NextDecade Corporation — FY2023 Form 10-K
Reporting period: Year ended December 31, 2023; this is an annual filing, not a standalone fourth-quarter report. NextDecade is developing and constructing LNG export and carbon capture projects and had no revenue in either 2023 or 2022.
Business context and progress
- In July 2023, NextDecade reached final investment decision (FID) and began construction of Phase 1 of the Rio Grande LNG facility: three trains with expected capacity of approximately 17.6 million tonnes per annum (MTPA). Total Phase 1 capital cost is estimated at approximately $18.0 billion, including owner costs, contingencies and financing costs.
- Phase 1 has long-term LNG sale agreements totaling approximately 16.15 MTPA with nine customers, at a weighted-average term of 19.2 years. The filing says approximately 14.65 MTPA of Henry Hub-linked contracts have average fixed fees expected to total approximately $1.8 billion annually, before inflation adjustments.
- The company is developing Trains 4 and 5 and a proposed CCS project at Rio Grande, as well as potential third-party CCS projects. No definitive commercial arrangements for third-party CCS projects are reported.
- As of January 2024, construction progress was reported as in line with EPC schedules: 14.3% complete for Trains 1 and 2 and common facilities, and 4.4% for Train 3. First-train commercial operations are expected in late 2027, subject to schedule and completion risks.
Financial results and liquidity
| Metric | 2023 | 2022 |
|---|---|---|
| Revenue | $0 | $0 |
| Operating loss | $122.7 million | $54.5 million |
| Net loss attributable to NextDecade | $221.6 million | $60.1 million |
| Net loss attributable to common stockholders | $182.7 million; $0.94 per share | $84.4 million; $0.65 per share |
| Cash used in operating activities | $73.6 million | $40.1 million |
| Cash used in investing activities | $1.753 billion | $40.9 million |
| Cash provided by financing activities | $2.058 billion | $118.2 million |
- The larger operating loss reflected higher general and administrative expense, up $62.4 million to $111.5 million, including increased employee and professional costs and share-based compensation. Other significant 2023 charges included a $44.8 million derivative loss, $50.3 million net interest expense and a $9.5 million debt-extinguishment loss.
- At year-end, cash and cash equivalents were $38.2 million. Restricted cash was $256.2 million, largely held within the Rio Grande project structure and not available to meet NextDecade’s corporate obligations. Consolidated total cash, cash equivalents and restricted cash was $294.5 million.
- Consolidated debt was $1.85 billion principal, or $1.816 billion net of issuance costs. This includes project-level Rio Grande debt; project cash and assets are restricted and there is no recourse to NextDecade for the consolidated VIE’s liabilities. Rio Grande’s Phase 1 financing included approximately $6.2 billion of equity commitments and facilities and notes totaling approximately $12.3 billion. These project resources are not equivalent to cash available to the parent company.
- Management and the auditor report substantial doubt about NextDecade’s ability to continue as a going concern: the company’s $38.2 million of unrestricted cash may not fund planned operations for one year after issuance of the statements. Management expects to seek additional financing and manage overhead.
Material changes, outlook and risks
- Compared with 2022, losses and operating cash outflows increased, while investing outflows rose sharply as Phase 1 construction began. Financing activity increased substantially, including project borrowing, sale of equity in the project joint venture and approximately $254.4 million of common-stock proceeds.
- The company’s project partners are entitled to priority distribution thresholds; NextDecade expects up to approximately 20.8% of available Phase 1 operating cash distributions, subject to those thresholds and potential arrearages. It does not anticipate common-stock dividends in the foreseeable future.
- Management expects to pursue FID and construction of Train 4, and subsequently Train 5, subject to EPC contracts, sufficient commercial arrangements, permits and financing. Train 4 would require additional long-term offtake and a combination of debt and equity. A January 2024 parent-subsidiary revolving facility provides up to $50 million, plus up to $12.5 million for interest, but matures early in specified circumstances, including shortly after a Train 4 FID.
- Key risks include project cost escalation or delay, contractor and pipeline execution, LNG market and customer risks, access to future financing, debt service and restrictive covenants, and dependence on project-level distributions. Phase 1’s Rio Bravo gas pipeline is being developed by Enbridge and is important to operations.
- Although major permits are reported as obtained, legal and regulatory matters remain: a D.C. Circuit challenge to FERC’s remand order and a motion to stay construction were pending as of the filing; FERC denied a separate stay request in January 2024. The proposed Rio Grande CCS amendment remained under FERC review.
- Management reported effective disclosure controls and internal control over financial reporting. The auditor gave an unqualified opinion on the financial statements but highlighted consolidation of the Rio Grande joint venture under the variable-interest-entity model as a critical audit matter. The auditor did not attest to internal control effectiveness.
Investor verification priorities
- Track parent-company unrestricted cash, financing needs and any update to the going-concern assessment; distinguish these from restricted Rio Grande project cash.
- Verify Phase 1 cost, schedule and construction progress against the $18.0 billion estimate and late-2027 first-train target.
- Check pipeline completion, customer contract conditions and the timing of first LNG deliveries and distributions to NextDecade.
- Monitor Train 4 commercial agreements, EPC terms, financing and FID decisions, plus any dilution from future capital raises.
- Follow pending permit litigation, construction-stay proceedings and the status of the FERC CCS amendment.
- Review Rio Grande debt drawdowns, interest-rate exposure, covenants and distribution restrictions; confirm which obligations are project-level versus parent-level.