Cheniere Corpus Christi Holdings, LLC - FORM 10-Q

Cheniere Corpus Christi Holdings, LLC - FORM 10-Q - May 3, 2018

Attached files

Attached files

Cheniere Corpus Christi Holdings, LLC Reports

file	filename
EX-32.1 - EXHIBIT 32.1 - Cheniere Corpus Christi Holdings, LLC	exhibit321cch2018form10q1s.htm
EX-31.1 - EXHIBIT 31.1 - Cheniere Corpus Christi Holdings, LLC	exhibit311cch2018form10q1s.htm
EX-10.5 - EXHIBIT 10.5 - Cheniere Corpus Christi Holdings, LLC	exhibit105cch2018form10q1s.htm
EX-10.4 - EXHIBIT 10.4 - Cheniere Corpus Christi Holdings, LLC	exhibit104cch2018form10q1s.htm
EX-10.3 - EXHIBIT 10.3 - Cheniere Corpus Christi Holdings, LLC	exhibit103cch2018form10q1s.htm
EX-10.2 - EXHIBIT 10.2 - Cheniere Corpus Christi Holdings, LLC	exhibit102cch2018form10q1s.htm
EX-10.1 - EXHIBIT 10.1 - Cheniere Corpus Christi Holdings, LLC	exhibit101cch2018form10q1s.htm

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

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

For the quarterly period ended March 31, 2018

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

For the transition period from to

Cheniere Corpus Christi Holdings, LLC

(Exact name of registrant as specified in its charter)



Delaware	333-215435	47-1929160
(State or other jurisdiction of incorporation or organization)	(Commission File Number)	(I.R.S. Employer Identification No.)

700 Milam Street, Suite 1900 Houston, Texas		77002
(Address of principal executive offices)		(Zip Code)

(713) 375-5000

(Registrant’s telephone number, including area code)

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes x No ¨

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes x No ¨

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



Large accelerated filer ¨			Accelerated filer ¨
Non-accelerated filer x (Do not check if a smaller reporting company)			Smaller reporting company ¨
			Emerging growth company ¨

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ¨

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ¨ No x

Indicate the number of shares outstanding of the issuer’s classes of common stock, as of the latest practicable date: Not applicable

CHENIERE CORPUS CHRISTI HOLDINGS, LLC

TABLE OF CONTENTS



	Definitions	1
Part I. Financial Information
Item 1.	Consolidated Financial Statements	3
	Consolidated Balance Sheets	3
	Consolidated Statements of Operations	4
	Consolidated Statement of Member’s Equity	5
	Consolidated Statements of Cash Flows	6
	Notes to Consolidated Financial Statements	7

Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	24

Item 3.	Quantitative and Qualitative Disclosures about Market Risk	32

Item 4.	Controls and Procedures	32

Part II. Other Information
Item 1.	Legal Proceedings	33

Item 1A.	Risk Factors	33

Item 6.	Exhibits	34

	Signatures	35

DEFINITIONS

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

Common Industry and Other Terms



Bcf		billion cubic feet
Bcf/d		billion cubic feet per day
Bcf/yr		billion cubic feet per year
Bcfe		billion cubic feet equivalent
DOE		U.S. Department of Energy
EPC		engineering, procurement and construction
FERC		Federal Energy Regulatory Commission
FTA countries		countries with which the United States has a free trade agreement providing for national treatment for trade in natural gas
GAAP		generally accepted accounting principles in the United States
Henry Hub		the final settlement price (in USD per MMBtu) for the New York Mercantile Exchange’s Henry Hub natural gas futures contract for the month in which a relevant cargo’s delivery window is scheduled to begin
LIBOR		London Interbank Offered Rate
LNG		liquefied natural gas, a product of natural gas that, through a refrigeration process, has been cooled to a liquid state, which occupies a volume that is approximately 1/600th of its gaseous state
MMBtu		million British thermal units, an energy unit
mtpa		million tonnes per annum
non-FTA countries		countries with which the United States does not have a free trade agreement providing for national treatment for trade in natural gas and with which trade is permitted
SEC		U.S. Securities and Exchange Commission
SPA		LNG sale and purchase agreement
TBtu		trillion British thermal units, an energy unit
Train		an industrial facility comprised of a series of refrigerant compressor loops used to cool natural gas into LNG

Abbreviated Legal Entity Structure

The following diagram depicts our abbreviated legal entity structure as of March 31, 2018, 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.


PART I.	FINANCIAL INFORMATION


ITEM 1.	CONSOLIDATED FINANCIAL STATEMENTS

CHENIERE CORPUS CHRISTI HOLDINGS, LLC AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

(in thousands)



	March 31,		December 31,
	2018		2017
ASSETS	(unaudited)
Current assets
Cash and cash equivalents	$	—	$	—
Restricted cash	82,767		226,559
Advances to affiliate	36,267		31,486
Other current assets	1,341		1,494
Other current assets—affiliate	195		190
Total current assets	120,570		259,729

Property, plant and equipment, net	8,712,509		8,261,383
Debt issuance and deferred financing costs, net	93,980		98,175
Non-current derivative assets	49,364		2,469
Other non-current assets, net	38,488		38,124
Total assets	$	9,014,911	$	8,659,880

LIABILITIES AND MEMBER’S EQUITY
Current liabilities
Accounts payable	$	4,647	$	6,461
Accrued liabilities	134,394		258,060
Due to affiliates	9,761		23,789
Derivative liabilities	6,476		19,609
Other current liabilities	2		—
Total current liabilities	155,280		307,919

Long-term debt, net	6,937,188		6,669,476
Non-current derivative liabilities	475		15,209

Member’s equity	1,921,968		1,667,276
Total liabilities and member’s equity	$	9,014,911	$	8,659,880

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

CHENIERE CORPUS CHRISTI HOLDINGS, LLC AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF OPERATIONS

(in thousands)

(unaudited)



	Three Months Ended March 31,
	2018			2017
Revenues	$	—		$	—

Expenses
Operating and maintenance expense	966			706
Operating and maintenance expense—affiliate	466			53
Development expense	34			92
Development expense—affiliate	—			8
General and administrative expense	850			1,415
General and administrative expense—affiliate	403			311
Depreciation and amortization expense	371			134
Total expenses	3,090			2,719

Loss from operations	(3,090		)	(2,719		)

Other income (expense)
Derivative gain, net	68,849			1,000
Other expense	(67		)	(38		)
Total other income	68,782			962

Net income (loss)	$	65,692		$	(1,757	)

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

CHENIERE CORPUS CHRISTI HOLDINGS, LLC AND SUBSIDIARIES

CONSOLIDATED STATEMENT OF MEMBER’S EQUITY

(in thousands)

(unaudited)



	Cheniere CCH HoldCo I, LLC		Total Member’s Equity
Balance at December 31, 2017	$	1,667,276	$	1,667,276
Capital contributions	189,000		189,000
Net income	65,692		65,692
Balance at March 31, 2018	$	1,921,968	$	1,921,968

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

CHENIERE CORPUS CHRISTI HOLDINGS, LLC AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

(in thousands)

(unaudited)



	Three Months Ended March 31,
	2018			2017
Cash flows from operating activities
Net income (loss)	$	65,692		$	(1,757	)
Adjustments to reconcile net income (loss) to net cash used in operating activities:
Depreciation and amortization expense	371			134
Total gains on derivatives, net	(68,733		)	(1,000		)
Net cash used for settlement of derivative instruments	(6,292		)	(10,736		)
Changes in operating assets and liabilities:
Accounts payable and accrued liabilities	(345		)	303
Due to affiliates	(147		)	676
Other, net	(143		)	(306		)
Other, net—affiliate	(5		)	(566		)
Net cash used in operating activities	(9,602		)	(13,252		)

Cash flows from investing activities
Property, plant and equipment, net	(589,061		)	(738,797		)
Other	—			36,341
Net cash used in investing activities	(589,061		)	(702,456		)

Cash flows from financing activities
Proceeds from issuances of debt	266,000			548,000
Debt issuance and deferred financing costs	(129		)	(1,088		)
Capital contributions	189,000			41,029
Net cash provided by financing activities	454,871			587,941

Net decrease in cash, cash equivalents and restricted cash	(143,792		)	(127,767		)
Cash, cash equivalents and restricted cash—beginning of period	226,559			270,540
Cash, cash equivalents and restricted cash—end of period	$	82,767		$	142,773

Balances per Consolidated Balance Sheet:



	March 31, 2018
Cash and cash equivalents	$	—
Restricted cash	82,767
Total cash, cash equivalents and restricted cash	$	82,767

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

CHENIERE CORPUS CHRISTI HOLDINGS, LLC AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(unaudited)

NOTE 1—NATURE OF OPERATIONS AND BASIS OF PRESENTATION

We are developing and constructing a natural gas liquefaction and export facility at the Corpus Christi LNG terminal (the “Liquefaction Facility”), which is on nearly 2,000 acres of land that we own or control near Corpus Christi, Texas, and a 23-mile natural gas supply pipeline (the “Corpus Christi Pipeline” and together with the Liquefaction Facility, the “Liquefaction Project”) through wholly owned subsidiaries CCL and CCP, respectively. The Liquefaction Project is being developed in stages. The first stage includes Trains 1 and 2, two LNG storage tanks, one complete marine berth and a second partial berth and all of the Liquefaction Project’s necessary infrastructure facilities (“Stage 1”). The second stage includes Train 3, one LNG storage tank and the completion of the second partial berth (“Stage 2”). Trains 1 and 2 are currently under construction, and Train 3 is being commercialized and has all necessary regulatory approvals in place. The construction of the Corpus Christi Pipeline is expected to be completed in second quarter of 2018.

