New Fortress Energy - Earnings Call - Q1 2025

Executive Summary

• Q1 2025 was a reset quarter with core operations intact but no one-offs: revenue fell to $470.5M, Adjusted EBITDA to $82.3M, and diluted EPS to $(0.73); vs Q1 2024, revenue declined 31.9% and Adjusted EBITDA fell 75.8%.
• The company closed the $1.055B sale of Jamaica assets, committing proceeds to debt reduction ($270M revolver, $55M Term Loan A) and liquidity, and outlined a shift toward asset‑level financing backed by 20‑year supply and demand contracts.
• Management raised 2025 “EBITDA plus gains” guidance to $1.25–$1.5B, driven by expected FEMA proceeds, FSRU sub‑charters/novations, Genera incentive payment, and Brazil/Nicaragua ramp, while reiterating core SG&A at ~$30M/quarter.
• Key operating headwinds included lower downstream volumes, higher gas costs (weighted average cost per MMBtu rose from $8.75 in Q4 2024 to $9.57 in Q1 2025), and increased vessel costs; Henry Hub index pricing used to invoice customers rose 63% YoY.
• Stock reacted sharply: law firm releases cite a 62.98% drop to $4.27 on May 15 following results; Nasdaq later notified NFE of a filing delay for its Form 10-Q, which NFE expects to resolve without delisting impact.

What Went Well and What Went Wrong

What Went Well

• Closed the $1.055B Jamaica sale with ~$778M net proceeds and a ~$$430M expected book gain, accelerating deleveraging and balance sheet simplification.
• Strategic pivot to asset‑level financing: matched long‑duration LNG supply (FLNG and Venture Global SPAs) to 20‑year demand contracts, underpinning ~$500M annual margin potential and setting up refinancing of corporate debt over the next ~12 months.
• FLNG 1 fully commissioned and producing reliably; optimization outage planned to lift throughput further; Brazil CELBA project ~95% complete and expected to begin earnings in Q3 2025, with PortoCem >50% complete.

Notable management quotes:

• “Our goal is the quality versus quantity of the earnings… repeatable, easy to understand and very long duration cash flows”.
• “We expect to start generating earnings from the CELBA power plant in the third quarter of this year. These developments are fully funded with asset-level debt”.
• “The asset level financing… has got the ability to refinance a significant portion of the balance sheet, if not all of it”.

What Went Wrong

• No one‑time gains in Q1; “quality…was high, but the quantity was lower than we were initially forecasting”—Adjusted EBITDA fell to $82.3M as downstream volumes dropped and cargo sale boosts did not recur.
• Cost pressure: weighted average cost of gas rose to $9.57/MMBtu (from $8.75 in Q4 2024), vessel costs +$12.3M YoY; Henry Hub invoicing index up 63% YoY; downstream volumes 25% lower QoQ and 37% lower YoY.
• PREPA island‑wide gas extension revised from 1 year to 100 days to allow an RFP, increasing near‑term contract duration uncertainty (though management expects longer-term solutions).

Transcript

Operator (participant)

Good day and welcome to the NFE First Quarter 2025 earnings call. Today's conference is being recorded. At this time, I will be handing the call over to Matt Reinhardt, Managing Director, for introductory remarks.

Matt Reinhard (Managing Director)

Good afternoon, everyone. Thank you for joining today's conference call, where we will be discussing our First Quarter 2025 results. The call is being recorded and will be available by replay on the Investor section of our website under the subheading Events and Presentations. At the same location, you'll find a presentation that we will walk through on today's call. Please review this, as it includes important information on forward-looking statements and non-GAAP measures. With that, let me hand the call over to our Chairman and CEO, Wesley Edens. Wes.

Great. Thanks, Matt. Welcome, everyone. Lots to go through here this afternoon, and I'll try and make my own statements brief. Start with the core earnings for the quarter. We're very much in line with expectation. If you look at the yellow boxes on the piece of paper, you can see that post the first quarter of 2024, which is the last quarter that we had the FEMA plants online in Puerto Rico, we've had basically extremely consistent core earnings: $110 milion, $177 million, but then $109 million, $116 million. Very much in line with that. Our forecast for the core earnings for the remainder of the year are basically very much in line with what this is for the first half, and then accelerating in the second half as we start to bring assets online, in particular those assets in Brazil.

That said, the EBITDA that we had forecast for the quarter were less than that simply because we did not have any one-off results to add to it. Again, if you look at our numbers historically, we've had a combination of core results plus one-off results, and we simply didn't have any one-off results this quarter. That said, we expect EBITDA plus gains to be $1.25 billion-$1.5 billion for the year, which is higher than our previous estimate. We're actually off to quite a good start in that regard, in particular when you consider the events of just today. We already had meaningful gains with our Jamaica sale, which I'll talk about in a second, and there's a handful of other things that are going to be significant events for us to add to our core events. Our goal is the quality versus quantity of the earnings.

