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 Corpus Christi liquefaction project. It provides a foundational revenue stream, reduces project risk, and is a critical step towards achieving financial close and making a final investment decision for the first liquefaction train.

What are the key conditions that must be met before Cheniere can proceed with the first liquefaction train under this SPA?

Cheniere's obligations to proceed with the first liquefaction train are contingent upon several critical factors. These include obtaining all necessary regulatory approvals for construction and operation, securing the required financing for the project, making a positive final investment decision, obtaining specified regulatory authorizations for LNG export from the U.S., and issuing an unconditional notice to proceed with construction.

How is the LNG priced under this agreement, and what is the contract term?

The contract sales price for each MMBtu of LNG is structured as $3.50 plus 115% of the final settlement price for the New York Mercantile Exchange Henry Hub natural gas futures contract for the month of scheduled delivery. Additionally, 14% of the fixed portion of this price will be subject to an annual adjustment for inflation. The SPA has a base term of 20 years, commencing from the date of first commercial delivery, with an option for Endesa to extend it for an additional period of up to 10 years.

What flexibility does Endesa have regarding LNG deliveries?

Endesa has the right to suspend delivery of any or all scheduled LNG cargoes within a given month by providing timely advance notice. If Endesa suspends deliveries, it remains obligated to pay the fixed portion of the contract sales price for the suspended quantity but forfeits the right to receive that specific LNG volume. Endesa can also resume deliveries with timely advance notice.

LNG 8-K: Material Agreements & Regulation FD

Summary

Cheniere Energy, Inc. (LNG) announced a significant development on April 2, 2014, with the signing of a long-term Liquefied Natural Gas (LNG) Sale and Purchase Agreement (SPA) between its subsidiary, Corpus Christi Liquefaction, LLC (CCLNG), and ENDESA GENERACIÓN, S.A. This agreement marks a crucial step for Cheniere's Corpus Christi project, as it secures a buyer for a substantial volume of LNG. The SPA outlines the sale of approximately 1.5 million tonnes per annum (mtpa) of LNG for a 20-year term, commencing upon the first commercial delivery from the first liquefaction train. Endesa will pay a price based on the Henry Hub natural gas futures contract, plus a fixed component with an inflation adjustment. The agreement includes provisions for delivery suspension by Endesa and outlines specific conditions that must be met for CCNLG to proceed with the first liquefaction train, including regulatory approvals, financing, and a final investment decision. This contract is a key indicator of project progression and future revenue generation for Cheniere.

Key Highlights

1Cheniere's subsidiary, CCNLG, signed a 20-year LNG Sale and Purchase Agreement (SPA) with ENDESA GENERACIÓN, S.A.
2The SPA commits Endesa to purchase approximately 1.5 million tonnes per annum (mtpa) of LNG, equivalent to 78,215,000 MMBtu annually.
3The contract commences upon the first commercial delivery from the first liquefaction train at the Corpus Christi facility.
4The pricing structure includes a fixed component ($3.50 per MMBtu) plus 115% of the relevant month's Henry Hub natural gas futures price, with a 14% inflation adjustment on the fixed portion.
5Endesa has the right to suspend deliveries under certain conditions, while still paying the fixed portion of the contract price.
6The SPA's effectiveness is contingent on CCNLG satisfying several key conditions, including obtaining regulatory approvals, securing financing, making a final investment decision, and securing export authorizations.
7The agreement allows for a potential 10-year extension at Endesa's option.

Cheniere Energy, Inc. 8-K Report, Material Agreement (Apr 2, 2014)

Summary

Key Highlights

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