cqp-20230930

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended September 30, 2023

☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from to

Commission file number 001-33366

Cheniere Energy Partners, L.P.

(Exact name of registrant as specified in its charter)


Delaware			20-5913059
(State or other jurisdiction of incorporation or organization)			(I.R.S. Employer Identification No.)

700 Milam Street, Suite 1900

Houston, Texas 77002

(Address of principal executive offices) (Zip Code)

(713) 375-5000

(Registrant’s telephone number, including area code)

Securities registered pursuant to Section 12(b) of the Act:


Title of each class	Trading Symbol	Name of each exchange on which registered
Common Units Representing Limited Partner Interests	CQP	NYSE American

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer

☒

Accelerated filer

☐

Non-accelerated filer

☐

Smaller reporting company

☐

Emerging growth company

☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒

As of October 26, 2023, the registrant had 484,039,123 common units outstanding.

CHENIERE ENERGY PARTNERS, L.P.

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	Definitions	1
Part I. Financial Information
Item 1.	Consolidated Financial Statements	3
	Consolidated Statements of Operations	3
	Consolidated Balance Sheets	4
	Consolidated Statements of Partners’ Equity (Deficit)	5
	Consolidated Statements of Cash Flows	6
	Notes to Consolidated Financial Statements	7
	Note 1—Nature of Operations and Basis of Presentation	7
	Note 2—Unitholders’ Equity	8
	Note 3—Restricted Cash and Cash Equivalents	8
	Note 4—Trade and Other Receivables, Net of Current Expected Credit Losses	8
	Note 5—Inventory	8
	Note 6—Property, Plant and Equipment, Net of Accumulated Depreciation	9
	Note 7—Derivative Instruments	9

	Note 8—Accrued Liabilities	13
	Note 9—Debt	13
	Note 10—Revenues	15
	Note 11—Related Party Transactions	17
	Note 12—Net Income (Loss) per Common Unit	18
	Note 13—Customer Concentration	20
	Note 14—Supplemental Cash Flow Information	20

Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	21

Item 3.	Quantitative and Qualitative Disclosures about Market Risk	30

Item 4.	Controls and Procedures	30

Part II. Other Information
Item 1.	Legal Proceedings	32

Item 1A.	Risk Factors	32

Item 5.	Other Information	32

Item 6.	Exhibits	32

	Signatures	33

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DEFINITIONS

As used in this quarterly report, the terms listed below have the following meanings:

Common Industry and Other Terms


ASU						Accounting Standards Update
Bcf						billion cubic feet
Bcf/d						billion cubic feet per day
Bcf/yr						billion cubic feet per year
Bcfe						billion cubic feet equivalent
DOE						U.S. Department of Energy
EPC						engineering, procurement and construction
ESG						environmental, social and governance
FASB						Financial Accounting Standards Board
FERC						Federal Energy Regulatory Commission
FTA countries						countries with which the United States has a free trade agreement providing for national treatment for trade in natural gas
GAAP						generally accepted accounting principles in the United States
Henry Hub						the final settlement price (in USD per MMBtu) for the New York Mercantile Exchange’s Henry Hub natural gas futures contract for the month in which a relevant cargo’s delivery window is scheduled to begin
IPM agreements						integrated production marketing agreements in which the gas producer sells to us gas on a global LNG index price, less a fixed liquefaction fee, shipping and other costs
LIBOR						London Interbank Offered Rate
LNG						liquefied natural gas, a product of natural gas that, through a refrigeration process, has been cooled to a liquid state, which occupies a volume that is approximately 1/600th of its gaseous state
MMBtu						million British thermal units; one British thermal unit measures the amount of energy required to raise the temperature of one pound of water by one degree Fahrenheit
mtpa						million tonnes per annum
non-FTA countries						countries with which the United States does not have a free trade agreement providing for national treatment for trade in natural gas and with which trade is permitted
SEC						U.S. Securities and Exchange Commission
SOFR						Secured Overnight Financing Rate
SPA						LNG sale and purchase agreement
TBtu						trillion British thermal units; one British thermal unit measures the amount of energy required to raise the temperature of one pound of water by one degree Fahrenheit
Train						an industrial facility comprised of a series of refrigerant compressor loops used to cool natural gas into LNG
TUA						terminal use agreement

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Abbreviated Legal Entity Structure

The following diagram depicts our abbreviated legal entity structure as of September 30, 2023, including our ownership of certain subsidiaries, and the references to these entities used in this quarterly report:

Unless the context requires otherwise, references to “CQP,” “the Partnership,” “we,” “us” and “our” refer to Cheniere Energy Partners, L.P. and its consolidated subsidiaries.

