Annual report pursuant to Section 13 and 15(d)

Net Loss per Common Unit

v3.6.0.2
Net Loss per Common Unit
 12 Months Ended
Dec. 31, 2016
Earnings Per Share [Abstract]  
Net Loss per Common Unit
NET LOSS PER COMMON UNIT
 
Net loss 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 loss 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 January 20, 2017, we declared a $0.425 distribution per common unit and the related distribution to our general partner to be paid on February 13, 2017 to unitholders of record as of February 2, 2017 for the period from October 1, 2016 to December 31, 2016.

The two-class method dictates that net income (loss) 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 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 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. Historical income (loss) attributable to a company that was purchased from an entity under common control is allocated to the predecessor owner in accordance with the terms 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 Class B units were issued at a discount to the market price of the common units into which they are convertible.  This discount, totaling $2,130.0 million, represents a beneficial conversion feature and is reflected as an increase in common and subordinated unitholders’ equity and a decrease in Class B unitholders’ equity to reflect the fair value of the Class B units at issuance on our Consolidated Statements of Partners’ Equity.  The beneficial conversion feature is considered a dividend that will be distributed ratably with respect to any Class B unit from its issuance date through its conversion date, resulting in an increase in Class B unitholders’ equity and a decrease in common and subordinated unitholders’ equity. We amortize the beneficial conversion feature assuming a conversion date of August 2017 for Cheniere Holdings’ and Blackstone CQP Holdco’s Class B units, although actual conversion may occur prior to or after these assumed dates. We are amortizing using the effective yield method with a weighted average effective yield of 888.7% per year and 966.1% per year for Cheniere Holdings’ and Blackstone CQP Holdco’s Class B units, respectively. The impact of the beneficial conversion feature is also included in earnings per unit for the years ended December 31, 2016, 2015 and 2014.

Based on the capital structure as of December 31, 2016, the anticipated impact to the capital accounts in connection with the amortization of the beneficial conversion feature is as follows in 2017 (in thousands):
Common Units
 
Class B Units
 
Subordinated Units
$(594,470)
 
$2,004,209
 
$(1,409,739)


Under our partnership agreement, the IDRs participate in net income (loss) only to the extent of the amount of cash distributions actually declared, thereby excluding the IDRs from participating in undistributed net income (loss). We did not allocate earnings or losses to IDR holders for the purpose of the two-class method earnings per unit calculation for any of the periods presented. The following table (in thousands, except per unit data) provides a reconciliation of net loss and the allocation of net loss to the common units, the subordinated units and the general partner units for purposes of computing net loss per unit.
 
 
 
 
Limited Partner Units
 
 
 
 
Total
 
Common Units
 
Class B Units
 
Subordinated Units
 
General Partner Units
Year Ended December 31, 2016
 
 
 
 
 
 
 
 
 
 
Net loss
 
$
(171,195
)
 
 
 
 
 
 
 
 
Declared distributions
 
99,028

 
97,047

 
—

 
—

 
1,981

Amortization of beneficial conversion feature of Class B units
 
—

 
(29,801
)
 
100,472

 
(70,671
)
 
—

Assumed allocation of undistributed net loss
 
$
(270,223
)
 
(78,547
)
 
—

 
(186,271
)
 
(5,404
)
Assumed allocation of net income (loss)
 
 
 
$
(11,301
)
 
$
100,472

 
$
(256,942
)
 
$
(3,423
)
 
 
 
 
 
 
 
 
 
 
 
Weighted average units outstanding
 
 
 
57,086

 
145,333

 
135,384

 
 
Net loss per unit
 
 
 
$
(0.20
)
 


 
$
(1.90
)
 
 
 
 
 
 
 
 
 
 
 
 
 
Year Ended December 31, 2015
 
 
 
 
 
 
 
 
 
 
Net loss
 
$
(318,891
)
 
 
 
 
 
 
 
 
Declared distributions
 
99,018

 
97,038

 
—

 
—

 
1,980

Assumed allocation of undistributed net loss
 
$
(417,909
)
 
(121,468
)
 
—

 
(288,083
)
 
(8,358
)
Assumed allocation of net loss
 
 
 
$
(24,430
)
 
$
—

 
$
(288,083
)
 
$
(6,378
)
 
 
 
 
 
 
 
 
 
 
 
Weighted average units outstanding
 
 
 
57,081

 
145,333

 
135,384

 
 
Net loss per unit
 
 
 
$
(0.43
)
 


 
$
(2.13
)
 
 
 
 
 
 
 
 
 
 
 
 
 
Year Ended December 31, 2014
 
 
 
 
 
 
 
 
 
 
Net loss
 
$
(410,036
)
 
 
 
 
 
 
 
 
Declared distributions
 
99,015

 
97,036

 
—

 
—

 
1,979

Assumed allocation of undistributed net loss
 
$
(509,051
)
 
(147,952
)
 
—

 
(350,918
)
 
(10,181
)
Assumed allocation of net loss
 
 
 
$
(50,916
)
 
$
—

 
$
(350,918
)
 
$
(8,202
)
 
 
 
 
 
 
 
 
 
 
 
Weighted average units outstanding
 
 
 
57,079

 
145,333

 
135,384

 
 
Net loss per unit
 
 
 
$
(0.89
)
 


 
$
(2.59
)