Basis of Presentation

The accompanying unaudited Consolidated Financial Statements of CCH have been prepared in accordance with GAAP for interim financial information and with Rule 10-01 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by GAAP for complete financial statements and should be read in conjunction with the Consolidated Financial Statements and accompanying notes included in our annual report on Form 10-K for the year ended December 31, 2017. In our opinion, all adjustments, consisting only of normal recurring adjustments necessary for a fair presentation, have been included. Certain reclassifications have been made to conform prior period information to the current presentation. The reclassifications did not have a material effect on our consolidated financial position, results of operations or cash flows.

On January 1, 2018, we adopted ASU 2014-09, Revenue from Contracts with Customers (Topic 606), and subsequent amendments thereto (“ASC 606”) using the full retrospective method. The adoption of ASC 606 represents a change in accounting principle that will provide financial statement readers with enhanced disclosures regarding the nature, amount, timing and uncertainty of revenue and cash flows arising from contracts with customers. The adoption of ASC 606 did not impact our previously reported financial statements in any prior period nor did it result in a cumulative effect adjustment to retained earnings.

Results of operations for the three months ended March 31, 2018 are not necessarily indicative of the results of operations that will be realized for the year ending December 31, 2018.

We are a disregarded entity for federal and state income tax purposes. Our taxable income or loss, which may vary substantially from the net income or loss reported on our Consolidated Statements of Operations, is included in the consolidated federal income tax return of Cheniere. The provision for income taxes, taxes payable and deferred income tax balances have been recorded as if we had filed all tax returns on a separate return basis from Cheniere.

NOTE 2—RESTRICTED CASH

Restricted cash consists of funds that are contractually restricted as to usage or withdrawal and have been presented separately from cash and cash equivalents on our Consolidated Balance Sheets. As of March 31, 2018 and December 31, 2017, restricted cash consisted of the following (in thousands):



	March 31,		December 31,
	2018		2017
Current restricted cash
Liquefaction Project	$	82,767	$	226,559

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.

CHENIERE CORPUS CHRISTI HOLDINGS, LLC AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—CONTINUED

(unaudited)

NOTE 3—PROPERTY, PLANT AND EQUIPMENT

Property, plant and equipment, net consists of LNG terminal costs and fixed assets, as follows (in thousands):



	March 31,			December 31,
	2018			2017
LNG terminal costs
LNG terminal construction-in-process	$	8,693,402		$	8,242,520
LNG site and related costs	13,844			13,844
Total LNG terminal costs	8,707,246			8,256,364
Fixed assets
Fixed assets	6,618			6,042
Accumulated depreciation	(1,355		)	(1,023		)
Total fixed assets, net	5,263			5,019
Property, plant and equipment, net	$	8,712,509		$	8,261,383

Depreciation expense was $0.3 million and $0.1 million during the three months ended March 31, 2018 and 2017, respectively.

NOTE 4—DERIVATIVE INSTRUMENTS

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


•	interest rate swaps (“Interest Rate Derivatives”) to protect against volatility of future cash flows and hedge a portion of the variable-rate interest payments on our credit facility (the “2015 CCH Credit Facility”) and


•	natural gas supply contracts for the commissioning and operation of the Liquefaction Project (“Liquefaction Supply Derivatives”).

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 hedging instruments, and changes in fair value are recorded within our Consolidated Statements of Operations to the extent not utilized for the commissioning process.

There have been no changes to our evaluation of and accounting for our derivative positions during the three months ended March 31, 2018. See Note 5—Derivative Instruments of our Notes to Consolidated Financial Statements in our annual report on Form 10-K for the year ended December 31, 2017 for additional information.

Interest Rate Derivatives

As of March 31, 2018, we had the following Interest Rate Derivatives outstanding:

Initial Notional Amount

Maximum Notional Amount

Effective Date

Maturity Date

Weighted Average Fixed Interest Rate Paid

Variable Interest Rate Received

Interest Rate Derivatives

$28.8 million

$4.9 billion

May 20, 2015

May 31, 2022

2.29%

One-month LIBOR

CHENIERE CORPUS CHRISTI HOLDINGS, LLC AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—CONTINUED

(unaudited)

Our Interest Rate Derivatives are categorized within Level 2 of the fair value hierarchy and are required to be measured at fair value on a recurring basis. We value our Interest Rate Derivatives using 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. The following table shows the fair value and location of our Interest Rate Derivatives on our Consolidated Balance Sheets (in thousands):



	March 31,			December 31,
Balance Sheet Location	2018			2017
Other current assets	$	263		$	—
Non-current derivative assets	49,096			2,469
Total derivative assets	49,359			2,469

Derivative liabilities	(6,476		)	(19,609		)
Non-current derivative liabilities	—			(15,118		)
Total derivative liabilities	(6,476		)	(34,727		)

Derivative asset (liability), net	$	42,883		$	(32,258	)

The following table shows the changes in the fair value and settlements of our Interest Rate Derivatives recorded in derivative gain, net on our Consolidated Statements of Operations during the three months ended March 31, 2018 and 2017 (in thousands):



	Three Months Ended March 31,
	2018		2017
Interest Rate Derivatives gain	$	68,849	$	1,000

Liquefaction Supply Derivatives

CCL has entered into index-based physical natural gas supply contracts to purchase natural gas for the commissioning and operation of the Liquefaction Project. The terms of the physical natural gas supply contracts range from approximately three to seven years, most of which commence upon the satisfaction of certain conditions precedent, if applicable, such as the date of first commercial delivery of specified Trains of the Liquefaction Project.

The fair value of the Liquefaction Supply Derivatives is predominantly driven by market commodity basis prices and our assessment of the associated conditions precedent, including evaluating whether the respective market is available as pipeline infrastructure is developed. Upon the satisfaction of conditions precedent, including completion and placement into service of relevant pipeline infrastructure to accommodate marketable physical gas flow, we recognize a gain or loss based on the fair value of the respective natural gas supply contracts.

Our Liquefaction Supply Derivatives are categorized within Level 3 of the fair value hierarchy and are required to be measured at fair value on a recurring basis. The fair value of our Liquefaction Supply Derivatives is determined using a market-based approach incorporating present value techniques, as needed, and is developed through the use of internal models which may be impacted by inputs that are unobservable in the marketplace.

The curves used to generate the fair value of the Liquefaction Supply Derivatives are based on basis adjustments applied to forward curves for a liquid trading point. In addition, there may be observable liquid market basis information in the near term, but terms of a Liquefaction Supply Derivatives contract may exceed the period for which such information is available, resulting in a Level 3 classification. In these instances, the fair value of the contract incorporates extrapolation assumptions made in the determination of the market basis price for future delivery periods in which applicable commodity basis prices were either not observable or lacked corroborative market data. As of March 31, 2018 and December 31, 2017, some of the Liquefaction Supply Derivatives existed within markets for which the pipeline infrastructure is under development to accommodate marketable physical gas flow. As of March 31, 2018 and December 31, 2017, CCL had secured up to approximately 2,057 TBtu and 2,024 TBtu, respectively, of natural gas feedstock through natural gas supply contracts supply contracts, a portion of which is subject to the achievement of certain project milestones and other conditions precedent. The forward notional natural gas buy position of the Liquefaction Supply Derivatives was approximately 1,052 TBtu and 1,019 TBtu as of March 31, 2018 and December 31, 2017, respectively.

