UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

SCHEDULE 14A

Proxy Statement Pursuant to Section 14(a) of the

Securities Exchange Act of 1934

(Amendment No.     )

Filed by the Registrant x Filed by a Party other than the Registrant ¨

Check the appropriate box:

Cheniere Energy, Inc.

(Name of Registrant as Specified In Its Charter)

(Name of Person(s) Filing Proxy Statement, if other than the Registrant)

Payment of Filing Fee (Check the appropriate box):

Notes:

Reg. §240.14a-101.

SEC 1913 (3-99)

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CHENIERE ENERGY, INC.

700 Milam Street, Suite 800

Houston, Texas 77002

(713) 375-5000

 

 

NOTICE OF ANNUAL MEETING OF STOCKHOLDERS

 

 

 

TIME AND DATE		9:00 a.m., Central Daylight Time on June 4, 2010
PLACE		The Crystal Ballroom at the Post Rice Lofts
		909 Texas Avenue
		Houston, Texas 77002
ITEMS OF BUSINESS		•To elect four Class III members of the Board of Directors to serve until the 2013 annual meeting of stockholders.
		•To ratify the appointment of Ernst & Young LLP as our independent accountants for the 2010 fiscal year.
		•To transact other business as may properly come before the Meeting and any adjournment or postponement thereof.
RECORD DATE		You can vote if you were a stockholder of record on April 5, 2010.
PROXY VOTING		It is important that your shares be represented and voted at the Meeting. You can vote your shares by completing and returning your proxy card or, in certain cases, by voting on the Internet or by telephone. See details under the heading “How do I vote if I am a stockholder of record?” or “How do I vote if I am a beneficial owner?”
ELECTRONIC AVAILABILITY OF PROXY MATERIALS		We are making this Proxy Statement, including the Notice of Annual Meeting and 2009 Annual Report on Form 10-K for the year ended December 31, 2009, available on our website at http://www.cheniere.com/corporate/2010_annual_meeting.shtml.
		BY ORDER OF THE BOARD OF DIRECTORS
		Anne V. Bruner Corporate Secretary
April 28, 2010

CHENIERE ENERGY, INC.

700 Milam Street, Suite 800

Houston, Texas 77002

(713) 375-5000

PROXY STATEMENT

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PROPOSAL 1—ELECTION OF CLASS III DIRECTORS

Directors and Nominees

The Board of Directors is divided into three classes. At the Meeting, Vicky A. Bailey, David B. Kilpatrick, Jason G. New and J. Robinson West will be nominated to serve as Class III directors. Each nominee, if elected, will hold office until the 2013 annual meeting of stockholders and will serve until his or her successor is duly elected and qualified or until his earlier death, resignation or removal. Mr. West has advised the Board that he desires for the Board to begin the process of finding an appropriate replacement for him. The Governance and Nominating Committee has commenced an effort to identify an appropriate successor for Mr. West on the Board.

Unless your proxy specifies otherwise or withholds authority to vote for one or more nominees named thereon and described below, it is intended that the shares represented by your proxy will be voted for the election of these four nominees. If you are a beneficial owner, your bank, broker or other holder of record is not permitted to vote your shares on Proposal 1 to elect directors if the bank, broker or other holder of record does not receive voting instructions from you. Proxies cannot be voted for a greater number of persons than the number of nominees named. The Board is unaware of any circumstances likely to render any nominee unavailable.

The Board of Directors recommends a vote FOR the election of the four nominees as Class III directors of the Company, to serve until the 2013 annual meeting of stockholders or until their successors are duly elected and qualified.

The individuals listed below currently serve on the Board of Directors of the Company. Each of the Class III directors is standing for re-election and has consented to serve as a director if re-elected.

Director Biographies

Charif Souki, a co-founder of the Company, is Chairman of the Company’s Board of Directors, Chief Executive Officer and President. In December 2002, Mr. Souki assumed the positions of President and Chief Executive Officer. He relinquished the title of President in April 2005 and was re-elected President again in April 2008. From June 1999 to December 2002, he was Chairman of the Board and an independent investment banker. From September 1997 until June 1999, he was Co-Chairman of the Board of Directors, and he served as Secretary from July 1996 until September 1997. Mr. Souki has over 20 years of independent investment banking experience and has specialized in providing financing for microcap and small capitalization companies with an

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emphasis on the oil and gas industry. Mr. Souki is a director, Chairman of the Board and the Chief Executive Officer of Cheniere Energy Partners GP, LLC (“Cheniere Energy Partners”), a wholly-owned subsidiary of the Company and the general partner of Cheniere Energy Partners, L.P., a publicly-traded limited partnership that is operating the Sabine Pass LNG receiving terminal in which the Company has approximately a 92% equity interest. Mr. Souki received a B.A. from Colgate University and an M.B.A. from Columbia University.

Walter L. Williams is a director of the Company. He served as Vice Chairman of the Board of Directors from June 1999 until June 2008. He previously served as President of Cheniere LNG, Inc. from February 1997 until June 2008, as President and Chief Executive Officer from September 1997 until June 1999 and as Vice Chairman of the Board of Directors from July 1996 until September 1997. Prior to joining the Company, Mr. Williams spent 32 years as a founder and later Chairman and Chief Executive Officer of Texoil Company, a publicly-held Gulf Coast exploration and production company. Prior to that time, he was an independent petroleum consultant. Mr. Williams is also a director of Cheniere Energy Partners. Mr. Williams received a B.S. in Petroleum Engineering from Texas A&M University and is a Registered Professional Engineer in Louisiana and Texas. Mr. Williams currently serves on the Dwight Look College of Engineering Advisory Council at Texas A&M University.

Vicky A. Bailey is Chair of our Compensation Committee and Section 162(m) Subcommittee and a member of our Audit Committee and Governance and Nominating Committee. Since November 2005, Ms. Bailey has been President of Anderson Stratton International, LLC, a strategic consulting and government relations company in Washington, D.C. She was a partner with Johnston & Associates, LLC, a public relations firm in Washington, D.C. from March 2004 through October 2005. Prior to joining Johnston & Associates, LLC, Ms. Bailey served as Assistant Secretary for the Office of Policy and International Affairs from 2001 through February 2004. From 2000 until May 2001, she was President and a director of PSI Energy, Inc, the Indiana electric utility subsidiary of Cinergy Corp. Prior to joining PSI Energy, Ms. Bailey was a Commissioner on the Federal Energy Regulatory Commission beginning in 1993. Ms. Bailey currently serves as a director of EQT Corporation, a publicly traded integrated energy company. In January 2010, Ms. Bailey was appointed as a member of the Secretary of Energy’s Blue Ribbon Commission on America’s Nuclear Future. She received a B.S. in industrial management from Purdue University.

Nuno Brandolini is a director of the Company. Mr. Brandolini is a general partner of Scorpion Capital Partners, L.P., a private equity firm organized as a small business investment company (SBIC). Prior to forming Scorpion Capital and its predecessor firm, Scorpion Holding, Inc., in 1995, Mr. Brandolini served as Managing Director of Rosecliff, Inc., a leveraged buyout fund co-founded by Mr. Brandolini in 1993. Prior to 1993, Mr. Brandolini was a Vice President in the investment banking department of Salomon Brothers, Inc., and a Principal with the Batheus Group and Logic Capital, two venture capital firms. Mr. Brandolini began his career as an investment banker with Lazard Freres & Co. During the past five years, Mr. Brandolini served as a director of Miravant Medical Technologies, a pharmaceutical preparations company. Mr. Brandolini received a law degree from the University of Paris and an M.B.A. from the Wharton School.

Keith F. Carney is the Lead Director of the Board of Directors and a member of our Audit Committee and Compensation Committee. He currently is engaged in private investments. From October 2001 through December 2005, Mr. Carney was President of Dolomite Advisors, LLC, an investment firm. Mr. Carney served as Executive Vice President of the Company from 1997 through August 2001 and Chief Financial Officer and Treasurer of the Company from July 1996 through November 1997. Prior to joining the Company, Mr. Carney was a securities analyst in the oil and gas exploration/production sector with Smith Barney, Inc. from 1992 to 1996. From 1982 to 1990, he was employed by Shell Oil as an exploration geologist. He received an M.S. in geology from Lehigh University in 1982 and an M.B.A. in Finance from the University of Denver in 1992.

John M. Deutch is Chairman of our Governance and Nominating Committee. Mr. Deutch is an Institute Professor at the Massachusetts Institute of Technology (“MIT”) and has been a member of the MIT faculty since 1970. Mr. Deutch has served in significant government posts throughout his career, including Director of Energy

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Research and Undersecretary of the U.S. Department of Energy, Undersecretary and Deputy Secretary of Defense, and Director of Central Intelligence. In addition, he has authored over 140 technical publications. Mr. Deutch is currently a director of Citigroup Inc. and Raytheon Company, each publicly traded companies. Mr. Deutch has announced that he will resign as a director of Citigroup Inc. in April 2010. During the past five years, he also served as a director of Schlumberger N.V. (Schlumberger Limited), a publicly traded oil, gas and field services company, and Cummins Inc., a publicly traded engines and turbine company. Mr. Deutch earned a B.A. in History and Economics from Amherst College and a B.S. in Chemical Engineering and a Ph.D. in Physical Chemistry from MIT.

Paul J. Hoenmans is a member of our Audit Committee and Governance and Nominating Committee. Mr. Hoenmans is retired with over 35 years of senior executive level experience in the oil and gas industry. He served Mobil Oil Corporation in various executive capacities, most recently as director and Executive Vice President, with overall responsibility for policy, strategy, performance and stakeholder contact. From 1986 through 1996, he served as the President of Mobil Oil Corporation’s exploration and production division, with worldwide responsibility for upstream operations. Mr. Hoenmans held various other positions of senior executive level responsibility with Mobil since 1975, over both upstream and downstream operations worldwide throughout the Americas, Africa, Southeast Asia, the Middle East, Europe and Scandinavia. He received a B.S. in civil engineering from the University of British Columbia.

David B. Kilpatrick is Chairman of our Audit Committee and a member of the Compensation Committee and Section 162(m) Subcommittee. Mr. Kilpatrick has over 30 years of executive, management and operating experience in the oil and gas industry. Since 1998, he has been the President of Kilpatrick Energy Group, a consulting firm to oil and gas companies. From 1996 to 1998, Mr. Kilpatrick was the President and Chief Operating Officer for Monterey Resources, Inc., an independent oil and gas company in California. From 1982 to 1996, he held various managerial positions at Santa Fe Energy Resources, an oil and gas production company. Mr. Kilpatrick is currently serving as a director of the California Independent Petroleum Association and the Independent Oil Producers Agency. He is also currently serving as a director of BreitBurn Energy Partners, L.P., a publicly traded independent oil and gas limited partnership. During the past five years, Mr. Kilpatrick served as a director of PYR Energy Corporation, a publicly traded crude petroleum and natural gas company and Whittier Energy Corporation, a publicly traded oil and gas field exploration services company. Mr. Kilpatrick received a B.S. in petroleum engineering from the University of Southern California and a B.A. in geology and physics from Whittier College.

