Does Cheniere Energy's CEO Really Deserve $142 Million Annual Pay?

Apr 29 2014, 4:18pm CDT | by

Charif Souki, CEO of Cheniere Energy, received total compensation of $142 million in 2013. This appears to place him atop the leader board of CEOs of all U.S.-based publicly traded companies.

According to the company’s proxy filing, released yesterday, Souki’s pay included a base salary of $800,000, a $3.7 million cash bonus and $133 million in stock awards. That’s a big improvement over 2012, when he scored $57.5 million, including $49 million in stock. All told, he owns 6.6 million shares of Cheniere (2.80%) worth $370 million.

In comparison, Exxon Mobil CEO Rex Tillerson made $28 million, while John Watson of Chevron did $24 million.

Cheniere (as I wrote about in this Forbes Magazine feature last year) is the company furthest along in building the multi-billion-dollar plants required to chill natural gas into condensed LNG for export around the globe. Its initial plants at Sabine Pass on the Gulf Coast are more than halfway complete, and first shipments could possibly occur as early as the end of 2015.

So is Souki’s pay outrageous, or justified?

Definitely the latter. To understand why, start by looking at how shares in Cheniere, ExxonMobil and Chevron have performed in recent years. Go back to August 2008, the bottom of the market. Since then, shares in Cheniere Energy are up nearly 1,800%. Chevron has advanced 54%. While Exxon is up just 25%.

By that measure, Souki absolutely deserves his pay — years ago Cheniere’s board created an incentive package and tied most of his stock awards to project completion milestones; if he hadn’t executed, he wouldn’t have gotten paid.

Back in 2008 Cheniere was a zombie company. Souki, a decade ago, had bet that the U.S. would soon run short on natural gas. So in its first iteration Cheniere figured out how to cite and build big terminals to receive imports of LNG. Souki even convinced companies like Chevron and Total to pay tens of millions a year to reserve capacity. (See my 2005 Forbes Magazine story “First Mover.”) When the shale boom hit and gas supplies flooded the U.S., Cheniere was left with some giant empty tanks.

But Souki was determined that Cheniere’s LNG holding tanks and brand new terminals. So in the past few years this former investment banker has raised about $8 billion to turn his lemons into lemonade and reposition Sabine Pass as an export terminal. He’s already signed up companies like Korea Gas, BG Group, Total and Centrica to long-term “take-or-pay” contracts that will generate about $3 billion a year in fee revenue for Cheniere for the next 20 years.

Now there’s been a handful of other LNG export projects approved by the feds and dozens more that have been proposed. But the reality is that very few of these will ever be built. LNG exporters will be happy to buy American gas as long as it’s cheap, but the more demand there is for gas (for power generation, transportation, manufacturing, LNG, etc), the higher the price will go, eroding the economics of shipping American gas to the other side of the world. In this business, first mover advantage matters a lot.

Souki bet collosally wrong the first time. But he salvaged that bet, becoming first in line to export American gas. By seizing opportunity and executing, he is building what will be an almost unique asset, one with guaranteed cashflow for a generation to come.

Souki and his small group of executives and dealmakers have made more than $12 billion for shareholders in recent years. Granted, Exxon and Chevron have generated significantly more shareholder value than that in the same time period, but Tillerson and Watson sit atop a much broader base of assets and opportunities and are backed by a much deeper bench of strong players.

So don’t begrudge the man his payday.

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