Cheniere Corpus Christi 10-Q 2022 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, 2022

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 was a voluntary filer until March 25, 2022. 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 (Deficit)	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—CCL Stage III Contribution and Merger	8
	Note 3—Restricted Cash and Cash Equivalents	9
	Note 4—Trade and Other Receivables, Net of Current Expected Credit Losses	9
	Note 5—Inventory	9
	Note 6—Property, Plant and Equipment, Net of Accumulated Depreciation	9
	Note 7—Derivative Instruments	10
	Note 8—Accrued Liabilities	14
	Note 9—Debt	15
	Note 10—Revenues	17
	Note 11—Related Party Transactions	18
	Note 12—Customer Concentration	22
	Note 13—Supplemental Cash Flow Information	22
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	23
Item 3.	Quantitative and Qualitative Disclosures about Market Risk	33
Item 4.	Controls and Procedures	33
Part II. Other Information
Item 1.	Legal Proceedings	34
Item 1A.	Risk Factors	34
Item 5.	Other Information	34
Item 6.	Exhibits	35
	Signatures	36

i

DEFINITIONS

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

Common Industry and Other Terms

ASU	Accounting Standards Update
Bcf	billion cubic feet
Bcf/d	billion cubic feet per day
Bcf/yr	billion cubic feet per year
Bcfe	billion cubic feet equivalent
DES	delivered ex-ship
DOE	U.S. Department of Energy
EPC	engineering, procurement and construction
FASB	Financial Accounting Standards Board
FERC	Federal Energy Regulatory Commission
FID	final investment decision
FOB	free-on-board
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 agreements	integrated production marketing agreements in which the gas producer sells to us gas on a global LNG index price, less a fixed liquefaction fee, shipping and other costs
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
SOFR	Secured Overnight Financing Rate
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, 2022, 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.

In June 2022, as part of the internal restructuring of Cheniere’s subsidiaries, Cheniere contributed its equity interest in Corpus Christi Liquefaction Stage III, LLC (“CCL Stage III”), formerly a wholly owned direct subsidiary of Cheniere, to us, and CCL Stage III was subsequently merged with and into CCL, the surviving entity of the merger and our wholly owned subsidiary.

2

PART I.    FINANCIAL INFORMATION

ITEM 1.     CONSOLIDATED FINANCIAL STATEMENTS

CHENIERE CORPUS CHRISTI HOLDINGS, LLC

CONSOLIDATED STATEMENTS OF OPERATIONS

(in millions)

(unaudited)

	Three Months Ended September 30,				Nine Months Ended September 30,
	2022		2021		2022		2021
Revenues
LNG revenues	$	1,737	$	1,029	$	4,668	$	2,470
LNG revenues—affiliate	1,126		509		2,560		1,108
Total revenues	2,863		1,538		7,228		3,578
Operating costs and expenses
Cost of sales (excluding items shown separately below)	5,929		1,608		10,712		2,593
Cost of sales—affiliate	47		12		95		49
Cost of sales—related party	—		53		—		124
Operating and maintenance expense	119		112		350		315
Operating and maintenance expense—affiliate	28		25		86		77
Operating and maintenance expense—related party	2		2		7		7
General and administrative expense	2		2		6		5
General and administrative expense—affiliate	11		8		27		20
Depreciation and amortization expense	112		110		334		309
Other	1		1		5		2
Total operating costs and expenses	6,251		1,933		11,622		3,501
Income (loss) from operations	(3,388)		(395)		(4,394)		77
Other income (expense)
Interest expense, net of capitalized interest	(106)		(117)		(340)		(328)
Loss on modification or extinguishment of debt	(6)		(9)		(36)		(9)
Interest rate derivative gain (loss), net	—		(2)		2		(3)
Other income, net	2		—		3		—
Total other expense	(110)		(128)		(371)		(340)
Net loss	$	(3,498)	$	(523)	$	(4,765)	$	(263)

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,
	2022		2021
ASSETS	(unaudited)
Current assets
Restricted cash and cash equivalents	$	202	$	44
Trade and other receivables, net of current expected credit losses	400		280
Accounts receivable—affiliate	599		315
Advances to affiliate	101		128
Inventory	138		156
Current derivative assets	23		17
Margin deposits	93		13
Other current assets	23		15
Total current assets	1,579		968
Property, plant and equipment, net of accumulated depreciation	13,392		12,607
Debt issuance and deferred financing costs, net of accumulated amortization	41		7
Derivative assets	13		37
Other non-current assets, net	215		145
Total assets	$	15,240	$	13,764
LIABILITIES AND MEMBER’S EQUITY (DEFICIT)
Current liabilities
Accounts payable	$	156	$	119
Accrued liabilities	1,080		631
Accrued liabilities—related party	1		1
Current debt, net of discount and debt issuance costs	—		366
Due to affiliates	35		35
Current derivative liabilities	1,901		668
Other current liabilities	1		1
Total current liabilities	3,174		1,821
Long-term debt, net of discount and debt issuance costs	8,369		9,986
Derivative liabilities	6,973		638
Other non-current liabilities	67		38
Other non-current liabilities—affiliate	3		—
Member’s equity (deficit)	(3,346)		1,281
Total liabilities and member’s equity (deficit)	$	15,240	$	13,764

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 (DEFICIT)

(in millions)

(unaudited)

Three and Nine Months Ended September 30, 2022
	Cheniere CCH HoldCo I, LLC		Total Member’s Equity (Deficit)
Balance at December 31, 2021	$	1,281	$	1,281
Contributions	138		138
Net loss	(740)		(740)
Balance at March 31, 2022	679		679
Contributions (excluding CCL Stage III entity)	801		801
Contribution of CCL Stage III entity (see Note 2)	(1,482)		(1,482)
Net loss	(527)		(527)
Balance at June 30, 2022	(529)		(529)
Contributions	681		681
Net loss	(3,498)		(3,498)
Balance at September 30, 2022	$	(3,346)	$	(3,346)

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
Distributions	(337)		(337)
Net loss	(71)		(71)
Balance at June 30, 2021	2,547		2,547
Distributions	(281)		(281)
Net loss	(523)		(523)
Balance at September 30, 2021	$	1,743	$	1,743

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,
	2022		2021
Cash flows from operating activities
Net loss	$	(4,765)	$	(263)
Adjustments to reconcile net loss to net cash provided by operating activities:
Depreciation and amortization expense	334		309
Amortization of discount and debt issuance costs	15		18
Loss on modification or extinguishment of debt	36		9
Total losses on derivatives instruments, net	5,754		987
Total gains on derivatives, net—related party	—		(13)
Net cash used for settlement of derivative instruments	(106)		(69)
Other	4		3
Changes in operating assets and liabilities:
Trade and other receivables, net of current expected credit losses	(120)		(72)
Accounts receivable—affiliate	(284)		(96)
Advances to affiliate	(25)		43
Inventory	16		(32)
Margin deposits	(80)		—
Accounts payable and accrued liabilities	462		316
Accrued liabilities—related party	—		8
Due to affiliates	(1)		—
Deferred revenue	32		—
Other, net	(38)		(54)
Net cash provided by operating activities	1,234		1,094
Cash flows from investing activities
Property, plant and equipment	(618)		(221)
Other	—		(2)
Net cash used in investing activities	(618)		(223)
Cash flows from financing activities
Proceeds from issuances of debt	440		750
Repayments of debt	(2,419)		(1,006)
Debt issuance and deferred financing costs	(44)		(3)
Debt extinguishment costs	(18)		(5)
Contributions	1,583		—
Distributions	—		(618)
Net cash used in financing activities	(458)		(882)
Net increase (decrease) in restricted cash and cash equivalents	158		(11)
Restricted cash and cash equivalents—beginning of period	44		70
Restricted cash and cash equivalents—end of period	$	202	$	59

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 located near Corpus Christi, Texas (the “Corpus Christi LNG Terminal”) through CCL, which has three operational Trains for a total production capacity of approximately 15 mtpa of LNG, three LNG storage tanks and two marine berths. Additionally, we are constructing an expansion of the Corpus Christi LNG Terminal (the “Corpus Christi Stage 3 Project”) for up to seven midscale Trains with an expected total production capacity of over 10 mtpa of LNG.

