New Fortress Energy Completes Previously Announced Acquisition and Transfer of 1.6 GW, 15-year Contracted Power Asset in Brazil
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Insights
The acquisition by New Fortress Energy Inc. of a 1.6 GW Capacity Reserve Contract from Ceiba Energy marks a significant expansion in the company's operational capacity in Brazil. This move strategically positions NFE to capitalize on the growing demand for electricity in the region, particularly given the proximity to their existing LNG terminal in Barcarena. By securing a 15-year contract for fixed capacity payments, NFE ensures a stable and predictable revenue stream, which is essential for long-term financial planning and investment stability.
The energy market in Brazil is in a phase of transition, with increased focus on diversifying energy sources and improving energy security. NFE's investment in a new power plant, which is expected to commence commercial operations by August 2026, aligns with the country's energy policy objectives. The anticipated $280 million in annual fixed capacity payments could significantly bolster NFE's revenue and improve its market position.
Investors should note that while the transaction is poised to enhance NFE's growth prospects, it also carries risks associated with construction and operational execution. Delays or cost overruns in the construction of the power plant, or changes in energy policy or market dynamics, could impact the expected revenue and profitability from this deal.
The issuance of Series A Convertible Preferred Stock to facilitate this transaction is noteworthy from a financial structuring standpoint. It suggests a strategic choice by New Fortress Energy to avoid immediate cash outlays and dilution of existing shareholders. Preferred stock often comes with dividends or conversion rights that could be attractive to investors seeking priority over common stock in dividend payments or potential upside through conversion to common stock.
However, the assumption of certain liabilities from Ceiba Energy's subsidiary as part of the acquisition is a factor that requires careful scrutiny. The specifics of these liabilities, their magnitude and how they will impact NFE's balance sheet are critical for evaluating the financial health of the company post-acquisition. Investors should look closely at future financial disclosures to assess how these assumed liabilities are managed and whether they pose any significant financial risks to NFE.
It's also important to consider the long-term implications of the 15-year PPA. While it provides a clear revenue pathway, the fixed nature of capacity payments may limit NFE's flexibility in responding to price fluctuations in the energy market. Additionally, the PPA's terms and conditions, including any clauses related to performance, termination, or price adjustments, will be key determinants of the deal's financial success.
The energy sector in Latin America and Brazil in particular, is experiencing a surge in demand due to economic growth and infrastructure development. New Fortress Energy's acquisition of the PortoCem PPA is a strategic move to establish a stronger foothold in this burgeoning market. The company's ability to leverage its existing LNG terminal for the new power plant's operations could provide competitive advantages in terms of logistics and cost-efficiency.
The significance of this transaction extends beyond immediate financial gains. It signals NFE's commitment to expanding its presence in renewable and cleaner energy sources, which may resonate well with environmentally conscious investors and consumers. This commitment could also align with global trends towards sustainable energy practices and potentially open up additional funding opportunities, such as green bonds or subsidies from governments and international organizations promoting clean energy initiatives.
While the news is positive, it is essential to monitor how NFE integrates this new asset into its portfolio and whether it can manage the operational complexities of a larger-scale power generation project. Success in this venture could position NFE as a key player in the regional energy market and provide valuable insights into the scalability of such projects for other energy companies.
Construction activities for the 1.6 GW power plant have commenced at NFE’s site adjacent to our existing LNG terminal located in Barcarena,
“Completing this transaction means we now have over 2.2 GW of contracted power at Barcarena that will reach COD in 2025 and 2026, in addition to our existing 15-year gas sales agreement with Norsk Hydro. This transaction represents the value of our operational LNG terminals in
For additional information on the acquisition, please reference the press release issued on December 27, 2023 on our investor relations website at https://ir.newfortressenergy.com/investor-relations.
About New Fortress Energy Inc.
New Fortress Energy Inc. (NASDAQ: NFE) is a global energy infrastructure company founded to help address energy poverty and accelerate the world’s transition to reliable, affordable, and clean energy. The company owns and operates natural gas and liquefied natural gas (LNG) infrastructure and an integrated fleet of ships and logistics assets to rapidly deliver turnkey energy solutions to global markets. Collectively, the company’s assets and operations reinforce global energy security, enable economic growth, enhance environmental stewardship and transform local industries and communities around the world.
Cautionary Language Regarding Forward-Looking Statements
This communication contains forward-looking statements. All statements contained in this communication other than historical information are forward-looking statements that involve known and unknown risks and relate to future events, our future financial performance or our projected business results. You can identify these forward-looking statements by the use of forward-looking words such as “expects,” “may,” “will,” “predicts,” “intends,” “plans,” “estimates,” “anticipates,” or the negative version of these terms or other comparable words. Forward looking statements include but are not limited to: expectations related to the amounts of annual fixed capacity payments under the PPA and expectations related to the timing for when our Barcarena power complex will commence operations and complete its expansion.
These forward-looking statements are necessarily estimates based upon current information and involve a number of risks, uncertainties and other factors, many of which are outside of the Company’s control. Actual results or events may differ materially from the results anticipated in these forward-looking statements. Specific factors that could cause actual results to differ from those in the forward-looking statements include, but are not limited to: failure to receive the expected fixed payments under our contracts, unknown and unforeseen risks related to the development, construction or commissioning schedule of the Barcarena power complex, including failure to meet design and engineering specifications, incompatibility of systems, delays and schedule changes, high costs and expenses, and regulatory and legal challenges, among others; failure to receive expected financing on terms acceptable to NFE; receipt of permits, approvals and authorizations from governmental and regulatory agencies on a timely basis or at all; our inability to operationalize our plans for the projects and derive the benefits expected; common risks related to successful integration of the businesses; breach or failure by the parties to comply with the covenants and obligations under the agreements; nonpayment or nonperformance of obligations by the parties; inability to realize the anticipated benefits from the project or our partnerships; adverse regional, national, or international economic conditions, adverse capital market conditions and adverse political developments; business disruption following the transaction; and the impact of public health crises, such as pandemics and epidemics and any related company or government policies and actions to protect the health and safety of individuals or government policies or actions to maintain the functioning of national or global economies and markets. These factors are not necessarily all of the important factors that could cause actual results to differ materially from those expressed in any of NFE’s forward-looking statements. Other known or unpredictable factors could also have material adverse effects on future results.
Any forward-looking statement speaks only as of the date on which it is made, and we undertake no duty to update or revise these forward-looking statements, even though our situation may change in the future. New factors emerge from time to time, and it is not possible for the Company to predict all such factors. When considering these forward-looking statements, you should keep in mind the risk factors and other cautionary statements included in NFE’s annual and quarterly reports filed with the Securities and Exchange Commission, which could cause its actual results to differ materially from those contained in any forward-looking statement.
View source version on businesswire.com: https://www.businesswire.com/news/home/20240320089491/en/
Investors
Chance Pipitone
ir@newfortressenergy.com
Media
press@newfortressenergy.com
Source: New Fortress Energy Inc.
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