Q4 2024 New Fortress Energy Inc Earnings Call
Good day and welcome to the NFU fourth quarter 'twenty 'twenty four earnings call Today's conference is being recorded at.
Speaker Change: At this time I would like to turn the conference over to Matt Leinart managing director for introductory remarks. Please go ahead.
Speaker Change: Thank you and good afternoon, everyone and thank you for joining today's conference call, where we will discuss our fourth quarter and full year 2024 results. This call is being recorded and will be available by replay on the investors section of our website under the heading events and presentations at the same location you will find a presentation that we will walk through on today's call. Please review.
Speaker Change: You. This because it includes important information on forward looking statements and non-GAAP measures with that I'll turn it over to our chairman and CEO Wahid, Alright, great, Matt and thanks, everyone for dialing in so that's let's just jump into it here and start with the presentation that we sent out so starting on page number three our quarterly financial results and annual financial results. So.
Speaker Change: I'm very very good quarter, concluding a very very good year $313 million and our EBITDA for the quarter, that's roughly a 50% increase over the guidance that we had previously provided.
Speaker Change: Provided so it was a big deal for that very positive outlook for 2025 and beyond.
We're confirming our guidance for $1 billion for this year in total so I bought the numbers are very very good a very very good report.
Speaker Change: The profile of the business that we run is tremendous you know we're an integrated gas the power company. We have five countries seven terminals manage your own nearly 10 gigawatts of power. So a very very significant portfolio. It's a capital intensive business to build which is the bad news, but once said it's created as it largely is now has massive.
Speaker Change: Competitive barriers to entry so sustainable competitive advantage is the are the terms that we use and basically where we are right. Now. So we think by just focusing on our current markets. We feel that we have an opportunity in the next two years to grow EBITDA by 50% or more so huge numbers I know, but that's how big these markets are and how big the opportunities are if we if we execute on them.
Speaker Change: Growth with very little in the way of Capex.
Speaker Change: And reduce then the debt of the amount of our debt outstanding and the cost of it dramatically. Those are the goals that we have there was tremendous work by our people. This last year and over the first couple of months of this year, a tremendous work actually I don't want to give a big thank you to all of them were very excited for what we have accomplished thus far this year and we think there's great things they had so with Atlas.
Speaker Change: Turning to page number four.
Speaker Change: A little bit more detail on the financial updates so basically here's the $3 14, and the 950 what is crystal clear is that the U S. LNG asset coming online what was the star of the show for us to starve their quarter and contributing significantly to earnings now and also in the future. The volumes that are created there allowed us to optimize the portfolio.
Speaker Change: It makes significant returns and are positioned to continue to do so in the quarters ahead. So two areas of focus for us as long term growth in our core markets number one and number two our asset sales and deleveraging so little bit of the detail in terms of the business page number five capital markets update in Alaska.
Speaker Change: Six months or so we have done a ton of different capital markets activities to all to strengthen the balance sheet increased liquidity.
Speaker Change: <unk> set ourselves up well for future growth.
Speaker Change: In October we raised $409 of new equity.
Speaker Change: Including $50 million of my own equity in November we extended the $900 million revolver out to October of 2027, we issued the $2 7 billion dollar bond that basically consolidated debt and extended the maturity out to 2029 and then in March as recently as today and it's been a very busy period started the year.
Speaker Change: Are we close the $425 million term loan B Upsized and we refinanced our corporate facility in Brazil, which was $200 million increase that to $350 million total of $4 $7 $75 billion in corporate transactions and.
Speaker Change: And it's put us up in a terrific place in terms of our balance sheet and liquidity do not execute what our plans are the goal is very simple we want to deleverage we want to simplify the capital structure and we want to reduce debt costs, all of which are well in hand.
Speaker Change: So, let's turn now to page number six gas.
Speaker Change: Gas supply update as I said <unk> entering service was a big catalyst for us and as a result, we have excess supply versus our current base of demand.
Speaker Change: The significant incremental demand that we see in our core markets, we will definitely come over the next couple of years, but this now this surplus then leads to the next question do we wait and sell excess cargoes over time until demand comes online or do we hedge and sell today to capture excess spread if you look at the chart on the right hand side the Blue line represents the <unk>.
Speaker Change: Rice of TTS as it goes forward. So you can see that it goes down fairly substantially over the last in the next couple of years, and then flattens out as people expect more and more gas.
Speaker Change: Gas to come onto the market the yellow box represents the amount of a gas or profitability that we have above our base. Our returns. So the base returns to the bottom that's if we sell to our customers down in line with the returns that we generate the yellow is the amount above that and so the question is do we hedge ourselves some of this or do we just.
Speaker Change: Let it all right I think in particular with the geopolitical time that we live in in particular, the prospects for some kind of a resolution in the Ukraine. Russian War, we think that that alone would have a profound impact on the market and if we did nothing and simply waiting for the events to transpire. The yellow are the yellow box can get bigger alright.
Speaker Change: Actually quite a bit smaller and so the answer of what we what we did in our judgment was to derisk sell a portion of it keeps significant upside if the market stays elevated or goes higher but if the market falls, we're insulated puts cash on balance sheet conservative approach by us that we felt was struck the right balance it's good for our earnings it's good for our cash flow was the right.
To make we still retain a lot of optionality. So a very very good result, with our LNG volumes.
Speaker Change: Page number seven I'm, just going to bring us on these because we're going to talk about them in some detail Tom Chris is going to talk about our fast LNG assets I'll spend some time talking about Puerto Rico, we have our senior management the endocrine yeah, Jeremy Dawson on the phone to talk about Brazil a loss.
Speaker Change: Lots of tremendous commercial activity the greatest opportunities for us exist in our biggest markets. So there's a lot that we have to talk about the work. We're looking forward to Chris Yeah, Hey, Thanks, a lot I really appreciate it so as Brad mentioned, we're pleased to report that our funds you want asset is performing above nameplate capacity demonstrating the exceptional dedication expertise of our operators since achieving <unk>.
Speaker Change: First gas in late July we successfully navigated several planned outages taking advantage of these windows to implement key process optimizations. These proactive measures have allowed us to maximize uptime enhanced production efficiency and ensure the asset is operating at optimal conditions, notably our highest production milestone was achieved in January when we reached approximately 100.
Speaker Change: 20% of nameplate capacity, a testament to the team's commitment to operational excellence today, we shipped 12 cargos totaling approximately 24 <unk> in parallel we've taken significant steps to lower other operating costs, including improving procurement strategies renegotiating service contracts and consolidating third party vendor support. Additionally.
Speaker Change: We've made tremendous progress and our commitment to the local community by increasing the proportion of local operators to approximately 50%. We anticipate this figure will rise to 80% Mexican workforce over the course of 2000 22025, reinforcing our long term investment in the region. Another key initiative underway is the direct sourcing of molecules from the Agua Dolce hub.
Speaker Change: Which is expected to yield annual savings of $15 million to $30 million and further optimize our supply chain.
