SecProbe.io

CORRESP
1
filename1.htm

    filename1.htm

600 Travis, Suite 4200

Houston, Texas 77002

713.220.4200 Phone

713.220.4285 Fax

andrewskurth.com

August 13, 2009

Mr. H. Roger Schwall

Assistant Director

Securities and Exchange Commission

100 F Street N.E., Stop 7010

Washington, D.C. 20549

Re:

Cheniere Energy, Inc.

Form 10-K for Fiscal Year Ended December 31, 2008

Filed February 27, 2009

File No. 001-16383

Dear Mr. Schwall:

On behalf of Cheniere Energy, Inc., a Delaware corporation (the “Company”), we enclose the responses of the Company to comments received from the staff of the Division of Corporation Finance (the “Staff”)
of the Securities and Exchange Commission (the “Commission”) by letter dated July 31, 2009, with respect to the Company’s Form 10-K for fiscal year ended December 31, 2008 (File No. 001-16383) (the “10-K”).  For your convenience, the responses are prefaced by the exact text of the Staff’s corresponding comment.

The Company acknowledges the following:  (i) the Company is responsible for the adequacy and accuracy of the disclosure in the 10-K; (ii) Staff comments or changes to disclosure in response to Staff comments do not foreclose the Commission from taking any action with respect to the 10-K; and (iii) the Company may not assert Staff comments as a defense in any proceeding initiated
by the Commission or any person under the federal securities laws of the United States.

Please let us know if you have any questions or if we can provide additional information or otherwise be of assistance in expediting the review process.

                Sincerely,

                Meredith S. Mouer

cc:           Meg A. Gentle (Cheniere Energy, Inc.)

Austin         Beijing         Dallas          Houston          London         New
York         The Woodlands         Washington, DC

Cheniere Energy, Inc.

Form 10-K (File No. 001-16383)

Company’s Responses to

SEC Comment Letter dated July 31, 2009

Form 10-K for the Fiscal Year Ended December 31, 2008

Management’s Discussion and Analysis of Financial Condition and Results of Operation, page 35

Contractual Obligations, page 47

1.

We note you exclude the interest component of your long-term debt.  In light of the significance of your long-term debt to your financial statements as a whole, please expand your accompanying footnotes to describe the nature of provisions that create, increase or accelerate obligations, or other pertinent data to the extent
necessary for an understanding of the timing and amount of your specified contractual obligations, as contemplated by Item 303(a)(5) of Regulation S-K.

Response:

In the accompanying footnotes, we cross-reference Note 18 of our Notes to Consolidated Financial Statements, which contains a description of the interest expense obligations under each debt instrument.  Similar disclosure appears beginning on page 45 of the 10-K.  However, in response to this comment, we will revise
the presentation in future filings so that our minimum cash obligation related to the interest component of our long-term debt is explicitly disclosed in the notes under the tabular disclosure of contractual obligations.

Beginning on page 45 of the 10-K, we describe and disclose in detail all provisions that create, increase or accelerate obligations, and other pertinent data to the extent necessary for the readers to understand the timing and amount for each long-term debt instrument.  In response to this comment, however, we will restate this
information below the tabular table in future filings.

Summary of Critical Accounting Policies and Estimates, page 50

2.

We note you identify seven areas of accounting where critical accounting policies are used to record activity.  However, your disclosures appear to lack association with specific accounting estimates that may be necessary to an understanding of your liquidity, capital resources, and results of operations.  Please
expand your disclosures to address the specific instances where uncertainties exist in your estimates.  Your disclosures should provide information about the quality and variability of your earnings and cash flow so that investors may ascertain the indicative value of your reported financial information.  We generally find that disclosures including both a sensitivity analysis and discussion of historical experience making the critical estimate are effective in conveying this information.  It
is important to note that while accounting policy notes in the financial statements generally describe the method used to apply an accounting principle, the discussion in MD&A should present your analysis of the uncertainties involved in applying a principle at a given time or the variability that is reasonably likely to result from its application over time.  Please refer to Section 501.14 of the Financial
Reporting Codification for further guidance.

Response:

In Note 2 of our Notes to Consolidated Financial Statements, we note that the preparation of our Consolidated Financial Statements requires us to make certain estimates and assumptions that affect the amounts reported in the Consolidated Financial Statements and accompanying Notes, which include, but are not limited to, the following:

·

property, plant and equipment,

·

goodwill,

·

valuation allowances for income tax assets, and

·

fair value of share-based payments.

