Q2 2024 New Fortress Energy Inc Earnings Call

Operator: You are currently on hold for the NFE second quarter 2024 conference call. At this time, we are assembling today's audience and plan to be underway shortly. We appreciate your patience and please remain on the line. [music] Good day and welcome to the NFE second quarter 2024 earnings call. Today's conference is being recorded. At this time, I would like to turn the conference over to Chance Pipitone. Please go ahead.

Speaker Change: You are currently on hold for the NFE second quarter 2024 conference call. At this time, we are assembling today's audience and plan to be underway shortly. We appreciate your patience and please remain on the line.

Chance Pipitone: Thank you, Samara. And good morning, everyone. Thank you for joining today's conference call, where we'll discuss our second quarter 2024 results. The call is being recorded and will be available by replay on the investors 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, including disclosures and risk factors. With that, I'll now hand over the call to our Chairman and CEO, Wes Edens. Great. Thanks, Chance.

Speaker Change: Good day and welcome to the NFE second quarter 2024 earnings call. Today's conference is being recorded. At this time, I would like to turn the conference over to Chance Pipitone. Please go ahead.

Speaker Change: Hey!

Chance Pipitone: Thank you, Samara, and good morning, everyone. Thank you for joining today's conference call, where we will discuss our second quarter 2024 results.

Speaker Change: The call is being recorded and will be available by replay on the investors 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.

Speaker Change: Please review this as it includes important information, including disclosures and risk factors.

Wes Edens: Welcome everybody. Please refer to the slide deck that we posted on our website as well as on this call. We'll be referring to that, but we have a lot to run through here. I look forward to catching up.

Wes Edens: With that, I'll now hand over the call to our Chairman and CEO , Wes Edens. Great. Thanks, Chance, and welcome, everybody. Please refer to the slide deck that we posted on our website as well as on this call. We'll be referring to that, but we have a lot to run through here. I look forward to catching up.

Wes Edens: So let's start with the numbers on page 3. Earnings for the quarter were $120 million in EBITDA. That was well below our quarterly goal of $275 million with a miss of $155 million. The miss was entirely a result of the delay in the deployment of our first FLNG-1 asset. Our goal was to bring this online in April of this year, and for a variety of reasons, we missed this by several months. That's the bad news.

Speaker Change: So let's start with numbers on page three.

Speaker Change: Our earnings for the quarter were $129 million in EBITDA, that was well below our target of our quarterly goal of $275 million, with a miss of $155 million.

Speaker Change: The miss was entirely a result of the delay in the deployment of our first FLNG-1 asset. Our goal was to bring this online in April of this year, and for a variety of reasons we missed this by several months. That's the bad news.

Wes Edens: The good news is we did bring it online last month, on July 19th, and it's been performing very well since then. This is an incredibly valuable project, and bringing it online in the timeline we achieved is a major accomplishment. It's a $2 billion-plus investment, and today's market generates $500 million a year in free cash flow, so it's highly profitable and has a big impact on the business. But as a result of the impact of the delay of even a few months' material, it had a big impact on the quarter that recently concluded. As I said, the good news is the project is up and running, and it's been performing well. We performed our first transfer of a partial cargo early this morning.

Speaker Change: The good news is we did bring it online last month, on July 19th, and it's been performing very well since then. It's an incredibly valuable project, and bringing it online in the timeline we achieved is a major accomplishment.

Speaker Change: It's a $2 billion-plus investment, and today's market generates $500 million a year in free cash flow, so it's highly profitable and has a big impact on the business. But as a result of the impact of the delay of even a few months' material, it had a big impact on the quarter that recently concluded.

Speaker Change: As I said, the good news is the project is up and running and it's been performing well. We performed our first transfer of a partial cargo early this morning. We'll now shut down the unit for approximately a week for planned maintenance.

Wes Edens: We'll now shut down the unit for approximately a week for planned maintenance and then fire it back up and expect to achieve full production levels shortly thereafter. This then becomes a cornerstone asset for our company. Flip to page four, please.

Speaker Change: and then fire back up and expect to achieve full production levels shortly thereafter. This then becomes a cornerstone asset for our company. Flip to page four, please.

Wes Edens: On page four, this is a bit of a recap of our past, present, and future financial results. In 2023, we made $1.3 billion. In the first quarter of 2024, we made $340 million. That was the last quarter that we had any of the residual impacts of the FEMA contracts. It was a good quarter for us.

Speaker Change: Page four, this is a bit of a recap of our past, present, and future financial results are shown here.

Speaker Change: In 2023, we made $1.3 billion. In the first quarter of 2024, we made $340 million. That was the last quarter that we had any of the residual impacts of the FEMA contracts. It was a good quarter for us.

Wes Edens: The one that recently concluded, $120 million. Our goal and forecast is for $275 million a quarter for the remainder of the year. Q3 will also be impacted by the delay as we cut this online in July.

Speaker Change: The one that recently concluded, $120 million.

Speaker Change: Our goal and forecast is for $275 million a quarter for the remainder of the year.

Wes Edens: We don't expect to get full production of this until the 1st of September, and thus it'll be somewhat reduced from the 275 goal. And then Q4 is a full quarter's production of $275 million. The FEMA claim that we'll talk about in just a few minutes with Brannen will bring us up to total EBITDA expectations for the year with a range of $1.4 to $1.5 billion. Guidance for next year is $1.3 billion.

Speaker Change: Q3 will also be impacted by the delay as we cut this online in July . We don't expect to get full production of this until the 1st of September , and thus it will be somewhat reduced from the $275 goal. And then Q4 is a full quarter's production of $275 million.

Speaker Change: The FEMA claim that we'll talk about in just a few minutes with Brannen will bring us up to total EBITDA expectations for the year with a range of 1.4 to 1.5 billion dollars.

Wes Edens: Basically, that is just the existing volumes and customers plus the addition of our Nicaraguan and Brazilian assets. At this point, over 90% of our expected revenues are contracted, so we feel very confident about achieving these results and feel that there's room for a significant upside, given that we're only about halfway through 2024. In addition, with the remainder of our Brazil contracts coming online in mid-2026, we expect this $1.35 billion to grow materially, which Andrew Dete will go through in just a moment. Turn to page five.

Speaker Change: Guidance for next year is $1.3 billion. Basically, that is just the existing volumes and customers plus the addition of our Nicaraguan and Brazilian assets.

Speaker Change: At this point, over 90% of our expected revenues are contracted, so we feel very confident about achieving these results and feel that there's room for significant upside given that we're only about halfway through 2024.

Andrew Dete: In addition, with the remainder of our Brazil contracts coming online in mid-2026, we expect this $1.3 billion to grow materially, which Andrew Dete will go through in just a moment. Turning to page five.

Wes Edens: Our broadly diversified business is now very easy to model and understand, and here's the math for next year. Our total supply at this point is approximately 170 TBTUs. 50 TBTUs equals one ton of LNG, so we have a current supply in our portfolio of approximately 3.5 million tons for next year. The five countries shown in the net margins are weighted averages of our various customer contracts. They range between the countries from $4.50 to $8.00 in margin.

Speaker Change: Our broadly diversified business is now very easy to model and understand, and here's the math for next year. Our total supply at this point is approximately 170 TBTUs. 50 TBTUs equals one ton of LNG, so we have a current supply in our portfolio of approximately 3.5 million tons for next year.

Speaker Change: The five countries shown in the net margins are weighted average or our various customer contracts. They range between the countries from $4.50 to $8.00 in margin. In general, this is a function of the proportion of the capital we've invested in order to achieve these results.

Wes Edens: In general, this is a function of the proportion of the capital we invested in order to achieve these results. Simply put, in those markets with the largest investment, in particular Brazil and Puerto Rico, our margins are the highest. The weighted net average is approximately $7.

Speaker Change: Simply in simple terms, in those markets of the largest investment, in particular Brazil and Puerto Rico, our margins are the highest.

Wes Edens: Multiply 7 times 170 gives you approximately $1.2 billion. Add $109 for ship operating margin, you get to our forecasted profit of $1.3 billion. Obviously, to the extent we sell more gas or more power, these numbers go up. We've invested approximately $8 billion to create this portfolio of gas and ships and power plants and terminals, and that investment is now behind us, and thus our goal is to grow organically from here with little or no additional capex.

Speaker Change: The weighted net average is approximately $7.

Speaker Change: Multiply 7 times 170, gives you approximately $1.2 billion. Add $109 for ship operating margin, you get to our forecasted profit of $1.3 billion.

Speaker Change: Obviously, to the extent we sell more gas or more power, these numbers go up. We've invested approximately $8 billion to create this portfolio of gas and ships and power plants and terminals, and that investment is now behind us, and thus our goal is to grow organically from here with little or no additional CapEx.

Wes Edens: The deployment of the FLNG asset represents a watershed event for us with respect to our investment activities, and now we are singularly focused on organic earnings and free cash flow. Page six is a simple page which shows the arithmetic behind the FLNG-1 project at the current market level. You can just follow along the top.

Speaker Change: The deployment of the FLNG asset represents a watershed event for us with respect to our investment activities, and now we are singularly focused on organic earnings and free cash flow.

Speaker Change: Page 6 is a simple page which shows the arithmetic behind the FLNG-1 project at current market levels.

Wes Edens: The total capacity of the unit is 1.4 million tons, which is 70 GBTU. The cost of LNG produced today is Henry Hub plus $2.50, or about $4.50 in total. The average margin of our business, as I said, is $7. Seven times 70 equals 490.

Speaker Change: You can just follow along the top. Total capacity of the unit is 1.4 million tons, which is 70 GBTU. Cost of LNG produced today is Henry Hub plus $2.50 for about $4.50 in total. The average margin of our business, as I said, is $7.

Speaker Change: 7 x 70 equals 490. Using our own facility and ships greatly reduces our logistics cost by $100 million, which then adds up to $590 million, or roughly $150 million a quarter. It's pretty simple math.

Wes Edens: Using our own facility and ships greatly reduces our logistics costs by $100 million. We've been added to $590 million, or roughly $150 million a quarter. Pretty simple math.

Speaker Change: Put to page 7.

Speaker Change: Operationally, we had a terrific quarter, highlighted by the F-1G1 put into service. First cargo was actually transferred early this morning, planned maintenance starts tonight for seven days, and we expect full production shortly thereafter.

Wes Edens: Click to page 7. Operationally, we had a terrific quarter, highlighted by the FLNG-1 put into service. First cargo was actually transferred early this morning. Planned maintenance starts tonight for seven days, and we expect full production shortly thereafter. Completion of FLNG1 triggered the FLNG2 financing, which is entire equity finance and requires no additional equity capital from us.

Speaker Change: Completion of FLNG1 triggered the FLNG2 financing, which is entire equity finance and requires no additional equity capital from us.

Wes Edens: The Brazilian terminals are complete. There's a beehive of great activity that I'll leave to Andrew to go through. Nicaragua is also nearly complete, and I'll run through that in just a second. So if you flip over to page number eight, well, let's talk about Nicaragua.

Speaker Change: The Brazilian terminals are complete. There's a beehive of great activity that I'll leave to Andrew to go through. Nicaragua is also nearly complete, and I'll run through that in just a second. So if you flip over to page number 8, well, let's talk about Nicaragua.

Wes Edens: This is, on the left hand side, is a picture of the power plant that we have built that is 100% completed. It's a 300 megawatt power plant. I think it's the first new modern power plant built in the country in the last 30 years. It is ready for operation. Five miles away, there's a jetty that an FSU will be moored at. That jetty is 95 percent complete, as you can see from the picture here, waiting for the ship to show up.

Andrew Dete: This is a, on the left hand side is a picture of the power plant that we have built that is 100% completed. It's a 300 megawatt power plant. I think it's the first new modern power plant built in the country in the last 30 years. It is ready for operations.

Andrew Dete: Five miles away, there's a jetty that an FSU will be moored at. That jetty is 95% complete, as you can see from the picture here, waiting for the ship to show up. The last bit of kit to be installed is the five-mile pipeline. All those construction materials were delivered in the last couple of weeks, and they're ready to be installed.

Wes Edens: The last bit of kit to be installed is the five-mile pipeline. All those construction materials were delivered in the last couple weeks, and they're ready to be installed. We expect that to be completed in September and begin operations thereafter. Our power plant is also located next to the IDB line, which allows us to then export power from Nicaragua to neighboring countries. So we feel like this is not just a Nicaragua terminal, but actually a Central American terminal. We think that there's a significant amount of activity that will come as a result of that. So with that, let me turn it over to Andrew.

Speaker Change: We expect that to be completed in September and begin operations thereafter. Our power plant is also located next to the IDB line, which allows us to then export power from Nicaragua to neighboring countries. So we feel like this is not just a Nicaragua terminal, but actually a Central American terminal. We think that there's a significant amount of activity that'll come as a result of that.

Andrew Dete: Good morning, everybody. Thanks, Wes. I'm on page nine for a similar update on Brazil. So, two big assets that we want to check in on that are a big part of our kind of future growth and future projections here. The first is the Selva 2 power plant. So that's our 630 megawatt power plant with the COD of July 2025. You can see a picture of that on the left. It's a small picture, but there's a big site and a ton of activity going on there.

Speaker Change: So now I'm going to turn it over to Andrew. Andrew? Good morning, everybody. Thanks, Wes. I'm on page 9 for a similar update on Brazil.

Andrew Dete: So, two big assets that we want to check in on that are a big part of our kind of future growth and future projections here.

Andrew Dete: The first is the Selva II power plant.

Andrew Dete: So that's our 630 megawatt power plant with the COD of July 2025.

Andrew Dete: You can see a picture of that on the left. It's a small picture, but there's a...

Andrew Dete: It's a 630 megawatt one-on-one combined cycle power plant, 25-year PPA, fully financed with BNDES debt from Brazil. And we're 70 percent complete today and well on track to commence cash flows in the second half of next year. So everything's going great there. As you know, this power plant is adjacent to our Barcarina terminal, which has been operational now for a few months. We've had two different cargoes loaded into Barcarina already.

Andrew Dete: There's a big site and a ton of activity going on there.

Andrew Dete: This is a 630 megawatt one-on-one combined cycle power plant, 25-year PPA, fully financed with BNDS.

Andrew Dete: debt from Brazil, and we're 70% complete today and well on track to convention cash flows.

Andrew Dete: and the second half of next year. So everything's going great there. As you know, this power plant is adjacent to our Barcarina Terminal, which has been operational now for a few months. We've had two different cargoes loaded into Barcarina already.

Andrew Dete: So we're operating very well. Everything's going great in Barcarina and Selva. To the right is our Port of Seine project. So this is the project that we acquired in December, and we've made great progress since then. So 1,600 megawatt power plant, 15-year PPA. We are now fully permitted.

