Business Context and Reporting Period
This Form 8-K Current Report was filed by Cheniere Energy, Inc. on July 12, 2012. The filing primarily addresses a significant financing event for Cheniere Energy Partners, L.P., a majority-owned subsidiary, regarding the Sabine Pass LNG liquefaction project.
Key Financial Metrics and Capital Structure
- Total Project Financing: Approximately $5.4 billion in total commitments for the construction of Trains 1 and 2 of the Liquefaction Project.
- Debt Commitments: Approximately $3.4 billion in executed firm financial commitments for a Term Loan A (Credit Facility).
- Equity Commitments: $2 billion in recently announced equity commitments.
- Loan Terms: The Credit Facility has a 7-year maturity. The interest rate is LIBOR plus 350 basis points during construction, stepping up to LIBOR plus 375 basis points during operations.
- Additional Funding: The company is working on commitments of approximately $200 million with additional financial institutions.
Material Changes and Strategic Adjustments
- Upsizing of Credit Facility: Cheniere Partners decided to upsize the Term Loan A facility and withdrew the previously announced syndication of a $1.25 billion Term Loan B facility.
- Withdrawal of Secondary Debt: The syndication of a $750 million Term Loan B was also withdrawn.
- Transaction Postponement: The purchase of the Creole Trail Pipeline from Cheniere Energy, Inc. has been postponed until after construction begins and financing for the purchase is obtained. Management states this is not expected to delay the financing of the Liquefaction Project.
Outlook, Management Commentary, and Risks
Charif Souki, Chairman and CEO, stated that the ability to access a large credit facility will significantly reduce financing costs during construction. The company expects to reach a final investment decision and issue a notice to proceed to Bechtel upon meeting all conditions precedent. These conditions include the completion of the financing process with Lenders and having all regulatory approvals in full force and effect. The Credit Facility is expected to close by the end of July 2012.
Investor Verification Checklist
- Verify the final closing date of the $3.4 billion Credit Facility.
- Confirm the status of the $200 million in additional financial institution commitments.
- Monitor the timeline for the final investment decision and the issuance of the notice to proceed to Bechtel.
- Track the status of regulatory approvals required to finalize the financing.
- Review the revised timeline for the purchase of the Creole Trail Pipeline.