UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

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

For the quarterly period ended June 30, 2021

or

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

 For the transition period from            to            

Commission file number 001-33366

Cheniere Energy Partners, L.P.

(Exact name of registrant as specified in its charter)

Delaware	20-5913059
(State or other jurisdiction of incorporation or organization)	(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)

Securities registered pursuant to Section 12(b) of the Act: 

Title of each class	Trading Symbol	Name of each exchange on which registered
Common Units Representing Limited Partner Interests	CQP	NYSE American

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 ☐

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

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

Large accelerated filer	☒	Accelerated filer	☐
Non-accelerated filer	☐	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 ☒

As of July 30, 2021, the registrant had 484,024,123 common units outstanding.

CHENIERE ENERGY PARTNERS, L.P.

TABLE OF CONTENTS

	Definitions	1
Part I. Financial Information
Item 1.	Consolidated Financial Statements	3
	Consolidated Statements of Income	3
	Consolidated Balance Sheets	4
	Consolidated Statements of Partners’ Equity	5
	Consolidated Statements of Cash Flows	6
	Notes to Consolidated Financial Statements	7
	Note 1—Nature of Operations and Basis of Presentation	7
	Note 2—Unitholders’ Equity	7
	Note 3—Restricted Cash	8
	Note 4—Accounts and Other Receivables, Net of Current Expected Credit Losses	8
	Note 5—Inventory	8
	Note 6—Property, Plant and Equipment, Net of Accumulated Depreciation	8
	Note 7—Derivative Instruments	9
	Note 8—Other Non-Current Assets, Net	12
	Note 9—Accrued Liabilities	12
	Note 10—Debt	13
	Note 11—Revenues from Contracts with Customers	15
	Note 12—Related Party Transactions	18
	Note 13—Net Income per Common Unit	22
	Note 14—Customer Concentration	24
	Note 15—Supplemental Cash Flow Information	24
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	25
Item 3.	Quantitative and Qualitative Disclosures about Market Risk	38
Item 4.	Controls and Procedures	39
Part II. Other Information
Item 1.	Legal Proceedings	40
Item 1A.	Risk Factors	40
Item 5.	Other Information	40
Item 6.	Exhibits	41
	Signatures	42

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; one British thermal unit measures the amount of energy required to raise the temperature of one pound of water by one degree Fahrenheit
mtpa	million tonnes per annum
non-FTA countries	countries with which the United States does not have a free trade agreement providing for national treatment for trade in natural gas and with which trade is permitted
SEC	U.S. Securities and Exchange Commission
SPA	LNG sale and purchase agreement
TBtu	trillion British thermal units; one British thermal unit measures the amount of energy required to raise the temperature of one pound of water by one degree Fahrenheit
Train	an industrial facility comprised of a series of refrigerant compressor loops used to cool natural gas into LNG
TUA	terminal use agreement

1

Abbreviated Legal Entity Structure

The following diagram depicts our abbreviated legal entity structure as of June 30, 2021, including our ownership of certain subsidiaries, and the references to these entities used in this quarterly report:

Unless the context requires otherwise, references to “Cheniere Partners,” “the Partnership,” “we,” “us” and “our” refer to Cheniere Energy Partners, L.P. and its consolidated subsidiaries, including SPLNG, SPL and CTPL. 

2

PART I.     FINANCIAL INFORMATION

ITEM 1.    CONSOLIDATED FINANCIAL STATEMENTS

CHENIERE ENERGY PARTNERS, L.P. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF INCOME

(in millions, except per unit data)

(unaudited)

	Three Months Ended June 30,				Six Months Ended June 30,
	2021		2020		2021		2020
Revenues
LNG revenues	$	1,597	$	1,332	$	3,266	$	2,781
LNG revenues—affiliate	211		61		425		249
Regasification revenues	67		68		134		135
Other revenues	14		9		27		23
Total revenues	1,889		1,470		3,852		3,188
Operating costs and expenses
Cost of sales (excluding items shown separately below)	888		398		1,836		1,097
Cost of sales—affiliate	12		5		54		5
Cost of sales—related party	1		—		1		—
Operating and maintenance expense	168		165		317		317
Operating and maintenance expense—affiliate	35		48		69		81
Operating and maintenance expense—related party	12		—		22		—
Development expense	1		—		1		—
General and administrative expense	3		8		5		10
General and administrative expense—affiliate	21		24		42		49
Depreciation and amortization expense	138		138		277		276
Impairment expense and loss on disposal of assets	6		—		6		5
Total operating costs and expenses	1,285		786		2,630		1,840
Income from operations	604		684		1,222		1,348
Other income (expense)
Interest expense, net of capitalized interest	(209)		(236)		(426)		(470)
Loss on modification or extinguishment of debt	—		(42)		(54)		(43)
Other income, net	—		—		—		6
Total other expense	(209)		(278)		(480)		(507)
Net income	$	395	$	406	$	742	$	841
Basic and diluted net income per common unit	$	0.73	$	0.78	$	1.38	$	1.62
Weighted average number of common units outstanding used for basic and diluted net income per common unit calculation	484.0		348.6		484.0		348.6

