Business context and reporting period
Excelerate Energy, Inc. filed this Form 10-K for the fiscal year ended December 31, 2022. The company provides LNG regasification, FSRU and terminal services, and LNG and natural gas sales. Its fleet comprised 10 FSRUs; nine were contracted or transitioning to their next assignment at year-end, with a weighted-average remaining contract term of 6.3 years. Results are consolidated with Excelerate Energy Limited Partnership (EELP); after the April 2022 IPO, Excelerate owned about 24.2% of EELP, while the remaining interests were held by Kaiser-affiliated EE Holdings.
Key financial metrics
| Metric | 2022 | 2021 |
|---|---|---|
| Revenue | $2,473.0 million | $888.6 million |
| Operating income | $186.7 million | $139.3 million |
| Net income, consolidated | $80.0 million | $41.2 million |
| Net income attributable to Excelerate shareholders | $13.3 million; $0.51 per share | Not applicable before IPO |
| Gross margin | $259.7 million | $200.4 million |
| Adjusted EBITDA (non-GAAP) | $294.9 million | $262.1 million |
| Adjusted EBITDAR (non-GAAP) | $331.1 million | $291.1 million |
| Cash provided by operating activities | $225.1 million | $141.6 million |
| Capital expenditures | $119.3 million | $36.1 million |
Revenue growth was driven by LNG and natural gas sales, which rose to $2,027.8 million from $420.5 million. FSRU and terminal services revenue declined to $445.2 million from $468.0 million. Gas sales carry substantial corresponding commodity costs: direct gas-sale costs were $1,906.8 million in 2022. Operating and net margins were approximately 7.6% and 3.2%, respectively; the unusually large gas-sales revenue base makes these ratios sensitive to commodity prices and sales mix.
At December 31, 2022, cash and cash equivalents were $516.7 million, plus $21.3 million of restricted cash. Current assets were $823.5 million and current liabilities $391.5 million. Debt carrying amounts were $214.3 million to third parties and $188.4 million to related parties; finance lease liabilities were $231.2 million. The company reported compliance with debt covenants at year-end. Operating cash flow less capital expenditures was approximately $105.8 million.
Material changes versus the prior comparable period
- Revenue increased 178% and consolidated net income increased 94% year over year, while Adjusted EBITDA rose about 13%.
- Gas sales expanded with operations in Brazil and New England and the start of service at Finland’s Inkoo Terminal in December 2022. Gas sales represented about 82% of revenue, versus 47% in 2021.
- Operating cash flow increased by $83.5 million. Working-capital movements were significant, including collections of Brazilian receivables and customer prepayments, offset in part by changes in accounts payable.
- Capital expenditures rose to $119.3 million, primarily reflecting the Foundation Vessels purchase, the first installment on a newbuild FSRU, and the Albania power project.
- SG&A increased $19.0 million, mainly from public-company costs and business development. The company recorded a $21.8 million charge related to extinguishing the Excellence vessel lease liability.
Outlook, risks and unusual items
The filing gives no numerical financial guidance. Management expected LNG markets to remain tight and vulnerable to supply and demand disruptions over the following years, while citing longer-term demand growth from emerging markets. It viewed European demand and new FSRU or integrated-project opportunities as potential growth drivers. These are expectations, not assurances.
- After year-end, Excelerate entered a 20-year LNG purchase agreement for 0.7 million tonnes per year, expected to begin in 2027. The commitment may increase commodity, basis-spread and oversupply exposure if supply purchases and customer sales are not balanced.
- In March 2023, the company exercised its $265 million option to purchase the Sequoia and expected to close in April, using proceeds from a new $250 million term loan. A March 2023 amended credit agreement also provides a $350 million revolving facility; the facilities mature in March 2027.
- A newbuild FSRU is expected in 2026 at an estimated cost of about $330 million, subject to adjustment. Remaining expected payments were approximately $50 million in 2024 and $250 million in 2025–2026.
- Customer concentration is notable: one unnamed customer accounted for 80% of 2022 revenue, partly reflecting high-volume gas sales and elevated market prices. The filing cautions that this revenue concentration may overstate the related operational concentration risk.
- Management concluded disclosure controls were ineffective at year-end because material weaknesses remained in the control environment, period-end reporting and income-tax provision controls. Remediation was in progress, with timing uncertain; certain previously identified IT and other control weaknesses had been remediated.
- Other key risks include customer nonpayment or termination, project delays and cost overruns, LNG price and supply volatility, foreign-exchange exposure, political and regulatory risks, vessel operations and maintenance, and financing covenants. The Tax Receivable Agreement requires payment of 85% of specified tax savings; estimated aggregate future payments were $76.7 million under stated assumptions, while a hypothetical full exchange of EELP interests implied an estimated liability of about $420.4 million.
- The company paid $0.05 per Class A share in 2022 and declared a further $0.025 dividend for the quarter ended December 31, 2022, payable in April 2023. Future dividends remain discretionary and subject to debt restrictions.
Important facts for investors to verify
- Review subsequent filings for confirmation that the Sequoia purchase closed, how it was financed, and the resulting debt and lease profile.
- Assess the identity and credit quality of the customer responsible for 80% of 2022 revenue, and distinguish recurring charter revenue from commodity-linked gas sales.
- Track whether the 2027-starting LNG purchase commitment is matched by customer contracts, and monitor exposure to index differentials and LNG price changes.
- Monitor remediation and independent testing of the remaining internal-control material weaknesses.
- Reconcile the company’s reported liquidity and cash generation with working-capital swings, committed newbuild payments, debt covenants and potential TRA payments.