Q1 2025 New Fortress Energy Inc Earnings Call
Thank you.
Good day and welcome to the end of the first quarter 'twenty 25 earnings call. Today's conference is being recorded at this time I will be handing the call over to Matt Reinhard managing director for introductory remarks.
Good afternoon, everyone. Thank you for joining today's conference call, where we will be discussing our first quarter 2025 results. The call's 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 the presentation that we will walk through on today's call. Please review this.
It includes important information on forward looking statements and non-GAAP measures with that let me hand, the call over to our chairman and CEO, Wes Edens Wes great. Thanks, Matt and welcome everyone. So lots to to go through here. This afternoon, and I'll try and he's trying to make my own statements Craig.
I'll start with the core earnings for the quarter were very much in line with expectation. If you look at the the yellow boxes on a piece of paper you can see that post the first quarter of 'twenty, four which was last quarter that we had the theme of plants online in Puerto Rico, We've had basically extremely consistent core earnings of 110 177.
But then 109 $1 16, so very much in line with that our forecast for the core earnings for the remainder of the year are basically very much in line with what this is.
So the first half and then accelerated in the second half as we start to bring assets online in particular those assets in Brazil.
That said that the.
EBITDA than we had forecast for the quarter were less than that simply because we did not have any one off results to add to that again. If you look at our numbers. Historically, we've had a combination of core results plus one off result, and we simply didn't have any one off results. This quarter that said, we expect EBITDA plus gains to.
1.25 to $1 5 billion for the year, which is higher than our previous estimate we're actually off to a quite a good start in that regard in particular when you consider the events of just today, we already had meaningful gains as our Jamaica sale, you'll talk about in a second and Theres a handful of other things that are gonna be significant enough for us to add to our core events.
But but our goal is the quantity quality versus quantity of the earnings in particular, what we are looking to generate for shareholders and for our constituents.
It's repeatable, Tom easy to understand and very long duration cash flows and I'll explain kind of what the portfolio looks like because we have a lot of those two to offer this one page page number four.
Material events.
You know that are in front of US first and foremost is the Jamaica sale $1.155 billion I closed today, just a few hours ago that translates into about $800 million in net proceeds of 430 million dollar gain so again, a good started whacking at the the one off gains that we expect to generate over the course of the year the FEMA claim.
As a as we originally had filed that with FEMA $659 million Theres, a very high degree of engagement with the Army Corps, which is our and in our prime contractor Weston.
Is making a lot of progress and we expect resolution of this claim at some point in the near term as with any preceding with the government. It's impossible to really forecast accurately you know the time or the amount of that but we remain optimistic about what our position is as we know what we are owed so they're in the 659 nine reflects that.
On the.
Oh on the Fsrus sub charters, we basically had a handful of fsrus that were surplus to our needs in our portfolio that we basically took back and then re let them at a higher rate to third parties. The estimate of the freeze and others. There's two others that are in there. They are the total nominal dollars are shown in the line below.
So $143 million in profit $59 million or 110 at 312, they ranjan being periods from anywhere from three to 10 years. The present die at a 10% discount rate just to give context to it is $236 million. So these are assets, we can either collect a month by month over the next three to five.
10 years, or we can look to sell them and generate a one time gain something we're evaluating.
Lastly, the excess cargoes sale that we conducted at the end of last year and reported the results in the fourth quarter, which again, if you look at the previous page excess cargo is $296 million or extra excess cargoes. We had we were concerned that actually the market might decline for value that turned out to be.
Prophetic because that's exactly what happened we sold them. So they're really the gains from them was the one time gain from last year, there's another $125 million to be collected primarily in the periods of 26 and 27% 728. So those are the big events for us there's others as well, but hopefully this gives you some useful context and evaluating the 1.25 to one point.
$5 billion EBITDA or gain estimates, we're providing for the year.
Page number five so our near term focus has been on asset sales on debt reduction and.
In deleveraging and the case study is the sale that we just concluded in Jamaica.
At the timeline below you can see we listed the.
The property for sale in the fourth quarter of 2024, we conducted our second round bid and in winter to down to five bidders in the first quarter, we chose to.
Our work with accelerated.
Exclusively in March and we concluded the sale now basically both the timing and the amount that we had forecast that we've exceeded so we did it in a shorter period of time and at a higher price than what we had originally forecast and so we feel great about that.
Little bit on Jamaica above it. This is the first market that we had started to conduct business.
And it is a great market, we ended up generating a $125 million in EBITDA stable mature market with long term contracts with a 20 year duration. So a significant portion of them were supply in Jamaica as gas and power needs. So roughly 60% of the ons gas or power we supply. They still think there are significant remaining growth opportunities in Jamaica.
For Bunkering expansion, so we feel great about the assets that we sold on to accelerate but from our standpoint. This is a meaningful deleveraging event for us So sale price of 1 billion or 55 $227 million in debt repayments from.
The direction of Melco asset in a power plant I estimated $50 million in fees net proceeds of $778 million, Chris will talk about that later.
