Cheniere Corpus Christi 10-Q 2021 Q3 Quarterly report

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 September 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 333-215435

Cheniere Corpus Christi Holdings, LLC 

(Exact name of registrant as specified in its charter)

Delaware	47-1929160
(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
None	None	None

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 ☒

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

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit 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 ☒

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

	Definitions	1
Part I. Financial Information
Item 1.	Consolidated Financial Statements	3
	Consolidated Statements of Operations	3
	Consolidated Balance Sheets	4
	Consolidated Statements of Member’s 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—Restricted Cash	7
	Note 3—Accounts and Other Receivables, Net of Current Expected Credit Losses	8
	Note 4—Inventory	8
	Note 5—Property, Plant and Equipment, Net of Accumulated Depreciation	8
	Note 6—Derivative Instruments	9
	Note 7—Accrued Liabilities	13
	Note 8—Debt	13
	Note 9—Revenues from Contracts with Customers	15
	Note 10—Related Party Transactions	17
	Note 11—Customer Concentration	21
	Note 12—Supplemental Cash Flow Information	21
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	22
Item 3.	Quantitative and Qualitative Disclosures about Market Risk	32
Item 4.	Controls and Procedures	33
Part II. Other Information
Item 1.	Legal Proceedings	34
Item 1A.	Risk Factors	34
Item 6.	Exhibits	34
	Signatures	35

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
IPM	integrated production marketing
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

1

Abbreviated Legal Entity Structure

The following diagram depicts our abbreviated legal entity structure as of September 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 “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 STATEMENTS OF OPERATIONS

(in millions)

(unaudited)

	Three Months Ended September 30,				Nine Months Ended September 30,
	2021		2020		2021		2020
Revenues
LNG revenues	$	1,029	$	337	$	2,470	$	1,290
LNG revenues—affiliate	509		106		1,108		340
Total revenues	1,538		443		3,578		1,630
Operating costs and expenses
Cost of sales (excluding items shown separately below)	1,608		180		2,593		369
Cost of sales—affiliate	12		16		49		24
Cost of sales—related party	53		29		124		77
Operating and maintenance expense	112		91		315		275
Operating and maintenance expense—affiliate	25		23		77		68
Operating and maintenance expense—related party	2		2		7		4
General and administrative expense	2		1		5		5
General and administrative expense—affiliate	8		5		20		15
Depreciation and amortization expense	110		86		309		256
Impairment expense and loss on disposal of assets	1		1		2		1
Total operating costs and expenses	1,933		434		3,501		1,094
Income (loss) from operations	(395)		9		77		536
Other income (expense)
Interest expense, net of capitalized interest	(117)		(89)		(328)		(278)
Loss on modification or extinguishment of debt	(9)		(9)		(9)		(9)
Interest rate derivative loss, net	(2)		—		(3)		(233)
Other income, net	—		1		—		1
Total other expense	(128)		(97)		(340)		(519)
Net income (loss)	$	(523)	$	(88)	$	(263)	$	17

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

3

CHENIERE CORPUS CHRISTI HOLDINGS, LLC AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

(in millions)

	September 30,		December 31,
	2021		2020
ASSETS	(unaudited)
Current assets
Restricted cash	$	59	$	70
Accounts and other receivables, net of current expected credit losses	268		198
Accounts receivable—affiliate	137		42
Advances to affiliate	102		144
Inventory	126		89
Current derivative assets	37		10
Current derivative assets—related party	7		3
Other current assets	41		17
Other current assets—affiliate	—		1
Total current assets	777		574
Property, plant and equipment, net of accumulated depreciation	12,691		12,853
Debt issuance and deferred financing costs, net of accumulated amortization	8		11
Derivative assets	36		114
Derivative assets—related party	10		1
Other non-current assets, net	124		87
Total assets	$	13,646	$	13,640
LIABILITIES AND MEMBER’S EQUITY
Current liabilities
Accounts payable	$	51	$	19
Accrued liabilities	541		318
Accrued liabilities—related party	20		16
Current debt, net of discount and debt issuance costs	103		269
Due to affiliates	26		32
Current derivative liabilities	673		143
Other current liabilities	1		—
Total current liabilities	1,415		797
Long-term debt, net of discount and debt issuance costs	10,027		10,101
Derivative liabilities	451		114
Other non-current liabilities	10		4
Member’s equity	1,743		2,624
Total liabilities and member’s equity	$	13,646	$	13,640

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

4

CHENIERE CORPUS CHRISTI HOLDINGS, LLC AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF MEMBER’S EQUITY

(in millions)

(unaudited)

Three and Nine Months Ended September 30, 2021
	Cheniere CCH HoldCo I, LLC		Total Member’s Equity
Balance at December 31, 2020	$	2,624	$	2,624
Net income	331		331
Balance at March 31, 2021	2,955		2,955
Capital distributions	(337)		(337)
Net loss	(71)		(71)
Balance at June 30, 2021	2,547		2,547
Capital distributions	(281)		(281)
Net loss	(523)		(523)
Balance at September 30, 2021	$	1,743	$	1,743

Three and Nine Months Ended September 30, 2020
	Cheniere CCH HoldCo I, LLC		Total Member’s Equity
Balance at December 31, 2019	$	2,418	$	2,418
Net loss	(51)		(51)
Balance at March 31, 2020	2,367		2,367
Capital contributions	145		145
Net income	156		156
Balance at June 30, 2020	2,668		2,668
Distributions	(2)		(2)
Net loss	(88)		(88)
Balance at September 30, 2020	$	2,578	$	2,578

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 millions)

(unaudited)

	Nine Months Ended September 30,
	2021		2020
Cash flows from operating activities
Net income	$	(263)	$	17
Adjustments to reconcile net income to net cash used in operating activities:
Depreciation and amortization expense	309		256
Amortization of discount and debt issuance costs	18		16
Loss on modification or extinguishment of debt	9		9
Total losses on derivatives, net	987		93
Total losses (gains) on derivatives, net—related party	(13)		3
Net cash used for settlement of derivative instruments	(69)		(146)
Impairment expense and loss on disposal of assets	2		1
Other	1		(1)
Changes in operating assets and liabilities:
Accounts receivable	(72)		(59)
Accounts receivable—affiliate	(96)		21
Advances to affiliate	43		16
Inventory	(32)		(13)
Accounts payable and accrued liabilities	316		78
Accrued liabilities—related party	8		11
Due to affiliates	—		7
Other, net	(54)		(47)
Other, net—affiliate	—		(1)
Net cash provided by operating activities	1,094		261
Cash flows from investing activities
Property, plant and equipment	(221)		(583)
Other	(2)		(4)
Net cash used in investing activities	(223)		(587)
Cash flows from financing activities
Proceeds from issuances of debt	750		910
Repayments of debt	(1,006)		(656)
Debt issuance and deferred financing costs	(3)		(8)
Debt extinguishment cost	(5)		—
Capital contributions	—		145
Distributions	(618)		—
Net cash provided by (used in) financing activities	(882)		391
Net increase (decrease) in restricted cash	(11)		65
Restricted cash—beginning of period	70		80
Restricted cash—end of period	$	59	$	145

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 operate a natural gas liquefaction and export facility (the “Liquefaction Facilities”) and operate a 23-mile natural gas supply pipeline that interconnects the Corpus Christi LNG terminal with several interstate and intrastate natural gas pipelines (the “Corpus Christi Pipeline” and together with the Liquefaction Facilities, the “Liquefaction Project”) near Corpus Christi, Texas, through our subsidiaries CCL and CCP, respectively. We operate 3 Trains for a total production capacity of approximately 15 mtpa of LNG. The Liquefaction Project also contains 3 LNG storage tanks and 2 marine berths.

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 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 nine months ended September 30, 2021 are not necessarily indicative of the results of operations that will be realized for the year ending December 31, 2021.

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. 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 contracts expected to arise from the market transition from LIBOR to alternative reference rates. We have credit facilities and interest rate swaps indexed to LIBOR, as further described in Note 6—Derivative Instruments and Note 8—Debt. 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—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 September 30, 2021 and December 31, 2020, we had $59 million and $70 million of restricted cash, respectively.

