S
|
QUARTERLY
REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF
1934
|
¨
|
TRANSITION
REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF
1934
|
Delaware
|
95-4352386
|
(State
or other jurisdiction of incorporation or organization)
|
(I.R.S.
Employer Identification No.)
|
700
Milam Street, Suite 800
|
|
Houston,
Texas
|
77002
|
(Address
of principal executive offices)
|
(Zip
code)
|
Large
accelerated filer ¨
|
Accelerated
filer S
|
Non-accelerated
filer ¨
|
Smaller
reporting company ¨
|
(Do
not check if a smaller reporting
company)
|
Item 1.
|
Consolidated
Financial Statements
|
1
|
Consolidated
Balance Sheets
|
1
|
|
Consolidated
Statements of Operations
|
2
|
|
Consolidated
Statement of Equity (Deficit)
|
3
|
|
Consolidated
Statements of Cash Flows
|
4
|
|
Notes
to Consolidated Financial Statements
|
5
|
|
Item 2.
|
Management’s
Discussion and Analysis of Financial Condition and Results of
Operations
|
21
|
Item 3.
|
Quantitative
and Qualitative Disclosures about Market Risk
|
36
|
Item 4.
|
Disclosure
Controls and Procedures
|
36
|
Item 1.
|
Legal
Proceedings
|
37
|
Item 6.
|
Exhibits
|
37
|
Item 1.
|
Consolidated
Financial Statements
|
September
30,
2009
|
December
31,
2008
|
|||||||
ASSETS
|
(unaudited)
|
(As
adjusted)
|
||||||
CURRENT
ASSETS
|
||||||||
Cash
and cash equivalents
|
$
|
87,354
|
$
|
102,192
|
||||
Restricted
cash and cash equivalents
|
183,273
|
301,550
|
||||||
LNG
inventory
|
20,760
|
—
|
||||||
Accounts
and interest receivable
|
8,895
|
3,630
|
||||||
Prepaid
expenses and other
|
19,985
|
9,220
|
||||||
TOTAL
CURRENT ASSETS
|
320,267
|
416,592
|
||||||
NON-CURRENT
RESTRICTED CASH AND CASH EQUIVALENTS
|
82,892
|
138,483
|
||||||
NON-CURRENT
RESTRICTED U.S. TREASURY SECURITIES
|
—
|
20,829
|
||||||
PROPERTY,
PLANT AND EQUIPMENT, NET
|
2,237,650
|
2,170,158
|
||||||
DEBT
ISSUANCE COSTS, NET
|
48,971
|
55,688
|
||||||
GOODWILL
|
76,819
|
76,844
|
||||||
INTANGIBLE
LNG ASSETS
|
6,106
|
6,106
|
||||||
LNG
HELD FOR COMMISSIONING
|
—
|
9,923
|
||||||
ADVANCES
UNDER LONG-TERM CONTRACTS
|
728
|
10,705
|
||||||
OTHER
|
15,612
|
14,754
|
||||||
TOTAL
ASSETS
|
$
|
2,789,045
|
$
|
2,920,082
|
||||
LIABILITIES
AND DEFICIT
|
||||||||
CURRENT
LIABILITIES
|
||||||||
Accounts
payable
|
$
|
250
|
$
|
1,220
|
||||
Accrued
liabilities
|
89,468
|
61,883
|
||||||
Deferred
revenue
|
26,196
|
2,500
|
||||||
Other
|
330
|
530
|
||||||
TOTAL
CURRENT LIABILITIES
|
116,244
|
66,133
|
||||||
LONG-TERM
DEBT, NET OF DISCOUNT
|
2,684,279
|
2,750,308
|
||||||
LONG-TERM
DEBT—RELATED PARTIES, NET OF DISCOUNT
|
344,697
|
332,054
|
||||||
DEFERRED
REVENUE
|
34,500
|
37,500
|
||||||
OTHER
NON-CURRENT LIABILITIES
|
16,930
|
8,141
|
||||||
COMMITMENTS
AND CONTINGENCIES
|
—
|
—
|
||||||
DEFICIT
|
||||||||
Stockholders’
equity (deficit)
|
||||||||
Preferred
stock, $.0001 par value, 5,000,000 shares authorized, none
issued
|
—
|
—
|
||||||
Common
stock, $.003 par value
|
||||||||
Authorized:
240,000,000 and 120,000,000 shares at September 30, 2009 and
December 31, 2008, respectively
|
||||||||
Issued
and outstanding: 56,529,000 and 52,297,000 shares at September 30, 2009
and December 31, 2008, respectively
|
170
|
157
|
||||||
Treasury
stock: 288,000 and 179,000 shares at September 30, 2009 and
December 31, 2008, respectively, at cost
|
(576
|
)
|
(496
|
)
|
||||
Additional
paid-in-capital
|
330,553
|
300,033
|
||||||
Accumulated
deficit
|
(962,045
|
)
|
(823,756
|
)
|
||||
Accumulated
other comprehensive loss
|
(41
|
)
|
(154
|
)
|
||||
TOTAL
STOCKHOLDERS’ DEFICIT
|
(631,939
|
)
|
(524,216
|
)
|
||||
Non-controlling
interest
|
224,334
|
250,162
|
||||||
TOTAL
DEFICIT
|
(407,605
|
)
|
(274,054
|
)
|
||||
TOTAL
LIABILITIES AND DEFICIT
|
$
|
2,789,045
|
$
|
2,920,082
|
Three
Months Ended
September
30,
|
Nine
Months Ended
September
30,
|
||||||||||||||||
2009
|
2008
|
2009
|
2008
|
||||||||||||||
(As
adjusted)
|
(As
adjusted)
|
||||||||||||||||
REVENUES
|
|||||||||||||||||
LNG
receiving terminal revenues
|
$
|
65,119
|
$
|
—
|
$
|
103,320
|
$
|
—
|
|||||||||
Oil
and gas sales
|
797
|
1,375
|
2,370
|
3,668
|
|||||||||||||
Marketing
and trading
|
(9,609
|
)
|
2,725
|
(10,265
|
)
|
2,823
|
|||||||||||
Other
|
25
|
—
|
100
|
—
|
|||||||||||||
TOTAL
REVENUES
|
56,332
|
4,100
|
95,525
|
6,491
|
|||||||||||||
OPERATING
COSTS AND EXPENSES
|
|||||||||||||||||
LNG
receiving terminal and pipeline development expense
|
122
|
1,522
|
122
|
10,803
|
|||||||||||||
LNG
receiving terminal and pipeline operating expense