Jason G. New is a Senior Managing Director of GSO Capital Partners LP (“GSO”), a subsidiary of Blackstone Group, L.P., and Head of Distressed Investing for GSO. Mr. New focuses on managing GSO’s public investment portfolio with a specific emphasis on stressed and distressed companies and on sourcing direct distressed investment opportunities. Mr. New is also a member of the GSO Investment Committee. Before joining GSO in 2005, Mr. New was a senior member of Credit Suisse’s distressed finance group. Mr. New joined Credit Suisse in 2000 when it acquired Donaldson, Lufkin & Jenrette (“DLJ”) where he was a member of DLJ’s restructuring group. Prior to joining DLJ in 1999, he was an associate with the law firm of Sidley Austin LLP where he practiced law in the firm’s corporate reorganization group. Mr. New received a J.D. from Duke University School of Law and a B.A., magna cum laude, from Allegheny College.

D. Dwight Scott is a Senior Managing Director of GSO and Head of GSO’s Houston office. At GSO, Mr. Scott focuses on investments in the energy and power markets and is a member of GSO’s Investment Committee. Before joining GSO in 2005, Mr. Scott was an Executive Vice President and Chief Financial Officer of El Paso Corporation. Prior to joining El Paso in 2000, Mr. Scott served as a managing director in the energy investment banking practice of Donaldson, Lufkin & Jenrette. Mr. Scott earned a B.A. from the University of North Carolina at Chapel Hill and an M.B.A. from The University of Texas at Austin. Mr. Scott is currently serving as a member of the board of directors of SandRidge Energy, Inc., a publicly traded oil and gas exploration and production company and Crosstex Energy GP, LLC, the general partner of a publicly traded midstream energy company. Mr. Scott is also a member of the Board of Trustees of KIPP.

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J. Robinson West is a member of our Compensation Committee and Section 162(m) Subcommittee. Mr. West is the founder and Chairman of the Board of PFC Energy, a consulting business covering all aspects of the oil, gas and power business. Prior to founding PFC in 1984, Mr. West served as the Assistant Secretary of the Interior for Policy, Budget and Administration, with responsibility for U.S. offshore oil policy. He is currently a member of the National Petroleum Council and the Council on Foreign Relations, as well as President of the Wyeth Endowment for American Art. Mr. West is currently serving as a director of Key Energy Services, Inc., a publicly traded rig-based well service company. He received a B.A. from the University of North Carolina at Chapel Hill and a J.D. from Temple University.

Governance Information

Director Independence

The Board determines the independence of each director and nominee for election as a director in accordance with the rules and regulations of the Securities and Exchange Commission (“SEC”) and the NYSE Amex LLC independence standards, which are listed below. The Board also considers relationships that a director may have:

The NYSE Amex LLC independence standards state that the following list of persons shall not be considered independent:

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As of February 22, 2010, the Board determined that Messrs. Carney, Deutch, Hoenmans, Kilpatrick and West and Ms. Bailey are independent, and none of them has a relationship that may interfere with the exercise of his or her independent judgment.

Board Leadership Structure and Role in Risk Oversight

Board Leadership Structure. Mr. Souki serves as Chairman of our Board and Chief Executive Officer. From time to time, the Board considers whether Mr. Souki continues to be the appropriate person to serve in the combined role of Chairman and Chief Executive Officer. The Board has determined that Mr. Souki should continue to serve in the combined role of Chairman and Chief Executive Officer based on various factors. First, as a co-founder of the Company, Mr. Souki’s leadership and vision for the Company have been instrumental in its development. Second, as the Company’s facilities transition into being fully operational, Mr. Souki continues to have the ability to execute on both the Company’s short-term and long-term strategies necessary for its overall business plan in the LNG marketplace. Finally, Mr. Souki has the confidence of the Board, the Company and its stockholders to continue to implement the Company’s business plan.

In addition to these factors, the Company has in place sound counter-balancing mechanisms to ensure the continued accountability of the Chief Executive Officer to the Board. These counter-balancing mechanisms include:

The Board does not currently have a policy as to whether the role of Chief Executive Officer and Chairman should be separate and has the right to separate these roles in the future if it determines that such a separation would be in the best interest of the Company and its stockholders.

Independent Lead Director. In May 2007, in light of evolving governance practices, including the fact that the Company’s Chairman position was held by a non-independent director, the Board established the position of Lead Director to provide independent leadership to the Board. The Lead Director’s role exists to ensure that the Board operates independently of management and that directors have an independent leadership contact. Mr. Carney currently serves as the Lead Director of the Board. The responsibilities of the Lead Director, which have been formally adopted by the Board, outline the Lead Director’s role. The responsibilities of the Lead Director are to:

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Board’s Role in Risk Oversight. Risks that could affect the Company are an integral part of Board and committee deliberations throughout the year. The Board has oversight responsibility for assessing the primary risks (including liquidity, credit, operations and regulatory compliance) facing the Company, the relative magnitude of these risks and management’s plan for mitigating these risks. In addition to the Board’s oversight responsibility, the committees of the Board consider the risks within their areas of responsibility. The Board receives full reports by each of the committees regarding the committees’ considerations and actions of particular risks within the Company. The Board also receives regular reports directly from members of management who are responsible for oversight of particular risks within the Company. The Board discusses the risks related to the Company’s business strategy at its meetings and performs regular assessments of the primary risks to the Company.

Director Nominations and Qualifications

Director Nomination Policy and Procedures. Our Director Nomination Policy and Procedures are attached to the Governance and Nominating Committee’s written charter as Exhibit A, which is available on our website at www.cheniere.com. The Governance and Nominating Committee considers suggestions for potential director nominees to the Board of Directors from any source, including current members of the Board of Directors and our management, advisors and stockholders. The Governance and Nominating Committee of the Board of Directors evaluates potential nominees by reviewing their qualifications, results of personal and reference interviews and any other information deemed relevant. Director nominees are recommended to the Board of Directors by the Governance and Nominating Committee. The full Board of Directors will select and recommend candidates for nomination as directors for stockholders to consider and vote upon at the annual stockholders’ meeting. The Governance and Nominating Committee reviews and considers any candidates submitted by a stockholder or stockholder group in the same manner as all other candidates.

Qualifications for consideration as a director nominee vary according to the particular areas of expertise being sought as a complement to the existing Board composition. However, minimum criteria for selection of members to serve on our Board of Directors include the following:

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Practices for Considering Diversity. The minimum criteria for selection of members to serve on our Board of Directors ensures that the Governance and Nominating Committee selects director nominees taking into consideration that the Board will benefit from having directors that represent a diversity of experience and backgrounds. Director nominees are selected so that the Board represents a diversity of experience in areas needed to foster the Company’s business success, including experience in the energy industry, finance, consulting, international affairs, public service, governance and regulatory compliance. Each year the Board of Directors and each committee participates in a self-assessment or evaluation of the effectiveness of the Board and its committees as a group. These evaluations assess the diversity of talents, expertise, and occupational and personal backgrounds of the Board members.

Stockholder Nominations for Director. A stockholder of the Company who is entitled to vote at a meeting of stockholders called for the election of directors may nominate candidates for election to the Board of Directors. Nominations made by a stockholder must be made by giving notice in writing to the Corporate Secretary of the Company before the later to occur of (i) 60 days prior to the date of the meeting of stockholders called for the election of directors or (ii) 10 days after the Board of Directors makes public disclosure of the date of such meeting. In no event will the public disclosure of an adjournment of an annual meeting of stockholders commence a new time period for the giving of a stockholder’s notice as described above. A stockholder’s notice must set forth the following information as to each person whom the stockholder proposes to nominate for election or re-election as a director: (i) the name, age, business address and residence address of such person, (ii) the principal occupation or employment of such person, (iii) the class and number of shares of capital stock of the Company that are then beneficially owned by such person, (iv) any other information relating to such person that is required by law or regulation to be disclosed in solicitations of proxies for the election of directors of the Company and (v) such person’s written consent to being named as a nominee for election as a director and to serve as a director, if elected. A stockholder’s notice must also set forth the following information as to the stockholder giving the notice: (i) the stockholder’s name and address as they appear in the stock records of the Company, (ii) the class and number of shares of capital stock of the Company that are then beneficially owned by the stockholder, (iii) a description of all arrangements or understandings between the stockholder and each nominee for election as a director and any other person or persons (naming such person or persons), relating to the stockholder’s nomination and (iv) any other information required by law or regulation to be provided by a stockholder intending to nominate a person for election as a director of the Company.

Director Qualifications. The Board has concluded that, in light of our business and structure, each of our directors possesses relevant experience, qualifications, attributes and skills and should continue to serve on our Board as of the date of this Proxy Statement. The primary qualifications of our directors are further discussed below.

Mr. Souki has extensive experience with the Company as Chief Executive Officer of Cheniere, Cheniere Energy Partners and the general partner of Sabine Pass LNG, L.P., and is responsible for developing the companies’ overall strategy and vision and implementing the business plans. In addition, with 20 years of experience as an investment banker specializing in the oil and gas industry, Mr. Souki brings a unique perspective on the energy business to our Board.

Mr. Williams has significant knowledge and expertise about Cheniere and its subsidiaries based on his long history with Cheniere serving as former Chief Executive Officer of the Company for two years and serving as

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Vice Chairman of the Board of Directors for over 12 years. Mr. Williams brings significant executive-level experience in the oil and gas industry as well as significant knowledge about the operations of the Company to our Board.

Ms. Bailey has extensive knowledge of the energy industry, including significant experience with the Federal Energy Regulatory Commission, and government and public relations, and she brings a diversified perspective to our Board based on her experience as a strategic consultant, a former energy executive and having served as Assistant Secretary for the Office of Policy and International Affairs.

Mr. Brandolini brings a unique financial perspective to our Board based on his extensive experience as an investment banker and having actively managed private equity investments for over 17 years.

Mr. Carney has over 28 years of experience in the oil and gas industry and significant knowledge and expertise about Cheniere and its subsidiaries based on his long history with Cheniere serving as former Executive Vice President and Chief Financial Officer and Treasurer of the Company. Mr. Carney brings significant executive-level experience in the oil and gas industry as well as significant expertise about the Company’s operations to our Board.

Mr. Deutch has extensive knowledge in the areas of technology, energy, international security and public policy, and he brings a diversified perspective about the energy industry to our Board based on having served in significant government and academic posts throughout his career as well as on many commissions during several presidential administrations, including having served in a number of positions for the U.S. Department of Energy.

Mr. Hoenmans has over 35 years of senior executive level experience in the oil and gas industry, including overall responsibility for policy, strategy, performance and stakeholder contact as well as worldwide responsibility for upstream operations. Mr. Hoenmans brings significant executive-level experience in the oil and gas industry as well as an international perspective to our Board.

Mr. Kilpatrick has over 30 years of executive, management and operating experience in the oil and gas industry and brings significant executive-level and consulting experience in the oil and gas industry to our Board.

Messrs. New and Scott serve as officers of GSO and its affiliates who have a significant capital investment in the Company and were nominated by GSO to serve as directors of the Company. Mr. New has extensive experience in distressed finance and corporate restructuring with an emphasis on sourcing direct distressed investment opportunities and brings a unique financial perspective on distressed companies to our Board. Mr. Scott has extensive knowledge of the energy industry based on his experience as an investment banker focusing on the energy industry and as a former energy executive. Mr. Scott brings significant executive-level experience in the oil and gas industry as well as a unique financial perspective to our Board.

Mr. West brings a unique perspective on the international energy industry to our Board based on his extensive experience as a consultant advising chief executive officers of leading international oil and gas companies and national oil companies on corporate strategy, portfolio management, acquisitions, divestitures, and investor relations as well as having served as Assistant Secretary of the Interior for Policy, Budget and Administration, with responsibility for U.S. offshore oil policy.

