Cheniere Energy, Inc. 10-K

ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA INDEX TO CONSOLIDATED FINANCIAL STATEMENTS CHENIERE ENERGY, INC. AND SUBSIDIARIES Management’s Report to the Stockholders of Cheniere Energy, Inc. 53 Reports of Independent Registered Public Accounting Firm 54 Consolidated Statements of Operations 57 Consolidated Balance Sheets 58 Consolidated Statements of Stockholders’ Equity (Deficit) 59 Consolidated Statements of Cash Flows 60 Notes to Consolidated Financial Statements 61 Note 1—Organization and Nature of Operations 61 Note 2—Summary of Significant Accounting Policies 61 Note 3—Restricted Cash and Cash Equivalents 69 Note 4—Accounts and Other Receivable s, Net of Current Expected Credit Losse s 69 Note 5—Inventory 69 Note 6—Property, Plant and Equipmen t, Net of Accumulated De preciation 70 Note 7—Derivative Instruments 71 Note 8—Other Non-current Asset s, Net 76 Note 9—Non-controlling Interest and Variable Interest Entities 77 Note 10—Accrued Liabilities 78 Note 11—Debt 79 Note 12—Leases 84 Note 13—Revenues from Contracts with Customers 85 Note 14—Related Party Transactions 88 Note 15—Income Taxes 89 Note 16—Share-based Compensation 92 Note 17—Employee Benefit Plan 94 Note 18—Net Income (Loss) per Share Attributable to Common Stockholders 95 Note 19— Stockholder s ’ Equity 96 Note 20—Commitments and Contingencies 96 Note 21—Customer Concentration 97 Note 22—Supplemental Cash Flow Information 98 52 MANAGEMENT’S REPORT TO THE STOCKHOLDERS OF CHENIERE ENERGY, INC. Management’s Report on Internal Control Over Financial Reporting As management, we are responsible for establishing and maintaining adequate internal control over financial reporting for Cheniere Energy, Inc. and its subsidiaries (“Cheniere”). In order to evaluate the effectiveness of internal control over financial reporting, as required by Section 404 of the Sarbanes-Oxley Act of 2002, we have conducted an assessment, including testing using the criteria in Internal Control—Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission (“COSO”). Cheniere’s system of internal control over financial reporting is designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with accounting principles generally accepted in the United States of America. Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements and, even when determined to be effective, can only provide reasonable assurance with respect to financial statement preparation and presentation. Based on our assessment, we have concluded that Cheniere maintained effective internal control over financial reporting as of December 31, 2021, based on criteria in Internal Control—Integrated Framework (2013) issued by the COSO. Cheniere’s independent registered public accounting firm, KPMG LLP, has issued an audit report on Cheniere’s internal control over financial reporting as of December 31, 2021, which is contained in this Form 10-K. Management’s Certifications The certifications of Cheniere’s Chief Executive Officer and Chief Financial Officer required by the Sarbanes-Oxley Act of 2002 have been included as Exhibits 31 and 32 in Cheniere’s Form 10-K. CHENIERE ENERGY, INC. By: /s/ Jack A. Fusco By: /s/ Zach Davis Jack A. Fusco Zach Davis President and Chief Executive Officer (Principal Executive Officer) Executive Vice President and Chief Financial Officer (Principal Financial Officer) 53 REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM To the Stockholders and Board of Directors Cheniere Energy, Inc.: Opinion on the Consolidated Financial Statements We have audited the accompanying consolidated balance sheets of Cheniere Energy, Inc. and subsidiaries (the Company) as of December 31, 2021 and 2020, the related consolidated statements of operations, stockholders’ equity (deficit), and cash flows for each of the years in the three-year period ended December 31, 2021, and the related notes and financial statement schedules I to II (collectively, the consolidated financial statements). In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2021 and 2020, and the results of its operations and its cash flows for each of the years in the three-year period ended December 31, 2021, in conformity with U.S. generally accepted accounting principles. We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the Company’s internal control over financial reporting as of December 31, 2021, based on criteria established in Internal Control—Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission, and our report dated February 23, 2022 expressed an unqualified opinion on the effectiveness of the Company’s internal control over financial reporting. Basis for Opinion These consolidated financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these consolidated financial statements based on our audits. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB. We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement, whether due to error or fraud. Our audits included performing procedures to assess the risks of material misstatement of the consolidated financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the consolidated financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements. We believe that our audits provide a reasonable basis for our opinion. Critical Audit Matter The critical audit matter communicated below is a matter arising from the current period audit of the consolidated financial statements that was communicated or required to be communicated to the audit committee and that: (1) relates to accounts or disclosures that are material to the consolidated financial statements and (2) involved our especially challenging, subjective, or complex judgments. The communication of a critical audit matter does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing a separate opinion on the critical audit matter or on the accounts or disclosures to which it relates. Fair value of the level 3 physical liquefaction supply derivatives As discussed in Notes 2 and 7 to the consolidated financial statements, the Company recorded fair value of level 3 physical liquefaction supply derivatives of $(4,036) million, as of December 31, 2021. The physical liquefaction supply derivatives consist of natural gas supply contracts for the operation of the liquefied natural gas facilities. The fair value of the level 3 physical liquefaction supply derivatives is developed using internal models that incorporate significant unobservable inputs. We identified the evaluation of the fair value of the level 3 physical liquefaction supply derivatives as a critical audit matter. Specifically, there is subjectivity in certain assumptions used to estimate the fair value, including assumptions for future prices of energy units for unobservable periods and liquidity. The following are the primary procedures we performed to address this critical audit matter. We evaluated the design and tested the operating effectiveness of certain internal controls related to the valuation of the level 3 physical liquefaction 54 supply derivatives. This included controls related to the assumptions for significant unobservable inputs and the fair value model. For a selection of level 3 liquefaction supply derivatives, we involved valuation professionals with specialized skills and knowledge who assisted in: • evaluating the future prices of energy units for observable periods by comparing to market data, including quoted or published forward prices • developing independent fair value estimates and comparing the independently developed estimates to the Company’s fair value estimates. In addition, we evaluated the Company’s assumptions for future prices of energy units for unobservable periods and liquidity by comparing them to market or third-party data, including adjustments for third party quoted transportation prices. /s/ KPMG LLP KPMG LLP We have served as the Company’s auditor since 2014. Houston, Texas February 23, 2022 55 REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM To the Stockholders and Board of Directors Cheniere Energy, Inc.: Opinion on Internal Control Over Financial Reporting We have audited Cheniere Energy, Inc. and subsidiaries’ (the Company) internal control over financial reporting as of December 31, 2021, based on criteria established in Internal Control—Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission. In our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of December 31, 2021, based on criteria established in Internal Control—Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission. We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the consolidated balance sheets of the Company as of December 31, 2021 and 2020, the related consolidated statements of operations, stockholders’ equity (deficit), and cash flows for each of the years in the three-year period ended December 31, 2021, and the related notes and financial statement schedules I to II (collectively, the consolidated financial statements), and our report dated February 23, 2022 expressed an unqualified opinion on those consolidated financial statements. Basis for Opinion The Company’s management is responsible for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting, included in the accompanying Management’s Report on Internal Control Over Financial Reporting. Our responsibility is to express an opinion on the Company’s internal control over financial reporting based on our audit. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB. We conducted our audit in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects. Our audit of internal control over financial reporting included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, and testing and evaluating the design and operating effectiveness of internal control based on the assessed risk. Our audit also included performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion. Definition and Limitations of Internal Control Over Financial Reporting A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements. Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate. /s/ KPMG LLP KPMG LLP Houston, Texas February 23, 2022 56 CHENIERE ENERGY, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF OPERATIONS (in millions, except per share data) Year Ended December 31, 2021 2020 2019 Revenues LNG revenues $ 15,395 $ 8,924 $ 9,246 Regasification revenues 269 269 266 Other revenues 200 165 218 Total revenues 15,864 9,358 9,730 Operating costs and expenses Cost of sales (excluding items shown separately below) 13,773 4,161 5,079 Operating and maintenance expense 1,444 1,320 1,154 Development expense 7 6 9 Selling, general and administrative expense 325 302 310 Depreciation and amortization expense 1,011 932 794 Impairment expense and loss on disposal of assets 5 6 23 Total operating costs and expenses 16,565 6,727 7,369 Income (loss) from operations ( 701 ) 2,631 2,361 Other expense Interest expense, net of capitalized interest ( 1,438 ) ( 1,525 ) ( 1,432 ) Loss on modification or extinguishment of debt ( 116 ) ( 217 ) ( 55 ) Interest rate derivative loss, net ( 1 ) ( 233 ) ( 134 ) Other expense, net ( 22 ) ( 112 ) ( 25 ) Total other expense ( 1,577 ) ( 2,087 ) ( 1,646 ) Income (loss) before income taxes and non-controlling interest ( 2,278 ) 544 715 Less: income tax provision (benefit) ( 713 ) 43 ( 517 ) Net income (loss) ( 1,565 ) 501 1,232 Less: net income attributable to non-controlling interest 778 586 584 Net income (loss) attributable to common stockholders $ ( 2,343 ) $ ( 85 ) $ 648 Net income (loss) per share attributable to common stockholders—basic $ ( 9.25 ) $ ( 0.34 ) $ 2.53 Net income (loss) per share attributable to common stockholders—diluted $ ( 9.25 ) $ ( 0.34 ) $ 2.51 Weighted average number of common shares outstanding—basic 253.4 252.4 256.2 Weighted average number of common shares outstanding—diluted 253.4 252.4 258.1 The accompanying notes are an integral part of these consolidated financial statements. 57 CHENIERE ENERGY, INC. AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS (1) (in millions, except share data) December 31, 2021 2020 ASSETS Current assets Cash and cash equivalents $ 1,404 $ 1,628 Restricted cash and cash equivalents 413 449 Accounts and other receivables, net of current expected credit losses 1,506 647 Inventory 706 292 Current derivative assets 55 32 Margin deposits 765 25 Other current assets 207 96 Total current assets 5,056 3,169 Property, plant and equipment, net of accumulated depreciation 30,288 30,421 Operating lease assets 2,102 759 Derivative assets 69 376 Goodwill 77 77 Deferred tax assets 1,204 489 Other non-current assets, net 462 406 Total assets $ 39,258 $ 35,697 LIABILITIES AND STOCKHOLDERS’ EQUITY Current liabilities Accounts payable $ 155 $ 35 Accrued liabilities 2,299 1,175 Current debt, net of discount and debt issuance costs 366 372 Deferred revenue 155 138 Current operating lease liabilities 535 161 Current derivative liabilities 1,089 313 Other current liabilities 94 2 Total current liabilities 4,693 2,196 Long-term debt, net of premium, discount and debt issuance costs 29,449 30,471 Operating lease liabilities 1,541 597 Finance lease liabilities 57 57 Derivative liabilities 3,501 151 Other non-current liabilities 50 7 Commitments and contingencies (see Note 20) Stockholders’ equity Preferred stock, $ 0.0001 par value, 5.0 million shares authorized, none issued — — Common stock, $ 0.003 par value, 480.0 million shares authorized; 275.2 million shares and 273.1 million shares issued at December 31, 2021 and 2020, respectively 1 1 Treasury stock: 21.6 million shares and 20.8 million shares at December 31, 2021 and 2020, respectively, at cost ( 928 ) ( 872 ) Additional paid-in-capital 4,377 4,273 Accumulated deficit ( 6,021 ) ( 3,593 ) Total stockholders' deficit ( 2,571 ) ( 191 ) Non-controlling interest 2,538 2,409 Total equity (deficit) ( 33 ) 2,218 Total liabilities and stockholders’ equity (deficit) $ 39,258 $ 35,697 (1) Amounts presented include balances held by our consolidated variable interest entity (“VIE”), CQP, as further discussed in Note 9 — Non-controlling Interest and Variable Interest Entity. As of December 31, 2021, total assets and liabilities of CQP, which are included in our Consolidated Balance Sheets, were $ 19.0 billion and $ 18.6 billion, respectively, including $ 0.9 billion of cash and cash equivalents and $ 0.1 billion of restricted cash and cash equivalents. The accompanying notes are an integral part of these consolidated financial statements. 58 CHENIERE ENERGY, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY (DEFICIT) (in millions) Total Stockholders’ Equity Common Stock Treasury Stock Additional Paid-in Capital Accumulated Deficit Non-controlling Interest Total Equity Shares Par Value Amount Shares Amount Balance at December 31, 2018 257.0 $ 1 12.8 $ ( 406 ) $ 4,035 $ ( 4,156 ) $ 2,455 $ 1,929 Vesting of restricted stock units 0.9 — — — — — — — Share-based compensation — — — — 131 — — 131 Shares withheld from employees related to share-based compensation, at cost ( 0.3 ) — 0.3 ( 19 ) — — — ( 19 ) Shares repurchased, at cost ( 4.0 ) — 4.0 ( 249 ) — — — ( 249 ) Net income attributable to non-controlling interest — — — — — — 584 584 Reacquisition of equity portion of convertible notes, net of tax — — — — 1 — — 1 Distributions and dividends to non-controlling interest — — — — — — ( 590 ) ( 590 ) Net income — — — — — 648 — 648 Balance at December 31, 2019 253.6 1 17.1 ( 674 ) 4,167 ( 3,508 ) 2,449 2,435 Vesting of restricted stock units and performance stock units 2.4 — — — — — — — Share-based compensation — — — — 114 — — 114 Issued shares withheld from employees related to share-based compensation, at cost ( 0.8 ) — 0.8 ( 43 ) — — — ( 43 ) Shares repurchased, at cost ( 2.9 ) — 2.9 ( 155 ) — — — ( 155 ) Net loss attributable to non-controlling interest — — — — — — 586 586 Reacquisition of equity component of convertible notes, net of tax — — — — ( 8 ) — — ( 8 ) Distributions and dividends to non-controlling interest — — — — — — ( 626 ) ( 626 ) Net loss — — — — — ( 85 ) — ( 85 ) Balance at December 31, 2020 252.3 1 20.8 ( 872 ) 4,273 ( 3,593 ) 2,409 2,218 Vesting of restricted stock units and performance stock units 2.1 — — — — — — — Share-based compensation — — — — 105 — — 105 Issued shares withheld from employees related to share-based compensation, at cost ( 0.7 ) — 0.7 ( 47 ) ( 1 ) — — ( 48 ) Shares repurchased, at cost ( 0.1 ) — 0.1 ( 9 ) — — — ( 9 ) Net income attributable to non-controlling interest — — — — — — 778 778 Distributions to non-controlling interest — — — — — — ( 649 ) ( 649 ) Dividends declared ($ 0.33 per common share) — — — — — ( 85 ) — ( 85 ) Net loss — — — — — ( 2,343 ) — ( 2,343 ) Balance at December 31, 2021 253.6 $ 1 21.6 $ ( 928 ) $ 4,377 $ ( 6,021 ) $ 2,538 $ ( 33 ) The accompanying notes are an integral part of these consolidated financial statements. 59 CHENIERE ENERGY, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS (in millions) Year Ended December 31, 2021 2020 2019 Cash flows from operating activities Net income (loss) $ ( 1,565 ) $ 501 $ 1,232 Adjustments to reconcile net income (loss) to net cash provided by operating activities: Depreciation and amortization expense 1,011 932 794 Share-based compensation expense 140 110 131 Non-cash interest expense 19 51 143 Amortization of debt issuance costs, premium and discount 72 114 103 Reduction of right-of-use assets 393 291 350 Loss on modification or extinguishment of debt 116 217 55 Total losses (gains) on derivatives, net 5,989 211 ( 400 ) Net cash provided by (used for) settlement of derivative instruments ( 1,579 ) 74 138 Impairment expense and loss on disposal of assets 5 6 23 Impairment expense and loss on equity method investments 24 126 88 Deferred taxes ( 715 ) 40 ( 521 ) Repayment of paid-in-kind interest related to repurchase of convertible notes ( 190 ) ( 911 ) — Other 4 2 — Changes in operating assets and liabilities: Accounts and other receivables, net of current expected credit losses ( 799 ) ( 154 ) 1 Inventory ( 409 ) 21 11 Margin deposits ( 741 ) ( 13 ) 6 Other current assets ( 101 ) ( 14 ) ( 24 ) Accounts payable and accrued liabilities 1,144 54 52 Deferred revenue 55 ( 23 ) 22 Operating lease liabilities ( 418 ) ( 277 ) ( 366 ) Other, net 14 ( 93 ) ( 5 ) Net cash provided by operating activities 2,469 1,265 1,833 Cash flows from investing activities Property, plant and equipment ( 966 ) ( 1,839 ) ( 3,056 ) Proceeds from sale of fixed assets 68 — — Investment in equity method investment — ( 100 ) ( 105 ) Other ( 14 ) ( 8 ) ( 2 ) Net cash used in investing activities ( 912 ) ( 1,947 ) ( 3,163 ) Cash flows from financing activities Proceeds from issuances of debt 5,911 7,823 6,434 Redemptions and repayments of debt ( 6,810 ) ( 6,940 ) ( 4,346 ) Debt issuance and other financing costs ( 53 ) ( 125 ) ( 51 ) Debt modification or extinguishment costs ( 82 ) ( 172 ) ( 15 ) Distributions to non-controlling interest ( 649 ) ( 626 ) ( 590 ) Payments related to tax withholdings for share-based compensation ( 48 ) ( 43 ) ( 19 ) Repurchase of common stock ( 9 ) ( 155 ) ( 249 ) Cash dividends to shareholders ( 85 ) — — Other 8 3 4 Net cash provided by (used in) financing activities ( 1,817 ) ( 235 ) 1,168 Net decrease in cash, cash equivalents and restricted cash and cash equivalents ( 260 ) ( 917 ) ( 162 ) Cash, cash equivalents and restricted cash and cash equivalents—beginning of period 2,077 2,994 3,156 Cash, cash equivalents and restricted cash and cash equivalents—end of period $ 1,817 $ 2,077 $ 2,994 Balances per Consolidated Balance Sheets: December 31, 2021 2020 Cash and cash equivalents $ 1,404 $ 1,628 Restricted cash and cash equivalents 413 449 Total cash, cash equivalents and restricted cash and cash equivalents $ 1,817 $ 2,077 The accompanying notes are an integral part of these consolidated financial statements. 