Cheniere Energy Partners, L.P. current report, 25 January 2012

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Business Context and Reporting Period

Company: Cheniere Energy Partners, L.P.
Filing Type: Form 8-K (Current Report)
Date of Report: January 25, 2012
Event: Entry into a Material Definitive Agreement (Amended and Restated LNG Sale and Purchase Agreement).

On January 26, 2012, Cheniere Partners announced the signing of an Amended and Restated LNG Sale and Purchase Agreement between its subsidiary, Sabine Pass Liquefaction, LLC ("Sabine Liquefaction"), and BG Gulf Coast LNG, LLC ("BG"), an affiliate of BG Energy Holdings Limited. This agreement amends an original agreement dated October 25, 2011.

Key Financial Metrics and Contract Terms

This filing details a long-term commercial agreement rather than historical financial performance. Key contractual financial terms include:

  • Annual Contract Quantity: 286,500,000 MMBtu (approximately 5.5 million tonnes per annum).
  • Fixed Sales Charge (Capacity Payment):
    • $2.25 per MMBtu for 182,500,000 MMBtu (Train 1).
    • $3.00 per MMBtu for 104,000,000 MMBtu (Trains 2, 3, and 4).
    • Note: This charge is payable monthly regardless of whether BG purchases LNG cargoes. Approximately $0.34 per MMBtu is subject to annual inflation adjustment.
  • Contract Sales Price (Commodity Payment): 115% of the final settlement price for the NYMEX Henry Hub natural gas futures contract for the month of delivery.
  • Term: 20 years, commencing on the date of first commercial delivery for the first liquefaction train, with an option for BG to extend for up to 10 additional years.
  • Guarantee: BG Parent has irrevocably guaranteed BG's payment obligations.

Material Changes and Contract Structure

The Amended and Restated SPA modifies the original October 2011 agreement to clarify delivery tranches and cancellation rights based on construction milestones:

  • Delivery Tranches:
    • Train 1: 182,500,000 MMBtu (Commences with first commercial delivery).
    • Train 2: 36,500,000 MMBtu.
    • Train 3: 34,000,000 MMBtu.
    • Train 4: 33,500,000 MMBtu.
  • Investment Decision Deadlines: If Sabine Liquefaction does not make a positive final investment decision (FID) for Trains 2, 3, or 4 by June 30, 2013, either party may cancel the respective tranches.
  • Operational Timelines:
    • Train 1 delivery designated within 180 days commencing 50 months after conditions are satisfied.
    • Trains 2 and 3 delivery designated within 180 days commencing 59 months after FID.
    • Train 4 delivery designated within 180 days commencing 68 months after FID.

Outlook, Risks, and Contingencies

Conditions Precedent: The agreement becomes effective only upon satisfaction of regulatory approvals, financing arrangements, a positive FID for Train 1, and export authorizations.

Termination Rights:

  • Force Majeure: BG may terminate if force majeure events result in a 50% reduction in available LNG for 24 consecutive months or aggregate 24 months within a 36-month period.
  • Performance Failures: BG may terminate if Sabine Liquefaction fails to make available two or more consecutive cargoes totaling 12% of the annual quantity, or two or more cargoes in a 12-month period totaling 35% of the annual quantity.
  • Delay: BG may terminate if the first train does not commence commercial operations within 180 days of the designated date.
  • Expiration of Conditions: Either party may terminate if conditions to the 20-year term are not satisfied by December 31, 2012 (unless extended by agreement).

Financial Statement Data: The filing text does not provide current revenue, profit, cash flow, debt, or liquidity figures for Cheniere Energy Partners, L.P.

Investor Verification Checklist

  • Verify the status of regulatory approvals and export authorizations required for the Sabine Pass Liquefaction project.
  • Confirm whether the positive final investment decision (FID) for the first liquefaction train has been made and if financing is secured.
  • Monitor the June 30, 2013 deadline for FIDs on Trains 2, 3, and 4 to assess the risk of contract cancellation for those tranches.
  • Review the full text of the Amended and Restated SPA (Exhibit 10.1) for specific definitions of force majeure and termination clauses.
  • Assess the creditworthiness of BG Energy Holdings Limited as the guarantor of payment obligations.