Code of Conduct and Ethics

Our Code of Business Conduct and Ethics, which is applicable to all directors, officers and employees of the Company, is available on the Company’s website at www.cheniere.com.

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Meetings and Committees of the Board

Our operations are managed under the broad supervision and direction of the Board of Directors, which has the ultimate responsibility for the establishment and implementation of the Company’s general operating philosophy, objectives, goals and policies. Pursuant to delegated authority, certain Board functions are discharged by the Board’s standing Audit, Compensation and Governance and Nominating Committees. Members of the Audit, Compensation and Governance and Nominating Committees for a given year are selected by the Board following the annual stockholders’ meeting. During the fiscal year ended December 31, 2009, the Company’s Board of Directors held 8 meetings. Each incumbent member of the Board attended or participated in at least 75% of the aggregate number of (i) Board meetings and (ii) committee meetings held by each committee of the Board on which the director served, with the exception of Mr. Brandolini who attended 69%. Although directors are not required to attend annual stockholders’ meetings, they are encouraged to attend such meetings. At the 2009 annual meeting of stockholders, all members of the Board of Directors were present with the exception of Mr. Brandolini and Mr. West.

Audit Committee

The Audit Committee’s members at December 31, 2009 were David B. Kilpatrick, Vicky A. Bailey, Nuno Brandolini, Paul J. Hoenmans and Jason G. New, all of whom were considered independent during their terms of service on the Audit Committee. In particular, in determining that Messrs. Brandolini and New were independent, the Board considered the Company’s transaction with GSO and the related party transactions discussed beginning on page 47 of this Proxy Statement. Effective February 22, 2010, Mr. Brandolini and Mr. New resigned from the Audit Committee and Mr. Carney was appointed as a member of the Audit Committee. Mr. Kilpatrick serves as Chairman of the Audit Committee. Each member of the Audit Committee has been determined by the Board to be “independent” as defined by the NYSE Amex listing standards and by the SEC, and the Board has determined that Mr. Carney is an “audit committee financial expert” as defined in Item 407(d)(5)(ii) of Regulation S-K promulgated by the SEC. The Audit Committee held 5 meetings during the fiscal year ended December 31, 2009.

The Audit Committee has a written charter, which is available on our website at www.cheniere.com. The Audit Committee is appointed by the Board to oversee the accounting and financial reporting processes of the Company and the audits of the Company’s financial statements. The Audit Committee assists the Board in monitoring:

The Audit Committee provides for open, ongoing communication among the independent accountants, financial and senior management, compliance officers and the Board concerning our financial and compliance position and affairs. The Audit Committee has the power to conduct or authorize investigations into any matters within its scope of responsibilities and has sole authority to retain special legal, accounting or other consultants to advise the Audit Committee and to approve the fees and other retention terms of such consultants. The Audit Committee’s responsibility is oversight, and it recognizes that the Company’s management is responsible for preparing the Company’s financial statements and complying with applicable laws and regulations.

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Governance and Nominating Committee

The Governance and Nominating Committee’s members at December 31, 2009 were John M. Deutch, Vicky A. Bailey, Nuno Brandolini and Paul J. Hoenmans, all of whom were considered independent during their terms of service on the Governance and Nominating Committee. In particular, in determining that Mr. Brandolini was independent, the Board considered the Company’s transaction with GSO and the related party transactions discussed beginning on page 47 of this Proxy Statement. Effective February 22, 2010, Mr. Brandolini resigned from the Governance and Nominating Committee. Mr. Deutch serves as Chairman of the Governance and Nominating Committee. Each member of the Governance and Nominating Committee has been determined by the Board to be “independent” as defined by the NYSE Amex LLC listing standards and by the SEC. The Governance and Nominating Committee did not hold any formal meetings during fiscal year ended December 31, 2009, and a majority of the independent directors of the Board took action, as necessary, to recommend to the full Board all items required to be addressed by the Governance and Nominating Committee during 2009.

The Governance and Nominating Committee has a written charter, which is available on our website at www.cheniere.com. The Governance and Nominating Committee is appointed by the Board to oversee the Company’s policies and practices relating to corporate governance and to review the effectiveness of the policies and practices periodically. The Governance and Nominating Committee has the following duties and responsibilities, among others:

Compensation Committee

The Compensation Committee’s members at December 31, 2009 were D. Dwight Scott, Keith F. Carney, David B. Kilpatrick and J. Robinson West, all of whom were considered independent during their terms of service on the Compensation Committee. In particular, in determining that Mr. Scott was independent, the Board considered the Company’s transaction with GSO and the related party transactions discussed beginning on page 47 of this Proxy Statement. Mr. Scott served as Chairman of the Compensation Committee until he resigned from the Compensation Committee on February 22, 2010. Effective February 22, 2010, Ms. Bailey was appointed as Chair and as a member of the Compensation Committee. Each Compensation Committee member has been determined by the Board to be free from any relationship that in the opinion of the Board would interfere with the exercise of independent judgment as a member of the Compensation Committee. Each member of the Compensation Committee is a non-employee director as defined in the rules and regulations of the SEC. Each member of the Compensation Committee also meets the independence requirements of the NYSE Amex LLC. The Compensation Committee held 7 meetings during 2009. The Compensation Committee reviews and approves the compensation policies, practices and plans of the Company pursuant to a written charter, which is available on our website at www.cheniere.com. The Chairman of the Compensation Committee,

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in consultation with other Compensation Committee members, members of management and the compensation consultant, determines the agenda and dates of Compensation Committee meetings.

Under Section 162(m) of the Internal Revenue Code of 1986, as amended (the “Code”), a public company’s corporate income tax deduction is capped at $1 million per year for amounts paid to the company’s chief executive officer and three other highest paid executives (excluding the chief executive officer and chief financial officer). However, the $1 million cap does not apply to performance-based compensation that is paid because of the attainment of one or more pre-established and objective performance goals adopted by a compensation committee consisting of two or more “outside directors.” For a member of a compensation committee to be considered an outside director under Section 162(m) of the Code, the director must not:

Mr. Carney, a member of the Compensation Committee, is a former officer of Cheniere and, as such, is not considered independent under the Code. It was also determined that Mr. Scott should not be considered independent under the Code because the non-advisory fee paid by the Company to GSO in August 2008 and the ongoing interest payments the Company pays on a loan with GSO constitute remuneration received by Mr. Scott from the Company. In order for performance-based compensation to meet the exemption of the $1 million cap, a Section 162(m) Subcommittee of all of the Compensation Committee members except for Mr. Scott and Mr. Carney exists. Ms. Bailey currently serves as Chair of the Section 162(m) Subcommittee. The purpose of the Section 162(m) Subcommittee is to monitor compliance by the Company with the requirements of Section 162(m) of the Code and to consider and approve performance-based awards. The Section 162(m) Subcommittee held one meeting during 2009.

The Compensation Committee’s charter is reviewed annually. Changes to the charter must be approved by the Board on the recommendation of the Compensation Committee. The charter provides that the Compensation Committee has the sole authority to retain and terminate any compensation consultant engaged to assist in the evaluation of compensation of directors and executive officers of the Company, including the sole authority to approve such consultant’s fees and other retention terms. Pursuant to the charter, the Compensation Committee and/or Section 162(m) Subcommittee have the following duties and responsibilities, among others:

Compensation Committee Interlocks and Insider Participation

Mr. Carney, who serves as a member of the Compensation Committee, was formerly an officer of the Company. Mr. Carney served as Chief Financial Officer and Treasurer of the Company from July 1996 through November 1997 and Executive Vice President from 1997 through August 2001. None of our executive officers serves as a member of the compensation committee of any other company that has an executive officer serving as a member of our Board of Directors. None of our executive officers serves as a member of the board of directors of any other company that has an executive officer serving as a member of our Compensation Committee.

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Director Compensation

The compensation paid to our directors for the year ended December 31, 2009, is set forth in the following table:

Director Compensation Table for Fiscal 2009

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During the fiscal year ended December 31, 2009, the Board of Directors approved compensation, payable as of June 15, 2009, of $160,000 to non-employee directors for service for the period from the 2009 Annual Meeting of Stockholders through the 2010 Annual Meeting of Stockholders. The Board also awarded the Chairman of the Audit Committee, the Chairman of the Compensation Committee and the Lead Director additional compensation of $20,000 each and the Chairman of the Governance and Nominating Committee additional compensation of $10,000 for the additional time required to perform their responsibilities. In order to provide the directors some flexibility on the type and timing of the compensation, directors were given the option to elect payment of such amounts 100% in restricted stock or 50% in restricted stock and 50% in cash. Cash payments are made quarterly. The number of shares of restricted stock issued was determined based on the closing price of the Company’s common stock as reported by the NYSE Amex LLC on the date payable (for June 15, 2009: $3.64). The directors’ restricted stock vests on the first anniversary of the date of grant.

PROPOSAL 2—RATIFICATION OF ERNST & YOUNG LLP AS INDEPENDENT ACCOUNTANTS

Ernst & Young LLP (“E&Y”) served as our independent auditor for the fiscal year ended December 31, 2009 and has been appointed by the Audit Committee to serve as our independent auditor for the fiscal year ending December 31, 2010.

Independent Accountant’s Fees

The following table sets forth the fees billed to us by E&Y for professional services for the years ended December 31, 2009 and 2008.

Audit Fees—Audit fees for the fiscal years ended December 31, 2009 and 2008 include attestation services and review of documents filed with the SEC in addition to audit, review and all other services performed to comply with generally accepted auditing standards.

Audit-Related Fees—Audit-related fees for the fiscal year ended December 31, 2008 were for due diligence, accounting assistance, and consultation concerning financial accounting and reporting standards.

Tax Fees—Tax fees for the fiscal year ended December 31, 2009 were for U.S. tax compliance and U.S. Customs and Border Protection compliance.

We did not pay E&Y any tax fees or other fees during the fiscal year ended December 31, 2008.

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Pre-Approval Policies and Procedures

The Audit Committee’s policy is to pre-approve all audit and non-audit services provided by the independent accountants and not to engage the independent accountants to perform any non-audit services specifically prohibited by law or regulation. All audit and non-audit services provided to us during the fiscal years ended December 31, 2009 and 2008 were pre-approved.

We anticipate that a representative of E&Y will participate in the Annual Meeting of Stockholders and may make a statement if they desire to do so, and they will be available to respond to appropriate questions concerning our financial statements.

The Board of Directors recommends a vote FOR the ratification of the Audit Committee’s appointment of Ernst & Young LLP as the Company’s independent accountants for the fiscal year ending December 31, 2010.

MANAGEMENT

Executive Officers

The following table sets forth the names, ages and positions of each of our executive officers, as of April 13, 2010, all of whom serve at the request of the Board of Directors and are subject to annual appointment by the Board:

Charif Souki, a co-founder of the Company, is currently Chairman of the Board of Directors and Chief Executive Officer. Further information regarding Mr. Souki is provided above under “Director Biographies.”

Jean Abiteboul has served as Senior Vice President—International since November 2007. Since February 2006, Mr. Abiteboul has also served as Executive Director, Cheniere LNG Services S.A.R.L., a wholly-owned subsidiary of the Company. From 1975 until February 2006, he held different positions within Gaz de France, a publicly traded natural gas distribution company, including Secretary to the Board of Directors from 2004 until 2006; International Executive Vice President from 2003 to 2004; Executive Vice President, Gas Supply, Trading and Marketing from 2002 until 2003; and Executive Vice President, Gas Supply from 1998 to 2003. He also served on the Board of Directors of Tejas Power Corporation (USA), Gas Metropolitan (Canada), Sceptre Resources (Canada) and other affiliated companies of Gaz de France in Europe. Mr. Abiteboul graduated as an Engineer from Ecole Centrale de Lyon and obtained a Diploma in Economics from Université de Lyon.

