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

The primary purpose of this 8-K filing is to announce the signing of a material definitive agreement: an LNG Sale and Purchase Agreement (SPA) between Cheniere's subsidiary, Sabine Pass Liquefaction, LLC, and Total Gas & Power North America, Inc. This agreement is a crucial step for the development of Cheniere's fifth liquefaction train.

What are the key terms of the SPA with Total?

The SPA is for a 20-year term, commencing with the first commercial delivery from the fifth liquefaction train. Sabine Liquefaction will sell approximately 2.0 million tonnes per annum (mtpa) of LNG to Total. The contract sales price is structured as a base of $3.00 per MMBtu plus 115% of the Henry Hub natural gas futures settlement price for the month of delivery, with annual inflation adjustments.

What conditions must be met for Cheniere to proceed with the fifth liquefaction train under this SPA?

Cheniere's obligations to proceed with the fifth liquefaction train are contingent upon several key conditions being satisfied or waived. These include obtaining all necessary regulatory approvals for construction and operation, securing the required financing, making a positive final investment decision, having export authorizations in place, and issuing an unconditional notice to proceed with construction.

What is the significance of this agreement for Cheniere Energy?

This agreement is highly significant as it demonstrates strong commercial support from a major energy company (Total) for Cheniere's proposed fifth liquefaction train. Securing such a long-term offtake agreement is vital for Cheniere to attract the necessary financing and make a final investment decision, thereby de-risking the project and paving the way for future revenue generation from its Sabine Pass liquefaction facility.

LNG 8-K: Material Agreements

Summary

Cheniere Energy, Inc.'s (LNG) 8-K filing from December 17, 2012, announces a significant development for its subsidiary, Cheniere Partners. The report details the signing of a long-term LNG Sale and Purchase Agreement (SPA) between Sabine Pass Liquefaction, LLC and Total Gas & Power North America, Inc., an affiliate of Total S.A. This agreement is crucial as it underpins the development of Cheniere's fifth liquefaction train at its Sabine Pass facility. Under the terms of the SPA, Sabine Liquefaction will supply approximately 2.0 million tonnes per annum of LNG to Total for a 20-year term, commencing with the fifth liquefaction train's commercial operation. The pricing mechanism includes a base price plus a variable component tied to Henry Hub natural gas futures, with adjustments for inflation, offering a clear revenue stream for Cheniere. The agreement is contingent upon several conditions, including regulatory approvals, securing financing, and a final investment decision for the fifth train, marking a critical step towards project sanctioning and future revenue generation.

Key Highlights

1Cheniere Partners, through its subsidiary Sabine Pass Liquefaction, has entered into a material definitive agreement for an LNG Sale and Purchase Agreement (SPA) with Total Gas & Power North America, Inc.
2The SPA involves the sale of approximately 2.0 million tonnes per annum (mtpa) of LNG over a 20-year term.
3The contract commences upon the first commercial delivery from Cheniere's fifth liquefaction train at Sabine Pass.
4The pricing formula is set at $3.00 per MMBtu plus 115% of the relevant month's Henry Hub natural gas futures contract price, with inflation adjustments.
5Total has certain rights to suspend deliveries, while still obligated to pay a portion of the fixed price, and can extend the contract term.
6The effectiveness of the SPA's obligations for Sabine Liquefaction to proceed with the fifth liquefaction train is subject to key conditions, including regulatory approvals, securing financing, and a positive final investment decision.
7The agreement includes detailed termination clauses for both parties, designed to manage risks related to force majeure, payment defaults, and project execution.

Cheniere Energy, Inc. 8-K Report, Material Agreement (Dec 17, 2012)

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