New Fortress Energy Inc. — 2020 Form 10-K Summary
Reporting period: Year ended December 31, 2020. The filing was signed March 16, 2021. Financial amounts below are in U.S. dollars; annual statement amounts are converted from thousands to millions unless stated otherwise.
Business context
New Fortress Energy (NFE) is an integrated LNG-to-power infrastructure company. It procures and liquefies natural gas, arranges shipping and delivery, and supplies LNG, natural gas, power and steam. At year-end, its operating facilities were in Jamaica, Puerto Rico and Miami; projects under development included facilities in Mexico and Nicaragua, and a proposed Ireland facility remained subject to planning permission and customer contracts.
Key financial metrics
| Metric | 2020 | 2019 |
|---|---|---|
| Total revenue | $451.7 million | $189.1 million |
| Operating revenue | $318.3 million | $145.5 million |
| Other revenue | $133.3 million | $43.6 million |
| Operating loss | $(155.4) million | $(187.3) million |
| Net loss | $(264.0) million | $(204.3) million |
| Net loss attributable to NFE stockholders | $(182.1) million | $(33.8) million |
| Basic and diluted loss per share | $(1.71) | $(1.62) |
| Cash from (used in) operating activities | $(125.6) million | $(234.3) million |
| Cash from (used in) investing activities | $(157.6) million | $(376.2) million |
| Cash from financing activities | $819.5 million | $602.6 million |
Fourth quarter: Revenue was $145.7 million, operating income was $18.0 million, net loss was $0.5 million, and net income attributable to stockholders was $0.2 million.
Liquidity and debt: At December 31, 2020, cash and cash equivalents were $601.5 million and restricted cash was $27.8 million. Current assets were $762.0 million versus current liabilities of $191.2 million. Long-term debt, including the current portion, was $1,239.6 million on the balance sheet; NFE reported $1.25 billion aggregate principal amount of senior secured notes. The notes bear 6.75% interest and mature in September 2025, with no principal due until maturity. Operating lease liabilities were $119.8 million. Contractual obligations totaled $4.36 billion, including debt, LNG and other purchase commitments, and leases.
Material changes versus 2019
- Revenue rose $262.5 million, driven mainly by higher volumes from the Old Harbour facility and the CHP plant, which began commercial operations in March 2020, and commissioning-related development revenue at San Juan.
- Operating loss narrowed by $31.9 million, but net loss increased by $59.6 million. Higher interest expense and debt-extinguishment losses weighed on the bottom line.
- A $105 million payment to terminate Centrica LNG purchases for the remainder of 2020, plus a $18.9 million loss on a mitigation sale, contributed to $124.1 million of contract termination and mitigation charges. NFE said open-market LNG purchases reduced its average third-party LNG cost from $0.73 to $0.46 per gallon year over year.
- Operating cash outflow improved by $108.7 million, mainly due to more favorable working-capital changes; it remained negative. Investing outflow declined as construction spending differed from the prior year.
- Debt increased from $619.1 million to $1,239.6 million on the balance sheet. NFE issued $1.25 billion of 6.75% secured notes, repaid prior facilities and bonds, and raised $290.8 million net from a December equity issuance.
Outlook, management commentary and risks
- Management said it expected available liquidity, operating cash flow and access to capital to fund capital expenditures and working capital for the next 12 months. The filing provides no quantified earnings or revenue guidance.
- NFE had approximately $1.18 billion of estimated expenditures for completed and existing projects, with approximately $789 million spent through year-end. It expected to fund committed projects with cash on hand and operating cash flows.
- Two acquisitions announced in January 2021—Hygo and Golar LNG Partners (GMLP)—were pending at the filing date, with closings expected in the first half of 2021 subject to approvals and other conditions. NFE obtained commitments for a $1.5 billion secured bridge facility and a $200 million revolving facility to support the GMLP transaction and related purposes.
- Three customers accounted for 88% of 2020 revenue. NFE identified customer concentration, counterparty credit and performance, LNG supply and price exposure, project delays and cost overruns, access to financing, regulatory approvals, and geographic concentration as key risks.
- The San Juan facility’s status under FERC jurisdiction remained unresolved. NFE stated it did not believe the facility was jurisdictional; the outcome and any required remedy were uncertain.
- Hygo disclosed an ongoing Brazil-Netherlands investigation concerning allegations involving its former CEO. Hygo’s internal review reported no evidence establishing bribery or other corrupt conduct involving Hygo; the external investigation remained ongoing.
- NFE reported no material adverse COVID-19 disruption in 2020 and no deterioration in collection timing or volume, while noting the pandemic’s future effects remained uncertain. It reported $1.2 million of COVID-related safety and response costs for the year.
- NFE reported effective disclosure controls and effective internal control over financial reporting; its auditor issued unqualified opinions on the financial statements and internal controls.
Important facts for investors to verify
- Track whether operating cash flow improves without relying on working-capital timing and whether new facilities generate contracted cash flows as planned.
- Review the economics and funding of the Hygo and GMLP acquisitions, including closing conditions, dilution, assumed obligations, bridge financing costs and integration risks.
- Assess the $105 million Centrica termination payment and whether new LNG supply contracts provide durable cost and margin benefits against customer pricing terms.
- Monitor customer concentration, particularly exposure to Jamaica’s utilities and PREPA, and the status of PREPA’s payment capacity and contracts.
- Follow the FERC matter concerning San Juan, permitting and construction progress at development projects, and any material outcome of the investigation involving Hygo’s former CEO.
- Confirm the company’s debt and liquidity position after acquisitions, including covenant restrictions, refinancing needs and the substantial LNG purchase and lease commitments.