Page number six fallen in Jamaica sale, our goals are very very clear number one first and foremost is to simplify the balance sheet and do so by extending the duration to match underlying assets and lower our debt cost to do so we are focused on moving from a corporate debt structure to one which is more asset level financing I will describe that in some <unk>.
This is something we've had a lot of experience about the floor and I think in many cases, when you have a capital structure that becomes too complex or too difficult for people to interpret.
The underlying asset value can become obscured by and you get kind of the worst of all worlds and so we're very focused on is isolating those assets that have the long duration the credit quality of the repeatability that we know to be the most making those valuable.
Expose those financing context and generate.
They're the right results for that so you look at page number seven and this is a good example of what I mean basically what we have done has matched our long term supply in our portfolio with our RF LNG unit, which is performing terrifically and then two long term contracts with venture global and match them up side by side with those contracts that are long term demand.
Man, so I've listened to five that are the most notable there are smaller ones as well, but these are the ones that are there there must be useful and basically you can see on the supply side. We have 215 TV to use in supply for a term of 20 years on the demand side. This handful of the large contracts is for 20 years as well on average and it ranges from trip.
B double b, plus double or triple B minus single B, plus and in one case, but they're generally high credit quality assets very long term rate duration and these are they are stated.
Our contract terms and simply.
Subtracting the cost of supply from the the value of the demand you'll see these assets alone generate $500 million in annual margin. These are not assets that we are aspirational that building or assets that we are talking about pursuing or whatever just really represents the core of the portfolio and the way I think of it as we're utilizing about 50%.
Of our total.
Supply portfolio. So of the 215 this is committed on 109.
PBT use of it.
To replicate our activities on the second half of this at terms similar to the first half we can generate 500 million that grows to a $1 billion annual margin with very very long duration and with that that presents tremendous financing opportunities. It also presents a great value to shareholders and that's what our focus is page now.
Or eight is that in order to close the loop and finance. This efficiently you need to control every aspect of the logistics chain supply demand terminal shifts in overall logistics. Fortunately, we control all of that so the four terminals that are relevant in this discussion is the la Paz terminal in Mexico, Puerto Sandino, Nicaragua, The Buck Arena terminal in Brazil.
And the San Juan terminal in San Juan Puerto Rico.
We have these terminals that we own and control essentially and have developed. In addition, we have a dedicated fleet of terminal shifts and transport our ships to basically see both supply to the Oh locations. But then also supply then onto the land. So basically you've connected the dots between every aspect of it and so the combination of our long term cash flows credit quality.
The duration in particular, but is the 20 year duration is what actually gives us so much optimism that there is theres meaningful things to do here and there's a reason why Charlie munger used to carry around the compounding tables in his back pocket.
Speaker Change: Three years of repeatable cash flows is an incredibly powerful combination and that's what we have already in hand, and we think the prospects for adding to it are terrific. So on the on the growth side two elements that we're focused on is Brazil, and Puerto Rico and I'm joined here in New York by the Andrew and Jeremy from a Brazil team run run yourself for us.
They can give some context, both on what we have accomplished and what we're focused on.
Speaker Change: Hello.
Speaker Change: Thanks, a lot good afternoon, everyone.
I'm pleased to be discussing our progress and outlook in Brazil.
Speaker Change: A few years, we've made significant strategic investments in the country lays the foundation for a high value and resilient business.
Speaker Change: 30 years of dedicated work and over billions of investment we are finally approaching the full commercial operation dates of our kiosks at.
Speaker Change: One of our projects a 624 megawatts of combined cycle power plant is expected to reach <unk> in the second half of this year.
Speaker Change: The second power plant a one six gigawatts open cycle plant is on track for <unk> by mid next year.
Speaker Change: Key moments for us these investments our core converting it to a long term contracted assets and we are very excited to be part of this transformation at NFC, Brazil in Jesus Slide number 10, I wanted to highlight the bucket in the complex and its associated long term contract.
Speaker Change: This contract all up then our inflation leak at Lincoln.
Speaker Change: Our protected for oil and gas price volatility and beckoned by strong credit ratings, providing stable and predictable predictable cash flows for our business starting with the hydro contract we began deliveries being March 2024.
Speaker Change: A 15 year guests to play agreement, which is indexed to Henry hub, plus six and Oh $4 per million Btu, which part of the are they really just hit by U S. CPI on a yearly basis, that's showing data slides.
Speaker Change: The contract covers approximately 30 that will be to use a year we have made.
Speaker Change: 90% take or pay for sale, but you are at 624 megawatt plant, we have a 25 year PPA with a 100% HR paid during the second semester of each year is starting from Sidoti.
Speaker Change: I expect that to occur in the second semester of the year.
Speaker Change: The gas volumes here is approximately 18 therapy to use year, considering only the take or pay we have pricing index.
Speaker Change: 91% of GKN blues are neither of $3 $36 per million Btu, which is also adjusted by U S. CPI on a yearly basis.
Speaker Change: That's part of our one six Gigawatts plant, we securities 15 year capacity contract with the national grid, which phase of approximately $280 million.
Speaker Change: The availability of the plant.
Speaker Change: As a dispatch components whenever that plant produces smaller assuming a 10% dispatch rate it would translate into approximately 12 <unk> year of additional gas demand at a premium gas prices.
