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Commitments and Contingencies (Notes)
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12 Months Ended |
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Dec. 31, 2014
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| Commitments and Contingencies Disclosure [Abstract] | |
| Commitments and Contingencies |
COMMITMENTS AND CONTINGENCIES
LNG Terminal Commitments and Contingencies
Obligations under LNG TUAs
Sabine Pass LNG has entered into third-party TUAs with Total and Chevron to provide berthing for LNG vessels and for the unloading, storage and regasification of LNG at the Sabine Pass LNG terminal.
Obligations under Bechtel EPC Contracts
Sabine Pass Liquefaction has entered into lump sum turnkey contracts for the engineering, procurement and construction (“EPC”) of Trains 1 and 2 (the “EPC Contract (Trains 1 and 2)”) and the EPC Contract of Trains 3 and 4 (the “EPC Contract (Trains 3 and 4)”) with Bechtel in November 2011 and December 2012, respectively.
The EPC Contract (Trains 1 and 2) provides that Sabine Pass Liquefaction will pay Bechtel a contract price of $3.9 billion, which is subject to adjustment by change order. Sabine Pass Liquefaction has the right to terminate the EPC Contract (Trains 1 and 2) for its convenience, in which case Bechtel will be paid (i) the portion of the contract price for the work performed, (ii) costs reasonably incurred by Bechtel on account of such termination and demobilization, and (iii) a lump sum of up to $30.0 million depending on the termination date.
The EPC Contract (Trains 3 and 4) provides for (i) the procurement, engineering, design, installation, training, commissioning and placing into service of Trains 3 and 4 of the Sabine Pass Liquefaction Project and related facilities and (ii) certain modifications and improvements to Train 1, Train 2 and the Sabine Pass LNG terminal. The EPC Contract (Trains 3 and 4) provides that Sabine Pass Liquefaction will pay Bechtel a contract price of $3.8 billion, which is subject to adjustment by change order. Sabine Pass Liquefaction has the right to terminate the EPC Contract (Trains 3 and 4) for its convenience, in which case Bechtel will be paid (i) the portion of the contract price for the work performed, (ii) costs reasonably incurred by Bechtel on account of such termination and demobilization, and (iii) a lump sum of up to $30.0 million depending on the termination date.
In December 2013, Corpus Christi Liquefaction entered into lump sum turnkey contracts for the engineering, procurement and construction of Trains and related facilities for the Corpus Christi Liquefaction Project. The Corpus Christi Liquefaction stage 1 EPC contract (the “Stage 1 EPC Contract”) with Bechtel includes two Trains, two tanks, one complete berth and a second partial berth. The Corpus Christi Liquefaction stage 2 EPC contract (the “Stage 2 EPC Contract”) with Bechtel includes one Train, one additional tank and completion of the second berth. The contract price of the Stage 1 EPC Contract is approximately $7.1 billion, and the contract price for the Stage 2 EPC Contract is approximately $2.4 billion. Corpus Christi Liquefaction has the right to terminate each of these EPC contracts for its convenience, in which case Bechtel will be paid costs reasonably incurred by Bechtel on account of such termination and demobilization. In addition, upon termination Bechtel will be paid the portion of the contract price for the work performed and a lump sum of $2.5 million if such EPC contract is terminated prior to issuance of the notice to proceed and up to $30.0 million depending on the termination date if such EPC contract is terminated after issuance of the notice to proceed.
Obligations under SPAs
Sabine Pass Liquefaction has entered into third-party SPAs with four customers which obligates Sabine Pass Liquefaction to purchase natural gas in sufficient quantities, liquefy the natural gas purchased, and deliver 834.0 million MMBtu per year of LNG to the customers’ vessels, subject to completion of construction of each of the first four Trains of the Sabine Pass Liquefaction Project as specified in the customers’ SPAs. In addition, Sabine Pass Liquefaction has entered into third-party SPAs with two customers to purchase natural gas in sufficient quantities, liquefy the natural gas purchased, and deliver 196.0 million MMBtu per year of LNG to the customers’ vessels, subject to completion of regulatory approvals, securing adequate financing, reaching a positive final investment decision to construct the relevant infrastructure, and construction of the fifth Train of the Sabine Pass Liquefaction Project.