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

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

	September 30,		December 31,
	2021		2020
Trade receivable	$	246	$	182
Other accounts receivable	22		16
Total accounts and other receivables, net of current expected credit losses	$	268	$	198

NOTE 4—INVENTORY

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

	September 30,		December 31,
	2021		2020
Materials	$	85	$	69
LNG	25		11
Natural gas	15		9
Other	1		—
Total inventory	$	126	$	89

NOTE 5—PROPERTY, PLANT AND EQUIPMENT, NET OF ACCUMULATED DEPRECIATION

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

	September 30,		December 31,
	2021		2020
LNG terminal
LNG terminal and interconnecting pipeline facilities	$	13,207	$	10,176
LNG site and related costs	294		276
LNG terminal construction-in-process	55		2,960
Accumulated depreciation	(872)		(568)
Total LNG terminal, net of accumulated depreciation	12,684		12,844
Fixed assets
Fixed assets	23		22
Accumulated depreciation	(16)		(13)
Total fixed assets, net of accumulated depreciation	7		9
Property, plant and equipment, net of accumulated depreciation	$	12,691	$	12,853

The following table shows depreciation expense and offsets to LNG terminal costs during the three and nine months ended September 30, 2021 and 2020 (in millions):

	Three Months Ended September 30,				Nine Months Ended September 30,
	2021		2020		2021		2020
Depreciation expense	$	111	$	85	$	309	$	255
Offsets to LNG terminal costs (1)	—		—		143		—

(1)We recognize offsets to LNG terminal costs related to the sale of commissioning cargoes because these amounts were earned or loaded prior to the start of commercial operations of the Liquefaction Project during the testing phase for its construction.

8

CHENIERE CORPUS CHRISTI HOLDINGS, LLC AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—CONTINUED

(unaudited)

NOTE 6—DERIVATIVE INSTRUMENTS

We have entered into the following derivative instruments that are reported at fair value:

•interest rate swaps (“CCH Interest Rate Derivatives”) to hedge the exposure to volatility in a portion of the floating-rate interest payments on our amended and restated term loan credit facility (the “CCH Credit Facility”) and to hedge against changes in interest rates that could impact anticipated future issuance of debt (“CCH Interest Rate Forward Start Derivatives” and, collectively with the CCH Interest Rate Derivatives, the “Interest Rate Derivatives”) and

•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 Operations 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 September 30, 2021 and December 31, 2020 (in millions):

	Fair Value Measurements as of
	September 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
CCH Interest Rate Derivatives liability	$	—	$	(67)	$	—	$	(67)	$	—	$	(140)	$	—	$	(140)
Liquefaction Supply Derivatives asset (liability)	(3)		11		(975)		(967)		4		(5)		12		11

We value our Interest Rate Derivatives using an income-based approach utilizing observable inputs to the valuation model including interest rate curves, risk adjusted discount rates, credit spreads and other relevant data. 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 September 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 CORPUS CHRISTI HOLDINGS, LLC 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 and international LNG prices. The following table includes quantitative information for the unobservable inputs for our Level 3 Physical Liquefaction Supply Derivatives as of September 30, 2021:

	Net Fair Value Liability (in millions)	Valuation Approach	Significant Unobservable Input	Range of Significant Unobservable Inputs / Weighted Average (1)
Physical Liquefaction Supply Derivatives	$(975)	Market approach incorporating present value techniques	Henry Hub basis spread	$(0.439) - $0.895 / $(0.012)
		Option pricing model	International LNG pricing spread, relative to Henry Hub (2)	162% - 516% / 257%

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

(2)Spread contemplates U.S. dollar-denominated pricing.    

Increases or decreases in basis or pricing spreads, 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, including those with related parties, during the three and nine months ended September 30, 2021 and 2020 (in millions):

	Three Months Ended September 30,				Nine Months Ended September 30,
	2021		2020		2021		2020
Balance, beginning of period	$	(260)	$	173	$	12	$	35
Realized and mark-to-market gains (losses):
Included in cost of sales	(766)		28		(1,032)		196
Purchases and settlements:
Purchases	(1)		(4)		17		(2)
Settlements	52		(23)		28		(55)
Balance, end of period	$	(975)	$	174	$	(975)	$	174
Change in unrealized gains (losses) relating to instruments still held at end of period	$	(766)	$	28	$	(1,032)	$	196

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.

Interest Rate Derivatives

We have entered into interest rate swaps to protect against volatility of future cash flows and hedge a portion of the variable interest payments on the CCH Credit Facility. We previously also had interest rate swaps to hedge against changes in interest rates that could impact the anticipated future issuance of debt. In August 2020, we settled the outstanding CCH Interest Rate Forward Start Derivatives.

10

CHENIERE CORPUS CHRISTI HOLDINGS, LLC AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—CONTINUED

(unaudited)

As of September 30, 2021, we had the following Interest Rate Derivatives outstanding:

	Notional Amounts
	September 30, 2021	December 31, 2020	Latest Maturity Date	Weighted Average Fixed Interest Rate Paid	Variable Interest Rate Received
CCH Interest Rate Derivatives	$4.5 billion	$4.6 billion	May 31, 2022	2.30%	One-month LIBOR

The following table shows the effect and location of our Interest Rate Derivatives on our Consolidated Statements of Operations during the three and nine months ended September 30, 2021 and 2020 (in millions):

		Gain ( Loss) Recognized in Consolidated Statements of Operations
	Consolidated Statements of Operations Location	Three Months Ended September 30,				Nine Months Ended September 30,
		2021		2020		2021		2020
CCH Interest Rate Derivatives	Interest rate derivative loss, net	$	(2)	$	—	$	(3)	$	(138)
CCH Interest Rate Forward Start Derivatives	Interest rate derivative loss, net	—		—		—		(95)

Liquefaction Supply Derivatives

CCL has entered into primarily index-based physical natural gas supply contracts and associated economic hedges, including those associated with our IPM transactions, 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 conditions precedent. The terms of the Financial Liquefaction Supply Derivatives range up to approximately three years.

The forward notional amount for our Liquefaction Supply Derivatives was approximately 3,028 TBtu and 3,152 TBtu as of September 30, 2021 and December 31, 2020, respectively, of which 119 TBtu and 60 TBtu, respectively, were for a natural gas supply contract CCL has with a related party.

The following table shows the effect and location of our Liquefaction Supply Derivatives recorded on our Consolidated Statements of Operations during the three and nine months ended September 30, 2021 and 2020 (in millions):

	Gain (Loss) Recognized in Consolidated Statements of Operations
Consolidated Statements of Operations Location (1)	Three Months Ended September 30,				Nine Months Ended September 30,
	2021		2020		2021		2020
LNG revenues	$	(3)	$	14	$	(3)	$	4
Cost of sales	(733)		(17)		(981)		136
Cost of sales—related party	6		(5)		13		(3)

(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 CORPUS CHRISTI HOLDINGS, LLC 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 derivative instruments on our Consolidated Balance Sheets (in millions):

	September 30, 2021
	CCH Interest Rate Derivatives		Liquefaction Supply Derivatives (1)		Total
Consolidated Balance Sheets Location
Current derivative assets	$	—	$	37	$	37
Current derivative assets—related party	—		7		7
Derivative assets	—		36		36
Non-current derivative assets—related party	—		10		10
Total derivative assets	—		90		90
Current derivative liabilities	(67)		(606)		(673)
Derivative liabilities	—		(451)		(451)
Total derivative liabilities	(67)		(1,057)		(1,124)
Derivative liability, net	$	(67)	$	(967)	$	(1,034)
	December 31, 2020
	CCH Interest Rate Derivatives		Liquefaction Supply Derivatives (1)		Total
Consolidated Balance Sheets Location
Current derivative assets	$	—	$	10	$	10
Current derivative assets—related party	—		3		3
Derivative assets	—		114		114
Derivative assets—related party	—		1		1
Total derivative assets	—		128		128
Current derivative liabilities	(100)		(43)		(143)
Derivative liabilities	(40)		(74)		(114)
Total derivative liabilities	(140)		(117)		(257)
Derivative asset (liability), net	$	(140)	$	11	$	(129)

(1)Does not include collateral posted with counterparties by us of $18 million and $5 million, which are included in other current assets in our Consolidated Balance Sheets as of September 30, 2021 and December 31, 2020, respectively.