Speaker Change: Projects are secured by strong Counterparties has mentioned that by west which demonstrates.
Speaker Change: <unk> robust commercial foundation is.
Speaker Change: We'll hand, it over to Jeremy to walk you through the construction update.
Jeremy: Good afternoon, everybody. It's my pleasure to give you a very positive construction update this quarter since we last spoke on our cell by power plant is Leandro just mentioned the 624 megawatt combined cycle plant since our last update we've increased general progress by over 7%.
Jeremy: Unfortunately, we've increased the progress by over 15%.
Jeremy: That brings both of our plants now to a 95% completion for silver and over 54% completion for Porto <unk>.
Jeremy: Those are major milestones that we've achieved are actually in spite of the fact that in this previous quarter. We had a very intense rainy season to work through in a couple of the months of the quarter, we had near 30 year historical levels of precipitation and.
Jeremy: And in the case of portal sandwiches and largely civil construction phase that was a significant achievement for the project team to not only maintain the.
Jeremy: Float and the schedule improvement that we have but also actually increase it a little bit back.
Jeremy: Back to sell but two on the combined cycle plants at 95%, we're nearing a very important milestone of mechanical completion.
Jeremy: We're in a phase right now very critical phase of the high pressure hydro testing we've tested the steam system up to 96 bar on our way to 300 bar eventually.
Jeremy: Another important milestone of the 95% is that it means a different level of effort at our site. The 95% mechanical completion milestone effectively means that we can transfer the main level of effort from our construction contractor over two hour power core provider Mitsubishi and allow them to you after our first fire, which we.
Jeremy: The first fire of the gas turbine, which we expect at the end of August to take over the level of effort at site and to start generating commissioning power.
Jeremy: And <unk>, although we are in a civil construction phase we did advance it significantly during this last quarter.
Jeremy: One interesting note is if you recall the last update we showed you photos of gas turbines in transit to the site.
Jeremy: You see here in our update on slide 11, we're showing your photos of gas turbines installed at site. We actually have two out of the three turbines that are already manufactured we have them installed at the site. The third gas turbine will be arriving at the end of the month and we're also in the process of installing two of the three electric generators.
Jeremy: We have the primary one.
Jeremy: <unk> that we've leveraged in our schedule.
Jeremy: More than 10% ahead of the planned completion percentage at this point is that our main equipment has arrived well ahead of the planned delivery dates this de risks our schedule completely and helps us to maintain a 10% float and our completion plan at this point.
Jeremy: Importantly in this past quarter since we last spoke we've also commenced work on our 500 kv transmission line.
Jeremy: And the substation, where our Gis will arrive later this year to be installed.
Jeremy: Yes, just to add.
Jeremy: Before I hand back to Leandro for the power auctions, one interesting note on portal Sam.
Speaker Change: As you recall. This project is one that we procured from another site and transferred it to our Barker inner facility with some milestones that were delayed from the original project developer.
Jeremy: We've actually transitioned to the schedule advancement to such a point that we are now accomplishing some of the original developers milestones.
Jeremy: That were promised to the regulators in Brazil, although it was they were more than a year into development. When we have when we procured this project so.
Jeremy: So we will look forward to another successful quarter and get back to you at that time.
Ed: Thank you Ed.
Speaker Change: Thank you Jeremy turning to slide number 12, I want to discuss the markets also look into the upcoming opportunities we face.
Jeremy: Focus on the capacity auction expected later this year.
Jeremy: First of all I mean, probably most of you heard about is the auction that was originally scheduled to happen in June what council and we believe this is a temporary delay actually the immediacy of minus nine energy has stated.
Jeremy: With that he expects the auction to take place in 2025.
Jeremy: And we expect rules.
Jeremy: To provide more clarity in fairness to the competition.
Jeremy: Just to make it clear the fundamentals havent changed at Brazil still need contract estimates van to 15 Gigawatts of capacity. The Ppas are expected to have <unk> between 2026 in 2030 for both brownfields and Greenfields assets and.
Jeremy: And we will affect capacity payments similar to 4% with 15 year terms for a greenfield projects in gas index to JK in TTS.
Jeremy: The postponement of the auction created some short term noise in the country, we had confidence in the structural needs for the auction.
Jeremy: There is no question that Brazil needs to power and if these auction business had been in the system could face Rio operational challenges, we are fully prepared as any few Brazil.
Jeremy: <unk> registered over two gigawatts of projects in the upcoming auction. Additionally, more than three gigawatts of third bodies projects have requested guests proposals from those showing clear market confidence.
Us: And the competitiveness of all of our platform in Brazil in short, we see that for a meaningful expansion of all of our business in Brazil with strong Counterparties solid regulatory support and rising demand for Orange integrated LNG to power. Our motto. Thank you very much and I'm going to hand, it over to US alright. Thanks Sandra.
Us: Now, let me briefly talk about Puerto Rico, because it's another big market for us there's a lot of activity just a bit of a situational overview of what the energy system.
Us: In Puerto Rico, it looks like.