60 CHENIERE ENERGY, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS NOTE 1— ORGANIZATION AND NATURE OF OPERATIONS We operate two natural gas liquefaction and export facilities at Sabine Pass and Corpus Christi (respectively, the “Sabine Pass LNG Terminal” and “Corpus Christi LNG Terminal”). CQP owns the Sabine Pass LNG Terminal located in Cameron Parish, Louisiana, which has natural gas liquefaction facilities consisting of six operational natural gas liquefaction Trains, with Train 6 achieving substantial completion on February 4, 2022, for a total production capacity of approximately 30 mtpa of LNG (the “SPL Project”). The Sabine Pass LNG Terminal also has operational regasification facilities that include five LNG storage tanks, vaporizers and two marine berths, with an additional marine berth that is under construction. CQP also owns a 94 -mile pipeline that interconnects the Sabine Pass LNG Terminal with a number of large interstate pipelines (the “Creole Trail Pipeline”) through its subsidiary, CTPL. As of December 31, 2021, we owned 100 % of the general partner interest and 48.6 % of the limited partner interest in CQP. The Corpus Christi LNG Terminal is located near Corpus Christi, Texas. We currently operate three Trains, for a total production capacity of approximately 15 mtpa of LNG. We also own a 21.5 -mile natural gas supply pipeline that interconnects the Corpus Christi LNG Terminal with several interstate and intrastate natural gas pipelines (the “Corpus Christi Pipeline” and together with the Trains, the “CCL Project”) through our subsidiary CCP, as part of the CCH Group. The CCL Project also contains three LNG storage tanks and two marine berths. Additionally, separate from the CCH Group, we are developing an expansion of the Corpus Christi LNG Terminal adjacent to the CCL Project (“Corpus Christi Stage 3”) through our subsidiary CCL Stage III, for up to seven midscale Trains with an expected total production capacity of over 10 mtpa of LNG. We received approval from FERC in November 2019 to site, construct and operate the expansion project. We remain focused on operational excellence and customer satisfaction. Increasing demand for LNG has allowed us to expand our liquefaction infrastructure in a financially disciplined manner. We have increased available liquefaction capacity at the SPL Project and the CCL Project (collectively, the “Liquefaction Projects”) as a result of debottlenecking and other optimization projects. We hold significant land positions at both the Sabine Pass LNG Terminal and the Corpus Christi LNG Terminal which provide opportunity for further liquefaction capacity expansion. The development of these sites or other projects, including infrastructure projects in support of natural gas supply and LNG demand, will require, among other things, acceptable commercial and financing arrangements before we make a final investment decision (“FID”). NOTE 2— SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Basis of Presentation Our Consolidated Financial Statements have been prepared in accordance with GAAP. The Consolidated Financial Statements include the accounts of Cheniere, its subsidiaries and affiliates in which we hold a controlling interest, reflecting ownership of a majority of the voting interest, as of the financial statement date. Additionally, we consolidate a VIE under certain criteria discussed further below. All intercompany accounts and transactions have been eliminated in consolidation. When necessary, reclassifications that are not material to our Consolidated Financial Statements are made to prior period financial information to conform to the current year presentation. VIEs We make a determination at the inception of each arrangement whether an entity in which we have made an investment or in which we have other variable interests is considered a VIE. Generally, an entity is a VIE if either (1) the entity does not have sufficient equity at risk to finance its activities without additional subordinated financial support from other parties, (2) the entity’s investors lack any characteristics of a controlling financial interest or (3) which was established with non-substantive voting. We consolidate VIEs when we are deemed to be the primary beneficiary. The primary beneficiary of a VIE is generally the party that both: (1) has the power to make decisions that most significantly affect the economic performance of the VIE and (2) has the obligation to absorb losses or the right to receive benefits that in either case could potentially be significant to the 61 CHENIERE ENERGY, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—CONTINUED VIE. If we are not deemed to be the primary beneficiary of a VIE, we account for the investment or other variable interests in a VIE in accordance with applicable GAAP. Non-controlling Interests When we consolidate an entity, we include 100% of the assets, liabilities, revenues and expenses of the subsidiary in our Consolidated Financial Statements. For those entities that we consolidate in which our ownership is less than 100%, we record a non-controlling interest as a component of equity on our Consolidated Balance Sheets, which represents the third party ownership in the net assets of the respective consolidated subsidiary. Additionally, the portion of the net income or loss attributable to the non-controlling interest is reported as net income (loss) attributable to non-controlling interest on our Consolidated Statements of Operations. Changes in our ownership interests in an entity that do not result in deconsolidation are generally recognized within equity. See Note 9—Non-controlling Interest and Variable Interest Entities for additional details about our non-controlling interest. Equity Method Investments Investments in non-controlled entities, which Cheniere has the ability to exercise significant influence over operating and financial policies are accounted for using the equity method of accounting, with our share of earnings or losses reported in other income (expense) on our Consolidated Statements of Operations. In applying the equity method of accounting, the investments are initially recognized at cost, and subsequently adjusted for our proportionate share of earnings, losses and distributions. Investments accounted for using the equity method of accounting are reported as a component of other noncurrent assets. See Note 8 — Other Non-Current Assets , N et for additional details about our equity method investments. Use of Estimates The preparation of Consolidated Financial Statements in conformity with GAAP requires management to make certain estimates and assumptions that affect the amounts reported in the Consolidated Financial Statements and the accompanying notes. Management evaluates its estimates and related assumptions regularly, including those related to fair value measurements of derivatives and other instruments, useful lives of property, plant and equipment, certain valuations including leases and asset retirement obligations (“AROs”) and recoverability of deferred tax assets, each as further discussed under the respective sections within this note. Changes in facts and circumstances or additional information may result in revised estimates, and actual results may differ from these estimates. Fair Value Measurements Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants. Hierarchy Levels 1, 2 and 3 are terms for the priority of inputs to valuation approaches used to measure fair value. Hierarchy Level 1 inputs are quoted prices in active markets for identical assets or liabilities. Hierarchy Level 2 inputs are inputs that are directly or indirectly observable for the asset or liability, other than quoted prices included within Level 1. Hierarchy Level 3 inputs are inputs that are not observable in the market. In determining fair value, we use observable market data when available, or models that incorporate observable market data. In addition to market information, we incorporate transaction-specific details that, in management’s judgment, market participants would take into account in measuring fair value. We maximize the use of observable inputs and minimize our use of unobservable inputs in arriving at fair value estimates. Recurring fair-value measurements are performed for derivative instruments, as disclosed in Note 7—Derivative Instruments , and liability-classified share-based compensation awards, as disclosed in Note 16 — S hare-Ba sed Compen s ation . The carrying amount of cash and cash equivalents, restricted cash and cash equivalents, accounts receivable and accounts payable reported on the Consolidated Balance Sheets approximates fair value. The fair value of debt is the estimated amount we would have to pay to repurchase our debt in the open market, including any premium or discount attributable to the difference between the stated interest rate and market interest rate at each balance sheet date. Debt fair values, as disclosed in Note 11—Debt , are based on quoted market prices for identical instruments, if available, or based on valuations of similar debt instruments using observable or unobservable inputs. 62 CHENIERE ENERGY, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—CONTINUED Revenue Recognition We recognize revenues when we transfer control of promised goods or services to our customers in an amount that reflects the consideration to which we expect to be entitled to in exchange for those goods or services. See Note 13—Revenues from Contracts with Customers for further discussion of our revenue streams and accounting policies related to revenue recognition. Cash and Cash Equivalents We consider all highly liquid investments with an original maturity of three months or less to be cash equivalents. Restricted Cash and Cash Equivalents Restricted cash and cash equivalents consist of funds that are contractually or legally restricted as to usage or withdrawal and have been presented separately from cash and cash equivalents on our Consolidated Balance Sheets. Accounts and Other Receivables Accounts and other receivables are reported net of any current expected credit losses. Current expected credit losses consider the risk of loss based on past events, current conditions and reasonable and supportable forecasts. A counterparty’s ability to pay is assessed through a credit review process that considers payment terms, the counterparty’s established credit rating or our assessment of the counterparty’s credit worthiness, contract terms, payment status, and other risks or available financial assurances. Adjustments to current expected credit losses are recorded in selling, general and administrative expense in our Consolidated Statements of Operations. As of both December 31, 2021 and 2020, we had current expected credit losses on our accounts and other receivables of $ 5 million. Inventory LNG and natural gas inventory are recorded at the lower of weighted average cost and net realizable value. Materials and other inventory are recorded at the lower of cost and net realizable value. Inventory is charged to expense when sold, or, for certain qualifying costs, capitalized to property, plant and equipment when issued, primarily using the weighted average method. Property, Plant and Equipment Property, plant and equipment are recorded at cost. Expenditures for construction and commissioning activities, major renewals and betterments that extend the useful life of an asset are capitalized, while expenditures for maintenance and repairs (including those for planned major maintenance projects) to maintain property, plant and equipment in operating condition are generally expensed as incurred. Generally, we begin capitalizing the costs of our LNG terminals once the individual project meets the following criteria: (1) regulatory approval has been received, (2) financing for the project is available and (3) management has committed to commence construction. Prior to meeting these criteria, most of the costs associated with a project are expensed as incurred. These costs primarily include professional fees associated with preliminary front-end engineering and design work, costs of securing necessary regulatory approvals and other preliminary investigation and development activities related to our LNG terminals. Generally, costs that are capitalized prior to a project meeting the criteria otherwise necessary for capitalization include: land acquisition costs, detailed engineering design work and certain permits that are capitalized as other non-current assets. We realize offsets to LNG terminal costs for sales of commissioning cargoes that were earned or loaded prior to the start of commercial operations of the respective Train during the testing phase for its construction. We depreciate our property, plant and equipment using the straight-line depreciation method over assigned useful lives. Refer to Note 6 — Prope rty, Plant and Equipment, N et of Accumulated Depreciation for additional discussion of our useful lives 63 CHENIERE ENERGY, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—CONTINUED by asset category. Upon retirement or other disposition of property, plant and equipment, the cost and related accumulated depreciation are removed from the account, and the resulting gains or losses are recorded in impairment expense and loss (gain) on disposal of assets. Management tests property, plant and equipment for impairment whenever events or changes in circumstances have indicated that the carrying amount of property, plant and equipment might not be recoverable. Assets are grouped at the lowest level for which there are identifiable cash flows that are largely independent of the cash flows of other groups of assets for purposes of assessing recoverability. Recoverability generally is determined by comparing the carrying value of the asset to the expected undiscounted future cash flows of the asset. If the carrying value of the asset is not recoverable, the amount of impairment loss is measured as the excess, if any, of the carrying value of the asset over its estimated fair value. We recorded $ 8 million of impairments related to property, plant and equipment during the year ended December 31, 2021. We did no t record any impairments related to property, plant and equipment during the years ended December 31, 2020 and 2019. Interest Capitalization We capitalize interest costs during the construction period of our LNG terminals and related assets as construction-in-process. Upon commencement of operations, these costs are transferred out of construction-in-process into terminal and interconnecting pipeline facilities assets and are amortized over the estimated useful life of the asset. Regulated Natural Gas Pipelines The Creole Trail Pipeline and Corpus Christi Pipeline are subject to the jurisdiction of the FERC in accordance with the Natural Gas Act of 1938 and the Natural Gas Policy Act of 1978. The economic effects of regulation can result in a regulated company recording as assets those costs that have been or are expected to be approved for recovery from customers, or recording as liabilities those amounts that are expected to be required to be returned to customers, in a rate-setting process in a period different from the period in which the amounts would be recorded by an unregulated enterprise. Accordingly, we record assets and liabilities that result from the regulated rate-making process that may not be recorded under GAAP for non-regulated entities. We continually assess whether regulatory assets are probable of future recovery by considering factors such as applicable regulatory changes and recent rate orders applicable to other regulated entities. Based on this continual assessment, we believe the existing regulatory assets are probable of recovery. These regulatory assets and liabilities are primarily classified in our Consolidated Balance Sheets as other assets and other liabilities. We periodically evaluate their applicability under GAAP and consider factors such as regulatory changes and the effect of competition. If cost-based regulation ends or competition increases, we may have to write off the associated regulatory assets and liabilities. Items that may influence our assessment are: • inability to recover cost increases due to rate caps and rate case moratoriums; • inability to recover capitalized costs, including an adequate return on those costs through the rate-making process and the FERC proceedings; • excess capacity; • increased competition and discounting in the markets we serve; and • impacts of ongoing regulatory initiatives in the natural gas industry. Natural gas pipeline costs include amounts capitalized as an Allowance for Funds Used During Construction (“AFUDC”). The rates used in the calculation of AFUDC are determined in accordance with guidelines established by the FERC. AFUDC represents the cost of debt and equity funds used to finance our natural gas pipeline additions during construction. AFUDC is capitalized as a part of the cost of our natural gas pipelines. Under regulatory rate practices, we generally are permitted to recover AFUDC, and a fair return thereon, through our rate base after our natural gas pipelines are placed in service. 