Sabine Pass Liquefaction, LLC (Form: 10-Q, Received: 11/08/2018 06:14:09)

Unsatisfied

Transaction Price

(in billions)

Weighted Average Recognition Timing (years) (1)

LNG revenues

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

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

For the quarterly period ended September 30, 2018

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

For the transition period from to

Sabine Pass Liquefaction, LLC

(Exact name of registrant as specified in its charter)



Delaware	333-192373	27-3235920
(State or other jurisdiction of incorporation or organization)	(Commission File Number)	(I.R.S. Employer Identification No.)

700 Milam Street, Suite 1900 Houston, Texas		77002
(Address of principal executive offices)		(Zip Code)

(713) 375-5000

(Registrant’s telephone number, including area code)

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

Note: As of January 1, 2018, the registrant is a voluntary filer not subject to the filing requirements of Sections 13 or 15(d) of the Securities Exchange Act of 1934. However, the registrant has filed all reports required pursuant to Sections 13 or 15(d) during the preceding 12 months as if the registrant was subject to such filing requirements.

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

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



Large accelerated filer o	Accelerated filer o
Non-accelerated filer x	Smaller reporting company o
	Emerging growth company o

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

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

Indicate the number of shares outstanding of the issuer’s classes of common stock, as of the latest practicable date: Not applicable

SABINE PASS LIQUEFACTION, LLC

TABLE OF CONTENTS



	Definitions	1
Part I. Financial Information
Item 1.	Financial Statements	2
	Balance Sheets	2
	Statements of Operations	3
	Statement of Member’s Equity (Deficit)	4
	Statements of Cash Flows	5
	Notes to Financial Statements	6

Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	20

Item 3.	Quantitative and Qualitative Disclosures about Market Risk	29

Item 4.	Controls and Procedures	29

Part II. Other Information
Item 1.	Legal Proceedings	30

Item 1A.	Risk Factors	30

Item 6.	Exhibits	31

	Signatures	32

DEFINITIONS

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

Common Industry and Other Terms



Bcf		billion cubic feet
Bcf/d		billion cubic feet per day
Bcf/yr		billion cubic feet per year
DOE		U.S. Department of Energy
EPC		engineering, procurement and construction
FERC		Federal Energy Regulatory Commission
FTA countries		countries with which the United States has a free trade agreement providing for national treatment for trade in natural gas
GAAP		generally accepted accounting principles in the United States
Henry Hub		the final settlement price (in USD per MMBtu) for the New York Mercantile Exchange’s Henry Hub natural gas futures contract for the month in which a relevant cargo’s delivery window is scheduled to begin
LIBOR		London Interbank Offered Rate
LNG		liquefied natural gas, a product of natural gas that, through a refrigeration process, has been cooled to a liquid state, which occupies a volume that is approximately 1/600th of its gaseous state
MMBtu		million British thermal units, an energy unit
mtpa		million tonnes per annum
non-FTA countries		countries with which the United States does not have a free trade agreement providing for national treatment for trade in natural gas and with which trade is permitted
SEC		U.S. Securities and Exchange Commission
SPA		LNG sale and purchase agreement
TBtu		trillion British thermal units, an energy unit
Train		an industrial facility comprised of a series of refrigerant compressor loops used to cool natural gas into LNG
TUA		terminal use agreement

Entity Abbreviations



Cheniere		Cheniere Energy, Inc.
Cheniere Investments		Cheniere Energy Investments, LLC
Cheniere Marketing		Cheniere Marketing, LLC and subsidiaries
Cheniere Partners		Cheniere Energy Partners, L.P.
Cheniere Terminals		Cheniere LNG Terminals, LLC
CTPL		Cheniere Creole Trail Pipeline, L.P.
SPLNG		Sabine Pass LNG, L.P.

Unless the context requires otherwise, references to “ SPL ,” the “Company,” “we,” “us” and “our” refer to Sabine Pass Liquefaction, LLC .


PART I.	FINANCIAL INFORMATION


ITEM 1.	FINANCIAL STATEMENTS

SABINE PASS LIQUEFACTION, LLC

BALANCE SHEETS

(in millions)



	September 30,		December 31,
	2018		2017
ASSETS	(unaudited)
Current assets
Cash and cash equivalents	$	—	$	—
Restricted cash	649		544
Accounts and other receivables	222		189
Accounts receivable—affiliate	21		163
Advances to affiliate	174		26
Inventory	76		85
Other current assets	35		54
Other current assets—affiliate	21		21
Total current assets	1,198		1,082

Property, plant and equipment, net	13,091		12,920
Debt issuance costs, net	14		18
Non-current derivative assets	16		17
Other non-current assets, net	152		169
Total assets	$	14,471	$	14,206

LIABILITIES AND MEMBER’S EQUITY
Current liabilities
Accounts payable	$	7	$	8
Accrued liabilities	439		606
Due to affiliates	52		66
Deferred revenue	95		84
Derivative liabilities	6		—
Total current liabilities	599		764

Long-term debt, net	13,494		13,477
Non-current derivative liabilities	2		3
Other non-current liabilities	5		—

Member’s equity (deficit)	371		(38		)
Total liabilities and member’s equity (deficit)	$	14,471	$	14,206

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

SABINE PASS LIQUEFACTION, LLC

STATEMENTS OF OPERATIONS

(in millions)

(unaudited)



	Three Months Ended September 30,						Nine Months Ended September 30,
	2018			2017			2018			2017
Revenues
LNG revenues	$	1,249		$	723		$	3,419		$	1,718
LNG revenues—affiliate	205			111			886			864
Total revenues	1,454			834			4,305			2,582

Operating costs and expenses
Cost of sales (excluding depreciation and amortization expense shown separately below)	758			488			2,291			1,576
Cost of sales—affiliate	8			5			23			15
Operating and maintenance expense	96			65			258			172
Operating and maintenance expense—affiliate	107			82			317			224
Development expense	—			1			1			2
General and administrative expense	1			3			4			5
General and administrative expense—affiliate	12			12			36			46
Depreciation and amortization expense	88			69			261			183
Total operating costs and expenses	1,070			725			3,191			2,223

Income from operations	384			109			1,114			359

Other income (expense)
Interest expense, net of capitalized interest	(146		)	(124		)	(445		)	(356		)
Loss on modification or extinguishment of debt	—			—			—			(42		)
Derivative loss, net	—			—			—			(2		)
Other income	5			3			9			5
Total other expense	(141		)	(121		)	(436		)	(395		)

Net income (loss)	$	243		$	(12	)	$	678		$	(36	)

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

SABINE PASS LIQUEFACTION, LLC

STATEMENT OF MEMBER’S EQUITY (DEFICIT)

(in millions)

(unaudited)



	Sabine Pass LNG-LP, LLC			Total Member’s Equity (Deficit)
Balance at December 31, 2017	$	(38	)	$	(38	)
Capital contributions	81			81
Distributions	(350		)	(350		)
Net income	678			678
Balance at September 30, 2018	$	371		$	371

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

SABINE PASS LIQUEFACTION, LLC

STATEMENTS OF CASH FLOWS

(in millions)

(unaudited)



	Nine Months Ended September 30,
	2018			2017
Cash flows from operating activities
Net income (loss)	$	678		$	(36	)
Adjustments to reconcile net income (loss) to net cash provided by operating activities:
Depreciation and amortization expense	261			183
Amortization of debt issuance costs, deferred commitment fees, premium and discount	16			14
Loss on modification or extinguishment of debt	—			42
Total losses on derivatives, net	42			53
Net cash used for settlement of derivative instruments	(6		)	(14		)
Changes in operating assets and liabilities:
Accounts and other receivables	(33		)	(69		)
Accounts receivable—affiliate	141			80
Advances to affiliate	(75		)	(37		)
Inventory	7			29
Accounts payable and accrued liabilities	(106		)	13
Due to affiliates	(3		)	11
Deferred revenue	11			61
Other, net	(5		)	(6		)
Other, net—affiliate	—			(7		)
Net cash provided by operating activities	928			317

Cash flows from investing activities
Property, plant and equipment, net	(554		)	(1,187		)
Net cash used in investing activities	(554		)	(1,187		)

Cash flows from financing activities
Proceeds from issuances of debt	—			2,314
Repayments of debt	—			(703		)
Debt issuance and deferred financing costs	—			(29		)
Capital contributions	81			7
Distributions	(350		)	(450		)
Net cash provided by (used in) financing activities	(269		)	1,139

Net increase in cash, cash equivalents and restricted cash	105			269
Cash, cash equivalents and restricted cash—beginning of period	544			358
Cash, cash equivalents and restricted cash—end of period	$	649		$	627

Balances per Balance Sheet:



	September 30, 2018
Cash and cash equivalents	$	—
Restricted cash	649
Total cash, cash equivalents and restricted cash	$	649

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

SABINE PASS LIQUEFACTION, LLC

NOTES TO FINANCIAL STATEMENTS

(unaudited)

NOTE 1—NATURE OF OPERATIONS AND BASIS OF PRESENTATION

Basis of Presentation

The accompanying unaudited Financial Statements of SPL have been prepared in accordance with GAAP for interim financial information and with Rule 10-01 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by GAAP for complete financial statements and should be read in conjunction with the Financial Statements and accompanying notes included in our annual report on Form 10-K for the year ended December 31, 2017 . In our opinion, all adjustments, consisting only of normal recurring adjustments necessary for a fair presentation, have been included. Certain reclassifications have been made to conform prior period information to the current presentation. The reclassifications did not have a material effect on our financial position, results of operations or cash flows.

On January 1, 2018, we adopted ASU 2014-09, Revenue from Contracts with Customers (Topic 606) , and subsequent amendments thereto (“ASC 606”) using the full retrospective method. The adoption of ASC 606 represents a change in accounting principle that will provide financial statement readers with enhanced disclosures regarding the nature, amount, timing and uncertainty of revenue and cash flows arising from contracts with customers. The adoption of ASC 606 did not impact our previously reported financial statements in any prior period nor did it result in a cumulative effect adjustment to retained earnings.

