Cheniere 4Q16 Review (LNG / CQH / CQP)

Transcription

1 Research Analysts Bhavesh Lodaya John Edwards, CFA Dylan Nassano (LNG / CQH / CQP) EARNINGS 28 February 2017 Americas/United States Equity Research Master Limited Partnerships Bullish Stance Going Into The Analyst Day Bottom Line: Cheniere entered 2017 with a strong quarter on its back. Although EBITDA was in-line (but below our initial read from the 10K) and Street (CQP $202mm EBITDA below our $208mm and the Street s $207mm), overall outlook for the business remains strong and Cheniere continues to deliver newer liquefaction trains within time. Our recent report (Chasing Cargoes and more) provides details related to the 56 cargoes (184 Bcf / 3.5mt) shipped during The only blip on the radar was the delay in the Chilean power plant project due to an unfavorable ruling by its Supreme Court. While this does push back realization of contracted cash flows, CMI can use the LNG production to serve marketing contracts and drive spot earnings. Cheniere has scheduled its Analyst Day for April 19 th and mgmt. intends to provide additional color on the MIDSHIP, modular LNG project developments along with laying out financial/strategic guidance. While all the big-ticket items are expected to be covered during the analyst day, we did gather a few incremental data points with earnings, detailed below. We are maintaining our $52/$28/$35 TPs for LNG/CQH/CQP and reiterate our Outperform ratings on all of them. Our 2017/18/19 EBITDA estimates for CQP are up 17% / down 3% / up 5%, primarily due to change in assumption of timing of contractual/cmi cargoes to align with timing of in service of trains. Primary Takeaways: Corpus Christi Train 3 & Long-term Mgmt. Incentives: With the change in global LNG supply/demand landscape since the end of 2016 as we enter the contracting window for the next leg of LNG demand early in the next decade, Cheniere sounded more confident on being able to attain FID for its third Corpus Christi train. The train is already partially commercialized (0.8 mtpa with EDP) and based on prior contracting requires ~2.7 mtpa of additional LT contracts to reach FID. In our view, Cheniere s 0.6 mtpa contract with the Chilean El Campesino power plant could be moved to this train to bring it closer to FID. Also, we believe the recent incentive compensation planning at Cheniere keeps the focus on this train. While we currently do not include CCL T3 in our forecasts, we had estimated ~$9 /sh in additional valuation for LNG from this train in our deep dive report Pioneers of US LNG Export Remain in a Position of Strength. Geographical Diversification of Natural Gas Procurement: Cheniere has already secured ~5.7 Bcf/d of natural gas supply through long-term contracts with US midstream operators. Today, mgmt. indicated that it has entered into a contract with a Canadian producer to source Montney shale gas. The contract would be based on Henry Hub pricing and help Cheniere manage intraday volume variances with a diverse supply source. The planned MIDSHIP pipe project out of the STACK & SCOOP also further diversifies and de-risks Cheniere's long-term natural gas requirements. Simplification is Priority: Although LNG withdrew its offer to buyout outstanding CQH interest, it did acquire an additional 2.5% via individual deals, raising its stake to 82.6%. Given, the recent simplification theme in DISCLOSURE APPENDIX AT THE BACK OF THIS REPORT CONTAINS IMPORTANT DISCLOSURES, ANALYST CERTIFICATIONS, LEGAL ENTITY DISCLOSURE AND THE STATUS OF NON-US ANALYSTS. US Disclosure: Credit Suisse does and seeks to do business with companies covered in its research reports. As a result, investors should be aware that the Firm may have a conflict of interest that could affect the objectivity of this report. Investors should consider this report as only a single factor in making their investment decision.

2 the industry, we believe an eventual roll-up of the structure is likely and provides tax, cost of capital and synergistic advantages as well as a common operating platform for the marketing business. Cheniere Marketing SPA of LNG/CQP: Presently, CQP has a SPA with Cheniere Marketing (CMI; controlled by LNG) under which CMI pays $3/Mcf for LNG sourced from the Sabine Pass terminal for its spot marketing business. However, investors/analysts were concerned about LNG s ability to honor this commitment, especially in a period of low LNG prices/margins that we saw in Over the 4Q call, mgmt. indicated that they have set up an informal committee which looks into this and agrees on a profit sharing model when margins move below $3/Mcf. This is consistent with our model which forecasts an 80/20 CQP/LNG margin split when margins are below the $3/Mcf level. However, in the strong LNG price environment during end-2016/early 2017, Cheniere has been able to honor the commitment without much need for a committee decision. Debt Refinancing and CQP Distribution Growth: Today, CQP priced an offering of $1.35Bn of 2028 senior notes with a 4.20% coupon. The proceeds from this offering are expected to re-finance/eliminate the existing credit facility. Last week, it priced a private offering of $800mm of 2037 senior notes with a 5.00% coupon With cash flow ramping up as newer trains are placed in to service, the logical question on investors minds is thoughts on CQP distribution growth. Mgmt. indicated that its existing credit facilities have restrictive covenants related to distribution growth and the refinancing is a first step toward growing distributions. We expect to hear more on Cheniere s de-leveraging and distribution growth policy at the Analyst Day. (LNG / CQH / CQP) 2