In particular, what we are looking to generate for shareholders and for our constituents is repeatable, easy to understand, and very long-duration cash flows. I'll explain kind of what the portfolio looks like because we have a lot of those to offer. Let's flip the page to page number four. Material events that are in front of us, first and foremost, is the Jamaica sale, $1.055 billion closed today, just a few hours ago. That translates into about $800 million in net proceeds, a $430 million gain. Again, a good start at whacking at the one-off gains that we expect to generate for the course of the year. The FEMA claim is, as we originally had filed it with FEMA, $659 million. There's a very high degree of engagement with the Army Corps, which is our prime contractor, Weston, that is making a lot of progress.

We expect resolution of this claim at some point in the near term. As with any proceeding with the government, it is impossible to really forecast accurately either the time or the amount of that. We remain optimistic about what our position is, as we know what we are owed. The $659 million reflects that. On the FSRU subcharters, we basically had a handful of FSRUs that were surplus to our needs in our portfolio that we took back and then relet them at a higher rate to third parties. The estimate of the Freeze, and then there are two others that are in there. The total nominal dollars are shown in the line below. $143 million in profit, $59 million, $110 million, $312 million. They range in periods from anywhere from three to ten years.

The present value at a 10% discount rate, just to give context to it, is $236 million. These are assets we can either collect month by month over the next three, five, 10 years, or we can look to sell them and generate a one-time gain, something we are evaluating. Lastly, the excess cargo sale that we conducted at the end of last year and reported the result in the fourth quarter, which, again, if you look at the previous page, the excess cargo was $296 million. These were excess cargoes that we had. We were concerned that actually the market might decline for value. That turned out to be prophetic, because that is exactly what happened. We sold them. Really, the gain from them was the one-time gain from last year. There is another $125 million to be collected, primarily in the periods of 2026 and 2027 and stubborn 2028.

Those are the big events for us. There are others as well. Hopefully, this gives you some useful context in evaluating the $1.25 billion-$1.5 billion EBITDA or gain estimate that we're providing for the year. Page number five. Our near-term focus has been on asset sales, on debt reduction, and deleveraging. The case study is the sale that we just concluded in Jamaica. If you look at the timeline below, you can see we listed the property for sale in the fourth quarter of 2024. We conducted our second-round bid and went down to five bidders in the first quarter. We chose to work with Accelerate exclusively in March, and we concluded the sale now. Basically, both the timing and the amount that we had forecast that we've exceeded.

We did it in a shorter period of time and at a higher price than what we had originally forecast. We feel great about that. A little bit on Jamaica above it. This is the first market that we had started to conduct business in, and it is a great market. We ended up generating $125 million in EBITDA, stable, mature market with long-term contracts with a 20-year duration. A significant portion of them were supplying Jamaica's gas and power needs. Roughly 60% of the island's gas or power we supply. They still think there are significant remaining growth opportunities in Jamaica for bunkering and expansion. We feel great about the asset that we sold on to Accelerate. From our standpoint, this is a meaningful deleveraging event for us.

Sale price of $1.055 billion, $227 million in debt repayment on the direct-to-Malco asset and the power plant, estimated $50 million in fees, net proceeds of $778 million. Crystal will talk about that later. Page number six. Following the Jamaica sale, our goals are very, very clear. Number one, first and foremost, is to simplify the balance sheet and do so by extending the duration to match underlying assets and lower our debt costs. To do so, we are focused on moving from a corporate debt structure to one which is more asset-level financing, and we'll describe that in some detail. This is something we've had a lot of experience about before.

I think in many cases, when you have a capital structure that becomes too complex or too difficult for people to interpret, the underlying asset value can become obscured by it, and you get kind of the worst of all worlds. What we're very focused on is isolating those assets that have the long duration, the credit quality, the repeatability that we know to be the most valuable, expose those in a financing context, and generate the right result for that. You look at page number seven, this is a good example of what I mean. Basically, what we have done is matched our long-term supply in our portfolio with our FLNG unit, which is performing terrifically, and then two long-term contracts with Venture Global, and matched them up side by side with those contracts that are our long-term demand.

I've listed the five that are the most notable. There are smaller ones as well, but these are the ones that are the most meaningful. Basically, you can see on the supply side, we have 215 TBtu of supply for a term of 20 years. On the demand side, this handful of the large contracts is for 20 years as well, on average. It ranges from BBB, BB+, BBB-, B+ in the one case. They're generally high-credit quality assets, very long-term duration, and these are their stated contract terms. Simply subtracting the cost of supply from the value of the demand, you can see these assets alone generate $500 million in annual margin. These are not assets that we are aspirational about building or assets that we are talking about pursuing or whatever.

This really represents the core of the portfolio. The way I think of it is we're utilizing about 50% of our total supply portfolio. Of the 215, this is committed on 109 TBtus of it. If we're able to replicate our activities on the second half of this at terms similar to the first half, we can generate $500 million that grows to $1 billion in annual margin with very, very long duration. That presents tremendous financing opportunities. It also presents great value to shareholders. That's what our focus is. Page number eight is that in order to close the loop and finance this efficiently, you need to control every aspect of the logistics chain: supply, demand, terminal, ships, and overall logistics. Fortunately, we control all of that.

