What is the significance of this Sale and Purchase Agreement (SPA) for Cheniere Energy (LNG)?

This SPA is highly significant as it secures a long-term offtake customer for Cheniere's Corpus Christi Liquefaction (CCLNG) facility, specifically for the second liquefaction train. It demonstrates progress in commercializing Cheniere's projects, provides revenue certainty, and de-risks the company's investment in the second train by securing a substantial portion of its capacity.

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

Before proceeding, Cheniere's subsidiary, CCLNG, must satisfy several critical conditions. These include obtaining all necessary regulatory approvals for construction and operation, securing the required financing for the second train and related facilities, making a positive final investment decision, ensuring that specified regulatory authorizations for LNG export are in effect, and issuing an unconditional notice to proceed with construction.

How is the LNG priced under this agreement?

The contract sales price is determined by taking $3.50 per MMBtu, plus 115% of the final settlement price of the New York Mercantile Exchange Henry Hub natural gas futures contract for the month of scheduled delivery. Additionally, 14% of the fixed portion of the contract sales price is subject to an annual adjustment for inflation.

What is the duration of the contract and can it be extended?

The SPA has a firm term of 20 years, commencing on the date of first commercial delivery of LNG from the second liquefaction train. GAS NATURAL FENOSA LNG SL (GNF) also holds the right to extend this term for an additional period of up to 10 years.

LNG 8-K: Material Agreements & Regulation FD

Summary

Cheniere Energy, Inc. (LNG) announced on June 2, 2014, a significant Liquefied Natural Gas (LNG) Sale and Purchase Agreement (SPA) between its subsidiary, Corpus Christi Liquefaction, LLC (CCLNG), and GAS NATURAL FENOSA LNG SL (GNF). This agreement is for the sale of LNG from the second liquefaction train at the CCLNG facility, with GNF agreeing to purchase an annual contract quantity of approximately 1.5 million tonnes per annum (mtpa) for a term of 20 years, extendable by GNF for up to 10 additional years. The financial terms include a pricing structure based on the Henry Hub natural gas futures contract plus a fixed component, adjusted for inflation. The agreement details significant conditions precedent for CCLNG to proceed with the second liquefaction train, including regulatory approvals, financing, a final investment decision, export authorizations, and a notice to proceed. This SPA represents a crucial step in the development and commercialization of Cheniere's Corpus Christi project, providing a contracted offtake for a substantial portion of the projected LNG output and de-risking future investment decisions.

Key Highlights

1Cheniere Energy's subsidiary, CCLNG, entered into a 20-year LNG Sale and Purchase Agreement (SPA) with GAS NATURAL FENOSA LNG SL (GNF).
2The SPA is for the offtake of LNG from the second liquefaction train at Cheniere's Corpus Christi facility.
3The contract quantity is approximately 1.5 million tonnes per annum (mtpa) of LNG.
4The contract price is structured as $3.50 per MMBtu plus 115% of the monthly Henry Hub natural gas futures contract price, with 14% of the fixed portion subject to inflation adjustment.
5The SPA includes specific conditions precedent for CCLNG to commence construction of the second liquefaction train, such as obtaining regulatory approvals, securing financing, and making a final investment decision.
6GNF has the option to extend the 20-year term for an additional period of up to 10 years.
7The agreement outlines detailed termination clauses for both parties, including provisions related to force majeure events, failure to meet delivery or offtake obligations, and financial defaults.

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

Summary

Key Highlights

Frequently Asked Questions