What is the total value of the EPC Agreement with Bechtel Corporation?

The Lump Sum Turnkey Engineering, Procurement and Construction (EPC) Agreement with Bechtel Corporation has a base contract price of $646,936,000, plus certain reimbursable costs. This price is subject to adjustment for changes in commodity prices, contingencies, and change orders.

When is the Sabine Pass LNG terminal expected to be operational?

According to the press release referenced in the filing, construction at the site is expected to begin in the first quarter of 2005, and the terminal is scheduled to be operational in early 2008. The EPC agreement specifies substantial completion within 1,247 days after the final notice to proceed.

What are the conditions required before Bechtel can commence full construction (issue a final Notice to Proceed)?

Sabine Pass LNG generally cannot issue a final Notice to Proceed (NTP) until it has documented sufficient funds or financing, obtained specified permits, paid Bechtel a 5% advance payment of the contract price, and at least 90 days have passed since the limited notice to proceed (LNTP).

What happens if Cheniere Energy decides to terminate the agreement for convenience?

If Sabine Pass LNG terminates the EPC Agreement for convenience, Bechtel would be compensated for the work performed prior to termination, cancellation charges owed to subcontractors (if not assigned), demobilization costs, and lost profits (generally 10% of the contract price, less a portion of the advance payment related to the NTP, with exceptions).

LNG 8-K: Material Agreements

Summary

Cheniere Energy, Inc. (LNG) announced a significant development through its wholly owned subsidiary, Sabine Pass LNG, L.P., by entering into a Lump Sum Turnkey Engineering, Procurement and Construction (EPC) Agreement with Bechtel Corporation. This agreement, effective December 18, 2004, details the construction of the Sabine Pass liquefied natural gas (LNG) receiving, storage, and regasification terminal in Louisiana. The project's substantial completion is targeted within 1,247 days of the final notice to proceed, with final completion expected shortly thereafter. The total contract price is approximately $646.9 million, subject to adjustments for commodity prices, change orders, and other factors. This filing is crucial for investors as it marks a definitive step towards the development of a major LNG infrastructure asset. The agreement outlines Bechtel's responsibilities, including performance guarantees and warranties, and defines the payment structure, including an upfront advance payment and milestone-based payments. The company has also provided details on termination clauses for both parties, change order procedures, and provisions for force majeure events, offering clarity on the project's execution framework and risk allocation.

Key Highlights

1Cheniere Energy's subsidiary, Sabine Pass LNG, L.P., signed a definitive EPC Agreement with Bechtel Corporation for the construction of the Sabine Pass LNG terminal.
2The EPC Agreement is a Lump Sum Turnkey contract, with a base contract price of approximately $646.9 million.
3The terminal, located in western Cameron Parish, Louisiana, will have a capacity of 2.6 billion cubic feet per day (Bcf/d).
4Substantial completion is scheduled within 1,247 days after Bechtel receives a final Notice to Proceed (NTP).
5Sabine Pass LNG must provide Bechtel with a limited notice to proceed (LNTP) contingent on sufficient funds, with a final NTP requiring proof of funds, permits, a 5% advance payment, and a 90-day waiting period.
6The agreement includes provisions for change orders, performance guarantees, warranties, and defined termination rights for both Sabine Pass LNG and Bechtel.
7A bonus of up to $12 million is available to Bechtel for early completion of construction meeting specific performance criteria.

Cheniere Energy, Inc. 8-K Report, Material Agreement (Dec 20, 2004)

Summary

Key Highlights

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