Andrew Dete: So we're operating very well and everything's going great in Buccarina and Selva. To the right is our Port of Seine project, so this is the project that we acquired in December and we've made great progress since then. So 1,600 megawatt power plant, 15 year PPA.

Andrew Dete: We've given full notice to proceed on our construction consortium, which is made up of Mitsubishi and Andrade Gutierrez. We've made great progress on the site, fully cleared. And as you can see from the picture on the right, we're actually starting to pour the foundations, which is a big step for us. And then Mitsubishi has made great progress on the turbines. You can see the picture of one of them.

Andrew Dete: We are now fully permitted. We've given full notice to proceed on our construction consortium, which is made up of Mitsubishi and Andrade Gutierrez.

Andrew Dete: We've made great progress on the site, fully cleared, and as you can see from the picture on the right, we're actually starting to pour the foundations, which is a big step for us. And then Mitsubishi has made great progress on the turbines. You can see the picture of one of them. And we are well on track, actually well ahead of schedule for our COD, which is the second half of 2026.

Andrew Dete: And we are well on track, actually well ahead of schedule for our COD, which is the second half of 2026. Norse Hydro is moving through commissioning really well at the Barcarina terminal. Gas volumes are up to about 60 percent of the contract demand as we commission the boilers and the calciners of their Alunorchi alumina refinery one by one. We expect to be at full ramp up on that contract by October of this year. And Barcarina is really coming together very well.

Speaker Change: Norse Chydro is moving through commissioning really well at the Buccarina Terminal.

Speaker Change: Gas volumes are up to about 60% of the contract demand as we commission the boilers and the calciners of their Alunorchi Aluminor refinery one by one.

Speaker Change: We expect to be at full ramp-up on that contract by October of this year, and Buckaran is really coming together very well.

Andrew Dete: I'm flipping to page 10 for a bit of a further update on Brazil. There are two other things we just want to check in on. One is our contracted EBITDA from Brazil. It's planned to be about $470 million by 2026 when we turn on the Barcarina terminal, the two power plants I went through, and then also our TGS terminal, which is operational. So our current contracted book, $470 million of EBITDA

Speaker Change: I'm flipping to page 10.

Speaker Change: for a bit of a further update on Brazil.

Speaker Change: There's two other things we just want to check in on. One is our contracted EBITDA from Brazil. It's planned to be about $470 million by 2026 when we turn on the Barcarina terminal, the two power plants I went through, and then also our TGS terminal, which is operational. So our current contracted book, $470 million of EBITDA by 2026.

Andrew Dete: And then the second thing is the growth that we expect out of Brazil, which is really from our TGS terminal in Santa Catarina. We are expecting the power auction to happen this year. We expect to win 2.5 gigawatts of power. That will be a mix between power that NFE builds and owns and other power plants that we supply on a contract, which will pay us a fixed margin plus compensate us for the gas supply. So we have $470 million of contracted margin. We believe that this power auction in Santa Catarina can increase our EBITDA by another $400 million.

Speaker Change: And then the second thing is the growth that we expect out of Brazil, which is really from our TGS terminal in Santa Catarina.

Speaker Change: We are expecting the power auction to happen this year. We expect to win two and a half gigawatts of power. That will be a mix between power that NFE builds and owns and other power plants that we supply on a contract which will pay us a fixed margin plus compensate us for the gas supply.

Speaker Change: So, we have $470 million of contracted margin. We believe that this power auction in Santa Catarina can increase our EBITDA by another $400 million. And so, we have great growth in Brazil over the next three to five years.

Andrew Dete: And so we have great growth in Brazil over the next three to five years. I'm going to move next to the structure and capital structure and CapEx update on page 12. So we have a few pages here to really walk through our next steps for the capital structure of NFE. And on page 12, we have two main initiatives. The first is to refinance our existing 2025 notes, which are due in September of next year.

Speaker Change: I'm going to move next to the structure and capital structure and CapEx update on page 12.

Speaker Change: So we have a few pages here to really walk through our next steps for the capital structure of NFE. And on page 12, we have two main initiatives.

Speaker Change: First is to refinance our existing 2025 notes. Those are due in September of next year.

Andrew Dete: We'll look to extend the maturity of those notes as soon as possible. We have an existing commitment to backstop this refinancing, and so we feel like getting those notes refinanced is secure, and we'll be in the market here soon to get the best execution on that refinancing that we can. Second is we're going to target less than four times debt to EBITDA, and that's senior secured corporate leverage to EBITDA by 2026.

Speaker Change: We'll look to extend the maturity of those notes as soon as possible. We have an existing commitment to backstop this refinancing. And so we feel like getting those notes refinanced is secure. And we'll be in the market here soon to kind of get the best execution on that refinancing that we can.

Speaker Change: Second is we're going to target less than four times debt to EBITDA, and that's senior secured corporate leverage to EBITDA by 2026.

Andrew Dete: You can see on the right side where we have effectively kind of shown what our guidance is for 2024 and 2025, as well as our LTM in 2023 debt-to-EBITDA metrics. And then you can see kind of how we're doing that math with all the debt laid out below that here. You know, as Wes went through, we forecast $1.3 billion of EBITDA in 2025, which would be almost exactly four times debt-to-EBITDA. And then in 2026, when Porto San, Brazil, and other assets turn online, we'll continue to grow that EBITDA and be below four times debt-to-EBITDA.

Speaker Change: You can see on the right side where we have effectively kind of shown what our guidance is for 2024 and 2025 as well as our LTM in 2023 debt-to-EBITDA metrics, and then you can see kind of how we're doing that math with all the debt laid out below that here.

Speaker Change: You know, as Wes went through, we forecast $1.3 billion of EBITDA in 2025, which would almost be exactly four times that EBITDA.

Wes Edens: And then in 2026, when Porto San, Brazil, and other assets turn online, we'll continue to grow that EBITDA and be below four times that EBITDA. So, you know, based on our projections here, we end up at a very comfortable amount of overall kind of long-term leverage at the corporate level.

Andrew Dete: So, you know, based on our projections here, we end up at a very comfortable amount of overall kind of long-term leverage at the corporate level. The next thing I want to walk through is basically how we're going to kind of continue to create more overall cash for debt service to deleverage, and then more, of course, free cash flow available for equity holders. And the first thing to kind of, you know, make that point is to show our CapEx.

Wes Edens: The next thing I want to walk through is basically how we're going to kind of continue to create more overall cash for debt service to deleverage and then more, of course, free cash flow available for equity holders. And the first thing to kind of make that point is to show our CapEx. So

Andrew Dete: So page 13 is a CapEx overview for the remaining part of 2024 and then into 2025. The key point here is obviously we're done with FLNG1, so CapEx is going down precipitously. We've got kind of small bite-sized CapEx on our downstream projects to finish those out and start generating revenues in 2025. You can see Brazil, Mexico, Nicaragua, Puerto Rico here on the page.

Wes Edens: Page 13 is a CapEx overview for the remaining part of 2024 and then into 2025.

Wes Edens: The key point here is that obviously we're done with SLNG-1, so CAPEX is going down precipitously.

Wes Edens: We've got kind of small, bite-sized CapEx on our downstream projects to finish those out and start generating revenues in 2025. You can see Brazil, Mexico, Nicaragua, Puerto Rico here on the page. That leads to, you know, about $128 million of net CapEx at the end of the year. And then we have CapEx on FL&G too.

Andrew Dete: That leads to, you know, about $128 million of net CapEx at the end of the year. And then we have CapEx on FLNG2, which is also here as well, netted against the term loan that we have for FLNG2. So really from a net CapEx perspective, we've got about $177 million for the remaining part of 2024. And then in 2025, that drops way off to $67 million of CapEx. So what you'll see, flipping to page 14, is how that materially impacts the cash generation.

Wes Edens: which is also here as well, netted against the term loan that we have for for FLNG2. So really from a net capex perspective, we've got about $177 million for the remaining part of 2024. And then in 2025, that drops way off to $67 million of capex.

Wes Edens: So what you'll see, flipping to page 14, is how that materially impacts the cash generation.

Andrew Dete: So what we wanted to do here is provide a very simple walk from our adjusted EBITDA reported numbers to what really is our cash flow available for debt service. So, you know, the cash we have to pay debt, eventually deleverage, and then, of course, also generate free cash flow. So in the remaining part of 2024, we start with $1 billion of adjusted EBITDA, and we end up with $683 million of cash available for debt service.

Wes Edens: So what we wanted to do here is provide a very simple walk from our adjusted EBITDA reported numbers.

Wes Edens: to what really is kind of our cash flow bill for debt service, so, you know, the cash we have.

Wes Edens: to pay debt, eventually deleverage, and then, of course, also generate free cash flow. So in the remaining part of 2024, we start with $1 billion of adjusted EBITDA, and we end up with $683 million of cash available for debt service.

Andrew Dete: In 2025, we're going to decrease SG&A, we're going to decrease CapEx, and we're going to end up with, you know, $1.3 billion of adjusted EBITDA but $933 million of cash flow available for debt service. So just wanted to provide a few numbers here on how lowering that overall CapEx spend actually leads to higher free cash flow for the business. And then flipping to page 15, the real long-term initiatives in our capital structure, which is effectively to migrate what we showed on the first page of this section, which is the sort of corporate loan leverage to asset-level leverage. And this does two really important things for us.

Wes Edens: In 2025, we're going to decrease SG&A, we're going to decrease CapEx, and we're going to end up, you know, $1.3 billion of adjusted EBITDA, but $933 million of cash flow available for debt service. So just wanted to provide a few numbers here on how lowering that overall CapEx spend actually leads to higher free cash flow for the business.

Wes Edens: And then flipping to page 15 is the real long-term initiatives on our capital structure, which is effectively to migrate what we showed on the first page of this section, which is the sort of corporate loan.

Andrew Dete: The first is it really harmonizes our long-term assets and contracts with longer-term debt. And by having longer-term debt, we bring down cost and we're able to lower corporate leverage to the benefit of equity holders. So our FLNG-1 asset, 30-year useful life, $2 billion replacement cost, and we expect to have $250 million of kind of annual cash flow at the asset. So we're showing illustrative asset debt of about $1.5 billion, which we think is very achievable.

Wes Edens: leverage to asset-level leverage. And this does two really important things for us. The first is it really harmonizes our long-term assets and contracts with longer-term debt, and by having longer-term debt we bring down cost

Wes Edens: and we're able to lower corporate leverage to the benefit of equity holders. So our FLNG1 asset, 30-year useful life, $2 billion replacement cost, and we expect to have $250 million of kind of annual cash flow at the asset. So we're showing illustrative asset debt of about $1.5 billion, which we think is very achievable.

Andrew Dete: On the right side, NFE Brazil, 18-year average contract duration, $500 million of run rate EBITDA in 2026, 2.2 gigawatts of power plants, 46 GBTUs of firm gas sales. And we expect almost $4 billion of enterprise value in 2026, which is a simple eight times the $500 million of contracted EBITDA. On that $4 billion of enterprise value, we'll have about $1 billion of long-term asset-level leverage, which we're using for construction. And then we assume we can get to, basically, 50% LTV on that, so another billion dollars of leverage.

Wes Edens: On the right side, NFE Brazil, 18-year average contract duration, 500 million of run rate EBITDA in 2026.

Wes Edens: 2.2 gigawatts of power plants, 46 TBTUs of firm gas sales, and we expect almost $4 billion of enterprise value in 2026, which is a simple eight times the $500 million of contracted EBITDA.

Wes Edens: On that $4 billion of enterprise value, we'll have about $1 billion of long-term asset-level leverage, which we're using for construction. And then we assume we can get to basically, you know, 50%.

Andrew Dete: That together with the FLNG-1 debt would mean $2.5 billion of leverage would migrate from the corporate level over time to the asset level. And we'd end up with a long-term sustainable capital structure at the NFE corporate level, and then with assets where we've aligned our long-term duration cash flows and assets with long-term duration lower-cost debt.

Wes Edens: Ltd. on that, so another billion dollars of leverage. That together with the FL&G One Debt would mean two and a half billion dollars of leverage would migrate from the corporate level over time to the asset level.

Wes Edens: And we'd end up with a long-term sustainable capital structure at the NFP corporate level, and then with assets where we've aligned our long-term duration cash flows and assets with long-term duration lower-cost debt.

Wes Edens: Great. Thanks, Andrew. So, let's talk about our new initiative, which is really just a continuation of an existing business that we've had around here for many, many years. So, look to page number 17.

Wes Edens: Wes, back to you. Great. Thanks, Andrew. So let's talk about our new initiative, which is really just a continuation of an existing business that we've had around here for many, many years. So let's go to page number 17.

Wes Edens: A big, big part of our business here at NFE is the development of power systems and management of those systems. We own or manage nine gigawatts of power between La Paz, Mexico, Puerto Sandino in our new project, Jamalco in Jamaica, Puerto Rico, of course, and then in Bacarana, Brazil. We are a global leader in power systems development overall. We own or have visibility of 2 gigawatts of turbines that are available for development in this modular form that we'll talk about in just a second.

Wes Edens: Big big part of our business here at NFE is the development of power systems and management of those systems

Wes Edens: We own or manage nine gigawatts of power between La Paz, Mexico, Puerto Sandino in our new project, Jamalco in Jamaica, Puerto Rico, of course, and then in Bacarana, Brazil.

Wes Edens: We are a global leader in power systems development overall. We own or have visibility of 2 gigawatts of turbines that are available for development in this modular form that we'll talk about in just a second. So our experience here is very, very significant.

Wes Edens: So our experience here is very, very significant, and in particular with respect to the deployment of modular highly reliable power systems. If you flip to page number 18, the two pictures that are shown are the power plants we built for the federal government last year. 425 megawatts of power was built in just 120 days. It provides 15% of the baseload power to the grid to Puerto Rico. It is by far the most stable and reliable portion of the grid with total availability of 99%.

Wes Edens: And in particular, with respect to the deployment of modular, highly reliable power systems.

Wes Edens: If you flip to page number 18, the two pictures that are shown are the power plants we built for the federal government last year.

Wes Edens: 425 megawatts of power was built in just 120 days.

Wes Edens: It provides 15% of the baseload power to the grid to Puerto Rico and is by far the most stable and reliable portion of the grid with total availability of 99%.

Wes Edens: We're going to talk about this modular design, what we believe is the impact that we can achieve here in the United States in assisting data center tenants. But before I do that, let me turn it over to Brannen just to pause right now and talk about this project and the FEMA contract and the claim and where we are with that right now.

Wes Edens: We're going to talk about this modular design and what we believe is the impact that we can achieve here in the United States in assisting data center tenants. But before I do that, let me turn it over to Brannen just to pause right now and talk about this project.

Brannen: and the FEMA contract and the claim, and then where we are with that right now, Brannen? You bet. Thank you, Wes, really appreciate that. And just as a reminder for folks on the phone, as Wes...

Brannen McElmurray: You bet. Thank you, Wes, really appreciate that.