Speaker Change: On the accounting front due to the assets exceptional performance and its ability to consistently produce we officially placed the asset into service as of December 31, 2020 for this milestone marks a significant step in the lifecycle of Epsilon as you want and positioned us for continued success in the year ahead.
Speaker Change: Moving to slide number 10, our investors.
Speaker Change: Investors have heard us talk about the incredible facility onshore at Altamira before and as a quick reminder, it was built in the mid two thousands by shell and is ideal facilities turned from an import terminals to an export terminal. The infrastructure includes deepwater berthing access direct including direct access to the open waters in the Gulf of America or Gulf of Mexico, whichever you or what have you.
Speaker Change: Is 250000 cubic meter tanks that are operational and cold now access to pipeline gas and power infrastructure and an incredibly protected operational location with only one named hurricane in the last 90 years that has hit the facility and it was only a category one comment.
Speaker Change: A comment on the F. O G project generally as this is a materially different construction project as compared with <unk>. One on <unk>. One we started construction and engineering at the same time, we didn't initially have chosen deployment locations. Our team had to engineer for any conceivable sea condition as well as multiple gas composition scenarios the iphones.
Speaker Change: One asset was also taken offshore too early in the development of the project and manpower constraints and weather conditions impacted the schedule materially contrast, all of these F. LNG one challenges with the <unk> project and the differences are stark, we're now able to build something that is already designed engineered and in the case of the modules we have <unk>.
As bill drawings all of this making the construction must be much easier to know and to price, which is what we've done with our construction partners.
Speaker Change: On the next slide we've outlined the current expected timeline for the completion of the <unk> asset we started engineering and procurement in Q2 of 2023 using <unk> one as a basis for design of the modules and the ultimate terminal is the deployment location, we signed our gas supply and partnership agreement for the onshore facility with the Cfe in Jan.
Speaker Change: During 2024 and started module construction at the same time, we currently expect onshore construction to commence this summer and are working closely with the cfe in that process right. Additional updates as permits are received over the last 18 months, we've spent about $625 million with the bulk of that being on procurement in the modules the remaining 408.
Speaker Change: To spend is back end loaded with about 160 expected to be spent in 2025 and the remainder to be spent in 2026 or 2027.
Speaker Change: Given that we built the modules, giving given that the modules that we build for LNG. One are the exact same breath LNG do we were able to ship shift risk to the construction contractor and get price and schedule certainty as a result of it.
Speaker Change: And as of February one 2035, we were over 50% complete on the modules and the majority of the large pieces of kit are either already at the queue at yard or ready to be shipped when needed with that.
Speaker Change: I will turn it back over to west for Puerto Rico, Great. Thanks, Chris So, let's flip to the following page page number 13.
Speaker Change: Here's a map of Puerto Rico with a bunch of dots on the dots represent power plants in different facilities. So there's the NFC facilities. Their current power plants. There are power plants that are targets for fuel switch theres, new builds and <unk> and other <unk>. So lots of dots on the map just a little bit of context to where we are today, we have two contract.
Speaker Change: It's one where we provide gas to the yellow dot, which is our SaaS one LNG facility, where we provide gas to the San Juan five and six power plant that runs through March of 2026.
Speaker Change: Two is we have a gas contract on the two.
Speaker Change: Plants that we built for the Army Corps that are adjacent one right there in the yard the other five miles down the road. The two of those together total about 50 TVT use of production is about one ton of LNG, the conversion, which I'll talk about just a second represent a massive opportunity for Puerto Rico and by derivative a massive opportunity.
Speaker Change: <unk> for us to basically take fuel ready assets that currently burn diesel switch them to natural gas save hundreds of millions billions of dollars over the years in time for the Puerto Ricans actually generate a significant amount of business for us that is between 50 and 100 GB to use in total demand lastly, the new.
Speaker Change: Build the business.
Speaker Change: <unk> is also very significant they announced their first newbuild powerplant in 25 years in January we're going to be providing the the gas for that when it comes online in 2028, we estimate that the total need for new power will generate between 150 and 200 TV to use and total volume if you add that all up you take the 50.
Speaker Change: We have now it grows to between 250 to 350 in total so truly were a fraction today of where we believe the market on this can be.
Speaker Change: The biggest gas to power market opportunity in the world and there is nobody is in a better position to access this and perform on behalf of Puerto Rico and we are so let's just flip the page real quickly.
Speaker Change: 14 is the photos you see many times the left hand side is the San Juan five and six that Orange boat is a boat that we have leased sits in front of our facility on the right hand side. There are two other contracts or assets in the island wide contract. It is a <unk> <unk> contract, we use about half of that.
Speaker Change: A little less than half of it today and that contract expired on March 15th and we just extended this weekend for one more year and I'll talk about that in just a second.
Speaker Change: Page 15, the opportunity to convert.
Speaker Change: Is the earliest and easiest short term win for Puerto Rico and for us to help them with so there are four plants that we show here that are currently burning diesel 925 megawatts theyre actually use significantly and so the the cost savings would be.
Speaker Change: $5 at todays prices roughly between what they pay for diesel and what they would pay for natural gas. These are a high priority of the government has made it a high priority. We are very aligned with them on that this alone would double the size of our portfolio and save Puerto Rico $250 million to $500 million a year. So.
Speaker Change: It's a win win on both sides and something that we are very very focused on the short term.
Speaker Change: Page number 16.
Speaker Change: Long term, it's all about new power, so a little bit of context average power plant in Puerto Rico built 1980, 150% of the power plants built in 1975 before desperate for more reliable less expensive power. That's the situation first new plant that they have announced to be built in 25 years is the the one.
Speaker Change: That is shown here schematically. It was originally scheduled to be a 478 megawatt power plant they've upsized. It to be 550 megawatts. We are the gas provider to that project. So 20 years at roughly 30 TVT use at today's margins Thats roughly $120 million in margin for 20 years with essentially no. Capex. This is that this is the benefit of having <unk>.
Speaker Change: All the capital and this capital intensive business establish that beachhead and now we're able to service customers efficiently and of course, it generates a tremendous amount of margin for us.
Speaker Change: Page number 17.
Speaker Change: Yesterday, we announced the one year extension of the ADT Btu contract. This is the island wide contract that allows them to grow gas use from currently 40 TVT used to roughly 80 as the maximum over the next year, we think that the bulk of that can be taken up by the the.
Speaker Change: Power.
Speaker Change: Growth, we've already saved Puerto Rico over $500 million in fuel savings on the San Juan five and six so we think by converting more power plants and burning more gas in this manner is the fastest way to more savings for Puerto Rico. So let's talk about page number 18, because we announced this late last night and this is the change in.
Speaker Change: The O&M agreement that exists between an error, which is our wholly owned subsidiary that manages the PREPA plants in exchange for $110 million payment.
Speaker Change: The the generic contract itself is actually quite simple, we get paid a base fee of $22 $5 million, we had $100 million incentive that basically we got paid 50% of the cost savings that were generated either by operations or from fuel savings, we earned $110 million over the course of that first year of the contract.
Speaker Change: We build them is Uh huh initially in July and then have to build them a number of times ever since then.
