Why did Cheniere Energy increase executive base salaries?

The Compensation Committee approved mid-year base salary increases to bring the compensation of certain executive officers in line with market rates for similar positions, as identified in the company's 2012 proxy statement.

What is the total value and composition of the bonus pool?

The total bonus pool approved for LTCBAs is approximately $60 million in cash and approximately 10 million restricted shares of Cheniere Energy's common stock.

How are the LTCBAs structured and vested?

Each executive officer receives a combination of a cash award and a restricted stock award. The cash awards vest in five equal annual installments of 20%, starting from the notice to proceed. The restricted stock awards vest in tranches: 35% upon the notice to proceed, and the remaining 65% over the subsequent four years on an anniversary basis. Employment with the company is generally required at the time of vesting.

LNG 8-K: Leadership Changes

Q: What is the Long-Term Commercial Bonus Award (LTCBA) and why was it given?

The LTCBA is a performance-based bonus awarded to executive officers in recognition of Sabine Pass Liquefaction, LLC, securing financing commitments for the first two liquefaction trains and issuing a full notice to proceed to Bechtel for construction of the project. It is designed to incentivize and reward executives for achieving significant project milestones.

Summary

Cheniere Energy, Inc. (LNG) announced on August 9, 2012, through an 8-K filing, significant compensation adjustments for its executive officers, effective mid-year 2012. These adjustments include base salary increases for executives whose compensation was deemed below market rates compared to industry peers, as detailed in the company's proxy statement. The primary focus of this filing is the approval of a substantial Long-Term Commercial Bonus Award (LTCBA) for executive officers tied to the successful financing and progression of the Sabine Pass Liquefaction Project. The approval of the LTCBA is a direct response to Sabine Pass Liquefaction, a subsidiary, securing financing commitments for the first two liquefaction trains and issuing a full notice to proceed to Bechtel for construction. The bonus pool allocated for these awards is approximately $60 million in cash and 10 million restricted shares of common stock. The structure of these awards involves both cash and restricted stock components, with specific vesting schedules designed to incentivize continued performance and retention, particularly in light of the significant capital project underway. This compensation package reflects a strong commitment to retaining key talent during a critical development phase for the company's core business.

Key Highlights

1Mid-year 2012 base salary increases were approved for executive officers whose compensation was below market rates.
2A Long-Term Commercial Bonus Award (LTCBA) was approved for executive officers tied to the financing and construction progress of the Sabine Pass Liquefaction Project.
3The approved bonus pool for LTCBAs consists of approximately $60 million in cash and 10 million restricted shares of Cheniere Energy common stock.
4The LTCBA includes both a cash award and a restricted stock award, with defined vesting schedules.
5The first installment of both the cash and restricted stock awards vested upon the issuance of a full notice to proceed (NTP) to Bechtel on August 9, 2012.
6Restricted stock awards have a staggered vesting schedule over four years, with 35% vesting immediately upon NTP.
7Executive officers must generally remain employed by the company at the time of vesting to receive their awards.

Cheniere Energy, Inc. 8-K Report, Executive Changes (Aug 10, 2012)

Summary

Key Highlights

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