Us: It's a very underinvested very antiquated system that is in great need of repair in great need of new investment and particularly on the new generation side Theres been no power plants built that are material in the last 30 years. So the average power plant is quite all which are rotating equipment is really not to operate efficiently for 40 50 60 years.
Us: And so there's a lot of challenges in terms of the fleet that exist.
Us: Over 50% of it runs on some combination of oil and diesel contrast that to the mainland United States were less than 1% of our electricity is is operated on diesel and you can see there's a huge difference between utilities that we find in the mainland and what we see there what that means is that the plan and the needs in the business in Puerto Rico on the energy.
We think are extremely clear number one theres, a lack of sufficient reserve, which means they need temporary power, which is exactly what they have done in terms of going out for a bid for temporary power.
Us: Especially with the upcoming summer and the demands on the system that happened when it gets hotter down there and of course hurricane season is around the corner. There is a concern that they lack adequate reserve from some of the plants.
Us: Being offline as they're trying to buttress that by holding an RFP for temporary power.
Us: Number two is there is a total of about 925 megawatts of tower today that runs on diesel that can be readily converted to natural gas that represents roughly a $300 million difference in fuel costs between.
Us: Turning to diesel and Brendan natural gas for no benefit whatsoever, and so our view is is that in the context of the RFP that is being.
Us: I've talked about for gas supply. It should include a provision to also convert those to other assets. We list. The four that are on here. Michael is 200 megawatt plant Camelot U 240 megawatts.
Us: Three Pratt and Whitney Mega gens that are in palisade co and then Gary one and two which is a combined cycle plant in the south all of those can be readily converted and simply doing so relatively low cost to the system and can generate very very meaningful.
Us: Decreases in fuel cost to them upwards of $300 million a year.
Us: Lastly is there has been no new power generation built in the last 30 years. There was a plant that was agreed by the government and in early January there was the first new PPA, that's been signed and some time, we are the gas provider for that in the long term and so we think that.
Us: Basically building new generation is really what will cure what ails the system for the most part because of the lack of reliability and the inefficiencies of the system is really really a function of these old power plants, So and right now there are plans underway by PREPA to address these issues by running the Rfps for temporary power ran an RFP for gas supply.
Us: Running an RFP for new generation, all of which we think are interesting opportunities and situations, which we will certainly take a hard look at our infrastructure in San Juan.
Us: It has had a very good quarter. This is the first time that we got a large ship. So basically we were able to replace the flotilla of kind of smaller logistical ships with a larger ship with the channel widening at the Army Corps had engaged and that actually allows us to be more efficient and bringing in more supply. So basically cut our expenses, but it also greatly increases the capacity of that.
Us: That terminal, which is a good time, so with that let me turn it over to Chris great.
Chris: Thanks, Ross I appreciate the opportunity to talk to everybody today first let me start with giving a little bit more color regarding the two recent SEC filings that we submitted earlier this week on Monday, we filed an 8-K outlining an update to the use of proceeds of the Jamaica sale, which I will walk through shortly and yesterday, we filed a notification of late filing under rule <unk> 25, which are.
Us: Allows the company to file our.
Us: Form 10-Q, no later than Monday, the 19th the reason for the <unk> filing is twofold first we wanted to be able to announce the consummation of the sale of the Jamaica business, including describing for investors to use of proceeds and second with the Jamaica asset sale proceeds in hand, we can report an improved liquidity prediction and reduction of the going concern risk there was.
Us: Included in the 10-K.
Us: So now turning to slide 15, we've outlined both the cash and the accounting treatment of the Jamaica transaction on the left side of the page we show the proceeds waterfall and on the right side. The gain we will recognize in the second quarter.
Us: Now prior to the most recent amendment of the credit agreement there was a requirement to use 75% of the proceeds of material asset sales to pay down Super priority debt, which included the revolving credit facility the term loans, a and b and the new 2029 notes.
Us: However, we were able to negotiate an agreement with the revolving credit facility lenders to waive this asset sale proceeds waterfall in exchange for the early pay down of the September amortization payment of $270 million.
Us: In addition, we also amended the term loan a where we agreed to a modest paydown of $55 million, which is in line with what they would have received under the waterfall anyway.
Us: Further we eliminated the debt to capitalization covenant in this facility and we matched the financial covenants of that loan to those in the revolving credit facility, none of which will be tested until September 30 of this year.
Us: As a result of these amendments we were able to retain almost $400 million of proceeds after tax that can be used to solve in part nearer term maturities, including the 2026 notes and non extended revolver tranche, thus eliminating debt maturities until the second half of 'twenty seven.
Us: On the right side of the page we show the expected accounting gain on this transaction gross proceeds of one point over <unk> 5 billion less the asset level debt and fees and expenses gets the net proceeds of $778 million, then reduce burden by our basis, which is $177 million and reduced by goodwill allocation of 172.
Us: Will result in a book gain of $430 million a.
Us: Big Big Thank you to our full team tirelessly worked to get to the Jamaica deal closed. This includes our internal employees, our external advisors and our partners at accelerates and we send best wishes for their success with an incredible asset.
