Cheniere: Revoking high executive payout would be detrimental to company

HOUSTON – Cheniere Energy and its executives asked a Delaware court late Monday to throw out a shareholder lawsuit that challenged $1.7 billion in stock awards, including most of CEO Charif Souki’s pay last year.

The Houston liquefied natural gas firm and its top brass argued the investors failed to establish a claim that would pass the court’s requirements to go to trial, and that they did not “state a claim upon which relief can be granted.” Cheniere said it would elaborate on the dispute in briefs to be filed later.

Cheniere officials and attorneys for the company and the executives did not immediately respond to requests for comment. An attorney for the investors declined to comment.

It was the first parry by the company in the three weeks after Cheniere shareholders alleged the company’s board didn’t have the authority to nearly triple stock awards to Souki and a handful of executives last year because a shareholder vote on the matter was not counted properly.

The investors say Cheniere did not count abstentions as no votes — as they contend is required by Delaware law — in a February 2013 vote on the company’s compensation plan first established in 2011. The increased payout would not have gotten shareholder approval under that counting, they said in a lawsuit filed in late May in the Delaware Court of Chancery.

Cheniere was incorporated in Delaware.

Cheniere claims ‘significant harm’

On Monday, Cheniere also applied with the Delaware court to validate the stock issuance, arguing it believed that under certain stock exchange rules, a shareholder vote on an equity compensation plan is measured by a majority of the votes cast and abstentions don’t count.

The company also said it had amended the 2011 plan in a proxy statement before the vote to include a clause that says abstentions will not be counted.

Doubt in the validity of the payout “creates the potential for significant harm to the company and its stockholders, as it threatens to undermine the purposes of the 2011 plan, which has
been spectacularly successful in incentivizing the Company’s executives,” the company said in the application.

The lawsuit seeks “to invalidate the compensation that has been earned by and paid to Cheniere executives,” which could “have an obvious detrimental impact on the company and its stockholders,” the firm added.

Stock rises

Souki, who also serves as Cheniere’s chairman and president, got $142 million in total pay last year, the bulk of which came from $133 million in stock awards that investors are contesting. Cheniere’s future briefs in the case will be filed on a schedule the parties agree to or the court determines, it said in court documents.

Next year, Cheniere is slated to become the first U.S. LNG exporter as it gears up to send tankers with liquefied natural gas to overseas markets from its export facility in Louisiana.

A surge of cheap, abundant natural gas in the United States had flipped the company’s LNG business on its head after the energy industry figured out how to extract hydrocarbons from deep-seated shale rock in North America. Its share price has grown nearly twenty-fold since the beginning of 2010, when it began to plan to turn LNG import facilities into export facilities.

Cheniere shares rose sharply Monday on the news that the Federal Energy Regulatory Committee late Friday pushed the company’s proposed LNG project in Corpus Christi closer to approval after it passed a key environmental review.

The company’s shares closed up $1.42 on Monday at $67.71 on the New York Stock Exchange.

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