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

3

CHENIERE ENERGY PARTNERS, L.P. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

(in millions, except unit data)

	June 30,		December 31,
	2021		2020
ASSETS	(unaudited)
Current assets
Cash and cash equivalents	$	1,239	$	1,210
Restricted cash	65		97
Accounts and other receivables, net of current expected credit losses	285		318
Accounts receivable—affiliate	65		184
Advances to affiliate	154		144
Inventory	116		107
Current derivative assets	23		14
Other current assets	97		61
Other current assets—affiliate	1		—
Total current assets	2,045		2,135
Property, plant and equipment, net of accumulated depreciation	16,789		16,723
Operating lease assets, net of accumulated amortization	95		99
Debt issuance costs, net of accumulated amortization	14		17
Derivative assets	21		11
Other non-current assets, net	159		160
Total assets	$	19,123	$	19,145
LIABILITIES AND PARTNERS’ EQUITY
Current liabilities
Accounts payable	$	16	$	12
Accrued liabilities	649		658
Accrued liabilities—related party	4		4
Current debt, net of discount and debt issuance costs	654		—
Due to affiliates	38		53
Deferred revenue	105		137
Deferred revenue—affiliate	11		1
Current operating lease liabilities	8		7
Current derivative liabilities	21		11
Total current liabilities	1,506		883
Long-term debt, net of premium, discount and debt issuance costs	16,935		17,580
Operating lease liabilities	87		90
Derivative liabilities	8		35
Other non-current liabilities	—		1
Other non-current liabilities—affiliate	16		17
Partners’ equity
Common unitholders’ interest (484.0 million units issued and outstanding at both June 30, 2021 and December 31, 2020)	805		714
General partner’s interest (2% interest with 9.9 million units issued and outstanding at June 30, 2021 and December 31, 2020)	(234)		(175)
Total partners’ equity	571		539
Total liabilities and partners’ equity	$	19,123	$	19,145

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

4

CHENIERE ENERGY PARTNERS, L.P. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF PARTNERS’ EQUITY

(in millions)

(unaudited)

Three and Six Months Ended June 30, 2021
	Common Unitholders’ Interest			Subordinated Unitholder’s Interest			General Partner’s Interest			Total Partners’ Equity
	Units	Amount		Units	Amount		Units	Amount
Balance at December 31, 2020	484.0	$	714	—	$	—	9.9	$	(175)	$	539
Net income	—	340		—	—		—	7		347
Distributions
Common units, $0.655/unit	—	(316)		—	—		—	—		(316)
General partner units	—	—		—	—		—	(35)		(35)
Balance at March 31, 2021	484.0	738		—	—		9.9	(203)		535
Net income	—	387		—	—		—	8		395
Distributions
Common units, $0.660/unit	—	(320)		—	—		—	—		(320)
General partner units	—	—		—	—		—	(39)		(39)
Balance at June 30, 2021	484.0	$	805	—	$	—	9.9	$	(234)	$	571

Three and Six Months Ended June 30, 2020
	Common Unitholders’ Interest			Subordinated Unitholder’s Interest			General Partner’s Interest			Total Partners’ Equity
	Units	Amount		Units	Amount		Units	Amount
Balance at December 31, 2019	348.6	$	1,792	135.4	$	(996)	9.9	$	(81)	$	715
Net income	—	307		—	119		—	9		435
Distributions
Common units, $0.630/unit	—	(220)		—	—		—	—		(220)
Subordinated units, $0.630/unit	—	—		—	(85)		—	—		(85)
General partner units	—	—		—	—		—	(25)		(25)
Balance at March 31, 2020	348.6	1,879		135.4	(962)		9.9	(97)		820
Net income	—	287		—	111		—	8		406
Distributions
Common units, $0.640/unit	—	(223)		—	—		—	—		(223)
Subordinated units, $0.640/unit	—	—		—	(86)		—	—		(86)
General partner units	—	—		—	—		—	(29)		(29)
Balance at June 30, 2020	348.6	$	1,943	135.4	$	(937)	9.9	$	(118)	$	888

