New Fortress Energy Inc. — FY2021 Form 10-K
Reporting period: Year ended December 31, 2021. This is an annual filing, not a standalone fourth-quarter report. Unless noted otherwise, amounts are in U.S. dollars.
Business context and reporting period
NFE is an integrated LNG-to-power infrastructure company, spanning LNG procurement, shipping, terminals, power generation and related services. Its operations include assets in Jamaica, Puerto Rico, Mexico and Brazil, alongside a global vessel business.
On April 15, 2021, NFE completed its acquisitions of Hygo and GMLP. The additions included a 50% interest in Brazil’s Sergipe power project, development projects and a vessel fleet. Their results are consolidated only from the acquisition date, so reported year-over-year comparisons reflect a substantially different business scope.
Key financial metrics
| Metric | FY2021 | FY2020 |
|---|---|---|
| Total revenue | $1.323 billion | $451.7 million |
| Operating income (loss) | $238.9 million | $(155.4) million |
| Net income (loss) | $92.7 million | $(264.0) million |
| Net income (loss) attributable to stockholders | $97.1 million | $(182.1) million |
| Diluted EPS | $0.47 | $(1.71) |
| Cash provided by (used in) operating activities | $84.8 million | $(125.6) million |
| Cash used in investing activities | $(2.274) billion | $(157.6) million |
| Cash provided by financing activities | $1.817 billion | $819.5 million |
Consolidated operating margin was approximately 18.1% of revenue and net margin approximately 7.0%. Segment operating margin was $581.8 million, a management-defined measure that excludes certain expenses and includes NFE’s proportionate share of equity-method investees; it is not directly comparable to consolidated operating income.
Revenue increased approximately 193% year over year. Major drivers included the acquisitions, higher delivered volumes and Henry Hub pricing, and $462.7 million of LNG cargo sales. Average Henry Hub pricing used to invoice customers rose 85% year over year. Delivered volumes increased to 41.8 TBtu from 35.6 TBtu.
At year-end, cash and cash equivalents were $187.5 million, restricted cash $76.5 million, current assets $584.9 million and current liabilities $562.5 million (current ratio approximately 1.04x). Total assets were $6.876 billion and total liabilities $4.882 billion. Gross principal debt was approximately $3.896 billion; debt reported on the balance sheet, net of financing costs and fair-value adjustments, was $3.855 billion. The 2021 cash-flow summary reports a net decrease in cash, cash equivalents and restricted cash of $365.3 million.
Annual dividends declared were $0.40 per share ($0.10 quarterly), totaling $79.8 million.
Material changes versus the prior comparable period
- NFE moved from a 2020 net loss of $264.0 million to 2021 net income of $92.7 million. The improvement reflects higher revenue and the acquired businesses, as well as cargo-sale gains in a strong LNG market; it should not be read as a like-for-like organic growth comparison.
- Operating cash flow improved by $210.3 million to $84.8 million, but remained modest relative to capital needs. Working capital absorbed cash, including a roughly $109 million cargo-sale receivable settled shortly after year-end.
- Investing outflows rose to $2.274 billion, including $1.586 billion net cash paid for the mergers and continued project development. Financing inflows included new notes, revolving-facility borrowings and a vessel term loan.
- Debt increased substantially from $1.250 billion of outstanding debt at year-end 2020 to approximately $3.896 billion of gross principal debt at year-end 2021. Interest expense rose to $154.3 million from $65.7 million.
- Three customers accounted for 88% of 2020 revenue. In 2021, two significant customers represented 25%, while a cargo-sale counterparty represented a further 23%, according to the filing’s customer-concentration note.
Outlook, commentary, risks and unusual items
- Management said it expected available liquidity, operating cash flow and access to capital sources to fund working capital and capital expenditures for the next 12 months. This is management’s assessment, not a guarantee. No quantified earnings or revenue guidance is provided in the supplied filing text.
- Management reported LNG supply commitments intended to cover approximately 100% of expected needs at specified facilities for six years. It also disclosed about 648 TBtu of contracted purchases for delivery through 2030, with annual commitments declining after 2025. LNG price and supply volatility remain important exposures.
- Committed expenditures for specified projects were estimated at $1.913 billion, with approximately $1.439 billion spent through year-end. Projects include La Paz, Puerto Sandino and Brazilian facilities. Timing, construction costs, customer contracts and permits remain execution risks.
- The first Fast LNG project was under development, with deployment expected under a commercial agreement; the technology is unproven. Puerto Sandino was expected to begin commercial operations in 2022, while the Barcarena project was scheduled to deliver power beginning in 2025. These are forward-looking expectations.
- In 2021, cargo sales of 18.5 TBtu supported results amid rising market prices. NFE also recognized $30.5 million of share-based compensation after determining a performance award was probable of vesting. It recorded $44.7 million of transaction and integration costs and a $11.0 million loss related to repurchasing the Eskimo vessel financing arrangement.
- Key risks include substantial leverage, working-capital needs, project completion and financing, customer concentration and credit, LNG price and procurement risks, foreign-exchange exposure, and regulatory uncertainty. FERC determined the San Juan facility was within its jurisdiction; NFE’s review petitions were pending and its operating-authorization application remained pending.
- The filing describes tax assessments in Jordan and Indonesia and an Indonesian VAT matter assumed in the GMLP acquisition. NFE disputed or challenged the matters; it reported no material legal proceedings as of filing. It also disclosed a former Hygo CEO’s connection to a Brazil/Netherlands corruption investigation; Hygo’s internal review found no evidence of bribery or other corrupt conduct involving Hygo, but the outcome and potential effects were uncertain.
- The auditor issued unqualified opinions on the financial statements and internal control over financial reporting. However, Hygo and GMLP were excluded from the internal-control assessment, except for goodwill and intangible-asset recognition; those acquired businesses represented significant portions of year-end assets and 2021 revenue.
Important facts for investors to verify
- Reconcile reported earnings and segment operating margin to recurring operating performance, particularly the contribution of cargo sales, acquisition effects, equity-method investments and incentive compensation.
- Review debt maturities, interest costs, covenant headroom, collateral and guarantees, and the availability and terms of additional financing.
- Track operating cash conversion, receivable collection and working-capital requirements alongside remaining committed project spending.
- Confirm progress on project construction, permits and commercial operations, including San Juan’s regulatory status, Puerto Sandino timing and Brazil development plans.
- Assess customer concentration and counterparty credit, including exposure to cargo-sale buyers and public-sector customers.
- Monitor LNG procurement prices, supply commitments and the economics and execution risk of Fast LNG.