Brannen: This project originated with FEMA initiating a grid stabilization mission for Puerto Rico. NFE responded by entering into two contracts, each of which were for a two-year duration.

Speaker Change: to build about 425 megawatts of power. Just to put it in perspective, NFE built this power, put it online on the grid in 120 days. It's the fastest deployment of large-scale power in the history of the U.S. Army Corps, which is actually saying something. In addition, it's an essential piece of infrastructure for the PR grid. About 15% of the grid currently is supplied by this power. And to put that in context, without it, hundreds of thousands of customers in Puerto Rico would not be receiving power every day. Most importantly, though, this particular power, these two particular power plants are 99% available and 99% reliable, which I think is a very key part of this particular solution, in particular, how it will apply to other applications, which we'll talk to in further slides.

Brannen McElmurray: And just as a reminder for folks on the phone, as Wes stated, this project originated with FEMA initiating a grid stabilization mission for Puerto Rico. NFE responded by entering into two contracts, each of which were for a two-year duration, to build about 425 megawatts of power. Just to put it in perspective, NFE built this power and put it online on the grid in 120 days. It's the fastest deployment of large-scale power in the history of the U.S. Army Corps, which is actually saying something.

Brannen McElmurray: In addition, it's an essential piece of infrastructure for the PR grid. About 15% of the grid currently is supplied by this power. And to put that in context, without it, hundreds of thousands of customers in Puerto Rico would not be receiving power every day. Most importantly, though, this particular power, these two particular power plants are 99% available and 99% reliable, which I think is a very key part of this particular solution. In particular, how it will apply to other applications, which we'll talk to in further slides.

Brannen McElmurray: To put a couple dates out there, on March 15th, NFE sold these two power plants to Puerto Rico at the end of the contracts that FEMA had decided to conclude. In addition, we entered into an 80 TBTU island-wide contract with no disruption of service. So from the point of view of the Puerto Rican people, these power plants continue to operate without interruption.

Speaker Change: To put a couple of dates out there, on March 15th, NFE sold these two power plants to Puerto Rico at the end of the contracts that FEMA had decided to conclude. In addition, we entered into an 80 TBTU island-wide contract with no disruption of service. So from the point of view of the Puerto Rican people, these power plants continue to operate without interruption.

Brannen McElmurray: Importantly, because our contracts were two years, the government does have a right to end contracts early if they have a change in need, a change in policy, or a change in strategy. However, if that happens, the government has an obligation to make certain payments to the contractors who are performing under those contracts. We have been going through a process which is considered a claim settlement process over the last several months to put together an extensive package with outside professionals who specialize in this, including our own team.

Speaker Change: Importantly, because our contracts were two years, the government does have a right to end contracts early if they have a change in need, a change in policy, or a change in strategy. However, if that happens, the government has an obligation to make certain payments to the contractors who are performing under those contracts.

Brannen McElmurray: We have submitted that package as a formal claim to Weston, who is our prime contractor, and they, in turn, have submitted it to the Army Corps. The claim is for $659 million, which approximates, essentially, what we are entitled to under the rules under this type of circumstance. To put it in perspective, there are billions of dollars that are remaining to be owed on the contract, so $659 million fits well within the four corners of what we would be entitled to under this process.

Speaker Change: We have been going through a process which is considered a claim settlement process over the last several months to put together an extensive package with outside professionals who specialize in this, including our own team. We have submitted that package as a formal claim to Weston, who is our prime contractor, and they, in turn, have submitted it to the Army Corps. The claim is in an amount of $659 million, which approximates, essentially, what we are entitled to under the rules under this type of circumstance. To put it in perspective, there are billions of dollars that are remaining to be owed on the contract, so $659 million fits well within the four corners of what we would be entitled to under this process.

Brannen McElmurray: In terms of next steps, we will go through a claim settlement process, which is a well-worn path, and we will update people as to the results once they are known. I think the important part of this project, though, is that it created extensive IP inside of NFE that showed us how, what technology to use, and the benefits of providing fast power for certain applications, including its reliability and availability, the speed at which we deployed this power, the team that we used, and the IP that we created can be applied to other concepts, including perhaps the fastest-growing area of infrastructure in the U.S. And for that, I'll turn it Great Thanks.

Speaker Change: In terms of next steps, we will go through a claim settlement process, which is a well-worn path, and we will update people as to the results once they are known.

Speaker Change: I think the important part of this project, though, is that it created extensive IP inside of NFE that showed us how, what technology to use, and the utilization of providing fast power for certain applications, including its reliability and availability. The speed at which we deployed this power, the team that we used, the IP that we created can be applied to other concepts, including perhaps the fastest growing area of infrastructure in the U.S.

Wes Edens: Great. Thanks, Brannen. So these are the type of power systems that are most typically found in emerging markets that have significant power needs, and most importantly, they need power now. So for somebody that needs power now, giving them a power solution that turns on in three or four or five years is simply not reflective of what their needs actually are. As it turns out, there's another market much closer to home that has a very similar need, hyperscaler data center users.

Wes Edens: And for that, I'll turn it over to Wes to talk more about on page 19. Great. Thanks, Brannen. So these are the types of power systems that are most typically found in emerging markets that have significant power needs, and most importantly, they need power now.

Wes Edens: So some of the needs power now, giving them a power solution that turns on in three or four or five years is simply not reflective of what their needs actually are.

Speaker Change: As it turns out, there's another market much closer to home that has a very similar need.

Wes Edens: You wouldn't think that emerging markets for power and hyperscaler data center users would be similar, but actually, they are quite similar. If you look at page 19, we formed a new company; we call it Klondike, that is focused on providing these kinds of power solutions to data centers. Page 19 shows the incredible growth of cloud computing that has occurred as companies have moved their computing needs out of their own servers into the hands of Amazon, Microsoft, and others. To meet these needs, there have been literally thousands of data centers built in this country. And they've traditionally been built along the lines of the steps outlined on page number 20. Step one, identify a site.

Speaker Change: hyper-scalar data center users. You wouldn't think that emerging markets for power and hyper-scalar data center users would be similar, but actually they are quite similar. If you flip to page number 19,

Speaker Change: We formed a new company, we call it Klondike, that is focused on providing these kind of power solutions to data centers. Page 19 shows the incredible growth of cloud computing that has occurred as companies have moved their computing needs out of their own servers into the hands of Amazon, Microsoft, and others.

Speaker Change: To meet these needs, there have been literally thousands of data centers built in this country. And they've traditionally been built along the lines of the steps outlined on page number 20.

Wes Edens: Locate that site close to end users slash city centers to mitigate latency issues. Step two, apply to the local utility for power. Power supply is subject to grid availability, but these were modest amounts of power initially, and so that was the process that was followed. And number three is the data center then to increase the reliability actually constructs their own backup power, which is necessary to provide the power redundancy that they need for their customers. These steps require connection to local grids, creating power struggle with local consumers.

Speaker Change: Step one, identify a site, locate that site close to end users slash city centers to mitigate latency issues.

Speaker Change: Step two, apply to the local utility for power. Power supply is subject to grid availability, but these were modest amounts of power initially, and so that was the process that was followed.

Speaker Change: And number three is the data center then, to increase the reliability, actually constructs their own backup power, which is necessary to provide the power redundancy that they need for their customers.

Speaker Change: These steps require connection to local grids, creating power struggle with local consumers. New grid connections can take three to five years, and data center tenants need power now. Click page number 21.

Wes Edens: New grid connections can take three to five years, and data center tenants need power now. This is a schematic that shows the island power that we are designing. In simple terms, it's the same basic formula which Brannen just described in Puerto Rico and Mexico and elsewhere.

Operator: You are currently on hold for the NFE Second Quarter 2024 conference call.

Operator: At this time, we are welcome to the NFE Second Quarter 2024 earnings call. Today's conference is being recorded.

Speaker Change: This is a schematic that shows the island power that we are designing.

Speaker Change: In simple terms, it's the same basic formula which Brannen just described in Puerto Rico and Mexico and elsewhere. What we've done in addition to what we installed in those markets is we installed backup generation to provide additional redundancy.

Wes Edens: What we've done in addition to what we installed in those markets is we installed backup generation to provide additional redundancy. So you look at the schematic, you can see an array of turbines that are shown on the upper middle and upper right-hand side, and then four additional turbines that are shown on the left-hand side. Basically, by increasing the number of backup units, you take system reliability, which is already extremely high, 99 plus percent in our experience in Puerto Rico, and you make it well over 100 percent.

Speaker Change: So if you look at the schematic, you can see an array of turbines that are shown on the upper middle and upper right-hand side, and then four additional turbines that are shown on the left-hand side.

Speaker Change: Basically, by increasing the number of backup units, you take system reliability, which is already extremely high, 99 plus percent in our experience in Puerto Rico, and you make it well over 100 percent. You achieve then the five nines reliability that are necessary for the data center users and do so in both a very efficient way.

Wes Edens: You achieve the five-nine reliability that is necessary for data center users and do so in both a very efficient way, a very, very quick path, so 120 days to deploy, and one that has ultimate system reliability. So, on page 22, we're addressing all the major constraints of digital infrastructure development by utilizing this behind-the-meter on-site power, and the business is up and running. So step one is to identify a site with either a data center partner or on our own site, and we're working on both as we speak.

Chance Pipitone: At this time, I would like to turn the conference over to Chance Pipitone. Please go ahead. Thank you, Samara, and good morning everyone. Thank you for joining today's conference call, where we will discuss our second quarter 2024 results. The call is being recorded and will be available by replay on the investor's section of our website under the subheading events and presentations. At the same location, you will find a presentation that we will walk through on today's call. Please review this as it includes important information, including disclosures and risk factors.

Speaker Change: A very, very quick path that's 120 days to deploy and one that has ultimate system reliability.

Speaker Change: So page number 22.

Speaker Change: We're addressing all the major constraints of digital infrastructure development by utilizing this behind-the-meter on-site power, and the business is up and running. So step one is to identify a site with either a data center partner or on our own site, and we're working on both as we speak.

Wes Edens: We are preparing to file permits on the site that we own in Pennsylvania. Pennsylvania and Ohio, in particular, we believe are very attractive because of their physical proximity to large population centers, as well as very abundant and inexpensive natural gas, which is a terrific combination. So step one is to identify a site that works.

Speaker Change: We are preparing to file permits on the site that we own in Pennsylvania. Pennsylvania and Ohio, in particular, we believe are very attractive because of their physical proximity to large population centers, as well as very abundant and inexpensive natural gas, which is a terrific combination.

Wesley Edens: With that, I will hand over the call to our Chairman and CEO, Wesley Edens. Great. Thanks, Chance, and welcome everybody.

Wesley Edens: Please refer to the slide deck that we posted on our website as well as on this call. We will be referring to that, but we have a lot to run through here. I look forward to catching up. Let's start with numbers on page three. Earnings for the quarter of $129, Nebidah, that was well below our quarterly goal of $275 million, that was the list of $155 million. The list was entirely a result of the delay in the deployment of our first FLNG1 asset. Our goal was to bring this online in April this year, and for a variety of reasons, we missed this by several months.

Wes Edens: Step two is to develop this state-of-the-art smart island grid, which we're in the process of doing right now, which utilizes the same factors which I outlined on the previous page to achieve redundancy. And number three is get power permits in hand and install this and turn on power next year. Page 23, you know, we outline, we have a number of our sites in our portfolio that we think are very suitable for fast power situations.

Speaker Change: So step one is to identify a site that works.

Speaker Change: Step two is to develop this state-of-the-art smart island grid, which we're in the process of doing right now, which utilizes the same factors which I outlined on the previous page to achieve redundancy. And number three is get power permits in hand and install this and turn on power next year.

Speaker Change: Page 23, you know, we outline, we have a number of our sites in our portfolio that we think are very suitable for fast power situations. We have the large site in Wyalutson, Pennsylvania, which we acquired years ago. We have a site in Shannon, Ireland, which is the site where we're intending to build a power plant. We have provided power in part to the grid in Ireland and have the capacity to provide behind the meter power to data center tenants there as well. And then a large site in Brazil, which is permitted for 1,000 megawatts of power on a 100-acre site located off the TBG pipeline, so we can provide the gas to provide the redundancy there.

Wes Edens: We have the large site in Wyalutson, Pennsylvania, which we acquired years ago. We have a site in Shannon, Ireland, which is the site where we're intending to build a power plant. We have provide power in part to the grid in Ireland and have the capacity to provide behind the meter power to data center tenants there as well. And then a large site in Brazil, which is permitted for a thousand megawatts of power on a hundred acre site located off the TBG pipeline, so we can provide the gas to provide the redundancy there.

Wesley Edens: That's the bad news. The good news is we did bring it online last month on July 19th, and it's been performing very well since then. This is an incredibly valuable project and bringing it online, and the timeline we achieved is a major accomplishment. It's a $2 billion plus investment, and today's market generates $500 million a year in free cash flow, so it's highly profitable and has a big impact on the business, but as a result of the impact of the delay of a few months' material, and had a big impact on the quarter that recently concluded.

Wes Edens: The economics of this business are potentially very compelling. Our expectation is that we'll enter into a long-term commitment with data center tenants that are credit worthy. This can provide certainty of cash flow, and allow us to finance this at a very low cost for an extended period. These are very exciting days for this business and one which, if it's successful, we would likely spend on shareholders as the valuation metrics for this industry, given the growth attributes of it, are very, very appealing. So a lot more to come on that.

Wesley Edens: As I said, the good news is the project is up and running. It's been performing well. We performed our first transfer of a partial cargo early this morning. We'll now shut down the unit for approximately a week for plan maintenance, and then fire back up and expect to achieve full production levels shortly thereafter, and this then becomes a cornerstone asset for our company.

Speaker Change: The economics of this business are potentially very compelling. Our expectation is we'll enter into a long-term commitment with data center tenants.

Speaker Change: that are credit worthy. This can provide certainty of cash flow, allow us to finance this at a very low cost for an extended period. It's very exciting days for this business, and one which, if it's successful, we would likely spend to shareholders as the valuation metrics for this industry, given the growth attributes of it, are very, very appealing. So, a lot more to come on that.

Wesley Edens: Put the page 4 please. Page 4, this is a bit of a recap of our past present future financial results are shown here. In 2023, we made $1.3 billion. In the first quarter of 2024, we made $349. That was the last quarter that we had in either residual impacts of the FEMA contract, because it was a good quarter for us. The one that recently concluded $129 our goal and forecast is for $275 million a quarter from the remainder of the year.

Chris Robertson: Chris. Yeah, thanks, Wes. Good morning, everybody.

Chris Robertson: Let's turn to slide number 25 and talk through earnings for a moment. As you've heard from Wes and Andrew, which have covered the bulk of the financing initiatives of the company, I'll quickly walk through the financial results for the second quarter. Total operating margin was $202 million from sales to customers through our downstream terminals, in addition to $12 million associated with LNG sales. And on this quarter, as we did in Q1, we had another $34 million of operating margin from the ship's segment.