Speaker Change: They wanted to convert and grow gas and utilize more of our business down there, but they became as the government very fixated on the incentive structure.
Speaker Change: And we said after a lot of consultation with them fine I mean, the government basically at the heart of it the government basically didn't feel comfortable with the structure of having us sell them gas and also charging an incentive fee.
Speaker Change: This is clearly the contract any incentives from day, one and so we after again a lot of consultation with them. We said you know what.
Speaker Change: Let's try and understand what it is youre focused on we'll try and come up with more focus on and find a compromise that works for both of US we have two goals, one where all of the $110 million and we wanted to get pay as well as we're just the Oh two we wanted to grow our supply of gas and by doing so he make more money because we're trying to generate more revenues.
Speaker Change: A more productive business and be save them millions of dollars in fuel savings. So we decided on this compromise they pay us $110 million, we agreed to eliminate the incentives together. We did then try to take the island off of diesel and fuel oil save them potentially billions and generate far more for us than the incentive structure would have in a manner that.
Speaker Change: They feel that they are aligned with us so it's very much of a win win.
Speaker Change: With that let me turn it over to.
Speaker Change: Andrew Okun, yet and Jeremy Dawson to talk briefly about our Brazil operation.
Speaker Change: Yes.
Leandra Quinn: Thank you very much was good afternoon, everyone. My name is Leandra Quinn and I am pleased that should be presenting the NFU, Brazil session alongside my partner in Brazil, Jeremy Dawson.
Leandra Quinn: Starting on slide number 20, I want to take this opportunity to highlight the incredible achievements in if he has made in Brazil over the past almost four years now since the acquisition of hydro. During this time, we have made significant investments landed round work for a successful business prepared to believe there is substantial.
And sustainable value to our shareholders due to this slide showcase the impressive.
Leandra Quinn: Assets that we built in Brazil, we now operate two LNG terminals with a supply capacity of approximately 200 terabits use per year, each terminal or a bucket in that room and all the while you can see it in the north of Brazil in a region with no access to pipelines is already operating at two <unk>.
Leandra Quinn: One key customer the big large hydro alumina refinery soon the terminal will also serve true of our own power plants under construction.
Leandra Quinn: Its region totally unimpressive two two gigawatts of installed capacity. Furthermore, our central Catarina terminal South of Brazil, a terminal that is connected to the same pipeline use it by Brazil between park guests from believe yet.
Leandra Quinn: Fully commission, it and ready to play a major role in the upcoming 2025 capacity auction in Brazil, which has a scheduled by the way to happen in June 2025, the auction as an amazing opportunity for NFC and we have all of our terminal we could not only secure long term power purchase agreements for our own.
Leandra Quinn: Rejects but also provide guests and terminal services for two existing power plants in the region.
Leandra Quinn: We believe most of the South terminal capacity will be contracted at third the auction reinforcing our position as a key player in Brazil's energy landscape I will provide more details on the auction of opportunity in the following slides now let's move to slide number 21. Please.
Leandra Quinn: And continuing with the <unk>.
Leandra Quinn: Overview of our business.
Leandra Quinn: I want to emphasize the strong foundation, we have built in Brazil through our existing contract. In addition to the although not too long term gas supply agreements that I mentioned that before we have secured over two two gigawatts with long term power purchase agreements contracted for more than 15 years.
Leandra Quinn: We have inflation adjusted Ppas do using sure a stable and predictable revenue stream for <unk> in the long run. It is also important to highlight that NFU has no commodity index risk in any of those existing contracts, both hollow northeast USA and Zip.
Leandra Quinn: Power plant Ppas, they do have a pass through for the commodity price with those contracts as far as I'm concerned that the market in the terminal is the only terminal in Brazil, with almost 100%, albeit capacity long term contracted.
Speaker Change: You're still on existing contracts on the funding side.
Speaker Change: <unk> already secured all mix of theory equity funding, which was was already injected into the project and all that that's a strong long term financing was already secured and disburse. It just demonstrates all reduced <unk> and commitment to these projects, which are fully funded until their completion.
Speaker Change: And looking ahead, we are focused on near term growth opportunities and we believe that that's the upcoming Brazilian capacity auction could represent a rates second wave of growth for <unk> in Brazil.
Speaker Change: Market is expecting a big auction that will contract to over 10 gigawatts of capacity.
Speaker Change: As auction represents the potential for higher margins for you and if you're in the South terminal and requires minimal additional capital investment as we have already built the Neccessary Foundation <unk> nation of Alberta flood.
Speaker Change: I would also like to highlight that our NFU registered over two gigawatts of its own capella.
Speaker Change: Capacity.
Speaker Change: Participating in the next auction and has many players requesting guest supply, Florida terminal, which again elevate solar it confidence that after the auction in June a material parts of the CGS terminal will have long term contracts.
Speaker Change: And if you could potentially double each sizing in Brazil.
Speaker Change: Moving to slide number 22.
Speaker Change: I'm going to give you guys a noble revealed.
Speaker Change: About the auction so far.
Speaker Change: First of all this slide highlights the strategic advantage of elbow or digests terminals location.
Its ideally position, they just sort of parts of the anticipated demand from the upcoming auction supply not only greenfield projects, but also existing assets in a region. That's currently lack access to flexible and reliable gas.
Speaker Change: If you move to slide number 23, please as I mention it we see a significant growth potential in the power auction scheduled for June.
Speaker Change: As also said these auctions is expected to awards between 10 to 15 gigawatts of new and existing power projects.
Speaker Change: <unk> Ppas awarded in this auction will commence its separation between 95 and 2030 and the PPA term will be from 10 years for existing power plants to 15 years for new plants those contracts they will be very similar to the ones that we own in Buckeye down that they want to see you go.
Speaker Change: What's more our plants.
Speaker Change: Where the system will pay a capacity fee for the power project in an energy fee whenever the project is called you produce forward.
Speaker Change: Energy fee of those contracts can be linkage to international indexes, including spots in this is like a J cayenne and the TTS.
Speaker Change: As I mentioned it before.
Speaker Change: He already registered two gigawatts of our own projects for this auction and have received requests from third parties to supply gas to an additional three gigawatts of projects.
Speaker Change: Our plan is to mitigate part of the terminal capacity to supply X D C projects.
Speaker Change: Supplying gas and terminal services, Amy for revenue stream already starting as early as of September 2025, and utilizing parts of the terminal to supply new projects, including an F fees of course, sorry.
Speaker Change: Any commercial operation dates between 2028 and 2030, it's important to highlight again that we can capture substantial growth with very little capex and equity needs.
Speaker Change: At this stage, we have no very bouquet of opportunities for or terminal and we will need to select the best projects to support our growth in Brazil until the auction date due to strong demand underscores the value of our intake.
Speaker Change: Integrated LNG and power capabilities and then if you right now in Brazil is one of the few players that is able to provide these capabilities.
Speaker Change: We're confident that in if you will secure a significant share of the largest capacity in the auction further reinforcing our position as a leading energy provider in Brazil. This growth will generate substantial value I'm sure for all of our shareholders and contributes to Brazil's energy security and economic to develop.
