Q2 2024 New Fortress Energy Inc Earnings Call

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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 will 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.

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.

Chance Pipitone: With that, I'll now hand over the call to our Chairman and CEO, Wes Edens. Great. Thanks.

Edens: and Edens.

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. Please review this as it includes important information including disclosures and risk factors.

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.

Wesley Edens: 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.

Wesley Edens: So let's start with numbers on page 3. Earnings for the quarter were $120 million in EBITDA. That was well below our target, 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 is 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 3.

Speaker Change: Our earnings for the quarter were $120 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 is 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.

Wesley Edens: 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. 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 that 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. This is 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 and then fire back up and expect to achieve full production levels shortly thereafter.

Wesley 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.

Wesley 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: This then becomes a cornerstone asset for our company. Flip to page four, please.

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 big quarter for us.

Wesley 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.

Wesley 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.

Wesley 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 is 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 $1.3 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 is room for a 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. Turn to page 5.

Wesley 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 average or our various customer contracts. They range between the countries from $4.50 to $8.00 in margin.

Andrew Dete: Our broadly diversified business is now very easy to model and understand. Here's the map for next year.

Andrew Dete: 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 at 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 invested in order to achieve these results.

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

Wesley Edens: Multiply 7 times 170 gives you approximately $1.2 billion. Then add $109 for the ship operating margin, and 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.

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

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

Wesley Edens: We've invested approximately $8 billion to create this portfolio of gas and ships, 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. The deployment of the FRNG 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: 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.

Wesley 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. Using our own facility and ships greatly reduces our logistics costs by $100 million, which then adds up to $590 million, or roughly $150 million a quarter. It'

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.

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, or about $4.50 in total. The average margin in 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 a pretty simple math.

Wesley Edens: Flip to page 7. Operationally, we had a terrific quarter, highlighted by the FLNG-1 put into service. The 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 an entire equity finance and requires no additional equity capital from us.

Speaker Change: Flip to page 7.

Speaker Change: Operationally, we had a terrific quarter, highlighted by the F-1 and G-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.

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

Wesley 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 eight, well, let's talk about Nicaragua.

Wesley Edens: 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% complete, as you can see from the picture here, waiting for the ship to show up.

Andrew Dete: 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 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.

Wesley Edens: The last bit of kit to be installed is the five-mile pipeline. All those construction materials have been 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 Nicaraguan 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. With that, I will turn it over to Andrew.

Andrew Dete: All those construction materials were delivered in the last couple of weeks and are ready to be installed.

Andrew Dete: We expect that to be completed in September and begin operations thereafter.

Speaker Change: 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, and we think that there's a significant amount of activity that will 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 II 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: With that, let me turn it over to Andrew. Andrew? Good morning, everybody. Thanks, Wes. I'm on page 9 for a similar update on Brazil.

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

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

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

Speaker Change: 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 already had two different cargoes loaded onto Barcarina.

Speaker Change: There's a big site and a ton of activity going on there. There's a 630 megawatt one-on-one combined cycle power plant, 25-year PPA, fully financed with BNDS.

Speaker Change: Debt from Brazil, and we're 70% 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 Barcarena terminal, which has been operational now for a few months. We've had two different cargoes loaded into Barcarena already, so we're operating very well and everything's going great in Barcarena and Selva.

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.

Speaker Change: 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 1600 megawatt power plant, 15 year PPA.

Andrew Dete: We've given full notice to proceed with our construction consortium, which is made up of Mitsubishi and Andrade Gutierrez. We've made great progress on the site, which is 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.

Speaker Change: 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.

Speaker Change: 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% of the contract demand as we commission the boilers and the calciners of their Alunorchi Aluminor 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 Bucarana Terminal. 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. We expect to be at full ramp up on that contract by October of this year and Bucarana 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 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.

Speaker Change: It's planned to be about $470 million by 2026 when we turn on the Bacarena 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 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. 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.

Speaker Change: 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. First is to refinance our existing 2025 notes. Those 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 NFV. 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 kind of get the best execution on that refinancing that we can.