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PART I. FINANCIAL INFORMATION

ITEM I. CONSOLIDATED FINANCIAL STATEMENTS

CHENIERE ENERGY PARTNERS, L.P. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF OPERATIONS

(in millions, except per unit data)

(unaudited)


	Three Months Ended September 30,				Nine Months Ended September 30,
	2023		2022		2023		2022
Revenues
LNG revenues	$	1,564	$	3,130	$	5,085	$	8,577
LNG revenues—affiliate	515		1,376		1,745		3,268
LNG revenues—related party	—		—		—		4
Regasification revenues	34		455		101		591

Other revenues	15		15		47		45

Total revenues	2,128		4,976		6,978		12,485

Operating costs and expenses
Cost of sales (excluding items shown separately below)	682		4,739		1,598		10,445
Cost of sales—affiliate	2		104		20		166
Cost of sales—related party	—		—		—		1
Operating and maintenance expense	211		189		680		550
Operating and maintenance expense—affiliate	38		39		120		118
Operating and maintenance expense—related party	14		18		44		45


General and administrative expense	2		3		8		3
General and administrative expense—affiliate	20		23		66		70
Depreciation and amortization expense	166		160		500		469
Other	4		—		6		—
Other—affiliate	1		—		1		—
Total operating costs and expenses	1,140		5,275		3,043		11,867

Income (loss) from operations	988		(299)		3,935		618

Other income (expense)
Interest expense, net of capitalized interest	(205)		(222)		(620)		(641)
Loss on modification or extinguishment of debt	(4)		—		(6)		—
Interest and dividend income	12		7		39		10


Total other expense	(197)		(215)		(587)		(631)

Net income (loss)	$	791	$	(514)	$	3,348	$	(13)

Basic and diluted net income (loss) per common unit (1)	$	1.19	$	(1.49)	$	5.53	$	(1.36)


Weighted average basic and diluted number of common units outstanding	484.0		484.0		484.0		484.0

(1)In computing basic and diluted net income (loss) per common unit, net income (loss) is reduced by the amount of undistributed net income (loss) allocated to participating securities other than common units, as required under the two-class method. See Note 12—Net Income (Loss) per Common Unit.

The accompanying notes are an integral part of these consolidated financial statements.

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CHENIERE ENERGY PARTNERS, L.P. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

(in millions, except unit data)



	September 30,		December 31,
	2023		2022
ASSETS	(unaudited)
Current assets
Cash and cash equivalents	$	499	$	904
Restricted cash and cash equivalents	35		92
Trade and other receivables, net of current expected credit losses	287		627
Trade receivables—affiliate	167		551

Advances to affiliate	141		177
Inventory	131		160
Current derivative assets	34		24
Margin deposits	—		35

Other current assets, net	60		50

Total current assets	1,354		2,620


Property, plant and equipment, net of accumulated depreciation	16,341		16,725
Operating lease assets	83		89
Debt issuance costs, net of accumulated amortization	17		8
Derivative assets	111		28
Other non-current assets, net	166		163

Total assets	$	18,072	$	19,633

LIABILITIES AND PARTNERS’ DEFICIT
Current liabilities
Accounts payable	$	50	$	32
Accrued liabilities	641		1,378
Accrued liabilities—related party	5		6
Current debt, net of discount and debt issuance costs	349		—
Due to affiliates	42		74
Deferred revenue	151		144
Deferred revenue—affiliate	1		3
Current operating lease liabilities	11		10
Current derivative liabilities	294		769
Other current liabilities	5		5
Total current liabilities	1,549		2,421

Long-term debt, net of discount and debt issuance costs	15,600		16,198

Operating lease liabilities	74		80
Finance lease liabilities	15		18
Derivative liabilities	1,731		3,024
Other non-current liabilities	52		—
Other non-current liabilities—affiliate	24		23



Partners’ deficit
Common unitholders’ interest (484.0 million units issued and outstanding at both September 30, 2023 and December 31, 2022)	647		(1,118)

General partner’s interest (2% interest with 9.9 million units issued and outstanding at both September 30, 2023 and December 31, 2022)	(1,620)		(1,013)
Total partners’ deficit	(973)		(2,131)
Total liabilities and partners’ deficit	$	18,072	$	19,633

The accompanying notes are an integral part of these consolidated financial statements.

