S
|
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
|
¨
|
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
|
Delaware
|
95-4352386
|
(State or other jurisdiction of incorporation or organization)
|
(I.R.S. Employer Identification No.)
|
700 Milam Street, Suite 800
|
|
Houston, Texas
|
77002
|
(Address of principal executive offices)
|
(Zip code)
|
Large accelerated filer
¨
|
Accelerated filer
S
|
Non-accelerated filer
¨
|
Smaller reporting company
¨
|
(Do not check if a smaller reporting company)
|
June 30,
2010
|
December 31,
2009
|
|||||||
ASSETS
|
(unaudited)
|
|||||||
CURRENT ASSETS
|
||||||||
Cash and cash equivalents
|
$
|
73,940
|
$
|
88,372
|
||||
Restricted cash and cash equivalents
|
76,164
|
138,309
|
||||||
LNG inventory
|
501
|
32,602
|
||||||
Accounts and interest receivable
|
21,565
|
9,899
|
||||||
Prepaid expenses and other
|
18,526
|
17,093
|
||||||
TOTAL CURRENT ASSETS
|
190,696
|
286,275
|
||||||
NON-CURRENT RESTRICTED CASH AND CASH EQUIVALENTS
|
82,892
|
82,892
|
||||||
PROPERTY, PLANT AND EQUIPMENT, NET
|
2,187,044
|
2,216,855
|
||||||
DEBT ISSUANCE COSTS, NET
|
41,347
|
47,043
|
||||||
GOODWILL
|
76,819
|
76,819
|
||||||
INTANGIBLE LNG ASSETS
|
6,067
|
6,088
|
||||||
OTHER
|
22,616
|
16,650
|
||||||
TOTAL ASSETS
|
$
|
2,607,481
|
$
|
2,732,622
|
||||
LIABILITIES AND DEFICIT
|
||||||||
CURRENT LIABILITIES
|
||||||||
Accounts payable
|
$
|
723
|
$
|
426
|
||||
Accrued liabilities
|
28,233
|
38,425
|
||||||
Deferred revenue
|
26,453
|
26,456
|
||||||
Other
|
1,108
|
905
|
||||||
TOTAL CURRENT LIABILITIES
|
56,517
|
66,212
|
||||||
LONG-TERM DEBT, NET OF DISCOUNT
|
2,593,386
|
2,692,740
|
||||||
LONG-TERM DEBT—RELATED PARTIES, NET OF DISCOUNT
|
309,495
|
349,135
|
||||||
DEFERRED REVENUE
|
31,773
|
33,500
|
||||||
OTHER NON-CURRENT LIABILITIES
|
2,875
|
23,162
|
||||||
COMMITMENTS AND CONTINGENCIES
|
—
|
—
|
||||||
DEFICIT
|
||||||||
Stockholders’ deficit
|
||||||||
Preferred stock, $.0001 par value, 5,000,000 shares authorized, none issued
|
—
|
—
|
||||||
Common stock, $.003 par value
|
||||||||
Authorized: 240,000,000 and 240,000,000 shares at June 30, 2010 and December 31, 2009, respectively
|
||||||||
Issued and outstanding: 57,627,000 and 56,651,000 shares at June 30, 2010 and December 31, 2009, respectively
|
173
|
170
|
||||||
Treasury stock: 924,000 and 697,000 shares at June 30, 2010 and December 31, 2009, respectively, at cost
|
(2,175
|
)
|
(1,494
|
)
|
||||
Additional paid-in-capital
|
346,954
|
336,971
|
||||||
Accumulated deficit
|
(934,736
|
)
|
(985,246
|
)
|
||||
Accumulated other comprehensive loss
|
(203
|
)
|
(133
|
)
|
||||
TOTAL STOCKHOLDERS’ DEFICIT
|
(589,987
|
)
|
(649,732
|
)
|
||||
Non-controlling interest
|
203,422
|
217,605
|
||||||
TOTAL DEFICIT
|
(386,565
|
)
|
(432,127
|
)
|
||||
TOTAL LIABILITIES AND DEFICIT
|
$
|
2,607,481
|
$
|
2,732,622
|
||||
Three Months Ended
June 30,
|
Six Months Ended
June 30,
|
|||||||||||||||
2010
|
2009
|
2010
|
2009
|
|||||||||||||
REVENUES
|
||||||||||||||||
LNG receiving terminal revenues
|
$
|
66,337
|
$
|
38,201
|
$
|
133,164
|
$
|
38,201
|
||||||||
Oil and gas sales
|
884
|
839
|
1,421
|
1,573
|
||||||||||||
Marketing and trading
|
1,029
|
(1,156
|
)
|
13,170
|
(656
|
)
|
||||||||||
Other
|
25
|
75
|
37
|
75
|
||||||||||||
TOTAL REVENUES
|
68,275
|
37,959
|
147,792
|
39,193
|
||||||||||||
OPERATING COSTS AND EXPENSES
|
||||||||||||||||
LNG receiving terminal and pipeline development expense
|
1,143
|
91
|
1,861
|
—
|
||||||||||||
LNG receiving terminal and pipeline operating expense
|
9,807
|
9,251
|
22,619
|
18,029
|
||||||||||||
Oil and gas production and exploration costs
|
113
|
77
|
211
|
164
|
||||||||||||
Depreciation, depletion and amortization
|
15,612
|
12,795
|
31,236
|
24,857
|
||||||||||||
General and administrative expense
|
16,910
|
15,422
|
36,128
|
33,219
|
||||||||||||
TOTAL OPERATING COSTS AND EXPENSES
|
43,585
|
37,636
|
92,055
|
76,269
|
||||||||||||
INCOME (LOSS) FROM OPERATIONS
|
24,690
|
323
|
55,737
|
(37,076
|
)
|
|||||||||||
OTHER INCOME (EXPENSE)
|
||||||||||||||||
Gain on sale of equity method investment
|
128,329
|
—
|
128,329
|
—
|
||||||||||||
Derivative gain (loss), net
|
(44
|
)
|
762
|
461
|
3,324
|
|||||||||||
Gain (loss) on early extinguishment of debt
|
(1,011
|
)
|
45,363
|
(1,011
|
)
|
45,363
|
||||||||||
Interest expense, net
|
(66,950
|
)
|
(61,959
|
)
|
(134,145
|
)
|
(115,209
|
)
|
||||||||
Interest income
|
142
|
388
|
239
|
1,199
|
||||||||||||
Other income (loss)
|
16
|
46
|
(87
|
)
|
(17
|
)
|
||||||||||
TOTAL OTHER INCOME (EXPENSE)
|
60,482
|
(15,400
|
)
|
(6,214
|
)
|
(65,340
|
)
|
|||||||||
INCOME (LOSS) BEFORE INCOME TAXES
|
85,172
|
(15,077
|
)
|
49,523
|
(102,416
|
)
|
||||||||||
INCOME TAX PROVISION
|
—
|
—
|
—
|
—
|
||||||||||||
NET INCOME (LOSS)
|
85,172
|
(15,077
|
)
|
49,523
|
(102,416
|
)
|
||||||||||
NET LOSS ATTRIBUTABLE TO NON-CONTROLLING INTEREST
|
505
|
2,026
|
987
|
6,624
|
||||||||||||
NET INCOME (LOSS) ATTRIBUTABLE TO COMMON STOCKHOLDERS
|
$
|
85,677
|
$
|
(13,051
|
)
|
$
|
50,510
|
$
|
(95,792
|
)
|
||||||
Net income (loss) per share attributable to common stockholders—basic
|
$
|
1.55
|
$
|
(0.25
|
)
|
$
|
0.92
|
$
|
(1.91
|
)
|
||||||
Net income (loss) per share attributable to common stockholders—diluted
|
$
|
0.86
|
$
|
(0.25
|
)
|
$
|
0.62
|
$
|
(1.91
|
)
|
||||||
Weighted average number of common shares outstanding—basic
|
55,317
|
51,576
|
55,161
|
50,121
|
||||||||||||
Weighted average number of common shares outstanding—diluted
|
116,596
|
51,576
|
110,610
|
50,121
|
Accumulated
|
|||||||||||||||||||||||||||
Additional
|
Other
|
Non-
|
Total
|
||||||||||||||||||||||||
Common Stock
|
Treasury Stock
|
Paid-in
|
Accumulated
|
Comprehensive
|
controlling
|
Equity
|
|||||||||||||||||||||
Shares
|
Amount
|
Shares
|
Amount
|
Capital
|
Deficit
|
Loss
|
Interest
|
(Deficit)
|
|||||||||||||||||||
Balance—December 31, 2009
|
56,651
|
$
|
170
|
697
|
$
|
(1,494
|
)
|
$
|
336,971
|
$
|
(985,246
|
)
|
$
|
(133
|
)
|
$
|
217,605
|
$
|
(432,127
|
)
|
|||||||
Issuances of restricted stock
|
1,203
|
3
|
—
|
—
|
(3
|
)
|
—
|
—
|
—
|
—
|
|||||||||||||||||
Forfeitures of restricted stock
|
(23
|
)
|
—
|
23
|
—
|
—
|
—
|
—
|
—
|
—
|
|||||||||||||||||
Stock-based compensation
|
—
|
—
|
—
|
—
|
9,985
|
—
|
—
|
—
|
9,985
|
||||||||||||||||||
Treasury stock acquired
|
(204
|
)
|
—
|
204
|
(681
|
)
|
1
|
—
|
—
|
—
|
(680
|
)
|
|||||||||||||||
Comprehensive income: Foreign currency translation
|
—
|
—
|
—
|
—
|
—
|
—
|
(70
|
)
|
—
|
(70
|
)
|
||||||||||||||||
Loss attributable to non-controlling interest
|
—
|
—
|
—
|
—
|
—
|
—
|
—
|
(987
|
)
|
(987
|
)
|
||||||||||||||||
Distribution to non-controlling interest
|
—
|
—
|
—
|
—
|
—
|
—
|
—
|
(13,196
|
)
|
(13,196
|
)
|
||||||||||||||||
Net income attributable to common stockholders
|
—
|
—
|
—
|
—
|
—
|
50,510
|
—
|
—
|
50,510
|
||||||||||||||||||
Balance— June 30, 2010
|
57,627
|
$
|
173
|
924
|
$
|
(2,175
|
)
|
$
|
346,954
|
$
|
(934,736
|
)
|
$
|
(203
|
)
|
$
|
203,422
|
$
|
(386,565
|
)
|
Six Months Ended
June 30,
|
||||||||
2010
|
2009
|
|||||||
CASH FLOWS FROM OPERATING ACTIVITIES
|
||||||||
Net income (loss) attributable to common stockholders
|
$
|
50,510
|
$
|
(95,792
|
)
|
|||
Adjustments to reconcile net income (loss) attributable to common stockholders to net cash used in operating activities:
|
||||||||
Gain on sale of limited partnership investment
|
(128,329
|
)
|
—
|
|||||
(Gain) loss on early extinguishment of debt
|
1,011
|
(45,363
|
)
|
|||||
Depreciation, depletion and amortization
|
31,236
|
24,857
|
||||||
Amortization of debt issuance and debt discount
|
13,705
|
14,896
|
||||||
Non-cash compensation
|
9,945
|
8,645
|
||||||
Restricted interest income on restricted cash and cash equivalents
|
—
|
(2,774
|
)
|
|||||
Use of restricted cash and cash equivalents
|
41,250
|
49,158
|
||||||
Non-cash derivative loss
|
164
|
223
|
||||||
Non-controlling interest
|
(987
|
)
|
(6,624
|
)
|
||||
Non-cash interest expense
|
17,428
|
15,565
|
||||||
Use of cash for accrued interest
|
(60,899
|
)
|
—
|
|||||
Other
|
(4,668
|
)
|
(118
|
)
|
||||
Changes in operating assets and liabilities:
|
||||||||
Accounts payable and accrued liabilities
|
(3,539
|
)
|
116
|
|||||
LNG inventory
|
32,100
|
(10,699
|
)
|
|||||
Accounts and interest receivable
|
(16,190
|
)
|
1,657
|
|||||
Deferred revenue
|
(2,086
|
)
|
21,738
|
|||||
Prepaid expenses and other
|
(1,255
|
)
|
(3,128
|
)
|
||||
NET CASH USED IN OPERATING ACTIVITIES
|
(20,604
|
)
|
(27,643
|
)
|
||||
CASH FLOWS FROM INVESTING ACTIVITIES
|
||||||||
Proceeds from sale of limited partnership investment
|
104,330
|
—
|
||||||
Use of restricted cash and cash equivalents
|
4,214
|
71,088
|
||||||
LNG terminal and pipeline construction-in-process, net
|
(3,065
|
)
|
(81,175
|
)
|
||||
Distributions from limited partnership investment
|
3,900
|
6,600
|
||||||
Purchases of LNG commissioning, net of amounts transferred to LNG terminal construction-in-process
|
—
|
(14,184
|
)
|
|||||
Purchases of intangibles and fixed assets, net of sales
|
326
|
(140
|
)
|
|||||
Other
|
(106
|
)
|
(2,844
|
)
|
||||
NET CASH PROVIDED BY (USED IN) INVESTING ACTIVITIES
|
109,599
|
(20,655
|
)
|
|||||
CASH FLOWS FROM FINANCING ACTIVITIES
|
||||||||
Use of restricted cash and cash equivalents
|
16,680
|
78,391
|
||||||
Distributions to non-controlling interest
|
(13,196
|
)
|
(13,196
|
)
|
||||
Debt repurchases
|
(104,681
|
)
|
(30,030
|
)
|
||||
Purchase of treasury shares
|
(681
|
)
|
(80
|
)
|
||||
Other
|
(1,549
|
)
|
(33
|
)
|
||||
NET CASH PROVIDED BY (USED IN) FINANCING ACTIVITIES
|
(103,427
|
)
|
35,052
|
|||||
NET DECREASE IN CASH AND CASH EQUIVALENTS
|
(14,432
|
)
|
(13,246
|
)
|
||||
CASH AND CASH EQUIVALENTS—beginning of period
|
88,372
|
102,192
|
||||||
CASH AND CASH EQUIVALENTS—end of period
|
$
|
73,940
|
$
|
88,946
|
June 30,
|
December 31,
|
|||||||
2010
|
2009
|
|||||||
LNG TERMINAL COSTS
|
||||||||
LNG receiving terminal
|
$ | 1,638,339 | $ | 1,637,542 | ||||
LNG receiving terminal construction-in-process
|
37,989 | 37,120 | ||||||
LNG site and related costs, net
|
2,992 | 2,994 | ||||||
Accumulated depreciation
|
(61,164 | ) | (40,200 | ) | ||||
Total LNG receiving terminal costs
|
1,618,156 | 1,637,456 | ||||||
NATURAL GAS PIPELINE COSTS
|
||||||||
Natural gas pipeline
|
563,683 | 564,213 | ||||||
Natural gas pipeline construction-in-process
|
2,419 | 1,995 | ||||||
Pipeline right-of-ways
|
18,455 | 18,455 | ||||||
Accumulated depreciation
|
(30,451 | ) | (23,004 | ) | ||||
Total natural gas pipeline costs
|
554,106 | 561,659 | ||||||
OIL AND GAS PROPERTIES, successful efforts method
|
||||||||
Proved
|
3,857 | 3,565 | ||||||
Accumulated depreciation, depletion and amortization
|
(2,133 | ) | (1,787 | ) | ||||
Total oil and gas properties, net
|
1,724 | 1,778 | ||||||
FIXED ASSETS
|
||||||||
Computers and office equipment
|
5,823 | 5,799 | ||||||
Furniture and fixtures
|
5,291 | 5,291 | ||||||
Computer software
|
12,325 | 12,284 | ||||||
Leasehold improvements
|
8,537 | 9,258 | ||||||
Other
|
1,442 | 1,488 | ||||||
Accumulated depreciation
|
(20,360 | ) | (18,158 | ) | ||||
Total fixed assets, net
|
13,058 | 15,962 | ||||||
PROPERTY, PLANT AND EQUIPMENT, NET
|
$ | 2,187,044 | $ | 2,216,855 |
Net proceeds from Cheniere Partners’ issuance of common units (1)
|
$ | 98,442 | ||
Net proceeds from Holdings’ sale of Cheniere Partners common units (2)
|
203,946 | |||
Distributions to Cheniere Partners’ non-controlling interest
|
(79,611 | ) | ||
Non-controlling interest share of loss of Cheniere Partners
|
(19,355 | ) | ||
Non-controlling interest as of June 30, 2010
|
$ | 203,422 |
(1)
|
In March and April 2007, we and Cheniere Partners completed a public offering of 15,525,000 Cheniere Partners common units (“Cheniere Partners Offering”). Through the Cheniere Partners Offering, Cheniere Partners received $98.4 million in net proceeds from the issuance of its common units to the public. Prior to January 1, 2009, a company was able to elect an accounting policy of recording a gain or loss on the sale of common equity of a subsidiary equal to the amount of proceeds received in excess of the carrying value of the parent’s investment. Effective January 1, 2009, the sale of common equity of a subsidiary is accounted for as an equity transaction.