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 get the best execution on that refinancing that we can.

Andrew Dete: Second, we're gonna 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 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.

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.

Speaker Change: You can see on the right side where we have effectively kind of shown what our guidance is for

Speaker Change: 2024 and 2025, as well as our LTM in 2023 debt-to-EBITDA metrics.

Speaker Change: 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 almost be exactly four times debt to EBITDA.

Andrew Dete: 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. So, you know, based on our projections here, we end up at a very comfortable amount of overall 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: 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.

Wes Edens: The next thing I want to walk through is basically how we're going to 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 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.

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 that we're done with FLNG1, so our 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, and Puerto Rico here on the page.

Wes Edens: The key point here is that obviously we're done with SLNG1, 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.

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, 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 in CapEx. So, what you'll see, flipping to page 14, is how that materially impacts cash generation.

Wes Edens: Mexico, Nicaragua, Puerto Rico here on the page, that leads to 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.

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, for 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.

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

Speaker Change: to what really is kind of our cash flow available for debt service, so you know the cash we have.

Speaker Change: 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.

Speaker Change: In 2025, we're going to decrease SG&A, we're gonna decrease CapEx, and we're gonna end up, you know, $1.3 billion of adjusted EBITDA, but $933 million of cash flow available for debt service.

Speaker Change: 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.

Speaker Change: 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.

Speaker Change: And I'm going to talk about the difference between asset level leverage and 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 costs.

Andrew Dete: The first is that it really harmonizes our long-term assets and contracts with longer-term debt. And by having longer-term debt, we bring down costs, 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 this 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.

Speaker Change: 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 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, you know, 50% LTV on that, so another billion dollars of leverage.

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

Speaker Change: 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 8 times the $500 million of contracted EBITDA.

Speaker Change: 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.

Speaker Change: LTV on that, so another billion dollars of leverage. That together with the FLNG1 debt would mean two and a half billion dollars of leverage would migrate from the corporate level over time to the asset level.

Speaker Change: And we'd end up with a long-term sustainable capital structure at the NFT 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.

Andrew Dete: Great. Thanks, Andrew.

Speaker Change: 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 hook 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.

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 nine gigawatts of power between La Paz, Mexico, Puerto San Dino in our new project, Jamalco in Jamaica, Puerto Rico, of course, and then in Baccarin in 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.

Operator: You are currently on hold for the NFV 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.

Speaker Change: We own or manage 9 gigawatts of power between La Paz, Mexico, Puerto San Dino in our new project, Jamalco in Jamaica, Puerto Rico of course, and then in Baccarin in Brazil.

Speaker Change: 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.

Wesley Edens: So our experience here is very, very significant, and in particular with respect to the deployment of modular, highly reliable power systems. We flip to page number 18 of the two pictures that are shown of the power plants we built for the federal government last year. 425 megawatts of power were built in just 120 days.

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

Speaker Change: 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.

Operator: Good day and welcome to the NFV Second Quarter 2024 earnings call. Today's conference is in recorded.

Wesley Edens: It provides 15% of the baseload power to the grid in Puerto Rico. It is by far the most stable and reliable portion of the grid with total availability of 99%. 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 to pause right now and talk about this project and the FEMA contract and the claim and where we are with that right now. Brannen?

Speaker Change: 425 megawatts of power was built in just 120 days.

Speaker Change: 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%.

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. 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: 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.

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

Brannen McElmurray: You bet. Thank you, Wes. I 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 was 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 is currently 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 as it will apply to other applications, which we'll talk about in further slides.

Wesley Edens: With that I will hand over the call to our chairmen and CEO Westy. Thanks, Chance and welcome everybody. 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 the numbers on page three. Earnings for the quarter were $129,000 in EBITDA. Those were $255,000.

Brannen: stated, you know, 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 percent 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, these two particular power plants are 99 percent available and 99 percent 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.

Wesley Edens: The missile was entirely resulted in 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.