3 Americas/United States Master Limited Partnerships Rating OUTPERFORM Price (28-Feb-17, US$) Target price (US$) week price range (US$) Market cap (US$ m) 10, Adjusted EV - Target price is for 12 months. Research Analysts Bhavesh Lodaya bhavesh.lodaya@credit-suisse.com John Edwards, CFA john.edwards@credit-suisse.com Dylan Nassano dylan.nassano@credit-suisse.com Cheniere Energy Partners, LP (CQP) Reiterate $35 TP and Outperform Investment Thesis: CQP derives cash flows from terminal use agreements with Total and Chevron and began deriving cash flows from the start-up of Trains of the Sabine Pass Liquefaction (SPL) project. Along with ~$2.9Bn/yr. of fees from 20-yr SPAs on Trains 1-5, CQP will also receive cash flows (fixed $3/MMBtu margin) from Cheniere Marketing (CMI, sub of LNG) from spot sale of spare LNG capacity available on SPL (2.7mtpa on five trains). Valuation: Our $35 target price is based on an equal weighted EV/EBITDA, P/DCF and 3-stage DDM valuation. Although, our TP implies ~12% NTM total return, we are reiterating our Outperform rating on the stock due to near term catalysts and expected incremental color on outlook at the Analyst Day. Estimates: Our 2017/18/19 EBITDA estimates for CQP are up 17% / down 3% / up 5%, primarily due to a change in timing of contractual cargoes and CMI cargoes to align with timing of in service of trains. DCF moves ~1% lower due to higher interest expenses from recent debt offerings. Risks: Delays in completion of new liquefaction trains and lower LNG prices yielding lower margins. Share price performance A p r Ju l O c t Ja n C Q P.A S& P IN D EX On 28-Feb-2017 the S&P 500 INDEX closed at Daily Mar01, Feb28, 2017, 03/01/16 = US$26.53 DCF/LP Unit Q1 Q2 Q3 Q4 2016A E E Financial and valuation metrics Year 12/16A 12/17E 12/18E 12/19E EBITDA (US$ m) 365 1,765 2,556 2,498 Distribution/unit- DPU (US$ m) Earnings/unit - EPU (US$) Prev. Earnings/unit - EPU (US$) EPU - consensus (US$) Distribution coverage (x) P/DCF (x) Adj. current EV/EBITDA (x) DPU (US$) 1.70 Distribution yld (%) 5.2 Units outstanding (m) 334 GP take (%) 1.9 Net debt current (US$ m) 14,322.1 Net debt/ebitda (x) month ADV (000's) 63 Net debt/market cap. (%) - Free float (%) 78 Institutional ownership (%) - Source: Company data, Thomson Reuters, Credit Suisse estimates (LNG / CQH / CQP) 3

4 Cheniere Energy Partners, LP (CQP) Price (28 Feb 2017): US$32.76; Rating: OUTPERFORM; Target Price: US$35.00; Analyst: Bhavesh Lodaya MLP Distributable Cash Flow 12/16A 12/17E 12/18E 12/19E (DCF) Adjusted EBITDA , , ,497.6 (-) Maintenance Capex (-) Cash Interest Expenses (+/-) Other Adjustments Total Distributable Cash Flow (US$) (24.7) 1, , ,673.1 (-) General Partner Adjustments DCF to limited partners (26.72) 1, , , DCF per LP unit (US$) (.47) Cash Distribution Declared Per Unit Distribution coverage (x) (.25) DCF/LP Unit 2016A Q Q Q Q E E Capex 12/16A 12/17E 12/18E 12/19E Expansion Capex Acquisitions Maintenance capex Cash Flow 12/16A 12/17E 12/18E 12/19E Net income (US$) (167.8) , ,318.8 DD&A Change in working capital Other cash & non-cash items (292.4) (268.3) (251.5) (243.8) Cash flow from operations (.2) 1, , ,823.1 Free cashflow to the firm (2,315.3) , ,553.1 Other investment/(outflows) (38.3) Cash flow from investments (2,353.4) (368.3) (333.3) (270.0) Net share issue/(repurchase) Dividends paid (99.0) (280.8) (997.7) (1,159.6) Change in debt (5,250.5) Other financing inflows/outflows 7,873.7 (514.8) 46.7 (80.0) Cashflow from financing activities 2,524.2 (795.6) (951.0) (1,239.6) Movements in cash/eq (.0) Balance Sheet (US$) 12/16A 12/17E 12/18E 12/19E Assets Cash & cash equivalents Account receivables Other current assets Total current assets , ,375.8 Total fixed assets 14, , , ,345.1 Other assets Total assets 15, , , ,146.8 Liabilities Accounts payables Short-term debt Other short term liabilities Total current liabilities Long-term debt 14, , , ,485.1 Other liabilities Total liabilities 15, , , ,375.1 Minority interests / other Total liabilities and equity 15, , , ,146.8 Financing Metrics 12/16A 12/17E 12/18E 12/19E Equity issuance Debt issuance/(repayment) (5,250.5) Leverage (x) Per share 12/16A 12/17E 12/18E 12/19E No. of shares (EOP) Earnings / unit EPU (US$) DPS (US$) Book value per share Operating cash flow/share (0.00) Valuation metrics 12/16A 12/17E 12/18E 12/19E Div yield (%) FCF yield (%) (140.7) EV/EBITDA (x) P/E (x) Price to book (x) Credit ratios 12/16A 12/17E 12/18E 12/19E Net debt/equity (%) Interest coverage ratio (X) Dividend payout ratio (%) (1.0) (2.8) (10.0) (11.6) Source: Company data, Thomson Reuters, Credit Suisse estimates Company Background CQP through its wholly owned subsidiary, Sabine Pass LNG, L.P.owns and operates the Sabine Pass LNG terminal located in western Cameron Parish, Louisiana on the Sabine Pass Channel. Blue/Grey Sky Scenario Our Blue Sky Scenario (US$) (1) No significant value addition from 100% Cheniere Marketing (CMI) utilization implies an additional 15% utilization over our 85% base case assumption for CQP s $35 TP. (2) $3 value addition from SPL T6 includes additional SPA payments from potential customer/s. We assume LT SPAs contracted at $2.50/MMBtu as against the current $3.50/unit (on CCL) given the expected LNG oversupply by the end of the decade. Our Grey Sky Scenario (US$) $2 value dilution from 0% Cheniere Marketing (CMI) utilization as against our 85% base case assumption for CQP s $35 TP. CMI assumption across both liquefaction projects across seven trains. Does not include SPL T Share price performance A p r Ju l O c t Jan C Q P.A S& P IN D EX On 28-Feb-2017 the S&P 500 INDEX closed at Daily Mar01, Feb28, 2017, 03/01/16 = US$26.53 (LNG / CQH / CQP) 4