12

CHENIERE CORPUS CHRISTI HOLDINGS, LLC 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):

	CCH Interest Rate Derivatives		Liquefaction Supply Derivatives
As of September 30, 2021
Gross assets	$	—	$	103
Offsetting amounts	—		(13)
Net assets	$	—	$	90
Gross liabilities	$	(67)	$	(1,075)
Offsetting amounts	—		18
Net liabilities	$	(67)	$	(1,057)
As of December 31, 2020
Gross assets	$	—	$	132
Offsetting amounts	—		(4)
Net assets	$	—	$	128
Gross liabilities	$	(140)	$	(136)
Offsetting amounts	—		19
Net liabilities	$	(140)	$	(117)

NOTE 7—ACCRUED LIABILITIES

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

	September 30,		December 31,
	2021		2020
Interest costs and related debt fees	$	107	$	7
Accrued natural gas purchases	352		186
Liquefaction Project costs	40		76
Other	42		49
Total accrued liabilities	$	541	$	318

NOTE 8—DEBT

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

	September 30,		December 31,
	2021		2020
Long-term debt:
2.742% to 7.000% senior secured notes due between June 2024 and December 2039 and CCH Credit Facility	$	10,128	$	10,217
Unamortized discount and debt issuance costs, net of accumulated amortization	(101)		(116)
Total long-term debt, net of discount and debt issuance costs	10,027		10,101
Current debt:
$1.2 billion CCH working capital facility (“CCH Working Capital Facility”) and current portion of CCH Credit Facility	104		271
Unamortized discount and debt issuance costs, net of accumulated amortization	(1)		(2)
Total current debt, net of discount and debt issuance costs	103		269
Total debt, net of discount and debt issuance costs	$	10,130	$	10,370

13

CHENIERE CORPUS CHRISTI HOLDINGS, LLC AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—CONTINUED

(unaudited)

Issuances and Repayments

The following table shows the issuances and repayments of long-term debt during the nine months ended September 30, 2021, excluding intra-quarter borrowings and repayments (in millions):

Issuances	Principal Amount Issued
2.742% Senior Notes due 2039 (the “2.742% CCH Senior Secured Notes”) (1)	750
Repayments	Principal Amount Repaid
CCH Credit Facility (1)	866

(1)Net proceeds of the 2.742% CCH Senior Secured Notes, together with cash on hand, were used to prepay a portion of the principal amount outstanding under the CCH Credit Facility, resulting in $9 million of loss on extinguishment of debt relating to the payment of early redemption fees and write off of unamortized issuance costs.

Credit Facilities

Below is a summary of our credit facilities outstanding as of September 30, 2021 (in millions):

	CCH Credit Facility		CCH Working Capital Facility
Original facility size	$	8,404	$	350
Incremental commitments	1,566		850
Less:
Outstanding balance	1,761		—
Commitments prepaid or terminated	8,209		—
Letters of credit issued	—		360
Available commitment	$	—	$	840
Priority ranking	Senior secured		Senior secured
Interest rate on available balance	LIBOR plus 1.75% or base rate plus 0.75%		LIBOR plus 1.25% - 1.75% or base rate plus 0.25% - 0.75%
Weighted average interest rate of outstanding balance	1.83%		n/a
Maturity date	June 30, 2024		June 29, 2023

Restrictive Debt Covenants

The indentures governing our senior notes and other agreements underlying our debt contain customary terms and events of default and certain covenants that, among other things, may limit us and our restricted subsidiaries’ ability to make certain investments or pay dividends or distributions.

As of September 30, 2021, we were in compliance with all covenants related to our debt agreements.

Interest Expense

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

	Three Months Ended September 30,				Nine Months Ended September 30,
	2021		2020		2021		2020
Total interest cost	$	118	$	117	$	355	$	365
Capitalized interest, including amounts capitalized as an Allowance for Funds Used During Construction	(1)		(28)		(27)		(87)
Total interest expense, net of capitalized interest	$	117	$	89	$	328	$	278

14

CHENIERE CORPUS CHRISTI HOLDINGS, LLC AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—CONTINUED

(unaudited)

Fair Value Disclosures

The following table shows the carrying amount and estimated fair value of our debt (in millions):

	September 30, 2021				December 31, 2020
	Carrying Amount		Estimated Fair Value		Carrying Amount		Estimated Fair Value
Senior notes — Level 2 (1)	$	6,500	$	7,225	$	5,750	$	6,669
Senior notes — Level 3 (2)	1,971		2,320		1,971		2,387
Credit facilities — Level 3 (3)	1,761		1,761		2,767		2,767

(1)The Level 2 estimated fair value was based on quotes obtained from broker-dealers or market makers of these senior notes and other similar instruments.

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

(3)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 9—REVENUES FROM CONTRACTS WITH CUSTOMERS

The following table represents a disaggregation of revenue earned from contracts with customers during the three and nine months ended September 30, 2021 and 2020 (in millions):

	Three Months Ended September 30,				Nine Months Ended September 30,
	2021		2020		2021		2020
LNG revenues (1)	$	1,032	$	323	$	2,473	$	1,286
LNG revenues—affiliate	509		106		1,108		340
Total revenues from customers	1,541		429		3,581		1,626
Net derivative gain (loss) (2)	(3)		14		(3)		4
Total revenues	$	1,538	$	443	$	3,578	$	1,630

(1)LNG revenues include revenues for LNG cargoes in which our customers exercised their contractual right to not take delivery but remained obligated to pay fixed fees irrespective of such election. During the three and nine months ended September 30, 2020, we recognized $62 million and $398 million, respectively, in LNG revenues associated with LNG cargoes for which customers notified us that they would not take delivery, of which $26 million would have been recognized subsequent to September 30, 2020 had the cargoes been lifted pursuant to the delivery schedules with the customers. LNG revenues during the three months ended September 30, 2021 and 2020 excluded zero and $200 million, respectively, and LNG revenues during the nine months ended September 30, 2021 and 2020 excluded $38 million and zero, respectively, that would have otherwise been recognized during the period if the cargoes were lifted pursuant to the delivery schedules with the customers. We did not have revenues associated with LNG cargoes for which customers notified us that they would not take delivery during the three and nine months ended September 30, 2021. Revenue is generally recognized upon receipt of irrevocable notice that a customer will not take delivery because our customers have no contractual right to take delivery of such LNG cargo in future periods and our performance obligations with respect to such LNG cargo have been satisfied.

(2)See Note 6—Derivative Instruments for additional information about our derivatives.

Contract Assets

The following table shows our contract assets, net of current expected credit losses, which are classified as other current assets and other non-current assets, net on our Consolidated Balance Sheets (in millions):

	September 30,		December 31,
	2021		2020
Contract assets, net of current expected credit losses	$	87	$	48

15

CHENIERE CORPUS CHRISTI HOLDINGS, LLC AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—CONTINUED

(unaudited)

Contract assets represent our right to consideration for transferring goods or services to the customer under the terms of a sales contract when the associated consideration is not yet due. Changes in contract assets during the nine months ended September 30, 2021 were primarily attributable to revenue recognized due to the delivery of LNG under certain SPAs for which the associated consideration was not yet due.

Transaction Price Allocated to Future Performance Obligations

Because many of our sales contracts have long-term durations, we are contractually entitled to significant future consideration which we have not yet recognized as revenue. The following table discloses the aggregate amount of the transaction price that is allocated to performance obligations that have not yet been satisfied as of September 30, 2021 and December 31, 2020:

	September 30, 2021			December 31, 2020
	Unsatisfied Transaction Price (in billions)		Weighted Average Recognition Timing (years) (1)	Unsatisfied Transaction Price (in billions)		Weighted Average Recognition Timing (years) (1)
LNG revenues	$	32.2	10	$	32.3	10
LNG revenues—affiliate	1.0		11	1.0		12
Total revenues	$	33.2		$	33.3

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

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

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

(2)The table above excludes substantially all variable consideration under our SPAs. We omit from the table above all variable consideration that is allocated entirely to a wholly unsatisfied performance obligation or to a wholly unsatisfied promise to transfer a distinct good or service that forms part of a single performance obligation when that performance obligation qualifies as a series. The amount of revenue from variable fees that is not included in the transaction price will vary based on the future prices of Henry Hub throughout the contract terms, to the extent customers elect to take delivery of their LNG, and adjustments to the consumer price index. Certain of our contracts contain additional variable consideration based on the outcome of contingent events and the movement of various indexes. We have not included such variable consideration in the transaction price to the extent the consideration is considered constrained due to the uncertainty of ultimate pricing and receipt. Approximately 59% and 31% of our LNG revenues from contracts included in the table above during the three months ended September 30, 2021 and 2020, respectively, and approximately 53% and 26% of our LNG revenues from contracts included in the table above during the nine months ended September 30, 2021 and 2020, respectively, were related to variable consideration received from customers. None of our LNG revenues—affiliates from the contract included in the table above were related to variable consideration received from customers during the three and nine months ended September 30, 2021 and 2020.

