What is the primary purpose of this 8-K filing?

This 8-K filing reports on the entry into a material definitive agreement: a Gas Purchase and Sale Agreement between Cheniere LNG Marketing, Inc. and PPM Energy, Inc.

What is the significance of the agreement for Cheniere Energy?

The agreement is significant as it secures a buyer for a substantial volume of natural gas (up to 600,000 MMBtu per day) that Cheniere plans to procure through its LNG import terminal and associated pipeline infrastructure. This demonstrates progress in monetizing Cheniere's development projects.

What are the key terms regarding the gas sale to PPM?

Cheniere Marketing will sell natural gas to PPM at a price of 96% of the NYMEX Henry Hub price plus $0.10 per MMBtu. PPM will receive 40% of the first 100,000 MMBtu/day from qualifying LNG supply agreements and 20% thereafter. Delivery will occur along Cheniere's Creole Trail Pipeline.

What is the duration of this agreement and what are the termination conditions?

The agreement has an initial term of 10 years, starting two months after the Sabine Pass LNG Receiving Terminal, Creole Trail Pipeline, and the connection between them commence commercial operations. It includes provisions for two 5-year extensions. Termination can occur if initial operations don't commence by specific dates (June 30, 2010 for terminal/pipeline, Oct 31, 2010 for gas delivery), or due to failure to obtain governmental approvals by June 30, 2008, excessive damages from LNG supply interruptions, material breach, or financial insolvency of either party.

LNG 8-K: Material Agreements

Summary

Cheniere Energy, Inc. (LNG) announced on April 4, 2006, through its wholly-owned subsidiary Cheniere LNG Marketing, Inc., a significant Gas Purchase and Sale Agreement with PPM Energy, Inc. (PPM), a U.S. subsidiary of Scottish Power plc. This agreement grants Cheniere Marketing the right to sell up to 600,000 MMBtu of natural gas per day to PPM, with an initial allocation of qualifying liquefied natural gas (LNG) purchases. The pricing mechanism and delivery points are detailed, centering around Cheniere's developing Sabine Pass LNG Receiving Terminal and the Creole Trail Pipeline. The agreement has an initial term of 10 years, with provisions for extensions, and includes specific termination clauses for both parties related to project development timelines, performance, and financial stability. PPM Energy's parent company, Scottish Power plc, through Scottish Power Finance (US), Inc., has provided a guarantee for PPM's obligations, indicating a degree of financial backing for this substantial contract.

Key Highlights

1Cheniere LNG Marketing, Inc. entered into a Gas Purchase and Sale Agreement with PPM Energy, Inc. (PPM) on April 4, 2006.
2The agreement allows Cheniere Marketing to sell up to 600,000 MMBtu of natural gas per day to PPM.
3PPM will be allocated a portion of qualifying LNG purchases, with specific definitions for 'qualifying LNG supply agreements'.
4The pricing for the natural gas sold to PPM is based on the NYMEX Henry Hub futures contract price plus a premium.
5Gas will be delivered to PPM at points along Cheniere's proposed Creole Trail Pipeline, servicing the Sabine Pass LNG Receiving Terminal.
6The agreement has an initial term of 10 years, commencing after the Sabine Pass LNG Receiving Terminal and related pipelines become operational.
7PPM Energy's obligations are guaranteed by its parent, Scottish Power Finance (US), Inc., which holds investment-grade credit ratings.

Cheniere Energy, Inc. 8-K Report, Material Agreement (Apr 6, 2006)

Summary

Key Highlights

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