Speaker Change: Thanks, Wes. Good morning, everybody. Let's turn to slide number 25 and talk through earnings for a moment. As you've heard from Wes and Andrew, which covered the bulk of the financing initiatives of the company, I'll quickly walk through the financial results for the second quarter.

Speaker Change: Total operating margin was $202 million from sales to customers through our downstream terminals in addition to $12 million associated with LNG sales.

Speaker Change: And on this quarter, as we did in Q1, we had another $34 million of operating margin from the ship's segment. So it's a total segment operating margin of $248 million, which compares to $384 million in Q1.

Chris Robertson: So it's a total segment operating margin of $248 million, which compares to $384 million in Q1. When you back out SG&A and deferred earnings, our adjusted EBITDA for the first quarter was $120 million. The deferred earnings line will be further explained in the 10Q, but this is a result of a $90 million payment received for gas deliveries that will occur during Q3 and Q4. On these sales, we locked in commodity pricing and will record $107 million of EBITDA and earnings associated with these volumes throughout the balance of 2024.

Wesley Edens: C-3 will also be impacted by the delay as we've got this online in July. We don't expect to get full production of this until the 1st of September, and thus it'll be some of reduced from the 275 goal, and then Q4 is a full quarter's production of $275.9. The theme acclaimed that we will talk about in just a few minutes with Brannen, we'll bring this up to total EBITDA expectations of the year with a range of $1.4 to $1.5 billion.

Speaker Change: When you back out SG&A and deferred earnings or adjusted EBITDA for the first quarter, it was $120 million.

Speaker Change: The deferred earnings line will be further explained in the 10-Q, but this is a result of a $90 million payment received for gas deliveries that will occur during Q3 and Q4.

Speaker Change: On these sales, we locked in commodity pricing and will record $107 million of EBITDA and earnings associated with these volumes throughout the balance of 2024.

Chris Robertson: As previously mentioned, the decrease in adjusted EBITDA quarter over quarter is predominantly driven by the termination of the FEMA power contract. However, this decrease was expected to be made up in large part with volumes from FLNG1 available to sell. However, those did not occur in Q2, and the $120 million of EBITDA was the result. As mentioned, once you have a full quarter of volumes from FLNG1, we would expect the quarterly adjusted EBITDA to be around $275 million.

Wesley Edens: Guidance for next year is $1.3 billion. Basically, that is just the existence of volumes and customers plus the addition of our Nicaragua and Brazilian assets. At this point, over 90% of our expected revenues are contracted. So, we feel very confident about achieving these results. We feel that there is room for significant upside given that we are only about halfway through 2024. In addition, with remainder of our Brazil contracts coming online in mid-20026, we expect this 1.3 billion-dollar material, materially, which Andrew Dean will go through just a moment.

Speaker Change: As previously mentioned, the decrease in Justitiva to quarter over quarter is predominantly driven by the termination of the FEMA power contract.

Speaker Change: This decrease was expected to be made up in large part with volumes from ethylene G1 available to sell. However, those did not occur in Q2, and the $120 million of EBITDA was the result. As Wes mentioned, once you have a full quarter of volumes from ethylene G1, we would expect the quarterly adjusted EBITDA to be around $275 million.

Chris Robertson: Moving on to slide number 26, we show the GAAP net income for the quarter, which was an $89 million loss or $0.44 per share on a diluted basis. There's only a modest change to adjusted net income, which adds back a non-cash impairment charge of $4 million, or $0.03 per share. So if you add up Q1 and Q2, for the first half of 2024, we have $53 million of adjusted net income, or $0.26 a share, and $142 million of funds from operations, or $0.69 per share.

Speaker Change: Moving on to slide number 26, we show the gap net income for the quarter, which was an $89 million loss, or 44 cents per share, on a diluted basis. There's only a modest change to adjusted net income, which adds back a non-cash impairment charge of $4 million, or 3 cents a share.

Wesley Edens: Turning to page 5. Our broadly diversified business is now very easy to model and understand. And here's the math for next year. Our toll supply at this point is approximately 170 TBTUs. 50 TBTUs equals 1 ton of LNG. So, we have a current supply in our portfolio of approximately 3.5 million tons for next year. The five countries shown and the net margins are weighted average or at various customer contracts. They range between the countries from $4.5 to $8 in margin.

Speaker Change: So if you add up Q1 and Q2, for the first half of 2024, we have $53 million of adjusted net income, or $0.26 a share, and $142 million of funds from operations, or $0.69 per share.

Chris Robertson: Also, just to repeat something we've mentioned in the past, when we collect on the claim from FEMA, that will be recognized as EBITDA and income during the period in which it is received. Finally, I wanted to mention that NFE's operating assets in Jamaica, Puerto Rico, Mexico had 99% uptime and reliability for the quarter, which is a testament to the tenacity of our, With that, I'll turn the call back over to Chance for Q&A.

Speaker Change: Also, just to repeat something we've mentioned in the past, when we collect on the claim from FEMA, that will be recognized as EBITDA and income during the period in which it is received.

Wesley Edens: In general, this is a function of the proportion of the capital we invested in order to achieve these results. Simple terms in those markets of the largest investment in particular Brazil and Puerto Rico are margins of the highest. The weighted net average is approximately $7. Multiply 7 times 170 gives you approximately $1.2 billion at $109 for ship operating margin. You get to a forecasted profit of $1.3 billion. Obviously, to the extent we sell more gas or more power, these numbers go up. We've invested approximately $8 billion to create this portfolio of gas and ships and power plants and terminals. And that investment is now behind us.

Speaker Change: Finally, I wanted to mention that NFE's operating assets in Jamaica, Puerto Rico, and Mexico had 99% uptime and reliability for the quarter, which is a testament to the tenacity of our team. With that, I'll turn the call back over to Chance for Q&A.

Chance Pipitone: Thanks, Chris. Operator, if you would, let's open up the lines for some Q&A. Thank you.

Chance Pipitone: Thanks, Chris. Operator, if you would, let's open up the lines for some Q&A. Thank you.

Operator: Thank you. If you would like to ask a question, please signal by pressing star 1 on your telephone keypad. If you are using a speakerphone, please make sure your mute function is turned off to allow your signal to reach our equipment.

Speaker Change: Thank you. If you would like to ask a question, please signal by pressing star 1 on your telephone keypad. If you are using a speakerphone, please make sure your mute function is turned off to allow your signal to reach our equipment.

Operator: Please limit yourself to one question and one follow-up. And we'll pause for just a moment to allow everyone an opportunity to signal for questions. Thank you. Thank you. And we'll take our first question from Ben Nolan with Siegel.

Wesley Edens: And thus, our goal is to grow organically from here with little or no additional catbacks. The deployment of the FRNG asset represents a watershed event for us with respect to our investment activities. And now, we are single to focus on organic earnings and free cash flow.

Speaker Change: Please limit yourself to one question and one follow-up.

Speaker Change: And we'll pause for just a moment to allow everyone an opportunity to signal for questions.

Wesley Edens: Page 6 is a simple page which shows you rhythmically about behind the FRNG one project in current market levels. You can just follow along the top. Total capacity of the unit is 1.4 million tons, which is 70 GBTU. Cost of the LNG produced today is Henry Hill plus $2.50 for about $4.50 in total. The average margin of our businesses, as I said, is $7.7 times 70 equals $4.90. Using your own facility and ships greatly reduces our logistics cost by $100 million, which then adds to $599, roughly $150 million of quarter. Pretty simple math.

Speaker Change: Thank you so much for watching this video.

Ben Nolan: Yeah, thank you. So, my first question is related to the contract. Looks like you've maybe got $500 million of that in the EBITDA for the back half of the year. You can maybe talk through how you feel about, you know, how you come to that number and any flexibility on timing. Is this a 4Q event or might it slip into next year? Any thoughts around that?

Speaker Change: and the AHIBDA for the back half of the year. Can you maybe talk through how you feel about, you know, how you come to that number and any flexibility on timing? Is this a 4Q event or might it slip into next year? Any thoughts around that?

Wesley Edens: Put the page 7. Operationally, we have a terrific quarter highlighted by the FRNG one putting to service. First cargo is actually transferred early this morning. Plan maintenance starts tonight for seven days and we expect full production shortly thereafter. Completion of FRNG one triggered the FRNG two financing, which is an equity finance and requires no additional equity capital from us. The Brazilian terminals are complete. There's a beehive of great activity that I'll leave to Andrew to go through. Nicaragua is also nearly complete, and I'll run through that in just a second.

Brannen McElmurray: Yes, Ben, this is Brannen. Thank you for the question. And probably what I'll use it as just an opportunity to kind of, you know, lay this out and sort of demystify it. As I kind of said on the call, you know, the original contract was for two years. Government has the right to terminate early under various circumstances.

Brannen: Yep, Ben, this is Brannen. Thank you for the question and probably what I'll use it as just an opportunity to kind of, you know, lay this out and sort of demystify it. As I kind of said on the call, you know, the original contract was for two years. Government has the right to terminate early.

Brannen McElmurray: When that happens, you know, there's a very tried and true kind of playbook and set of rules that you go through as the counterparty for the government to basically settle up. And the idea from the government's perspective is that they're trying to put you in a place that you would have been had they fully performed, particularly with respect to investments and commitments, et cetera, that you've made. I think the key concept to kind of understand here is, you know, keep in mind what we actually did for them was build two power plants, 425 megawatts, and that work was complete at the time of COD.

Brannen: under various circumstances. When that happens, you know, there is a very tried and true, you know, kind of playbook and set of rules that you go through as the counterparty to the government to basically settle up. And the idea from the government perspective is they're trying to put you in a place that you would have been had they fully performed, particularly with respect to investments and commitments, etc., that you've made. I think the key concept to kind of realize here is, you know, keep in mind what we actually did for them is build two power plants, 425 megawatts, and that work was complete at the time of COD.

Wesley Edens: So if you flip over to page number eight, we'll just talk about Nicaragua. This is on the left hand side of the picture of the power plant that we have built that is 100% completed. It's a 300 megawatt power plant. I think it's the first new modern power plant built in the country in the last 30 years. It is ready for operation. 5 miles away, there's a jetty, there's an FSU will be a moored at, that jetty is 95% complete, as you can see from the picture here waiting for the ship to show up.

Brannen McElmurray: So functionally, the investments, commitments, you know, all the other things that we positioned the business to do were, in effect, done at the time we turned on the power plant, which is, I think, a key concept. So when you go through this process with them, if you kind of aggregate gross sort of amounts owing under those two contracts, kind of from the time that they stopped to the time it would have finished, you know, obviously you know the math. It's measured in the billions of dollars.

Brannen: So, functionally, the investments, commitments, you know, all the other things that we positioned the business to do were, in effect, done at the time we turned on the power plant, which is, I think, a key concept. So when you go through this process with them, if you kind of aggregate gross sort of amounts owing under those two contracts, kind of from the time that they stopped to the time it would have finished, you know, obviously, you know the math, it's measured in the billions of dollars. We've gone through, you know, an extensive dialogue with Weston, who is our counterparty. We have, you know, lots of folks who do this, you know, professionally all the time for the government. And through that process, we have kind of, you know, zeroed in on really two concepts. One is the fact that, you know, we did a ton of work around infrastructure, logistics chain

Wesley Edens: The last bit of kit to be installed is the 5 mile pipeline. All those the construction materials were delivered in the last couple weeks and they're ready to be installed, expect that to be completed in September and begin operations thereafter. Our power plant is also located next to the IDB line, which allows us to then export power from Nicaragua to neighboring countries. So we feel like this is not just a Nicaragua terminal, but actually a central American terminal. I think there's a significant amount of activity that will come as a result of that.

Brannen McElmurray: So we've gone through, you know, an extensive dialogue with Weston, who is our counterparty. We have, you know, lots of folks who do this, you know, professionally all the time for the government, and through that process, we have kind of, you know, zeroed in on really two concepts. One is the fact that, you know, we did a ton of work around infrastructure, logistics chain, and kind of positioning our business to make it work, particularly with respect to, like, ships and terminals and, you know, gear, et cetera, and then also with respect to the fuel that was being provided. So when you add all those line items up and you kind of go through the entitlement, you know, rules, it actually adds up to 650, you know, right around $659 million.

Andrew Dete: So that will turn it over to Andrew. Good morning everybody, thanks West. I'm on page 9 for a similar update on Brazil. So two big assets that we want to check in on that are a big part of our future growth and future projections here. The first is the Selva to power plant. So that's our 630 megawatt power plant with the COD of July 2025. You can see a picture of that on the left.

Brannen: to make it work, particularly with respect to, like, ships and terminals and

Brannen: and Chris Walsh and the next panel is Chris Walsh and the next panel is I and also with respect to the fuel being provided so when you add those line items up

Andrew Dete: It's a small picture, but there's a big site and a ton of activity going on there. This is 630 megawatt, one-on-one combined cycle power plant, 25-year PBA, fully financed with BNDS, debt from Brazil, and we're 70% complete today and well-entracted comments and cash flows in the second half of next year. So everything's going great there. As you know, this power plant is adjacent to our Barkerana terminal, which has been operational now for a few months.

Brannen McElmurray: So that was put on a piece of paper with, you know, thousands of pages back up, submitted to Weston. They, in turn, did their, you know, initial, you know, take on it. We had a little bit of puts and takes on that, but essentially the numbers stayed the same.

Brannen: rules, it actually adds up to 650, you know, right around $659 million. So that was put on a piece of paper with, you know, thousands of pages back up, submitted to Weston, they in turn did their, you know, initial, you know, take on it, we had a little bit of puts and takes on that, but essentially, the number stayed the same. And then they turn around, put their name on it, and then send it in to the Army Corps for processing. And then effectively, you will enter into, you know, what is best thought of as a contract settlement process.

Brannen McElmurray: And then they turn around, put their name on it, and then send it in to the Army Corps for processing. And then, effectively, you will enter into what is best thought of as a contract settlement process with them at some point. Now, Weston is our counterparty, so that's actually the person that we'll be dealing with. And then, presumably, we will make ourselves available to the Army Corps. As to timing, I think there is, you know, no certainty about that because, you know, you're talking about, you know, a government process that there would be a dialogue around.

Andrew Dete: We've had two different cargo loaded into Barkerana already. So we're operating very well and everything's going great in Barkerana and Selva. To the right is our Port of Send project. So this is the project that we acquired in December, and we've made great progress since then. So 1,600 megawatt power plant, 15-year PPA. We're now fully permitted. We've given full notice to proceed on our construction consortium, which is made up of Mitsubishi, and Andrea Gutierrez.