The four terminals that are relevant in this discussion are the La Paz terminal in Mexico, Porto Sandino in Nicaragua, the Bacarena terminal in Brazil, and the San Juan terminal in San Juan, Puerto Rico. We have these terminals that we own and control, essentially, and have developed. In addition, we have a dedicated fleet of terminal ships and transport ships to basically both supply to the locations, but then also supply then onto the land. Basically, you have connected the dots between every aspect of it. The combination of the long-term cash flows, credit quality, duration, in particular of this, the 20-year duration, is what actually gives us so much optimism that there are meaningful things to do here. There is a reason why Charlie Munger used to carry around the compounding tables in his back pocket. 20 years of repeatable cash flows is an incredibly powerful combination.

That is what we have already in hand, and we think the prospects for adding to it are terrific. On the growth side, two elements that we are focused on are Brazil and Puerto Rico. I am joined here in New York by Leandro and Jeremy from our Brazil team who run Brazil for us. They can give some context both on what we have accomplished and what we are focused on. Fellas.

Leandro Cunha (Managing Director)

Thanks a lot, Wes. Good afternoon, everyone. I'm pleased to be discussing our progress and outlook in Brazil. Over the past few years, we've made significant and strategic investments in the country, laying the foundation for a high-value and resilient business. After years of dedicated work and over billions of investment, we are finally approaching the full commercial operation date of our key assets. One of our projects, a 624 MW combined cycle power plant, is expected to reach COD in the second half of this year, while the second power plant, a 1.6 GW open cycle plant, is on track for COD by mid-next year. This is a key moment for us. These investments are converting into a long-term contracted asset, and we're very excited to be part of this transformation at NFE Brazil. In this slide number 10, I wanted to highlight the Bacarena complex and its associated long-term contracts.

These contracts, all of them, are inflation-linked. They are protected from gas price volatility and backed by strong credit ratings, providing stable and predictable cash flows for our business. Starting with the Norsk Hydro contract, we began deliveries in March 2024 under a 15-year gas supply agreement, which is indexed to Henry Hub +$6.04 per million BTU adder, with part of the adder adjusted by U.S. CPI on a yearly basis, as shown in these slides. The contract covers approximately 30 TBtu with a 90% take-or-pay. For CELBA 2, our 624 MW plant, we have a 25-year PPA with 100% take-or-pay during the second semester of each year, starting from COD, expected to occur in the second semester of the year.

The gas volumes here are approximately 18 TBtu here, considering only the take-or-pay, with price indexed to 91% of JKM plus an adder of $3.36 per million BTU, which is also adjusted by U.S. CPI on a yearly basis. Finally, at PortoCem, our 1.6 GW plant, we secured this 15-year capacity contract with the National Grid, which pays approximately $280 million for the availability of the plant, plus a dispatch component whenever the plant produces power. Assuming a 10% dispatch rate, it would translate into an approximately 12 TBtu of additional gas demand at a premium gas price. These projects are secured by strong counterparties, as mentioned by Wes, which demonstrates how robust our commercial foundation is. I will hand it over to Jeremy to walk you through the construction update.

Jeremy Dawson (Managing Director)

Good afternoon, everybody. It's my pleasure to give you a very positive construction update this quarter. Since we last spoke on our CELBA power plant, as Leandro just mentioned, the 624 MW combined cycle plant, since our last update, we've increased general progress by over 7%. On Portocém, we've increased the progress by over 15%. That brings both of our plants now to a 95% completion for CELBA and an over 54% completion for Portocém. Those major milestones that we've achieved are actually in spite of the fact that in this previous quarter, we had a very intense rainy season to work through. In a couple of the months of the quarter, we had near 30-year historical levels of precipitation.

In the case of Portocém, which is in a largely civil construction phase, that was a significant achievement for the project team to not only maintain the float and the schedule improvement that we have, but also actually increase it a little bit. Back to CELBA 2 on the combined cycle plants, at 95%, we're nearing a very important milestone of mechanical completion. We're in a phase right now, a very critical phase of the high-pressure hydro testing. We've tested the steam system up to 96 bar on our way to 300 bar eventually. Another important milestone of the 95% is that it means a different level of effort at our site.

The 95% mechanical completion milestone effectively means that we can transfer the main level of effort from our construction contractor over to our power core provider, Mitsubishi, and allow them to, after first fire, which we expect at first fire of the gas turbine, which we expect at the end of August, to take over the level of effort at site and to start generating commissioning power. On Portocém, although we are in a civil construction phase, we did advance it significantly during this last quarter. One interesting note is, if you recall the last update, we showed you photos of gas turbines in transit to the site. As you see here in our update on slide 11, we're showing you photos of gas turbines installed at site. We actually have two out of the three turbines that are already manufactured. We have them installed at the site.

The third gas turbine will be arriving at the end of the month, and we're also in the process of installing two of the three electric generators. We have the primary ability that we've leveraged in our schedule, being more than 10% ahead of the planned completion percentage at this point, is that our main equipment has arrived well ahead of the planned delivery dates. This de-risks our schedule completely and helps us to maintain a 10% float in our completion plan at this point. Importantly, in this past quarter since we last spoke, we've also commenced work on our 500 kV transmission line and the substation, where our GIS will arrive later this year to be installed. Just before I hand back to Leandro for the power auctions, one interesting note on PortoCem.