Wesley Edens: That's the bad news. The good news is we did bring it online last month on July 19th and has 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 even a few months' material and had a big impact on the quarter of the recently concluded.

Wesley Edens: 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 not 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. Put the page four please. Page four, this is a bit of a recap of our past present future financial results are shown here.

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.

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: So from the point of view of the Puerto Rican people, these power plants continue to operate without interruption. However, important, because our contracts were for 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.

Wesley Edens: 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 neither residual impacts of the FEMA contractors because it was a big quarter for us. The one that recently concluded $129 our goal and forecast is for $275 million a quarter for the remainder of the year. C-3 will also be impacted by the delay as we cut this online in July.

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.

Wesley Edens: We don't expect to get full production of this until the first of September and thus it'll be some of reduced from the $275 goal and then Q-4 is a full quarter's production of $275 million. The theme acclaim that we'll talk about in just a few minutes with Brandon, we'll bring this up to total EBITDA expectations of the year with a range of $1.4 to $1.5 billion. Guidance for next year is $1.3 billion.

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 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 contracts for $659 million.

Brannen McElmurray: 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 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.

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.

Wesley Edens: Basically that is just the existing 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'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-20026, we expect this $1.3 billion raw material which Andrew Dete will go through just a moment.

Wes Edens: 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. 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.

Brannen McElmurray: 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 over to Wes to talk more about on page 19.

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 in the net margins are weighted average or at various customer contracts. They range between the countries from $4.5 to $8 in margin.

Wesley Edens: 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. 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: 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.

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

Wesley 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.

Wes Edens: 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,

Wesley Edens: In general, this is a function of the proportion of the capital invested in order to achieve these results. Simple and simple terms in those markets of the large investment in particular Brazil and Puerto Rico are margins are 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 to get to our forecasted profit of $1.3 billion. Obviously, to the extent we sell more gas or more power, these numbers go up.

Wes Edens: We formed a new company, we call it Klondike.

Wes Edens: 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.

Wes Edens: 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.

Wesley Edens: 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 catbacks.

Wesley 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, the data center then, to increase reliability, actually constructs its own backup power, which is necessary to provide the power redundancy that they need for their customers.

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

Wesley Edens: The deployment of the FRNG 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 6 is a simple page which shows you with me, but behind the FRNG1 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.

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

Wes Edens: 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.

Wesley Edens: These steps require connection to local grids, creating a 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. This is a schematic that shows the island power that we are designing. In simple terms, this is the same basic formula which Brannen just described in Puerto Rico and Mexico and elsewhere.

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.

Wesley Edens: The average margin of our business 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, a roughly $150 million of quarter. Pretty simple map. Foot to page 7. Operationally we had a terrific quarter highlighted by the FRNG1 putting to service. First cargo was actually transferred early this morning. Plan maintenance starts tonight for seven days and we expect full production show that they are after.

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.

Wesley 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.

Wesley Edens: Completion of FRNG1 triggered the FRNG2 financing, which is an equity finance and requires no additional equity capital from us. The Brazilian terminals are complete. There is a beehive of great activity that I will leave to Andrew to go through. Nicaragua is also nearly complete, and I will run through that in just a second.

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. Basically by increasing the number of backup units.

Speaker Change: 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 five nines of reliability that are necessary for the data center users and do so in both a very efficient way, a very, very quick path that's 120 days to deploy, and one that has ultimate system reliability.

Wesley 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 that's 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.

Wesley Edens: So if you flip over to page number 8, we will 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 is a 300 megawatt power plant. I think it is 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. The FSU will be on Muradat.

Speaker Change: So page number 22.

Wesley Edens: 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. 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.

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.

Wesley Edens: We are preparing to file permits on the site that we own in Pennsylvania. Pennsylvania and Ohio, in particular, 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. 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. So step one is to identify a site that works.

Wesley 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 to get power permits in hand and install this and turn on power next year. On page 23, we outline, we have a number of sites in our portfolio that we think are very suitable for fast power situations.

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.

Andrew Dete: So that will turn it over to Andrew.

