Business Context and Reporting Period
New Fortress Energy LLC filed this Form 8-K on February 5, 2019, reporting events occurring primarily on January 30 and February 4, 2019, in connection with its initial public offering and related corporate transactions. The company is an emerging growth company. The filing does not present quarterly or annual operating results.
Financing and Key Financial Metrics
- The company priced an IPO of 20,000,000 Class A shares at $14.00 per share, or $13.1950 per share net of underwriting discounts and commissions.
- Underwriters received a 30-day option to purchase up to an additional 3,000,000 Class A shares.
- The offering closed on February 4, 2019, generating approximately $257.6 million of net proceeds after underwriting discounts, commissions and estimated offering expenses.
- All net proceeds were contributed to New Fortress Intermediate LLC in exchange for 20,000,000 NFI LLC Units.
- The filing does not provide revenue, profit, cash flow, margins, total debt, cash balances, or liquidity ratios.
Planned Use of Proceeds
- Approximately $20 million to complete the marine LNG storage and regasification terminal in Old Harbour, Jamaica.
- Approximately $100 million to partially fund the dual-fired combined heat and power facility in Clarendon, Jamaica.
- Approximately $30 million to partially fund the regasification terminal in La Paz, Baja California Sur, Mexico.
- Approximately $100 million to complete the landed multi-fuel handling facility at the Port of San Juan, Puerto Rico.
- The remainder for general corporate purposes, including potential development of additional liquefiers and downstream facilities.
Material Changes Versus the Prior Comparable Period
- No comparable financial-period information is provided.
- The company completed its IPO and became a public company, with Class A shares issued to public investors and Class B shares and NFI LLC Units held by existing owners and affiliates.
- NFE Atlantic Holdings LLC became an indirect subsidiary of the company through the contribution transactions.
- The company’s board expanded from two to eight directors and was divided into three staggered classes with terms expiring in 2020, 2021 and 2022.
- The company adopted an amended and restated operating agreement and NFI adopted an amended and restated limited liability company agreement.
Governance, Outlook, Risks and Unusual Items
- Existing shareholders retained significant governance rights under the Shareholders’ Agreement, including director-designation rights based on their voting ownership percentage.
- Eligible shareholders received demand, piggyback and shelf registration rights, which could facilitate future sales of Class A shares and create potential dilution or market-supply pressure.
- Holders of NFI LLC Units generally have a redemption right for corresponding Class A shares at a one-for-one ratio, subject to customary adjustments.
- The company entered into an administrative services agreement with FIG LLC for back-office services and related selling, general and administrative expenses.
- The company adopted the 2019 Omnibus Incentive Plan, initially reserving the equivalent of 16,705,882 Class A shares for awards. Beginning in 2020, the annual reserve may increase based on outstanding Class A and Class B shares and remaining plan capacity.
- New directors will generally receive a $100,000 annual cash retainer and an initial restricted share unit grant valued at $1 million, with additional compensation for the audit committee chair.
- The company entered into broad indemnification agreements with directors and executive officers and agreed to indemnify certain existing shareholders in specified circumstances.
- Underwriters or their affiliates had other relationships with the company, including lending relationships under the company’s term loan facility and an administrative-agent role, creating potential conflicts of interest.
- The filing includes no quantitative operating guidance or detailed management forecast. Project completion, construction funding and future facility development remain subject to execution, financing and other project risks.
Most Important Facts for Investors to Verify
- Confirm the final number of Class A shares sold, including whether the underwriters exercised any portion of their 3,000,000-share option.
- Reconcile the approximately $257.6 million net proceeds to the final offering expenses and capital structure.
- Review the company’s subsequent financial statements for cash balances, debt, liquidity, revenue and project spending.
- Assess the ownership, voting control and potential dilution associated with Class A shares, Class B shares, NFI LLC Units and redemption rights.
- Review the Shareholders’ Agreement for director-designation, registration, transfer and sale-assistance rights.
- Evaluate construction status, remaining funding requirements and completion risks for the Jamaica, Mexico and Puerto Rico projects.
- Review the term loan facility and related-party administrative services arrangements, including applicable costs and covenants.