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 June 30, 2017
OR
¨ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
 For the transition period from              to             
Cheniere Corpus Christi Holdings, LLC  
(Exact name of registrant as specified in its charter)
 
 
 
 
 
 
Delaware
333-215435
47-1929160
(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  ¨     No x
Note: The registrant became subject to these filing requirements on April 10, 2017. 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 and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted 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. (Check one):
Large accelerated filer ¨
Accelerated filer ¨
Non-accelerated filer x (Do not check if a smaller reporting company)
Smaller reporting company ¨
 
 
 
Emerging growth company ¨

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
 
 
 
 
 



CHENIERE CORPUS CHRISTI HOLDINGS, LLC
TABLE OF CONTENTS




 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 


 



i


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
Bcfe
 
billion cubic feet equivalent
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
 
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



1


Abbreviated Organizational Structure

The following diagram depicts our abbreviated organizational structure as of June 30, 2017 , including our ownership of certain subsidiaries, and the references to these entities used in this quarterly report:
CCHORGCHARTA09.JPG
Unless the context requires otherwise, references to “CCH,” “the Company,” “we,” “us,” and “our” refer to Cheniere Corpus Christi Holdings, LLC and its consolidated subsidiaries.



2


PART I.
FINANCIAL INFORMATION
ITEM 1.
CONSOLIDATED FINANCIAL STATEMENTS
CHENIERE CORPUS CHRISTI HOLDINGS, LLC AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(in thousands)




 
 
June 30,
 
December 31,
 
 
2017
 
2016
ASSETS
 
(unaudited)
 
 
Current assets
 
 
 
 
Cash and cash equivalents
 
$

 
$

Restricted cash
 
103,290

 
197,201

Advances to affiliate
 
13,629

 
20,108

Other current assets
 
1,353

 
37,195

Other current assets—affiliate
 
159

 
141

Total current assets
 
118,431

 
254,645

 
 
 
 
 
Non-current restricted cash
 

 
73,339

Property, plant and equipment, net
 
7,491,961

 
6,076,672

Debt issuance and deferred financing costs, net
 
109,581

 
155,847

Non-current advances under long-term contracts
 

 
46,398

Other non-current assets, net
 
37,285

 
29,547

Total assets
 
$
7,757,258

 
$
6,636,448

 
 
 
 
 
LIABILITIES AND MEMBER’S EQUITY
 
 
 
 
Current liabilities
 
 
 
 
Accounts payable
 
$
9,352

 
$
9,120

Accrued liabilities
 
96,876

 
137,648

Due to affiliates
 
15,574

 
7,050

Derivative liabilities
 
31,672

 
43,383

Total current liabilities
 
153,474

 
197,201

 
 
 
 
 
Long-term debt, net
 
6,122,876

 
5,081,715

Non-current derivative liabilities
 
53,575

 
43,105

Other non-current liabilities—affiliate
 

 
618

 
 
 
 
 
Member’s equity
 
1,427,333

 
1,313,809

Total liabilities and member’s equity
 
$
7,757,258

 
$
6,636,448





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

3


CHENIERE CORPUS CHRISTI HOLDINGS, LLC AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands)
(unaudited)


 
Three Months Ended June 30,
 
Six Months Ended June 30,
 
2017
 
2016
 
2017
 
2016
 
 
 
 
 
 
 
 
Revenues
$

 
$

 
$

 
$

 
 
 
 
 
 
 
 
Expenses
 
 
 
 
 
 
 
Operating and maintenance expense
858

 
321

 
1,564

 
537

Operating and maintenance expense—affiliate
96

 
17

 
149

 
20

Development expense (recovery)
323

 
(52
)
 
415

 
(184
)
Development expense (recovery)—affiliate

 
58

 
8

 
(120
)
General and administrative expense
1,548

 
1,002

 
2,963

 
1,777

General and administrative expense—affiliate
153

 
274

 
464

 
291

Depreciation and amortization expense
155

 
52

 
289

 
84

Other
5

 

 
5

 

Total expenses
3,138

 
1,672

 
5,857

 
2,405

 
 
 
 
 
 
 
 
Loss from operations
(3,138
)
 
(1,672
)
 
(5,857
)
 
(2,405
)
 
 
 
 
 
 
 
 
Other expense
 
 
 
 
 
 
 
Loss on early extinguishment of debt
(32,480
)
 
(29,011
)
 
(32,480
)
 
(29,011
)
Derivative loss, net
(33,096
)
 
(75,877
)
 
(32,096
)
 
(236,053
)
Other expense
(44
)
 
(25
)
 
(82
)
 

Total other expense
(65,620
)
 
(104,913
)
 
(64,658
)
 
(265,064
)

 
 
 
 
 
 
 
Net loss
$
(68,758
)
 
$
(106,585
)
 
$
(70,515
)
 
$
(267,469
)




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

4


CHENIERE CORPUS CHRISTI HOLDINGS, LLC AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF MEMBER’S EQUITY
(in thousands)
(unaudited)



 
Cheniere CCH HoldCo I, LLC
 
Total Member s
Equity
Balance at December 31, 2016
$
1,313,809

 
$
1,313,809

Capital contributions
184,039

 
184,039

Net loss
(70,515
)
 
(70,515
)
Balance at June 30, 2017
$
1,427,333

 
$
1,427,333





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

5


CHENIERE CORPUS CHRISTI HOLDINGS, LLC AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
(unaudited)

 
Six Months Ended June 30,
 
2017
 
2016
Cash flows from operating activities
 
 
 
Net loss
$
(70,515
)
 
$
(267,469
)
Adjustments to reconcile net loss to net cash used in operating activities:
 
 
 
Depreciation and amortization expense
289

 
84

Loss on early extinguishment of debt
32,480

 
29,011

Total losses on derivatives, net
32,479

 
236,053

Net cash used for settlement of derivative instruments
(33,720
)
 
(13,710
)
Other
5

 

Changes in operating assets and liabilities:
 
 
 
Accounts payable and accrued liabilities
157

 
761

Due to affiliates
726

 
(438
)
Other, net
(1,047
)
 
(1,350
)
Other, net—affiliate
(636
)
 
149

Net cash used in operating activities
(39,782
)
 
(16,909
)
 
 
 
 
Cash flows from investing activities
 

 
 
Property, plant and equipment, net
(1,382,418
)
 
(1,031,602
)
Other
32,391

 
(15,306
)
Net cash used in investing activities
(1,350,027
)
 
(1,046,908
)
 
 
 
 
Cash flows from financing activities
 

 
 
Proceeds from issuances of debt
2,497,000

 
2,318,000

Repayments of debt
(1,436,050
)
 
(1,050,660
)
Debt issuance and deferred financing costs
(22,401
)
 
(27,166
)
Capital contributions
184,039

 

Other
(29
)
 
(10
)
Net cash provided by financing activities
1,222,559

 
1,240,164

 
 
 
 
Net increase (decrease) in cash, cash equivalents and restricted cash
(167,250
)
 
176,347

Cash, cash equivalents and restricted cash—beginning of period
270,540

 
46,770

Cash, cash equivalents and restricted cash—end of period
$
103,290

 
$
223,117


Balances per Consolidated Balance Sheet:
 
June 30, 2017
Cash and cash equivalents
$

Restricted cash
103,290

Total cash, cash equivalents and restricted cash
$
103,290





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

6


CHENIERE CORPUS CHRISTI HOLDINGS, LLC AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(unaudited)


NOTE 1—NATURE OF OPERATIONS AND BASIS OF PRESENTATION
  
We are developing and constructing a natural gas liquefaction and export facility at the Corpus Christi LNG terminal (the “Liquefaction Facility”) , which is on nearly 2,000 acres of land that we own or control near Corpus Christi, Texas, and a 23 -mile natural gas supply pipeline (the “Corpus Christi Pipeline” and together with the Liquefaction Facility, the “Liquefaction Project”) through wholly owned subsidiaries CCL and CCP, respectively. The Liquefaction Project is being developed in stages. The first stage (“Stage 1”) includes Trains 1 and 2 , two LNG storage tanks, one complete marine berth and a second partial berth and all of the Liquefaction Project ’s necessary infrastructure facilities. The second stage includes Train 3, one LNG storage tank and the completion of the second partial berth. Stage 1 and the Corpus Christi Pipeline are currently under construction, and Train 3 is being commercialized and has all necessary regulatory approvals in place.

Basis of Presentation

The accompanying unaudited Consolidated Financial Statements of CCH 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 Consolidated and Combined Financial Statements and accompanying notes included in our registration statement on Form S-4, as amended, filed with the SEC and declared effective on April 10, 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 had no effect on our overall consolidated financial position, results of operations or cash flows.

Results of operations for the three and six months ended June 30, 2017 are not necessarily indicative of the results of operations that will be realized for the year ending December 31, 2017 .

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 Consolidated Statements of Operations, is included in the consolidated federal income tax return of Cheniere. The provision for income taxes, taxes payable and deferred income tax balances have been recorded as if we had filed all tax returns on a separate return basis (“hypothetical carve-out basis”) from Cheniere.

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 Consolidated Balance Sheets. As of June 30, 2017 and December 31, 2016 , restricted cash consisted of the following (in thousands):
 
 
June 30,
 
December 31,
 
 
2017
 
2016
Current restricted cash
 
 
 
 
Liquefaction Project
 
$
103,290

 
$
197,201

 
 
 
 
 
Non-current restricted cash
 
 
 
 
Liquefaction Project
 

 
73,339


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.




7


CHENIERE CORPUS CHRISTI HOLDINGS, LLC AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—CONTINUED
(unaudited)


NOTE 3—PROPERTY, PLANT AND EQUIPMENT
 
Property, plant and equipment, net consists of LNG terminal costs and fixed assets, as follows (in thousands):
 
 
June 30,
 
December 31,
 
 
2017
 
2016
LNG terminal costs
 
 
 
 
LNG terminal construction-in-process
 
$
7,474,008

 
$
6,060,299

LNG site and related costs
 
13,844

 
14,006

Total LNG terminal costs
 
7,487,852

 
6,074,305

Fixed assets
 
 
 
 
Fixed assets
 
4,598

 
2,620

Accumulated depreciation
 
(489
)
 
(253
)
Total fixed assets, net
 
4,109

 
2,367

Property, plant and equipment, net
 
$
7,491,961

 
$
6,076,672

 

Depreciation expense was $0.1 million and $42 thousand in the three months ended June 30, 2017 and 2016 , respectively, and $0.2 million and $0.1 million in the six months ended June 30, 2017 and 2016 , respectively.

NOTE 4—DERIVATIVE INSTRUMENTS
 
We have entered into the following derivative instruments that are reported at fair value:
interest rate swaps (“Interest Rate Derivatives”) to protect against volatility of future cash flows and hedge a portion of the variable-rate interest payments on our credit facility (the “2015 CCH Credit Facility”) and
natural gas supply contracts for the commissioning and operation of the Liquefaction Project (“Liquefaction Supply Derivatives”) .

None of our derivative instruments are designated as cash flow hedging instruments, and changes in fair value are recorded within our Consolidated Statements of Operations to the extent not utilized for the commissioning process.