Results of operations for the three and nine months ended September 30, 2018 are not necessarily indicative of the results of operations that will be realized for the year ending December 31, 2018 .

We are a disregarded entity for federal and state income tax purposes. Our taxable income or loss, which may vary substantially from the net income or loss reported on our Statements of Operations, is able to be included in the federal income tax return of Cheniere Partners, a publicly traded partnership which indirectly owns us. Accordingly, no provision or liability for federal or state income taxes is included in the accompanying Financial Statements.

NOTE 2—RESTRICTED CASH

Restricted cash consists of funds that are contractually restricted as to usage or withdrawal and have been presented separately from cash and cash equivalents on our Balance Sheets. As of September 30, 2018 and December 31, 2017 , restricted cash consisted of the following (in millions):



	September 30,		December 31,
	2018		2017
Current restricted cash
Liquefaction Project	$	649	$	544

Pursuant to the accounts agreement entered into with the collateral trustee for the benefit of our debt holders, we are required to deposit all cash received into reserve accounts controlled by the collateral trustee. The usage or withdrawal of such cash is restricted to the payment of liabilities related to the Liquefaction Project and other restricted payments.

SABINE PASS LIQUEFACTION, LLC

NOTES TO FINANCIAL STATEMENTS—CONTINUED

(unaudited)

NOTE 3—ACCOUNTS AND OTHER RECEIVABLES

As of September 30, 2018 and December 31, 2017 , accounts and other receivables consisted of the following (in millions):



	September 30,		December 31,
	2018		2017
Trade receivable	$	213	$	185
Other accounts receivable	9		4
Total accounts and other receivables	$	222	$	189

NOTE 4—INVENTORY

As of September 30, 2018 and December 31, 2017 , inventory consisted of the following (in millions):



	September 30,		December 31,
	2018		2017
Natural gas	$	9	$	17
LNG	21		26
Materials and other	46		42
Total inventory	$	76	$	85

NOTE 5—PROPERTY, PLANT AND EQUIPMENT

As of September 30, 2018 and December 31, 2017 , property, plant and equipment, net consisted of the following (in millions):



	September 30,			December 31,
	2018			2017
LNG terminal costs
LNG terminal	$	9,952		$	9,963
LNG terminal construction-in-process	3,716			3,283
Accumulated depreciation	(583		)	(330		)
Total LNG terminal costs, net	13,085			12,916
Fixed assets
Fixed assets	13			10
Accumulated depreciation	(7		)	(6		)
Total fixed assets, net	6			4
Property, plant and equipment, net	$	13,091		$	12,920

Depreciation expense was $85 million and $66 million during the three months ended September 30, 2018 and 2017 , respectively, and $254 million and $177 million during the nine months ended September 30, 2018 and 2017 , respectively.

We realized offsets to LNG terminal costs of $79 million and $242 million in the three and nine months ended September 30, 2017 , respectively, that were related to the sale of commissioning cargoes because these amounts were earned or loaded prior to the start of commercial operations of the respective Train of the Liquefaction Project , during the testing phase for its construction. We did no t realize any offsets to LNG terminal costs in the three and nine months ended September 30, 2018 .

NOTE 6—DERIVATIVE INSTRUMENTS

We have entered into commodity derivatives consisting of natural gas supply contracts for the commissioning and operation of the Liquefaction Project (“Physical Liquefaction Supply Derivatives”) and associated economic hedges (collectively, the “Liquefaction Supply Derivatives”) . We had previously entered into interest rate swaps to hedge the exposure to volatility in a portion of the floating-rate interest payments under one of our credit facilities (“Interest Rate Derivatives”) , and these Interest Rate Derivatives were settled in March 2017.

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

SABINE PASS LIQUEFACTION, LLC

NOTES TO FINANCIAL STATEMENTS—CONTINUED

(unaudited)

The following table shows the fair value of our derivative instruments that are required to be measured at fair value on a recurring basis as of September 30, 2018 and December 31, 2017 , which are classified as other current assets , non-current derivative assets , derivative liabilities or non-current derivative liabilities in our Balance Sheets (in millions).



	Fair Value Measurements as of
	September 30, 2018									December 31, 2017
	Quoted Prices in Active Markets (Level 1)			Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)		Total		Quoted Prices in Active Markets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)		Total
Liquefaction Supply Derivatives asset (liability)	$	(1	)	$	1	$	19	$	19	$	2	$	10	$	43	$	55

There have been no changes to our evaluation of and accounting for our derivative positions during the nine months ended September 30, 2018 . See Note 7—Derivative Instruments of our Notes to Financial Statements in our annual report on Form 10-K for the year ended December 31, 2017 for additional information.

We value our Liquefaction Supply Derivatives using a market based approach incorporating present value techniques, as needed, using observable commodity price curves, when available and other relevant data.

The fair value of our Physical Liquefaction Supply Derivatives is predominantly driven by market commodity basis prices and our assessment of the associated conditions precedent, including evaluating whether the respective market is available as pipeline infrastructure is developed. Upon the satisfaction of conditions precedent, including completion and placement into service of relevant pipeline infrastructure to accommodate marketable physical gas flow, we recognize a gain or loss based on the fair value of the respective natural gas supply contracts.

We include a portion of our Physical Liquefaction Supply Derivatives as Level 3 within the valuation hierarchy as the fair value is developed through the use of internal models which may be impacted by inputs that are unobservable in the marketplace. The curves used to generate the fair value of our Physical Liquefaction Supply Derivatives are based on basis adjustments applied to forward curves for a liquid trading point. In addition, there may be observable liquid market basis information in the near term, but terms of a Physical Liquefaction Supply Derivatives contract may exceed the period for which such information is available, resulting in a Level 3 classification. In these instances, the fair value of the contract incorporates extrapolation assumptions made in the determination of the market basis price for future delivery periods in which applicable commodity basis prices were either not observable or lacked corroborative market data.

The Level 3 fair value measurements of our Physical Liquefaction Supply Derivatives could be materially impacted by a significant change in certain natural gas market basis spreads due to the contractual notional amount represented by our Level 3 positions, which is a substantial portion of our overall Physical Liquefaction Supply Derivatives portfolio. The following table includes quantitative information for the unobservable inputs for our Level 3 Physical Liquefaction Supply Derivatives as of September 30, 2018 :



	Net Fair Value Asset (in millions)	Valuation Approach	Significant Unobservable Input	Significant Unobservable Inputs Range
Physical Liquefaction Supply Derivatives	$19	Market approach incorporating present value techniques	Basis Spread	$(0.448) - $0.079

SABINE PASS LIQUEFACTION, LLC

NOTES TO FINANCIAL STATEMENTS—CONTINUED

(unaudited)

The following table shows the changes in the fair value of our Level 3 Physical Liquefaction Supply Derivatives during the three and nine months ended September 30, 2018 and 2017 (in millions):



	Three Months Ended September 30,						Nine Months Ended September 30,
	2018			2017			2018			2017
Balance, beginning of period	$	11		$	40		$	43		$	79
Realized and mark-to-market gains (losses):
Included in cost of sales	4			(8		)	(5		)	(43		)
Purchases and settlements:
Purchases	4			(1		)	8			1
Settlements	1			(2		)	(27		)	(8		)
Transfers out of Level 3 (1)	(1		)	—			—			—
Balance, end of period	$	19		$	29		$	19		$	29
Change in unrealized gains relating to instruments still held at end of period	$	4		$	(8	)	$	(5	)	$	(43	)

(1) Transferred to Level 2 as a result of observable market for the underlying natural gas purchase agreements.

Derivative assets and liabilities arising from our derivative contracts with the same counterparty are reported on a net basis, as all counterparty derivative contracts provide for net settlement. The use of derivative instruments exposes us to counterparty credit risk, or the risk that a counterparty will be unable to meet its commitments in instances when our derivative instruments are in an asset position. Additionally, we evaluate our own ability to meet our commitments in instances where our derivative instruments are in a liability position. Our derivative instruments are subject to contractual provisions which provide for the unconditional right of set-off for all derivative assets and liabilities with a given counterparty in the event of default.

Interest Rate Derivatives

We had entered into Interest Rate Derivatives to protect against volatility of future cash flows and hedge a portion of the variable interest payments on the credit facilities we entered into in June 2015 (the “Credit Facilities”) , based on a portion of the expected outstanding borrowings over the term of the Credit Facilities. In March 2017, we settled the Interest Rate Derivatives and recognized a derivative loss of $7 million in conjunction with the termination of approximately $1.6 billion of commitments under the Credit Facilities .

The following table shows the changes in the fair value and settlements of our Interest Rate Derivatives recorded in derivative loss, net on our Statements of Operations during the three and nine months ended September 30, 2018 and 2017 (in millions):



	Three Months Ended September 30,				Nine Months Ended September 30,
	2018		2017		2018		2017
Interest Rate Derivatives loss	$	—	$	—	$	—	$	(2	)

Liquefaction Supply Derivatives

We have entered into index-based physical natural gas supply contracts and associated economic hedges to purchase natural gas for the commissioning and operation of the Liquefaction Project. The terms of the physical natural gas supply contracts range up to six years, some of which commence upon the satisfaction of certain conditions precedent.

We had secured up to approximately 2,755 TBtu and 2,214 TBtu of natural gas feedstock through natural gas supply contracts as of September 30, 2018 and December 31, 2017 , respectively. The notional natural gas position of our Liquefaction Supply Derivatives was approximately 2,206 TBtu and 1,520 TBtu as of September 30, 2018 and December 31, 2017 , respectively.

SABINE PASS LIQUEFACTION, LLC

NOTES TO FINANCIAL STATEMENTS—CONTINUED

(unaudited)

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



	Fair Value Measurements as of (1)
Balance Sheet Location	September 30, 2018			December 31, 2017
Other current assets	$	11		$	41
Non-current derivative assets	16			17
Total derivative assets	27			58

Derivative liabilities	(6		)	—
Non-current derivative liabilities	(2		)	(3		)
Total derivative liabilities	(8		)	(3		)

Derivative asset, net	$	19		$	55


(1)	Does not include collateral calls of $2 million and $1 million for such contracts, which are included in other current assets in our Balance Sheets as September 30, 2018 and December 31, 2017 , respectively.