As you recall, this project is one that we procured from another site and transferred it to our Bacarena facility with some milestones that were delayed from the original project developer. We've actually transitioned to the schedule advancement to such a point that we're now accomplishing some of the original developer's milestones that were promised to the regulators in Brazil, although they were more than a year into development when we procured this project. We look forward to another successful quarter and get back to you at that time. Thanks, Leandro.

Leandro Cunha (Managing Director)

Thank you, Jeremy. Turning to slide number 12, I want to discuss the market's outlook and the upcoming opportunities with a focus on the capacity auction expected later this year. First of all, I mean, probably most of you heard about it. The auction that was originally scheduled to happen in June was canceled, and we believe this is a temporary delay, actually. The Ministry of Mines and Energy has stated publicly that he expects the auction to take place in 2025, and we expect rules to provide more clarity and fairness to the competition. Just to make it clear, the fundamentals haven't changed. Brazil still needs to contract, in our estimate, 10 GW-15 GW of capacity. The PPAs are expected to have CODs between 2026 and 2030 for both brownfields and greenfield assets.

We will offer capacity payments similar to PortoCem with 15-year terms for greenfield projects and gas indexed to JKM and TTF. While the postponement of the auction created some short-term noise in the country, we're confident in the structural needs for the auction. There is no question that Brazil needs the power, and if this auction doesn't happen, the system could face real operational challenges. We're fully prepared as NFE Brazil. We are positioned to register over 2 GW of projects in the upcoming auction. Additionally, more than 3 GW of third-party projects have requested gas proposals from us, showing clear market confidence and the competitiveness of our platform in Brazil. In short, we see a path for meaningful expansion of our business in Brazil with strong counterparties, solid regulatory support, and rising demand for our integrated LNG-to-power model.

Thank you very much, and I want to hand it over to Wes.

Wesley Edens (Chairman and CEO)

Great. Thanks, Leandro. Let me briefly talk about Puerto Rico because it's another big market for us with a lot of activity. Just a bit of a situational overview of what the energy system in Puerto Rico looks like. It's a very underinvested, very antiquated system that is in great need of repair and great need of new investment, in particular on the new generation side. There's been no power plants built that are material in the last 30 years, so the average power plant is quite old, which rotating equipment is really not to operate efficiently for 40, 50, 60 years. There's a lot of challenges in terms of the fleet that exists. Over 50% of it runs on some combination of oil and diesel. Contrast that to the mainland United States, where less than 1% of our electricity is operated on diesel.

You can see there's a huge difference between the utilities that we find in the mainland and what we see there. What that means is that the plan and the needs in the business in Puerto Rico on the energy side, we think, are extremely clear. Number one, there's a lack of sufficient reserve, which hence means that they need temporary power, which is exactly what they have done in terms of going out for a bid for temporary power. Especially with the upcoming summer and the demands on the system that happen when it gets hotter down there, and of course, hurricane season is around the corner, there's a concern that they lack adequate reserve from some of the plants being offline, and so they're trying to buttress that by holding an RFP for temporary power.

Number two is there is a total of about 925 MW of power today that runs on diesel that can be readily converted to natural gas. That represents roughly a $300 million difference in fuel costs between burning the diesel and burning the natural gas for no benefit whatsoever. Our view is that in the context of the RFP that is being talked about for gas supply, it should include a provision to also convert those other assets. We list the four that are on here. There is the Mayagüez 200 MW plant, Capellanía 240 MW, the three Pratt & Whitney mega gens that are in Palo Seco, and the Aguirre 1 and 2, which is the combined cycle plant in the south.

All those can be readily converted, and simply doing so is relatively low cost to the system and can generate very, very meaningful decreases in fuel costs to them, upwards of $300 million a year. Lastly, there has been no new power generation built in the last 30 years. There was a plant that was agreed by the government in early January. It was the first new PPA that's been signed in some time. We are the gas provider for that in the long term, and so we think that basically building new generation is really what will cure what ails the system for the most part because the lack of reliability and the inefficiency of the system is really, really a function of these old power plants.

Right now, there are plans underway by PREPA to address these issues by running the RFPs for temporary power, running an RFP for gas supply, and running an RFP for new generation, all of which we think are interesting opportunities and situations which we will certainly take a hard look at. Our infrastructure in San Juan has had a very good quarter. This is the first time that we got a large ship, so basically we're able to replace the flotilla of kind of smaller logistical ships with a larger ship with the channel widening that the Army Corps had engaged in. That actually allows us to be more efficient in bringing in more supply. Basically, it cuts our expenses, but it also greatly increases the capacity of that terminal, which is a good thing. With that, let me turn it over to Chris.

Christopher Guinta (CFO)

Great. Thanks, Wes. Appreciate the opportunity to talk to everybody today. First, let me start with giving a little bit more color regarding the two recent SEC filings that we submitted earlier this week. On Monday, we filed an 8-K outlining an update to the use of proceeds of the Jamaica sale, which I'll walk through shortly. Yesterday, we filed a notification of late filing under Rule 12B-25, which allows the company to file our full form 10-Q no later than Monday the 19th. The reason for the late filing is twofold. First, we wanted to be able to announce the consummation of the sale of the Jamaica business, including describing for investors the use of proceeds. Second, with the Jamaica asset sale proceeds in hand, we can report an improved liquidity prediction and reduction of the going concern risk that was included in the 10-K.

