Charif Souki, chairman and co-founder of Tellurian, speaks during the CERAWeek energy conference in Houston last year. Photo / Aaron M. Sprecher, Bloomberg via Getty Images
He has been hailed as the architect of the US liquefied natural gas industry, a man whose brash vision reconfigured global energy markets and once made him the best-paid executive in America.
Now Charif Souki says he is battling Swiss bank UBS to keep a roof over his head.
Souki founded Cheniere Energy, the company that invented the business of shipping chilled US shale gas overseas. The trade has blossomed since Cheniere’s first cargo left port in 2016, turning the US into a critical LNG supplier to allies facing an energy crunch.
“Charif has been at the forefront, the pioneer, the person who in the face of scepticism delivered the proof of concept on a massive scale,” historian Daniel Yergin said when Souki was honoured with the United States Energy Award in 2021.
But Souki, sacked from Cheniere after a bruising clash with the investor Carl Icahn, has so far failed to repeat his success with a second gas export venture named Tellurian. Recent financial struggles with UBS have only complicated his plans.
This year his bankers stripped him of much of his Tellurian shareholdings in a dispute over a defaulted loan. His prized sailboat, the Tango, has been seized. UBS is seeking to liquidate more of his assets including Aspen Valley Ranch, an 813-acre luxury compound in Colorado that includes several residences in addition to his own. Last week two of his personal investment vehicles filed for bankruptcy protection in order to stave off an auction.
Forced sales would “strip my family of its privately held business”, “cause my children...to become unemployed”, and “render me homeless”, Souki wrote in an affidavit submitted in a lawsuit seeking to stop them.
Tellurian plans to construct Driftwood LNG on 1,200 acres along Louisiana’s Calcasieu river. If fully built it would become one of the largest single export projects in the US, costing $25 billion (NZ$41b).
The site has a contentious history. Souki began discussing the location with former BG Group executive Martin Houston in 2014, when he still led Cheniere. Cheniere advanced Houston’s company $46m (NZ$75m) to begin buying land.
Icahn bought a stake in Cheniere in 2015 and promptly put a stop to a development that he viewed as risky and expensive. When Souki was fired that December, Icahn issued a statement to “thank and congratulate the board for having the ‘guts’” to let him go.
The Icahn camp was displeased when, a few months later, the former Cheniere chief announced he was going into business with Houston to build a liquefaction plant at the very same site.
In duelling lawsuits, Cheniere demanded repayment of the $46mn that Houston had used to buy the land, while Houston’s company sought damages from Cheniere for walking away from their joint venture. The litigation was settled in 2020, leaving the pair free to pursue, under the auspices of Tellurian, the scheme that had been thwarted at Cheniere.
The venture began auspiciously. French oil major Total made an investment in 2016, later promising to buy 2.5m tonnes a year from Driftwood. By 2017 Tellurian, with few assets besides the still-unconstructed terminal, commanded a stock market valuation of nearly $3b.
At around that time Souki, looking to raise cash, says he called a childhood friend and longtime financial adviser who had recently arrived at the wealth management arm of UBS.
By 2018, the bank had lent $90m to Souki via a lending fund attached to its UBS O’Connor asset management unit, secured against his Tellurian shares and other collateral.
A year later, the UBS fund followed up with a $60m loan to Tellurian, where Souki was chair. Souki has said in an affidavit that he made an introduction but “was not involved in the negotiations of the Tellurian loan”.
Soon after the loans were funded, Tellurian hit the rocks.
In 2020, with pandemic-hit economies shutting down and the price of gas in freefall, potential customers including Indian importer Petronet walked away from their tentatively agreed deals. Total backed out the following year. Collecting the money it had advanced against an LNG project on the Calcasieu river was to prove no easier for UBS than it had for Cheniere.
Unlike Cheniere, which had fired and then sued Souki, UBS tried at first to court him. Souki says that UBS O’Connor’s co-head of capital solutions, Baxter Wasson, asked him to “right the ship” at Tellurian, promising in return that the bank would take a “holistic approach” that would allow “time and flexibility” for Souki to repay his own loans.
Tellurian said in a securities filing this year that it had not been aware of any such arrangement, which “may have created a conflict of interest”. Souki, who took on extra responsibilities with a new title of executive chair, declined to comment on whether there had been any conflict.
After Tellurian repaid its loans in 2021, UBS turned its attention to the money it had lent Souki, putting the two sides at loggerheads. Souki sold some parts of Aspen Valley Ranch and says he tried to sell others but was blocked by the bank, a claim UBS denies.
Two days before last Christmas Eve, UBS notified Souki it was seizing the Tango, which has since been sold in a process that Souki claims was also botched. Earlier this year UBS liquidated the Tellurian shares that Souki had pledged while they traded near two-year lows; Souki says the sales were poorly timed and drove the stock even lower.
“You can tell who is not very competent when things start not going well,” Souki said in an interview. “They [UBS O’Connor] have taken a group of assets that had a lot of value. And by simply being bad about everything, they managed to destroy a lot of value.”
UBS countered in a court filing last month that it was not required to exercise “clairvoyance”. The bank declined further comment.
Souki is now trying to reassert control over the sale of his ranch and his real estate brokerage in the Colorado ski town of Aspen, the remaining collateral for loans on which UBS says tens of millions of dollars are still outstanding. A New York court refused his request for an injunction that would have barred UBS from conducting a planned auction of his assets.
But after last week’s bankruptcy protection filing for two of his personal investment vehicles, any decisions on a sale could be put in the hands of a federal judge. “I don’t think there’s going to be an auction any more,” Souki said.
Last year Driftwood lost two more high-profile buyers in Shell and Vitol and was forced to abandon a $1b bond sale. Tellurian’s shares have lost 80 per cent of their value since 2019.
Two independent directors stepped down earlier this year, citing personal reasons and time commitments. Tellurian said in a subsequent filing that it believed neither had ever been “comfortable with the risk profile and strategic direction” of the company.
Yet Souki is optimistic that he can defy sceptics and obtain the billions of dollars he needs to complete the project as global trade in LNG reaches new records.
“Out of the $12b or $13b we’re going to need [for Driftwood’s first phase], we’re now sure that we have nine of them,” he told the Financial Times. “We’re highly confident that there’s other mezzanine financiers who will come in. So $2b from equity partners. It’s not going to be very hard.”
Some energy executives say Souki himself has become the project’s biggest obstacle, making Tellurian a possible target for an activist hedge fund.
“If you took him out, then I think those contracts get signed and people come back,” said Ben Dell, managing partner of private equity group Kimmeridge.
Souki said that if new shareholders did come on board, he was confident he could convince them to back his strategy.
As for losing the ranch in a forced sale, he offered a milder version of the fears expressed in court papers. “I would be homeless in Aspen for a short period of time,” he said. “But I do have other properties around the world.”
Written by: Mark Vandevelde in New York and Myles McCormick in Houston
© Financial Times
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