The following table shows the changes in the fair value and settlements of our Liquefaction Supply Derivatives recorded in cost of sales on our on our Statements of Operations during the three and nine months ended September 30, 2018 and 2017 (in millions):



	Three Months Ended September 30,					Nine Months Ended September 30,
	2018		2017			2018			2017
Liquefaction Supply Derivatives gain (loss) (1)	$	10	$	(11	)	$	(42	)	$	(51	)


(1)	Does not include the realized value associated with derivative instruments that settle through physical delivery. Fair value fluctuations associated with commodity derivative activities are classified and presented consistently with the item economically hedged and the nature and intent of the derivative instrument.

Balance Sheet Presentation

Our derivative instruments are presented on a net basis on our Balance Sheets as described above. The following table shows the fair value of our derivatives outstanding on a gross and net basis (in millions):



	Gross Amounts Recognized			Gross Amounts Offset in the Balance Sheets			Net Amounts Presented in the Balance Sheets
Offsetting Derivative Assets (Liabilities)	Gross Amounts Recognized			Gross Amounts Offset in the Balance Sheets			Net Amounts Presented in the Balance Sheets
As of September 30, 2018
Liquefaction Supply Derivatives	$	31		$	(4	)	$	27
Liquefaction Supply Derivatives	(13		)	5			(8		)
As of December 31, 2017
Liquefaction Supply Derivatives	$	64		$	(6	)	$	58
Liquefaction Supply Derivatives	(3		)	—			(3		)

SABINE PASS LIQUEFACTION, LLC

NOTES TO FINANCIAL STATEMENTS—CONTINUED

(unaudited)

NOTE 7—OTHER NON-CURRENT ASSETS

As of September 30, 2018 and December 31, 2017 , other non-current assets, net consisted of the following (in millions):



	September 30,		December 31,
	2018		2017
Advances made under EPC and non-EPC contracts	$	15	$	26
Advances made to municipalities for water system enhancements	90		93
Advances and other asset conveyances to third parties to support LNG terminals	29		30
Tax-related payments and receivables	—		1
Information technology service assets	17		19
Other	1		—
Total other non-current assets, net	$	152	$	169

NOTE 8—ACCRUED LIABILITIES

As of September 30, 2018 and December 31, 2017 , accrued liabilities consisted of the following (in millions):



	September 30,		December 31,
	2018		2017
Interest costs and related debt fees	$	143	$	230
Accrued natural gas purchases	249		298
Liquefaction Project costs	47		78
Total accrued liabilities	$	439	$	606

NOTE 9—DEBT

As of September 30, 2018 and December 31, 2017 , our debt consisted of the following (in millions):



	September 30,			December 31,
	2018			2017
Long-term debt
5.625% Senior Secured Notes due 2021 (“2021 Senior Notes”)	$	2,000		$	2,000
6.25% Senior Secured Notes due 2022 (“2022 Senior Notes”)	1,000			1,000
5.625% Senior Secured Notes due 2023 (“2023 Senior Notes”)	1,500			1,500
5.75% Senior Secured Notes due 2024 (“2024 Senior Notes”)	2,000			2,000
5.625% Senior Secured Notes due 2025 (“2025 Senior Notes”)	2,000			2,000
5.875% Senior Secured Notes due 2026 (“2026 Senior Notes”)	1,500			1,500
5.00% Senior Secured Notes due 2027 (“2027 Senior Notes”)	1,500			1,500
4.200% Senior Secured Notes due 2028 (“2028 Senior Notes”)	1,350			1,350
5.00% Senior Secured Notes due 2037 (“2037 Senior Notes”)	800			800
Unamortized discount, premium and debt issuance costs, net	(156		)	(173		)
Total long-term debt, net	13,494			13,477

Current debt
$1.2 billion Working Capital Facility (“Working Capital Facility”)	—			—
Total debt, net	$	13,494		$	13,477

SABINE PASS LIQUEFACTION, LLC

NOTES TO FINANCIAL STATEMENTS—CONTINUED

(unaudited)

Working Capital Facility

Below is a summary of our Working Capital Facility as of September 30, 2018 (in millions):



	Working Capital Facility
Original facility size	$	1,200
Less:
Outstanding balance	—
Letters of credit issued	494
Available commitment	$	706

Interest rate	LIBOR plus 1.75% or base rate plus 0.75%
Maturity date	December 31, 2020, with various terms for underlying loans

Restrictive Debt Covenants

As of September 30, 2018 , we were in compliance with all covenants related to our debt agreements.

Interest Expense

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



	Three Months Ended September 30,						Nine Months Ended September 30,
	2018			2017			2018			2017
Total interest cost	$	198		$	198		$	594		$	581
Capitalized interest	(52		)	(74		)	(149		)	(225		)
Total interest expense, net	$	146		$	124		$	445		$	356

Fair Value Disclosures

The following table shows the carrying amount, which is net of unamortized premium, discount and debt issuance costs, and estimated fair value of our debt (in millions):



	September 30, 2018				December 31, 2017
	Carrying Amount		Estimated Fair Value		Carrying Amount		Estimated Fair Value
Senior notes (1)	$	12,703	$	13,495	$	12,687	$	13,955
2037 Senior Notes (2)	791		831		790		871


(1)	Includes 2021 Senior Notes , 2022 Senior Notes , 2023 Senior Notes , 2024 Senior Notes , 2025 Senior Notes , 2026 Senior Notes , 2027 Senior Notes and 2028 Senior Notes . The Level 2 estimated fair value was based on quotes obtained from broker-dealers or market makers of these senior notes and other similar instruments.


(2)	The Level 3 estimated fair value was calculated based on inputs that are observable in the market or that could be derived from, or corroborated with, observable market data, including interest rates based on debt issued by parties with comparable credit ratings to us and inputs that are not observable in the market.

SABINE PASS LIQUEFACTION, LLC

NOTES TO FINANCIAL STATEMENTS—CONTINUED

(unaudited)

NOTE 10—REVENUES FROM CONTRACTS WITH CUSTOMERS

The following table represents a disaggregation of revenue earned from contracts with customers during the three and nine months ended September 30, 2018 and 2017 (in millions):



	Three Months Ended September 30,				Nine Months Ended September 30,
	2018		2017		2018		2017
LNG revenues	$	1,185	$	717	$	3,302	$	1,695
LNG revenues—affiliate	205		111		886		864
Total revenues from customers	1,390		828		4,188		2,559
Gains from derivative instruments (1)	64		6		117		23
Total revenues	$	1,454	$	834	$	4,305	$	2,582


(1)	Includes the realized value associated with a portion of derivative instruments that settle through physical delivery.

LNG Revenues

We have entered into numerous SPAs with third party customers for the sale of LNG on a free on board (“FOB”) (delivered to the customer at the Sabine Pass LNG terminal) basis. Our customers generally purchase LNG for a price consisting of a fixed fee per MMBtu of LNG (a portion of which is subject to annual adjustment for inflation) plus a variable fee per MMBtu of LNG equal to approximately 115% of Henry Hub. The fixed fee component is the amount payable to us regardless of a cancellation or suspension of LNG cargo deliveries by the customers. The variable fee component is the amount generally payable to us only upon delivery of LNG plus all future adjustments to the fixed fee for inflation. The SPAs and contracted volumes to be made available under the SPAs are not tied to a specific Train; however, the term of each SPA generally commences upon the date of first commercial delivery of a specified Train.

Revenues from the sale of LNG are recognized at a point in time when the LNG is delivered to the customer, at the Sabine Pass LNG terminal, which is the point legal title, physical possession and the risks and rewards of ownership transfer to the customer. Each individual molecule of LNG is viewed as a separate performance obligation. The stated contract price (including both fixed and variable fees) per MMBtu in each LNG sales arrangement is representative of the stand-alone selling price for LNG at the time the sale was negotiated. We have concluded that the variable fees meet the exception for allocating variable consideration to specific parts of the contract. As such, the variable consideration for these contracts is allocated to each distinct molecule of LNG and recognized when that distinct molecule of LNG is delivered to the customer. Because of the use of the exception, variable consideration related to the sale of LNG is also not included in the transaction price.

Fees received pursuant to SPAs are recognized as LNG revenues only after substantial completion of the respective Train. Prior to substantial completion, sales generated during the commissioning phase are offset against the cost of construction for the respective Train, as the production and removal of LNG from storage is necessary to test the facility and bring the asset to the condition necessary for its intended use.

Deferred Revenue Reconciliation

The following table reflects the changes in our contract liabilities, which we classify as deferred revenues on our Balance Sheets (in millions):



	Nine Months Ended September 30, 2018
Deferred revenues, beginning of period	$	84
Cash received but not yet recognized	95
Revenue recognized from prior period deferral	(84		)
Deferred revenues, end of period	$	95

We record deferred revenue when we receive consideration, or such consideration is unconditionally due from a customer, prior to transferring goods or services to the customer under the terms of a sales contract. Changes in deferred revenue during the nine months ended September 30, 2018 are primarily attributable to differences between the timing of revenue recognition and the receipt of advance payments related to delivery of LNG under certain SPAs.

SABINE PASS LIQUEFACTION, LLC

NOTES TO FINANCIAL STATEMENTS—CONTINUED

(unaudited)

Transaction Price Allocated to Future Performance Obligations

Because many of our sales contracts have long-term durations, we are contractually entitled to significant future consideration which we have not yet recognized as revenue. The following table discloses the aggregate amount of the transaction price that is allocated to performance obligations that have not yet been satisfied as of September 30, 2018 :


(1)	The weighted average recognition timing represents an estimate of the number of years during which we shall have recognized half of the unsatisfied transaction price.