Interest Rate Derivatives

As of  June 30, 2017 , we had the following Interest Rate Derivatives outstanding:
 
 
Initial Notional Amount
 
Maximum Notional Amount
 
Effective Date
 
Maturity Date
 
Weighted Average Fixed Interest Rate Paid
 
Variable Interest Rate Received
Interest Rate Derivatives
 
$28.8 million
 
$4.9 billion
 
May 20, 2015
 
May 31, 2022
 
2.29%
 
One-month LIBOR

Our Interest Rate Derivatives are categorized within Level 2 of the fair value hierarchy and are required to be measured at fair value on a recurring basis. We value our Interest Rate Derivatives using valuations based on the initial trade prices. Using an income-based approach, subsequent valuations are based on observable inputs to the valuation model including interest rate curves, risk adjusted discount rates, credit spreads and other relevant data.

In May 2017, we settled a portion of our Interest Rate Derivatives and recognized a derivative loss of $13.0 million in conjunction with the termination of approximately $1.4 billion of commitments under the 2015 CCH Credit Facility, as discussed in Note 6—Debt .



8


CHENIERE CORPUS CHRISTI HOLDINGS, LLC AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—CONTINUED
(unaudited)



The following table (in thousands) shows the fair value and location of our Interest Rate Derivatives on our Consolidated Balance Sheets:
 
 
June 30,
 
December 31,
Balance Sheet Location
 
2017
 
2016
Derivative liabilities
 
$
(31,672
)
 
$
(43,383
)
Non-current derivative liabilities
 
(53,192
)
 
(43,105
)
Total derivative liabilities
 
$
(84,864
)
 
$
(86,488
)

The following table (in thousands) shows the changes in the fair value and settlements of our Interest Rate Derivatives recorded in derivative loss, net on our Consolidated Statements of Operations during the three and six months ended June 30, 2017 and 2016 :
 
 
Three Months Ended June 30,
 
Six Months Ended June 30,
 
 
2017
 
2016
 
2017
 
2016
Interest Rate Derivatives loss
 
$
(33,096
)
 
$
(75,877
)
 
$
(32,096
)
 
$
(236,053
)

Liquefaction Supply Derivatives

CCL entered into the Liquefaction Supply Derivatives during the six months ended June 30, 2017 . The fair value of the 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 as of the reporting date.

The fair value of substantially all of the Liquefaction Supply Derivatives is developed through the use of internal models which are impacted by inputs that are unobservable in the marketplace. As a result, the fair value of the Liquefaction Supply Derivatives is designated as Level 3 within the valuation hierarchy. The curves used to generate the fair value of the 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 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. Internal fair value models include conditions precedent to the respective long-term natural gas supply contracts. As of June 30, 2017 , some of the Liquefaction Supply Derivatives existed within markets for which the pipeline infrastructure is under development to accommodate marketable physical gas flow. The forward notional natural gas buy position of the Liquefaction Supply Derivatives was approximately 280 TBtu as of June 30, 2017 .

The following table includes quantitative information for the unobservable inputs for our Liquefaction Supply Derivatives as of June 30, 2017 :
 
 
Net Fair Value Liability
(in thousands)
 
Valuation Technique
 
Significant Unobservable Input
 
Significant Unobservable Inputs Range
Liquefaction Supply Derivatives
 
$(383)
 
Income Approach
 
Basis Spread
 
$(0.098) - $0.080

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. 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.




9


CHENIERE CORPUS CHRISTI HOLDINGS, LLC AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—CONTINUED
(unaudited)


The following table (in thousands) shows the fair value and location of our Liquefaction Supply Derivatives on our Consolidated Balance Sheets:
 
 
June 30,
 
December 31,
Balance Sheet Location
 
2017
 
2016
Non-current derivative liabilities
 
$
(383
)
 
$


The following table (in thousands) shows the changes in the fair value of our Liquefaction Supply Derivatives recorded in our Consolidated Statements of Operations during the three and six months ended June 30, 2017 and 2016 :
 
 
 
Three Months Ended June 30,
 
Six Months Ended June 30,
 
Statement of Operations Location
 
2017
 
2016
 
2017
 
2016
Liquefaction Supply Derivatives loss
Operating and maintenance expense
 
$
383

 
$

 
$
383

 
$


Balance Sheet Presentation

Our derivative instruments are presented on a net basis on our Consolidated Balance Sheets as described above. The following table (in thousands) shows the fair value of our derivatives outstanding on a gross and net basis:
 
 
Gross Amounts Recognized
 
Gross Amounts Offset in the Consolidated Balance Sheets
 
Net Amounts Presented in the Consolidated Balance Sheets
Offsetting Derivative Assets (Liabilities)
 
 
 
As of June 30, 2017
 
 
 
 
 
 
Interest Rate Derivatives
 
$
(86,112
)
 
$
1,248

 
$
(84,864
)
Liquefaction Supply Derivatives
 
(383
)
 

 
(383
)
As of December 31, 2016
 
 
 
 
 
 
Interest Rate Derivatives
 
(95,923
)
 
9,435

 
(86,488
)

NOTE 5—ACCRUED LIABILITIES
 
As of June 30, 2017 and December 31, 2016 , accrued liabilities consisted of the following (in thousands): 
 
 
June 30,
 
December 31,
 
 
2017
 
2016
Interest costs and related debt fees
 
$
9,401

 
$
59,994

Liquefaction Project costs
 
74,369

 
73,150

Other
 
13,106

 
4,504

Total accrued liabilities
 
$
96,876

 
$
137,648


NOTE 6—DEBT

As of June 30, 2017 and December 31, 2016 , our debt consisted of the following (in thousands): 
 
 
June 30,
 
December 31,
 
 
2017
 
2016
Long-term debt
 
 
 
 
7.000% Senior Secured Notes due 2024 (“2024 CCH Senior Notes”)
 
$
1,250,000

 
$
1,250,000

5.875% Senior Secured Notes due 2025 (“2025 CCH Senior Notes”)
 
1,500,000

 
1,500,000

5.125% Senior Secured Notes due 2027 (“2027 CCH Senior Notes”)
 
1,500,000

 

2015 CCH Credit Facility
 
1,941,737

 
2,380,788

Unamortized debt issuance costs
 
(68,861
)
 
(49,073
)
Total long-term debt, net
 
6,122,876

 
5,081,715

 
 
 
 
 
Current debt
 
 
 
 
$350 million CCH Working Capital Facility (“CCH Working Capital Facility”)
 

 

Total debt, net
 
$
6,122,876

 
$
5,081,715





10


CHENIERE CORPUS CHRISTI HOLDINGS, LLC AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—CONTINUED
(unaudited)


2027 CCH Senior Notes

In May 2017, we issued an aggregate principal amount of $1.5 billion of the 2027 CCH Senior Notes , which are jointly and severally guaranteed by our subsidiaries CCL, CCP and CCP GP (each a “Guarantor” and collectively, the “Guarantors”) . Net proceeds of the offering of approximately $1.4 billion , after deducting commissions, fees and expenses and provisioning for incremental interest required under the 2027 CCH Senior Notes during construction, were used to prepay a portion of the outstanding borrowings under the 2015 CCH Credit Facility , resulting in a write-off of debt issuance costs associated with the 2015 CCH Credit Facility of $32.5 million during both the three and six months ended June 30, 2017 . Borrowings under the 2027 CCH Senior Notes accrue interest at a fixed rate of 5.125% , and interest on the 2027 CCH Senior Notes is payable semi-annually in arrears. The 2027 CCH Senior Notes are governed by the same common indenture as our other senior notes (the “CCH Indenture”) , which contains customary terms and events of default, covenants and redemption terms.

At any time prior to January 1, 2027, we may redeem all or a part of the 2027 CCH Senior Notes at a redemption price equal to the “make-whole” price set forth in the CCH Indenture , plus accrued and unpaid interest, if any, to the date of redemption. We also may at any time on or after January 1, 2027 through the maturity date of June 30, 2027, redeem the 2027 CCH Senior Notes , in whole or in part, at a redemption price equal to 100% of the principal amount of the 2027 CCH Senior Notes to be redeemed, plus accrued and unpaid interest, if any, to the date of redemption.

In connection with the closing of the sale of the 2027 CCH Senior Notes , we and the Guarantors entered into a registration rights agreement (the “CCH Registration Rights Agreement”) . Under the terms of the CCH Registration Rights Agreement , we and the Guarantors have agreed, and any future guarantors will agree, to use commercially reasonable efforts to file with the SEC and cause to become effective a registration statement relating to an offer to exchange any and all of the 2027 CCH Senior Notes for a like aggregate principal amount of our debt securities with terms identical in all material respects to the 2027 CCH Senior Notes sought to be exchanged (other than with respect to restrictions on transfer or to any increase in annual interest rate), within 360 days after May 19, 2017. Under specified circumstances, we and the Guarantors have also agreed, and any future guarantors will also agree, to use commercially reasonable efforts to cause to become effective a shelf registration statement relating to resales of the 2027 CCH Senior Notes . We will be obligated to pay additional interest on the 2027 CCH Senior Notes if we fail to comply with our obligation to register them within the specified time period.

Credit Facilities

Below is a summary (in thousands) of our credit facilities outstanding as of June 30, 2017 :
 
 
2015 CCH Credit Facility
 
CCH Working Capital Facility
Original facility size
 
$
8,403,714

 
$
350,000

Outstanding balance
 
1,941,737

 

Commitments terminated
 
3,832,263

 

Letters of credit issued
 

 
82,161

Available commitment
 
$
2,629,714

 
$
267,839

 
 
 
 
 
Interest rate
 
LIBOR plus 2.25% or base rate plus 1.25% (1)
 
LIBOR plus 1.50% - 2.00% or base rate plus 0.50% - 1.00%
Maturity date
 
Earlier of May 13, 2022 or second anniversary of CCL Trains 1 and 2 completion date
 
December 14, 2021, with various terms for underlying loans
 
(1)
There is a 0.25% step-up for both LIBOR and base rate loans following completion of Trains 1 and 2 of the Liquefaction Project .



11


CHENIERE CORPUS CHRISTI HOLDINGS, LLC AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—CONTINUED
(unaudited)



Interest Expense

Total interest expense consisted of the following (in thousands):
 
 
Three Months Ended June 30,
 
Six Months Ended June 30,
 
 
2017
 
2016
 
2017
 
2016
Total interest cost
 
$
88,168

 
$
51,160

 
$
168,356

 
$
92,755

Capitalized interest, including amounts capitalized as an Allowance for Funds Used During Construction
 
(88,168
)
 
(51,160
)
 
(168,356
)
 
(92,755
)
Total interest expense, net
 
$

 
$

 
$

 
$


Fair Value Disclosures

The following table (in thousands) shows the carrying amount and estimated fair value of our debt:
 
 
June 30, 2017
 
December 31, 2016
 
 
Carrying
Amount
 
Estimated
Fair Value
 
Carrying
Amount
 
Estimated
Fair Value
Senior notes (1)
 
$
4,250,000

 
$
4,518,438

 
$
2,750,000

 
$
2,901,563

Credit facilities (2)
 
1,941,737

 
1,941,737

 
2,380,788

 
2,380,788

 
(1)
Includes 2024 CCH Senior Notes , 2025 CCH Senior Notes and 2027 CCH Senior Notes (collectively, the “CCH Senior Notes”) . The Level 2 estimated fair value was based on quotes obtained from broker-dealers or market makers of the CCH Senior Notes and other similar instruments.
(2)
Includes 2015 CCH Credit Facility and CCH Working Capital Facility . The Level 3 estimated fair value approximates the principal amount because the interest rates are variable and reflective of market rates and the debt may be repaid, in full or in part, at any time without penalty.