Corpus Christi Liquefaction has entered into third-party SPAs which obligates Corpus Christi Liquefaction to purchase natural gas in sufficient quantities, liquefy the natural gas purchased, and deliver 438.7 million MMBtu per year of LNG to the customers’ vessels, subject to completion of regulatory approvals, securing adequate financing, reaching a final investment decision to construct the relevant infrastructure, and construction of the first Train at the Corpus Christi Liquefaction Project.
Obligations under Term Gas Supply Contracts
Sabine Pass Liquefaction has entered into index-based physical natural gas supply contracts to secure natural gas feedstock for the Sabine Pass Liquefaction Project. The terms of these contracts range from approximately one to seven years and commence upon the occurrence of conditions precedent, including the date of first commercial operation of specified Trains of the Sabine Pass Liquefaction Project. As of December 31, 2014, the forward notional natural gas buy position of Sabine Pass Liquefaction’s Term Gas Supply Derivatives was approximately 1,249.4 million MMBtu.
Restricted Net Assets
At December 31, 2014, our restricted net assets of consolidated subsidiaries were approximately $2,641 million.
Other Commitments
In the ordinary course of business, we have entered into certain multi-year licensing and service agreements, none of which are considered material to our financial position.
Legal Proceedings
During the second quarter of 2014, four lawsuits were filed in the Court of Chancery of the State of Delaware (the “Court”) against us and/or certain of our present and former officers and directors that challenge the manner in which abstentions were treated in connection with the stockholder vote on Amendment No. 1 to the Cheniere Energy, Inc. 2011 Incentive Plan (“Amendment No. 1”), pursuant to which, among other things, the number of shares of common stock available for issuance under the Cheniere Energy, Inc. 2011 Incentive Plan (the “2011 Plan”) was increased from 10 million to 35 million shares. The lawsuits contend that abstentions should have been counted as “no” votes in tabulating the outcome of the vote and that the stockholders did not approve Amendment No. 1 when abstentions are counted as such. The lawsuits further contend that portions of the Amended and Restated Bylaws of Cheniere Energy, Inc. adopted on April 3, 2014 are invalid and that certain disclosures relating to these matters made by us are misleading. The lawsuits assert claims for breach of contract and breach of fiduciary duty (both on a class and a derivative basis) and claims for unjust enrichment (on a derivative basis). The lawsuits seek, among other things, a declaration that the February 1, 2013 stockholder vote on Amendment No. 1 is void, disgorgement of all compensation distributed as a result of Amendment No. 1, voiding the awards made from the shares reserved pursuant to Amendment No. 1 and monetary damages. On June 16, 2014, we filed a verified application with the Court pursuant to 8 Del. C. § 205 (the “Section 205 Action”) in which we asked the Court to declare valid the issuance, pursuant to the 2011 Plan, of the 25 million additional shares of our common stock covered by Amendment No. 1, whether occurring in the past or the future.
The parties to the above-referenced lawsuits and the Section 205 Action have entered into a Stipulation and Agreement of Compromise, Settlement and Release dated December 12, 2014 (the “Stipulation”), subject to its terms and conditions, including receipt, among other things, of Court approval, to resolve the litigation.
We have also agreed that plaintiffs’ counsel is entitled to a fee in connection with the resolution of the stockholder lawsuits, which will be paid by us, our successors in interest and/or our insurers. On February 10, 2015, plaintiffs filed an application with the Court, accompanied by a memorandum of law and expert reports, requesting an award of fees and expenses in the amount of approximately $43 million. If no agreement is reached between us and plaintiffs, we are entitled to contest the amount of fees sought by plaintiffs. The amount of the fee has not yet been determined. We have notified our insurance carriers of the claim. No assurance can be made as to whether any amounts ultimately will be recovered from the insurance carriers.
We have accrued our best estimate of probable loss in accrued liabilities on our Consolidated Balance Sheets. We estimate that the ultimate resolution of the matter could result in a total loss of up to approximately $43 million. As the approval process for the Stipulation and plaintiffs' fee award progresses, additional information could become known and we may be required to recognize additional general and administrative expense, and that amount could be material to our consolidated financial position, results of operations or cash flows.
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