Meg Gentle has served as Senior Vice President and Chief Financial Officer since March 2009. Prior to March 2009, she served as Senior Vice President—Strategic Planning & Finance since February 2008. Prior to February 2008, she served as Vice President of Strategic Planning since September 2005 and Manager of Strategic Planning since June 2004. Prior to joining Cheniere in June 2004 as Manager, Strategic Planning, Ms. Gentle spent eight years in energy market development, economic evaluation, and long-range planning. She conducted international business development and strategic planning for Anadarko Petroleum Corporation, a publicly traded integrated energy company, from January 1998 to May 2004 and energy market analysis for Pace Global Energy Services, an energy management and consulting firm, from August 1996 to December 1998. Ms. Gentle is currently a director and Senior Vice President and Chief Financial Officer of Cheniere Energy

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Partners GP, LLC, a wholly-owned subsidiary of the Company. Ms. Gentle received her B.A. in Economics and International Affairs from James Madison University in May 1996 and her M.B.A. from Rice University in May 2004.

R. Keith Teague has served as Senior Vice President—Asset Group since April 2008 and President of Cheniere Pipeline Company, a wholly-owned subsidiary of the Company, since January 2005. Prior to April 2008, he served as Vice President—Pipeline Operations since May 2006. He is responsible for the development, construction and operation of the Company’s LNG receiving terminal and pipeline assets. Mr. Teague began his career with the Company in February 2004 as Director of Facility Planning. Prior to joining the Company, Mr. Teague served as the Director of Strategic Planning for the CMS Panhandle Companies from December 2001 until September 2003. Mr. Teague is currently a director, President and Chief Operating Officer of Cheniere Energy Partners GP, LLC. Mr. Teague received a B.S. in civil engineering from Louisiana Tech University and an M.B.A. from Louisiana State University.

H. Davis Thames has served as Senior Vice President—Marketing of the Company since December 2007 and President of Cheniere Marketing, Inc., a wholly-owned subsidiary of the Company, since November 2007. Prior to that time, he was Vice President Marketing, Strategy & Analysis since December 2006 and Executive Vice President of Cheniere Marketing, Inc. since February 2007. Prior to joining the Company as Vice President Marketing & Analysis on July 2005, Mr. Thames worked for several years at Cross Country Energy, LLC, serving as Director of Finance, Risk Management and Credit for Transwestern Pipeline, Florida Gas Transmission, and Northern Border Partners, before being promoted to Senior Director of Special Projects at the time of Cross Country’s acquisition by Southern Union and General Electric. Mr. Thames also served as President of Citrus Trading Corp. Previously, Mr. Thames worked in several structured commodity derivative and project finance teams for Enron Corp. Prior to joining Enron, Mr. Thames managed one of Flowserve Corp.’s engineering groups, designing rotating equipment for the energy industry. Mr. Thames earned a B.S. in Mechanical Engineering from The University of Texas at Austin, an M.S. in Mechanical Engineering from Texas A&M University, and an M.B.A. from the UCLA Anderson School of Management.

Indemnification of Officers and Directors

Our Restated Certificate of Incorporation (“Certificate of Incorporation”) and Amended and Restated By-laws, as amended (“By-laws”), provide that the Company shall indemnify its directors and officers to the fullest extent possible under Delaware law. These indemnification provisions require the Company to indemnify such persons against certain liabilities and expenses to which they may become subject by reason of their service as a director or officer of the Company or any of its affiliated enterprises. The provisions also set forth certain procedures, including the advancement of expenses, that apply in the event of a claim for indemnification.

We have also entered into an Indemnification Agreement with each member of our Board of Directors and each officer of the Company. The Indemnification Agreement provides for indemnification for all expenses and claims that a director or officer incurs as a result of actions taken, or not taken, on behalf of the Company while serving as a director, officer, employee, controlling person, agent or fiduciary of the Company, or any subsidiary of the Company, with such indemnification to be paid within 25 days after demand. The Indemnification Agreement provides that no indemnification will generally be provided (1) for claims brought by the director or officer, except for a claim of indemnity under the Indemnification Agreement, if the Company approves the bringing of such claim, or if the Delaware General Corporation Law requires providing indemnification because the director or officer has been successful on the merits of such claim, (2) for claims under Section 16(b) of the Securities Exchange Act of 1934, as amended, (3) if the director or officer did not act in good faith or in a manner reasonably believed by the director or officer to be in or not opposed to the best interests of the Company, (4) if the director or officer had reasonable cause to believe that his or her conduct was unlawful in a criminal proceeding, or (5) if the director or officer is adjudged liable to the Company. Indemnification will be provided to the extent permitted by law, the Company’s Certificate of Incorporation and By-laws, and to a greater extent if by law the scope of coverage is expanded after the date of the Indemnification Agreement. In all events, the scope of coverage will not be less than what is in existence on the date of the Indemnification Agreement.

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SECURITY OWNERSHIP

As of April 13, 2010, there were 57,262,754 shares of common stock outstanding. The information provided below summarizes the beneficial ownership of directors, nominees for director, named executive officers as set forth in the Summary Compensation Table below, and owners of more than 5% of outstanding common stock. “Beneficial Ownership” generally includes those shares of Company common stock that a person has the power to vote, sell or acquire within 60 days. It includes shares of Company common stock that is held directly and also shares held indirectly through a relationship, a position as a trustee or under a contract or understanding.

Directors and Executive Officers

The following table sets forth information with respect to shares of common stock of the Company owned of record and beneficially as of April 13, 2010, by each director, nominee for director and named executive officer and by all directors and executive officers of the Company as a group. On April 13, 2010, the directors and executive officers of the Company beneficially owned an aggregate of 2,921,386 shares of common stock (approximately 5.1% of the outstanding shares entitled to vote at the time).

The table also presents the ownership of common units of Cheniere Energy Partners, L.P. (“Cheniere Partners”) owned of record or beneficially as of April 13, 2010, by each director, nominee for director and named executive officer and by all directors and executive officers of the Company as a group. The Company owns a majority interest in Cheniere Partners though its wholly-owned subsidiaries, Cheniere LNG Holdings, LLC, Cheniere Subsidiary Holdings, LLC, Cheniere Common Units Holding, LLC and Cheniere Energy Partners GP, LLC. As of April 13, 2010, there were 26,416,357 common units, 135,383,831 subordinated units and 3,302,045 general partner units of Cheniere Partners outstanding.

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Owners of More than Five Percent of Outstanding Stock

The following table shows the beneficial owners known by us to own more than five percent of our voting stock as of April 13, 2010.

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REPORT OF THE AUDIT COMMITTEE

The Audit Committee of the Board is responsible for oversight of the accounting and financial reporting processes of the Company and oversight of the audits of our financial statements. Management of the Company is responsible for preparing our financial statements and complying with applicable laws and regulations. It is the responsibility of management and the independent accountants to determine that our financial statements are complete and accurate and are in accordance with generally accepted accounting principles.

The Audit Committee discussed with both our internal and independent accountants the overall scope and plans for their respective audits. In addition, the Audit Committee met with both management and our independent accountants to review and discuss all financial statements prior to their issuance and to discuss significant accounting issues. Management advised the Audit Committee that all financial statements were prepared in accordance with generally accepted accounting principles. The Audit Committee’s review with the independent accountants included discussions of those matters required to be discussed by Public Company Accounting Oversight Board Auditing Standard AU Section 380 (Communication with Audit Committees) and Rule 2-07 of SEC Regulation S-X. The Audit Committee also discussed with the independent accountants, among other things, matters relating to their independence, and the Audit Committee received the written disclosures and the letter from the independent accountants required by applicable requirements of the Public Company Accounting Oversight Board regarding the independent accountant’s communications with the Audit Committee concerning independence. Finally, the Audit Committee continued to monitor the scope and adequacy of our internal control system.

On the basis of these reviews and discussions, the Audit Committee recommended to the Board of Directors that the Board approve the inclusion of the Company’s audited financial statements in our Annual Report on Form 10-K for the year ended December 31, 2009 for filing with the SEC.

THE AUDIT COMMITTEE

David B. Kilpatrick, Chairman

Vicky A. Bailey

Keith F. Carney

Paul J. Hoenmans

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EXECUTIVE COMPENSATION

Compensation Discussion and Analysis

The following discussion and analysis of compensation arrangements of our named executive officers should be read together with the compensation tables and related disclosures set forth below. This discussion contains forward-looking statements that are based on our current plans, as well as considerations, expectations and determinations regarding future compensation programs. Actual compensation programs that we adopt may differ materially from currently planned programs as summarized in this discussion.

Company Overview

We own and operate the Sabine Pass LNG receiving terminal and Creole Trail Pipeline located in the Gulf Coast of the United States.

Overview of Executive Compensation for 2009

The following are highlights of the more significant events involving our executive officers’ compensation for 2009:

Compensation Philosophy and Objectives

Our executive compensation program and objectives are based on our need to attract and retain executives with the talent and experience necessary for Cheniere to achieve its primary business goals. We compete for executive talent with larger energy companies that have substantially greater resources. In 2009, we generally targeted our executives’ base salaries at the median of the market data of energy companies within which we operate and compete with for executive talent. Our executive officers’ total compensation for 2009 consisted of their annual base salary and a discretionary bonus award, the payment of which was based on the Company’s performance in 2009. During 2009, we also implemented a new long-term incentive plan for our employees, including our executive officers, and our executive officers were granted 2009 Phantom Stock Awards that vest in future years based on a combination of performance and continued employment.

Independent Compensation Consultant

The Compensation Committee has engaged Deloitte Consulting LLP (“Deloitte”) to review our compensation practices and provide the Compensation Committee with advice and assistance related to the design of our incentive compensation plans. In 2009, management made recommendations to the Compensation Committee concerning competitive pay ranges for our executive officers, appropriate base salary adjustments, a new long-term incentive plan for all of our employees, including the executive officers, and the amounts of the 2009 Bonus Awards. Deloitte reviewed management’s recommendations and provided guidance to the Compensation Committee and management regarding the reasonableness of the recommendations based on

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market data. Deloitte also assisted the Compensation Committee and management in the establishment of a 2010 bonus plan for all of our employees, including our executive officers. The Compensation Committee and management seek Deloitte’s guidance in an effort to establish compensation packages for our executive officers that are reasonable and in line with other companies in our industry. Deloitte reports to the Compensation Committee Chairman and has direct access to Compensation Committee members. Deloitte attends Compensation Committee meetings on request and also meets with the Compensation Committee in executive session without management present. Those Deloitte personnel involved in matters within the purview of the Compensation Committee do not participate in any other services provided to us by Deloitte affiliates. During 2009, we used Deloitte Financial Advisory Services LLP for certain accounting services, Deloitte Tax LLP for certain tax consulting services, Deloitte Accounting Services (France) for certain payroll and financial bookkeeping services for our French office and Taj Societe D’Avocats, a member of Deloitte Touche Tohmatsu, for certain professional tax services. The aggregate fees the Company paid to Deloitte’s affiliates for non-executive compensation consulting services was $159,202 during 2009, and the aggregate fees the Company paid to Deloitte for executive compensation consulting services was $48,855 during 2009. The decision to engage and the fees the Company paid to Deloitte’s affiliates for non-executive compensation consulting services were approved by management and not the Compensation Committee or the Board because these services fall within management’s approval authority in the normal course of business. The Compensation Committee believes that the nature and scope of these services do not impair Deloitte’s ability to provide an independent perspective to the Compensation Committee in its deliberations about executive officer compensation.