NOTE 7—RELATED PARTY TRANSACTIONS

We had $15.6 million and $7.1 million due to affiliates and zero and $0.6 million of other non-current liabilities—affiliate as of June 30, 2017 and December 31, 2016 , respectively, under agreements with affiliates, as described below.

LNG Sale and Purchase Agreements

CCL has entered into two fixed price 20 -year SPAs with Cheniere Marketing International LLP (“Cheniere Marketing UK”). Under the first SPA (the “Cheniere Marketing Foundation SPA”), Cheniere Marketing UK will purchase LNG from CCL for a price consisting of a fixed fee of $3.50 per MMBtu (a portion of which is subject to annual adjustment for inflation) of LNG plus a variable fee equal to 115% of Henry Hub per MMBtu of LNG. At Cheniere Marketing UK’s option, which has not been exercised yet, the Cheniere Marketing Foundation SPA commences upon the date of first commercial delivery for Train 2 and includes an annual contract quantity of 40 TBtu of LNG. The second SPA (the “Cheniere Marketing Base SPA”) allows Cheniere Marketing UK to purchase, at its option, (1) up to a cumulative total of 150 TBtu of LNG within the commissioning periods for Trains 1 through 3, (2) any LNG produced from the end of the commissioning period for Train 1 until the date of first commercial delivery of LNG from Train 1 and (3) any excess LNG produced by the Liquefaction Facility that is not committed to customers under third-party SPAs or to Cheniere Marketing UK under the Cheniere Marketing Foundation SPA , as determined by CCL in each contract year, in each case for a price consisting of a fixed fee of $3.00 per MMBtu of LNG plus a variable fee equal to 115% of Henry Hub per MMBtu of LNG. Under the Cheniere Marketing Base SPA , Cheniere Marketing UK may, without charge, elect to suspend deliveries of cargoes (other than commissioning cargoes) scheduled for any month under the applicable annual delivery program by providing specified notice in advance.

Services Agreements

We recorded aggregate expenses from affiliates on our Consolidated Statements of Operations of $0.2 million and $0.3 million during the three months ended June 30, 2017 and 2016 , respectively, and $0.5 million and $0.2 million for the six months ended June 30, 2017 and 2016 , respectively, under the services agreements below.



12


CHENIERE CORPUS CHRISTI HOLDINGS, LLC AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—CONTINUED
(unaudited)


  
Gas and Power Supply Services Agreement (“G&P Agreement”)

CCL has entered into a gas and power supply services agreement with Cheniere Energy Shared Services, Inc. (“Shared Services”), a wholly owned subsidiary of Cheniere, pursuant to which Shared Services will manage the gas and power procurement requirements of CCL. The services include, among other services, exercising the day-to-day management of CCL’s natural gas and power supply requirements, negotiating agreements on CCL’s behalf and providing other administrative services. Prior to the substantial completion of each Train of the Liquefaction Facility , no monthly fee payment is required except for reimbursement of operating expenses. After substantial completion of each Train of the Liquefaction Facility , for services performed while the Liquefaction Facility is operational, CCL will pay, in addition to the reimbursement of operating expenses, a fixed monthly fee of $125,000 (indexed for inflation) for services with respect to such Train.

Operation and Maintenance Agreements (“O&M Agreements”)

CCL has entered into an O&M Agreement (“CCL O&M Agreement”) with Cheniere LNG O&M Services, LLC (“O&M Services”), a wholly owned subsidiary of Cheniere, pursuant to which CCL receives all of the necessary services required to construct, operate and maintain the Liquefaction Facility . The services to be provided include, among other services, preparing and maintaining staffing plans, identifying and arranging for procurement of equipment and materials, overseeing contractors, administering various agreements and other services required to operate and maintain the Liquefaction Facility . Prior to the substantial completion of each Train of the Liquefaction Facility , no monthly fee payment is required except for reimbursement of operating expenses. After substantial completion of each Train of the Liquefaction Facility , for services performed while the Liquefaction Facility is operational, CCL will pay, in addition to the reimbursement of operating expenses, a fixed monthly fee of $125,000 (indexed for inflation) for services with respect to such Train.

CCP has entered into an O&M Agreement (“CCP O&M Agreement”) with O&M Services pursuant to which CCP receives all of the necessary services required to construct, operate and maintain the Corpus Christi Pipeline . The services to be provided include, among other services, preparing and maintaining staffing plans, identifying and arranging for procurement of equipment and materials, overseeing contractors and other services required to operate and maintain the Corpus Christi Pipeline . CCP is required to reimburse O&M Services for all operating expenses incurred on behalf of CCP.

Management Services Agreements (“MSAs”)

CCL has entered into an MSA with Shared Services pursuant to which Shared Services manages the construction and operation of the Liquefaction Facility , excluding those matters provided for under the G&P Agreement and the CCL O&M Agreement. The services include, among other services, exercising the day-to-day management of CCL’s affairs and business, managing CCL’s regulatory matters, preparing status reports, providing contract administration services for all contracts associated with the Liquefaction Facility and obtaining insurance. Prior to the substantial completion of each Train of the Liquefaction Facility , no monthly fee payment is required except for reimbursement of operating expenses. After substantial completion of each Train, CCL will pay, in addition to the reimbursement of related expenses, a monthly fee equal to 3% of the capital expenditures incurred in the previous month and a fixed monthly fee of $375,000 for services with respect to such Train.

CCP has entered into an MSA with Shared Services pursuant to which Shared Services manages CCP’s operations and business, excluding those matters provided for under the CCP O&M Agreement. The services include, among other services, exercising the day-to-day management of CCP’s affairs and business, managing CCP’s regulatory matters, preparing status reports, providing contract administration services for all contracts associated with the Corpus Christi Pipeline and obtaining insurance. CCP is required to reimburse Shared Services for the aggregate of all costs and expenses incurred in the course of performing the services under the MSA.

Lease Agreement

CCL has entered into agreements with Cheniere Land Holdings, LLC (“Cheniere Land Holdings”) to lease approximately 60 acres of land owned by Cheniere Land Holdings for the Liquefaction Facility . The total annual lease payment, paid in advance upon 30 days of the effective date of the respective leases, is $0.4 million , and the terms of the agreements range from three to five years. We recorded $0.1 million of lease expense related to these agreements as operating and maintenance expense—affiliate



13


CHENIERE CORPUS CHRISTI HOLDINGS, LLC AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—CONTINUED
(unaudited)


for each of the three and six months ended June 30, 2017 and no expense during the six months ended June 30, 2016 . As of June 30, 2017 , we had $0.2 million of prepaid expense related to this agreement in other current assets—affiliate.

Dredge Material Disposal Agreement

CCL has entered into a dredge material disposal agreement with Cheniere Land Holdings that terminates in 2025 which grants CCL permission to use land owned by Cheniere Land Holdings for the deposit of dredge material from the construction and maintenance of the Liquefaction Facility . Under the terms of the agreement, CCL will pay Cheniere Land Holdings $0.50 per cubic yard of dredge material deposits up to 5.0 million cubic yards.

Tug Hosting Agreement

In February 2017, CCL entered into a tug hosting agreement with Corpus Christi Tug Services, LLC (“Tug Services”) to provide certain marine structures, support services and access necessary at the Liquefaction Facility for Tug Services to provide its customers with tug boat and marine services. Tug Services is required to reimburse CCL for any third party costs incurred by CCL in connection with providing the goods and services.

State Tax Sharing Agreements
CCL has entered into a state tax sharing agreement with Cheniere. Under this agreement, Cheniere has agreed to prepare and file all state and local tax returns which CCL 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, CCL will pay to Cheniere an amount equal to the state and local tax that CCL would be required to pay if CCL’s 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 CCL under this agreement; therefore, Cheniere has not demanded any such payments from CCL. The agreement is effective for tax returns due on or after May 2015.

CCP has entered into a state tax sharing agreement with Cheniere. Under this agreement, Cheniere has agreed to prepare and file all state and local tax returns which CCP 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, CCP will pay to Cheniere an amount equal to the state and local tax that CCP would be required to pay if CCP’s 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 CCP under this agreement; therefore, Cheniere has not demanded any such payments from CCP. The agreement is effective for tax returns due on or after May 2015.

Equity Contribution Agreement

We have entered into an equity contribution agreement with Cheniere pursuant to which Cheniere has agreed to provide, directly or indirectly, at our request based on reaching specified milestones of the Liquefaction Project , cash contributions up to approximately $2.6 billion for Stage 1 . As of June 30, 2017 , we have received $1.7 billion in contributions from Cheniere under this agreement.

NOTE 8—SUPPLEMENTAL CASH FLOW INFORMATION

The following table (in thousands) provides supplemental disclosure of cash flow information:
 
Six Months Ended June 30,
 
2017
 
2016
Cash paid during the period for interest, net of amounts capitalized
$
34,309

 
$


The balance in property, plant and equipment, net funded with accounts payable and accrued liabilities (including affiliate) was $109.4 million and $173.6 million , as of June 30, 2017 and 2016 , respectively.




14


CHENIERE CORPUS CHRISTI HOLDINGS, LLC AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—CONTINUED
(unaudited)


NOTE 9—RECENT ACCOUNTING STANDARDS

The following table provides a brief description of recent accounting standards that had not been adopted by the Company as of June 30, 2017 :
Standard
 
Description
 
Expected Date of Adoption
 
Effect on our Consolidated 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 continue to evaluate the effect of this standard on our Consolidated Financial Statements. Preliminarily, we plan to adopt this standard using the full retrospective approach and we do not currently anticipate that the adoption will have a material impact upon our revenues. The Financial Accounting Standards Board has issued and may issue in the future amendments and interpretive guidance which may cause our evaluation to change. Furthermore, we routinely enter into new contracts and we cannot predict with certainty whether the accounting for any future contract under the new standard would result in a significant change from existing guidance. Because this assessment is preliminary and the accounting for revenue recognition is subject to significant judgment, this conclusion could change as we finalize our assessment. We have not yet determined the impact that recognizing fulfillment costs as assets will have on our Consolidated Financial Statements.
ASU 2016-02, Leases (Topic 842)
 
This standard requires a lessee to recognize leases on its balance sheet by recording a lease liability representing the obligation to make future lease payments and a right-of-use asset representing the right to use the underlying asset for the lease term. A lessee is permitted to make an election not to recognize lease assets and liabilities for leases with a term of 12 months or less. The standard also modifies the definition of a lease and requires expanded disclosures. This guidance may be early adopted, and must be adopted using a modified retrospective approach with certain available practical expedients.
 
January 1, 2019

 
We continue to evaluate the effect of this standard on our Consolidated Financial Statements. Preliminarily, we expect that the requirement to recognize all leases on our Consolidated Balance Sheets will be a significant change from current practice but will not have a material impact upon our Consolidated Balance Sheets. Because this assessment is preliminary and the accounting for leases is subject to significant judgment, this conclusion could change as we finalize our assessment. We have not yet determined the impact of the adoption of this standard upon our results of operations or cash flows, whether we will elect to early adopt this standard or which, if any, practical expedients we will elect upon transition.
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

 
We are currently evaluating the impact of the provisions of this guidance on our Consolidated Financial Statements and related disclosures.