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

16

CHENIERE CORPUS CHRISTI HOLDINGS, LLC AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—CONTINUED

(unaudited)

NOTE 10—RELATED PARTY TRANSACTIONS

Below is a summary of our related party transactions as reported on our Consolidated Statements of Operations during the three and nine months ended September 30, 2021 and 2020 (in millions):

	Three Months Ended September 30,				Nine Months Ended September 30,
	2021		2020		2021		2020
LNG revenues—affiliate
Cheniere Marketing Agreements	$	500	$	106	$	1,079	$	334
Contracts for Sale and Purchase of Natural Gas and LNG	9		—		29		6
Total LNG revenues—affiliate	509		106		1,108		340
Cost of sales—affiliate
Contracts for Sale and Purchase of Natural Gas and LNG	12		16		18		24
Cheniere Marketing Agreements	—		—		31		—
Total cost of sales—affiliate	12		16		49		24
Cost of sales—related party
Natural Gas Supply Agreement	53		29		124		77
Operating and maintenance expense—affiliate
Services Agreements	24		23		76		68
Land Agreements	1		—		1		—
Total operating and maintenance expense—affiliate	25		23		77		68
Operating and maintenance expense—related party
Natural Gas Transportation Agreements	2		2		7		4
General and administrative expense—affiliate
Services Agreements	8		5		20		15

We had $26 million and $32 million due to affiliates as of September 30, 2021 and December 31, 2020, respectively, under agreements with affiliates, as described below.

Cheniere Marketing Agreements

Cheniere Marketing SPA

CCL has a fixed price SPA with Cheniere Marketing (the “Cheniere Marketing Base SPA”) with a term of 20 years which allows Cheniere Marketing 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 and (2) any excess LNG produced by the Liquefaction Facilities that is not committed to customers under third-party SPAs. Under the Cheniere Marketing Base SPA, Cheniere Marketing 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. Additionally, CCL has: (1) a fixed price SPA with a term through 2043 with Cheniere Marketing which allows them to purchase volumes of approximately 15 TBtu per annum of LNG and (2) an SPA with Cheniere Marketing for approximately 44 TBtu of LNG with a maximum term up to 2026 associated with the integrated production marketing gas supply agreement between CCL and EOG Resources, Inc. As of September 30, 2021 and December 31, 2020, CCL had $136 million and $39 million of accounts receivable—affiliate, respectively, under these agreements with Cheniere Marketing.

Train 3 Commissioning Letter Agreement

Under the Cheniere Marketing Base SPA, CCL entered into a letter agreement with Cheniere Marketing for the sale of commissioning cargoes from Train 3 of the Liquefaction Project. Under the agreement, CCL paid a one-time shipping fee to Cheniere Marketing of $1 million after the commencement of the commissioning of Train 3 in December 2020.

17

CHENIERE CORPUS CHRISTI HOLDINGS, LLC AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—CONTINUED

(unaudited)

Facility Swap Agreement

We have entered into an arrangement with subsidiaries of Cheniere to provide the ability, in limited circumstances, to potentially fulfill commitments to LNG buyers in the event operational conditions impact operations at either the Sabine Pass or Corpus Christi liquefaction facilities. The purchase price for such cargoes would be (i) 115% of the applicable natural gas feedstock purchase price or (ii) a free-on-board U.S. Gulf Coast LNG market price, whichever is greater.

Services Agreements

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

CCL has a G&P 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 Facilities, no monthly fee payment is required except for reimbursement of operating expenses. After substantial completion of each Train of the Liquefaction Facilities, for services performed while the Liquefaction Facilities 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 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 Facilities. 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, information technology services and other services required to operate and maintain the Liquefaction Facilities. Prior to the substantial completion of each Train of the Liquefaction Facilities, no monthly fee payment is required except for reimbursement of operating expenses. After substantial completion of each Train of the Liquefaction Facilities, for services performed while the Liquefaction Facilities 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 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, information technology services 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 a MSA with Shared Services pursuant to which Shared Services manages the construction and operation of the Liquefaction Facilities, 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 Facilities and obtaining insurance. Prior to the substantial completion of each Train of the Liquefaction Facilities, no monthly fee payment is required except for reimbursement of 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 a 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.

18

CHENIERE CORPUS CHRISTI HOLDINGS, LLC AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—CONTINUED

(unaudited)

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.

Natural Gas Supply Agreement

CCL is party to a natural gas supply agreement with a related party in the ordinary course of business, to obtain a fixed minimum daily volume of feed gas for the operation of the Liquefaction Project through March 2022. This related party is partially owned by the investment management company that also partially owns our affiliated entity. In addition to the amounts recorded on our Consolidated Statements of Operations in the table above, CCL recorded accrued liabilities—related party of $19 million and $13 million, current derivative assets—related party of $7 million and $3 million and derivative assets—related party of $10 million and $1 million as of September 30, 2021 and December 31, 2020, respectively, related to this agreement.

Natural Gas Transportation Agreements

Agreements with Related Party

CCL is party to natural gas transportation agreements with a related party in the ordinary course of business for the operation of the Liquefaction Project, for a period of 10 years which began in May 2020. Cheniere accounts for its investment in this related party as an equity method investment. In addition to the amounts recorded on our Consolidated Statements of Operations in the table above, CCL recorded accrued liabilities—related party of $1 million as of both September 30, 2021 and December 31, 2020 related to this agreement.

Agreements with Cheniere Corpus Christi Liquefaction Stage III, LLC

Cheniere Corpus Christi Liquefaction Stage III, LLC, a wholly owned subsidiary of Cheniere, has a transportation precedent agreement with CCP to secure firm pipeline transportation capacity for the transportation of natural gas feedstock to the expansion of the Corpus Christi LNG terminal it is constructing adjacent to the Liquefaction Project. The agreement will have a primary term of 20 years from the service commencement date with right to extend the term for 2 successive five-year terms.

Contracts for Sale and Purchase of Natural Gas and LNG

CCL has an agreement with Sabine Pass Liquefaction, LLC that allows them to sell and purchase natural gas with each other. Natural gas purchased under this agreement is initially recorded as inventory and then to cost of sales—affiliate upon its sale, except for purchases related to commissioning activities which are capitalized as LNG terminal construction-in-process. Natural gas sold under this agreement is recorded as LNG revenues—affiliate.

CCL also has an agreement with Midship Pipeline Company, LLC that allows them to sell and purchase natural gas with each other.

Land Agreements

Lease Agreements

CCL has agreements with Cheniere Land Holdings, LLC (“Cheniere Land Holdings”), a wholly owned subsidiary of Cheniere, to lease the land owned by Cheniere Land Holdings for the Liquefaction Facilities. The total annual lease payment is $0.6 million, and the terms of the agreements range from three to seven years.

Easement Agreements

CCL has agreements with Cheniere Land Holdings which grant CCL easements on land owned by Cheniere Land Holdings for the Liquefaction Facilities. The total annual payment for easement agreements is $0.1 million, excluding any previously paid one-time payments, and the terms of the agreements range from three to five years.

19

CHENIERE CORPUS CHRISTI HOLDINGS, LLC AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—CONTINUED

(unaudited)

Dredge Material Disposal Agreement

CCL has a dredge material disposal agreement with Cheniere Land Holdings that terminates in 2042 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 Facilities. 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 and $4.62 per cubic yard for any quantities above that.

Tug Hosting Agreement

In February 2017, CCL entered into a tug hosting agreement with Corpus Christi Tug Services, LLC (“Tug Services”), a wholly owned subsidiary of Cheniere, to provide certain marine structures, support services and access necessary at the Liquefaction Facilities 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 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 and Cheniere has not demanded any such payments from CCL under the agreement. The agreement is effective for tax returns due on or after May 2015.