Now, turning to slide 15, we've outlined both the cash and the accounting treatment of the Jamaica transaction. On the left side of the page, we show the proceeds waterfall, and on the right side, the gain we will recognize in the second quarter. Prior to the most recent amendment of the credit agreement, there was a requirement to use 75% of the proceeds of material asset sales to pay down super priority debt, which included the revolving credit facility, the term loans A and B, and the new 2029 notes. However, we were able to negotiate an agreement with the revolving credit facility lenders to waive this asset sale proceeds waterfall in exchange for the early paydown of the September amortization payment of $270 million.

In addition, we also amended the term loan A, where we agreed to a modest paydown of $55 million, which is in line with what they would have received under the waterfall anyway. Further, we eliminated the debt-to-capitalization covenant in this facility, and we matched the financial covenants of that loan to those in the revolving credit facility, none of which will be tested until September 30th, 2024. As a result of these amendments, we were able to retain almost $400 million of proceeds after tax that can be used to solve, in part, nearer term maturities, including the 2026 notes and non-extended revolver tranche, thus eliminating debt maturities until the second half of 2027. On the right side of the page, we show the expected accounting gain on this transaction.

Gross proceeds of $1.055 billion less the asset-level debt and fees and expenses gets to net proceeds of $778 million, then reduced by our basis, which is $177 million, and reduced by goodwill allocation of $172 million, will result in a book gain of $430 million. A big thank you to our full team that tirelessly worked to get the Jamaica deal closed. This includes our internal employees, our external advisors, and our partners at Accelerate, and we send best wishes for their success with an incredible asset. Go ahead and turn now to slide number 16, and let's talk for a minute more about the two FSRU contracts that we signed over the last couple of months. In December, we announced that we chartered the Eskimo to EGAS, and this week, we announced that we chartered the Freeze to Energía 2000.

These two projects alone equate to approximately $200 million of future earnings. Additionally, we are in advanced discussions with counterparties on two additional FSRU opportunities, which contribute an incremental $100 million to the total value of the portfolio. On an annual basis, these relits can increase our cash flow up to about $50 million in added EBITDA per year. Further, with the high demand for these contracts, we have the opportunity to novate or sell them to other companies, which would provide us with upfront payments that we think are around $200 million. When that occurs, it would be included in EBITDA and, of course, earnings. Turn, please, now to slide 17, and we have financial results. Total segment operating margin was $106 million for Q1 compared to $240 million for Q4 of 2024.

Core SG&A for the first quarter was $34 million, which is equal to what we had for Q4 of 2024. For the balance of 2025, we're forecasting $30 million a quarter. As Wes stated earlier, adjusted EBITDA for the first quarter was $82 million. Moving to slide 18 for Q1, we had a $200 million net loss for GAAP, or a loss of $0.73 a share. We had no material one-time items leading to the adjusted EPS to be the same as GAAP. As Wes said already, the quality of our earnings this quarter was high, but the quantity was lower than we were initially forecasting. Two differences that we were initially expecting in the first quarter versus what we are reporting is, one, the recognition of the PR incentive payment, which is about $110 million.

This is still something we expect to receive in 2025, but was not agreed to before the closing of the first quarter. Two, a sale of the Eskimo vessel charter. Again, this is still something that we expect to complete in 2025, but we think that combining this with the other charters that have been signed, as well as ones in process, makes this more attractive as a package of contracts than one-off. In spite of lower-than-expected earnings, we still have a strong liquidity position. We ended Q1 with $448 million of cash on hand and $275 million available under a revolving credit facility. Add to that the $393 million of cash proceeds after debt paydown, and you have over $1.1 billion of pro forma liquidity at the end of Q1. With that, thanks everybody for your time.

I'll turn the call back over to the operator for Q&A.

Operator (participant)

Thank you. If you would like to ask a question, please signal by pressing star one on your telephone keypad. If you're using a speakerphone, please make sure your mute function is turned off to allow your signal to reach our equipment. Again, press star one to ask a question. Our first question is going to come from Gregory Lewis from BTIG.

Gregory Lewis (Managing Director)

Yeah, hi, thank you, and good afternoon, and thanks for taking my questions, everybody. You know, Chris, I was hoping—thanks for laying out the liquidity and the cash and the injection post the Jamaica sale. I was hoping you could walk us through—I mean, clearly, you have a lot of restricted cash on the balance sheet. Could you maybe kind of point to, is that restricted against specific projects, and what kind of hurdles are there that could free up that cash to make it unrestricted?

Christopher Guinta (CFO)

Hey, Greg. Short answer is it's almost all related to the CapEx in Brazil. That is restricted cash, meaning it can only be spent on the two projects that are still under construction, the CELBA power plant and the PortoCem power plant. The remainder, which is probably in the magnitude of $40 million-$50 million, is restricted around kind of other credit instruments that we have inside the business, some of which will be freed up as a result of this Jamaica transaction, about $30 million of it. The remainder would stay restricted just because, again, it's collateral for other kind of credit support enhancement, credit enhancement on other instruments that are on the business.

