What operational or counterparty risks (e.g., project‑related, regulatory, or credit risks) might impact the ability to deliver the 2 MTpa over the contract term?

The 20‑year SPA between Sempra Infrastructure and EQT hinges on the successful completion and long‑term operation of the Port Arthur LNG Phase 2 train. The most material operational risk is construction‑phase execution: any delay in civil works, cryogenic equipment procurement, or commissioning can push the commercial start‑date beyond the contract’s “first‑ship” clause, triggering force‑majeure penalties or loss of take‑or‑pay payments. Phase 2 is a brownfield expansion that must obtain additional permits (EPA air‑emission, U.S. Coast Guard, and Texas Railroad Commission approvals). A tightening of environmental regulations or a successful litigation challenge could halt or slow the plant, reducing capacity availability. Once online, routine uptime is a function of feed‑gas supply (EQT’s Appalachian shale output), turbine reliability, and maintenance scheduling; a prolonged outage would impair the 2 Mtpa delivery target and could expose Sempra to liquidated‑damage claims.

On the counterparty side, EQT’s credit profile is the key driver of payment risk. The company carries a high‑leverage balance sheet tied to its natural‑gas production and has been sensitive to commodity‑price swings; a sustained drop in Henry Hub or spot LNG prices could strain cash‑flows and lead to covenant breaches. S&P/ Moody’s ratings, debt‑to‑EBITDA ratios, and the upcoming 2025 refinancing calendar should be tracked closely. Moreover, the SPA is subject to U.S. export licensing (DOE) and any future policy shift—e.g., stricter GHG reporting or carbon‑pricing—could increase the cost of delivering LNG and affect EQT’s willingness or ability to honor the purchase obligation.

Trading implications: The contract creates a long‑dated, volume‑locked exposure to U.S. LNG supply, which can be priced into forward curves as a “soft‑landing” anchor for the North‑American export market. Traders should price in a credit‑risk premium on EQT‑linked swaps or forward contracts, especially in the 5‑10 year window when refinancing risk peaks. Monitoring S&P credit spreads on EQT, construction‑progress updates from Sempra, and regulatory filings (DOE licensing, EPA rule changes) will provide early signals of delivery risk. A prudent hedge could involve buying LNG price caps or credit default swaps on EQT while maintaining a modest long position in the Port Arthur export train’s forward curve, allowing the strategy to benefit from the upside of a tight U.S. LNG market while limiting exposure to project‑ or counterparty‑related disruptions.