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x
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QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
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¨
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TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
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Delaware
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333-192373
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27-3235920
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(State or other jurisdiction of incorporation or organization)
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(Commission File Number)
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(I.R.S. Employer Identification No.)
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700 Milam Street, Suite 1900
Houston, Texas
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77002
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(Address of principal executive offices)
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(Zip Code)
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Large accelerated filer
¨
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Accelerated filer
¨
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Non-accelerated filer
x
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Smaller reporting company
¨
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(Do not check if a smaller reporting company)
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Bcf/d
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billion cubic feet per day
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Bcf/yr
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billion cubic feet per year
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DOE
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U.S. Department of Energy
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EPC
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engineering, procurement and construction
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FERC
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Federal Energy Regulatory Commission
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FTA countries
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countries with which the United States has a free trade agreement providing for national treatment for trade in natural gas
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GAAP
|
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generally accepted accounting principles in the United States
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Henry Hub
|
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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
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LIBOR
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London Interbank Offered Rate
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LNG
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liquefied natural gas, a product of natural gas consisting primarily of methane (CH4) that is in liquid form at near atmospheric pressure
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MMBtu
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million British thermal units, an energy unit
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mtpa
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million tonnes per annum
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non-FTA countries
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countries without a free trade agreement providing for national treatment for trade in natural gas and with which trade is permitted
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SEC
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Securities and Exchange Commission
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SPA
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LNG sale and purchase agreement
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Train
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a refrigerant compressor train used in the industrial process to convert natural gas into LNG
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TUA
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terminal use agreement
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Cheniere
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Cheniere Energy, Inc.
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Cheniere Investments
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Cheniere Energy Investments, LLC
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Cheniere Marketing
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Cheniere Marketing, LLC
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Cheniere Partners
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Cheniere Energy Partners, L.P.
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Cheniere Terminals
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Cheniere LNG Terminals, LLC
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CTPL
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Cheniere Creole Trail Pipeline, L.P.
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SPLNG
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Sabine Pass LNG, L.P.
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June 30,
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December 31,
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||||
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2015
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2014
|
||||
ASSETS
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(unaudited)
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||||
Current assets
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||||
Cash and cash equivalents
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$
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—
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$
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—
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Restricted cash
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340,545
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|
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155,810
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Accounts receivable—affiliate
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|
1,255
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|
2,750
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|
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Advances to affiliate
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15,586
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|
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23,969
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|
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Other current assets
|
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7,308
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|
|
3,541
|
|
||
Other current assets—affiliate
|
|
5,251
|
|
|
153
|
|
||
Total current assets
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|
369,945
|
|
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186,223
|
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||||
Non-current restricted cash
|
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655,970
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457,053
|
|
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Property, plant and equipment, net
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8,420,767
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6,962,395
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Debt issuance costs, net
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281,623
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228,913
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Non-current derivative assets
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426
|
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11,744
|
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Other non-current assets
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118,054
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99,417
|
|
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Total assets
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$
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9,846,785
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$
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7,945,745
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LIABILITIES AND MEMBER’S EQUITY
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||||
Current liabilities
|
|
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|
||||
Accounts payable
|
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$
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5,054
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$
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5,974
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Accrued liabilities
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286,501
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113,538
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|
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Due to affiliates