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CHENIERE ENERGY PARTNERS, L.P. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF PARTNERS’ EQUITY (DEFICIT)

(in millions)

(unaudited)


Three and Nine Months Ended September 30, 2023
	Common Unitholders’ Interest			General Partner’s Interest	Total Partners’ Deficit
	Units	Amount				Units			Amount















Balance at December 31, 2022	484.0	$	(1,118)		9.9		$	(1,013)		$	(2,131)
Net income	—	1,897			—		38			1,935

Distributions
Common units, $1.070/unit	—	(518)			—		—			(518)

General partner units	—	—			—		(236)			(236)
Balance at March 31, 2023	484.0	261			9.9		(1,211)			(950)
Net income	—	610			—		12			622
Distributions
Common units, $1.03/unit	—	(499)			—		—			(499)
General partner units	—	—			—		(219)			(219)
Balance at June 30, 2023	484.0	372			9.9		(1,418)			(1,046)
Net income	—	774			—		17			791

Distributions
Common units, $1.03/unit	—	(499)			—		—			(499)
General partner units	—	—			—		(219)			(219)

Balance at September 30, 2023	484.0	$	647		9.9		$	(1,620)		$	(973)


Three and Nine Months Ended September 30, 2022
	Common Unitholders’ Interest			General Partner’s Interest	Total Partners’ Equity (Deficit)
	Units	Amount				Units			Amount
Balance at December 31, 2021	484.0	$	1,024		9.9		$	(306)		$	718
Net income	—	157			—		2			159
Novated IPM agreement (see Note 14)	—	(2,712)			—		—			(2,712)
Distributions
Common units, $0.700/unit	—	(339)			—		—			(339)
General partner units	—	—			—		(56)			(56)
Balance at March 31, 2022	484.0	(1,870)			9.9		(360)			(2,230)
Net income	—	335			—		7			342
Distributions
Common units, $1.05/unit	—	(508)			—		—			(508)
General partner units	—	—			—		(229)			(229)
Balance at June 30, 2022	484.0	(2,043)			9.9		(582)			(2,625)
Net loss	—	(503)			—		(11)			(514)
Distributions
Common units, $1.06/unit	—	(513)			—		—			(513)
General partner units	—	—			—		(232)			(232)
Balance at September 30, 2022	484.0	$	(3,059)		9.9		$	(825)		$	(3,884)

The accompanying notes are an integral part of these consolidated financial statements.

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CHENIERE ENERGY PARTNERS, L.P. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

(in millions)

(unaudited)


	Nine Months Ended September 30,
	2023		2022
Cash flows from operating activities
Net income (loss)	$	3,348	$	(13)
Adjustments to reconcile net income (loss) to net cash provided by operating activities:
Depreciation and amortization expense	500		469
Amortization of debt issuance costs, premium and discount	22		22
Loss on modification or extinguishment of debt	6		—
Total losses (gains) on derivative instruments, net	(1,867)		2,447

Net cash provided by (used for) settlement of derivative instruments	6		(54)

Other	16		28

Changes in operating assets and liabilities:
Trade and other receivables, net of current expected credit losses	340		(290)
Trade receivables—affiliate	384		(231)

Advances to affiliate	31		(10)
Inventory	30		(67)
Margin deposits	35		(52)
Contract assets	—		(387)
Accounts payable and accrued liabilities	(662)		592
Accrued liabilities—related party	(2)		5
Due to affiliates	(30)		2
Total deferred revenue	59		6
Other, net	(21)		(30)
Other, net—affiliate	(2)		5
Net cash provided by operating activities	2,193		2,442

Cash flows from investing activities
Property, plant and equipment, net	(170)		(356)
Other	(6)		—
Net cash used in investing activities	(176)		(356)

Cash flows from financing activities
Proceeds from issuances of debt	1,397		—
Redemptions and repayments of debt	(1,650)		—
Debt issuance and other financing costs	(32)		—
Debt extinguishment costs	(1)		—

Distributions	(2,190)		(1,877)
Other	(3)		—
Net cash used in financing activities	(2,479)		(1,877)

Net increase (decrease) in cash, cash equivalents and restricted cash and cash equivalents	(462)		209
Cash, cash equivalents and restricted cash and cash equivalents—beginning of period	996		974
Cash, cash equivalents and restricted cash and cash equivalents—end of period	$	534	$	1,183

Balances per Consolidated Balance Sheet:


	September 30,
	2023
Cash and cash equivalents	$	499
Restricted cash and cash equivalents	35

Total cash, cash equivalents and restricted cash and cash equivalents	$	534

The accompanying notes are an integral part of these consolidated financial statements.

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CHENIERE ENERGY PARTNERS, L.P. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(unaudited)

NOTE 1—NATURE OF OPERATIONS AND BASIS OF PRESENTATION

We own the natural gas liquefaction and export facility located in Cameron Parish, Louisiana at Sabine Pass (the “Sabine Pass LNG Terminal”) which has six operational Trains, for a total production capacity of approximately 30 mtpa of LNG (the “Liquefaction Project”). The Sabine Pass LNG Terminal also has operational regasification facilities that include five LNG storage tanks, vaporizers and three marine berths. Additionally, the Sabine Pass LNG Terminal includes a 94-mile pipeline owned by our subsidiary, CTPL, that interconnects the Sabine Pass LNG Terminal with a number of large interstate and intrastate pipelines (the “Creole Trail Pipeline”).