|
8,004
|
4,163
|
26,033
|
4,579
|
|||||||||||||
Oil
and gas production and exploration costs
|
126
|
120
|
290
|
421
|
|||||||||||||
Depreciation,
depletion and amortization
|
14,269
|
7,220
|
39,126
|
12,837
|
|||||||||||||
Restructuring
charges
|
—
|
287
|
—
|
78,851
|
|||||||||||||
General
and administrative expense
|
15,557
|
29,933
|
48,776
|
79,976
|
|||||||||||||
TOTAL
OPERATING COSTS AND EXPENSES
|
38,078
|
43,245
|
114,347
|
187,467
|
|||||||||||||
INCOME
(LOSS) FROM OPERATIONS
|
18,254
|
(39,145
|
)
|
(18,822
|
)
|
(180,976
|
)
|
||||||||||
Loss
from equity method investments
|
—
|
—
|
—
|
(4,800
|
)
|
||||||||||||
Derivative
gain, net
|
1,158
|
14,692
|
4,482
|
2,325
|
|||||||||||||
Gain (loss) on early extinguishment of debt |
—
|
(10,716 | ) | 45,363 | (10,716 | ) | |||||||||||
Interest
expense, net
|
(61,557
|
)
|
(40,977
|
)
|
(176,766
|
)
|
(90,249
|
)
|
|||||||||
Interest
income
|
114
|
3,535
|
1,313
|
17,940
|
|||||||||||||
Other
income (loss)
|
124
|
(33
|
)
|
107
|
(103
|
)
|
|||||||||||
LOSS
BEFORE INCOME TAXES AND NON-CONTROLLING INTEREST
|
(41,907
|
)
|
(72,644
|
)
|
(144,323
|
)
|
(266,579
|
)
|
|||||||||
INCOME
TAX PROVISION
|
—
|
—
|
—
|
—
|
|||||||||||||
LOSS
BEFORE NON-CONTROLLING INTEREST
|
(41,907
|
)
|
(72,644
|
)
|
(144,323
|
)
|
(266,579
|
)
|
|||||||||
NON-CONTROLLING
INTEREST
|
(590
|
)
|
1,025
|
6,034
|
4,694
|
||||||||||||
NET
LOSS
|
$
|
(42,497
|
)
|
$
|
(71,619
|
)
|
$
|
(138,289
|
)
|
$
|
(261,885
|
)
|
|||||
Net
loss per common share—basic and diluted
|
$
|
(0.80
|
)
|
$
|
(1.51
|
)
|
$
|
(2.71
|
)
|
$
|
(5.55
|
)
|
|||||
Weighted
average number of common shares outstanding—basic and
diluted
|
52,945
|
47,492
|
51,073
|
47,200
|
Cheniere
Energy, Inc. Common Stockholders
|
|||||||||||||||||||||||||||
Common
Stock
|
Treasury
Stock
|
Additional
|
Accumulated
|
Accumulated
Other
Comprehensive
|
Non-
controlling
|
Total
Equity
|
|||||||||||||||||||||
Shares
|
Amount
|
Shares
|
Amount
|
Paid-in-Capital
|
Deficit
|
Loss
|
Interest
|
(Deficit)
|
|||||||||||||||||||
Balance—December
31, 2008
|
52,297
|
$
|
157
|
179
|
$
|
(496
|
)
|
$
|
181,289
|
$
|
(785,389
|
)
|
$
|
(154
|
)
|
$
|
250,162
|
$
|
(354,431
|
) | |||||||
Cumulative
effect of accounting change
|
—
|
—
|
—
|
—
|
118,744
|
(38,367
|
)
|
—
|
—
|
80,377
|
|||||||||||||||||
Balance—December
31, 2008 (as adjusted)
|
52,297
|
$
|
157
|
179
|
$
|
(496
|
)
|
$
|
300,033
|
$
|
(823,756
|
)
|
$
|
(154
|
)
|
$
|
250,162
|
$
|
(274,054
|
) | |||||||
Issuances
of stock
|
3,985
|
12
|
—
|
—
|
16,212
|
—
|
—
|
—
|
16,224
|
||||||||||||||||||
Issuances
of restricted stock
|
356
|
1
|
—
|
—
|
(1
|
)
|
—
|
—
|
—
|
—
|
|||||||||||||||||
Forfeitures
of restricted stock
|
(86
|
)
|
—
|
86
|
—
|
—
|
—
|
—
|
—
|
—
|
|||||||||||||||||
Stock-based
compensation
|
—
|
—
|
—
|
—
|
14,308
|
—
|
—
|
—
|
14,308
|
||||||||||||||||||
Treasury
stock acquired
|
(23
|
)
|
23
|
(80
|
)
|
1
|
—
|
—
|
—
|
(79
|
) | ||||||||||||||||
Foreign
currency translation
|
—
|
—
|
—
|
—
|
—
|
—
|
113
|
—
|
113
|
||||||||||||||||||
Loss
attributable to non-controlling interest
|
—
|
—
|
—
|
—
|
—
|
—
|
—
|
(6,034
|
)
|
(6,034
|
) | ||||||||||||||||
Distributions
to non-controlling interest
|
—
|
—
|
—
|
—
|
—
|
—
|
—
|
(19,794
|
)
|
(19,794
|
) | ||||||||||||||||
Net
loss
|
—
|
—
|
—
|
—
|
—
|
(138,289
|
)
|
—
|
—
|
(138,289
|
) | ||||||||||||||||
Balance—September
30, 2009
|
56,529
|
$ |
170
|
288
|
$ |
(576
|
)
|
$ |
330,553
|
$ |
(962,045
|
)
|
$ |
(41
|
)
|
$ |
224,334
|
$ |
(407,605
|
) |
Nine
Months Ended
September
30,
|
||||||||
2009
|
2008
|
|||||||
CASH
FLOWS FROM OPERATING ACTIVITIES
|
(As
adjusted)
|
|||||||
Net
loss
|
$
|
(138,289
|
)
|
$
|
(261,885
|
)
|
||
Adjustments
to reconcile net loss to net cash used in operating
activities:
|
||||||||
(Gain)/loss
on early extinguishment of debt
|
(45,362
|
)
|
10,716
|
|||||
Depreciation,
depletion and amortization
|
39,126
|
12,837
|
||||||
Amortization
of debt issuance and debt discount
|
21,179
|
20,059
|
||||||
Non-cash
compensation
|
13,416
|
26,204
|
||||||
Non-cash
restructuring charges
|
—
|
17,680
|
||||||
Restricted
interest income on restricted cash and cash equivalents
|
(2,794
|
)
|
(15,441
|
)
|
||||
Non-cash
derivative (gain)/loss
|
587
|
(4,254
|
)
|
|||||
Non-cash
inventory write-downs
|
17,065
|
—
|
||||||
Use
of restricted cash and cash equivalents
|
(22,237
|
)
|
59,195
|
|||||
Non-controlling
interest
|
(6,034
|
)
|
(4,695