5 4Q16 Earnings CQP Figure 1: CQP 4Q16 vs. CS Estimates 4Q16 4Q16 CS Diff. 4Q15 Actual Estimate Diff. (%) Actual Comments Regasification revenues % 66 LNG revenues % 0 Other revenues NA 1 Total revenues % 67 Total operating cost and expense, net % 55 EBIT (Operating Income) % 12 Recurring Net Income to LP unitholders % (119) Weighted average LP units outstanding (0) 0% 57 Earnings Per LP Unit (Recurring) $0.07 $1.09 ($1.02) -94% ($1.21) Net Income % (121) Interest expense, net % 42 Depreciation expense % 18 Derivative loss (gain), net (93) 0 (93) NM (4) Includes $61mm gain on change in fair value of derivatives Others (75) (0) (75) NM 92 EBITDA (6) -3% 31 Street at $207mm (LNG / CQH / CQP) 5

6 Key Charts Figure 2: : CQP EBITDA and DCF ($mm) 3,500 3,000 2,841 2,850 CQP EBITDA and DCF ($mm) 3,121 3,130 3,139 3,149 3,159 3,168 3,177 3,187 3,197 3,206 3,215 3,225 3,014 2,936 3,500 3,000 2,500 2,000 1,765 2,556 2,498 1,790 1,673 1,920 2,007 2,137 2,241 2,378 2,417 2,434 2,450 2,460 2,469 2,478 2,488 2,498 2,507 2,516 2,526 2,500 2,000 1,500 1,500 1,000 1,056 1, (500) 69 (116) 365 (25) (500) EBITDA DCF Figure 3: CQP DCF ($Bn) and Distribution Coverage $3,000 $2,500 $2, x CQP DCF ($Bn) and Distribution Coverage 1,920 2,007 2,137 2,241 2,378 2,417 2,434 2,450 2,460 2,469 2,478 2,488 2,498 2,507 2,516 2,526 1,790 1, x 3.0x 2.5x $1,500 $1,000 $500 1, x 1.4x 1.4x 1.3x 1.2x 1.1x 1.1x 1.0x 1.0x 1.0x 1.0x 1.0x 1.0x 1.0x 1.0x 1.0x 1.0x 1.0x 2.0x 1.5x 1.0x $0 -$500 (116) (25) 0.5x 0.0x (LNG / CQH / CQP) 6

7 Figure 4: CQP Distribution Growth $4.00 $3.50 $3.00 $2.50 $2.00 $1.50 $1.00 $0.50 $0.00 $1.70 $1.70 $1.70 $3.29 $3.48 $3.59 $3.65 $3.68 $3.70 $3.72 $3.73 $3.75 $3.77 $3.78 $3.80 $ % $3.05 $2.81 $2.57 $2.16 $2.35 9% 10% 9% 9% 8% 6% CQP Distributions 3% 2% 1% 1% 0% 0% 0% 0% 0% 0% 0% 30% 25% 20% 15% 10% 5% 0% Distributions/unit Annual growth (LNG / CQH / CQP) 7

8 CQP Valuation Our $35 target price is based on an equal weighted EV/EBITDA, P/DCF and 3-stage DDM valuation. Our TP implies ~12% NTM total returns, however, we reiterate our Outperform rating on the stock due to near term catalysts. EV/EBITDA Valuation We assign a 11.5x multiple to CQP s 2020E EBITDA, which would be the first full year of operations for all five SPL trains. We derive a target price of $30 based on this method, after discounting the 2020E valuation to NTM. DDM Valuation We arrive at a $36 target price based on a 3-stage DDM (10%/~6%/0%) discounted at 9% cost of equity. We assume distributions to be maintained at $1.70/unit/yr. (zero growth) through 4Q17. We forecast distribution growth to begin in 1Q18 with a $0.10/unit increase to $0.525/unit. P/DCF Valuation We assign a 13x multiple to CQP s 2020E DCF, which would be the first full year of operations for all five SPL trains. The 13x multiple assumption is in line with the current and LT 13.4x average multiple for our coverage group. We derive a target price of $38 based on this method, after discounting the 2020E valuation to NTM Figure 5: CQP Valuation Metric 2020E Multiple EV EBITDA Low Base High Low Base High EV/EBITDA 2, x 11.5x 12.5x 29,963 32,804 35,646 Less: 2020 Net Debt 12,136 12,136 12,136 Total Equity Value 17,826 20,668 23,509 LP Take % 89% 89% 89% Units O/S Price/Unit 2020E $33 $39 $44 No. of years discount 3 Discount Factor 0.77 Price/Unit NTM $26 $30 $ E Multiple DCF/unit Low Base High Low Base High Price/DCF 2020E $ x 13.0x 14.0x $45 $49 $53 No. of years discount 3 Discount Factor 0.77 Price/DCF NTM $35 $38 $41 Discount Rate Low Base High Low Base High 3-Stage DDM 10.0% 9.0% 8.0% $32 $36 $41 Average Target Price - NTM $31 $35 $38 + Probability of Sabine Pass Liquefaction Train 6 0% $0 Final Target Price - NTM $35 Distribution/unit (12-mo out) $1.70 Yield (12-mo out) 4.9% Current Price $32.76 Total Return (NTM) 12% (LNG / CQH / CQP) 8