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41,091
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13,051
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Derivative liabilities
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7,839
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23,247
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|
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Other current liabilities
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60
|
|
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—
|
|
||
Total current liabilities
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|
340,545
|
|
|
155,810
|
|
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|
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|
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|
||||
Long-term debt, net
|
|
8,516,202
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|
|
6,517,266
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|
||
Non-current derivative liabilities
|
|
653
|
|
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268
|
|
||
|
|
|
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|
||||
Member’s equity
|
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989,385
|
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1,272,401
|
|
||
Total liabilities and member’s equity
|
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$
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9,846,785
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$
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7,945,745
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Three Months Ended
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Six Months Ended
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||||||||||||
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June 30,
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June 30,
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||||||||||||
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2015
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2014
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2015
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2014
|
||||||||
Revenues
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$
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—
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$
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—
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$
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—
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$
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—
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||||||||
Expenses
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||||||
Development expense
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1,367
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3,792
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2,518
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|
|
7,288
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|
||||
Development expense—affiliate
|
206
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|
|
242
|
|
|
410
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|
|
394
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|
||||
General and administrative expense
|
1,562
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1,823
|
|
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2,720
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3,346
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|
||||
General and administrative expense—affiliate
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24,791
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15,462
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39,366
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35,429
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|
||||
Terminal use agreement maintenance expense (recovery)
|
(279
|
)
|
|
14,906
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17,521
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14,433
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|
||||
Terminal use agreement maintenance expense—affiliate
|
143
|
|
|
106
|
|
|
178
|
|
|
337
|
|
||||
Depreciation expense
|
412
|
|
|
269
|
|
|
818
|
|
|
361
|
|
||||
Operating and maintenance expense
|
997
|
|
|
2,035
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|
|
3,406
|
|
|
2,035
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|
||||
Operating and maintenance expense—affiliate
|
78
|
|
|
5
|
|
|
128
|
|
|
5
|
|
||||
Total expenses
|
29,277
|
|
|
38,640
|
|
|
67,065
|
|
|
63,628
|
|
||||
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|
||||||||
Loss from operations
|
(29,277
|
)
|
|
(38,640
|
)
|
|
(67,065
|
)
|
|
(63,628
|
)
|
||||
|
|
|
|
|
|
|
|
||||||||
Other income (expense)
|
|
|
|
|
|
|
|
|
|
||||||
Interest expense, net
|
(12,915
|
)
|
|
—
|
|
|
(19,309
|
)
|
|
—
|
|
||||
Loss on early extinguishment of debt
|
(7,281
|
)
|
|
(114,335
|
)
|
|
(96,273
|
)
|
|
(114,335
|
)
|
||||
Derivative gain (loss), net
|
1,214
|
|
|
(60,255
|
)
|
|
(35,225
|
)
|
|
(95,178
|
)
|
||||
Other income (expense)
|
158
|
|
|
(247
|
)
|
|
222
|
|
|
(176
|
)
|
||||
Total other expense
|
(18,824
|
)
|
|
(174,837
|
)
|
|
(150,585
|
)
|
|
(209,689
|
)
|
||||
|
|
|
|
|
|
|
|
||||||||
Net loss
|
$
|
(48,101
|
)
|
|
$
|
(213,477
|
)
|
|
$
|
(217,650
|
)
|
|
$
|
(273,317
|
)
|
|
Sabine Pass LNG-LP, LLC
|
|
Total Member’s Equity
|
||||
Balance at December 31, 2014
|
$
|
1,272,401
|
|
|
$
|
1,272,401
|
|
Capital contributions from Cheniere Partners
|
15,149
|
|
|
15,149
|
|
||
Non-cash distributions to limited partner for conveyance of assets under the Cooperation Agreement
|
(80,515
|
)
|
|
(80,515
|
)
|
||
Net loss
|
(217,650
|
)
|
|
(217,650
|
)
|
||
Balance at June 30, 2015
|
$
|
989,385
|
|
|
$
|
989,385
|
|
|
Six Months Ended
|
||||||
|
June 30,
|
||||||
|
2015
|
|
2014
|
||||
Cash flows from operating activities
|
|
|
|
||||
Net loss
|
$
|
(217,650
|
)
|
|
$
|
(273,317
|
)
|
Adjustments to reconcile net loss to net cash provided by (used in) operating activities:
|
|
|
|
||||
Depreciation expense
|
818
|
|
|
361
|
|
||
Non-cash terminal use agreement maintenance expense
|
16,417
|
|
|
14,978
|
|
||
Total losses on derivatives, net
|
35,144
|
|
|
95,178
|
|
||
Net cash used for settlement of derivative instruments
|
(38,171
|
)
|
|
(17,864
|
)
|
||
Loss on extinguishment of debt
|
96,273
|
|
|
114,335
|
|
||
Changes in restricted cash for certain operating activities
|
37,976
|
|
|
71,977
|
|
||
Changes in operating assets and liabilities:
|
|
|
|
||||
LNG inventory
|
1,864
|
|
|
(16,217
|
)
|
||
Accounts payable
|
(254
|
)
|
|
1,758
|
|
||
Accrued liabilities
|
75,062
|
|
|
229
|
|
||
Due to affiliates
|
9,467
|
|
|
1,484
|
|
||
Advances to affiliate
|
8,383
|
|
|
9,108
|
|
||
Other, net
|
(4,996
|
)
|
|
(3,750
|
)
|
||
Other—affiliate
|
(20,333
|
)
|
|
1,740
|
|
||
Net cash provided by (used in) operating activities
|
—
|
|
|
—
|
|
||
|
|
|
|
||||
Cash flows from investing activities
|
|
|
|
|
|
||
Property, plant and equipment, net
|
(1,398,960
|
)
|
|
(1,257,563
|
)
|
||
Use of restricted cash for the acquisition of property, plant and equipment
|
1,448,523
|
|
|
1,255,046
|
|
||
Other
|
(49,563
|
)
|
|
2,517
|
|
||
Net cash provided by (used in) investing activities
|
—
|
|
|
—
|
|
||
|
|
|
|
||||
Cash flows from financing activities
|
|
|
|
|
|
||
Proceeds from issuances of long-term debt
|
2,000,000
|
|
|
2,584,500
|
|
||
Repayments of long-term debt
|
—
|
|
|
(177,000
|
)
|
||
Capital contributions from Cheniere Partners
|
15,149
|
|
|
9,715
|
|
||
Investment in restricted cash
|
(1,870,151
|
)
|
|
(2,332,018
|
)
|
||
Debt issuance and deferred financing costs
|
(144,998
|
)
|
|
(85,197
|
)
|
||
Net cash provided by (used in) financing activities
|
—
|
|
|
—
|
|
||
|
|
|
|
||||
Net increase (decrease) in cash and cash equivalents
|
—
|
|
|
—
|
|
||
Cash and cash equivalents—beginning of period
|
—
|
|
|
—
|
|
||
Cash and cash equivalents—end of period
|
$
|
—
|
|
|
$
|
—
|
|
|
|
June 30,
|
|
December 31,
|
||||
|
|
2015
|
|
2014
|
||||
LNG terminal costs
|
|
|
|
|
||||
LNG terminal
|
|
$
|
13,171
|
|
|
$
|
12,821
|
|
LNG terminal construction-in-process
|
|
8,403,210
|
|
|
6,946,242
|
|
||
Accumulated depreciation
|
|
(446
|
)
|
|
(260
|
)
|
||
Total LNG terminal costs, net
|
|
8,415,935
|
|
|
6,958,803
|
|
||
Fixed assets
|
|
|
|
|
|
|
||
Vehicles
|
|
1,337
|
|
|
854
|
|
||
Furniture and fixtures
|
|
1,154
|
|
|
1,154
|
|
||
Machinery and equipment
|
|
339
|
|
|
339
|
|
||
Other
|
|
3,680
|
|
|
2,292
|
|
||
Accumulated depreciation
|
|
(1,678
|
)
|
|
(1,047
|
)
|
||
Total fixed assets, net
|
|
4,832
|
|
|
3,592
|
|
||
Property, plant and equipment, net
|
|
$
|
8,420,767
|
|
|
$
|
6,962,395
|
|
•
|
commodity derivatives to hedge the exposure to price risk attributable to future sales of our LNG inventory (“Natural Gas Derivatives”);
|
•
|
commodity derivatives consisting of natural gas purchase agreements and associated economic hedges to secure natural gas feedstock for the Liquefaction Project (“Liquefaction Supply Derivatives”); and
|
•
|
interest rate swaps to hedge the exposure to volatility in a portion of the floating-rate interest payments under the 2015 Credit Facilities (“Interest Rate Derivatives”).