We have increased available liquefaction capacity at our Liquefaction Project as a result of debottlenecking and other optimization projects. We hold a significant land position at the Sabine Pass LNG Terminal, which provides opportunity for further liquefaction capacity expansion. In May 2023, certain of our subsidiaries entered the pre-filing review process with the FERC under the National Environmental Policy Act for an expansion adjacent to the Liquefaction Project with a potential production capacity of up to 20 mtpa of LNG. The development of this site 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 a positive final investment decision.

We do not have employees and thus we and our subsidiaries have various services agreements with affiliates of Cheniere in the ordinary course of business, including services required to construct, operate and maintain the Liquefaction Project, and administrative services. See Note 11—Related Party Transactions for additional details of the activity under these services agreements during the three and nine months ended September 30, 2023 and 2022.

As of September 30, 2023, Cheniere owned 48.6% of our limited partner interest in the form of 239.9 million of our common units. Cheniere also owns 100% of our general partner interest and our incentive distribution rights (“IDRs”).

Basis of Presentation

The accompanying unaudited Consolidated Financial Statements of CQP have been prepared in accordance with GAAP for interim financial information and in accordance with Rule 10-01 of Regulation S-X and reflect all normal recurring adjustments which are, in the opinion of management, necessary for a fair statement of the financial results for the interim periods presented. 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 fiscal year ended December 31, 2022.

Results of operations for the three and nine months ended September 30, 2023 are not necessarily indicative of the results of operations that will be realized for the year ending December 31, 2023.

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

ASU 2020-04

In March 2020, the FASB issued 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 as a result of the market transition from LIBOR to alternative reference rates. The temporary optional expedients under the standard became effective March 12, 2020 and will be available until December 31, 2024 following a subsequent amendment to the standard.

As further detailed in Note 9—Debt, all of our existing credit facilities include a variable interest rate indexed to SOFR, incorporated through replacements of previous credit facilities subsequent to the effective date of ASU 2020-04. We elected to apply the optional expedients as applicable to certain replaced facilities; however, the impact of applying the optional expedients was not material, and the transition to SOFR did not have a material impact on our cash flows.

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CHENIERE ENERGY PARTNERS, L.P. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—CONTINUED

(unaudited)

NOTE 2—UNITHOLDERS’ EQUITY

The common units represent limited partner interests in us, which entitle the unitholders to participate in partnership distributions and exercise the rights and privileges available to limited partners under our partnership agreement. Although common unitholders are not obligated to fund losses of the Partnership, their capital account, which would be considered in allocating the net assets of the Partnership were it to be liquidated, continues 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 IDRs, which allow the general partner to receive a higher percentage of quarterly distributions of available cash from operating surplus 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.

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 we have paid to date have been made from accumulated operating surplus as defined in the partnership agreement.

As of September 30, 2023, our total securities beneficially owned in the form of common units were held 48.6% by Cheniere, 41.5% by CQP Target Holdco L.L.C. (“CQP Target Holdco”) and other affiliates of Blackstone Inc. (“Blackstone”) and Brookfield Asset Management Inc. (“Brookfield”) and 7.9% by the public. All of our 2% general partner interest was held by Cheniere. CQP Target Holdco’s equity interests are 50.0% owned by BIP Chinook Holdco L.L.C., an affiliate of Blackstone, and 50.0% owned by BIF IV Cypress Aggregator (Delaware) LLC, an affiliate of Brookfield. The ownership of CQP Target Holdco, Blackstone and Brookfield are based on their most recent filings with the SEC.

NOTE 3—RESTRICTED CASH AND CASH EQUIVALENTS

As of September 30, 2023 and December 31, 2022, we had $35 million and $92 million of restricted cash and cash equivalents, respectively, for which the usage or withdrawal of such cash is restricted to the payment of liabilities related to the Liquefaction Project as required under certain debt arrangements.