64 CHENIERE ENERGY, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—CONTINUED Derivative Instruments We use derivative instruments to hedge our exposure to cash flow variability from interest rate, commodity price and foreign currency exchange (“FX”) rate risk. Derivative instruments are recorded at fair value and included in our Consolidated Balance Sheets as assets or liabilities depending on the derivative position and the expected timing of settlement, unless they satisfy criteria for, and we elect, the normal purchases and sales exception, under which we account for the instrument under the accrual method of accounting, whereby revenues and expenses are recognized only upon delivery, receipt or realization of the underlying transaction. When we have the contractual right and intent to net settle, derivative assets and liabilities are reported on a net basis. Changes in the fair value of our derivative instruments are recorded in earnings, unless we elect to apply hedge accounting and meet specified criteria. We did no t have any derivative instruments designated as cash flow or fair value hedges during the years ended December 31, 2021, 2020 and 2019. See Note 7—Derivative Instruments for additional details about our derivative instruments. Leases We determine if an arrangement is, or contains, a lease at inception of the arrangement. When we determine the arrangement is, or contains, a lease, we classify the lease as either an operating lease or a finance lease. Operating and finance leases are recognized on our Consolidated Balance Sheets by recording a lease liability representing the obligation to make future lease payments and a right-of-use asset representing the right to use the underlying asset for the lease term. Operating and finance lease right-of-use assets and liabilities are generally recognized based on the present value of minimum lease payments over the lease term. In determining the present value of minimum lease payments, we use the implicit interest rate in the lease if readily determinable. In the absence of a readily determinable implicitly interest rate, we discount our expected future lease payments using our relevant subsidiary’s incremental borrowing rate. The incremental borrowing rate is an estimate of the interest rate that a given subsidiary would have to pay to borrow on a collateralized basis over a similar term to that of the lease term. Options to renew a lease are included in the lease term and recognized as part of the right-of-use asset and lease liability, only to the extent they are reasonably certain to be exercised. We have elected practical expedients to (1) omit leases with an initial term of 12 months or less from recognition on our balance sheet and (2) to combine both the lease and non-lease components of an arrangement in calculating the right-of-use asset and lease liability for all classes of leased assets. Lease expense for operating lease payments is recognized on a straight-line basis over the lease term. Lease expense for finance leases is recognized as the sum of the amortization of the right-of-use assets on a straight-line basis and the interest on lease liabilities using the effective interest method over the lease term. Certain of our leases also contain variable payments, such as inflation, that are included in the right-of-use asset and lease liability only when the contract terms require the payment of a fixed amount that is unavoidable. See Note 12—Leases for additional details about our leases. Concentration of Credit Risk Financial instruments that potentially subject us to a concentration of credit risk consist principally of derivative instruments and accounts receivable related to our long-term SPAs and regasification contracts, each discussed further below. Additionally, we maintain cash balances at financial institutions, which may at times be in excess of federally insured levels. We have not incurred credit losses related to these cash balances to date. The use of derivative instruments exposes us to counterparty credit risk, or the risk that a counterparty will be unable to meet its commitments. Certain of our commodity derivative transactions are executed through over-the-counter contracts which are subject to nominal credit risk as these transactions are settled on a daily margin basis with investment grade financial institutions. Collateral deposited for such contracts is recorded within other current assets. Our interest rate and FX derivative instruments are placed with investment grade financial institutions whom we believe are acceptable credit risks. We monitor 65 CHENIERE ENERGY, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—CONTINUED counterparty creditworthiness on an ongoing basis; however, we cannot predict sudden changes in counterparties’ creditworthiness. In addition, even if such changes are not sudden, we may be limited in our ability to mitigate an increase in counterparty credit risk. Should one of these counterparties not perform, we may not realize the benefit of some of our derivative instruments. We have contracted our anticipated production capacity under SPAs and under IPM agreements. Substantially all of our contracted capacity is from contracts with terms exceeding 10 years. Excluding contracts with terms less than 10 years, our SPAs and IPM agreements had approximately 17 years of weighted average remaining life as of December 31, 2021. We market and sell LNG produced by the Liquefaction Projects that is not required for other customers through our integrated marketing function. We are dependent on the respective customers’ creditworthiness and their willingness to perform under their respective agreements. SPLNG has entered into two long-term TUAs with third parties for regasification capacity at the Sabine Pass LNG Terminal. SPLNG is dependent on the respective customers’ creditworthiness and their willingness to perform under their respective TUAs. SPLNG has mitigated this credit risk by securing TUAs for a significant portion of its regasification capacity with creditworthy third party customers with a minimum Standard & Poor’s rating of A. See Note 21—Customer Concentration for additional details about our customer concentration. Our arrangements with our customers incorporate certain provisions to mitigate our exposure to credit losses and include, under certain circumstances, customer collateral, netting of exposures through the use of industry standard commercial agreements and margin deposits with certain counterparties in the over-the-counter derivative market, with such margin deposits primarily facilitated by independent system operators and by clearing brokers. Payments on margin deposits, either by us or by the counterparty depending on the position, are required when the value of a derivative exceeds our pre-established credit limit with the counterparty. Margin deposits are returned to us (or to the counterparty) on or near the settlement date for non-exchange traded derivatives, and we exchange margin calls on a daily basis for exchange traded transactions. Goodwill Goodwill is the excess of acquisition cost of a business over the estimated fair value of net assets acquired. Goodwill is not amortized however we test goodwill for impairment at least annually as of October 1st, or more frequently if events or circumstances indicate goodwill is more likely than not impaired. When evaluating goodwill for impairment, we may either perform a qualitative assessment or a quantitative test. The qualitative assessment is an assessment of historical information and relevant events and circumstances to determine whether it is more likely than not that the fair value of a reporting unit is less than its carrying amount, including goodwill. If it is concluded that it is more-likely-than not that an impairment exists, a quantitative test is required which compares the estimated fair value of a reporting unit to its carrying value and measures any goodwill impairment as the amount by which the carrying amount of the reporting unit exceeds its fair value. We may elect not to perform the qualitative assessment and instead perform a quantitative impairment test. We completed our annual assessment of goodwill impairment in the current year by performing a qualitative assessment; which indicated it was no t more likely than not that there was an impairment and therefore no quantitative test was required. Significant judgments and assumptions are inherent in our estimate of future cash flows used to determine the estimate of the reporting unit’s fair value. Factors that could trigger a lower fair value estimate include significant negative industry or economic trends, cost increases, disruptions to our business, regulatory or political environment changes or other unanticipated events. Debt Our debt consists of current and long-term secured and unsecured debt securities, convertible debt securities and credit facilities with banks and other lenders. Debt issuances are placed directly by us or through securities dealers or underwriters and are held by institutional and retail investors. Debt is recorded on our Consolidated Balance Sheets at par value adjusted for unamortized discount or premium and net of unamortized debt issuance costs related to term notes. Debt issuance costs consist primarily of arrangement fees, professional fees, legal fees and printing costs. If debt issuance costs are incurred in connection with a line of credit 66 CHENIERE ENERGY, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—CONTINUED arrangement or on undrawn funds, the debt issuance costs are presented as an asset on our Consolidated Balance Sheets. Discounts, premiums and debt issuance costs directly related to the issuance of debt are amortized over the life of the debt and are recorded in interest expense, net of capitalized interest using the effective interest method. Gains and losses on the extinguishment or modification of debt are recorded in loss on modification or extinguishment of debt on our Consolidated Statements of Operations. We classify debt on our Consolidated Balance Sheets based on contractual maturity, with the following exceptions: • We classify term debt that is contractually due within one year as long-term debt if management has the intent and ability to refinance the current portion of such debt with future cash proceeds from an executed long-term debt agreement. • We evaluate the classification of long-term debt extinguished after the balance sheet date but before the financial statements are issued based on facts and circumstances existing as of the balance sheet date. Asset Retirement Obligations We recognize AROs for legal obligations associated with the retirement of long-lived assets that result from the acquisition, construction, development and/or normal use of the asset and for conditional AROs in which the timing or method of settlement are conditional on a future event that may or may not be within our control. The fair value of a liability for an ARO is recognized in the period in which it is incurred, if a reasonable estimate of fair value can be made. The fair value of the liability is added to the carrying amount of the associated asset. This additional carrying amount is depreciated over the estimated useful life of the asset. We have no t recorded an ARO associated with the Sabine Pass LNG Terminal. Based on the real property lease agreements at the Sabine Pass LNG Terminal, at the expiration of the term of the leases we are required to surrender the LNG terminal in good working order and repair, with normal wear and tear and casualty expected. Our property lease agreements at the Sabine Pass LNG Terminal have terms of up to 90 years including renewal options. We have determined that the cost to surrender the Sabine Pass LNG Terminal in good order and repair, with normal wear and tear and casualty expected, is immaterial. We have no t recorded an ARO associated with the Creole Trail Pipeline or the Corpus Christi Pipeline. We believe that it is not feasible to predict when the natural gas transportation services provided by the Creole Trail Pipeline or the Corpus Christi Pipeline will no longer be utilized. In addition, our right-of-way agreements associated with the Creole Trail Pipeline and the Corpus Christi Pipeline have no stipulated termination dates. We intend to operate the Creole Trail Pipeline and the Corpus Christi Pipeline as long as supply and demand for natural gas exists in the United States and intend to maintain it regularly. Share-based Compensation We have awarded share-based compensation in the form of stock (immediately vested), restricted stock shares, restricted stock units, performance stock units and phantom units. The awards and our related accounting policies are more fully described in Note 16—Share-based Compensation . Income Taxes Provisions for income taxes are based on taxes payable or refundable for the current year and deferred taxes on temporary differences between the tax basis of assets and liabilities and their reported amounts in our Consolidated Financial Statements. Deferred tax assets and liabilities are included in our Consolidated Financial Statements at currently enacted income tax rates applicable to the period in which the deferred tax assets and liabilities are expected to be realized or settled. As changes in tax laws or rates are enacted, deferred tax assets and liabilities are adjusted through the current period’s provision for income taxes. A valuation allowance is recorded to reduce the carrying value of our deferred tax assets when it is more likely than not that a portion or all of the deferred tax assets will expire before realization of the benefit or future deductibility is not probable. 67 CHENIERE ENERGY, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—CONTINUED We recognize the financial statement effects of a tax position when it is more likely than not, based on the technical merits, that the position will be sustained upon examination. Net Income (Loss) Per Share Basic net income (loss) per share attributable to common stockholders (“EPS”) excludes dilution and is computed by dividing net income (loss) attributable to common stockholders by the weighted average number of common shares outstanding during the period. Diluted EPS reflects potential dilution and is computed by dividing net income (loss) attributable to common stockholders by the weighted average number of common shares outstanding during the period increased by the number of additional common shares that would have been outstanding if the potential common shares had been issued. The dilutive effect of unvested stock is calculated using the treasury-stock method and the dilutive effect of convertible securities is calculated using the treasury or if-converted method. Refer to Note 18— Net Income (Loss) per Sh are A ttributable to Common Stockholders for additional details of EPS for the years ended December 31, 2021, 2020 and 2019. Business Segment We have determined that we operate as a single operating and reportable segment. Substantially all of our long-lived assets are located in the United States. Our chief operating decision maker makes resource allocation decisions and assesses performance based on financial information presented on a consolidated basis in the delivery of an integrated source of LNG to our customers. Recent Accounting Standards In August 2020, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2020-06, Debt—Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging—Contracts in Entity’s Own Equity (Subtopic 815-40): Accounting for Convertible Instruments and Contracts in an Entity’s Own Equity . This guidance simplifies the accounting for convertible instruments primarily by eliminating the existing cash conversion and beneficial conversion models within Subtopic 470-20, which will result in fewer embedded conversion options being accounted for separately from the debt host. The guidance also amends and simplifies the calculation of earnings per share relating to convertible instruments. This guidance is effective for annual periods beginning after December 15, 2021, including interim periods within that reporting period, with earlier adoption permitted for fiscal years beginning after December 15, 2020, including interim periods within that reporting period, using either a full or modified retrospective approach. We plan to adopt this guidance on January 1, 2022 using the modified retrospective approach. Preliminarily, we anticipate the adoption of ASU 2020-06 will primarily result in the reclassification of the previously bifurcated equity component associated with the 4.25 % Convertible Senior Notes due 2045 (the “2045 Cheniere Convertible Senior Notes”) to debt as a result of the elimination of the cash conversion model. We currently estimate that the reclassification of the $ 194 million equity component will result in an approximate $ 190 million increase in the carrying value of our 2045 Cheniere Convertible Senior Notes, with the difference primarily impacting retained earnings as of January 1, 2022. In December 2021, we issued a notice of redemption for all $ 625 million aggregate principal amount outstanding of 2045 Cheniere Convertible Senior Notes, which were redeemed on January 5, 2022. We continue to evaluate the impact of the provisions of this guidance on our Consolidated Financial Statements and related disclosures. See Note 11—Debt for further discussion on the 2045 Cheniere Convertible Senior Notes. In March 2020, the FASB issued ASU 2020-04, Reference Rate Reform (Topic 848): Facilitation of the Effects of Reference Rate Reform on Financial Reporting . This guidance primarily provides temporary optional expedients which simplify the accounting for contract modifications to existing contracts expected to arise from the market transition from LIBOR to alternative reference rates. The transition period under this standard is effective March 12, 2020 and will apply through December 31, 2022. We have various credit facilities and interest rate swaps indexed to LIBOR, as further described in Note 7—Derivative Instruments and Note 11—Debt . To date, we have amended certain of our credit facilities to incorporate a fallback replacement rate indexed to SOFR as a result of the expected LIBOR transition. We elected to apply the optional expedients as applicable to certain modified terms, however the impact of applying the optional expedients has not been material thus far. We will continue to elect to apply the optional expedients to qualifying contract modifications in the future. 