|
|
Fair Value Measurements as of
|
||||||||||||||||||||||||||||||
|
June 30, 2015
|
|
December 31, 2014
|
||||||||||||||||||||||||||||
|
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
|
||||||||||||||||
Natural Gas Derivatives asset
|
$
|
—
|
|
|
$
|
163
|
|
|
$
|
—
|
|
|
$
|
163
|
|
|
$
|
—
|
|
|
$
|
1,071
|
|
|
$
|
—
|
|
|
$
|
1,071
|
|
Liquefaction Supply Derivatives asset (liability)
|
—
|
|
|
(27
|
)
|
|
440
|
|
|
413
|
|
|
—
|
|
|
—
|
|
|
342
|
|
|
342
|
|
||||||||
Interest Rate Derivatives liability
|
—
|
|
|
(8,172
|
)
|
|
—
|
|
|
(8,172
|
)
|
|
—
|
|
|
(12,036
|
)
|
|
—
|
|
|
(12,036
|
)
|
|
|
Net Fair Value Asset
|
|
Valuation Technique
|
|
Significant Unobservable Input
|
|
Significant Unobservable Inputs Range
|
Liquefaction Supply Derivatives
|
|
$440
|
|
Income Approach
|
|
Basis Spread
|
|
$ (0.350) - $0.020
|
|
|
June 30, 2015
|
|
December 31, 2014
|
||||||||||||||||||||
|
|
Natural Gas Derivatives (1)
|
|
Liquefaction Supply Derivatives
|
|
Total
|
|
Natural Gas Derivatives (1)
|
|
Liquefaction Supply Derivatives
|
|
Total
|
||||||||||||
Balance Sheet Location
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
Other current assets
|
|
$
|
163
|
|
|
$
|
307
|
|
|
$
|
470
|
|
|
$
|
1,071
|
|
|
$
|
76
|
|
|
$
|
1,147
|
|
Non-current derivative assets
|
|
—
|
|
|
426
|
|
|
426
|
|
|
—
|
|
|
586
|
|
|
586
|
|
||||||
Total derivative assets
|
|
163
|
|
|
733
|
|
|
896
|
|
|
1,071
|
|
|
662
|
|
|
1,733
|
|
||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
Derivative liabilities
|
|
—
|
|
|
(222
|
)
|
|
(222
|
)
|
|
—
|
|
|
(53
|
)
|
|
(53
|
)
|
||||||
Non-current derivative liabilities
|
|
—
|
|
|
(98
|
)
|
|
(98
|
)
|
|
—
|
|
|
(267
|
)
|
|
(267
|
)
|
||||||
Total derivative liabilities
|
|
—
|
|
|
(320
|
)
|
|
(320
|
)
|
|
—
|
|
|
(320
|
)
|
|
(320
|
)
|
||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
Derivative asset, net
|
|
$
|
163
|
|
|
$
|
413
|
|
|
$
|
576
|
|
|
$
|
1,071
|
|
|
$
|
342
|
|
|
$
|
1,413
|
|
|
(1)
|
Does not include a collateral
deposit
of
$0.2 million
and a collateral call of
$1.0 million
for such contracts, which are included in
other current assets
in our Balance Sheets as of
June 30, 2015
and
December 31, 2014
, respectively.
|
|
|
|
Three Months Ended June 30,
|
|
Six Months Ended June 30,
|
||||||||||||
|
Statement of Operations Location
|
|
2015
|
|
2014
|
|
2015
|
|
2014
|
||||||||
Natural Gas Derivatives gain (loss)
|
Derivative gain (loss), net
|
|
$
|
(255
|
)
|
|
$
|
(133
|
)
|
|
$
|
444
|
|
|
$
|
(577
|
)
|
Liquefaction Supply Derivatives gain (1)
|
Operating and maintenance expense
|
|
81
|
|
|
—
|
|
|
81
|
|
|
—
|
|
|
|
|
Initial Notional Amount
|
|
Maximum Notional Amount
|
|
Effective Date
|
|
Maturity Date
|
|
Weighted Average Fixed Interest Rate Paid
|
|
Variable Interest Rate Received
|
Interest Rate Derivatives
|
|
$20.0 million
|
|
$690.8 million
|
|
August 14, 2012
|
|
July 31, 2019
|
|
1.98%
|
|
One-month LIBOR
|
|
|
|
|
Fair Value Measurements as of
|
||||||
|
|
Balance Sheet Location
|
|
June 30, 2015
|
|
December 31, 2014
|
||||
Interest Rate Derivatives
|
|
Non-current derivative assets (Other non-current liabilities)
|
|
$
|
(555
|
)
|
|
$
|
11,158
|
|
Interest Rate Derivatives
|
|
Derivative liabilities
|
|
(7,617
|
)
|
|
(23,194
|
)
|
|
Three Months Ended June 30,
|
|
Six Months Ended June 30,
|
||||||||||||
|
2015
|
|
2014
|
|
2015
|
|
2014
|
||||||||
Interest Rate Derivatives gain (loss)
|
$
|
1,469
|
|
|
$
|
(60,122
|
)
|
|
$
|
(35,669
|
)
|
|
$
|
(94,601
|
)
|
|
|
Gross Amounts Recognized
|
|
Gross Amounts Offset in the Balance Sheets
|
|
Net Amounts Presented in the Balance Sheets
|
||||||
Offsetting Derivative Assets (Liabilities)
|
|
|
|
|||||||||
As of June 30, 2015
|
|
|
|
|
|
|
||||||
Natural Gas Derivatives
|
|
$