NOTE 4—TRADE AND OTHER RECEIVABLES, NET OF CURRENT EXPECTED CREDIT LOSSES

Trade and other receivables, net of current expected credit losses consisted of the following (in millions):



	September 30,		December 31,
	2023		2022
Trade receivables	$	275	$	603
Other receivables	12		24
Total trade and other receivables, net of current expected credit losses	$	287	$	627

NOTE 5—INVENTORY

Inventory consisted of the following (in millions):



	September 30,		December 31,
	2023		2022
Materials	$	104	$	103
LNG	8		27
Natural gas	16		28
Other	3		2
Total inventory	$	131	$	160

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CHENIERE ENERGY PARTNERS, L.P. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—CONTINUED

(unaudited)

NOTE 6—PROPERTY, PLANT AND EQUIPMENT, NET OF ACCUMULATED DEPRECIATION

Property, plant and equipment, net of accumulated depreciation consisted of the following (in millions):



	September 30,		December 31,
	2023		2022
LNG terminal
Terminal and interconnecting pipeline facilities	$	20,122	$	20,072

Construction-in-process	201		140
Accumulated depreciation	(4,004)		(3,512)
Total LNG terminal, net of accumulated depreciation	16,319		16,700
Fixed assets
Fixed assets	30		29
Accumulated depreciation	(26)		(25)
Total fixed assets, net of accumulated depreciation	4		4
Assets under finance leases
Tug vessels	23		23
Accumulated depreciation	(5)		(2)
Total assets under finance leases, net of accumulated depreciation	18		21
Property, plant and equipment, net of accumulated depreciation	$	16,341	$	16,725

The following table shows depreciation expense and offsets to LNG terminal costs (in millions):


	Three Months Ended September 30,				Nine Months Ended September 30,
	2023		2022		2023		2022
Depreciation expense	$	166	$	158	$	497	$	465
Offsets to LNG terminal costs (1)	—		—		—		148

(1)We recognize offsets to LNG terminal costs 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.

NOTE 7—DERIVATIVE INSTRUMENTS

SPL has commodity derivatives consisting of natural gas supply contracts, including those under the IPM agreement, for the operation of the Liquefaction Project and associated economic hedges (collectively, the “Liquefaction Supply Derivatives”).

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

The following table shows the fair value of the derivative instruments that are required to be measured at fair value on a recurring basis, by the fair value hierarchy levels prescribed by GAAP (in millions):


	Fair Value Measurements as of
	September 30, 2023								December 31, 2022
	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)	$	13	$	(1)	$	(1,892)	$	(1,880)	$	(12)	$	(10)	$	(3,719)	$	(3,741)

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

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CHENIERE ENERGY PARTNERS, L.P. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—CONTINUED

(unaudited)

The fair value of the 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, but not limited to, evaluation of whether the respective market exists from the perspective of market participants as infrastructure is developed.

We include a significant portion of our 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 may use in valuing the asset or liability. To the extent valued using an option pricing model, we consider the future prices of energy units for unobservable periods to be a significant unobservable input to estimated net fair value. In estimating the future prices of energy units, we make judgments about market risk related to liquidity of commodity indices and volatility utilizing available market data. Changes in facts and circumstances or additional information may result in revised estimates and judgments, and actual results may differ from these estimates and judgments. We derive our volatility assumptions based on observed historical settled global LNG market pricing or accepted proxies for global LNG market pricing as well as settled domestic natural gas pricing. Such volatility assumptions also contemplate, as of the balance sheet date, observable forward curve data of such indices, as well as evolving available industry data and independent studies. In developing our volatility assumptions, we acknowledge that the global LNG industry is inherently influenced by events such as unplanned supply constraints, geopolitical incidents, unusual climate events including drought and uncommonly mild, by historical standards, winters and summers, and real or threatened disruptive operational impacts to global energy infrastructure. Our current estimate of volatility does not exclude the impact of otherwise rare events unless we believe market participants would exclude such events on account of their assertion that those events were specific to our company and deemed within our control.

The Level 3 fair value measurements of the natural gas positions within the Liquefaction Supply Derivatives could be materially impacted by a significant change in certain natural gas and international LNG prices. The following table includes quantitative information for the unobservable inputs for the Level 3 Liquefaction Supply Derivatives as of September 30, 2023:

Net Fair Value Liability

(in millions)

Valuation Approach

Significant Unobservable Input

Range of Significant Unobservable Inputs / Weighted Average (1)

Liquefaction Supply Derivatives

$(1,892)

Market approach incorporating present value techniques

Henry Hub basis spread

$(0.543) - $0.510 / $0.040

Option pricing model

International LNG pricing spread, relative to Henry Hub (2)

103% - 422% / 213%

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

(2)Spread contemplates U.S. dollar-denominated pricing.

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

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CHENIERE ENERGY PARTNERS, L.P. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—CONTINUED

(unaudited)

The following table shows the changes in the fair value of the Level 3 Liquefaction Supply Derivatives (in millions):


	Three Months Ended September 30,				Nine Months Ended September 30,
	2023		2022		2023		2022
Balance, beginning of period	$	(2,255)	$	(3,456)	$	(3,719)	$	38
Realized and change in fair value gains (losses) included in net income (loss) (1):
Included in cost of sales, existing deals (2)	294		(1,545)		1,275		(155)
Included in cost of sales, new deals (3)	8		—		23		—
Purchases and settlements:
Purchases (4)	—		3		—		(4,896)
Settlements (5)	59		(24)		522		(11)


Transfers out of level 3 (6)	2		(2)		7		—
Balance, end of period	$	(1,892)	$	(5,024)	$	(1,892)	$	(5,024)
Favorable (unfavorable) changes in fair value relating to instruments still held at the end of the period	$	302	$	(1,545)	$	1,298	$	(155)

(1)Does not include the realized value associated with derivative instruments that settle through physical delivery, as settlement is equal to contractually fixed price from trade date multiplied by contractual volume. See settlements line item in this table.