Gregory Lewis (Managing Director)

Okay, super helpful. Just as we kind of look across the cap structure at some of the debt, it's trading at a discount. You kind of alluded to maybe looking to kind of refinance that post the Jamaica transaction. Just given some of the cash on the balance sheet and kind of running the numbers, is the company looking at potentially doing open market repurchases of some of that debt just to try to maybe be a little bit opportunistic?

Wesley Edens (Chairman and CEO)

We certainly look at the capital structure. We think that there are some significant opportunities as a result of this. I think the—I talked about the asset-level debt, and maybe I should amplify that just for a second because it'll help this. The capital structure that's used for liquefaction generally is people build a liquefier. They enter into a series of SPAs. It's, for the most part, kind of a wholesaling strategy of selling gas onto others. The margin in that business is relatively low, but then the credit quality and the duration is very, very long and very, very high, and so they're able to generate significant amounts of financeability when they do so. In our case, we also have a portfolio of gas, both from our own liquefier as well as from other sources. Our overall cost of that gas is roughly Henry Hub +$2.50.

Our margin across the assets that I list is about $4.50. So it's $500 million of financeable cash flow that's buried in our capital structure right now. But when you expose that into a 20-year duration transaction and just run the numbers on it, it has got the ability to refinance a significant portion of the balance sheet, if not all of it. From a standing start on where we are right now, we think it's now the appropriate time to really focus on this. Obviously, there was a lot of focus on the company's part in this Jamaica sale, but that's over with, and this will be the next step of it. I think in the context of that, the goal would be to refinance the corporate balance sheet in its entirety over the course of the next 12 months or so.

As part of doing so, if we're successful in that, we'll obviously repay all the debt. As we start to repay it, you'll look at opportunities perhaps to retire at a discount if there still are bonds that are available at a discount. That's the process for it. We think that deleveraging through the asset sale we just had, adding meaningful liquidity and addressing liquidity issues, which now, with $1 billion plus in liquidity, we feel great about what the transaction has realized for us. We're near completion on the power plant in Brazil, and we have assets in hand that are extremely financeable with very, very high quality and very long-term cash flows. Now is the time to refinance, lower cost dramatically, extend the term so they're consistent with the duration of the underlying cash flows.

We think we can actually, with the improvement in our capital structure, that the loan will actually be a substantial benefit to us. We still have a lot of dry powder, so we've only utilized about half of the volumes that we own in our portfolio. If we're successful in recapitalizing the balance sheet and lowering costs and extending, and we also then grow as we expect to in Brazil and Puerto Rico and other places, all that growth would then accrue to the benefit of the shareholders. Those are the next two steps that we really see. First was an asset sale, now it's a recapitalization refinance, and then it'll be growth. Those are the primary components of what we think it takes to be really successful.

Sort of give you a long answer to a short question, but that's the context that hopefully will make sense a little bit better.

Gregory Lewis (Managing Director)

No, that was super helpful. Thank you very much.

Operator (participant)

Our next question comes from Chris Robertson from Deutsche Bank.

Chris Robertson (VP of Equity Research Analyst)

Hey, good afternoon. Thank you for taking my questions. Wes, I was wondering if you could talk a little bit about the short-term power opportunity in Puerto Rico here. When people are bidding into the process, is it for equipment or equipment plus fuel? What strategy is NFE taking here in terms of, are you bidding in to provide equipment or just fuel supply, or how does that process work?

Wesley Edens (Chairman and CEO)

I can only relate to what I read through the portal because it's a government-run process, so they're actually quite disciplined about how they respond to information and provide information. The rules were quite clear in that they were asking for a unitary cost of power kind of period. You're not actually able to just simply bid in turbines. We actually asked that question specifically in the RFP questionnaire in the portal. The two questions we asked were, were you allowed to bid in equipment versus an aggregate power price, number one? Number two, was there any minimum dispatch that we could assume that we'd be guaranteed to know how much power would be generated and therefore could run the numbers on it a little bit easier? The answer to that was, no, there was no minimum. The requirements in the RFP were quite stringent.

From our standpoint, we're blessed to have a big operation on the island, and it can take advantage of the infrastructure that we have in place, but that's basically what it is. I'd say of the three opportunities that I outlined, the emergency power and the gas contract and the long-term generation, they all could be interesting under the right circumstances. I'd say the emergency power was probably the least interesting, just economically given the relatively short duration and the lack of any kind of a commitment in terms of the utility of it.

Chris Robertson (VP of Equity Research Analyst)

Okay, gotcha. As my follow-up question, maybe one for Leandro here. As it relates to CELBA, on the 18 TBtu per year, should we think about that as being more seasonally weighted in the back half of the year, or is it kind of split across all four quarters? And then just to confirm on slide 10 here, there's no fixed capacity payment related to that? It's just the 100% take-or-pay on the volumes?