|
241
|
|
|
$
|
(78
|
)
|
|
$
|
163
|
|
Liquefaction Supply Derivatives
|
|
733
|
|
|
—
|
|
|
733
|
|
|||
Liquefaction Supply Derivatives
|
|
(320
|
)
|
|
—
|
|
|
(320
|
)
|
|||
Interest Rate Derivatives
|
|
(8,172
|
)
|
|
—
|
|
|
(8,172
|
)
|
|||
As of December 31, 2014
|
|
|
|
|
|
|
||||||
Natural Gas Derivatives
|
|
1,079
|
|
|
(8
|
)
|
|
1,071
|
|
|||
Liquefaction Supply Derivatives
|
|
662
|
|
|
—
|
|
|
662
|
|
|||
Liquefaction Supply Derivatives
|
|
(320
|
)
|
|
—
|
|
|
(320
|
)
|
|||
Interest Rate Derivatives
|
|
11,158
|
|
|
—
|
|
|
11,158
|
|
|||
Interest Rate Derivatives
|
|
(23,194
|
)
|
|
—
|
|
|
(23,194
|
)
|
|
|
June 30,
|
|
December 31,
|
||||
|
|
2015
|
|
2014
|
||||
Interest expense and related debt fees
|
|
$
|
209,692
|
|
|
$
|
97,785
|
|
LNG liquefaction costs
|
|
76,809
|
|
|
15,753
|
|
||
Total accrued liabilities
|
|
$
|
286,501
|
|
|
$
|
113,538
|
|
|
|
Interest
|
|
June 30,
|
|
December 31,
|
||||
|
|
Rate
|
|
2015
|
|
2014
|
||||
Long-term debt
|
|
|
|
|
|
|
||||
2021 Senior Notes
|
|
5.625%
|
|
$
|
2,000,000
|
|
|
$
|
2,000,000
|
|
2022 Senior Notes
|
|
6.250%
|
|
1,000,000
|
|
|
1,000,000
|
|
||
2023 Senior Notes
|
|
5.625%
|
|
1,500,000
|
|
|
1,500,000
|
|
||
2024 Senior Notes
|
|
5.750%
|
|
2,000,000
|
|
|
2,000,000
|
|
||
2025 Senior Notes
|
|
5.625%
|
|
2,000,000
|
|
|
—
|
|
||
2015 Credit Facilities (1)
|
|
(2)
|
|
—
|
|
|
—
|
|
||
Total long-term debt
|
|
|
|
8,500,000
|
|
|
6,500,000
|
|
||
Long-term debt premium
|
|
|
|
|
|
|
|
|
||
2021 Senior Notes
|
|
|
|
9,457
|
|
|
10,177
|
|
||
2023 Senior Notes
|
|
|
|
6,745
|
|
|
7,089
|
|
||
Total long-term debt, net
|
|
|
|
$
|
8,516,202
|
|
|
$
|
6,517,266
|
|
|
(1)
|
Matures on the earlier of December 31, 2020 or the second anniversary of the completion date of Trains 1 through 5 of the Liquefaction Project.
|
(2)
|
Variable interest rate, at our election, is LIBOR or the base rate plus the applicable margin. The applicable margins for
LIBOR
loans range from
1.30%
to
1.75%
, depending on the applicable 2015 Credit Facility, and the applicable margin for base rate loans is
1.75%
. Interest on
LIBOR
loans is due and payable at the end of each
LIBOR
period, and interest on base rate loans is due and payable at the end of each quarter.
|
|
|
June 30, 2015
|
|
December 31, 2014
|
||||||||||||
|
|
Carrying
Amount
|
|
Estimated
Fair Value
|
|
Carrying
Amount
|
|
Estimated
Fair Value
|
||||||||
2021 Senior Notes, net of premium (1)
|
|
$
|
2,009,457
|
|
|
$
|
2,049,646
|
|
|
$
|
2,010,177
|
|
|
$
|
1,985,050
|
|
2022 Senior Notes (1)
|
|
1,000,000
|
|
|
1,027,500
|
|
|
1,000,000
|
|
|
1,020,000
|
|
||||
2023 Senior Notes, net of premium (1)
|
|
1,506,745
|
|
|
1,493,561
|
|
|
1,507,089
|
|
|
1,476,947
|
|
||||
2024 Senior Notes (1)
|
|
2,000,000
|
|
|
1,982,500
|
|
|
2,000,000
|
|
|
1,970,000
|
|
||||
2025 Senior Notes (1)
|
|
2,000,000
|
|
|
1,960,000
|
|
|
—
|
|
|
—
|
|
||||
2015 Credit Facilities (2)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(1)
|
The Level 2 estimated fair value was based on quotations obtained from broker-dealers who make markets in these and similar instruments based on the closing trading prices on
June 30, 2015
and
December 31, 2014
, as applicable.
|
(2)
|
The Level 3 estimated fair value approximates the principal amount because the interest rates are variable and reflective of market rates and the debt may be repaid, in full or in part, at any time without penalty.
|
|
Six Months Ended June 30,
|
||||||
|
2015
|
|
2014
|
||||
Balance in property, plant and equipment, net funded with accounts payable and accrued liabilities (including affiliate)
|
$
|
232,923
|
|
|
$
|
276,788
|
|
Non-cash distributions to limited partner for conveyance of assets under Cooperation Agreement
|
80,515
|
|
|
—
|
|
ITEM 2.