Role of Compensation Committee and Executive Officers in Compensation Decisions

The Compensation Committee has the responsibility to review and approve annual compensation, including the competitiveness of each element of the total compensation package, for the Chief Executive Officer (“CEO”) and each of our Senior Vice Presidents, who together with the CEO we will refer to in this Compensation Discussion and Analysis collectively as the “Executive Officers.” The Compensation Committee endeavors to provide total compensation for the Executive Officers that is reasonable and competitive. In determining total compensation for the Executive Officers, the Compensation Committee recognizes that the Company is at a critical stage in its commercial development and that the Executive Officers’ total compensation must provide an incentive to achieve the Company’s overall business plan.

The base salaries, discretionary bonus awards and other equity awards for the Executive Officers, other than the CEO, are customarily proposed to the Compensation Committee by the CEO. The compensation recommendations for the CEO are developed by the Compensation Committee. All recommendations reflect input from Deloitte and our Human Resources (“HR”) department based on their review of external market data and Deloitte’s guidance on best practices. The Compensation Committee makes the final determination as to the base salaries, discretionary bonus awards and other equity awards for each of the Executive Officers based on Company and individual performance, the Company’s budget for compensation and market data.

Elements of 2009 Executive Compensation

We strive to offer a competitive compensation and benefits package to enable us to retain our current personnel and to recruit new executive talent as necessary. Each year, the Compensation Committee reviews external market data to determine the competitiveness of the total compensation package of our Executive Officers. The market data selected is representative of the energy industry within which we operate and includes companies relative to our size and business activity with which we compete for executive talent. Our HR department compiles and analyzes the market data with verification from Deloitte that our HR department’s analysis is accurate and reasonable. The Compensation Committee reviews the following components of the Executive Officers’ compensation relative to the amount paid to executives in similar positions within the market data: base salary, cash bonuses and equity compensation. We use the market data as a point of reference for measuring the compensation of the Executive Officers, but compensation decisions are made based on a combination of considerations. Our CEO works with our HR department to provide the Compensation

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Committee with recommendations on compensation based on the following considerations: the Company’s performance, the roles, responsibilities and performance of the Executive Officers, the Company’s budget for compensation and market competitiveness.

In 2009, the total compensation package for each of our Executive Officers included his or her annual base salary and a discretionary bonus award. Payment of the discretionary bonus award was based on the Company’s performance in 2009. We also implemented a new long-term incentive plan for our employees, including our Executive Officers, and the Executive Officers were granted 2009 Phantom Stock Awards. The 2009 Phantom Stock Awards vest in future years based on a combination of performance and continued employment and will be settled in cash or in shares of our common stock as determined by the Compensation Committee.

In 2009, the total compensation package of our employees, including our Executive Officers, was intended to focus their efforts on the achievement of certain of the Company’s near-term financial and non-financial goals for 2009 as well as progress made towards the achievement of long-term goals under our three-year business plan. We believe our compensation policies and practices are not reasonably likely to have a material adverse effect on the Company and do not include risk-taking incentives or encourage our employees, including our Executive Officers, to take excessive risks in order to receive larger awards. The actual compensation awarded to our employees, including our Executive Officers, is generally based on the Company’s achievement of annual as well as long-term goals that were reviewed and approved by management.

2009 Base Salaries

Our Executive Officers’ base salaries for 2009 are set forth in the table below. Mr. Souki’s base salary increase was effective January 7, 2009. The decision to increase Mr. Souki’s base salary for 2009 is described in more detail below under “Analysis of Executive Officers’ Total Compensation for 2009 – Base Salary.” None of the other Executive Officers received a base salary increase for 2009.

2009 Base Salary

2009 Bonus Awards

On January 6, 2010, the Compensation Committee considered the achievement of certain of the Company’s near-term financial and non-financial goals for 2009 as well as progress made towards the achievement of long-term goals under our three-year business plan and decided that it was appropriate to pay discretionary bonus awards to the Executive Officers for 2009 performance. The discretionary bonus awards were paid in a combination of cash and shares of our common stock. The amount of the Executive Officers’ discretionary bonus awards was determined based on target amounts that had been previously established by the Compensation

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Committee as a percentage of the Executive Officers’ base salaries (the “2009 Annual Bonus Targets”). The Compensation Committee approved a cash bonus pool at the 2009 Annual Bonus Targets. In addition, the Compensation Committee also approved the issuance of 679,000 shares of our common stock to be granted to the Executive Officers on January 27, 2010, pursuant to the Cheniere Energy, Inc. Amended and Restated 2003 Stock Incentive Plan, as amended (the “2003 Plan”). The shares were allocated to the Executive Officers based on their contributions during 2009. The shares are not restricted and are immediately tradable. The following discretionary bonus awards were paid to the Executive Officers for 2009 performance and are described in more detail below under “Analysis of Executive Officers’ Total Compensation for 2009 – 2009 Bonus Awards.”

2009 Bonus Awards

2009 Phantom Stock Awards

On February 25, 2009, the Section 162(m) Subcommittee of the Compensation Committee of the Board of Directors (the “Section 162(m) Subcommittee”) approved the 2009 Phantom Stock Awards for our Executive Officers granted under the 2003 Plan. The 2009 Phantom Stock Awards were made on February 25, 2009, and June 12, 2009, as set forth below and are described in more detail below under “Analysis of Executive Officers’ Total Compensation for 2009 – 2009 Phantom Stock Awards.”

2009 Phantom Stock Awards

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2008 Retention Awards and Change of Control Agreements

In 2008, the Compensation Committee approved a special retention program for certain employees, including the Executive Officers who remained with the Company following a significant reduction of our workforce that occurred in 2008. The retention program included a short-term retention award paid in cash and equity, which vested on December 1, 2008, a long-term retention award paid in equity, which vests over three years beginning on December 31, 2008, and a potential cash payment payable upon a change of control of the Company. The retention program is not intended to be an annual element of compensation. The retention awards for the Executive Officers are as set forth below and are described in more detail below under “Analysis of Executive Officers’ Total Compensation for 2009 – 2008 Retention Awards and Change of Control Agreements.”

2008 Retention Awards

Benefits

We offer the same benefits package to all of our employees and Executive Officers. The Cheniere Retirement Plan is a tax-qualified 401(k) savings plan pursuant to which we match 100% up to the lesser of 6% of salary deferrals or the maximum deferrals permitted by law. Effective for 2010, the employer match contribution will be reduced to 5% of salary deferrals or the maximum deferrals permitted by law. We also provide all employees with medical, dental and vision benefits as well as health reimbursement arrangements. In addition, employees are covered by short-term and long-term disability, basic life insurance equal to two times base salary and voluntary life (elective) insurance and accidental death and dismemberment insurance. We also provide a Section 125 Cafeteria Plan for our employees. We do not offer a defined benefit pension plan to our employees, including the Executive Officers.

Perquisites and Other Personal Benefits

Perquisites are provided to the Executive Officers on a limited basis. We currently provide contract parking for all of our employees, and the Executive Officers are assigned a reserved parking space in our office building.

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In July 2009, we entered into a U.K. assignment letter with Mr. Souki so that he is able to spend a portion of his time working from London to conduct international and domestic operations for the Company. Pursuant to the U.K. assignment letter, in 2009, the Company paid for a one-time finder’s fee for Mr. Souki’s temporary living arrangements in the U.K. and all fees, including reasonable legal fees, for preparation and obtainment of the proper work clearances in the U.K. The Company also pays for an annual allowance for the cost of housing in the U.K. In April 2010, the Compensation Committee approved an amendment to Mr. Souki’s U.K. assignment letter to extend the term of his assignment to July 1, 2011 and increase the amount of his annual allowance.

Mr. Abiteboul uses a car either leased or owned by the Company. In addition, the Company pays the costs of personal tax services, club memberships and home telecommunication services for Mr. Abiteboul. The Company also makes contributions to a discretionary French retirement plan on behalf of Mr. Abiteboul. In April 2010, the Compensation Committee approved an amendment to Mr. Abiteboul’s French employment agreement. The amendment provides for a secondment arrangement with Cheniere Supply & Marketing, Inc. and Mr. Abiteboul. Mr. Abiteboul will be seconded by the Company to the Company’s London office, which serves as the head office of the English branch of Cheniere Supply & Marketing, Inc., for the purposes of developing the commercial strategy and sourcing LNG supply for the Company. Cheniere Supply & Marketing, Inc. will make direct payment to a landlord to cover the lease payments related to Mr. Abiteboul’s temporary housing in the U.K and Mr. Abiteboul will receive a tax equalization payment for a portion of the taxes he will incur as a result of the secondment. The Company has also agreed to pay reasonable installation costs related to the commencement of Mr. Abiteboul’s secondment and reasonable fees related to Mr. Abiteboul’s individual tax planning and preparation of his tax declaration.

The total cost to the Company for any perquisites and other personal benefits provided to the Executive Officers during 2007, 2008 and 2009 is provided in the “Summary Compensation Table.”

Analysis of Executive Officers’ Total Compensation for 2009

Base Salary

The base salaries of the Executive Officers are designed to be comparable to like positions in the marketplace from where we recruit executive talent and we do not differentiate the base salaries (except for the impact of international exchange rates) of our Senior Vice Presidents. For 2009, management proposed to the Compensation Committee base salary increases for the Executive Officers. The Compensation Committee reviewed base salary data for similar executive officer positions from published survey data in the Towers Perrin Energy Survey and determined Mr. Souki’s base salary was significantly below the median of the market data. The Compensation Committee approved a base salary increase of approximately 20% for Mr. Souki for 2009. However, the Compensation Committee determined that, based on the current conditions in the market, none of the other Executive Officers would receive a base salary increase for 2009.

Mr. Souki’s base salary was approximately 20% below the median of the base salaries of other chief executive officers in the Towers Perrin Energy Survey. Deloitte has recommended the Towers Perrin Energy Survey as an appropriate comparison of market data for our Executive Officers because it includes the most comprehensive group of energy companies responding to a compensation survey. However, after reviewing the data from the Towers Perrin Energy Survey, the Compensation Committee also decided to review base salary proxy data of a representative peer group of the Company. The Compensation Committee compiled a list of energy companies from the Bloomberg Houston Chronicle 150 list, which consists of companies that are either based in Texas or are large employers in Texas. From this list, the following energy companies were chosen to

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comprise a peer group of publicly traded gas, power and energy construction companies with total assets below $15 billion, which were considered more representative of Cheniere in both size and type of business:

Proxy Data Peer Group

The median base salary for chief executive officers in the peer group was $720,000. Based on this peer group data, on February 26, 2009, the Compensation Committee determined a base salary increase of approximately 20% for Mr. Souki was reasonable. Mr. Souki’s new base salary in the amount of $720,000 was effective January 7, 2009.

The CEO’s base salary is set at a higher amount than the Senior Vice Presidents’ base salaries because the CEO is responsible for developing the Company’s overall strategy and vision and implementing the Company’s business plan. In addition, the market data indicates that the base salary for a chief executive officer position is customarily set higher than other officer positions.

For 2009, we did not differentiate the base salaries (except for the impact of international exchange rates) of the Senior Vice Presidents because management recognizes that each of the Senior Vice Presidents has similar potential to significantly impact the performance of the Company. Management believes that not differentiating the base salary of the Senior Vice Presidents fosters teamwork and cooperation at the management levels, which is critical for our success.