CHENIERE CORPUS CHRISTI HOLDINGS, LLC AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—CONTINUED

(unaudited)

The Level 3 fair value measurements of our Liquefaction Supply Derivatives could be materially impacted by a significant change in certain natural gas market basis spreads due to the contractual notional amount represented by our Level 3 positions, which is a substantial portion of our overall Physical Liquefaction Supply portfolio. The following table includes quantitative information for the unobservable inputs for our Liquefaction Supply Derivatives as of March 31, 2018:



	Net Fair Value Liability (in thousands)	Valuation Approach	Significant Unobservable Input	Significant Unobservable Inputs Range
Liquefaction Supply Derivatives	$(207)	Market approach incorporating present value techniques	Basis Spread	$(0.725) - $0.050

The following table shows the changes in the fair value of our Level 3 Physical Liquefaction Supply Derivatives during the three months ended March 31, 2018 and 2017 (in thousands):



	Three Months Ended March 31,
	2018			2017
Balance, beginning of period	$	(91	)	$	—
Realized and mark-to-market gains:
Included in operating and maintenance expense	351			—
Purchases	(467		)	—
Balance, end of period	$	(207	)	$	—
Change in unrealized losses relating to instruments still held at end of period	$	351		$	—

Derivative assets and liabilities arising from our derivative contracts with the same counterparty are reported on a net basis, as all counterparty derivative contracts provide for net settlement. The use of derivative instruments exposes us to counterparty credit risk, or the risk that a counterparty will be unable to meet its commitments in instances when our derivative instruments are in an asset position. Additionally, we evaluate our own ability to meet our commitments in instances where our derivative instruments are in a liability position. Our derivative instruments are subject to contractual provisions which provide for the unconditional right of set-off for all derivative assets and liabilities with a given counterparty in the event of default.

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



	March 31,			December 31,
Balance Sheet Location	2018			2017
Non-current derivative assets	$	268		$	—

Non-current derivative liabilities	(475		)	(91		)

Derivative liability, net	$	(207	)	$	(91	)

The following table shows the changes in the fair value of our Liquefaction Supply Derivatives recorded in our Consolidated Statements of Operations during the three months ended March 31, 2018 and 2017 (in thousands):



		Three Months Ended March 31,
	Statement of Operations Location	2018		2017
Liquefaction Supply Derivatives loss	Operating and maintenance expense	$	116	$	—

CHENIERE CORPUS CHRISTI HOLDINGS, LLC AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—CONTINUED

(unaudited)

Balance Sheet Presentation

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



	Gross Amounts Recognized			Gross Amounts Offset in the Consolidated Balance Sheets			Net Amounts Presented in the Consolidated Balance Sheets
Offsetting Derivative Assets (Liabilities)	Gross Amounts Recognized			Gross Amounts Offset in the Consolidated Balance Sheets			Net Amounts Presented in the Consolidated Balance Sheets
As of March 31, 2018
Interest Rate Derivatives	$	49,446		$	(87	)	$	49,359
Interest Rate Derivatives	(6,945		)	469			(6,476		)
Liquefaction Supply Derivatives	347			(79		)	268
Liquefaction Supply Derivatives	(1,249		)	774			(475		)
As of December 31, 2017
Interest Rate Derivatives	$	2,808		$	(339	)	$	2,469
Interest Rate Derivatives	(34,747		)	20			(34,727		)
Liquefaction Supply Derivatives	(130		)	39			(91		)

NOTE 5—ACCRUED LIABILITIES

As of March 31, 2018 and December 31, 2017, accrued liabilities consisted of the following (in thousands):



	March 31,		December 31,
	2018		2017
Interest costs and related debt fees	$	64,335	$	136,283
Liquefaction Project costs	61,412		107,055
Other	8,647		14,722
Total accrued liabilities	$	134,394	$	258,060

NOTE 6—DEBT

As of March 31, 2018 and December 31, 2017, our debt consisted of the following (in thousands):



	March 31,			December 31,
	2018			2017
Long-term debt
7.000% Senior Secured Notes due 2024 (“2024 CCH Senior Notes”)	$	1,250,000		$	1,250,000
5.875% Senior Secured Notes due 2025 (“2025 CCH Senior Notes”)	1,500,000			1,500,000
5.125% Senior Secured Notes due 2027 (“2027 CCH Senior Notes”)	1,500,000			1,500,000
2015 CCH Credit Facility	2,750,737			2,484,737
Unamortized debt issuance costs	(63,549		)	(65,261		)
Total long-term debt, net	6,937,188			6,669,476

Current debt
$350 million CCH Working Capital Facility (“CCH Working Capital Facility”)	—			—
Total debt, net	$	6,937,188		$	6,669,476

CHENIERE CORPUS CHRISTI HOLDINGS, LLC AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—CONTINUED

(unaudited)

Credit Facilities

Below is a summary of our credit facilities outstanding as of March 31, 2018 (in thousands):



	2015 CCH Credit Facility		CCH Working Capital Facility
Original facility size	$	8,403,714	$	350,000
Less:
Outstanding balance	2,750,737		—
Commitments terminated	3,832,263		—
Letters of credit issued	—		288,575
Available commitment	$	1,820,714	$	61,425

Interest rate	LIBOR plus 2.25% or base rate plus 1.25% (1)		LIBOR plus 1.50% - 2.00% or base rate plus 0.50% - 1.00%
Maturity date	Earlier of May 13, 2022 or second anniversary of CCL Trains 1 and 2 completion date		December 14, 2021, with various terms for underlying loans


(1)	There is a 0.25% step-up for both LIBOR and base rate loans following the completion of Trains 1 and 2 of the Liquefaction Project as defined in the common terms agreement.

Restrictive Debt Covenants

As of March 31, 2018, we were in compliance with all covenants related to our debt agreements.

Interest Expense

Total interest expense consisted of the following (in thousands):



	Three Months Ended March 31,
	2018			2017
Total interest cost	$	101,195		$	80,188
Capitalized interest, including amounts capitalized as an Allowance for Funds Used During Construction	(101,195		)	(80,188		)
Total interest expense, net	$	—		$	—

Fair Value Disclosures

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



	March 31, 2018				December 31, 2017
	Carrying Amount		Estimated Fair Value		Carrying Amount		Estimated Fair Value
Senior notes (1)	$	4,250,000	$	4,441,250	$	4,250,000	$	4,590,625
Credit facilities (2)	2,750,737		2,750,737		2,484,737		2,484,737


(1)	Includes 2024 CCH Senior Notes, 2025 CCH Senior Notes and 2027 CCH Senior Notes (collectively, the “CCH Senior Notes”). The Level 2 estimated fair value was based on quotes obtained from broker-dealers or market makers of the CCH Senior Notes and other similar instruments.


(2)	Includes 2015 CCH Credit Facility and CCH Working Capital Facility. The Level 3 estimated fair value approximates the principal amount because the interest rates are variable and reflective of market rates and the debt may be repaid, in full or in part, at any time without penalty.

CHENIERE CORPUS CHRISTI HOLDINGS, LLC AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—CONTINUED

(unaudited)

NOTE 7—REVENUES FROM CONTRACTS WITH CUSTOMERS

We have entered into numerous SPAs with third party customers for the sale of LNG on a Free on Board (“FOB”) (delivered to the customer at the Corpus Christi LNG terminal) basis. Our customers generally purchase LNG for a price consisting of a fixed fee per MMBtu of LNG (a portion of which is subject to annual adjustment for inflation) plus a variable fee per MMBtu of LNG equal to approximately 115% of Henry Hub. The fixed fee component is the amount payable to us regardless of a cancellation or suspension of LNG cargo deliveries by the customers. The variable fee component is the amount generally payable to us only upon delivery of LNG plus all future adjustments to the fixed fee for inflation. The SPAs and contracted volumes to be made available under the SPAs are not tied to a specific Train; however, the term of each SPA generally commences upon the date of first commercial delivery of a specified Train.

Revenues from the sale of LNG are recognized at a point in time when the LNG is delivered to the customer, at the Corpus Christi LNG terminal, which is the point legal title, physical possession and the risks and rewards of ownership transfers to the customer. Each individual molecule of LNG is viewed as a separate performance obligation. The stated contract price (including both fixed and variable fees) per MMBtu in each LNG sales arrangement is representative of the stand-alone selling price for LNG at the time the sale was negotiated. We have concluded that the variable fees meet the optional exception for allocating variable consideration. As such, the variable consideration for these contracts is allocated to each distinct molecule of LNG and recognized when that distinct molecule of LNG is delivered to the customer. Because of the use of the optional exception, variable consideration related to the sale of LNG is also not included in the transaction price.

Fees received pursuant to SPAs are recognized as LNG revenues only after substantial completion of the respective Train. Prior to substantial completion, sales generated during the commissioning phase are offset against the cost of construction for the respective Train, as the production and removal of LNG from storage is necessary to test the facility and bring the asset to the condition necessary for its intended use.

Transaction Price Allocated to Future Performance Obligations

Because many of our sales contracts have long-term durations, we are contractually entitled to significant future consideration which we have not yet recognized as revenue. The following table discloses the aggregate amount of the transaction price that is allocated to performance obligations that have not yet been satisfied as of March 31, 2018:


(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 optional 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)

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 table above excludes all variable consideration under our SPAs. The amount of revenue from variable fees that is not included in the transaction price will vary based on the future prices of Henry Hub throughout the contract terms, to the extent customers elect to take delivery of their LNG, and adjustments to the consumer price index. Certain of our contracts contain additional variable consideration based on the outcome of contingent events and the movement of various indexes. The receipt of such variable consideration is considered constrained due to the uncertainty of ultimate pricing and receipt and we have not included such variable consideration in the transaction price.