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 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: 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 Wyalutsin, Pennsylvania, which we fired 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.

Wesley Edens: We have a large site in Wyalutsin, Pennsylvania, which we acquired years ago. We have a site in Shannon, Ireland, which is the location 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 we have 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.

Andrew Dete: It's a 630 megawatt, one-on-one combined cycle power plant, 25-year PPA, fully financed with BNDS, debt from Brazil, and we're 70% complete today and well-entracted comments and cash flows, and the second half of next year. So everything's going great there. As you know, this power plant is adjacent to our Barker and a terminal, which has been operational now for a few months. We've had two different cargo loads in the Barker. So we're operating very well and everything's going great in Barker and Selva.

Wesley 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.

Speaker Change: The economics of this business are potentially very compelling.

Andrew Dete: 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 are now fully permitted. 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.

Speaker Change: 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.

Christopher Guinta: Chris. Yeah, thanks, Wes. Good morning, everybody.

Christopher Guinta: Let's turn to slide number 25 and talk through earnings for a moment. As you've heard from Wes and Andrew, who 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 this quarter, as we did in Q1, we had another $34 million of operating margin from the ship segment.

Chris: 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.

Andrew Dete: 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 Kydro is moving through commissioning really well at the Barker and a terminal. Gas volumes are up to about 60% of the contract demand as we commission the boilers and the calciners of their Allenorchi Illumina Refinery 1 by 1. We expect to be at full ramp up on that contract by October of this year. And Barker and is really coming to get it very well.

Christopher Guinta: 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.

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

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 Barker and a 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: 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 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.

Christopher Guinta: 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.

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 Caterina. 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.

Speaker Change: As previously mentioned, the decrease in Justitia Vida 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 FLNG-1 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 FLNG-1, we would expect the quarterly adjusted EBITDA to be around $275 million.

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

Christopher Guinta: Moving on to slide number 26, we show the gap 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 a 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.

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: 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.

Christopher Guinta: 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, and Mexico had 99% uptime and reliability for the quarter, which is a testament to the tenacity of our employees. With that, I'll turn the call back over to Chance for Q&A.

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: 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.

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.

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. 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. © 2013 University of Georgia College of Agricultural and Environmental Sciences UGA Extension Office of Communications and Creative Services, And we'll take our first question from Ben Nolan with Siegel.

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. Please limit yourself to one question and one follow-up.

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 Porto 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.

Speaker Change: And we'll take our first question from Ben Nolan with Siegel.

Benjamin Nolan: Yeah, thank you. So my first question is related to the agreement contract. Looks like you've maybe got $500 million of that in the EBITDA 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 it a 4Q event or might it slip into next year? Any thoughts around that?

Speaker Change: Please go ahead.

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 will available for equity holders.

Ben Nolan: Yeah, thank you. So, my first question is related...

Ben Nolan: Related to the FEMA contract, it looks like you've maybe got $500 million of

Andrew Dete: 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 F1G1. So our 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.

Andrew Dete: 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.

Speaker Change: That and the Hibidah for the back half of the year.

Speaker Change: 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?

Brannen McElmurray: Yes, Ben, this is Brannen. Thank you for the question. And probably, 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, but the government has the right to terminate early under various circumstances.

Speaker Change: 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 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, 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.

Speaker Change: 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, 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.

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 bill 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 bill for debt service.

Speaker Change: 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,

Andrew Dete: In 2025, we're going to decrease SGNA, 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 bill 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.

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, 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 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 we did a ton of work around infrastructure, the logistics chain, and kind of positioning our business to make it work, particularly with respect to like ships and terminals and, you know, gear, etc.

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: 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 chains, 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. 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 McElmurray: 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 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 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, and we expect almost 4 billion of enterprise value in 2026, which is a simple 8 times the 500 million of contracted EBITDA.

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 initial take on it. We had a little bit of put and takes on that, but essentially, the number stayed the same. And then they turned around, put their name on it, and then sent 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.

Andrew Dete: 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 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 low cost debt.

