New Fortress Energy Inc.

Ladies and gentlemen, thank you for standing by, and welcome to the New Fortress Energy Court Quarter and Full Year 2020 conference call. At this time, all participants are in the listen-only mode. After the speaker presentation, there will be a question-and-answer session. To ask a question during the session, you will need to press star 1 on your telephone. Please be advised that today's conference is being recorded. If you require any further assistance, please press star 0. I would now like to hand the conference over to your speaker today, Josh Kane from Investor Relations. Please go ahead.

Thank you. I would like to welcome you to the New Fortress Energy fourth quarter and full year 2020 earnings call. Joining me here today are Wes Edens, our CEO and chairman of the board, Chris Junta, our chief financial officer, Andrew Deedy, leading our Brazil efforts, Alav Shah, the head of Fast LNG, and Jake Sliske, who leads Xero, our renewable hydrogen division. Throughout the call, we are going to reference the earnings supplement that was posted to the New Fortress Energy website. If you've not already done so, I'd suggest that you download it now. In addition, we will be discussing some non-GAAP financial measures during the call today. The reconciliations of those measures to the most directly comparable GAAP measures can be found in the earnings supplement. Before I turn the call over to Wes, I would like to point out that certain statements made today will be forward-looking statements, including regarding future earnings. These statements by their nature are uncertain and may differ materially from our actual results. We encourage you to review the disclaimers in our press release and investor presentation regarding non-GAAP financial measures and forward-looking statements and to review the risk factors contained in the quarterly report filed with the SEC. Now, I would like to turn the call over to Wes. Great.

Thanks, Josh, and thanks, everyone, for dialing in. So, as usual, we will go through our presentation with you all here, and I've got a number of folks from the team that will pitch in a different part. There's a lot to go through this morning, but we'll try and do so in an expedited fashion, so we'll leave plenty of time for questions. So really a big quarter and a big year for us. First of all, on the operating side, operating numbers for the quarter were actually quite good, very much in line with what our expectations were. We had one terminal that was down in or one turbine that was down in Puerto Rico that was part of a scheduled maintenance item. If you X that out of it, we're basically very much right on top of all the operating numbers, and Chris will go through that in details. But solid operating numbers, and, again, the three zeros in terms of incidents and injuries and people without were all zeros. So we had a very, very solid operating quarter and feel great about that. Developments that are at the end of their – Their development time is just about ready to turn on in Mexico and Nicaragua. The punchline is very much on time and on budget. Expect in the next, you know, 30 to 45 days, both of those are essentially done and ready to go. I feel great about that. So we're, in addition to the terminals getting finished, we also announced that we won a a bid to provide 250,000 gallons a day to CFE in Baja, which is great. We've long said the organic growth from our existing portfolio was a big, big part of the story going forward. They're the biggest partner for us, not just in Baja, but in Mexico, and we look forward to partnering with them. So that terminal will turn on in May, and our power plant is ready to go at the end of June. So organically, across the board, that's all good. The big news for the quarter and the big news for the year, of course, we announced earlier. So on January 13th, we announced the acquisition of Hygo from Golar, as well as the MLP from them, a portfolio of 13 owned ships and one leased ships. The high growth transaction is really a transformational one that we'll spend some real time on. Brazil, we think, is perhaps the best market in the world. We now have really a constellation of terminals up and down the coast of it. These are very, very special terminals in that Not only are they going to be high volumes, but also good margins for us. So Andrew Deedy, who's been the point person for us, will detail this. But the way we look at those terminals, we think that at the end of the day, they're capable of generating kind of four to five times the volumes that we get from our other terminals. Not all terminals are created equal. This is just a function of the incredible size of that market and the need for gas and power. So 45 times what we think we generate from our other terminals in the portfolio at kind of 50% to 75% of the net margin. So a little bit more competitive in the marketplace. The margins are a little tighter, but the volumes could be considerably larger. So that's a big, big win for us. We acquired the portfolio to ship assets from Golar, the MLP. really less a ship acquisition than really kind of closing the gap on what we needed to provide for our own terminals. So that transaction fit us like a glove. It adds immediately $300 million or so in EBITDA, so it's a big incremental amount of cash flow for us, and it actually fills a need that we have for both FSRUs and for FSUs across the portfolio. So that is a great transaction for us. Looks like we're on schedule to close both those transactions sometime in the next 30 days or so. There's a number of different approvals that are out there, all of which are ordinary course at this point, we think. And I'd say at this point our goal is to close sometime in the first half of April, and we'll obviously update you as we get closer to that. Last topic for us and something we'll spend a lot of time on is a huge