CCL Stage III, CCL and CCP received approval from FERC in November 2019 to site, construct and operate the Corpus Christi Stage 3 Project. In March 2022, CCL Stage III issued limited notice to proceed to Bechtel Energy Inc. (“Bechtel”) to commence early engineering, procurement and site works. In June 2022, Cheniere’s board of directors made a positive FID with respect to the investment in the construction and operation of the Corpus Christi Stage 3 Project and issued a full notice to proceed with construction to Bechtel effective June 16, 2022. In connection with the positive FID, CCL Stage III, through which Cheniere was developing and constructing the Corpus Christi Stage 3 Project, was contributed to us from Cheniere (the “Contribution”) on June 15, 2022. Immediately following the Contribution, CCL Stage III was merged with and into CCL (the ��Merger”), the surviving entity of the merger and our wholly owned subsidiary. Refer to Note 2—CCL Stage III Contribution and Merger for additional information on the Contribution and Merger of CCL Stage III.

Through our subsidiary CCP, we also own a 21.5-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 existing operational Trains, midscale Trains, storage tanks and marine berths, the “Liquefaction Project”).

We have increased available liquefaction capacity at our Liquefaction Project as a result of debottlenecking and other optimization projects. We hold a significant land position at the Corpus Christi LNG Terminal which provides opportunity for further liquefaction capacity expansion. In August 2022, CCH and another subsidiary of Cheniere initiated the pre-filing review process with the FERC under the National Environmental Policy Act for an expansion adjacent to the Liquefaction Project consisting of two midscale Trains with an expected total production capacity of approximately 3 mtpa of LNG. The development of this site or other projects, including infrastructure projects in support of natural gas supply and LNG demand, will require, among other things, acceptable commercial and financing arrangements before we make a positive FID.

Basis of Presentation

The accompanying unaudited Consolidated Financial Statements of CCH have been prepared in accordance with GAAP for interim financial information and in accordance with Rule 10-01 of Regulation S-X and reflect all normal recurring adjustments which are, in the opinion of management, necessary for a fair statement of the financial results for the interim periods presented. 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, 2021.

Results of operations for the three and nine months ended September 30, 2022 are not necessarily indicative of the results of operations that will be realized for the year ending December 31, 2022.

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

ASU 2020-04

In March 2020, the FASB issued 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. The standard is effective from March 12, 2020 to December 31, 2022.

7

CHENIERE CORPUS CHRISTI HOLDINGS, LLC AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(unaudited)

We had interest rate swaps and various credit facilities indexed to LIBOR, as further described in Note 7—Derivative Instruments and Note 9—Debt, respectively. In June 2022, we amended our credit facilities to bear interest at a variable rate per annum based on SOFR as a result of the expected LIBOR transition. Since adoption of the standard, we elected to apply the optional expedients as applicable to certain modified facilities; however, the impact of applying the optional expedients was not material, and the transition to SOFR or other replacement rate indexes does not have a material impact on our cash flows.

NOTE 2—CCL STAGE III CONTRIBUTION AND MERGER

As described in Note 1—Nature of Operations and Basis of Presentation, the Contribution of the CCL Stage III legal entity to us from Cheniere occurred on June 15, 2022, which was immediately followed by the Merger, in which CCL Stage III was merged with and into CCL, with CCL continuing as the surviving company.

The Contribution was accounted for as a common control transaction as the assets and liabilities were transferred between entities under Cheniere’s control. As a result, the net liability transfer was recognized as a contribution in our Consolidated Statement of Member’s Equity (Deficit) and at the historical basis of Cheniere on June 15, 2022 in our Consolidated Balance Sheets. The Contribution has been presented prospectively as we have concluded that the Contribution did not represent a change in our reporting entity, primarily as we concluded that CCL Stage III did not constitute a business under FASB topic Accounting Standards Codification 805, Business Combinations. The Merger had no impact on our Consolidated Financial Statements as it occurred between our consolidated subsidiaries.

The net liabilities of CCL Stage III contributed to us and recognized on our Consolidated Balance Sheets on June 15, 2022 consisted of the following (in millions):

	June 15, 2022
ASSETS
Property, plant and equipment, net of accumulated depreciation	$	441
Derivatives assets	112
Other non-current assets, net	19
Total assets	$	572
LIABILITIES
Current liabilities
Accounts payable	$	3
Due to affiliates	1
Total current liabilities	4
Derivative liabilities	2,050
Total net liabilities contributed	$	(1,482)

Amended and Restated Debt Agreements

In June 2022, in connection with the FID with respect to the Corpus Christi Stage 3 Project referenced above, CCH amended and restated its term loan credit facility (the “CCH Credit Facility”) and its working capital facility (“CCH Working Capital Facility”) to, among other things, (1) increase the commitments to approximately $4.0 billion and $1.5 billion for the CCH Credit Facility and the CCH Working Capital Facility, respectively, (2) extend the maturity of the CCH Credit Facility to the earlier of June 15, 2029 or two years after the substantial completion of the last Train of the Corpus Christi Stage 3 Project and of the CCH Working Capital Facility through June 15, 2027, (3) update the indexed interest rate to SOFR and (4) make certain other changes to the terms and conditions of the existing facility. See Note 9—Debt for additional information on our credit facilities.

8

CHENIERE CORPUS CHRISTI HOLDINGS, LLC AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—CONTINUED

(unaudited)

NOTE 3—RESTRICTED CASH AND CASH EQUIVALENTS

Restricted cash and cash equivalents consist of funds that are contractually or legally restricted as to usage or withdrawal. As of September 30, 2022 and December 31, 2021, we had $202 million and $44 million of restricted cash and cash equivalents, 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.

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

Trade and other receivables, net of current expected credit losses consisted of the following (in millions):

	September 30,		December 31,
	2022		2021
Trade receivables	$	309	$	256
Other receivables	91		24
Total trade and other receivables, net of current expected credit losses	$	400	$	280

NOTE 5—INVENTORY

Inventory consisted of the following (in millions):

	September 30,		December 31,
	2022		2021
Materials	$	89	$	88
LNG	26		45
Natural gas	23		21
Other	—		2
Total inventory	$	138	$	156

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

Property, plant and equipment, net of accumulated depreciation consisted of the following (in millions):

	September 30,		December 31,
	2022		2021
LNG terminal
Terminal and interconnecting pipeline facilities	$	13,285	$	13,222
Site and related costs	302		294
Construction-in-process	1,111		66
Accumulated depreciation	(1,311)		(981)
Total LNG terminal, net of accumulated depreciation	13,387		12,601
Fixed assets
Fixed assets	24		23
Accumulated depreciation	(19)		(17)
Total fixed assets, net of accumulated depreciation	5		6
Property, plant and equipment, net of accumulated depreciation	$	13,392	$	12,607

9

CHENIERE CORPUS CHRISTI HOLDINGS, LLC AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—CONTINUED

(unaudited)

The following table shows depreciation expense and offsets to LNG terminal costs (in millions):

	Three Months Ended September 30,				Nine Months Ended September 30,
	2022		2021		2022		2021
Depreciation expense	$	111	$	111	$	332	$	309
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 respective Trains of the Liquefaction Project during the testing phase for its construction.

NOTE 7—DERIVATIVE INSTRUMENTS

We have entered into the following derivative instruments:

•interest rate swaps (“Interest Rate Derivatives”) to hedge the exposure to volatility in a portion of the floating-rate interest payments on our CCH Credit Facility, with the last of our Interest Rate Derivatives expiring in May 2022; and

•commodity derivatives consisting of natural gas and power supply contracts, including those under our IPM agreements, for the development, 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 such changes are 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 (in millions):

	Fair Value Measurements as of
	September 30, 2022								December 31, 2021
	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
Interest Rate Derivatives liability	$	—	$	—	$	—	$	—	$	—	$	(40)	$	—	$	(40)
Liquefaction Supply Derivatives asset (liability)	(76)		19		(8,781)		(8,838)		5		4		(1,221)		(1,212)

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 or option-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, but not limited to, evaluation of whether the respective market exists from the perspective of market participants as infrastructure is developed.