Speaker Change: 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 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, 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.

Brannen McElmurray: 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, a government process that there would be a dialogue around, but, 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.

Wesley Edens: West back to you. Great. Thanks, Andrew.

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.

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 nine 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: 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 engagement here pretty soon and our goal is to try to settle this in the third quarter.

Brannen McElmurray: Okay, appreciate it. And then sticking with Puerto Rico for a second and thinking about the incremental ADE TBTU side of it, 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 ADE TBTU?

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

Wesley Edens: Bill. 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 formula. We'll talk about in just a second. So our experience here is very, very significant. And in particular with respect to the deployment of modular, highly reliable power systems, we put to page number 18, the two pictures that are shown in the power plants we built for the federal government last year.

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...

Speaker Change: sufficient to absorb all of that? I mean, is there anything that could get in the way of that, if you could be too...

Brannen McElmurray: 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 that it actually needs 5,500 megawatts of power, right? That's the way to think about it. It peaks at 3.3 gigawatts.

Wesley Edens: 425 megawatts of power was built in just 120 days. It provides 15% of the base load power to the grid to Puerto Rico. And it's by far the most stable and reliable portion of the grid with the total availability of 99%. We're going to talk about this modular design.

Speaker Change: Yep, um...

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.

Wesley Edens: What we believe is the impact that we can achieve here in the United States on an assistant data center tennis.

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.

Brannen McElmurray: You need about 700 megawatts of operational reserve, 900 megawatts of maintenance reserve, and 600 megawatts of generation reserve. That's what they need. But today, you don't have that.

Brannen McElmurray: 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 that right now. You bet. 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. And if he 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, and if he 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.

Brannen McElmurray: And so, functionally, what's getting ready to happen is, with our two power plants that we made available, plus the megagens that will be converted, plus Mayaguez 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 time. As it relates to today, you know, what we are hyper-focused on are things that we could convert in the short term.

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 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.

Speaker Change: you know, certainly over time.

Speaker Change: As it relates to today, you know, what we are 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 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, you know, more likely to displace diesel and other generation.

Brannen McElmurray: 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 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

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 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: In other words, it becomes cheaper and more likely to dispatch, and then, you know, more likely to displace diesel and other generations, both because of inefficiency and fuel cost that are currently running. Yeah. And one other thing to add to that, Ben, 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?

Speaker Change: both because of inefficiency and fuel costs that are currently running.

Speaker Change: And 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, so 170 TBTUs, of that, about 150 of it is already contracted.

Brannen McElmurray: To put a couple 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. 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 in contracts early if they have a change in need, a change in policy, or a change in strategy.

Brannen McElmurray: Not including, you know, the upsize in the Puerto Rico contract. So you're 88 percent of the 2,025 results are essentially 100 percent contract or 88 percent contracted right now. The incremental volumes that Brandon is talking about are, you know, the other 40 or so TBTUs 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 contracts would be about $13 as a sale price. So it doesn't really matter.

Ben Nolan: Right, not including the upsides in the Puerto Rico contract. So, your 88% of the 2025 results are essentially 100% contracted or 88% contracted right now.

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

Speaker Change: 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. 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.

Brannen McElmurray: 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. 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.

Brannen McElmurray: 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. 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.

Wesley Edens: 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 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.

Brannen: They're significant. They're far beyond the size and the scale of what the contract is in place. So we feel like the organic 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.

Wesley 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 last, and again the same point, is that the price in the market 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.

Brannen: And then last, and again the same point, is that the price in the market 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, if that makes sense.

Wesley Edens: 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.

Operator: Thank you, and we'll take our next question from Greg Lewis with CTIC.

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

Gregory Lewis: 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 on just 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 side? Is that something we're actively looking to do?

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,

Wesley Edens: And for that, I'll turn it over to West to talk more about on page 19. Great. Thanks, Brandon.

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

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

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?

Wesley 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 distribution business right now. We basically buy gas from the manufacturer LNG, right? And we list there are a couple of portfolio purchases that we make on a long-term basis. Then we have our own.