CHENIERE CORPUS CHRISTI HOLDINGS, LLC AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—CONTINUED

(unaudited)

We have entered into contracts to sell LNG that are conditioned upon one or both of the parties achieving certain milestones such as reaching a final investment decision on a certain liquefaction Train or obtaining financing. These contracts are considered completed contracts for revenue recognition purposes and are included in the transaction price above.

We have elected the practical expedient to omit the disclosure of the transaction price allocated to future performance obligations and an explanation of when the entity expects to recognize the amount as revenue as of March 31, 2017.

NOTE 8—RELATED PARTY TRANSACTIONS

Below is a summary of our related party transactions as reported on our Consolidated Statements of Operations for the three months ended March 31, 2018 and 2017 (in thousands):



	Three Months Ended March 31,
	2018		2017
Operating and maintenance expense—affiliate
Services Agreements	$	233	$	—
Lease Agreements	233		53
Total operating and maintenance expense—affiliate	466		53

Development expense—affiliate
Services Agreements	—		8

General and administrative expense—affiliate
Services Agreements	403		311

We had $9.8 million and $23.8 million due to affiliates as of March 31, 2018 and December 31, 2017, respectively, under agreements with affiliates, as described below.

LNG Sale and Purchase Agreements

CCL has a fixed price 20-year SPA with Cheniere Marketing International LLP (“Cheniere Marketing”) (the “Cheniere Marketing Base SPA”) 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, (2) any LNG produced from the end of the commissioning period for Train 1 until the date of first commercial delivery of LNG from Train 1 and (3) any excess LNG produced by the Liquefaction Facility that is not committed to customers under third-party SPAs. 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.

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 Facility, no monthly fee payment is required except for reimbursement of operating expenses. After substantial completion of each Train of the Liquefaction Facility, for services performed while the Liquefaction Facility is operational, CCL will pay, in addition to the reimbursement of operating expenses, a fixed monthly fee of $125,000 (indexed for inflation) for services with respect to such Train.

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

CCL has an O&M Agreement (“CCL O&M Agreement”) with Cheniere LNG O&M Services, LLC (“O&M Services”), a wholly owned subsidiary of Cheniere, pursuant to which CCL receives all of the necessary services required to construct, operate and maintain the Liquefaction Facility. The services to be provided include, among other services, preparing and maintaining

CHENIERE CORPUS CHRISTI HOLDINGS, LLC AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—CONTINUED

(unaudited)

staffing plans, identifying and arranging for procurement of equipment and materials, overseeing contractors, administering various agreements and other services required to operate and maintain the Liquefaction Facility. Prior to the substantial completion of each Train of the Liquefaction Facility, no monthly fee payment is required except for reimbursement of operating expenses. After substantial completion of each Train of the Liquefaction Facility, for services performed while the Liquefaction Facility is operational, CCL will pay, in addition to the reimbursement of operating expenses, a fixed monthly fee of $125,000 (indexed for inflation) for services with respect to such Train.

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

Management Services Agreements (“MSAs”)

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

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

Lease Agreements

CCL has agreements with Cheniere Land Holdings, LLC (“Cheniere Land Holdings”), a wholly owned subsidiary of Cheniere, to lease approximately 85 acres of land owned by Cheniere Land Holdings for the Liquefaction Facility. The total annual lease payment is $0.4 million, and the terms of the agreements range from three to five years.

In February 2018, CCL entered into agreements with Cheniere Land Holdings which grants CCL a limited license to use certain roads on land owned by Cheniere Land Holdings for the Liquefaction Facility. The total annual lease payment is $0.1 million, and the term of each agreement is five years.

We had $0.2 million as of both March 31, 2018 and December 31, 2017 of prepaid expense related to these agreements in other current assets—affiliate.

Dredge Material Disposal Agreement

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

Tug Hosting Agreement

In February 2017, CCL entered into a tug hosting agreement with Corpus Christi Tug Services, LLC (“Tug Services”), a wholly owned subsidiary of Cheniere, to provide certain marine structures, support services and access necessary at the Liquefaction

CHENIERE CORPUS CHRISTI HOLDINGS, LLC AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—CONTINUED

(unaudited)

Facility for Tug Services to provide its customers with tug boat and marine services. Tug Services is required to reimburse CCL for any third party costs incurred by CCL in connection with providing the goods and services.

State Tax Sharing Agreements

CCL has a state tax sharing agreement with Cheniere. Under this agreement, Cheniere has agreed to prepare and file all state and local tax returns which CCL and Cheniere are required to file on a combined basis and to timely pay the combined state and local tax liability. If Cheniere, in its sole discretion, demands payment, CCL will pay to Cheniere an amount equal to the state and local tax that CCL would be required to pay if CCL’s state and local tax liability were calculated on a separate company basis. There have been no state and local taxes paid by Cheniere for which Cheniere could have demanded payment from CCL under this agreement; therefore, Cheniere has not demanded any such payments from CCL. The agreement is effective for tax returns due on or after May 2015.

CCP has a state tax sharing agreement with Cheniere. Under this agreement, Cheniere has agreed to prepare and file all state and local tax returns which CCP and Cheniere are required to file on a combined basis and to timely pay the combined state and local tax liability. If Cheniere, in its sole discretion, demands payment, CCP will pay to Cheniere an amount equal to the state and local tax that CCP would be required to pay if CCP’s state and local tax liability were calculated on a separate company basis. There have been no state and local taxes paid by Cheniere for which Cheniere could have demanded payment from CCP under this agreement; therefore, Cheniere has not demanded any such payments from CCP. The agreement is effective for tax returns due on or after May 2015.

Equity Contribution Agreements

Equity Contribution Agreement

We have an equity contribution agreement with Cheniere pursuant to which Cheniere has agreed to provide, directly or indirectly, at our request based on reaching specified milestones of the Liquefaction Project, cash contributions up to approximately $2.6 billion for Stage 1. As of March 31, 2018, we have received $1.9 billion in contributions from Cheniere under this agreement.

Early Works Equity Contribution Agreement

In December 2017, we entered into an early works equity contribution agreement with Cheniere pursuant to which Cheniere is obligated to provide, directly or indirectly, at our request based on amounts due and payable in respect of limited notices to proceed issued under the Stage 2 EPC Contract, cash contributions of up to $310.0 million to us for the early works related to Stage 2. The amount of cash contributions Cheniere provides may be increased by Cheniere in its sole discretion. As of March 31, 2018, we have received $135.0 million in contributions from Cheniere under this agreement.

NOTE 9—SUPPLEMENTAL CASH FLOW INFORMATION

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



	Three Months Ended March 31,
	2018		2017
Cash paid during the period for interest, net of amounts capitalized	$	64,656	$	2,052

The balance in property, plant and equipment, net funded with accounts payable and accrued liabilities (including affiliate) was $134.0 million and $213.4 million as of March 31, 2018 and 2017, respectively.

CHENIERE CORPUS CHRISTI HOLDINGS, LLC AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—CONTINUED

(unaudited)

NOTE 10—RECENT ACCOUNTING STANDARDS

The following table provides a brief description of a recent accounting standard that had not been adopted by us as of March 31, 2018:

CHENIERE CORPUS CHRISTI HOLDINGS, LLC AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—CONTINUED

(unaudited)

Additionally, the following table provides a brief description of recent accounting standards that were adopted by us during the reporting period:



Standard	Description	Date of Adoption	Effect on our Consolidated Financial Statements or Other Significant Matters
ASU 2014-09, Revenue from Contracts with Customers (Topic 606), and subsequent amendments thereto	This standard provides a single, comprehensive revenue recognition model which replaces and supersedes most existing revenue recognition guidance and requires an entity to recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. The standard requires that the costs to obtain and fulfill contracts with customers should be recognized as assets and amortized to match the pattern of transfer of goods or services to the customer if expected to be recoverable. The standard also requires enhanced disclosures. This guidance may be adopted either retrospectively to each prior reporting period presented subject to allowable practical expedients (“full retrospective approach”) or as a cumulative-effect adjustment as of the date of adoption (“modified retrospective approach”).	January 1, 2018	We adopted this guidance on January 1, 2018, using the full retrospective method. The adoption of this guidance represents a change in accounting principle that will provide financial statement readers with enhanced disclosures regarding the nature, amount, timing and uncertainty of revenue and cash flows arising from contracts with customers. The adoption of this guidance did not impact our previously reported financial statements in any prior period nor did it result in a cumulative effect adjustment to retained earnings. See Note 7—Revenues from Contracts with Customers for additional disclosures.
ASU 2016-16, Income Taxes (Topic 740): Intra-Entity Transfers of Assets Other Than Inventory	This standard requires the immediate recognition of the tax consequences of intercompany asset transfers other than inventory. This guidance may be early adopted, but only at the beginning of an annual period, and must be adopted using a modified retrospective approach.	January 1, 2018	The adoption of this guidance did not have an impact on our Consolidated Financial Statements or related disclosures.