(2)Impact to earnings on deals that existed at the beginning of the period and continue to exist at the end of the period.

(3)Impact to earnings on deals that were entered into during the reporting period and continue to exist at the end of the period.

(4)Includes any day one gain (loss) recognized during the reporting period on deals that were entered into during the reporting period which continue to exist at the end of the period, in addition to any derivative contracts acquired from entities at a value other than zero on acquisition date, such as derivatives assigned or novated during the reporting period and continuing to exist at the end of the period.

(5)Roll-off in the current period of amounts recognized in our Consolidated Balance Sheets at the end of the previous period due to settlement of the underlying instruments in the current period.

(6)Transferred out of Level 3 as a result of observable market for the underlying natural gas purchase agreements.

All counterparty derivative contracts provide for the unconditional right of set-off in the event of default. We have elected to report derivative assets and liabilities arising from those derivative contracts with the same counterparty and the unconditional contractual right of set-off on a net basis. The use of derivative instruments exposes SPL to counterparty credit risk, or the risk that a counterparty will be unable to meet its commitments, in instances when the derivative instruments are in an asset position. Additionally, counterparties are at risk that SPL will be unable to meet its commitments in instances where the derivative instruments are in a liability position. We incorporate both SPL’s nonperformance risk and the respective counterparty’s nonperformance risk in fair value measurements depending on the position of the derivative. In adjusting the fair value of the 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 holds Liquefaction Supply Derivatives which are primarily indexed to the natural gas market and international LNG indices. The firm terms of the Liquefaction Supply Derivatives range up to approximately 15 years, some of which commence upon the satisfaction of certain events or states of affairs.

The forward notional amount for the Liquefaction Supply Derivatives was approximately 5,642 TBtu and 5,972 TBtu as of September 30, 2023 and December 31, 2022, respectively, excluding notional amounts associated with extension options that were uncertain to be taken as of September 30, 2023.

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CHENIERE ENERGY PARTNERS, L.P. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—CONTINUED

(unaudited)

The following table shows the effect and location of the Liquefaction Supply Derivatives recorded on our Consolidated Statements of Operations (in millions):


	Gain (Loss) Recognized in Consolidated Statements of Operations
Consolidated Statements of Operations Location (1)	Three Months Ended September 30,				Nine Months Ended September 30,
	2023		2022		2023		2022
LNG revenues	$	—	$	(3)	$	—	$	1
Cost of sales	365		(1,625)		1,867		(2,448)

(1)Does not include the realized value associated with Liquefaction Supply Derivatives 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.

Fair Value and Location of Derivative Assets and Liabilities on the Consolidated Balance Sheets

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




	Fair Value Measurements as of (1)
Consolidated Balance Sheets Location	September 30, 2023		December 31, 2022
Current derivative assets	$	34	$	24
Derivative assets	111		28
Total derivative assets	145		52

Current derivative liabilities	(294)		(769)
Derivative liabilities	(1,731)		(3,024)
Total derivative liabilities	(2,025)		(3,793)

Derivative liability, net	$	(1,880)	$	(3,741)

(1)Does not include collateral posted by counterparties to us of $1 million as of September 30, 2023, which is included in other current liabilities on our Consolidated Balance Sheets, and collateral posted with counterparties by us of $35 million as of December 31, 2022, which is included in margin deposits on our Consolidated Balance Sheets.

Consolidated Balance Sheets Presentation

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


	Liquefaction Supply Derivatives
	September 30, 2023		December 31, 2022
Gross assets	$	172	$	57
Offsetting amounts	(27)		(5)
Net assets	$	145	$	52

Gross liabilities	$	(2,029)	$	(3,814)
Offsetting amounts	4		21
Net liabilities	$	(2,025)	$	(3,793)

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CHENIERE ENERGY PARTNERS, L.P. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—CONTINUED

(unaudited)

NOTE 8—ACCRUED LIABILITIES

Accrued liabilities consisted of the following (in millions):



	September 30,		December 31,
	2023		2022
Natural gas purchases	$	372	$	1,017
Interest costs and related debt fees	151		218
LNG terminal and related pipeline costs	86		137
Other accrued liabilities	32		6
Total accrued liabilities	$	641	$	1,378