CCP has 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 and Cheniere has not demanded any such payments from CCP under the agreement. The agreement is effective for tax returns due on or after May 2015.

Equity Contribution Agreements

Equity Contribution Agreement

In May 2018, we amended and restated the existing equity contribution agreement with Cheniere (the “Equity Contribution Agreement”) pursuant to which Cheniere agreed to provide cash contributions up to approximately $1.1 billion, not including $2.0 billion previously contributed under the original equity contribution agreement. As of September 30, 2021, we have received $703 million in contributions under the Equity Contribution Agreement and Cheniere has no outstanding letters of credit on our behalf. Cheniere is only required to make additional contributions under the Equity Contribution Agreement after the commitments under the CCH Credit Facility have been reduced to zero and to the extent cash flows from operations of the Liquefaction Project are unavailable for Liquefaction Project costs.

20

CHENIERE CORPUS CHRISTI HOLDINGS, LLC AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—CONTINUED

(unaudited)

NOTE 11—CUSTOMER CONCENTRATION

The following table shows external customers with revenues of 10% or greater of total revenues from external customers and external customers with accounts receivable, net of current expected credit losses and contract assets, net of current expected credit losses balances of 10% or greater of total accounts receivable, net of current expected credit losses from external customers and contract assets, net of current expected credit losses from external customers, respectively:

	Percentage of Total Revenues from External Customers				Percentage of Accounts Receivable, Net and Contract Assets, Net from External Customers
	Three Months Ended September 30,		Nine Months Ended September 30,			September 30,	December 31,
	2021	2020	2021	2020		2021	2020
Customer A	22%	17%	23%	33%		17%	15%
Customer B	13%	14%	16%	16%		*	*
Customer C	16%	12%	16%	*		*	10%
Customer D	*	*	*	*		*	16%
Customer E	*	*	*	*		30%	27%
Customer F	*	13%	*	*		*	11%
Customer G	10%	—%	*	—%		*	—%

* Less than 10%

NOTE 12—SUPPLEMENTAL CASH FLOW INFORMATION

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

	Nine Months Ended September 30,
	2021		2020
Cash paid during the period for interest, net of amounts capitalized	$	219	$	192
Non-cash distributions to affiliates for conveyance of assets	—		2

The balance in property, plant and equipment, net of accumulated depreciation funded with accounts payable and accrued liabilities (including affiliate) was $15 million and $52 million as of September 30, 2021 and 2020, respectively.

21

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” within the meaning of Section 27A of the Securities Act of 1933, as amended (the “Securities Act”), and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”). 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 any proposed LNG terminal, liquefaction facility, pipeline facility or other projects, 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 Trains or pipelines, including statements concerning the engagement of any EPC contractor or other contractor and the anticipated terms and provisions of any agreement with any EPC or other contractor, and anticipated costs related thereto;

•statements regarding any SPA or other agreement to be entered into or performed substantially in the future, including any revenues anticipated to be received and the anticipated timing thereof, and statements regarding the amounts of total 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 or pipelines, including the financing of such Trains or pipelines;

•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;

•statements regarding the outbreak of COVID-19 and its impact on our business and operating results, including any customers not taking delivery of LNG cargoes, the ongoing credit worthiness of our contractual counterparties, any disruptions in our operations or construction of our Trains and the health and safety of Cheniere’s employees, and on our customers, the global economy and the demand for LNG; 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,” “achieve,” “anticipate,” “believe,” “contemplate,” “continue,” “estimate,” “expect,” “intend,” “plan,” “potential,” “predict,” “project,” “pursue,” “target,” 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”

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in our annual report on Form 10-K for the fiscal year ended December 31, 2020. All forward-looking statements attributable to us or persons acting on our behalf are expressly qualified in their entirety by these risk factors. These forward-looking statements speak only as of the date made, and other than as required by law, we undertake no obligation to update or revise any forward-looking statement or provide reasons why actual results may differ, whether as a result of new information, future events or otherwise.

Introduction

The following discussion and analysis presents management’s view of our business, financial condition and overall performance and should be read in conjunction with our 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

•Results of Operations

•Liquidity and Capital Resources

•Off-Balance Sheet Arrangements

•Summary of Critical Accounting Estimates

•Recent Accounting Standards

Overview of Business

We operate a natural gas liquefaction and export facility (the “Liquefaction Facilities”) and operate a 23-mile natural gas supply pipeline that interconnects the Corpus Christi LNG terminal with several interstate and intrastate natural gas pipelines (the “Corpus Christi Pipeline” and together with the Liquefaction Facilities, the “Liquefaction Project”) near Corpus Christi, Texas, through our subsidiaries CCL and CCP, respectively.

We operate three Trains with a total production capacity of approximately 15 mtpa of LNG. The Liquefaction Project also contains three LNG storage tanks with aggregate capacity of approximately 10 Bcfe and two marine berths that can each accommodate vessels with nominal capacity of up to 266,000 cubic meters.

Additionally, we are committed to the responsible and proactive management of our most important environmental, social and governance (“ESG”) impacts, risks and opportunities. Cheniere published its 2020 Corporate Responsibility (“CR”) report, which details our strategy and progress on ESG issues, as well as our efforts on integrating climate considerations into our business strategy and taking a leadership position on increased environmental transparency, including conducting a climate scenario analysis and our plan to provide LNG customers with Cargo Emission Tags. In August 2021, Cheniere also announced a peer-reviewed LNG life cycle assessment study which allows for improved greenhouse gas emissions assessment, which was published in the American Chemical Society Sustainable Chemistry & Engineering Journal. Cheniere’s CR report is available at cheniere.com/IMPACT. Information on our website, including the CR report, is not incorporated by reference into this Quarterly Report on Form 10-Q.

Overview of Significant Events

Our significant events since January 1, 2021 and through the filing date of this Form 10-Q include the following:

•As of October 31, 2021, over 380 cumulative LNG cargoes totaling over 25 million tonnes of LNG have been produced, loaded and exported from the Liquefaction Project.

•In August 2021, we issued an aggregate principal amount of $750 million of fully amortizing 2.742% Senior Secured Notes due 2039 (the “2.742% CCH Senior Secured Notes”). The net proceeds of the 2.742% CCH Senior Secured Notes were used to prepay a portion of the principal amount outstanding under our amended and restated term loan credit facility (the “CCH Credit Facility”).

•On March 26, 2021, substantial completion of Train 3 of the Liquefaction Project was achieved.

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•CCL entered into an SPA for portfolio volumes aggregating approximately 7 million tonnes of LNG to be delivered between 2021 and 2032.

Results of Operations

The following charts summarize the total revenues and total LNG volumes loaded (including both operational and commissioning volumes) during the nine months ended September 30, 2021 and 2020:

(1) The nine months ended September 30, 2021 excludes four TBtu that were loaded at our affiliate’s facility.

Our consolidated net loss was $523 million and $88 million for the three months ended September 30, 2021 and 2020, respectively, and a net loss of $263 million and net income of $17 million for the nine months ended September 30, 2021 and 2020, respectively. These $435 million and $280 million increases in net losses, respectively, were mainly due to the increase in commodity derivatives losses from changes in fair value and settlements of $719 million and $882 million between the three months period and nine months period, respectively, partially offset by increased revenue from increased volume of LNG delivered between the periods, partly as a result of the third Train which achieved substantial completion on March 26, 2021, and from increased revenues per MMBtu.

Substantially all derivative losses relate to the use of commodity derivative instruments related to our IPM agreements, which are indexed to international LNG prices. While operationally, we utilize commodity derivatives to mitigate price volatility for commodities procured or sold over a period of time, as a result of unprecedented appreciation in forward international LNG commodity curves during the three and nine months ended September 30, 2021, we recognized $735 million and approximately $1.0 billion, respectively, of non-cash unfavorable changes in fair value attributed to positions related to IPM gas supply agreements.