CHENIERE CORPUS CHRISTI HOLDINGS, LLC AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—CONTINUED

(unaudited)

NOTE 11—SUPPLEMENTAL GUARANTOR INFORMATION

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

The following is condensed consolidating financial information for CCH (“Parent Issuer”) and the Guarantors. We did not have any non-guarantor subsidiaries as of March 31, 2018.



Condensed Consolidating Balance Sheet
March 31, 2018
(in thousands)

	Parent Issuer		Guarantors		Eliminations			Consolidated
ASSETS
Current assets
Cash and cash equivalents	$	—	$	—	$	—		$	—
Restricted cash	82,762		5		—			82,767
Advances to affiliate	—		36,267		—			36,267
Other current assets	342		999		—			1,341
Other current assets—affiliate	—		196		(1		)	195
Total current assets	83,104		37,467		(1		)	120,570

Property, plant and equipment, net	748,394		7,964,115		—			8,712,509
Debt issuance and deferred financing costs, net	93,980		—		—			93,980
Non-current derivative assets	49,096		268		—			49,364
Investments in subsidiaries	8,074,525		—		(8,074,525		)	—
Other non-current assets, net	—		38,488		—			38,488
Total assets	$	9,049,099	$	8,040,338	$	(8,074,526	)	$	9,014,911

LIABILITIES AND MEMBER’S EQUITY
Current liabilities
Accounts payable	$	139	$	4,508	$	—		$	4,647
Accrued liabilities	64,868		69,526		—			134,394
Due to affiliates	661		9,100		—			9,761
Derivative liabilities	6,476		—		—			6,476
Other current liabilities	—		2		—			2
Total current liabilities	72,144		83,136		—			155,280

Long-term debt, net	6,937,188		—		—			6,937,188
Non-current derivative liabilities	—		475		—			475
Deferred tax liability	—		3,880		(3,880		)	—

Member’s equity	2,039,767		7,952,847		(8,070,646		)	1,921,968
Total liabilities and member’s equity	$	9,049,099	$	8,040,338	$	(8,074,526	)	$	9,014,911

CHENIERE CORPUS CHRISTI HOLDINGS, LLC AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—CONTINUED

(unaudited)



Condensed Consolidating Balance Sheet
December 31, 2017
(in thousands)

	Parent Issuer		Guarantors		Eliminations			Consolidated
ASSETS
Current assets
Cash and cash equivalents	$	—	$	—	$	—		$	—
Restricted cash	226,559		—		—			226,559
Advances to affiliate	—		31,486		—			31,486
Other current assets	246		1,248		—			1,494
Other current assets—affiliate	—		191		(1		)	190
Total current assets	226,805		32,925		(1		)	259,729

Property, plant and equipment, net	651,687		7,609,696		—			8,261,383
Debt issuance and deferred financing costs, net	98,175		—		—			98,175
Non-current derivative assets	2,469		—		—			2,469
Investments in subsidiaries	7,648,111		—		(7,648,111		)	—
Other non-current assets, net	—		38,124		—			38,124
Total assets	$	8,627,247	$	7,680,745	$	(7,648,112	)	$	8,659,880

LIABILITIES AND MEMBER’S EQUITY
Current liabilities
Accounts payable	$	82	$	6,379	$	—		$	6,461
Accrued liabilities	136,389		121,671		—			258,060
Due to affiliates	—		23,789		—			23,789
Derivative liabilities	19,609		—		—			19,609
Total current liabilities	156,080		151,839		—			307,919

Long-term debt, net	6,669,476		—		—			6,669,476
Non-current derivative liabilities	15,118		91		—			15,209
Deferred tax liability	—		2,983		(2,983		)	—

Member’s equity	1,786,573		7,525,832		(7,645,129		)	1,667,276
Total liabilities and member’s equity	$	8,627,247	$	7,680,745	$	(7,648,112	)	$	8,659,880

CHENIERE CORPUS CHRISTI HOLDINGS, LLC AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—CONTINUED

(unaudited)



Condensed Consolidating Statement of Operations
Three Months Ended March 31, 2018
(in thousands)

	Parent Issuer			Guarantors			Eliminations			Consolidated

Revenues	$	—		$	—		$	—		$	—

Expenses
Operating and maintenance expense	—			966			—			966
Operating and maintenance expense—affiliate	—			466			—			466
Development expense	—			34			—			34
General and administrative expense	99			751			—			850
General and administrative expense—affiliate	—			403			—			403
Depreciation and amortization expense	13			358			—			371
Total expenses	112			2,978			—			3,090

Loss from operations	(112		)	(2,978		)	—			(3,090		)

Other income (expense)
Derivative gain, net	68,849			—			—			68,849
Other income (expense)	(68		)	4,476			(4,475		)	(67		)
Total other income	68,781			4,476			(4,475		)	68,782

Income before income taxes	68,669			1,498			(4,475		)	65,692
Income tax provision	—			(897		)	897			—
Net income	$	68,669		$	601		$	(3,578	)	$	65,692



Condensed Consolidating Statement of Operations
Three Months Ended March 31, 2017
(in thousands)

	Parent Issuer			Guarantors			Eliminations			Consolidated

Revenues	$	—		$	—		$	—		$	—

Expenses
Operating and maintenance expense	—			706			—			706
Operating and maintenance expense—affiliate	—			53			—			53
Development expense	—			92			—			92
Development expense—affiliate	—			8			—			8
General and administrative expense	311			1,104			—			1,415
General and administrative expense—affiliate	—			311			—			311
Depreciation and amortization expense	—			134			—			134
Total expenses	311			2,408			—			2,719

Loss from operations	(311		)	(2,408		)	—			(2,719		)

Other income (expense)
Derivative gain, net	1,000			—			—			1,000
Other income (expense)	(40		)	4,860			(4,858		)	(38		)
Total other income	960			4,860			(4,858		)	962

Net income (loss)	$	649		$	2,452		$	(4,858	)	$	(1,757	)

CHENIERE CORPUS CHRISTI HOLDINGS, LLC AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—CONTINUED

(unaudited)



Condensed Consolidating Statement of Cash Flows
Three Months Ended March 31, 2018
(in thousands)

	Parent Issuer			Guarantors			Eliminations			Consolidated
Cash flows from operating activities
Net income	$	68,669		$	601		$	(3,578	)	$	65,692
Adjustments to reconcile net income to net cash used in operating activities:
Depreciation and amortization expense	13			358			—			371
Allowance for funds used during construction	—			(4,475		)	4,475			—
Deferred income taxes	—			897			(897		)	—
Total losses (gains) on derivatives, net	(68,849		)	116			—			(68,733		)
Net cash used for settlement of derivative instruments	(6,292		)	—			—			(6,292		)
Changes in operating assets and liabilities:
Accounts payable and accrued liabilities	(111		)	(234		)	—			(345		)
Due to affiliates	—			(147		)	—			(147		)
Other, net	167			(310		)	—			(143		)
Other, net—affiliate	—			(5		)	—			(5		)
Net cash used in operating activities	(6,403		)	(3,199		)	—			(9,602		)

Cash flows from investing activities
Property, plant and equipment, net	(165,851		)	(423,210		)	—			(589,061		)
Investments in subsidiaries	(426,414		)	—			426,414			—
Net cash used in investing activities	(592,265		)	(423,210		)	426,414			(589,061		)

Cash flows from financing activities
Proceeds from issuances of debt	266,000			—			—			266,000
Debt issuance and deferred financing costs	(129		)	—			—			(129		)
Capital contributions	189,000			426,414			(426,414		)	189,000
Net cash provided by financing activities	454,871			426,414			(426,414		)	454,871

Net increase (decrease) in cash, cash equivalents and restricted cash	(143,797		)	5			—			(143,792		)
Cash, cash equivalents and restricted cash—beginning of period	226,559			—			—			226,559
Cash, cash equivalents and restricted cash—end of period	$	82,762		$	5		$	—		$	82,767

Balances per Condensed Consolidating Balance Sheet:



	March 31, 2018
	Parent Issuer		Guarantors		Eliminations		Consolidated
Cash and cash equivalents	$	—	$	—	$	—	$	—
Restricted cash	82,762		5		—		82,767
Total cash, cash equivalents and restricted cash	$	82,762	$	5	$	—	$	82,767

CHENIERE CORPUS CHRISTI HOLDINGS, LLC AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—CONTINUED

(unaudited)



Condensed Consolidating Statement of Cash Flows
Three Months Ended March 31, 2017
(in thousands)