15


CHENIERE CORPUS CHRISTI HOLDINGS, LLC AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—CONTINUED
(unaudited)


NOTE 10—SUPPLEMENTAL GUARANTOR INFORMATION

Our CCH Senior Notes are jointly and severally guaranteed by our subsidiaries, CCL, CCP and CCP GP (each a “Guarantor” and collectively, the “Guarantors”) . These guarantees are full and unconditional, subject to certain customary release provisions including (1) the sale, exchange, disposition or transfer (by merger, consolidation or otherwise) of the capital stock or all or substantially all of the assets of the Guarantors, (2) the designation of the Guarantor as an “unrestricted subsidiary” in accordance with the CCH Indenture , (3) upon the legal defeasance or covenant defeasance or discharge of obligations under the CCH Indenture and (4) the release and discharge of the Guarantors pursuant to the Common Security and Account Agreement. See Note 6—Debt for additional information regarding the CCH Senior Notes .

The following is condensed consolidating financial information for CCH (“Parent Issuer”) and the Guarantors . We did not have any non-guarantor subsidiaries as of June 30, 2017 .
Condensed Consolidating Balance Sheet
June 30, 2017
(in thousands)
 
 
 
 
 
 
 
 
 
Parent Issuer
 
Guarantors
 
Eliminations
 
Consolidated
ASSETS
 
 
 
 
 
 
 
Current assets
 
 
 
 
 
 
 
Cash and cash equivalents
$

 
$

 
$

 
$

Restricted cash
103,290

 

 

 
103,290

Advances to affiliate

 
13,629

 

 
13,629

Other current assets
446

 
907

 

 
1,353

Other current assets—affiliate

 
160

 
(1
)
 
159

Total current assets
103,736

 
14,696

 
(1
)
 
118,431

 
 
 
 
 
 
 
 
Property, plant and equipment, net
466,884

 
7,025,077

 

 
7,491,961

Debt issuance and deferred financing costs, net
109,581

 

 

 
109,581

Investments in subsidiaries
7,080,480

 

 
(7,080,480
)
 

Other non-current assets, net

 
37,285

 

 
37,285

Total assets
$
7,760,681

 
$
7,077,058

 
$
(7,080,481
)
 
$
7,757,258

 
 
 
 
 
 
 
 
LIABILITIES AND MEMBER’S EQUITY
 
 
 
 
 
 
 
Current liabilities
 
 
 
 
 
 
 
Accounts payable
$
429

 
$
8,923

 
$

 
$
9,352

Accrued liabilities
10,576

 
86,300

 

 
96,876

Due to affiliates
114

 
15,460

 

 
15,574

Derivative liabilities
31,672

 

 

 
31,672

Total current liabilities
42,791

 
110,683

 

 
153,474

 
 
 
 
 
 
 
 
Long-term debt, net
6,122,876

 

 

 
6,122,876

Non-current derivative liabilities
53,192

 
383

 

 
53,575

 
 
 
 
 
 
 
 
Member’s equity
1,541,822

 
6,965,992

 
(7,080,481
)
 
1,427,333

Total liabilities and member’s equity
$
7,760,681

 
$
7,077,058

 
$
(7,080,481
)
 
$
7,757,258







16


CHENIERE CORPUS CHRISTI HOLDINGS, LLC AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—CONTINUED
(unaudited)


Condensed Consolidating Balance Sheet
December 31, 2016
(in thousands)
 
 
 
 
 
 
 
 
 
Parent Issuer
 
Guarantors
 
Eliminations
 
Consolidated
ASSETS
 
 
 
 
 
 
 
Current assets
 
 
 
 
 
 
 
Cash and cash equivalents
$

 
$

 
$

 
$

Restricted cash
197,201

 

 

 
197,201

Advances to affiliate

 
20,108

 

 
20,108

Other current assets
152

 
37,043

 

 
37,195

Other current assets—affiliate

 
142

 
(1
)
 
141

Total current assets
197,353

 
57,293

 
(1
)
 
254,645

 
 
 
 
 
 
 
 
Non-current restricted cash
73,339

 

 

 
73,339

Property, plant and equipment, net
306,342

 
5,770,330

 

 
6,076,672

Debt issuance and deferred financing costs, net
155,847

 

 

 
155,847

Investments in subsidiaries
5,927,833

 

 
(5,927,833
)
 

Non-current advances under long-term contracts

 
46,398

 

 
46,398

Other non-current assets, net
50

 
29,497

 

 
29,547

Total assets
$
6,660,764

 
$
5,903,518

 
$
(5,927,834
)
 
$
6,636,448

 
 
 
 
 
 
 
 
LIABILITIES AND MEMBER’S EQUITY
 
 
 
 
 
 
 
Current liabilities
 
 
 
 
 
 
 
Accounts payable
$
332

 
$
8,788

 
$

 
$
9,120

Accrued liabilities
61,328

 
76,320

 

 
137,648

Due to affiliates

 
7,050

 

 
7,050

Derivative liabilities
43,383

 

 

 
43,383

Total current liabilities
105,043

 
92,158

 

 
197,201

 
 
 
 
 
 
 
 
Long-term debt, net
5,081,715

 

 

 
5,081,715

Non-current derivative liabilities
43,105

 

 

 
43,105

Other non-current liabilities—affiliate

 
618

 

 
618

 
 
 
 
 
 
 
 
Member’s equity
1,430,901

 
5,810,742

 
(5,927,834
)
 
1,313,809

Total liabilities and member’s equity
$
6,660,764

 
$
5,903,518

 
$
(5,927,834
)
 
$
6,636,448





17


CHENIERE CORPUS CHRISTI HOLDINGS, LLC AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—CONTINUED
(unaudited)


Condensed Consolidating Statement of Operations
Three Months Ended June 30, 2017
(in thousands)
 
 
 
 
 
 
 
 
 
Parent Issuer
 
Guarantors
 
Eliminations
 
Consolidated
 
 
 
 
 
 
 
 
Revenues
$

 
$

 
$

 
$

 
 
 
 
 
 
 
 
Expenses
 
 
 
 
 
 
 
Operating and maintenance expense

 
858

 

 
858

Operating and maintenance expense—affiliate

 
96

 

 
96

Development expense

 
323

 

 
323

General and administrative expense
329

 
1,219

 

 
1,548

General and administrative expense—affiliate

 
153

 

 
153

Depreciation and amortization expense

 
155

 

 
155

Other

 
5

 

 
5

Total expenses
329

 
2,809

 

 
3,138

 
 
 
 
 
 
 
 
Loss from operations
(329
)
 
(2,809
)
 

 
(3,138
)
 
 
 
 
 
 
 
 
Other income (expense)
 
 
 
 
 
 
 
Loss on early extinguishment of debt
(32,480
)
 

 

 
(32,480
)
Derivative loss, net
(33,096
)
 

 

 
(33,096
)
Other income (expense)
(45
)
 
2,958

 
(2,957
)
 
(44
)
Total other income (expense)
(65,621
)
 
2,958

 
(2,957
)
 
(65,620
)
 
 
 
 
 
 
 
 
Net income (loss)
$
(65,950
)
 
$
149

 
$
(2,957
)
 
$
(68,758
)




18


CHENIERE CORPUS CHRISTI HOLDINGS, LLC AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—CONTINUED
(unaudited)


Condensed Consolidating Statement of Operations
Three Months Ended June 30, 2016
(in thousands)
 
 
 
 
 
 
 
 
 
Parent Issuer
 
Guarantors
 
Eliminations
 
Consolidated
 
 
 
 
 
 
 
 
Revenues
$

 
$

 
$

 
$

 
 
 
 
 
 
 
 
Expenses
 
 
 
 
 
 
 
Operating and maintenance expense

 
321

 

 
321

Operating and maintenance expense—affiliate

 
17

 

 
17

Development expense recovery

 
(52
)
 

 
(52
)
Development expense—affiliate

 
58

 

 
58

General and administrative expense
227

 
775

 

 
1,002

General and administrative expense—affiliate

 
274

 

 
274

Depreciation and amortization expense

 
52

 

 
52

Total expenses
227

 
1,445

 

 
1,672

 
 
 
 
 
 
 
 
Loss from operations
(227
)
 
(1,445
)
 

 
(1,672
)
 
 
 
 
 
 
 
 
Other income (expense)
 
 
 
 
 
 
 
Loss on early extinguishment of debt
(29,011
)
 

 

 
(29,011
)
Derivative loss, net
(75,877
)
 

 

 
(75,877
)
Other income (expense)
(26
)
 
1

 

 
(25
)
Total other income (expense)
(104,914
)
 
1

 

 
(104,913
)
 
 
 
 
 
 
 
 
Net loss
$
(105,141
)
 
$
(1,444
)
 
$

 
$
(106,585
)




19


CHENIERE CORPUS CHRISTI HOLDINGS, LLC AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—CONTINUED
(unaudited)


Condensed Consolidating Statement of Operations
Six Months Ended June 30, 2017
(in thousands)
 
 
 
 
 
 
 
 
 
Parent Issuer
 
Guarantors
 
Eliminations
 
Consolidated
 
 
 
 
 
 
 
 
Revenues
$

 
$

 
$

 
$

 
 
 
 
 
 
 
 
Expenses
 
 
 
 
 
 
 
Operating and maintenance expense

 
1,564

 

 
1,564

Operating and maintenance expense—affiliate

 
149

 

 
149

Development expense

 
415

 

 
415

Development expense—affiliate

 
8

 

 
8

General and administrative expense
640

 
2,323

 

 
2,963

General and administrative expense—affiliate

 
464

 

 
464

Depreciation and amortization expense

 
289

 

 
289

Other

 
5

 

 
5

Total expenses
640

 
5,217

 

 
5,857

 
 
 
 
 
 
 
 
Loss from operations
(640
)
 
(5,217
)
 

 
(5,857
)
 
 
 
 
 
 
 
 
Other income (expense)
 
 
 
 
 
 
 
Loss on early extinguishment of debt
(32,480
)
 

 

 
(32,480
)
Derivative loss, net
(32,096
)
 

 

 
(32,096
)
Other income (expense)
(85
)
 
7,818

 
(7,815
)
 
(82
)
Total other income (expense)
(64,661
)
 
7,818

 
(7,815
)
 
(64,658
)
 
 
 
 
 
 
 
 
Net income (loss)
$
(65,301
)
 
$
2,601

 
$
(7,815
)
 
$
(70,515
)




20


CHENIERE CORPUS CHRISTI HOLDINGS, LLC AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—CONTINUED
(unaudited)


Condensed Consolidating Statement of Operations
Six Months Ended June 30, 2016
(in thousands)
 
 
 
 
 
 
 
 
 
Parent Issuer
 
Guarantors
 
Eliminations
 
Consolidated
 
 
 
 
 
 
 
 
Revenues
$

 
$

 
$

 
$

 
 
 
 
 
 
 
 
Expenses
 
 
 
 
 
 
 
Operating and maintenance expense

 
537

 

 
537

Operating and maintenance expense—affiliate

 
20

 

 
20

Development expense recovery

 
(184
)
 

 
(184
)
Development expense recovery—affiliate

 
(120
)
 

 
(120
)
General and administrative expense
334

 
1,443

 

 
1,777

General and administrative expense—affiliate

 
291

 

