What is the significance of this SPA for Cheniere Energy?

This SPA is significant because it secures a long-term contract for a substantial volume of LNG from Cheniere's Corpus Christi facility, specifically for the third liquefaction train. This agreement helps de-risk the project, provides a predictable revenue stream, and is crucial for Cheniere to achieve financial close and proceed with the construction of the third train.

What are the conditions that must be met for the third liquefaction train to proceed under this SPA?

The key conditions include obtaining all necessary regulatory approvals for construction and operation, securing the required financing for the third train, making a positive final investment decision (FID) to proceed with construction, having specified regulatory authorizations in effect for LNG export from the U.S., and issuing an unconditional notice to proceed with construction.

How is the price of LNG determined under this agreement?

The contract sales price is a combination of a fixed component and a variable component. It 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 in which the cargo is scheduled. A part of the fixed fee will be adjusted annually for inflation.

What flexibility does EDP have regarding LNG deliveries?

EDP has the right to suspend the delivery of any or all scheduled LNG cargoes for a given month by providing timely advance notice. If they suspend deliveries, they are still obligated to pay the fixed portion of the contract sales price for the suspended quantity but forfeit their right to receive that LNG. They also have the right to resume deliveries with advance notice.

LNG 8-K: Material Agreements & Regulation FD

Summary

Cheniere Energy, Inc. (LNG) announced a significant development through an 8-K filing on December 18, 2014, detailing a new Liquefied Natural Gas (LNG) Sale and Purchase Agreement (SPA) between its subsidiary, Corpus Christi Liquefaction, LLC (CCLNG), and EDP Energias de Portugal S.A. (EDP). This agreement is crucial as it involves the sale of approximately 0.77 million tonnes per annum of LNG over a 20-year term, commencing with the first commercial delivery from the third liquefaction train at Cheniere's Corpus Christi facility. The pricing mechanism is tied to the Henry Hub natural gas futures contract, plus a fixed component adjusted for inflation, providing a clear revenue stream for Cheniere. The SPA is contingent on several key conditions, including regulatory approvals, necessary financing, a positive final investment decision for the third train, and obtaining export authorizations. The commencement of commercial operations for the third liquefaction train is expected within a specific timeframe following the satisfaction of these conditions. This agreement underscores Cheniere's strategy to expand its LNG export capacity and secure long-term contracts, which are vital for project financing and investor confidence in its growth trajectory.

Key Highlights

1Cheniere Energy's subsidiary, Corpus Christi Liquefaction, LLC (CCLNG), entered into a 20-year LNG Sale and Purchase Agreement (SPA) with EDP Energias de Portugal S.A. (EDP).
2The SPA covers an annual contract quantity of 40,000,000 MMBtu of LNG, equivalent to approximately 0.77 million tonnes per annum (mtpa).
3The agreement is for LNG to be supplied from the third liquefaction train at Cheniere's Corpus Christi facility.
4The contract sales price is $3.50 per MMBtu plus 115% of the New York Mercantile Exchange Henry Hub natural gas futures contract for the delivery month, with a portion of the fixed fee subject to inflation adjustment.
5EDP has the right to suspend deliveries by providing advance notice, while still being obligated to pay the fixed portion of the contract sales price.
6The SPA's effectiveness is contingent upon satisfaction of several conditions, including regulatory approvals, securing financing, and a positive final investment decision for the third liquefaction train.

Cheniere Energy, Inc. 8-K Report, Material Agreement (Dec 18, 2014)

Summary

Key Highlights

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