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Based in Houston, TX, Cheniere Energy Partners LP Holdings (CQH) scheduled a $600 million IPO on the NYSE with a market capitalization of $4.6 billion at a price range midpoint of $20 for Friday, December 13, 2013.

Nine operating company IPOs are scheduled for this week. The full IPO calendar can be found at IPOpremium.

SEC Documents

Manager, Joint managers: Goldman Sachs, Morgan Stanley, Credit Suisse, RBC Capital Markets

Co-Managers: Barclays, Citi, JPMorgan, Societe Generale, Banca IMI, HSBC Corporation, Mitsubishi UFJ Securities, Mizuho Securities, Scotiabank/Howard Weil, SMBC Nikko

Summary
CQH will own a 55.9% limited partner interest in Cheniere Partners (CQP), which has a $10 billion market cap.

CQH will have no incentive distribution rights, which is relatively uncommon for limited partnerships.

Unclear language

"The amount of the initial quarterly distribution on Cheniere Partners' common units is $0.425 per unit, or $1.70 per year" or 8.5% per year. Page 68, S-1. This is apparently CQH.

But then the language in the S-1 loosely uses the term "Cheniere Partners" without being specific (in many cases) about whether it is the IPO of "Cheniere Energy Partners LP Holdings" or whether it is the parent "Cheniere Energy Partners LP."

Organization chart

Valuation

Post IPO CQH will own a 55.9% limited partnership interest in CQP

Cap (MM)

Dividend yield

Cheniere Energy Partners LP Holdings *

Hi risk

$4,640

8.50%

Cheniere Energy Partners LP (CQP)

Low risk

$9,960

5.76%

Cheniere Energy (LNG)

10,590

none

*IPO proceeds are earmarked for CQP

Conclusion
The rating on CQH is neutral to positive.

To put the conclusions and observations in context, the following is reorganized, edited and summarized from the full S-1 referenced above:

Business
Cheniere Energy Partners LP Holdings is a Delaware limited liability company that, upon consummation of this offering, will own a 55.9% limited partner interest in Cheniere Partners, a publicly-traded limited partnership (NYSE MKT: CQP), $10 billion market cap.

Cheniere Energy Partners' only business will consist of owning Cheniere Partners units, and, accordingly, its results of operations and financial condition will be dependent on the performance of Cheniere Partners. Cheniere Partners owns and operates liquefied natural gas ("LNG") regasification facilities and, adjacent to these facilities, currently has natural gas liquefaction facilities under construction (the "Liquefaction Project").

Organization chart

Cheniere Holdings was formed to hold the Cheniere Partners limited partner interests that are owned by Cheniere, thereby allowing Cheniere to segregate its lower risk, stable, cash flow generating assets from its higher risk, early stage development projects and marketing activities.

Cheniere believes that an initial public offering of equity interests in Cheniere Holdings to fund Cheniere's early stage development projects and marketing activities will provide Cheniere with a lower-cost source of capital funding than other alternatives.

Incentive distribution rights not held by CQP

Upon the closing of this offering, Cheniere will continue to own, indirectly through GP Holdco, the general partner of Cheniere Partners and the incentive distribution rights in Cheniere Partners, and Cheniere Holdings will hold all of the limited partner interests in Cheniere Partners that are owned by Cheniere prior to the closing of this offering.

In addition, Cheniere Holdings will own a non-economic voting interest in Cheniere GP Holding Company, LLC that will allow Cheniere Holdings to control GP Holdco and the appointment of four of the eleven members to the board of directors of the general partner of Cheniere Partners to oversee the operations of Cheniere Partners.

If Cheniere relinquishes the director voting share, which it may do in its sole discretion, or ceases to own greater than 25% of our outstanding shares, its non-economic voting interest in GP Holdco would be extinguished and it would cease to control GP Holdco.

Dividends

"The amount of the initial quarterly distribution on Cheniere Partners' common units is $0.425 per unit, or $1.70 per year." Page 68, S-1. This is apparently CQH.

But then the language in the S-1 loosely uses the term "Cheniere Partners" without being specific (in many cases) about whether it is the IPO of "Cheniere Energy Partners LP Holdings " or whether it is the paren "Cheniere Energy Partners LP."

When Cheniere Partners makes cash distributions to CQH with respect to CQH's Cheniere Partners units, CQH will pay dividends to its shareholders consisting of the cash that it receives from Cheniere Partners, less income taxes and reserves established by the board of directors.

On October 22, 2013, Cheniere Partners declared a regular quarterly cash distribution of $0.425 per common unit, or $1.70 per common unit on an annualized basis, which was paid on November 14, 2013, to common unitholders of record as of November 1, 2013.

Cheniere Partners has paid the initial quarterly distribution amount of $0.425 per common unit, or $1.70 per common unit on an annualized basis, for each fiscal quarter since its initial public offering in March 2007. Cheniere Partners has not made any cash distributions in respect of the subordinated units with respect to the quarters ended on or after June 30, 2010.

Within ten business days after CQH receives a distribution on its Cheniere Partners units, it will declare dividends on its shares of the cash that CQH receives as distributions in respect of its Cheniere Partners units, less income taxes and any reserves established by its board of directors to pay company expenses and amounts due under the Services Agreement, to service and reduce indebtedness that CQP may incur and for company purposes, in each case as permitted by its LLC Agreement.

Pursuant to the Services Agreement, CQH has agreed to pay an administrative fee to reimburse Cheniere for the costs and expenses incurred on CQH's behalf. If distributions are made on the Cheniere Partners units that CQH owns as of the closing of this offering other than in cash, CQH may, but is not required to, pay a dividend on its shares in substantially the same form.

However, if Cheniere Partners makes a distribution on Cheniere Partners units in the form of additional Cheniere Partners units, CQH will be required to hold any units it receives as a distribution on the Cheniere Partners units CQH will hold immediately after the closing of this offering.

Competition

Through its wholly-owned subsidiary, Sabine Pass LNG, L.P., Cheniere Partners owns and operates the regasification facilities at the Sabine Pass LNG terminal located on the Sabine Pass deep water shipping channel less than four miles from the Gulf Coast.

Sabine Pass LNG currently does not experience competition for its terminal capacity because the entire approximately 4.0 Bcf/d of regasification capacity that is available at the Sabine Pass LNG terminal has been fully contracted. If and when Sabine Pass LNG has to replace any TUAs, it will compete with other than-existing LNG terminals for customers.

Use of proceeds

CQH expects to net $553.2 million from its IPO. Proceeds are allocated as follows:

  • Repay intercompany indebtedness and payables, in the aggregate amount of approximately $259.8 million; and
  • Make a distribution to Cheniere with the remaining proceeds.

Disclaimer: This CQH IPO report is based on a reading and analysis of CQH's S-1 filing, which can be found here, and a separate, independent analysis by IPOdesktop.com. There are no unattributed direct quotes in this article.

Source: IPO Preview: Cheniere Energy Partners LP Holdings