|
)
|
||||
Non-cash
interest charges
|
23,866
|
3,852
|
||||||
Other
|
(19
|
)
|
(109
|
)
|
||||
Changes
in operating assets and liabilities:
|
||||||||
Accounts
and interest receivable
|
(433
|
)
|
41,214
|
|||||
Prepaid
expenses
|
(11,022
|
)
|
19,349
|
|||||
Deferred
revenue
|
20,696
|
—
|
||||||
LNG
inventory
|
(34,335
|
)
|
—
|
|||||
Accounts
payable and accrued liabilities
|
30,364
|
(25,835
|
)
|
|||||
Other
|
—
|
(299
|
)
|
|||||
NET
CASH USED IN OPERATING ACTIVITIES
|
(94,226
|
)
|
(101,412
|
)
|
||||
CASH
FLOWS FROM INVESTING ACTIVITIES
|
||||||||
LNG
terminal and pipeline construction-in-process, net
|
(97,991
|
)
|
(521,687
|
)
|
||||
Use
of restricted cash and cash equivalents
|
96,464
|
391,399
|
||||||
Use
of restricted treasury securities
|
—
|
12,673
|
||||||
Purchases
of LNG commissioning, net of amounts transferred to LNG terminal
construction-in-process
|
—
|
(16,595
|
)
|
|||||
Purchases
of intangible and fixed assets, net of sales
|
(293
|
)
|
(2,765
|
)
|
||||
Oil
and gas property, net of sales
|
(467
|
)
|
||||||
Advances
under long-term contracts, net of amounts transferred to LNG terminal
construction-in-process
|
—
|
(6,587
|
)
|
|||||
Distributions
from limited partnership investment
|
9,000
|
4,800
|
||||||
Other
|
(66
|
)
|
(15,522
|
)
|
||||
NET
CASH PROVIDED BY (USED IN) INVESTING ACTIVITIES
|
6,647
|
(154,284
|
)
|
|||||
CASH
FLOWS FROM FINANCING ACTIVITIES
|
||||||||
Use
of (investment in) restricted cash and cash equivalents
|
123,263
|
(255,586
|
)
|
|||||
Debt
repurchase
|
(30,030
|
)
|
—
|
|||||
Distributions
to non-controlling interest
|
(19,794
|
)
|
(19,794
|
)
|
||||
Debt
issuance costs
|
(121
|
)
|
(28,148
|
)
|
||||
Purchase
of treasury shares
|
(80
|
)
|
(4,405
|
)
|
||||
Proceeds
from related party debt issuance
|
—
|
250,000
|
||||||
Proceeds
from debt issuance
|
—
|
239,965
|
||||||
Repayment
of Bridge Loan
|
—
|
(95,000
|
)
|
|||||
Sale
of common stock
|
—
|
471
|
||||||
Other
|
(497
|
)
|
—
|
|||||
NET
CASH PROVIDED BY FINANCING ACTIVITIES
|
72,741
|
87,503
|
||||||
NET
DECREASE IN CASH AND CASH EQUIVALENTS
|
(14,838
|
)
|
(168,193
|
)
|
||||
CASH
AND CASH EQUIVALENTS—beginning of period
|
102,192
|
296,530
|
||||||
CASH
AND CASH EQUIVALENTS—end of period
|
$
|
87,354
|
$
|
128,337
|
Three
Months Ended
September
30, 2008
|
Nine
Months Ended
September
30, 2008
|
|||||||||||||||||||||||
Prior
to
adoption
|
Effect
of
adoption
|
As
adjusted
|
Prior
to
adoption
|
Effect
of
adoption
|
As
adjusted
|
|||||||||||||||||||
Increase:
|
||||||||||||||||||||||||
Interest
expense
|
$
|
(36,801
|
)
|
$
|
(4,176
|
)
|
$
|
(40,977
|
)
|
$
|
(78,051
|
)
|
$
|
(12,198
|
)
|
$
|
(90,249
|
)
|
||||||
Net
loss
|
(67,443
|
)
|
(4,176
|
)
|
(71,619
|
)
|
(249,687
|
)
|
(12,198
|
)
|
(261,885
|
)
|
||||||||||||
Basic
and diluted net loss per share
|
$
|
(1.42
|
)
|
$
|
(0.09
|
)
|
$
|
(1.51
|
)
|
$
|
(5.29
|
)
|
$
|
(0.26
|
)
|
$
|
(5.55
|
)
|
December
31, 2008
|
||||||||||||
Prior
to
adoption
|
Effect
of
adoption
|
As
adjusted
|
||||||||||
Increase/(decrease):
|
||||||||||||
Debt
issuance costs
|
$
|
57,676
|
$
|
(1,988
|
)
|
$
|
55,688
|
|||||
Long-term
debt, net of discount
|
2,832,673
|
(82,365
|
)
|
2,750,308
|
||||||||
Additional
paid-in capital
|
181,289
|
118,744
|
300,033
|
|||||||||
Accumulated
deficit
|
(785,389
|
)
|
(38,367
|
)
|
(823,756
|
)
|
Net
proceeds from Cheniere Partners’ issuance of common units
(1)
|
$
|
98,442
|
||
Net
proceeds from Holdings’ sale of Cheniere Partners common units
(2)
|
203,946
|
|||
Distributions
on Cheniere Partners’ non-controlling interest
|
(59,818
|
)
|
||
Non-controlling
interest share of loss of Cheniere Partners
|
(18,236
|
)
|
||
Non-controlling
interest at September 30, 2009
|
$
|
224,334
|
(1)
|
In
March and April 2007, we and Cheniere Energy Partners, L.P. (“Cheniere
Partners”) completed a public offering of 15,525,000 Cheniere Partners
common units (“Cheniere Partners Offering”). Through the Cheniere Partners
Offering, Cheniere Partners received $98.4 million in net proceeds from
the issuance of its common units to the public. Prior to January 1, 2009,
a company was able to elect an accounting policy of recording a gain or
loss on the sale of common equity of a subsidiary equal to the amount of
proceeds received in excess of the carrying value of the parent’s
investment. Effective January 1, 2009, the sale of common equity of a
subsidiary will be accounted for as an equity
transaction.