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 and volatility.

10

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, 2022:

	Net Fair Value Liability (in millions)	Valuation Approach	Significant Unobservable Input	Range of Significant Unobservable Inputs / Weighted Average (1)
Physical Liquefaction Supply Derivatives	$(8,781)	Market approach incorporating present value techniques	Henry Hub basis spread	$(1.992) - $0.355 / $(0.153)
		Option pricing model	International LNG pricing spread, relative to Henry Hub (2)	89% - 943% / 190%

(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 (in millions):

	Three Months Ended September 30,				Nine Months Ended September 30,
	2022		2021 (1)		2022		2021 (1)
Balance, beginning of period	$	(5,006)	$	(260)	$	(1,221)	$	12
Realized and mark-to-market losses:
Included in cost of sales	(4,123)		(766)		(2,727)		(1,032)
Purchases and settlements:
Purchases	1		(1)		(5,290)		17
Settlements	346		52		457		28
Transfers out of Level 3, net (2)	1		—		—		—
Balance, end of period	$	(8,781)	$	(975)	$	(8,781)	$	(975)
Change in unrealized losses relating to instruments still held at end of period	$	(4,123)	$	(766)	$	(2,727)	$	(1,032)

(1)Includes amounts recorded related to natural gas supply contracts that CCL had with a related party. The agreement ceased to be considered a related party agreement during 2021, as discussed in Note 11—Related Party Transactions.

(2)Transferred out of Level 3 as a result of unobservable market for the underlying natural gas purchase agreements.

Except for Interest Rate Derivatives, 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 those derivative contracts with the same counterparty and the unconditional contractual right of set-off 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 depending on the position of the derivative. 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.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—CONTINUED

(unaudited)

Interest Rate Derivatives

We previously entered into the following Interest Rate Derivatives to protect against volatility of future cash flows and hedge a portion of the variable interest payments on the CCH Credit Facility, which expired in May 2022:

	Notional Amounts
	September 30, 2022	December 31, 2021	Weighted Average Fixed Interest Rate Paid	Variable Interest Rate Received
Interest Rate Derivatives	$—	$4.5 billion	2.30%	One-month LIBOR

The following table shows the effect and location of our Interest Rate Derivatives on our Consolidated Statements of Operations (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,
		2022		2021		2022		2021
Interest Rate Derivatives	Interest rate derivative gain (loss), net	$	—	$	(2)	$	2	$	(3)

Liquefaction Supply Derivatives

CCL holds Liquefaction Supply Derivatives which are primarily indexed to the natural gas market and international LNG indices. The remaining terms of the Physical Liquefaction Supply Derivatives range up to 25 years, some of which commence upon the satisfaction of certain events or states of affairs. The terms of the Financial Liquefaction Supply Derivatives range up to approximately three years.

The forward notional amount for our Liquefaction Supply Derivatives was approximately 8,137 TBtu and 2,915 TBtu as of September 30, 2022 and December 31, 2021, respectively.

The following table shows the effect and location of our Liquefaction Supply Derivatives recorded on our Consolidated Statements of Operations (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,
	2022		2021		2022		2021
LNG revenues	$	—	$	(3)	$	7	$	(3)
Cost of sales	(3,883)		(733)		(5,763)		(981)
Cost of sales—related party (2)	—		6		—		13

(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.

(2)Includes amounts recorded related to natural gas supply contracts that we had with a related party. This agreement ceased to be considered a related party agreement as of November 1, 2021 as discussed in Note 11—Related Party Transactions.

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(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, 2022
	Interest Rate Derivatives		Liquefaction Supply Derivatives (1)		Total
Consolidated Balance Sheets Location
Current derivative assets	$	—	$	23	$	23
Derivative assets	—		13		13
Total derivative assets	—		36		36
Current derivative liabilities	—		(1,901)		(1,901)
Derivative liabilities	—		(6,973)		(6,973)
Total derivative liabilities	—		(8,874)		(8,874)
Derivative liability, net	$	—	$	(8,838)	$	(8,838)
	December 31, 2021
	Interest Rate Derivatives		Liquefaction Supply Derivatives (1)		Total
Consolidated Balance Sheets Location
Current derivative assets	$	—	$	17	$	17
Derivative assets	—		37		37
Total derivative assets	—		54		54
Current derivative liabilities	(40)		(628)		(668)
Derivative liabilities	—		(638)		(638)
Total derivative liabilities	(40)		(1,266)		(1,306)
Derivative liability, net	$	(40)	$	(1,212)	$	(1,252)

(1)Does not include collateral posted with counterparties by us of $93 million and $13 million as of September 30, 2022 and December 31, 2021, respectively, which are included in other current assets in our Consolidated Balance Sheets.

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(unaudited)

Consolidated Balance Sheets Presentation

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

	Liquefaction Supply Derivatives
As of September 30, 2022
Gross assets	$	41
Offsetting amounts	(5)
Net assets	$	36
Gross liabilities	$	(9,349)
Offsetting amounts	475
Net liabilities	$	(8,874)
As of December 31, 2021
Gross assets	$	76
Offsetting amounts	(22)
Net assets	$	54
Gross liabilities	$	(1,295)
Offsetting amounts	29
Net liabilities	$	(1,266)

NOTE 8—ACCRUED LIABILITIES

Accrued liabilities consisted of the following (in millions): 

	September 30,		December 31,
	2022		2021
Natural gas purchases	$	844	$	531
Interest costs and related debt fees	112		7
Liquefaction Project costs	82		43
Other accrued liabilities	42		50
Total accrued liabilities	$	1,080	$	631

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—CONTINUED

(unaudited)

NOTE 9—DEBT

Debt consisted of the following (in millions): 

	September 30,		December 31,
	2022		2021
Senior Secured Notes:
7.000% due 2024	$	1,250	$	1,250
5.875% due 2025	1,500		1,500
5.125% due 2027 (1)	1,500		1,500
3.700% due 2029 (1)	1,492		1,500
3.72% weighted average rate due 2039 (1)	2,699		2,721
Total Senior Secured Notes	8,441		8,471
CCH Credit Facility	—		1,728
CCH Working Capital Facility (2)	—		250
Total debt	8,441		10,449
Current portion of long-term debt	—		(117)
Short-term debt	—		(250)
Unamortized discount and debt issuance costs, net	(72)		(96)
Total long-term debt, net of discount and debt issuance costs	$	8,369	$	9,986

(1)Subsequent to September 30, 2022 and through October 31, 2022, Cheniere executed bond repurchases totaling $221 million, inclusive of CCH’s Senior Secured Notes due 2027, 2029 and 2039 on the open market, which were immediately contributed to us from Cheniere and cancelled by us.

(2)The CCH Working Capital Facility is classified as short-term debt.

Cancellation of CCH Senior Secured Notes Contributed from Cheniere

During the three and nine months ended September 30, 2022, Cheniere repurchased $30 million of CCH’s Senior Secured Notes due 2029 and 2039 on the open market, which were immediately contributed to us from Cheniere, and cancelled by us. It was determined that for accounting purposes, Cheniere repurchased the bonds on our behalf as a principal as opposed to as an agent, and thus the debt extinguishment was accounted for as an extinguishment directly with Cheniere. As a result, the net gain on extinguishment of $5 million was recorded as a contribution within our Consolidated Statements of Member’s Equity.

