LNG

Business Context and Reporting Period

Company: Cheniere Energy, Inc.
Filing Type: Form 8-K (Current Report)
Date of Report: August 5, 2014
Event: Entry into a Material Definitive Agreement involving an Amended and Restated LNG Sale and Purchase Agreement between Sabine Pass Liquefaction, LLC (a subsidiary of Cheniere Energy Partners, L.P.) and Cheniere Marketing, LLC (a wholly owned subsidiary of Cheniere Energy, Inc.).

Key Financial Metrics

This filing does not report revenue, profit, cash flow, margins, debt, or liquidity metrics. The document focuses exclusively on the terms of a contractual agreement.

Material Changes and Agreement Terms

The Amended and Restated SPA modifies the original May 14, 2012 agreement with the following key changes:

• Volume Limits Removed: The limit on the maximum annual contract quantity Cheniere Marketing may purchase has been removed.
• Pricing Mechanism Changed: The price calculation based on a share of net profit was replaced with a fixed formula: 115% of the Henry Hub price plus $3.00 per MMBtu.
• Scope: Cheniere Marketing may purchase any LNG produced by Sabine Pass Liquefaction in excess of that required for other customers, subject to available capacity.
• Term: The agreement term is twenty years from the later of August 1, 2018, or the date of first commercial delivery of the first liquefaction train. Cheniere Marketing has the right to extend the term for an additional period of up to ten years.
• Cancellation Rights: Cheniere Marketing may cancel a scheduled cargo without charge by timely advance notice.

Outlook, Risks, and Contingencies

Termination Triggers: The agreement outlines specific circumstances permitting termination by either party, including:

• Bankruptcy events.
• Late payments exceeding $30 million for ten days or more.
• Delays in first commercial delivery exceeding 180 days (by Cheniere Marketing).
• Violations of LNG export licenses or applicable laws.
• Force majeure events resulting in interruptions totaling 24 months within a 36-month period, preventing 50% or more of the annualized contract quantity.
• Failure to take or make available 50% of scheduled cargoes in a 12-month period (excluding force majeure).
• Failure to execute required direct agreements with lenders within 60 days of request.

Licensing Obligations: Sabine Pass Liquefaction agreed to use reasonable efforts to amend or obtain additional LNG export licenses sufficient to meet obligations under this agreement and other agreements.

Investor Verification Checklist

• Verify the current status of LNG export licenses required to fulfill the 20-year term.
• Confirm the projected date of first commercial delivery for the Sabine Pass LNG terminal to determine the agreement's start date.
• Assess the impact of the new pricing formula (115% Henry Hub + $3.00) on Cheniere Marketing's margins compared to the previous net profit share model.
• Review the full text of Exhibit 10.1 for exceptions and qualifications not detailed in the summary.
• Monitor the availability of excess LNG production capacity at Sabine Pass Liquefaction.