New Fortress Energy Inc. — 2022 Form 10-K
Reporting period: Year ended December 31, 2022. This is an annual report, not a standalone fourth-quarter filing; selected Q4 figures are included below. Amounts are U.S. dollars unless noted.
Business context
NFE is an integrated LNG and natural gas infrastructure company, with terminal and power operations and a vessel-chartering business. It reports two segments: Terminals and Infrastructure, and Ships. Its 2022 results include acquisitions made in 2021 and significant 2022 transactions, including the Sergipe asset sale and Energos vessel transaction, which limit comparability with prior periods.
Financial performance and liquidity
| Metric | 2022 | 2021 |
|---|---|---|
| Total revenue | $2.368 billion | $1.323 billion |
| GAAP gross margin | $1.046 billion | $483.4 million |
| Operating income | $737.4 million | $238.9 million |
| Net income | $184.8 million | $92.7 million |
| Net income attributable to stockholders | $194.5 million; diluted EPS $0.93 | $97.1 million; diluted EPS $0.47 |
| Cash from operating activities | $355.1 million | $84.8 million |
| Consolidated segment operating margin, non-GAAP | $1.189 billion | $581.8 million |
Revenue rose 79%, driven principally by higher LNG cargo sales and higher Henry Hub-linked customer pricing; delivered volumes fell about 5% to 39.5 TBtu. GAAP gross margin was about 44% of revenue in 2022 versus 37% in 2021 (calculated from reported figures). The filing reports Q4 revenue of $546.4 million, operating income of $250.5 million, and net income of $65.8 million. Q4 gross margin was $332.6 million, compared with $260.0 million in Q3.
At year-end, cash and cash equivalents were $675.5 million, with a further $165.4 million of current restricted cash. Current assets of $1.387 billion were slightly below current liabilities of $1.409 billion; accrued liabilities included a $626.3 million dividend payable, paid in January 2023. Debt principal was approximately $4.582 billion (balance-sheet debt, net of deferred financing costs, was $4.542 billion), versus $3.896 billion of principal at year-end 2021. NFE reported $4.582 billion of total principal and interest payments in its debt maturity schedule? The filing’s contractual-obligations table instead reports $7.106 billion of long-term debt obligations over time, including scheduled interest. The company said it expected sufficient liquidity for the next 12 months and foreseeable future, relying on cash, operating cash flow, borrowings, and potential asset sales or new financing.
Contractual obligations totaled $28.436 billion, including $20.833 billion of LNG, natural gas, and construction purchase commitments, $7.106 billion of debt obligations, and $497.1 million of lease obligations. The purchase commitment amounts include index-priced estimates based on December 31, 2022 prices and are not equivalent to fixed cash payments.
Material changes and unusual items
- The August 2022 Energos transaction generated approximately $1.85 billion in proceeds. NFE retained about 20% of Energos; accounting rules treated most vessel proceeds as financing rather than a sale, resulting in a $1.406 billion vessel financing obligation with an approximately 15.9% effective interest rate.
- The October 2022 sale of the Sergipe investment generated approximately $530 million in proceeds to NFE. NFE recorded an approximately $369.2 million impairment of its CELSEPAR investment and a $50.7 million impairment of CEBARRA assets held for sale.
- NFE recorded a further $118.6 million other-than-temporary impairment of its Hilli investment. Total losses from equity-method investments were $472.2 million in 2022, versus $14.4 million of income in 2021.
- Interest expense increased to $236.9 million from $154.3 million, largely reflecting higher debt and the Energos financing obligation. A $123.4 million income-tax benefit included significant discrete items, so the reported net income and effective tax rate may not represent a recurring tax outcome.
- The Board declared a special $3.00-per-share dividend totaling $626.3 million in December 2022, paid in January 2023, in addition to quarterly dividends of $0.10 per share during 2022.
Outlook, commentary, and risks
NFE expected its first Fast LNG unit to deploy in 2023, with additional units planned thereafter. It estimated fully completed Fast LNG units would cost $800–$900 million each. The filing does not provide a clear quantified earnings or revenue guidance range. Management expects near-term results to benefit from selling LNG cargoes into elevated global markets, while its long-term plan is to sell substantially all Fast LNG output under long-term take-or-pay contracts. These are forward-looking expectations, not assured outcomes.
Other project timelines included expected operations at the Santa Catarina terminal in 2023, Barcarena terminal by year-end 2023, Barcarena power plant in 2025, and Ireland in the first half of 2024, subject to permitting, construction, financing, and customer conditions. The filing states committed expenditures for existing and completed projects were approximately $3.826 billion, with $2.473 billion spent through year-end 2022.
- Execution and permitting: Fast LNG is unproven, and projects face construction delays, cost overruns, and permit risk. MARAD’s review of the Louisiana FLNG application remained paused pending further information; Ireland planning permission was still pending.
- Regulatory exposure: NFE’s application to operate the San Juan facility remained pending with FERC, although the facility was permitted to continue operating during the application process. Mexico’s power-market rules and permits also present risks.
- Supply, prices, and customers: NFE depends substantially on third-party LNG supply and a limited customer base; two customers represented 42% of 2022 revenue. LNG price volatility, supplier nonperformance, and customer payment or nomination shortfalls could affect margins and liquidity.
- Leverage and funding: Debt, interest costs, covenants, working-capital needs, and substantial project commitments create financing risk. The company reported compliance with applicable debt covenants at year-end.
- Geographic, weather, and climate risks: Operations are exposed to political, foreign-exchange, regulatory, hurricane, and other natural-disaster risks. NFE also faces potential climate regulation and changing demand for fossil fuels.
- Other disclosures: NFE reported no material legal proceedings and stated its disclosure controls and internal control over financial reporting were effective. The auditor issued unqualified opinions and identified impairment assessment of $2.419 billion of construction in progress as a critical audit matter.
On February 6, 2023, NFE announced a proposed exchange of its Hilli interest for approximately 4.1 million NFE shares and $100 million cash, subject to closing conditions. In February 2023, it also increased its revolving facility capacity from $440 million to $741.7 million; the filing does not state the amount drawn at that date.
Most important facts for investors to verify
- Whether Fast LNG and major terminal and power projects achieve permitting, construction, commissioning, and cost targets on schedule.
- Actual cash available after restricted balances, the special dividend, project spending, and debt service; confirm revolver usage and covenant headroom.
- Whether LNG supply contracts and customer take-or-pay commitments cover planned volumes and protect margins amid price volatility.
- Customer concentration, payment performance, and exposure to government-linked counterparties, including PREPA and customers in Jamaica and Mexico.
- Closing and final economics of the Hilli exchange, and the impact of the Energos financing structure and its high effective interest cost.
- Whether 2022’s impairments and tax benefits, and the resulting reported earnings, are representative of recurring performance.