2009 Bonus Awards

On January 6, 2010, the Compensation Committee approved discretionary bonus awards for the Executive Officers for 2009 performance. The Compensation Committee measured performance for 2009 against the achievement of certain of the Company’s near-term financial and non-financial goals for 2009 as well as progress made towards the achievement of long-term goals under our three-year business plan. Specifically, the Compensation Committee considered the following:

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The Compensation Committee considered the Executive Officers’ 2009 Annual Bonus Targets and determined that it was appropriate to pay the Executive Officers a discretionary bonus in cash at the 2009 Annual Bonus Targets as a result of the Company’s performance in 2009. The 2009 Annual Bonus Targets were previously determined based on the 50^th percentile of total cash compensation derived from the Towers Perrin Energy Survey and the proxy data of our peer group. The discretionary cash bonus resulted in the Executive Officers’ total cash compensation being competitive with the median of the Towers Perrin Energy Survey market data; however, the Executive Officer’s total compensation (total cash compensation plus equity awards) was below the median of the Towers Perrin Energy Survey market data as a result of a decline in the Company’s stock price, which was $2.00 at that time. It was determined that it was appropriate to exclude the 2009 Phantom Stock Awards from this analysis because the 2009 Phantom Stock Awards do not vest until December 15, 2011. Therefore, on January 6, 2010, the Compensation Committee approved the issuance of 814,747 shares of our common stock to be granted to certain officers, including the Executive Officers (the “2009 Stock Grant”), which the Compensation Committee felt would make up for the significant lack of retained value at the end of the year, despite management’s tremendous efforts to prevent this. Of the 814,747 shares approved by the Compensation Committee, 679,000 shares were allocated by the Compensation Committee to the Executive Officers based on a recommendation from the CEO and each Executive Officer’s contributions during 2009. The shares were granted to the Executive Officers on January 27, 2010, under the 2003 Plan. The shares are not restricted and are immediately tradable.

Each Executive Officer received a discretionary cash bonus at the Executive Officer’s 2009 Annual Bonus Target and a 2009 Stock Grant.

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For 2009, each Executive Officer’s total compensation (total cash compensation plus equity awards) was at or below the median of the Towers Perrin Energy Survey market data, with the exception of Mr. Teague whose total compensation was above the median of the Towers Perrin Energy Survey market data.

2009 Phantom Stock Awards

The Compensation Committee, based on a recommendation by management, approved the implementation of a new long-term incentive plan in 2009 for our employees, including the Executive Officers. The Executive Officers’ long-term incentive plan was granted in the form of phantom stock and, on February 25, 2009, and June 12, 2009, the Section 162(m) Subcommittee approved the 2009 Phantom Stock Awards for our Executive Officers granted under the 2003 Plan. The 2009 Phantom Stock Awards vest in future years based on a combination of performance and continued employment and are meant to cover three years’ worth of equity awards. The performance measures for the 2009 Phantom Stock Awards were determined to provide an incentive for management to achieve the goals under the Company’s three-year business plan. If the $5.00 Per Share (as defined below) performance measure is achieved, the payout of the 2009 Phantom Stock Awards is designed to make the Executive Officers’ total compensation (total cash compensation plus equity awards) competitive with the median of the Towers Perrin Energy Survey market data. The $10.00 Per Share (as defined below) performance measure was designed as a stretch goal for the Company, and if achieved, the payout of the 2009 Phantom Stock Awards is designed to be more significant in accordance with the performance of the Company and possibly greater than the 75^th percentile of the Towers Perrin Energy Survey market data. The 2009 Phantom Stock Awards will be settled in cash or in shares of our common stock as determined by the Compensation Committee in connection with each settlement. The 2009 Phantom Stock Awards have the following vesting terms:

In addition, upon the signing on or before December 15, 2011, of a contract (or contracts) which secures an aggregate of $150 million of Annual Cash Receipts from a third party (or parties) for a weighted average term of seven years or more in connection with either the use or firm commitment reservation of capacity of the Sabine Pass LNG receiving terminal or the Creole Trail Pipeline (“$150 Million of Annual Cash Receipts”), or if on or before December 15, 2011, our stock price equals or exceeds $10.00 per share, calculated as (x) the highest cost

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basis of any share of our common stock owned by a beneficial owner of 30% or more of the combined voting power of the voting securities of the Company so as to constitute a Change of Control under clause (i) of the Change of Control definition under the 2003 Plan, or (y) the closing price on the date of a corporate transaction that constitutes a Change of Control under clause (ii) or (iii) of the Change of Control definition under the 2003 Plan (“$10.00 Per Share COC Event”), any remaining unvested portions will vest as follows:

“Annual Cash Receipts” equals the cash receipts we expect to receive pursuant to a contract (or contracts) signed between the Company and/or any of its consolidated subsidiaries, including Cheniere Energy Partners, L.P. and Sabine Pass LNG, L.P., with a third party (or parties). The Annual Cash Receipts expected to be received will be calculated according to the terms of the contract (or contracts) signed. For any series of cargo purchases (whether or not such cargo purchases are expected to be delivered to a terminal owned by the Company), Annual Cash Receipts will be equal to the margin expected from the transaction, considering the anticipated purchase or sale prices for each cargo, shipping (if any), and the direct costs associated with transportation and regasification of such cargoes. If the terms of any contract signed include reference to, or are valued upon, any index rates, Annual Cash Receipts will be calculated based on a futures or forward contract for the applicable index.

An Executive Officer will forfeit any unvested 2009 Phantom Stock Awards if the Executive Officer is terminated for Cause (as defined in the 2003 Plan) or the Executive Officer resigns prior to vesting. If an Executive Officer’s employment is terminated by the Company on or before December 15, 2011, for a reason other than Cause, Disability (as defined in the 2003 Plan) or death, then the 2009 Phantom Stock Awards will vest on the Executive Officer’s termination date as follows: (i) one-third will automatically vest on the Executive Officer’s termination date; (ii) an additional one-third will vest in the event $5.00 Per Share (calculated with respect to the 90 consecutive calendar days preceding the Executive Officer’s termination date) or $75 Million of Annual Cash Receipts is achieved on or before the Executive Officer’s termination date; (iii) an additional one-third will vest in the event $10.00 Per Share is achieved (calculated with respect to the 90 consecutive calendar days preceding the Executive Officer’s termination date); and (iv) all of the 2009 Phantom Stock Awards not yet vested will vest in the event $150 Million of Annual Cash Receipts is achieved or a $10 Per Share COC Event occurs on or before the Executive Officer’s termination date.

The 2009 Phantom Stock Awards will fully vest upon a termination of the Executive Officer’s employment after a Change of Control (as defined in the 2003 Plan), but in each case only if such Change of Control occurs on or before December 15, 2011, and is a termination (a) by the Company for any reason other than Cause or (b) by the Executive Officer for Good Reason (as defined in the 2003 Plan).

2008 Retention Awards and Change of Control Agreements

In 2008, the Compensation Committee approved a special retention program for certain employees, including the Executive Officers, who remained with the Company following a significant reduction of our workforce during 2008. The retention program was designed to ensure we would be able to retain employees with the skills necessary to address the immediate challenges of the Company. Management believed that the retention program was necessary given the uncertainty that remained at the time regarding the Company’s long-term prospects and liquidity and the additional workload that the remaining employees would be required to incur. The retention program was not intended to be an annual element of compensation. The Compensation Committee worked with Deloitte and designed a retention program so that the total size of the retention awards was reasonable and in line with total severance/change of control compensation of other companies in our industry. The retention program included a short-term retention award paid in cash and equity, which vested on

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December 1, 2008, a long-term retention award paid in equity, which vests over three years beginning on December 31, 2008, and a potential cash payment payable upon a change of control of the Company. The outstanding awards under the retention program are described in more detail below.

Value of Executive Officers’ Total Compensation in 2009

For 2009, the valuation method specified by the Securities and Exchange Commission rules for equity compensation reported in the Summary Compensation Table overstates the value of the 2009 Phantom Stock Awards that were granted to our Executive Officers under the long-term incentive plan that was implemented in 2009. The Summary Compensation Table includes the grant date fair value for the 2009 Phantom Stock Awards that were granted to the Executive Officers. The 2009 Phantom Stock Awards were granted upfront as multi-year performance-based awards. The 2009 Phantom Stock Awards are designed to provide three years’ worth of equity awards to incentivize the Executive Officers to execute the goals under the Company’s three-year business plan. The 2009 Phantom Stock Awards have the potential to provide the Executive Officers with substantial upside gain if the $10.00 Per Share performance measure is achieved, but only if the Executive Officers remain

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with the Company until the December 15, 2011 vesting date. The following table shows the value of the Executive Officer’s compensation in 2009 based on an annualized value of the 2009 Phantom Stock Awards. The annualized value of the 2009 Phantom Stock Awards is reflected in the table instead of the total grant date fair value because the 2009 Phantom Stock Awards were designed as multi-year performance-based awards that do not vest until December 15, 2011. The actual value of the 2009 Phantom Stock Awards realized by the Executive Officers will depend on the stock price of the Company at the time the awards vest and become payable to the Executive Officers. Values for non-equity compensation are the same as in the Summary Compensation Table.

Value of Executive Officer’s Total Compensation in 2009 based on

Annualized Value of the 2009 Phantom Stock Awards

Compensatory Arrangements for Certain Executive Officers

On June 30, 2009, the independent directors of the Board of Directors approved a U.K. assignment letter for Mr. Souki so that he is able to spend a portion of his time working from London to conduct international and domestic operations for the Company. The U.K assignment letter was effective July 1, 2009, for a period of twelve months, but may be extended by the Compensation Committee or Board for additional twelve-month periods not to exceed a total of three years. Mr. Souki spends a portion of his time traveling internationally to help us pursue long-term arrangements to secure LNG supply. In 2009, the Company paid for a one-time finder’s fee for Mr. Souki’s temporary living arrangements in the U.K. and all fees, including reasonable legal fees, to prepare and obtain the proper work clearances in the U.K. The Company also pays Mr. Souki an annual allowance for the cost of housing in the U.K. For 2009, the amount of Mr. Souki’s annual base salary allocated to his assignment in the U.K. was $216,000. For 2010, the amount of Mr. Souki’s annual base salary allocated to his assignment in the U.K. is anticipated to be $220,300 as a result of his 2010 base salary adjustment. In April 2010, the Compensation Committee approved an amendment to Mr. Souki’s U.K. assignment letter to extend the term of his assignment to July 1, 2011 and increase the amount of his annual allowance to $200,000. The allowance is paid in quarterly installments in the month preceding each quarter and is not included in his base salary for purposes of determining annual bonus awards or change of control payments. Mr. Souki is responsible for paying his individual tax liabilities and filing all necessary tax returns.