|
(2)
|
In conjunction with the Cheniere Partners Offering, Cheniere LNG Holdings LLC (“Holdings”) sold a portion of the Cheniere Partners common units held by it to the public, realizing proceeds net of offering costs of $203.9 million, which included $39.4 million of net proceeds realized once the underwriters exercised their option to purchase an additional 2,025,000 common units from Holdings. Due to the subordinated distribution rights on our subordinated units, we have recorded those proceeds as a non-controlling interest.
|
June 30,
|
December 31,
|
|||||||
2010
|
2009
|
|||||||
Accrued interest expense and related debt fees
|
$ | 16,152 | $ | 16,179 | ||||
Payroll
|
5,814 | 11,118 | ||||||
LNG terminal construction and operating costs
|
1,520 | 10,335 | ||||||
Other accrued liabilities
|
4,747 | 793 | ||||||
Total accrued liabilities
|
$ | 28,233 | $ | 38,425 |
June 30,
|
December 31,
|
|||||||
2010
|
2009
|
|||||||
Long-term debt (including related parties):
|
||||||||
Senior Notes (including related parties)
|
$ | 2,215,500 | $ | 2,215,500 | ||||
2007 Term Loan
|
298,000 | 400,000 | ||||||
2008 Convertible Loans (including related parties)
|
247,563 | 293,714 | ||||||
Convertible Senior Unsecured Notes
|
204,630 | 204,630 | ||||||
Total long-term debt
|
2,965,693 | 3,113,844 | ||||||
Debt discount:
|
||||||||
Senior Notes (including related parties)
|
(30,124 | ) | (32,471 | ) | ||||
Convertible Senior Unsecured Notes
|
(32,688 | ) | (39,498 | ) | ||||
Total debt discount
|
(62,812 | ) | (71,969 | ) | ||||
Long-term debt (including related parties), net of discount
|
$ | 2,902,881 | $ | 3,041,875 |
June 30,
2010
|
December 31,
2009
|
|||||||
Principal amount
|
$
|
204,630
|
$
|
204,630
|
||||
Unamortized discount
|
(32,688
|
)
|
(39,498
|
)
|
||||
Net carrying amount
|
$
|
171,942
|
$
|
165,132
|
June 30,
2010
|
December 31,
2009
|
|||||||||||||||
Carrying
Amount
|
Estimated
Fair Value
|
Carrying
Amount
|
Estimated
Fair Value
|
|||||||||||||
2013 Notes (1)
|
$
|
550,000
|
$
|
495,000
|
$
|
550,000
|
$
|
503,250
|
||||||||
2016 Notes, net of discount (1)
|
1,635,376
|
1,365,539
|
1,633,029
|
1,371,744
|
||||||||||||
Convertible Senior Unsecured Notes, net of discount (2)
|
171,942
|
102,305
|
165,132
|
95,777
|
||||||||||||
2007 Term Loan (3)
|
298,000
|
287,992
|
400,000
|
384,640
|
||||||||||||
2008 Convertible Loans (3)
|
247,563
|
249,569
|
293,714
|
299,001
|
(1)
|
The fair value of the Senior Notes, net of discount, is based on quotations obtained from broker-dealers who made markets in these and similar instruments as of June 30, 2010 and December 31, 2009, as applicable.
|
(2)
|
The fair value of our Convertible Senior Unsecured Notes was based on the closing trading prices on June 30, 2010 and December 31, 2009, as applicable.
|
(3)
|
The 2007 Term Loan and 2008 Convertible Loans are closely held by few holders and purchases and sales are infrequent and are conducted on a bilateral basis without price discovery by us. These loans are not rated and have unique covenants and collateral packages such that comparisons to other instruments would be imprecise. Moreover, the 2008 Convertible Loans are convertible into shares of Cheniere common stock. Nonetheless, we have provided an estimate of the fair value of these loans as of June 30, 2010 and December 31, 2009 based on an index of the yield to maturity of CCC rated debt of other companies in the energy sector.
|
Three Months Ended
June 30,
|
Six Months Ended
June 30,
|
|||||||||||||||
2010
|
2009
|
2010
|
2009
|
|||||||||||||
Weighted average common shares outstanding:
|
||||||||||||||||
Basic
|
55,317
|
51,576
|
55,161
|
50,121
|
||||||||||||
Dilutive common stock options (1)
|
5,990
|
—
|
5,937
|
—
|
||||||||||||
Dilutive Convertible Senior Unsecured Notes (2)
|
5,777
|
—
|
—
|
—
|
||||||||||||
Dilutive 2008 Convertible Loans (3)
|
49,512
|
—
|
49,512
|
—
|
||||||||||||
Diluted
|
116,596
|
51,576
|
110,610
|
50,121
|
||||||||||||
Basic income (loss) per share attributable to common stockholders
|
$
|
1.55
|
$
|
(0.25
|
)
|
$
|
0.92
|
$
|
(1.91
|
)
|
||||||
Diluted income (loss) per share attributable to common stockholders
|
$
|
0.86
|
$
|
(0.25
|
)
|
$
|
0.62
|
$
|
(1.91
|
)
|
(1)
|
Stock options, phantom stock and unvested stock of 10.7 million shares representing securities that could potentially dilute basic EPS in the future, were not included in the diluted net loss per share computations for the three and six-month periods ended June 30, 2009, because they would have been anti-dilutive.
|
(2)
|
Common shares of 5.8 million issuable upon conversion of the Convertible Senior Unsecured Notes for the three-month period ended June 30, 2009 were not included in the diluted computation because the computation of diluted net loss per share attributable to common stockholders utilizing the “if-converted” method would be anti-dilutive. Common shares of 5.8 million issuable upon conversion of the Convertible Senior Unsecured Notes for the six-month period ended June 30, 2009, were not included in the diluted computations because the computations of diluted net income (loss) per share attributable to common stockholders utilizing the “if-converted” method would be anti-dilutive.
|
(3)
|
Common shares of 50.0 million issuable upon conversion of the 2008 Convertible Loans were not included in the computations of diluted net loss per share for the three- and six-month periods ended June 30, 2009 because the computations of diluted net loss per share attributable to common stockholders utilizing the “if-converted” method would be anti-dilutive.
|
Three Months Ended
June 30,
|
Six Months Ended
June 30,
|
|||||||||||||||
2010
|
2009
|
2010
|
2009
|
|||||||||||||
Net income (loss) attributable to common stockholders
|
$
|
85,677
|
$
|
(13,051
|
)
|
$
|
50,510
|
$
|
(95,792
|
)
|
||||||
Other comprehensive income (loss) items:
|
||||||||||||||||
Foreign currency translation
|
(82
|
)
|
104
|
(70
|
)
|
42
|
||||||||||
Comprehensive income (loss) attributable to common stockholders
|
$
|
85,595
|
$
|
(12,947
|
)
|
$
|
50,440
|
$
|
(95,750
|
)
|
Six Months Ended
June 30,
|
||||||||
2010
|
2009
|
|||||||
Cash paid for interest, net of amounts capitalized
|
$
|
156,898
|
$
|
89,378
|
||||
Construction-in-process and debt issuance additions funded with accrued liabilities
|
—
|
20,989
|
Segments
|
||||||||||||||||||||
LNG Receiving Terminal
|
Natural
Gas Pipeline
|
LNG & Natural Gas Marketing
|
Corporate and Other (1)
|
Total
Consolidation
|
||||||||||||||||
As of or for the Six Months Ended June 30, 2010
|
||||||||||||||||||||
Revenues
|
$ | 133,164 | $ | 37 | $ | 13,170 | $ | 1,421 | $ | 147,792 | ||||||||||
Intersegment revenues (losses) (2) (3) (4) (5)
|
127,710 | 255 | (126,736 | ) | (1,229 | ) | — | |||||||||||||
Depreciation, depletion and amortization
|
21,363 | 7,496 | 572 | 1,805 | 31,236 | |||||||||||||||
Non-cash compensation
|
844 | 254 | 3,601 | 5,286 | 9,985 | |||||||||||||||
Income (loss) from operations
|
200,533 | (10,848 | ) | (125,279 | ) | (8,669 | ) | 55,737 | ||||||||||||
Interest expense, net
|
(92,360 | ) | (22,394 | ) | — | (19,391 | ) | (134,145 | ) | |||||||||||
Interest income
|
162 | — | 44 | 33 | 239 | |||||||||||||||
Goodwill
|
76,819 | — | — | — | 76,819 | |||||||||||||||
Total assets
|
1,920,528 | 561,737 | 94,771 | 30,445 | 2,607,481 | |||||||||||||||
Expenditures for additions to long-lived assets
|
1,937 | (105 | ) | (349 | ) | (76 | ) | 1,407 | ||||||||||||
As of or for the Six Months Ended June 30, 2009
|
||||||||||||||||||||
Revenues
|
$ | 38,201 | $ | 75 | $ | (656 | ) | $ | 1,573 | $ | 39,193 | |||||||||
Intersegment revenues (losses) (2) (3) (4) (5)
|
126,614 | 431 | (121,683 | ) | (5,362 | ) | — | |||||||||||||
Depreciation, depletion and amortization
|
14,017 | 7,436 | 731 | 2,673 | 24,857 | |||||||||||||||
Non-cash compensation
|
767 | 246 | 2,467 | 5,153 | 8,633 | |||||||||||||||
Income (loss) from operations
|
123,078 | (10,886 | ) | (131,546 | ) | (17,722 | ) | (37,076 | ) | |||||||||||
Interest expense, net
|
(70,946 | ) | (22,287 | ) | — | (21,976 | ) | (115,209 | ) | |||||||||||
Interest income
|
937 | — | 181 | 81 | 1,199 | |||||||||||||||
Goodwill
|
76,844 | — | — | — | 76,844 | |||||||||||||||
Total assets
|
2,074,757 | 584,630 | 144,835 | (18,437 | ) | 2,785,785 | ||||||||||||||
Expenditures for additions to long-lived assets
|
89,583 | 910 | 69 | 241 | 90,803 | |||||||||||||||
For the Three Months Ended June 30, 2010
|
||||||||||||||||||||
Revenues
|
$ | 66,337 | $ | 26 | $ | 1,028 | $ | 884 | $ | 68,275 | ||||||||||
Intersegment revenues (losses) (2) (3) (4) (5)
|
63,759 | 24 | (63,058 | ) | (725 | ) | — | |||||||||||||
Depreciation, depletion and amortization
|
10,674 | 3,728 | 264 | 946 | 15,612 | |||||||||||||||
Non-cash compensation
|
376 | 121 | 1,040 | 2,098 | 3,635 | |||||||||||||||
Income (loss) from operations
|
101,850 | (5,497 | ) | (67,091 | ) | (4,572 | ) | 24,690 | ||||||||||||
Interest expense, net
|
(45,922 | ) | (11,260 | ) | — | (9,768 | ) | (66,950 | ) | |||||||||||
Interest income
|
96 | — | 30 | 16 | 142 | |||||||||||||||
Expenditures for additions to long-lived assets
|
917 | 60 | (349 | ) | (12 | ) | 616 | |||||||||||||
For the Three Months Ended June 30, 2009
|
||||||||||||||||||||
Revenues
|
$ | 38,201 | $ | 75 | $ | (1,156 | ) | $ | 839 | $ | 37,959 | |||||||||
Intersegment revenues (losses) (2) (3) (4) (5)
|
64,065 | 161 | (57,229 | ) | (6,997 | ) | — | |||||||||||||
Depreciation, depletion and amortization
|
7,262 | 3,768 | 362 | 1,403 | 12,795 | |||||||||||||||
Non-cash compensation
|
306 | 163 | 1,333 | 2,884 | 4,686 | |||||||||||||||
Income (loss) from operations
|
80,780 | (4,728 | ) | (63,125 | ) | (12,605 | ) | 322 | ||||||||||||
Interest expense, net
|
(35,971 | ) | (11,288 | ) | — | (14,700 | ) | (61,959 | ) | |||||||||||
Interest income
|
305 | — | 69 | 14 | 388 | |||||||||||||||
Expenditures for additions to long-lived assets
|
35,471 | 841 | 69 | 203 | 36,584 |
(1)
|
Includes corporate activities, oil and gas exploration, development and exploitation activities and certain intercompany eliminations. Our oil and gas exploration, development and exploitation operating activities have been included in the corporate and other column due to the lack of a material impact that these activities have on our consolidated financial statements.
|
(2)
|
Intersegment revenues related to our LNG receiving terminal segment are primarily from TUA capacity reservation fee revenues of $125.5 million and $125.1 million and tug revenues that were received from our LNG and natural gas marketing segment for the six months ended June 30, 2010 and 2009, respectively. Intersegment revenues related to our LNG receiving terminal
|
|
segment are primarily from TUA capacity reservation fee revenues of $62.8 million and $62.5 million and tug revenues that were received from our LNG and natural gas marketing segment for the three-month periods ended June 30, 2010 and 2009, respectively. These LNG receiving terminal segment intersegment revenues are eliminated with intersegment expenses in our Consolidated Statement of Operations.
|
(3)
|
Intersegment revenues related to our natural gas pipeline segment are primarily from transportation fees charged by our natural gas pipeline segment to our LNG receiving terminal and LNG and natural gas marketing segments to transport natural gas that was regasified at the Sabine Pass LNG receiving terminal. These natural gas pipeline segment intersegment revenues are eliminated with intersegment expenses in our Consolidated Statement of Operations.
|
(4)
|
Intersegment losses related to our LNG and natural gas marketing segment are primarily from TUA capacity reservation fee expenses of $125.5 million and $125.1 million and tug costs that were incurred from our LNG receiving terminal segment for the six-month periods ended June 30, 2010 and 2009, respectively. Intersegment losses related to our LNG and natural gas marketing segment are primarily from TUA capacity reservation fee expenses of $62.8 million and $62.5 million and tug costs that were incurred from our LNG receiving terminal segment for the three-month periods ended June 30, 2010 and 2009, respectively. The costs of the LNG and natural gas marketing segment TUA capacity reservation fee expenses are classified as marketing trading gains (losses) as they are considered capacity contracts related to our energy trading and risk management activities. These LNG and natural gas marketing segment intersegment revenues are eliminated with intersegment expenses in our Consolidated Statement of Operations.
|
(5)
|
Intersegment losses related to corporate and other are from various transactions between our LNG receiving terminal, natural gas pipeline and LNG and natural gas marketing segments in which revenue recorded by one operating segment is eliminated with a non-revenue line item (i.e. operating expense or is capitalized) by the other operating segment.
|
|
•
|
statements relating to the construction or operation of each of our proposed liquefied natural gas (“LNG”) receiving terminals or our proposed pipelines or liquefaction facilities, or expansions or extensions thereof, including statements concerning the completion or expansion thereof by certain dates or at all, the costs related thereto and certain characteristics, including amounts of regasification and storage capacity, the number of storage tanks and docks, pipeline deliverability and the number of pipeline interconnections, if any;
|
|
•
|
statements regarding future levels of domestic natural gas production, supply or consumption; future levels of LNG imports into North America; sales of natural gas in North America; exports of natural gas from North America; and the transportation, other infrastructure or prices related to natural gas, LNG or other energy sources or hydrocarbon products;
|
|
•
|
statements regarding any financing transactions or arrangements, or ability to enter into such transactions or arrangements, whether on the part of Cheniere or at the project level;
|
|
•
|
statements regarding any terminal use agreement (“TUA”) or other commercial arrangements presently contracted, optioned or marketed, or potential arrangements, to be performed substantially in the future, including any cash distributions and revenues anticipated to be received and the anticipated timing thereof, and statements regarding the amounts of total LNG regasification or liquefaction capacity that are, or may become, subject to TUAs or other contracts;
|
|
•
|
statements regarding counterparties to our TUAs, construction contracts and other contracts;
|
|
•
|
statements regarding any business strategy, any business plans or any other plans, forecasts, projections or objectives, including potential revenues and capital expenditures, any or all of which are subject to change;
|
|
•
|
statements regarding legislative, governmental, regulatory, administrative or other public body actions, requirements, permits, investigations, proceedings or decisions;
|
|
•
|
statements regarding our anticipated LNG and natural gas marketing activities; and
|
|
•
|
any other statements that relate to non-historical or future information.
|
·
|
In March 2010, Cheniere Marketing entered into various agreements (“JPMorgan LNG Agreements”) with JPMorgan LNG Co. (“LNGCo”), an indirect subsidiary of JPMorgan Chase & Co., providing Cheniere Marketing with financial support to source more cargoes of LNG than it could source on a stand-alone basis;
|
·
|
In June 2010, we used $102.0 million of cash received from the sale of our 30% limited partner interest in Freeport LNG Development, L.P. (“Freeport LNG”) to prepay a portion of the 2007 Term Loan described below;
|
·
|
In June 2010, we used $63.6 million of cash and cash equivalents held in a TUA reserve account established in connection with the 2008 Convertible Loans described below to prepay $60.9 million of accrued interest on, and $2.7 million of principal of, the 2008 Convertible Loans as a result of the assignment of the Cheniere Marketing TUA; and
|
·
|
In June 2010, Cheniere Partners initiated a project to add liquefaction services at the Sabine Pass LNG receiving terminal that would transform the terminal into a bi-directional facility capable of liquefying natural gas and exporting LNG in addition to importing and regasifying foreign-sourced LNG.
