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

This 8-K filing announces the entry into a material definitive agreement, specifically a significant 20-year LNG Sale and Purchase Agreement (SPA) between Cheniere Energy's subsidiary, Sabine Pass Liquefaction, LLC, and GAIL (India) Limited. This agreement is a crucial step in the development and commercialization of Cheniere's Sabine Pass LNG export project.

What are the key terms of the LNG Sale and Purchase Agreement with GAIL?

The SPA commits Sabine Liquefaction to sell approximately 3.5 million tonnes per annum (mtpa) of LNG to GAIL for a 20-year term, commencing with the fourth liquefaction train. The pricing is linked to the Henry Hub natural gas futures contract plus a fixed component, subject to inflation adjustments. GAIL also has an option to extend the contract for an additional 10 years.

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

The SPA's effectiveness hinges on several critical conditions, including Sabine Liquefaction receiving all necessary regulatory approvals for the fourth liquefaction train, securing financing for its construction and operation, making a positive final investment decision, and having necessary export authorizations in place.

When is the earliest the LNG deliveries under this SPA could begin?

The SPA specifies that deliveries for the main 3.5 mtpa quantity will commence with the first commercial delivery from the fourth liquefaction train. The first commercial delivery date will be designated within a 180-day period starting 68 months after the satisfaction of the preceding conditions. However, there's a provision allowing Sabine Liquefaction to propose an earlier date under certain circumstances by December 31, 2012, subject to GAIL's approval.

LNG 8-K: Material Agreements

Summary

Cheniere Energy, Inc. (LNG) announced a significant development through its subsidiary, Sabine Pass Liquefaction, LLC, by entering into a 20-year LNG Sale and Purchase Agreement (SPA) with GAIL (India) Limited. This agreement, commencing with the fourth liquefaction train, positions Cheniere to supply a substantial volume of liquefied natural gas (LNG) to India's largest gas importer. The SPA includes a base price linked to the Henry Hub natural gas futures contract, with provisions for inflation adjustment, and offers GAIL an option for a 10-year extension. The full realization of this agreement is contingent upon several key conditions, including regulatory approvals, securing necessary financing, and a positive final investment decision for the fourth liquefaction train. This filing marks a critical step for Cheniere in progressing its Sabine Pass LNG export project, demonstrating demand and solidifying a long-term revenue stream, which is crucial for attracting further investment and financing for its expansion plans.

Key Highlights

1Cheniere Partners subsidiary, Sabine Pass Liquefaction, signed a 20-year LNG Sale and Purchase Agreement (SPA) with GAIL (India) Limited.
2The SPA is for an annual contract quantity of 182,500,000 MMBtu (approximately 3.5 million tonnes per annum) of LNG, starting with the fourth liquefaction train.
3A smaller initial quantity of 10,400,000 MMBtu (approximately 0.2 mtpa) is included for the period between the second and fourth train's commercial operation.
4The contract sales price is set at $3.00 per MMBtu plus 115% of the New York Mercantile Exchange Henry Hub natural gas futures contract for the month of scheduled delivery.
5GAIL has the option to extend the 20-year term for an additional 10 years.
6The SPA's effectiveness is subject to satisfaction of several conditions, including regulatory approvals, securing financing, and a positive final investment decision for the fourth liquefaction train.
7Both parties have specific termination rights based on various conditions, including force majeure events, delivery/offtake failures, payment defaults, and failure to meet project commencement deadlines.

Cheniere Energy, Inc. 8-K Report, Material Agreement (Dec 12, 2011)

Summary

Key Highlights

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