We have elected the following exemptions which omit certain potential future sources of revenue from the table above:


(1)	We omit from the table above all performance obligations that are part of a contract that has an original expected duration of one year or less.

(2)

We omit from the table above all variable consideration that is allocated entirely to a wholly unsatisfied performance obligation or to a wholly unsatisfied promise to transfer a distinct good or service that forms part of a single performance obligation when that performance obligation qualifies as a series. The table above excludes all variable consideration under our SPAs. The amount of revenue from variable fees that is not included in the transaction price will vary based on the future prices of Henry Hub throughout the contract terms, to the extent customers elect to take delivery of their LNG, and adjustments to the consumer price index. During each of the three and nine months ended September 30, 2018 , approximately 55% of our LNG revenues and 100% of our LNG revenues—affiliate in both periods were related to variable consideration received from customers.

We have entered into contracts to sell LNG that are conditioned upon one or both of the parties achieving certain milestones such as reaching a final investment decision on a certain liquefaction Train, obtaining financing or achieving substantial completion of a Train and any related facilities. These contracts are considered completed contracts for revenue recognition purposes and are included in the transaction price above when the conditions are considered probable of being met.

We have elected the practical expedient to omit the disclosure of the transaction price allocated to future performance obligations and an explanation of when the entity expects to recognize the amount as revenue as of December 31, 2017 .

SABINE PASS LIQUEFACTION, LLC

NOTES TO FINANCIAL STATEMENTS—CONTINUED

(unaudited)

NOTE 11—RELATED PARTY TRANSACTIONS

Below is a summary of our related party transactions as reported on our Statements of Operations for the three and nine months ended September 30, 2018 and 2017 (in millions):



	Three Months Ended September 30,				Nine Months Ended September 30,
	2018		2017		2018		2017
LNG revenues—affiliate
Cheniere Marketing SPA and Cheniere Marketing Master SPA	$	205	$	111	$	886	$	864

Cost of sales—affiliate
Cargo loading fees under TUA	8		5		23		15

Operating and maintenance expense—affiliate
TUA	64		47		192		129
Natural Gas Transportation Agreement	20		17		61		53
Services Agreements	23		17		64		41
LNG Site Sublease Agreement	—		1		—		1
Total operating and maintenance expense—affiliate	107		82		317		224

General and administrative expense—affiliate
Services Agreements	12		12		36		46

LNG Terminal-Related Agreements

Terminal Use Agreements

We have a TUA with SPLNG to provide berthing for LNG vessels and for the unloading, loading, storage and regasification of LNG . We have reserved approximately 2.0 Bcf/d of regasification capacity and we are obligated to make monthly capacity payments to SPLNG aggregating approximately $250 million per year (the “TUA Fees”) , continuing until at least May 2036. We obtained this reserved capacity as a result of an assignment in July 2012 by Cheniere Investments of its rights, title and interest under its TUA . In connection with the assignment, we, Cheniere Investments and SPLNG also entered into a terminal use rights assignment and agreement (the “TURA”) pursuant to which Cheniere Investments had the right to use our reserved capacity under the TUA and had the obligation to pay the TUA Fees required by the TUA to SPLNG. Cheniere Investments’ right to use our capacity at the Sabine Pass LNG terminal and its respective percentage of TUA Fees payable was reduced from 100% to zero as each of Trains 1 through 4 reached commercial operations.

Cheniere Partners has guaranteed our obligations under our TUA and the obligations of Cheniere Investments under the TURA . Cargo loading fees incurred under the TUA are recorded as cost of sales—affiliate, except for the portion related to commissioning activities which is capitalized as LNG terminal construction-in-process.

In connection with our TUA , we are required to pay for a portion of the cost to maintain the cryogenic readiness of the regasification facilities at the Sabine Pass LNG terminal, which is based on our share of the commercial LNG storage capacity at the Sabine Pass LNG terminal.

Cheniere Marketing SPA

Cheniere Marketing has an SPA with us to purchase, at Cheniere Marketing’s option, any LNG produced by us in excess of that required for other customers at a price of 115% of Henry Hub plus $3.00 per MMBtu of LNG .

Cheniere Marketing Master SPA

We have an agreement with Cheniere Marketing that allows us to sell and purchase LNG with Cheniere Marketing by executing and delivering confirmations under this agreement. We executed a confirmation with Cheniere Marketing that obligates

SABINE PASS LIQUEFACTION, LLC

NOTES TO FINANCIAL STATEMENTS—CONTINUED

(unaudited)

Cheniere Marketing in certain circumstances to buy LNG cargoes produced during the period while Bechtel Oil, Gas and Chemicals, Inc. has control of, and is commissioning, Train 5 of the Liquefaction Project.

Natural Gas Transportation Agreements

To ensure we are able to transport adequate natural gas feedstock to the Sabine Pass LNG terminal, we have a transportation precedent agreement and a negotiated rate agreement to secure firm pipeline transportation capacity with CTPL, a wholly owned subsidiary of Cheniere Partners, and third-party pipeline companies. These agreements have a primary term of 20 years from commercial operation of Train 2 and thereafter continue in effect from year to year until terminated by either party upon written notice of 1 year or the term of the agreements, whichever is less. In addition, we have the right to elect to extend the term of the agreements for up to two consecutive ten -year terms. Maximum rates, charges and fees shall be applicable for the entitlements and quantities delivered pursuant to the agreements unless CTPL has advised us that it has agreed otherwise.

Services Agreements

As of September 30, 2018 and December 31, 2017 , we had $174 million and $26 million of advances to affiliates, respectively, under the services agreements described below. The non-reimbursement amounts incurred under these agreements are recorded in general and administrative expense—affiliate.

Liquefaction O&M Agreement

We have an operation and maintenance agreement (the “Liquefaction O&M Agreement”) with Cheniere Investments, a wholly owned subsidiary of Cheniere Partners, pursuant to which we receive all of the necessary services required to construct, operate and maintain the Liquefaction Project . Before each Train of the Liquefaction Project is operational, the services to be provided include, among other services, obtaining governmental approvals on our behalf, preparing an operating plan for certain periods, obtaining insurance, preparing staffing plans and preparing status reports. After each Train is operational, the services include all necessary services required to operate and maintain the Train. Prior to the substantial completion of each Train of the Liquefaction Project , in addition to reimbursement of operating expenses, we are required to pay a monthly fee equal to 0.6% of the capital expenditures incurred in the previous month. After substantial completion of each Train, for services performed while the Train is operational, we will pay, in addition to the reimbursement of operating expenses, a fixed monthly fee of $83,333 (indexed for inflation) for services with respect to the Train.

Liquefaction MSA

We have a management services agreement (the “Liquefaction MSA”) with Cheniere Terminals pursuant to which Cheniere Terminals manages the construction and operation of the Liquefaction Project, excluding those matters provided for under the Liquefaction O&M Agreement . The services include, among other services, exercising the day-to-day management of our affairs and business, managing our regulatory matters, managing bank and brokerage accounts and financial books and records of our business and operations, entering into financial derivatives on our behalf and providing contract administration services for all contracts associated with the Liquefaction Project . Prior to the substantial completion of each Train of the Liquefaction Project , we pay a monthly fee equal to 2.4% of the capital expenditures incurred in the previous month. After substantial completion of each Train, we will pay a fixed monthly fee of $541,667 (indexed for inflation) for services with respect to such Train.

Cheniere Investments Information Technology Services Agreement

Cheniere Investments has an information technology services agreement with Cheniere, pursuant to which Cheniere Investment’s subsidiaries, including us, receive certain information technology services. On a quarterly basis, the various entities receiving the benefit are invoiced by Cheniere Investments according to the cost allocation percentages set forth in the agreement. In addition, Cheniere is entitled to reimbursement for all costs incurred by Cheniere that are necessary to perform the services under the agreement.

SABINE PASS LIQUEFACTION, LLC

NOTES TO FINANCIAL STATEMENTS—CONTINUED

(unaudited)

LNG Site Sublease Agreement

We have agreements with SPLNG to sublease a portion of the Sabine Pass LNG terminal site for the Liquefaction Project . The aggregate annual sublease payment is $1 million . The initial terms of the subleases expire on December 31, 2034, with options to renew for multiple 10 -year extensions with similar terms as the initial terms. The annual sublease payments will be adjusted for inflation every five years based on a consumer price index, as defined in the sublease agreements.

Cooperation Agreement

We have a cooperation agreement with SPLNG that allows us to retain and acquire certain rights to access the property and facilities that are owned by SPLNG for the purpose of constructing, modifying and operating the Liquefaction Project . In consideration for access given to us, we have agreed to transfer to SPLNG title of certain facilities, equipment and modifications, which SPLNG is obligated to operate and maintain. The term of this agreement is consistent with our TUA described above. We did no t convey any assets to SPLNG under this agreement during the three and nine months ended September 30, 2018 and 2017 .

Contract for Sale and Purchase of Natural Gas and LNG

We have an agreement with SPLNG that allows us to sell and purchase natural gas and LNG with SPLNG. Natural gas and LNG purchased under this agreement are recorded as inventory, except for purchases related to commissioning activities which are capitalized as LNG terminal construction-in-process.

State Tax Sharing Agreement

We have a state tax sharing agreement with Cheniere. Under this agreement, Cheniere has agreed to prepare and file all state and local tax returns which we and Cheniere are required to file on a combined basis and to timely pay the combined state and local tax liability. If Cheniere, in its sole discretion, demands payment, we will pay to Cheniere an amount equal to the state and local tax that we would be required to pay if our state and local tax liability were calculated on a separate company basis. There have been no state and local taxes paid by Cheniere for which Cheniere could have demanded payment from us under this agreement; therefore, Cheniere has not demanded any such payments from us. The agreement is effective for tax returns due on or after August 2012.