NOTE 9—DEBT

Debt consisted of the following (in millions):



	September 30,		December 31,
	2023		2022
SPL:
Senior Secured Notes:


5.75% due 2024 (the “2024 SPL Senior Notes”)	$	350	$	2,000
5.625% due 2025	2,000		2,000
5.875% due 2026	1,500		1,500
5.00% due 2027	1,500		1,500
4.200% due 2028	1,350		1,350
4.500% due 2030	2,000		2,000
4.746% weighted average rate due 2037	1,782		1,782
Total SPL Senior Secured Notes	10,482		12,132
Working capital revolving credit and letter of credit reimbursement agreement (the “SPL Working Capital Facility”)	—		—
Revolving credit and guaranty agreement (the “SPL Revolving Credit Facility”)	—		—
Total debt - SPL	10,482		12,132

CQP:
Senior Notes:


4.500% due 2029	1,500		1,500
4.000% due 2031	1,500		1,500
3.25% due 2032	1,200		1,200
5.95% due 2033 (the “2033 CQP Senior Notes”)	1,400		—
Total CQP Senior Notes	5,600		4,200
Credit facilities (the “CQP Credit Facilities”)	—		—
Revolving credit and guaranty agreement (the “CQP Revolving Credit Facility”)	—		—
Total debt - CQP	5,600		4,200
Total debt	16,082		16,332

Current debt, net of discount and debt issuance costs	(349)		—

Long-term portion of unamortized discount and debt issuance costs, net	(133)		(134)
Total long-term debt, net of discount and debt issuance costs	$	15,600	$	16,198

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CHENIERE ENERGY PARTNERS, L.P. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—CONTINUED

(unaudited)

Credit Facilities

Below is a summary of our credit facilities outstanding as of September 30, 2023 (in millions):


	SPL Revolving Credit Facility (1)		CQP Revolving Credit Facility (1)
Total facility size	$	1,000	$	1,000
Less:
Outstanding balance	—		—

Letters of credit issued	284		—
Available commitment	$	716	$	1,000

Priority ranking	Senior secured		Senior unsecured
Interest rate on available balance (2)	SOFR plus credit spread adjustment of 0.1%, plus margin of 1.0% - 1.75% or base rate plus 0.0% - 0.75%		SOFR plus credit spread adjustment of 0.1%, plus margin of 1.125% - 2.0% or base rate plus 0.125% - 1.0%

Commitment fees on undrawn balance (2)	0.075% - 0.30%		0.10% - 0.30%
Maturity date	June 23, 2028		June 23, 2028

(1)In June 2023, we and SPL refinanced and replaced the CQP Credit Facilities and the SPL Working Capital Facility with the CQP Revolving Credit Facility and the SPL Revolving Credit Facility, respectively, resulting in extended maturity dates, revised borrowing capacities, reduced rate of interest and commitment fees applicable thereunder and certain other changes to terms and conditions.

(2)The margin on the interest rate and the commitment fees is subject to change based on the applicable entity’s credit rating.

Restrictive Debt Covenants

The indentures governing our senior notes and other agreements underlying our debt contain customary terms and events of default and certain covenants that, among other things, may limit us and our restricted subsidiaries’ ability to make certain investments or pay dividends or distributions. SPL is restricted from making distributions under agreements governing its indebtedness generally until, among other requirements, appropriate reserves have been established for debt service using cash or letters of credit and a historical debt service coverage ratio and projected debt service coverage ratio of at least 1.25:1.00 is satisfied.

As of September 30, 2023, we and SPL were in compliance with all covenants related to our respective debt agreements.

Interest Expense

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


	Three Months Ended September 30,				Nine Months Ended September 30,
	2023		2022		2023		2022
Total interest cost	$	207	$	231	$	626	$	678
Capitalized interest	(2)		(9)		(6)		(37)
Total interest expense, net of capitalized interest	$	205	$	222	$	620	$	641

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CHENIERE ENERGY PARTNERS, L.P. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—CONTINUED

(unaudited)

Fair Value Disclosures

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


	September 30, 2023				December 31, 2022
	Carrying Amount		Estimated Fair Value (1)		Carrying Amount		Estimated Fair Value (1)
Senior notes	$	16,082	$	14,943	$	16,332	$	15,386

(1)As of both September 30, 2023 and December 31, 2022, $1.2 billion of the fair value of our senior notes were classified as Level 3 since these senior notes were valued by applying an unobservable illiquidity adjustment to the price derived from trades or indicative bids of instruments with similar terms, maturities and credit standing. The remainder of our senior notes are classified as Level 2, based on prices derived from trades or indicative bids of the instruments.