Leandro Cunha (Managing Director)

Yeah. Chris, the power plants do have a capacity payment. It is around $25 million per year. The biggest payment that we get is the second semester of the year, which is linked to the production of power and linked to the 18 TBtu of gas mentioned in the slide. We get some payments throughout the year, but most of the payments of the plants, they are due on the second semester where we need to produce power.

Chris Robertson (VP of Equity Research Analyst)

Okay, that's a lot more clear. Thank you for clarifying that. I'll turn it over.

Leandro Cunha (Managing Director)

Welcome.

Operator (participant)

Our next question is going to come from Wade Suki from Capital One.

Wade Suki (Equity Analyst)

Good afternoon, everyone. Appreciate y'all taking my questions. Just to follow up, I think it was on Greg's question to make sure I heard y'all correctly on asset sales. I think y'all originally had a goal of like $2 billion of memory serves. It oftentimes fails me. Clearly, Jamaica derisks a substantial portion of that. Anything left out here you could discuss?

Christopher Guinta (CFO)

Yeah, actually about other asset sales. I mean, I think the business, we have an amazing business in Brazil, as these guys have talked about, which poses a lot of opportunities for us. You have those Pacific Theater, which is another kind of business in and of itself in Nicaragua and in Mexico. I think absent asset sales, Wes's point of being able to do large kind of securitization-type transactions would allow us to refinance our debt at a significantly cheaper rate. That's our real goal, to be honest with you, Wade.

Wade Suki (Equity Analyst)

Understood. Appreciate that. Just switching gears here a little bit. I did notice SLNG2 not in the presentation. Can you give us a status update there? There has not been much development.

Christopher Guinta (CFO)

Sure. Yeah, there hasn't been much development over the last kind of 60 days on FLNG 2. I mean, still under construction in the Kiewit Yard. We have been focused, obviously, on the closing of the Jamaica transaction and on the refinancing of the business in order to ensure that we have ample liquidity and altitude, so to speak, in the day-to-day operations. We love the project. We're still engaged on it with the people in Corpus and in Mexico, and we'll be providing additional updates as we make more material construction progress.

Wade Suki (Equity Analyst)

Great. And Nicaragua?

Christopher Guinta (CFO)

I'm sorry?

Wade Suki (Equity Analyst)

Nicaragua. Just hoping to get an update there. Thank you.

Wesley Edens (Chairman and CEO)

Yeah, Nicaragua, we are in the final stages of restructuring our PPA with the government. We've had a lot of productive thoughts about that. Basically, what we're trying to do is to create a structure that looks most similar to the CELBA and in Puerto Rico long-term gas contracts. There is basically a capacity payment that is designed to cover expenses and then a marginal gas cost that we think reflects kind of the value of the credit. If you think about it, Norsk Hydro, which is an investment-grade credit, is Henry Hub +6. The CFE, which is a BBB- credit, is Henry Hub +7.45. We want to be at a modest premium to that to reflect the lower credit quality for Nicaragua.

I think once we get the final agreement on the contract, then we'll finish up what remaining work we've got. The power plant itself is virtually 100% built. The terminal needs a little bit more time and effort, but we're very, very close to the end, so we just need to finalize our agreement to move ahead on that.

Wade Suki (Equity Analyst)

Great. Thank you so much. I'll go back into the queue.

Operator (participant)

Our next question is going to come from Craig Shere from Tuohy Brothers.

Craig Shere (Director of Research)

Hi. Thanks for taking the questions. On slide seven, I mean, obviously, we're not getting the Plaquemines and especially CP2 volumes anytime soon. What are your thoughts about bridging LNG supply needs between now and commencement of the Venture Global SPAs?

Wesley Edens (Chairman and CEO)

We're actually very well positioned right now because we've got the volumes from FLNG. Right now, the asset is producing basically right at nameplate capacity at the cold box. We are planning an outage here in a couple of weeks that we think is going to significantly improve from that level. It is already performing very consistently and reliably and at a good level. We think there's a significant amount of upside with the planned outage and debottlenecking activity of it. That is 90 TBtu is our estimate of where that will end up with. With the volumes that we have in place that are needed in Brazil, it is really just the Norsk Hydro at this year and the second half of next year. It becomes the CELBA plant. Puerto Rico, the large gas contract we signed earlier this year, is slated to come on in 2028.

As we look across the portfolio, it's actually quite balanced overall in terms of the needs kind of step by step. If we add to those volumes because we're successful in either Brazil or Puerto Rico or elsewhere, we can always then add any volumes to address that. We've got a net position that is 215 versus the long term of 109. Obviously, there's some short-term volumes in there that could be displaced if we were successful in some of these longer-term things. We're in a very good position in terms of our gas needs and our gas use at the time. It actually works well for the timing of these future developments.

Gotcha. You have been talking for a number of months or quarters about the significant opportunities with both the Puerto Rico RFP and Brazil capacity auction into June and second half this year. Obviously, you have some competitive infrastructure advantages. Do you believe some of the noise around liquidity and balance sheet could impact any of the decision-making there by regulators? Do you think that given your entrenched position and the obvious virtual cycle of favorable awards on the whole business just kind of makes that a moot point?