Brannen: with them at some point. Now, Weston is our counterparty. So that's actually the person that we'll be dealing with. And then presumably, we will make ourselves available for the Army Corps. As to timing, I think there is, you know, no certainty on that, because, you know, you're talking about, you know, you know, a government process that there would be a dialogue around. But, you know, just keep in mind the following, you know, we have been, you know, in dialogue, you know, for the last, you know, four or five months going back and forth over, you know, the details, providing information. Functionally, what you're doing is checking off on somebody's due diligence checklist. And so we'll continue that process, make ourselves available, you know, as soon as anybody wants to talk about it. I think our belief is that we will get engaged.

Andrew Dete: We've made great progress on the site, fully cleared. And as you can see from the picture on the right, we're actually starting to pour the foundations, which is a big step for us. And then Mitsubishi has made great progress on the turbines. You can see the picture of one of them, and we are well-entracted, actually well ahead of schedule for our COD, which is the second half of 2026. Norse Hydro is moving through commissioning really well at the Barkerana terminal.

Brannen McElmurray: But, you know, just keep in mind the following. You know, we have been, you know, in dialogue for the last, you know, four or five months going back and forth over, you know, the details, providing information. Functionally, what you're doing is checking off boxes on somebody's due diligence checklist. And so we'll continue that process, make ourselves available, you know, as soon as anybody wants to talk about it. I think our belief is that we will get engagement here pretty soon, and our goal is to try to settle this in the third quarter.

Andrew Dete: Gas volumes are up to about 60% of the contract demand, as we commission the boilers and the calciners of their Allenorchee Illumina Refinery 1 by 1. We expect to be at full ramp up on that contract by October of this year, and Barkerana is really coming to get it very well.

Brannen: each been here pretty soon and our goal is to try to settle this in the third quarter.

Brannen McElmurray: Okay, I appreciate it. And then sticking with Puerto Rico for a second, and thinking about the incremental 80 TBTU isomide side of it, it should be online in the fourth quarter. Is there anything that would stand in the way of reaching that threshold? And is the power generation, gas power generation, sufficient to absorb all of that? I mean, is there anything that could get in the way of that?

Andrew Dete: I'm flipping to page 10 for a bit of a further update on Brazil. There's two other things we just want to check in on. One is our contracted EBITDA from Brazil. It's planned to be about 470 million by 2026 when we turn on the Barkerana terminal, the two power plants I went through, and then also our TGS terminal, which is operational. So our current contracted book, 470 million of EBITDA by 2026.

Speaker Change: Okay, I appreciate it. And then sticking with Puerto Rico for a second and thinking about the incremental 80 TBTU islamide side of it.

Speaker Change: that should be online in the fourth quarter. Is there anything that would stand in the way of reaching that threshold? And is the power generation, gas power generation, sufficient to absorb all of that? I mean, is there anything that could get in the way of that, ABCDT?

Andrew Dete: And then the second thing is the growth that we expect out of Brazil, which is really from our TGS terminal in Santa Catarina. We are expecting the power auction to happen this year. We expect to win two and a half gigawatts of power. That will be a mix between power that NFE builds and owns, and other power plants that we supply on a contract which will pay us a fixed margin plus compensators for the gas supply.

Brannen McElmurray: Yep. So let me I'm going to start by answering it in this way, just because of the way you ended it.

Speaker Change: Yep.

Speaker Change: I'm going to start by answering it in this way, just because of the way you ended it.

Speaker Change: I think the way to think about the Puerto Rican system, you know, because this is our strategy.

Speaker Change: is, it actually needs 5,500 megawatts of power, right? That's the way to think about it. It peaks at 3.3 gigawatts. You need about 700 megawatts of operational reserve, 900 megawatts of maintenance reserve, and 600 megawatts of generation reserve. That's what they need.

Andrew Dete: So we have 470 million of contract in margin. We believe that this power auction in Santa Catarina can increase our EBITDA by another 400 million. And so we have great growth in Brazil over the next three to five years.

Brannen McElmurray: I think the way to think about the Puerto Rican system, you know, because this is our strategy, is it actually needs 5500 megawatts of power, right? That's the way to think about it. It peaks at 3.3 gigawatts, you need about 700 megawatts of operational reserve, 900 megawatts of maintenance reserve, and 600 megawatts of generation reserve. That's what they need. Today, you don't have that.

Andrew Dete: I'm going to move next to the structure and capital structure and capex update on page 12. So we have a few pages here to really walk through our next steps for the capital structure of NFE. And on page 12, we have two main initiatives. First is to refinance our existing 2025 notes. Those are doing September of next year. We'll look to extend the maturity of those notes as soon as possible. We have an existing commitment to backstop this refinancing.

Speaker Change: Today, you don't have that.

Speaker Change: And so, functionally, what's getting ready to happen is with our, you know, two power plants that we made available.

Speaker Change: plus the Megagens that will be converted, plus Mayaguez that will be converted, plus the other projects that we're doing, including adding additional power, either through our own process or through the P3 process. You know, our expectation is we'll hit those metrics.

Andrew Dete: And so we feel like getting those notes refinances secure. And we'll be in the market here soon to kind of get the best execution on that refinancing that we can. Second is we're going to target less than four times debt to EBITDA and that's senior secured corporate leverage to EBITDA by 2026. You can see on the right side where we have effectively kind of shown what our guidance is for 2024 and 2025 as well as our LTM and 2023 debt to EBITDA metrics.

Speaker Change: You know, certainly over, over time.

Brannen McElmurray: And so functionally, what's getting ready to happen is with our, you know, two power plants that we made available, plus the megagens that will be converted, plus MiGWES will be converted, plus the other projects we're doing, including adding additional power, either through our own process, or through the P3 process, you know, our expectation is we'll hit those metrics, you know, certainly over over time, as it relates to today, you know, what we're hyper focused on are things that we could convert in the short term, the megagens, as we talk about often, are gas ready today, you know, there's a regulatory process that we have to go through that we're almost complete. But as soon as that paperwork comes in, and is done, then that 8690 megawatts will be turned on to gas once once it's turned on to gas, it'll go down in the merit order up in the merit order, everyone think about it.

Speaker Change: As it relates to today, what we are hyper-focused on are things that we can convert in the short term. The megagens, as we talk about often, are gas-ready today. There's a regulatory process that we have to go through that we're almost complete, but as soon as that paperwork comes in and is done, then that 86, 90 megawatts will be turned on to gas. Once it's turned on to gas, it'll go down in the merit order, up in the merit order, however you want to think about it. In other words, it becomes cheaper and more likely to dispatch, and then more likely to displace diesel and other generation, both because of inefficiency and fuel cost that are currently running. Yeah. One other thing to amplify on that, Ben, is that our business now is so easy to model, and I went through the numbers on the page.

Andrew Dete: And then you can see kind of how we're doing that math with all the debt laid out below that here. As West went through, we forecast 1.3 billion of EBITDA in 2025, which would almost be exactly four times debt to EBITDA. And then in 2026, when Porta Sen and Brazil and other assets turn online, we'll continue to grow that EBITDA and be below four times debt to EBITDA. So based on our projections here, we end up at a very comfortable amount of overall kind of long term leverage at the corporate level.

Brannen McElmurray: In other words, it becomes cheaper, and more likely to dispatch, and then, you know, more likely to displace diesel and other generation, both because of inefficiency and fuel cost that are currently running. Yeah, and one other thing to amplify that is that our business now is so easy to model. And I went through the numbers on the page.

Speaker Change: So 170 TBTUs. Of that, about 150 of it is already contracted, right, not including, you know, the upsides in the Puerto Rico contract. So you're 88% of the 2,025 results are essentially 100% contracted or 88% contracted right now.

Andrew Dete: The next thing I want to walk through is basically how we're going to kind of continue to create more overall cash for debt service to de-leverage and then more of course free cash flow available for equity holders. And the first thing to kind of make that point is to show our CapEx. So page 13 is a CapEx overview for the remaining part of 2024 and then into 2025. The key point here is that obviously we're done with F-01.

Wes Edens: So 170 TBT use of that about 150 of it is already contracted, right, not including the upsize in the Puerto Rico contract. So you're 88% of the 2025 results are essentially 100% contracted or 88% contracted right now. The incremental volumes that Brandon is talking about, are, you know, the other 40 or so TBT use, you'd actually have to go out and buy incremental fuel in order to supply those contracts. Also, a happy coincidence is that the margin on the Puerto Rican contracts as we go through the illustrative margin there is about the same margin if you just sold those volumes into the marketplace. So the market for LNG today is about $13. The margin on those, those contracts would be about $13 as a sale price. So it doesn't really matter.

Ben: The incremental volumes that Brannen is talking about are, you know, the other 40 or so TBTU's. So you'd actually have to go out and buy incremental fuel in order to supply those contracts.

Ben: Also, a happy coincidence is that the margin on the Puerto Rican contracts, as we go through the illustrative margin there, is about the same margin if you just sold those volumes into the marketplace. So the market for LNG today is about $13. The margin on those contracts would be about $13 as a sale price. So it doesn't really matter. There's really literally no incremental risk one way or the other. Obviously our goal long-term is to serve customers. So we want to serve our customers there. As Brannen said, when you look at the island-wide needs that they have for power and cheaper power and cleaner power, they're significant. They're far beyond the size of the scale of what the contract is in place. So we feel like the organic...

Andrew Dete: So CapEx is going down precipitously. We've got kind of small bite-sized CapEx on our downstream projects to finish those out and start generating revenues in 2025. You can see Brazil, Mexico, Nicaragua, Puerto Rico here on the page. That leads to, you know, about 128 million of net CapEx to the end of the year. And then we have CapEx on FLNG2, which is also here as well, netted against the term loan that we have for FLNG2. So really from a net CapEx perspective we've got about 177 million for the remaining part of 24 and then in 2025 that drops way off the 67 million of CapEx.

Wes Edens: There's really literally no incremental risk one way or the other. Obviously, our goal long term is to serve customers who want to serve our customers there. As Brandon said, when you look at the the island wide needs that they have for power and cheaper power and cleaner power, they're significant. They're far beyond the size of the scale of what the contract is in place. So we feel like the organic ability to grow that contract is material.

Andrew Dete: So we'll see flipping the page 14 is how that materially impacts the cash generation. So what we wanted to do here is provide a very simple walk from our adjusted EBITDA reported numbers to what really is kind of our cash flow available for debt service. So with the cash we have to pay debt eventually de-leverage and then of course also generate free cash flow. So in the remaining part of 2024 we start with a billion dollars of adjusted EBITDA and we end up with 683 million of cash for cash over debt service.

Ben: ability to grow that contract is material. Simply fulfilling it will actually utilize all the existing portfolio of gas that we have right now. And we think there's a significant amount of upside, you know, beyond that. And then last, and again, the same point is that the price in the market, the price in the markets for our products is basically the same. So in that happy coincidence, there's actually no real financial exposure whatsoever. So it's an incredibly secure price today.

Wes Edens: Simply fulfilling it will actually utilize all the existing portfolio of gas that we have right now, and we think there's a significant amount of upside, you know, beyond that. And then lastly, and again, the same point is that the price in the market, the price in the markets for our products is basically the same. So in that happy coincidence, there's actually no real financial exposure whatsoever. So it's an incredibly secure price.

Andrew Dete: In 2025 we're going to decrease SG&A, we're going to decrease CapEx and we're going to end up, you know, 1.3 billion of adjusted EBITDA but 933 million of cash flow available for debt service. So I'm just wondering about a few numbers here and how lowering that overall CapEx spend actually leads to higher free cash flow for the business.

Speaker Change: That makes sense.

Greg Lewis: Thank you. And we'll take our next question from Greg Lewis with CTIB. Please go ahead.

Speaker Change: Thank you. And we'll take our next question from Greg Lewis with CTIB. Please go ahead.

Wes Edens: Yeah, hi, thank you. And good morning. And thanks for taking my questions. Um, you know, I guess I want to follow up with Ben just in some of the comments. So, as we think about, you know, where the market is today, around pricing and realizing those spreads. How are we thinking about, and with the financing coming up, how are we thinking about hedging our natural gas, our power exposure, how are we thinking about that on the commodity side? Is that something we're actively looking to do and just kind of an update there?

Greg Lewis: Yeah, hi. Thank you and good morning and thanks for taking my questions. You know, I guess I want to follow up with Ben just in some of the comments. So, as we think about, you know, where the market is today around pricing and realizing those spreads,

Andrew Dete: And then flipping the page 15 is the real long-term initiatives on our capital structure which is effectively to migrate what we showed on the first page of this section which is a sort of corporate loan leverage to asset level leverage. And this does two really important things for us. The first is it really harmonizes our long-term assets and contracts with longer-term debt. And by having longer-term debt we bring down cost and we're able to lower corporate leverage to the benefit of equity holders.

Speaker Change: How are we thinking about, and with the financing coming up, how are we thinking about hedging

Speaker Change: You know, our natural gas, our power exposure, how are we thinking about that on the commodity side? Is that something we're actively looking to do and just kind of an update there?

Wes Edens: We essentially have no exposure. As I said, we have a portfolio of 170 TBTUs. You have current demand in hand for 150 TBTUs with a large pipeline behind that. And the market is basically right on top of what our net spreads are to deliver to customers. So in terms of our business, it is really purely a spread business right now. We basically buy gas from manufacturer LNG, right?

Andrew Dete: So our FLNG1 asset, 30 year useful life, 2 billion dollar replacement cost and we expect to have 250 million of kind of annual cash flow at the asset. So we're showing illustrative asset debt of about 1.5 billion which I think is very achievable. On the right side NFE Brazil, 18 year average contract duration, 500 million of run rate EBITDA in 2026, 2.2 gigawatts of power plants, 46 TBTUs of firm gas sales.

Speaker Change: We essentially have no exposure. As I said, we have a portfolio of 170 TBTUs.

Speaker Change: You have current demand in hand for 150 TBTUs with a large pipeline behind that.

Speaker Change: And the market is basically right on top of what our net spreads are to deliver to customers. So, in terms of our business, it is really purely a spread business right now. We basically buy gas from manufacturing LNG, right, and we list there's a couple of portfolio purchases that we make on a long-term basis, then we have our own.

Wes Edens: And we list there are a couple of portfolio purchases that we make on a long-term basis, then we have our own. We have long-term off-take contracts. The average term of our contract is well in excess of 10 years. We then simply provide logistics in the middle and deliver to them.

Andrew Dete: And we expect almost 4 billion of enterprise value in 2026 which is a simple 8 times the 500 million of contracted EBITDA. On that 4 billion of enterprise value, we'll have about 1 billion of long-term asset level leverage which we're using for construction. And then we assume we can get to basically 50% LTV on that so another billion dollars of leverage. That together with the FLNG1 that would mean 2.5 billion dollars of leverage would migrate from the corporate level over time to the asset level.

Speaker Change: We have long-term off-take contracts. The average term of our contract is well in excess of 10 years.