 
291

Depreciation and amortization expense

 
84

 

 
84

Total expenses
334

 
2,071

 

 
2,405

 
 
 
 
 
 
 
 
Loss from operations
(334
)
 
(2,071
)
 

 
(2,405
)
 
 
 
 
 
 
 
 
Other income (expense)
 
 
 
 
 
 
 
Loss on early extinguishment of debt
(29,011
)
 

 

 
(29,011
)
Derivative loss, net
(236,053
)
 

 

 
(236,053
)
Other income (expense)
(3
)
 
3

 

 

Total other income (expense)
(265,067
)
 
3

 

 
(265,064
)
 
 
 
 
 
 
 
 
Net loss
$
(265,401
)
 
$
(2,068
)
 
$

 
$
(267,469
)




21


CHENIERE CORPUS CHRISTI HOLDINGS, LLC AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—CONTINUED
(unaudited)


Condensed Consolidating Statement of Cash Flows
Six Months Ended June 30, 2017
(in thousands)
 
 
 
 
 
 
 
 
 
Parent Issuer
 
Guarantors
 
Eliminations
 
Consolidated
Cash flows from operating activities
 
 
 
 
 
 
 
Net income (loss)
$
(65,301
)
 
$
2,601

 
$
(7,815
)
 
$
(70,515
)
Adjustments to reconcile net income (loss) to net cash used in operating activities:
 
 
 
 
 
 
 
Depreciation and amortization expense

 
289

 

 
289

Allowance for funds used during construction

 
(7,815
)
 
7,815

 

Loss on early extinguishment of debt
32,480

 

 

 
32,480

Total losses on derivatives, net
32,096

 
383

 

 
32,479

Net cash used for settlement of derivative instruments
(33,720
)
 

 

 
(33,720
)
Other

 
5

 

 
5

Changes in operating assets and liabilities:
 
 
 
 
 
 
 
Accounts payable and accrued liabilities
128

 
29

 

 
157

Due to affiliates
115

 
611

 

 
726

Other, net
(293
)
 
(754
)
 

 
(1,047
)
Other, net—affiliate

 
(636
)
 

 
(636
)
Net cash used in operating activities
(34,495
)
 
(5,287
)
 

 
(39,782
)
 
 
 
 
 
 
 
 
Cash flows from investing activities
 
 
 
 
 
 
 
Property, plant and equipment, net
(202,665
)
 
(1,179,753
)
 

 
(1,382,418
)
Investments in subsidiaries
(1,152,649
)
 

 
1,152,649

 

Other

 
32,391

 

 
32,391

Net cash used in investing activities
(1,355,314
)
 
(1,147,362
)
 
1,152,649

 
(1,350,027
)
 
 
 
 
 
 
 
 
Cash flows from financing activities
 
 
 
 
 
 
 
Proceeds from issuances of debt
2,497,000

 

 

 
2,497,000

Repayments of debt
(1,436,050
)
 

 

 
(1,436,050
)
Debt issuance and deferred financing costs
(22,401
)
 

 

 
(22,401
)
Capital contributions
184,039

 
1,152,806

 
(1,152,806
)
 
184,039

Distributions

 
(157
)
 
157

 

Other
(29
)
 

 

 
(29
)
Net cash provided by financing activities
1,222,559

 
1,152,649

 
(1,152,649
)
 
1,222,559

 
 
 
 
 
 
 
 
Net decrease in cash, cash equivalents and restricted cash
(167,250
)
 

 

 
(167,250
)
Cash, cash equivalents and restricted cash—beginning of period
270,540

 

 

 
270,540

Cash, cash equivalents and restricted cash—end of period
$
103,290

 
$

 
$

 
$
103,290







22


CHENIERE CORPUS CHRISTI HOLDINGS, LLC AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—CONTINUED
(unaudited)


Condensed Consolidating Statement of Cash Flows
Six Months Ended June 30, 2016
(in thousands)
 
 
 
 
 
 
 
 
 
Parent Issuer
 
Guarantors
 
Eliminations
 
Consolidated
Cash flows from operating activities
 
 
 
 
 
 
 
Net loss
$
(265,401
)
 
$
(2,068
)
 
$

 
$
(267,469
)
Adjustments to reconcile net loss to net cash used in operating activities:
 
 
 
 
 
 
 
Depreciation and amortization expense

 
84

 

 
84

Loss on early extinguishment of debt
29,011

 

 

 
29,011

Total losses on derivatives, net
236,053

 

 

 
236,053

Net cash used for settlement of derivative instruments
(13,710
)
 

 

 
(13,710
)
Changes in operating assets and liabilities:
 
 
 
 
 
 
 
Accounts payable and accrued liabilities
97

 
664

 

 
761

Due to affiliates
5

 
(443
)
 

 
(438
)
Other, net
(350
)
 
(1,000
)
 

 
(1,350
)
Other, net—affiliate

 
149

 

 
149

Net cash used in operating activities
(14,295
)
 
(2,614
)
 

 
(16,909
)
 
 
 
 
 
 
 
 
Cash flows from investing activities
 
 
 
 
 
 
 
Property, plant and equipment, net
(64,673
)
 
(966,929
)
 

 
(1,031,602
)
Investments in subsidiaries
(984,849
)
 

 
984,849

 

Other

 
(15,306
)
 

 
(15,306
)
Net cash used in investing activities
(1,049,522
)
 
(982,235
)
 
984,849

 
(1,046,908
)
 
 
 
 
 
 
 
 
Cash flows from financing activities
 
 
 
 
 
 
 
Proceeds from issuances of debt
2,318,000

 

 

 
2,318,000

Repayments of debt
(1,050,660
)
 

 

 
(1,050,660
)
Debt issuance and deferred financing costs
(27,166
)
 

 

 
(27,166
)
Capital contributions

 
984,849

 
(984,849
)
 

Other
(10
)
 

 

 
(10
)
Net cash provided by financing activities
1,240,164

 
984,849

 
(984,849
)
 
1,240,164

 
 
 
 
 
 
 
 
Net increase in cash, cash equivalents and restricted cash
176,347

 

 

 
176,347

Cash, cash equivalents and restricted cash—beginning of period
46,770

 

 

 
46,770

Cash, cash equivalents and restricted cash—end of period
$
223,117

 
$

 
$

 
$
223,117






23


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; 
statements 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 and pipeline, 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 counterparties to our commercial contracts, construction contracts and other contracts;
statements regarding our planned development and construction of additional Trains and pipeline, 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-historical 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 registration statement on Form S-4, as amended, filed with the SEC and declared effective on April 10, 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.




24


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 Consolidated 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 in September 2014 to develop, construct, operate, maintain and own a natural gas liquefaction and export facility (the “Liquefaction Facility”) and a pipeline facility (collectively, the “Liquefaction Project”) on nearly 2,000 acres of land that we own or control near Corpus Christi, Texas, through wholly-owned subsidiaries CCL and CCP, respectively.

The Liquefaction Project is being developed for up to three Trains, with expected aggregate nominal production capacity, which is prior to adjusting for planned maintenance, production reliability and potential overdesign, of approximately 13.5 mtpa of LNG, three LNG storage tanks with aggregate capacity of approximately 10.1 Bcfe and two marine berths that can each accommodate vessels with nominal capacity of up to 266,000 cubic meters. The Liquefaction Project is being developed in stages. The first stage (“Stage 1”) includes Trains 1 and 2, two LNG storage tanks, one complete marine berth and a second partial berth and all of the Liquefaction Project ’s necessary infrastructure facilities. The second stage (“Stage 2”) includes Train 3, one LNG storage tank and the completion of the second partial berth. The Liquefaction Project also includes a 23-mile natural gas supply pipeline that will interconnect the Corpus Christi LNG terminal with several interstate and intrastate natural gas pipelines (the “Corpus Christi Pipeline”) . Stage 1 and the Corpus Christi Pipeline are currently under construction, and Train 3 is being commercialized and has all necessary regulatory approvals in place.

Overview of Significant Events

Our significant accomplishments since January 1, 2017 and through the filing date of this Form 10-Q include our issuance of an aggregate principal amount of $1.5 billion of 5.125% Senior Secured Notes due 2027 (the “2027 CCH Senior Notes”) . Net proceeds of the offering of approximately  $1.4 billion , after deducting commissions, fees and expenses and provisioning for incremental interest required under the  2027 CCH Senior Notes  during construction, were used to prepay a portion of the outstanding borrowings under our credit facility  (the “2015 CCH Credit Facility”) .

Liquidity and Capital Resources
 
The following table (in thousands) provides a summary of our liquidity position at June 30, 2017 and December 31, 2016 :
 
June 30,
 
December 31,
 
2017
 
2016
Cash and cash equivalents
$

 
$

Restricted cash designated for the Liquefaction Project
103,290

 
270,540

Available commitments under the following credit facilities:
 
 
 
2015 CCH Credit Facility (“2015 CCH Credit Facility”)
2,629,714

 
3,602,714

$350 million CCH Working Capital Facility (“CCH Working Capital Facility”)
267,839

 
350,000


For additional information regarding our debt agreements, see Note 6—Debt of our Notes to Consolidated Financial Statements.



25



Liquefaction Facilities

Liquefaction Facilities

The Liquefaction Project is being developed and constructed at the Corpus Christi LNG terminal, on nearly 2,000 acres of land that we own or control near Corpus Christi, Texas. In December 2014, we received authorization from the FERC to site, construct and operate Stages 1 and 2 of the Liquefaction Project . The following table summarizes the overall project status of Stage 1 of the Liquefaction Project :
 
Stage 1
Overall project completion percentage
67.9%
Project completion percentage of:
 
Engineering
100%
Procurement
87.8%
Subcontract work
39.2%
Construction
41.0%
Expected date of substantial completion
Train 1
1H 2019
 
Train 2
2H 2019

The DOE has authorized the export of domestically produced LNG by vessel from the Corpus Christi LNG terminal to FTA countries for a 25-year term and to non-FTA countries for a 20-year term up to a combined total of the equivalent of 767 Bcf/yr (approximately 15 mtpa) of natural gas. A party to the proceeding requested a rehearing of the authorization to non-FTA countries , which was denied by the DOE in May 2016. In July 2016, the same party petitioned the U.S. Court of Appeals for the District of Columbia Circuit to review the authorization to non-FTA countries and the DOE order denying the request for rehearing of the same. The appeal is pending. The terms of each 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 7 to 10 years from the date the order was issued.

Customers

CCL has entered into seven fixed price, 20-year SPA s with extension rights with six third parties to make available an aggregate amount of LNG that equates to approximately 7.7 mtpa of LNG, which is approximately 86% of the expected aggregate nominal production capacity of Trains 1 and 2. The obligation to make LNG available under these SPAs commences from the date of first commercial delivery for Trains 1 and 2, as specified in each SPA. In addition, CCL has entered into one fixed price, 20-year SPA with a third party for another 0.8 mtpa of LNG that commences with the date of first commercial delivery for Train 3. Under these eight SPA s, the customers will purchase LNG from CCL for a price consisting of a fixed fee of $3.50 per MMBtu of LNG (a portion of which is subject to annual adjustment for inflation) plus a variable fee equal to 115% of Henry Hub per MMBtu of LNG. 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. 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 commences upon the start of operations of a specified Train.

