Cheniere(US:CQP)2021-02-23 16:00Financial Position - As of December 31, 2020, the company had $1.2 billion in cash and cash equivalents, $0.1 billion in current restricted cash, and $17.8 billion in total debt outstanding[111]. - The company’s liquidity and financial performance could be adversely affected by its existing level of cash resources and significant debt[110]. - As of December 31, 2020, the company had $17.8 billion in total debt outstanding, with significant maturities scheduled, including $1.0 billion in 2022 and $3.5 billion in 2025[219]. - The company paid aggregate distributions of $1.4 billion on its common units, subordinated units, and related general partner units during the year ended December 31, 2020[213]. Operational Risks - The company is dependent on long-term contracts with eight third-party customers and two third-party customers under TUAs, exposing it to credit risk if any significant customer fails to perform[115]. - The COVID-19 pandemic has heightened credit and performance risks for customers, potentially affecting the company's financial condition and operating results[115]. - The company faces risks from construction delays and cost overruns, which could lead to reduced revenues or termination of customer contracts[104]. - The construction costs of Train 6 may exceed current estimates due to change orders and other factors, potentially leading to increased financing needs[131]. - The COVID-19 pandemic has caused a slowdown in construction, with potential delays impacting the completion of one or more Trains[132]. - Delays in Train completion could result in reduced revenues or termination of SPAs by customers, as significant delays may allow customers to terminate agreements[142]. - The company’s operations could be impacted by various risks including hurricanes, regulatory approvals, and competition in the LNG market[106]. - If third-party pipelines become unavailable, it could adversely affect the company's ability to meet SPA obligations and reduce revenues[157]. - The company may not be able to purchase sufficient natural gas to meet delivery obligations under SPAs, risking termination of those agreements by customers[159]. - The construction and operation of the Sabine Pass LNG terminal and the Creole Trail Pipeline face inherent risks including explosions, equipment failures, and adverse weather conditions, which could materially affect the company's financial condition and operations[162]. Market and Regulatory Environment - The company’s ability to hedge risks may be adversely affected by regulatory changes, impacting its operating results and cash flows[122]. - Regulatory approvals from FERC and DOE are critical for the construction and operation of LNG facilities, with ongoing conditions and potential delays in obtaining necessary permits[139]. - Environmental regulations may lead to increased compliance costs and operational restrictions, affecting the company's financial performance[184]. - The company is subject to extensive federal and state regulations, and non-compliance could result in significant penalties and operational limitations[188]. - Political instability in natural gas exporting countries may hinder LNG trade with the United States, impacting supply and pricing dynamics[170]. - The company faces competition from various energy sources, including coal and oil, which may affect the demand for LNG and its pricing[171]. Competition and Human Resources - The company faces competition for skilled personnel, which could increase operating costs and impact project timelines[147]. - The company may face challenges in competing with Cheniere due to its significantly greater resources and experience[237]. - Cheniere is not restricted from competing with the company and can develop its own LNG facilities and pipelines without offering opportunities to the company[236]. Financial Strategy and Growth - The company may need to sell equity or equity-related securities, which could dilute unitholders' interests in its assets and business operations[112]. - The company intends to pursue acquisitions of additional LNG terminals and natural gas pipelines, but there are no guarantees of successful negotiations or financing[206]. - The company’s ability to grow is contingent upon making accretive acquisitions or capital expansion projects, which may be hindered by various factors[202]. - The company expects to pursue various sources of funding, including debt and equity financings, for acquisitions or capital expansion projects[231]. - The partnership agreement limits the fiduciary duties of the general partner, which may affect the cash available for distributions to unitholders[238]. Taxation and Unitholder Issues - The anticipated after-tax economic benefit of an investment in common units depends on being treated as a partnership for federal income tax purposes[260]. - If treated as a corporation for tax purposes, cash available for distribution to unitholders would be substantially reduced, impacting the value of common units[261]. - Changes in state law may subject the company to additional entity-level taxation, negatively affecting cash available for distribution[264]. - The IRS may challenge the company's tax positions, which could adversely impact the market for common units and reduce cash available for distribution[273]. - Unitholders may be required to pay taxes on their share of taxable income even if no cash distributions are received[278]. - The company’s partnership agreement allows for adjustments to distribution amounts if subjected to entity-level taxation due to law changes[262]. - Tax-exempt entities face unique tax issues from owning common units, potentially resulting in adverse tax consequences[282]. Compliance and Safety - The company is currently in discussions with the LDEQ to resolve self-reported deviations related to the Sabine Pass LNG terminal, covering the period from January 1, 2012, to March 25, 2016[298]. - A Consolidated Compliance Order was received from LDEQ on April 11, 2016, regarding the deviations, but the company does not expect any material adverse impact on financial results[298]. - In February 2018, the PHMSA issued a Corrective Action Order due to a minor LNG leak at the Sabine Pass LNG terminal, which has since been addressed[299]. - The tanks involved in the February 2018 incident have been taken out of operational service for analysis, repair, and remediation[299]. - A Consent Agreement and Order was executed with PHMSA on April 20, 2018, to replace the initial Corrective Action Order[299]. - The company continues to coordinate with PHMSA and FERC regarding the operational conditions required for returning the tanks to service[299]. - The company does not anticipate that the ongoing compliance and repair efforts will have a material adverse impact on its financial results or operations[299].