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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
Date of Report (Date of earliest event reported): April 4, 2006
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CHENIERE ENERGY, INC.
(Exact name of registrant as specified in its charter)
Delaware 1-16383 95-4352386
(State or other jurisdiction of (Commission (I.R.S. Employer
incorporation or organization) File Number) Identification No.)
717 Texas Avenue
Suite 3100
Houston, Texas 77002
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (713) 659-1361
Check the appropriate box below if the Form 8-K filing is intended to
simultaneously satisfy the filing obligation of the registrant under any of the
following provisions (see General Instruction A.2. below):
|_| Written communications pursuant to Rule 425 under the Securities Act (17
CFR 230.425)
|_| Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR
240.14a-12)
|_| Pre-commencement communications pursuant to Rule 13e-4(c) under the
Exchange Act (17 CFR 240.14d-2(b))
|_| Pre-commencement communications pursuant to Rule 13e-4(c) under the
Exchange Act (17 CFR 240.13e-4(c))
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Item 1.01. Entry into a Material Definitive Agreement.
On April 4, 2006, Cheniere LNG Marketing, Inc. ("Cheniere Marketing"), a
wholly-owned subsidiary of Cheniere Energy, Inc. ("Cheniere"), entered into a
Gas Purchase and Sale Agreement (the "Agreement") with PPM Energy, Inc. ("PPM"),
which is a U.S. subsidiary of Scottish Power plc, a developer and operator of
renewable energy in both the United Kingdom and the United States. Pursuant to
the Agreement, Cheniere Marketing has the right to sell to PPM up to 600,000
million British thermal units ("MMBtu") of natural gas per day, and has agreed
to initially allocate qualifying liquefied natural gas ("LNG") purchases to PPM.
A qualifying LNG supply agreement:
o has an initial term of at least two years;
o has a purchase quantity of LNG equivalent to at least 100,000 MMBtu
per day of continuously delivered natural gas;
o has a contract price for purchased LNG, as converted into a price per
MMBtu, of not more than 94% of the final NYMEX settlement price per
MMBtu for a delivery month, less $0.32 per MMBtu;
o has the LNG receiving terminal being developed by Cheniere in western
Cameron Parish, Louisiana (the "Sabine Pass LNG Receiving Terminal")
as the primary destination of the LNG; and
o is not a contract that supports another downstream natural gas
purchase agreement.
PPM will be allocated 40% of the first 100,000 MMBtu per day achieved under a
qualifying LNG supply agreement and 20% after a delivery quantity of 100,000
MMBtu has been achieved. PPM has agreed to buy the natural gas from Cheniere
Marketing at a price equal to the sum of (a) 96% of the NYMEX Henry Hub natural
gas futures contract price for a delivery month, plus (b) $0.10 per MMBtu. Gas
will be delivered to PPM at delivery points designated by PPM from time to time
along Cheniere's proposed natural gas pipeline that will service the LNG
receiving terminal being developed by Cheniere at the mouth of the Calcasieu
Channel in central Cameron Parish, Louisiana (the "Creole Trail Pipeline").
Both PPM and Cheniere Marketing are excused from performance under the
Agreement for reasons of force majeure or planned maintenance. Except for
weather events that may delay an LNG tanker's transit within, or entry into, the
Gulf of Mexico, Cheniere Marketing may not claim force majeure for interruptions
in LNG supply that may occur overseas. Instead, Cheniere Marketing has the right
to notify PPM prior to each delivery month that the monthly delivery quantity
will be reduced due to an anticipated interruption of LNG supply. If an
interruption in LNG supply occurs within a delivery month, and Cheniere
Marketing has not notified PPM of its anticipated occurrence, Cheniere Marketing
is liable to PPM for its damages or losses, which are capped at $0.50 per MMBtu
over the quantity of gas that was not delivered.
