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Icahn Takes Cheniere Stake, Wants A Word With CEO Souki

Entities controlled by activist investor Carl Icahn have taken an 8.2% stake in first-moving, yet so far profitless liquefied natural gas (LNG) terminal developer Cheniere Energy Inc.

A regulatory filing said Icahn believes Houston-based Cheniere shares are "undervalued" and talks with management and the company's board are planned. Discussions are expected to be on Cheniere operations, capital spending, financing and executive compensation, according to the Securities and Exchange Commission (SEC) filing.

Cheniere CEO Charif Souki and the company have been criticized in the past for the CEO's hefty compensation, which in 2013 was valued at $142 million but has since declined to $7.7 million as of last year, according to the Wall Street Journal.

The filing said Icahn "may also seek shareholder board representation if appropriate. As of Aug. 5, 2015, the reporting persons have not had any discussions with representatives of the issuer's management or board of directors."

Cheniere Energy shares were up more than 5% at midday Friday.

The investor acquired more than 19 million Cheniere shares at a cost of more than $1 billion through outright purchase, forward contracts and call options, according to the filing.

In 2001 it was announced that Cheniere planned to develop three LNG terminals along the Texas Coast (see Daily GPIJune 13, 2001). In those pre-shale natural gas days, the race was to develop facilities to import LNG. In late 2005, Souki said the company expected to have 11.4 Bcf/d of LNG regasification capacity available along the Gulf Coast, with four deepwater ports, seven unloading docks and 15 storage tanks able to hold 51.7 Bcfe (see Daily GPINov. 16, 2005).

In early 2008, Cheniere's completed Sabine Pass terminal in Louisiana was receiving cooldown cargoes of LNG (see Daily GPIMarch 31, 2008). A year later, Cheniere got regulatory approval to modify the Sabine Pass terminal to allow for the re-export of previously imported LNG (see Daily GPIJune 2, 2009). In 2010, Cheniere got the OK to export U.S.-sourced LNG from proposed liquefaction facilities at Sabine Pass (see Daily GPISept. 13, 2010). The terminal is slated to begin exporting around the end of the year.

The global LNG market has been oversupplied as of late, with many saying the window of opportunity for exports from the United States is closing. However, others counsel that a long-term view is needed to understand the export opportunity (see Daily GPIApril 20).

Meanwhile, Cheniere, which is also developing a terminal in Corpus Christi, TX, announced in June potential LNG projects that could add 19 million tonnes per annum of production capacity to its future capabilities, giving it aggregate capacity of 60 mtpa by 2025 (see Daily GPIJune 11).

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