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

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 the Amazon, Microsoft and others. To meet these needs, there have been literally thousands of data centers built through this country. They traditionally have been built along the lines of the steps outlined on page number 20.

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 manufacturer LNG, right, and there's a couple of portfolio purchases that we make on a long-term basis that we have our own.

Wesley Edens: 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.

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

Wesley Edens: Security. Step 1, identify a site. Locate that site close to end users, slash city centers to mitigate latency issues. Step 2, apply 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.

Wesley 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 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,

Wesley 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, incrementally, what is in hand, long-term contracts, capacity payments, additionally in Brazil, add hundreds of millions of dollars to that.

Wesley Edens: These steps require connection to local grids, creating power struggle with local consumers. New grid connections can take 3 to 5 years, and data center tends to be 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 Brandon 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.

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.

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

Wesley Edens: 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, 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 them the 5-9's reliability that are necessary for the data center users and do so in both a very efficient way, a very, very quick path that's 120 days to deploy, and one that has ultimate system reliability.

Wesley Edens: So you really have a business which is now 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 a three-month time frame. We had a delay of a couple of months. Unfortunately, that happens quite often.

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. 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, and we feel...

Wesley Edens: That's behind us. It now operates, and it works well.

Wesley 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, a real goal to have less debt in the longer term and lower cost debt over time. And the path to get there is incremental, 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.

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

Wesley 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: Okay and then just on the on the opportunity and

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

Wesley Edens: So page number 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 often running. So step one is to identify a site with either a data center partner on our own site, and 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, 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.

Speaker Change: 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?

Wesley 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. So gas today, the LIHEAP index today is around $1.50.

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.

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

Wesley Edens: 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.

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.

Wesley Edens: We have the large site in Wyoming, Pennsylvania, which we fired 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 I have the capacity to provide behind the meter power to data center centers 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 redundancy there.

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

Wesley Edens: 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 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: And so what you've seen is at PJM and then at the utilities, AEP and others, a real backup. 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.

Wesley Edens: That's where we come in. The fast power solutions that we have, the IP, as Brandon described it, are 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, you 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,

Wesley Edens: 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 the extended period.

Wesley Edens: 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.

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.

Wesley Edens: It's actually close, just down the road 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 build, apply for permits, build our power, and 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.

Chris Guinta: Chris, yeah, thanks, Wes.

Chris Guinta: Good morning, everybody. Let's turn to slide number 25 and talk through earnings for a moment. As you've heard from Wes and Andrea, which 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.

Wesley Edens: 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. 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.

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

Chris Guinta: 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, 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.

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.

Wesley Edens: That's basically the business. What we want to be is the power provider for these data centers. This is not a me too, let's go build a bunch of data centers. There are a lot of people that can do that and do a terrific job at it. What we are very expert at is providing fast, low-cost, and reliable power systems. That's what they need, that's what we have, that's what we think the opportunity is.

Wesley Edens: And I think the best place to do 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 an abundant supply of gas. And those two things together are a very, very powerful combination.

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 the hyperscalers for data centers, and they have abundant supply of gas. And those two things together are a very, very powerful combination.

Chris Guinta: 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 and G1 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 and G1, we would expect the quarterly adjusted EBITDA to be around $275 million.

Operator: 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, 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 2026-2027?

Chris Guinta: Awards. Moving on to site 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 adjusted 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 adjusted net income or $0.26 cents a share, and $142 million of funds from operations or $0.69 cents per share.

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

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?

Wesley Edens: It's a really good question, Craig. As you know, there is still 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, if you think that Henry Hub next year is forecasted to be around $3.50, add $2.50, and that 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, you know, 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 forecasted to be around $3.50?

Chris Guinta: 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 was received. Finally, I wanted to mention that NFIs 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.

Chance Pipitone: With that, I'll turn the call back over to Chance for Q9. Thanks, Chris.