68 CHENIERE ENERGY, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—CONTINUED NOTE 3— RESTRICTED CASH AND CASH EQUIVALENTS Restricted cash and cash equivalents consists of funds that are contractually or legally restricted as to usage or withdrawal and have been presented separately from cash and cash equivalents on our Consolidated Balance Sheets. As of December 31, 2021 and 2020, restricted cash and cash equivalents consisted of the following (in millions): December 31, 2021 2020 Restricted cash and cash equivalents SPL Project $ 98 $ 97 CCL Project 44 70 Cash held by our subsidiaries that is restricted to Cheniere 271 282 Total restricted cash and cash equivalents $ 413 $ 449 Pursuant to the accounts agreements entered into with the collateral trustees for the benefit of SPL’s debt holders and CCH’s debt holders, SPL and CCH are required to deposit all cash received into reserve accounts controlled by the collateral trustees. The usage or withdrawal of such cash is restricted to the payment of liabilities related to the Liquefaction Projects and other restricted payments. The majority of the cash held by our subsidiaries that is restricted to Cheniere relates to advance funding for operation and construction needs of the Liquefaction Projects. NOTE 4— ACCOUNTS AND OTHER RECEIVABLES, NET OF CURRENT EXPECTED CREDIT LOSSES As of December 31, 2021 and 2020, accounts and other receivables, net of current expected credit losses consisted of the following (in millions): December 31, 2021 2020 Trade receivables SPL and CCL $ 802 $ 482 Cheniere Marketing 640 113 Other accounts receivable 64 52 Total accounts and other receivables, net of current expected credit losses $ 1,506 $ 647 NOTE 5— INVENTORY As of December 31, 2021 and 2020, inventory consisted of the following (in millions): December 31, 2021 2020 Materials $ 174 $ 150 LNG in-transit 312 88 LNG 153 27 Natural gas 64 26 Other 3 1 Total inventory $ 706 $ 292 69 CHENIERE ENERGY, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—CONTINUED NOTE 6— PROPERTY, PLANT AND EQUIPMENT, NET OF ACCUMULATED DEPRECIATION As of December 31, 2021 and 2020, property, plant and equipment, net of accumulated depreciation consisted of the following (in millions): December 31, 2021 2020 LNG terminal LNG terminal and interconnecting pipeline facilities $ 30,660 $ 27,475 LNG site and related costs 441 324 LNG terminal construction-in-process 2,995 5,378 Accumulated depreciation ( 3,912 ) ( 2,935 ) Total LNG terminal, net of accumulated depreciation 30,184 30,242 Fixed assets and other Computer and office equipment 25 25 Furniture and fixtures 20 19 Computer software 120 117 Leasehold improvements 45 45 Land 1 59 Other 19 25 Accumulated depreciation ( 176 ) ( 164 ) Total fixed assets and other, net of accumulated depreciation 54 126 Assets under finance lease Tug vessels 60 60 Accumulated depreciation ( 10 ) ( 7 ) Total assets under finance lease, net of accumulated depreciation 50 53 Property, plant and equipment, net of accumulated depreciation $ 30,288 $ 30,421 The following table shows depreciation expense and offsets to LNG terminal costs during the years ended December 31, 2021, 2020 and 2019 (in millions): Year Ended December 31, 2021 2020 2019 Depreciation expense $ 1,006 $ 926 $ 788 Offsets to LNG terminal costs (1) 319 19 301 (1) We recognize offsets to LNG terminal costs related to the sale of commissioning cargoes because these amounts were earned or loaded prior to the start of commercial operations of the respective Trains of the Liquefaction Projects during the testing phase for its construction. LNG Terminal Costs Our LNG terminals are depreciated using the straight-line depreciation method applied to groups of LNG terminal assets with varying useful lives. The identifiable components of our LNG terminals have depreciable lives between 6 and 50 years, as follows: Components Useful life (years) LNG storage tanks 50 Natural gas pipeline facilities 40 Marine berth, electrical, facility and roads 35 Water pipelines 30 Regasification processing equipment 30 Sendout pumps 20 Liquefaction processing equipment 6 - 50 Other 10 - 30 70 CHENIERE ENERGY, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—CONTINUED Fixed Assets and Other Our fixed assets and other are recorded at cost and are depreciated on a straight-line method based on estimated lives of the individual assets or groups of assets. NOTE 7— DERIVATIVE INSTRUMENTS We have entered into the following derivative instruments that are reported at fair value: • interest rate swaps (“CCH Interest Rate Derivatives”) to hedge the exposure to volatility in a portion of the floating-rate interest payments on CCH’s amended and restated term loan credit facility (the “CCH Credit Facility”) and previously, to hedge against changes in interest rates that could impact anticipated future issuances of debt by CCH (“CCH Interest Rate Forward Start Derivatives” and, collectively with the CCH Interest Rate Derivatives, the “Interest Rate Derivatives”); • commodity derivatives consisting of natural gas supply contracts for the commissioning and operation of the Liquefaction Projects and potential future development of Corpus Christi Stage 3 (“Physical Liquefaction Supply Derivatives”) and associated economic hedges (“Financial Liquefaction Supply Derivatives,” and collectively with the Physical Liquefaction Supply Derivatives, the “Liquefaction Supply Derivatives”); • physical derivatives consisting of liquified natural gas contracts in which we have contractual net settlement (“Physical LNG Trading Derivatives”) and financial derivatives to hedge the exposure to the commodity markets in which we have contractual arrangements to purchase or sell physical LNG (collectively, “LNG Trading Derivatives”); and • foreign currency exchange (“FX”) contracts to hedge exposure to currency risk associated with cash flows denominated in currencies other than United States dollar (“FX Derivatives”), associated with both LNG Trading Derivatives and operations in countries outside of the United States. We recognize our derivative instruments as either assets or liabilities and measure those instruments at fair value. None of our derivative instruments are designated as cash flow or fair value hedging instruments, and changes in fair value are recorded within our Consolidated Statements of Operations to the extent not utilized for the commissioning process, in which case it is capitalized. The following table shows the fair value of our derivative instruments that are required to be measured at fair value on a recurring basis as of December 31, 2021 and 2020 (in millions): Fair Value Measurements as of December 31, 2021 December 31, 2020 Quoted Prices in Active Markets (Level 1) Significant Other Observable Inputs (Level 2) Significant Unobservable Inputs (Level 3) Total Quoted Prices in Active Markets (Level 1) Significant Other Observable Inputs (Level 2) Significant Unobservable Inputs (Level 3) Total CCH Interest Rate Derivatives liability $ — $ ( 40 ) $ — $ ( 40 ) $ — $ ( 140 ) $ — $ ( 140 ) Liquefaction Supply Derivatives asset (liability) 7 ( 9 ) ( 4,036 ) ( 4,038 ) 5 ( 6 ) 241 240 LNG Trading Derivatives liability ( 22 ) ( 378 ) — ( 400 ) ( 3 ) ( 131 ) — ( 134 ) FX Derivatives asset (liability) — 12 — 12 — ( 22 ) — ( 22 ) We value our Interest Rate Derivatives using an income-based approach utilizing observable inputs to the valuation model including interest rate curves, risk adjusted discount rates, credit spreads and other relevant data. We value our LNG Trading Derivatives and our Liquefaction Supply Derivatives using a market or option-based approach incorporating present value techniques, as needed, using observable commodity price curves, when available, and other relevant data. We value our FX Derivatives with a market approach using observable FX rates and other relevant data. The fair value of our Physical Liquefaction Supply Derivatives and LNG Trading Derivatives are predominantly driven by observable and unobservable market commodity prices and, as applicable to our natural gas supply contracts, our assessment 71 CHENIERE ENERGY, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—CONTINUED of the associated events deriving fair value, including, but not limited to, evaluation of whether the respective market exists from the perspective of market participants as infrastructure is developed. We include our Physical LNG Trading Derivatives and a portion of our Physical Liquefaction Supply Derivatives as Level 3 within the valuation hierarchy as the fair value is developed through the use of internal models which incorporate significant unobservable inputs. In instances where observable data is unavailable, consideration is given to the assumptions that market participants would use in valuing the asset or liability. This includes assumptions about market risks, such as future prices of energy units for unobservable periods, liquidity, volatility and contract duration. The Level 3 fair value measurements of our Physical LNG Trading Derivatives and the natural gas positions within our Physical Liquefaction Supply Derivatives could be materially impacted by a significant change in certain natural gas and international LNG prices. The following table includes quantitative information for the unobservable inputs for our Level 3 Physical Liquefaction Supply Derivatives as of December 31, 2021: Net Fair Value Liability (in millions) Valuation Approach Significant Unobservable Input Range of Significant Unobservable Inputs / Weighted Average (1) Physical Liquefaction Supply Derivatives $( 4,036 ) Market approach incorporating present value techniques Henry Hub basis spread $( 1.368 ) - $ 0.628 / $( 0.016 ) Option pricing model International LNG pricing spread, relative to Henry Hub (2) 185 % - 662 % / 248 % (1) Unobservable inputs were weighted by the relative fair value of the instruments. (2) Spread contemplates U.S. dollar-denominated pricing. Increases or decreases in basis or pricing spreads, in isolation, would decrease or increase, respectively, the fair value of our Physical LNG Trading Derivatives and our Physical Liquefaction Supply Derivatives. The following table shows the changes in the fair value of our Level 3 Physical LNG Trading Derivatives and Physical Liquefaction Supply Derivatives during the years ended December 31, 2021, 2020 and 2019 (in millions): Year Ended December 31, 2021 2020 2019 Balance, beginning of period $ 241 $ 138 $ ( 29 ) Realized and mark-to-market gains (losses): Included in cost of sales ( 4,305 ) 156 ( 77 ) Purchases and settlements: Purchases ( 1 ) 5 199 Settlements 29 ( 65 ) 44 Transfers into Level 3, net (1) — 7 1 Balance, end of period $ ( 4,036 ) $ 241 $ 138 Change in unrealized gain (loss) relating to instruments still held at end of period $ ( 4,305 ) $ 156 $ ( 77 ) (1) Transferred into Level 3 as a result of unobservable market, or out of Level 3 as a result of observable market for the underlying natural gas purchase agreements. All counterparty derivative contracts provide for the unconditional right of set-off in the event of default. We have elected to report derivative assets and liabilities arising from our derivative contracts with the same counterparty on a net basis. The use of derivative instruments exposes us to counterparty credit risk, or the risk that a counterparty will be unable to meet its commitments in instances when our derivative instruments are in an asset position. Additionally, counterparties are at risk that we will be unable to meet our commitments in instances where our derivative instruments are in a liability position. We incorporate both our own nonperformance risk and the respective counterparty’s nonperformance risk in fair value measurements. In adjusting the fair value of our derivative contracts for the effect of nonperformance risk, we have considered the impact of any applicable credit enhancements, such as collateral postings, set-off rights and guarantees. 72 CHENIERE ENERGY, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—CONTINUED Interest Rate Derivatives CCH has entered into interest rate swaps to protect against volatility of future cash flows and hedge a portion of the variable interest payments on the CCH Credit Facility. CCH previously also had interest rate swaps to hedge against changes in interest rates that could impact the anticipated future issuance of debt. In August 2020, we settled the outstanding CCH Interest Rate Forward Start Derivatives. As of December 31, 2021, we had the following Interest Rate Derivatives outstanding: Notional Amounts December 31, 2021 December 31, 2020 Latest Maturity Date Weighted Average Fixed Interest Rate Paid Variable Interest Rate Received CCH Interest Rate Derivatives $ 4.5 billion $ 4.6 billion May 31, 2022 2.30 % One-month LIBOR The following table shows the effect and location of our Interest Rate Derivatives on our Consolidated Statements of Operations during the years ended December 31, 2021, 2020 and 2019 (in millions): Gain (Loss) Recognized in Consolidated Statements of Operations Consolidated Statements of Operations Location Year Ended December 31, 2021 2020 2019 CCH Interest Rate Derivatives Interest rate derivative loss, net $ ( 1 ) $ ( 138 ) $ ( 101 ) CCH Interest Rate Forward Start Derivatives Interest rate derivative loss, net — ( 95 ) ( 33 ) Commodity Derivatives SPL, CCL and CCL Stage III have entered into physical natural gas supply contracts and associated economic hedges, including those associated with transactions under our IPM agreements, to purchase natural gas for the commissioning and operation of the Liquefaction Projects and potential future development of Corpus Christi Stage 3, respectively, which are primarily indexed to the natural gas market and international LNG indices. The remaining terms of the index-based physical natural gas supply contracts range up to approximately 15 years, some of which commence upon the satisfaction of certain events or states of affairs. The terms of the Financial Liquefaction Supply Derivatives range up to approximately three years . Commencing in first quarter of 2021, we have entered into physical LNG transactions that provide for contractual net settlement. Such transactions are accounted for as LNG Trading Derivatives, and are designed to economically hedge exposure to the commodity markets in which we sell LNG. We have entered into, and may from time to time enter into, financial LNG Trading Derivatives in the form of swaps, forwards, options or futures. The terms of LNG Trading Derivatives range up to approximately one year . The following table shows the notional amounts of our Liquefaction Supply Derivatives and LNG Trading Derivatives (collectively, “Commodity Derivatives”): December 31, 2021 December 31, 2020 Liquefaction Supply Derivatives LNG Trading Derivatives Liquefaction Supply Derivatives LNG Trading Derivatives Notional amount, net (in TBtu) (1) 11,238 33 10,483 20 (1) The balances as of December 31, 2020 include notional amounts for natural gas supply contracts that SPL and CCL have with related parties. These agreements are not considered related party as of December 31, 2021 as discussed in Note 14—Related Party Transactions . 73 CHENIERE ENERGY, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—CONTINUED The following table shows the effect and location of our Commodity Derivatives recorded on our Consolidated Statements of Operations during the years ended December 31, 2021, 2020 and 2019 (in millions): Gain (Loss) Recognized in Consolidated Statements of Operations Consolidated Statements of Operations Location (1) Year Ended December 31, 2021 2020 2019 LNG Trading Derivatives LNG revenues $ ( 1,812 ) $ ( 26 ) $ 402 LNG Trading Derivatives Cost of sales 91 ( 42 ) ( 89 ) Liquefaction Supply Derivatives (2) LNG revenues 3 ( 1 ) 2 Liquefaction Supply Derivatives (2) Cost of sales ( 4,303 ) 94 194 (1) Fair value fluctuations associated with commodity derivative activities are classified and presented consistently with the item economically hedged and the nature and intent of the derivative instrument. (2) Does not include the realized value associated with derivative instruments that settle through physical delivery. FX Derivatives Cheniere Marketing has entered into FX Derivatives to protect against the volatility in future cash flows attributable to changes in international currency exchange rates. The FX Derivatives economically hedge the foreign currency exposure arising from cash flows expended for both physical and financial LNG transactions that are denominated in a currency other than the United States dollar. The terms of FX Derivatives range up to approximately one year . The total notional amount of our FX Derivatives was $ 762 million and $ 786 million as of December 31, 2021 and 2020, respectively. The following table shows the effect and location of our FX Derivatives recorded on our Consolidated Statements of Operations during the years ended December 31, 2021, 2020 and 2019 (in millions): Gain (Loss) Recognized in Consolidated Statements of Operations Consolidated Statements of Operations Location Year Ended December 31, 2021 2020 2019 FX Derivatives LNG revenues $ 33 $ ( 3 ) $ 25 74 CHENIERE ENERGY, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—CONTINUED Fair Value and Location of Derivative Assets and Liabilities on the Consolidated Balance Sheets The following table shows the fair value and location of our derivative instruments on our Consolidated Balance Sheets (in millions): December 31, 2021 CCH Interest Rate Derivatives Liquefaction Supply Derivatives (1) LNG Trading Derivatives (2) FX Derivatives Total Consolidated Balance Sheets Location Current derivative assets $ — $ 38 $ 2 $ 15 $ 55 Derivative assets — 69 — — 69 Total derivative assets — 107 2 15 124 Current derivative liabilities ( 40 ) ( 644 ) ( 402 ) ( 3 ) ( 1,089 ) Derivative liabilities — ( 3,501 ) — — ( 3,501 ) Total derivative liabilities ( 40 ) ( 4,145 ) ( 402 ) ( 3 ) ( 4,590 ) Derivative asset (liability), net $ ( 40 ) $ ( 4,038 ) $ ( 400 ) $ 12 $ ( 4,466 ) December 31, 2020 CCH Interest Rate Derivatives Liquefaction Supply Derivatives (1) LNG Trading Derivatives (2) FX Derivatives Total Consolidated Balance Sheets Location Current derivative assets $ — $ 27 $ — $ 5 $ 32 Derivative assets — 376 — — 376 Total derivative assets — 403 — 5 408 Current derivative liabilities ( 100 ) ( 54 ) ( 134 ) ( 25 ) ( 313 ) Derivative liabilities ( 40 ) ( 109 ) — ( 2 ) ( 151 ) Total derivative liabilities ( 140 ) ( 163 ) ( 134 ) ( 27 ) ( 464 ) Derivative asset (liability), net $ ( 140 ) $ 240 $ ( 134 ) $ ( 22 ) $ ( 56 ) (1) Does not include collateral posted with counterparties by us of $ 20 million and $ 9 million as of December 31, 2021 and 2020, respectively, which are included in margin deposits in our Consolidated Balance Sheets. Includes derivative assets for natural gas supply contracts that SPL and CCL had with related parties as of December 31, 2020. These agreements are not considered related party as of December 31, 2021 as discussed in Note 14—Related Party Transactions . (2) Does not include collateral posted with counterparties by us of $ 745 million and $ 16 million, as of December 31, 2021 and 2020, respectively, which are included in margin deposits in our Consolidated Balance Sheets. 