Wes Edens: So it really is a spread business. It's one we have spent $8 billion building to get to this point. So we invested a tremendous amount of capital to get there. We made $1.3 billion last year. We think we're going to make between $1.4 and $1.5 this year. Notably, with no additional FEMA dollars coming whatsoever, we think the number is $1.3 billion is the guidance for next year.

Speaker Change: We then simply provide the logistics in the middle and deliver to it, so it really is a spread business. It's one we have spent $8 billion roughly building to get to this point, so we invested a tremendous amount of capital to get there. We made $1.3 billion last year. We think we're going to make between $1.4 and $1.5 billion this year. Notably, with no additional FEMA dollars coming whatsoever, we think the number is $1.3 billion as the guidance for next year. I showed that as simple as you possibly can, which is 170 TBTUs times...

Andrew Dete: And we'd end up with a long-term sustainable capital structure at the NFE corporate level. And then with assets where we've aligned our long-term duration cash flows and assets with long-term duration lower cost debt. Respect to you.

Wes Edens: And I showed that as simple as you possibly can, which is 170 TBTUs times the $7 margin that is across our business, plus the $100 million, roughly, of ship operating results. That gets you to $1.3 billion. As Andrew said, gradually, what is in hand, long-term contracts, capacity payments, additionally in Brazil, add hundreds of millions of dollars to that. So you really have a business which is now rock solid, is highly diversified, and has a billion and a half and growing EBITDA in the gun sites for it with essentially no more capex spent to do it.

Andrew Dete: Great. Thanks, Andrew.

Speaker Change: The $7 margin that is across our business, plus the $100 million roughly of ship operating results, that gets you to $1.3 billion.

Wesley Edens: So let's talk about our new initiative which is really just a continuation of an existing business that we've had around here for many, many years. So look to page number 17. A big, big part of our business here at NFE is the development of power systems and management of those systems. We own or manage 9 gigawatts of power between La Paz, Mexico, Puerto Sandino, our new project, Jamalco, and Jamaica, Puerto Rico, of course, and then in Baccharina, Brazil.

Speaker Change: As Andrew said, incrementally, what is in hand, long-term contracts, capacity payments...

Speaker Change: Additionally, in Brazil, add hundreds of millions of dollars to that, so you really have a business which now is rock solid, is highly diversified, has a billion and a half and growing EBITDA in the gun sites for it, with essentially no more capex spent to do it. So that's the profile of the business right now. Obviously, the results of a quarter like this are disappointing, but you're measuring a 30-year business across the three-month time frame. We had a delay of a couple of months. Unfortunately, that happens. That's behind us. It now operates. And so we feel like, you know, the financial footing of the company is incredibly secure. We've got, as Andrew went through in great detail, we have a real goal to have less debt and longer-term and lower-cost debt over time. And the path to get there is incrementally just to perform as we have. And we'll go through it.

Wes Edens: So that's the profile of the business right now. Obviously, the results of a quarter like this are disappointing, but you're measuring a 30-year business across a three-month time frame. We had a delay of a couple of months. Unfortunately, that happens. That's behind us. It now operates, and it works well.

Wesley Edens: We are a global leader in power systems development overall. We own or have visibility of two gigawatts of turbines that are available for development in this modular form. We'll talk about in just a second. So our experience here is very, very significant. This is 120 days. It provides 15% of the base load power to the grid to Puerto Rico, and is by far the most stable and reliable portion of the grid with total availability of 99%.

Wes Edens: And so we feel like the financial footing of the company is incredibly secure. We've got, as Andrew went through in great detail, we have a real goal to have less debt in longer term and lower cost debt over time. And the path to get there is incrementally just to perform as we have. And we'll go through it. And we feel really, really good about the prospects for doing that productively here in the very short term.

Wes Edens: Okay, and then just on the opportunity in Pennsylvania and Ohio, I mean obviously everyone saw the PGM news around the auction pricing. Could you talk a little bit about, is that an opportunity or just where we look today as we bring your fast power solution to? you know, that area of the country, you know, I guess, how should we be thinking about that over the next couple of years and that opportunity? Yeah, I think

Speaker Change: We feel really, really good about the prospects for doing that, you know, productively here in the very short term.

Speaker Change: okay and then just on the on the opportunity and

Wesley Edens: We're going to talk about this modular design and what we believe is the impact that we can achieve here in the United States on and assisting data center tenants.

Speaker Change: Pennsylvania and Ohio. I mean obviously everyone saw the PGM news around the auction pricing. Could you talk a little bit about is that an opportunity or just where we look today as we bring your fast power solution to

Brannen McElmurray: But before I do that, let me turn it over to Brandon, just to pause right now and talk about this project and the FEMA contract and the claim and where we are at right now. Thank you, Wes, really appreciate that. And just as a reminder for folks on the phone, as Wes stated, this project originated with FEMA initiating a grid stabilization mission for Puerto Rico. NFE responded by entering into two contracts, each of which were for a two-year duration to build about 425 megawatts of power.

Speaker Change: and the rest of that area of the country. I guess, how should we be thinking about that over the next couple of years and that opportunity?

Wes Edens: Yeah, I think that it is perhaps the best market for data center development, not just in the United States, but perhaps around the world. It's got a combination of plentiful land, it's got actually large population centers which are nearby, and it has very inexpensive and very long-term gas.

Speaker Change: Yeah, I think that it is perhaps the best market for data center development, not just in the United States, but perhaps around the world. It's got a combination of plentiful land, it's got actually large population centers which are nearby, and it has very inexpensive and very long-term gas.

Wes Edens: So gas today, the lighting index today is around $1.50, so the actual energy payment component of that is actually really, really attractive. The challenge for data center providers is exactly what I outlined. If they were going typically to a utility and saying, I need 5 or 10 or 20 megawatts worth of power, they'd apply for a grid connection, they'd get it in relatively short order, they'd develop it, and move on. They now go in for hundreds, if not thousands of megawatts, and that's a real problem.

Brannen McElmurray: Just to put it in perspective, NFE built this power, put it online on the grid in 120 days. It's the fastest deployment of large scale power in the history of the US Army Corps, which is actually saying something. In addition, it's an essential piece of infrastructure for the PR grid, about 15% of the grid currently is supplied by this power and to put that in context without it hundreds of thousands of customers in Puerto Rico would not be receiving power every day.

Speaker Change: So gas today, the LIHEAP index today is around $1.50. So the actual energy payment component of that is actually really, really attractive. The challenge for the data center providers is exactly what I outlined. If they're going typically to a utility and saying, I need 5 or 10 or 20 megawatts worth of power, they'd apply for a grid connection, they'd get it in relatively short order, they'd develop it and move on.

Wes Edens: And so what you've seen is that PJM and then the utilities, AEP and others, are real backups. So what was previously maybe a six-month or nine-month process can now be a three-year or a five-year or a seven-year process, and that simply is not responsive to the business needs that they have.

Speaker Change: They now go in for hundreds, if not thousands of megawatts, and that's a real problem.

Brannen McElmurray: Most importantly though, this particular power, these two particular power plants are 99% available and 99% reliable, which I think is very key part of this particular solution in particular how it will apply to other applications which we'll talk to in further slides. To put a couple of dates out there on March 15, NFE sold these two power plants to Puerto Rico at the end of the contracts that FEMA had decided to conclude.

Speaker Change: And so what you've seen is that PJM and then at the utilities, AEP and others, are real backups. So what was previously maybe a six-month or nine-month process now can be a three-year or a five-year or a seven-year process, and that simply is not responsive to the business needs that they have. That's where we come in.

Wes Edens: That's where we come in. The fast power solutions that we have, the IP, as Brandon described it, is incredibly valuable. And what's also incredibly valuable is that we have a portfolio of turbines in a warehouse, plus we have access to other turbines, and so we have the feedstock that you need to actually then provide this, and the knowledge and the ability to install this quickly. So the basic process is, take a site.

Speaker Change: The fast power solutions that we have, the IP, as Brannen described it, is incredibly valuable.

Speaker Change: And what's also incredibly valuable is that we have a portfolio of turbines in a warehouse, plus we have access to other turbines, and so we have the feedstock that you need to actually then provide this, and the knowledge and the ability to install this quickly. So the basic process is, take a site, we have a phenomenal site in Wyoming that we developed over the last several years. It's on a large natural gas pipeline, it's got adjacency to fiber, it's actually close just down the road actually from the Talon Power Plant, so it gives you some sense of the attractiveness of that to a prospective data center user. We then simply apply for permits, build our power, provide redundancy to it, that then allows it to mimic the redundancy they would get with a grid, except it's an island power,

Brannen McElmurray: In addition, we entered into an 80 TBTU island-wide contract with no disruption of service. So from the point of view of the Puerto Rican people, these power plants continue to operate without interruption. Importantly, because our contracts were two years, the government does have a right to end contracts early if they haven't a change in need, a change in policy, or a change in strategy. However, if that happens, the government has an obligation to make certain payments to the contract.

Wes Edens: We have a phenomenal site in Wyoming that we developed over the last several years. It's on a large natural gas pipeline, and it's got adjacency to fiber.

Wes Edens: It's actually close, just down the road, actually, from the Talon Power Plant, so it gives you some sense of the attractiveness of that to a prospective data center user. We then simply apply for permits, build our power, provide redundancy to it that then allows it to mimic the redundancy they would get with a grid, except it's an island power, and we can do so and turn on power, we think, in 2025.

Brannen McElmurray: We have been going through a process which is considered a claim settlement process over the last several months to put together an extensive package with outside professionals who specialize in this including our own team. We have submitted that package as a formal claim to Weston who is our prime contractor and they in turn have submitted it to the Army Corps. The claim is an amount of $659 million which approximates essentially what we are entitled to under the rules under this type of circumstance to put it in perspective.

Wes Edens: There is no way they can get power out of the grid in 2025. In fact, for most of the utilities around the country, we think that the timeline to get power could be three years or four years or five years. So go call your favorite hyperscaler tenant, there are many of them; ask them what their prospects are for their business; the answer is, great. Ask them what their prospects are for getting power now, and their answers are, decidedly, less great.

Speaker Change: We can do so and turn on power, we think, in 2025.

Speaker Change: There is no way they can get power out of a grid in 2025. In fact, for most of the utilities around the country, we think that the timeline to get power could be three years or four years or five years.

Speaker Change: So, go call your favorite hyperscaler tenant, there's many of them, ask them what their prospects are for their business, the answer is great, ask them what their prospects are for getting power now, and their answers are decidedly less great. That's basically the business. What we want to be is the power provider to these data centers. This is not a me too, let's go build a bunch of data centers, there's a lot of people that can do that and do a terrific job at that. What we are very expert at is providing fast and low cost and reliable power systems.

Wes Edens: That's basically the business. What we want to be is the power provider to these data centers. This is not a me-too, let's go build a bunch of data centers, there's a lot of people that can do that and do a terrific job at that. What we are very expert at is providing fast and low-cost and reliable power systems. That's what they need, that's what we have, that's what we think the opportunity is, and I think the best place to prosecute that, in my opinion, at this point, is Pennsylvania and Ohio, because they both are places that have lots of demand from hyperscalers for data centers, and they have abundant supply of gas, and those two things together are a very, very powerful combination.

Brannen McElmurray: There are billions of dollars that were remaining to be owed on the contracts of $659 million that's well within the four corners of what we would be entitled to under this process. In terms of next steps, we will go through a claim settlement process which is a well-worn path and we will update people as to the results once they are known. I think the important part of this project though, is it a created extensive IP inside of NFC that showed us how what technology to use and the utilization of providing fast power for certain applications including its reliability and availability. The speed at which we deployed this power, the team that we use, the IP that we created can be applied to other concepts including perhaps the fastest growing area of infrastructure in the U.S.

Speaker Change: That's what they need. That's what we have. That's what we think the opportunity is. And I think the best place to prosecute that, in my opinion, at this point, is Pennsylvania and Ohio, because they both are places that have lots of demand from hyperscalers for data centers, and they have abundant supply of gas. And those two things together are a very, very powerful combination.

Wes Edens: Thank you. And we'll take our next question from Craig Shere with the Tui Brothers. Please go ahead.

Speaker Change: Thank you. And we'll take our next question from Craig Shere with Tui Brothers. Please go ahead.

Craig Shere: Good morning. Thanks for taking the questions. So after Nicaragua, you see further downstream growth in 2025 restricted by a growth of economically contracted or internally produced LNG supply. And how do you see that changing for the better or worse in the 2026-2027?

Craig Shearer: Good morning. Thanks for taking the questions.

Wesley Edens: And for that, I'll turn it over to West to talk more about on page 19. Great. Thanks, Brandon. So these are the type of power systems that are most typically found in emerging markets that have significant power needs and most importantly, they need power now. So some of the needs power now, giving them a power solution that turns on in three or four or five years is simply not reflective of what their needs actually are.

Craig Shere: So after Nicaragua, do you see further downstream growth in 2025 restricted by a growth of economically contracted or internally produced LNG supply? And how do you see that changing for the better or worse in the 2026-2027?

Wes Edens: It's a really good question, Craig. As you know, there still is a shortage of LNG, that's why prices are still relatively elevated, modest compared to where they were at the height of the Ukrainian-Russian conflict, but still, you know, reasonably high. So do you think that Henry Hub next year is forecast to be around $3.50, add $2.50 as a good proxy for what would be the cost of it plus an adder, so maybe that's a $6 cost to buy LNG in the marketplace long-term. And the market is roughly $6 or $7 higher than that, it's $13, $13.50, kind of et cetera.

Speaker Change: It's a really good question, Craig. As you know, there still is a shortage of LNG. That's why prices are still relatively elevated, modest compared to where they were at the height of the Ukrainian-Russian conflict, but still, you know, reasonably high. So do you think that Henry Hub next year is forecast to be around $3.50? Add $2.50 is a good proxy for what would be the cost of it plus an adder. So maybe that's a $6 cost to buy LNG in the marketplace long term. When the market is roughly $6 or $7 higher than that, it's $13, $13.50, kind of et cetera, those numbers come down dramatically as you move to 2027 and beyond. In 2027, 2028, there's a significant amount of LNG supply that's coming online.

Wesley Edens: As it turns out, there's another market much closer to home that has a very similar need, hyper-scalar data center users. You wouldn't think that emerging markets for power and hyper-scalar data center users would be similar but actually they are quite similar.

Wesley Edens: If you look to page number 19, we formed a new company, we call it Klondike, that is focused on providing these kind of power solutions to data centers. Page 19 shows the incredible growth of cloud computing that has occurred as companies have moved their computing needs out of their own servers into the hands of Amazon, Microsoft and others. To meet these needs, there have been literally thousands of data centers built through this country.