|
MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
|
•
|
statements that we expect to commence or complete construction of our natural gas liquefaction project, or any expansions or portions thereof, by certain dates, or at all;
|
•
|
s
tatements regarding future levels of domestic and international natural gas production, supply or consumption or future levels of LNG exports from North America and other countries worldwide or purchases of natural gas, regardless of the source of such information, or the transportation or other infrastructure or demand for and prices related to natural gas, LNG or other hydrocarbon products
;
|
•
|
statements regarding any financing transactions or arrangements, or ability to enter into such transactions;
|
•
|
statements relating to the construction of our Trains, including statements concerning the engagement of any EPC contractor or other contractor and the anticipated terms and provisions of any agreement with any EPC or other contractor, and anticipated costs related thereto;
|
•
|
statements regarding any SPA or other agreement to be entered into or performed substantially in the future, including any revenues anticipated to be received and the anticipated timing thereof, and statements regarding the amounts of total liquefaction or storage capacities that are, or may become, subject to contracts;
|
•
|
statements regarding counterparties to our commercial contracts, construction contracts and other contracts;
|
•
|
statements regarding our planned development and construction of additional Trains, including the financing of such Trains;
|
•
|
statements that our Trains, when completed, will have certain characteristics, including amounts of liquefaction capacities;
|
•
|
statements regarding our business strategy, our strengths, our business and operation plans or any other plans, forecasts, projections, or objectives, including anticipated revenues and capital expenditures, any or all of which are subject to change;
|
•
|
statements regarding legislative, governmental, regulatory, administrative or other public body actions, approvals, requirements, permits, applications, filings, investigations, proceedings or decisions; and
|
•
|
any other statements that relate to non-historica
l or future information.
|
•
|
Overview of Business
|
•
|
Overview of Significant Events
|
•
|
Liquidity and Capital Resources
|
•
|
Results of Operations
|
•
|
Off-Balance Sheet Arrangements
|
•
|
Summary of Critical Accounting Estimates
|
•
|
Recent Accounting Standards
|
•
|
We issued an aggregate principal amount of $2.0 billion of 5.625% Senior Secured Notes due 2025 (the “2025 Senior Notes”). Net proceeds from the offering will be used to pay a portion of the capital costs associated with the construction of the first four Trains of the Liquefaction Project.
|
•
|
We received authorization from the FERC to site, construct and operate Trains 5 and 6 of the Liquefaction Project.
|
•
|
We received authorization from the DOE to export up to a combined total of the equivalent of 503.3 Bcf/yr of domestically produced LNG by vessel from Trains 5 and 6 of the Liquefaction Project to non-FTA countries for a 20-year term.
|
•
|
We entered into a lump sum turnkey contract for the engineering, procurement and construction of Train 5 of the Liquefaction Project (the “EPC Contract (Train 5)”).
|
•
|
We entered into four credit facilities (collectively, the “2015 Credit Facilities”) totaling $4.6 billion, which replaced our existing credit facilities. The 2015 Credit Facilities will be used to fund a portion of the costs of developing, constructing and placing into operation Trains 1 through 5 of the Liquefaction Project.
|
•
|
We issued a notice to proceed to Bechtel Oil, Gas and Chemicals, Inc. (“Bechtel”) under the EPC Contract (Train 5).
|
•
|
$2.0 billion
of 5.625% Senior Secured Notes due 2021 (the “2021 Senior Notes”);
|
•
|
$1.0 billion
of 6.250% Senior Secured Notes due 2022 (the “2022 Senior Notes”);
|
•
|
$1.5 billion
of 5.625% Senior Secured Notes due 2023 (the “2023 Senior Notes”);
|
•
|
$2.0 billion
of 5.75% Senior Secured Notes due 2024 (the “2024 Senior Notes” and collectively with the 2021 Senior Notes, the 2022 Senior Notes, the 2023 Senior Notes and the 2025 Senior Notes, the “Senior Notes”); and
|
•
|
$2.0 billion
of the 2025 Senior Notes.
|
|
|
Six Months Ended June 30,
|
||||||
|
|
2015
|
|
2014
|
||||
Sources of cash and cash equivalents
|
|
|
|
|
||||
Proceeds from issuances of long-term debt
|
|
$
|
2,000,000
|
|
|
$
|
2,584,500
|
|
Use of restricted cash for the acquisition of property, plant and equipment
|
|
1,448,523
|
|
|
1,255,046
|
|
||
Capital contributions from Cheniere Partners
|
|
15,149
|
|
|
9,715
|
|
||
Other
|
|
—
|
|
|
2,517
|
|
||
Total sources of cash and cash equivalents
|
|
3,463,672
|
|
|
3,851,778
|
|
||
Uses of cash and cash equivalents
|
|
|
|
|
||||
Investment in restricted cash
|
|
(1,870,151
|
)
|
|
(2,332,018
|
)
|
||
Property, plant and equipment, net
|
|
(1,398,960
|
)
|
|
(1,257,563
|
)
|
||
Repayments of long-term debt
|
|
—
|
|
|
(177,000
|
)
|
||
Debt issuance and deferred financing costs
|
|
(144,998
|
)
|
|
(85,197
|
)
|
||
Other
|
|
(49,563
|
)
|
|
—
|
|
||
Total uses of cash and cash equivalents
|
|
(3,463,672
|
)
|
|
(3,851,778
|
)
|
||
|
|
|
|
|
||||
Net increase (decrease) in cash and cash equivalents
|
|
—
|
|
|
—
|
|
||
Cash and cash equivalents-beginning of period
|
|
—
|
|
|
—
|
|
||
Cash and cash equivalents-end of period
|
|
$
|
—
|
|
|
$
|
—
|
|
Exhibit No.
