Business Context and Reporting Period
This Form 8-K filing by Cheniere Energy Partners, L.P. (the "Partnership") reports a material definitive agreement entered into on November 7, 2018. The Partnership's indirect wholly owned subsidiary, Sabine Pass Liquefaction, LLC ("SPL"), executed a Lump Sum Turnkey Agreement for the Engineering, Procurement, and Construction (EPC) of the Sabine Pass LNG Stage 4 Liquefaction Facility.
Key Financial Metrics and Contract Terms
The filing details a specific capital project contract rather than general financial performance metrics such as revenue or cash flow.
- Contract Price: $2,016,892,573 (excluding the cost of an option for a third berth).
- Project Scope: One liquefaction train with an expected nominal production capacity of approximately 4.5 million tonnes per annum (mtpa).
- Contractor: Bechtel Oil, Gas and Chemicals, Inc. (guaranteed by Bechtel Global Energy, Inc.).
- Location: Sabine Pass LNG terminal in Cameron Parish, Louisiana.
- Payment Adjustments: The price is subject to change orders for delays, changes in law, force majeure, and other specified conditions.
Material Changes and Contractual Provisions
The primary material change is the execution of the EPC Contract. Key contractual provisions include:
- Performance Guarantees: Bechtel must achieve 95% of the performance guarantee by the substantial completion date. Failure to do so triggers delay liquidated damages and a 10-month correction period.
- Termination for Convenience: SPL may terminate the contract for convenience. If terminated after the full notice to proceed, Bechtel may receive up to $30.0 million depending on the date. If terminated prior to the notice to proceed, a lump sum between $1.0 million and $2.5 million applies.
- Termination for Delay: If SPL fails to issue the full notice to proceed by February 2, 2021, either party may terminate, with Bechtel receiving incurred costs plus a $5.0 million lump sum.
- Liability Limits: Bechtel's liability is limited under the contract, except for indemnification obligations, title warranties, and the obligation to complete work to ensure the train is ready to produce LNG.
Guidance, Outlook, and Risks
The filing does not provide updated financial guidance or management commentary on future earnings. However, it outlines specific risks and contingencies associated with the project:
- Schedule Risk: Bechtel is entitled to change orders if SPL delays issuing notices to proceed by specified dates prior to July 1, 2019.
- Force Majeure: Either party may terminate if a force majeure event suspends a substantial portion of work for more than 100 consecutive days or exceeds 180 days in aggregate within a 24-month period.
- Default Risks: Termination rights exist for both parties in the event of insolvency, failure to pay, or material non-compliance with obligations.
Important Facts for Investor Verification
- Verify the total capital expenditure impact of the $2.017 billion contract price on the Partnership's balance sheet and liquidity.
- Confirm the timeline for the "full notice to proceed" to avoid potential termination penalties or cost increases.
- Assess the financial implications of the option to engineer, design, construct, and commission a third berth, which is not included in the current contract price.
- Review the specific daily rates for delay liquidated damages and performance liquidated damages defined in the full EPC Contract (Exhibit 10.1).
- Note that the filing text does not provide clear values for the Partnership's current revenue, profit, or cash flow; this document solely reports the new agreement.