|
Sabine
Pass LNG, L.P.
|
Cheniere Energy
Partners, L.P.
|
Other Cheniere Energy, Inc.
|
Consolidated Cheniere Energy,
Inc.
|
|||||||||||||
Cash and cash equivalents
|
$
|
—
|
$
|
—
|
$
|
73,940
|
$
|
73,940
|
||||||||
Restricted cash and cash equivalents
|
113,087
|
43,117
|
2,852
|
159,056
|
||||||||||||
Total
|
$
|
113,087
|
$
|
43,117
|
$
|
76,792
|
$
|
232,996
|
·
|
In March 2010, our liquidity position was improved by entering into the JPMorgan LNG Agreements, which monetized our then-existing LNG inventory of 2,415,000 MMBtu, may reduce our working capital requirements to operate our marketing business by allowing us to source more cargos of LNG than we could source on a stand-alone basis, and
|
|
may provide additional financial support to commercialize our capacity at the Sabine Pass LNG receiving terminal and Creole Trail Pipeline;
|
·
|
In May 2010, our capital structure was improved by the pre-payment of $102.0 million of principal of the 2007 Term Loan as a result of the sale of our 30% interest in Freeport LNG. The principal pre-payment also reduced the amount of annual interest payable under the 2007 Term Loan by $10.1 million, offsetting or potentially exceeding any distributions we may have received from our 30% interest in Freeport LNG as a source of liquidity; and
|
·
|
In June 2010, our liquidity and capital structure were improved by assigning Cheniere Marketing’s TUA to a subsidiary of Cheniere Partners and entering into related transactions. We used the restricted cash that was previously reserved to fund Cheniere Marketing’s TUA payment obligation to prepay $60.9 million in accrued interest and $2.7 million of principal on the 2008 Convertible Loans. As a result of the TUA assignment and related transactions, we improved our annual cash flow by $5 million to $16 million on a net basis:
|
o
|
the assignment of the TUA eliminated the need for us to use distributions we receive from Cheniere Partners to fund Cheniere Marketing’s TUA payment obligation and therefore the distributions we receive will be available to us as unrestricted cash;
|
o
|
the elimination of Cheniere Marketing’s TUA payments reduces the cash available to Cheniere Partners to make distributions on the subordinated units that we own; and
|
o
|
we amended our management services agreement with Cheniere Partners to change our fixed management fee to a variable fee dependent on cash available to Cheniere Partners after distributions to its common unitholders and general partner and therefore the cash we receive for managing Cheniere Partners may be less than it was prior to June 30, 2010.
|
|
•
|
Total Gas and Power North America, Inc. (formerly known as Total LNG USA, Inc.) (“Total”) has reserved approximately 1.0 Bcf/d of regasification capacity and has agreed to make monthly capacity payments to Sabine Pass LNG aggregating approximately $125 million per year for 20 years that commenced April 1, 2009. Total, S.A. has guaranteed Total’s obligations under its TUA up to $2.5 billion, subject to certain exceptions; and
|
|
•
|
Chevron U.S.A., Inc. (“Chevron”) has reserved approximately 1.0 Bcf/d of regasification capacity and has agreed to make monthly capacity payments to Sabine Pass LNG aggregating approximately $125 million per year for 20 years that commenced on July 1, 2009. Chevron Corporation has guaranteed Chevron’s obligations under its TUA up to 80% of the fees payable by Chevron.
|
For the Six Months Ended June 30, 2010
|
||||||||||
LNG and natural gas marketing revenue
(GAAP measure)
|
Adjusted LNG and natural gas marketing revenue
(Non-GAAP measure)
|
Difference
|
||||||||
Physical natural gas sales
|
$
|
36,485
|
$ |
36,485
|
$ |
—
|
||||
Cost of LNG
|
(29,762
|
)
|
(41,261
|
)
|
11,499
|
(a)
|
||||
Realized natural gas derivative gain
|
4,298
|
4,298
|
—
|
|||||||
Unrealized gas derivative gain
|
(41
|
)
|
(41
|
)
|
—
|
|||||
Other energy trading activities and adjustments
|
2,190
|
1,661
|
529
|
|||||||
LNG and natural gas revenue
|
$
|
13,170
|
$ |
1,142
|
$ |
12,028
|
(a)
|
The Cost of LNG GAAP measure takes into consideration only the cost of LNG that was regasified and sold during the six-month period ended June 30, 2010, using the weighted average cost method for LNG inventory. The Cost of LNG non-GAAP measure represents the marketing revenue, net of historical cost of LNG, expected from future LNG inventory sales based on published forward natural gas price curve prices corresponding to the future months when the regasified LNG is planned to be sold.
|
Six Months Ended June 30,
|
||||||||
2010
|
2009
|
|||||||
Sources of cash and cash equivalents
|
||||||||
Proceeds from sale of limited partnership investment
|
$ | 104,330 | $ | — | ||||
Use of restricted cash and cash equivalents
|
20,894 | 149,479 | ||||||
Distribution from limited partnership investment in Freeport LNG
|
3,900 | 6,600 | ||||||
Other
|
326 | 4,286 | ||||||
Total sources of cash and cash equivalents
|
129,450 | 160,365 | ||||||
Uses of cash and cash equivalents
|
||||||||
Debt repurchases
|
(104,681 | ) | (30,030 | ) | ||||
Operating cash flow
|
(20,604 | ) | (27,643 | ) | ||||
Distributions to non-controlling interest
|
(13,196 | ) | (13,196 | ) | ||||
LNG receiving terminal and pipeline construction-in-process, net
|
(3,065 | ) | (81,175 | ) | ||||
Purchases of LNG for commissioning, net of amounts transferred to LNG receiving terminal construction-in-process
|
— | (14,184 | ) | |||||
Other
|
(2,336 | ) | (7,383 | ) | ||||
Total uses of cash and cash equivalents
|
(143,882 | ) | (173,611 | ) | ||||
Net increase (decrease) in cash and cash equivalents
|
(14,432 | ) | (13,246 | ) | ||||
Cash and cash equivalents—beginning of period
|
88,372 | 102,192 | ||||||
Cash and cash equivalents—end of period
|
$ | 73,940 | $ | 88,946 |
Sabine
Pass LNG, L.P.
|
Cheniere Energy
Partners, L.P.
|
Other Cheniere Energy, Inc.
|
Consolidated Cheniere Energy,
Inc.
|
||||||||||||
Long-term debt (including related parties)
|
|||||||||||||||
Senior Notes (including related parties)
|
$
|
2,215,500
|
$
|
—
|
$
|
—
|
$
|
2,215,500
|
|||||||
2007 Term Loan
|
—
|
—
|
298,000
|
298,000
|
|||||||||||
2008 Convertible Loans (including related parties)
|
—
|
—
|
247,563
|
247,563
|
|||||||||||
Convertible Senior Unsecured Notes
|
—
|
—
|
204,630
|
204,630
|
|||||||||||
Total long-term debt
|
2,215,500
|
—
|
750,193
|
2,965,693
|
|||||||||||
Debt discount (including related parties)
|
|||||||||||||||
Senior Notes (including related parties) (1)
|
(30,124
|
)
|
—
|
—
|
(30,124
|
)
|
|||||||||
Convertible Senior Unsecured Notes (2)
|
—
|
—
|
(32,688
|
)
|
(32,688
|
)
|
|||||||||
Total debt discount
|
(30,124
|
)
|
—
|
(32,688
|
)
|
(62,812
|
)
|
||||||||
Long-term debt (including related parties), net of discount
|
$
|
2,185,376
|
$
|
—
|
$
|
717,505
|
$
|
2,902,881
|
|
(1)
|
In September 2008, Sabine Pass LNG issued an additional $183.5 million, par value, of 2016 Notes. The net proceeds from the additional issuance of the 2016 Notes were $145.0 million. The difference between the par value and the net proceeds is the debt discount, which will be amortized through the maturity of the 2016 Notes.
|
|
(2)
|
Effective as of January 1, 2009, we are required to record a debt discount on our Convertible Senior Unsecured Notes. The unamortized discount will be amortized through the maturity of the Convertible Senior Unsecured Notes.
|
Three Month Period Ended
June 30,
|
||||||||
2010
|
2009
|
|||||||
Physical natural gas sales, net of costs and inventory write-down
|
$ | 929 | $ | (1,061 | ) | |||
Loss from derivatives
|
(2,104 | ) | (219 | ) | ||||
Other energy trading activities
|
2,204 | 124 | ||||||
Total LNG and natural gas marketing gain (loss)
|
$ | 1,029 | $ | (1,156 | ) |
Six-Month Period Ended
June 30,
|
||||||||
2010
|
2009
|
|||||||
Physical natural gas sales, net of costs
|
$ | 6,724 | $ | (1,062 | ) | |||
Gain (loss) from derivatives
|
4,256 | (219 | ) | |||||
Other energy trading activities
|
2,190 | 625 | ||||||
Total LNG and natural gas marketing gain (loss)
|
$ | 13,170 | $ | (656 | ) |
|
•
|
inability to recover cost increases due to rate caps and rate case moratoriums;
|
|
•
|
inability to recover capitalized costs, including an adequate return on those costs through the rate-making process and the FERC proceedings;
|
|
•
|
excess capacity;
|
|
•
|
increased competition and discounting in the markets we serve; and
|
|
•
|
impacts of ongoing regulatory initiatives in the natural gas industry.
|
10.1*
|
Termination Agreement, dated June 24, 2010, by and among Sabine Pass LNG, L.P., Cheniere Marketing, LLC and JPMorgan LNG Co.
|
10.2*
|
Amendment of LNG Terminal Use Agreement, dated June 15, 2010, by and between Total Gas & Power North America, Inc. and Sabine Pass LNG, L.P.
|
10.3*
|
Amendment of LNG Terminal Use Agreement, dated June 16, 2010, by and between Chevron U.S.A. Inc. and Sabine Pass LNG, L.P.
|
31.1*
|
Certification by Chief Executive Officer required by Rule 13a-14(a) and 15d-14(a) under the Exchange Act
|
31.2*
|
Certification by Chief Financial Officer required by Rule 13a-14(a) and 15d-14(a) under the Exchange Act
|
32.1**
|
Certification by Chief Executive Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
|
32.2**
|
Certification of Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
|
*
|
Filed herewith.
|
**
|
Furnished herewith.
|
CHENIERE ENERGY, INC.
|
/s/ J
ERRY
D. S
MITH
|
Jerry D. Smith
Vice President and Chief Accounting Officer
(on behalf of the registrant and
as principal accounting officer)
|
Date: August 5, 2010
|
CHENIERE MARKETING, LLC
|
|
By:
|
/s/ Graham McArthur
|
Name:
|
Graham McArthur
|
Title:
|
Treasurer
|
SABINE PASS LNG, L.P.
|
|
By: Sabine Pass LNG-GP, Inc.
|
|
its general partner
|
|
By:
|
/s/ Meg Gentle
|
Name:
|
Meg Gentle
|
Title:
|
Chief Financial Officer
|
JPMORGAN LNG CO.
|
|
By:
|
/s/ Patrick Strange
|
Name:
|
Patrick Strange
|
Title:
|
Managing Director
|
1.17
|
“Customer”
means TOTAL GAS & POWER NORTH AMERICA, INC. unless and until substituted by an assignee in accordance with Article 17, whereupon such assignee shall become Customer to the extent of such assignment.
|
1.20
|
“Customer’s Inventory
” means, at any given time, the quantity in MMBTUs that represents LNG and Gas held by SABINE for Customer’s account. For the avoidance of doubt, Customer’s Inventory shall be determined after deduction of Retainage in accordance with Section 4.2 and reduction of PLC Fuel in accordance with Section 3.3(c)(iii) and (iv).
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|
1.22
|
“Delivery Point”
or
“Delivery Points”
means any current and future physical points of interconnection at the Sabine Pass Facility connecting the Sabine Pass Facility and a Downstream Pipeline as nominated by Customer for redelivery of its Gas. The Delivery Points as of the Amendment Effective Date are: (a) the KMLP Leg 1 Interconnect; (b) the KMLP Leg 2 Interconnect; and (c) the Creole Trail Interconnect.
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|
1.24
|
“Downstream Pipeline”
means all current and future Gas pipelines with a physical connection at the Delivery Point that transport Gas from the Sabine Pass Facility and excludes other pipelines connected to the Downstream Pipeline at locations other than at the Sabine Pass Facility.
|
|
1.95
|
“
Amended Services
” shall have the meaning set forth in Section 25.19.
|
|
1.96
|
“Amendment”
shall mean the amendment to the Agreement dated the 15
th
of June of 2010.
|
|
1.97
|
“Amendment Effective Date”
shall mean the 15
th
of June of 2010 date on which the Amendment to the Agreement has become effective.
|
|
1.98
|
“Aggregate Minimum Inventory”
shall mean a quantity of LNG equivalent to one million one hundred thousand (1,100,000) MMBTUs.
|
|
1.99
|
“Aggregate Storage Capacity”
shall mean the existing maximum LNG storage capacity available to Customer and Other Customers (excluding Heel and Retainage) in the Sabine Pass Facility, expressed in billion Standard Cubic Feet. As of the Amendment Effective Date, the Aggregate Storage Capacity of the Sabine Pass Facility is equal to sixteen and nine-tenths (16.9) billion Standard Cubic Feet.
|
|
1.100
|
“Creole Trail Interconnect”
means the interconnection between the Cheniere Creole Trail pipeline system and the Sabine Pass Facility.
|
|
1.101
|
“Customer Minimum Inventory”
shall have the meaning set forth in Section 10.5(a).
|
|
1.102
|
“Customer’s Projected Inventory”
shall have the meaning set forth in Section 5.2(b)(i).
|
|
1.103
|
“Customer’s Storage Capacity”
shall be equal to six (6) billion Standard Cubic Feet.
|
|
1.104
|
“Daily Records”
shall have the meaning set forth in Section 5.2(b).
|
|
1.105
|
“Excess GHV”
shall have the meaning set forth in Section 9.8(c).
|
|
1.106
|
“Excess N2”
shall have the meaning set forth in Section 5.2(d)(ii)d.
|
|
1.107
|
“Excused PLC Facilities Unavailability Day”
shall have the meaning set forth in Section 3.3(c)(v).
|
|
1.108
|
“Gas Day”
means a period of twenty-four (24) consecutive hours beginning at 9:00 A.M. Central Time.
|
1.109
|
“Heel”
shall mean a quantity of LNG required to be maintained by SABINE in the Sabine Pass Facility to allow the provision of Services to Customer and Other Customers. For the purpose of those calculations set forth in Section 3.3(c)(iii) and 5.2(d)(ii), the aggregate amount of Heel and Retainage shall be limited to one million one hundred thousand (1,100,000) MMBTUs.
|
|
1.110
|
“Heel BOG Selling Price”
shall mean the weighted average price of SABINE sales of boil-off Gas quantity from the Heel or Retainage required pursuant to Section 10.5(e), net of transportation costs and SABINE’s actual administrative and other costs incurred by it in connection with the selling of such boil-off Gas quantity.
|
|
1.111
|
“HGHV Nonconforming Gas”
shall have the meaning set forth in Section 9.8(a).
|
|
1.112
|
“Implementation Period”
shall have the meaning set forth in Section 25.19.
|
|
1.113
|
“Incremental GRR Quantity”
shall have the meaning set forth in Section 3.3(c)(v).
|
|
1.114
|
“KMLP”
means Kinder Morgan Louisiana Pipeline LLC.
|
|
1.115
|
“KMLP-GHV”
shall have the meaning set forth in Section 9.7.
|
|
1.116
|
“KMLP Leg 1 Interconnect”
means the interconnection between the Kinder Morgan Louisiana Pipeline and the Sabine Pass Facility (KMLP PIN 44399).
|
|
1.117
|
“KMLP Leg 2 Interconnect”
means the interconnection between the Kinder Morgan Louisiana Pipeline and the Sabine Pass Facility (KMLP PIN 44385).
|
|
1.118
|
“Minimum GRR”
shall have the meaning set forth in Section 5.2(d)(ii).
|
|
1.119
|
“Minimum GRR Fee”
shall have the meaning set forth in Section 3.3(c)(i).
|
|
1.120
|
“Minimum Inventory Cargo Costs”
shall mean the costs and expenses incurred by SABINE in purchasing a Cargo in accordance with Section 10.5(d) to restore the Aggregate Minimum Inventory, including the purchase price or other costs of the Cargo, transportation costs, and SABINE’s actual administrative and other costs incurred by it in connection with the purchase of such Cargo.
|
|
1.121
|
“Minimum Inventory Default Quantity”
shall have the meaning set forth in Section 10.5(b).
|
|
1.122
|
“Minimum Vaporization Nomination Deficit”
shall have the meaning set forth in Section 3.3(c)(iii).
|
|
1.123
|
“Monthly Records”
shall have the meaning set forth in Section 5.2(c).