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

5

CHENIERE ENERGY PARTNERS, L.P. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

(in millions)

(unaudited)

	Six Months Ended June 30,
	2021		2020
Cash flows from operating activities
Net income	$	742	$	841
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization expense	277		276
Amortization of debt issuance costs, premium and discount	15		17
Loss on modification or extinguishment of debt	54		43
Total gains on derivatives, net	(54)		(29)
Net cash provided by settlement of derivative instruments	18		3
Impairment expense and loss on disposal of assets	6		5
Other	7		7
Changes in operating assets and liabilities:
Accounts and other receivables, net of current expected credit losses	32		6
Accounts receivable—affiliate	119		103
Advances to affiliate	3		14
Inventory	(9)		14
Accounts payable and accrued liabilities	(48)		(242)
Due to affiliates	(13)		(8)
Deferred revenue	(32)		(133)
Other, net	(49)		(40)
Other, net—affiliate	7		(3)
Net cash provided by operating activities	1,075		874
Cash flows from investing activities
Property, plant and equipment	(316)		(581)
Net cash used in investing activities	(316)		(581)
Cash flows from financing activities
Proceeds from issuances of debt	1,500		1,995
Repayments of debt	(1,500)		(2,000)
Debt issuance and other financing costs	(20)		(34)
Debt extinguishment costs	(40)		(39)
Distributions to owners	(710)		(668)
Other	8		(1)
Net cash used in financing activities	(762)		(747)
Net decrease in cash, cash equivalents and restricted cash	(3)		(454)
Cash, cash equivalents and restricted cash—beginning of period	1,307		1,962
Cash, cash equivalents and restricted cash—end of period	$	1,304	$	1,508

Balances per Consolidated Balance Sheets:

	June 30,
	2021
Cash and cash equivalents	$	1,239
Restricted cash	65
Total cash, cash equivalents and restricted cash	$	1,304

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

6

CHENIERE ENERGY PARTNERS, L.P. AND SUBSIDIARIES 

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(unaudited)

NOTE 1—NATURE OF OPERATIONS AND BASIS OF PRESENTATION

The Sabine Pass LNG terminal is located in Cameron Parish, Louisiana, and has natural gas liquefaction facilities consisting of five operational natural gas liquefaction Trains and one additional Train under construction that is expected to be substantially completed in the first half of 2022, for a total production capacity of approximately 30 mtpa of LNG (the “Liquefaction Project”). The Sabine Pass LNG terminal also has operational regasification facilities that include five LNG storage tanks, vaporizers and two marine berths, with an additional marine berth that is under construction. We also own a 94-mile pipeline through our subsidiary, CTPL, that interconnects the Sabine Pass LNG terminal with a number of large interstate pipelines (the “Creole Trail Pipeline”).

Basis of Presentation

The accompanying unaudited Consolidated Financial Statements of Cheniere Partners 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 Financial Statements and accompanying notes included in our annual report on Form 10-K for the fiscal year ended December 31, 2020.

Results of operations for the three and six months ended June 30, 2021 are not necessarily indicative of the results of operations that will be realized for the year ending December 31, 2021.

We are not subject to either federal or state income tax, as our partners are taxed individually on their allocable share of our taxable income. Accordingly, no provision or liability for federal or state income taxes is included in the accompanying Consolidated Financial Statements.

Recent Accounting Standards

In March 2020, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2020-04, Reference Rate Reform (Topic 848): Facilitation of the Effects of Reference Rate Reform on Financial Reporting. This guidance primarily provides temporary optional expedients which simplify the accounting for contract modifications to existing debt agreements expected to arise from the market transition from LIBOR to alternative reference rates. The optional expedients were available to be used upon issuance of this guidance but we have not yet applied the guidance because we have not yet modified any of our existing contracts for reference rate reform. Once we apply an optional expedient to a modified contract and adopt this standard, the guidance will be applied to all subsequent applicable contract modifications until December 31, 2022, at which time the optional expedients are no longer available.

