NextDecade Corporation — FY2020 Form 10-K
Reporting period: Year ended December 31, 2020; filed March 25, 2021. This is an annual report, not a standalone fourth-quarter filing. NextDecade is a pre-revenue LNG project developer focused principally on the proposed Rio Grande LNG Terminal in Brownsville, Texas.
Business context and project status
- The FERC authorized construction and operation of the Terminal, with the design optimized from six trains to five for planned capacity of up to 27 mtpa. Related permit appeals remained pending.
- A 20-year Shell LNG sale agreement for approximately 2 mtpa became effective in 2020, subject to the first train becoming commercially operable. The company continued seeking additional binding offtake commitments needed for financing and a final investment decision (FID).
- NextDecade sold Rio Bravo Pipeline Company to an Enbridge subsidiary for approximately $19.4 million, including $15.0 million received at closing and a contingent balance payable after FID and initial project financing. Pipeline transportation arrangements were retained. Because of a repurchase right if the project does not proceed by the specified deadline, the company recorded sale proceeds and certain buyer costs as a non-current liability and did not derecognize Rio Bravo’s assets at year-end.
Financial performance and liquidity
| Metric | FY2020 | FY2019 |
|---|---|---|
| Revenue | $0 | $0 |
| Operating loss | $22.0 million | $35.0 million |
| Net loss attributable to NextDecade | $14.3 million | $35.9 million |
| Net loss attributable to common stockholders | $28.8 million | $48.6 million |
| Basic and diluted loss per share | $0.24 | $0.45 |
| Operating cash used | $26.3 million | $40.7 million |
| Cash and cash equivalents at year-end | $22.6 million | $15.7 million |
- The smaller operating loss reflected no invitation-to-bid costs in 2020 after the EPC bidding process concluded, lower general and administrative costs, and a favorable $7.9 million change in warrant liabilities. The warrant revaluation is non-cash and market-sensitive.
- 2020 investing cash flow was a net inflow of $18.5 million, primarily reflecting $62.0 million of investment-security proceeds, partly offset by $32.4 million of property and equipment spending and $10.9 million of other asset spending. Financing cash flow was $14.6 million, principally the $15.0 million Rio Bravo closing payment.
- Year-end current assets were $23.3 million and current liabilities $5.1 million, a derived current ratio of about 4.5x. Total assets were $201.7 million; total liabilities $28.9 million; and stockholders’ equity $60.4 million. Series A and B convertible preferred stock, presented separately as mezzanine equity, totaled about $112.3 million.
- No conventional borrowings are shown on the balance sheet; substantial project financing will be required. Preferred shares carry cumulative 12% annual dividends, payable in cash or in kind. The company paid $14.3 million in preferred dividends in kind during 2020.
- Management reported approximately $67 million of pre-FID development spending in 2020 and expected that spending to average about $3 million per month through year-end 2021. Year-end cash alone was below this indicated spending pace; the filing also reports a subsequent $24.5 million Series C preferred-stock financing completed by March 22, 2021.
Margins are not meaningful because the company reported no revenue. The filing does not provide a clear consolidated quarterly revenue trend beyond reporting zero revenue in each 2020 quarter.
Material changes versus 2019
- Operating cash outflow improved by $14.4 million and operating loss narrowed by $13.0 million. Net loss attributable to common stockholders improved by $19.8 million.
- General and administrative expense declined by $2.3 million; invitation-to-bid costs fell by $10.2 million to zero. Lower interest income and preferred dividends that increased to $14.3 million partly offset improvements.
- Investment securities declined from $62.2 million at year-end 2019 to zero after redemption in 2020; the redemption resulted in a $0.4 million loss.
- Terminal and pipeline assets not yet placed in service rose to $161.3 million from $133.9 million. Total assets declined to $201.7 million from $221.2 million.
Outlook, risks and unusual items
- Management anticipated FID on at least two Terminal trains in 2021, with a carbon-capture project FID soon afterward. This is a stated expectation, not a guarantee. The filing says significant revenues and operating cash flows depend on completing the Terminal, which was expected to take several years.
- Management said a planned carbon-capture and storage project could reduce permitted Terminal CO2 emissions by more than 90%; the five-train optimization was expected to reduce emissions by approximately 21% versus the original six-train design. These are projections, not achieved results.
- Bechtel EPC contract prices for Trains 1–2 and Train 3 were $7.042 billion and $2.323 billion, respectively. The company had issued limited notices to proceed; the March 2021 amendments extended contract validity to July 31, 2022.
- Key risks include inability to obtain financing or sufficient offtake contracts, construction cost increases or delays, dependence on Enbridge-affiliated pipeline development, pending permit litigation and additional approvals, volatile LNG markets, COVID-19 effects, and environmental or community opposition.
- The company elected in January 2021 to abandon its Galveston Bay LNG site; the DOE terminated its export authorization for that project in March 2021. A separate local lawsuit challenging the Brownsville site lease was dismissed in August 2020, while federal permit appeals remained pending.
- The independent auditor issued an unqualified opinion on the financial statements. The auditor identified warrant-liability valuation and Rio Bravo sale accounting as critical audit matters. Management reported effective disclosure controls and internal control over financial reporting; the auditor was not required to attest to internal-control effectiveness.
Investor verification priorities
- Whether FID was achieved, for how many trains, and whether binding offtake, construction financing, and required equity are sufficient to fund the project.
- Available liquidity against continued pre-FID spending, including the terms and proceeds of Series C financing and the cumulative preferred dividend burden.
- Status and possible effect of appeals, permits, the Brownsville site lease, and Enbridge’s pipeline and transportation commitments.
- Whether EPC cost estimates, schedules, and limited notices to proceed remain valid, and what additional commitments are required for full construction.
- Assumptions supporting projected carbon-capture reductions, project economics, customer demand, and LNG pricing.