NOTE 12—CUSTOMER CONCENTRATION

The following table shows customers with revenues of 10% or greater of total third-party revenues and customers with accounts receivable balances of 10% or greater of total accounts receivable from third parties:



	Percentage of Total Third-Party Revenues				Percentage of Accounts Receivable from Third Parties
	Three Months Ended September 30,		Nine Months Ended September 30,		September 30,	December 31,
	2018	2017	2018	2017	2018	2017
Customer A	25%	34%	29%	47%	28%	39%
Customer B	22%	26%	24%	29%	27%	32%
Customer C	22%	39%	24%	21%	22%	27%
Customer D	25%	—%	20%	—%	19%	—%

NOTE 13—SUPPLEMENTAL CASH FLOW INFORMATION

The following table provides supplemental disclosure of cash flow information (in millions):



	Nine Months Ended September 30,
	2018		2017
Cash paid during the period for interest, net of amounts capitalized	$	510	$	395

The balance in property, plant and equipment, net funded with accounts payable and accrued liabilities (including affiliate) was $195 million and $243 million , as of September 30, 2018 and 2017 , respectively.

SABINE PASS LIQUEFACTION, LLC

NOTES TO FINANCIAL STATEMENTS—CONTINUED

(unaudited)

NOTE 14—RECENT ACCOUNTING STANDARDS

The following table provides a brief description of a recent accounting standard that had not been adopted by us as of September 30, 2018 :

SABINE PASS LIQUEFACTION, LLC

NOTES TO FINANCIAL STATEMENTS—CONTINUED

(unaudited)

Additionally, the following table provides a brief description of recent accounting standards that were adopted by us during the reporting period:



Standard	Description	Date of Adoption	Effect on our Financial Statements or Other Significant Matters
ASU 2014-09, Revenue from Contracts with Customers (Topic 606) , and subsequent amendments thereto	This standard provides a single, comprehensive revenue recognition model which replaces and supersedes most existing revenue recognition guidance and requires an entity to recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. The standard requires that the costs to obtain and fulfill contracts with customers should be recognized as assets and amortized to match the pattern of transfer of goods or services to the customer if expected to be recoverable. The standard also requires enhanced disclosures. This guidance may be adopted either retrospectively to each prior reporting period presented subject to allowable practical expedients (“full retrospective approach”) or as a cumulative-effect adjustment as of the date of adoption (“modified retrospective approach”).	January 1, 2018	We adopted this guidance on January 1, 2018, using the full retrospective method. The adoption of this guidance represents a change in accounting principle that will provide financial statement readers with enhanced disclosures regarding the nature, amount, timing and uncertainty of revenue and cash flows arising from contracts with customers. The adoption of this guidance did not impact our previously reported financial statements in any prior period nor did it result in a cumulative effect adjustment to retained earnings. See Note 10—Revenues from Contracts with Customers for additional disclosures.
ASU 2016-16, Income Taxes (Topic 740): Intra-Entity Transfers of Assets Other Than Inventory	This standard requires the immediate recognition of the tax consequences of intercompany asset transfers other than inventory. This guidance may be early adopted, but only at the beginning of an annual period, and must be adopted using a modified retrospective approach.	January 1, 2018	The adoption of this guidance did not have an impact on our Financial Statements or related disclosures.


ITEM 2.	MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Information Regarding Forward-Looking Statements

This quarterly report contains certain statements that are, or may be deemed to be, “forward-looking statements.” All statements, other than statements of historical or present facts or conditions, included herein or incorporated herein by reference are “forward-looking statements.” Included among “forward-looking statements” are, among other things:


•	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 imports into or 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 our 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 such 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 natural gas liquefaction or storage capacities that are, or may become, subject to 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, capital expenditures, maintenance and operating costs and cash flows, 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.

All of these types of statements, other than statements of historical or present facts or conditions, are forward-looking statements. In some cases, forward-looking statements can be identified by terminology such as “may,” “will,” “could,” “should,” “expect,” “plan,” “project,” “intend,” “anticipate,” “believe,” “estimate,” “predict,” “potential,” “pursue,” “target,” “continue,” the negative of such terms or other comparable terminology. The forward-looking statements contained in this quarterly report are largely based on our expectations, which reflect estimates and assumptions made by our management. These estimates and assumptions reflect our best judgment based on currently known market conditions and other factors. Although we believe that such estimates are reasonable, they are inherently uncertain and involve a number of risks and uncertainties beyond our control. In addition, assumptions may prove to be inaccurate. We caution that the forward-looking statements contained in this quarterly report are not guarantees of future performance and that such statements may not be realized or the forward-looking statements or events may not occur. Actual results may differ materially from those anticipated or implied in forward-looking statements as a result of a variety of factors described in this quarterly report and in the other reports and other information that we file with the SEC, including those discussed under “Risk Factors” in our annual report on Form 10-K for the year ended December 31, 2017 . All forward-looking statements attributable to us or persons acting on our behalf are expressly qualified in their entirety by these risk factors. These forward-looking statements speak only as of the date made, and other than as required by law, we undertake no obligation to update or revise any forward-looking statement or provide reasons why actual results may differ, whether as a result of new information, future events or otherwise.

Introduction

The following discussion and analysis presents management’s view of our business, financial condition and overall performance and should be read in conjunction with our Financial Statements and the accompanying notes. This information is intended to provide investors with an understanding of our past performance, current financial condition and outlook for the future. Our discussion and analysis includes the following subjects:


•	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

Overview of Business

We were formed by Cheniere Partners to develop, construct and operate natural gas liquefaction facilities in Cameron Parish, Louisiana (the “Liquefaction Project”) at the Sabine Pass LNG terminal adjacent to the existing regasification facilities owned and operated by SPLNG. Our vision is to provide clean, secure and affordable energy to the world, while responsibly delivering a reliable, competitive and integrated source of LNG, in a safe and rewarding work environment. The liquefaction of natural gas into LNG allows it to be shipped economically from areas of the world where natural gas is abundant and inexpensive to produce to other areas where natural gas demand and infrastructure exist to economically justify the use of LNG. We plan to construct up to six Trains, which are in various stages of development, construction and operations. Trains 1 through 4 are operational, Train 5 is undergoing commissioning and Train 6 is being commercialized and has all necessary regulatory approvals in place. Each Train is expected to have a nominal production capacity, which is prior to adjusting for planned maintenance, production reliability, potential overdesign and debottlenecking opportunities, of approximately 4.5 mtpa of LNG and an adjusted nominal production capacity of approximately 4.5 to 4.9 mtpa of LNG.

Overview of Significant Events

Our significant accomplishments since January 1, 2018 and through the filing date of this Form 10-Q include the following:

Operational


•	As of October 31, 2018, more than 215 cargoes have been produced, loaded and exported from the Liquefaction Project year to date. To date, over 475 cumulative LNG cargoes have been exported from the Liquefaction Project , with deliveries to 29 countries and regions worldwide.


•	In September 2018, feed gas was introduced to Train 5 of the Liquefaction Project as part of the commissioning process, and first LNG production from Train 5 occurred in October 2018.

Financial


•	We reached the following contractual milestones:


◦	In June 2018, the date of first commercial delivery was reached under the 20-year SPA with BG Gulf Coast LNG, LLC (“BG”) relating to Train 3 of the Liquefaction Project .


◦	In March 2018, the date of first commercial delivery was reached under the 20-year SPA with GAIL (India) Limited (“GAIL”) relating to Train 4 of the Liquefaction Project .

Liquidity and Capital Resources

The following table provides a summary of our liquidity position at September 30, 2018 and December 31, 2017 (in millions):



	September 30,		December 31,
	2018		2017
Cash and cash equivalents	$	—	$	—
Restricted cash designated for the Liquefaction Project	649		544
Available commitments under the $1.2 billion Working Capital Facility (“Working Capital Facility”)	706		470

For additional information regarding our debt agreements, see Note 9—Debt of our Notes to Financial Statements in this quarterly report and Note 10—Debt of our Notes to Financial Statements in our annual report on Form 10-K for the year ended December 31, 2017.

Liquefaction Facilities

We are developing, constructing and operating the Liquefaction Project at the Sabine Pass LNG terminal adjacent to the existing regasification facilities. We have received authorization from the FERC to site, construct and operate Trains 1 through 6. We have achieved substantial completion of Trains 1, 2, 3 and 4 of the Liquefaction Project and commenced operating activities in May 2016, September 2016, March 2017 and October 2017, respectively. Train 5 of the Liquefaction Project is undergoing commissioning and the following table summarizes the status as of September 30, 2018 :



		Train 5
Overall project completion percentage		98.5%
Completion percentage of:
Engineering		100%
Procurement		100%
Subcontract work		92.7%
Construction		97.8%
Date of expected substantial completion		1Q 2019

The following orders have been issued by the DOE authorizing the export of domestically produced LNG by vessel from the Sabine Pass LNG terminal:


•	Trains 1 through 4— FTA countries for a 30-year term, which commenced on May 15, 2016, and non-FTA countries for a 20-year term, which commenced on June 3, 2016, in an amount up to a combined total of the equivalent of 16 mtpa (approximately 803 Bcf/yr of natural gas).


•	Trains 1 through 4— FTA countries for a 25-year term and non-FTA countries for a 20-year term in an amount up to a combined total of the equivalent of approximately 203 Bcf/yr of natural gas (approximately 4 mtpa).


•	Trains 5 and 6— FTA countries and non-FTA countries for a 20-year term, in an amount up to a combined total of 503.3 Bcf/yr of natural gas (approximately 10 mtpa).

In each case, the terms of these authorizations begin on the earlier of the date of first export thereunder or the date specified in the particular order, which ranges from five to 10 years from the date the order was issued. In addition, we received an order providing for a three-year makeup period with respect to each of the non-FTA orders for LNG volumes we were authorized but unable to export during any portion of the initial 20-year export period of such order.

In January 2018, the DOE issued orders authorizing us to export domestically produced LNG by vessel from the Sabine Pass LNG terminal to FTA countries and non-FTA countries over a two-year period commencing January 2018, in an aggregate amount up to the equivalent of 600 Bcf of natural gas (however, exports under this order, when combined with exports under the orders above, may not exceed 1,509 Bcf/yr ).

