Approximately $2.2 billion of debt securities affected
New York, February 02, 2012 -- Moody's Investors Service placed Sabine Pass LNG, LP's (Sabine Pass
or Project) B3 rating under review for possible upgrade
RATINGS RATIONALE
Sabine Pass is 88.9% indirectly owned by Cheniere Energy
Inc (Cheniere, not rated) and Sabine Pass's credit quality remains
closely linked to Cheniere since Sabine Pass currently represents most
of Cheniere's consolidated cash flows and operating assets and has extensive
contractual agreements.
The rating action reflects Sabine Pass Liquefaction LLC's (SPL)
substantial process in developing a large liquefaction project,
which is an indirect subsidiary of Cheniere and an affiliate of Sabine
Pass. To date, Cheniere has been successful in finalizing
major project contracts for SPL including the EPC contract and four long-term
offtake agreements with investment grade counterparties. Anticipated
contracted revenue from the liquefaction project ranges from $411
million to over $2 billion depending on the number of LNG trains
completed and placed into operations. These revenues are likely
to substantially improve Cheniere's financial profile. Cheniere
anticipates the LNG trains reaching operations between the 2015-2018
time frame.
Additionally, Sabine Pass is expected to directly benefit from SPL
since Cheniere Energy Investments (CEI) is expected to assign to the liquefaction
project the existing terminal use agreement (TUA) between Sabine Pass
and CEI. Moody's does not attribute any value to payments
made by CEI to the Project since CEI does not currently have any meaningful
cash flow generating assets other than Sabine Pass. The assignment
of the TUA to SPL is expected to lead to a substantial increase in cash
flows available at the Project to pay debt once the liquefaction plant
reaches commercial operations.
The rating action also incorporates roughly $391 million in equity
issuances at Cheniere and at Cheniere Energy Partners over the last four
months resulting in approximately $300 million in debt reduction
at Cheniere in January 2012. The recent debt payment eliminated
Cheniere's May 2012 debt maturity and reduced debt to approximately
$487 million compared to the prior amount of nearly $800
million. That said, Cheniere still faces a $205 million
convertible note due in August 2012 and continues to be cash flow negative.
During the review period over the next 3 to 6 months, Moody's
will assess Cheniere's ability to achieve project development milestones
including the receipt of FERC authorization, completion of necessary
financing and the commencement of construction. Cheniere anticipates
FERC approval and financing commitments for the liquefaction plant in
Q1 2012 and the start of construction thereafter in 2012.
Over the next six months, Moody's will also assess Cheniere's
progress in addressing its near term debt maturities and its negative
cash flow position. Sabine Pass's rating could improve by
one or more notches and the extent of any rating improvement depends on
Cheniere's execution of these milestones items and the underlying
provisions.
Sabine Pass LNG L.P. was formed in 2004 to construct,
own and operate a liquefied natural gas (LNG) receiving terminal with
an aggregate regasification capacity of 4 Bcf/d. Sabine has signed
three 20-year Terminal Use Agreements (TUA's) for 100% of
its regasification capacity on a "take or pay" basis. Sabine is
88.8%, indirectly-owned by Cheniere Energy,
Inc (not rated).
The last rating action on Sabine Pass occurred on January 5, 2011,
when the rating on Project's B3 rating was confirmed and the outlook was
changed to negative from under review for possible downgrade.
The principal methodology used in this rating was Generic Project Finance
Methodology published in December 2010. Please see the Credit Policy
page on www.moodys.com for a copy of this methodology.
REGULATORY DISCLOSURES
Although this credit rating has been issued in a non-EU country
which has not been recognized as endorsable at this date, this credit
rating is deemed "EU qualified by extension" and may still
be used by financial institutions for regulatory purposes until 30 April
2012. Further information on the EU endorsement status and on the
Moody's office that has issued a particular Credit Rating is available
on www.moodys.com.
For ratings issued on a program, series or category/class of debt,
this announcement provides relevant regulatory disclosures in relation
to each rating of a subsequently issued bond or note of the same series
or category/class of debt or pursuant to a program for which the ratings
are derived exclusively from existing ratings in accordance with Moody's
rating practices. For ratings issued on a support provider,
this announcement provides relevant regulatory disclosures in relation
to the rating action on the support provider and in relation to each particular
rating action for securities that derive their credit ratings from the
support provider's credit rating. For provisional ratings,
this announcement provides relevant regulatory disclosures in relation
to the provisional rating assigned, and in relation to a definitive
rating that may be assigned subsequent to the final issuance of the debt,
in each case where the transaction structure and terms have not changed
prior to the assignment of the definitive rating in a manner that would
have affected the rating. For further information please see the
ratings tab on the issuer/entity page for the respective issuer on www.moodys.com.
Moody's adopts all necessary measures so that the information it
uses in assigning a rating is of sufficient quality and from sources Moody's
considers to be reliable including, when appropriate, independent
third-party sources. However, Moody's is not
an auditor and cannot in every instance independently verify or validate
information received in the rating process.
Please see Moody's Rating Symbols and Definitions on the Rating
Process page on www.moodys.com for further information on
the meaning of each rating category and the definition of default and
recovery.
Please see ratings tab on the issuer/entity page on www.moodys.com
for the last rating action and the rating history. The date on
which some ratings were first released goes back to a time before Moody's
ratings were fully digitized and accurate data may not be available.
Consequently, Moody's provides a date that it believes is
the most reliable and accurate based on the information that is available
to it. Please see the ratings disclosure page on our website www.moodys.com
for further information.
Please see www.moodys.com for any updates on changes to
the lead rating analyst and to the Moody's legal entity that has
issued the rating.
Clifford J Kim
Vice President - Senior Analyst
Project Finance Group
Moody's Investors Service, Inc.
250 Greenwich Street
New York, NY 10007
U.S.A.
JOURNALISTS: 212-553-0376
SUBSCRIBERS: 212-553-1653
James Hempstead
Senior Vice President
Corporate Finance Group
JOURNALISTS: 212-553-0376
SUBSCRIBERS: 212-553-1653
Releasing Office:
Moody's Investors Service, Inc.
250 Greenwich Street
New York, NY 10007
U.S.A.
JOURNALISTS: 212-553-0376
SUBSCRIBERS: 212-553-1653
Moody's places Sabine Pass LNG B3 rating under review for possible upgrade
