Business Context and Reporting Period
Company: Cheniere Energy Partners, L.P.
Filing Type: Form 8-K (Current Report)
Date: November 21, 2011
Event: Entry into a Material Definitive Agreement (LNG Sale and Purchase Agreement).
Key Financial Metrics and Contract Terms
This filing details a long-term contract rather than historical financial performance. Key contractual financial terms include:
- Annual Contract Quantity: 182,500,000 MMBtu (approx. 3.5 million tonnes per annum).
- Fixed Sales Charge: $2.49 per MMBtu on the full annual quantity, payable monthly regardless of cargo purchase. Includes a 13.6% annual inflation adjustment.
- Variable Sales Price: 115% of the NYMEX Henry Hub natural gas futures settlement price for the delivery month.
- Contract Term: 20 years, with an option to extend for up to 10 or 12 years.
- Guarantee: Payment obligations are irrevocably guaranteed by Gas Natural Fenosa.
Material Changes and Conditions
The agreement is contingent upon several conditions precedent before obligations become effective:
- Receipt of all regulatory approvals for the second LNG liquefaction train in Cameron Parish, Louisiana.
- Securing necessary financing arrangements.
- A positive final investment decision by Sabine Liquefaction.
- Execution of other facilitating agreements and export authorizations.
- Deadline: Conditions must be satisfied or waived by December 31, 2012, or a later date agreed upon by the parties.
Outlook, Risks, and Termination Provisions
Outlook: The agreement secures a long-term off-take for the second LNG train at the Sabine Pass facility, subject to project completion.
Risks and Termination Rights:
- Force Majeure: GNA may terminate if force majeure events result in a 50%+ reduction in available LNG for 24 months (uninterrupted or aggregated).
- Performance Failure: GNA may terminate if Sabine Liquefaction fails to deliver 7 consecutive cargoes or 20 cargoes in a 12-month period, or if commercial operations do not commence within 180 days of the designated date.
- Financial Default: Either party may terminate if the other fails to pay amounts exceeding $20 million or enters bankruptcy.
- Guaranty Lapse: Sabine Liquefaction may terminate if the Gas Natural Fenosa guaranty ceases to be effective for more than 10 business days.
Investor Verification Checklist
- Verify the status of regulatory approvals for the second LNG train in Louisiana.
- Confirm the timeline for the Final Investment Decision (FID) and financing closure.
- Monitor the December 31, 2012 deadline for satisfying conditions precedent.
- Review the creditworthiness of Gas Natural Fenosa as the guarantor.
- Assess the impact of the 115% Henry Hub pricing formula on future revenue volatility.