9 (LNG / CQH / CQP) 9 Figure 6: CQP Summary Cheniere Energy Partners, LP (AMEX - CQP) Abbreviated Financial Statements CQP Yr ending December 31 ($ millions, except per unit data) Q17E 2Q17E 3Q17E 4Q17E 2017E 2018E 2019E 2020E 2021E 2022E 2023E 2024E 2025E 2026E 2027E 2028E 2029E 2030E LNG Terminal Revenues LNG Liquefaction revenues ,077 2,948 2,934 3,320 3,329 3,415 3,493 3,599 3,608 3,617 3,626 3,635 3,644 3,653 Revenues - affiliate Total Revenues 270 1, ,327 3,183 3,170 3,558 3,567 3,653 3,731 3,838 3,847 3,856 3,866 3,876 3,885 3,894 EBITDA ,765 2,556 2,498 2,841 2,850 2,936 3,014 3,121 3,130 3,139 3,149 3,159 3,168 3,177 EPU ($0.43) $0.20 $1.63 $3.20 $0.69 $0.87 $6.40 $3.70 $2.75 $3.10 $3.05 $3.08 $3.06 $3.16 $3.13 $3.11 $3.11 $3.11 $3.11 $3.11 Average Units Outstanding Distributable Cash Flow (DCF) Adjusted EBITDA ,765 2,556 2,498 2,841 2,850 2,936 3,014 3,121 3,130 3,139 3,149 3,159 3,168 3,177 (-) Interest Expense (-) Maintenance Capex Total Distributable Cash Flow (116) (25) ,056 1,790 1,673 1,920 2,007 2,137 2,241 2,378 2,417 2,434 2,450 2,460 2,469 2,478 (-) Cash Paid to General Partner (GP) (-) GP Portion of Surplus Cash Flow / (Cash Flow Deficit)* DCF to Limited Partners (118) (27) ,049 1,755 1,605 1,803 1,782 1,797 1,786 1,832 1,818 1,809 1,808 1,808 1,809 1,811 DCF per LP unit ($2.06) ($0.47) $2.61 $4.21 $0.86 $1.06 $3.05 $3.67 $3.35 $3.77 $3.72 $3.75 $3.73 $3.83 $3.80 $3.78 $3.78 $3.78 $3.78 $3.78 Cash Distribution Declared Per Unit $1.70 $1.70 $0.43 $0.43 $0.43 $0.43 $1.70 $2.16 $2.35 $2.57 $2.81 $3.05 $3.29 $3.48 $3.59 $3.65 $3.68 $3.70 $3.72 $3.73 % yr/yr growth 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 27.1% 8.6% 9.6% 9.3% 8.5% 7.9% 5.8% 3.2% 1.5% 1.0% 0.6% 0.4% 0.4% Implied forward yield 5.2% 5.2% 6.6% 7.16% 7.8% 8.6% 9.3% 10.0% 10.6% 11.0% 11.1% 11.2% 11.3% 11.3% 11.4% Cash Distribution Coverage (Total DCF/Total Distribution Declared) -1.17x -0.25x 6.03x 9.73x 2.00x 2.47x 3.04x 1.93x 1.40x 1.42x 1.28x 1.19x 1.10x 1.07x 1.04x 1.03x 1.02x 1.01x 1.01x 1.01x % of Total Cash Distribution General Partner 2% 2% 2% 2% 1% 1% 2% 3% 6% 9% 14% 19% 22% 25% 26% 26% 27% 27% 27% 27% Limited Partners 98% 98% 98% 98% 99% 99% 98% 83% 94% 91% 86% 81% 78% 75% 74% 74% 73% 73% 73% 73% Capital Expenditures & Acquisitions Growth Capex 2,912 1, Maintenance Capex Acquisitions Total Capital Expenditures & Acquisitions 2,912 1, Financing and Credit Metrics Equity Issuances ($ Millions) Net Debt Issuances ($ Millions) - includes credit facility 2,860 2,752 (2,260) (201) (258) (155) (2,873) Total Debt ($ Millions) 11,855 14,433 14,322 14,121 13,863 13,709 13,709 13,709 13,709 13,709 12,209 11,709 11,209 10,959 10,759 10,759 10,759 10,759 10,759 10,759 Net Debt-to-TTM EBITDA 170.2x 17.9x 13.6x 8.5x 7.3x 6.7x 6.7x 5.1x 4.6x 4.3x 4.1x 3.8x 3.6x 3.5x 3.4x 3.4x 3.3x 3.3x 3.3x 3.3x Interest Expense ($ Millions) EBITDA-to-Interest Expense 0.4x 1.0x 2.2x 2.8x 3.1x 3.7x 2.9x 4.0x 3.7x 3.8x 4.2x 4.6x 5.0x 5.4x 5.7x 5.8x 5.9x 5.9x 6.0x 6.0x Maintenance Capex As % of EBITDA 0% 9% 8% 6% 5% 6% 6% 5% 6% 6% 6% 6% 6% 5% 5% 5% 5% 5% 5% 5% C 28 February 2017

10 Americas/United States Master Limited Partnerships Rating OUTPERFORM Price (28-Feb-17, US$) Target price (US$) week price range (US$) Market cap (US$ m) 11, Adjusted EV - Target price is for 12 months. Research Analysts Bhavesh Lodaya bhavesh.lodaya@credit-suisse.com John Edwards, CFA john.edwards@credit-suisse.com Dylan Nassano dylan.nassano@credit-suisse.com Cheniere Energy, Inc. (LNG) Reiterate $52 TP and Outperform Investment Thesis: LNG s cash flows are spread across (1) Corpus Christi Aggregate ~$1.4Bn/yr. of 20-yr contracted cash flows from Trains 1 & 2 (100% LNG ownership) and (2) Cheniere Marketing margins from sale of LNG through short-term contracts and spot sales. For investors with a LT bullish view on commodity fundamentals, we recommend LNG, which has exposure to most of the growth optionality, at the cost of higher volatility in its cash flows Valuation: Our $52 target price is based on an equal weighted EV/EBITDA, P/DCF and 3-stage DDM valuation. Although, our TP implies ~8% NTM total return, we are reiterating our Outperform rating on the stock due to near term catalysts and expected incremental color on outlook at the Analyst Day. Estimates: Our LT DCF estimates for LNG move ~2% lower due to change in timing of CMI cargoes to align with timing of in service of trains and higher G&A expenses relative to prior forecasts. Risks: Delays in completion of new liquefaction trains at Sabine Pass and Corpus Christi and lower LNG prices yielding lower margins. Share price performance A p r Ju l O c t Ja n LN G.A S& P IN D EX On 28-Feb-2017 the S&P 500 INDEX closed at Daily Mar01, Feb28, 2017, 03/01/16 = US$35.03 DCF/LP Unit Q1 Q2 Q3 Q4 2016A E E Financial and valuation metrics Year 12/16A 12/17E 12/18E 12/19E EBITDA (US$ m) 145 1,745 2,605 2,487 Distribution/unit- DPU (US$ m) Earnings/unit - EPU (US$) Prev. Earnings/unit - EPU (US$) (2.12) EPU - consensus (US$) Distribution coverage (x) P/DCF (x) Adj. current EV/EBITDA (x) DPU (US$) 0.00 Distribution yld (%) 0.0 Units outstanding (m) 238 GP take (%) - Net debt current (US$ m) 21,046.3 Net debt/ebitda (x) - 6-month ADV (000's) 274 Net debt/market cap. (%) - Free float (%) 92 Institutional ownership (%) - Source: Company data, Thomson Reuters, Credit Suisse estimates (LNG / CQH / CQP) 10