|
|
Description
|
10.1
|
|
Lump Sum Turnkey Agreement for the Engineering, Procurement and Construction of the Sabine Pass LNG Stage 3 Liquefaction Facility, dated May 4, 2015, by and between Sabine Pass Liquefaction, LLC and Bechtel Oil, Gas and Chemicals, Inc. (Portions of this exhibit have been omitted and filed separately with the Securities and Exchange Commission pursuant to a request for confidential treatment.) (Incorporated by reference to Exhibit 10.1 to Cheniere Energy Partners, L.P.’s Current Report on Form 8-K/A (SEC File No. 001-33366), filed on July 1, 2015)
|
10.2*
|
|
Change order to the Lump Sum Turnkey Agreement for the Engineering, Procurement and Construction of the Sabine Pass LNG Liquefaction Facility, dated as of November 11, 2011, between Sabine Pass Liquefaction, LLC and Bechtel Oil, Gas and Chemicals, Inc.: the Change Order CO-00041 Additional Building Utility Tie-in Packages and Fire and Gas Modifications, dated April 9, 2015
|
10.3*
|
|
Change order to the Lump Sum Turnkey Agreement for the Engineering, Procurement and Construction of the Sabine Pass LNG Stage 2 Liquefaction Facility, dated as of December 20, 2012, between Sabine Pass Liquefaction, LLC and Bechtel Oil, Gas and Chemicals, Inc.: the Change Order CO-00018 Permanent Restroom Trailers and Installation of Tie-In for GTG Fuel Gas Interconnect, dated May 21, 2015
|
10.4*
|
|
Change order to the Lump Sum Turnkey Agreement for the Engineering, Procurement and Construction of the Sabine Pass LNG Stage 3 Liquefaction Facility, dated as of May 4, 2015, between Sabine Pass Liquefaction, LLC and Bechtel Oil, Gas and Chemicals, Inc.: the Change Order CO-00001 Currency and Fuel Provisional Sum Adjustment, dated June 25, 2015 (Portions of this exhibit have been omitted and filed separately with the SEC pursuant to a request for confidential treatment)
|
10.5
|
|
Second Amended and Restated Credit Agreement (Term Loan A), dated as of June 30, 2015, among Sabine Pass Liquefaction, LLC, as Borrower, Société Générale, as the Commercial Banks Facility Agent and the Common Security Trustee, and the lenders from time to time party thereto (Incorporated by reference to Exhibit 10.1 to Cheniere Energy Partners, L.P.’s Current Report on Form 8-K (SEC File No. 001-33366), filed on July 1, 2015)
|
10.6
|
|
Second Amended and Restated Common Terms Agreement, dated as of June 30, 2015, among Sabine Pass Liquefaction, LLC, as Borrower, the representatives and agents from time to time parties thereto, and Société Générale, as the Common Security Trustee and Intercreditor Agent (Incorporated by reference to Exhibit 10.2 to Cheniere Energy Partners, L.P.’s Current Report on Form 8-K (SEC File No. 001-33366), filed on July 1, 2015)
|
10.7
|
|
KEXIM Direct Facility Agreement, dated as of June 30, 2015, among Sabine Pass Liquefaction, LLC, as Borrower, The Export-Import Bank of Korea, a governmental financial institution of the Republic of Korea (“KEXIM"), as the KEXIM Direct Facility Lender, Shinhan Bank New York Branch, as the KEXIM Facility Agent, and Société Générale, as the Common Security Trustee (Incorporated by reference to Exhibit 10.3 to Cheniere Energy Partners, L.P.’s Current Report on Form 8-K (SEC File No. 001-33366), filed on July 1, 2015)
|
10.8
|
|
KEXIM Covered Facility Agreement, dated as of June 30, 2015, among Sabine Pass Liquefaction, LLC, as Borrower, Shinhan Bank New York Branch, as the KEXIM Facility Agent, Société Générale, as the Common Security Trustee, KEXIM and the lenders from time to time party thereto (Incorporated by reference to Exhibit 10.4 to Cheniere Energy Partners, L.P.’s Current Report on Form 8-K (SEC File No. 001-33366), filed on July 1, 2015)
|
10.9
|
|
Amended and Restated KSURE Covered Facility Agreement, dated as of June 30, 2015, among Sabine Pass Liquefaction, LLC, as Borrower, The Korea Development Bank, New York Branch, as the KSURE Covered Facility Agent, Société Générale, as the Common Security Trustee, and the lenders from time to time party thereto (Incorporated by reference to Exhibit 10.5 to Cheniere Energy Partners, L.P.’s Current Report on Form 8-K (SEC File No. 001-33366), filed on July 1, 2015)
|
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
|
101.INS*
|
|
XBRL Instance Document
|
101.SCH*
|
|
XBRL Taxonomy Extension Schema Document
|
101.CAL*
|
|
XBRL Taxonomy Extension Calculation Linkbase Document
|
101.DEF*
|
|
XBRL Taxonomy Extension Definition Linkbase Document
|
101.LAB*
|
|
XBRL Taxonomy Extension Labels Linkbase Document
|
101.PRE*
|
|
XBRL Taxonomy Extension Presentation Linkbase Document
|
|
|
|
|
|
*
|
Filed herewith.
|
**
|
Furnished herewith.
|
|
|
SABINE PASS LIQUEFACTION, LLC
|
|
|
|
|
|
Date:
|
July 30, 2015
|
By:
|
/s/ Michael J. Wortley
|
|
|
|
Michael J. Wortley
|
|
|
|
Chief Financial Officer
|
|
|
|
(on behalf of the registrant and
as principal financial officer)
|
|
|
|
|
Date:
|
July 30, 2015
|
By:
|
/s/ Leonard Travis
|
|
|
|
Leonard Travis
|
|
|
|
Chief Accounting Officer
|
|
|
|
(on behalf of the registrant and
as principal accounting officer)
|
PROJECT NAME:
Sabine Pass LNG Liquefaction Facility
OWNER:
Sabine Pass Liquefaction, LLC
CONTRACTOR:
Bechtel Oil, Gas and Chemicals, Inc.