We enter into derivative instruments to manage our exposure to commodity-related marketing risk and changing interest rate volatility. Derivative instruments are reported at fair value on our Consolidated Financial Statements. In some cases, the underlying transactions being economically hedged are accounted for under the accrual method of accounting, whereby revenues and expenses are recognized only upon delivery, receipt or realization of the underlying transaction. Because the recognition of derivative instruments at fair value has the effect of recognizing gains or losses relating to future period exposure, and given the significant volumes, long-term duration and volatility in price basis for certain of our derivative contracts, use of derivative instruments may result in continued volatility of our results of operations based on changes in market pricing, counterparty credit risk and other relevant factors, notwithstanding the operational intent to mitigate risk exposure over time.

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Revenues

	Three Months Ended September 30,						Nine Months Ended September 30,
(in millions, except volumes)	2021		2020		Change		2021		2020		Change
LNG revenues	$	1,029	$	337	$	692	$	2,470	$	1,290	$	1,180
LNG revenues—affiliate	509		106		403		1,108		340		768
Total revenues	$	1,538	$	443	$	1,095	$	3,578	$	1,630	$	1,948
LNG volumes recognized as revenues (in TBtu) (1)	193		65		128		541		264		277

(1)Excludes volume associated with cargoes for which customers notified us that they would not take delivery. During the nine months ended September 30, 2021, includes four TBtu that were loaded at our affiliate’s facility.

Total revenues increased by approximately $1.1 billion and $1.9 billion during the three and nine months ended September 30, 2021 from the three and nine months ended September 30, 2020, respectively, primarily as a result of higher volume of LNG delivered between the periods due to the delivery of all available volume of LNG in 2021 and as a result of production from the third Train which achieved substantial completion on March 26, 2021, as well as increased revenues per MMBtu during the three and nine months ended September 30, 2021. During the three and nine months ended September 30, 2020, we recognized $62 million and $398 million, respectively, in LNG revenues associated with LNG cargoes for which customers notified us that they would not take delivery, of which $26 million would have been recognized subsequent to September 30, 2020 had the cargoes been lifted pursuant to the delivery schedules with the customers. LNG revenues during the three months ended September 30, 2021 and 2020 excluded zero and $200 million, respectively, and LNG revenues during the nine months ended September 30, 2021 and 2020 excluded $38 million and zero, respectively, that would have otherwise been recognized during the quarter if the cargoes were lifted pursuant to the delivery schedules with the customers. We did not have revenues associated with LNG cargoes for which customers notified us that they would not take delivery during the three and nine months ended September 30, 2021.

Also included in LNG revenues are the sale of certain unutilized natural gas procured for the liquefaction process and gains and losses from derivative instruments, which include the realized value associated with a portion of derivative instruments that settle through physical delivery. We recognized revenues of $60 million and $97 million during the three months ended September 30, 2021 and 2020, respectively, and $150 million and $148 million during the nine months ended September 30, 2021 and 2020, respectively, related to these transactions.

Prior to substantial completion of a Train, amounts received from the sale of commissioning cargoes from that Train are offset against LNG terminal construction-in-process, because these amounts are earned or loaded during the testing phase for the construction of that Train. During the nine months ended September 30, 2021, we realized offsets to LNG terminal costs of $143 million corresponding to 28 TBtu of LNG that were related to the sale of commissioning cargoes. We did not realize any offsets to LNG terminal costs during the three months ended September 30, 2021 and three and nine months ended September 30, 2020.

Operating costs and expenses

	Three Months Ended September 30,						Nine Months Ended September 30,
(in millions)	2021		2020		Change		2021		2020		Change
Cost of sales	$	1,608	$	180	$	1,428	$	2,593	$	369	$	2,224
Cost of sales—affiliate	12		16		(4)		49		24		25
Cost of sales—related party	53		29		24		124		77		47
Operating and maintenance expense	112		91		21		315		275		40
Operating and maintenance expense—affiliate	25		23		2		77		68		9
Operating and maintenance expense—related party	2		2		—		7		4		3
General and administrative expense	2		1		1		5		5		—
General and administrative expense—affiliate	8		5		3		20		15		5
Depreciation and amortization expense	110		86		24		309		256		53
Impairment expense and loss on disposal of assets	1		1		—		2		1		1
Total operating costs and expenses	$	1,933	$	434	$	1,499	$	3,501	$	1,094	$	2,407

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Total operating costs and expenses increased between the three and nine months ended September 30, 2021 compared to the three and nine months ended September 30, 2020, primarily as a result of increased cost of sales. Cost of sales includes costs incurred directly for the production and delivery of LNG from the Liquefaction Project, to the extent those costs are not utilized for the commissioning process. Cost of sales (including related party) increased during the three and nine months ended September 30, 2021 from the comparable 2020 periods, primarily as a result of increased cost of natural gas feedstock as a result of higher US natural gas prices and increased volume of LNG delivered, as well as unfavorable changes in our commodity derivatives to secure natural gas feedstock for the Liquefaction Project driven by unfavorable shifts in international forward commodity curves. Partially offsetting these increases during the nine months ended September 30, 2021 was a decrease in net costs associated with the sale of certain unutilized natural gas procured for the liquefaction process. Cost of sales—affiliate increased during the nine months ended September 30, 2021 as a result of the cost of cargoes procured from our affiliate to fulfill our commitments to our long-term customers during operational constraints.

Operating and maintenance expense (including affiliate and related party) primarily includes costs associated with operating and maintaining the Liquefaction Project. Operating and maintenance expense (including affiliate and related party) increased between the three and nine months ended September 30, 2021 and 2020 primarily due to increased natural gas transportation and storage capacity demand charges, generally as a result of an additional Train that was in operation between the periods. Operating and maintenance (including affiliates) also includes third-party service and maintenance contract costs, payroll and benefit costs of operations personnel, insurance and regulatory costs and other operating costs.

Depreciation and amortization expense increased during the three and nine months ended September 30, 2021 from the comparable period in 2020 as a result of commencing operations of Train 3 of the Liquefaction Project in March 2021.

Other expense (income)

	Three Months Ended September 30,						Nine Months Ended September 30,
(in millions)	2021		2020		Change		2021		2020		Change
Interest expense, net of capitalized interest	$	117	$	89	$	28	$	328	$	278	$	50
Loss on modification or extinguishment of debt	9		9		—		9		9		—
Interest rate derivative loss, net	2		—		2		3		233		(230)
Other income, net	—		(1)		1		—		(1)		1
Total other expense	$	128	$	97	$	31	$	340	$	519	$	(179)

Interest expense, net of capitalized interest increased during the three and nine months ended September 30, 2021 compared to the comparable periods in 2020, primarily because the construction of the final Train of the Liquefaction Project was completed in March 2021, which eliminated the portion of total interest costs that was eligible for capitalization. During the three months ended September 30, 2021 and 2020 we incurred $118 million and $117 million of total interest cost, of which we capitalized $1 million and $28 million, respectively. During the nine months ended September 30, 2021 and 2020, we incurred $355 million and $365 million of total interest cost of which we capitalized $27 million and $87 million, respectively. Capitalized interest primarily related to interest costs incurred to construct the assets of the Liquefaction Project.

Interest rate derivative loss, net decreased during the nine months ended September 30, 2021 compared to the comparable 2020 period, primarily due to a favorable shift in the long-term forward LIBOR curve between the periods and the settlement of certain outstanding derivatives in August 2020 that were in an unfavorable position.

Liquidity and Capital Resources

The following table provides a summary of our liquidity position at September 30, 2021 and December 31, 2020 (in millions):

	September 30,		December 31,
	2021		2020
Restricted cash designated for the Liquefaction Project	$	59	$	70
Available commitments under the following credit facilities:
$1.2 billion CCH Working Capital Facility (“CCH Working Capital Facility”)	840		767

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Corpus Christi LNG Terminal

Liquefaction Facilities

We are currently operating three Trains and two marine berths at the Liquefaction Project. We completed construction of Trains 1, 2 and 3 of the Liquefaction Project and commenced commercial operating activities in February 2019, August 2019 and March 2021, respectively. We received approval from FERC to site, construct and operate up to a combined total equivalent of approximately 875.16 Bcf/yr (approximately 17 mtpa) of natural gas from the Liquefaction Project.

The DOE has authorized the export of domestically produced LNG by vessel from the Corpus Christi LNG terminal to FTA countries and non-FTA countries through December 31, 2050, up to a combined total equivalent of approximately 767 Bcf/yr (approximately 15 mtpa) of natural gas, and an additional 108.16 Bcf/yr (approximately 2 mtpa) to FTA countries only, with the authorization for the additional volume to non-FTA countries pending.