11 Cheniere Energy, Inc. (LNG) Price (28 Feb 2017): US$48.05; Rating: OUTPERFORM; Target Price: US$52.00; Analyst: Bhavesh Lodaya MLP Distributable Cash Flow 12/16A 12/17E 12/18E 12/19E (DCF) Adjusted EBITDA , , ,487.0 (-) Maintenance Capex (-) Cash Interest Expenses (+/-) Other Adjustments (116.8) 1, , ,258.3 Total Distributable Cash Flow (US$) (226.9) (229.4) (-) General Partner Adjustments DCF to limited partners (226.94) (229.43) DCF per LP unit (US$) (.96) (.96) Cash Distribution Declared Per Unit Distribution coverage (x) DCF/LP Unit 2016A Q Q Q Q E E Capex 12/16A 12/17E 12/18E 12/19E Expansion Capex Acquisitions Maintenance capex Cash Flow 12/16A 12/17E 12/18E 12/19E Net income (US$) (610.0) 1, , ,995.5 DD&A Change in working capital (231.2) Other cash & non-cash items (143.3) (607.5) (590.8) (583.0) Cash flow from operations (403.8) , ,449.3 Free cashflow to the firm (4,759.4) (1,988.2) Other investment/(outflows) (57.8) 2, Cash flow from investments (4,413.4) (368.3) (333.3) (453.3) Net share issue/(repurchase) Dividends paid Change in debt Other financing inflows/outflows 4,907.6 (411.8) (1,275.9) (996.0) Cashflow from financing activities 4,907.6 (411.8) (1,275.9) (996.0) Movements in cash/eq Balance Sheet (US$) 12/16A 12/17E 12/18E 12/19E Assets Cash & cash equivalents , , ,826.6 Account receivables Other current assets Total current assets 2, , , ,189.0 Total fixed assets 20, , , ,816.2 Other assets Total assets 23, , , ,834.4 Liabilities Accounts payables Short-term debt Other short term liabilities 1, , , ,028.1 Total current liabilities 1, , , ,076.7 Long-term debt 21, , , ,770.2 Other liabilities Total liabilities 22, , , ,947.0 Minority interests / other 2, , , ,326.1 Total liabilities and equity 23, , , ,834.4 Financing Metrics 12/16A 12/17E 12/18E 12/19E Equity issuance Debt issuance/(repayment) Leverage (x) Per share 12/16A 12/17E 12/18E 12/19E No. of shares (EOP) Earnings / unit EPU (US$) (2.67) DPS (US$) Book value per share (5.87) (12.17) (17.94) (22.02) Operating cash flow/share (1.70) Valuation metrics 12/16A 12/17E 12/18E 12/19E Div yield (%) FCF yield (%) (48.3) (17.4) EV/EBITDA (x) P/E (x) (18.0) Price to book (x) (8.2) (3.9) (2.7) (2.2) Credit ratios 12/16A 12/17E 12/18E 12/19E Net debt/equity (%) ( ) (2711.6) (2084.4) Interest coverage ratio (X) (0.1) Dividend payout ratio (%) Source: Company data, Thomson Reuters, Credit Suisse estimates Company Background Cheniere Energy, Inc. is a Houston-based energy company primarily engaged in LNG-related businesses. The Company operates in three segments: LNG terminal business, natural gas pipeline business, and LNG and natural gas marketing business. Blue/Grey Sky Scenario Our Blue Sky Scenario (US$) (1) $2 value addition from 100% Cheniere Marketing (CMI) utilization implies an additional 15% utilization over our 85% base case assumption for LNG s $52 TP. (2) $8 value addition from SPL T6 includes 100% GP distributions from CQP and dividends from ownership of 80.1% of CQH. (3) $9 value addition from CCL T3 includes 100% ownership of LT SPA liquefaction fees. Assumes 85% utilization for CMI volumes at CCL T3. Our Grey Sky Scenario (US$) $13 value dilution from 0% Cheniere Marketing (CMI) utilization as against our 85% base case assumption for LNG s $52 TP. CMI assumption across both liquefaction projects across seven trains. Does not include SPL T6 and CCL T Share price performance A p r Ju l O c t Jan LN G.A S& P IN D EX On 28-Feb-2017 the S&P 500 INDEX closed at Daily Mar01, Feb28, 2017, 03/01/16 = US$35.03 (LNG / CQH / CQP) 11

