	9				—				6				—				15
Non-current derivative assets	—				—				32				—				32
Investments in subsidiaries	2,963				508				—				(3,471		)		—
Other non-current assets, net	—				24				144				—				168
Total assets	$	4,829			$	3,299			$	14,952			$	(3,696	)		$	19,384
LIABILITIES AND PARTNERS’ EQUITY
Current liabilities
Accounts payable	$	—			$	2			$	38			$	—			$	40
Accrued liabilities	56				24				629				—				709
Due to affiliates	3				155				49				(161		)		46
Deferred revenue	—				23				132				—				155
Deferred revenue—affiliate	—				22				—				(21		)		1
Current operating lease liabilities	—				6				—				—				6
Derivative liabilities	—				—				9				—				9
Total current liabilities	59				232				857				(182		)		966
Long-term debt, net	4,055				—				13,524				—				17,579
Non-current operating lease liabilities	—				82				5				—				87
Non-current derivative liabilities	—				—				16				—				16
Other non-current liabilities	—				1				—				—				1
Other non-current liabilities—affiliate	—				21				16				(17		)		20
Partners’ equity	715				2,963				534				(3,497		)		715
Total liabilities and partners’ equity	$	4,829			$	3,299			$	14,952			$	(3,696	)		$	19,384

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Condensed Consolidating Statement of Income
Three Months Ended March 31, 2020
(in millions)
	Parent Issuer				Guarantors				Non-Guarantors				Eliminations				Consolidated
Revenues
LNG revenues	$	—			$	—			$	1,449			$	—			$	1,449
LNG revenues—affiliate	—				—				188				—				188
Regasification revenues	—				67				—				—				67
Regasification revenues—affiliate	—				67				—				(67		)		—
Other revenues	—				14				—				—				14
Other revenues—affiliate	—				62				—				(62		)		—
Total revenues	—				210				1,637				(129		)		1,718
Operating costs and expenses
Cost of sales (excluding items shown separately below)	—				—				699				—				699
Cost of sales—affiliate	—				—				12				(12		)		—
Operating and maintenance expense	—				13				139				—				152
Operating and maintenance expense—affiliate	—				33				113				(113		)		33
General and administrative expense	1				—				1				—				2
General and administrative expense—affiliate	4				7				18				(4		)		25
Depreciation and amortization expense	1				20				117				—				138
Impairment expense and loss on disposal of assets	—				5				—				—				5
Total operating costs and expenses	6				78				1,099				(129		)		1,054
Income (loss) from operations	(6		)		132				538				—				664
Other income (expense)
Interest expense, net of capitalized interest	(54		)		(2		)		(178		)		—				(234		)
Loss on modification or extinguishment of debt	—				—				(1		)		—				(1		)
Equity earnings of subsidiaries	490				360				—				(850		)		—
Other income, net	5				—				1				—				6
Total other income (expense)	441				358				(178		)		(850		)		(229		)
Net income	$	435			$	490			$	360			$	(850	)		$	435

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Condensed Consolidating Statement of Income
Three Months Ended March 31, 2019
(in millions)
	Parent Issuer				Guarantors				Non-Guarantors				Eliminations				Consolidated
Revenues
LNG revenues	$	—			$	—			$	1,367			$	—			$	1,367
LNG revenues—affiliate	—				—				305				—				305
Regasification revenues	—				66				—				—				66
Regasification revenues—affiliate	—				66				—				(66		)		—
Other revenues	—				11				—				—				11
Other revenues—affiliate	—				59				—				(59		)		—
Total revenues	—				202				1,672				(125		)		1,749
Operating costs and expenses
Cost of sales (excluding items shown separately below)	—				—				879				—				879
Cost of sales—affiliate	—				—				9				(9		)		—
Operating and maintenance expense	—				28				110				—				138
Operating and maintenance expense—affiliate	—				33				107				(111		)		29
General and administrative expense	1				1				1				—				3
General and administrative expense—affiliate	3				6				15				(3		)		21
Depreciation and amortization expense	1				17				96				—				114
Impairment expense and loss on disposal of assets	—				—				2				—				2
Total operating costs and expenses	5				85				1,219				(123		)		1,186
Income (loss) from operations	(5		)		117				453				(2		)		563
Other income (expense)
Interest expense, net of capitalized interest	(36		)		(1		)		(150		)		—				(187		)
Equity earnings of subsidiaries	422				308				—				(730		)		—
Other income, net	4				—				5				—				9
Total other income (expense)	390				307				(145		)		(730		)		(178		)
Net income	$	385			$	424			$	308			$	(732	)		$	385