In December 2020, the DOE announced a new policy in which it would no longer issue short-term export authorizations separately from long-term authorizations. Accordingly, the DOE amended each of CCL’s long-term authorizations to include short-term export authority, and vacated the short-term orders.

Customers

CCL has entered into fixed price long-term SPAs with third-parties, generally with terms of 20 years (plus extension rights) and with a weighted average remaining contract length of approximately 18 years (plus extension rights) for Trains 1 through 3 of the Liquefaction Project to make available an aggregate amount of LNG that is approximately 80% of the total production capacity from these Trains. Under these SPAs, the customers will purchase LNG from CCL on a free on board (“FOB”) basis for a price consisting of a fixed fee per MMBtu of LNG (a portion of which is subject to annual adjustment for inflation) plus a variable fee per MMBtu of LNG equal to approximately 115% of Henry Hub. The customers may elect to cancel or suspend deliveries of LNG cargoes, with advance notice as governed by each respective SPA, in which case the customers would still be required to pay the fixed fee with respect to the contracted volumes that are not delivered as a result of such cancellation or suspension. We refer to the fee component that is applicable regardless of a cancellation or suspension of LNG cargo deliveries under the SPAs as the fixed fee component of the price under our SPAs. We refer to the fee component that is applicable only in connection with LNG cargo deliveries as the variable fee component of the price under our SPAs. The variable fee under CCL’s SPAs entered into in connection with the development of the Liquefaction Project was sized at the time of entry into each SPA with the intent to cover the costs of gas purchases and transportation and liquefaction fuel to produce the LNG to be sold under each such SPA. The SPAs and contracted volumes to be made available under the SPAs are not tied to a specific Train; however, the term of each SPA generally commences upon the date of first commercial delivery for the applicable Train, as specified in each SPA.

In aggregate, the minimum annual fixed fee portion to be paid by the third-party SPA customers is approximately $1.8 billion for Trains 1 through 3.

In addition, Cheniere Marketing International LLP (“Cheniere Marketing”) has agreements with CCL to purchase: (1) approximately 15 TBtu per annum of LNG with a term through 2043, (2) any LNG produced by CCL in excess of that required for other customers at Cheniere Marketing’s option and (3) approximately 44 TBtu of LNG with a maximum term up to 2026 associated with the IPM gas supply agreement between CCL and EOG Resources, Inc..

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 variability 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. As of September 30, 2021, CCL had secured up to approximately 2,798 TBtu of natural gas feedstock through long-term natural gas supply contracts with remaining terms that range up to 10 years, a portion of which is subject to the achievement of certain project milestones and other conditions precedent.

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A portion of the natural gas feedstock transactions for CCL are IPM transactions, in which the natural gas producers are paid based on a global gas market price less a fixed liquefaction fee and certain costs incurred by us.

Construction

CCL entered into separate lump sum turnkey contracts with Bechtel Oil, Gas and Chemicals, Inc. (“Bechtel”) for the engineering, procurement and construction of Trains 1 through 3 of the Liquefaction Project under which Bechtel charged a lump sum for all work performed and generally bore project cost, schedule and performance risks unless certain specified events occurred, in which case Bechtel may have caused CCL to enter into a change order, or CCL agreed with Bechtel to a change order.

Capital Resources

The following table provides a summary of our capital resources from borrowings and available commitments for the Liquefaction Project, excluding any equity contributions, at September 30, 2021 and December 31, 2020 (in millions):

	September 30,		December 31,
	2021		2020
Senior notes (1)	$	8,471	$	7,721
Credit facilities outstanding balance (2)	1,761		2,767
Letters of credit issued (2)	360		293
Available commitments under credit facilities (2)	840		767
Total capital resources from borrowings and available commitments (3)	$	11,432	$	11,548

(1)Includes our 2.742% to 7.000% senior secured notes due between June 2024 and December 2039 (collectively, the “CCH Senior Notes”).

(2)Includes the CCH Credit Facility and the CCH Working Capital Facility.

(3)Does not include additional borrowings or contributions by our indirect parents which may be used for the Liquefaction Project.

CCH Senior Notes

The CCH Senior Notes are jointly and severally guaranteed by each of our consolidated subsidiaries, CCL, CCP and CCP GP (each a “Guarantor” and collectively, the “Guarantors”). The indentures governing the CCH Senior Notes contain 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. The covenants included in the respective indentures that govern the CCH Senior Notes are subject to a number of important limitations and exceptions.

The CCH Senior Notes are our senior secured obligations, ranking senior in right of payment to any and all of our future indebtedness that is subordinated to the CCH Senior Notes and equal in right of payment with our other existing and future indebtedness that is senior and secured by the same collateral securing the CCH Senior Notes. The CCH Senior Notes are secured by a first-priority security interest in substantially all of our assets and the assets of the CCH Guarantors.

At any time prior to six months before the respective dates of maturity for each 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 appropriate indenture, plus accrued and unpaid interest, if any, to the date of redemption. At any time within six months of the respective dates of maturity for each of the CCH Senior Notes, we may 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.

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The Guarantors’ guarantees are full and unconditional, subject to certain release provisions including (1) the sale, exchange, disposition or transfer (by merger, consolidation or otherwise) of all or substantially all of the capital stock or the assets of the Guarantors, (2) the designation of the Guarantor as an “unrestricted subsidiary” in accordance with the indentures governing the CCH Senior Notes (the “CCH Indentures”), (3) upon the legal defeasance or covenant defeasance or discharge of obligations under the CCH Indentures and (4) the release and discharge of the Guarantors pursuant to the Common Security and Account Agreement. In the event of a default in payment of the principal or interest by us, whether at maturity of the CCH Senior Notes or by declaration of acceleration, call for redemption or otherwise, legal proceedings may be instituted against the Guarantors to enforce the guarantee.

The rights of holders of the CCH Senior Notes against the Guarantors may be limited under the U.S. Bankruptcy Code or federal or state fraudulent transfer or conveyance law. Each guarantee contains a provision intended to limit the Guarantor’s liability to the maximum amount that it could incur without causing the incurrence of obligations under its guarantee to be a fraudulent conveyance or transfer under U.S. federal or state law. However, there can be no assurance as to what standard a court will apply in making a determination of the maximum liability of the Guarantors. Moreover, this provision may not be effective to protect the guarantee from being voided under fraudulent conveyance laws. There is a possibility that the entire guarantee may be set aside, in which case the entire liability may be extinguished.

Summarized financial information about us and the Guarantors as a group (the “Obligor Group”) is omitted herein because such information would not be materially different from our Consolidated Financial Statements.

The CCH Senior Notes are our senior secured obligations, ranking senior in right of payment to any and all of our future indebtedness that is subordinated to the CCH Senior Notes and equal in right of payment with our other existing and future indebtedness that is senior and secured by the same collateral securing the CCH Senior Notes. The CCH Senior Notes are secured by a first-priority security interest in substantially all of our assets and the assets of the CCH Guarantors.

The security interests in our assets and the assets of the CCH Guarantors are subject to release provisions including (1) upon satisfaction and discharge of the CCH Indentures, (2) upon the legal defeasance or covenant defeasance with respect to the applicable CCH Senior Notes or (3) upon payment in full in cash of the applicable CCH Senior Notes and all other related obligations that are outstanding, due and payable at the time the CCH Senior Notes are paid full in cash; and in accordance with the Common Security and Account Agreement governing the parties to the CCH Senior Notes.

CCH Credit Facility

We have total commitments under the CCH Credit Facility of $6.1 billion. Our obligations under the 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 both September 30, 2021 and December 31, 2020, we had no available commitments. As of September 30, 2021 and December 31, 2020, we had $1.8 billion and $2.6 billion, respectively, of loans outstanding under the CCH Credit Facility.

The CCH Credit Facility matures on June 30, 2024, with principal payments due quarterly commencing on the earlier of (1) the first quarterly payment date occurring more than three calendar months following the completion of the Liquefaction Project as defined in the common terms agreement and (2) a set date determined by reference to the date under which a certain LNG buyer linked to the last Train of the Liquefaction Project to become operational 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 completion of Trains 1 through 3 and designed to achieve a minimum projected fixed debt service coverage ratio of 1.50:1.