development for us. We announced yesterday that we are now FID on our first FLNG. So FLNG, this industry loves acronyms, so floating liquefiers, basically is a concept that was pioneered originally by GOLAR There's a handful of these floating liquefiers around the world, and in the transaction that we did with the MLP, we acquired a 50% interest in one of those ships, the Healy, but we have made a modification to that that we think is a faster, cheaper, better solution for it, and again, we'll spend some real time kind of going through that, but the net of it is that this actually allows us to produce our own LNG at prices well below where we can buy LNG in the marketplace, so it both solves a big challenge for us in terms of finding gas for our portfolio and also creates a massive economic opportunity by basically creating incremental margin in all of this. So we'll talk about that in some detail. So page five, if you look at kind of the detail on all this. So what I did in preparation for this call was simply went back to where we were a year ago. Now, A year ago, we were one week into this terrible pandemic, and it was pretty quiet here in the office. We went from a full office on the 11th of March to a handful of people by the 12th and 13th, and by today, the 16th, we were down to literally a skeleton crew. It was me, a handful of people, and my dog. So it was a very, very different place where we were. We had five terminals we were committed to at that point. We had the two in Jamaica that were open. The one in Puerto Rico at that point was still under construction, so it was a pretty dark time a year ago. Our total volumes at the time was about 800,000 gallons per day, operationally 1.9 million gallons that were committed, and the gas supply that we had in our portfolio then was about $5.50. So roll forward 12 months, and what a difference a year makes. We've gone from five terminals to nine terminals, so we've The four that are operating in Montego Bay, Old Harbor, San Juan, and then Sergipe, which is the terminal with the big power plant in Brazil that is operating right now. There are five developing ones, so the two, Mexico and Nicaragua, which I talked about, and then the Swape terminal that Andrew will talk about, the Bacarena terminal, again, in Brazil, and then a Southeast Asian terminal that we are committed on as well. Volumes have increased dramatically, so... 800,000 a day goes to 1.9 million. 1.9 committed goes to 5.1 million, so two and a half times bigger. Operating margin goes from basically zero or negligible to $1.2 billion a year when the terminals that are actually under development are completed. So we've taken a massive step forward as a company. And at the bottom of the page, the FAST LNG, as we call it, so rather than floating LNG, it's the FAST LNG, which I'll detail in a second here. We believe we can produce LNG between $3 and $4 in MMBTU, so a couple of dollars in MMBTU below what it is. And on the right-hand side, this is what really gets us all excited and out of bed early in the morning, is one year from now when these terminals are all on, we've got the nine we're committed to. There's two that we are very, very close to being FID on, so it'll take us to 11. That takes our volumes up to 19.3 million gallons per day, so a far cry from the 800,000 we were producing a year ago. Operating margin, if we continue to buy in gas at the market, $1.6 billion. And to the extent that we can also then produce... our own LNG across the whole portfolio, it adds roughly a billion dollars in earnings. So it's a huge transformation for us as a company. We really are in really the last stages of moving from being a development company to an operating company. You can see that the impact of this across the portfolio is really tremendous. So let's look at the next section. We look at page seven. The graphic, the visual of the planet with our different operations spread around I think is a compelling one. Obviously, we started in the Caribbean, so there's the Jamaica, Puerto Rico terminals. Then you're in Mexico and Central America. Now with Brazil, we'll have four terminals in total across there. It's a continent-sized country. It's a huge market for us, biggest market we're in by far. You see that big blue ship that is off the coast of West Africa. That's the Healy, which is, again, this 2.4 million ton floating LNG ship that we own a 50% interest in. Then there's FSRUs in the Middle East, in Southeast Asia. We're very close to announcing our first deal in Southeast Asia, so it really has gone from a regional company to a global company, and that creates massive, massive synergies and opportunities for us. On page number eight, we just showed the different terminals. So the four that you're on the left-hand side, Montego Bay, Old Harbor, San Juan, then the Sergipe portfolio, this is the terminal that actually has the 1.5 gigawatt power plant that we also acquired as part of the HIGO. It's the largest power plant in Latin America, so a very, very significant asset that really anchors that terminal. The two that are in construction in the middle of the page here, La Paz and Nicaragua, are literally days away from being 100% completed. And then on the right-hand side, we've got the Swape Terminal, Bacarena, and then the Southeast Asia Terminal. And if you flip to page number nine, the two that we expect additional FIDs in the next 90 to 120 days, there's a large offshore terminal in Santa Catarina, Brazil, and then a terminal we've been working on for quite some time in Shannon, Ireland. We're filing our final planning papers on that at the end of this month that we expect to be FID on that sometime in the middle of the year. So with that, let me pause and turn it over to Andrew Didi. Andrew, as I said, is the person who's the point person for us in Brazil, and I think he can give us some great color on what's going on down there. Andrew?