	Parent Issuer			Guarantors			Eliminations			Consolidated
Cash flows from operating activities
Net income (loss)	$	649		$	2,452		$	(4,858	)	$	(1,757	)
Adjustments to reconcile net income (loss) to net cash used in operating activities:
Depreciation and amortization expense	—			134			—			134
Allowance for funds used during construction	—			(4,858		)	4,858			—
Total gains on derivatives, net	(1,000		)	—			—			(1,000		)
Net cash used for settlement of derivative instruments	(10,736		)	—			—			(10,736		)
Changes in operating assets and liabilities:
Accounts payable and accrued liabilities	269			34			—			303
Due to affiliates	—			676			—			676
Other, net	117			(423		)	—			(306		)
Other, net—affiliate	—			(566		)	—			(566		)
Net cash used in operating activities	(10,701		)	(2,551		)	—			(13,252		)

Cash flows from investing activities
Property, plant and equipment, net	(82,239		)	(656,558		)	—			(738,797		)
Investments in subsidiaries	(622,768		)	—			622,768			—
Other	—			36,341			—			36,341
Net cash used in investing activities	(705,007		)	(620,217		)	622,768			(702,456		)

Cash flows from financing activities
Proceeds from issuances of debt	548,000			—			—			548,000
Debt issuance and deferred financing costs	(1,088		)	—			—			(1,088		)
Capital contributions	41,029			622,768			(622,768		)	41,029
Net cash provided by financing activities	587,941			622,768			(622,768		)	587,941

Net decrease in cash, cash equivalents and restricted cash	(127,767		)	—			—			(127,767		)
Cash, cash equivalents and restricted cash—beginning of period	270,540			—			—			270,540
Cash, cash equivalents and restricted cash—end of period	$	142,773		$	—		$	—		$	142,773


ITEM 2.	MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Information Regarding Forward-Looking Statements

This quarterly report contains certain statements that are, or may be deemed to be, “forward-looking statements.” All statements, other than statements of historical or present facts or conditions, included herein or incorporated herein by reference are “forward-looking statements.” Included among “forward-looking statements” are, among other things:


•	statements that we expect to commence or complete construction of our proposed LNG terminal, liquefaction facilities, pipeline facilities or other projects, or any expansions or portions thereof, by certain dates, or at all;

•

statements regarding future levels of domestic and international natural gas production, supply or consumption or future levels of LNG imports into or exports from North America and other countries worldwide or purchases of natural gas, regardless of the source of such information, or the transportation or other infrastructure or demand for and prices related to natural gas, LNG or other hydrocarbon products;


•	statements regarding any financing transactions or arrangements, or our ability to enter into such transactions;


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


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


•	statements regarding our planned development and construction of additional Trains and pipeline, including the financing of such Trains;


•	statements that our Trains, when completed, will have certain characteristics, including amounts of liquefaction capacities;


•	statements regarding our business strategy, our strengths, our business and operation plans or any other plans, forecasts, projections, or objectives, including anticipated revenues, capital expenditures, maintenance and operating costs and cash flows, any or all of which are subject to change;


•	statements regarding legislative, governmental, regulatory, administrative or other public body actions, approvals, requirements, permits, applications, filings, investigations, proceedings or decisions; and


•	any other statements that relate to non-historical or future information.

All of these types of statements, other than statements of historical or present facts or conditions, are forward-looking statements. In some cases, forward-looking statements can be identified by terminology such as “may,” “will,” “could,” “should,” “expect,” “plan,” “project,” “intend,” “anticipate,” “believe,” “estimate,” “predict,” “potential,” “pursue,” “target,” “continue,” the negative of such terms or other comparable terminology. The forward-looking statements contained in this quarterly report are largely based on our expectations, which reflect estimates and assumptions made by our management. These estimates and assumptions reflect our best judgment based on currently known market conditions and other factors. Although we believe that such estimates are reasonable, they are inherently uncertain and involve a number of risks and uncertainties beyond our control. In addition, assumptions may prove to be inaccurate. We caution that the forward-looking statements contained in this quarterly report are not guarantees of future performance and that such statements may not be realized or the forward-looking statements or events may not occur. Actual results may differ materially from those anticipated or implied in forward-looking statements as a result of a variety of factors described in this quarterly report and in the other reports and other information that we file with the SEC, including those discussed under “Risk Factors” in our annual report on Form 10-K for the year ended December 31, 2017. All forward-looking statements attributable to us or persons acting on our behalf are expressly qualified in their entirety by these risk factors. These forward-looking statements speak only as of the date made, and other than as required by law, we undertake no obligation to update or revise any forward-looking statement or provide reasons why actual results may differ, whether as a result of new information, future events or otherwise.

Introduction

The following discussion and analysis presents management’s view of our business, financial condition and overall performance and should be read in conjunction with our Consolidated Financial Statements and the accompanying notes. This information is intended to provide investors with an understanding of our past performance, current financial condition and outlook for the future. Our discussion and analysis includes the following subjects:


•	Overview of Business


•	Overview of Significant Events


•	Liquidity and Capital Resources


•	Results of Operations


•	Off-Balance Sheet Arrangements


•	Summary of Critical Accounting Estimates


•	Recent Accounting Standards

Overview of Business

We were formed in September 2014 to develop, construct, operate, maintain and own a natural gas liquefaction and export facility (the “Liquefaction Facility”) and a 23-mile natural gas supply pipeline (the “Corpus Christi Pipeline” and together with the Liquefaction Facility, the “Liquefaction Project”) on nearly 2,000 acres of land that we own or control near Corpus Christi, Texas, through wholly-owned subsidiaries CCL and CCP, respectively.

The Liquefaction Project is being developed in stages for up to three Trains, with expected aggregate nominal production capacity, which is prior to adjusting for planned maintenance, production reliability and potential overdesign, of approximately 13.5 mtpa of LNG, three LNG storage tanks with aggregate capacity of approximately 10.1 Bcfe and two marine berths that can each accommodate vessels with nominal capacity of up to 266,000 cubic meters. The first stage (“Stage 1”) includes Trains 1 and 2, two LNG storage tanks, one complete marine berth and a second partial berth and all of the Liquefaction Project’s necessary infrastructure facilities. The second stage (“Stage 2”) includes Train 3, one LNG storage tank and the completion of the second partial berth. The Liquefaction Project also includes the Corpus Christi Pipeline that will interconnect the Corpus Christi LNG terminal with several interstate and intrastate natural gas pipelines. Stage 1 and the Corpus Christi Pipeline are currently under construction, and Train 3 is being commercialized and has all necessary regulatory approvals in place. The construction of the Corpus Christi Pipeline is expected to be completed in second quarter of 2018.

Overview of Significant Events

Our significant accomplishments since January 1, 2018 and through the filing date of this Form 10-Q include the following:

Strategic


•	In February 2018, CCL entered into a 20-year SPA with PetroChina International Company Limited, a subsidiary of China National Petroleum Corporation, for the sale of LNG beginning in 2023.

Financial

•

In April 2018, Cheniere engaged financial institutions to assist in the structuring and arranging of up to $6.4 billion of credit facilities for us through an amendment and upsize of our existing credit facilities (the “2015 CCH Credit Facility”), the proceeds of which will be used to fund a portion of the costs of developing, constructing and placing into service three Trains and related facilities of the Liquefaction Project, and the related pipeline being developed near Corpus Christi, Texas and for related business purposes.

Liquidity and Capital Resources

The following table provides a summary of our liquidity position at March 31, 2018 and December 31, 2017 (in thousands):



	March 31,		December 31,
	2018		2017
Cash and cash equivalents	$	—	$	—
Restricted cash designated for the Liquefaction Project	82,767		226,559
Available commitments under the following credit facilities:
2015 CCH Credit Facility	1,820,714		2,086,714
$350 million CCH Working Capital Facility (“CCH Working Capital Facility”)	61,425		186,422

For additional information regarding our debt agreements, see Note 6—Debt of our Notes to Consolidated Financial Statements in this quarterly report and Note 7—Debt of our Notes to Consolidated Financial Statements in our annual report on Form 10-K for the year ended December 31, 2017.

Liquefaction Facilities

The Liquefaction Project is being developed and constructed at the Corpus Christi LNG terminal. In December 2014, we received authorization from the FERC to site, construct and operate Stages 1 and 2 of the Liquefaction Project. The following table summarizes the overall project status of Stage 1 of the Liquefaction Project as of March 31, 2018:



	Stage 1
Overall project completion percentage	85.7%
Completion percentage of:
Engineering	100%
Procurement	100%
Subcontract work	68.9%
Construction	68.1%
Expected date of substantial completion	Train 1	1H 2019
	Train 2	2H 2019

Train 3 is being commercialized and has all necessary regulatory approvals in place. The DOE has authorized the export of domestically produced LNG by vessel from the Corpus Christi LNG terminal to FTA countries for a 25-year term and to non-FTA countries for a 20-year term up to a combined total of the equivalent of 767 Bcf/yr (approximately 15 mtpa) of natural gas. The terms of each of these authorizations begin on the earlier of the date of first export thereunder or the date specified in the particular order, which ranges from 7 to 10 years from the date the order was issued.