Us: Go ahead, and turn now to slide number 16, and lets talk for a minute more about the two fsrus contracts that we signed over the last couple of months in December we announced that we chartered the Eskimo to EES and this week, we announced that we chartered the freeze to enter here 2000. These.
Us: These two projects alone equate to approximately $200 million of future earnings. Additionally, we are in advanced discussions with Counterparties on two additional fsrus opportunities, which contribute an incremental $100 million to the total value of the portfolio on.
Us: On an annual basis. These <unk> can increase our cash flow up to about $50 million in added EBITDA per year further with the high demand for these contracts, we have the opportunity to nova or sell them to other companies, which would provide us with upfront payments that we think are around $200 million and when that occurs it would be included in EBITDA and of course earnings.
Churn pleased now to slide 17, we have financial results. Our total segment operating margin was $106 million for Q1 compared to 240 for Q4 of 2024 core SG&A for the first quarter was $34 million, which is equal to what we had for Q4 of 24 and for the balance of 225, we're forecasting.
Us: $30 million a quarter as Wes stated earlier adjusted EBITDA for the first quarter was $82 million.
Us: Moving to slide 18 for Q1, we had $200 million net loss for GAAP or a loss of <unk> 73, a share and we had no material onetime items, leading to the adjusted EPS adjusted EPS to be the same as GAAP as we said already the quality of our earnings this quarter was high but the quantity was lower than we were initially forecasting.
Us: Two differences that we were initially expecting in the first quarter versus what we are reporting is one the recognition of the PR incentive payment, which is about $110 million. This is still something we expect to receive in 2025 was not agreed to before the end of the before the closing of the first quarter and to a sale of the Eskimo vessel charter.
Us: This is still something that we expect to complete in 2025, but we think that combining this with the other charters that have been signed as well as ones in process makes this a more attractive as a package of contracts than one off.
Us: In spite of lower than expected earnings we still have a strong liquidity position. We ended Q1 with $448 million of cash on hand, and $275 million available under our revolving credit facility add to that the $393 million of cash proceeds after debt pay down and you have over $1 1 billion of pre.
Us: Former liquidity at the end of Q1.
Us: With that thanks, everybody for your time I will turn the call back over to the operator for Q&A.
Speaker Change: Thank you if you would like to ask a question. Please signal by pressing star one on your telephone keypad. If you are using a speaker phone. Please make sure your mute function is turned off.
Us: We will allow your signal.
Us: Matt.
Speaker Change: Press Star one to ask questions and our first question is going to come from Gregory Lewis from <unk>.
Us: Okay.
Gregory Lewis: Yes, hi, Thank you and good afternoon, and thanks for taking my questions everybody.
Gregory Lewis: Chris I was hoping you know thanks for laying out the liquidity and the cash and the injection.
Gregory Lewis: Post the Jamaica sale.
Gregory Lewis: I was hoping you could walk us through I mean, clearly you have.
Gregory Lewis: A lot of restricted cash on the balance sheet.
Gregory Lewis: Could you maybe kind of point to.
Gregory Lewis: Is that restricted against specific projects and what kind of hurdles are there that could could free up that cash to make it unrestricted.
Gregory Lewis: Hey, Greg short answer is it's almost all related to the Capex in Brazil. So that is restricted cash meaning it can only be spent on the two projects that are still under construction the sell the power plant and that put us in power plant.
The remainder which is probably in the magnitude of $40 million to $50 million is restricted around kind of other credit instruments that we have inside the business some of which will be freed up as a result of this jamaica transaction about $30 million of it.
Gregory Lewis: The remainder would stay restricted just because again its collateral for other kind of credit support enhancement credit enhancement on other instruments around the business.
Gregory Lewis: Okay Super helpful. And then just as we look as we kind of look across the cap structure structure at some of the debt.
Gregory Lewis: Trading at a discount.
Gregory Lewis: You know <unk> kind of alluded to may be looking to kind of refinance that post the Jamaica transaction.
Gregory Lewis: But just given some of the cash on the balance sheet and kind of running the numbers is the company looking at potentially doing open market repurchases.
Gregory Lewis: Repurchases of some of that debt just to try to maybe be a little bit opportunistic.
Gregory Lewis: We certainly look at the capital structure, and we think that.
Gregory Lewis: There are some significant opportunities as a result of it I think the.
Gregory Lewis: I talked about the asset level debt and maybe I should amplify that just for a second because it'll help.
The capital structure is used for liquefaction generally as people build the liquefy are they enter into a series of SBA.
Gregory Lewis: It's for the most part kind of a wholesaling strategy of selling gas onto others. The margin in that business is relatively low, but then that the credit quality and the duration is very very long and very very high and so they're able to generate significant amounts of.
Gregory Lewis: Finance ability when they do so in our case, we also have a portfolio of gas both from our own liquid fire as well as from the other other sources.
Gregory Lewis: Our overall cost of.
Gregory Lewis: That gas is roughly Henry hub, plus $2 50, our margin across the assets.
Gregory Lewis: Assets that I list is about $4 50, so it's $500 million of.