Speaker Change: Add $2.50 is a good proxy for what would be the cost of it, plus an add or something. 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. 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. After that, we think it's a much more normalized market.

Operator: Operator, if you would, let's open up the logs for some Q1. Thank you. If you would like to ask a question, please note by pressing star one on your telephone. If you were using a press phone, 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.

Wesley 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.

Wesley Edens: So, today, 2024, 2025, 2026 are very valuable years. After that, we think it's a much more normalized market. In a more normalized market, the power is downstream. And so, the $8 billion we spent on developing largely our downstream portfolio allows us to access markets that are large and growing, Mexico and Brazil being the top of that list, but also Puerto Rico, Central America, you know, Jamaica. Those are countries that also have incremental demand.

Benjamin Nolan: I will take our first question from Ben Nolan with Stevele. Please go ahead. Yeah, thank you. So my first question is related to the FEMA contract. It looks like you've maybe got 500 million of that in the Hibidah for the back app of 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 4Q event or might it slip into next year? Any thoughts around that? Yep, Ben. This is Brian. Thank you for the question.

Speaker Change: In a more normalized market, the power is the 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.

Wesley Edens: So, we do feel like there's a lot of organic growth to come from our portfolio. We think there will 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 it is rock solid. And we feel like the increments in Brazil are another several hundred million dollars or are actually contracted and are being built, as Andrew detailed with great precision. So, a billion and a half dollars in business at this point, we think is very much where we are right now, and there's a substantial chance that we can grow that.

Speaker Change: 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. We think there's a lot of availability of gas out a couple of years.

Speaker Change: 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 we think is very much where we are right now and there's a substantial chance that we can grow that.

Brannen McElmurray: And probably what I'll use is an opportunity to lay this out and demystify it. As I kind of said on the call, the original contract was for two years. Government has the right to terminate early under very circumstances. When that happens, there is a very tried and true 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, et cetera, that you've made.

Wesley Edens: Okay, and as a follow-up, To your point, Wes, I mean, two and a half dollars contracted netbacks long term for liquefaction. I think in one of your slides, the implicit was three and a half dollars. Is that two and a half to three and a half dollars? Or should we just see that basically included in the seven dollar average downstream margin? Or do you see that additive in some way over time? No, it's actually...

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.

Brannen McElmurray: 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. 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, I think, key concept.

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: No, 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.

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.

Brannen McElmurray: 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, the math, it's measured in the billions of dollars. 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-down on really two concepts.

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: 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: 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 in the simple way that we've described the business. And, in fact, the way the business exists is just simply the amount of production that we have, the 170 TBTUs at this time, times the margin of $7.

Brannen McElmurray: 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 $659 million.

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.

Wesley 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, so moving from 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.

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 take on it. 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. And then effectively, you will enter into, you know, what is best thought of as a contract settlement process with them at some point.

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

Operator: Thank you, and we'll 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.

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

Brannen McElmurray: 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. 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.

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

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

Wesley 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 off-takes 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 worthy tenants so we think it's

Speaker Change: It's we think it's a very capital light 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 of those those contracts

Brannen McElmurray: Functionally, what you're doing is checking the op 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.

Brannen McElmurray: And our goal is to try to settle this in the third quarter. Okay, I appreciate it. And then sticking with Puerto Rico for a second and thinking about the incremental 80-TBTU, I will mide side of it, it should be online in the fourth quarter. Is there anything that should would stand in the way of reaching that threshold and is the power generation, gas power power generation sufficient to absorb all of that? I mean, is there anything that could be getting the way that you could be doing? Yep.

Speaker Change: [inaudible]

Speaker Change: Thank you.

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 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.

Speaker Change: [inaudible]

Brannen McElmurray: 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, because this is our strategy, is it actually needs 5,500 megawatts of power. 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.

Speaker Change: [inaudible]

Wesley 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.

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

Wesley 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 other calls and the feedback and we'll look forward to to speaking to you all in the near future. Thank you.

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.

Brannen McElmurray: 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-gents that would be converted, plus myigwas 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 time. As it relates to today, you know, what we are hyper focused on are things that we should convert in the short term.