|
|
1.124
|
“PLC Facilities”
shall have the meaning set forth in Section 3.3(c).
|
|
1.125
|
“PLC Fuel”
shall have the meaning set forth in Section 3.3(c)(iii).
|
|
1.126
|
“PLC Fuel Retainage”
shall have the meaning set forth in Section 3.3(c)(iii)
|
|
1.127
|
“PLC Facilities Unavailability Day”
shall have the meaning set forth in Section 3.3(c)(v).
|
|
1.128
|
“Preliminary Nomination Notice”
shall have the meaning set forth in Section 5.2(d)(i).
|
|
1.129
|
“Primary Right”
shall have the meaning set forth in Section 10.1(a)(iv).
|
|
1.130
|
“Transfer Fee”
shall have the meaning set forth in Section 3.1(b)(iii)C.
|
|
1.131
|
“Transferor” and “Transferee”
shall have the meanings set forth in Section 3.1(b)(iii) A and B as applicable.
|
|
2.1
|
Services to be provided by SABINE
|
(a)
|
access to a berth for LNG Vessels at the Sabine Pass Facility;
|
(b)
|
the unloading and receipt of LNG from LNG Vessels at the Receipt Point;
|
(c)
|
the Storage of Customer’s Inventory;
|
(d)
|
the regasifying of LNG held in Storage;
|
(e)
|
the transportation and delivery of such Regasified LNG to the Delivery Point (it being acknowledged that SABINE may, at its option, cause Gas to be redelivered to Customer at the Delivery Point from sources other than Regasified LNG);
|
(f)
|
recognize, maintain and administer the record of all LNG and inventory transfers pursuant to Section 3.1(b)(iii);
|
(g)
|
the minimization of Minimum GRR pursuant to Section 3.3(c) and Section 5.2(d)(ii); and
|
(h)
|
other activities directly related to performance by SABINE of the foregoing, including, metering, custody transfer and reporting.
|
|
A.
|
Inventory Transfers
. Customer has the right to transfer to one or more Other Customers all or a portion of Customer’s Inventory held in storage and to have one or more Other Customers transfer all or a portion of their inventory held in storage to Customer. For purposes of this Section 3.1(b)(iii)A., the Person who is transferring inventory to another Person shall be referred to as the “
Transferor
” and the Person to whom inventory is being transferred shall be referred to as the “
Transferee
”. The maximum quantity of any such transfer shall be limited such that the Transferee’s inventory does not exceed the Transferee’s storage capacity as a result of such transfer. Each inventory transfer must be initiated by the Transferor sending notice of the transfer to SABINE via the Sabine Pass Website and must be confirmed by the Transferee sending notice to SABINE via the Sabine Pass Website. SABINE will recognize each such inventory transfer for purposes of computing Customer’s Inventory and the inventory of the Other Customer participating in the inventory transfer, effective no later than the scheduling deadline of the NAESB cycle following the Transferee’s confirmation of the Transferor’s transfer notice via the Sabine Pass Website.
|
|
B.
|
LNG Reception Transfers
. Customer has the right to transfer to one or more Other Customers all or a portion of Customer’s LNG at the Receipt Point and to have one or more Other Customers transfer all or a portion of their LNG at the Receipt Point to Customer. For purposes of this Section 3.1(b)(iii)B., the Person who is transferring LNG to another Person shall be referred to as the “Transferor” and the Person to whom LNG is being transferred shall be referred to as the “Transferee”. The maximum quantity of any such transfer shall be limited such that the Transferee’s inventory does not exceed the Transferee’s storage capacity as a result of such transfer. Each LNG transfer must be initiated by the Transferor sending notice of the transfer to SABINE via the Sabine Pass Website and must be confirmed by the Transferee sending notice to SABINE via the Sabine Pass Website. During the Implementation Period and for the purposes of Services Quantity administration, inventory transfers at the Receipt Point will be administered as in Section 3.1(b)(iii)A. following the completion of the LNG unloading for the Transferor. Following the Implementation Period and for the purposes of Services Quantity administration, SABINE will recognize each such LNG transfer for
|
|
for purposes of computing Customer’s Inventory and the inventory of the Other Customer participating in the LNG transfer, effective as of the time that the quantities of LNG unloaded at the Receipt Point (net of the quantities transferred) would have been credited to the Transferor’s account. As a consequence of the transfer: (x) the total quantity of LNG transferred at the Receipt Point to the Transferee shall be credited toward the Transferor’s Maximum LNG Reception Quantity (or similar maximum contractual entitlement to receive LNG berthing, unloading and receipt services); (y) Retainage associated with the quantity of LNG transferred shall be deducted from the Transferor’s account, and (z) the increase in Minimum GRR as provided in Section 5.2(d)(ii)c. shall be for the Transferor’s account.
|
|
C.
|
Transfer Fee
. Except as provided in Section 10.5, as consideration to SABINE for the recording of each inventory and LNG reception transfer pursuant to this Section 3.1(b)(iii), the Transferor shall pay SABINE a fee (“
Transfer Fee
”) equal to two cents ($0.02) per MMBTU transferred with a minimum Transfer Fee of ten thousand dollars ($10,000).
|
|
D.
|
Terminal Transfers
. SABINE and Customer may also enter into inventory and/or LNG reception transfers, via the Sabine Pass Website, subject to the same terms and conditions as otherwise stated in this Section 3.1(b)(iii) except that no Transfer Fee shall be assessed; and
|
|
3.3
|
Gas Redelivery
|
|
(a)
|
No Pre-Delivery Right
. Except as provided in Section 5.2(d)(iii) on any given day during a Contract Year, Customer shall not be entitled to receive quantities of Gas in excess of Customer’s Inventory.
|
(b)
|
Gas Redelivery Rate
. For purposes of this Agreement, the term “
Gas Redelivery Rate
” means, subject to the proviso of this Section 3.3(b) and Section 5.2(d), 1,050,000 MMBTU per day or such lesser rate nominated by Customer; provided, however, that at no time shall Customer’s Inventory exceed Customer’s Storage Capacity.
|
|
(c)
|
Minimization of Minimum GRR
:
|
|
(i)
|
As part of the PLC Facilities, SABINE has installed a pipeline compressor that enables compression and send-out through the Delivery Point of the Sabine Pass Facility’s boil-off Gas quantity up to a rate of approximately twenty-five thousand (25,000) MMBTU per day. Commencing on the Amendment Effective Date, Customer shall pay SABINE a monthly fixed fee for the delivery of its Minimum GRR utilizing the existing PLC Facility in an annual amount equal to three hundred seventy five thousand dollars ($375,000) (“
Minimum GRR Fee
”) for the remainder of the Initial Term and pro rata thereof for any partial Contract Year.
|
(ii)
|
As soon as practicable, SABINE shall procure, install, maintain and operate a second, permanent pipeline compressor with materially similar specifications as the original pipeline compressor described in (i) above to supplement and become part of the PLC Facilities. When operated in conjunction with the pipeline compressor described in Section 3.3(c)(i), the combined capacity will have the capability of managing the incremental boil-off Gas generated as a result of the unloading of a Cargo under normal operating conditions from an LNG Vessel in accordance with Section 5.2(d)(ii)c. without use of the Sabine Pass Facility’s recondenser and vaporizer facilities. From the date when the second pipeline compressor is installed and is ready to commence operations, the Minimum GRR Fee payable by Customer to SABINE for the delivery of its Minimum GRR utilizing the PLC Facilities shall increase to the annual amount of seven hundred fifty thousand dollars ($750,000) for the remainder of the Initial Term and pro rata thereof for any partial Contract Year.
|
(iii)
|
In addition to the annual fixed fee component described in Sections 3.3(c)(i) or (ii) above, Customer shall pay SABINE a variable component fee equal to Customer’s pro rata share of the fuel expense incurred by SABINE to operate the PLC
|
|
Facilities each day (“
PLC Fuel
”). Such pro-rata share of the fuel expense incurred by SABINE to operate the PLC Facilities shall be based on the amount by which Customer’s and Other Customers’ allocated Gas redelivery quantities are less than their respective pro rata shares of the aggregate Gas redelivery nominations required to manage the boil-off Gas without running the PLC Facilities, that rate being 250,000 MMBTU (“
Minimum Vaporization Nomination Deficit
”), such pro-rata share to be based on the ratio of Customer’s Minimum Vaporization Nomination Deficit to the aggregate of Customer’s and the Other Customers’ Minimum Vaporization Nomination Deficit. Customer’s and Other Customers’ respective pro rata shares of the aggregate Gas redelivery nominations required to manage the boil-off Gas without running the PLC Facilities shall be based on the ratio of each of their respective inventories to the aggregate inventory in the Sabine Pass Facility (excluding Heel and Retainage) on such day. The PLC Fuel shall be assessed as a reduction in Customer’s Inventory (“
PLC Fuel Retainage
”) recorded, after the Implementation Period, daily, for each day that Customer’s Minimum Vaporization Nomination Deficit is greater than zero (0). During the Implementation Period, the PLC Fuel Retainage will be recorded at least monthly and administered as an inventory transfer between Customer and SABINE as per Section 3.1(b)(iii). During the Implementation Period and as soon as practicable, SABINE shall install, maintain and operate meters capable of measuring the quantity of electricity consumed by the PLC Facilities. SABINE shall then determine the PLC Fuel for each Gas Day as the product of: (a) the ratio of the quantity of electricity consumed by the PLC Facilities to the total quantity of electricity being generated by the Sabine Pass Facility Gas turbine generators and; (b) the total quantity of Gas consumed by the Sabine Pass Facility Gas turbine generators. Whenever the PLC Facilities meters are not available for any reason, SABINE shall perform an estimate of the PLC Fuel based on the mechanical energy considering:
|
a.
|
a reasonable estimation of the pipeline compressor thermal and mechanical efficiency;
|
b.
|
the ambient air temperature;
|
c.
|
the measurements of the discharge and suction pressures of the pipeline compressor at least on a hourly basis; and
|
d.
|
a reasonable estimation of the average heat rate of the Sabine Pass Facility gas turbine generators.
|
(iv)
|
Notwithstanding the foregoing, if in any month SABINE receives at least seven million five hundred thousand (7,500,000) MMBTU of Customer’s LNG, the PLC Fuel attributable to Customer shall be reduced to zero (0) for the first ten (10) days in the following month on which PLC Fuel would otherwise have been attributable to Customer. For each one million (1,000,000) MMBTU that SABINE receives above seven million five hundred thousand (7,500,000) MMBTU of Customer’s LNG the PLC Fuel attributable to Customer shall be reduced to zero (0) for an additional two (2) days in the following month.
|
(v)
|
A PLC Facilities Unavailability Day (“
PLC Facilities Unavailability Day
”) shall consist of any day during which: (w) all pipeline compressors comprising the PLC Facilities are unavailable for whatever reason other than events of Force Majeure (except that for purposes of this Section 3.3(c)(v) the definition of Force Majeure shall exclude mechanical breakdown of the PLC Facilities not caused by actions or events external to the PLC Facilities); and (x) as a consequence, Customer’s redelivery nomination has to be increased pursuant to Section 5.2(d)(ii)b. For each PLC Facilities Unavailability Day in a Contract Year beyond a threshold number of such days in that Contract Year determined pursuant to Section 3.3(c)(vi) below (“
Excused PLC Facilities Unavailability Days
”), SABINE shall calculate a credit that shall be applied in the immediately succeeding monthly payments as a reduction in Customer’s Minimum GRR Fee. Until the permanent second (2nd) pipeline compressor is in operation pursuant to Section 3.3(c)(ii), such credit shall be equal to the product of one cent ($0.01) multiplied by the Incremental GRR Quantity, thereafter the credit shall be equal to the product of two cents ($0.02) multiplied by the Incremental GRR Quantity. The Incremental GRR Quantity shall be: (y) for the first PLC Facilities Unavailability Day, the positive difference between Customer’s Minimum GRR for such day calculated by SABINE pursuant to Section 5.2(d)(ii)b. minus Customer’s original redelivery nomination for such day and (z) for each subsequent consecutive PLC Facilities Unavailability Day, if any, the positive difference between Customer’s Minimum GRR for such day calculated by SABINE pursuant to Section 5.2(d)(ii)b. minus the higher of Customer’s redelivery nomination for such day and what would have been Customer’s Minimum GRR for such day calculated pursuant to Section 5.2(d)(ii), had the PLC Facilities been available on
|
|
such day. In no event shall the credits to Customer in any Contract Year exceed the Minimum GRR Fee.
|
(vi)
|
Until the permanent second pipeline compressor is in operation pursuant to Section 3.3(c)(ii), the number of Excused PLC Facilities Unavailability Days shall be eight (8) in each Contract Year or pro rata thereof. Thereafter, the number of Excused PLC Facilities Unavailability Days shall be four (4) in each Contract Year or pro rata thereof.
|
(vii)
|
Notwithstanding the foregoing, whenever Customer is not entitled to receive any credit pursuant to Section 3.3(c)(v) above, and any of the pipeline compressors comprising the PLC Facilities becomes unavailable for any reason (including Force Majeure) for more than one hundred and eighty (180) consecutive days (provided however that in the event such unavailability of the PLC Facilities is due to a PLC motor failure, such duration shall be extended by a reasonable amount of time to allow for the replacement or repair of the PLC motor based on reasonable industry timelines then in effect for such part), the Minimum GRR Fee shall be: (x) reduced by half (if only one (1) pipeline compressor is unavailable); or (y) suspended (if both pipeline compressors are unavailable), as applicable, on a day-by-day basis until full availability of the pipeline compressor(s). For purposes of this Section 3.3(c)(vii), the Minimum GRR Fee shall be equal to the annual Minimum GRR Fee divided by the number of days in the year. In no event shall the credits to Customer in any Contract Year exceed the Minimum GRR Fee.
|
|
4.2
|
Retainage
|
|
5.2
|
Gas Delivery Procedure
|
|
(b)
|
Daily Records
. Following the Implementation Period, SABINE shall, on each day by 7:00 a.m. Central Time post on the Sabine Pass Website for access by Customer certain records (“
Daily Records
”), including the following:
|
(i)
|
a projection of Customer’s Inventory as of 9:00 a.m. Central Time on the day of the posting of the Daily Records and as of the commencement of the next succeeding Gas Day based on Customer’s Inventory, scheduled redelivery nominations and PLC Fuel usage (“
Customer’s Projected Inventory
”);
|
(ii)
|
the expected total capacity of the Sabine Pass Facility to vaporize and deliver Gas, as of 9:00 a.m. Central Time on the day following the posting of the Daily Records, determined by SABINE as a Reasonable and Prudent Operator (“
Total Vaporization Capacity
”);
|
(iii)
|
the sum of all Other Customers maximum Gas redelivery rates (or similar maximum daily contractual entitlement to receive Gas at the Delivery Point);
|
(iv)
|
Customer’s Minimum GRR determined in accordance with Section 5.2(d)(ii);
|
(v)
|
the estimated boil-off Gas quantity for the Gas Day preceding the day of the posting of the Daily Records; and
|
(vi)
|
an estimate of the highest Gross Heating Value SABINE anticipates delivering to Customer at any Delivery Point during the next two (2) week period, up to and including the maximum Gross Heating Value specified in Section 10.3(a) as well as SABINE’s estimate of the highest Gross Heating Value of any LNG then in storage. This Gas redelivery heating value forecast will be based on SABINE’s reasonable estimate of the current heating value of the LNG in storage, Customer’s and Other Customers aggregate redelivery nominations received by SABINE for the next two (2) week period, Customer’s and Other Customers aggregate Cargo receipts for which SABINE has received nominations, and the assumption of redelivering Gas from the LNG in storage with the highest Gross Heating Value on a priority basis.
|
|
(c)
|
Monthly Records
. Following the Implementation Period, SABINE shall, by the 10th day of each month, post on the Sabine Pass Website for access by Customer certain records (“
Monthly Records
”), including the following:
|
(i)
|
the sum of Customer and all Other Customers closing inventory for each day of the previous month;
|
(ii)
|
the sum of SABINE’s Retainage and Heel for each day of the previous month;
|
(iii)
|
the sum of Customer and all Other Customers allocated Gas redeliveries for each Gas day of the previous month; and
|
(iv)
|
SABINE’s estimate of the boil-off Gas quantity for each Gas Day of the previous month.
|
(i)
|
Preliminary Gas Nomination
. Commencing on the day before the Commercial Start Date, the Scheduling Representative shall, by 7:30 a.m. each Day, notify to SABINE a preliminary nomination (“
Preliminary Nomination Notice
”) of the quantities of Gas (including any desired share of Excess Gas) that Customer desires to be delivered to it at the Delivery Point commencing at 9:00 a.m. on the subsequent day.
|
(ii)
|
Minimum Gas Redelivery Rate
. Each Gas Day Customer shall be required, and SABINE shall require each Other Customer, to nominate at least a minimum quantity of Gas for redelivery at the Delivery Point (“
Minimum GRR
”). On any given day Customer’s Minimum GRR shall be:
|
a.