Wes Edens: Those numbers come down dramatically as you move to 2027 and beyond. In 2027, 2028, there's a significant amount of LNG supply that's coming online in Qatar and other places in the world. Venture Global has a significant amount of supply at that point in time. So we think that there is a bit of a window. That's why we're so focused on getting this first asset up and running. So today, 2024, 2025, 2026, very valuable.

Wesley Edens: They have traditionally been built along the lines of the steps outlined on page number 20. Step 1, identify a site. Locate that site close to end users, slash city centers to mitigate latency issues. Step 2, apply to the local utility for power. Power supply is subject to grid availability, but these were modest amounts of power initially. And so that was the process that was followed. And number 3 is the data center then to increase the reliability, actually constructs their own backup power, which is necessary to provide the power redundancy that they need for their customers. These steps require connection to local grids, creating power struggle with local consumers.

Speaker Change: and Matt Farrish.

Wes Edens: After that, we think it's a much more normalized market. In a more normalized market, the power is the downstream, and so the $8 billion we spent on developing our largely downstream portfolio allows us to access markets that are large and growing, Mexico and Brazil being at the top of that list, but also Puerto Rico, Central America, you know, Jamaica; those are countries that also have incremental demand. So we do feel like there's a lot of organic growth to come from our portfolio.

Matt Farrish: In a more normalized market, the power is downstream.

Speaker Change: And so the $8 billion we've spent in developing largely our downstream portfolio allows us to access markets that are large and growing, Mexico, Brazil being the top of that list, but also Puerto Rico, Central America, Jamaica, those are countries that also have incremental demand. So we do feel like there's a lot of organic growth to come from our portfolio. We think there's a lot of availability of gas out a couple of years, and we've got our own supply to take care of our customers over the next couple of years. So with the numbers that are in hand right now, the $1.3 billion we feel is rock solid, and we feel like the increments in Brazil are another several hundred million dollars are actually contracted and are being built, as Andrew detailed in great precision. So a billion and a half dollar business at this point.

Wesley Edens: New grid connections can take 3 to 5 years, and data center tenants need power now, put page number 21. This is a schematic that shows the island power that we are designing. In simple terms, the same basic formula, which Brannen just described in Puerto Rico and Mexico and elsewhere, what we've done in addition to what we installed in those markets is we installed backup generation to provide additional redundancy. So if you look at the schematic, you can see an array of turbines that are shown on the upper and middle and upper right hand side.

Wes Edens: We think there'll be a lot of availability of gas in a couple of years, and we've got our own supply to take care of our customers over the next couple of years. So with the numbers that are in hand right now, the $1.3 billion, we feel is rock solid, and we feel like the increments in Brazil are another several hundred million dollars are actually contracted and are being built, as Andrew detailed in great precision. So a billion and a half dollar business at this point is, we think, very much where we are right now, and there's a substantial chance that we can grow that.

Speaker Change: At this point, we think it's very much where we are right now, and there's a substantial chance that we can grow that.

Wesley Edens: And then for additional turbines that are shown on the left hand side, basically by increasing the number of backup units, you take system reliability, which is already extremely high, 99 plus percent in our experience in Puerto Rico, and you make it well over 100 percent. And you achieve then the 5, 9s reliability that are necessary for the data center users and do so in both a very efficient way. There's a very, very quick path that's 120 days to deploy, and one that has ultimate system reliability.

Wes Edens: Okay, and as a follow-up, Wes, I mean, $2.5, you know, contracted netbacks long-term for liquefaction. I think in one of your slides, the implicit was $3.5, affected netback presumed value for FLNG. Is that $2.5 to $3.5? Should we just see that basically included in the $7 average downstream margin, or do you see that added in some way over time?

Speaker Change: Okay, and as a follow-up...

Speaker Change: To your point, Wes, I mean, $2.50 contracted netbacks long-term for liquefaction. I think in one of your slides, the implicit was $3.50 affected netback presumed value for FLNG.

Speaker Change: Is that $2.50 to $3.50? Should we just see that basically included in the $7.00 average downstream margin, or do you see that additive in some way over time?

Wesley Edens: So page number 22, we're addressing all the major constraints of digital infrastructure development, but by utilizing this behind the meter on site power, and the business is off and running. So step one is to identify a site with either a data center partner on our own site. We're working on both as we speak. We have a preparing to file permits on the site that we own in Pennsylvania, Pennsylvania, Ohio in particular.

Wes Edens: No, it's actually, it's basically included in the margin. Really, we think of the asset as producing gas into our own portfolio. The benefit of producing it over the next couple of years versus the market is well over a billion dollars. If you just simply take the 70 TBTUs of production and look at it over the next couple of dollars versus market, it is over $1.2 billion in incremental benefits. So the way I think of the asset that just came online is actually a combination of number one, $2 billion roughly in terms of the cost to replicate it, and number two, just being in business today and taking advantage of higher prices gives you the benefit of another billion too.

Wes Edens: No, it's actually...

Speaker Change: Now it's actually it's basically included in the margin really we think of the

Speaker Change: The asset is producing gas into our own portfolio.

Speaker Change: The benefit of producing it over the next couple of years versus the market is well over a billion dollars if you just simply take

Speaker Change: and I'm going to be talking about the 70 TBTUs of production and look at it over the next couple of dollars versus market. It is over $1.2 billion in incremental benefits. So the way I think of the asset that just came online is actually a combination of, number one, $2 billion roughly in terms of the cost to replicate it, and number two, just being in business today and taking advantage of higher prices gives you the benefit of another billion, too. So you're well over $3 billion in asset value. That's how big of an impact that this has on our company, our finances, our book value kind of, et cetera, et cetera.

Wesley Edens: We believe are very attractive because of their physical proximity to large population centers, as well as very abundant and inexpensive natural gas, which is a terrific combination. So step one is to identify a site that works. Now step two is to develop this state of the arts might arm and grid, which in the process of doing right now, which utilizes the same factors which I outlined in the previous page to achieve redundancy.

Wes Edens: So you're well over $3 billion in asset value. That's how big of an impact that this has on our company, our finances, our book value kind of et cetera, et cetera. But at the end of the day, we view this as an integrated model and the simple way that we describe the business and in fact the way the business exists is just simply the amount of production that we have, 170 TBTUs at this time, times the margin of $7.

Wesley Edens: And the number three is get power permits in hand and install this and turn on tower next year. Page 23, you know, we outline we have a number of our sites in our portfolio. We think are very suitable for past power situations. We have the large site in Wyoming, Pennsylvania, which we part years ago. We have a site in Shannon, Ireland, which is the site where we're intending to build a power plant.

Speaker Change: But at the end of the day, we view this as an integrated model in the simple way that we've described the business. And in fact, the way the business exists is just simply, you know, the amount of production that we have, 170 TBTUs at this time, times the margin of $7. That's what gives us the $1.2 billion plus $100 million. That's the base load of your $1.3 billion before the additional growth in Brazil. So it's a greatly, greatly simplified and straightforward and diversified model. There's no lumpiness to it. There's no real subjectivity to it. There's not really a bunch of things that we're wishing and hoping and forecasting about this. It's really a business that exists. Long-term contracts to long-term offtake.

Wes Edens: That's what gives us the $1.2 billion plus $100 million. That's the base load of your $1.3 billion before the additional growth in Brazil. So it's a greatly, greatly simplified and straightforward and diversified model. There's no lumpiness to it. There's no real subjectivity to it. There's not really a bunch of things that we're wishing and hoping and forecasting about this. It's really a business that exists, long-term contracts to long-term offtake with very little credit exposure is the core of the business. Thank you, and we'll take our next question.

Wesley Edens: We have provide power in part to the grid in Ireland and have it faster to provide behind the meter power to data center. And then there's a large site in Brazil, which is permitted for a thousand megawatts of power on a hundred acre site, located off the TBG pipeline so we can provide the gas to provide the redundancy there. The economics of this business are potentially very compelling. Our expectations will enter into a long term commitment with data center tents that are credit worthy. This can provide certainty of cash flow, allow us to finance this at a very low cost from extended period.

Speaker Change: with very little credit exposure is the core of the business.

Operator: Thank you. And we'll take our next question from Tariqa Bidd with J.P. Morgan. Please go ahead. Good morning. I'd love to get some more color for you guys.

Speaker Change: Thank you. And we'll take our next question from Tariq Ahmed with J.P. Morgan. Please go ahead.

Tariqa Bidd: How do you think about the capital intensity of the Klondike business? And sort of how do you think about financing?

Wesley Edens: It's very exciting days for this business and one which if it's successful, we would likely spend the shareholders as the valuation metrics for this industry given the growth attributes of it are very, very appealing. So a lot more to come on that.

Tariq Ahmed: Good morning. I'd love to get some more color for you guys on how you think about the capital intensity of the Klondike business and sort of how do you think about financing that business over time.

Wes Edens: We think it basically is very little in terms of capital intensity because the nature of the contracts are going to be very, very long offtakes to very, very high-critical-worthy tenants. So we think it's a very capital-like business and basically one where we'll sign a modest amount of capital for down payments on turbines or transformers or things like that, but really down payments. But long-term, we think it is a highly cashflow-generative business with very little equity capital long-term just given the nature of those contracts.

Speaker Change: We think it basically is very little in terms of capital intensity because the nature of the contracts are going to be very very long off takes to very very high critical or the tenant so we think it's

Chris: Chris. Yeah, thanks, Wes.

Chris: Good morning, everybody. Let's turn to slide number 25 and talk through earnings for a moment. As you heard from Wes and Andrea, which recovered the bulk of the financing initiatives of the company, I'll quickly walk through the financial results for the second quarter. Total operating margin was $202 million from sales to customers through our downstream terminals in addition to 12 million associated with LNG sales. And on this quarter, as we did in Q1, we had another 34 million of operating margin from the ship's segment.

Speaker Change: It's, we think it's a very capital-like business and basically one where we, you know, we'll sign a modest amount of capital for down payments on turbines or transformers or things like that, but really down payments, but long-term we think it is a highly cash flow generative business with very little equity capital long-term just given the nature of those contracts.

Chris: So it's a total segment operating margin of $248 million, which compares to $384 million in Q1. When you back out SGNA and deferred earnings are adjusted, even though the first quarter was $120 million. The deferred earnings line will be further explained in the 10Q, but this is a result of a $90 million payment received for gas deliveries that will occur during Q3 and Q4. On these sales, we locked in commodity pricing and record $107 million of EBITDA and earnings associated with these volumes throughout the balance of 2024.

Speaker Change: Thank you. That's helpful.

Speaker Change: And then secondly, I'd just love any color you can give on sort of when you plan on starting to address the 25s and 26s, your senior notes. I think you've said during the prepared remarks you had a commitment in hand on the 25s.

Andrew Dete: Hey, it's Andrew. Yeah, that's right. We, you know, look, it's obviously not the best market it could be, but, you know, we feel like we need to, you know, extend the maturity out. And, you know, we'll be looking to address that in the very near term.

Speaker Change: Hey, it's Andrew. Yeah, that's right. We, you know, look, it's obviously not the best market it could be, but, you know, we feel like we need to, you know, extend the maturity out and, you know, we'll be looking to address that in the very near term.

Chris: As previously mentioned, the decrease in just the EBITDA quarter over quarter is predominantly driven by the termination of the FEMA power contract. This decrease was expected and made up in large part with volumes from F1 available to sell. However, those did not occur in Q2 and the $120 million EBITDA was the result. As Wes mentioned, once you have a full quarter of volumes from F1, we would expect the quarterly adjusted EBITDA to be around $275 million.

Wes Edens: Thank you. And at this time, I will turn the conference back to Wes Eden for any additional or closing remarks.

Speaker Change: Thank you. Thank you. Thank you.

Speaker Change: Thank you.

Speaker Change: And at this time, I will turn the conference back to Wes Eden for any additional or closing remarks.

Wes Edens: Great. Well, thanks everyone for dialing in. We appreciate the calls and the feedback, and we'll look forward to speaking to you all in the near future. Thank you.

Wes Eden: Great. Well, thanks, everyone, for dialing in. Appreciate the calls and the feedback, and we'll look forward to speaking to you all in the near future. Thank you.

Chris: Moving on to slide number 26, we show the gap net income for the quarter, which is an $89 million loss or $0.44 per share on a diluted basis. There's only a modest change to adjust the net income which adds back a non-cash and payment charge of $4 million or $3 cents a share. So if you add up Q1 and Q2 for the first half of 2024, we have $53 million of adjust the net income, or $0.26 cents a share, and $142 million of funds from operations or $0.69 cents per share.

Operator: Thank you. And this concludes today's call. Thank you for your participation. You may now disconnect.

Speaker Change: Thank you. And this concludes today's call. Thank you for your participation. You may now disconnect.

Speaker Change: Thank you for watching!

Chris: Also, just to repeat something we've mentioned in the past, when we collect on the claim from FEMA, that will be recognized as EBITDA and income during the period in which it is received. Finally, I wanted to mention that NFE's operating assets in Jamaica, Puerto Rico, Mexico, had 99% uptime and reliability for the quarter, which is a testament to the tenacity of our team. With that, I'll turn the call back over to Chance for Q9.

Chance Pipitone: Thanks, Chris.

Operator: Operative, if you would, let's open up the lines for some Q&A. Thank you. If you would like to ask a question, please signal by pressing star 1 on your telephone. If you are using a press telephone, please make sure your mute function is turned off to allow your signal to reach our equipment. Please limit yourself to one question and one follow-up. And we'll pause for just a moment to allow everyone an opportunity to signal for questions.

Benjamin Nolan: I will take our first question from Ben Nolan with Stevele. Please go ahead. Yeah, thank you.

Brannen McElmurray: So, my first question is related to making contracts. Looks like you've maybe got 500 million of that in the EBITDA for the back after the year. You may be talking through how you feel about how you come to that number and any flexibility on timing. Is it a 4-Q event or might it slip in the next year and any thoughts around that? Yep, Ben, this is Brandon. Thank you for the question.

Speaker Change: ?? ?? ?? ?? ??

Brannen McElmurray: And probably what I'll use is just an opportunity to lay this out and sort of demystify it. As I kind of said on the call, you know, the original contract was for two years. Government has the right to terminate early under very circumstances. When that happens, you know, there is a very tried and true, you know, kind of playbook and set of rules that you go through as the counterparty for the government to basically settle up.

Brannen McElmurray: And the idea from the government perspective is they're trying to put you in a place that you would have been had they fully performed, particularly with respect to investments and commitments, et cetera, that you've made. I think the key concept to kind of realize here is, you know, keep in mind what we actually did for them is build two power plants, 425 megawatts. And that work was complete at the time of COD.

Brannen McElmurray: So, functionally, the investments, commitments, you know, all the other things that we position the business to do were in effect done at the time we turned on the power plant, which is a key concept. So, when you go through this process with them, if you kind of aggregate gross sort of amounts owing under those two contracts, kind of from the time that they stopped at the time it would have finished, you know, obviously, you know, you know, the math, it's measured in the billions of dollars.