DATE OF AGREEMENT: November 11, 2011
|
CHANGE ORDER NUMBER:
CO-00041
DATE OF CHANGE ORDER: April 9, 2015
|
1.
|
Parties agree Bechtel will provide engineering for utility tie-in packages for three (3) new buildings being constructed in the Existing Facility: Maintenance Building, Warehouse Building, and RTFC (Fire House) Building. The procuring, construction, and tie-ins for these buildings will be done by SPL.
|
2.
|
Parties agree Bechtel will require vendors to use Mobil brand oil for compressor oil flushing and first fill.
|
3.
|
Parties agree Bechtel will modify the current design to ensure the Regasification Area fire and gas system is separated from the Liquefaction Area control and that the Operators Work Station is separated from the Stage 3 workstation. Additionally, the operation interface of the fire and gas system will require enhancements. Additional details include:
|
a.
|
Relocation of the existing Regasification S3 Work Station to the northwest corner of the control room or downstairs room in the control building.
|
b.
|
Addition of three (3) Modbus gateway converters to be installed in the three (3) existing Stage 1 EQP panels located in the substations.
|
c.
|
Addition of three (3) Modbus gateway converters to be installed in the three (3) existing Regasification EQP panels located on the East Jetty, West Jetty, and Building A-213.
|
d.
|
Addition of one (1) fiber optic to Ethernet switch to be installed in existing telecommunication cabinet located in the telecommunication room of the control building. This switch shall be capable of supporting three (3) inputs from each of the following areas: Regasification, Stage 1, Stage 2, and Stage 3 (total of twelve (12).
|
e.
|
Addition of six (6) fiber optic serial converters to be located in the Control Building.
|
f.
|
All interface wiring/cabling including fiber optics and jumpers from the above-listed items. The fiber cable used for this change will eliminate or reduce the 20% spare fiber optic cable capacity.
|
g.
|
Changes to the system configuration so that the graphic and alarms can be accessed from HMI in other areas.
|
4.
|
Exhibit A shows the layout of the changes noted above.
|
5.
|
The overall cost breakdown for this Change Order is detailed in Exhibit B.
|
6.
|
Schedule C-1 (Milestone Payment Schedule) of Attachment C of the Agreement will be amended by including the milestone(s) listed in Exhibit C of this Change Order.
|
The original Contract Price was
|
$
|
3,900,000,000
|
|
Net change by previously authorized Change Orders (#0001-00040)
|
$
|
211,278,725
|
|
The Contract Price prior to this Change Order was
|
$
|
4,111,278,725
|
|
The Contract Price will be (increased) by this Change Order in the amount of
|
$
|
556,218
|
|
The new Contract Price including this Change Order will be
|
$
|
4,111,834,943
|
|
/s/ Ed Lehotsky
|
|
/s/ JT Jackson
|
Owner
|
|
Contractor
|
Ed Lehotsky
|
|
JT Jackson
|
Name
|
|
Name
|
VP LNG Projects
|
|
Sr. Vice President
|
Title
|
|
Title
|
May 7, 2015
|
|
April 9, 2015
|
Date of Signing
|
|
Date of Signing
|
PROJECT NAME:
Sabine Pass LNG Stage 2 Liquefaction Facility
OWNER:
Sabine Pass Liquefaction, LLC
CONTRACTOR:
Bechtel Oil, Gas and Chemicals, Inc.
DATE OF AGREEMENT: December 20, 2012
|
CHANGE ORDER NUMBER:
CO-00018
DATE OF CHANGE ORDER:
May 21, 2015
|
1.
|
Parties agree Bechtel will require vendors to use Mobil brand oil for compressor oil flushing and first fill.
|
2.
|
Parties agree Bechtel will perform the engineering and procurement needed for a tie-in to isolation block valves into the GTG Fuel Gas supply to Stage 1&2/Regas pipelines. The tie-in will be made downstream of the existing control valves PV-31018 A&B and upstream of Fuel Gas knockout drum V-120. Piping from the tie point is to be routed south underneath pipe way south of V-120 where the isolation valves are to be located. A platform is to be added to provide access to the isolation valves.
|
3.
|
Exhibit A depicts the layout of the above-referenced GTG tie-ins.
|
4.
|
Parties agree Bechtel will source three (3) Fuel Gas Valves, Woodward model #99008-1548 to support the existing Regas Operations GTG maintenance overhaul work. This Change Order includes the procurement, shipping, engineering and procurement of these items.
|
5.
|
Parties agree Bechtel will pour slabs (without piles) and provide electrical and potable water service connections for four (4) restroom trailers (P1-P4). Specifically, the details include:
|
a.
|
Bechtel will provide 120 volt power and terminate in Junction Boxes in “unclassified” area near the pipe rack location. Electrical power will be routed in existing cable tray on an existing pipe rack.
|
b.
|
Each trailer will be provided with one source of 120V (20 amp) for lighting and HVAC per Ameri-Can Engineering.
|
c.
|
Bechtel will provide slabs without piles to support the toilet trailers for each of the 4 locations. No soil improvement will be carried out.
|
d.
|
Water will be potable quality. Bechtel to provide potable water with RPZD (Reduced Pressure Zone Device).
|
e.
|
No winterization will be provided but each will have low point drains.
|
f.
|
Potable water line and electrical 110V cable will be terminated in an “unclassified” area near or adjacent to the Liquefaction pipe rack. SPL will provide the interconnection utilities from Bechtel’s tie-in location to each restroom trailer facility.
|
6.