Customers

We have entered into six fixed price SPA s with terms of at least 20 years (plus extension rights) with third parties to make available an aggregate amount of LNG that is between approximately 80% to 95% of the expected aggregate adjusted nominal production capacity of Trains 1 through 5. Under these SPA s, the customers will purchase LNG from us for a price consisting of a fixed fee per MMBtu of LNG (a portion of which is subject to annual adjustment for inflation) plus a variable fee per MMBtu of LNG equal to approximately 115% of Henry Hub . In certain circumstances, the customers may elect to cancel or suspend deliveries of LNG cargoes, in which case the customers would still be required to pay the fixed fee with respect to the contracted volumes that are not delivered as a result of such cancellation or suspension. We refer to the fee component that is applicable regardless of a cancellation or suspension of LNG cargo deliveries under the SPAs as the fixed fee component of the price under our SPAs. We refer to the fee component that is applicable only in connection with LNG cargo deliveries as the variable fee component of the price under our SPAs . The variable fees under our SPAs were sized at the time of entry into each SPA with the intent to cover the costs of gas purchases and transportation related to, and operating and maintenance costs to produce, the LNG to be sold under each such SPA. The SPA s and contracted volumes to be made available under the SPA s are not tied to a specific Train; however, the term of each SPA generally commences upon the date of first commercial delivery of a specified Train. Under our SPA with BG , BG has contracted for volumes related to Trains 3 and 4, for which the obligation to make volumes related to Train 3 available to BG has commenced and the obligation to make volumes related to Train 4 available to BG is expected to commence approximately one year after the date of first commercial delivery under our SPA with GAIL for Train 4.

In aggregate, the annual fixed fee portion to be paid by the third-party SPA customers is approximately $2.2 billion for Trains 1 through 3 and the SPA with GAIL for Train 4, increasing to $2.3 billion upon the date of first commercial delivery of Train 4 under the SPA with BG and to $2.9 billion upon the date of first commercial delivery of Train 5, with the applicable fixed fees starting from the date of first commercial delivery from the applicable Train, as specified in each SPA.

In addition, Cheniere Marketing has entered into an SPA with us to purchase, at Cheniere Marketing’s option, any LNG produced by us in excess of that required for other customers.

Natural Gas Transportation, Storage and Supply

To ensure we are able to transport adequate natural gas feedstock to the Sabine Pass LNG terminal, we have entered into transportation precedent and other agreements to secure firm pipeline transportation capacity with CTPL, a wholly owned subsidiary of Cheniere Partners, and third-party pipeline companies. We have entered into firm storage services agreements with third parties to assist in managing variability in natural gas needs for the Liquefaction Project. We have also entered into enabling agreements and long-term natural gas supply contracts with third parties in order to secure natural gas feedstock for the Liquefaction Project . As of September 30, 2018 , we had secured up to approximately 2,755 TBtu of natural gas feedstock through long-term and short-term natural gas supply contracts.

Construction

We have entered into lump sum turnkey contracts with Bechtel Oil, Gas and Chemicals, Inc. (“Bechtel”) for the engineering, procurement and construction of Trains 1 through 5 of the Liquefaction Project , under which Bechtel charges a lump sum for all work performed and generally bears project cost risk unless certain specified events occur, in which case Bechtel may cause us to enter into a change order, or we agree with Bechtel to a change order.

The total contract price of the EPC contract for Train 5 of the Liquefaction Project is approximately $3.1 billion reflecting amounts incurred under change orders through September 30, 2018 . Total expected capital costs for Trains 1 through 5 are estimated to be between $12.5 billion and $13.5 billion before financing costs and between $17.5 billion and $18.5 billion after financing costs, including, in each case, estimated owner’s costs and contingencies.

Final Investment Decision on Train 6

We will contemplate making a final investment decision to commence construction of Train 6 of the Liquefaction Project based upon, among other things, entering into an EPC contract, entering into acceptable commercial arrangements and obtaining adequate financing to construct Train 6.

Terminal Use Agreements

We have entered into a TUA with SPLNG to provide berthing for LNG vessels and for the unloading, loading, storage and regasification of LNG. We have reserved approximately 2.0 Bcf/d of regasification capacity and we are obligated to make monthly capacity payments to SPLNG aggregating approximately $250 million per year (the “TUA Fees”) , continuing until at least May 2036. We obtained this reserved capacity as a result of an assignment in July 2012 by Cheniere Investments of its rights, title and interest under its TUA . In connection with the assignment, we, Cheniere Investments and SPLNG also entered into a terminal use rights assignment and agreement (the “TURA”) pursuant to which Cheniere Investments had the right to use our reserved capacity under the TUA and had the obligation to pay the TUA Fees required by the TUA to SPLNG. Cheniere Investments’ right to use our capacity at the Sabine Pass LNG terminal and its respective percentage of TUA Fees payable was reduced from 100% to zero as each of Trains 1 through 4 reached commercial operations.

Cheniere Partners has guaranteed our obligations under our TUA and the obligations of Cheniere Investments under the TURA . During the three months ended September 30, 2018 and 2017 , we recorded operating and maintenance expense—affiliate of $64 million and $47 million , respectively, for the TUA Fees and cost of sales—affiliate of $8 million and $5 million , respectively, for cargo loading services incurred under the TUA . During the nine months ended September 30, 2018 and 2017 , we recorded operating and maintenance expense—affiliate of $192 million and $129 million , respectively, for the TUA Fees and cost of sales—affiliate of $23 million and $15 million , respectively, for cargo loading services incurred under the TUA .

Additionally, we have entered into a partial TUA assignment agreement with Total Gas & Power North America, Inc. (“Total”) , another TUA customer, whereby upon substantial completion of Train 3, we gained access to a portion of Total ’s capacity and other services provided under Total ’s TUA with SPLNG. Upon substantial completion of Train 5, we will gain access to substantially all of Total ’s capacity. This agreement provides us with additional berthing and storage capacity at the Sabine Pass LNG terminal that may be used to provide increased flexibility in managing LNG cargo loading and unloading activity, permit us to more flexibly manage our LNG storage capacity and accommodate the development of Trains 5 and 6. Notwithstanding any arrangements between Total and us, payments required to be made by Total to SPLNG will continue to be made by Total to SPLNG in accordance with its TUA. During each of the three months ended September 30, 2018 and 2017 , we recorded $7.5 million and during the nine months ended September 30, 2018 and 2017 , we recorded $23 million and $15 million , respectively, as operating and maintenance expense under this partial TUA assignment agreement.

Capital Resources

We currently expect that our capital resources requirements with respect to Trains 1 through 5 of the Liquefaction Project will be financed through project debt and borrowings and cash flows under the SPA s. We believe that with the net proceeds of borrowings, available commitments under the Working Capital Facility and cash flows from operations, we will have adequate financial resources available to complete Train 5 of the Liquefaction Project and to meet our currently anticipated capital, operating and debt service requirements. We began generating cash flows from operations from the Liquefaction Project in May 2016, when Train 1 achieved substantial completion and initiated operating activities. Trains 2, 3 and 4 subsequently achieved substantial completion in September 2016, March 2017 and October 2017, respectively. We realized offsets to LNG terminal costs of $79 million and $242 million in the three and nine months ended September 30, 2017 , respectively, that were related to the sale of commissioning cargoes because these amounts were earned or loaded prior to the start of commercial operations, during the testing phase for the construction of those Trains of the Liquefaction Project . We did no t realize any offsets to LNG terminal costs in the three and nine months ended September 30, 2018 .

The following table provides a summary of our capital resources from borrowings and available commitments for the Liquefaction Project , excluding equity contributions from Cheniere Partners and cash flows from operations (as described in Sources and Uses of Cash ), at September 30, 2018 and December 31, 2017 (in millions):



	September 30,		December 31,
	2018		2017
Senior notes (1)	$	13,650	$	13,650
Working Capital Facility outstanding balance	—		—
Letters of credit issued under Working Capital Facility	494		730
Available commitments under Working Capital Facility	706		470
Total capital resources from borrowings and available commitments	$	14,850	$	14,850

(1)

Includes 5.625% Senior Secured Notes due 2021, 6.25% Senior Secured Notes due 2022, 5.625% Senior Secured Notes due 2023, 5.75% Senior Secured Notes due 2024, 5.625% Senior Secured Notes due 2025, 5.875% Senior Secured Notes due 2026 (the “2026 Senior Notes”) , 5.00% Senior Secured Notes due 2027 (the “2027 Senior Notes”) , 4.200% Senior Secured Notes due 2028 (the “2028 Senior Notes”) and 5.00% Senior Secured Notes due 2037 (the “2037 Senior Notes”) (collectively, the “Senior Notes”) .

For additional information regarding our debt agreements related to the Liquefaction Project , see Note 9—Debt of our Notes to Financial Statements in this quarterly report and Note 10—Debt of our Notes to Financial Statements in our annual report on Form 10-K for the year ended December 31, 2017.

Senior Notes

The Senior Notes are secured on a pari passu first-priority basis by a security interest in all of our membership interests and substantially all of our assets.

At any time prior to three months before the respective dates of maturity for each series of the Senior Notes (except for the 2026 Senior Notes , 2027 Senior Notes , 2028 Senior Notes and 2037 Senior Notes , in which case the time period is six months before the respective dates of maturity), we may redeem all or part of such series of the Senior Notes at a redemption price equal to the “make-whole” price (except for the 2037 Senior Notes , in which case the redemption price is equal to the “optional redemption” price) set forth in the respective indentures governing the Senior Notes , plus accrued and unpaid interest, if any, to the date of redemption. We may also, at any time within three months of the respective maturity dates for each series of the Senior Notes (except for the 2026 Senior Notes , 2027 Senior Notes , 2028 Senior Notes and 2037 Senior Notes , in which case the time period is within six months of the respective dates of maturity), redeem all or part of such series of the Senior Notes at a redemption price equal to 100% of the principal amount of such series of the Senior Notes to be redeemed, plus accrued and unpaid interest, if any, to the date of redemption.