75 CHENIERE ENERGY, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—CONTINUED Consolidated Balance Sheets Presentation Our derivative instruments are presented on a net basis on our Consolidated Balance Sheets as described above. The following table shows the fair value of our derivatives outstanding on a gross and net basis (in millions): CCH Interest Rate Derivatives Liquefaction Supply Derivatives LNG Trading Derivatives FX Derivatives As of December 31, 2021 Gross assets $ — $ 155 $ 10 $ 48 Offsetting amounts — ( 48 ) ( 8 ) ( 33 ) Net assets $ — $ 107 $ 2 $ 15 Gross liabilities $ ( 40 ) $ ( 4,382 ) $ ( 551 ) $ ( 10 ) Offsetting amounts — 237 149 7 Net liabilities $ ( 40 ) $ ( 4,145 ) $ ( 402 ) $ ( 3 ) As of December 31, 2020 Gross assets $ — $ 452 $ — $ 6 Offsetting amounts — ( 49 ) — ( 1 ) Net assets $ — $ 403 $ — $ 5 Gross liabilities $ ( 140 ) $ ( 184 ) $ ( 163 ) $ ( 62 ) Offsetting amounts — 21 29 35 Net liabilities $ ( 140 ) $ ( 163 ) $ ( 134 ) $ ( 27 ) NOTE 8— OTHER NON-CURRENT ASSETS, NET As of December 31, 2021 and 2020, other non-current assets, net consisted of the following (in millions): December 31, 2021 2020 Contract assets, net of current expected credit losses $ 135 $ 80 Advances made to municipalities for water system enhancements 81 84 Equity method investments 56 81 Advances and other asset conveyances to third parties to support LNG terminals 80 60 Debt issuance costs and debt discount, net of accumulated amortization 34 42 Advances made under EPC and non-EPC contracts 5 9 Advance tax-related payments and receivables 17 20 Other 54 30 Total other non-current assets, net $ 462 $ 406 Equity Method Investments As of December 31, 2021, our equity method investment consists of our interest in Midship Holdings, LLC (“Midship Holdings”), which manages the business and affairs of Midship Pipeline Company, LLC (“Midship Pipeline”). Midship Pipeline is currently operating an approximately 200 -mile natural gas pipeline project (the “Midship Project”) that connects production in the Anadarko Basin to Gulf Coast markets. The Midship Project commenced operations in April 2020. During the years ended December 31, 2021 and 2020, we recognized other-than-temporary impairment losses of $ 37 million and $ 129 million, respectively, related to our investment in Midship Holdings. Impairment during the years ended December 31, 2021 and 2020 was precipitated primarily due to declining market conditions in the energy industry and customer credit risk, resulting in a reduction in the fair value of our equity interests. During the year ended December 31, 2019, we recognized losses of $ 87 million related to our investments in certain equity method investees, including Midship Holdings. Impairments during the year ended December 31, 2019 were primarily the result of cost overruns and extended construction timelines for operating infrastructure of our investees’ projects, resulting in a reduction of the fair value of our equity interests. 76 CHENIERE ENERGY, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—CONTINUED The fair values of our equity interests were measured using an income approach, which utilized level 3 fair value inputs such as projected earnings and discount rates, and/or market approach. Impairment losses associated with our equity method investments are presented in other expense, net. Our investment in Midship Holdings, net of impairment losses, was $ 56 million and $ 80 million as of December 31, 2021 and 2020, respectively. NOTE 9— NON-CONTROLLING INTEREST AND VARIABLE INTEREST ENTITY We own a 48.6 % limited partner interest in CQP in the form of 239.9 million common units, with the remaining non-controlling limited partner interest held by Blackstone Inc., Brookfield Asset Management Inc. and the public. In July 2020, the board of directors of CQP’s general partner confirmed and approved that, following the distribution with respect to the three months ended June 30, 2020, the financial tests required for conversion of CQP’s subordinated units, all of which were held by us, were met under the terms of CQP’s partnership agreement. Accordingly, effective August 17, 2020, the first business day following the payment of the distribution, all of CQP’s subordinated units were automatically converted into common units on a one-for-one basis and the subordination period was terminated. We also own 100 % of the general partner interest and the incentive distribution rights in CQP. CQP is accounted for as a consolidated VIE. CQP is a limited partnership formed by us in 2006 to own and operate the Sabine Pass LNG Terminal and related assets. Our subsidiary, Cheniere Partners GP, is the general partner of CQP. In 2012, CQP, Cheniere and Blackstone CQP Holdco LP (“Blackstone CQP Holdco”) entered into a unit purchase agreement whereby CQP sold 100.0 million Class B units to Blackstone CQP Holdco in a private placement. The board of directors of Cheniere Partners GP was modified to include three directors appointed by Blackstone CQP Holdco, four directors appointed by us and four independent directors mutually agreed upon by Blackstone CQP Holdco and us and appointed by us. In addition, we provided Blackstone CQP Holdco with a right to maintain one board seat on our Board of Directors (our “Board”). A quorum of Cheniere Partners GP directors consists of a majority of all directors, including at least two directors appointed by Blackstone CQP Holdco, two directors appointed by us and two independent directors. Blackstone CQP Holdco will no longer be entitled to appoint Cheniere Partners GP directors in the event that Blackstone CQP Holdco’s ownership in CQP is less than 20 % of outstanding common units and subordinated units. As a holder of common units of CQP, we are not obligated to fund losses of CQP. However, our capital account, which would be considered in allocating the net assets of CQP were it to be liquidated, continues to share in losses of CQP. We have determined that Cheniere Partners GP is a VIE and that we, as the holder of the equity at risk, do not have a controlling financial interest due to the rights held by Blackstone CQP Holdco. However, we continue to consolidate CQP as a result of Blackstone CQP Holdco’s right to maintain one board seat on our Board which creates a de facto agency relationship between Blackstone CQP Holdco and us. GAAP requires that when a de facto agency relationship exists, one of the members of the de facto agency relationship must consolidate the VIE based on certain criteria. As a result, we consolidate CQP in our Consolidated Financial Statements. 77 CHENIERE ENERGY, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—CONTINUED The following table presents the summarized assets and liabilities (in millions) of CQP, our consolidated VIE, which are included in our Consolidated Balance Sheets as of December 31, 2021 and 2020. The assets in the table below may only be used to settle obligations of CQP. In addition, there is no recourse to us for the consolidated VIE’s liabilities. The assets and liabilities in the table below include third party assets and liabilities of CQP only and exclude intercompany balances that eliminate in consolidation. December 31, 2021 2020 ASSETS Current assets Cash and cash equivalents $ 876 $ 1,210 Restricted cash and cash equivalents 98 97 Accounts and other receivables, net of current expected credit losses 580 318 Other current assets 285 182 Total current assets 1,839 1,807 Property, plant and equipment, net of accumulated depreciation 16,830 16,723 Other non-current assets, net 316 287 Total assets $ 18,985 $ 18,817 LIABILITIES Current liabilities Accrued liabilities $ 1,077 $ 662 Other current liabilities 200 167 Total current liabilities 1,277 829 Long-term debt, net of premium, discount and debt issuance costs 17,177 17,580 Other non-current liabilities 100 126 Total liabilities $ 18,554 $ 18,535 NOTE 10— ACCRUED LIABILITIES As of December 31, 2021 and 2020, accrued liabilities consisted of the following (in millions): December 31, 2021 2020 Accrued natural gas purchases $ 1,323 $ 576 Accrued derivative settlements 329 — Interest costs and related debt fees 214 245 LNG terminals and related pipeline costs 144 147 Compensation and benefits 180 123 Accrued LNG inventory 34 4 Other accrued liabilities 75 80 Total accrued liabilities $ 2,299 $ 1,175 78 CHENIERE ENERGY, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—CONTINUED NOTE 11— DEBT As of December 31, 2021 and 2020, our debt consisted of the following (in millions): December 31, 2021 2020 SPL: Senior Secured Notes: 6.25 % due 2022 $ — $ 1,000 5.625 % due 2023 1,500 1,500 5.75 % due 2024 2,000 2,000 5.625 % due 2025 2,000 2,000 5.875 % due 2026 1,500 1,500 5.00 % due 2027 1,500 1,500 4.200 % due 2028 1,350 1,350 4.500 % due 2030 2,000 2,000 4.27 % weighted average rate due 2037 1,282 800 Total SPL Senior Secured Notes 13,132 13,650 $ 1.2 billion Working Capital Revolving Credit and Letter of Credit Reimbursement Agreement (the “2020 SPL Working Capital Facility”) — — Total debt - SPL 13,132 13,650 CQP: Senior Notes: 5.250 % due 2025 — 1,500 5.625 % due 2026 — 1,100 4.500 % due 2029 1,500 1,500 4.000 % due 2031 1,500 — 3.25 % due 2032 1,200 — Total CQP Senior Notes 4,200 4,100 CQP Credit Facilities executed in 2019 (“2019 CQP Credit Facilities”) — — Total debt - CQP 4,200 4,100 CCH: Senior Secured Notes: 7.000 % due 2024 1,250 1,250 5.875 % due 2025 1,500 1,500 5.125 % due 2027 1,500 1,500 3.700 % due 2029 1,500 1,500 3.72 % weighted average rate due 2039 2,721 1,971 Total CCH Senior Secured Notes 8,471 7,721 CCH Credit Facility (1) 1,728 2,627 $ 1.2 billion CCH Working Capital Facility (“CCH Working Capital Facility”) (2) 250 140 Total debt - CCH 10,449 10,488 Cheniere: 4.625 % Senior Secured Notes due 2028 (“Cheniere Senior Secured Notes”) 2,000 2,000 4.875 % Convertible Unsecured Notes due 2021 (“2021 Cheniere Convertible Unsecured Notes”) (1) — 476 2045 Cheniere Convertible Senior Notes (3) 625 625 $ 1.25 billion Cheniere Revolving Credit Facility (“Cheniere Revolving Credit Facility”) — — Cheniere’s term loan facility (“Cheniere Term Loan Facility”) — 148 Total debt - Cheniere 2,625 3,249 Cheniere Marketing: trade finance facilities and letter of credit facility (2) — — Total debt 30,406 31,487 Current portion of long-term debt ( 117 ) ( 232 ) Short-term debt ( 250 ) ( 140 ) Unamortized premium, discount and debt issuance costs, net ( 590 ) ( 644 ) Total long-term debt, net of premium, discount and debt issuance costs $ 29,449 $ 30,471 (1) A portion of the outstanding balance that is due within one year is classified as current portion of long-term debt. (2) These debt instruments are classified as short-term debt. 79 CHENIERE ENERGY, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—CONTINUED (3) The redemption of these notes was financed with borrowings under the Cheniere Revolving Credit Facility, which is a long-term debt instrument. Therefore, the 2045 Cheniere Convertible Senior Notes were classified as long-term debt as of December 31, 2021. See Convertible Notes section below for further discussion of the redemption. Senior Notes SPL Senior Secured Notes The SPL Senior Secured Notes are senior secured obligations of SPL, ranking equally in right of payment with SPL’s other existing and future senior debt and secured by the same collateral and senior in right of payment to any of its future subordinated debt. Subject to permitted liens, the SPL Senior Secured Notes are secured on a pari passu first-priority basis by a security interest in all of the membership interests in SPL and substantially all of SPL’s assets. SPL may, at any time, redeem all or part of the SPL Senior Secured Notes at specified prices set forth in the respective indentures governing the SPL Senior Secured Notes, plus accrued and unpaid interest, if any, to the date of redemption. The series of SPL Senior Secured Notes due in 2037 are fully amortizing according to a fixed sculpted amortization schedule, as set forth in the respective indentures. CQP Senior Notes The CQP Senior Notes are jointly and severally guaranteed by each of CQP’s subsidiaries other than SPL and, subject to certain conditions governing its guarantee, Sabine Pass LP (each a “Guarantor” and collectively, the “CQP Guarantors”). The CQP Senior Notes are senior obligations of CQP, ranking equally in right of payment with CQP’s other existing and future unsubordinated debt and senior to any of its future subordinated debt. In the event that the aggregate amount of CQP’s secured indebtedness and the secured indebtedness of the CQP Guarantors (other than the CQP Senior Notes or any other series of notes issued under the CQP Base Indenture) outstanding at any one time exceeds the greater of (1) $ 1.5 billion and (2) 10 % of net tangible assets, the CQP Senior Notes will be secured to the same extent as such obligations under the 2019 CQP Credit Facilities. The obligations under the 2019 CQP Credit Facilities are unconditionally guaranteed and secured by a first-priority lien (subject to permitted encumbrances) on substantially all the existing and future tangible and intangible assets and rights of CQP and the CQP Guarantors and equity interests in the CQP Guarantors (except, in each case, for certain excluded properties set forth in the 2019 CQP Credit Facilities). The liens securing the CQP Senior Notes, if applicable, will be shared equally and ratably (subject to permitted liens) with the holders of other senior secured obligations, which include the 2019 CQP Credit Facilities obligations and any future additional senior secured debt obligations. CQP may, at any time, redeem all or part of the CQP Senior Notes at specified prices set forth in the respective indentures governing the CQP Senior Notes, plus accrued and unpaid interest, if any, to the date of redemption. CCH Senior Secured Notes The CCH Senior Secured Notes are jointly and severally guaranteed by CCH’s subsidiaries, CCL, CCP and Corpus Christi Pipeline GP, LLC (each a “CCH Guarantor” and collectively, the “CCH Guarantors”). The CCH Senior Secured Notes are senior secured obligations of CCH, ranking senior in right of payment to any and all of CCH’s future indebtedness that is subordinated to the CCH Senior Secured Notes and equal in right of payment with CCH’s other existing and future indebtedness that is senior and secured by the same collateral securing the CCH Senior Secured Notes. The CCH Senior Secured Notes are secured by a first-priority security interest in substantially all of CCH’s and the CCH Guarantors’ assets. CCH may, at any time, redeem all or part of the CCH Senior Secured Notes at specified prices set forth in the respective indentures governing the CCH Senior Secured Notes, plus accrued and unpaid interest, if any, to the date of redemption. Cheniere Senior Secured Notes The Cheniere Senior Secured Notes are our general senior obligations and rank senior in right of payment to all of our future obligations that are, by their terms, expressly subordinated in right of payment to the Cheniere Senior Secured Notes and equally in right of payment with all of our other existing and future unsubordinated indebtedness. The Cheniere Senior Secured Notes became unsecured in June 2021 concurrent with the repayment of all outstanding obligations under the Cheniere Term Loan Facility and may, in certain instances become secured in the future in connection with the incurrence of additional secured indebtedness by us. When required, the Cheniere Senior Secured Notes will be secured on a first-priority basis by a lien on substantially all of our assets and equity interests in our direct subsidiaries (other than certain excluded subsidiaries), which liens rank pari passu with the liens securing the Cheniere Revolving Credit Facility. As of December 31, 2021, the Cheniere Senior Secured Notes are not guaranteed by any of our subsidiaries. In the future, the Cheniere Senior Secured Notes will be 80 CHENIERE ENERGY, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—CONTINUED guaranteed by our subsidiaries who guarantee our other material indebtedness. We may, at any time, redeem all or part of the Cheniere Senior Secured Notes at specified prices set forth in the indenture governing the Cheniere Senior Secured Notes, plus accrued and unpaid interest, if any, to the date of redemption. Below is a schedule of future principal payments that we are obligated to make on our outstanding debt at December 31, 2021 (in millions): Years Ending December 31, Principal Payments 2022 (1) $ 992 2023 1,567 2024 4,794 2025 3,537 2026 1,579 Thereafter 17,937 Total $ 30,406 (1) Includes $ 625 million aggregate principal amount outstanding of the 2045 Cheniere Convertible Senior Notes as we issued a notice of redemption on December 6, 2021 for all amounts outstanding. As discussed above, the balance is classified as long-term debt in our Consolidated Balance Sheets as the redemption was financed with long-term borrowings subsequent to the balance sheet date. See Convertible Notes section below