Credit Facilities

Below is a summary of our credit facilities outstanding as of September 30, 2022 (in millions):

	CCH Credit Facility (1)		CCH Working Capital Facility (1)
Total facility size	$	3,260	$	1,500
Less:
Outstanding balance	—		—
Letters of credit issued	—		218
Available commitment	$	3,260	$	1,282
Priority ranking	Senior secured		Senior secured
Interest rate on available balance	SOFR plus credit spread adjustment of 0.1% , plus margin of 1.5% or base rate plus 0.5%		SOFR plus credit spread adjustment of 0.1%, plus margin of 1.0% - 1.5% or base rate plus applicable margin
Commitment fees on undrawn balance	0.53%		0.18%
Maturity date	(2)		June 15, 2027

(1)In June 2022, we amended and restated the CCH Credit Facility and CCH Working Capital Facility resulting in $20 million of debt extinguishment and modification costs to, among other things, (a) provide incremental commitments of $3.7 billion and $300 million for the CCH Credit Facility and the CCH Working Capital Facility,

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—CONTINUED

(unaudited)

respectively, in connection with the FID with respect to the Corpus Christi Stage 3 Project, (b) extend the maturity, (c) update the indexed interest rate to SOFR and (d) make certain other changes to the terms and conditions of each existing facility.

(2)The CCH Credit Facility matures the earlier of June 15, 2029 or two years after the substantial completion of the last Train of the Corpus Christi Stage 3 Project.

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, 2022, 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,
	2022		2021		2022		2021
Total interest cost	$	119	$	118	$	356	$	355
Capitalized interest, including amounts capitalized as an allowance for funds used during construction	(13)		(1)		(16)		(27)
Total interest expense, net of capitalized interest	$	106	$	117	$	340	$	328

Fair Value Disclosures

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

	September 30, 2022				December 31, 2021
	Carrying Amount		Estimated Fair Value		Carrying Amount		Estimated Fair Value
Senior notes — Level 2 (1)	$	6,470	$	6,049	$	6,500	$	7,095
Senior notes — Level 3 (2)	1,971		1,797		1,971		2,227

(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. 

The estimated fair value of our credit facilities approximates the principal amount outstanding 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.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—CONTINUED

(unaudited)

NOTE 10—REVENUES

The following table represents a disaggregation of revenue earned (in millions):

	Three Months Ended September 30,				Nine Months Ended September 30,
	2022		2021		2022		2021
Revenues from contracts with customers
LNG revenues	$	1,737	$	1,032	$	4,661	$	2,473
LNG revenues—affiliate	1,126		509		2,560		1,108
Total revenues from contracts with customers	2,863		1,541		7,221		3,581
Net derivative gain (loss) (1)	—		(3)		7		(3)
Total revenues	$	2,863	$	1,538	$	7,228	$	3,578

(1)See Note 7—Derivative Instruments for additional information about our derivatives.

Contract Assets and Liabilities

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,
	2022		2021
Contract assets, net of current expected credit losses	$	132	$	104

The following table reflects the changes in our contract liabilities, which we classify as other non-current liabilities on our Consolidated Balance Sheets (in millions):

	Nine Months Ended September 30, 2022
Deferred revenue, beginning of period	$	35
Cash received but not yet recognized in revenue	67
Revenue recognized from prior year end deferral	(35)
Deferred revenue, end of period	$	67

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:

	September 30, 2022			December 31, 2021
	Unsatisfied Transaction Price (in billions)		Weighted Average Recognition Timing (years) (1)	Unsatisfied Transaction Price (in billions)		Weighted Average Recognition Timing (years) (1)
LNG revenues	$	51.4	11	$	31.7	9
LNG revenues—affiliate	1.3		9	1.1		10
Total revenues	$	52.7		$	32.8

(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

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—CONTINUED

(unaudited)

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 73% and 59% of our LNG revenues from contracts included in the table above during the three months ended September 30, 2022 and 2021, respectively, and approximately 70% and 53% of our LNG revenues from contracts included in the table above during the nine months ended September 30, 2022 and 2021, respectively, were related to variable consideration received from customers. Approximately 89% and 87% of our LNG revenues—affiliate from contracts included in the table above during the three and nine months ended September 30, 2022, 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.

We may enter into contracts to sell LNG that are conditioned upon one or both of the parties achieving certain milestones such as reaching FID 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.

NOTE 11—RELATED PARTY TRANSACTIONS

Below is a summary of our related party transactions as reported on our Consolidated Statements of Operations (in millions):

	Three Months Ended September 30,				Nine Months Ended September 30,
	2022		2021		2022		2021
LNG revenues—affiliate
Cheniere Marketing Agreements	$	1,022	$	500	$	2,394	$	1,079
Contracts for Sale and Purchase of Natural Gas and LNG	104		9		166		29
Total LNG revenues—affiliate	1,126		509		2,560		1,108
Cost of sales—affiliate
Contracts for Sale and Purchase of Natural Gas and LNG	47		12		95		18
Cheniere Marketing Agreements	—		—		—		31
Total cost of sales—affiliate	47		12		95		49
Cost of sales—related party
Natural Gas Supply Agreement (1)	—		53		—		124
Operating and maintenance expense—affiliate
Services Agreements	28		24		86		76
Land Agreements	—		1		—		1
Total operating and maintenance expense—affiliate	28		25		86		77
Operating and maintenance expense—related party
Natural Gas Transportation Agreements	2		2		7		7
General and administrative expense—affiliate
Services Agreements	11		8		27		20

(1)Includes amounts recorded related to natural gas supply contracts that we had with a related party. This agreement ceased to be considered a related party agreement during 2021, as discussed below.

We had $35 million due to affiliates as of both September 30, 2022 and December 31, 2021, under agreements with affiliates, as described below.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—CONTINUED

(unaudited)

Cheniere Marketing Agreements

Cheniere Marketing SPA

CCL has an amended and restated fixed price SPA with Cheniere Marketing International LLP (“Cheniere Marketing”), a wholly owned subsidiary of Cheniere, (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 Project 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, 2022 and December 31, 2021, CCL had $593 million and $314 million of accounts receivable—affiliate, respectively, under these agreements with Cheniere Marketing.

In association with an IPM agreement between CCL and ARC Resources U.S. Corp, CCL entered into an SPA in June 2022 with Cheniere Marketing to sell Cheniere Marketing approximately 44 TBtu per annum of LNG at a price linked to the Platts Japan Korea Marker (“JKM”), for a term of 15 years commencing with commercial operations of Train 7 of the Corpus Christi Stage 3 Project.

Cheniere Marketing Letter Agreement

CCL has a letter agreement with Cheniere Marketing for the sale of up to 48 cargoes scheduled to be delivered between 2023 and 2025 at a price equal to 115% of Henry Hub plus $1.97 per MMBtu.

Facility Swap Agreement

We have 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 (1) 115% of the applicable natural gas feedstock purchase price or (2) an FOB 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 Project, no monthly fee payment is required except for reimbursement of operating expenses. After substantial completion of each Train of the Liquefaction Project, CCL will pay, in addition to the reimbursement of related expenses, a fixed monthly fee of $30,000 (indexed for inflation) per mtpa for services performed 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 Project. 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 Project. Prior to the substantial completion of each Train of the Liquefaction Project, no monthly fee payment is

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(unaudited)

required except for reimbursement of operating expenses. After substantial completion of each Train of the Liquefaction Project, CCL will pay, in addition to the reimbursement of related expenses, a fixed monthly fee of $53,000 (indexed for inflation) per mtpa for services performed 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 an MSA with Shared Services pursuant to which Shared Services manages the construction and operation of the Liquefaction Project, 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 Project and obtaining insurance. Prior to the substantial completion of each Train of the Liquefaction Project, 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 of $157,000 (adjusted for inflation) per mtpa for services performed with respect to such Train.

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

Natural Gas Supply Agreement

CCL was 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. The related party entity was acquired by a non-related party on November 1, 2021, therefore, as of such date, this agreement ceased to be considered a related party 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. CCL recorded accrued liabilities—related party of $1 million as of both September 30, 2022 and December 31, 2021 with this related party.

CCL is party to a natural gas transportation agreement with a related party in the ordinary course of business for the operation of the Liquefaction Project, with an initial term of 20 years with extension rights. Cheniere has an equity interest in this related party.

Contracts for Sale and Purchase of Natural Gas and LNG

CCL has an agreement with Sabine Pass Liquefaction, LLC that allows the parties 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.