We do not believe that we have estimates that would materially impact our liquidity or capital resources.  For example, we do not estimate the collectability of large receivable balances for liquidity purposes, as our customers prepay their usage fees prior to the month services are rendered.

The use of estimates does, however, impact our results of operations.  A few examples are: the use of estimates in determining the depreciation of our fixed assets; the use of estimates in determining value in the assessment of goodwill; and the use of estimates in the calculation of fair value related to our share-based compensation
payments.  Although we believe these estimates are discussed in the relevant sections in our Notes to Consolidated Financial Statements, in response to this comment, we will address these estimates in the Summary of Critical Accounting Policies and Estimates within our MD&A in our future filings.

2

Cheniere Energy, Inc.

Form 10-K (File No. 001-16383)

Company’s Responses to

SEC Comment Letter dated July 31, 2009

Management’s Report on Internal Control Over Financial Reporting, page 57

3.

In the first paragraph of this section, you state that internal control over financial reporting may not prevent or detect misstatements because of its inherent limitations.  The language in this paragraph appears to limit management’s conclusions regarding the effectiveness of your internal control over financial reporting
at a reasonable assurance level.  Please confirm for us, if true, that the disclosure is not meant to limit management’s conclusions as to the effectiveness of your internal control over financial reporting.  Also, in future filings, please remove or revise the disclosure so that it does not appear to limit management’s conclusions.

Response:

We confirm that this disclosure is not meant to limit management’s conclusions as to the effectiveness of our internal control over financial reporting.  We will revise the disclosure in future filings as follows: “Because of its inherent limitations, internal control over financial reporting may not prevent or detect
misstatements and, even when determined to be effective, can only provide reasonable assurance with respect to financial statement preparation and presentation.”

4.

Please include a statement that the registered public accounting firm that audited the financial statements has issued an attestation report on your internal control over financial reporting.  See Item 308(a)(4) of Regulation S-K.

Response:

In future filings, we will include a statement that the registered public accounting firm that audited the financial statements has issued an attestation report on our internal control over financial reporting.  Please note that our report appears on the page immediately preceding the attestation report from our registered public
accounting firm.

3

Cheniere Energy, Inc.

Form 10-K (File No. 001-16383)

Company’s Responses to

SEC Comment Letter dated July 31, 2009

Financial Statements and Supplementary Data, page 56

General

5.

We note in your financial statements the changes in operating results in the year ended December 31, 2008 in comparison to your prior years’ operating results.  In all future filings, the disclosure in the “Business” and “Management’s Discussion and Analysis…” sections of the registration
statement or periodic report (as the case may be), and elsewhere in the disclosure, as appropriate, should be revised and expanded in order to fully discuss the various business strategies and operational factors impacting the company, it operations and results, and the actions taken, as necessary, by the company in response to these changes in operating results.

Examples would include the (i) current operating results and the current application process with FERC to adapt its facilities in order to export LNG as a result of the higher LNG prices available outside of the United States and the relation to these current factors to your initial business plan which was based upon an assumption of higher LNG prices existing in the United States
than that existing outside the United States.

Response:

We will revise our disclosure in future filings to expand on our business strategies and operational factors impacting the Company, its operations and results, and the actions taken, as necessary, by the Company in response to these changes in operating results.

With respect to your example above, please note that we secured the necessary approvals to export LNG in order to maximize the flexibility of the Company’s assets.  We did not secure these approvals in response to any changes in the Company’s operating results. We do not view these approvals as material to our business and
the approvals do not represent any change to our business strategy.

We make no assumption as to the relative price of LNG in the United States compared to the world market.  Our business plan is not and was not based upon an assumption of higher LNG prices in the United States compared to prices outside the United States.

We believe that LNG can be produced and delivered to the United States for a lower cost than the cost to produce natural gas in North America at the margin.  Therefore, we expect that it would be profitable to produce and deliver LNG to the United States even if North America were the lowest-priced natural gas market in the world.

4

Cheniere Energy, Inc.

Form 10-K (File No. 001-16383)

Company’s Responses to

SEC Comment Letter dated July 31, 2009

6.