We have also entered into an indefinite term employment agreement with Mr. Abiteboul in compliance with local practice and pursuant to the laws of France where he resides. In April 2010, the Compensation Committee approved an amendment to Mr. Abiteboul’s French employment agreement to provide for a secondment arrangement with Cheniere Supply & Marketing, Inc. and Mr. Abiteboul. Mr. Abiteboul will be seconded by the Company to the Company’s London office, which serves as the head office of the English branch of Cheniere Supply & Marketing, Inc., for the purposes of developing the commercial strategy and sourcing LNG supply for the Company. Mr. Abiteboul’s secondment will not exceed a total of twenty-four months and any extension of his secondment in excess of twenty-four months is subject to Compensation Committee or full Board approval and a

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separate amendment to his employment agreement. During his secondment, Mr. Abiteboul will continue to report to Mr. Charif Souki, Chairman, Chief Executive Officer and President of the Company. Pursuant to his employment agreement, Mr. Abiteboul has been entitled to an expatriate indemnity as a portion of his annual salary as a result of his travel outside of France. Effective April 30, 2010, Mr. Abiteboul will no longer receive the expatriate indemnity. Mr. Abiteboul’s annual base salary of 233,725 euros will be paid by Cheniere Supply & Marketing, Inc. in a sum equivalent to the monthly Euro value in British Pounds Sterling on a monthly basis and the Company will take all necessary steps to ensure Mr. Abiteboul will remain covered by the French State basic pension and complementary pension regimes, subject to the necessary contributions. In addition, Cheniere Supply & Marketing, Inc. will also make direct payment to a landlord in an amount not to exceed the Euro equivalent of a maximum of £200,000 per year to cover the lease payments related to Mr. Abiteboul’s temporary housing in the U.K. Mr. Abiteboul will also receive the British Pounds Sterling equivalent of £200,000 minus the Euro equivalent of the lease payments per year as the Company’s contribution to a tax equalization payment for a portion of the taxes he will incur as a result of the secondment. These payments will not be included in Mr. Abiteboul’s base salary for purposes of determining annual bonus awards, contributions to employee retirement plans or potential change of control payments. The Company has also agreed to pay reasonable installation costs related to the commencement of Mr. Abiteboul’s secondment. Mr. Abiteboul is responsible for the payment of his individual tax liabilities and for filing all necessary tax returns; provided, however, that the Company has agreed to pay for reasonable fees related to Mr. Abiteboul’s individual tax planning and preparation of his tax declaration. Mr. Abiteboul’s secondment may be terminated by the Company or by Mr. Abiteboul with a notice period of two months. If Mr. Abiteboul’s secondment is terminated by the Company prior to the end of the maximum twenty-four month period, the Company will repatriate Mr. Abiteboul and be responsible for the costs of such repatriation. If Mr. Abiteboul resigns from the Company prior to the end of his secondment, the Company will not be responsible for the costs of his repatriation. All other terms of Mr. Abiteboul’s employment agreement remain unchanged and he will return to his previous role pursuant to his employment agreement at the end of his secondment. Additional information about Mr. Abiteboul’s French employment agreement is provided below in “Narrative to the Summary Compensation Table and Grants of Plan-Based Awards Table” beginning on page 40 of this Proxy Statement.

On February 26, 2009, Mr. Turkleson resigned as Chief Financial Officer of the Company, effective as of March 1, 2009, in order to pursue other opportunities. The Compensation Committee approved a payment (the “Severance Payment”) to Mr. Turkleson consisting of (i) a cash payment equal to one month’s base salary in the amount of $22,735 and (ii) the accelerated vesting of Mr. Turkleson’s outstanding equity awards, which consisted of 40,842 shares of restricted stock. Payment of the Severance Payment was conditioned upon Mr. Turkleson’s execution of a release and separation agreement following his termination of employment with the Company. These terms were consistent with the manner in which severance was received by all other employees who were affected by the significant reduction of our workforce in 2008.

2010 Base Salary Adjustments

On January 6, 2010, the Compensation Committee approved a 2% base salary increase for the Executive Officers for 2010, effective January 4, 2010, as follows:

2010 Base Salary

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At the end of 2009, the Compensation Committee reviewed the peer group developed at the beginning of 2009 and determined that this peer group was still the most appropriate peer group in terms of size and type of business. The decision to approve base salary increases for the Executive Officers was made after reviewing 2009 base salaries for similar executive officer positions in the Towers Perrin Energy Survey and proxy data from the peer group. The Compensation Committee believed a 2% base salary increase was reasonable for the Executive Officers because many of the Executive Officers’ base salaries were significantly below the median of the market data. It was determined that the Compensation Committee would evaluate and consider adjusting to market at a future date those Executive Officers’ base salaries that remain significantly below market, and that at this time the focus should be on the Executive Officer’s incentive compensation under the 2009 Phantom Stock Awards and any short-term cash bonus plan because these awards are tied to the performance of the Company. The 2% base salary increase for the Executive Officers was also the same percentage approved for company-wide base salary increases.

2010 Goals & Bonus Plan

On April 8, 2010, the Compensation Committee approved the 2010 Goals & Bonus Plan. The 2010 Goals & Bonus Plan covers all employees of the Company not designated as participants in the Company’s operator and technician plan and is designed to link the performance goals and bonus awards for the 2010 performance year to margin goals that are tied to short-term and long-term contracts entered into by the Company.

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Except as set forth below, a participant shall forfeit any unvested portion of his or her Bonus if the participant’s employment with the Company terminates for any reason prior to the applicable vesting dates. Any unvested portion of the Bonus shall become immediately vested and payable to the participant (or the beneficiary in the case of the participant’s death) if (i) the Company terminates the participant’s employment without Cause (as defined in the 2003 Plan) or the participant terminates his or her employment for Good Reason (as defined in the 2003 Plan), or (ii) the participant dies or incurs a Disability (as defined in the 2003 Plan) or a Change of Control (as defined in the 2003 Plan) occurs before the Bonus is fully vested. Notwithstanding the foregoing, in any circumstance in which the 2003 Plan definitions of Disability or Change of Control would be operative and with respect to which the income tax under Section 409A of the Internal Revenue Code would apply or be imposed, but where such tax would not apply or be imposed if the meaning of the term “Disability” met the requirements of Section 409A(a)(2)(A)(ii) of the Internal Revenue Code or “Change of Control” met the requirements of Section 409A(a)(2)(A)(v) of the Internal Revenue Code, then the term “Disability” shall have the meaning ascribed to it within the meaning of Treas. Reg. §1.409A–3(i)(4) and “Change of Control” shall mean, but only for the transaction so affected, a “change in control event” within the meaning of Treas. Reg. §1.409A–3(i)(5). If the payment of the Bonus would be subject to additional taxes and interest under Section 409A of the Internal Revenue Code because the timing of such payment is not delayed as provided in Section 409A(a)(2)(B) of the Internal Revenue Code, then such payment shall be paid on the date that is six months (plus one day) after the date of the participant’s termination of employment with the Company (or if such payment date does not fall on a business day, the next following business day), or such earlier date upon which such payment can be paid under Section 409A of the Internal Revenue Code without being subject to such additional taxes and interest.

The total annual cash Bonus payment that may be paid to all participants is limited to $20,000,000 per year until the bonus pool is paid. The Company has the right to take any action as may be necessary or appropriate to satisfy any federal, state, local or any other tax withholding obligations as it determines are necessary at the time payments of the Bonus are made.

Information about Other Compensation-Related Matters

Guidelines for Granting Equity-Based Awards

We recognize that granting equity awards presents specific legal, tax and accounting issues and, therefore, we adopted guidelines on December 17, 2007, for all grants of equity-based awards. The guidelines reflect the Company’s prior practices for granting equity-based awards. Under the guidelines, all equity awards granted to employees subject to the reporting requirements of Section 16 of the Exchange Act must be approved by the Compensation Committee or the Section 162(m) Subcommittee, and all stock options granted to members of the Board of Directors must be approved by the Board. The Board has established an Equity Grant Committee and has appointed the Chairman of the Board as the sole member of that Committee to act on behalf of the Board and the Compensation Committee to grant restricted stock and stock options to eligible employees (other than Executive Officers) and consultants. Restricted stock awards made by the Equity Grant Committee in a calendar year cannot exceed 25,000 shares of restricted stock per recipient or an aggregate of 400,000 shares of restricted stock to all recipients. The Board has also authorized the CEO to designate employees and consultants (other than Executive Officers) to be recipients of stock options and to determine the terms of such stock options. Stock option awards made by the CEO and the Equity Grant Committee in a calendar year cannot exceed 100,000 stock

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options per recipient or an aggregate of 1,000,000 stock options to all recipients. The Compensation Committee periodically ratifies all stock options granted by the CEO and Equity Grant Committee and restricted stock granted by the Equity Grant Committee. Under the provisions of the 2003 Plan, stock options cannot be granted at an exercise price less than the closing price of a share of the Company’s common stock as reported on the NYSE Amex LLC on the grant date of such stock options.

Stock Ownership Requirements

The Board of Directors believes that the members of the Company’s Board of Directors and executive officers should display their commitment to the Company by owning a significant amount of Company stock and, on April 3, 2008, implemented stock ownership guidelines. The Board amended the stock ownership guidelines, effective as of September 11, 2009, which provide as follows:

Stock Ownership Guidelines for

Non-Employee Directors and Executive Officers

Items considered for purposes of meeting the stock ownership guidelines include: Company stock beneficially owned by a non-employee director or Executive Officer or his or her spouse or dependent children; phantom stock and restricted stock whether or not yet vested; the in-the-money value of vested but unexercised stock options; Company stock acquired upon the exercise of stock options; and common units of Cheniere Energy Partners, L.P. held directly by a non-employee director or Executive Officer or his or her spouse or dependent children. The number of shares of Company stock required to be owned by each non-employee director is determined annually as of the close of business on the first trading date following the Company’s annual meeting of stockholders (following, and including, the issuance of Company stock relating to such year’s annual non-employee director compensation). The value of each share of Company stock is equal to the greater of (i) the fair market value of the Company’s stock on the date the non-employee director or Executive Officer acquired the stock, or (ii) the fair market value of the Company’s stock on any given measurement date. All non-employee directors and Executive Officers are expected to be in full compliance with the guidelines by the fifth anniversary of the original effective date (April 3, 2008) of the guidelines or within five years of initial appointment to a position subject to the guidelines, with certain ownership thresholds that must be met in the interim period. If a non-employee director or Executive Officer is not in compliance with the guidelines, he or she is required to retain the entire after-tax value of Company stock received upon the vesting of stock awards and the exercise of stock options until the interim threshold requirements or compliance with the guidelines is achieved. The Board recognizes that there may be occasions in which the guidelines place a severe hardship on the individual and has delegated discretion to the Compensation Committee to determine whether an exemption should be granted to the individual in such instances. The Governance and Nominating Committee periodically assesses the guidelines and each individual’s compliance with the guidelines. As of December 31, 2009, all of our non-employee directors and Executive Officers were in compliance with the guidelines with the exception of Jason New and Dwight Scott who are not subject to the guidelines in light of their capacity as representatives of GSO and GSO’s significant capital investment in the Company.

Accounting and Tax Implications

The 2009 Phantom Stock Awards are designed to provide awards that are based on a combination of performance and service and consequently will not qualify as performance-based awards deductible for federal

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income tax purposes under Section 162(m) of the Internal Revenue Code. The 2009 Bonus Awards do not qualify as performance-based awards under Section 162(m) of the Internal Revenue Code. We will not be able to recognize tax benefits that may otherwise be available to the Company related to the 2009 Phantom Stock Awards and the 2009 Bonus Awards made to our executive officers that are subject to the Section 162(m) limitations.

COMPENSATION COMMITTEE REPORT

The Compensation Committee has reviewed and discussed the Compensation Discussion and Analysis required by Item 402(b) of Regulation S-K with management and, based on such review and discussions, the Compensation Committee recommended to the Board that the Compensation Discussion and Analysis be included in this Proxy Statement.