I think that we have a very viable business. We have a billion dollars in balance sheet. We've got significant assets that are not only very, very expensive to build, but are also very time-consuming to build. We feel like we've kind of earned our competitive position in these countries the hard way. We actually have set out years ago to build the essential infrastructure to get it into there. I mean, that said, in no case are we a monopoly. We don't want to be a monopoly. We're not regulated like a monopoly. That's not what we aspire to be. In Puerto Rico itself, I think today we actually provide less than 50% of the fuel that's provided on the island. Eco Electric in the south has significant gas abilities. We've got a very, very good position in San Juan that's by design.

We spent hundreds of millions of dollars developing our product there like anybody else could do or could have done to give ourselves that position. In no respect are we monopolistic about this. We think we're well positioned. What we have predicted to happen in these countries, we think, is largely coming true. I mean, we're certainly disappointed that the auctions in Brazil were delayed, but there were reasons for that that are out of our control. As Leandro said, the needs of the country haven't gotten less. They've gotten greater during that period. We feel great about those auctions. We've got a great, great asset in the south that we think is going to play a central role in those auctions when they do come.

In Puerto Rico, with both the short-term and long-term generation needed, we think that having gas in San Juan is going to prove to be very, very helpful. We will obviously need to find if we can do that at economically attractive levels and go from there. We feel like the competitive situation is actually really good. I mean, I think most importantly, when you disaggregate and you look behind the numbers, you look at the assets that we have got, you are generating $500 million in cash flow on 20-year duration assets that are largely right around investment grade. That is a laudable place to be. We feel like our valuation in no way reflects that.

We will go finance ourselves on a long-term basis, and we will fix the capital structure and align it with the same duration of what we have on the asset side and kind of go from there. If we are fortunate and through hard work of us and our people in the field, we can add to it with more long-term offtake and use up some of the excess capacity we have on the supply side, we think that there is a tremendous amount of upside in both the debt and the equity side. That is the plan. The one thing I would say is that on this, the last thing I will say is that on the securitization front, we have securitized or have created structured financings for many, many different products over our careers.

I think in the scale of degree of difficulty, if you just take the Brazilian assets, you've got two assets that have got direct obligations by the Brazilian government in one case, Norsk Hydro in the other. So BB+ and BBB rated counterparties, discrete cash flows with no variability that run out for 15 and 25 years. That does not sound like the hardest thing in the world to kind of realize. They're U.S. dollar-based contracts. That is what we're going to be very focused on. I think if we're successful there, it gives us a real opportunity then to attack our capital structure and do some good work there. That is the plan for the summer, and we'll see how it plays out.

Craig Shere (Director of Research)

Great. Thank you.

Operator (participant)

Our last question will come from Tareq Amin from JPMorgan.

Tareq Amin (Analyst)

Hey, good afternoon. Could you guys maybe help us bridge through the liquidity picture a little bit, particularly sort of how you're thinking about gross CapEx needs for the remainder of the year? Obviously, you have a bunch of restricted cash as well as liquidity outlines, but just would love to understand sort of how much is yet to go out the door.

Christopher Guinta (CFO)

Yeah. I'd say we'll start in Brazil. The remainder of the CapEx for CELBA and PortoCem is fully funded with cash on the balance sheet on that restricted cash line. That's paid for. That will be paid this year and through the first kind of six-ish, maybe nine months in total because you'll have some lag in the payments beyond COD in 2026 for PortoCem. Beyond PortoCem, you have very little remaining CapEx to spend. Obviously, FLNG 1 has been placed into service. You have no more spend in Mexico or really in Puerto Rico until you get conversions. Whatever CapEx is needed for those conversions, we envision would be paid for by PREPA. That really then leaves you in Nicaragua, and we've disclosed this before. Remaining to spend in Nicaragua is about $50 million-$60 million.

The rest is FLNG 2. I would say that FLNG 2, the pacing, we have the control on that, on how that goes out. As I mentioned a moment ago, our intention is to be very disciplined with cash at the moment so that we can ensure that we are solving all near-term maturities. As we have those in hand or we do refinancing, as Wes just discussed, we would then move forward in greater pace on the FLNG 2 CapEx development.

Tareq Amin (Analyst)

Thank you. That was very helpful you guys walked through the covenant amendments on the revolver and the terminal A. Is it fair to assume that sort of the ASTEL language on the 12th and the terminal B likely don't apply given the amount of capital you're spending?

Christopher Guinta (CFO)

I'm not sure I understood the question. You're talking about the reinvestment rights?

Tareq Amin (Analyst)

Yeah. In terms of you're having to prepay those with asset sale proceeds.

Christopher Guinta (CFO)

We are not using asset sales proceeds to repay those. We have cash on the balance sheet and cash flows from our operations that we can use to refinance if we want or to pay off any of the other instruments.

Tareq Amin (Analyst)

Okay. Fair enough. Thank you very much.

Operator (participant)

There are no further questions in the queue.

Wesley Edens (Chairman and CEO)

Great. Okay. Thank you very much, everyone. Look forward to talking to you next quarter. Thank you.

Christopher Guinta (CFO)

Thank you.

Operator (participant)

This concludes today's call. Thank you for your participation. You may now disconnect.