The estimated fair value of our credit facilities approximates the principal amount outstanding 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.

NOTE 10—REVENUES

The following table represents a disaggregation of revenue earned (in millions):


	Three Months Ended September 30,				Nine Months Ended September 30,
	2023		2022		2023		2022
Revenues from contracts with customers
LNG revenues	$	1,564	$	3,133	$	5,085	$	8,576
LNG revenues—affiliate	515		1,376		1,745		3,268
LNG revenues—related party	—		—		—		4
Regasification revenues	34		455		101		591
Other revenues	15		15		47		45

Total revenues from contracts with customers	2,128		4,979		6,978		12,484
Net derivative gain (loss) (1)	—		(3)		—		1
Total revenues	$	2,128	$	4,976	$	6,978	$	12,485

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

Termination Agreement with Chevron

In June 2022, Chevron U.S.A. (“Chevron”) entered into an agreement with SPLNG providing for the early termination of the TUA and an associated terminal marine services agreement between the parties and their affiliates (the “Termination Agreement”), effective July 2022, for a lump sum fee of $765 million (the “Termination Fee”). Obligations pursuant to the TUA and associated agreement, including Chevron’s obligation to pay SPLNG capacity payments totaling $125 million annually (adjusted for inflation) from 2023 through 2029, terminated on December 31, 2022, upon SPLNG’s receipt of the Termination Fee in December 2022. We allocated the $765 million Termination Fee to the terminated commitments, with $796 million in cash inflows allocable to the termination of the TUA, which was recognized ratably over the July 6, 2022 to December 31, 2022 period as regasification revenues on our Consolidated Statements of Operations.

Contract Assets and Liabilities

The following table shows our contract assets, net of current expected credit losses, which are classified as other current assets, net and other non-current assets, net on our Consolidated Balance Sheets (in millions):



	September 30,		December 31,
	2023		2022
Contract assets, net of current expected credit losses	$	1	$	1

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CHENIERE ENERGY PARTNERS, L.P. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—CONTINUED

(unaudited)

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


	Nine Months Ended September 30, 2023

Deferred revenue, beginning of period	$	144
Cash received but not yet recognized in revenue	203
Revenue recognized from prior period deferral	(144)
Deferred revenue, end of period	$	203

The following table reflects the changes in our contract liabilities to affiliate, which we classify as deferred revenue—affiliate and other non-current liabilities—affiliate on our Consolidated Balance Sheets (in millions):


	Nine Months Ended September 30, 2023

Deferred revenue—affiliate, beginning of period	$	8
Cash received but not yet recognized in revenue	6
Revenue recognized from prior period deferral	(8)
Deferred revenue—affiliate, end of period	$	6

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:


	September 30, 2023			December 31, 2022
	Unsatisfied Transaction Price (in billions)		Weighted Average Recognition Timing (years) (1)	Unsatisfied Transaction Price (in billions)		Weighted Average Recognition Timing (years) (1)
LNG revenues	$	48.4	8	$	50.8	8
LNG revenues—affiliate	1.5		2	2.0		2
Regasification revenues	0.7		3	0.8		4
Total revenues	$	50.6		$	53.6

(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.

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. Additionally, we have excluded variable consideration related to volumes that contractually are subject to additional liquefaction capacity beyond what is currently in construction or operation. The following table summarizes the amount of variable consideration earned under contracts with customers included in the table above:


	Three Months Ended September 30,				Nine Months Ended September 30,
	2023		2022		2023		2022
LNG revenues	53	%	78	%	55	%	74	%
LNG revenues—affiliate	64	%	77	%	68	%	76	%
Regasification revenues	7	%	1	%	7	%	2	%

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CHENIERE ENERGY PARTNERS, L.P. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—CONTINUED

(unaudited)

NOTE 11—RELATED PARTY TRANSACTIONS

Below is a summary of our transactions with our affiliates and other related parties, all in the ordinary course of business, as reported on our Consolidated Statements of Operations (in millions):


	Three Months Ended September 30,				Nine Months Ended September 30,
	2023		2022		2023		2022
LNG revenues—affiliate
SPAs and Letter Agreements with Cheniere Marketing	$	513	$	1,328	$	1,742	$	3,173
Contracts for Sale and Purchase of Natural Gas and LNG with other affiliates	2		48		3		95
Total LNG revenues—affiliate	515		1,376		1,745		3,268

LNG revenues—related party
Natural Gas Transportation and Storage Agreements (1)	—		—		—		4







Cost of sales—affiliate

Contracts for Sale and Purchase of Natural Gas and LNG	2		104		20		166


Cost of sales—related party
Natural Gas Transportation and Storage Agreements (1)	—		—		—		1



Operating and maintenance expense—affiliate

Services Agreements (see Note 1)