NOTE 2—UNITHOLDERS’ EQUITY

The common units represent limited partner interests in us. The holders of the units are entitled to participate in partnership distributions and exercise the rights and privileges available to limited partners under our partnership agreement. Our partnership agreement requires that, within 45 days after the end of each quarter, we distribute all of our available cash (as defined in our partnership agreement). Generally, our available cash is our cash on hand at the end of a quarter less the amount of any reserves established by our general partner. All distributions paid to date have been made from accumulated operating surplus as defined in the partnership agreement.

Although common unitholders are not obligated to fund losses of the Partnership, its capital account, which would be considered in allocating the net assets of the Partnership were it to be liquidated, continues to share in losses.

The general partner interest is entitled to at least 2% of all distributions made by us. In addition, the general partner holds incentive distribution rights (“IDRs”), which allow the general partner to receive a higher percentage of quarterly distributions of available cash from operating surplus as additional target levels are met, but may transfer these rights separately from its general partner interest. The higher percentages range from 15% to 50%, inclusive of the general partner interest.

7

CHENIERE ENERGY PARTNERS, L.P. AND SUBSIDIARIES 

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—CONTINUED

(unaudited)

As of June 30, 2021, our total securities beneficially owned in the form of common units were held 48.6% by Cheniere, 41.4% by CQP Target Holdco L.L.C. (“CQP Target Holdco”) and other affiliates of The Blackstone Group Inc. (“Blackstone”) and Brookfield Asset Management Inc. (“Brookfield”) and 8.0% by the public. All of our 2% general partner interest was held by Cheniere. CQP Target Holdco’s equity interests are 50.00% owned by BIP Chinook Holdco L.L.C., an affiliate of Blackstone and 50.00% owned by BIF IV Cypress Aggregator (Delaware) LLC, an affiliate of Brookfield. The ownership of CQP Target Holdco, Blackstone and Brookfield are based on their most recent filings with the SEC.

NOTE 3—RESTRICTED CASH

Restricted cash consists of funds that are contractually or legally 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, 2021 and December 31, 2020, we had $65 million and $97 million of restricted cash, respectively.

Pursuant to the accounts agreement entered into with the collateral trustee for the benefit of SPL’s debt holders, SPL is 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.

NOTE 4—ACCOUNTS AND OTHER RECEIVABLES, NET OF CURRENT EXPECTED CREDIT LOSSES

As of June 30, 2021 and December 31, 2020, accounts and other receivables, net of current expected credit losses consisted of the following (in millions):

	June 30,		December 31,
	2021		2020
SPL trade receivable	$	264	$	300
Other accounts receivable	21		18
Total accounts and other receivables, net of current expected credit losses	$	285	$	318

NOTE 5—INVENTORY

As of June 30, 2021 and December 31, 2020, inventory consisted of the following (in millions):

	June 30,		December 31,
	2021		2020
Materials	$	81	$	81
LNG	9		8
Natural gas	25		17
Other	1		1
Total inventory	$	116	$	107

NOTE 6—PROPERTY, PLANT AND EQUIPMENT, NET OF ACCUMULATED DEPRECIATION

As of June 30, 2021 and December 31, 2020, property, plant and equipment, net of accumulated depreciation consisted of the following (in millions):

	June 30,		December 31,
	2021		2020
LNG terminal
LNG terminal and interconnecting pipeline facilities	$	16,941	$	16,908
LNG terminal construction-in-process	2,463		2,154
Accumulated depreciation	(2,620)		(2,344)
Total LNG terminal, net of accumulated depreciation	16,784		16,718
Fixed assets
Fixed assets	30		29
Accumulated depreciation	(25)		(24)
Total fixed assets, net of accumulated depreciation	5		5
Property, plant and equipment, net of accumulated depreciation	$	16,789	$	16,723

8

CHENIERE ENERGY PARTNERS, L.P. AND SUBSIDIARIES 

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—CONTINUED

(unaudited)

The following table shows depreciation expense during the three and six months ended June 30, 2021 and 2020 (in millions):

	Three Months Ended June 30,				Six Months Ended June 30,
	2021		2020		2021		2020
Depreciation expense	$	137	$	137	$	275	$	274

NOTE 7—DERIVATIVE INSTRUMENTS

We have entered into commodity derivatives consisting of natural gas supply contracts for the commissioning and operation of the Liquefaction Project (“Physical Liquefaction Supply Derivatives”) and associated economic hedges (“Financial Liquefaction Supply Derivatives,” and collectively with the Physical Liquefaction Supply Derivatives, the “Liquefaction Supply Derivatives”).

