What is the significance of this SPA for Cheniere Energy?

This SPA is highly significant as it secures a long-term buyer for a substantial volume of LNG from Cheniere's Sabine Pass liquefaction facility, specifically for the fifth train. It validates Cheniere's project development and de-risks future investment by ensuring a significant portion of its future production will be contracted, providing a predictable revenue stream.

What are the key commercial terms of the agreement?

Centrica will purchase approximately 1.75 million tonnes per annum (mtpa) of LNG. The pricing mechanism is based on $3.00 per MMBtu plus 115% of the NYMEX Henry Hub natural gas futures contract for the month of delivery, with 11.5% of the fixed portion adjusted annually for inflation. The term is 20 years, with an option for Centrica to extend for up to 10 years.

What are the conditions that must be met before Cheniere proceeds with the fifth liquefaction train?

Cheniere's commitment to proceed with the fifth liquefaction train under this SPA is subject to several critical conditions, including obtaining all necessary regulatory approvals for construction and operation, securing financing, making a positive final investment decision, obtaining export authorizations, and issuing an unconditional notice to proceed with construction.

What are the termination rights for Centrica under this agreement?

Centrica can terminate the SPA under various conditions, including prolonged force majeure events causing significant delivery reductions, failure by Sabine Liquefaction to make available at least 50% of scheduled cargoes over a 12-month period, or if the fifth liquefaction train does not commence operations within 180 days of its designated start date. Other termination triggers include bankruptcy of Sabine Liquefaction or failure to pay amounts exceeding $30 million.

LNG 8-K: Material Agreements

Summary

Cheniere Energy Partners, L.P. (a subsidiary of Cheniere Energy, Inc.) has entered into a significant Liquefied Natural Gas (LNG) Sale and Purchase Agreement (SPA) with Centrica plc. This agreement, effective as of March 25, 2013, pertains to the sale of LNG from Sabine Pass Liquefaction, LLC, a Cheniere Partners subsidiary, to Centrica. The SPA outlines the terms for the sale of approximately 1.75 million tonnes per annum (mtpa) of LNG, commencing with the first commercial delivery from the fifth liquefaction train. Centrica will purchase LNG at a price linked to the Henry Hub natural gas futures contract, with a base price and inflation adjustment. This agreement represents a substantial long-term commitment, with a 20-year term and an option for Centrica to extend for an additional 10 years, marking a crucial step in Cheniere's project development and securing long-term revenue streams.

Key Highlights

1Cheniere Energy Partners, L.P. has signed a 20-year LNG Sale and Purchase Agreement (SPA) with Centrica plc for approximately 1.75 mtpa.
2The SPA covers LNG sales from Sabine Pass Liquefaction, LLC, a subsidiary of Cheniere Partners.
3The contract price is set at $3.00 per MMBtu plus 115% of the relevant month's NYMEX Henry Hub natural gas futures contract price, with a portion subject to inflation adjustment.
4Centrica has flexibility to suspend deliveries under certain conditions, while still being obligated to pay a portion of the fixed price.
5The agreement is contingent upon several conditions precedent, including regulatory approvals, necessary financing, a positive final investment decision, and export authorizations for the fifth liquefaction train.
6The SPA has a 20-year term, commencing with the first commercial delivery from the fifth liquefaction train, with an option for Centrica to extend for up to 10 additional years.
7Termination clauses are outlined for both parties under specific circumstances, including force majeure events, failure to meet delivery/take obligations, financial distress, and non-satisfaction of certain conditions by a specified date (June 30, 2015, or later).

Cheniere Energy, Inc. 8-K Report, Material Agreement (Mar 25, 2013)

Summary

Key Highlights

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