Cheniere Energy (LNG) Risk Analysis

In March 2015, we issued $625 million aggregate principal amount of 4.25% Convertible Senior Notes due 2045 (the "2045 Cheniere Convertible Senior Notes") to certain investors through a registered direct offering. We have the option to satisfy the 2045 Cheniere Convertible Senior Notes conversion obligation with cash, common stock or a combination thereof. Prior to December 15, 2044, the 2045 Cheniere Convertible Senior Notes will be convertible upon the occurrence of certain conditions, and on and after such date they will become freely convertible. The 2045 Cheniere Convertible Senior Notes will become convertible into the common stock of Cheniere at an initial conversion price of $138.38 per share. The conversion of some or all of the 2045 Cheniere Convertible Senior Notes into shares of our common stock will dilute the ownership percentages and voting power of our existing stockholders. Based on the initial conversion price, if we elect to satisfy the entire conversion obligation of the 2045 Cheniere Convertible Senior Notes with common stock, approximately 4.5 million shares of our common stock would be issued upon the conversion, assuming the notes are converted at maturity. Any sales in the public market of the shares issuable upon conversion of the 2045 Cheniere Convertible Senior Notes could adversely affect the prevailing market prices of our common stock. In addition, the existence of the 2045 Cheniere Convertible Senior Notes may encourage short selling by market participants because the conversion of the 2045 Cheniere Convertible Senior Notes could be used to satisfy short positions, or the anticipated conversion of the 2045 Cheniere Convertible Senior Notes into shares of our common stock could depress the price of our common stock.

We had a net loss attributable to common stockholders of $85 million for the year ended December 31, 2020, as well as net losses attributable to common stockholders in prior years. In the future, we may incur operating losses and experience negative operating cash flow. We may not be able to reduce costs, increase revenues or reduce our debt service obligations sufficiently to maintain our cash resources, which could cause us to have inadequate liquidity to continue our business. We will continue to incur significant capital and operating expenditures while we develop and construct the Liquefaction Projects, Corpus Christi Stage 3 and other projects. Any delays beyond the expected development period for these projects could cause operating losses and negative operating cash flows. Our future liquidity may also be affected by the timing of construction financing availability in relation to the incurrence of construction costs and other outflows and by the timing of receipt of cash flows under third-party agreements in relation to the incurrence of project and operating expenses. Moreover, many factors (including factors beyond our control) could result in a disparity between liquidity sources and cash needs, including factors such as construction delays and breaches of agreements. Our ability to generate any significant positive operating cash flow and achieve profitability in the future is dependent on our ability to successfully and timely complete and operate the applicable project.

We test our long-lived assets for impairment whenever events or changes in circumstances indicate that the carrying amount of these assets may not be recoverable. We test goodwill for impairment annually during the fourth quarter, or more frequently as circumstances dictate. Significant negative industry or economic trends, including a significant decline in the market price of our common stock, reduced estimates of future cash flows for our business or disruptions to our business could lead to an impairment charge of our long-lived assets, including goodwill. Our valuation methodology for assessing impairment requires management to make judgments and assumptions based on historical experience and to rely heavily on projections of future operating performance. Projections of future operating results and cash flows may vary significantly from results. In addition, if our analysis results in an impairment to our goodwill or long-lived assets, we may be required to record a charge to earnings in our Consolidated Financial Statements during a period in which such impairment is determined to exist, which may negatively impact our operating results.

We are relying on third parties, principally Bechtel, for the design and engineering services underlying our estimates of the future capacity ratings and performance capabilities of the Liquefaction Projects. If any Train, when actually constructed, fails to have the capacity ratings and performance capabilities that we intend, our estimates may not be accurate. Failure of any of our Trains to achieve our intended capacity ratings and performance capabilities could prevent us from achieving the commercial start dates under our SPAs and could have a material adverse effect on our business, contracts, financial condition, operating results, cash flow, liquidity and prospects.

To reduce our exposure to fluctuations in (1) changing interest rates, (2) commodity-related marketing and price risks and (3) foreign exchange volatility, we enter into derivative financial instruments, including futures, swaps and option contracts. To the extent we hedge our exposure to commodity price, interest rate or foreign currency exchange rate exposures, we forego the benefits we would otherwise experience if commodity prices, interest rates or foreign currency exchange rates were to change favorably to our hedged position. Hedging arrangements could also expose us to risk of financial loss in some circumstances, including when: - expected supply is less than the amount hedged or is otherwise imperfect;- the counterparty to the hedging contract defaults on its contractual obligations; or - there is a change in the expected differential between the underlying price in the hedging agreement and actual prices received. Our use of derivative financial instruments are recorded at fair value on our Consolidated Balance Sheets with changes in the fair value resulting from fluctuations in the underlying commodity prices or hedged item recognized in earnings, unless they satisfy criteria for, and we elect, the normal purchases and sales exception or hedge accounting treatment. All of our derivative financial instruments do not qualify for these exceptions from fair value reporting through earnings. As a result, our quarterly and annual results are subject to significant fluctuations caused by changes in fair value, including circumstances in which there is no underlying economic impact yet realized. The use of derivatives also may require the posting of cash collateral with counterparties, which can impact working capital when commodity prices, interest rates or foreign currency exchange rates change.