for further discussion of the redemption. Credit Facilities Below is a summary of our committed credit facilities outstanding as of December 31, 2021 (in millions): 2020 SPL Working Capital Facility (1) 2019 CQP Credit Facilities (2) CCH Credit Facility (3) CCH Working Capital Facility (4) Cheniere Revolving Credit Facility (5) Original facility size $ 1,200 $ 1,500 $ 8,404 $ 350 $ 750 Incremental commitments — — 1,566 850 500 Less: Outstanding balance — — 1,729 250 — Commitments prepaid or terminated — 750 8,241 — — Letters of credit issued 395 — — 361 — Available commitment $ 805 $ 750 $ — $ 589 $ 1,250 Priority ranking Senior secured Senior secured Senior secured Senior secured Senior secured Interest rate on available balance LIBOR plus 1.125 % - 1.750 % or base rate plus 0.125 % - 0.750 % LIBOR plus 1.25 % - 2.125 % or base rate plus 0.25 % - 1.125 % LIBOR plus 1.75 % or base rate plus 0.75 % (6) LIBOR plus 1.25 % - 1.75 % or base rate plus 0.25 % - 0.75 % (6) LIBOR plus 1.250 % - 2.375 % or base rate plus 0.250 % - 1.375 % (6) Weighted average interest rate of outstanding balance n/a n/a 1.85 % 3.50 % n/a Commitment fees on undrawn balance 0.20 % 0.49 % n/a 0.50 % 0.25 % Maturity date March 19, 2025 May 29, 2024 June 30, 2024 June 29, 2023 October 28, 2026 (1) The obligations of SPL under the 2020 SPL Working Capital Facility are secured by substantially all of the assets of SPL as well as a pledge of all of the membership interests in SPL and certain future subsidiaries of SPL on a pari passu basis by a first priority lien with the SPL Senior Secured Notes. The 2020 SPL Working Capital Facility contains customary conditions precedent for extensions (2) See CQP Senior Notes section above for discussion of the rights and privileges of the 2019 CQP Credit Facilities. (3) The obligations of CCH under the CCH Credit Facility are secured by a first priority lien on substantially all of the assets of CCH and its subsidiaries and by a pledge by Cheniere CCH Holdco I of its limited liability company interests in CCH. 81 CHENIERE ENERGY, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—CONTINUED (4) The obligations of CCH under the CCH Working Capital Facility are secured by substantially all of the assets of CCH and the CCH Guarantors as well as all of the membership interests in CCH and each of the CCH Guarantors on a pari passu basis with the CCH Senior Secured Notes and the CCH Credit Facility. (5) The Cheniere Revolving Credit Facility is secured by a first priority security interest (subject to permitted liens and other customary exceptions) in substantially all of our assets, including our interests in our direct subsidiaries (other than certain excluded subsidiaries). The Cheniere Revolving Credit Facility contains a financial covenant requiring us to maintain a non-consolidated leverage ratio not to exceed 5.50 :1.00 as of the end of any fiscal quarter if (i) as of the last day of such fiscal quarter the aggregate principal amount of outstanding loans plus drawn and unreimbursed letters of credit is greater than 35 % of the aggregate commitments under the Cheniere Revolving Credit Facility (a “Covenant Trigger Event”) or (ii) a Covenant Trigger Event had occurred and been continuing as of the last day of the immediately preceding fiscal quarter and as of the last day of such ending fiscal quarter such Covenant Trigger Event had not ceased for a period of at least thirty consecutive days. (6) These facilities were amended in 2021 to establish a SOFR-indexed replacement rate for LIBOR. Convertible Notes As of December 31, 2021, we had $ 625 million aggregate principal amount of the 2045 Cheniere Convertible Senior Notes outstanding, of which $ 321 million was recorded as debt, net of discount and debt issuance costs of $ 304 million, and $ 194 million was recorded as equity. The effective interest rate as of December 31, 2021 was 9.4 %, which was the rate to accrete the discounted carrying value of the notes to the face value over the remaining contractual amortization period. Subject to various limitations and conditions under the indenture, the notes were convertible by us or by the holders to 7.2265 shares of our common stock per $1,000 principal amount. Additionally, we had the right, at our option, to redeem all or any part of the 2045 Cheniere Convertible Senior Notes at a redemption price equal to the accreted amount of the notes to be redeemed, plus accrued and unpaid interest, if any, to such redemption date. On December 6, 2021, we issued a notice of redemption for all $ 625 million aggregate principal amount outstanding of the 2045 Cheniere Convertible Senior Notes. The notice of redemption allowed holders to elect to convert their notes at any time prior to a specified deadline on December 31, 2021, with settlement of such converted notes in cash, as elected by the Company, on January 5, 2022. The impact of holders electing conversion was immaterial to the financial statements. The 2045 Cheniere Convertible Senior Notes not converted were redeemed on January 5, 2022 with borrowings under the Cheniere Revolving Credit Facility. Restrictive Debt Covenants The indentures governing our senior notes and other agreements underlying our debt contain customary terms and events of default and certain covenants that, among other things, may limit us, our subsidiaries’ and its restricted subsidiaries’ ability to make certain investments or pay dividends or distributions. SPL, CQP and CCH are restricted from making distributions under agreements governing their respective indebtedness generally until, among other requirements, deposits are made into any required debt service reserve accounts and a historical debt service coverage ratio and projected debt service coverage ratio of at least 1.25 :1.00 is satisfied. At December 31, 2021, our restricted net assets of consolidated subsidiaries were approximately $ 1.5 billion. As of December 31, 2021, each of our issuers was in compliance with all covenants related to their respective debt agreements. 82 CHENIERE ENERGY, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—CONTINUED Interest Expense Total interest expense, net of capitalized interest, including interest expense related to our convertible notes, consisted of the following (in millions): Year Ended December 31, 2021 2020 2019 Interest cost on convertible notes: Interest per contractual rate $ 36 $ 152 $ 256 Amortization of debt discount 10 45 40 Amortization of debt issuance costs — 8 12 Total interest cost related to convertible notes 46 205 308 Interest cost on debt and finance leases excluding convertible notes 1,558 1,568 1,538 Total interest cost 1,604 1,773 1,846 Capitalized interest ( 166 ) ( 248 ) ( 414 ) Total interest expense, net of capitalized interest $ 1,438 $ 1,525 $ 1,432 Fair Value Disclosures The following table shows the carrying amount and estimated fair value of our debt (in millions): December 31, 2021 December 31, 2020 Carrying Amount Estimated Fair Value Carrying Amount Estimated Fair Value Senior notes — Level 2 (1) $ 24,550 $ 26,725 $ 24,700 $ 27,897 Senior notes — Level 3 (2) 3,253 3,693 2,771 3,423 Credit facilities — Level 3 (3) 1,978 1,978 2,915 2,915 2021 Cheniere Convertible Unsecured Notes — Level 3 (2) — — 476 480 2045 Cheniere Convertible Senior Notes — Level 1 (4) 625 526 625 496 (1) The Level 2 estimated fair value was based on quotes obtained from broker-dealers or market makers of these senior notes and other similar instruments. (2) The Level 3 estimated fair value was calculated based on inputs that are observable in the market or that could be derived from, or corroborated with, observable market data, including our stock price and interest rates based on debt issued by parties with comparable credit ratings to us and inputs that are not observable in the market. (3) The Level 3 estimated fair value approximates the principal amount because the interest rates are variable and reflective of market rates and the debt may be repaid, in full or in part, at any time without penalty. (4) The Level 1 estimated fair value was based on unadjusted quoted prices in active markets for identical liabilities that we had the ability to access at the measurement date. 83 CHENIERE ENERGY, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—CONTINUED NOTE 12— LEASES Our leased assets consist primarily of LNG vessel time charters (“vessel charters”) and additionally include tug vessels, office space and facilities and land sites. All of our leases are classified as operating leases except for our tug vessels supporting the Corpus Christi LNG Terminal, which are classified as finance leases. The following table shows the classification and location of our right-of-use assets and lease liabilities on our Consolidated Balance Sheets (in millions): December 31, Consolidated Balance Sheets Location 2021 2020 Right-of-use assets—Operating Operating lease assets $ 2,102 $ 759 Right-of-use assets—Financing Property, plant and equipment, net of accumulated depreciation 50 53 Total right-of-use assets $ 2,152 $ 812 Current operating lease liabilities Current operating lease liabilities $ 535 $ 161 Current finance lease liabilities Other current liabilities 2 2 Non-current operating lease liabilities Operating lease liabilities 1,541 597 Non-current finance lease liabilities Finance lease liabilities 57 57 Total lease liabilities $ 2,135 $ 817 The following table shows the classification and location of our lease costs on our Consolidated Statements of Operations (in millions): Consolidated Statements of Operations Location Year Ended December 31, 2021 2020 2019 Operating lease cost (a) Operating costs and expenses (1) $ 621 $ 432 $ 612 Finance lease cost: Amortization of right-of-use assets Depreciation and amortization expense 3 2 3 Interest on lease liabilities Interest expense, net of capitalized interest 9 7 10 Total lease cost $ 633 $ 441 $ 625 (a) Included in operating lease cost: Short-term lease costs $ 139 $ 93 $ 230 Variable lease costs 21 16 7 (1) Presented in cost of sales, operating and maintenance expense or selling, general and administrative expense consistent with the nature of the asset under lease. Future annual minimum lease payments for operating and finance leases as of December 31, 2021 are as follows (in millions): Years Ending December 31, Operating Leases (1) Finance Leases 2022 $ 600 $ 11 2023 514 10 2024 456 10 2025 244 10 2026 218 10 Thereafter 294 117 Total lease payments 2,326 168 Less: Interest ( 250 ) ( 109 ) Present value of lease liabilities $ 2,076 $ 59 (1) Does not include approximately $ 1.2 billion of legally binding minimum lease payments primarily for vessel charters which were executed as of December 31, 2021 but will commence in future periods primarily in the next year and have fixed minimum lease terms of up to 10 years. 84 CHENIERE ENERGY, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—CONTINUED The following table shows the weighted-average remaining lease term and the weighted-average discount rate for our operating leases and finance leases: December 31, 2021 December 31, 2020 Operating Leases Finance Leases Operating Leases Finance Leases Weighted-average remaining lease term (in years) 5.6 16.7 8.2 17.7 Weighted-average discount rate (1) 3.6 % 16.2 % 5.4 % 16.2 % (1) The finance leases commenced prior to the adoption of the current leasing standard under GAAP. In accordance with previous accounting guidance, the implied rate is based on the fair value of the underlying assets. The following table includes other quantitative information for our operating and finance leases (in millions): Year Ended December 31, 2021 2020 2019 Cash paid for amounts included in the measurement of lease liabilities: Operating cash flows from operating leases $ 483 $ 309 $ 389 Operating cash flows from finance leases 10 10 9 Right-of-use assets obtained in exchange for operating lease liabilities 1,736 615 235 LNG Vessel Subcharters From time to time, we sublease certain LNG vessels under charter to third parties while retaining our existing obligation to the original lessor. As of December 31, 2021 and 2020, we had $ 15 million and zero future minimum sublease payments to be received from LNG vessel subcharters. The following table shows the sublease income recognized in other revenues on our Consolidated Statements of Operations (in millions): Year Ended December 31, 2021 2020 2019 Fixed income $ 72 $ 68 $ 122 Variable income 37 27 22 Total sublease income $ 109 $ 95 $ 144 NOTE 13— REVENUES FROM CONTRACTS WITH CUSTOMERS The following table represents a disaggregation of revenue earned from contracts with customers during the years ended December 31, 2021, 2020 and 2019 (in millions): Year Ended December 31, 2021 2020 2019 LNG revenues (1) $ 17,171 $ 8,954 $ 8,817 Regasification revenues 269 269 266 Other revenues 91 70 74 Total revenues from customers 17,531 9,293 9,157 Net derivative gain (loss) (2) ( 1,776 ) ( 30 ) 429 Other (3) 109 95 144 Total revenues $ 15,864 $ 9,358 $ 9,730 (1) LNG revenues include revenues for LNG cargoes in which our customers exercised their contractual right to not take delivery but remained obligated to pay fixed fees irrespective of such election. During the year ended December 31, 2020, we recognized $ 969 million in LNG revenues associated with LNG cargoes for which customers notified us that they would not take delivery, of which $ 38 million would have been recognized during the year ended December 31, 2021 had the cargoes been lifted pursuant to the delivery schedules with the customers. We did no t have revenues associated with LNG cargoes for which customers notified us that they would not take delivery during the years ended December 31, 2021 and 2019. Revenue is generally recognized upon receipt of irrevocable notice that a customer will not take delivery because our customers have no contractual right to take delivery of such LNG cargo in future periods and our performance obligations with respect to such LNG cargo have been satisfied. 85 CHENIERE ENERGY, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—CONTINUED (2) See Note 7—Derivative Instruments for additional information about our derivatives. (3) Includes revenues from LNG vessel subcharters. See Note 12—Leases for additional information about our subleases. LNG Revenues 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 either the Sabine Pass or Corpus Christi LNG terminal) or delivered at terminal (“DAT”) (delivered to the customer at their LNG receiving 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 generally equal to 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. We intend to primarily use LNG sourced from our Sabine Pass or Corpus Christi LNG terminals to provide contracted volumes to our customers. However, we supplement this LNG with volumes procured from third parties. LNG revenues recognized from LNG that was procured from third parties was $ 499 million, $ 414 million and $ 268 million for the years ended December 31, 2021, 2020 and 2019, respectively. Revenues from the sale of LNG are recognized at a point in time when the LNG is delivered to the customer, either at the Sabine Pass or Corpus Christi LNG terminal or at the customer’s LNG receiving terminal, based on the terms of the contract, which is the point legal title, physical possession and the risks and rewards of ownership transfer 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 contract was negotiated. We have concluded that the variable fees meet the exception for allocating variable consideration to specific parts of the contract. 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 exception, variable consideration related to the sale of LNG is also not included in the transaction price. When we sell LNG on a DAT basis, we consider all transportation costs, including vessel chartering, loading/unloading and canal fees, as fulfillment costs and not as separate services provided to the customer within the arrangement, regardless of whether or not such activities occur prior to or after the customer obtains control of the LNG. We expense fulfillment costs as incurred unless otherwise dictated by GAAP. 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. Regasification Revenues The Sabine Pass LNG Terminal has operational regasification capacity of approximately 4 Bcf/d. Approximately 2 Bcf/d of the regasification capacity at the Sabine Pass LNG Terminal has been reserved under two long-term TUAs with unaffiliated third party customers, under which they are required to pay fixed monthly fees regardless of their use of the LNG terminal. Each of the customers has reserved approximately 1 Bcf/d of regasification capacity. The customers are each obligated to make monthly capacity payments to SPLNG aggregating approximately $ 125 million annually for 20 years that commenced in 2009, which is representative of fixed consideration in the contract. A portion of this fee is adjusted annually for inflation which is considered variable consideration. The remaining capacity of the Sabine Pass LNG Terminal has been reserved by SPL, for which the associated revenues are eliminated in consolidation. Because SPLNG is continuously available to provide regasification service on a daily basis with the same pattern of transfer, we have concluded that SPLNG provides a single performance obligation to its customers on a continuous basis over time. We have determined that an output method of recognition based on elapsed time best reflects the benefits of this service 86 CHENIERE ENERGY, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—CONTINUED to the customer and accordingly, LNG regasification capacity reservation fees are recognized as regasification revenues on a straight-line basis over the term of the respective TUAs. In 2012, SPL entered into a partial TUA assignment agreement with TotalEnergies Gas & Power North America, Inc. (“Total”), whereby upon substantial completion of Train 5 of the SPL Project, SPL gained access to substantially all of Total’s capacity and other services provided under Total’s TUA with SPLNG. This agreement provides SPL with additional berthing and storage capacity at the Sabine Pass LNG Terminal that may be used to provide increased flexibility in managing LNG cargo loading and unloading activity and permit SPL to more flexibly manage its LNG storage capacity. Notwithstanding any arrangements between Total and SPL, payments required to be made by Total to SPLNG will continue to be made by Total to SPLNG in accordance with its TUA and we continue to recognize the payments received from Total as revenue. During the years ended December 31, 2021, 2020 and 2019, SPL recorded $ 129 million, $ 129 million and $ 104 million, respectively, as operating and maintenance expense under this partial TUA assignment agreement. Contract Assets and Liabilities The following table shows our contract assets, net of current expected credit losses, which are classified as other current assets and other non-current assets, net on our Consolidated Balance Sheets (in millions): December 31, 2021 2020 Contract assets, net of current expected credit losses $ 140 $ 80 Contract assets represent our right to consideration for transferring goods or services to the customer under the terms of a sales contract when the associated consideration is not yet due. Changes in contract assets during the year ended December 31, 2021 were primarily attributable to revenue recognized due to the delivery of LNG under certain SPAs for which the associated consideration was not yet due. The following table reflects the changes in our contract liabilities, which we classify as deferred revenue and other non-current liabilities on our Consolidated Balance Sheets (in millions): Year Ended December 31, 2021 Deferred revenue, beginning of period $ 138 Cash received but not yet recognized in revenue 194 Revenue recognized from prior period deferral ( 138 ) Deferred revenue, end of period $ 194 We record deferred revenue when we receive consideration, or such consideration is unconditionally due from a customer, prior to transferring goods or services to the customer under the terms of a sales contract. Changes in deferred revenue during the years ended December 31, 2021 and 2020 are primarily attributable to differences between the timing of revenue recognition and the receipt of advance payments related to delivery of LNG under certain SPAs. 