12 Key Charts Figure 7: LNG Consolidated DCF ($/unit) Cheniere Inc (LNG) Post-tax DCF/unit Build Up Net Distributable Cash $12.0 $10.0 SPL T5 CCL T 1 & 2 In Service $6.57 $0.76 $0.44 $6.90 $0.76 $0.44 $7.11 $0.76 $0.44 Cash Taxes 20%) G&A (CCL consol) $8.0 $6.0 SPL T 3 & 4 In Service $4.10 $0.79 $0.13 $4.45 $4.52 $4.59 Interest expenses (CCL consol) $4.0 $2.0 $0.0 ($2.0) $0.06 $0.06 $0.18 ($0.61) ($0.55) ($0.66) ($1.26) ($1.79) SPL T 1 & 2 In Service ($0.95) $0.25 $0.73 $0.43 $1.71 $1.06 $0.12 $1.14 $3.96 $1.85 $1.63 $0.14 $0.28 $0.47 ($1.39) ($1.57) ($1.63) ($0.59) ($0.57) ($0.69) ($0.96) $0.15 $2.14 ($2.16) ($0.73) $2.01 $2.09 $2.14 $2.14 $2.39 $2.53 ($1.45) ($1.45) ($1.45) ($0.64) ($0.64) ($0.64) ($1.14) ($1.20) ($1.24) CMI CCL Marketing Profits (T 1-2) CMI SPL Marketing Profits (T 1-5) Corpus Christi (T 1-2) Contracted CQH Management Fees CQH Dividends (post CQH taxes) ($4.0) mm shares o/s mm shares o/s 2017E 238 mm shares o/s 2018E 247 mm shares o/s 2019E 247 mm shares o/s 2020E 247 mm shares o/s 5-Yr 2025E 280 mm 5-Yr 2030E 280 mm 5-Yr shares o/s shares o/s 2035E 280 mm shares o/s CQP GP Distributions Figure 8: LNG Consolidated DCF ($mm) Cheniere Inc (LNG) Post-tax DCF Build Up Net Distributable Cash Flow $3,500 $3,000 $2,500 SPL T5 CCL T 1 & 2 In Service 1, , , Cash Taxes 20%) G&A (CCL consol) $2,000 $1,500 $1,000 $500 $0 ($500) ($1,000) ($1,500) 15 (137) (131) (286) (157) (406) SPL T 1 & 2 In Service (227) SPL T 3 & 4 In Service (331) (387) (403) (140) (229) (140) (170) 1,012 (534) (180) 1, ,264 1, (405) (405) (405) (180) (180) (180) (318) (336) (348) 5-Yr 5-Yr 5-Yr E 2018E 2019E 2020E 2025E 2030E 2035E Interest expenses (CCL consol) CMI CCL Marketing Profits (T 1-2) CMI SPL Marketing Profits (T 1-5) Corpus Christi (T 1-2) Contracted CQH Management Fees CQH Dividends (post CQH taxes) CQP GP Distributions (LNG / CQH / CQP) 12

13 Figure 9: LNG DCF Valuation LNG Valuation Our $52 target price is based on a discounted cash flow model that uses forecasts through 2036E. Our TP implies ~8% NTM total returns, however, we reiterate our Outperform rating on the stock due to near-term catalysts. Stage 1 Stage 2 Year Fiscal E 2018E 2019E 2020E 2021E 2022E 2023E 2024E 2025E 2026E 2027E 2028E 2029E 2030E FCF/Share (post tax) -$0.96 -$0.96 $0.15 $2.14 $4.10 $5.16 $5.86 $5.68 $6.06 $6.57 $6.68 $6.76 $6.82 $6.86 $6.90 0% 111% 199% 196% 106% 70% -18% 38% 50% 12% 8% 5% 4% 4% Discount Rate 9.5% 9.5% 9.5% 9.5% 9.5% 9.5% 9.5% 9.5% 9.5% 9.5% 9.5% 9.5% 9.5% 9.5% Discount Factor Time factor Discounted FCFF -$0.88 $0.12 $1.63 $2.85 $3.28 $3.40 $3.01 $2.93 $2.90 $2.70 $2.49 $2.29 $2.11 $1.94 FCFF PV $ Terminal Value 77.9 PV of Terminal Value $ SPL T6 $ - + CCL T3 $ - Current Price $ Target Price $ 52 Expected Return 8% (LNG / CQH / CQP) 13

14 (LNG / CQH / CQP) 14 Figure 10: LNG Consolidated DCF Summary Model Cheniere Energy Inc. (AMEX - LNG) ($ in millions except for per share data) Yr ending December Q17E 2Q17E 3Q17E 4Q17E 2017E 2018E 2019E 2020E 2021E 2022E 2023E 2024E 2025E 2026E 2027E 2028E 2029E 2030E CQP CQP GP Distributions CQP LP Distributions (beginning 2017) CQH (through 2016 only) 1 CQH Dividends (less taxes) Management Fees CCL Corpus Christi (T 1-2) , , , , , , , , , ,264.2 CMI SPL Marketing Profits (T 1-5) CCL Marketing Profits (T 1-2) Gross distributable cash flow , , , , , , , , , , , ,850.4 Interest expenses G&A Cash Taxes Tax rate 0% 0% 0% 0% 0% 0% 0% 0% 0% 0% 20% 20% 20% 20% 20% 20% 20% 20% Cash available to pay dividends (406.3) (226.9) (93.0) (95.9) (21.3) (19.2) (229.4) , , , , , , , , , , , Shares o/s LNG Cash available to pay dividends per share ($1.7913) ($0.9608) ($0.3909) ($0.4031) ($0.0895) ($0.0805) ($0.9640) $ $ $ $ $ $ $ $ $ $ $ $ $ LNG Dividend/share declared $ $ $ $ $ $ $ $ $ $ $ $ $ Sequential change Total dividends (declared basis) , , , , , , , , , , ,929.1 Distribution Coverage Ratio NA NA NA NA NA NA NA 1.00x 1.00x 1.00x 1.00x 1.00x 1.00x 1.00x 1.00x 1.00x 1.00x 1.00x 1.00x 1.00x 28 February 2017

15 Rating OUTPERFORM Price (28-Feb-17, US$) Target price (US$) week price range (US$) Market cap (US$ m) 5, Adjusted EV - Target price is for 12 months. Research Analysts Bhavesh Lodaya bhavesh.lodaya@credit-suisse.com John Edwards, CFA john.edwards@credit-suisse.com Dylan Nassano dylan.nassano@credit-suisse.com Americas/United States Master Limited Partnerships Cheniere Energy Partners, LP Holdings LLC (CQH) Reiterate $28 TP and Outperform Investment Thesis: CQH currently derives LP distributions from CQP through ownership of ~55% CQP units. We expect CQP to continue its $0.425/unit/q payout through 2017 and expect a $0.10/unit increase in quarterly dist. to $0.525/unit in 1Q18. Our distribution forecasts imply ~10% first 5-yr distribution CAGR and 6% over the following five years Valuation: Our $28 target price is based on an equal weighted EV/EBITDA, P/DCF and 3-stage DDM valuation. Although, our TP implies ~19% NTM total return, we are reiterating our Outperform rating on the stock due to near term catalysts and expected incremental color on outlook at the Analyst Day. Estimates: Our forecasts for CQH DCF are unchanged as we have not made any changes to our forecasts for CQP distribution growth. Risks: Lower distribution growth at CQP relative to forecast, driven by delays in completion of additional trains at CQP and lower margins. Share price performance A p r Ju l O c t Ja n C Q H.A S& P IN D EX On 28-Feb-2017 the S&P 500 INDEX closed at Daily Mar01, Feb28, 2017, 03/01/16 = US$17.0 DCF/LP Unit Q1 Q2 Q3 Q4 2016A E E Financial and valuation metrics Year 12/16A 12/17E 12/18E 12/19E EBITDA (US$ m) Distribution/unit- DPU (US$ m) Earnings/unit - EPU (US$) Prev. Earnings/unit - EPU (US$) EPU - consensus (US$) Distribution coverage (x) P/DCF (x) Adj. current EV/EBITDA (x) DPU (US$) 0.07 Distribution yld (%) 0.3 Units outstanding (m) 232 GP take (%) - Net debt current (US$ m).0 Net debt/ebitda (x) - 6-month ADV (000's) 17 Net debt/market cap. (%) - Free float (%) 17 Institutional ownership (%) - Source: Company data, Thomson Reuters, Credit Suisse estimates (LNG / CQH / CQP) 15

