What is the main event reported in this 8-K filing?

The main event is that Total LNG USA, Inc., a subsidiary of Total SA, has exercised its option to secure 1.0 billion cubic feet per day (Bcf/d) of liquefied natural gas (LNG) regasification capacity at Cheniere Energy's Sabine Pass LNG terminal. This exercise was confirmed on November 9, 2004, with a $10 million advance payment and a guarantee from Total SA.

What are the key financial terms of the agreement with Total?

Total will pay a tariff of $0.32 per million British thermal units (mmbtu) for the 1.0 Bcf/d capacity over a 20-year period, beginning no later than April 1, 2009. The tariff is subject to adjustment for inflation. Additionally, Total made an initial advance Capacity Reservation Fee of $10 million, which will be amortized as a reduction of the tariff over ten years.

What conditions must be met for the agreement to proceed, and what is the deadline?

The transaction remains subject to two key conditions: (1) approval by the Federal Energy Regulatory Commission (FERC) for the construction of the Sabine Pass terminal, and (2) confirmation of Cheniere's ability to finance the facility's construction. Total has the right to terminate the agreement if these conditions are not satisfied by June 30, 2005.

Are there any other important provisions in the associated agreements?

Yes, an Omnibus Agreement was also entered into. A notable provision allows Total, under certain circumstances, to adopt the pricing terms of future third-party terminal use agreements for capacity of 50 million cubic feet per day or more, if entered into before the commercial start date of the Sabine Pass terminal.

LNG 8-K: Material Agreements

Summary

This 8-K filing reports a significant development for Cheniere Energy, Inc. (LNG) regarding its Sabine Pass LNG receiving terminal. On November 9, 2004, Total LNG USA, Inc., a subsidiary of Total SA, exercised its option to secure 1.0 billion cubic feet per day (Bcf/d) of regasification capacity. This action, marked by a $10 million advance payment and a guarantee from Total SA, solidifies a crucial agreement that commenced with a Terminal Use Agreement (TUA) signed on September 2, 2004. The exercise of the option by Total is a key de-risking event for the Sabine Pass project. Investors should note that the agreement is for a substantial 20-year term, commencing no later than April 1, 2009, with a tariff of $0.32 per mmbtu, subject to inflation adjustments. This secures a significant portion of the terminal's capacity and revenue stream, providing greater visibility into future cash flows for Cheniere.

Key Highlights

1Total LNG USA, Inc. has exercised its option to secure 1.0 Bcf/d of regasification capacity at Cheniere's Sabine Pass LNG terminal.
2This exercise includes an initial $10 million advance Capacity Reservation Fee payment and a guarantee from parent company Total SA.
3The Terminal Use Agreement (TUA) is for a 20-year term, commencing no later than April 1, 2009.
4The agreed-upon tariff is $0.32 per mmbtu, with provisions for inflation adjustment.
5Total has the right to terminate the agreement if key conditions, including FERC approval and financing confirmation, are not met by June 30, 2005.
6The Capacity Reservation Fee payments will be amortized over ten years as a reduction of Total's tariff.
7The filing also references an Omnibus Agreement that includes provisions for Total to potentially adopt pricing from future third-party agreements.

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

Summary

Key Highlights

Frequently Asked Questions