|
(2)
|
In
conjunction with the Cheniere Partners Offering, Cheniere LNG Holdings,
LLC (“Holdings”) sold a portion of the Cheniere Partners common units held
by it to the public, realizing proceeds net of offering costs of $203.9
million, which included $39.4 million of net proceeds realized once the
underwriters exercised their option to purchase an additional 2,025,000
common units from Holdings. Due to the subordinated distribution rights on
our subordinated units, we have recorded those proceeds as a
non-controlling interest.
|
September
30,
2009
|
December
31,
2008
|
|||||||
LNG
TERMINAL COSTS
|
||||||||
LNG
receiving terminal
|
$
|
1,605,154
|
$
|
927,298
|
||||
LNG
terminal construction-in-process
|
74,263
|
643,340
|
||||||
LNG
site and related costs, net
|
2,850
|
2,579
|
||||||
Accumulated
depreciation
|
(30,250
|
)
|
(7,813
|
)
|
||||
Total
LNG terminal costs, net
|
1,652,017
|
1,565,404
|
||||||
NATURAL
GAS PIPELINE
|
||||||||
Natural
gas pipeline plant
|
564,613
|
562,893
|
||||||
Natural
gas pipeline construction-in-process
|
2,891
|
7,937
|
||||||
Pipeline
right-of-ways
|
18,459
|
18,221
|
||||||
Accumulated
depreciation
|
(19,284
|
)
|
(8,454
|
)
|
||||
Total
natural gas pipeline costs, net
|
566,679
|
580,597
|
||||||
OIL
AND GAS PROPERTIES, successful efforts method
|
||||||||
Proved
|
3,558
|
3,439
|
||||||
Accumulated
depreciation, depletion and amortization
|
(1,719
|
)
|
(1,043
|
)
|
||||
Total
oil and gas properties, net
|
1,839
|
2,396
|
||||||
FIXED
ASSETS
|
||||||||
Computer
and office equipment
|
5,799
|
5,693
|
||||||
Furniture
and fixtures
|
5,316
|
5,315
|
||||||
Computer
software
|
12,213
|
12,128
|
||||||
Leasehold
improvements
|
9,258
|
9,208
|
||||||
Other
|
1,280
|
1,254
|
||||||
Accumulated
depreciation
|
(16,751
|
)
|
(11,837
|
)
|
||||
Total
fixed assets, net
|
17,115
|
21,761
|
||||||
PROPERTY,
PLANT AND EQUIPMENT, NET
|
$
|
2,237,650
|
$
|
2,170,158
|
September
30,
2009
|
December
31,
2008
|
|||||||
Current
assets
|
$
|
58,087
|
$
|
72,834
|
||||
Construction-in-process
|
79,425
|
62,768
|
||||||
Property,
plant and equipment, net
|
859,969
|
887,388
|
||||||
Other
assets
|
30,746
|
31,608
|
||||||
Total
assets
|
1,028,227
|
1,054,598
|
||||||
Current
liabilities
|
9,148
|
61,317
|
||||||
Notes
payable
|
1,105,843
|
1,090,086
|
||||||
Deferred
revenue and other deferred credits
|
13,536
|
15,401
|
||||||
Partners’
capital
|
(100,300
|
)
|
(112,206
|
)
|
||||
Total
liabilities and partners’ capital
|
$
|
1,028,227
|
$
|
1,054,598
|
Three
Months Ended
September
30,
|
Nine
Months Ended
September
30,
|
|||||||||||||||
2009
|
2008
|
2009
|
2008
|
|||||||||||||
Income
(loss) from continuing operations
|
$
|
36,445
|
$
|
16,622
|
$
|
101,986
|
$
|
(16,535
|
)
|
|||||||
Net
income (loss)
|
16,456
|
4,541
|
41,906
|
(29,143
|
)
|
|||||||||||
Cheniere’s
30% equity in net income (loss) from limited partnership
(1)
|
4,937
|
1,362
|
12,572
|
(8,743
|
)
|
(1)
|
During
the three month periods ended September 30, 2009 and 2008, we did not
record $4.9 million and $1.4 million, respectively, and during the nine
months ended September 30, 2009 and 2008, we did not record $12.6 million
and ($8.7) million of the net income (losses) for such periods,
respectively, as the basis in this investment had been reduced to zero and
because we did not guarantee any obligations and had not been committed to
provide any further financial
support.