Both the indenture governing the 2037 Senior Notes (the “ 2037 Senior Notes Indenture”) and the common indenture governing the remainder of the Senior Notes (the “Indenture”) include restrictive covenants. We may incur additional indebtedness in the future, including by issuing additional notes, and such indebtedness could be at higher interest rates and have different maturity dates and more restrictive covenants than our current outstanding indebtedness, including the Senior Notes and the Working Capital Facility . Under the 2037 Senior Notes Indenture and the Indenture , we may not make any distributions until, among other requirements, deposits are made into debt service reserve accounts as required and a debt service coverage ratio test of 1.25:1.00 is satisfied. As of September 30, 2018 , we were in compliance with all covenants related to the Senior Notes . Semi-annual principal payments for the 2037 Senior Notes are due on March 15 and September 15 of each year beginning September 15, 2025.

Working Capital Facility

In September 2015, we entered into the Working Capital Facility , which is intended to be used for loans (“Working Capital Loans”) , the issuance of letters of credit, as well as for swing line loans (“Swing Line Loans”) , primarily for certain working capital requirements related to developing and placing into operation the Liquefaction Project . We may, from time to time, request increases in the commitments under the Working Capital Facility of up to $760 million and, upon the completion of the debt financing of Train 6 of the Liquefaction Project , request an incremental increase in commitments of up to an additional $390 million. As of September 30, 2018 and December 31, 2017 , we had $706 million and $470 million of available commitments, $494 million and $730 million aggregate amount of issued letters of credit under the Working Capital Facility , respectively. We did no t have any amounts outstanding under the Working Capital Facility as of both September 30, 2018 and December 31, 2017 .

The Working Capital Facility matures on December 31, 2020, and the outstanding balance may be repaid, in whole or in part, at any time without premium or penalty upon three business days’ notice. Loans deemed made in connection with a draw upon a letter of credit have a term of up to one year. Swing Line Loans terminate upon the earliest of (1) the maturity date or earlier termination of the Working Capital Facility , (2) the date 15 days after such Swing Line Loan is made and (3) the first borrowing date for a Working Capital Loan or Swing Line Loan occurring at least three business days following the date the Swing Line Loan is made. We are required to reduce the aggregate outstanding principal amount of all Working Capital Loans to zero for a period of five consecutive business days at least once each year.

The Working Capital Facility contains conditions precedent for extensions of credit, as well as customary affirmative and negative covenants. As of September 30, 2018 , we were in compliance with all covenants related to the Working Capital Facility . Our obligations under the Working Capital Facility are secured by substantially all of our assets as well as all of our membership interests on a pari passu basis with the Senior Notes .

Sources and Uses of Cash

The following table summarizes the sources and uses of our cash, cash equivalents and restricted cash for the nine months ended September 30, 2018 and 2017 (in millions). The table presents capital expenditures on a cash basis; therefore, these amounts differ from the amounts of capital expenditures, including accruals, which are referred to elsewhere in this report. Additional discussion of these items follows the table.



	Nine Months Ended September 30,
	2018			2017
Operating cash flows	$	928		$	317
Investing cash flows	(554		)	(1,187		)
Financing cash flows	(269		)	1,139

Net increase in cash, cash equivalents and restricted cash	105			269
Cash, cash equivalents and restricted cash—beginning of period	544			358
Cash, cash equivalents and restricted cash—end of period	$	649		$	627

Operating Cash Flows

Our operating cash inflows during the nine months ended September 30, 2018 and 2017 were $928 million and $317 million , respectively. The $611 million increase in operating cash inflows in 2018 compared to 2017 was primarily related to increased cash receipts from the sale of LNG cargoes, partially offset by increased operating costs and expenses as a result of the of additional Trains that were operating at the Liquefaction Project in 2018. During the nine months ended September 30, 2018 , Trains 1 through 4 were operational, whereas during the nine months ended September 30, 2017 , Trains 1 and 2 were operational for nine months and Train 3 was operational for six months.

Investing Cash Flows

Investing cash outflows during the nine months ended September 30, 2018 and 2017 were $554 million and $1.2 billion , respectively, and were primarily used to fund the construction costs for the Liquefaction Project . These costs are capitalized as construction-in-process until achievement of substantial completion.

Financing Cash Flows

Financing cash outflows during the nine months ended September 30, 2018 were $269 million , primarily as a result of:


•	$81 million of equity contributions from Cheniere Partners; and


•	$350 million of distributions to Cheniere Partners.

Financing cash inflows during the nine months ended September 30, 2017 were $1.1 billion , primarily as a result of:


•	issuances of senior notes for an aggregate principal amount of $2.15 billion;


•	$55 million of borrowings and $369 million of repayments made under the credit facilities we entered into in June 2015;


•	$110 million of borrowings and $334 million of repayments made under the Working Capital Facility ;


•	$ 29 million of debt issuance costs related to up-front fees paid upon the closing of these transactions;


•	$7 million of equity contributions from Cheniere Partners; and


•	$450 million of distributions to Cheniere Partners.

Results of Operations

Our net income was $243 million in the three months ended September 30, 2018 , compared to a net loss of $12 million in the three months ended September 30, 2017 . This $255 million increase in net income in 2018 was primarily a result of increased income from operations due to additional Trains operating between the periods, which was partially offset by increased interest expense, net of amounts capitalized.

Our net income was $678 million in the nine months ended September 30, 2018 , compared to a net loss of $36 million in the nine months ended September 30, 2017 . This $714 million increase in net income in 2018 was primarily a result of increased income from operations due to additional Trains operating between the periods and decreased loss on modification or extinguishment of debt, which were partially offset by increased interest expense, net of amounts capitalized.

Revenues



	Three Months Ended September 30,						Nine Months Ended September 30,
(in millions, except volumes)	2018		2017		Change		2018		2017		Change
LNG revenues	$	1,249	$	723	$	526	$	3,419	$	1,718	$	1,701
LNG revenues—affiliate	205		111		94		886		864		22
Total revenues	$	1,454	$	834	$	620	$	4,305	$	2,582	$	1,723

LNG volumes recognized as revenues (in TBtu)	228		144		84		691		439		252

We begin recognizing LNG revenues from the Liquefaction Project following the substantial completion and the commencement of operating activities of the respective Trains. During the nine months ended September 30, 2018 , Trains 1 through 4 were operational, whereas during the nine months ended September 30, 2017 , Trains 1 and 2 were operational for nine months and Train 3 was operational for six months. The increase in revenues for the three and nine months ended September 30, 2018 from the comparable periods in 2017 was primarily attributable to the increased volume of LNG sold following the achievement of substantial completion of these Trains, as well as increased revenues per TBtu sold. We expect our LNG revenues to increase in the future upon Train 5 becoming operational.

Prior to substantial completion of a Train, amounts received from the sale of commissioning cargoes from that Train are offset against LNG terminal construction-in-process because these amounts are earned or loaded during the testing phase for the construction of that Train. We realized offsets to LNG terminal costs of $79 million corresponding to 14 TBtu of LNG in the three months ended September 30, 2017 and $242 million corresponding to 40 TBtu of LNG in the nine months ended September 30, 2017 that were related to the sale of commissioning cargoes. There were no commissioning cargoes sold that were realized as offsets to LNG terminal costs in the three and nine months ended September 30, 2018 .

Operating costs and expenses



	Three Months Ended September 30,							Nine Months Ended September 30,
(in millions)	2018		2017		Change			2018		2017		Change
Cost of sales	$	758	$	488	$	270		$	2,291	$	1,576	$	715
Cost of sales—affiliate	8		5		3			23		15		8
Operating and maintenance expense	96		65		31			258		172		86
Operating and maintenance expense—affiliate	107		82		25			317		224		93
Development expense	—		1		(1		)	1		2		(1		)
General and administrative expense	1		3		(2		)	4		5		(1		)
General and administrative expense—affiliate	12		12		—			36		46		(10		)
Depreciation and amortization expense	88		69		19			261		183		78
Total operating costs and expenses	$	1,070	$	725	$	345		$	3,191	$	2,223	$	968

Our total operating costs and expenses increased during the three and nine months ended September 30, 2018 from the three and nine months ended September 30, 2017 , primarily as a result of additional Trains that were operating between the periods. There were four Trains operating during the nine months ended September 30, 2018 , whereas two Trains were operating for nine months and a third Train was operating for six months during the comparable period in 2017.

Cost of sales increased during the three and nine months ended September 30, 2018 from the comparable periods in 2017, primarily as a result of the increase in operating Trains during 2018. Cost of sales includes costs incurred directly for the production and delivery of LNG from the Liquefaction Project , to the extent those costs are not utilized for the commissioning process. The increase during the three and nine months ended September 30, 2018 from the comparable periods in 2017 was primarily related to the increase in the volume of natural gas feedstock, partially offset by lower prices of natural gas feedstock between the periods. Cost of sales also includes gains and losses from derivatives associated with economic hedges to secure natural gas feedstock for the Liquefaction Project , variable transportation and storage costs and other costs to convert natural gas into LNG.

Operating and maintenance expense (including affiliates) increased during the three and nine months ended September 30, 2018 from the comparable periods in 2017, as a result of the increase in operating Trains during 2018. Operating and maintenance expense includes costs associated with operating and maintaining the Liquefaction Project . The increase during the three and nine months ended September 30, 2018 from the comparable periods in 2017 was primarily related to TUA reservation charges paid to SPLNG and to Total from payments under the partial TUA assignment agreement, natural gas transportation and storage capacity demand charges paid to CTPL and third parties, third-party service and maintenance contract costs and payroll and benefit costs of operations personnel. Operating and maintenance expense (including affiliates) also includes insurance and regulatory costs and other operating costs.