|
Customer’s pro rata share of SABINE’s reasonable estimate of the quantity of boil-off Gas generated at the Sabine Pass Facility on such Gas Day (excluding boil
off Gas associated with the loading or unloading of any LNG vessel other than Customer’s LNG Vessel), such pro rata share to be based on the ratio of Customer’s Inventory to the aggregate inventory in the Sabine Pass Facility on such day (excluding Heel and Retainage). Each Other Customers pro rata share of the Sabine Pass Facility boil-off Gas quantity shall also be based on the ratio of such Other Customers inventory to the aggregate inventory in the Sabine Pass Facility (excluding Heel and Retainage). If, on any given day, Customer’s Inventory is less than zero (0), Customer’s Inventory shall be deemed to be zero (0) for the purpose of determining Customer’s Minimum GRR.
|
b.
|
In the event that PLC Facilities become unavailable for any reason, SABINE shall as soon as practicable
|
|
notify Customer’s Scheduling Representative by email and shall make reasonable endeavors to contact Customer’s Scheduling Representative by telephone to inform Customer that the PLC Facilities are unavailable and that its Minimum GRR shall become its pro rata share of the quantity required to manage the boil-off Gas quantity using the Sabine Pass Facility’s vaporization facilities (excluding boil-off Gas associated with the loading or unloading of any LNG vessel other than Customer’s LNG Vessel) until such time that the PLC Facilities are returned to service. In this event, Customer’s pro rata share shall be based on the ratio of Customer’s Inventory to the aggregate LNG inventory in the Sabine Pass Facility (excluding Heel and Retainage). SABINE shall cooperate with Customer to adjust Customer’s nomination and to facilitate redelivery and Customer’s receipt of the Minimum GRR. SABINE shall also notify Customer of the estimated period during which the PLC Facilities will be unavailable and shall update this estimate to Customer on a daily basis. SABINE shall promptly notify Customer when the PLC Facilities resume service.
|
c.
|
In the event that an LNG Vessel is planned to be or has been unloaded on behalf of Customer, Customer’s Minimum GRR shall be the rate set forth in Sections 5.2(d)(ii)a. or 5.2(d)(ii)b. above plus SABINE’s reasonable estimate of the additional Gas redelivery rate sufficient to manage the incremental boil-off Gas quantity generated as a result of unloading the LNG Vessel on behalf of Customer during and after unloading of such LNG.
|
d.
|
If, in SABINE’s determination, LNG delivered by Customer to SABINE will, for reasons not attributable to SABINE, result in Gas to be delivered to Customer or Other Customers at the Delivery Point to not conform to the nitrogen content limitation (expressed as a percentage) specified in Section 10.3(b), Customer’s Minimum GRR shall be the rate set forth in Sections 5.2(d)(ii)a. or 5.2(d)(ii)b. above plus SABINE’s reasonable estimate of Customer’s pro rata share of the additional Gas redelivery rate required to ensure that the Gas to be delivered to Customer or Other Customers at the Delivery Point will conform to the nitrogen content limitation specified in Section 10.3(b). Customer’s pro rata share of the additional
|
|
Gas redelivery rate shall be calculated based on the ratio of: (w) the product of Customer’s Excess N2 and Customer’s Inventory to; (x) the sum of the product of Customer’s Excess N2 and Customer’s Inventory and the product of each Other Customers Excess N2 and each Other Customers inventory. Excess N2 for Customer and each Other Customer shall be determined as the positive difference between: (y) the volumetrically weighted average of SABINE’s estimation of the nitrogen percentage of each of Customer’s and Other Customers individual quantities of LNG received or transferred and remaining in Customer’s and Other Customers inventories; and (z) sixteen hundredths percent (0.16%) (“
Excess N2
”).
|
(i)
|
the actual nitrogen percentage of each individual remaining quantity of LNG received on the day received at the Receipt Point;
|
(ii)
|
the nitrogen percentage of each remaining quantity of LNG transferred pursuant to Section 3.1(b)(iii) on the day of the transfer, calculated as the volumetrically weighted average of the nitrogen percentage of the Transferor’s remaining quantities of LNG received or transferred prior to the transfer date and being transferred;
|
(iii)
|
the dates of each remaining quantity of LNG transferred pursuant to Section 3.1(b)(iii), determined as the volumetrically weighted average of the nitrogen percentage of the Transferor’s remaining quantities of LNG received or transferred prior to the transfer date and being transferred;
|
(iv)
|
the duration in number of days between the dates each remaining quantity of LNG has been received or the dates as determined pursuant to Section 3.1(b)(iii) above each remaining quantity of LNG has been transferred;
|
(v)
|
the estimated actual average nitrogen percentage of the LNG in Sabine Pass Facility;
|
(vi)
|
the determination of a nitrogen percentage daily decrease factor that will enable the volumetrically weighted average of the nitrogen percentage for each of the remaining quantities of LNG received or transferred for the Customer and Other Customers to be equal to the estimated actual average nitrogen percentage of all of the LNG in the Sabine Pass Facility.
|
e.
|
On any given day Customer’s Minimum GRR shall be reduced to a minimum of zero (0) to the extent that the aggregate of the Other Customers redelivery nominations are in excess of the aggregate of the Other Customers minimum gas redelivery rates, such excess to be allocated to Customer for reduction of Customer’s Minimum GRR based on the ratio of Customer’s Inventory to the aggregate LNG inventory of Customer and all Other Customers whose redelivery nominations are not in excess of their Minimum GRRs.
|
f.
|
SABINE will use reasonable endeavors to minimize Customer’s Minimum GRR.
|
g.
|
Customer’s Minimum GRR shall be based solely on the quantity of boil-off Gas generated by the Sabine Pass Facility in connection with the provision by SABINE of Services available to Customer.
|
(iii)
|
Confirmation of Gas Redelivery Nominations during Cargo Unloading.
For any days when an LNG Vessel unloading is anticipated on behalf of Customer, SABINE shall use reasonable efforts to accept a Gas redelivery nomination in excess of Customer’s Projected Inventory up to Customer’s Gas Redelivery Rate if: (x) SABINE anticipates that such excess quantity will be in SABINE’s possession and control (but not yet considered received and credited to Customer’s Inventory in accordance with Annex I) by the flowing time of the Gas redelivery nomination for such excess quantity; and (y) the Downstream Pipeline will permit SABINE to redeliver
|
|
less than Customer’s confirmed Gas redelivery nomination if such excess quantity is not in SABINE’s possession and control by the flowing time of the Gas redelivery nomination. If such excess quantity is not in SABINE’s possession and control by the flowing time of the Gas redelivery nomination, SABINE shall, in its sole discretion, determine the actual quantity of Gas to be redelivered to Customer but such quantity shall not be less than the quantity of Customer’s LNG actually received at the Sabine Pass Facility. If the Downstream Pipeline will not permit SABINE to redeliver less than Customer’s confirmed Gas redelivery nomination, SABINE shall use reasonable efforts to accept a Gas redelivery nomination in excess of Customer’s Projected Inventory up to Customer’s Gas Redelivery Rate if such excess quantity is in SABINE’s possession and control on or prior to confirmation of Customer’s nomination for such excess quantity on the relevant Downstream Pipeline.
|
(iv)
|
Nominations of Excess Gas may only be requested if the Scheduling Representative has stated, in the Preliminary Nomination Notice, a GRR of 1,050,000 MMBTUs per day.
|
(v)
|
In the event that on a day SABINE does not receive a Preliminary Nomination Notice on a timely basis, the Scheduling Representative shall be deemed to have nominated a Gas Redelivery Rate equal to the Customer’s Minimum GRR and Section 3.4 shall apply.
|
|
(b)
|
LNG Vessel Nomination
. As soon as practicable but no later than the day of departure of the LNG Vessel from the Loading Port (unless the LNG Vessel contains a Cargo acquired or redirected after loading, in which case the deadline shall be as soon as practicable after such acquisition or redirection), Customer shall notify SABINE of the information specified below:
|
(i)
|
name of LNG Vessel and, in reasonable detail, the dimensions, specifications, operator, and owner of such LNG Vessel;
|
(ii)
|
name of Loading Port;
|
(iii)
|
expected departure date of LNG Vessel from Loading Port;
|
(iv)
|
estimated arrival date at the Sabine Pass Facility; and
|
(v)
|
any changes in the Expected Receipt Quantity since Customer’s prior notice.
|
|
(a)
|
Issuance
. Subject to any applicable restrictions, including any nighttime transit restrictions imposed by Governmental Authorities or Pilots or any other reasonable timing restrictions imposed by SABINE under Section 7.1(b)(iii), the Master of an LNG Vessel or its agent may give to SABINE its notice of readiness (“
NOR
”) to unload (berth or no berth) upon arrival of such LNG Vessel at the specific location off the Sabine Pass Facility at which Pilots customarily board the LNG Vessel (such location referred to as the “
Pilot Boarding Station
”).
|
|
9.7
|
LNG GHV at Receipt Point and Gas GHV at KMLP Delivery Point
|
|
9.8
|
Weathered Inventory Gross Heating Value
|
(a)
|
Expected Nonconforming Gas due to High Gross Heating Value
. Notwithstanding the provisions in Section 9.4 and Section 9.5, if at any time and for reasons not attributable to SABINE, SABINE expects, after taking into account the expected Gas redelivery nominations and the expected dates of unloading of LNG Vessels for Customer and Other Customers, that due to boil-off, within the next forty (40), days a portion or all of the LNG held in storage in the Sabine Pass Facility will, when vaporized, produce Nonconforming Gas but only due to its high Gross Heating Value (“
HGHV Nonconforming Gas
”), then SABINE shall as soon as
|
|
reasonably practicable provide notice to Customer and Other Customers, such notice to include the quantity and current Gross Heating Value of the LNG expected to produce HGHV Nonconforming Gas.
|
(b)
|
SABINE’s Right to Cure
. If at the end of the thirty (30) day period following the date of SABINE’s notice pursuant to Section 9.8(a) above, Customer and/or Other Customers have failed to arrange to cure the expected HGHV Nonconforming Gas, SABINE shall have the right to make arrangements to cure the expected HGHV Nonconforming Gas by any and all means including arranging for the procurement of a Cargo at commercially reasonable prices. Customer shall indemnify and reimburse SABINE from and against Customer’s pro-rata share of the costs (other than capital costs) associated with the expected HGHV Nonconforming Gas cure arranged by SABINE.
|
(c)
|
Allocation
. Customer’s pro-rata share of the cost of the Nonconforming Gas cure shall be calculated based on the ratio of: (w) the product of Customer’s Excess GHV and Customer’s Inventory to; (x) the sum of the product of Customer’s Excess GHV and Customer’s Inventory and the product of each Other Customers’ GHV and each Other Customers’ inventory. Customer’s Inventory and Other Customers inventories shall be determined as of the thirty-first (31st) day following the date of SABINE’s notice sent pursuant to Section 9.8(a). Excess GHV for Customer and for each Other Customer shall be determined as the positive difference between: (y) the volumetrically weighted average of SABINE’s estimation of the Gross Heating Value calculated as of the seventy first (71st) day following the date of SABINE’s notice sent pursuant to Section 9.8(a) of each of Customer’s and Other Customers quantities of LNG received or transferred and remaining in Customer’s and each Other Customers inventories; and (z) one thousand one hundred and sixty five (1165) BTU per Standard Cubic Foot (“
Excess GHV
”).
|
(d)
|
Excess GHV Determination
. SABINE shall determine a value representing the Gross Heating Value on the seventy-first (71st) day following the date of SABINE’s notice sent pursuant to Section 9.8(a) for each of Customer’s and Other Customers individual quantities of LNG received or transferred and remaining in Customer’s and Other Customers inventories considering:
|
(i)
|
the actual Gross Heating Value of each individual remaining quantity of LNG received, on the day received at the Receipt Point;
|
(ii)
|
the Gross Heating Value of each remaining quantity of LNG transferred pursuant to Section 3.1(b)(iii), calculated as the
|
|
volumetrically weighted average of the Gross Heating Value of the Transferor’s remaining quantities of LNG received or transferred prior to the transfer date and contributing to the LNG transfer;
|
(iii)
|
the date of each remaining quantity of LNG transferred pursuant to Section 3.1(b)(iii), determined as the volumetrically weighted average of the dates of the Transferor’s remaining quantities of LNG received or transferred prior to the transfer date and contributing to the LNG transfer;
|
(iv)
|
the duration in number of days between the dates each remaining quantity of LNG has been received or the dates as determined pursuant to Section 9.8(d)(iii) above for any remaining quantity of LNG transferred and the seventy-first (71st) day following the date of SABINE’s notice sent pursuant to Section 9.8(a);
|
(v)
|
the expected average Gross Heating Value of all LNG in Sabine Pass Facility on the seventy-first (71st) day following the date of SABINE’s notice sent pursuant to Section 9.8(a); and
|
(vi)
|
the determination of a Gross Heating Value daily increase factor that will result in the volumetrically weighted average of the Gross Heating Value estimated on the seventy-first (71st) day following the date of SABINE’s notice sent pursuant to Section 9.8(a) of the remaining quantities of LNG received or transferred for the Customer and Other Customers to be equal to the expected average Gross Heating Value of all LNG in Sabine Pass Facility as determined in the preceding Section.
|
|
(a)
|
Delivery Point
.
|
(i)
|
Subject to Section 3.3, the quantity of Gas nominated by Customer for any day pursuant to Section 5.2 shall be delivered at the Delivery Point nominated by Customer. Customer may nominate quantities of Gas from Customer’s Inventory for delivery at one or more Delivery Points on a given day; provided, however, that the aggregate of such
|
|
nominations by Customer shall not exceed the Gas Redelivery Rate (plus any Excess Gas and/or any Make-Up Quantity). Except as provided below, the KMLP Leg 1 Interconnect and the KMLP Leg 2 Interconnect shall be operated at one common variable pressure and as a single Delivery Point.
|
(ii)
|
If on any given day the total Gas redelivery nominations of Customer and Other Customers require SABINE to deliver Gas to both the KMLP Leg 1 Interconnect and the KMLP Leg 2 Interconnect at different pressures, SABINE shall deliver the nominated quantities so long as: (a) such operations, in SABINE’s sole discretion, will not impede SABINE’s ability to fulfill its contractual obligations to Other Customers; and (b) Customer and SABINE agree to the quantity of LNG to be reimbursed to SABINE by Customer pursuant to the following sentence prior to delivery of the nominated quantities. Customer shall reimburse SABINE for any additional fuel expense incurred by SABINE in delivering such nominated quantities in the form of a no-fee transfer, as per Section 3.1(b)(iii)D, of LNG from Customer’s Inventory to SABINE in the quantity agreed to as provided in the foregoing sentence.
|
(iii)
|
SABINE shall deliver the quantities of Gas nominated by Customer at each Delivery Point, subject to confirmation by the Downstream Pipelines of Customer’s nomination and scheduling of Gas in accordance with Section 10.2(a).
|
(iv)
|
Customer has an equal primary right of nomination and scheduling with Chevron U.S.A. Inc. (“
Primary Right
”) at the KMLP Leg 1 Interconnect and at the KMLP Leg 2 Interconnect.
|
|
10.5
|
Minimum Inventory
|
|
(a)
|
Customer Minimum Inventory.