THE COMPENSATION COMMITTEE

Keith F. Carney

David B. Kilpatrick

J. Robinson West

February 22, 2010

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SUMMARY COMPENSATION

The following table and narrative text sets forth the total compensation awarded to, earned by, or paid to our CEO and CFO (and former CFO) and our three other most highly compensated executive officers for 2009, 2008 and 2007, who are referred to as our “named executive officers” in the following compensation tables.

Summary Compensation Table

For Messrs. Souki, Abiteboul and Thames, the amount in this column for 2008 includes the grant date fair value ($5.34) of restricted stock awarded as part of their short-term retention award and long-term retention award which was granted on May 9, 2008. The restricted stock awarded as part of the short-term retention award vested on December 1, 2008. One-third of the restricted stock awarded as the long-term retention award vested on December 31, 2008, one-third vested on December 31,

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2009, and one-third will vest on December 31, 2010. For Mr. Turkleson, the amount in this column for 2008 includes the grant date fair value ($5.34) of restricted stock awarded as part his long-term retention award which was granted on May 9, 2008. When Mr. Turkleson resigned as Chief Financial Officer of the Company effective March 1, 2009, the Compensation Committee approved the accelerated vesting of all of his outstanding equity awards, including his long-term retention award.

For Messrs. Souki and Turkleson, the amount in this column for 2007 includes the grant date fair value ($27.75) of restricted stock awarded as their 2006 incentive award which was granted on January 12, 2007, plus the grant date fair values determined using a Monte Carlo simulation model of $22.24, $26.75, $30.21 and $34.19 for phantom stock awards which were granted on May 25, 2007 pursuant to the 2007 Incentive Plan and 2008 – 2010 Incentive Plan. The shares of restricted stock awarded as their 2006 incentive award vested in three equal annual installments beginning one year from the date of grant. The phantom stock awards that were granted to them pursuant to the 2007 Incentive Plan vested and became payable in equal shares of our common stock on January 18, 2008. In October 2008, Messrs. Souki and Turkleson agreed to the forfeiture and cancellation of the phantom stock awards that were granted to them pursuant to the 2008 – 2010 Incentive Plan and effective as of October 23, 2008, these awards were cancelled and the reserved shares were returned to the 2003 Plan.

All Other Compensation included in the Summary Compensation Table

In addition, for 2009, the amount in this column for Mr. Souki also reflects Mr. Souki’s annual allowance for housing in the U.K. in the amount of $94,455, a one-time finder’s fee in the amount of $20,736 (£12,783) for locating Mr. Souki’s temporary living arrangements in the U.K. and legal fees in the amount of $6,258 to prepare and obtain the proper work clearances for Mr. Souki in the U.K.

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pursuant to his U.K. assignment letter. The amount for Mr. Souki reported in this column for 2009 represents the U.S. dollar equivalent based on the December 31, 2009 exchange rate of 1.62212 USD to 1 British Pound Sterling.

For 2008, the amount in this column for Mr. Souki also reflects the aggregate incremental cost to the Company attributable to the personal use of an assistant provided by the Company to Mr. Souki. For 2007, the amount in this column for Mr. Souki reflects minimal incremental cost to the Company when Mr. Souki’s wife accompanied him on flights that had been chartered for business purposes and the aggregate incremental cost to the Company attributable to the personal use of an assistant provided by the Company to Mr. Souki. In cases where an executive’s guest occupied a seat on a business trip, we only took into account the incremental cost of providing in-flight catering for that guest in the All Other Compensation column based on applicable SEC rules.

The cost of Mr. Souki’s personal use of an assistant was $7,925 and $12,800 for 2008 and 2007, respectively, which was computed as a percent of the total compensation and benefits cost to the Company for the assistant including base salary, bonus and employer-paid benefits.

For 2009, the amount in this column for Mr. Abiteboul reflects the cost paid by the Company for his use of a car either leased by the Company, including the cost of insurance, from January 2009 through September 2009 in the amount of $17,790 (12,412 EUR) and the aggregate incremental cost to the Company related to Mr. Abiteboul’s use of a Company-owned car from October 2009 through December 2009 in the amount of $6,074 (4,238 EUR). The incremental cost to the Company related to Mr. Abiteboul’s use of the Company-owned car includes the costs paid by the Company for insurance, maintenance, fuel and parking.

In addition for 2009, the amount in this column for Mr. Abiteboul reflects the cost paid by the Company for personal tax services in the amount of $4,175 (2,913 EUR), club memberships in the amount of $2,544 (1,775 EUR), discretionary French retirement plan contributions in the amount of $10,558 (7,366 EUR) and home telecommunication services in the amount of $1,541 (1,075 EUR). The amount for Mr. Abiteboul reported in this column for 2009 represents the U.S. dollar equivalent based on the December 31, 2009 exchange rate of 1.4333 USD to 1 EUR.

For 2008, the amount in this column for Mr. Abiteboul reflects the cost paid by the Company for the use of a car leased by the Company in the amount of $29,884 (21,199 EUR), personal legal services in the amount of $19,389 (13,754 EUR), club memberships in the amount of $11,426 (8,105 EUR), discretionary French retirement plan contributions in the amount of $11,512 (8,166 EUR), and the cost of meal tickets which are customarily paid by French companies for French employees in the amount of $937 (665 EUR). The amount for Mr. Abiteboul reported in this column for 2008 represents the U.S. dollar equivalent based on the December 31, 2008 exchange rate of 1.40970 USD to 1 EUR.

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GRANTS OF PLAN-BASED AWARDS

The following table and narrative text describe the plan-based awards made to the named executive officers during 2009.

Grants of Plan-Based Awards

During Fiscal Year 2009

Narrative to the Summary Compensation Table and Grants of Plan-Based Awards Table

Compensatory Arrangements for Certain Executive Officers

On June 30, 2009, the independent directors of the Board of Directors approved a U.K. assignment letter for Mr. Souki so that he is able to spend a portion of his time working from London to conduct international and domestic operations for the Company. In April 2010, the Compensation Committee approved an amendment to Mr. Souki’s U.K. assignment letter. Mr. Souki’s U.K. assignment letter, as amended, is described in more detail in the Compensation Discussion and Analysis under “Compensatory Arrangements for Certain Executive Officers” beginning on page 31 of this Proxy Statement.

In compliance with local practice, we entered into an indefinite term employment agreement with Mr. Abiteboul, under the laws of France where he is located, when he joined the Company in February 2006. Pursuant to the agreement, Mr. Abiteboul receives a fixed annual gross salary and expatriation allowance, which are reviewed annually by the Compensation Committee. He is also entitled to receive an annual bonus and an annual award of equity each in an amount up to 100 percent of his annual salary. Mr. Abiteboul’s compensation is subject to deductions for social security, including his social security contribution, additional retirement and social welfare contributions, medical insurance and unemployment insurance, as provided by French law.

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Mr. Abiteboul participates in permanent and private medical insurance arrangements in France and is entitled to a death in-service benefit at the rate of five times his annual salary. The Company provides Mr. Abiteboul with use of a car either leased or owned by the Company, and the Company pays for insurance, maintenance, fuel and parking expenses related to the car, personal tax services, club memberships, a discretionary French retirement plan contribution and home telecommunication services for Mr. Abiteboul. Mr. Abiteboul is entitled to three months’ prior notice in the event of his termination by the Company except in the case of his serious misconduct or gross negligence. The agreement provides for non-compete and non-solicitation obligations on the part of Mr. Abiteboul for a period of 12 months following the termination of the agreement. In consideration for the non-compete obligation, Mr. Abiteboul will receive a monthly indemnity equal to 30 percent of his average fixed monthly salary over the previous 12-month period. Any failure by Mr. Abiteboul to observe the non-compete obligation will release the Company from paying the indemnity. In April 2010, the Compensation Committee approved an amendment to Mr. Abiteboul’s employment agreement to provide for a secondment arrangement with Cheniere Supply & Marketing, Inc. and Mr. Abiteboul, which is described in more detail in the Compensation Discussion and Analysis under “Compensatory Arrangements for Certain Executive Officers” beginning on page 31 of this Proxy Statement.

On February 26, 2009, Mr. Turkleson resigned as Chief Financial Officer of the Company effective as of March 1, 2009 in order to pursue other opportunities. The Compensation Committee approved a severance payment to Mr. Turkleson which is described in more detail in the Compensation Discussion and Analysis under “Compensatory Arrangements for Certain Executive Officers” beginning on page 31 of this Proxy Statement.

2009 Bonus Awards

The Compensation Committee measured performance for 2009 against the achievement of certain near-term financial and non-financial goals applicable to 2009 as well as progress made towards the achievement of long-term goals under our three-year business plan and decided that it was appropriate to pay the named executive officers discretionary bonus awards for 2009 performance. The amount of the named executive officers discretionary bonus awards was determined based on the named executive officers’ 2009 Annual Bonus Targets. The Compensation Committee approved a cash bonus pool at the 2009 Annual Bonus Targets. In addition, the Compensation Committee also approved the issuance of 679,000 shares of our common stock to be granted to the named executive officers on January 27, 2010, pursuant to the 2003 Plan. The shares were allocated to the named executive officers based on their contributions during 2009. The shares are not restricted and are immediately tradable. Mr. Souki received a cash bonus of $1,080,000 and a grant of 190,000 shares of our common stock, Ms. Gentle received a cash bonus of $245,540 and a grant of 77,000 shares of our common stock, Mr. Abiteboul received a cash bonus of $299,030 and a grant of 100,000 shares of our common stock, Mr. Thames received a cash bonus of $245,540 and a grant of 135,000 shares of our common stock, and Mr. Teague received a cash bonus of $245,540 and a grant of 77,000 shares of our common stock. Mr. Turkleson resigned as Chief Financial Officer of the Company effective March 1, 2009, and did not receive a 2009 Bonus Award. The amount of each named executive officer’s 2009 Bonus Award is included in the “Summary Compensation Table” and the named executive officers’ 2009 Annual Bonus Targets are included in the “Grants of Plan-Based Awards during Fiscal Year 2009” table.

2009 Phantom Stock Awards

On February 25, 2009, the Section 162(m) Subcommittee approved the 2009 Phantom Stock Awards for our named executive officers granted under the 2003 Plan. The 2009 Phantom Stock Awards vest in future years based on a combination of performance and continued employment and are meant to cover three years’ worth of equity awards. The 2009 Phantom Stock Awards will be settled in cash or in shares of our common stock as determined by the Compensation Committee in connection with each settlement. The number of shares of common stock underlying the 2009 Phantom Stock Awards that may vest and become payable in future years to the named executive officers upon the satisfaction of the performance and continued employment conditions is included in the “Grants of Plan-Based Awards during Fiscal Year 2009” table at threshold, target and maximum payout levels. The actual value of the 2009 Phantom Stock Awards will depend on the stock price of the Company at the time the

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awards vest and become payable to the named executive officers. The vesting terms of the 2009 Phantom Stock Awards are described in more detail in the Compensation Discussion and Analysis under “Analysis of Executive Officers’ Total Compensation for 2009 – 2009 Phantom Stock Awards” beginning on page 28 of this Proxy Statement.

OUTSTANDING EQUITY AWARDS

The following table reflects the number of securities underlying unexercised stock options held by the named executive officers as of December 31, 2009, the exercise price of the unexercised stock options and the date of expiration of the unexercised stock options. The table also reflects the total number and aggregate value or payout value of shares of unvested restricted stock and 2009 Phantom Stock Awards held by the named executive officers as of December 31, 2009.

Outstanding Equity Awards at December 31, 2009