What is the primary purpose of this Amended and Restated LNG Sale and Purchase Agreement?

The primary purpose is to formalize and significantly expand Cheniere's Sabine Pass liquefaction project's offtake agreement with BG, providing substantial contracted volumes of LNG for BG and a firm revenue stream for Cheniere. It clarifies terms regarding volume, pricing, delivery schedules, and project development.

What is the financial implication of the 'fixed sales charge' for Cheniere?

The fixed sales charge is a crucial element for investors as it provides revenue certainty. BG is obligated to pay this charge regardless of whether it actually takes delivery of the LNG. This de-risks Cheniere's investment in the liquefaction facilities and ensures a baseline level of cash flow is generated, supporting the financing and construction of the project.

What are the key risks or conditions associated with the expansion to multiple liquefaction trains?

The agreement includes specific deadlines for Cheniere to make positive final investment decisions (FIDs) for the second, third, and fourth liquefaction trains by June 30, 2013. If these FIDs are not made, BG has the right to cancel the contracted volumes associated with those trains. Additionally, BG can terminate specific tranches if the respective trains do not commence operations in a timely manner.

How does the agreement address potential disruptions or force majeure events?

The SPA includes provisions for force majeure events affecting either Sabine Liquefaction or BG. In such cases, particularly if they lead to significant reductions in available LNG volumes or prolonged disruptions, BG may have the right to terminate certain portions of the agreement. During a force majeure event, BG's obligation to pay the fixed sales charge may be subject to adjustments.

LNG 8-K: Material Agreements

Summary

Cheniere Energy, Inc. (LNG), through its subsidiary Cheniere Partners, L.P., announced a significant development with an Amended and Restated LNG Sale and Purchase Agreement (SPA) with BG Gulf Coast LNG, LLC. This agreement solidifies a long-term commitment for the sale and purchase of liquefied natural gas (LNG) from Cheniere's Sabine Pass liquefaction facility. The amended SPA significantly expands upon the original agreement, outlining firm commitments for LNG volumes and a fixed sales charge structure, providing greater revenue certainty for Cheniere's future operations. The core of the amendment focuses on the sale of approximately 5.5 million tonnes per annum (mtpa) of LNG. Crucially, a substantial portion of this volume will be subject to a fixed sales charge, payable regardless of actual purchase volumes, which de-risks the project for Cheniere and provides predictable cash flow. The agreement also details the commencement dates for delivery from multiple liquefaction trains and includes provisions for project development milestones, such as final investment decisions and regulatory approvals, which are critical for advancing Cheniere's expansion plans.

Key Highlights

1Cheniere Partners entered into an Amended and Restated LNG Sale and Purchase Agreement (SPA) with BG Gulf Coast LNG, LLC, a BG Energy Holdings Limited affiliate.
2The agreement covers the sale of approximately 5.5 million tonnes per annum (mtpa) of Liquefied Natural Gas (LNG).
3BG will pay a fixed sales charge of $2.25 per MMBtu for a portion of the contracted volume and $3.00 per MMBtu for volumes related to subsequent liquefaction trains, payable regardless of actual LNG purchases.
4The SPA has a 20-year term, commencing with the first commercial delivery from the first liquefaction train, with an option for BG to extend for up to 10 additional years.
5The agreement outlines critical milestones and deadlines for final investment decisions (FIDs) for additional liquefaction trains, with cancellation clauses if FIDs are not met by June 30, 2013.
6BG Parent has provided an irrevocable guarantee for BG's payment obligations, enhancing counterparty credit risk mitigation for Cheniere.
7The effectiveness of the SPA is contingent upon several conditions, including regulatory approvals, secured financing, positive FIDs for the first train, and export authorizations.

Cheniere Energy, Inc. 8-K Report, Material Agreement (Jan 26, 2012)

Summary

Key Highlights

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