Jeremy Dawson: And then I will now hand, it over to Jeremy <unk>, who will give you.
Speaker Change: Dates on construction.
Speaker Change: Thank you Leandro and good afternoon, everybody. My name is Jeremy Dawson I'm responsible for building and operating the Brazilian assets I'd.
Speaker Change: I'd like to start I, just have a couple of slides I'm on slide 24.
Speaker Change: But I would like to start with just what that bottom line upfront. The good news we are on schedule and one case. We're ahead of schedule with construction were also on budget. So this is an excellent outcome for the company.
Speaker Change: And we've done a good job in terms of contracting.
Speaker Change: And being able to eliminate any capex leakage and also have been able to back to back any regulatory or delay risk we have to the parties most capable of managing that risk, which is the construction consortiums themselves.
Speaker Change: If I could have you draw your attention to the map on the right side of the slide I'd like to point out this nice geographical cluster of assets that we have coming together.
Speaker Change: You can see the Alden Archie Norsk hydro alumina refinery right in the middle of the photo.
Speaker Change: And then just down into the left both of our power plant locations ill talk about those in just a second.
Speaker Change: But this is a profitable cluster of assets that will be delivered in <unk>.
To next summer.
Speaker Change: And we will then be able to conclude our capex cycle in the bark arena cluster.
Speaker Change: This cluster of assets is going to is going to have a demand of approximately 60 TB to use per year with potential for upsizing that as the power plants.
Speaker Change: Dispatch increases in years of poor hydrology in Brazil, which are becoming more frequent.
Speaker Change: I'd like to start with the Norsk hydro.
Speaker Change: The contract. This is a 30 T btu per annum contract, which we started servicing in March of 'twenty four.
Speaker Change: It's got a 15 year tenure with a very.
Speaker Change: Creditworthy counterparty and Norsk.
That contract and our current volumes on a month on a daily basis. We're currently supplying approximately 74 million cubic feet per day of gas to that facility.
Speaker Change: We have two power projects, which you've heard about before I'll give you an update on them. They are although there.
Speaker Change: Both power plants of course, they are quite different.
Speaker Change: <unk> power plant.
Speaker Change: As a combined cycle.
Speaker Change: Powerplant, which basically means that it captures the waste heat generated by the turbine combustion and passes that through a water and steam cycle to it to increase the power plant efficiency and output by about 50% compared to a simple cycle project.
Speaker Change: That's a very important process for a power plant is expected to dispatch any significant amount on an annual basis, which this plant does.
Speaker Change: The power plant is at 630 megawatt power plant using Mitsubishi technology.
Speaker Change: It is 88% complete.
Speaker Change: It has a 25 year PPA.
Leandra Quinn: With all of the terms that Leandro mentioned before in terms of commodity risk pass through.
Speaker Change: And also inflation adjusted.
Speaker Change: D C O D or the commercial operation date of this asset will occur in the second half of this year.
Speaker Change: The portal Sam asked that is quite different. This is a simple cycle project, which is generally used when you have any kind of sort of fast start peak support application, which is the nature of this asset. It is a 1.6 gigawatt power plant, which is expected to dispatch less than silver.
Speaker Change: But it's at 39% complete has a 15 year PPA and the C. O D will be the following summer.
Speaker Change: If I could have you go to now slide 25. Please.
Speaker Change: I don't want to get into a little bit more detail on these these assets.
Speaker Change: And talk about the construction specifically of each one.
Speaker Change: As I did mentioned sell but two is the 630 megawatt plant.
Speaker Change: And being combined cycle. It is a bit more complex in terms of the engineering.
Speaker Change: And and the erection phase of this project. So we chosen engineering heavy consortium, we chose the consortium of Japanese consortium of Toyo engineering with Mitsubishi as the equipment supplier.
Speaker Change: And have been able to secure lump sum turnkey contracts.
Speaker Change: Which placed the risk of schedule and cost overruns firmly on the consortium.
Speaker Change: And also aligns our goals in terms of project completion on time and on budget.
Speaker Change: The project is 88% complete as I said, we've already started cold commissioning.
Speaker Change: Just this week, we had a very important milestone for the project, especially for a combined cycle project. We Europe, we were able to introduce water onto the site into the water treatment plant, which allows us to start commissioning the water and steam cycle.
Speaker Change: This project as I said, we'll provide firm power dispatch annually during the second semester of every year and the cash flows for this project will commence in the second half of 'twenty five.
Speaker Change: You can see a few photos there on the right.
Speaker Change: Sam we have a different consortium makeup primarily because of the different nature of the projects are simple cycle project is much more civil construction focused rather than.
The complex erection and construction activities that are related to a combined cycle. So we chose a local contractor that is very experienced and has a very good track record in Brazil and is very experienced with.
Speaker Change: The civil construction part of of the scope.
Speaker Change: Theyre also partnered with Mitsubishi on a joint and several basis in one and our strong lump sum turnkey contracts.
Speaker Change: Just 39% complete compared to a planned at this stage completion of 31%. So we're quite pleased to be a quite significantly ahead of schedule. This is as I said before a standby asset. It is a is a capacity contract where we earn a very healthy capacity payments in exchange for being ready to be online.
Speaker Change: Immediately upon being notified by the system operator, the capacity revenues of this contract will commence in the second half of 'twenty six as I said before.
Speaker Change: I wanted to point out one interesting are two interesting photos on portal sandwich highlight sort of the challenges.
Speaker Change: That are inherent in constructing in a very remote and.
Speaker Change: Rainy area of the World in this case, we're building in the Amazon.
Speaker Change: You can see in the first photo on the bottom left that we have a very large tent erected over the site that tent is almost 60 feet high and over 300 feet long.
Speaker Change: It essentially is covering an area of the work of the site, where we're going to do a lot of civil work and installation of balance of plant equipment. During the rainy season. So essentially we created a dome. So that we can continue construction.
Speaker Change: Without any interference from the weather that's going on right now is we're in the rainy season.
Speaker Change: Then you see a photo of one of the gas turbines that is currently en route to the site.
Speaker Change: That is a Mitsubishi 501, J a C advanced air cooled designed gas turbine its state of the art.
Speaker Change: It is one of the largest turbines available in the world with a ISO output rating of about of over 400 megawatts.
Speaker Change: It is one of the five of these turbines that we own as an F. E. We're the second largest fleet owner.
Speaker Change: Our second largest customer of Mitsubishi power in the world when it comes to advanced class gas turbines.
Speaker Change: This this gas turbine is being loaded in this photo at the Savannah, Georgia Port after departing Mitsubishi manufacturing facilities.
Speaker Change: In the United States. There are two of them are currently en route to two two our project right now they'll arrive in about four to five weeks and the other two will arrive a few months after that.
Speaker Change: With that I'll turn it over to Chris for the financials update thank you.
Chris: Super Thanks, Jeremy lets turn to the next section I'll walk through a little more detail on both the financial results for the quarter and fiscal year 2024, as well as an update on cash flow and liquidity.
