What is the key takeaway from this 8-K filing for Cheniere Energy investors?

The key takeaway is the signing of a long-term, 20-year Sale and Purchase Agreement (SPA) for LNG with PT Pertamina (Persero), a major Indonesian energy company. This agreement provides significant contracted revenue for Cheniere's Corpus Christi liquefaction project and demonstrates progress in securing long-term offtake for its export facilities.

What flexibility does Pertamina have under this agreement?

Pertamina has the right to suspend delivery of scheduled LNG cargoes by providing timely advance notice. However, if they suspend a delivery, they are still obligated to pay the fixed portion of the contract sales price for that quantity and forfeit the right to receive it. They can also resume deliveries with advance notice.

LNG 8-K: Material Agreements & Regulation FD

Q: What are the main conditions that must be met before Cheniere can proceed with the second liquefaction train under this SPA?

Cheniere (CCLNG) must satisfy several critical conditions, including obtaining all necessary regulatory approvals, securing project financing, making a positive final investment decision (FID) for the second train, obtaining U.S. export authorizations, and issuing an unconditional notice to proceed with construction.

Q: How is the LNG priced under this agreement?

The contract sales price is set at $3.50 per MMBtu, plus 115% of the final settlement price for the New York Mercantile Exchange Henry Hub natural gas futures contract for the month the LNG cargo is scheduled. A portion of the fixed fee will also be adjusted annually for inflation.

Summary

Cheniere Energy, Inc. (LNG) announced a significant development on July 1, 2014, 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 PT Pertamina (Persero) of Indonesia. This agreement involves the sale of approximately 0.76 million tonnes per annum (mtpa) of LNG from the second liquefaction train at Cheniere's Corpus Christi facility, commencing upon the train's commercial delivery date. The pricing structure is based on a fixed fee plus 115% of the New York Mercantile Exchange Henry Hub natural gas futures contract price, with a portion of the fixed fee subject to annual inflation adjustments. Pertamina has flexibility to suspend deliveries, though it remains obligated to pay a portion of the fixed price for suspended quantities. The agreement is contingent upon Cheniere securing regulatory approvals, financing, making a positive final investment decision for the second train, obtaining necessary export authorizations, and issuing a notice to proceed. The commencement of commercial operations is targeted to be within 180 days after a designated delivery date, with a hard stop for satisfaction of conditions by June 30, 2015, or later if agreed.

Key Highlights

1Cheniere Energy's subsidiary, Corpus Christi Liquefaction, LLC (CCLNG), signed a 20-year LNG Sale and Purchase Agreement (SPA) with PT Pertamina (Persero).
2The SPA covers the sale of approximately 0.76 million tonnes per annum (mtpa) of LNG from the second liquefaction train at Cheniere's Corpus Christi facility.
3The contract is for a 20-year term, commencing upon the date of first commercial delivery of LNG from the second liquefaction train.
4Pertamina has the option to extend the SPA for an additional 10 years.
5The pricing formula is $3.50 per MMBtu plus 115% of the relevant Henry Hub natural gas futures contract settlement price.
6The agreement's effectiveness is subject to several conditions precedent, including regulatory approvals, financing, final investment decision, export authorizations, and notice to proceed for the second liquefaction train.
7The SPA includes termination clauses for both parties under specific force majeure, delivery failure, or financial default scenarios.

Cheniere Energy, Inc. 8-K Report, Material Agreement (Jul 1, 2014)

Summary

Key Highlights

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