NextDecade Corporation — FY2021 Form 10-K
Reporting period: Fiscal year ended December 31, 2021. This is an annual report, not a standalone fourth-quarter filing. NextDecade was a pre-revenue LNG and carbon-capture project developer.
Business context and project status
- The principal project is the Rio Grande LNG export terminal at Brownsville, Texas, planned for up to 27 million tonnes per annum (mtpa). The company described an optimized five-train design; construction and significant operating cash flows depended on financing and a positive final investment decision (FID).
- The company reported that major permits had been obtained, subject to final FERC notice to proceed and continuing regulatory and legal matters. The FERC authorization remained valid after a court remand of two technical environmental issues; an appeal concerning an Army Corps permit was pending.
- A 20-year agreement with Shell covers approximately 2 mtpa, conditional on the first train becoming commercially operable. In March 2022, after year-end, the company signed a binding heads of agreement with Guangdong Energy for up to 1.5 mtpa; a definitive sale agreement was contemplated for Q2 2022.
- NEXT Carbon Solutions, formed in 2021, pursued third-party carbon capture and storage (CCS) opportunities. The company was seeking FERC approval to incorporate CCS at the terminal, targeting capture and sequestration of at least 90% of terminal-generated CO2.
Financial performance and liquidity
| Metric | FY2021 | FY2020 |
|---|---|---|
| Revenue | $0 | $0 |
| Operating expenses / operating loss | $19.5 million / $(19.5) million | $22.0 million / $(22.0) million |
| Net loss attributable to NextDecade | $(22.0) million | $(14.3) million |
| Net loss attributable to common stockholders | $(40.4) million | $(28.8) million |
| Basic and diluted loss per common share | $(0.34) | $(0.24) |
| Cash used in operating activities | $(18.0) million | $(26.3) million |
| Cash used in investing activities | $(18.5) million | Cash provided: $18.5 million |
| Cash provided by financing activities | $39.4 million | $14.6 million |
- Cash and cash equivalents were $25.6 million at year-end, versus $22.6 million a year earlier. Management expected to spend about $3 million per month on development activities during 2022 and did not expect operating cash flow that year.
- Management and the auditor cited substantial doubt about the company’s ability to continue as a going concern: year-end cash was insufficient to fund planned operations for one year after the financial statements were issued. Continued operations depended on additional financing and cost management.
- Total assets were $222.1 million, including $173.8 million of property, plant and equipment, primarily terminal and pipeline assets not yet in service. Total liabilities were $33.8 million; the balance sheet showed $19.9 million of stockholders’ equity and $168.4 million of convertible preferred stock presented separately as mezzanine equity. No conventional borrowings are identified in the supplied balance-sheet data; other non-current liabilities were $23.0 million.
- Current assets were $26.4 million and current liabilities $8.2 million, but this balance-sheet comparison does not remove the disclosed going-concern uncertainty. Contractual obligations listed totaled $4.0 million, mostly due in 2022.
- No operating margins are meaningful because the company had no revenue. The filing reported no cash dividends on common stock and did not anticipate them in the foreseeable future.
Changes, outlook, risks and unusual items
- Net loss attributable to the company increased $7.7 million year over year, despite a $3.4 million reduction in general and administrative expenses. The main adverse change was a $2.5 million loss on common-stock warrant liabilities, compared with a $7.9 million gain in 2020; these fair-value changes affected earnings and were non-cash.
- Common-stockholder loss also reflected $18.3 million of preferred-stock dividends in 2021, principally paid in kind. Preferred stock carries cumulative dividends at 12% annually and has conversion and liquidation rights that may dilute or rank ahead of common stockholders.
- The company raised $39.5 million from Series C preferred stock in 2021 and sold about $0.6 million of common stock through its at-the-market program. Funding the remainder of 2022 development and eventual project construction required further equity, equity-linked or debt financing; availability and terms were uncertain.
- Construction of the terminal was expected to be at least four years away. The company’s plans relied on FID, financing, additional commercial commitments, third-party EPC performance, and Enbridge-affiliated pipeline development. Delays, cost increases, permit challenges, gas supply or LNG-market changes could impair project economics.
- Other key risks include dilution and preferred-stock rights, dependence on a limited number of customers and counterparties, environmental and climate-policy changes, carbon-credit market development and incentives, competition, construction and operating hazards, and uncertainty from COVID-19 and the Russia-Ukraine conflict.
- The company reported effective disclosure controls and effective management-assessed internal control over financial reporting. The auditor issued an unmodified financial-statement opinion but highlighted going concern; the auditor did not attest to internal control.
Most important facts for investors to verify
- Whether NextDecade secured sufficient financing, reached FID, and advanced construction; check subsequent filings for cash runway and financing terms.
- Whether the Guangdong Energy heads of agreement became a definitive SPA and whether additional binding offtake commitments support project financing.
- Current status of FERC’s remanded environmental issues, the pending permit appeal, final notice to proceed, and other required approvals.
- Updated terminal and CCS costs, schedule, pipeline readiness, and the status and economics of CCS customer contracts and carbon-credit or tax-incentive assumptions.
- Potential dilution and priority claims from 12% cumulative preferred dividends, conversions, warrants, and future capital raises.