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(unaudited)

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

Land Agreements

Rental Agreements

CCL has agreements with Cheniere Land Holdings, LLC (“CLH”), a wholly owned subsidiary of Cheniere, to rent the land owned by CLH for the Liquefaction Project. The total annual rental payment is $0.6 million with terms through 2031.

Easement Agreements

CCL has agreements with CLH which grant CCL easements on land owned by CLH for the Liquefaction Project. 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.

Master License Agreements

CCL has agreements with CLH which grant CCL licenses to enter certain land owned by CLH for the Liquefaction Project. The aggregate annual payment for these agreements is $1 million, commencing January 2022 through completion of construction at the Liquefaction Project, subject to early termination.

Dredge Material Disposal Agreement

CCL has a dredge material disposal agreement with CLH that terminates in 2042 which grants CCL permission to use land owned by CLH for the deposit of dredge material from the construction and maintenance of the Liquefaction Project. Under the terms of the agreement, CCL will pay CLH $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

CCL has 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 Project 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 and CCP each have a state tax sharing agreement with Cheniere. Under these agreements, Cheniere has agreed to prepare and file all state and local tax returns which each of the entities 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, each of the respective entities will pay to Cheniere an amount equal to the state and local tax that each of the entities would be required to pay if its state and local tax liability were calculated on a separate company basis. To date, there have been no state and local tax payments demanded by Cheniere under the tax sharing agreements. The agreements for both CCL and CCP were effective for tax returns due on or after May 2015.

Equity Contribution Agreements

We entered into equity contribution agreements with Cheniere and certain of its subsidiaries (the “Equity Contribution Agreements”) pursuant to which Cheniere agreed to contribute any of CCH’s Senior Secured Notes that Cheniere has repurchased to CCH. During the three and nine months ended September 30, 2022, Cheniere repurchased a total of $30 million of the outstanding principal amount of CCH’s Senior Secured Notes due 2029 and 2039 on the open market, which were immediately contributed under the Equity Contribution Agreements to us from Cheniere and cancelled by us.

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(unaudited)

NOTE 12—CUSTOMER CONCENTRATION

The following table shows external customers with revenues of 10% or greater of total revenues from external customers and external customers with trade and other receivables, net of current expected credit losses and contract assets, net of current expected credit losses balances of 10% or greater of total trade and other receivables, 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 Trade and Other Receivables, Net and Contract Assets, Net from External Customers
	Three Months Ended September 30,		Nine Months Ended September 30,			September 30,	December 31,
	2022	2021	2022	2021		2022	2021
Customer A	20%	22%	22%	23%		*	*
Customer B	15%	13%	15%	16%		*	*
Customer C	15%	16%	14%	16%		10%	*
Customer D	*	*	*	*		22%	31%
Customer E	*	*	*	*		10%	11%
Customer F	13%	10%	*	*		*	*
Customer G	*	*	*	*		10%	*
Customer H	12%	*	10%	*		*	*

* Less than 10%

NOTE 13—SUPPLEMENTAL CASH FLOW INFORMATION

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

	Nine Months Ended September 30,
	2022		2021
Cash paid during the period for interest on debt, net of amounts capitalized	$	225	$	219
Right-of-use assets obtained in exchange for new operating lease liabilities	3		—
Non-cash investing activity:
Transfers of property, plant and equipment in exchange for other non-current assets	17		—
Contributions of assets from affiliates	7		—
Non-cash financing activity:
Cancellation of CCH Senior Secured Notes contributed to us from Cheniere (see Note 9)	30		—
Contribution of CCL Stage III entity to us from Cheniere (see Note 2)	(1,482)		—

The balance in property, plant and equipment, net of accumulated depreciation funded with accounts payable and accrued liabilities (including affiliate) was $42 million and $15 million as of September 30, 2022 and 2021, respectively.

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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 our 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 regarding our future sources of liquidity and cash requirements;

•statements relating to the construction of our Trains and pipeline, including statements concerning the engagement of any EPC contractor or other contractor and the anticipated terms and provisions of any agreement with any EPC or other contractor, and anticipated costs related thereto;

•statements regarding any SPA or other agreement to be entered into or performed substantially in the future, including any revenues anticipated to be received and the anticipated timing thereof, and statements regarding the amounts of total natural gas liquefaction or storage capacities that are, or may become, subject to contracts;

•statements regarding counterparties to our commercial contracts, construction contracts and other contracts;

•statements regarding our planned development and construction of additional Trains and pipelines, including the financing of such Trains and 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; 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” in our annual report on Form 10-K for the fiscal year ended December 31, 2021. 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

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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 

•Overview of Significant Events

•Results of Operations

•Liquidity and Capital Resources

•Summary of Critical Accounting Estimates

•Recent Accounting Standards

Overview

We are a Delaware limited liability company formed in 2014 by Cheniere. We provide clean, secure and affordable LNG to integrated energy companies, utilities and energy trading companies around the world. We aspire to conduct our business in a safe and responsible manner, delivering a reliable, competitive and integrated source of LNG to our customers.

LNG is natural gas (methane) in liquid form. The LNG we produce is shipped all over the world, turned back into natural gas (called “regasification”) and then transported via pipeline to homes and businesses and used as an energy source that is essential for heating, cooking and other industrial uses. Natural gas is a cleaner-burning, abundant and affordable source of energy. When LNG is converted back to natural gas, it can be used instead of coal, which reduces the amount of pollution traditionally produced from burning fossil fuels, like sulfur dioxide and particulate matter that enters the air we breathe. Additionally, compared to coal, it produces significantly fewer carbon emissions. By liquefying natural gas, we are able to reduce its volume by 600 times so that we can load it onto special LNG carriers designed to keep the LNG cold and in liquid form for efficient transport overseas.

We own and operate a natural gas liquefaction and export facility located near Corpus Christi, Texas (the “Corpus Christi LNG Terminal”) through CCL, which has natural gas liquefaction facilities consisting of three operational Trains for a total production capacity of approximately 15 mtpa of LNG, three LNG storage tanks of 10 Bcfe and two marine berths that can each accommodate vessels with nominal capacity of up to 266,000 cubic meters. Additionally, we are constructing an expansion of the Corpus Christi LNG Terminal (the “Corpus Christi Stage 3 Project”) for up to seven midscale Trains with an expected total production capacity over 10 mtpa of LNG.

CCL Stage III, CCL and CCP received approval from FERC in November 2019 to site, construct and operate the Corpus Christi Stage 3 Project. In March 2022, CCL Stage III issued limited notice to proceed to Bechtel Energy Inc. (“Bechtel”) to commence early engineering, procurement and site works. In June 2022, Cheniere’s board of directors (the “Board”) made a positive FID with respect to the Corpus Christi Stage 3 Project and issued a full notice to proceed with construction to Bechtel effective June 16, 2022. In connection with the positive FID, CCL Stage III, through which Cheniere was developing and constructing the Corpus Christi Stage 3 Project, was contributed to us from Cheniere (the “Contribution”) on June 15, 2022. Immediately following the Contribution, CCL Stage III was merged with and into CCL (the “Merger”), the surviving entity of the merger and our wholly owned subsidiary. Refer to Note 2—CCL Stage III Contribution and Merger for additional information on the Contribution and Merger of CCL Stage III.

We also own and operate through CCP a 21.5-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 existing operational Trains, midscale Trains, storage tanks and marine berths, the “Liquefaction Project”).

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Our customer arrangements provide us with significant, stable and long-term cash flows. We contract our anticipated production capacity under SPAs, in which our customers are generally required to pay a fixed fee with respect to the contracted volumes irrespective of their election to cancel or suspend deliveries of LNG cargoes, and under IPM agreements, in which the gas producer sells natural gas to us on a global LNG index price, less a fixed liquefaction fee, shipping and other costs. Our long-term customer arrangements form the foundation of our business and provide us with significant, stable, long-term cash flows. Through our SPAs and IPM agreements, we have contracted approximately 85% of the total anticipated production capacity from the Liquefaction Project with approximately 18 years of weighted average remaining life as of September 30, 2022. In March 2022, the DOE authorized the export of an additional 108.16 Bcf/yr of domestically produced LNG by vessel from the Corpus Christi LNG Terminal through December 31, 2050 to non-FTA countries, that were previously authorized for FTA countries only. For further discussion of the contracted future cash flows under our revenue arrangements, see the liquidity and capital resources disclosures in our annual report on Form 10-K for the fiscal year ended December 31, 2021.