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 December 31, 2021 and 2020: December 31, 2021 December 31, 2020 Unsatisfied Transaction Price (in billions) Weighted Average Recognition Timing (years) (1) Unsatisfied Transaction Price (in billions) Weighted Average Recognition Timing (years) (1) LNG revenues $ 107.1 9 $ 102.3 10 Regasification revenues 1.9 4 2.1 5 Total revenues $ 109.0 $ 104.4 (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. 87 CHENIERE ENERGY, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—CONTINUED We have elected the following exemptions which omit certain potential future sources of revenue from the table above: (1) We omit from the table above all performance obligations that are part of a contract that has an original expected duration of one year or less. (2) The table above excludes substantially all variable consideration under our SPAs and TUAs. We omit from the table above all variable consideration that is allocated entirely to a wholly unsatisfied performance obligation or to a wholly unsatisfied promise to transfer a distinct good or service that forms part of a single performance obligation when that performance obligation qualifies as a series. The amount of revenue from variable fees that is not included in the transaction price will vary based on the future prices of Henry Hub throughout the contract terms, to the extent customers elect to take delivery of their LNG, and adjustments to the consumer price index. Certain of our contracts contain additional variable consideration based on the outcome of contingent events and the movement of various indexes. We have not included such variable consideration in the transaction price to the extent the consideration is considered constrained due to the uncertainty of ultimate pricing and receipt. Approximately 60 % and 40 % of our LNG revenues from contracts included in the table above during the years ended December 31, 2021 and 2020, respectively, were related to variable consideration received from customers. During each of the years ended December 31, 2021 and 2020, approximately 5 % of our regasification revenues were related to variable consideration received from customers. We may enter into contracts to sell LNG that are conditioned upon one or both of the parties achieving certain milestones such as reaching FID on a certain liquefaction Train, obtaining financing or achieving substantial completion of a Train and any related facilities. These contracts are considered completed contracts for revenue recognition purposes and are included in the transaction price above when the conditions are considered probable of being met. NOTE 14— RELATED PARTY TRANSACTIONS Natural Gas Supply Agreements SPL Natural Gas Supply Agreement SPL was party to a natural gas supply agreement with a related party in the ordinary course of business, to obtain a fixed minimum daily volume of feed gas for the operation of the SPL Project. This related party was partially owned by Blackstone Inc., who also partially owns CQP’s limited partner interests. This entity was acquired by a non-related party on December 31, 2021; therefore, as of such date, this agreement ceased to be considered a related party agreement. CCL Natural Gas Supply Agreement CCL was party to a natural gas supply agreement with a related party in the ordinary course of business, to obtain a fixed minimum daily volume of feed gas for the operation of the CCL Project. However, this entity was acquired by a non-related party on November 1, 2021; therefore, as of such date, this agreement ceased to be considered a related party and the related party transactions disclosed herein were recognized prior to this date. The Liquefaction Supply Derivatives related to this agreement were recorded on our Consolidated Balance Sheets as follows (in millions, except notional amount): December 31, 2021 2020 Current derivative assets $ — $ 3 Derivative assets — 1 Notional amount (in TBtu) — 60 88 CHENIERE ENERGY, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—CONTINUED We recorded the following amounts on our Consolidated Statements of Operations during the years ended December 31, 2021, 2020 and 2019 related to these agreements (in millions): Year Ended December 31, 2021 2020 2019 Cost of sales (a) (1) $ 162 $ 114 $ 85 (a) Included in costs of sales: Liquefaction Supply Derivative gain (1) $ 13 $ ( 1 ) $ ( 1 ) (1) Includes amounts recorded related to natural gas supply contracts that SPL and CCL had with related parties. These agreements ceased to be considered related party agreements during 2021, as discussed above. Natural Gas Transportation and Storage Agreements SPL is party to various natural gas transportation and storage agreements and CTPL is party to an operational balancing agreement with a related party in the ordinary course of business for the operation of the SPL Project, with initial primary terms of up to 10 years with extension rights. This related party is partially owned by Brookfield Asset Management, Inc., who indirectly acquired a portion of CQP’s limited partner interests in September 2020. We recorded LNG revenue of $ 1 million and zero , operating and maintenance expense of $ 46 million and $ 13 million and cost of sales of $ 1 million and zero during the years ended December 31, 2021 and 2020, respectively. Additionally, we recorded accrued liabilities of $ 4 million as of both December 31, 2021 and 2020 with this related party. CCL is party to natural gas transportation agreements with Midship Pipeline in the ordinary course of business for the operation of the CCL Project, for a period of 10 years which began in May 2020. We account for our investment in Midship Holdings, which manages the business and affairs of Midship Pipeline, as an equity method investment. We recorded operating and maintenance expense of $ 9 million and $ 6 million during the years ended December 31, 2021 and 2020, respectively. Additionally, we recorded accrued liabilities of $ 1 million as of both December 31, 2021 and 2020 with this related party. Operation and Maintenance Service Agreements Cheniere LNG O&M Services, LLC (“O&M Services”), our wholly owned subsidiary, provides the development, construction, operation and maintenance services to Midship Pipeline pursuant to agreements in which O&M Services receives an agreed upon fee and reimbursement of costs incurred. O&M Services recorded $ 7 million, $ 9 million and $ 12 million in the years ended December 31, 2021, 2020 and 2019, respectively, of other revenues and $ 2 million of accounts receivable as of both December 31, 2021 and 2020 for services provided to Midship Pipeline under these agreements. NOTE 15— INCOME TAXES The jurisdictional components of income before income taxes and non-controlling interest on our Consolidated Statements of Operations for the years ended December 31, 2021, 2020 and 2019 are as follows (in millions): Year Ended December 31, 2021 2020 2019 U.S. $ ( 2,317 ) $ 720 $ 289 International 39 ( 176 ) 426 Total income (loss) before income taxes and non-controlling interest $ ( 2,278 ) $ 544 $ 715 89 CHENIERE ENERGY, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—CONTINUED Income tax provision (benefit) included in our reported net income consisted of the following (in millions): Year Ended December 31, 2021 2020 2019 Current: Federal $ — $ — $ — State 3 — — Foreign 5 — 4 Total current 8 — 4 Deferred: Federal ( 633 ) 41 ( 475 ) State ( 89 ) 2 ( 46 ) Foreign 1 — — Total deferred ( 721 ) 43 ( 521 ) Total income tax provision (benefit) $ ( 713 ) $ 43 $ ( 517 ) Our income tax rates do not bear a customary relationship to statutory income tax rates. A reconciliation of the federal statutory income tax rate of 21% to our effective income tax rate is as follows: Year Ended December 31, 2021 2020 2019 U.S. federal statutory tax rate 21.0 % 21.0 % 21.0 % Non-controlling interest 7.2 ( 22.6 ) ( 17.2 ) State tax, net of federal benefit ( 2.5 ) — ( 5.4 ) Executive compensation ( 0.5 ) 1.4 1.3 Nondeductible interest expense — 8.0 5.0 Foreign earnings taxed in the U.S. — 1.2 6.7 Foreign rate differential ( 0.1 ) ( 3.7 ) ( 11.4 ) Tax credits 0.6 ( 4.5 ) ( 5.2 ) Internal restructuring — 7.0 — Other — 1.0 1.4 Valuation allowance 5.6 ( 0.9 ) ( 68.5 ) Effective tax rate as reported 31.3 % 7.9 % ( 72.3 ) % Significant components of our deferred tax assets and liabilities at December 31, 2021 and 2020 are as follows (in millions): December 31, 2021 2020 Deferred tax assets Net operating loss carryforwards and credits Federal $ 3,231 $ 3,084 Foreign 2 3 State 244 257 Federal and state tax credits 108 95 Derivative instruments 951 7 Other 584 283 Less: valuation allowance ( 63 ) ( 190 ) Total deferred tax assets 5,057 3,539 Deferred tax liabilities Investment in partnerships ( 716 ) ( 765 ) Property, plant and equipment ( 2,638 ) ( 2,089 ) Other ( 499 ) ( 196 ) Total deferred tax liabilities ( 3,853 ) ( 3,050 ) Net deferred tax assets $ 1,204 $ 489 90 CHENIERE ENERGY, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—CONTINUED Valuation Allowance We recognize deferred tax assets and liabilities for future tax consequences arising from differences between the carrying amounts of existing assets and liabilities under GAAP and their respective tax bases, and for net operating loss (“NOL”) carryforwards and tax credit carryforwards. We evaluate the realizability of our deferred tax assets as of each reporting date, weighing all positive and negative evidence, and establish a valuation allowance if we determine that it is more likely than not that some or all of our deferred tax assets will not be realized. The assessment requires significant judgment and is performed in each of our applicable jurisdictions. In making such determination, we consider various factors such as historical profitability, future projections of sustained profitability underpinned by fixed-price long-term SPAs, reversal of existing deferred tax liabilities, construction and operational milestones reached on our Liquefaction Projects and our long-term SPAs achieving date of first commercial delivery. We recorded a valuation allowance of $ 190 million in 2020 against our deferred tax assets. Our valuation allowance decreased by $ 127 million for the year ended December 31, 2021, which was primarily attributable to a portion of our Louisiana NOLs no longer requiring a valuation allowance. Positive evidence supporting such conclusion included a change in Louisiana tax law allowing for indefinite carryover of NOLs, coupled with successful completion and subsequent operations of Train 3 of the CCL Project, and forecasts of sustained future profitability underpinned by fixed-price long-term SPAs. We maintained a valuation allowance of $ 63 million at December 31, 2021 primarily against state NOL carryforward deferred tax assets, for which we continue to believe the more likely than not recognition threshold was not met. NOL and tax credit carryforwards As of December 31, 2021, we had federal, state and foreign NOL carryforwards of approximately $ 15.7 billion, $ 2.4 billion and $ 10.0 million, respectively. Approximately $ 13.8 billion of our NOLs have an indefinite carryforward period. All other NOLs will expire between 2028 and 2037. As of December 31, 2021, we had federal and state tax credit carryforwards of $ 107 million and $ 1 million, respectively. The federal tax credit carryforwards include investment tax credit carryforwards of $ 60 million related to capital equipment placed in service at our Liquefaction Projects. We account for our federal investment tax credits under the flow-through method. The federal tax credit carryforwards also include $ 44 million of foreign tax credits related to tax years 2014 through 2021. The federal and state tax credit carryforwards will expire between 2024 and 2041. We experienced an ownership change within the provisions of U.S. Internal Revenue Code (“IRC”) Section 382 in 2008, 2010 and 2012. An analysis of the annual limitation on the utilization of our NOLs was performed in accordance with IRC Section 382. It was determined that IRC Section 382 will not limit the use of our NOLs over the carryover period. We continue to monitor trading activity in our shares which may cause an additional ownership change which could ultimately affect our ability to fully utilize our existing NOL carryforwards. Unrecognized Tax Benefits As of December 31, 2021, we had unrecognized tax benefits of $ 65 million. If recognized, $ 56 million of unrecognized tax benefits would affect our effective tax rate in future periods. Currently, we do not recognize interest and penalties associated with the unrecognized tax benefits provided in our Consolidated Statements of Operations or our Consolidated Balance Sheets because settlement of uncertain tax positions would result in an adjustment to our NOL carryforward. Interest and penalties related to income tax matters would be recognized as part of income tax expense. We are subject to tax in the U.S. and various state and foreign jurisdictions and we remain subject to periodic audits and reviews by taxing authorities. Federal and state tax returns for the years after 2017 remain open for examination. Tax authorities may have the ability to review and adjust carryover attributes that were generated prior to these periods if utilized in an open tax year. 91 CHENIERE ENERGY, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—CONTINUED A reconciliation of the beginning and ending amounts of our unrecognized tax benefits for the years ended December 31, 2021 and 2020, is as follows (in millions): Year Ended December 31, 2021 2020 Balance at beginning of the year $ 62 $ 61 Additions based on tax positions related to current year 3 1 Additions for tax positions of prior years — — Reductions for tax positions of prior years — — Settlements — — U.S. tax reform rate change — — Balance at end of the year $ 65 $ 62 NOTE 16— SHARE-BASED COMPENSATION We have granted restricted stock shares, restricted stock units, performance stock units and phantom units to employees and non-employee directors under the 2011 Incentive Plan, as amended (the “2011 Plan”) and the 2020 Incentive Plan (the “2020 Plan”). The 2011 Plan and the 2020 Incentive Plan provide for the issuance of 35.0 million shares and 8.0 million shares, respectively, of our common stock that may be in the form of various share-based performance awards deemed by the Compensation Committee of our Board (the “Compensation Committee”). We recognize share-based compensation based upon the estimated fair value of awards. The recognition period for these costs begins at either the applicable service inception date or grant date and continues throughout the requisite service period. For equity-classified share-based compensation awards (which include restricted stock shares, restricted stock units and performance stock units granted to employees and non-employee directors), compensation cost is recognized based on the grant-date fair value and not subsequently remeasured unless modified. The fair value is recognized as expense (net of any capitalization) using the straight-line basis for awards that vest based solely on service conditions and using the accelerated recognition method for awards that vest based on performance conditions. For awards with both time and performance-based conditions, we recognize compensation cost based on the probable outcome of the performance condition at each reporting period. For liability-classified share-based compensation awards that cash settle (which include phantom units and a portion of performance stock units), compensation costs are remeasured at fair value through settlement or maturity. We account for forfeitures as they occur. Total share-based compensation consisted of the following (in millions): Year Ended December 31, 2021 2020 2019 Share-based compensation costs, pre-tax: Equity awards $ 105 $ 114 $ 131 Liability awards (1) 40 2 9 Total share-based compensation 145 116 140 Capitalized share-based compensation ( 5 ) ( 6 ) ( 9 ) Total share-based compensation expense $ 140 $ 110 $ 131 Tax benefit associated with share-based compensation expense $ 33 $ 23 $ 14 (1) The amount of share-based compensation recognized in 2021 associated with liability awards includes 0.2 million of performance share units held by five employees that are scheduled to vest in 2022 that were reclassified from equity awards to liability awards during 2021 as a result of a modification to settle the awards in cash in lieu of shares. We recognized approximately $ 18 million in incremental expense as a result of the modification. 