Subject to further provisions of this Section 10.5, Customer shall maintain Customer’s Inventory of not less than a quantity calculated as the Aggregate Minimum Inventory multiplied by the ratio of the Customer’s Storage Capacity over the Aggregate Storage Capacity (“
Customer
Minimum Inventory
”). SABINE shall require that each Other Customer maintain its pro rata share of Aggregate Minimum Inventory on the
|
|
same terms and conditions that are applicable to Customer under this Section 10.5.
|
|
(b)
|
Minimum Inventory Default Quantity
. Whenever Customer’s Inventory falls below the Customer Minimum Inventory, SABINE shall provide timely notice to Customer. Whenever Customer’s Inventory remains below Customer Minimum Inventory for more than forty (40) consecutive days, SABINE shall start accounting and keeping record of the cumulative amount of the daily difference between the Customer Minimum Inventory and Customer’s Inventory (“
Minimum Inventory Default Quantity
”). If, on any given day, Customer’s Inventory is less than zero (0), Customer’s Inventory shall be deemed to be zero (0) for the purpose of determining Customer’s Minimum Inventory Default Quantity. At any time Customer’s Inventory is less than three (3) times Customer’s Minimum Inventory, Customer shall have the right to receive up to one million five hundred thousand (1,500,000) MMBTUs of additional inventory via an inventory or LNG reception transfer from an Other Customer at no Transfer Fee. Customer shall be entitled to two (2) such no-fee transfers in any one (1) calendar year. SABINE shall report to Customer on a monthly basis the Minimum Inventory Default Quantity of Customer and each Other Customer.
|
|
(c)
|
Aggregate Minimum Inventory Default
. Notwithstanding Section 10.5(b) above, whenever the sum of Customer’s Inventory and Other Customers’ Inventories falls below the Aggregate Minimum Inventory and in the reasonable opinion of SABINE there is a material risk, after taking into account the expected dates of unloading of LNG Vessels, and the risk of delay or interruption to any such unloading, that the total quantity of LNG in the Sabine Pass Facility to be held in Customer’s Inventory and Other Customers’ Inventories will be lower than the Aggregate Minimum Inventory during the succeeding forty (40) days, SABINE shall provide timely notice to Customer and all Other Customers.
|
|
(d)
|
Cargo Procurement
. If at the end of the thirty (30) day period following the receipt of SABINE’s notice pursuant to Section 10.5(c) above, Customer and/or Other Customers have failed to arrange for delivery of a Cargo to the Sabine Pass Facility in the coming ten (10) days to ensure that there will be LNG at least equal to the Aggregate Minimum Inventory, SABINE shall have the right to procure a Cargo using good faith efforts to obtain commercially reasonable prices, in order to restore the Aggregate Minimum Inventory. Customer shall indemnify and reimburse SABINE from and against Customer’s pro rata share of the Minimum Inventory Cargo Costs associated with the acquisition of such Cargo. Customer’s pro rata share of the Minimum Inventory Cargo Costs
|
|
shall be calculated as the ratio of Customer’s Minimum Inventory Default Quantity to the sum of Customer’s and Other Customers’ Minimum Inventory Default Quantities as of the date of delivery of such Cargo. If, at such time and for any reason, the Minimum Inventory Default Quantities of Customer and all of the Other Customers is zero (0), Customer’s pro rata share of the Minimum Inventory Cargo Costs shall be calculated at the ratio of Customer’s Storage Capacity to the Aggregate Storage Capacity. Upon payment by Customer of all amounts for which it is liable under this Section 10.5(d), Customer shall be entitled to have its share of the Cargo acquired by SABINE (using the same allocation methodology as for the Minimum Inventory Cargo Costs) credited without charge to Customer’s Inventory, net of Retainage. Upon Customer’s payment to SABINE of its pro rata share of the Minimum Inventory Cargo Costs, the Customer Minimum Inventory Default Quantity, if any, shall be reset at zero (0). The liability of Customer and Other Customers towards SABINE under this Section 10.5(d) shall be several and not joint and shall be limited in the manner set forth in this Section 10.5. In the event that SABINE acquires a Cargo pursuant to this Section 10.5(d) and on the date of delivery of such Cargo Customer’s Minimum Default Quantity is zero (0), Customer shall nonetheless have the option to acquire and have credited to Customer’s Inventory up to twenty-five percent (25%) of such Cargo upon payment to SABINE of a percentage of the Minimum Inventory Cargo Costs equivalent to the percentage of the Cargo Customer elects to acquire. In the event that Customer exercises such right, the Other Customers share of such Cargo and associated Minimum Inventory Cargo Costs shall be reduced pro rata (using the same allocation methodology as for the Minimum Inventory Cargo Costs) to reflect the portion of the Cargo acquired by Customer and the portion of the Minimum Inventory Cargo Costs borne by Customer.
|
|
(e)
|
Sale of BOG from Heel or Retainage
. At any time during which and for as long as Customer’s and Other Customers’ Inventories are jointly zero (0), SABINE shall nominate and sell the boil-off Gas quantity from the Heel or Retainage. If, pursuant to the preceding sentence, SABINE sells any Heel or Retainage, Customer shall have the obligation on the day following the credit of any LNG to Customer’s Inventory to sell at the Heel BOG Selling Price (“
Heel BOG Selling Price
”) and transfer to SABINE a quantity of LNG equal to the Customer’s pro rata share of Heel or Retainage sold by SABINE. Customer’s pro rata share of Heel or Retainage sold shall be calculated as the ratio of Customer’s Minimum Inventory Default Quantity to the sum of Customer’s and Other Customers’ Minimum Inventory Default Quantities as of the day immediately prior to the delivery of the Cargo pursuant to Section 10.5(d) above.
|
|
(g)
|
Successors and Assignees
. Any successor or assignee of Customer or any Other Customer shall remain liable for any Minimum Inventory Default Quantity as accounted for by SABINE.
|
11.1
|
Monthly Statements
|
|
(c)
|
the monthly portion of the Minimum GRR Fee net of any applicable credits for the following month;
|
|
25.19
|
Implementation Period
|
SABINE PASS LNG, L.P.
|
TOTAL GAS & POWER NORTH AMERICA,
|
|||
INC.
|
||||
By: Sabine Pass LNG-GP, Inc.
|
||||
its general partner
|
||||
By:
|
/s/ R. Keith Teague
|
By:
|
/s/ Bruce E. Henderson
|
|
Name:
|
R. Keith Teague
|
Name:
|
Bruce E. Henderson
|
|
Title:
|
President
|
Title:
|
President & General Manager
|
1.18
|
“Customer’s Inventory
” means, at any given time, the quantity in MMBTUs that represents LNG and Gas held by SABINE for Customer’s account. For the avoidance of doubt, Customer’s Inventory shall be determined after deduction of Retainage in accordance with Clause C.3 and reduction of PLC Fuel in accordance with Section 5.3(e).
|
|
1.20
|
“Delivery Point”
or
“Delivery Points”
means any current and future physical points of interconnection at the Sabine Pass Facility connecting the Sabine Pass Facility and a Downstream Pipeline as nominated by Customer for redelivery of its Gas. The Delivery Points as of the Amendment Effective Date are: (a) the KMLP Leg 1 Interconnect; (b) the KMLP Leg 2 Interconnect; and (c) the Creole Trail Interconnect.
|
|
1.22
|
“Downstream Pipeline”
means all current and future Gas pipelines with a physical connection at the Delivery Point that transport Gas from the Sabine Pass Facility and excludes other pipelines connected to the Downstream Pipeline at locations other than at the Sabine Pass Facility.
|
|
1.79
|
“
Amended Services
” shall have the meaning set forth in Section 25.18.
|
|
1.80
|
“
Amendment
” shall mean this amendment dated and effective as of June 16
th
, 2010.
|
|
1.82
|
“
Aggregate Minimum Inventory
” shall mean a quantity of LNG equivalent to one million one hundred thousand (1,100,000) MMBTUs.
|
|
1.83
|
“
Aggregate Storage Capacity
” shall mean the existing maximum LNG storage capacity available to Customer and Other Customers (excluding Heel and Retainage) in the Sabine Pass Facility, expressed in billion Standard Cubic Feet. As of the Amendment Effective Date, the Aggregate Storage Capacity of the Sabine Pass Facility is equal to sixteen and nine-tenths (16.9) billion Standard Cubic Feet.
|
|
1.84
|
“
Creole Trail Interconnect
”
means the interconnection between the Cheniere Creole Trail pipeline system and the Sabine Pass Facility.
|
|
1.85
|
“
Customer Minimum Inventory
” shall have the meaning set forth in Section 10.5(a).
|
|
1.86
|
“
Customer’s Projected Inventory
”
shall have the meaning set forth in Section 5.3(f)(i).
|
|
1.87
|
“
Customer’s Storage Capacity
” shall be equal to four (4) billion Standard Cubic Feet.
|
|
1.88
|
“
Daily Records”
shall have the meaning set forth in Section 5.3(f).
|
|
1.89
|
“
Excess Services
” shall have the meaning set forth in Section 3.1(d).
|
|
1.90
|
“
Excess GHV
” shall have the meaning set forth in Section 9.7(c).
|
|
1.91
|
“
Excess N2
” shall have the meaning set forth in Section 5.3(h)(i)(d).
|
|
1.92
|
“
Excused PLC Facilities Unavailability Day
” shall have the meaning set forth in Section 5.3(e)(v).
|
|
1.93
|
“
Gas Day
”
means a period of twenty-four (24) consecutive hours beginning at 9:00 A.M. Central Time.
|
|
1.94
|
“
Heel
” shall mean a quantity of LNG required to be maintained by SABINE in the Sabine Pass Facility to allow the provision of Services to Customer and Other Customers. For the purpose of those calculations set forth in Section 5.3(e)(iii) and 5.3(h)(i)a., the aggregate amount of Heel and Retainage shall be limited to one million one hundred thousand (1,100,000) MMBTUs.
|
|
1.95
|
“
Heel BOG Selling Price
” shall mean the weighted average price of SABINE sales of boil-off Gas quantity from the Heel or Retainage required pursuant to Section 10.5(e), net of transportation costs and SABINE’s actual administrative and other costs incurred by it in connection with the selling of such boil-off Gas quantity.
|
|
1.96
|
“
HGHV Nonconforming Gas
” shall have the meaning set forth in Section 9.7(a).
|
|
1.97
|
“
Implementation Period
” shall have the meaning set forth in Section 25.18.
|
|
1.98
|
“
Incremental GRR Quantity
” shall have the meaning set forth in Section 5.3(e)(v).
|
|
1.101
|
“
KMLP Leg 1 Interconnect
” means the interconnection between the Kinder Morgan Louisiana Pipeline and the Sabine Pass Facility (KMLP PIN 44399).
|
|
1.102
|
“
KMLP Leg 2 Interconnect
” means the interconnection between the Kinder Morgan Louisiana Pipeline and the Sabine Pass Facility (KMLP PIN 44385)
.
|
|
1.103
|
“
Large LNG Vessel
”
shall mean an LNG Vessel with a capacity in excess of four (4) billion Standard Cubic Feet.
|
|
1.106
|
“
Minimum Inventory Cargo Costs
” shall mean the costs and expenses incurred by SABINE in purchasing a Cargo in accordance with Section 10.5(d) to restore the Aggregate Minimum Inventory, including the purchase price or other costs of the Cargo, transportation costs, and SABINE’s actual administrative and other costs incurred by it in connection with the purchase of such Cargo.
|
|
1.107
|
“
Minimum Inventory Default Quantity
” shall have the meaning set forth in Section 10.5(b).
|
|
1.108
|
“
Minimum Vaporization Nomination Deficit
” shall have the meaning set forth in Section 5.3(e)(iii).
|
|
1.109
|
“
Monthly Records
” shall have the meaning set forth in Section 5.3(g).
|
|
1.112
|
“
PLC Fuel Retainage
”
shall have the meaning set forth in Section 5.3(e)(iii).
|
|
1.113
|
“
PLC Facilities Unavailability Day
” shall have the meaning set forth in Section 5.3(e)(v).
|
|
1.114
|
“
Primary Right
”
shall have the meaning set forth in Section 10.1(a)(iv).
|
|
1.115
|
“
Transfer Fee
”
shall have the meaning set forth in Section 3.1(c)(iii).
|
|
1.116
|
“
Transferor
” and “
Transferee
” shall have the meanings set forth in Section 3.1(c)(i) and (ii) as applicable.
|
|
IV
|
(a)
|
access to a berth for LNG Vessels at the Sabine Pass Facility;
|
(b)
|
the unloading and receipt of LNG from LNG Vessels at the Receipt Point;
|
(c)
|
the Storage of Customer’s Inventory;
|
(d)
|
the regasifying of LNG held in Storage;
|
(e)
|
the transportation and delivery of such Regasified LNG to the Delivery Point nominated by Customer (it being acknowledged that SABINE may, at its option, cause Gas to be redelivered to Customer at the Delivery Point from sources other than Regasified LNG);
|
(f)
|
recognize, maintain and administer the record of all LNG and inventory transfers pursuant to Section 3.1(c);
|
(g)
|
the minimization of Minimum GRR pursuant to Section 5.3(e) and Section 5.3(h); and
|
(h)
|
other activities directly related to performance by SABINE of the foregoing, including, without limitation, metering, custody transfer and reporting.
|
(iii)
|
Storage of Customer’s Inventory
. Subject to Section 3.1(e), Customer is entitled to receive LNG storage capacity up to a maximum storage quantity of four (4) billion Standard Cubic Feet.
|
(i)
|
Inventory Transfers
. Customer has the right to transfer to one or more Other Customers all or a portion of Customer’s Inventory held in storage and to have one or more Other Customers transfer all or a portion of their inventory held in storage to Customer. For
|
|
purposes of this Section 3.1(c)(i), the Person who is transferring inventory to another Person shall be referred to as the “
Transferor
” and the Person to whom inventory is being transferred shall be referred to as the “
Transferee
”. The maximum quantity of any such transfer shall be limited such that the Transferee’s inventory does not exceed the Transferee’s storage capacity as a result of such transfer. Each inventory transfer must be initiated by the Transferor sending notice of the transfer to SABINE via the Sabine Pass Website and must be confirmed by the Transferee sending notice to SABINE via the Sabine Pass Website. SABINE will recognize each such inventory transfer for purposes of computing Customer’s Inventory and the inventory of the Other Customer participating in the inventory transfer, effective no later than the scheduling deadline of the NAESB cycle following the Transferee’s confirmation of the Transferor’s transfer notice via the Sabine Pass Website.
|
(ii)
|
LNG Reception Transfers
. Customer has the right to transfer to one or more Other Customers all or a portion of Customer’s LNG at the Receipt Point and to have one or more Other Customers transfer all or a portion of their LNG at the Receipt Point to Customer. For purposes of this Section 3.1(c)(ii), the Person who is transferring LNG to another Person shall be referred to as the
“Transferor
” and the Person to whom LNG is being transferred shall be referred to as the
“Transferee
”. The maximum quantity of any such transfer shall be limited such that the Transferee’s inventory does not exceed the Transferee’s storage capacity as a result of such transfer. Each LNG transfer must be initiated by the Transferor sending notice of the transfer to SABINE via the Sabine Pass Website and must be confirmed by the Transferee sending notice to SABINE via the Sabine Pass Website. During the Implementation Period, inventory transfers at the Receipt Point will be administered as in Section 3.1(c)(i) following the completion of the LNG unloading for the Transferor. Following the Implementation Period, SABINE will recognize each such LNG transfer for purposes of computing Customer’s Inventory and the inventory of the Other Customer participating in the LNG transfer, effective as of the time that the quantities of LNG unloaded at the Receipt Point (net of the quantities transferred) would have been credited to the Transferor’s account. As a consequence of the transfer: (x) the total quantity of LNG transferred at the Receipt Point to the Transferee shall be credited toward the Transferor’s Maximum LNG Reception Quantity (or similar maximum contractual entitlement to receive LNG berthing, unloading and receipt services); (y) Retainage associated with the quantity of LNG transferred shall be deducted from the Transferor’s account; and (z)
|
|
the increase in Minimum GRR as provided in Section 5.3(h)(i)c shall be for the Transferor’s account.
|
(iii)
|
Transfer Fee
. Except as provided in Section 10.5, as consideration to SABINE for the recording of each inventory and LNG reception transfer pursuant to this Section 3.1(c), the Transferor shall pay SABINE a fee (“
Transfer Fee
”) equal to two cents ($0.02) per MMBTU transferred with a minimum Transfer Fee of ten thousand dollars ($10,000).
|
(iv)
|
Terminal Transfers
. SABINE and Customer may also enter into inventory and/or LNG reception transfers, via the Sabine Pass Website, subject to the same terms and conditions as otherwise stated in this Section 3.1(c) except that no Transfer Fee shall be assessed.
|
|
(d)
|
Excess Services
. Separate and apart from the provisions of Section 3.1(b), SABINE may, in its sole discretion, allow berthing, unloading and receipt of quantities in excess of the Maximum LNG Reception Quantity or redelivery of Gas in excess of the Gas Redelivery Rate in response to a request from Customer for such Excess Services; provided, however, that if such Excess Services are provided, such Excess Services shall be based on the order of the receipt of a written request from Customer or Other Customers. The fees applicable to such Excess Services shall be as negotiated by the Parties in connection with such Services.
|
|
(e)
|
Excess Storage
. SABINE agrees to provide Customer with temporary storage in excess of Customer’s Storage Capacity in order to unload a Large LNG Vessel, provided that: (i) such additional storage capacity is available at the Sabine Pass Facility; (ii) making available such temporary storage shall not, in the sole discretion of SABINE, adversely affect the rights of any Other Customer; and (iii) SABINE and Customer agree on a send-out plan for Gas to be redelivered for Customer’s account at the Delivery Point prior to, during and following completion of unloading. In the event that SABINE and Customer do not reach agreement on a send-out plan, the send-out plan shall be prescribed by SABINE and shall consist of: (x) prior to the arrival of such Large LNG Vessel, send-out nominations of up to the Gas Redelivery Rate to reduce Customer’s Inventory to accommodate the incoming Cargo; and (y) on any day on which Customer’s Inventory exceeds Customer’s Storage Capacity, send-out nominations of not less than the Gas Redelivery Rate to reduce Customer’s Inventory to not more than Customer’s Storage Capacity.
|
|
VII
|
|
(e)
|
Minimization of Minimum GRR
:
|
(i)
|
As part of the PLC Facilities, SABINE has installed a pipeline compressor that enables compression and send-out through the Delivery Point of the Sabine Pass Facility’s boil-off Gas quantity up to a rate of approximately twenty-five thousand (25,000) MMBTU per day. Commencing on the Amendment Effective Date, Customer shall pay SABINE a monthly fixed fee for the delivery of its Minimum GRR utilizing the existing PLC Facility in an annual amount equal to two hundred fifty thousand dollars ($250,000) (“
Minimum GRR Fee
”) for the remainder of the Initial Term and pro rata thereof for any partial Contract Year.