We remain focused on operational excellence and customer satisfaction. Increasing demand for LNG has allowed us to expand our liquefaction infrastructure in a financially disciplined manner. We have increased available liquefaction capacity at our Liquefaction Project as a result of debottlenecking and other optimization projects. We hold a significant land position at the Corpus Christi LNG Terminal, which provides opportunity for further liquefaction capacity expansion. In August 2022, CCH and another subsidiary of Cheniere initiated the pre-filing review process with the FERC under the National Environmental Policy Act for an expansion adjacent to the Liquefaction Project consisting of two midscale Trains with an expected total production capacity of approximately 3 mtpa of LNG. The development of this site or other projects, including infrastructure projects in support of natural gas supply and LNG demand, will require, among other things, acceptable commercial and financing arrangements before we make a positive FID.

Additionally, we are committed to the responsible and proactive management of our most important environmental, social and governance (“ESG”) impacts, risks and opportunities. In June 2022, Cheniere published its 2021 Corporate Responsibility (“CR”) report, which details our approach and progress on ESG issues, including Cheniere’s collaboration with natural gas midstream companies, methane detection technology providers and leading academic institutions to implement quantification, monitoring, reporting and verification of greenhouse gas (“GHG”) emissions at natural gas gathering, processing, transmission and storage systems specific to our supply chain, as well as our contributions to energy security during a critical time in history. Additionally, Cheniere commenced providing Cargo Emissions Tags (“CE Tags”) to its long-term customers in June 2022. The CE Tags provide customers with estimated GHG emissions data associated with each LNG cargo produced at the Liquefaction Project and are provided for both FOB and DES LNG cargoes. Cheniere also joined the Oil and Gas Methane Partnership (“OGMP”) 2.0, the United Nations Environment Programme’s (“UNEP”) flagship oil and gas methane emissions reporting and mitigation initiative in October 2022. OGMP 2.0 is a comprehensive, measurement-based reporting framework intended to improve the accuracy and transparency of methane emissions reporting in the oil and gas sector. Cheniere’s CR report is available at cheniere.com/our-responsibility/reporting-center. 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, 2022 and through the filing date of this Form 10-Q include the following:

Strategic

•In July 2022, CCL entered into a long-term LNG SPA with PTT Global LNG Company Limited (“PTTGL”), under which PTTGL has agreed to purchase 20 million tonnes of LNG from CCL for twenty years beginning in 2026. The SPA calls for a combination of FOB and DES deliveries. The purchase price for LNG under the SPA is indexed to the Henry Hub price, plus a fixed liquefaction fee.

•In March 2022, CCL amended its existing long-term SPA with Engie SA (“Engie”), increasing the volume Engie has agreed to purchase from CCL to approximately 11 million tonnes of LNG on an FOB basis, and extending the term to approximately 20 years, which began in September 2021.

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•On June 15, 2022, Cheniere’s Board made a positive FID with respect to the Corpus Christi Stage 3 Project and issued a full notice to proceed with construction to Bechtel under the EPC contract to commence construction of the Corpus Christi Stage 3 Project effective June 16, 2022. In connection with the positive FID, CCL Stage III was contributed to us and subsequently merged with and into CCL, with CCL the surviving company of the merger and our wholly owned subsidiary. Notable contracts received by CCL in connection with the merger included the following:

◦IPM agreements held by CCL Stage III with ARC Resources U.S. Corp (“ARC U.S.”), EOG Resources, Inc. and Apache Corporation, each with terms of approximately 15 years, aggregating approximately 65 million tonnes, approximately 40 million tonnes of which commences with commercial operations of certain Trains of the Corpus Christi Stage 3 Project (the “Transferred IPM Agreements”);

◦SPAs held by Cheniere Marketing International LLP (“Cheniere Marketing”), a wholly owned subsidiary of Cheniere, or its subsidiaries with Foran Energy Group, Ltd, CPC Corporation, Sinochem Group Co. Ltd. and Polskie Gornictwo Naftowe I Gazownictwo S.A. (“PGNiG”), for which CCL entered into a newly executed agreement between CCL and PGNiG taking the place of a portion of the term of the existing agreement between PGNiG and Cheniere Marketing, aggregating approximately 105 million tonnes of LNG to be delivered through 2046; and

◦the aforementioned EPC contract with Bechtel for the Corpus Christi Stage 3 Project for a contract price of approximately $5.5 billion, subject to adjustment only by change order.

•In June 2022, CCL and Cheniere Marketing entered into an SPA for a term of 15 years for approximately 44 TBtu per annum of LNG associated with the IPM agreement between CCL and ARC U.S. referenced above.

Operational

•As of October 31, 2022, approximately 600 cumulative LNG cargoes totaling over 40 million tonnes of LNG have been produced, loaded and exported from the Liquefaction Project.

Financial

•In June 2022, CCH amended and restated its term loan credit facility (the “CCH Credit Facility”) and its working capital facility (the “CCH Working Capital Facility”) to, among other things, (1) increase the commitments to approximately $4.0 billion and $1.5 billion for the CCH Credit Facility and the CCH Working Capital Facility, respectively, which are intended to fund a portion of the cost of developing, constructing and operating the Corpus Christi Stage 3 Project, (2) extend the maturity of the CCH Credit Facility to the earlier of June 15, 2029 or two years after the substantial completion of the last Train of the Corpus Christi Stage 3 Project and extend the maturity of the CCH Working Capital Facility to June 15, 2027, (3) update the indexed interest rate to SOFR and (4) make certain other changes to the terms and conditions of each existing facility.

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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, 2022 and 2021:

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

Net loss

Our consolidated net loss was $3.5 billion and $4.8 billion for the three and nine months ended September 30, 2022, respectively, compared to net loss of $523 million and $263 million for the three and nine months ended September 30, 2021, respectively. Substantially all of the increase in net loss of $3.0 billion and $4.5 billion during the three and nine month comparable periods, respectively, was due to an increase in commodity derivatives losses from unfavorable changes in fair value and settlements of $3.2 billion and $4.8 billion between the periods, respectively, as further described below. Included in the derivative loss incurred during both the three and nine months ended September 30, 2022 was a loss incurred of $2.9 billion and $3.3 billion, respectively, associated with, and following the Contribution of, the Transferred IPM Agreements on June 15, 2022, primarily attributable to CCL’s lower credit risk profile relative to that of CCL Stage III, resulting in a higher derivative liability given reduced risk of CCL’s own nonperformance. Partially offsetting the increased net loss during the periods was increased gross margin per MMBtu on LNG delivered, due to higher margins on sales indexed to Henry Hub plus a mark up, generally at 115%, as a result of increases in the index, and increased volumes delivered, in part due to substantial completion and commencement of operations of Train 3 of the Liquefaction Project, which achieved substantial completion on March 26, 2021 (the “Train 3 Completion”).

Substantially all derivative losses relate to the use of commodity derivative instruments indexed to international LNG prices, primarily related to our IPM agreements. While operationally we utilize commodity derivatives to mitigate price volatility for commodities procured or sold over a period of time, as a result of significant appreciation in forward international LNG commodity curves during the three and nine months ended September 30, 2022, we recognized approximately $3.6 billion and $5.3 billion, respectively, of non-cash unfavorable changes in fair value attributed to positions indexed to such prices, including the losses of $2.9 billion and $3.3 billion, respectively on the Transferred IPM Agreements in connection with the contribution as described above.

