Billionaire Carl Icahn’s Portfolio Of Energy Firms

Billionaire and activist investor Carl Icahn has become a household name not just for being a savvy investor but also for being a fearsome corporate raider. Among the corporations he has tangled with include Time Warner Inc (NYSE:TWX) and Blockbuster Video. In all his activism he has done so with the goal of enhancing the various investments he has made.

Icahn’s investment efforts have seen him amass a fortune estimated to be in the range of over $17 billion according to Forbes magazine. In the publication’s list of the richest people in the world Icahn is ranked in position 79.

In 2016 Icahn’s public profile was raised when he became a special advisor to then president-elect Donald Trump. Before long he was accused of using the position to benefit the investments of his hedge fund by pushing for and lobbying for regulatory reforms which would assist CVR Energy, Inc. (NYSE:CVI), a refiner. He resigned from the advisor position soon after.

Stellar investment

Of late CVR Energy has emerged as one of the best investments that Icahn has made as the price of the stock has appreciated by more than 100% in the last couple of months. In CVR Energy Icahn owns shares numbering 71.2 million after having invested approximately $2.65 billion in the company.

For the last half a decade the stock of CVR Energy has ranked as Icahn’s top pick. During that time Icahn has not disposed of or added to his stake and this has led CVR Refining LP and CVR Energy to be viewed as Icahn Enterprises’ subsidiaries though they trade as distinct public firms.

In late 2016 CVR Energy started taking short positions in Renewable Identification Numbers (RINs). This was in the conviction that with a Republican in the White House there would be changes being effected in the Renewable Fuel Standard and this would lead to the prices of RINs falling. By mid last year however this hadn’t materialized and instead of falling the prices of RINs began going up. CVR Energy was consequently forced to begin covering its obligations at prices that were higher than had been originally envisioned.

Conflict of interest

Last year in November it was reported that the United States Attorney’s office for New York’s Southern District was looking into the dealings of Icahn that involved RINs as well as the attempts he had made to push for changes to the regulations while holding an advisor’s role with the Trump White House. This was a conflict of interest as it would have resulted in the prices of RINs being affected and Icahn’s company benefiting massively.

A lawyer representing Icahn has defended the activist investor saying that the position he held then as special advisor to Trump was ‘unofficial’ and he was therefore exempted from a federal rule which would otherwise have resulted in criminal charges being levelled against him.

Cheniere Energy

Another energy stock that Icahn owns is Cheniere Energy, Inc. (NYSEAMERICAN: LNG). In this firm Icahn holds shares numbering 32.68 million and the amount he has invested is approximately $1.76 billion. Three years ago the activist investor acquired a large interest in the energy firm and was rewarded with two seats on the board. At the time Icahn said in an interview that the market didn’t properly understand the firm. Icahn insisted that company’s contracts were solid and that they accounted for about 80% of the production in the firm. He also denied an assertion by an analyst that the firm was ‘spoilt gods’ because of contracts that were deemed suspect. Icahn insisted that due diligence had been conducted on the contracts and they had been found to be proper.

Earlier in the year Cheniere Energy became the first exporter of LNG in the United States to ink a deal with an energy firm based in China that was state-owned. The deal will see Cheniere Energy sell around 1.2 million tons of LNG per year to China National Petroleum Corporation. The world’s second biggest economy has emerged as one the largest growth markets for LNG globally as its imports of the commodity increased by 50% last year to reach a figure of 38 million tons. Most of the LNG that China imports comes from Qatar, Malaysia and Australia.

This year the growth prospects of Cheniere Energy are not very bright due to the fact that there aren’t any new liquefaction trains which are scheduled for completion in 2018. The company completed the first four trains in 2017 and 2016 within budget and ahead of schedule. On an annual basis Cheniere Energy has projected that each of these facilities will generate about $0.5 billion in EBITDA. It is likely that this year will see Cheniere Energy firming up future plans for expansion in order to assist in offsetting its poor prospects for immediate growth.

SandRidge Energy

Yet another energy firm that Icahn owns is SandRidge Energy Inc. (NYSE:SD). The number of shares that Icahn owns in this firm is 4.82 million. Unlike the other two stocks above Icahn has invested $101.53 million in this firm which is a tiny amount by comparison. All the shares that Icahn owns in this firm were acquired last year in the fourth quarter. During his time as a shareholder he has been instrumental in pushing the company into bailing on a planned acquisition of Bonanza Creek Energy on the grounds that the deal would destroy the value of SandRidge Energy while offering no economies of scale or synergies.

In an interview with CNBC Icahn has revealed that the reason he invested in SandRidge Energy was because he had witnessed poor corporate governance practices which he wanted to correct. Another hedge fund which was in agreement with Icahn was Fir Tree which was started by Jeffrey Tannenbaum. Fir Tree is the second-biggest owner of SandRidge’s stock and it argued that the acquisition would deplete the cash reserves of the energy firm. Towards this Icahn has been pushing to have the board of the company changed as well as modifications to the bylaws made. SandRidge Energy has so far rebuffed these proposals.

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