16 Cheniere Energy Partners, LP Holdings LLC (CQH) Price (28 Feb 2017): US$24.33; Rating: OUTPERFORM; Target Price: US$28.00; Analyst: Bhavesh Lodaya MLP Distributable Cash Flow 12/16A 12/17E 12/18E 12/19E (DCF) Adjusted EBITDA (-) Maintenance Capex (-) Cash Interest Expenses (+/-) Other Adjustments (.0).0.0 (.0) Total Distributable Cash Flow (US$) (-) General Partner Adjustments DCF to limited partners DCF per LP unit (US$) Cash Distribution Declared Per Unit Distribution coverage (x) DCF/LP Unit 2016A Q Q Q Q E E Capex 12/16A 12/17E 12/18E 12/19E Expansion Capex Acquisitions Maintenance capex Cash Flow 12/16A 12/17E 12/18E 12/19E Net income (US$) DD&A Change in working capital Other cash & non-cash items (17.8) (209.0) (510.2) (554.1) Cash flow from operations (.0).0.0 (.0) Free cashflow to the firm (.0).0.0 (.0) Other investment/(outflows) Cash flow from investments Net share issue/(repurchase) Dividends paid Change in debt Other financing inflows/outflows Cashflow from financing activities Movements in cash/eq. (.0).0.0 (.0) Balance Sheet (US$) 12/16A 12/17E 12/18E 12/19E Assets Cash & cash equivalents Account receivables Other current assets Total current assets Total fixed assets Other assets Total assets Liabilities Accounts payables Short-term debt Other short term liabilities Total current liabilities Long-term debt Other liabilities Total liabilities Minority interests / other Total liabilities and equity Financing Metrics 12/16A 12/17E 12/18E 12/19E Equity issuance Debt issuance/(repayment) Leverage (x) Per share 12/16A 12/17E 12/18E 12/19E No. of shares (EOP) Earnings / unit EPU (US$) DPS (US$) Book value per share Operating cash flow/share (0.00) (0.00) Valuation metrics 12/16A 12/17E 12/18E 12/19E Div yield (%) FCF yield (%) (0.0) (0.0) EV/EBITDA (x) P/E (x) Price to book (x) Credit ratios 12/16A 12/17E 12/18E 12/19E Net debt/equity (%) Interest coverage ratio (X) Dividend payout ratio (%) Source: Company data, Thomson Reuters, Credit Suisse estimates Company Background Cheniere Energy Partners LP Holdings, LLC (Cheniere Holdings) owns a 55.9% limited partner interest in Cheniere Partners, a publicly-traded limited Blue/Grey Sky Scenario Our Blue Sky Scenario (US$) (1) $1 value addition from 100% Cheniere Marketing (CMI) utilization implies an additional 15% utilization over our 85% base case assumption for CQH s $28 TP. (2) $2 value addition from SPL T6 includes additional SPA payments from potential customer/s. We assume LT SPAs contracted at $2.50/MMBtu as against the current $3.50/unit (on CCL) given the expected LNG oversupply by the end of the decade. Our Grey Sky Scenario (US$) $3 value dilution from 0% Cheniere Marketing (CMI) utilization as against our 85% base case assumption for CQH s $28 TP. CMI assumption across both liquefaction projects across seven trains. Does not include SPL T Share price performance A p r Ju l O c t Jan C Q H.A S& P IN D EX On 28-Feb-2017 the S&P 500 INDEX closed at Daily Mar01, Feb28, 2017, 03/01/16 = US$17.0 (LNG / CQH / CQP) 16

17 Figure 11: CQH DCF Valuation CQH Valuation Our $28 target price is based on a discounted cash flow model that uses forecasts through 2036E. Our TP implies ~19% NTM total returns, however, we reiterate our Outperform rating on the stock due to near-term catalysts. Stage 1 Stage 2 Year Fiscal E 2018E 2019E 2020E 2021E 2022E 2023E 2024E 2025E 2026E 2027E 2028E 2029E 2030E FCF (post tax) Growth rate % 144.1% 8.6% -12.3% 9.4% 8.6% 7.9% 5.8% 3.2% 1.5% 1.0% 0.6% 0.4% 0.4% Shares Outstanding FCF/Share $0.08 $0.90 $2.20 $2.39 $2.10 $2.29 $2.49 $2.69 $2.84 $2.93 $2.98 $3.01 $3.03 $3.04 $3.05 Discount Rate 9.0% 9.0% 9.0% 9.0% 9.0% 9.0% 9.0% 9.0% 9.0% 9.0% 9.0% 9.0% 9.0% 9.0% Discount Factor Discounted FCFF FCFF PV $ Terminal Value $ PV of Terminal Value $ 6.21 Current Price of CQH $ Target Price $ 28 Expected Return 19% (LNG / CQH / CQP) 17