|
(ii)
|
As soon as practicable, SABINE shall procure, install, maintain and operate a second, permanent pipeline compressor with materially similar specifications as the original pipeline compressor described in (i) above to supplement and become part of the PLC Facilities. When operated in conjunction with the pipeline compressor described in Section 5.3(e)(i), the combined capacity will have the capability of managing the incremental boil-off Gas generated as a result of the unloading of a Cargo under normal operating conditions from an LNG Vessel in accordance with Section 5.3(h)(i)c. without use of the Sabine Pass Facility’s recondenser and vaporizer facilities. From the date when the second pipeline compressor is installed and is ready to commence operations, the Minimum GRR Fee payable by Customer to SABINE for the delivery of its Minimum GRR utilizing the PLC Facilities shall increase to the annual amount of five hundred thousand dollars ($500,000), payable on a monthly basis, for the remainder of the Initial Term and pro rata thereof for any partial Contract Year.
|
(iii)
|
In addition to the annual fixed fee component described in Sections 5.3(e)(i) or (ii) above, Customer shall pay SABINE a variable component fee equal to Customer’s pro rata share of the fuel expense incurred by SABINE to operate the PLC Facilities each day (“
PLC Fuel
”). Such pro rata share of the fuel expense incurred by SABINE to operate the PLC Facilities shall be based on the amount by which Customer’s and Other Customers’ allocated Gas redelivery quantities are less than their respective pro rata shares of the aggregate Gas redelivery nominations required to manage the
|
|
boil-off Gas without running the PLC Facilities, that rate being two hundred fifty thousand (250,000) MMBTU (“
Minimum Vaporization Nomination Deficit
”), such pro rata share to be based on the ratio of Customer’s Minimum Vaporization Nomination Deficit to the aggregate of Customer’s and the Other Customers’ Minimum Vaporization Nomination Deficit. Customer’s and Other Customers’ respective pro rata shares of the aggregate Gas redelivery nominations required to manage the boil-off Gas without running the PLC Facilities shall be based on the ratio of each of their respective inventories to the aggregate inventory in the Sabine Pass Facility (excluding Heel and Retainage) on such day. The PLC Fuel shall be assessed as a reduction in Customer’s Inventory (“
PLC Fuel Retainage
”) recorded, after the Implementation Period, daily, for each day that Customer’s Minimum Vaporization Nomination Deficit is greater than zero (0). During the Implementation Period the PLC Fuel Retainage will be recorded at least monthly and administered as an inventory transfer between Customer and SABINE as per Section 3.1(c)(iv). During the Implementation Period and as soon as practicable, SABINE shall install, maintain and operate meters capable of measuring the quantity of electricity consumed by the PLC Facilities. SABINE shall then determine the PLC Fuel for each Gas Day as the product of: (a) the ratio of the quantity of electricity consumed by the PLC Facilities to the total quantity of electricity being generated by the Sabine Pass Facility Gas turbine generators and; (b) the total quantity of Gas consumed by the Sabine Pass Facility Gas turbine generators. Whenever the PLC Facilities meters are not available for any reason, SABINE shall perform an estimate of the PLC Fuel based on the mechanical energy considering:
|
a.
|
a reasonable estimation of the pipeline compressor thermal and mechanical efficiency;
|
b.
|
the ambient air temperature;
|
c.
|
the measurements of the discharge and suction pressures of the pipeline compressor at least on a hourly basis; and
|
d.
|
a reasonable estimation of the average heat rate of the Sabine Pass Facility gas turbine generators.
|
(iv)
|
Notwithstanding the foregoing, if in any month SABINE receives at least seven million five hundred thousand (7,500,000) MMBTU of Customer’s LNG, the PLC Fuel attributable to Customer shall be reduced to zero (0) for the first ten (10) days in the following month on which PLC Fuel would otherwise have been attributable to Customer. For each one million (1,000,000) MMBTU that SABINE receives above seven million five hundred thousand (7,500,000)
|
|
MMBTU of Customer’s LNG the PLC Fuel attributable to Customer shall be reduced to zero (0) for an additional two (2) days in the following month.
|
(v)
|
A PLC Facilities Unavailability Day (“
PLC Facilities Unavailability Day
”) shall consist of any day during which: (w) all pipeline compressors comprising the PLC Facilities are unavailable for whatever reason other than events of Force Majeure (except that for purposes of this Section 5.3(e)(v) the definition of Force Majeure shall exclude mechanical breakdown of the PLC Facilities not caused by actions or events external to the PLC Facilities); and (x) as a consequence, Customer’s redelivery nomination has to be increased pursuant to Section 5.3(h)(i)b. For each PLC Facilities Unavailability Day in a Contract Year beyond a threshold number of such days in that Contract Year determined pursuant to Section 5.3(e)(vi) below (“
Excused PLC Facilities Unavailability Days
”), SABINE shall calculate a credit that shall be applied in the immediately succeeding monthly payments as a reduction in Customer’s Minimum GRR Fee. Until the permanent second (2nd) pipeline compressor is in operation pursuant to Section 5.3(e)(ii), such credit shall be equal to the product of one cent ($0.01) multiplied by the Incremental GRR Quantity, thereafter the credit shall be equal to the product of two cents ($0.02) multiplied by the Incremental GRR Quantity. The Incremental GRR Quantity shall be: (y) for the first PLC Facilities Unavailability Day, the positive difference between Customer’s Minimum GRR for such day calculated by SABINE pursuant to Section 5.3(h)(i)b minus Customer’s original redelivery nomination for such day; and (z) for each subsequent consecutive PLC Facilities Unavailability Day, if any, the positive difference between Customer’s Minimum GRR for such day calculated by SABINE pursuant to Section 5.3(h)(i)b minus the higher of Customer’s redelivery nomination for such day and what would have been Customer’s Minimum GRR for such day calculated pursuant to Section 5.3(h)(i)a, c or d, had the PLC Facilities been available on such day. In no event shall the credits to Customer in any Contract Year exceed the Minimum GRR Fee.
|
(vi)
|
Until the permanent second pipeline compressor is in operation pursuant to Section 5.3(e)(ii), the number of Excused PLC Facilities Unavailability Days shall be eight (8) in each Contract Year or pro rata thereof. Thereafter, the number of Excused PLC Facilities Unavailability Days shall be four (4) in each Contract Year or pro rata thereof.
|
(vii)
|
Notwithstanding the foregoing, whenever Customer is not entitled to receive any credit pursuant to Section 5.3(e)(v) and any of the pipeline compressors comprising the PLC Facilities becomes
|
|
unavailable for any reason (including Force Majeure) for more than one hundred eighty (180) consecutive days (provided however that in the event such unavailability of the PLC Facilities is due to a PLC motor failure, such duration shall be extended by a reasonable amount of time to allow for the replacement or repair of the PLC motor based on reasonable industry timelines then in effect for such part) the Minimum GRR Fee shall be: (x) reduced by half (if only one (1) pipeline compressor is unavailable); or (y) suspended (if both pipeline compressors are unavailable), as applicable, on a day-by-day basis until availability of the pipeline compressor(s). For purposes of this Section 5.3(e)(vii), the Minimum GRR Fee shall be equal to the annual Minimum GRR Fee divided by the number of days in the year. In no event shall the credits to Customer in any Contract Year exceed the Minimum GRR Fee.
|
|
(f)
|
Daily Records
. Following the Implementation Period, SABINE shall, on each day by 7:00 a.m. Central Time post on the Sabine Pass Website for access by Customer certain records (“
Daily Records
”), including the following:
|
(i)
|
a projection of Customer’s Inventory as of 9:00 a.m. Central Time on the day of the posting of the Daily Records and as of the commencement of the next succeeding Gas Day based on Customer’s Inventory, scheduled redelivery nominations and PLC Fuel usage (“
Customer’s Projected Inventory
”);
|
(ii)
|
the expected total capacity of the Sabine Pass Facility to vaporize and deliver Gas, as of 9:00 a.m. Central Time on the day following the posting of the Daily Records, determined by SABINE as a Reasonable and Prudent Operator;
|
(iii)
|
the sum of all Other Customers maximum Gas redelivery rates (or similar maximum daily contractual entitlement to receive Gas at the Delivery Point);
|
(iv)
|
Customer’s Minimum GRR determined in accordance with Section 5.3(h)(i);
|
(v)
|
the estimated boil-off Gas quantity for the Gas Day preceding the day of the posting of the Daily Records; and
|
(vi)
|
an estimate of the highest Gross Heating Value SABINE anticipates delivering to Customer at any Delivery Point during the next two (2) week period, up to and including the maximum Gross Heating Value specified in Section 10.3(a) as well as SABINE’s estimate of the highest Gross Heating Value of any LNG then in storage. This Gas redelivery heating value forecast will be based on SABINE’s
|
|
reasonable estimate of the current heating value of the LNG in storage, Customer’s and Other Customers aggregate redelivery nominations received by SABINE for the next two (2) week period, Customer’s and Other Customers aggregate Cargo receipts for which SABINE has received nominations, and the assumption of redelivering Gas from the LNG in storage with the highest Gross Heating Value on a priority basis.
|
|
(g)
|
Monthly Records
.
|
(i)
|
the sum of Customer and all Other Customers closing inventory for each day of the previous month;
|
(ii)
|
the sum of SABINE’s Retainage and Heel for each day of the previous month;
|
(iii)
|
the sum of Customer and all Other Customers allocated Gas redeliveries for each Gas day of the previous month; and
|
(iv)
|
SABINE’s estimate of the boil-off Gas quantity for each Gas Day of the previous month.
|
(h)
|
Gas Redelivery Nominations
.
|
(i)
|
Minimum Gas Redelivery Rate
. Each Gas Day Customer shall be required, and SABINE shall require each Other Customer, to nominate at least a minimum quantity of Gas for redelivery at the Delivery Point (“
Minimum GRR
”). On any given day Customer’s Minimum GRR shall be:
|
a.
|
Customer’s pro rata share of SABINE’s reasonable estimate of the quantity of boil-off Gas generated at the Sabine Pass Facility on such Gas Day (excluding boil off Gas associated with the loading or unloading of any LNG vessel other than Customer’s LNG Vessel), such pro rata share to be based on the ratio of Customer’s Inventory to the aggregate inventory in the Sabine Pass Facility on such day (excluding Heel and Retainage). Each Other Customers pro rata share of the Sabine Pass Facility boil-off Gas quantity shall also be based on the ratio of such Other Customers inventory to the aggregate inventory in the Sabine Pass Facility (excluding Heel and Retainage). If, on any given day, Customer’s Inventory is less than zero (0), Customer’s Inventory shall be deemed to be zero (0) for the purpose of determining Customer’s Minimum GRR.
|
b.
|
In the event that PLC Facilities become unavailable for any reason, SABINE shall as soon as practicable notify Customer’s Scheduling Representative by email and shall make reasonable endeavors to contact Customer’s Scheduling Representative by telephone to inform Customer that the PLC Facilities are unavailable and that its Minimum GRR shall become its pro rata share of the quantity required to manage the boil-off Gas quantity using the Sabine Pass Facility’s vaporization facilities (excluding boil-off Gas associated with the loading or unloading of any LNG vessel other than Customer’s LNG Vessel) until such time that the PLC Facilities are returned to service. In this event, Customer’s pro rata share shall be based on the ratio of Customer’s Inventory to the aggregate LNG inventory in the Sabine Pass Facility (excluding Heel and Retainage). SABINE shall cooperate with Customer to adjust Customer’s nomination and to facilitate redelivery and Customer’s receipt of the Minimum GRR. SABINE shall also notify Customer of the estimated period during which the PLC Facilities will be unavailable and shall update this estimate to Customer on a daily basis. SABINE shall promptly notify Customer when the PLC Facilities resume service.
|
c.
|
In the event that an LNG Vessel is planned to be or has been unloaded on behalf of Customer, Customer’s Minimum GRR shall be the rate set forth in Sections 5.3(h)(i)a or 5.3(h)(i)b above plus SABINE’s reasonable estimate of the additional Gas redelivery rate sufficient to manage the incremental boil-off Gas quantity generated as a result of unloading the LNG Vessel on behalf of Customer during and after unloading of such LNG.
|
d.
|
If, in SABINE’s determination, LNG delivered by Customer to SABINE will, for reasons not attributable to SABINE, result in Gas to be delivered to Customer or Other Customers at the Delivery Point to not conform to the nitrogen content limitation (expressed as a percentage) specified in Section 10.3(b), Customer’s Minimum GRR shall be the rate set forth in Sections 5.3(h)(i)a or 5.3(h)(i)b above plus SABINE’s reasonable estimate of Customer’s pro rata share of the additional Gas redelivery rate required to ensure that the Gas to be delivered to Customer or Other Customers at the Delivery Point will conform to the nitrogen content limitation specified in Section 10.3(b). Customer’s pro rata share of the additional Gas redelivery rate shall be calculated based on the ratio of: (w) the product of Customer’s Excess N2 and Customer’s Inventory to; (x) the sum of the product of
|
|
Customer’s Excess N2 and Customer’s Inventory and the product of each Other Customers Excess N2 and each Other Customers inventory. Excess N2 for Customer and each Other Customer shall be determined as the positive difference between: (y) the volumetrically weighted average of SABINE’s estimation of the nitrogen percentage of each of Customer’s and Other Customers individual quantities of LNG received or transferred and remaining in Customer’s and Other Customers inventories; and (z) sixteen hundredths percent (0.16%) (“
Excess N2
”).
|
|
(i)
|
the actual nitrogen percentage of each individual remaining quantity of LNG received on the day received at the Receipt Point;
|
|
(ii)
|
the nitrogen percentage of each remaining quantity of LNG transferred pursuant to Section 3.1(c)(ii) on the day of the transfer, calculated as the volumetrically weighted average of the nitrogen percentage of the Transferor’s remaining quantities of LNG received or transferred prior to the transfer date and being transferred;
|
|
(iii)
|
the dates of each remaining quantity of LNG transferred pursuant to Section 3.1(c)(ii), determined as the volumetrically weighted average of the nitrogen percentage of the Transferor’s remaining quantities of LNG received or transferred prior to the transfer date and being transferred;
|
|
(iv)
|
the duration in number of days between the dates each remaining quantity of LNG has been received or the dates as determined pursuant to Section 5.3(h)(i)d(iii) above each remaining quantity of LNG has been transferred;
|
|
(v)
|
the estimated actual average nitrogen percentage of the LNG in Sabine Pass Facility;
|
|
(vi)
|
the determination of a nitrogen percentage daily decrease factor that will enable the volumetrically weighted average of the nitrogen percentage for each of the remaining quantities of LNG received or
|
|
transferred for the Customer and Other Customers to be equal to the estimated actual average nitrogen percentage of all of the LNG in the Sabine Pass Facility.
|
e.
|
On any given day Customer’s Minimum GRR shall be reduced to a minimum of zero (0) to the extent that the aggregate of the Other Customers redelivery nominations are in excess of the aggregate of the Other Customers minimum gas redelivery rates, such excess to be allocated to Customer for reduction of Customer’s Minimum GRR based on the ratio of Customer’s Inventory to the aggregate LNG inventory of Customer and all Other Customers whose redelivery nominations are not in excess of their Minimum GRRs.
|
f.
|
SABINE will use reasonable endeavors to minimize Customer’s Minimum GRR.
|
g.
|
Customer’s Minimum GRR shall be based solely on the quantity of boil-off Gas generated by the Sabine Pass Facility in connection with the provision by SABINE of Services available to Customer.
|
h.
|
On any Gas Day on which Customer fails to nominate its Minimum GRR and such failure is for reasons other than an event of Force Majeure or the inability of a Downstream Pipeline to take delivery of Customer’s Gas, such inability being not unreasonably within the control of Customer, Customer shall be deemed to have transferred to SABINE and SABINE shall take title to a quantity of Gas equal to the difference between Customer’s Minimum GRR and the quantity of Gas nominated by Customer for redelivery on such day, free and clear of all Claims. SABINE shall sell or otherwise dispose of such Gas using commercially good faith efforts to obtain reasonable prices and to minimize costs. Customer shall indemnify, defend and hold harmless SABINE, its Affiliates, and their respective directors, officers, members and employees, for the actual and reasonable costs incurred by SABINE as a result of such sale or other disposition of same by SABINE. SABINE shall credit to Customer’s account the net proceeds from the sale or other disposition of Customer’s Inventory to which it takes title
|
|
hereunder, minus transportation costs, third party charges, and an administrative fee of five cents ($0.05) per MMBTU; provided, however, that if the amount of the credit exceeds the amount due SABINE under the next monthly statement, SABINE agrees to pay any such excess amount to Customer within five (5) Business Days after delivery of such monthly statement.