In aggregate, the fixed fee portion to be paid by the third-party SPA customers is approximately $1.4 billion annually for Trains 1 and 2, and $1.5 billion if we make a positive FID with respect to Stage 2 of the Liquefaction Project , with the applicable fixed fees starting from the date of first commercial delivery from the applicable Train. These fixed fees equal approximately $550 million, $846 million and $140 million for each of Trains 1 through 3, respectively.

In addition, CCL has entered into two fixed price 20-year SPAs with Cheniere Marketing International LLP (“Cheniere Marketing UK”). Under the first SPA (the “Cheniere Marketing Foundation SPA”), Cheniere Marketing UK will purchase LNG from CCL for a price consisting of a fixed fee of $3.50 (a portion of which is subject to annual adjustment for inflation) per MMBtu of LNG plus a variable fee equal to 115% of Henry Hub per MMBtu of LNG. At Cheniere Marketing UK’s option, which has not been exercised yet, the Cheniere Marketing Foundation SPA commences upon the date of first commercial delivery for Train 2 and includes an annual contract quantity of 40 TBtu of LNG. The second SPA (the “Cheniere Marketing Base SPA”) allows Cheniere Marketing UK to purchase, at its option, (1) up to a cumulative total of 150 TBtu of LNG within the commissioning periods for Trains 1 through 3, (2) any LNG produced from the end of the commissioning period for Train 1 until the date of first commercial delivery of LNG from Train 1 and (3) any excess LNG produced by the Liquefaction Facility that is not committed



26


to customers under third-party SPAs or to Cheniere Marketing UK under the Cheniere Marketing Foundation SPA , as determined by CCL in each contract year, in each case for a price consisting of a fixed fee of $3.00 per MMBtu of LNG plus a variable fee equal to 115% of Henry Hub per MMBtu of LNG. Under the Cheniere Marketing Base SPA , Cheniere Marketing UK may, without charge, elect to suspend deliveries of cargoes (other than commissioning cargoes) scheduled for any month under the applicable annual delivery program by providing specified notice in advance.
 
Natural Gas Transportation, Storage and Supply

To ensure CCL is able to transport adequate natural gas feedstock to the Corpus Christi LNG terminal, it has entered into transportation precedent agreements to secure firm pipeline transportation capacity with CCP and certain third-party pipeline companies. CCL has entered into a firm storage services agreement with a third party to assist in managing volatility in natural gas needs for the Liquefaction Project . CCL has also entered into enabling agreements and long-term natural gas supply contracts with third parties, and will continue to enter into such agreements, in order to secure natural gas feedstock for the Liquefaction Project . We expect to enter into gas supply contracts under these enabling agreements as and when required for the Liquefaction Project . As of June 30, 2017 , CCL has secured up to approximately 280 TBtu of natural gas feedstock through long-term natural gas supply contracts.

Construction

CCL entered into separate lump sum turnkey contracts with Bechtel Oil, Gas and Chemicals, Inc. (“Bechtel”) for the engineering, procurement and construction of Stages 1 and 2 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 CCL to enter into a change order, or CCL agrees with Bechtel to a change order.

The total contract price of the EPC contract for Stage 1, which does not include the Corpus Christi Pipeline , is approximately $7.8 billion , reflecting amounts incurred under change orders through June 30, 2017 . Total expected capital costs for Stage 1 are estimated to be between $9.0 billion and $10.0 billion before financing costs, and between $11.0 billion and $12.0 billion after financing costs including, in each case, estimated owner’s costs and contingencies. Included in these estimates are total expected capital costs for the Corpus Christi Pipeline of between $350 million and $400 million, including the estimated contingency.

Pipeline Facilities

In December 2014, the FERC issued a certificate of public convenience and necessity under Section 7(c) of the Natural Gas Act of 1938, as amended, authorizing CCP to construct and operate the Corpus Christi Pipeline . The Corpus Christi Pipeline is designed to transport 2.25 Bcf/d of natural gas feedstock required by the Liquefaction Project from the existing regional natural gas pipeline grid. The construction of the Corpus Christi Pipeline commenced in January 2017.

Final Investment Decision on Stage 2

We will contemplate making an FID to commence construction of Stage 2 of the Liquefaction Project based upon, among other things, entering into acceptable commercial arrangements and obtaining adequate financing to construct the facility.




27


Capital Resources

We expect to finance the construction costs of the Liquefaction Project from one or more of the following: project financing, operating cash flow from CCL and CCP and equity contributions from Cheniere. The following table (in thousands) provides a summary of our capital resources for the Liquefaction Project , excluding any equity contributions, at June 30, 2017 and December 31, 2016 :
 
 
June 30,
 
December 31,
 
 
2017
 
2016
Senior notes (1)
 
$
4,250,000

 
$
2,750,000

Credit facilities outstanding balance (2)
 
1,941,737

 
2,380,788

Letters of credit issued (2)
 
82,161

 

Available commitments under credit facilities (2)
 
2,897,553

 
3,952,714

Total capital resources from borrowings and available commitments
 
$
9,171,451

 
$
9,083,502

 
(1)
Includes 7.000% Senior Secured Notes due 2024 (the “2024 CCH Senior Notes”) , 5.875% Senior Secured Notes due 2025 (the “2025 CCH Senior Notes”) and 2027 CCH Senior Notes (collectively, the “CCH Senior Notes”) .
(2)
Includes 2015 CCH Credit Facility and CCH Working Capital Facility .

For additional information regarding our debt agreements related to the Liquefaction Project , see Note 6—Debt of our Notes to Consolidated Financial Statements.

CCH Senior Notes

In May 2017, we issued aggregate principal amount of $1.5 billion of the 2027 CCH Senior Notes , in addition to the existing 2024 CCH Senior Notes and 2025 CCH Senior Notes . The CCH Senior Notes are jointly and severally guaranteed by our subsidiaries, CCL, CCP and Corpus Christi Pipeline GP, LLC (“CCP GP”, and collectively with CCL and CCP, each a “Guarantor” and collectively, the “Guarantors”) .

The indenture governing the CCH Senior Notes (the “CCH Indenture”) contains customary terms and events of default and certain covenants that, among other things, limit our ability and the ability of our restricted subsidiaries to: incur additional indebtedness or issue preferred stock; make certain investments or pay dividends or distributions on membership interests or subordinated indebtedness or purchase, redeem or retire membership interests; sell or transfer assets, including membership or partnership interests of our restricted subsidiaries; restrict dividends or other payments by restricted subsidiaries to us or any of our restricted subsidiaries; incur liens; enter into transactions with affiliates; dissolve, liquidate, consolidate, merge, sell or lease all or substantially all of the properties or assets of us and our restricted subsidiaries taken as a whole; or permit any Guarantor to dissolve, liquidate, consolidate, merge, sell or lease all or substantially all of its properties and assets.

At any time prior to six months before the respective dates of maturity for each series of the CCH Senior Notes , we may redeem all or part of such series of the CCH Senior Notes at a redemption price equal to the “make-whole” price set forth in the CCH Indenture , plus accrued and unpaid interest, if any, to the date of redemption. We also may at any time within six months of the respective dates of maturity for each series of the CCH Senior Notes , redeem all or part of such series of the CCH Senior Notes , in whole or in part, at a redemption price equal to 100% of the principal amount of the CCH Senior Notes to be redeemed, plus accrued and unpaid interest, if any, to the date of redemption.

2015 CCH Credit Facility

In May 2015, we entered into the 2015 CCH Credit Facility . Our obligations under the 2015 CCH Credit Facility are secured by a first priority lien on substantially all of our assets and the assets of our subsidiaries and by a pledge by CCH HoldCo I of its limited liability company interests in us. As of June 30, 2017 and December 31, 2016 , we had $2.6 billion and $3.6 billion of available commitments and $1.9 billion and $2.4 billion of outstanding borrowings under the 2015 CCH Credit Facility , respectively.

The principal of the loans made under the 2015 CCH Credit Facility must be repaid in quarterly installments, commencing on the earlier of (1) the first quarterly payment date occurring more than three calendar months following project completion and (2) a set date determined by reference to the date under which a certain LNG buyer linked to Train 2 of the Liquefaction Project



28


is entitled to terminate its SPA for failure to achieve the date of first commercial delivery for that agreement. Scheduled repayments will be based upon a 19-year tailored amortization, commencing the first full quarter after the project completion and designed to achieve a minimum projected fixed debt service coverage ratio of 1.55:1.

Under the terms of the 2015 CCH Credit Facility , we are required to hedge not less than 65% of the variable interest rate exposure of our senior secured debt. We are restricted from making distributions under agreements governing our indebtedness generally until, among other requirements, the completion of the construction of Trains 1 and 2 of the Liquefaction Project , funding of a debt service reserve account equal to six months of debt service and achieving a historical debt service coverage ratio and fixed projected debt service coverage ratio of at least 1.25:1.00.
CCH Working Capital Facility

In December 2016, we entered into the $350 million CCH Working Capital Facility , which is intended to be used for loans (“CCH Working Capital Loans”) , the issuance of letters of credit, as well as for swing line loans (“CCH Swing Line Loans”) for certain working capital requirements related to developing and placing into operation the Liquefaction Project . Loans under the CCH Working Capital Facility are guaranteed by the Guarantors . We may, from time to time, request increases in the commitments under the CCH Working Capital Facility of up to the maximum allowed under the Common Terms Agreement that was entered into concurrently with the 2015 CCH Credit Facility . We did not have any amounts outstanding under the CCH Working Capital Facility as of both June 30, 2017 and December 31, 2016 and $82.2 million and zero aggregate amount of letters of credit were issued as of June 30, 2017 and December 31, 2016 , respectively.

The CCH Working Capital Facility matures on December 14, 2021, and we may prepay the CCH Working Capital Loans , CCH Swing Line Loans and loans made in connection with a draw upon any letter of credit (“CCH LC Loans”) at any time without premium or penalty upon three business days’ notice and may re-borrow at any time. CCH LC Loans have a term of up to one year. CCH Swing Line Loans terminate upon the earliest of (1) the maturity date or earlier termination of the CCH Working Capital Facility , (2) the date that is 15 days after such CCH Swing Line Loan is made and (3) the first borrowing date for a CCH Working Capital Loan or CCH Swing Line Loan occurring at least four business days following the date the CCH Swing Line Loan is made. We are required to reduce the aggregate outstanding principal amount of all CCH Working Capital Loans to zero for a period of five consecutive business days at least once each year.

The CCH Working Capital Facility contains conditions precedent for extensions of credit, as well as customary affirmative and negative covenants. Our obligations under the CCH Working Capital Facility are secured by substantially all our assets and the assets of the Guarantors as well as all of our membership interests and each of the Guarantors on a  pari passu  basis with the CCH Senior Notes and the 2015 CCH Credit Facility .

