What is the primary significance of this SPA for Cheniere Energy?

This SPA is highly significant as it secures a major long-term buyer for Cheniere's liquefied natural gas from its Sabine Pass liquefaction project. It demonstrates commercial progress and de-risks the project by providing a predictable revenue stream through fixed charges and a market-linked sales price, which is crucial for securing financing and making a final investment decision.

What are the key financial terms of the agreement for Cheniere?

Cheniere will receive a fixed charge of $2.25 per MMBtu for the full 182,500,000 MMBtu annual contract quantity, payable monthly, ensuring a baseline income. Additionally, BG will pay a contract sales price equivalent to 115% of the relevant Henry Hub natural gas futures contract price for delivered LNG. This structure offers both revenue stability and upside potential.

What conditions must be met for this SPA to become fully effective?

The SPA's effectiveness is contingent on Sabine Pass Liquefaction satisfying several critical conditions. These include obtaining all necessary regulatory approvals for its first LNG liquefaction train, securing financing for its construction and operation, making a positive final investment decision, and having specified regulatory authorizations in place for exporting LNG from the United States.

What is the duration of this agreement and what are the renewal options?

The LNG Sale and Purchase Agreement has an initial term of 20 years, commencing from the date of the first commercial delivery of LNG. BG also holds the right to extend this term for an additional period of up to 10 years.

LNG 8-K: Material Agreements

Summary

Cheniere Energy, Inc. (LNG) announced a significant development through its majority-owned subsidiary, Cheniere Partners, with the signing of a long-term LNG Sale and Purchase Agreement (SPA) between Sabine Pass Liquefaction, LLC and BG Gulf Coast LNG, LLC. This agreement, spanning 20 years with an option for an additional 10 years, is a pivotal step for Cheniere's Sabine Pass liquefaction project, securing a major buyer for its liquefied natural gas. The SPA outlines BG's commitment to purchase a substantial annual quantity of LNG (182,500,000 MMBtu, or approximately 3.5 million tonnes per annum). Importantly, BG will pay a fixed charge of $2.25 per MMBtu for the full contracted quantity, irrespective of actual purchases, providing a stable revenue stream for Cheniere. Additionally, BG will pay a contract sales price tied to the Henry Hub natural gas futures contract, with the company's payment obligations fully guaranteed by BG Energy Holdings Limited. The effectiveness of the SPA is contingent upon Cheniere securing necessary regulatory approvals, financing, and making a final investment decision for its first liquefaction train.

Key Highlights

1Cheniere Energy's subsidiary, Sabine Pass Liquefaction, has signed a 20-year LNG Sale and Purchase Agreement (SPA) with BG Gulf Coast LNG, LLC.
2The SPA secures a buyer for approximately 3.5 million tonnes per annum (mtpa) of Liquefied Natural Gas (LNG).
3BG will pay a fixed charge of $2.25 per MMBtu for the full annual contract quantity, ensuring a baseline revenue for Cheniere.
4The contract sales price is linked to the New York Mercantile Exchange Henry Hub natural gas futures contract, plus a premium.
5BG's payment obligations are unconditionally guaranteed by BG Energy Holdings Limited.
6The agreement is subject to several conditions precedent, including regulatory approvals, securing financing, and a final investment decision for Cheniere's first liquefaction train.
7The SPA includes provisions for termination by either party under specific circumstances, such as force majeure events or failure to meet operational milestones.

Cheniere Energy, Inc. 8-K Report, Material Agreement (Oct 26, 2011)

Summary

Key Highlights

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