|
September
30,
2009
|
December
31,
2008
|
|||||||
LNG
terminal construction costs
|
$
|
20,216
|
$
|
26,768
|
||||
Accrued
interest expense and related fees
|
56,225
|
17,305
|
||||||
Pipeline
construction costs
|
1,791
|
5,102
|
||||||
Payroll
|
8,620
|
8,717
|
||||||
Other
accrued liabilities
|
2,616
|
3,991
|
||||||
Accrued
liabilities
|
$
|
89,468
|
$
|
61,883
|
September
30,
2009
|
December
31,
2008
|
|||||||
(As
adjusted)
|
||||||||
Long-term
debt (including related parties):
|
||||||||
Senior
Notes (including related parties)
|
$
|
2,215,500
|
$
|
2,215,500
|
||||
2007
Term Loan
|
400,000
|
400,000
|
||||||
2008
Convertible Loans (including related parties)
|
285,259
|
261,393
|
||||||
Convertible
Senior Unsecured Notes
|
204,630
|
325,000
|
||||||
Total
long-term debt
|
3,105,389
|
3,201,893
|
||||||
Debt
discount:
|
||||||||
Senior
Notes (including related parties)
|
(33,645
|
)
|
(37,166
|
)
|
||||
Convertible
Senior Unsecured Notes
|
(42,768
|
)
|
(82,365
|
)
|
||||
Total
debt discount
|
(76,413
|
)
|
(119,531
|
)
|
||||
Long-term
debt (including related parties), net of discount
|
$
|
3,028,976
|
$
|
3,082,362
|
September
30,
2009
|
December
31,
2008
|
|||||||
(As
adjusted)
|
||||||||
Principal
amount
|
$
|
204,630
|
$
|
325,000
|
||||
Unamortized
discount
|
(42,768
|
)
|
(82,365
|
)
|
||||
Net
carry amount
|
$
|
161,862
|
$
|
242,635
|
Quoted Prices in
Active Markets for
Identical
Instruments
(Level
1)
|
Significant
Other
Observable
Inputs
(Level
2)
|
Significant
Unobservable Inputs
(Level
3)
|
Total
Carrying
Value
|
|||||||||||||
Derivatives
asset
|
$
|
973
|
$
|
—
|
$
|
—
|
$
|
973
|
||||||||
Derivatives
liability
|
$
|
330
|
$
|
—
|
$
|
—
|
$
|
330
|
September
30, 2009
|
December
31, 2008
|
|||||||||||||||
Carrying
Amount
|
Estimated
Fair
Value
|
Carrying
Amount
|
Estimated
Fair
Value
|
|||||||||||||
(As
adjusted)
|
(As
adjusted)
|
|||||||||||||||
2013
Notes (1)
|
$
|
550,000
|
$
|
492,250
|
$
|
550,000
|
$
|
412,500
|
||||||||
2016
Notes, net of discount (1)
|
1,631,855
|
1,387,077
|
1,628,334
|
1,204,967
|
||||||||||||
Convertible
Senior Unsecured Notes, net of discount (2)
|
161,862
|
72,838
|
242,635
|
37,608
|
||||||||||||
2007
Term Loan (3)
|
400,000
|
379,160
|
400,000
|
400,000
|
||||||||||||
2008
Convertible Loans (3)
|
285,259
|
282,806
|
261,393
|
261,393
|
||||||||||||
Restricted
U.S. Treasury securities (4)
|
—
|
—
|
20,829
|
22,901
|
(1)
|
The
fair value of the Senior Notes, net of discount, is based on quotations
obtained from broker-dealers who made markets in these and similar
instruments as of September 30, 2009 and December 31, 2008, as
applicable.
|
(2)
|
The
fair value of our Convertible Senior Unsecured Notes is based on the
closing trading prices on September 30, 2009 and December 31, 2008,
as applicable.
|
(3)
|
The
2007 Term Loan and 2008 Convertible Loans are closely held by few holders
and purchases and sales are infrequent and are conducted on a bilateral
basis without price discovery by us. These loans are not rated
and have unique covenants and collateral packages such that comparisons to
other instruments would be imprecise. Moreover, the 2008 Convertible Loans
are convertible into shares of Cheniere common stock. Nonetheless, we have
provided an estimate of the fair value of these loans as of September 30,
2009 based on an index of the yield to maturity of CCC rated debt of other
companies in the energy sector.
|
(4)
|
The
fair value of our restricted U.S. Treasury securities is based on
quotations obtained from broker-dealers who made markets in these and
similar instruments as of December 31,
2008.
|
Three
Months Ended
September
30,
|
Nine
Months Ended
September
30,
|
|||||||||||||||
2009
|
2008
|
2009
|
2008
|
|||||||||||||
(As
adjusted)
|
(As
adjusted)
|
|||||||||||||||
Weighted
average common shares outstanding:
|
||||||||||||||||
Basic
|
52,945
|
47,492
|
51,073
|
47,200
|
||||||||||||
Dilutive
common stock options (1)
|
—
|
—
|
—
|
—
|
||||||||||||
Dilutive
Convertible Senior Unsecured Notes (2)
|
—
|
—
|
—
|
—
|
||||||||||||
Dilutive
2008 Convertible Loans (3)
|
—
|
—
|
—
|
—
|
||||||||||||
Diluted
|
52,945
|
47,492
|
51,073
|
47,200
|
||||||||||||
Basic
loss per share
|
$
|
(0.80
|
)
|
$
|
(1.51
|
)
|
$
|
(2.71
|
)
|
$
|
(5.55
|
)
|
||||
Diluted
loss per share
|
$
|
(0.80
|
)
|
$
|
(1.51
|
)
|
$
|
(2.71
|
)
|
$
|
(5.55
|
)
|
(1)
|
Stock
options, phantom stock and unvested stock representing securities that
could potentially dilute basic EPS in the future that were not included in
the diluted computation because they would have been anti-dilutive for the
three and nine months ended September 30, 2009 and 2008, were $10.7
million and $7.4 million,
respectively.
|
(2)
|
Common
shares of 5.8 million and 9.2 million issuable upon conversion of the
Convertible Senior Unsecured Notes for the three and nine-month periods
ended September 30, 2009 and the three and nine-months periods ended
September 30, 2008, respectively, were not included in the diluted
computation because the computation of diluted net loss per share
utilizing the “if-converted” method would be
anti-dilutive.
|
(3)
|
Common
shares of 50.0 million issuable upon conversion of the 2008 Convertible
Loans were not included in the computation of diluted because the
computation of diluted net loss per share utilizing the “if-converted”
method would be anti-dilutive.