Chris: Turning to slide 27, we've included some comments on financing activities, both past and present as Youre all familiar in Q4 2024. The company completed a series of refinancing transactions, where we exchanged $875 million or 25 notes $1 billion of 'twenty six notes $500 million of 29 notes into a new $2 7 billion.
Chris: 2029 tranche that included about $300 million of new cash proceeds to the balance sheet as part of that transaction. We agreed to an amendment with our revolving credit facility lenders to extend $900 million of the $1 billion revolver into October of 2027.
Chris: In addition, we issued $400 million of primary equity equity anchored by an additional personal investment from our CEO and.
Chris: And Friday, we priced and today, we're closing the upsize of our term loan B facility, where we raised $425 million and.
Chris: With this we terminated commitments under the term loan a facility in the amount of $350 million. This transaction puts incremental cash on balance sheet, which will be used to fund the F. O N G to Capex program.
Chris: This refinancing was a natural progression of terming out and replacing relationship capital from select members of our supportive Bank group with institutional investors that are better situated to have long term funded loans in place. The 2025 asset sales processes are well underway and it's worth just talking about earlier, we expect to generate $2 billion net proceeds after fees and any app.
Chris: That level of debt payoffs, which can be used to further pay down corporate debt, specifically, we will be using eligible proceeds from asset sales to retire the 2026 notes or we could do a refinancing to extend them, but in any event that is a near term focus for us longer term, we think the right capital structure would be to take out the terminal b in the remainder of the term loan a with a long term asset level.
Chris: Answering secured by the EF LNG units as well as long term off take agreements. We think this combination of delevering as well as extending maturities is in the best interest of debt and equity holders alike.
Chris: Final comment here is that while we have seen some downgrades to our corporate debt ratings. We would expect that these steps. Once completed will result in positive improvements to our corporate debt profile, which we expect will lead to upgrades.
Chris: Flipping to slide 28, and the takeaway from this page is that as a result of the refinancing transactions and equity capital raise we completed in Q4 as well as the monetizing the portion of our supply that we were along you can see the company has ample liquidity to service debt and to pay committed capex on the left side of the page we have the cash flow walk that we've included in prior presentations.
Chris: <unk> embedded in this we've updated the 2025 estimated adjusted EBITDA to be $1 billion as Wes described already this afternoon.
On Capex. This now includes the costs associated with <unk> two as we have that cash on balance sheet, but it continues to exclude the Brazil, Powerplant Capex, which is fully funded through either restricted cash on the balance sheet or committed financing facilities.
Chris: For debt service. This this includes the increased costs associated with refinancing, but assume so we pay off $2 billion of debt coming from asset sale proceeds and important note here is that the way the debt documents work a minimum of 75% of any asset sale proceeds in excess of $50 million go to pay off debt. The company does have discretion in keeping a portion of the cash on the balance sheet.
Chris: But for this exercise and consistent with what we've said publicly we're assuming we use all of the proceeds to Delever and again to keep it simple. This assumes that pay down is pro rata to the 29 notes the Rcs.
Chris: And the term loans, we've excluded the portion of adjusted EBITDA represents earnings that are generated from charter to third parties and we've excluded the portion of ship charter hire that's running through interest expense.
Chris: This results and cash flow use of $200 million for fiscal year 2025 on the right side of the page we show beginning of the year unrestricted cash balance was $493 million then add to that the proceeds from the term loan b and luminous financings that have just closed which is $490 million you have the negative $200 million of funds.
Chris: Cash flow from the west side of the page and finally, our expectation of the theme of claim which after taxes and debt repayment sweep yields cash inflows of $425 million. All of this results in an end of year cash balance projection in excess of $1 2 billion.
Chris: Turning forward to slide 29, and we have the financial results total segment operating margin was 240 million for Q4, and just under $1 1 billion for fiscal year 2024 for Q4. This was 206 million from sales to customers through our downstream terminals and cargoes that were sold to the market, which is about 85% of the revenue for the quarter silver.
Chris: Percentage exists for the full year 'twenty, four which is 955 for the year or 88% of total segment operating margin in Q4, we had $34 million of operating margin from the ships, which contributed to 137 for the full year core SG&A for the third quarter was $34 million, which is up slightly from Q3, largely due to the professional fees incurred around them.
Chris: Refinancing transactions for 2025, we're forecasting $30 million per quarter or $120 million per year. The deferred earnings line was 108 million in the fourth quarter and there's no for the fiscal year 2024. This represents previously contemplated cargo sales that were included in segment revenue in Q2, and Q3, but they were not recognized in EBITDA until Q4.
Chris: As a result of all of this and the punch line adjusted EBITDA for the third quarter $313 million or $950 million for the full year of 2024.
Chris: Moving on to slide 30 for Q4 $242 million or a net loss for GAAP or loss of $1 11 per share for fiscal year 'twenty for $270 million of a net loss of $1 25, a share but importantly, the majority of the Q4 result is a $235 million of charges related to the extinguishment of debt 225 of that was <unk>.
Chris: Noncash and is largely driven by the equity issuance associated with the New 2028, 29 note, which was issued as part of the refinancing if.
Chris: If you adjust that and other nonrecurring items out we would result in $29 million and net income for Q4 or 13 cents, a share and $101 million net income for the full year 'twenty 446 cents a share finally funds from operations for the fourth quarter of $68 million and for the fiscal year $263 million now.
Chris: Now that we've shared the high level earnings for Q4 and fiscal year 'twenty four I won't expand just a little more on the financing financial statement impact of the press release out. This morning regarding the termination of the fuel incentives of PREPA in prior quarters, notably Q2, and Q3 'twenty four we previously recognized $58 million associated with the fuel savings under our generic incentive contract with.
Chris: PREPA however, given that we are changing this incentive contract we were having to reverse that revenue as we recognized $33 million in fuel savings during Q2 $25 million in fuel savings. During Q3, we had been intending to recognize another $25 million in Q4.
Chris: So we were previously projecting an additional $83 million in EBITDA for fiscal year 'twenty for that will be excluded and deferred over future periods, but the cash is in hand.
Chris: Now <unk>.
Chris: Given this has been a change this has been a changing daily over the past week, we need a couple of extra days to ensure appropriate presentation and disclosures in the 10-K. So as a result, we will be filing a notification of late filing under rule <unk> 25, with the SEC. It is important to note, though that the income statement and adjusted EBITDA numbers included in our earnings release our.
Reflective of the final PREPA deal, we do not expect any material changes to these results released and furnished within the earnings 8-K filed with the SEC. Today further it is our expectation that we will file the 10-K before the end of the week.
Speaker Change: With that I'll turn the call back over to west for some additional updates Greg just a couple of brief updates and then we'll Oh go to questions. So.
Speaker Change: The three most frequently asked questions I thought I would actually like to say to the end so questions about the asset sales you know we've said this before is this is all public information.
Speaker Change: We are very focused on deleveraging the company deleveraging can happen from one or two ways. It can happen the old fashion way by making more money than you spend in using that to pay down debt.
Speaker Change: We intend to do and that'll become a bigger and bigger factor for us as we move forward number two though you can sell assets.