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Condensed Consolidating Statement of Cash Flows
Three Months Ended March 31, 2020
(in millions)
	Parent Issuer				Guarantors				Non-Guarantors				Eliminations				Consolidated
Cash flows provided by operating activities	$	490			$	521			$	374			$	(850	)		$	535
Cash flows from investing activities
Property, plant and equipment, net	—				(24		)		(293		)		—				(317		)
Investments in subsidiaries	(286		)		(225		)		—				511				—
Return of capital	79				11				—				(90		)		—
Net cash used in investing activities	(207		)		(238		)		(293		)		421				(317		)
Cash flows from financing activities
Debt issuance and other financing costs	—				—				(7		)		—				(7		)
Distributions to parent	—				(568		)		(371		)		939				—
Contributions from parent	—				285				225				(510		)		—
Distributions to owners	(330		)		—				—				—				(330		)
Net cash used in financing activities	(330		)		(283		)		(153		)		429				(337		)
Net decrease in cash, cash equivalents and restricted cash	(47		)		—				(72		)		—				(119		)
Cash, cash equivalents and restricted cash—beginning of period	1,778				3				181				—				1,962
Cash, cash equivalents and restricted cash—end of period	$	1,731			$	3			$	109			$	—			$	1,843

Balances per Condensed Consolidating Balance Sheet:

	March 31, 2020
	Parent Issuer				Guarantors				Non-Guarantors				Eliminations				Consolidated
Cash and cash equivalents	$	1,731			$	3			$	—			$	—			$	1,734
Restricted cash	—				—				109				—				109
Total cash, cash equivalents and restricted cash	$	1,731			$	3			$	109			$	—			$	1,843

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Condensed Consolidating Statement of Cash Flows
Three Months Ended March 31, 2019
(in millions)
	Parent Issuer				Guarantors				Non-Guarantors				Eliminations				Consolidated
Cash flows provided by operating activities	$	404			$	364			$	213			$	(637	)		$	344
Cash flows from investing activities
Property, plant and equipment, net	—				(5		)		(280		)		2				(283		)
Investments in subsidiaries	(218		)		(164		)		—				382				—
Other	—				—				(1		)		—				(1		)
Net cash used in investing activities	(218		)		(169		)		(281		)		384				(284		)
Cash flows from financing activities
Distributions to parent	—				(404		)		(231		)		635				—
Contributions from parent	—				218				164				(382		)		—
Distributions to owners	(304		)		—				—				—				(304		)
Net cash used in financing activities	(304		)		(186		)		(67		)		253				(304		)
Net increase (decrease) in cash, cash equivalents and restricted cash	(118		)		9				(135		)		—				(244		)
Cash, cash equivalents and restricted cash—beginning of period	779				6				756				—				1,541
Cash, cash equivalents and restricted cash—end of period	$	661			$	15			$	621			$	—			$	1,297

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

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

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

•	statements that we expect to commence or complete construction of our proposed LNG 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 from North America and other countries worldwide or purchases of natural gas, regardless of the source of such information, or the transportation or other infrastructure or demand for and prices related to natural gas, LNG or other hydrocarbon products;

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

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

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

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

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

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

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

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

•

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 Cheniere’s 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.

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•	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

•	As of April 27, 2020, more than 975 cumulative LNG cargoes totaling over 65 million tonnes of LNG have been produced, loaded and exported from the Liquefaction Project.

•	In March 2020, SPL entered into a $1.2 billion Working Capital Revolving Credit and Letter of Credit Reimbursement Agreement (the “2020 SPL Working Capital Facility”), which refinanced its previous working capital facility, reduced the interest rate and extended the maturity date to March 2025.

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•	Trains 1 through 4—FTA countries for a 30-year term, which commenced in May 2016, and non-FTA countries for a 20-year term, which commenced in June 2016, 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 for a 25-year term and non-FTA countries for a 20-year term, both of which commenced in December 2018, 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 for a 20-year term, which partially commenced in June 2019 and the remainder commenced in September 2019, in an amount up to a combined total of 503.3 Bcf/yr of natural gas (approximately 10 mtpa).

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(1)

Includes SPL’s 5.625% Senior Secured Notes due 2021, 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”) and 5.00% Senior Secured Notes due 2037 (the “2037 SPL Senior Notes”) (collectively, the “SPL Senior Notes”) and our 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, 2020 SPL Working Capital Facility and 2019 CQP Credit Facilities.

(4)	Does not include equity contributions that may be available from Cheniere’s borrowings under its convertible notes, which may be used for the Sabine Pass LNG Terminal.

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•	$330 million of distributions to unitholders; and

•	$7 million of debt issuance costs related to the up-front fees paid upon the refinancing of the 2020 SPL Working Capital Facility.

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ITEM 3.	QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

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ITEM 1A.	RISK FACTORS

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