Derivative instruments, which in addition to managing exposure to commodity-related marketing and price risks are utilized to manage exposure to changing interest rates volatility, are reported at fair value on our Consolidated Financial Statements. For commodity derivative instruments related to our IPM agreements, including those transferred to CCL during the nine months ended September 30, 2022 as described further in Overview of Significant Events, the underlying LNG sales being economically hedged are accounted for under the accrual method of accounting, whereby revenues expected to be derived from the future LNG sales are recognized only upon delivery or realization of the underlying transaction. Because the

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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.

As described in Overview of Significant Events, during the nine months ended September 30, 2022, we entered into SPAs with various counterparties for approximately 135 million tonnes of LNG. We expect our net income or loss in the future to be impacted by the revenues and associated expenses related to the commencement of these agreements.

Revenues

	Three Months Ended September 30,						Nine Months Ended September 30,
(in millions, except volumes)	2022		2021		Variance		2022		2021		Variance
LNG revenues	$	1,737	$	1,029	$	708	$	4,668	$	2,470	$	2,198
LNG revenues—affiliate	1,126		509		617		2,560		1,108		1,452
Total revenues	$	2,863	$	1,538	$	1,325	$	7,228	$	3,578	$	3,650
LNG volumes recognized as revenues (in TBtu) (1)	196		193		3		585		541		44

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

Total revenues increased by approximately $1.3 billion and $3.7 billion during the three and nine months ended September 30, 2022 from the comparable periods in 2021, respectively, primarily as a result of increased pricing due to appreciation in the Henry Hub index. Additionally, there were higher volumes of LNG delivered during the nine months ended September 30, 2022 compared to the nine months ended September 30, 2021 as a result of the additional production capacity of approximately 5 mtpa from the Train 3 Completion.

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 record any offsets to LNG terminal costs during the three and nine months ended September 30, 2022 and the three months ended September 30, 2021.

Also included in LNG revenues are sales of certain unutilized natural gas procured for the liquefaction process and gains and losses from certain commodity derivative instruments, which include the realized value associated with a portion of derivative instruments that settle through physical delivery. We recognized revenues of $81 million and $60 million during the three months ended September 30, 2022 and 2021, respectively, and $186 million and $150 million during the nine months ended September 30, 2022 and 2021, respectively, related to these transactions.

Operating costs and expenses

	Three Months Ended September 30,						Nine Months Ended September 30,
(in millions)	2022		2021		Variance		2022		2021		Variance
Cost of sales	$	5,929	$	1,608	$	4,321	$	10,712	$	2,593	$	8,119
Cost of sales—affiliate	47		12		35		95		49		46
Cost of sales—related party	—		53		(53)		—		124		(124)
Operating and maintenance expense	119		112		7		350		315		35
Operating and maintenance expense—affiliate	28		25		3		86		77		9
Operating and maintenance expense—related party	2		2		—		7		7		—
General and administrative expense	2		2		—		6		5		1
General and administrative expense—affiliate	11		8		3		27		20		7
Depreciation and amortization expense	112		110		2		334		309		25
Other	1		1		—		5		2		3
Total operating costs and expenses	$	6,251	$	1,933	$	4,318	$	11,622	$	3,501	$	8,121

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Total operating costs and expenses increased by $4.3 billion and $8.1 billion during the three and nine months ended September 30, 2022 from the comparable periods in 2021, respectively. 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 also includes change in fair value of commodity derivatives to secure natural gas feedstock for the Liquefaction Project, costs associated with the sale of certain unutilized natural gas procured for the liquefaction process, variable transportation and storage costs and other costs to convert natural gas into LNG. Substantially all of the increase in operating costs and expenses in both comparable periods was attributed to third party cost of sales, which increased by $4.3 billion and $8.1 billion during the three and nine months ended September 30, 2022 from the comparable 2021 periods, respectively, primarily as a result of unfavorable changes in our commodity derivatives to secure natural gas feedstock for the Liquefaction Project, as discussed in Net loss above, increased pricing of natural gas feedstock due to higher U.S. natural gas prices and, to a lesser extent, from increased volume of LNG delivered.

Operating and maintenance expense (including affiliate and related party) primarily includes costs associated with operating and maintaining the Liquefaction Project and also includes service and maintenance, insurance, regulatory costs and other operating costs. During the nine months ended September 30, 2022, operating and maintenance expense increased from the comparable period in 2021, primarily due to increased natural gas transportation and storage capacity demand charges following Train 3 Completion, as Train 3 was in operation for the full nine months ended September 30, 2022 as compared to six of the nine months ended September 30, 2021.

Depreciation and amortization expense increased during the nine months ended September 30, 2022 from the comparable period in 2021 primarily as a result of Train 3 Completion.

Other expense (income)

	Three Months Ended September 30,						Nine Months Ended September 30,
(in millions)	2022		2021		Variance		2022		2021		Variance
Interest expense, net of capitalized interest	$	106	$	117	$	(11)	$	340	$	328	$	12
Loss on modification or extinguishment of debt	6		9		(3)		36		9		27
Interest rate derivative loss (gain), net	—		2		(2)		(2)		3		(5)
Other income, net	(2)		—		(2)		(3)		—		(3)
Total other expense	$	110	$	128	$	(18)	$	371	$	340	$	31

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

	Three Months Ended September 30,				Nine Months Ended September 30,
	2022		2021		2022		2021
Total interest cost	$	119	$	118	$	356	$	355
Capitalized interest, including amounts capitalized as an allowance for funds used during construction	(13)		(1)		(16)		(27)
Total interest expense, net of capitalized interest	$	106	$	117	$	340	$	328

Interest expense, net of capitalized interest decreased during the three months ended September 30, 2022 from the comparable period in 2021 due to a higher portion of total interest costs eligible for capitalization following the issuance of full notice to proceed to Bechtel on the Corpus Christi Stage 3 Project in June 2022. Interest expense, net of capitalized interest increased during the nine months ended September 30, 2022 from the comparable period in 2021 due to a lower portion of total interest costs eligible for capitalization related to the Corpus Christi Stage 3 Project in 2022 as compared to Train 3 in 2021.

Loss on modification or extinguishment of debt decreased during the three months ended September 30, 2022 from the comparable period in 2021 and increased during the nine months ended September 30, 2022 from the comparable period in 2021, due to the amount of debt that was paid down in the respective periods prior to their scheduled maturities as further described in Liquidity and Capital Resources—Sources and Uses of Cash—Financing Cash Flows.

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Liquidity and Capital Resources

The following information describes our ability to generate and obtain adequate amounts of cash to meet our requirements in the short term and the long term. In the short term, we expect to meet our cash requirements using operating cash flows and available liquidity, consisting of restricted cash and cash equivalents and available commitments under our credit facilities. In the long term, we expect to meet our cash requirements using operating cash flows and other future potential sources of liquidity, which may include debt offerings. The table below provides a summary of our available liquidity (in millions).

	September 30, 2022
Restricted cash and cash equivalents designated for the Liquefaction Project	$	202
Available commitments under our credit facilities (1):
CCH Credit Facility	3,260
CCH Working Capital Facility	1,282
Total available liquidity	$	4,744

(1)Available commitments represent total commitments less loans outstanding and letters of credit issued under each of our credit facilities as of September 30, 2022. See Note 9—Debt of our Notes to Consolidated Financial Statements for additional information on our credit facilities and other debt instruments.

Our liquidity position subsequent to September 30, 2022 will be driven by future sources of liquidity and future cash requirements. Future sources of liquidity are expected to be composed of (1) cash receipts from executed contracts, under which we are contractually entitled to future consideration, and (2) additional sources of liquidity, from which we expect to receive cash although the cash is not underpinned by executed contracts. Future cash requirements are expected to be composed of (1) cash payments under executed contracts, under which we are contractually obligated to make payments, and (2) additional cash requirements, under which we expect to make payments although we are not contractually obligated to make the payments under executed contracts.

Revised Capital Allocation Plan

In September 2022, the board of directors of Cheniere approved a revised long-term capital allocation plan, which may involve the repayment, redemption or repurchase, on the open market or otherwise, of debt, including our senior notes. Pursuant to the capital allocation plan, in the three months ended September 30, 2022, Cheniere repurchased a total of $30 million of CCH’s Senior Secured Notes due 2029 and 2039 on the open market.