|
Three
Months Ended
September
30,
|
Nine
Months Ended
September
30,
|
|||||||||||||||
2009
|
2008
|
2009
|
2008
|
|||||||||||||
(As
adjusted)
|
(As
adjusted)
|
|||||||||||||||
Net
loss
|
$
|
(42,497
|
)
|
$
|
(71,619
|
)
|
$
|
(138,289
|
)
|
$
|
(261,885
|
)
|
||||
Other
comprehensive loss items:
|
||||||||||||||||
Foreign
currency translation
|
71
|
(17
|
)
|
113
|
(80
|
)
|
||||||||||
Comprehensive
loss
|
$
|
(42,426
|
)
|
$
|
(71,636
|
)
|
$
|
(138,176
|
)
|
$
|
(261,965
|
)
|
Nine
Months Ended
September
30,
|
||||||||
2009
|
2008
|
|||||||
Cash
paid during the period for interest, net of amounts
capitalized
|
$
|
91,204
|
$
|
29,752
|
||||
Construction-in-process
and debt issuance additions funded with accrued
liabilities
|
5,592
|
77,006
|
Three
Months Ended
September
30,
|
Nine
Months Ended
September
30,
|
|||||||||||||||
2009
|
2008
|
2009
|
2008
|
|||||||||||||
(As
adjusted)
|
(As
adjusted)
|
|||||||||||||||
Revenues:
|
||||||||||||||||
LNG
receiving terminal (1)
|
$
|
128,533
|
$
|
—
|
$
|
286,777
|
$
|
—
|
||||||||
Natural
gas pipeline
|
293
|
565
|
799
|
916
|
||||||||||||
LNG
& natural gas marketing (1)
|
(73,376
|
)
|
3,464
|
(195,716
|
)
|
3,238
|
||||||||||
Eliminations
(2)
|
85
|
(1,304
|
)
|
1,295
|
(1,331
|
)
|
||||||||||
Corporate
and other (3)
|
797
|
1,375
|
2,370
|
3,668
|
||||||||||||
Total
consolidated
|
$
|
56,332
|
$
|
4,100
|
$
|
95,525
|
$
|
6,491
|
||||||||
Net
income (loss):
|
||||||||||||||||
LNG
receiving terminal (1)
|
$
|
66,975
|
$
|
(23,193
|
)
|
$
|
123,432
|
$
|
(63,360
|
)
|
||||||
Natural
gas pipeline
|
(16,485
|
)
|
(16,789
|
)
|
(49,740
|
)
|
(20,852
|
)
|
||||||||
LNG
& natural gas marketing (1)
|
(65,921
|
)
|
45,149
|
(197,332
|
)
|
(23,016
|
)
|
|||||||||
Corporate
and other (3)
|
(27,066
|
)
|
(76,786
|
)
|
(14,650
|
)
|
(154,657
|
)
|
||||||||
Total
consolidated
|
$
|
(42,497
|
)
|
$
|
(71,619
|
)
|
$
|
(138,290
|
)
|
$
|
(261,885
|
)
|
||||
Expenditures
for additions to long-lived assets:
|
||||||||||||||||
LNG
receiving terminal (1)
|
$
|
20,663
|
$
|
65,964
|
$
|
110,598
|
$
|
360,079
|
||||||||
Natural
gas pipeline
|
(5,021
|
)
|
5,333
|
(4,111
|
)
|
147,576
|
||||||||||
LNG
& natural gas marketing (1)
|
84
|
(13
|
)
|
1,084
|
(473
|
)
|
||||||||||
Corporate
and other (3)
|
(181
|
)
|
(3,489
|
)
|
(1,222
|
)
|
(6,845
|
)
|
||||||||
Total
consolidated
|
$
|
15,545
|
$
|
67,795
|
$
|
106,349
|
$
|
500,337
|
September
30,
2009
|
December
31,
2008
|
|||||||
Total
assets:
|
(As
adjusted)
|
|||||||
LNG
receiving terminal
|
$
|
2,073,045
|
$
|
2,191,671
|
||||
Natural
gas pipeline
|
575,185
|
590,995
|
||||||
LNG
& natural gas marketing
|
128,637
|
136,138
|
||||||
Corporate
and other (1)
|
12,178
|
1,278
|
||||||
Total
consolidated
|
$
|
2,789,045
|
$
|
2,920,082
|
(1)
|
Segment
revenues include intersegment sales and related costs of sales to
affiliated subsidiaries, primarily TUA fees of $62.5 million and $187.6
million paid by Cheniere Marketing to Sabine Pass LNG, which are
eliminated in consolidation for the three and nine month periods ended
September 30, 2009. Affiliated sales are recognized on the basis of
prevailing market, regulated prices or at levels provided for under
contractual agreements. Operating income is derived from revenues and
expenses directly associated with each segment.
|
(2)
|
Eliminates
intersegment sales primarily related to intercompany pipeline
transactions.
|
(3)
|
Includes
corporate activities and oil and gas exploration, development and
exploitation activities. Our oil and gas exploration, development and
exploitation activities have been included in the corporate and other
column because these activities do not materially impact our financial
statements. Amounts are restated to include oil and gas exploration,
development and exploitation activities within the corporate and other
segment as of December 31, 2008 and for the three and nine month periods
ended September 30, 2008.
|
Option
|
Weighted
Average
Exercise
Price
|
Weighted
Average
Remaining
Contractual
Term
|
Aggregate
Intrinsic
Value
|
|||||||||||||
(in thousands)
|
(in thousands)
|
|||||||||||||||
Outstanding
at January 1, 2009
|
1,206
|
$
|
28.96
|
|||||||||||||
Granted
|
—
|
—
|
||||||||||||||
Exercised
|
—
|
—
|
||||||||||||||
Forfeited
or Expired
|
(323
|
) |
36.07
|
|||||||||||||
Outstanding
at September 30, 2009
|
883
|
$
|
26.36
|
5.34
|
—
|
|||||||||||
Exercisable
at September 30, 2009
|
843
|
$
|
25.73
|
5.28
|
—
|
Non-Vested
Shares
|
Weighted
Average Grant
Date
Fair
ValuePer
Share
|
||||
(in thousands)
|
|||||
Non-vested
at January 1, 2009
|
3,724
|
$
|
3.46
|
||
Granted
|
326
|
—
|
|||
Vested
|
(532
|
) |
9.48
|
||
Forfeited
|
(86
|
) |
4.47
|
||
Non-vested
at September 30, 2009
|
3,432
|
$
|
2.18
|
ITEM 2.
