How is the price determined for the LNG purchased by Cheniere Marketing under the new agreement?

The price is set at 115% of the then-current Henry Hub price plus $3.00 per MMBtu of LNG for any excess volumes purchased by Cheniere Marketing.

What is the duration of this new agreement?

The base term of the agreement is twenty years, commencing from the later of August 1, 2018, or the date of the first commercial delivery of the first liquefaction train. Cheniere Marketing also holds an option to extend the term for an additional period of up to ten years.

Under what conditions can either party terminate this agreement?

The agreement can be terminated under several conditions, including bankruptcy of either party, significant late payments (over $30 million for 10+ days), substantial delays in the first commercial delivery (over 180 days), violations of LNG export licenses, prolonged force majeure events (over 24 months in a 36-month period impacting significant volumes), failure to take or make available a substantial percentage of scheduled cargoes, and failure to execute direct agreements with lenders.

LNG 8-K: Material Agreements

Q: What is the main change introduced by the Amended and Restated SPA?

The primary change is the removal of the quantity limit for Cheniere Marketing and the establishment of a mechanism for Cheniere Marketing to purchase any excess LNG produced by Sabine Pass Liquefaction at a specific premium over the Henry Hub price. This provides flexibility for both parties regarding excess production and offtake.

Summary

Cheniere Energy, Inc. (LNG), through its subsidiary Sabine Pass Liquefaction, LLC, has entered into an Amended and Restated LNG Sale and Purchase Agreement (SPA) with its affiliate, Cheniere Marketing, LLC. This amendment significantly alters the terms of their prior agreement, primarily removing quantity limitations for Cheniere Marketing and changing the pricing mechanism. Notably, Cheniere Marketing gains the option to purchase any excess LNG produced by Sabine Pass Liquefaction that is not committed to other customers, at a price of 115% of the Henry Hub price plus $3.00 per MMBtu. This revised agreement establishes a long-term relationship, with a base term of twenty years from the commencement of commercial operations, extendable by Cheniere Marketing. The amendment aims to facilitate increased LNG offtake and provides Sabine Pass Liquefaction with greater flexibility in managing its production. Investors should note the extended commitment and the pricing structure, which offers a premium over the benchmark Henry Hub price for excess volumes, potentially enhancing revenue for Cheniere Energy.

Key Highlights

1Cheniere Energy's subsidiary, Sabine Pass Liquefaction, LLC, entered into an Amended and Restated LNG Sale and Purchase Agreement (SPA) with Cheniere Marketing, LLC.
2The amended SPA removes the previous limit on the maximum annual contract quantity Cheniere Marketing could purchase.
3Cheniere Marketing now has the option to purchase any LNG produced by Sabine Pass Liquefaction not committed to other customers.
4The sale price for this excess LNG is set at 115% of the Henry Hub price plus $3.00 per MMBtu.
5The agreement has a twenty-year term from the first commercial delivery of the first liquefaction train, with an option for Cheniere Marketing to extend it for another ten years.
6The SPA includes provisions for termination under various circumstances, including bankruptcy, significant late payments, delays in delivery, license violations, and prolonged force majeure events.
7Sabine Pass Liquefaction will use reasonable efforts to obtain sufficient LNG export licenses to meet its obligations under this and other agreements.

Cheniere Energy, Inc. 8-K Report, Material Agreement (Aug 11, 2014)

Summary

Key Highlights

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