Equity Contribution Agreement

In May 2015, we entered into an equity contribution agreement with Cheniere (the “Equity Contribution Agreement”) pursuant to which Cheniere agreed to provide tiered equity contributions of approximately $2.6 billion for Stage 1 and the Corpus Christi Pipeline . The first tier of equity funding of approximately $1.5 billion (the “First Tier Equity Funding”) was contributed to us concurrently with the closing of the 2015 CCH Credit Facility . The second tier of equity funding, up to a maximum amount of approximately $1.1 billion, will be contributed concurrently and pro rata with funding under our project financing debt starting on the date on which further disbursements of such debt would result in a senior debt to equity ratio of greater than 75/25 (the “Second Tier Pro Rata Equity Funding”) . As of June 30, 2017 , we have received $1.7 billion in contributions under the Equity Contribution Agreement , of which approximately $1.5 billion was the First Tier Equity Funding and approximately $0.2 billion was part of the Second Tier Pro Rata Equity Funding . On March 2, 2017, Cheniere entered into a $750 million senior secured revolving credit facility (the “CEI Revolving Credit Facility”). The proceeds of the CEI Revolving Credit Facility are available to Cheniere to back-stop its obligations under the CEI Equity Contribution Agreement to provide the Second Tier Pro Rata Equity Funding to us and for general corporate purposes.




29


Sources and Uses of Cash

The following table (in thousands) summarizes the sources and uses of our cash, cash equivalents and restricted cash for the six months ended June 30, 2017 and 2016 . 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. 
 
Six Months Ended June 30,
 
2017
 
2016
Operating cash flows
$
(39,782
)
 
$
(16,909
)
Investing cash flows
(1,350,027
)
 
(1,046,908
)
Financing cash flows
1,222,559

 
1,240,164

 
 
 
 
Net increase (decrease) in cash, cash equivalents and restricted cash
(167,250
)
 
176,347

Cash, cash equivalents and restricted cash—beginning of period
270,540

 
46,770

Cash, cash equivalents and restricted cash—end of period
$
103,290

 
$
223,117


Operating Cash Flows

Operating cash outflows during the six months ended June 30, 2017 and 2016 were $39.8 million and $16.9 million , respectively. The increase in operating cash outflows in 2017 compared to 2016 was primarily related to increased cash used for settlement of derivative instruments.

Investing Cash Flows

Investing cash outflows during the six months ended June 30, 2017 and 2016 were $1.4 billion and $1.0 billion , respectively, and are primarily used to fund the construction costs for Stage 1 of the Liquefaction Project . These costs are capitalized as construction-in-process until achievement of substantial completion. In addition to cash outflows for construction costs for the Liquefaction Project , we received $36.3 million during the six months ended June 30, 2017 from the return of collateral payments previously paid for the Liquefaction Project , which was offset by $3.9 million paid for infrastructure to support the Liquefaction Project . During the six months ended June 30, 2016 , we used an additional $15.3 million primarily for infrastructure of the Liquefaction Project , including $5.0 million of the collateral payments returned to us during the six months ended June 30, 2017 .

Financing Cash Flows

Financing cash inflows during the six months ended June 30, 2017 were $1.2 billion , primarily as a result of:
$973.0 million of borrowings under the 2015 CCH Credit Facility ;
issuance of aggregate principal amount of $1.5 billion of the  2027 CCH Senior Notes , which was used to prepay $1.4 billion of outstanding borrowings under the 2015 CCH Credit Facility ;
$24.0 million of borrowings and $24.0 million of repayments made under the CCH Working Capital Facility ;
$22.4 million of debt issuance and deferred financing costs related to up-front fees paid upon the closing of these transactions; and
$184.0 million of equity contributions from Cheniere.
Financing cash inflows during the six months ended June 30, 2016 were $1.2 billion , primarily as a result of:
$1.1 billion of borrowings under the 2015 CCH Credit Facility ;
issuance of an aggregate principal amount of $1.25 billion of the 2024 CCH Senior Notes in May 2016, which were use to prepay $1.1 billion of outstanding borrowings under the 2015 CCH Credit Facility ; and
$27.2 million of debt issuance costs related to up-front fees paid upon the closing of these transactions.




30


Results of Operations

Our consolidated net loss was $68.8 million in the three months ended June 30, 2017 , compared to a net loss of $106.6 million in the three months ended June 30, 2016 . This $37.8 million decrease in net loss in 2017 was primarily a result of decreased derivative loss, net.

Our consolidated net loss was $70.5 million in the six months ended June 30, 2017 , compared to a net loss of $267.5 million in the six months ended June 30, 2016 . This $197 million decrease in net loss in 2017 was primarily a result of decreased derivative loss, net.

Loss from operations
 
Three Months Ended June 30,
 
Six Months Ended June 30,
(in thousands)
2017
 
2016
 
Change
 
2017
 
2016
 
Change
Revenues
$

 
$

 
$

 
$

 
$

 
$

 
 
 
 
 
 
 
 
 
 
 


Operating and maintenance expense
858

 
321

 
537

 
1,564

 
537

 
1,027

Operating and maintenance expense—affiliate
96

 
17

 
79

 
149

 
20

 
129

Development expense (recovery)
323

 
(52
)
 
375

 
415

 
(184
)
 
599

Development expense (recovery)—affiliate

 
58

 
(58
)
 
8

 
(120
)
 
128

General and administrative expense
1,548

 
1,002

 
546

 
2,963

 
1,777

 
1,186

General and administrative expense—affiliate
153

 
274

 
(121
)
 
464

 
291

 
173

Depreciation and amortization expense
155

 
52

 
103

 
289

 
84

 
205

Other
5

 

 
5

 
5

 

 
5

 
 
 
 
 
 
 
 
 
 
 


Loss from operations
$
(3,138
)
 
$
(1,672
)
 
$
(1,466
)
 
$
(5,857
)
 
$
(2,405
)
 
$
(3,452
)

Our loss from operations increased $1.5 million and $3.5 million during the three and six months ended June 30, 2017 , respectively, from the comparable periods in 2016 primarily as a result of increased expenses from increased ad valorem taxes, insurance costs, labor costs and professional fees.

Other expense
 
Three Months Ended June 30,
 
Six Months Ended June 30,
(in thousands)
2017
 
2016
 
Change
 
2017
 
2016
 
Change
Loss on early extinguishment of debt
$
32,480

 
$
29,011

 
$
3,469

 
$
32,480

 
$
29,011

 
$
3,469

Derivative loss, net
33,096

 
75,877

 
(42,781
)
 
32,096

 
236,053

 
(203,957
)
Other expense
44

 
25

 
19

 
82

 

 
82

Total other expense
$
65,620

 
$
104,913

 
$
(39,293
)
 
$
64,658

 
$
265,064

 
$
(200,406
)

Derivative loss, net decreased during the three and six months ended June 30, 2017 from the comparable periods in 2016 primarily due to a favorable shift in the long-term forward LIBOR curve between the periods. During the three and six months ended June 30, 2017 , we also recognized a $13.0 million loss in May 2017 upon the settlement of interest rate swaps associated with approximately $1.4 billion of commitments that were terminated under the 2015 CCH Credit Facility .

Off-Balance Sheet Arrangements
 
As of June 30, 2017 , we had no transactions that met the definition of off-balance sheet arrangements that may have a current or future material effect on our consolidated financial position or operating results. 

Summary of Critical Accounting Estimates

The preparation of our Consolidated Financial Statements in conformity with GAAP requires management to make certain estimates and assumptions that affect the amounts reported in the Consolidated Financial Statements and the accompanying notes. There have been no significant changes to our critical accounting estimates from those disclosed in our registration statement on Form S-4, as amended, filed with the SEC and declared effective on April 10, 2017.



31



Recent Accounting Standards  

For descriptions of recently issued accounting standards, see Note 9—Recent Accounting Standards of our Notes to Consolidated 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 to secure natural gas feedstock for 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):
 
June 30, 2017
 
December 31, 2016
 
Fair Value
 
Change in Fair Value
 
Fair Value
 
Change in Fair Value
Liquefaction Supply Derivatives
$
(383
)
 
$
38

 
$

 
$

 
See  Note 4—Derivative Instruments for additional details about our derivative instruments.

Interest Rate Risk

We have entered into interest rate swaps to hedge the exposure to volatility in a portion of the floating-rate interest payments under the 2015 CCH Credit Facility (“Interest Rate Derivatives”) . In order to test the sensitivity of the fair value of the Interest Rate Derivatives to changes in interest rates, management modeled a 10% change in the forward 1-month LIBOR curve across the remaining terms of the Interest Rate Derivatives as follows (in thousands):
 
June 30, 2017
 
December 31, 2016
 
Fair Value
 
Change in Fair Value
 
Fair Value
 
Change in Fair Value
Interest Rate Derivatives
$
(84,864
)
 
$
43,802

 
$
(86,488
)
 
$
52,047


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 President and 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 President and Chief Financial Officer concluded that our disclosure controls and procedures are effective.




32


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.

ITEM 1A.
RISK FACTORS

There have been no material changes from the risk factors disclosed in our registration statement on Form S-4, as amended, filed with the SEC and declared effective on April 10, 2017.

ITEM 5.
OTHER INFORMATION

Compliance Disclosure

Pursuant to Section 13(r) of the Exchange Act , if during the quarter ended June 30, 2017 , we or any of our affiliates had engaged in certain transactions with Iran or with persons or entities designated under certain executive orders, we would be required to disclose information regarding such transactions in our quarterly report on Form 10-Q as required under Section 219 of the Iran Threat Reduction and Syria Human Rights Act of 2012. During the quarter ended June 30, 2017 , we did not engage in any transactions with Iran or with persons or entities related to Iran.




33


ITEM 6.
EXHIBITS
Exhibit No.
 
Description
4.1
 
Second Supplemental Indenture, dated as of May 19, 2017, among Cheniere Corpus Christi Holdings, LLC, as issuer, Corpus Christi Liquefaction, LLC, Cheniere Corpus Christi Pipeline, L.P. and Corpus Christi Pipeline GP, LLC, as guarantors, and The Bank of New York Mellon, as trustee (Incorporated by reference to Exhibit 4.1 to the Company’s Current Report on Form 8-K (SEC File No. 333-215435), filed on May 19, 2017)
4.2
 
Form of 5.125% Senior Secured Note due 2027 (Included as Exhibit A-1 to Exhibit 4.1 above)
10.1*
 
Change orders to the Fixed Price Separated Turnkey Agreement for the Engineering, Procurement and Construction of the Corpus Christi Stage 1 Liquefaction Facility, dated as of December 6, 2013, between Corpus Christi Liquefaction, LLC and Bechtel Oil, Gas and Chemicals, Inc.: (i) the Change Order CO-00034 Condensate Tie-In, Utility Water Tie-In, and Feed Gas Tie-In Relocation, dated April 18, 2017 and (ii) the Change Order CO-00035 Nitrogen Tie-In Relocation, dated April 21, 2017 (Portions of this exhibit have been omitted and filed separately with the SEC pursuant to a request for confidential treatment.)
10.2
 
Registration Rights Agreement, dated as of May 19, 2017, among Cheniere Corpus Christi Holdings, LLC and Corpus Christi Liquefaction, LLC, Cheniere Corpus Christi Pipeline, L.P. and Corpus Christi Pipeline GP, LLC, as guarantors, and RBC Capital Markets, LLC, for itself and as representative of the purchasers (Incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K (SEC File No. 333-215435), filed on May 19, 2017)
31.1*
 
Certification by Chief Financial Officer required by Rule 13a-14(a) and 15d-14(a) under the Exchange Act
32.1**
 
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.




34


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.

