What is the purpose of the $325 million Senior Letter of Credit and Reimbursement Agreement?

The primary purpose of this agreement is to provide Sabine Pass Liquefaction, LLC (SPL) with the ability to obtain letters of credit. These letters of credit will be used to cover certain working capital requirements essential for the development, construction, and operational startup of four new liquefaction trains adjacent to the Sabine Pass LNG terminal.

What are the costs associated with this agreement for SPL?

SPL will incur two types of fees: a commitment fee of 0.75% per annum on the unissued portion of the letters of credit and a letter of credit fee of 2.5% per annum on the undrawn portion of all issued letters of credit. These fees are payable quarterly in arrears.

What happens if letters of credit are drawn upon?

If a letter of credit is drawn upon, the drawn amount is considered a 'Senior LC Loan' to SPL. SPL is obligated to repay the full amount of this loan on the business day immediately following the draw. Additionally, interest will accrue on these loans at an annual rate of 2.0% plus the higher of the federal funds rate plus 0.50% or The Bank of Nova Scotia's announced prime rate.

How does this agreement relate to Cheniere's overall project timeline and funding?

This agreement is a critical component for advancing Cheniere's significant expansion project at Sabine Pass. By securing a facility for letters of credit, the company demonstrates continued progress and is equipping itself with a financial tool to manage project costs during the intensive development and construction phases of the new liquefaction trains.

LNG 8-K: Material Agreements & Financial Events

Summary

Cheniere Energy Partners, L.P. (through its wholly owned subsidiary Sabine Pass Liquefaction, LLC - SPL) has entered into a $325 million Senior Letter of Credit and Reimbursement Agreement. This agreement is specifically designed to facilitate the issuance of letters of credit, which will support working capital requirements for the development and construction of four new liquefaction trains at the Sabine Pass LNG terminal in Louisiana. Each train is expected to have a nominal production capacity of at least 182.5 million MMBtu per year. This financing is a key step in advancing Cheniere's substantial liquefaction project. The letters of credit are intended to cover operational needs during the development and construction phases, demonstrating continued progress on expanding its LNG export capabilities. Investors should note the structure of the agreement, including commitment and letter of credit fees, and the conditions under which draws would convert to 'Senior LC Loans' with associated interest and repayment terms.

Key Highlights

1Sabine Pass Liquefaction, LLC (SPL), a subsidiary of Cheniere Energy Partners, L.P., secured a $325 million Senior Letter of Credit and Reimbursement Agreement.
2The agreement is intended to fund working capital requirements for the development and construction of four new liquefaction trains at the Sabine Pass LNG terminal.
3Each liquefaction train is planned to have a nominal production capacity of at least 182.5 million MMBtu per year.
4The agreement facilitates the issuance of letters of credit to support project development.
5SPL will pay commitment fees (0.75% annually on unissued portion) and letter of credit fees (2.5% annually on undrawn portion).
6Drawn amounts will be considered 'Senior LC Loans' due the next business day, bearing interest at 2.0% plus the higher of the federal funds rate plus 0.50% or Bank of Nova Scotia's prime rate.
7The agreement is linked to existing covenants and obligations under the Amended and Restated Common Terms Agreement dated May 28, 2013.

Cheniere Energy, Inc. 8-K Report, Material Agreement (Apr 25, 2014)

Summary

Key Highlights

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