92 CHENIERE ENERGY, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—CONTINUED The total unrecognized compensation cost at December 31, 2021 relating to non-vested share-based compensation arrangements consisted of the following: Unrecognized Compensation Cost (in millions) Recognized over a weighted average period (years) Restricted Stock Share Awards $ 1 0.3 Restricted Stock Unit and Performance Stock Unit Awards $ 140 1.5 Restricted Stock Share Awards Restricted stock share awards are awards of common stock that are subject to restrictions on transfer and to a risk of forfeiture if the recipient terminates employment with us prior to the lapse of the restrictions. These awards vest based on service conditions ( one , two , three or four -year service periods) and performance conditions. All performance conditions of the awards have been achieved as of December 31, 2021. The table below provides a summary of our restricted stock outstanding (in millions, except for per share information): Shares Weighted Average Grant Date Fair Value Per Share Non-vested at January 1, 2021 0.1 $ 41.78 Granted 0.0 0.00 Vested ( 0.1 ) 45.10 Forfeited 0.0 0.00 Non-vested at December 31, 2021 0.0 $ 0.00 The fair value of restricted stock share awards vested for the years ended December 31, 2021, 2020 and 2019 were $ 2 million, $ 3 million and $ 3 million, respectively. Restricted Stock Unit and Performance Stock Unit Awards Restricted stock units are stock awards that vest over a service period of three years and entitle the holder to receive shares of our common stock upon vesting, subject to restrictions on transfer and to a risk of forfeiture if the recipient terminates employment with us prior to the lapse of the restrictions. Performance stock units provide for cliff vesting after a period of three years with payouts based on metrics dependent upon market and performance achieved over the defined performance period compared to pre-established performance targets. The settlement amounts of the awards are based on a performance condition consisting of cumulative distributable cash flow per share, and in certain circumstances, a market condition consisting of absolute total shareholder return (“ATSR”) of our common stock. All performance stock units will settle entirely in stock, with the exception of awards granted in 2021 and 2022 to certain officers which will settle in cash up to a cap of $ 3 million and certain awards vesting in 2022 that settled in cash in lieu of shares. In addition, in December 2021 the Board authorized the Compensation Committee, in its discretion, to permit certain officers to make an election to cash settle their performance stock units that are earned and vest in 2023 and 2024. Where applicable, the compensation for performance stock units containing a market condition of ATSR is based on a fair value assigned to the market metric using a Monte Carlo model as of the grant date, which utilizes level 3 inputs such as projected stock volatility and projected risk free rates, and remains constant through the vesting period for the equity-settled component and is remeasured each reporting period for the cash-settled component. Compensation cost attributed to the performance metric will vary due to changing estimates regarding the expected achievement of the performance metric of cumulative distributable cash flow per share. The number of shares that may be earned at the end of the vesting period ranges from 0 % up to 300 % of the target award amount. Both restricted stock units and performance stock units will be settled in Cheniere common stock (on a one-for-one basis) and are classified as equity awards, however, a portion of the performance stock units granted in 2021 and 2022 will partially settle in cash, subject to individual limits. In addition, in December 2021 the Board authorized the Compensation Committee, in its discretion, to permit certain officers to make an election to cash settle their performance stock units that are earned and vest in 2023 and 2024. The portion of performance stock units expected to settle in Cheniere common stock (on a one-for-one basis) are classified as equity awards and the portion of performance stock units expected to settle in cash are classified as liability awards. 93 CHENIERE ENERGY, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—CONTINUED The table below provides a summary of our restricted share unit and performance stock unit awards outstanding assuming payout at target for awards containing performance conditions (in millions, except for per unit information): Units Weighted Average Grant Date Fair Value Per Unit Non-vested at January 1, 2021 3.7 $ 60.00 Granted (1) 2.2 70.99 Vested ( 2.1 ) 59.57 Forfeited ( 0.1 ) 64.31 Non-vested at December 31, 2021 (2) 3.7 $ 66.71 (1) This number includes 0.2 million incremental shares of our common stock that were issued based on performance results from previously-granted performance stock unit awards. (2) This number excludes 1.3 million performance stock units, which represent the incremental number of common units that would be issued if the maximum level of performance under the target awards amount is achieved. The table below provides a summary of restricted share unit and performance stock unit awards issued and fair value of units vested: Year Ended December 31, 2021 2020 2019 Units issued (in millions) 2.2 1.8 1.9 Weighted average grant date fair value per unit $ 70.99 $ 53.88 $ 67.47 Fair value of units vested (in millions) $ 123 $ 137 $ 45 Phantom Units Awards Phantom units are share-based awards granted to employees over a vesting period that entitle the grantee to receive the cash equivalent to the value of a share of our common stock upon each vesting. Phantom units are not eligible to receive quarterly distributions. These awards vest based on service conditions ( two , three or four -year service periods). We did no t issue any phantom units to our employees and non-employee directors during the years ended December 31, 2021, 2020 and 2019. The remaining outstanding phantom units vested during the year ended December 31, 2021. The value of phantom units vested during the years ended December 31, 2021, 2020 and 2019 was $ 1 million, $ 4 million and $ 11 million, respectively. NOTE 17— EMPLOYEE BENEFIT PLAN We have a defined contribution plan (“401(k) Plan”) which allows eligible employees to contribute up to 75 % of their compensation up to the Internal Revenue Service maximum. We match each employee’s deferrals (contributions) up to 6 % of compensation and may make additional contributions at our discretion. Employees are immediately vested in the contributions made by us. Our contributions to the 401(k) Plan were $ 15 million for each of the years ended December 31, 2021, 2020 and 2019. We have made no discretionary contributions to the 401(k) Plan to date. 94 CHENIERE ENERGY, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—CONTINUED NOTE 18— NET INCOME (LOSS) PER SHARE ATTRIBUTABLE TO COMMON STOCKHOLDERS The following table reconciles basic and diluted weighted average common shares outstanding for the years ended December 31, 2021, 2020 and 2019 (in millions, except per share data): Year Ended December 31, 2021 2020 2019 Net income (loss) attributable to common stockholders $ ( 2,343 ) $ ( 85 ) 648 Weighted average common shares outstanding: Basic 253.4 252.4 256.2 Dilutive unvested stock — — 1.9 Diluted 253.4 252.4 258.1 Net income (loss) per share attributable to common stockholders—basic $ ( 9.25 ) $ ( 0.34 ) $ 2.53 Net income (loss) per share attributable to common stockholders—diluted $ ( 9.25 ) $ ( 0.34 ) $ 2.51 Potentially dilutive securities that were not included in the diluted net income (loss) per share computations because their effects would have been anti-dilutive were as follows (in millions): Year Ended December 31, 2021 2020 2019 Unvested stock (1) 1.8 3.4 2.3 Convertible notes 2021 Cheniere Convertible Unsecured Notes (2) — — 13.7 11% Convertible Senior Secured Notes due 2025 (“2025 CCH HoldCo II Convertible Senior Notes”) (3) — — 25.5 2045 Cheniere Convertible Senior Notes (4) — 4.5 4.5 Total potentially dilutive common shares 1.8 7.9 46.0 (1) Includes the impact of unvested shares containing performance conditions to the extent that the underlying performance conditions are satisfied based on actual results as of the respective dates. (2) In the second quarter of 2021, we repaid the remaining principal amount of the 2021 Cheniere Convertible Unsecured Notes in cash; therefore, the 2021 Cheniere Convertible Unsecured Notes were not included in the computation of net income per share for the year ended December 31, 2021. Additionally, since we had the intent and ability to settle the remaining outstanding principal amount of the 2021 Cheniere Convertible Unsecured Notes in cash and the excess conversion premium (the “conversion spread”) in either cash or shares, the treasury stock method was applied for calculating any potential dilutive effect of the conversion spread on net income per share for the year ended December 31, 2020. However, since the average market price of our common stock did not exceed the conversion price of our 2021 Cheniere Convertible Unsecured Notes, the conversion spread was excluded from the computation of diluted net income per share for the year ended December 31, 2020. (3) In the third quarter of 2020, we redeemed the remaining principal amount of the 2025 CCH HoldCo II Convertible Senior Notes and the related premium in cash; therefore, the 2025 CCH HoldCo II Convertible Senior Notes were not included in the computation of net income per share for the year ended December 31, 2021 and 2020. (4) Since we had the intent and ability to settle the outstanding principal amount of the 2045 Cheniere Convertible Senior Notes in cash and the conversion spread in either cash or shares, the treasury stock method was applied for calculating any potential dilutive effect of the conversion spread on net income per share for the year ended December 31, 2021. However, since the average market price of our common stock did not exceed the conversion price for our 2045 Cheniere Convertible Senior Notes, the conversion spread was excluded from the computation of diluted net income per share for the year ended December 31, 2021. 95 CHENIERE ENERGY, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—CONTINUED NOTE 19— STOCKHOLDERS’ EQUITY Share Repurchase Programs On June 3, 2019, we announced that our Board authorized a three -year, $ 1.0 billion share repurchase program of our common stock. On September 7, 2021, the Board authorized a reset in the share repurchase program to $ 1.0 billion, inclusive of any amounts remaining under the previous authorization as of September 30, 2021, for an additional three years beginning on October 1, 2021. The following table presents information with respect to repurchases of common stock during the years ended December 31, 2021, 2020 and 2019 (in millions, except per share data): Year Ended December 31, 2021 2020 2019 Aggregate common stock repurchased 0.1 2.9 4.0 Weighted average price paid per share $ 87.32 $ 53.88 $ 62.27 Total amount paid $ 9 $ 155 $ 249 As of December 31, 2021, we had up to $ 998 million of the share repurchase program available. Dividends During the year ended December 31, 2021, we declared and paid an inaugural quarterly dividend of $ 0.33 per common share. On January 25, 2022, we declared a quarterly dividend of $ 0.33 per common share that is payable on February 28, 2022 to shareholders of record as of February 7, 2022. NOTE 20— COMMITMENTS AND CONTINGENCIES We have various contractual obligations which are recorded as liabilities in our Consolidated Financial Statements. Other items, such as certain unconditional purchase commitments and other executed contracts which do not meet the definition of a liability as of December 31, 2021, are not recognized as liabilities but require disclosures in our Consolidated Financial Statements. LNG Terminal Commitments and Contingencies EPC Contract SPL has a lump sum turnkey contract with Bechtel Oil, Gas and Chemicals, Inc. (“Bechtel”) for the engineering, procurement and construction of Train 6 of the SPL Project. The total contract price of the EPC contract for Train 6 of the SPL Project, which achieved substantial completion on February 4, 2022, and the third marine berth that is currently under construction is approximately $ 2.5 billion, reflecting amounts incurred under change orders through December 31, 2021. As of December 31, 2021, we had approximately $ 0.2 billion remaining under this contract. Natural Gas Supply, Transportation and Storage Service Agreements SPL, CCL and CCL Stage III have physical natural gas supply contracts to secure natural gas feedstock for the SPL Project, the CCL Project and potential future development of Corpus Christi Stage 3, respectively. The remaining terms of these contracts range up to 15 years. Additionally, SPL and CCL have natural gas transportation and storage service agreements for the SPL Project and the CCL Project, respectively. The initial terms of the natural gas transportation agreements range up to 20 years for the SPL Project and the CCL Project, with renewal options for certain contracts, and commence upon the occurrence of conditions precedent. The initial term of the natural gas storage service agreements for the SPL Project ranges up to 10 years and the initial term of the natural gas storage service agreements for the CCL Project ranges up to five years . 96 CHENIERE ENERGY, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—CONTINUED As of December 31, 2021, the obligations of SPL, CCL and CCL Stage III under natural gas supply, transportation and storage service agreements for contracts in which conditions precedent were met were as follows (in billions): Years Ending December 31, Payments Due (1) 2022 $ 8.8 2023 6.3 2024 4.6 2025 3.3 2026 2.7 Thereafter 16.5 Total $ 42.2 (1) Pricing of natural gas supply contracts is variable based on market commodity basis prices adjusted for basis spread, and pricing of IPM agreements is variable based on global gas market prices less fixed liquefaction fees and certain costs by us . Amounts included are based on estimated forward prices and basis spreads as of December 31, 2021. Some of our contracts may not have been negotiated as part of arranging financing for the underlying assets providing the natural gas supply, transportation and storage services. Does not include incremental volumes of approximately 1,790 TBtu and 548 TBtu, respectively, pursuant to an amended IPM agreement and gas supply agreement with EOG Resources, Inc. that was executed subsequent to December 31, 2021, a portion of which is conditional on the in-service date of certain asset infrastructure and substantially all of which will be delivered after 2026. Environmental and Regulatory Matters Our LNG terminals and pipelines are subject to extensive regulation under federal, state and local statutes, rules, regulations and laws. These laws require that we engage in consultations with appropriate federal and state agencies and that we obtain and maintain applicable permits and other authorizations. Failure to comply with such laws could result in legal proceedings, which may include substantial penalties. We believe that, based on currently known information, compliance with these laws and regulations will not have a material adverse effect on our results of operations, financial condition or cash flows. Legal Proceedings We are, and 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. We recognize legal costs in connection with legal and regulatory matters as they are incurred. While the results of these litigation matters and claims cannot be predicted with certainty, we believe the reasonably possible losses from such matters, individually and in the aggregate, are not material. Additionally, we believe the probable final outcome of such matters will not have a material impact on our operating results, financial position or cash flows. NOTE 21— CUSTOMER CONCENTRATION The following table shows external customers with revenues of 10% or greater of total revenues from external customers and external customers with accounts receivable, net of current expected credit losses and contract assets, net of current expected credit losses balances of 10% or greater of total accounts receivable, net of current expected credit losses from external customers and contract assets, net of current expected credit losses from external customers, respectively: Percentage of Total Revenues from External Customers Percentage of Accounts Receivable, Net and Contract Assets, Net from External Customers Year Ended December 31, December 31, 2021 2020 2019 2021 2020 Customer A 12 % 14 % 16 % 10 % 14 % Customer B 12 % 12 % 10 % * 12 % Customer C 10 % 10 % 11 % * * Customer D * 10 % 11 % * * * Less than 10% 97 CHENIERE ENERGY, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—CONTINUED The following table shows revenues from external customers attributable to the country in which the revenues were derived (in millions). We attribute revenues from external customers to the country in which the party to the applicable agreement has its principal place of business. Revenues from External Customers Year Ended December 31, 2021 2020 2019 Ireland $ 1,838 $ 1,130 $ 989 Singapore 1,740 646 533 South Korea 1,680 942 1,207 Spain 1,577 1,034 598 India 1,375 1,021 1,160 United States 1,340 2,466 2,807 United Kingdom 1,246 678 559 Other countries 5,068 1,441 1,877 Total $ 15,864 $ 9,358 $ 9,730 NOTE 22— SUPPLEMENTAL CASH FLOW INFORMATION The following table provides supplemental disclosure of cash flow information (in millions): Year Ended December 31, 2021 2020 2019 Cash paid during the period for interest on debt, net of amounts capitalized $ 1,365 $ 1,395 $ 1,126 Cash paid for income taxes, net of refunds 4 2 24 Non-cash investing and financing activities: Property, plant and equipment, net of accumulated depreciation funded with accounts payable and accrued liabilities 339 282 473 98 ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE None.