Customers

CCL entered into eight fixed-price SPAs with terms of at least 20 years (plus extension rights) with seven third parties to make available an aggregate amount of LNG that is between approximately 85% to 95% of the expected aggregate adjusted nominal production capacity of Trains 1 and 2. Under these eight SPAs, the customers will purchase LNG from CCL for a price consisting of a fixed fee per MMBtu of LNG (a portion of which is subject to annual adjustment for inflation) plus a variable fee per MMBtu of LNG equal to approximately 115% of Henry Hub. In certain circumstances, the customers may elect to cancel or suspend deliveries of LNG cargoes, in which case the customers would still be required to pay the fixed fee with respect to the contracted volumes that are not delivered as a result of such cancellation or suspension. We refer to the fee component that is applicable regardless of a cancellation or suspension of LNG cargo deliveries under the SPAs as the fixed fee component of the price under our SPAs. We refer to the fee component that is applicable only in connection with LNG cargo deliveries as the variable fee component of the price under our SPAs. The variable fee under CCL’s SPAs entered into in connection with the development of Stage 1 of the Liquefaction Project was sized at the time of entry into each SPA with the intent to cover the costs of gas purchases and transportation related to, and operating and maintenance costs to produce, the LNG to be sold under each such SPA. The SPAs and contracted volumes to be made available under the SPAs are not tied to a specific Train; however, the term of each SPA generally commences upon the date of first commercial delivery for Train 1 or Train 2, as specified in each SPA.

In aggregate, the annual fixed fee portion to be paid by the third-party SPA customers is approximately $550 million for Train 1, increasing to $1.4 billion upon the date of first commercial delivery of Train 2 of the Liquefaction Project, with the applicable fixed fees generally starting from the date of first commercial delivery from the applicable Train, as specified in each SPA.

CCL expects to sell LNG that it produces that is in excess of the contract quantities committed under CCL’s third-party SPAs to Cheniere Marketing International LLP, an indirect wholly-owned subsidiary of Cheniere.

Natural Gas Transportation, Storage and Supply

To ensure CCL is able to transport adequate natural gas feedstock to the Corpus Christi LNG terminal, it has entered into transportation precedent agreements to secure firm pipeline transportation capacity with CCP and certain third-party pipeline companies. CCL has entered into a firm storage services agreement with a third party to assist in managing volatility in natural gas needs for the Liquefaction Project. CCL has also entered into enabling agreements and long-term natural gas supply contracts with third parties, and will continue to enter into such agreements, in order to secure natural gas feedstock for the Liquefaction Project. As of March 31, 2018, CCL has secured up to approximately 2,057 TBtu of natural gas feedstock through long-term natural gas supply contracts, a portion of which is subject to the achievement of certain project milestones and other conditions precedent.

Construction

CCL entered into separate lump sum turnkey contracts with Bechtel Oil, Gas and Chemicals, Inc. (“Bechtel”) for the engineering, procurement and construction of Stages 1 and 2 of the Liquefaction Project under which Bechtel charges a lump sum for all work performed and generally bears project cost risk unless certain specified events occur, in which case Bechtel may cause CCL to enter into a change order, or CCL agrees with Bechtel to a change order.

The total contract price of the EPC contract for Stage 1, which does not include the Corpus Christi Pipeline, is approximately $7.8 billion, reflecting amounts incurred under change orders through March 31, 2018. Total expected capital costs for Stage 1 and the Corpus Christi Pipeline are estimated to be between $9.0 billion and $10.0 billion before financing costs, and between $11.0 billion and $12.0 billion after financing costs including, in each case, estimated owner’s costs and contingencies and total expected capital costs for the Corpus Christi Pipeline of between $350 million and $400 million. The total contract price of the EPC contract for Stage 2, which was amended and restated in December 2017, is approximately $2.4 billion.

Pipeline Facilities

In December 2014, the FERC issued a certificate of public convenience and necessity under Section 7(c) of the Natural Gas Act of 1938, as amended, authorizing CCP to construct and operate the Corpus Christi Pipeline. The Corpus Christi Pipeline is designed to transport 2.25 Bcf/d of natural gas feedstock required by the Liquefaction Project from the existing regional natural gas pipeline grid. The construction of the Corpus Christi Pipeline commenced in January 2017 and is expected to be completed in second quarter of 2018.

Final Investment Decision on Stage 2

We have issued limited notice to proceed to Bechtel for the commencement of certain engineering, procurement and construction activities for Stage 2 of the Liquefaction Project. Final investment decision and full notice to proceed for Stage 2 of the Liquefaction Project will be contingent on obtaining adequate financing to construct the facility.

Capital Resources

We expect to finance the construction costs of the Liquefaction Project from one or more of the following: project financing, operating cash flows from CCL and CCP and equity contributions from Cheniere. The following table provides a summary of our capital resources for the Liquefaction Project, excluding any equity contributions, at March 31, 2018 and December 31, 2017 (in thousands):



	March 31,		December 31,
	2018		2017
Senior notes (1)	$	4,250,000	$	4,250,000
Credit facilities outstanding balance (2)	2,750,737		2,484,737
Letters of credit issued (2)	288,575		163,578
Available commitments under credit facilities (2)	1,882,139		2,273,136
Total capital resources from borrowings and available commitments	$	9,171,451	$	9,171,451


(1)	Includes 7.000% Senior Secured Notes due 2024, 5.875% Senior Secured Notes due 2025 and 5.125% Senior Secured Notes due 2027 (collectively, the “CCH Senior Notes”).


(2)	Includes 2015 CCH Credit Facility and CCH Working Capital Facility.

For additional information regarding our debt agreements related to the Liquefaction Project, see Note 6—Debt of our Notes to Consolidated Financial Statements in this quarterly report and Note 7—Debt of our Notes to Consolidated Financial Statements in our annual report on Form 10-K for the year ended December 31, 2017.

CCH Senior Notes

The CCH Senior Notes are jointly and severally guaranteed by our subsidiaries, CCL, CCP and CCP GP (each a “Guarantor” and collectively, the “Guarantors”).

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

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

2015 CCH Credit Facility

In May 2015, we entered into the 2015 CCH Credit Facility. Our obligations under the 2015 CCH Credit Facility are secured by a first priority lien on substantially all of our assets and the assets of our subsidiaries and by a pledge by CCH HoldCo I of its limited liability company interests in us. As of March 31, 2018 and December 31, 2017, we had $1.8 billion and $2.1 billion of available commitments and $2.8 billion and $2.5 billion of outstanding borrowings under the 2015 CCH Credit Facility, respectively.

The principal of the loans made under the 2015 CCH Credit Facility must be repaid in quarterly installments, commencing on the earlier of (1) the first quarterly payment date occurring more than three calendar months following project completion and (2) a set date determined by reference to the date under which a certain LNG buyer linked to Train 2 of the Liquefaction Project is entitled to terminate its SPA for failure to achieve the date of first commercial delivery for that agreement. Scheduled repayments

will be based upon a 19-year tailored amortization, commencing the first full quarter after the project completion and designed to achieve a minimum projected fixed debt service coverage ratio of 1.55:1.00.

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

CCH Working Capital Facility

In December 2016, we entered into the $350 million CCH Working Capital Facility, which is intended to be used for loans (“CCH Working Capital Loans”), the issuance of letters of credit, as well as for swing line loans (“CCH Swing Line Loans”) for certain working capital requirements related to developing and placing into operation the Liquefaction Project. Loans under the CCH Working Capital Facility are guaranteed by the Guarantors. We may, from time to time, request increases in the commitments under the CCH Working Capital Facility of up to the maximum allowed under the Common Terms Agreement that was entered into concurrently with the 2015 CCH Credit Facility. We did not have any amounts outstanding under the CCH Working Capital Facility as of both March 31, 2018 and December 31, 2017 and we had $288.6 million and $163.6 million aggregate amount of letters of credit were issued as of March 31, 2018 and December 31, 2017, respectively.