Brannen McElmurray: So, we've gone through, you know, an extensive dialogue with Weston, who is our counterparty. We have, you know, lots of folks who do this, you know, professionally all the time for the government. And through that process, we have kind of, you know, zero in on really two concepts. One is the fact that, you know, we did a ton of work around infrastructure, logistics chain is kind of positioning our business to make it work, particularly with respect to like shifts and terminals.

Brannen McElmurray: And, you know, gear, et cetera. And then also with respect to the fuel that was being provided. So, when you add all those line items up and you kind of go through the entitlement, you know, rules, it actually adds up to $659 million. So, that was put on a piece of paper with, you know, thousands of pages back up submitted to Weston. They in turn did their, you know, initial take on it.

Brannen McElmurray: We had a little bit of puts and takes on that, but essentially the numbers stayed the same. And then they turn around, put their name on it and then send it in to the Army Corps for processing.

Brannen McElmurray: And then effectively, you will enter into, you know, what is best thought of as a contract settlement process with them at some point. Now, Weston is our counterparty, so that's actually the person that we'll be dealing with. And then presumably we will make ourselves available for the Army Corps as timing.

Brannen McElmurray: I think there is, you know, no certainty on that because, you know, you're talking about, you know, a government process that there would be a dialogue around, but, you know, just keep in mind the following. You know, we have been, you know, in dialogue, you know, for the last, you know, four or five months going back and forth over, you know, the details providing information functionally what you're doing is checking the op on somebody's due diligence checklist.

Brannen McElmurray: And so we'll continue that process, make ourselves available, you know, as soon as anybody wants to talk about it, I think our belief is that we will get engagement here pretty soon. And our goal is to try to settle this in the third quarter.

Brannen McElmurray: Okay, I appreciate it.

Brannen McElmurray: And then sticking with Puerto Rico for a second and thinking about the incremental 80-TBTU, I will my side of it, it should be online in the fourth quarter. Is there anything that should would stand in the way of that reaching that threshold and is power generation, gas power generation sufficient to absorb all of that? I mean, is there anything that could get in the way of that? Yep.

Brannen McElmurray: Hey, so let me, I'm going to start by answering it in this way just because of the way you ended it. I think the way to think about the Puerto Rican system, you know, because this is our strategy, is it actually needs 5,500 megawatts of power, right? That's the way to think about it. It peaks at 3.3 gigawatts. You need about 700 megawatts of operational reserve, 900 megawatts of maintenance reserve, and 600 megawatts of generation reserve.

Brannen McElmurray: That's what they need. Today, you don't have that. And so, functionally, what's getting ready to happen is with our, you know, two power plants that we made available, plus the mega-gins that would be converted, plus myaguas that would be converted, plus the other projects we're doing, including adding additional power, either through our own process or through the P3 process. You know, our expectation is we'll hit those metrics, you know, certainly over, over time.

Brannen McElmurray: As it relates to today, you know, what we are hyper focused on are things that we should convert in the short term. The mega-gins, as we talk about often, are gas ready today. You know, there's a regulatory process that we have to go through that we're almost complete. But as soon as that paperwork comes in and is done, then that 86, 90 megawatts will be turned on to gas. Once it's turned on to gas, it'll go down in the merit order, up in the merit order, having to think about it. In other words, it becomes cheaper and more likely to dispatch and then, you know, more likely to displace diesel and other generation, both because of inefficiency and fuel cost that are currently running.

Wesley Edens: One other thing to amplify in that is that our business now is so easy to model. And I went through the numbers on the page. So 170 TBTUs of that, about 150 of it, is already contracted. Right? Not including the upsides and the Puerto Rico contract. So you're 88% of the 2000 and 25 results are essentially 100% contract or 88% contracted right now. The incremental volumes that Brandon is talking about are, you know, the other 40 or so TBTUs.

Wesley Edens: You actually have to go out and buy incremental fuel in order to supply those contracts. Also, a happy coincidence is that the margin on the Puerto Rico contract, as we go through the illustrative margin there, is about the same margin if you just sold those volumes into the marketplace. So the market for LNG today is about $13. The margin on those contracts would be about $13 in the sale price. So it doesn't really matter.

Wesley Edens: There's literally no incremental risk one way or the other. Obviously, our goal long term is to serve customers. So we want to serve our customers there. As Brandon said, when you look at the island-wide needs that they have for power and cheaper power and cleaner power, they're significant. They're far beyond the size of the scale of what the contract is in place. So we feel like the organic ability to grow that contract is material.

Wesley Edens: Simply fulfilling it will actually utilize all the existing portfolio gas that we have right now. And we think there's a significant amount of upside beyond that. And then last and again, the same point is that the price in the market, the price in the markets for our products is basically the same. So in that happy coincidence, there's actually no real financial exposure whatsoever. So it's an incredibly secure price today.

Benjamin Nolan: That makes sense. Thank you.

Craig Lewis: I'm going to take our next question from Craig Lewis with CTIP. Please go ahead. Yeah, I thank you and good morning and thanks for taking my questions. You know, I guess I want to follow up with Ben in some of the comments. So as we think about, you know, where the market is today around pricing and realizing those spreads, how are we thinking about and with the financing coming up, how are we thinking about hedging, you know, our natural gas, our power exposure, how are we thinking about that on the commodity prices?

Craig Lewis: Is that something we're actively looking to do and just kind of an update there? We essentially have no exposure. As I said, we have a portfolio of 170 TBTUs. You have current demand, current demand in hand for 150 TBTUs with a large pipeline behind that. And the market is basically right on top of what our net spreads are to deliver to customers. So in terms of our business, it is really purely a spread business right now.

Craig Lewis: We basically buy gas or manufacturer LNG, right? We list there's a couple of portfolio purchases that we make on a long term basis that we have our own. We have long term off-take contracts. The average term of our contract is well in excess of 10 years. We then simply provide the logistics and the middle and deliver to it. So it really is a spread business. It's when we spent $8 billion roughly building to get to this point.

Craig Lewis: So we invested a tremendous amount of capital to get there. We made $1.3 billion last year. We think we're going to make between $1.4 and $1.5 this year. Notably, with no additional FEMA dollars coming whatsoever, we think the number is $1.3 billion as the guidance for next year. And I showed that as simple as you possibly can, which is $170 TBTUs times the $7 margin that is across our business plus the $100 million roughly of ship operating results that gives you the $1.3 billion.

Craig Lewis: As Andrew said, incrementally, what is in hand long term contract capacity payments, additionally in Brazil, add hundreds of millions of dollars to that. So you really have a business which now is rock solid, is highly diversified, has a billion and a half and growing EBITDA in the gun sites for it, but essentially no more CapEx spent to do it. So that's the profile of the business right now. Obviously, the results are a quarter like this or disappointing, but you're measuring a 30-year business across the three-month timeframe.

Craig Lewis: We had a delay of a couple of months. Unfortunately, that happens. That's behind us and now it works well. And so we feel like the financial footing of the company is incredibly secure. As Andrew went through in great detail, we have a real goal to have less debt and longer term and lower cost debt over time. And the path to get there is incrementally just to perform as we have. And we'll go through it and we feel really, really good about the prospects for doing that productively here in the very short term.

Wesley Edens: OK, and then just on the opportunity in Pennsylvania and Ohio. I mean, obviously everyone saw the PGN news around the auction pricing. Could you talk a little bit about is that an opportunity or just where we look today as we bring your fast power solution to that area of the country? I guess how should we be thinking about that over the next couple of years in that opportunity? Yeah, I think that it is perhaps the best market for data center development, not just the United States, but perhaps around the world.

Wesley Edens: It's got a combination of the plentiful land. It's got actually large population centers which are nearby and it has very inexpensive and very long-term gas. So gas today, the lighting index today is around $1.50. So the actual energy payment component of that is actually really, really attractive. The challenge for the data center providers is exactly what I outlined. If they are going typically to a utility and saying I need 5 or 10 or 20 megawatts with the power, they apply for a grid connection that get it in relatively short order, they are developed and move on.

Wesley Edens: They now go in for hundreds, if not thousands of megawatts, and that's a real problem. So what you've seen is that PGM and that at the utilities, AEP and others are real backups. So what was previously maybe a six-month or nine-month process now can be a three-year or five-year or seven-year process, and that simply is not responsive to the business leads that they have. That's where we come in. The fast power solution that we have, the IP as Brandon described, is incredibly valuable.

Wesley Edens: And what's also incredibly valuable is that we have a portfolio of turbines in a warehouse, plus we have access to other turbines. And so we have the feedstock that you need to actually then provide this and the knowledge and the ability to install this quickly. So the basic process is take a site, we have a phenomenal site in why we're losing that we developed over the last several years. It's on a large natural gas pipeline, it's got a JSON-C2 fiber, it's actually closed just on the road actually from the talent power plants.

Wesley Edens: It gives you some sense of the attractiveness of that to a prospective data center user. We then simply apply for permits, build our power, provide redundancy to it, that then allows it to mimic the redundancy they would get with a grid, except it's an island power, and we can do so in turn on power, we think in 2025. There is no way they can get power out of a grid in 2025.

Wesley Edens: In fact, from most of the utilities around the country, we think that the timeline to get power could be three years or four years or five years. So go call your favorite hyper-scaler, you know, ten, there's many of them. Ask them what their prospects are for their business, the answer is great. Ask them what their prospects are for getting power now, and their answers are decidedly less great. That's basically the business.

Wesley Edens: What we want to be is the power provider to these data centers. This is not a me too, let's go build a bunch of data centers. There's a lot of people that can do that and do a terrific job with that. What we are very expert at is providing fast and low cost and reliable power systems. That's what they need, that's what we have, that's what we think the opportunity is. And I think the best place to prosecute that in my opinion at this point is Pennsylvania, Ohio, because they both are places that have lots of demand from the hyper-scalers for data centers and you have abundant supply of gas. Those two things together are a very, very powerful combination. Thank you, and we'll take our next question from Craig Shere with two wee brothers.

Craig Shere: Please go ahead. Good morning, thanks for taking the questions.

Wesley Edens: So after Nicaragua, do you see further downstream growth in 2025 are restricted by a growth of economically contracted or internally produced LNG supply, and how do you see that changing for the better or worse in the 2026, 2027? It's a really good question, Craig, as you know, there's still a shortage of LNG, that's what prices are still relatively elevated, modest compared to where they were at the height of the Ukrainian Russian conflict, but still reasonably high.

Wesley Edens: So if you think that Henry Hub next year's forecast would be around $3.50, add $2.50 is a good proxy for what would be the cost of it plus an adder. So maybe that's a $6 cost to buy LNG in the marketplace long term, and the market is roughly $6 or $7 higher than that is $13, $13.50, kind of, et cetera. Those numbers come down dramatically as you move to 2027 and beyond.

Wesley Edens: In 2027, 2028, there's a significant amount of LNG supply that's coming online in Qatar and other places in the world. Venture Global has a significant amount of supply at that point in time, so we think that there is a bit of a window. That's where we're still focused on giving this first asset up and running. So today, 2024, 2025, 2026, very valuable. After that, we think it's a much more normalized market.

Wesley Edens: In a more normalized market, the power is the downstream, and so the $8 billion we spent in developing our, largely our downstream portfolio allows us to access markets that are large and growing. Mexico, Brazil, being the top of that list, but also Puerto Rico, Central America, Jamaica, those are countries that also have incremental demand. So we think, feel like there's a lot of organic growth to come from our portfolio. We think there's a lot of availability of gas out a couple of years, and we've got our own supply to take care of our customers over the next couple of years.

Wesley Edens: So with the numbers that are in hand right now, the $1.3 billion we feel is rock solid, and we feel like the increments in Brazil are another several hundred million dollars are actually contracted and are being built as Andrew detailed in great precision. So, a billion and a half dollar business at this point, we think is very much where we are right now, and this is a substantial chance that we can grow that.

Wesley Edens: Okay, and as a follow up, you know, to your point was, I mean, $2.5, you know, contracted nutbacks long term for liquefaction. I think in one of your slides, the implicit was 3.5 dollars affected nutback presumed value for FLNG. Is that 2.5 to 3.5 dollars? Should we just see that basically included in the $7 average downstream margin, or do you see that additive in some way over time? Now it's actually, it's basically included in the margin.

Wesley Edens: Really, we think of the asset as producing gas into our own portfolio. The benefit of producing over the next couple of years versus the market is well over a billion dollars. If you just simply take the 70 TBTUs of production and look at it over the next couple of dollars versus market, it is over a 1.2 billion dollars in incremental benefits. So the way I think of the asset that just came online is actually a combination of number one, $2 billion roughly in terms of the cost to replicate it.

Wesley Edens: And number two, just being in business today and taking advantage of higher prices gives you the benefit of another billion, too. So you're well over $3 billion in asset diet. That's how big of an impact that this has on our company, our finances, our book value, kind of, et cetera, et cetera. But at the end of the day, we view this as an integrated model in a simple way that we've described the business and the fact the way the business exists is just simply the amount of production that we have, the 170 TBTUs in this time, times the margin of $7, that's what gives us the 1.2 billion plus 100 million, that's the base load of your 1.3 billion before the additional growth in Brazil.

Wesley Edens: So it's a greatly, greatly simplified and straightforward and diversified model. There's no lumpiness to it. There's no real subjectivity to it. There's not really a bunch of things that we're wishing and hoping and forecasting about this. It's really a business that exists long term contracts to long term offtake with very little credit exposure is the core of the business.

Craig Shere: Thank you.

Tarek Hamid: I will take our next question from Tarek Hamid with J.P. Morgan. Please go ahead. Good morning. I'd love to get some more color for you guys and how do you think about the capital intensity of the Klondike business and how do you think about financing that business over time? We think it basically is very little in terms of capital intensity because the nature of the contracts are going to be very, very long off-takes to very, very high critical of the tenets.

Tarek Hamid: So we think it's a very capital-like business and basically one where we will sign up a modest amount of capital for down payments on turbines or transformers or things like that for really down payments. But long term we think it is a highly cash flow generative business with very little equity capital long term just given the nature of those contracts.

Andrew Dete: And then secondly, just love any color you can give on sort of when you plan on starting to address the 25s and 26s your senior notes. I think you said during the prepared remarks you had a commitment in hand on the 25s. Hey, it's Andrew. Yeah, that's right. It's obviously not the best market it could be, but we feel like we need to extend the maturity out. And we'll be looking to address that in a very near term.

Andrew Dete: Thank you.

Wesley Edens: And at this time, I will turn the conference back to West Eden for any additional or closing remarks. Great. Well, thanks everyone for dialing in. I appreciate the other calls and the feedback and we look forward to speaking to you all in the near future.

Operator: Thank you.

Operator: And this concludes today's call. Thank you for your participation. You may now disconnect.

Operator: [inaudible]