Under the 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 certain distributions under agreements governing our indebtedness generally until, among other requirements, the completion of the construction of Trains 1 through 3 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.

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CCH Working Capital Facility

We have total commitments under the CCH Working Capital Facility of $1.2 billion. The CCH Working Capital Facility is intended to be used for loans (“CCH Working Capital Loans”) and the issuance of letters of credit for certain working capital requirements related to developing and operating the Liquefaction Project and for related business purposes. 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 for working capital under the Common Terms Agreement that was entered into concurrently with the CCH Credit Facility. As of September 30, 2021 and December 31, 2020, we had $840 million and $767 million of available commitments, zero and $140 million of loans outstanding and $360 million and $293 million aggregate amount of issued letters of credit under the CCH Working Capital Facility, respectively.

The CCH Working Capital Facility matures on June 29, 2023, and we may prepay the CCH Working Capital 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. 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 of our assets and the assets of the Guarantors as well as all of our membership interests and the membership interest in each of the Guarantors on a pari passu basis with the CCH Senior Notes and the CCH Credit Facility.

Equity Contribution Agreement

In May 2018, we amended and restated the existing equity contribution agreement with Cheniere (the “Equity Contribution Agreement”) pursuant to which Cheniere agreed to provide cash contributions up to approximately $1.1 billion, not including $2.0 billion previously contributed under the original equity contribution agreement. As of September 30, 2021, we have received $703 million in contributions under the Equity Contribution Agreement and Cheniere has posted zero of letters of credit on our behalf under its revolving credit facility. Cheniere is only required to make additional contributions under the Equity Contribution Agreement after the commitments under the CCH Credit Facility have been reduced to zero and to the extent cash flows from operations of the Liquefaction Project are unavailable for Liquefaction Project costs.

Restrictive Debt Covenants

As of September 30, 2021, we were in compliance with all covenants related to our debt agreements.

LIBOR

The use of LIBOR is expected to be phased out by June 2023. It is currently unclear whether LIBOR will be utilized beyond that date or whether it will be replaced by a particular rate. We intend to continue working with our lenders and counterparties to pursue any amendments to our debt and derivative agreements that are currently subject to LIBOR following LIBOR cessation and will continue to monitor, assess and plan for the phase out of LIBOR.

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Sources and Uses of Cash

The following table summarizes the sources and uses of our cash, cash equivalents and restricted cash for the nine months ended September 30, 2021 and 2020 (in millions). The table presents capital expenditures on a cash basis; therefore, these amounts differ from the amounts of capital expenditures, including accruals, which are referred to elsewhere in this report. Additional discussion of these items follows the table. 

	Nine Months Ended September 30,
	2021		2020
Sources of cash, cash equivalents and restricted cash:
Net cash provided by operating activities	$	1,094	$	261
Proceeds from issuances of debt	750		910
Capital contributions	—		145
	$	1,844	$	1,316
Uses of cash, cash equivalents and restricted cash:
Property, plant and equipment	$	(221)	$	(583)
Repayments of debt	(1,006)		(656)
Debt issuance and deferred financing costs	(3)		(8)
Debt extinguishment cost	(5)		—
Distributions	(618)		—
Other	(2)		(4)
	(1,855)		(1,251)
Net increase (decrease) in restricted cash	$	(11)	$	65

Operating Cash Flows

Operating cash flows during the nine months ended September 30, 2021 and 2020 were $1,094 million and $261 million, respectively. The $833 million increase in operating cash inflows in 2021 compared to 2020 was primarily related to increased cash receipts from the sale of LNG cargoes due to higher revenue per MMBtu and increased volume of LNG delivered between periods, in addition to higher than normal contributions from LNG and natural gas portfolio optimization activities due to significant volatility in LNG and natural gas markets during the nine months ended September 30, 2021. Partially offsetting these operating cash inflows was higher operating cash outflows due to higher natural gas feedstock costs.

Proceeds from Issuance of Debt, Repayments of Debt, Debt Issuance and Other Financing Costs and Debt Modification or Extinguishment Costs

During the nine months ended September 30, 2021, we issued an aggregate principal amount of $750 million of the 2.742% CCH Senior Secured Notes and incurred $3 million of debt issuance and deferred financing costs related to this issuance. The proceeds of this issuance, together with cash on hand, were used to repay $866 million of outstanding borrowings under the CCH Credit Facility and $140 million of outstanding borrowings under the CCH Working Capital Facility, and we incurred $5 million related to these repayments. During the nine months ended September 30, 2020, we issued an aggregate principal amount of $769 million of the 3.52% Senior Secured Notes due 2039 and incurred $8 million of debt issuance and deferred financing costs related to this issuance. We also borrowed $141 million and repaid $656 million under the CCH Working Capital Facility.

Distributions

During the nine months ended September 30, 2021, we made distributions of $618 million to Cheniere.

Property, Plant and Equipment

Cash outflows for property, plant and equipment were primarily for the construction costs for the Liquefaction Project, which are capitalized as construction-in-process until achievement of substantial completion. On March 26, 2021, substantial completion of Train 3 of the Liquefaction Project was achieved.

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Off-Balance Sheet Arrangements

As of September 30, 2021, 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 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 annual report on Form 10-K for the fiscal year ended December 31, 2020.

Recent Accounting Standards 

For descriptions of recently issued accounting standards, see Note 1—Nature of Operations and Basis of Presentation 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 for the commissioning and operation of the Liquefaction Project (“Liquefaction Supply Derivatives”). In order to test the sensitivity of the fair value of the Liquefaction Supply Derivatives to changes in underlying commodity prices, management modeled a 10% change in the commodity price for natural gas for each delivery location as follows (in millions):

	September 30, 2021				December 31, 2020
	Fair Value		Change in Fair Value		Fair Value		Change in Fair Value
Liquefaction Supply Derivatives	$	(967)	$	170	$	11	$	77

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

Interest Rate Risk

We are exposed to interest rate risk primarily when we incur debt related to project financing. Interest rate risk is managed in part by replacing outstanding floating-rate debt with fixed-rate debt with varying maturities. We have entered into interest rate swaps to hedge the exposure to volatility in a portion of the floating-rate interest payments under the CCH Credit Facility (“CCH Interest Rate Derivatives”). In order to test the sensitivity of the fair value of the CCH Interest Rate Derivatives to changes in interest rates, management modeled a 10% change in the forward one-month LIBOR curve across the remaining terms of the CCH Interest Rate Derivatives as follows (in millions):

	September 30, 2021				December 31, 2020
	Fair Value		Change in Fair Value		Fair Value		Change in Fair Value
CCH Interest Rate Derivatives	$	(67)	$	—	$	(140)	$	1

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

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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 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.

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

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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. There have been no material changes to the legal proceedings disclosed in our annual report on Form 10-K for the fiscal year ended December 31, 2020.

ITEM 1A.     RISK FACTORS

There have been no material changes from the risk factors disclosed in our annual report on Form 10-K for the fiscal year ended December 31, 2020.

ITEM 6.     EXHIBITS

Exhibit No.	Description
4.1	Fifth Supplemental Indenture, dated as of August 24, 2021, among the Company, as issuer, CCL, CCP 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 August 24, 2021)
10.1	Registration Rights Agreement, dated as of August 24, 2021, among the Company and CCL, CCP. and Corpus Christi Pipeline GP, LLC, as guarantors, and Morgan Stanley & Co. 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 August 24, 2021)
22.1	List of Issuers and Guarantor Subsidiaries (Incorporated by reference to Exhibit 22.1 to the Company’s Registration Report on Form S-4 (SEC File No. 333-215435), filed on July 14, 2020)
31.1*	Certification by President and Chief Financial Officer required by Rule 13a-14(a) and 15d-14(a) under the Exchange Act
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
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
104*	Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101)

*	Filed herewith.
**	Furnished herewith.

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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:	November 3, 2021	By:	/s/ Zach Davis
			Zach Davis
			President and Chief Financial Officer
			(Principal Executive and Financial Officer)
Date:	November 3, 2021	By:	/s/ Leonard E. Travis
			Leonard E. Travis
			Chief Accounting Officer
			(on behalf of the registrant and as principal accounting officer)

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