Hey, everybody. Good morning. And I just wanted to go a little bit deeper on Brazil, just to echo some of the comments that Wes made in the beginning. We're so excited about this because we think, really, this is the unique market for both volume and margin opportunity in LNG and in natural gas. And three main reasons we believe that. One is the market opportunity that exists today. So a 35 MTPA market with about 10% of LNG imports in 2019. We see basically four to five times the volume of the current NFE terminals and our terminals in Brazil at 50 to 75% of the margins. The second is the growth of that market. So, you know, we believe the key regulatory reforms are in place to basically emerge from a vertically integrated monopoly run by Petrobras. to an open and competitive gas market that will solve supply constraints and also deliver gas to new areas of the country as we see an underdeveloped gas grid and gas infrastructure develop over time. And then the third is really the ability to combine those volumes with margin. And so we mentioned this sort of nascent regulatory market and an ability to compete both kind of with LNG sold on Brent oil price linkages as well as with high-priced HFO and diesel in the country. And so when we looked at this acquisition, we look at the terminals that we're now developing, we just couldn't be more excited about maintaining both the volume and the margin opportunity. I'll flip to page 11, which is an overview of the terminals that we have in Brazil. So just to start with this, We loved the Hygo business because what we saw is a really strategically located portfolio of terminals. So a tremendous job that the folks at Hygo did in terms of permitting and getting these assets either operational in the case of Sergipe or, you know, ready to construct. And so let me kind of go, you know, north to south on the terminals and give a little profile of each one of them. So starting in the northeast in the state of Pará with Bacarena, This terminal, from a margin perspective, will be most similar to the operational NFE terminals we have today, but with four to five times greater volume potential just because we're in the Brazil market here. Bacaranda will be the sole supply of natural gas in the region, so we'll compete with HFO and diesel, and we are both co-located and surrounded by really large industrial demand not only kind of in the port itself, but certainly as we circle down the Amazon River. You have an industrial opportunity, a power opportunity, and a small-scale opportunity that we think is really special and unique, and we're very, very excited about Buccarina. The next one is Swapis. So Swapis is in the state of Pernambuco and is, you know, a different thing than Bacarena in that here we have gas volumes that are potentially significantly, you know, orders of magnitude greater than what we've seen in isolated regions of the world because what we have is we have huge demand at a seriously developed industrial port. We have great small-scale demand in the region as, again, we compete with LPG and diesel off the gas grid. And then we also have a connection to the TAG pipeline, which basically runs almost the length of the coast of Brazil from sort of the Sao Paulo Rio region all the way to the state of Ceará in the north. And our connection to that means we can access demand centers both north and south of the Swapay Terminal itself. You know, beautiful infrastructure with a fixed jetty already in place, and so we're very excited about Swape. This is also where we are in the process of moving 288 megawatts of PPAs that we've acquired from BR Distributora. Third is the Sergipe Terminal, so operating 1.5 gigawatt power plant, largest thermal power plant in Latin America, as Wes mentioned. Here we also have a permitted expansion for up to another 1.7 gigawatts. And so, you know, a lot of fixed revenues coming from that plant today. And, you know, we're obviously excited to perform to own the Sergipe Terminal and the Sergipe Power Plant. Going to the south of Santa Catarina, this terminal in San Francisco de Azul in the state of Santa Catarina really combines, you know, both high volumes like we see in Swape with really best-in-class margin potential. So, Here we'll be connected to the TBG pipeline, and we'll be competing against gas that is coming from Bolivia, which is both declining and, frankly, quite expensive to transport all the way west to east from Bolivia. There's also a lot of stranded demand in the south of Brazil, so we'll be adding basically critical infrastructure to the TBG pipeline in terms of gas supply and compression at this point in the pipeline. And so we see the Santa Catarina terminal as combining