|
Parties agree Bechtel will modify the current design to ensure the Regasification Area fire and gas system is separated from the Liquefaction Area control and that the Operators Work Station is separated from the Stage 3 workstation. Additionally, the operation interface of the fire and gas system will require enhancements. Additional details include:
|
a.
|
The addition of one (1) S3 Work Station and one (1) EQP Controller with associated fiber optic serial converter and EDIO module for interface with Regasification EQP for Fire Water Pump Start signals to be dedicated to the Liquefaction Stages 1 & 2 with provisions to incorporate future Stage 3.
|
b.
|
Addition of three (3) Modbus gateway converters to be installed in the three (3) existing Stage 2 EQP panels located in the substations.
|
c.
|
Addition of one (1) Modbus gateway converters to be installed in the existing Stage 2 EQP panels located in the Control Room.
|
d.
|
Addition of three (3) fiber optic serial converters to be located in the Control Building.
|
e.
|
All interface wiring/cabling including fiber optics and jumpers for the above items. The fiber cable used for this change will eliminate or reduce the 20% spare fiber optics capacity required by the specifications. This specification deviation has been agreed to by SPL.
|
f.
|
Changes to the system configuration so that the graphics and alarms can be accessed from HMI in other areas.
|
g.
|
Exhibit B details this scope of Work.
|
7.
|
Parties agree Bechtel will install a 3” x 2” reducer just before it ties in with 36”-24RP-14475-134-N to reduce the flow of propane and minimize the impact to the adjacent property if a spill occurred. This work is detailed in Exhibit C.
|
8.
|
Parties agree that Milestones 42.01 and 51.01 of Schedule C-1 will be amended and replaced with the following description to conform with the requirements of Article 11.1.A of the Agreement:
|
a.
|
Milestone 42.01 - “Subproject 3 - Deliver 120 Day Notice for RFSU to Cheniere.”
|
b.
|
Milestone 51.01 - “Subproject 4 - Deliver 120 Day Notice for RFSU to Cheniere.”
|
9.
|
The overall cost breakdown for this Change Order is detailed in Exhibit D.
|
10.
|
Schedule C-1 (Milestone Payment Schedule) of Attachment C of the Agreement will be amended by including the milestone(s) listed in Exhibit E of this Change Order.
|
The original Contract Price was
|
$
|
3,769,000,000
|
|
Net change by previously authorized Change Orders (#0001-00017)
|
$
|
25,308,381
|
|
The Contract Price prior to this Change Order was
|
$
|
3,794,308,381
|
|
The Contract Price will be increased by this Change Order in the amount of
|
$
|
1,078,633
|
|
The new Contract Price including this Change Order will be
|
$
|
3,795,387,014
|
|
/s/ Ed Lehotsky
|
|
/s/ JT Jackson
|
Owner
|
|
Contractor
|
Ed Lehotsky
|
|
JT Jackson
|
Name
|
|
Name
|
VP LNG Projects
|
|
Sr. Vice President
|
Title
|
|
Title
|
June 30, 2015
|
|
May 27, 2015
|
Date of Signing
|
|
Date of Signing
|
PROJECT NAME:
Sabine Pass LNG Stage 3 Liquefaction Facility
OWNER:
Sabine Pass Liquefaction, LLC
CONTRACTOR:
Bechtel Oil, Gas and Chemicals, Inc.
DATE OF AGREEMENT: May 4, 2015
|
CHANGE ORDER NUMBER:
CO-00001
DATE OF CHANGE ORDER:
June 25, 2015
|
The original Contract Price was
|
$
|
2,987,000,000
|
|
Net change by previously authorized Change Orders
|
$
|
—
|
|
The Contract Price prior to this Change Order was
|
$
|
2,987,000,000
|
|
The Contract Price will be decreased by this Change Order in the amount of
|
$
|
(35,865,556
|
)
|
The new Contract Price including this Change Order will be
|
$
|
2,951,134,444
|
|
/s/ Ed Lehotsky
|
|
/s/ JT Jackson
|
Owner
|
|
Contractor
|
Ed Lehotsky
|
|
JT Jackson
|
Name
|
|
Name
|
VP LNG Projects
|
|
Sr. Vice President
|
Title
|
|
Title
|
June 30, 2015
|
|
June 25, 2015
|
Date of Signing
|
|
Date of Signing
|
1.
|
I have reviewed this quarterly report on Form 10-Q of Sabine Pass Liquefaction, LLC;
|
2.
|
Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
|
3.
|
Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
|
4.
|
The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) for the registrant and have:
|
a)
|
Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
|
b)
|
Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation;
|
c)
|
Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and
|
5.
|
The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions):
|
a)
|
All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and
|
b)
|
Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.
|
/s/ R. Keith Teague
|
R. Keith Teague
|
Principal Executive Officer of
|
Sabine Pass Liquefaction, LLC
|
1.
|
I have reviewed this quarterly report on Form 10-Q of Sabine Pass Liquefaction, LLC;
|
2.
|
Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
|
3.
|
Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
|
4.
|
The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) for the registrant and have:
|
a)
|
Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
|
b)
|
Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation;
|
c)
|
Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and
|
5.
|
The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions):
|
a)
|
All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
|
b)
|
Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting.
|
/s/ Michael J. Wortley
|
Michael J. Wortley
|
Chief Financial Officer of
|
Sabine Pass Liquefaction, LLC
|
(1)
|
The Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934; and
|
(2)
|
The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.
|
/s/ R. Keith Teague
|
R. Keith Teague
|
Principal Executive Officer of
|
Sabine Pass Liquefaction, LLC
|
(1)
|
The Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934; and
|
(2)
|
The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.
|
/s/ Michael J. Wortley
|
Michael J. Wortley
|
Chief Financial Officer of
|
Sabine Pass Liquefaction, LLC
|