8-KMaterial Agreements

Cheniere Energy, Inc. 8-K Report, Material Agreement (Feb 23, 2006)

Filed February 23, 2006For Securities:LNG

Summary

Cheniere Energy, Inc. (LNG) has filed an 8-K report detailing a significant material definitive agreement entered into by its wholly-owned subsidiary, Cheniere Sabine Pass Pipeline Company. This agreement, effective February 1, 2006, is for Engineering, Procurement, and Construction (EPC) services with Willbros Engineers, Inc. for a crucial 16-mile, 42-inch pipeline and associated facilities. This pipeline will connect Cheniere's liquefied natural gas (LNG) terminal under construction at Sabine Pass to a pipeline interconnect at Johnson's Bayou, Louisiana. The EPC agreement outlines a comprehensive scope of work for Willbros, including project management, engineering, procurement, construction, and construction management. Key milestones are established, with material receipt and ware yard preparation not commencing before January 1, 2007, and physical construction beginning no earlier than April 1, 2007. The project is targeted for mechanical completion by September 30, 2007. The total contract price is capped at approximately $67.7 million, excluding certain sales and use taxes that Cheniere will reimburse. The agreement includes detailed provisions for change orders, warranties, termination rights for both convenience and default, and force majeure events, providing a structured framework for this critical infrastructure development.

Key Highlights

  • 1Cheniere Sabine Pass Pipeline Company, a subsidiary of Cheniere Energy, Inc., entered into a material EPC agreement with Willbros Engineers, Inc. on February 21, 2006.
  • 2The agreement covers engineering, procurement, and construction services for a 16-mile, 42-inch pipeline and related facilities connecting the Sabine Pass LNG terminal to Johnson's Bayou, Louisiana.
  • 3The total contract price for the EPC services is not to exceed $67,670,200, with potential adjustments for change orders.
  • 4Construction activities are scheduled to commence later in 2007, with a target mechanical completion date of September 30, 2007.
  • 5The EPC agreement includes robust provisions for change orders, performance warranties from Willbros, and defined termination rights for both parties, offering recourse in various scenarios.
  • 6Force majeure clauses are in place, addressing potential delays due to uncontrollable events and outlining potential adjustments to the contract price for standby expenses, up to a limit of $1,500,000.

Frequently Asked Questions

The EPC agreement is for the engineering, procurement, and construction of a 16-mile, 42-inch pipeline and related facilities. This pipeline is crucial for connecting Cheniere's liquefied natural gas (LNG) terminal under construction at Sabine Pass, Louisiana, to a pipeline interconnect at Johnson's Bayou, Louisiana, facilitating the transportation of natural gas.

The contract price is capped at $67,670,200, excluding Louisiana sales and use taxes on permanent materials and equipment, which Cheniere will reimburse. This price covers all aspects of the project management, engineering, material procurement, construction, and construction management services provided by Willbros Engineers, Inc.

While the agreement details commencement dates for different phases, the target for mechanical completion of the pipeline and related facilities is September 30, 2007. This timeline is subject to adjustments through change orders.

The agreement includes several protections for Cheniere, such as a capped contract price, detailed warranties from Willbros regarding the quality and suitability of work and materials, and clear termination rights for default or convenience. It also outlines procedures for handling change orders and force majeure events, ensuring a structured approach to project execution and risk management.