really some of the high-volume attributes of being on an interstate pipeline with an ability to basically supply new customers with gas and also convert people from HFO and diesel. Tremendous small-scale opportunity in the region as well, and a highly developed region that today pays a lot for LPG and HFO. So when we look at that portfolio as a whole, we're very, very excited about how strategically located each one of these terminals are. how far along they are in their development. Bacarena today is ready for construction, has all the permitting it needs, and can be online very early in 2022. The other two also, you know, very far along in development, will be online in the first half of 2022. And so we're excited to, you know, be kind of a first mover in the new open gas market in Brazil and to have these strategic locations from the Hygo acquisition.

Yeah, great. Thanks, Andrew. Look, I wanted to provide some detail on this because I don't want people to just lump Brazil in as a single point of reference for us. Each one of these terminals is unique. It has its own attributes, its own place in the marketplace. We have specific development and commercial teams that are in place for each one of these now, and we think that each of these individually has a chance to really, really outperform. So it's a big focus for us. Andrew and the team have done a great job in integrating with the team that was on the ground already in Brazil for Golar and Hygo, which we think is a terrific team. And so we are quite excited about that. Chris? Chris?

Yeah, great. So I'm going to turn to page 14. Thanks, Wes. Thanks, guys. When you look at 14, we highlight the strategic importance of the GMLP acquisition. We're purchasing a fleet of vessels that generates a stable stream of contracted cash flows over the next few years. The acquisition also solves our long-term ship needs as we intend to integrate the vessels in our logistics chain once they roll off their current charters. In fact, when you consider the full build-out of the terminals that we acquired in the Hygo transaction and combine that with our own organic growth, we forecast the need of eight FSRUs and four FSUs, which you can see on the left side of the page pairs very nicely with what we are buying from Golar. So while we have strong, consistent cash flows from the MLP now, once the current charges for these vessels expire, we can plug them into the NFP machine and save materially on our expected logistics costs by owning the assets ourselves. When you take a look at slide 15, you can really see the velocity of growth that NFE is experiencing. As Wes talked about earlier, this page evidences that we've gone from a development company a year ago to an operating business with over $830 million of annualized operating margin once Mexico and Nicaragua come online. Further, as we ramp into the over 5 million gallons per day of committed volumes and combine that with the $300 million of cash flow from the MLP, we will be producing over $1 billion in operating margins. When you add the first fast LNG unit, this takes us to over $1.2 billion in committed operating margins. The breakdown is helpful because you can see in the downstream business is the biggest driver of profitability. But as Wes said, and as you look at the far right column, by pairing the fast LNG solution with our downstream demand, the effective per unit margin doubles. Finally, as we convert on our commercial pipeline, we can see a clear path to close to $3 billion in operating margin in the next one and a half to two years. If you turn to slide number 16, this shows our summary financial information for Q4. And on the whole, it was a fantastic quarter. During the quarter, we achieved our highest single-day volume totals in San Juan, in Old Harbor, and in Jamalco. We had our highest quarterly revenue and the best operating margin performance to date. Volumes for the quarter were a little less than Q3, which is due to two customer-driven maintenance outages, which I wanted to touch on briefly. The first was turbine maintenance that PREPA conducted on the San Juan Power Plant Unit 6 during November and December, and the second was a diesel commissioning of the Old Harbor Power Plant. This is a dual-fuel plant with NFE providing the backup fuel as well, so while there was a volume reduction, we didn't see any dip in operating margin from that asset. We are expecting a similar maintenance outage in Q1-Q2 for Unit 5 in San Juan, and also the installation of our selective catalytic reducer, which will provide further emissions reductions for the power plant. A quick comment on maintenance that we previously mentioned. As we get more terminals, these