What is the main purpose of the agreement between Cheniere Energy and Chevron USA?

The main purpose is to secure regasification capacity for Chevron USA at Cheniere's Sabine Pass LNG terminal. This agreement is a key step in the development and commercialization of the terminal, providing a foundational customer and revenue stream.

What are the financial implications of this agreement for Cheniere Energy?

The agreement involves initial advance Capacity Reservation Fee payments from Chevron USA, totaling up to $20 million, with a guaranteed $5 million payment. Furthermore, Chevron USA has the option to invest $200 million for a 20% stake in Sabine Pass LNG, which would provide significant capital for the project. The long-term tariff of $0.32 per million British thermal units for 20 years provides a predictable revenue stream once the terminal is operational.

What are the key conditions and deadlines associated with this agreement?

The agreements are subject to final corporate approvals, notably by the ChevronTexaco Board of Directors, by December 20, 2004. Without this approval, Chevron USA has the right to terminate the agreements. Subsequent payments and potential capacity adjustments are also tied to this approval, as well as FERC approval and confirmation of financing for the construction of the facility.

How does this agreement impact Chevron USA's role and commitment to the Sabine Pass project?

Chevron USA is securing a substantial amount of regasification capacity (700 mmcf/d) for a long term (20 years) and has the option to become a significant equity partner (20% stake). The agreement also provides Chevron USA with flexibility to adjust its reserved capacity and includes advance payments, demonstrating a serious commitment to the project, contingent on corporate approvals.

LNG 8-K: Material Agreements

Summary

Cheniere Energy, Inc. (LNG) announced a significant development for its Sabine Pass LNG terminal project through its wholly-owned subsidiary, Sabine Pass LNG, L.P. The company entered into a Terminal Use Agreement (TUA) with Chevron USA, Inc., a subsidiary of ChevronTexaco, to secure regasification capacity at the Louisiana-based facility. This agreement is a crucial step towards commercializing the Sabine Pass project and signals strong industry interest and potential revenue generation for Cheniere.

Key Highlights

1Cheniere's Sabine Pass LNG, L.P. entered into a Terminal Use Agreement (TUA) with Chevron USA, Inc.
2Chevron USA will secure 700 million cubic feet per day (mmcf/d) of regasification capacity at the Sabine Pass LNG terminal.
3The TUA has a term of 20 years, commencing no later than July 1, 2009.
4An Omnibus Agreement includes provisions for Chevron USA to make advance Capacity Reservation Fee payments totaling up to $20 million.
5Chevron USA has an option to make a $200 million equity investment for a 20% limited partner interest in Sabine Pass LNG, subject to approvals.
6Both the TUA and Omnibus Agreement are subject to final corporate approvals, including ChevronTexaco's Board of Directors, by December 20, 2004.
7ChevronTexaco will guarantee certain obligations of its subsidiary under the TUA.

Cheniere Energy, Inc. 8-K Report, Material Agreement (Nov 9, 2004)

Summary

Key Highlights

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