18 (LNG / CQH / CQP) 18 Figure 12: CQH Summary Model Yr ending December 31 ($ millions, except per unit data) Q17E 2Q17E 3Q17E 4Q17E 2017E 2018E 2019E 2020E 2021E 2022E 2023E 2024E 2025E 2026E 2027E 2028E 2029E 2030E CQP Common Units Owned x CQP Distribution per Common Unit $1.700 $1.700 $1.700 $1.700 $0.425 $0.425 $0.425 $0.425 $1.700 $2.160 $2.345 $2.570 $2.810 $3.050 $3.290 $3.480 $3.590 $3.645 $3.680 $3.702 $3.718 $3.734 = CQP Pre-Tax Cash Flow from Common Units CQP Cash Flow from Subordinated Units Total CQP Pre-Tax Cash Flows G&A expenses G&A expenses affiliate Gross Distributable Cash Flow Assumed tax rate 20% 20% 20% 20% 20% 20% 20% 20% 20% 20% 20% - Taxes withheld = CQH Cash Available for Dividends / CQH Shares Outstanding CQH DCF available per share $0.021 $0.078 $0.078 $0.077 $0.018 $0.018 $0.433 $0.433 $0.902 $2.202 $2.392 $2.098 $2.295 $2.492 $2.689 $2.845 $2.935 $2.980 $3.009 $3.027 $3.040 $3.053 = CQH Dividend per Share $0.021 $0.074 $0.079 $0.080 $0.018 $0.018 $0.433 $0.433 $0.902 $2.202 $2.392 $2.098 $2.295 $2.492 $2.689 $2.845 $2.935 $2.980 $3.009 $3.027 $3.040 $3.053 TTM Dividends $0.074 $0.079 $0.080 $0.078 $0.077 $0.490 $0.902 $0.902 $2.202 $2.392 $2.098 $2.295 $2.492 $2.689 $2.845 $2.935 $2.980 $3.009 $3.027 $3.040 $3.053 Distribution Coverage Ratio 1.00x 1.06x 0.99x 0.96x 1.00x 1.00x 1.00x 1.00x 1.00x 1.00x 1.00x 1.00x 1.00x 1.00x 1.00x 1.00x 1.00x 1.00x 1.00x 1.00x 1.00x 1.00x CQH Units Beginning Common Units outstanding Ending Common Units outstanding Average Common Units outstanding CQH Ownership 19.9% Public % ownership 19.9% 19.9% 19.9% 19.3% 17.4% 17.4% 17.4% 17.4% 17.4% 17.4% 17.4% 17.4% 17.4% 17.4% 17.4% 17.4% 17.4% 17.4% 17.4% 17.4% 17.4% 17.4% LNG % ownership 80.1% 80.1% 80.1% 80.7% 82.6% 82.6% 82.6% 82.6% 82.6% 82.6% 82.6% 82.6% 82.6% 82.6% 82.6% 82.6% 82.6% 82.6% 82.6% 82.6% 82.6% 82.6% Dividends Public LNG Total CQH taxes not attributed to LNG interest CQP Units Owned by CQH Common units Subordinated units Class B units Total % increase each quarter (at CQP) 3.5% 3.5% 28 February 2017

19 Companies Mentioned (Price as of 28-Feb-2017) Cheniere Energy Partners, LP (CQP.A, $32.76, OUTPERFORM, TP $35.0) Cheniere Energy Partners, LP Holdings LLC (CQH.A, $24.33, OUTPERFORM, TP $28.0) Cheniere Energy, Inc. (LNG.A, $48.05, OUTPERFORM, TP $52.0) Disclosure Appendix Analyst Certification Bhavesh Lodaya and John Edwards, CFA, each certify, with respect to the companies or securities that the individual analyzes, that (1) the views expressed in this report accurately reflect his or her personal views about all of the subject companies and securities and (2) no part of his or her compensation was, is or will be directly or indirectly related to the specific recommendations or views expressed in this report. 3-Year Price and Rating History for Cheniere Energy Partners, LP (CQP.A) CQP.A Closing Price Target Price Date (US$) (US$) Rating 02-Apr O 02-Jun Dec Aug * 12-Oct * Asterisk signifies initiation or assumption of coverage Target Price Closing Price CQP.A Jan Jan Jan O U T PERFO RM 3-Year Price and Rating History for Cheniere Energy Partners, LP Holdings LLC (CQH.A) CQH.A Closing Price Target Price Date (US$) (US$) Rating 02-Apr O 14-Aug R 15-Dec O 08-Apr Aug * 12-Oct N 12-Dec O * Asterisk signifies initiation or assumption of coverage Target Price Closing Price CQH.A 01- Jan Jan Jan O U T PERFO RM REST RIC T ED N EU T RA L 3-Year Price and Rating History for Cheniere Energy, Inc. (LNG.A) LNG.A Closing Price Target Price Date (US$) (US$) Rating 02-Apr N 02-Jun Oct R 15-Dec O 08-Apr Aug * 12-Oct Nov Dec * Asterisk signifies initiation or assumption of coverage N EU T RA L REST RIC T ED O U T PERFO RM Target Price Closing Price LNG.A 01- Jan Jan Jan (LNG / CQH / CQP) 19

20 The analyst(s) responsible for preparing this research report received Compensation that is based upon various factors including Credit Suisse's total revenues, a portion of which are generated by Credit Suisse's investment banking activities As of December 10, 2012 Analysts stock rating are defined as follows: Outperform (O) : The stock s total return is expected to outperform the relevant benchmark* over the next 12 months. Neutral (N) : The stock s total return is expected to be in line with the relevant benchmark* over the next 12 months. 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Credit Suisse's policy is only to publish investment research that is impartial, independent, clear, fair and not misleading. For more detail please refer to Credit Suisse's Policies for Managing Conflicts of Interest in connection with Investment Research: Credit Suisse does not provide any tax advice. Any statement herein regarding any US federal tax is not intended or written to be used, and cannot be used, by any taxpayer for the purposes of avoiding any penalties. Target Price and Rating Valuation Methodology and Risks: (12 months) for Cheniere Energy Partners, LP (CQP.A) Method: Our $35 target price is based on an equal weighted EV/EBITDA, P/DCF and 3-stage DDM valuation. Our TP implies ~12% NTM total returns. We are reiterating our Outperform rating on the stock given the near term catalysts. (LNG / CQH / CQP) 20