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

The following table shows the fair value of our derivative instruments that are required to be measured at fair value on a recurring basis as of June 30, 2021 and December 31, 2020 (in millions):

	Fair Value Measurements as of
	June 30, 2021								December 31, 2020
	Quoted Prices in Active Markets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)		Total		Quoted Prices in Active Markets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)		Total
Liquefaction Supply Derivatives asset (liability)	$	(11)	$	(7)	$	33	$	15	$	1	$	(1)	$	(21)	$	(21)

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

The fair value of our Physical Liquefaction Supply Derivatives is predominantly driven by observable and unobservable market commodity prices and, as applicable to our natural gas supply contracts, our assessment of the associated events deriving fair value, including evaluating whether the respective market is available as pipeline infrastructure is developed. The fair value of our Physical Liquefaction Supply Derivatives incorporates risk premiums related to the satisfaction of conditions precedent, such as completion and placement into service of relevant pipeline infrastructure to accommodate marketable physical gas flow. As of June 30, 2021 and December 31, 2020, some of our Physical Liquefaction Supply Derivatives existed within markets for which the pipeline infrastructure was under development to accommodate marketable physical gas flow.

We include a portion of our Physical Liquefaction Supply Derivatives as Level 3 within the valuation hierarchy as the fair value is developed through the use of internal models which incorporate significant unobservable inputs. In instances where observable data is unavailable, consideration is given to the assumptions that market participants would use in valuing the asset or liability. This includes assumptions about market risks, such as future prices of energy units for unobservable periods, liquidity, volatility and contract duration.

9

CHENIERE ENERGY PARTNERS, L.P. AND SUBSIDIARIES 

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—CONTINUED

(unaudited)

The Level 3 fair value measurements of natural gas positions within our Physical Liquefaction Supply Derivatives could be materially impacted by a significant change in certain natural gas prices. The following table includes quantitative information for the unobservable inputs for our Level 3 Physical Liquefaction Supply Derivatives as of June 30, 2021:

	Net Fair Value Asset (in millions)	Valuation Approach	Significant Unobservable Input	Range of Significant Unobservable Inputs / Weighted Average (1)
Physical Liquefaction Supply Derivatives	$33	Market approach incorporating present value techniques	Henry Hub basis spread	$(0.350) - $0.190 / $0.007

(1)    Unobservable inputs were weighted by the relative fair value of the instruments.

Increases or decreases in basis, in isolation, would decrease or increase, respectively, the fair value of our Physical Liquefaction Supply Derivatives.

The following table shows the changes in the fair value of our Level 3 Physical Liquefaction Supply Derivatives during the three and six months ended June 30, 2021 and 2020 (in millions):

	Three Months Ended June 30,				Six Months Ended June 30,
	2021		2020		2021		2020
Balance, beginning of period	$	(36)	$	49	$	(21)	$	24
Realized and mark-to-market gains:
Included in cost of sales	67		4		58		32
Purchases and settlements:
Purchases	1		(1)		—		—
Settlements	1		(1)		(4)		(6)
Transfers into Level 3, net (1)	—		—		—		1
Balance, end of period	$	33	$	51	$	33	$	51
Change in unrealized gains relating to instruments still held at end of period	$	67	$	4	$	58	$	32

(1)    Transferred into Level 3 as a result of unobservable market, or out of Level 3 as a result of observable market for the underlying natural gas purchase agreements.

All counterparty derivative contracts provide for the unconditional right of set-off in the event of default. We have elected to report derivative assets and liabilities arising from our derivative contracts with the same counterparty on a net basis. The use of derivative instruments exposes us to counterparty credit risk, or the risk that a counterparty will be unable to meet its commitments in instances when our derivative instruments are in an asset position. Additionally, counterparties are at risk that we will be unable to meet our commitments in instances where our derivative instruments are in a liability position. We incorporate both our own nonperformance risk and the respective counterparty’s nonperformance risk in fair value measurements. In adjusting the fair value of our derivative contracts for the effect of nonperformance risk, we have considered the impact of any applicable credit enhancements, such as collateral postings, set-off rights and guarantees.