Speaker Change: Accretive values and use those proceeds to pay down debt. The first asset that we are focused on is Jamaica. So Jamaica is the country, where we went first so it's our oldest and most developed market just to buy a review its about a 30 <unk> downstream market, we generate about $125 million in EBITDA virtually all of that is.
Speaker Change: Cash flow because that's what happens to these businesses over time is that once they are up and running there's very little capex to run them.
Speaker Change: It's an extremely attractive profile of assets as Scott.
Speaker Change: 20, plus years of downstream demand contractually, it's got 20 plus years of gas supply 100% of the of the assets are U S. Dollar basis, It's never suffered a dollar of credit loss in its entire history. So it is a phenomenal asset it's in a very very good market and we have phenomenal people that.
Speaker Change: We're lucky to work with down there so not surprisingly it's been a very sought after asset. We started this process back in the fourth quarter, whereas we're now in a kind of a final process with a handful of different folks and although it's always hard to predict the exact timing for this if you like the outcome. Thus far has been very positive and then we will kind of go on from there. So.
Speaker Change: The asset sale update FEMA.
Speaker Change: Female.
Speaker Change: My favorite four letter word has been a has been a very very productive period of time for us FEMA the way that it works just administratively as that you have.
Speaker Change: We contracted with a prime contractor, who then in turn contracts with the Army Corps that then in turn that money is paid by FEMA. FEMA. Obviously is the is the disaster relief providers. They play a massive role in all seriousness both in a place like Puerto Rico, but also in the wildfires out west and everyplace else.
Speaker Change: As a critical critical role that we value and deeply respect we.
Speaker Change: We have had the most kind of comprehensive.
Speaker Change: A person.
Speaker Change: Interactions with the Army Corps folks.
Speaker Change: That there is a great amount of understanding that we have accomplished in terms of them explain us explain to them what the nature is of our business and exactly how we provided gas. This in all the different aspects of the contract and we've learned a lot about from them in terms of how they think about the process and whatnot. It's an interactive process that does not have a definitive date right now, but I can say.
Speaker Change: The level of respect and interaction across the board between us and between them and between FEMA is at an all time high for sure and we feel very good about the constructive newness of it.
Speaker Change: Lastly, Klondike as are our effort to provide power to a data center developments that asset. The first asset that we have that is in our portfolio is in Pennsylvania. We filed in early January to get building permits and air permits for the power plant that we would build there we expect to.
Speaker Change: Those sometime in the middle of this year and we are hopeful that later this year, we'll have good news with respect to the.
Speaker Change: Consummation of construction and marketing with it. So those are the three update last thing I'd say is just when you look at the quarter end the year in total it's been obviously, a heck of a period.
Speaker Change: Q4 $313 million in EBITDA, the year $950 million in EBITDA, our guidance for next year is $1 billion, which is what we're just reaffirm what we said before our two biggest markets are the ones that have the biggest opportunities in Brazil that first power plant, we expect to turn on in the second half of the year and produce cash flow for us to power.
Speaker Change: Options as we enter went through.
Speaker Change: Our upcoming they could be.
Speaker Change: Significant assets for us, we're incredibly well positioned in that market in both the north and most importantly in the south Puerto Rico, perhaps the biggest gas to power opportunity in the world. We are the sole provider of gas in San Juan where over 80% of the people in that geographic area. So we feel like we're incredibly well positioned.
Speaker Change: Capital structure Wise 4.7 dollars $75 billion later.
Speaker Change: It's been a very very busy and productive year for us in the balance sheet is in much better shape than it was at the beginning of it.
Speaker Change: Excellent liquidity as Chris went through we are poised to deleverage simplify and grow the business and those are the two.
Speaker Change: Our perspective is that we have so with that I will take a pause and we'll open it up to questions. Thank you very much.
Speaker Change: And if you would like to ask a question. Please signal by pressing star one on your telephone keypad.
Speaker Change: If you are using.
Speaker Change: Please make sure your mute function is turned off to allow your signal to reach our equipment.
Speaker Change: Again press Star one to ask a question.
Speaker Change: And we'll take our first question from Ben Nolan with Stifel.
Ben Nolan: Yes. Thanks, I appreciate you taking my questions.
Ben Nolan: So I the first I wanted to start if we could on slide number six where you talked about your effective open position.
Ben Nolan: Can you maybe.
Ben Nolan: Can you quantify that a little bit.
Ben Nolan: Between what you're buying and producing 170 T V to use.
Ben Nolan: Annual supply.
Ben Nolan: How much of that is available and then you talk about a portion of it has been fixed can you maybe.
Ben Nolan: Put a little a little context on the spread that you have locked in for it yet yes.
Ben Nolan: Yes, the majority of our position the vast majority of it is either sold or destined for a downstream customer or hedged. So our actual long position would show up as something slightly more than that then that basically the decision that we made as I said was to derisk the portfolio.
Ben Nolan: With really the you know the caveat being that we think that there is a lot of volatility potentially had and to the extent that there was we didn't want to let the yellow box about evaporate and so our goal is not to be exposed to at this point either increases in.
Ben Nolan: TGF that actually then somehow hurt us because we were short or decrease in TTS somehow eroded the profits that we already had in the balance sheet. So we thought that actually the conservative approach was the right one and Thats why we hedged up obviously when the F. LNG to kind of comes into the portfolio here in the first part of 'twenty seven those are.
Ben Nolan: The incremental volumes and those are those are volumes that we are already talking to people that are interested in buying them. So it's a good position to be in so that would be technically a long position, but it's not yet something that is deliverable about it but the on on the balance sheet deliberate positions. We are essentially neutral. So we have had as I said, we've either sold.
Ben Nolan: Knitted discretely or we have.
Ben Nolan: Hedge them.
Ben Nolan: So that we are actually insulated from price moves.
Ben Nolan: Okay.
Speaker Change: And then and then for my next question I know in conversations that we've had in the past and there were a number of cost saving initiatives that you guys were looking to undertake to do that and in Puerto Rico or in the Virgin Islands are in Jamaica.
Speaker Change: Could you maybe give any update on first of all what those look like how how how meaningful they would be and where you are in that process.
Speaker Change: Yes, I'd say the majority of the cost savings are from the ships and Fsrus side of the balance sheet. So we've got some fsrus that have come back to us that are under market and we've talked about initiatives to try to realize the gap between market, where the price of those are those are more opportunities on the profit side and the other side. We've got an abundance of ships when we started the.
Speaker Change: We increased the portfolio of gas we provided in Puerto Rico, we increase the number of supply shifts from two to five we're kind of we're trying to.
<unk> reduced that from five to two so that is well underway and we spent a tremendous amount of time and effort.
Speaker Change: Basically refurbishing and upgrading the birth in Puerto Rico to be able to take a bigger ship that'll then simplify that supply chain and that's what we're focused on right now and we have a handful of other initiatives that we think there are also meaningful one of the things that has been really interesting is that as we have basically built some version of just about every terminal you can imagine we've learned a.