Corpus Christi Stage 3 Project

The following table summarizes the project completion and construction status of the Corpus Christi Stage 3 Project as of September 30, 2022:

Overall project completion percentage	12.2%
Completion percentage of:
Engineering	24.1%
Procurement	18.6%
Subcontract work	10.8%
Construction	0.8%
Date of expected substantial completion	2H 2025 - 1H 2027

Supplemental Guarantor Information

The 7.000% Senior Secured Notes due 2024, 5.875% Senior Secured Notes due 2025, 5.125% Senior Secured Notes due 2027, 3.700% Senior Secured Notes due 2029 and the series of Senior Secured Notes due 2039 with weighted average rate of 3.72% (collectively, the “CCH Senior Notes”) are jointly and severally guaranteed by each of our consolidated subsidiaries, CCL, CCP and Corpus Christi Pipeline GP, LLC (each a “Guarantor” and collectively, the “Guarantors”).

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

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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 is omitted herein because such information would not be materially different from our Consolidated Financial Statements.

Sources and Uses of Cash

The following table summarizes the sources and uses of our restricted cash and cash equivalents (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,
	2022		2021
Net cash provided by operating activities	$	1,234	$	1,094
Net cash used in investing activities	(618)		(223)
Net cash used in financing activities	(458)		(882)
Net increase (decrease) in restricted cash and cash equivalents	$	158	$	(11)

Operating Cash Flows

Operating cash flows during the nine months ended September 30, 2022 and 2021 were $1,234 million and $1,094 million, respectively. The $140 million increase between the periods was primarily related to cash used as working capital as a result of payment timing differences and timing of cash receipts from the sale of LNG cargoes. The increase was partially offset by a decrease in operating cash inflows due to higher costs associated with the sale of certain unutilized natural gas procured for the liquefaction process during the nine months ended September 30, 2022.

Investing Cash Flows

Our investing cash net outflows in both years primarily were for the construction costs for the Liquefaction Project. The $395 million increase in 2022 compared to 2021 was primarily due to spend during the nine months ended September 30, 2022 related to construction work performed by Bechtel for the Corpus Christi Stage 3 Project. We expect our capital expenditures to increase in future periods as construction work progresses on the Corpus Christi Stage 3 Project following the issuance of full notice to proceed to Bechtel in June 2022.

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Financing Cash Flows

The following table summarizes our financing activities (in millions):

	Nine Months Ended September 30,
	2022		2021
Proceeds from issuances of debt	$	440	$	750
Repayments of debt	(2,419)		(1,006)
Debt issuance and deferred financing costs	(44)		(3)
Debt extinguishment costs	(18)		(5)
Contributions	1,583		0
Distributions	—		(618)
Net cash used in financing activities	$	(458)	$	(882)

Debt Issuances and Related Financing Costs

The following table shows the issuances of debt, including intra-quarter borrowings (in millions):

	Nine Months Ended September 30,
	2022		2021
3.72% weighted average rate Senior Secured Notes due 2039	—		$	750
CCH Credit Facility	$	440	—
Total debt issuances	$	440	$	750

During the nine months ended September 30, 2022 and 2021, we paid debt issuance costs and other financing costs of $44 million and $3 million, respectively, related to the debt issuances above and amendment of credit facilities during the respective periods.

Debt Repayments and Related Extinguishment Costs

The following table shows the repayments of debt, including intra-quarter repayments (in millions):

	Nine Months Ended September 30,
	2022		2021
CCH Credit Facility	$	(2,169)	$	(866)
CCH Working Capital Facility	(250)		(140)
Total debt repayments	$	(2,419)	$	(1,006)

During the nine months ended September 30, 2022 and 2021, we paid debt modification or extinguishment costs of $18 million and $5 million, respectively, related to the these repayments.

Capital Contributions and Distributions

During the nine months ended September 30, 2022, we received cash capital contributions of $1.6 billion from Cheniere and during the nine months ended September 30, 2021 we made cash distributions of $618 million to Cheniere.

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, 2021.

Recent Accounting Standards 

For a summary of recently issued accounting standards, see Note 1—Nature of Operations and Basis of Presentation of our Notes to Consolidated Financial Statements.

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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, 2022				December 31, 2021
	Fair Value		Change in Fair Value		Fair Value		Change in Fair Value
Liquefaction Supply Derivatives	$	(8,838)	$	1,933	$	(1,212)	$	186

See Note 7—Derivative Instruments of our Notes to Consolidated Financial Statements for additional details about our derivative instruments.

ITEM 4.     CONTROLS AND PROCEDURES

We maintain a set of disclosure controls and procedures that are designed to ensure that information required to be disclosed by us in the reports voluntarily filed by us under the 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, 2021.

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, 2021.

ITEM 5.    OTHER INFORMATION

On November 1, 2022, CCL and Cheniere Marketing International LLP (“Cheniere Marketing”) entered into: (1) an SPA for approximately 0.85 mtpa of LNG associated with the previously announced IPM agreement between CCL and Apache Corporation; (2) an SPA for approximately 2.55 mtpa of LNG associated with the previously announced IPM agreement between CCL and EOG Resources, Inc.; and (3) letter agreements to make certain amendments to: (a) the SPA, dated December 30, 2019, between CCL and Cheniere Marketing; and (b) the SPA, dated June 15, 2022, between CCL and Cheniere Marketing.

On November 1, 2022, CCL and Cheniere Marketing entered into Shipping Services Agreements for the provision of certain shipping and transportation-related services associated with (1) the SPA between CCL and Foran Energy Group Co. Ltd. and (2) the SPA between Cheniere Marketing and CPC Corporation, Taiwan, which will be novated from Cheniere Marketing to CCL following substantial completion of Train 6 of the Corpus Christi Stage 3 Project.

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ITEM 6.    EXHIBITS

Exhibit No.	Description
10.1*	Change orders to the Lump Sum Turnkey Agreement for the Engineering, Procurement and Construction of the Corpus Christi Liquefaction Stage 3 Project, dated March 1, 2022, by and between CCL Stage III and Bechtel Oil Gas and Chemicals, Inc.: (i) the Change Order CO-00004 Currency Conversion, dated June 27, 2022, (ii) the Change Order CO-00005 Fuel Adjustment, dated July 15, 2022, (iii) the Change Order CO-00006 Removal of Laydown Yard Scope Option, dated August 2, 2022, (iv) the Change Order CO-00007 Removal of Air Bridges Scope Option, dated August 22, 2022, (v) the Change Order CO-00008 Acid Gas Flare K/O Drum, dated August 16, 2022, and (vi) the Change Order CO-00009 Package 7A (Without Site Work), dated August 16, 2022 (Portions of this exhibit have been omitted.)
10.2*	LNG Sale and Purchase Agreement (Apache Corporation), dated June 15, 2022, between CCL and Cheniere Marketing
10.3*	LNG Sale and Purchase Agreement (EOG Resources, Inc.), dated June 15, 2022, between CCL and Cheniere Marketing
10.4*	Letter Agreement regarding changes to the ARC IPM SPA, dated November 1, 2022, between CCL and Cheniere Marketing
10.5*	Letter Agreement regarding changes to the EOG Early IPM SPA, dated November 1, 2022, between CCL and Cheniere Marketing
10.6*	Shipping Services Agreement in relation to the CPC SPA, dated November 1, 2022, between CCL and Cheniere Marketing (Portions of this exhibit have been omitted.)
10.7*	Shipping Services Agreement in relation to the Foran SPA, dated November 1, 2022, between CCL and Cheniere Marketing (Portions of this exhibit have been omitted.)
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 March 11, 2022)
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 2, 2022	By:	/s/ Zach Davis
			Zach Davis
			President and Chief Financial Officer
			(Principal Executive and Financial Officer)
Date:	November 2, 2022	By:	/s/ David Slack
			David Slack
			Chief Accounting Officer
			(on behalf of the registrant and as principal accounting officer)

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