Gregory Lewis: Financial cash flow that's buried in our capital structure right now, but when you expose that into a 20 year duration transaction and just run the numbers on it. It has got the ability to refinance a significant portion of the balance sheet, if not all and so from a standing start on where we are right. Now we think it's now the appropriate time to really focus on this obviously there was a law.
Gregory Lewis: Lot of focus on the company's part in this Jamaica sale, but that's over with and this will be the next step of it and I think in the context of that.
Gregory Lewis: Goal would be to refinance the corporate balance sheet in its entirety over the course of the next 12 months or so and as part of doing so for successful and that will obviously repay all the debt and as we start to repay and you will look at opportunities perhaps to retire at a discount if they are still our bonds that are available at a discount.
Gregory Lewis: That's that's the process, Florida.
Gregory Lewis: We think that.
Gregory Lewis: Deleveraging through the asset sale, we just had adding meaningful liquidity and addressing and liquidity issues, which now with $1 billion plus in liquidity, we feel great about what transaction.
Gregory Lewis: Realized for US we're near completion on the power plant in Brazil, and we have assets in hand that are extremely financeable with very very high quality and very long term cash flow now is the time to refinance lower cost dramatically extend the terms that are consistent with the duration of the underlying cash flows and then we think we can actually with the improved.
Gregory Lewis: And our capital structure.
Gregory Lewis: That the law in Washington, the substantial benefit to us and we still have a lot of dry powder. So we've only utilized about half of the volumes that we own in our portfolio and so if we're successful in recapitalizing, the balance sheet and lowering costs and extending and then we also then grow as we expect two in Brazil, and Puerto Rico and other places all of that.
Gregory Lewis: Growth would then accrue to the benefit of the shareholders and so thats. The next two steps that we really see so first was an asset sale and now it's a recapitalization refinanced and then it will be growth and those are those are the primary components of what we think it takes to be to be really successful. So sorry to give you a long answer to.
Gregory Lewis: A short question, but.
Gregory Lewis: That's the context that hopefully will make it makes sense for a little bit better.
Gregory Lewis: No that was super helpful. Thank you very much.
Gregory Lewis: Yes.
Chris Robertson: And our next question comes from Chris Robertson from Deutsche Bank.
Chris Robertson: Hey, good afternoon. Thank you for taking my questions.
Chris Robertson: I was wondering if you could talk a little bit about the short term power opportunity in Puerto Rico here when people are bidding into the process is it for equipment or equipment plus fuel.
Chris Robertson: And what strategy is NFC taken here in terms of are you bidding into provide equipment or just fuel supplier or how does that process work.
Chris Robertson: Well I can only relate to what I've read through the portal because it's a government run process. So they're actually quite disciplined about how they respond to information and fraud information.
Chris Robertson: The rules are quite clear and the thing that we're asking for a unitary cost of power kind of period. So you are not actually able to just simply get in.
Chris Robertson: Turbines, we actually asked that question specifically in India.
Chris Robertson: And the RFP questionnaire and affordable and the two questions. We ask are or where you're allowed to bid in equipment versus say in aggregate power price number one and number two was there any minimum dispatch. So we can assume there will be guaranteed to know how much power would be generated and therefore can run the numbers on it will be easier.
Answer to that was no there was no minimum so the requirements in the RFP were.
Chris Robertson: We're quite stringent from our standpoint, we're blessed to have a big operation on the island and so it can take advantage of the of the infrastructure that we have in place, but thats basically what lesson.
Chris Robertson: They have the of the three opportunities that I outlined.
Chris Robertson: Emergency power and the gas contract and a long term generation. They all could be interesting under the right circumstances, but that's an emergency power is probably the least interesting just economically given the relatively short duration and the lack of any kind of a commitment in terms of the utility.
Chris Robertson: No.
Speaker Change: Okay got you. That's my follow up question, maybe one for Leandro here as it relates to Silva.
Speaker Change: On the AT&T Btu per year should we think about that as being more seasonally weighted in the back half of the year or is that kind of split across all four quarters.
Speaker Change: And then just to confirm on slide 10 years Theres no fixed capacity payment related to that is just the 100% take or pay on the volume.
Speaker Change: Yes, so Chris the floor plans to have a capacity payments, it's around $25 million for year, but.
Speaker Change: The biggest payment that we get the second semester of the year.
Speaker Change: Which is linkage should the production of power and linkage to the 18th therapy to use.
Speaker Change: <unk> guys mentioned 18 days light, so we get some payments throughout the year, but.
Speaker Change: Most of the payments of the plants. They are due on the second semester, we need should produce slower.
Speaker Change: Okay. That's a lot more clear thank you for clarifying that I will turn it over.
Speaker Change: Welcome.
Speaker Change: And our next question is going to come from Wade from capital one.
Wade: Good afternoon, everyone. I appreciate you taking my questions just a follow up I think it was on greg's.
Wade: Question make sure I heard you correctly on asset sales I think you. All originally had a goal of $2 billion of memory serves all oftentimes sales.
Wade: But clearly to make a derisked substantially a substantial portion of that anything left out there you can discuss.
Wade: Okay.
