Cheniere Energy Partners, L.P. (CQP) stock intrinsic value fair value estimate & owner earnings analysis

Cheniere Energy Partners owns the Sabine Pass LNG terminal in Louisiana, with more than 30 million tonnes a year of liquefaction capacity. It turns U.S. natural gas into LNG for export. Most capacity is sold under long-term contracts, where customers pay a fixed fee per unit whether or not they take cargoes, plus a variable fee that covers the gas and fuel costs. About 85% of expected output is contracted through the mid-2030s, and the contracts and gas-supply agreements have roughly 13 years of weighted average life left. The remaining volume is sold by Cheniere's marketing arm at market margins. Two customers account for 22% and 15% of revenue. The partnership has no stock-based compensation, so nothing is deducted for it. What we measure. We estimate owner earnings: operating cash flow, less swings in working capital, less the capital spending needed to keep the plant running. Growth capex is stripped out using each year's rise in revenue. This is cash after interest, so the roughly $14.2 billion of long-term debt is not deducted again. Non-cash items such as depreciation and the large swings in derivative gains and losses (about $741 million of gains in 2025) do not distort the figure, because we start from cash. Per unit, on about 484 million units, owner earnings were -$0.37 in 2017, $2.43 in 2018, $0.80 in 2019, $1.86 in 2020, $3.76 in 2021, $8.77 in 2022, $5.53 in 2023, $5.60 in 2024 and $5.94 in 2025. Reading the history. Through 2019, and partly through 2020, the company was still building trains. Those years mix construction spending with operating earnings, so they say little about steady-state earning power. 2022 was a spike year, driven by exceptional market margins and the first months of the sixth train. We anchor on the median of 2020-2025, which is $5.56 per unit. The median removes the 2022 spike and sits right on the 2024 and 2025 results. The figure for 2020 is depressed by construction spending that the formula treats as maintenance, so it understates that year's earning power. It only affects the low end of the window and not the median, and it is the source of our post-contract earnings assumption below. Growth check. Owner earnings grew about 6% in 2025 ($5.94 vs $5.60). Our base case starts at $5.56, below the 2025 level, and assumes no growth. The first half of 2026 was stronger, with operating cash flow of $1.61 billion against $1.22 billion a year earlier. That is one half-year, so we do not raise the level on it. It only informs the bull case. Base case: $58.38 per unit. Earnings hold at $5.56 for 13 years, the weighted remaining life of the contracts. After that we assume $1.86 a year for another 17 years, the owner earnings the partnership actually reported in 2020, its weakest year in this record. After that the value is zero. We include no growth. The Sabine Pass expansion of up to about 20 million tonnes a year has regulatory approvals but no final investment decision and only partial contracting. We also assume no margin improvement. Bear case: $36.30 per unit. Marketing margins on the uncontracted volume of about 15% disappear, which removes roughly $1 per unit. Maturing debt is refinanced at higher rates than the 4.73% average today. The larger customers, at 22% and 15% of revenue, carry concentration risk. Earnings run at $4.10 for the 13 years of contracts, and nothing is credited after that, because no replacement contracts are yet visible. Bull case: $75.62 per unit. Earnings run at $6.60 a year, which is the first-half 2026 cash-flow pace annualised. That pace rests on continued production above nameplate and lower interest as debt is paid down (net repayments of about $655 million in 2025). It is followed by $3.50 a year for 17 years, which is the 2020 figure with construction spending normalised. What could make this wrong. Long-term contracts expire on a schedule that could be less favourable than the 13-year average, and the 10-K's "through the mid-2030s" language may put the contracted cliff earlier. We do not know what replacement contracts will pay. Our post-contract assumption relies on the 2020 result and is not backed by signed agreements. The uncontracted volume depends on global LNG spot margins. Derivative fair-value swings do not affect the cash-based measure.