Speaker Change: Are things and as part of that we think that there are there are significant opportunities in pretty much in the shipping business everything he touches worth millions of dollars. So you can reduce a ship or two or just use it more efficiently you can save meaningful amounts of money and that really is the focus.
Speaker Change: On the people side, obviously, we think.
Speaker Change: Yes, there is always opportunities to continue to grow the business and whatnot, but we've got a great core of people have worked extremely hard and really effectively and so we think theres less on the labor side, but on the ship side of it we think that theres definitely meaningful opportunities to do do some good work.
Speaker Change: Alright, I appreciate it thanks a lot.
Speaker Change: Thanks Pat.
Speaker Change: We will take our next question from Chris Robertson with Deutsche Bank.
Chris Robertson: Hi, good afternoon, and thank you for taking my questions.
Chris Robertson: Okay.
Chris Robertson: About the Brazil power option.
Chris Robertson: A pretty good job of laying overview there. So I wanted to ask him a bit more of a specific question.
Chris Robertson: About the two gigawatts.
Chris Robertson: That you registered with your own power projects just in terms of where would you source. The turbines. How are you thinking about the number of different projects makes up that two gigawatts and what estimated capex might look like for something like that.
Chris Robertson: Yeah.
Hi, Chris Thanks for the question. So we as I said, we have registered two gigawatts in projects.
Speaker Change: And you went straight to the point I mean, the most difficult thing for dos auction will be to secure turbines availability.
Speaker Change: And we did it so we have a secured serbians from one of the O&M. That's our partner. So we're confident that we have third news available not only for the 2028.
Speaker Change: Youll debate, but also for $29 30.
Speaker Change: The capex for those grants I'm really here, what we just did that to purchase sand, which we hired a full EPC lump sum turnkey last year is around 600.
Speaker Change: Dollars.
Speaker Change: Sorry for kilowatts installed.
Speaker Change: Those projects that are going to be spread over two different sites initially.
Speaker Change: As we have many other projects thats qualified for the auction connected to the same pipeline that we do provide gas.
Speaker Change: It would also be interested just somehow partnered with us so that number into the auction in June could increase a bit.
Speaker Change: Okay, Thanks to that I guess.
Speaker Change: A follow up when you guys are talking to potential partners here that have existing assets and youre coming in as a potential gas supply partner.
Speaker Change: How are those conversations going with the potential for sharing in some part of fixed capacity payments. In addition to.
Speaker Change: The variable dispatch and the spread on that is that part of the conversation or what does that look like.
Chris Robertson: Yeah, absolutely, Chris I mean, we're discussing with.
Chris Robertson: About potentially supplying gas to brownfield assets.
Chris Robertson: In the end of the day, what those projects need is a guide of gas call option rights because they are power plants is available to produce power whenever the system needs. So they need to buy gas.
Chris Robertson: They're required to produce smaller so it's I guess call option.
Chris Robertson: Yes, I mean in order to buy that skull option for us they would need to pay.
Chris Robertson: Premium for the call option, which is our terminal fee flows a strike price that it's gonna be a premium over the DJ km. So yes, I would say is that all the players in the country.
Chris Robertson: We are already expecting that because we have.
Chris Robertson: Don contracts before charging capacity fees or terminal fees and.
Chris Robertson: A high strike by ice with average day by day gas. So all the discussions that we have has there having right now they are already on that direction.
Chris Robertson: Okay. Yeah that was really helpful. Thank you I'll turn it over.
Thank you.
Chris Robertson: Yeah.
Chris Robertson: And we will take our next question comes.
Chris Robertson: Robbie please.
Chris Robertson: AG.
Chris Robertson: Hey, Thanks for taking my questions.
Chris Robertson: A couple on Puerto Rico.
Chris Robertson: First as we think about building to that $1 billion of EBITDA guidance. It seems like Theres a lot of upside to volumes under the island wide contract how quickly can some of these older plant switchover to gas.
Chris Robertson: It really as quickly as they can get re gas install and so.
Chris Robertson: If you have the re gas in stock, which we do.
Chris Robertson: You can actually convert them fairly quickly that the mega gens are actually connected to a re gas system now so they could actually convert.
Chris Robertson: At the drop of a hat. The mic was plant is entirely gas ready. They just simply needs re gas that is put in place and it's basically a re gas unit buffer tank is is what kind of sits between.
Chris Robertson: The capital Archie plant same thing, it's actually a gas plant and 160 of the 240 megawatts. The other asset need some some technical work and then the Gary plant is actually ready today. So.
Chris Robertson: The short term opportunity on the conversions is significant and it really became one of the factors in the discussions we had with them as I said they were just uncomfortable notwithstanding the contract. They are uncomfortable with the notion that we'd be selling gas and generating revenues and still in sarnia and earning an incentive even though that's where the contract called for and there was an easy decision to <unk>.
Chris Robertson: Sit down and say look.
Chris Robertson: We share objectives, and our objectives are we want us to provide more gas and power to the island and we want to save you a lot of money and they want to save money on a go forward basis, and they want to save on incentives and so it's a very very simple and easy.
Chris Robertson: There there are a few things in life that are truly win win. This is one of them. So we're happy to do our part on that and we think that the benefits will become manifest quickly because we think that theres going to be a significant amount of activity on these initiatives.
Speaker Change: The conversion side.
Speaker Change: That's helpful color and then.
Kind of longer term, how does contract renewal work for the island wide contract is it are there a fixed number of extension options or like you know it does it does just roll every March.
Speaker Change: There's a couple of different extension off.
Options, but for the first time the government really came to US came to me a couple of months ago and said, we would like to run an RFP for a new contract that would have a significantly more duration.
Speaker Change: Obviously, the the year by year.
Speaker Change: Tenor of it creates instability in terms of their energy security they recognize what a critical part of the.
Speaker Change: Energy sector. The gas is today only to get more critical as they add more volume into it and so this is something we've talked about having a duration of 10 years or 15 years or even longer. So we know what the tenor looks like on the new contract that we signed.
On the new power plant, that's a 20 year, so, but I would expect that there will be something that happens in the not too distant future with no no specific time associated with it right now and I would expect it ended up being a significantly longer duration at least on a portion of it and what they have right now.
Speaker Change: West Thanks, very much for taking my questions.
Speaker Change: Alright, Thank you very much.
Speaker Change: We'll take our next question from Craig Shere with Tuohy brothers.
Craig Shere: Hi, Thanks for taking the question.
Craig Shere: Just continuing on the question about.
Craig Shere: Renewing or extending longer term the ADT btu contract.
Craig Shere: Island wide.
Craig Shere: Uh huh.
Craig Shere: So your initial sales on the island. We're we're just like gas sales gas margin sales that ADT Btu is diesel lanes.
Craig Shere: But it won't be Dieseling forever right I mean, you made.
Craig Shere: Plaza 20 years, but.
Go ahead.
Craig Shere: Yes, it did.
Craig Shere: Definitely won't be that the diesel length Ironically.
Craig Shere: Our initiative because it was linked to our savings initiatives, we wanted to make it crystal clear there was savings so we'd like to diesels you'd say at 73% of diesel.
Craig Shere: You save 20% of the money, it's not that hard.