Wade: Yes, I forgot that other asset sales I mean, I think like the business. We have an amazing business in Brazil is these guys are talked about those there's a lot of opportunities for US you have those Pacific theater, which is another kind of business in and of itself in Nicaragua and then.
Wade: And in Mexico, but I think like absent asset sales lessens point of being able to do large kind of securitization type transactions would allow us to refinance our debt at a significantly cheaper rate that's our real goal to be honest with you Ed.
Ed: Understood I appreciate that.
Ed: Switching gears here a little bit.
Ed: I didn't notice.
Ed: LNG too.
Ed: Can you give us a status update there.
Ed: And because there hasnt been much ww.
Ed: Sure, Yes, there hasnt been much development over the last 60 days on an F. O N G number two I mean still dunder construction and the kiewit yard.
Ed: We have been focused obviously on the closing of the Jamaica transaction and on the refinancing of the business in order to ensure that we have ample liquidity and altitude. So to speak in the day to day operations, We love the project, we're still engaged on it with.
Ed: The people in Corpus and in Mexico, and we will be providing additional updates as we make more material construction progress.
Ed: Okay.
Ed: Robert.
Ed: I'm sorry.
Ed: Just hoping to get an update there. Thank you yeah in Nicaragua, we are in the final stages of restructuring.
Ed: Restructuring, our PPA with the government and it had a lot of productive thoughts about that and basically what we're trying to do is to create a structure that looks most similar to the sell the end.
Ed: In Puerto Rico.
Ed: Long term gas contracts. So there is basically a capacity payment that is designed to cover expenses and then a marginal gas costs that we think it reflects kind of the.
Ed: Uh huh.
Ed: The value of the credit so when you think about it Norsk hydro, which is an investment grade credit as Henry hub plus six.
Ed: The Cfe, which is triple B minus credit as Henry hub, plus 745, so we want to be at a modest premium to that to reflect the.
Ed: The lower credit quality for Nicaragua, So I think once we get the.
Ed: The final agreement on the contract and we'll finish up what remaining work we've got the power plant itself is virtually 100% built.
Ed: The terminal needs a little bit more time and effort, but we're very very close to the end. So we just need to finalize our agreement to move ahead on that.
Speaker Change: Great. Thank you so much I'll go back into the queue.
Speaker Change: And our next question is going to come from Craigs.
Speaker Change: Hi, Thanks for taking the questions.
Speaker Change: On slide seven I mean, obviously, we're not getting the plaquemines and especially CPT volumes anytime soon.
Speaker Change: What are your thoughts about great Danielle in LNG supply needs between now and commencement of the venture global SBA.
Speaker Change: We're actually very well positioned right now because we've got the volumes from F. LNG right now.
And is producing basically right at nameplate capacity at the cold box.
Speaker Change: We are planning an outage here in a couple of weeks. So we think is going to significantly improve from that level. So it is already performing very consistently and reliably and at a good level and we think theres a significant amount of upside with the planned outage and debottlenecking activity on it. So that's 90 TVT uses our estimate of where that will end up with.
Speaker Change: With the <unk>.
The volumes that we have in place that are needed in.
Speaker Change: In Brazil.
Speaker Change: Just the Norsk hydro at this year in the second half of next year, then it becomes the solve a plant.
Speaker Change: Puerto Rico.
Speaker Change: The large gas contract we signed earlier this year is slated to come on in 2028. So as we look across the portfolio is actually quite balanced overall in terms of the needs.
Speaker Change: Kind of step by step and if we add to those those are those volumes because we were successful in either Brazil, or Puerto Rico or elsewhere. You can always then add any volumes too to address that but we've got a net position that is $2 15 versus long term of 109, obviously there are some short term volumes in there.
It could be displaced if we if we are successful in some of these longer term things, but where we are in a very good position in terms of our gas needs and our gas use at the time so.
It's actually it works well for the timing of these future developments.
Speaker Change: Gotcha.
Speaker Change: You've been talking for a number of months or quarters about the significant opportunities with both the Puerto Rico RFP in Brazil capacity auction.
Speaker Change: Into June and second half this year.
Obviously, you have some competitive infrastructure advantages.
Speaker Change: Do you believe some of the noise around.
Speaker Change: <unk> liquidity in <unk>.
Speaker Change: Balance sheet could.
Speaker Change: Could impact any of the decision, making there by regulators or do you think that given your entrenched position in the obvious virtual cycle of favorable awards on the whole business.
Just kind of makes that a moot point.
Speaker Change: Well I think that.
Speaker Change: We are a very viable business for a $1 billion in balance sheet. We've got significant assets that are not only.
Speaker Change: Very very expensive to build but are also very very.
Speaker Change: Very time consuming to build so we feel like we've kind of earned our competitive position in these countries as part of the hard way, we actually have.
Speaker Change: Set out years ago to build the essential infrastructure to get it into their I mean that said in no case are we a monopoly we don't want to be a monopoly we're not regulated monopoly thats something we aspire to be in Puerto Rico itself I think today, we actually provide less than 50% of the fuel is provided on the island, so equal electrical in the south as.
Speaker Change: Significant gas.
Speaker Change: Abilities, we've got a very very good position in San Juan.
