8-KMaterial AgreementsFinancial EventsOther Events+1

Cheniere Energy, Inc. 8-K Report, Material Agreement (Jul 24, 2006)

Filed July 24, 2006For Securities:LNG

Summary

Cheniere Energy, Inc. (LNG) filed an 8-K on July 24, 2006, detailing significant financing and construction agreements for the expansion of its Sabine Pass LNG terminal. The company's wholly-owned subsidiary, Sabine Pass LNG, L.P., secured a First Amended and Restated Credit Agreement, increasing available loans from $822 million to $1.5 billion. This financing is earmarked for expanding the terminal's regasification capacity from 2.6 Bcf/d (Phase 1) to 4.0 Bcf/d (Phase 2). In conjunction with the credit agreement, Sabine entered into three key construction agreements to support the Phase 2 expansion. These include an EPCM agreement with Bechtel for overall project management and construction, a Tank Contract with Zachry Construction Corporation and Diamond LNG LLC for the construction of two new LNG tanks, and a Soil Contract with Remedial Construction Services, L.P. for soil remediation. These agreements represent a substantial commitment to increasing Cheniere's LNG infrastructure and operational capacity.

Key Highlights

  • 1Sabine Pass LNG, a subsidiary of Cheniere Energy, amended its credit agreement, increasing total loan commitments to $1.5 billion from $822 million.
  • 2The expanded financing is designated for the expansion of the Sabine Pass LNG terminal from 2.6 Bcf/d to 4.0 Bcf/d of regasification capacity (Phase 2).
  • 3Three key construction agreements were executed with Bechtel (EPCM services), Zachry/Diamond LNG (tank construction), and Remedial Construction Services (soil remediation) for Phase 2.
  • 4The Amended Credit Agreement has a final maturity date of July 1, 2015, with semi-annual principal repayments starting around October 1, 2009.
  • 5Interest rates on borrowings under the credit agreement are variable (LIBOR plus a margin of 0.875% to 1.125%).
  • 6Interest rate swap agreements were entered into to fix the LIBOR component on borrowings up to $1.25 billion at a blended rate of 5.26% until July 1, 2015.

Frequently Asked Questions

The primary purpose of these agreements is to secure financing and commence construction for the expansion of Cheniere Energy's Sabine Pass LNG terminal. This expansion will increase its regasification capacity from 2.6 Bcf/d to 4.0 Bcf/d (Phase 2).

Cheniere's subsidiary, Sabine Pass LNG, L.P., amended its credit agreement to increase total loan commitments to $1.5 billion, up from $822 million previously. Of this, $538.1 million is specifically allocated for Phase 2 loans.

The key contractors are Bechtel (for Engineering, Procurement, Construction, and Management services), Zachry Construction Corporation and Diamond LNG LLC (for constructing two LNG tanks), and Remedial Construction Services, L.P. (for soil remediation and improvement).

The filing outlines target completion dates for the tanks and soil remediation, with milestones for the first tank around March 2009 and the second around June 2009. However, borrowing availability under the credit agreement extends until April 1, 2009, or one month after the commercial start date of the Total TUA, whichever is later, and final maturity of the debt is July 1, 2015.