|
(ii)
|
Confirmation of Gas Redelivery Nominations during Cargo Unloading
. For any days when an LNG Vessel unloading is anticipated on behalf of Customer, SABINE shall use reasonable efforts to accept a Gas redelivery nomination in excess of Customer’s Projected Inventory up to Customer’s Gas Redelivery Rate if: (x) SABINE anticipates that such excess quantity will be in SABINE’s possession and control (but not yet considered received and credited to Customer’s Inventory in accordance with Annex I) by the flowing time of the Gas redelivery nomination for such excess quantity; and (y) the Downstream Pipeline will permit SABINE to redeliver less than Customer’s confirmed Gas redelivery nomination if such excess quantity is not in SABINE’s possession and control by the flowing time of the Gas redelivery nomination. If such excess quantity is not in SABINE’s possession and control by the flowing time of the Gas redelivery nomination, SABINE shall, in its sole discretion, determine the actual quantity of Gas to be redelivered to Customer but such quantity shall not be less than the quantity of Customer’s LNG actually received at the Sabine Pass Facility. If the Downstream Pipeline will not permit SABINE to redeliver less than Customer’s confirmed Gas redelivery nomination, SABINE shall use reasonable efforts to accept a Gas redelivery nomination in excess of Customer’s Projected Inventory up to Customer’s Gas Redelivery Rate if such excess quantity is in SABINE’s possession and control on or prior to confirmation of Customer’s nomination for such excess quantity on the relevant Downstream Pipeline.
|
(b)
|
LNG Vessel Nomination
. As soon as practicable but no later than the day of departure of the LNG Vessel from the Loading Port (unless the LNG Vessel contains a Cargo acquired or redirected after loading, in which case the deadline shall be as soon as practicable after such acquisition or redirection), Customer shall notify SABINE of the information specified below:
|
(i)
|
name of LNG Vessel and, in reasonable detail, the dimensions, specifications, operator, and owner of such LNG Vessel;
|
(ii)
|
name of Loading Port;
|
(iii)
|
expected departure date of LNG Vessel from Loading Port;
|
(iv)
|
estimated arrival date at the Sabine Pass Facility; and
|
(v)
|
any changes in the Expected Receipt Quantity since Customer’s prior notice.
|
|
(a)
|
Issuance
. Subject to any applicable restrictions, including any nighttime transit restrictions imposed by Governmental Authorities or Pilots or any other reasonable timing restrictions imposed by SABINE (in light of SABINE’s obligation to have the capability to provide Services twenty-four (24) hours a day, seven (7) days a week), the Master of an LNG Vessel or its agent may give to SABINE its notice of readiness (“
NOR
”) to unload (berth or no berth) upon arrival of such LNG Vessel at the specific location off the Sabine Pass Facility at which Pilots customarily board the LNG Vessel (such location referred to as the “
Pilot Boarding Station
”).
|
|
9.7
|
Weathered Inventory Gross Heating Value
|
(a)
|
Expected Nonconforming Gas due to High Gross Heating Value
. Notwithstanding the provisions in Section 9.4 and Section 9.5, if at any time and for reasons not attributable to SABINE, SABINE expects, after taking into account the expected Gas redelivery nominations and the expected dates of unloading of LNG Vessels for Customer and Other Customers, that due to boil-off, within the next forty (40), days a portion or all of the LNG held in storage in the Sabine Pass Facility will, when vaporized, produce Nonconforming Gas but only due to its high Gross Heating Value (“
HGHV Nonconforming Gas
”), then SABINE shall as soon as reasonably practicable provide notice to Customer and Other Customers, such notice to include the quantity and current Gross Heating Value of the LNG expected to produce HGHV Nonconforming Gas.
|
(b)
|
SABINE’s Right to Cure
. If at the end of the thirty (30) day period following the date of SABINE’s notice pursuant to Section 9.7(a) above, Customer and/or Other Customers have failed to arrange to cure the expected HGHV Nonconforming Gas, SABINE shall have the right to make arrangements to cure the expected HGHV Nonconforming Gas by any and all means including, but not limited to, arranging for the procurement of a Cargo at commercially reasonable prices. Customer shall indemnify and reimburse SABINE from and against Customer’s pro rata share of the costs (other than capital costs) associated with the expected HGHV Nonconforming Gas cure arranged by SABINE.
|
(c)
|
Allocation
. Customer’s pro rata share of the cost of the Nonconforming Gas cure shall be calculated based on the ratio of: (w) the product of Customer’s Excess GHV and Customer’s Inventory to; (x) the sum of the product of Customer’s Excess GHV and Customer’s Inventory and the product of each Other Customers GHV and each Other Customers inventory. Customer’s Inventory and Other Customers inventories shall be determined as of the thirty-first (31st) day following the date of SABINE’s notice sent pursuant to Section 9.7(a). Excess GHV for Customer and for each Other Customer shall be determined as the positive difference between: (y) the volumetrically weighted average of SABINE’s estimation of the Gross Heating Value calculated as of the seventy first (71st) day following the date of SABINE’s notice sent pursuant to Section 9.7(a) of each of Customer’s and Other Customers quantities of LNG received or transferred and remaining in Customer’s and each Other Customers inventories; and (z) one thousand one hundred sixty five (1165) BTU per Standard Cubic Foot (“
Excess GHV
”).
|
(d)
|
Excess GHV Determination
. SABINE shall determine a value representing the Gross Heating Value on the seventy-first (71st) day following the date of SABINE’s notice sent pursuant to Section 9.7(a) for each of Customer’s and Other Customers individual quantities of LNG received or transferred and remaining in Customer’s and Other Customers inventories considering:
|
(i)
|
the actual Gross Heating Value of each individual remaining quantity of LNG received, on the day received at the Receipt Point;
|
(ii)
|
the Gross Heating Value of each remaining quantity of LNG transferred pursuant to Section 3.1(c)(iii), calculated as the volumetrically weighted average of the Gross Heating Value of the Transferor’s remaining quantities of LNG received or transferred prior to the transfer date and contributing to the LNG transfer;
|
(iii)
|
the date of each remaining quantity of LNG transferred pursuant to Section 3.1(c)(iii), determined as the volumetrically weighted average of the dates of the Transferor’s remaining quantities of LNG received or transferred prior to the transfer date and contributing to the LNG transfer;
|
(iv)
|
the duration in number of days between the dates each remaining quantity of LNG has been received or the dates as determined pursuant to Section 9.7(d)(iii) above for any remaining quantity of LNG transferred and the seventy-first (71
st
) day following the date of SABINE’s notice sent pursuant to Section 9.7(a);
|
(v)
|
the expected average Gross Heating Value of all LNG in Sabine Pass Facility on the seventy-first (71
st
) day following the date of SABINE’s notice sent pursuant to Section 9.7(a); and
|
(vi)
|
the determination of a Gross Heating Value daily increase factor that will result in the volumetrically weighted average of the Gross Heating Value estimated on the seventy-first (71
st
) day following the date of SABINE’s notice sent pursuant to Section 9.7(a) of the remaining quantities of LNG received or transferred for the Customer and Other Customers to be equal to the expected average Gross Heating Value of all LNG in Sabine Pass Facility as determined in the preceding Section.
|
|
(a)
|
Delivery Point
.
|
(i)
|
Subject to Section 3.3, the quantity of Gas nominated by Customer for any day pursuant to Section 5.3 shall be delivered at the Delivery Point nominated by Customer. Customer may nominate quantities of Gas from Customer’s Inventory for delivery at one or more Delivery Points on a given day; provided, however, that the aggregate of such nominations by Customer shall not exceed the Gas Redelivery Rate (plus any Make-Up Quantity or Excess Service quantity). Except as provided below, the KMLP Leg 1 Interconnect and the KMLP Leg 2 Interconnect shall be operated at one common variable pressure and as a single Delivery Point.
|
(ii)
|
If on any given day the total Gas redelivery nominations of Customer and Other Customers require SABINE to deliver Gas to both the KMLP Leg 1 Interconnect and the KMLP Leg 2 Interconnect at different pressures, SABINE shall deliver the nominated quantities so long as: (a) such operations, in SABINE’s sole discretion, will not impede SABINE’s ability to fulfill its contractual obligations to Other Customers; and (b) Customer and SABINE agree to the quantity of LNG to be reimbursed to SABINE by Customer pursuant to the following sentence prior to delivery of the nominated quantities. Customer shall reimburse SABINE for any additional fuel expense incurred by SABINE in delivering such nominated quantities in the form of a no-fee transfer, as per Section 3.1(c)(iv) of LNG from Customer’s Inventory to SABINE in the quantity agreed to as provided in the foregoing sentence.
|
(iii)
|
SABINE shall deliver the quantities of Gas nominated by Customer at each Delivery Point, subject to confirmation by the Downstream Pipelines of Customer’s nomination and scheduling of Gas in accordance with Section 10.2(a).
|
(iv)
|
Customer has an equal, primary right of nomination and scheduling with Total Gas & Power North America, Inc. (and any successor or assignee) (“
Primary Right
”) at the KMLP Leg 1 Interconnect and at the KMLP Leg 2 Interconnect.
|
|
(c)
|
Gas Delivery Pressure
. Gas when delivered by SABINE to Customer shall be at a temperature of not less than 40.0 degrees Fahrenheit and shall meet the pressure requirements of the Downstream Pipeline; provided, however, that such pressure shall be a least 1000 psig but shall not be required to exceed a maximum pressure of 1440 psig.
|
|
(a)
|
Customer Minimum Inventory
. Subject to further provisions of this Section 10.5, Customer shall maintain Customer’s Inventory of not less than a quantity calculated as the Aggregate Minimum Inventory multiplied by the ratio of the Customer’s Storage Capacity over the Aggregate Storage Capacity (“
Customer
Minimum Inventory
”). SABINE shall require that each Other Customer maintain its pro rata share of Aggregate Minimum Inventory on the same terms and conditions that are applicable to Customer under this Section 10.5.
|
|
(b)
|
Minimum Inventory Default Quantity
. Whenever Customer’s Inventory falls below the Customer Minimum Inventory, SABINE shall provide timely notice to Customer. Whenever Customer’s Inventory remains below Customer Minimum Inventory for more than forty (40) consecutive days, SABINE shall start accounting and keeping record of the cumulative amount of the daily difference between the Customer Minimum Inventory and Customer’s Inventory (“
Minimum Inventory Default Quantity
”). If, on any given day, Customer’s Inventory is less than zero (0), Customer’s Inventory shall be deemed to be zero (0) for the purpose of determining Customer’s Minimum Inventory Default Quantity. At any time Customer’s Inventory is less than three (3) times Customer’s Minimum Inventory, Customer shall have the right to receive up to one million five hundred thousand (1,500,000) MMBTUs of additional inventory via an inventory or LNG reception transfer from an Other Customer at no Transfer Fee. Customer shall be entitled to two (2) such no-fee transfers in any one (1) calendar year. SABINE shall report to Customer on a monthly basis the Minimum Inventory Default Quantity of Customer and each Other Customer.
|
|
(c)
|
Aggregate Minimum Inventory Default
. Notwithstanding Section 10.5(b) above, whenever the sum of Customer’s Inventory and Other Customers Inventories falls below the Aggregate Minimum Inventory and in the reasonable opinion of SABINE there is a material risk, after taking into account the expected dates of unloading of LNG Vessels, and the risk of delay or interruption to any such unloading, that the total quantity of LNG in the Sabine Pass Facility to be held in Customer’s Inventory and Other Customers Inventories will be lower than the Aggregate Minimum Inventory during the succeeding forty (40) days, SABINE shall provide timely notice to Customer and all Other Customers.
|
|
(d)
|
Cargo Procurement
. If at the end of the thirty (30) day period following the receipt of SABINE’s notice pursuant to Section 10.5(c) above, Customer and/or Other Customers have failed to arrange for delivery of a Cargo to the Sabine Pass Facility in the coming ten (10) days to ensure that there will be LNG at least equal to the Aggregate Minimum Inventory, SABINE shall have the right to procure a Cargo using good faith efforts to obtain commercially reasonable prices, in order to restore the Aggregate Minimum Inventory. Customer shall indemnify and reimburse SABINE from and against Customer’s pro rata share of the Minimum Inventory Cargo Costs associated with the acquisition of such Cargo. Customer’s pro rata share of the Minimum Inventory Cargo Costs shall be calculated as the ratio of Customer’s Minimum Inventory Default Quantity to the sum of Customer’s and Other Customers Minimum Inventory Default Quantities as of the date of delivery of such Cargo. If, at such time and for any reason, the Minimum Inventory Default Quantities of Customer and all of the Other Customers is zero (0), Customer’s pro rata share of the Minimum Inventory Cargo Costs shall be calculated at the ratio of Customer’s Storage Capacity to the Aggregate Storage Capacity. Upon payment by Customer of all amounts for which it is liable under this Section 10.5(d), Customer shall be entitled to have its share of the Cargo acquired by SABINE (using the same allocation methodology as for the Minimum Inventory Cargo Costs) credited without charge to Customer’s Inventory, net of Retainage. Upon Customer’s payment to SABINE of its pro rata share of the Minimum Inventory Cargo Costs, the Customer Minimum Inventory Default Quantity, if any, shall be reset at zero (0). The liability of Customer and Other Customers towards SABINE under this Section 10.5(d) shall be several and not joint and shall be limited in the manner set forth in this Section 10.5. In the event that SABINE acquires a Cargo pursuant to this Section 10.5(d) and on the date of delivery of such Cargo Customer’s Minimum Default Quantity is zero (0), Customer shall nonetheless have the option to acquire and have credited to Customer’s Inventory up to twenty-five percent
|
|
(25%) of such Cargo upon payment to SABINE of a percentage of the Minimum Inventory Cargo Costs equivalent to the percentage of the Cargo Customer elects to acquire. In the event that Customer exercises such right, the Other Customers share of such Cargo and associated Minimum Inventory Cargo Costs shall be reduced pro rata (using the same allocation methodology as for the Minimum Inventory Cargo Costs) to reflect the portion of the Cargo acquired by Customer and the portion of the Minimum Inventory Cargo Costs borne by Customer.
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(e)
|
Sale of BOG from Heel or Retainage
. At any time during which and for as long as Customer’s and Other Customers Inventories are jointly zero (0), SABINE shall nominate and sell the boil-off Gas quantity from the Heel or Retainage. If, pursuant to the preceding sentence, SABINE sells any Heel or Retainage, Customer shall have the obligation on the day following the credit of any LNG to Customer’s Inventory to sell at the Heel BOG Selling Price (“
Heel BOG Selling Price
”) and transfer to SABINE a quantity of LNG equal to the Customer’s pro rata share of Heel or Retainage sold by SABINE. Customer’s pro rata share of Heel or Retainage sold shall be calculated as the ratio of Customer’s Minimum Inventory Default Quantity to the sum of Customer’s and Other Customers Minimum Inventory Default Quantities as of the day immediately prior to the delivery of the Cargo pursuant to Section 10.5(d) above.
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(g)
|
Successors and Assignees
. Any successor or assignee of Customer or any Other Customer shall remain liable for any Minimum Inventory Default Quantity as accounted for by SABINE.
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|
|
11.1
|
Monthly Statements
|
(a)
|
the Reservation Fee for the following month;
|
(b)
|
the Operating Fee for the following month;
|
(c)
|
the monthly portion of the Minimum GRR Fee net of any applicable credits for the following month;
|
(d)
|
any charges under Section 4.2 and/or Section 8.9 for the prior month;
|
(e)
|
any charges under Section 3.1(c)(iii) for the prior month;
|
(f)
|
any charges under Section 10.5(d) for the prior month.
|
|
|
|
25.18
|
Implementation Period
|
|
|
SABINE PASS LNG, L.P.
|
CHEVRON U.S.A. INC.
|
|||
By: Sabine Pass LNG-GP, Inc.
|
||||
its general partner
|
||||
By:
|
/s/ R. Keith Teague
|
By:
|
/s/ Patrick J. Blough
|
|
Name:
|
R. Keith Teague
|
Name:
|
Patrick J. Blough
|
|
Title:
|
President
|
Title:
|
Vice President
|
1.
|
I have reviewed this quarterly report on Form 10-Q of Cheniere Energy, Inc.;
|
2.
|
Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
|
3.
|
Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
|
4.
|
The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
|
|
a)
|
Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
|
|
b)
|
Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
|
|
c)
|
Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
|
|
d)
|
Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and
|
5.
|
The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):
|
|
a)
|
All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
|
|
b)
|
Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.
|
/s/ C
HARIF
S
OUKI
|
Charif Souki
|
Chief Executive Officer, President & Chairman of the Board
|
1.
|
I have reviewed this quarterly report on Form 10-Q of Cheniere Energy, Inc.;
|
2.
|
Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
|
3.
|
Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
|
4.
|
The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
|
|
a)
|
Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
|
|
b)
|
Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
|
|
c)
|
Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
|
|
d)
|
Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and
|
5.
|
The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):
|
|
a)
|
All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
|
|
b)
|
Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.
|
/
S
/ M
EG
A. G
ENTLE
|
Meg A. Gentle
|
Senior Vice President & Chief Financial Officer
|
|
(1)
|
The Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934; and
|
|
(2)
|
The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.
|
/s/ C HARIF S OUKI |
Charif Souki
|
Chief Executive Officer, President & Chairman of the Board
|
|
(1)
|
The Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934; and
|
|
(2)
|
The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.
|
/s/ M
EG
A. G
ENTLE
|
Meg A. Gentle
|
Senior Vice President & Chief Financial Officer
|