Speaker Change: And but it wasn't the pricing that they objected to at the end of the day. It was really just this notion of your sinus gas why are you also being charges an incentive for it and that became the heart of the discussion I think the new contract that we signed on a new power plant as Henry hub base I think there's certainly it'll be Henry hub base when they go to redo it thats not a nash.
Craig Shere: <unk> set to the diesel savings that was an artifact from.
Craig Shere: Different part of the transaction that we're trying to do but.
Craig Shere: I mean, just to put it in perspective, you have again 925 megawatts of gas or diesel burning plants. Today, you probably have you know one five to two gigawatts of new power needed. We have the peak your plants that are being built right now that another 280 or 60 megawatts or whatever.
Craig Shere: So there's a there's a tremendous amount of.
Craig Shere: Of room for this I mean, we've even talked.
Craig Shere: With him about converting some of their old steam or plans to bring those boilers to running on gas so I think that.
Craig Shere: Now that we've kind of gotten past this point on the on the incentive part of it I think it is kind of a logjam that then opens up that's our bet and it said that based on the fact that I assume that people will want to save money and have less emissions right that seems like a very logical outcome and if they do that we will sell more gas it'll be more profitable for us and so.
Craig Shere: Well it seems like a given the short run is actually a great opportunity for both of us.
Craig Shere: That's the win win aspect of it.
Craig Shere: And where the conversion from diesel to Henry hub plus.
Craig Shere: You're confident you still have sufficient LNG availability respectable margins give.
Craig Shere: Given selling at the Henry hub plus.
Craig Shere: We do we think that the margins are.
Craig Shere: Are appropriate and consistent with they are across the rest of the portfolio. So I think it's a good situation. Obviously the more you sell probably the it may affect your margin is some level that you're on a total volume basis as I said when you add it all up the gas need quite likely could be 250, or 300 or 350 <unk> to use so.
Many many times the size of the 50 Tvs use you currently have so there's just there's a lot of efficiencies and deploying that much gas and we think theres a lot of savings for them billions and billions of dollars of savings frankly and for US. It's obviously it could be a huge market.
Speaker Change: Gotcha and I just wanted to confirm real quick the $110 million in their apparel payment.
Speaker Change: Part of the 1 billion guided 2025 EBITDA.
Speaker Change: It is.
Speaker Change: Yes.
Speaker Change: Great. Thank you.
Speaker Change: You bet.
Speaker Change: We will take our next question from Lee <unk> with capital one.
Afternoon, everyone. Thank you for taking my question.
Speaker Change: One on guidance.
Speaker Change: I might have missed an interim step somewhere but.
Speaker Change: But wonder if you could kind of speak to the moving parts for prior guidance I thought it was around 1.32 to one.
Speaker Change: If there is anything embedded in guidance.
Speaker Change: Sales are sort of market corrections.
Speaker Change: Okay.
Speaker Change: So anyway, it's Chris no simple changes that were not including a FEMA claim in the guidance for 2025, the $1 billion would be exclusive of the client that's a simple answer.
Speaker Change: So that's what I thought thank you just to switch gears, a little bit dovetail on that as it goes to <unk> question earlier.
Speaker Change: Talking about the supply book open cargoes and whatnot I'm, not just thinking about longer term projects.
Speaker Change: Running.
Speaker Change: So just wondering if you might be able to give us color on the <unk>.
Speaker Change: Third party supply book kind of what the supply situation is in the out years, excluding LNG wanted to maybe 26 2007 timeframe maybe color you can give us on the third party supply that would be great. Thank you yeah.
Speaker Change: Yeah.
Speaker Change: Obviously, the further out you go the more suppliers available the tightness in the market is really a function of the shortness of gas in particular in Europe with the.
Speaker Change: The restrictions on the Russian gas is why Russian gas coming back into the European markets. If that was the past.
Speaker Change: We would have a profound impact I think on certainly on prices in Europe in the industrial worldwide. As you go further out Theres, obviously, a tremendous amount of activity on the construction side and the prices go out and so, especially if you are looking for longer term tenor.
Speaker Change: There is a lot of.
Speaker Change: Gas that is available so.
Speaker Change: With respect to our portfolio, we do have a couple of million tonnes and long term contracts, we have our own LNG. So we have very long dated I think that.
Speaker Change: As you extend duration in some of these portfolios. You also then likely to then look to maybe a layer and other.
Speaker Change: The supply so it's a it's a large portfolio as I said it is on a current basis, we feel like.
Speaker Change: It is well matches, we can make it so it's like you're predicting the usage levels with all of the different customers and there's always different factors into it but to the best of our abilities. That's what we've tried to do to Derisk. The portfolio take advantage of the elevation in price generate some earnings but still maintain some significant amounts of upside on those and so that's the that's the.
Speaker Change: That's the goal.
Speaker Change: But longer term, there's lots of gas I think that is readily available for longer term projects, especially with creditworthy downstream.
Speaker Change: Perfect. Thank you so much appreciate it good luck can I squeeze one more in.
Speaker Change: Sure I think the last questions.
Speaker Change: Thank you.
Speaker Change: I was just wondering if theres anything sort of.
Speaker Change: Maybe.
Speaker Change: More creative you can do in Brazil, with the auction coming up and I'm thinking about the existing.
Sam: Quarter Sam.
Speaker Change: Several plants.
Speaker Change: Is there anything whether it's adding capacity or expanding the plants or anything like that.
Speaker Change: No.
Speaker Change: Again kind of thinking creatively to participate.
Speaker Change: And that all of them.
Speaker Change: Anything there would be great. Thank you.
Speaker Change: I gave an answer for the Android at the port of sand and southern plants are committed right. So.
Speaker Change: Unfortunately, we can only commit them once.
Speaker Change: They are they are there.
Speaker Change: Two very long term contracts that said.
Speaker Change: We think that there is incremental capacity at the terminal and so obviously, that's something that leandra and Jeremy and the other guys down there are in the thick of India.
Speaker Change: Power auctions.
Speaker Change: Or an unbelievable opportunity in our judgment in terms of the the array of options that they have both on the brownfield and Greenfield sites and both on the gas terminal cash flows et cetera. The one point that I would just reinforce is that we're in the past we either bought or acquired these ppas and then filter plants, we think now.
Speaker Change: There's lots of different opportunities to partner in different ways. We're very focused on our terminal cash flows, but the overall emphasis the businesses to minimize capex maximize free cash flow grow without actually building a tremendous amount of stuff on balance sheet. So while you can put capital into it we think that that's actually something that we're very very focused.
Speaker Change: And we think theres going to be lots of opportunity to do so in the south so.
Speaker Change: Great. Thank you so much appreciate it.
Speaker Change: Alright time, I will turn the conference back for any additional or closing remarks.
Speaker Change: Great well. Thank you everyone for your time on a on a Monday night, we appreciate it and look forward to talking to you again soon thank you.
Speaker Change: This concludes today's call. Thank you for your participation you may now disconnect.
Speaker Change: [music].
Speaker Change: Yeah.
Speaker Change: [music].