Speaker Change: ? ? ?

Brannen McElmurray: The mega-gents, 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, everyone I 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.

Brannen McElmurray: 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. So 170 TBTUs of that, about 150 of it, is already contracted, right? Not including the upsides in the Puerto Rico contract. So your 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, you actually have to go out and buy incremental fuel in order to supply those contracts.

Brannen McElmurray: 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 first contracts would be about $13 in the sale price. So it doesn't really matter. There's literally no incremental risk one way or the other. Obviously, our goal long-term is to serve customers.

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Brannen McElmurray: 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. 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.

Brannen McElmurray: And then last and again, the same point is that the price in the market, the price in the market 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 place 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. Hi, thank you and good morning and thanks for taking my questions. I guess I want to follow up with Ben in some of the comments. So as we think about 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?

Craig Lewis: How are we thinking about that on the commodity prices? 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 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 and 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 have spent $8 billion roughly building to get to this point.

Craig Lewis: So we invested 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. 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 the 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 size for it, but essentially no more CapEx spend 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: Okay, 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 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 pain 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 needs that they have. That's where we come in.

Wesley Edens: The fast power solution that we have, the IP as Brandon described, 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, we have a phenomenal site in why we're losing that we developed over the last several years.

Wesley Edens: It's on a large natural gas pipeline. It's got a Jason C2 fiber. It's actually close just on the road actually from the talent power plants. It gives you some sense of like the, you know, the attractiveness of that to a prospective data center user. We then simply build, 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.

Wesley Edens: And we can do so and turn on power. We think in 2025. There is no way they can get power grid in 2025. In fact, from most of the utilities around the country, we think that the timeline to get power to be three years or four years or five years. So go call your favorite hyper scalar, you know, tennis. There's many of them. Ask them what their prospects are for their business.

Wesley Edens: 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 to let's go build a bunch of data centers. There's a lot of people that can do that and do a terrific job of that. What we are very expert at is providing fast and low cost and reliable power systems.

Wesley Edens: 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 to prosecute that in my opinion at this point is Pennsylvania, Ohio. Because they both are places that have lots of demand for from the hyperscalers for data centers and you have abundant supply of gas. And those two things together are very, very powerful combination. Thank you.

Craig Shere: And we'll take our next question from Craig. Shere, with two wee brothers, please go ahead.

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

Craig Shere: 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.

Craig Shere: In 2027, 2028, there is a significant amount of LNG supply that is 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.

Craig Shere: 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 do feel like there's a lot of organic growth to come from our portfolio. We do, there's a lot of availability of gas out a couple of years.

Craig Shere: 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 and detailed in great precision. So a billion and a half dollar of business at this point, we think is very much where we are right now.

Craig Shere: And this is a substantial chance that we can grow that. Okay. And as a follow up, you know, to your point was, 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 additive in some way over time?

Craig Shere: Now it's actually, it's basically included in the margin. Really, we think of the asset is producing gas into our own portfolio. Now, 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 TBTU's of production and look at it over the next couple of dollars versus market, it is over a $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.

Craig Shere: 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.

Craig Shere: And the fact the way the business exists is just simply the amount of production that we have, the 170 TBTUs, and this is 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.

Craig Shere: 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.D. Morgan. Please go ahead.

Wesley Edens: Good morning. I'd love to get some more color for you guys and how you think about the capital and density 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 and density because the nature of the contracts are going to be very, very long off-takes to very, very high critical of the tennis. So we think it's a very capital-like business and basically one where we will sign up and 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 of generative business with very little equity capital, long term, just given the nature of those contracts.

Andrew Dete: And then secondly, we 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 prepare remarks you had a commitment in hand on the 25s. 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.

Wesley Edens: Thank you. 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'll look forward to speaking to you all in the near future.

Operator: Thank you. And this concludes today's call. Thank you for your participation. You may now disconnect. Thank you, and Andrew Dede, who is the director of the film, and the director of the film and director of the film,