Liquefaction Supply Derivatives

SPL has entered into primarily index-based physical natural gas supply contracts and associated economic hedges to purchase natural gas for the commissioning and operation of the Liquefaction Project. The remaining terms of the physical natural gas supply contracts range up to 10 years, some of which commence upon the satisfaction of certain events or states of affairs. The terms of the Financial Liquefaction Supply Derivatives range up to approximately three years.

The notional natural gas position of our Liquefaction Supply Derivatives was approximately 5,078 TBtu and 4,970 TBtu as of June 30, 2021 and December 31, 2020, respectively, of which 91 TBtu for each of the periods were for a natural gas supply contract that SPL has with a related party.

10

CHENIERE ENERGY PARTNERS, L.P. AND SUBSIDIARIES 

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—CONTINUED

(unaudited)

Fair Value and Location of Derivative Assets and Liabilities on the Consolidated Balance Sheets

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

	Fair Value Measurements as of (1)
Consolidated Balance Sheets Location	June 30, 2021		December 31, 2020
Current derivative assets	$	23	$	14
Derivative assets	21		11
Total derivative assets	44		25
Current derivative liabilities	(21)		(11)
Derivative liabilities	(8)		(35)
Total derivative liabilities	(29)		(46)
Derivative asset (liability), net	$	15	$	(21)

(1)    Does not include collateral posted with counterparties by us of $16 million and $4 million, which are included in other current assets in our Consolidated Balance Sheets as of June 30, 2021 and December 31, 2020, respectively. Includes a natural gas supply contract that SPL has with a related party, which had a fair value of zero as of both June 30, 2021 and December 31, 2020.

The following table shows the gain (loss) from changes in the fair value, settlements and location of our Liquefaction Supply Derivatives recorded on our Consolidated Statements of Income during the three and six months ended June 30, 2021 and 2020 (in millions):

Consolidated Statements of Income Location (1)	Three Months Ended June 30,				Six Months Ended June 30,
	2021		2020		2021		2020
LNG revenues	$	—	$	(4)	$	—	$	(4)
Cost of sales	56		12		54		33

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

11

CHENIERE ENERGY PARTNERS, L.P. AND SUBSIDIARIES 

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—CONTINUED

(unaudited)

Consolidated Balance Sheets Presentation

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

	Liquefaction Supply Derivatives
As of June 30, 2021
Gross assets	$	46
Offsetting amounts	(2)
Net assets	$	44
Gross liabilities	$	(33)
Offsetting amounts	4
Net liabilities	$	(29)
As of December 31, 2020
Gross assets	$	69
Offsetting amounts	(44)
Net assets	$	25
Gross liabilities	$	(48)
Offsetting amounts	2
Net liabilities	$	(46)

NOTE 8—OTHER NON-CURRENT ASSETS, NET

As of June 30, 2021 and December 31, 2020, other non-current assets, net consisted of the following (in millions):

	June 30,		December 31,
	2021		2020
Advances made to municipalities for water system enhancements	$	82	$	84
Advances and other asset conveyances to third parties to support LNG terminal	33		33
Advances made under EPC and non-EPC contracts	2		9
Tax-related prepayments and receivables	16		17
Information technology service prepayments	5		6
Other	21		11
Total other non-current assets, net	$	159	$	160

NOTE 9—ACCRUED LIABILITIES

As of June 30, 2021 and December 31, 2020, accrued liabilities consisted of the following (in millions):

	June 30,		December 31,
	2021		2020
Interest costs and related debt fees	$	201	$	203
Accrued natural gas purchases	310		374
LNG terminal and related pipeline costs	116		71
Other accrued liabilities	22		10
Total accrued liabilities	$	649	$	658

12

CHENIERE ENERGY PARTNERS, L.P. AND SUBSIDIARIES 

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—CONTINUED

(unaudited)

NOTE 10—DEBT

As of June 30, 2021 and December 31, 2020, our debt consisted of the following (in millions):

	June 30,		December 31,
	2021		2020
Long-term debt:
SPL — 4.200% to 6.25% senior secured notes due between March 2022 and September 2037 and working capital facility (“2020 SPL Working Capital Facility”)	$	12,994	$	13,650
Cheniere Partners — 4.000% to 5.625% senior notes due between October 2025 and March 2031 and credit facilities (“2019 CQP Credit Facilities”)	4,100		4,100
Unamortized premium, discount and debt issuance costs, net of accumulated amortization	(159)		(170)
Total long-term debt, net of premium, discount and debt issuance costs