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MANAGEMENT’S
DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS
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|
•
|
statements
relating to the construction and operation of each of our existing or
proposed liquefied natural gas (“LNG”) receiving terminals or our existing
or proposed pipelines, or expansions or extensions thereof, including
statements concerning the completion or expansion thereof by certain dates
or at all, the costs related thereto and certain characteristics,
including amounts of regasification and storage capacity, the number of
storage tanks and docks, pipeline deliverability and the number of
pipeline interconnections, if any;
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|
•
|
statements
regarding future levels of domestic natural gas production, supply or
consumption; future levels of LNG production or LNG imports into North
America; sales of natural gas in North America; and the transportation,
other infrastructure or prices related to natural gas, LNG or other energy
sources or hydrocarbon products;
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|
•
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statements
regarding any financing transactions or arrangements, or ability to enter
into such transactions or arrangements, whether on the part of Cheniere or
any subsidiary or at the project
level;
|
|
•
|
statements
regarding any terminal use agreement (“TUA”) or other commercial
arrangements presently contracted, optioned or marketed or potential
arrangements to be performed substantially in the future, including any
cash distributions and revenues anticipated to be received and the
anticipated timing thereof, and statements regarding the amounts of LNG
regasification capacity that are, or may become subject to, TUAs or other
contracts;
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|
•
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statements
regarding counterparties to our TUAs, construction contracts and other
contracts;
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•
|
statements
regarding any business strategies, any business plans or any other plans,
forecasts, projections or objectives, including potential revenues,
capital expenditures, cost savings and strategic options, any or all of
which are subject to change;
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|
•
|
statements
regarding legislative, governmental, regulatory, administrative or other
public body actions, requirements, permits, investigations, proceedings or
decisions;
|
|
•
|
statements
regarding our anticipated LNG and natural gas marketing activities;
and
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|
•
|
any
other statements that relate to non-historical or future
information.
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|
•
|
Sabine
Pass LNG received capacity reservation fee payments from Cheniere
Marketing, our wholly owned subsidiary, Total Gas & Power North
America, Inc. (formally known as Total LNG USA, Inc.) (“Total”) and
Chevron U.S.A., Inc. (“Chevron”);
|
|
•
|
we
began receiving limited partner distributions from Freeport LNG
Development, L.P. (“Freeport LNG”);
|
|
•
|
Cheniere
Marketing purchased, transported and successfully unloaded commercial LNG
cargos into the Sabine Pass LNG receiving
terminal;
|
|
•
|
we
reduced debt by exchanging $120.4 million aggregate principal amount of
our 2¼% Convertible Senior Unsecured Notes due 2012 (“Convertible Senior
Unsecured Notes”) for a combination of $30.0 million cash and cash
equivalents and 4.0 million shares of our common stock, reducing our
principal amount due in 2012 to $204.6 million, at September 30, 2009;
and
|
|
•
|
we
substantially completed construction and achieved full operability of our
LNG receiving terminal with approximately 4.0 Bcf/d of total sendout
capacity and five LNG storage tanks with approximately 16.9 Bcf of
aggregate storage capacity.
|
(in
thousands)
|
SabinePass
LNG,
L.P.
|
Cheniere
Energy
Partners,
L.P.
|
Other
Cheniere
Energy,
Inc.
|
Consolidated
Cheniere Energy,
Inc.
|
||||||||||||
Cash
and cash equivalents
|
$
|
—
|
$
|
—
|
$
|
87,354
|
$
|
87,354
|
||||||||
Restricted
cash and cash equivalents
|
258,724
|
210
|
7,231
|
266,165
|
||||||||||||
Total
|
$
|
258,724
|
$
|
210
|
$
|
94,585
|
$
|
353,519
|
|
•
|
Total
Gas and Power North America, Inc. (formerly known as Total LNG USA, Inc.)
(“Total”) has reserved approximately 1.0 Bcf/d of regasification capacity
and has agreed to make monthly capacity payments to Sabine Pass LNG
aggregating approximately $125 million per year for 20 years that
commenced April 1, 2009. Total, S.A. has guaranteed Total’s
obligations under its TUA up to $2.5 billion, subject to certain
exceptions; and
|
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•
|
Chevron
U.S.A., Inc. (“Chevron”) has reserved approximately 1.0 Bcf/d of
regasification capacity and has agreed to make monthly capacity payments
to Sabine Pass LNG aggregating approximately $125 million per year for 20
years that commenced July 1, 2009. Chevron Corporation has guaranteed
Chevron’s obligations under its TUA up to 80% of the fees payable by
Chevron.
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Nine
Months Ended
September
30,
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||||||||
2009
|
2008
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|||||||
(As
adjusted)
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||||||||
SOURCES
OF CASH AND CASH EQUIVALENTS
|
||||||||
Use
of restricted cash and cash equivalents
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$
|
219,727
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$
|
391,399
|
||||
Use
of restricted treasury securities
|
—
|
12,673
|
||||||
Proceeds
from debt
|
—
|
239,965
|
||||||
Proceeds
from related party debt
|
—
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250,000
|
||||||
Distributions
from limited partnership investment
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9,000
|
4,800
|
||||||
Sale
of common stock
|
—
|
471
|
||||||
Total
sources of cash and cash equivalents
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228,727
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899,308
|
||||||
USES
OF CASH AND CASH EQUIVALENTS
|
||||||||
LNG
terminal and pipeline construction-in-process
|
(97,991
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)
|
(521,687
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)
|
||||
Debt
repurchases
|
(30,030
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)
|
—
|
|||||
Operating
cash flow
|
(94,226
|
)
|
(101,412
|
)
|
||||
Distributions
to non-controlling interest holders
|
(19,794
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)
|
(19,794
|
)
|
||||
Purchases
of intangible and fixed assets, net of sales
|
(760
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)
|
(2,765
|
)
|
||||
Debt
issuance costs
|
(121
|
)
|
(28,148
|
)
|
||||
Purchase
of treasury shares
|
(80
|
)
|
(4,405
|
)
|
||||
Purchase
of LNG for commissioning, net of amounts transferred to LNG terminal
construction-in-process
|
—
|
(16,595
|
)
|
|||||
Advances
under long-term contracts, net of transfers to
construction-in-process
|
—
|
(6,587
|
)
|
|||||
Investment
in restricted cash and cash equivalents
|
—
|
(255,586
|
)
|
|||||
Repayment
of debt
|
—
|
(95,000
|
)
|
|||||
Other
|
(563
|
)
|
(15,522
|
)
|
||||
Total
uses of cash and cash equivalents
|
(243,565
|
)
|
(1,067,501
|
)
|
||||
NET
DECREASE IN CASH AND CASH EQUIVALENTS
|
(14,838
|
)
|
(168,193
|
)
|
||||
CASH
AND CASH EQUIVALENTS—beginning of period
|
102,192
|
296,530
|
||||||
CASH
AND CASH EQUIVALENTS—end of period
|
$
|
87,354
|
$
|
128,337
|
Sabine
Pass
LNG,
L.P.