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

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

Equity Contribution Agreement

In May 2015, we entered into an equity contribution agreement with Cheniere (the “Equity Contribution Agreement”) pursuant to which Cheniere agreed to provide tiered equity contributions of approximately $2.6 billion for Stage 1 and the Corpus Christi Pipeline. The first tier of equity funding of approximately $1.5 billion (the “First Tier Equity Funding”) was contributed to us concurrently with the closing of the 2015 CCH Credit Facility. The second tier of equity funding, up to a maximum amount of approximately $1.1 billion, will be contributed concurrently and pro rata with funding under our project financing debt starting on the date on which further disbursements of such debt would result in a senior debt to equity ratio of greater than 75/25 (the “Second Tier Pro Rata Equity Funding”). As of March 31, 2018, we have received $1.9 billion in contributions under the Equity Contribution Agreement, of which approximately $1.5 billion was the First Tier Equity Funding and approximately $0.4 billion was part of the Second Tier Pro Rata Equity Funding. On March 2, 2017, Cheniere entered into a $750 million senior secured revolving credit facility (the “CEI Revolving Credit Facility”). The proceeds of the CEI Revolving Credit Facility are available to Cheniere to back-stop its obligations under the Equity Contribution Agreement to provide the Second Tier Pro Rata Equity Funding to us and for general corporate purposes.

Early Works Equity Contribution Agreement

Restrictive Debt Covenants

As of March 31, 2018, we were in compliance with all covenants related to our debt agreements.

Sources and Uses of Cash

The following table summarizes the sources and uses of our cash, cash equivalents and restricted cash for the three months ended March 31, 2018 and 2017 (in thousands). 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.



	Three Months Ended March 31,
	2018			2017
Operating cash flows	$	(9,602	)	$	(13,252	)
Investing cash flows	(589,061		)	(702,456		)
Financing cash flows	454,871			587,941

Net decrease in cash, cash equivalents and restricted cash	(143,792		)	(127,767		)
Cash, cash equivalents and restricted cash—beginning of period	226,559			270,540
Cash, cash equivalents and restricted cash—end of period	$	82,767		$	142,773

Operating Cash Flows

Operating cash outflows during the three months ended March 31, 2018 and 2017 were $9.6 million and $13.3 million, respectively. The decrease in operating cash outflows in 2018 compared to 2017 was primarily related to decreased cash used for settlement of derivative instruments.

Investing Cash Flows

Investing cash outflows during the three months ended March 31, 2018 and 2017 were $589.1 million and $702.5 million, respectively, and are primarily used to fund the construction costs for Stage 1 of the Liquefaction Project. These costs are capitalized as construction-in-process until achievement of substantial completion. In addition to cash outflows for construction costs for the Liquefaction Project, we received $36.3 million during the three months ended March 31, 2017 from the return of collateral payments previously paid for the Liquefaction Project.

Financing Cash Flows

Financing cash inflows during the three months ended March 31, 2018 were $454.9 million, primarily as a result of:

•$266.0 million of borrowings under the 2015 CCH Credit Facility; and

•$189.0 million of equity contributions from Cheniere.

Financing cash inflows during the three months ended March 31, 2017 were $587.9 million, primarily as a result of:

•$548.0 million of borrowings under the 2015 CCH Credit Facility;

•$1.1 million of debt issuance costs related to up-front fees paid upon the closing of this transaction; and

•$41.0 million of equity contributions from Cheniere.

Results of Operations

Our consolidated net income was $65.7 million in the three months ended March 31, 2018, compared to a net loss of $1.8 million in the three months ended March 31, 2017. This $67.5 million increase in net income in 2018 was primarily a result of increased derivative gain, net associated with interest rate derivative activity.

Loss from operations



	Three Months Ended March 31,
(in thousands)	2018			2017			Change
Revenues	$	—		$	—		$	—

Operating and maintenance expense	966			706			260
Operating and maintenance expense—affiliate	466			53			413
Development expense	34			92			(58		)
Development expense—affiliate	—			8			(8		)
General and administrative expense	850			1,415			(565		)
General and administrative expense—affiliate	403			311			92
Depreciation and amortization expense	371			134			237
Total expenses	3,090			2,719			371

Loss from operations	$	(3,090	)	$	(2,719	)	$	(371	)

Our loss from operations increased $0.4 million during the three months ended March 31, 2018 from the three months ended March 31, 2017 primarily as a result of increased operating and maintenance expense from additional labor costs and professional fees.

Other expense (income)



	Three Months Ended March 31,
(in thousands)	2018			2017			Change
Derivative gain, net	$	(68,849	)	$	(1,000	)	$	(67,849	)
Other expense	67			38			29
Total other income	$	(68,782	)	$	(962	)	$	(67,820	)

Derivative gain, net increased from a net loss during the three months ended March 31, 2017 to a net gain during the three months ended March 31, 2018. The increase in derivative gain, net in 2018 as compared to derivative gain, net in 2017 was primarily due to a favorable shift in the long-term forward LIBOR curve between the periods.

Off-Balance Sheet Arrangements

As of March 31, 2018, we had no transactions that met the definition of off-balance sheet arrangements that may have a current or future material effect on our consolidated financial position or operating results.

Summary of Critical Accounting Estimates

The preparation of our Consolidated Financial Statements in conformity with GAAP requires management to make certain estimates and assumptions that affect the amounts reported in the Consolidated Financial Statements and the accompanying notes. There have been no significant changes to our critical accounting estimates from those disclosed in our annual report on Form 10-K for the year ended December 31, 2017.

Recent Accounting Standards

For descriptions of recently issued accounting standards, see Note 10—Recent Accounting Standards of our Notes to Consolidated Financial Statements.


ITEM 3.	QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Marketing and Trading Commodity Price Risk

We have entered into commodity derivatives consisting of natural gas supply contracts to secure natural gas feedstock for the Liquefaction Project (“Liquefaction Supply Derivatives”). In order to test the sensitivity of the fair value of the Liquefaction Supply Derivatives to changes in underlying commodity prices, management modeled a 10% change in the commodity price for natural gas for each delivery location as follows (in thousands):



	March 31, 2018					December 31, 2017
	Fair Value			Change in Fair Value		Fair Value			Change in Fair Value
Liquefaction Supply Derivatives	$	(207	)	$	19	$	(91	)	$	10

Interest Rate Risk

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



	March 31, 2018				December 31, 2017
	Fair Value		Change in Fair Value		Fair Value			Change in Fair Value
Interest Rate Derivatives	$	42,883	$	45,698	$	(32,258	)	$	43,994

See Note 4—Derivative Instruments 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 Securities Exchange Act of 1934, as amended (the “Exchange Act”), is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms. As of the end of the period covered by this report, we evaluated, under the supervision and with the participation of our management, including our President and Chief Financial Officer, the effectiveness of our disclosure controls and procedures pursuant to Rule 13a-15 of the Exchange Act. Based on that evaluation, our President and Chief Financial Officer concluded that our disclosure controls and procedures are effective.

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.

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 year ended December 31, 2017.


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 year ended December 31, 2017.


ITEM 6.	EXHIBITS



Exhibit No.		Description
10.1*		Consent for Amendment to the Common Security and Account Agreement, dated February 14, 2018, among the Company, as Company, CCL, CCP, and CCP GP, as Guarantors, the Senior Creditor Group Representatives party thereto from time to time, Société Générale, as Intercreditor Agent and Security Trustee, and Mizuho Bank, Ltd., as Account Bank
10.2*		Second Amendment to the Common Security and Account Agreement, dated February 14, 2018, among the Company, as Company, CCL, CCP, and CCP GP, as Guarantors, Société Générale as Security Trustee, and Mizuho Bank, Ltd., as Account Bank
10.3*		Consent for Execution of Precedent Agreement with the Natural Gas Pipeline Company of America LLC, dated February 14, 2018, among the Company, as Borrower, CCL, CCP, and CCP GP, as Guarantors, Société Générale, as Term Loan Facility Agent and Intercreditor Agent
10.4*		Change orders to the Fixed Price Separated Turnkey Agreement for the Engineering, Procurement and Construction of the Corpus Christi Stage 1 Liquefaction Facility, dated as of December 6, 2013, between CCL and Bechtel Oil, Gas and Chemicals, Inc.: (i) the Change Order CO-00038 Settlement of Various Scopes, dated November 10, 2017, (ii) the Change Order CO-00039 OSHA Handrails, East Jetty Scaffold, Attachment Y, and Insurance Provisional Sum, dated February 26, 2018, and (iii) the Change Order CO-00041 GE Service Bulletins and JT Valve Modifications, dated March 6, 2018 (Portions of this exhibit have been omitted and filed separately with the SEC pursuant to a request for confidential treatment.)
10.5*		Amendment No. 1 of LNG Sale and Purchase Agreement (FOB), dated February 27, 2018, between CCL (Seller) and Gas Natural Fenosa LNG GOM, Limited (Buyer)
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



*	Filed herewith.
**	Furnished herewith.

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:	May 3, 2018	By:	/s/ Michael J. Wortley
			Michael J. Wortley
			President and Chief Financial Officer
			(on behalf of the registrant and as principal financial officer)

Date:	May 3, 2018	By:	/s/ Leonard Travis
			Leonard Travis
			Chief Accounting Officer
			(on behalf of the registrant and as principal accounting officer)

Unsatisfied
Transaction Price
(in billions)

Weighted Average Recognition Timing (years) (1)

LNG revenues