What is the significance of the SPA with Pertamina for Cheniere Energy?

The SPA with Pertamina is a critical step for Cheniere as it secures a long-term buyer for a significant portion of the LNG produced by its Corpus Christi Liquefaction facility. This agreement provides revenue visibility and is a key factor in enabling Cheniere to reach its Final Investment Decision (FID) and secure necessary financing for the project.

What are the key conditions that must be met before Cheniere can proceed with the Corpus Christi liquefaction train?

Cheniere must satisfy several conditions precedent, including obtaining all required regulatory approvals for construction and operation, securing project financing, making a positive final investment decision, and obtaining specified regulatory authorizations to export LNG from the United States. These conditions must be met or waived by December 31, 2014.

How is the price of LNG determined under this agreement?

The contract sales price is determined by taking the New York Mercantile Exchange Henry Hub natural gas futures contract price for the relevant month and adding $3.50 per MMBtu, plus 115% of that Henry Hub price. Additionally, 11.5% of the fixed portion of the contract sales price will be subject to an annual adjustment for inflation.

What is the role of the Omnibus Agreement?

The Omnibus Agreement introduces flexibility by allowing Pertamina to potentially enter into a similar LNG sale and purchase agreement with Cheniere's Sabine Pass facility instead of Corpus Christi, under specific circumstances. This would occur if Cheniere decides to proceed with the sixth liquefaction train at Sabine Pass before making a final investment decision for the first train at Corpus Christi, and subject to necessary approvals.

LNG 8-K: Material Agreements & Regulation FD

Summary

Cheniere Energy, Inc. (LNG) announced a significant milestone on December 4, 2013, with the signing of a 20-year Liquefied Natural Gas (LNG) Sale and Purchase Agreement (SPA) between its subsidiary, Corpus Christi Liquefaction, LLC (CCLNG), and Indonesia's state-owned energy company, PT PERTAMINA (PERSERO) (Pertamina). This agreement is crucial for the development of Cheniere's Corpus Christi liquefaction facility. Under the SPA, Pertamina commits to purchasing approximately 0.8 million tonnes per annum (mtpa) of LNG, with deliveries commencing upon the first commercial delivery from the first liquefaction train at CCLNG. The pricing mechanism is tied to the Henry Hub natural gas futures contract, plus a fixed component with an inflation adjustment, providing revenue visibility for Cheniere. The agreement is subject to several conditions precedent, including regulatory approvals, financing, and a final investment decision by Cheniere, with a deadline of December 31, 2014, for these conditions to be satisfied or waived.

Key Highlights

1Cheniere Energy's subsidiary, CCLNG, has entered into a 20-year SPA with PT PERTAMINA (PERSERO) for the purchase of LNG.
2The SPA covers an annual contract quantity of approximately 0.8 million tonnes per annum (mtpa) of LNG.
3The contract sales price is based on the New York Mercantile Exchange Henry Hub natural gas futures contract plus a fixed price component (3.50/MMBtu), subject to an inflation adjustment.
4The SPA's 20-year term commences with the first commercial delivery from the first liquefaction train at the CCLNG facility, with an option for Pertamina to extend for an additional 10 years.
5Key conditions precedent for CCLNG to commence construction of the first liquefaction train include obtaining all regulatory approvals, securing financing, making a positive final investment decision, and having export authorizations in place.
6The SPA includes provisions for Pertamina to suspend deliveries under certain conditions while remaining obligated to pay a portion of the fixed price.
7An Omnibus Agreement was also executed, which outlines a scenario where Pertamina would enter a similar SPA with Cheniere's Sabine Pass facility if a final investment decision for the sixth train at Sabine Pass precedes that of the first train at Corpus Christi.

Cheniere Energy, Inc. 8-K Report, Material Agreement (Dec 5, 2013)

Summary

Key Highlights

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