|
Cheniere
Energy
Partners,
L.P.
|
Other
Cheniere
Energy,
Inc.
|
Consolidated
Cheniere Energy,
Inc.
|
|||||||||||||
Long-term
debt (including related parties)
|
||||||||||||||||
Senior
Notes (including related parties)
|
$ | 2,215,500 | $ | — | $ | — | $ | 2,215,500 | ||||||||
2007
Term Loan
|
— | — | 400,000 | 400,000 | ||||||||||||
2008
Convertible Loans (including related parties)
|
— | — | 285,259 | 285,259 | ||||||||||||
Convertible
Senior Unsecured Notes
|
— | — | 204,630 | 204,630 | ||||||||||||
Total
long-term debt
|
2,215,500 | — | 889,889 | 3,105,389 | ||||||||||||
Debt
discount (including related parties)
|
||||||||||||||||
Senior
Notes (including related parties) (1)
|
(33,645 | ) | — | — | (33,645 | ) | ||||||||||
Convertible
Senior Unsecured Notes (2)
|
— | — | (42,768 | ) | (42,768 | ) | ||||||||||
Total
debt discount
|
(33,645 | ) | (42,768 | ) | (76,413 | ) | ||||||||||
Long-term
debt (including related parties), net of discount
|
$ | 2,181,855 | $ | — | $ | 847,121 | $ | 3,028,976 |
(1)
|
In
September 2008, Sabine Pass LNG issued an additional $183.5 million, par
value, of 2016 Notes. The net proceeds from the additional
issuance of the 2016 Notes were $145.0 million. The difference
between the par value and the net proceeds is the debt discount, which
will be amortized through the maturity of the 2016
Notes.
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(2)
|
Effective
as of January 1, 2009, we are required to record a debt discount on our
Convertible Senior Unsecured Notes. The unamortized discount
will be amortized through the maturity of the Convertible Senior Unsecured
Notes.
|
|
•
|
inability
to recover cost increases due to rate caps and rate case
moratoriums;
|
|
•
|
inability
to recover capitalized costs, including an adequate return on those costs
through the rate-making process and the FERC
proceedings;
|
|
•
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excess
capacity;
|
|
•
|
increased
competition and discounting in the markets we serve;
and
|
|
•
|
impacts
of ongoing regulatory initiatives in the natural gas
industry.
|
|
Item 3.
|
Quantitative
and Qualitative Disclosures About Market
Risk
|
|
Item 4.
|
Disclosure
Controls and Procedures
|
Item 1.
|
Legal
Proceedings
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Item 6.
|
Exhibits
|
10.1
|
Change
Order 61 to Lump Sum Turnkey Engineering, Procurement and Construction
Agreement dated December 18, 2004, between Sabine Pass LNG, L.P. and
Bechtel Corporation
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10.2
|
Change
Order 62 to Lump Sum Turnkey Engineering, Procurement and Construction
Agreement dated December 18, 2004, between Sabine Pass LNG, L.P. and
Bechtel Corporation
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10.3
|
Change
Orders 13, 14, 15 and 16 to Engineer, Procure and Construct (EPC) LNG Unit
Rates Soil Contract, dated July 21, 2006, between Sabine Pass LNG, L.P.
and Remedial Construction Services, L.P.
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10.4
|
Third
Amendment to Guarantee and Collateral Agreement (Crest Entities) and
Fourth Amendment to Guarantee and Collateral Agreement (Non-Crest
Entities), dated September 17, 2009, by Cheniere Common Units Holdings,
LLC, the guarantors and the grantors signatory thereto and The Bank of New
York Mellon, as collateral agent
|
10.5
|
Fifth
Amendment to Credit Agreement, dated September 17, 2009, by Cheniere
Common Units Holdings, LLC, the other Loan Parties (as defined therein),
the Lenders (as defined therein) and The Bank of New York Mellon, as
administrative agent and collateral agent
|
10.6
|
Assumption
Agreement, dated September 17, 2009, by Cheniere Marketing, LLC (formerly
Cheniere Marketing, Inc.) in favor of The Bank of New York Mellon as
collateral agent
|
31.1
|
Certification
by Chief Executive Officer required by Rule 13a-14(a) and 15d-14(a) under
the Exchange Act
|
31.2
|
Certification
by Chief Financial Officer required by Rule 13a-14(a) and 15d-14(a) under
the Exchange Act
|
32.1
|
Certification
by Chief Executive Officer pursuant to 18 U.S.C. Section 1350, as adopted
pursuant to Section 906 of the Sarbanes-Oxley Act of
2002
|
32.2
|
Certification
of Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted
pursuant to Section 906 of the Sarbanes-Oxley Act of
2002
|
CHENIERE
ENERGY, INC.
|
|
/s/ JERRY
D.
SMITH
|
|
Jerry
D. Smith
Vice
President and Chief Accounting Officer
(on
behalf of the registrant and
as
principal accounting officer)
|
|
Date:
November 5, 2009
|