Speaker Change: By design and we spent hundreds of millions of dollars developing our product there like anybody else could do or could have done.
Speaker Change: To give ourselves that position, but in no respect our we monopolistic about this we think we're well positioned and.
Speaker Change: What we have predicted.
Speaker Change: To happen in these countries, we think is largely coming true.
Speaker Change: We're certainly disappointed that the auctions in Brazil were delayed but there was reasons for that that are out of our control as we Andrew said the needs of the country haven't gotten last they've gotten greater during that period. So we feel great about those auctions and we've got great great asset in the South that we think is going to play a central role in those auctions when they do.
Speaker Change: And in Puerto Rico with.
Speaker Change: Both the short term and long term generation needed, we think that having gas in San Juan is going to prove to be very very helpful. And so we'll obviously need to find if we can do that and economically attractive levels in.
Speaker Change: And go from that but we feel like the competitive situation is actually really good I mean, I think most importantly, when you disaggregate it and you look behind the numbers. When you look at the assets that we got Youre generating half a billion dollars in cash flow on a 20 year duration assets that are largely right around investment grade so that that is a that.
Speaker Change: As a laudable place to be we feel like that our valuation in no way reflects that and so we'll go finance ourselves on a long term basis, and we will fix the capital structure and align it with the same duration of what we're we've got on the asset side and kind of go from there and if we're fortunate and through hard work ahead of us and our people in the field.
Speaker Change: Can add two art with.
Speaker Change: More long term.
Speaker Change: Offtake and use up some of the excess capacity, we got on the supply side, we think that.
Speaker Change: There's a tremendous amount of upside in both the debt and the equity side. So that's that's the plan and the one thing I'd say is that the last thing I'll say is that on the securitization front.
Speaker Change: We've securitized.
Speaker Change: Creative structuring financings for many many different products over our careers and I think in the scale of degree of difficulty. If you just take the Brazilian assets, you've got two assets that have got direct obligations by the Brazilian government in one case, Norsk hydro and the others, So double b, plus and Triple B rated counterparties discrete cash.
Speaker Change: Flows with no variability around for 15 years to 25 years that doesn't sound like the hardest thing in the world to kind of realize our U S. Dollar based contracts. That's what we're going to be very focused on and I think if we're successful there. It gives us a real opportunity then to attack our capital structure and and do some good work there so thats.
Speaker Change: That's the plan for the summer and we'll see how it how it plays out.
Speaker Change: Great. Thank you.
Speaker Change: And our last question will come from Tarek Hamid from Jpmorgan.
Tarek Hamid: Hey, good afternoon.
Could you guys, maybe help us bridge through the liquidity picture a little bit.
Tarek Hamid: Particularly.
Tarek Hamid: How youre thinking about gross capex needs for the remainder of the year. Obviously, you have a bunch of restricted cash as well as liquidity outlined but just would love to understand sort of how much is yet to go out the door.
Tarek Hamid: Yes, so I would say.
Tarek Hamid: Let's start in Brazil, so the remainder of the Capex for silver and Porto <unk> is fully funded with cash on the balance sheet on that restricted cash loans. So that's paid for that.
And that will be pace this year and through the first kind of six ish, maybe nine months in total because youll have some lag in the payments beyond COPD in 2026 report also.
Tarek Hamid: Beyond Porto Sam you have very little remaining capex to spend obviously F. LNG. One has been placed into service you have no more spend in Mexico or in.
Tarek Hamid: Really in Puerto Rico until you get conversions and those conversions whatever capex is needed for those conversions, we envision would be paid for by PREPA that they really then leaves you in Nicaragua and we've disclosed this before it's about Ah.
Tarek Hamid: Remaining to spend in Nicaragua is about $50 million to $60 million and then the rest is F. LNG to I would say that F. LNG to the pacing we have the control on that on how that goes out and as I mentioned, a moment ago. Our intention is to be very disciplined with cash at the moment. So that we can ensure that.
Tarek Hamid: We are solving all near term.
Tarek Hamid: Maturities and as we have those in hand, or redo refinancings as Wes just discussed we would then re we would move forward in greater pace on the LNG to Capex development.
Tarek Hamid: Thank you.
Tarek Hamid: And then you were.
Speaker Change: Very helpful. You guys walked through the Covenant amendment on the revolver and the term loan a.
Speaker Change: But is it fair to assume that through the App the language on the <unk> and the term loan b likely don't apply given the amount of capital you're spending.
Speaker Change: I'm not sure I understood. The question Youre talking about like the reinvestment rates.
Speaker Change: Yeah, well in terms of your Youre happy to prepay those without the deal proceeds.
Speaker Change: Well, we aren't using asset sale proceeds to repay those we have cash on the balance sheet and cash flows from our operations that we can use to refinance if we want the orix.
Speaker Change: Pay off any of the other instruments.
Speaker Change: Okay fair enough. Thank you very much.
Speaker Change: And there are no other questions in the queue.
Speaker Change: Great. Okay. Thank you very much everyone look forward to talking to you next quarter. Thank you. Thank you.
Speaker Change: And this concludes today's call. Thank you for your participation you may now disconnect.
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