Chanos sees US LNG exporter Cheniere Energy as ‘looming disaster’
By CHRISTIAN BAUMGAERTEL
Bloomberg
Jim Chanos is locking horns with Carl Icahn over liquid natural gas.
Chanos said he’s betting against Cheniere Energy, the US natural-gas exporter whose biggest shareholder is Icahn. The company is a “looming disaster” and demand for liquid natural gas (LNG) isn’t growing, Chanos said Wednesday. in an interview with CNBC.
Last month, Icahn took control of two board seats at the Houston-based company after reporting an 8.18% stake on Aug. 6. He said he plans to talk to management about “operations, capital expenditures, financings and executive compensation.” Shares have slumped 19% this year.
Cheniere CEO Charif Souki agreed to give Icahn the board seats in return for the investor signing agreements that limit his ability to wage a proxy fight or publicly agitate about the company.
Cheniere is set to become the first exporter of gas from US shale formations. Its Sabine Pass terminals on the Gulf Coast plan to begin operations in December.
US exports face rising competition from Iran once sanctions end, Citigroup analysts including Anthony Yuel said in a Sept. 2 report. The plunge in oil prices already has eroded the price advantage for US gas exports, according to Bloomberg Intelligence.
Buy Ratings
Souki was the highest-paid CEO in corporate America in 2013. After a shareholder revolt and lawsuit, the board reduced his salary to $1 last year.
Cheniere fell 3.9% to $54.53 at 10:20 a.m. in New York. The stock has eight buy ratings and no holds from analysts.
Hedge funds including Baupost Group and Viking Global Investors are among the company’s top shareholders. Other hedge funds with stakes in Cheniere include PointState Capital, Lone Pine Capital and Soroban Capital Partners.
Chanos, president and founder of New York-based hedge fund Kynikos Associates who had predicted the collapse of Enron, said last year that he’s shorting shares of Royal Dutch Shell and BG Group because of poor prospects for producers of liquified natural gas.
Last month, Chanos said he’s shorting SolarCity, the biggest US rooftop solar developer. Solar shares have been dropping in lockstep with the price of oil since June, disconnecting the stocks from expected growth in demand for solar energy, according to Pavel Molchanov, an analyst at Raymond James Financial.
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