The Agreement runs for an initial term of 10 years beginning two months
after the later to occur of commencement of commercial operations at the Sabine
Pass LNG Receiving Terminal, commencement of commercial operation of the Creole
Trail Pipeline with firm service provided to certain principal pipelines, and
commencement of commercial delivery of natural gas from the Sabine Pass LNG
Receiving Terminal to the Creole Trail Pipeline. The Agreement will extend for a
five-year period following the initial term and for a second five-year period
following the first extension term unless either party provides written notice
of termination to the other party at least 120 days prior to the expiration of
the then-current term.
Either party may terminate the Agreement if the initial term has not
commenced by June 30, 2010 or Cheniere Marketing has not elected to deliver gas
to PPM by October 31, 2010. In addition, Cheniere Marketing may terminate the
Agreement if:
o it has not received all governmental approvals for the construction
and operation of the Sabine Pass LNG Receiving Terminal, Cheniere's
proposed natural gas pipeline that will service the Sabine Pass LNG
Receiving Terminal (the "Sabine Pass Pipeline"), or the Creole Trail
Pipeline by June 30, 2008;
o it incurs cumulative damages or losses resulting from interruptions of
LNG exceeding $15 million; however, PPM may avoid termination by
reimbursing Cheniere Marketing for its damages or losses;
o there is a material breach by PPM of a representation or warranty in
the agreement, which remains unremedied for more than five business
days after notice thereof;
o PPM fails to make any payment when due, within five business days
after notice thereof; or
o PPM or its guarantor makes an assignment for the benefit of its
creditors, becomes subject to voluntary or involuntary bankruptcy
proceedings, or otherwise becomes bankrupt or insolvent.
PPM may also terminate the Agreement if:
o it incurs cumulative damages or losses exceeding $15 million resulting
from interruptions of LNG supply; however, Cheniere Marketing may
avoid termination by reimbursing PPM for its damages or losses;
o PPM fails to receive natural gas on 15 days in any twelve-month
period;
o there is a material breach by Cheniere Marketing of a representation
or warranty in the agreement, which remains unremedied for more than
five business days after notice thereof; or
o Cheniere Marketing makes an assignment for the benefit of its
creditors, becomes subject to voluntary or involuntary bankruptcy
proceedings or otherwise becomes bankrupt or insolvent.
If an event of force majeure lasts more than 24 consecutive months and will not
be resolved in the foreseeable future, either party may reduce its obligations
under the Agreement by the amount of the delivery quantity affected by the event
of force majeure.
PPM has provided a guarantee executed in favor of Cheniere Marketing by Scottish
Power Finance (US), Inc. ("SPF(US)"), a wholly-owned indirect subsidiary of
Scottish Power plc and the parent of PPM. SPF(US) has a corporate credit rating
of A-, and a senior unsecured rating of BBB+, from Standard & Poors. In the
event that the sum of the value of the gas delivered by Cheniere Marketing which
has yet to be invoiced, and the gas delivered by Cheniere Marketing which has
been invoiced but has yet to be paid by PPM, exceeds the amount of the
guarantee, Cheniere Marketing has the right to reduce delivery volumes in the
succeeding month if PPM does not elect to pay for invoiced gas on an accelerated
basis.
The foregoing description of the Agreement is not complete and is qualified
in its entirety by reference to the Agreement.
Item 8.01. Other Events.
On April 6, 2006, the Company issued a press release announcing that
Cheniere LNG Marketing, Inc. entered into a Gas Purchase Agreement with PPM
Energy, Inc. The press release is attached as Exhibit 99.1 to this Current
Report on Form 8-K and is incorporated by reference into this Item 8.01.
Item 9.01. Financial Statements and Exhibits.
c) Exhibits
Exhibit
Number Description
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99.1 Press Release dated April 6, 2006 (filed herewith).
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
CHENIERE ENERGY, INC.
Date: April 6, 2006 By: /s/ Don A. Turkleson
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Name: Don A. Turkleson
Title: Senior Vice President
and Chief Financial Officer
EXHIBIT INDEX
Exhibit
Number Description
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99.1 Press Release dated April 6, 2006 (filed herewith).