 
 
CHENIERE CORPUS CHRISTI HOLDINGS, LLC
 
 
 
 
Date:
August 7, 2017
By:
/s/ Michael J. Wortley
 
 
 
Michael J. Wortley
 
 
 
President and Chief Financial Officer
 
 
 
(on behalf of the registrant and
as principal financial officer)
 
 
 
 
Date:
August 7, 2017
By:
/s/ Leonard Travis
 
 
 
Leonard Travis
 
 
 
Chief Accounting Officer
 
 
 
(on behalf of the registrant and
as principal accounting officer)




35


Exhibit 10.1

*** indicates material has been omitted pursuant to a Confidential Treatment Request filed with the Securities and Exchange Commission. A complete copy of this agreement has been filed separately with the Securities and Exchange Commission.
CHANGE ORDER FORM

Condensate Tie-In, Utility Water Tie-In, and Feed Gas Tie-In Relocation

PROJECT NAME:   Corpus Christi Stage 1 Liquefaction Facility

OWNER: Corpus Christi Liquefaction, LLC

CONTRACTOR: Bechtel Oil, Gas and Chemicals, Inc.

DATE OF AGREEMENT: December 6, 2013
CHANGE ORDER NUMBER: CO-00034

DATE OF CHANGE ORDER: April 18, 2017



The Agreement between the Parties listed above is changed as follows: (attach additional documentation if necessary)

1.
Per Article 6.1.B of the Agreement, Parties agree to implement changes to the Condensate Tie-In, Utility Water Tie-In, and due to the Feed Gas Tie-In Relocation.
2.
The scope of this Change Order is as detailed in Exhibit A.
3.
The cost breakdowns for the scopes of work noted above in this Change Order are detailed in Exhibit B. These costs are as detailed on Trend no.’s: S1-1228 (dated 06 Mar. 2017), S1-2003 (dated 06 Mar. 2017) and S1-2004 (dated 27 Mar. 2017)
4.
Schedule C-1 (Milestone Payment Schedule) of Attachment C of the Agreement will be amended by including the Milestone(s) listed in Exhibit C of this Change Order.
Exhibits B and C of this Change Order were revised to include a credit of $102,728 due to CCL from Change Order 21 (Secondary Access Road, DMPA-1 Scope and Use, Credit for Material Disposal, Power Pole Relocation). There is no separate trend for this credit, the credit amount has been included in the total amount of shown on Exhibits B and C.

Adjustment to Contract Price
 
$
7,080,830,000

Net change by previously authorized Change Orders (0001-00033)
$
705,808,621

The Contract Price prior to this Change Order was
$
7,786,638,621

The Aggregate Equipment Price will be changed by this Change Order in the amount of
$
***

The Aggregate Labor and Skills Price will be changed by this Change Order in the amount of
$
***

The new Contract Price including this Change Order will be
$
7,791,063,472


Adjustment to Aggregate Equipment Price
The original Aggregate Equipment Price was
$
***
Net change by previously authorized Change Orders (0001-00033)
$
***
The Aggregate Equipment Price prior to this Change Order was
$
***
The Aggregate Equipment Price will be changed by this Change Order in the amount of
$
***
The new Aggregate Equipment Price including this Change Order will be
$
***






Adjustment to Aggregate Labor and Skills Price
The original Aggregate Labor and Skills Price was
$
***
Net change by previously authorized Change Orders (0001-00033)
$
***
The Aggregate Labor and Skills Price prior to this Change Order was
$
***
The Aggregate Labor and Skills Price will be changed by this Change Order in the amount of
$
***
The new Aggregate Labor and Skills Price including this Change Order will be
$
***

Adjustment to Aggregate Provisional Sum
The original Aggregate Provisional Sum was
$
950,561,351

Net change by previously authorized Change Orders (0001-00033)
$
(745,966,926
)
The Aggregate Provisional Sum prior to this Change Order was
$
204,594,425

The Aggregate Provisional Sum will be changed by this Change Order in the amount of
$

The new Aggregate Provisional Sum including this Change Order will be
$
204,594,425


Adjustment to dates in Project Schedule
The following dates are modified (list all dates modified; insert N/A if no dates modified) : N/A

Adjustment to other Changed Criteria (insert N/A if no changes or impact; attach additional documentation if necessary) N/A

Adjustment to Payment Schedule: Yes. See Exhibit C of this Change Order.

Adjustment to Minimum Acceptance Criteria: N/A

Adjustment to Performance Guarantees: N/A

Adjustment to Design Basis: N/A

Other adjustments to liability or obligation of Contractor or Owner under the Agreement: N/A


Select either A or B :
[A] This Change Order shall constitute a full and final settlement and accord and satisfaction of all effects of the change reflected in this Change Order upon the Changed Criteria and shall be deemed to compensate Contractor fully for such change. Initials:
/s/ SB Contractor /s/ EL Owner


[B] This Change Order shall not constitute a full and final settlement and accord and satisfaction of all effects of the change reflected in this Change Order upon the Changed Criteria and shall not be deemed to compensate Contractor fully for such change. Initials: ____ Contractor ____ Owner


Upon execution of this Change Order by Owner and Contractor, the above-referenced change shall become a valid and binding part of the original Agreement without exception or qualification, unless noted in this Change Order. Except as modified by this and any previously issued Change Orders, all other terms and conditions of the Agreement shall remain in full force and effect. This Change Order is executed by each of the Parties’ duly authorized representatives.






/s/ Ed Lehotsky
 
/s/ Sergio Buoncristiano
Owner
 
Contractor
Ed Lehotsky
 
Sergio Buoncristiano
Name
 
Name
Sr. VP LNG E&C
 
SVP
Title
 
Title
April 25, 2017
 
April 19, 2017
Date of Signing
 
Date of Signing





*** indicates material has been omitted pursuant to a Confidential Treatment Request filed with the Securities and Exchange Commission. A complete copy of this agreement has been filed separately with the Securities and Exchange Commission.
CHANGE ORDER FORM

Nitrogen Tie-In Relocation

PROJECT NAME:   Corpus Christi Stage 1 Liquefaction Facility

OWNER: Corpus Christi Liquefaction, LLC

CONTRACTOR: Bechtel Oil, Gas and Chemicals, Inc.

DATE OF AGREEMENT: December 6, 2013
CHANGE ORDER NUMBER: CO-00035

DATE OF CHANGE ORDER: April 21, 2017



The Agreement between the Parties listed above is changed as follows: (attach additional documentation if necessary)

1.
Per Article 6.1.B of the Agreement, Parties agree to implement changes due to the Nitrogen Tie-In Relocation.
2.
The scope of this Change Order is as detailed in Exhibit A.
3.
The cost breakdowns for the scopes of work noted above in this Change Order are detailed in Exhibit B. These costs are as detailed on Trend no: S1-2009 (dated 13 Apr. 2017).
4.
Schedule C-1 (Milestone Payment Schedule) of Attachment C of the Agreement will be amended by including the Milestone(s) listed in Exhibit C of this Change Order.






Adjustment to Contract Price
 
$
7,080,830,000

Net change by previously authorized Change Orders (0001-00034)
$
710,233,472

The Contract Price prior to this Change Order was
$
7,791,063,472

The Aggregate Equipment Price will be changed by this Change Order in the amount of
$
***

The Aggregate Labor and Skills Price will be changed by this Change Order in the amount of
$
***

The new Contract Price including this Change Order will be
$
7,793,096,937


Adjustment to Aggregate Equipment Price
The original Aggregate Equipment Price was
$
***
Net change by previously authorized Change Orders (0001-00034)
$
***
The Aggregate Equipment Price prior to this Change Order was
$
***
The Aggregate Equipment Price will be changed by this Change Order in the amount of
$
***
The new Aggregate Equipment Price including this Change Order will be
$
***






Adjustment to Aggregate Labor and Skills Price
The original Aggregate Labor and Skills Price was
$
***
Net change by previously authorized Change Orders (0001-00034)
$
***
The Aggregate Labor and Skills Price prior to this Change Order was
$
***
The Aggregate Labor and Skills Price will be changed by this Change Order in the amount of
$
***
The new Aggregate Labor and Skills Price including this Change Order will be
$
***

Adjustment to Aggregate Provisional Sum
The original Aggregate Provisional Sum was
$
950,561,351

Net change by previously authorized Change Orders (0001-00034)
$
(745,966,926
)
The Aggregate Provisional Sum prior to this Change Order was
$
204,594,425

The Aggregate Provisional Sum will be changed by this Change Order in the amount of
$

The new Aggregate Provisional Sum including this Change Order will be
$
204,594,425


Adjustment to dates in Project Schedule
The following dates are modified (list all dates modified; insert N/A if no dates modified) : N/A

Adjustment to other Changed Criteria (insert N/A if no changes or impact; attach additional documentation if necessary) N/A

Adjustment to Payment Schedule: Yes. See Exhibit C of this Change Order.

Adjustment to Minimum Acceptance Criteria: N/A

Adjustment to Performance Guarantees: N/A

Adjustment to Design Basis: N/A

Other adjustments to liability or obligation of Contractor or Owner under the Agreement: N/A


Select either A or B :
[A] This Change Order shall constitute a full and final settlement and accord and satisfaction of all effects of the change reflected in this Change Order upon the Changed Criteria and shall be deemed to compensate Contractor fully for such change. Initials:
/s/ SB Contractor /s/ EL Owner


[B] This Change Order shall not constitute a full and final settlement and accord and satisfaction of all effects of the change reflected in this Change Order upon the Changed Criteria and shall not be deemed to compensate Contractor fully for such change. Initials: ____ Contractor ____ Owner


Upon execution of this Change Order by Owner and Contractor, the above-referenced change shall become a valid and binding part of the original Agreement without exception or qualification, unless noted in this Change Order. Except as modified by this and any previously issued Change Orders, all other terms and conditions of the Agreement shall remain in full force and effect. This Change Order is executed by each of the Parties’ duly authorized representatives.






/s/ Ed Lehotsky
 
/s/ Sergio Buoncristiano
Owner
 
Contractor
Ed Lehotsky
 
Sergio Buoncristiano
Name
 
Name
Sr. VP LNG E&C
 
SVP
Title
 
Title
April 25, 2017
 
April 25, 2017
Date of Signing
 
Date of Signing





Exhibit 31.1
CERTIFICATION BY PRESIDENT AND CHIEF FINANCIAL OFFICER
PURSUANT TO RULE 13a-14(a) AND 15d-14(a) UNDER THE EXCHANGE ACT

I, Michael J. Wortley , certify that:
1.
I have reviewed this quarterly report on Form 10-Q of Cheniere Corpus Christi Holdings, 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.
I am responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) for the registrant and have:
a)
Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
b)
Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation;
c)
Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and
5.
I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):
a)
All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
b)
Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.
 
Date: August 7, 2017
/s/ Michael J. Wortley
Michael J. Wortley
President and Chief Financial Officer of
Cheniere Corpus Christi Holdings, LLC





Exhibit 32.1
CERTIFICATION BY PRESIDENT AND CHIEF FINANCIAL OFFICER
PURSUANT TO 18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the quarterly report of Cheniere Corpus Christi Holdings, LLC (the “Company”) on Form 10-Q for the quarter ended June 30, 2017 , as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Michael J. Wortley , President and Chief Financial Officer of the Company, certify, pursuant to 18 U.S.C. § 1350, as adopted pursuant to § 906 of the Sarbanes-Oxley Act of 2002, to my knowledge, that:
(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.

Date: August 7, 2017
/s/ Michael J. Wortley
Michael J. Wortley
President and Chief Financial Officer of
Cheniere Corpus Christi Holdings, LLC