8-KOther EventsExhibits & Filings

Cheniere Energy, Inc. 8-K Report, Corporate Update (Oct 23, 2006)

Filed October 23, 2006For Securities:LNG

Summary

Cheniere Energy, Inc. (LNG) filed an 8-K on October 23, 2006, providing crucial updates on its Sabine Pass Liquefied Natural Gas (LNG) receiving terminal construction and operations. The company detailed projected completion timelines for various phases of the terminal, with the first phase expected to be operational by Q1 2008, achieving 2.0 Bcf/d capacity. Further expansion, Phase 2 – Stage 1, aims for full operability at 4.0 Bcf/d by Q3 2009. A significant development highlighted is the anticipated amended and restated Terminal Use Agreement (TUA) between its subsidiary Cheniere Marketing, Inc. and Sabine Pass LNG. This TUA is expected to generate approximately $250 million in annual revenues for at least 19 years, commencing January 1, 2009, providing a substantial revenue stream for the project. The filing also provided an illustrative cash flow summary for Sabine Pass LNG, projecting approximately $467 million in EBITDA for 2010, based on projected revenues from TUAs with Total, Chevron, and Cheniere Marketing. This projection assumes full operation of the terminal and contractually stipulated payments. The company also disclosed significant construction expenditures, with $507 million of the anticipated $900-$950 million for Phase 1 and $39 million of the $500-$550 million for Phase 2 – Stage 1 already funded as of September 30, 2006. Financing for the construction is supported by a $1.5 billion credit facility and a $600 million term loan.

Key Highlights

  • 1Construction of the Sabine Pass LNG receiving terminal is progressing, with Phase 1 aiming for operational status and 2.0 Bcf/d capacity by Q1 2008, and Phase 2 – Stage 1 expansion targeting 4.0 Bcf/d by Q3 2009.
  • 2Cheniere Marketing, Inc. is expected to enter an amended TUA with Sabine Pass LNG, reserving 2.0 Bcf/d of regasification capacity.
  • 3The Cheniere Marketing TUA is projected to generate approximately $250 million in annual revenue for at least 19 years, commencing January 1, 2009, with initial monthly revenues of $5 million in 2008.
  • 4An illustrative cash flow summary for Sabine Pass LNG projects $467 million in EBITDA for 2010, based on projected TUA revenues and operating expenses.
  • 5As of September 30, 2006, Cheniere had funded $507 million of Phase 1 and $39 million of Phase 2 – Stage 1 construction expenditures, utilizing a mix of equity and project finance debt.
  • 6The Sabine Pass LNG receiving terminal project is financed through a $1.5 billion credit facility and a $600 million term loan.
  • 7An independent engineer's report deems the Phase 1 and Phase 2 – Stage 1 projects technically viable, with reasonable budgets and schedules, and low environmental risks.

Frequently Asked Questions

Cheniere expects to achieve revaporized natural gas sendout of 2.0 Bcf/d or more by the first quarter of 2008 for the initial phase. The full 2.6 Bcf/d Phase 1 capacity is anticipated in the third quarter of 2008. Phase 2 – Stage 1, targeting 4.0 Bcf/d, is expected to be fully operational by the third quarter of 2009.

The amended and restated Terminal Use Agreement (TUA) with Cheniere Marketing, Inc. is anticipated to provide annual revenues of approximately $250 million for at least 19 years, commencing January 1, 2009. Additionally, there will be initial revenues of $5 million per month during 2008.

As of September 30, 2006, construction costs were funded by $236.7 million in equity capital and capacity reservation fee prepayments, and $270.5 million from project finance debt. The project is further supported by a $1.5 billion amended and restated credit facility and a $600 million term loan.

An illustrative cash flow summary projects that the Sabine Pass LNG receiving terminal will generate approximately $467 million in EBITDA in 2010, assuming all TUAs are in place and payments are made as contractually stipulated. This projection is based on anticipated TUA revenues and estimated operating expenses.