21 Oct

Overview of Cheniere’s sale and purchase contracts

WRITTEN BY Keisha Bandz

Secured sales and purchase agreements 

Cheniere Energy, Inc.’s (LNG) master limited partnership, or MLP, company’s Sabine Pass liquefaction project has already secured four fixed-price, 20-year SPAs (or sales and purchase agreements) with third parties, for trains one through four, totaling 16 million metric tonnes per annum, or mtpa, of LNG capacity, starting in 2015 when the first LNG train commences.

Plus, the Sabine Pass liquefaction project has two more fixed-price, 20-year SPAs for another 3.75 mtpa of LNG with third parties. These will commence when train five comes online. Train five has yet to receive regulatory approval.

Overview of Cheniere’s sale and purchase contracts

Third parties

Third parties include the following six entities:

  1. BG Gulf Coast LNG, LLC – This SPA commences when train one starts, and includes an annual contract quantity of 286,500,000 MMBtu, or British thermal units in millions, of LNG.
  2. Gas Natural Aprovisionamientos SDG S.A., or Gas Natural Fenosa – This SPA commences when train two starts and includes an annual contract quantity of 182,500,000 MMBtu of LNG. Gas Natural Fenosa is a Spanish natural gas utilities company.
  3. Korea Gas Corporation – This SPA commences when train three starts and includes an annual contract quantity of 182,500,000 MMBtu of LNG.
  4. GAIL (India) Limited –  This SPA commences when train four starts and includes an annual contract quantity of 182,500,000 MMBtu of LNG.
  5. Total (TOT) – This SPA commences when train five starts and includes an annual contract quantity of 104,750,000 MMBtu of LNG.
  6. Centrica – This SPA commences when train five starts and includes an annual contract quantity of 91,250,000 MMBtu of LNG.

Terms of agreement

Under the SPAs, customers will purchase LNG from Sabine Pass for a price made up of a fixed fee—which varies between $2.25 and $3, depending on the agreement (see image above)— plus 115% of Henry Hub per MMBtu of LNG.

Corpus Christi customer

The Corpus Christi liquefaction project has also secured a two-year SPA with PT Pertamina (Persero) that includes an annual contract quantity of 39,680,000 MMBtu of LNG.

The SPA commences when the first train at Corpus Christi starts. The project has yet to receive regulatory approval.

Key ETFs

Cheniere is a component of the Vanguard Total World Stock Market ETF (VT), Global X MLP & Energy Infrastructure ETF (MLPX), and the iShares Dow Jones US Energy Sector ETF (IYE).

In the next part of this series, we’ll look at the major questions investors have about Cheniere.

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