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    New Fortress Energy Inc (NFE)

    Q3 2024 Earnings Summary

    Reported on Mar 7, 2025 (Before Market Open)
    Pre-Earnings Price$9.59Last close (Nov 6, 2024)
    Post-Earnings Price$9.83Open (Nov 7, 2024)
    Price Change
    $0.24(+2.50%)

    What went well

    • NFE's infrastructure assets in multiple countries, including Jamaica, Puerto Rico, Mexico, and soon Nicaragua and Brazil, are either completed or near completion, providing stable, long-term cash flows with minimal commodity risk, making them highly attractive as infrastructure investments.
    • Even smaller markets like Jamaica contribute over $100 million of long-term income for 17 years, highlighting the significant value of NFE's assets and their potential to enhance the company's financial position.
    • Positive political developments in Puerto Rico, with the new administration supporting gas conversions and new gas-fired power, present significant opportunities for NFE to expand its gas supply business, leading to substantial savings for Puerto Rico and increased revenues for NFE.

    What went wrong

    • Reduction in Puerto Rico Guidance and Dependence on Political Developments: The company has reduced its guidance for Puerto Rico volumes in 2025 from over 100 TBtus to 53 TBtus, indicating a significant decrease in expected sales. This reduction is attributed to delays in power plant conversions pending political developments, introducing uncertainty and reliance on external factors for growth.
    • Delays and Uncertainties in FLNG 2 Project: The execution of future permits for FLNG 2 is still pending with the new administration in Mexico, and the company expects to receive them in the next 90 days. Additionally, expected CapEx for FLNG 2 in Q3 and Q4 has decreased, suggesting the project may be delayed to manage cash flows, potentially impacting future revenue growth.
    • Exploration of Asset Sales Potentially Due to Liquidity Concerns: The company is exploring strategic options, including asset sales, to enhance liquidity and financial flexibility. It is considering bringing in strategic partners or selling assets in key projects such as Brazil, Puerto Rico, Jamaica, Mexico, Nicaragua, and FLNG 1, which may indicate underlying liquidity issues and could affect future earnings.

    Q&A Summary

    1. 2025 Free Cash Flow
      Q: Should we expect over $1 billion in free cash flow available for debt reduction in 2025?
      A: Management confirmed that with an illustrative adjusted EBITDA of $1.3 billion and net CapEx of $70 million in 2025, free cash flow is expected to be positive and available for debt reduction. ( )

    2. FLNG 2 CapEx Flexibility
      Q: Can you update on FLNG 2 CapEx, regulatory approvals, and ability to manage timing to control cash flows?
      A: Management stated they have the ability to adjust FLNG 2 development timing to manage cash flows, reducing expected CapEx in Q3 and Q4. Regulatory approvals are pending but anticipated within the next 90 days, with a strong relationship maintained with Mexico's CFE. ( )

    3. Puerto Rico Gas Conversions
      Q: What's the status of power plant conversions in Puerto Rico and their impact on TBTU guidance?
      A: The election of Governor Jennyfer, who supports gas conversions and new gas-fired power, is expected to accelerate conversions of diesel plants to natural gas. This could increase TBTU volumes beyond the base case of 53 TBTUs in 2025, reflecting significant market opportunities. ( )

    4. Asset Sales and Debt Reduction
      Q: Has your long-term focus changed, and can asset sales lead to stable operations by 2026?
      A: Management reaffirmed their strategy of providing gas and power in underserved markets. They indicated that selling one or two assets could generate substantial cash flows, potentially paying off all corporate debt and re-rating the company, leading to more stable operations. ( )

    5. FSRU Market and EBITDA
      Q: How do you view current FSRU market opportunities and their impact on EBITDA?
      A: There's strong demand for FSRUs due to the global need for regas capacity. Management sees potential EBITDA uplift by re-chartering surplus FSRUs like the Eskimo at higher market rates, capitalizing on the premium in the FSRU market. ( )

    6. Data Centers Development
      Q: Can you provide an update on data center initiatives?
      A: Management is in discussions with potential tenants for their Wyalusing assets. They see strong market interest in off-grid power solutions for data centers, viewing it as a compelling stand-alone investment with potential for replication at other sites. ( )

    7. LNG Shipping Logistics
      Q: Can you explain recent LNG vessel movements and logistics?
      A: LNG shipments from Altamira to Puerto Rico are expected to be regular, with vessels loading approximately every 18 to 20 days at full capacity. Variations in ship movements are due to operational adjustments to service customer demand. ( , )

    8. SG&A Expenses Outlook
      Q: There's been an uptick in SG&A; what's the path forward?
      A: Core SG&A expenses have declined for three consecutive quarters. The recent increase includes non-cash items and transaction-related expenses. Management anticipates core SG&A to be around $25 million in 2025. ( )

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