8-KMaterial Agreements

Cheniere Energy, Inc. 8-K Report, Material Agreement (Dec 18, 2017)

Filed December 18, 2017For Securities:LNG

Summary

Cheniere Energy, Inc.'s subsidiary, Corpus Christi Liquefaction, LLC (CCL), has entered into an Amended and Restated Fixed Price Separated Turnkey Agreement with Bechtel Oil, Gas and Chemicals, Inc. for the Engineering, Procurement, and Construction (EPC) of the Corpus Christi Stage 2 Liquefaction Facility. This agreement supersedes a prior contract and outlines the terms for building a liquefaction train with a capacity of approximately 4.5 million tonnes per annum (mtpa), an LNG storage tank, and associated infrastructure. This development is significant as it represents a substantial commitment to expanding Cheniere's export capacity. The contract price is approximately $2.36 billion, with provisions for adjustments due to change orders initiated by either party under specific circumstances. The agreement also includes detailed terms regarding performance guarantees, liquidated damages for delays or underperformance, schedule bonuses, and termination clauses for both CCL and Bechtel, providing a framework for project execution and risk mitigation.

Key Highlights

  • 1Cheniere's subsidiary, CCL, has executed a new EPC contract with Bechtel for the Corpus Christi Stage 2 Liquefaction Facility.
  • 2The contract covers the construction of one liquefaction train with an expected capacity of 4.5 mtpa.
  • 3The total contract price is approximately $2.36 billion, subject to change orders.
  • 4The agreement details Bechtel's obligations regarding performance guarantees, with provisions for liquidated damages if minimum acceptance criteria are not met.
  • 5Various termination rights are defined for both Cheniere and Bechtel, including for default, convenience, or extended force majeure.
  • 6Bechtel's liability is capped, with specific exceptions for certain obligations like title warranty and completion of essential work.

Frequently Asked Questions

This 8-K filing announces the entry into a material definitive agreement by Cheniere's subsidiary, Corpus Christi Liquefaction, LLC, for the Engineering, Procurement, and Construction (EPC) of its Stage 2 Liquefaction Facility at Corpus Christi, Texas.

The EPC contract price is approximately $2.36 billion. This price is subject to adjustment based on specific change orders as outlined in the agreement.

The contract includes a minimum acceptance criteria for the liquefaction train's performance guarantee. If this is not met by the substantial completion date, Bechtel will pay delay liquidated damages. Bechtel is also required to attempt to correct performance issues, and if unsuccessful after a defined period, Cheniere has options, including declaring a default. Performance liquidated damages are also applicable if performance guarantees are not met within a specified period after substantial completion.

CCL has the right to terminate the EPC contract for Bechtel's default (e.g., failure to commence work, abandonment, material non-compliance, insolvency) or for its own convenience. Termination for convenience has different financial implications depending on whether it occurs before or after the Notice to Proceed (NTP).