Depreciation and amortization expense increased during the three and nine months ended September 30, 2018 from the three and nine months ended September 30, 2017 as a result of an increased number of operational Trains, as the assets related to the Trains of the Liquefaction Project began depreciating upon reaching substantial completion.

We expect our operating costs and expenses to generally increase in the future upon Train 5 achieving substantial completion, although certain costs will not proportionally increase with the number of operational Trains as cost efficiencies will be realized.

Other expense (income)



	Three Months Ended September 30,									Nine Months Ended September 30,
(in millions)	2018			2017			Change			2018			2017			Change
Interest expense, net of capitalized interest	$	146		$	124		$	22		$	445		$	356		$	89
Loss on modification or extinguishment of debt	—			—			—			—			42			(42		)
Derivative loss, net	—			—			—			—			2			(2		)
Other income	(5		)	(3		)	(2		)	(9		)	(5		)	(4		)
Total other expense	$	141		$	121		$	20		$	436		$	395		$	41

Interest expense, net of capitalized interest, increased during the three and nine months ended September 30, 2018 compared to the three and nine months ended September 30, 2017 primarily as a result of a decrease in the portion of total interest costs that could be capitalized as additional Trains of the Liquefaction Project completed construction between the periods. We incurred $198 million of total interest costs during each of the three months ended September 30, 2018 and 2017 , of which we capitalized $52 million and $74 million , respectively, which was primarily related to the construction of the Liquefaction Project. For the nine months ended September 30, 2018 and 2017 , we incurred $594 million and $581 million of total interest cost, respectively, of which we capitalized $149 million and $225 million , respectively, which was primarily related to the construction of the Liquefaction Project.

Loss on modification or extinguishment of debt decreased during the nine months ended September 30, 2018 , as compared to the nine months ended September 30, 2017 . Loss on modification or extinguishment of debt recognized during the nine months ended September 30, 2017 was attributable to the $42 million write-off of debt issuance costs in March 2017 upon termination of the remaining available balance of $1.6 billion under the previous credit facilities in connection with the issuance of the 2028 Senior Notes and the 2037 Senior Notes .

Off-Balance Sheet Arrangements

As of September 30, 2018 , we had no transactions that met the definition of off-balance sheet arrangements that may have a current or future material effect on our financial position or operating results.

Summary of Critical Accounting Estimates

The preparation of our Financial Statements in conformity with GAAP requires management to make certain estimates and assumptions that affect the amounts reported in the Financial Statements and the accompanying notes. There have been no significant changes to our critical accounting estimates from those disclosed in our annual report on Form 10-K for the year ended December 31, 2017 .

Recent Accounting Standards

For descriptions of recently issued accounting standards, see Note 14—Recent Accounting Standards of our Notes to Financial Statements.


ITEM 3.	QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Marketing and Trading Commodity Price Risk

We have entered into commodity derivatives consisting of natural gas supply contracts for the commissioning and operation of the Liquefaction Project (“Liquefaction Supply Derivatives”) . In order to test the sensitivity of the fair value of the Liquefaction Supply Derivatives to changes in underlying commodity prices, management modeled a 10% change in the commodity price for natural gas for each delivery location as follows (in millions):



	September 30, 2018				December 31, 2017
	Fair Value		Change in Fair Value		Fair Value		Change in Fair Value
Liquefaction Supply Derivatives	$	19	$	3	$	55	$	5

See Note 6—Derivative Instruments for additional details about our derivative instruments.

ITEM 4. CONTROLS AND PROCEDURES

We maintain a set of disclosure controls and procedures that are designed to ensure that information required to be disclosed by us in the reports voluntarily filed by us under the Securities Exchange Act of 1934, as amended (the “Exchange Act”) , is recorded, processed, summarized and reported within the time periods specified in the SEC ’s rules and forms. As of the end of the period covered by this report, we evaluated, under the supervision and with the participation of our management, including our Chief Executive Officer and our Chief Financial Officer, the effectiveness of our disclosure controls and procedures pursuant to Rule 13a-15 of the Exchange Act . Based on that evaluation, our Chief Executive Officer and our Chief Financial Officer concluded that our disclosure controls and procedures are effective.

During the most recent fiscal quarter, there have been no changes in our internal control over financial reporting that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.


PART II.	OTHER INFORMATION


ITEM 1.	LEGAL PROCEEDINGS

We may in the future be involved as a party to various legal proceedings, which are incidental to the ordinary course of business. We regularly analyze current information and, as necessary, provide accruals for probable liabilities on the eventual disposition of these matters.

Please see Part II, Item 1, “Legal Proceedings” in our Quarterly Report on Form 10-Q for the period ended June 30, 2018 .


ITEM 1A.	RISK FACTORS

There have been no material changes from the risk factors disclosed in our annual report on Form 10-K for the year ended December 31, 2017 .


ITEM 6.	EXHIBITS



Exhibit No.		Description
10.1*		Fourth Omnibus Amendment, dated as of September 17, 2018, to (a) the Second Amended and Restated Common Terms Agreement, dated as of June 30, 2015, by and among the Company, as Borrower, Société Générale, as the Common Security Trustee and as the Intercreditor Agent, The Bank of Nova Scotia, as the Secured Debt Holder Group Representative for the Working Capital Debt and other Secured Debt Holder Group Representatives party thereto from time to time, the Secured Hedge Representatives and the Secured Gas Hedge Representatives party thereto from time to time and (b) the Amended and Restated Senior Working Capital Revolving Credit and Letter of Credit Reimbursement Agreement, dated as of September 4, 2015, by and among the Company, as Borrower, Société Générale as the Swing Line Lender and as the Common Security Trustee, The Bank of Nova Scotia as the Senior Issuing Bank and Senior Facility Agent and the other agents and lenders from time to time party thereto
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 by 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.

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.



		SABINE PASS LIQUEFACTION, LLC

Date:	November 7, 2018	By:	/s/ Michael J. Wortley
			Michael J. Wortley
			Chief Financial Officer
			(on behalf of the registrant and as principal financial officer)

Date:	November 7, 2018	By:	/s/ Leonard E. Travis
			Leonard E. Travis
			Chief Accounting Officer
			(on behalf of the registrant and as principal accounting officer)



SABINE PASS LIQUEFACTION, LLC ,
as the Borrower


By:	/s/ Lisa C. Cohen
Name: Lisa C. Cohen
Title: Treasurer



SOCIÉTÉ GÉNÉRALE,
as Common Security Trustee and Secured
Debt Holder Group Representative for the
Commercial Banks Facility


By:	/s/ Ellen Turkel
Name: Ellen Turkel
Title: Director



SOCIÉTÉ GÉNÉRALE,
as the Intercreditor Agent


By:	/s/ Ellen Turkel
Name: Ellen Turkel
Title: Director



SOCIÉTÉ GÉNÉRALE,
as Commercial Bank Lender, Swing Line Lender
and Working Capital Lender


By:	/s/ Ellen Turkel
Name: Ellen Turkel
Title: Director



THE BANK OF NOVA SCOTIA, HOUSTON BRANCH
as the Secured Debt Holder Group Representative for the Working Capital Facility


By:	/s/ Alfredo Brahim
Name: Alfredo Brahim
Title: Director



THE BANK OF NOVA SCOTIA, HOUSTON BRANCH
as Senior Issuing Bank and Working Capital Lender


By:	/s/ Alfredo Brahim
Name: Alfredo Brahim
Title: Director



ABN AMRO CAPITAL USA LLC,
as Senior Issuing Bank and Working Capital Lender


By:	/s/ Casey Lowary
Name: Casey Lowary
Title: Managing Director


By:	/s/ Darrell Holley
Name: Darrell Holley
Title: Managing Director



MUFG BANK, LTD.,
as Working Capital Lender


By:	/s/ Saad Iqbal
Name: Saad Iqbal
Title: Managing Director



INDUSTRIAL AND COMMERCIAL BANK
OF CHINA LIMITED, NEW YORK BANK,
as Working Capital Lender


By:	/s/ Michael Fabisiak
Name: Michael Fabisiak
Title: Head of Project Finance, Americas


By:	/s/ N/A
Name:
Title:



ING CAPITAL LLC,
as Working Capital Lender


By:	/s/ Subha Pasumarti
Name: Subha Pasumarti
Title: Managing Director


By:	/s/ Hans Beekmans
Name: Hans Beekmans
Title: Director



LANDESBANK BADEN-WÜRTTEMBERG,
NEW YORK BRANCH,
as Working Capital Lender


By:	/s/ Adam Rahal
Name: Adam Rahal
Title: Legal Counsel


By:	/s/ Michael Thier
Name: Michael Thier
Title: Senior Risk Manager



LLOYDS BANK PLC,
as Working Capital Lender


By:	/s/ Kamala Basdeo
Name: Kamala Basdeo
Title: Assistant Manager
	Transaction Execution
	Category A
	B002


By:	/s/ Jennifer Larrow
Name: Jennifer Larrow
Title: Assistant Manager
	Transaction Execution
	Category A
	L003



MORGAN STANLEY BANK, N.A.,
as Working Capital Lender


By:	/s/ Jake Dowden
Name: Jake Dowden
Title: Authorized Signatory



SUMITOMO MITSUI BANKING
CORPORATION,
as Working Capital Lender


By:	/s/ Juan Kreutz
Name: Juan Kreutz
Title: Managing Director



COMMONWEALTH BANK OF AUSTRALIA ,
as Working Capital Lender

By its attorney under Power of Attorney dated
24 June 2013:


Signature of Attorney:	/s/ Annette Tomoski
Name of Attorney:	Annette Tomoski


Signed by its duly constituted attorney in the
presence of:


Signature of Witness:	/s/ Daniel Sardelic
Name of Witness:	Daniel Sardelic



WELLS FARGO BANK, N.A. ,
as Working Capital Lender


By:	/s/ J. Michael Quigley
Name: J. Michael Quigley
Title: Assistant Vice President


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)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f )) 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 is made known to us by others within those entities, particularly during the period in which this report is being prepared;


b)	Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;


c)	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;


d)	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


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.


(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.