Please provide us, as supplemental information, an analysis to support your decision to remove the supplemental information relating to your oil and gas reserves and related financial data from your Form 10-K.  In this regard, we note, without limitation, you have excluded the disclosures set forth in FAS 69, FAS 131, FAS 143
and Industry Guide 2.  The staff does note your statement on page 13 that “As a result of the lack of materiality to our consolidated financial statements taken as a whole, our oil and gas exploration, development and exploitation activities have been excluded as a separately disclosed operating segment.”

Response:

In the fourth quarter of 2008, we decided to present our oil and gas exploration, development and exploitation activities as part of our corporate and other business segment due to the immaterial nature of this segment.  In addition, we assessed the materiality of the required disclosures found in the guidance you referenced above
and determined that these disclosures regarding our oil and gas exploration, development and exploitation activities were immaterial on a quantitative and qualitative basis (as described below) to the readers of our financial statements.

Qualitative – In connection with our 2008 cost savings program, we terminated all personnel that were working on developing our oil and gas exploration, development and exploitation activities and reassigned responsibilities for oversight of our oil and gas activities
to another vice president within the Company.  We have stated that our primary focus is on the development of our LNG-related businesses.

Quantitative – As of December 31, 2008, we had a net balance of $2.4 million of proved oil and gas property and an asset retirement obligation of $0.3 million on our Consolidated Balance Sheets.

5

Cheniere Energy, Inc.

Form 10-K (File No. 001-16383)

Company’s Responses to

SEC Comment Letter dated July 31, 2009

Consolidated Statement of Cash Flows, page 64

7.

We note your classification in 2008 of $(248,767) as a financing activity, with a caption titled ‘Investment in restricted cash and cash equivalents;’ and your disclosure on page 43 that proceeds from the borrowings under the 2008 Convertible Loans “were used to fund reserve accounts of $248.8 million.”  We
also note your disclosure on pages 45 and 46 that certain of these funds “were utilized to pay for interest on the Bridge Loan, to pay expenses incurred in connection with the issuance of the 2008 Convertible Loans and consideration of other strategic alternatives and to fund working capital and general corporate needs of Cheniere and its subsidiaries.”  Please explain to us why you believe it is appropriate to classify the use of all of these proceeds as a financing activity.

Response:

Below is an itemized reconciliation of cash outflows and inflows from our financing activities, as follows (in thousands):

Borrowings:

Bridge Loan (May 2008)

$
95,000

2008 Convertible Loans (August 2008)

250,000

Sabine Pass LNG Senior Notes Offering (September 2008)

145,000

Total proceeds from borrowings

490,000

Use of restricted cash:

2008 Convertible Loans

(135,000
)

(i)

Sabine Pass LNG Senior Notes Offering

(145,000
)

(ii)

Funds used to pay debt issuance costs on Sabine Pass LNG Senior Notes Offering

4,840

(iii)

Funds used to pay minority interest holders

26,393

(iv)

Total use of borrowings that were restricted (investment in restricted cash)

(248,767
)

Use of unrestricted cash:

Extinguish Bridge Loan

(95,000
)

Sabine Pass LNG debt issuance costs

(4,840
)

Debt issuance costs incurred on other borrowings

(29,664
)

Payment to minority interest holders

(26,393
)

Purchase of treasury shares and other

(4,467
)

Total use of borrowings that were unrestricted (investment in unrestricted cash)

(160,364
)

Use of cash considered financing activities

$
80,869

$135 million of our borrowings from the 2008 Convertible Loans was placed into a reserve account for Cheniere Marketing, LLC’s TUA payments to Sabine Pass LNG, L.P.  Because these funds were presented as restricted cash and cash equivalents on our Consolidated Financial Statements, we presented the funds as funds being ‘investment
in restricted cash and cash equivalents.’

(i)

$145 million of our borrowings from the Sabine Pass LNG Senior Notes Offering in September 2008 were presented as ‘investment in restricted cash and cash equivalents’ because the borrowings occurred at Sabine Pass LNG, L.P. and such funds are considered restricted to the Company.

(ii)

$4.8 million represents restricted funds used at Sabine Pass LNG, L.P. to pay for debt issuance costs for the Sabine Pass LNG Senior Notes Offering in September 2008, and therefore we present the use of this cash as ‘investment in restricted cash and cash equivalents.’

(iii)

$26.4 million represents the restricted funds used by Cheniere Energy Partners, L.P. from the restricted account (distribution reserve account) to pay common unit distributions, and therefore we present the use of th