maintenance events will be less pronounced and have less of an impact on each quarter's results. Revenue for the quarter was $146 million, and the cost of goods sold was $85 million, which resulted in the $61 million of operating margin you see here. This $61 million was our highest quarter on record and represents approximately 40% margins, which is in line with our target and long-term expectations. I want to highlight that in a quarter where LNG prices range from below $2 to over $30, our average cost of LNG for the quarter was $4.20, which is within 5% of our estimate. SG&A expense for the quarter was $22 million after normalizing for non-cash compensation, development, and one-time expenses. This is up slightly, primarily due to some extra headcount on the Mexico and Nicaragua projects, which will migrate to operating expenses going forward. For 2021, we expect corporate SG&A will stay around $80 million annually for the NFB standalone business and increase to approximately $90 million on an annualized basis once we close the transactions. Last thing I wanted to point out is that the balance sheet remains very healthy, with over $600 million of cash on hand at December 31st. This is a result of the two financing transactions we did in December, raising approximately $550 million in total proceeds. With that, I'll turn the call back over to Wes. Great. Thanks, Chris.

So let's go to page number 18 and talk about gas. As I've said before, gas is one of the biggest focuses we have as a company. Gas supply is, in many respects, our biggest risk from a financial standpoint of the company. The gas is... generally a stable asset in terms of commodity pricing. It's been quite a bit more stable than the oil-based fuels have been over the course of the last couple of years. Although, if you look at last year from the low to the high, I think the lowest price that I saw in LNG that was sold commercially in the world was about $1.25. The highest price I saw at the very end of the year was nearly $39. So between those, now there's a lot of stability in the middle, but obviously there's big swings on either end of that. And so we're very, very focused on not getting caught by these swings and being able to provide our own portfolio with supply that we can actually rely on in terms of the prices we use for ourselves and then to our customers. So when you look at page number 18, our volume is operational in Jamaica and Puerto Rico, 2.1 million gallons per day. Add in Mexico and Nicaragua, that takes it to 3.3 million. Add in Sergipe in the Southeast Asia terminal, it's going to take it to 5.1 million gallons per day. Divide that by 1.6 because 1 million tons is basically about 1.6 million gallons. And we have total gas demand today of 3 million tons. We've contracted 2.2 million gallons per day, so 1.3 million tons. So with this, we still need supply for about 55% of our portfolio, 1.7 million tons of gas demand. So let's look at page number 19. The indexed price gas supply is not only a problem for us, but it's also a challenge for our customers. You know, the vast majority of gas in the world is indexed either to Brent or to JKM, which is the Asian price, or to Henry Hubb. And the problem from a customer standpoint is that virtually none of them have a demand which is also based upon oil. So if you are... running a power plant, if you're running a refinery, if you're running a hotel or a shopping mall and you need electricity for it, the price of oil has little to do with the economics of your business. And yet, if you were indexed to the price of gas, you were at the end of that whip. And you can see from this chart on the right-hand side, that can be a very, very difficult place to be. So over the course of the last year, Brent crude prices have nearly doubled. And the power plant revenues haven't doubled. The shopping mall revenues haven't doubled. The refinery prices haven't doubled. And so you end up with a real mismatch between the two. Customers prefer fixed price supply, but that's something that has not been available on the market to this point. So turn to page 20. So the genesis of this is that we have been interested in the floating LNG markets for a long time. We ourselves have built our own liquefier, have run it for the last five years, have had a lot of experience in the liquefaction side. We're fortunate enough to partner up with the GOLAR guys who really have been the pioneers of many things that have happened on the high seas. They were one of the first parties to actually convert their ships into FSRUs, so floating regas units. There's a handful of FLNG vessels on Earth, and they actually own and operate one of them off the coast of Cameroon. That's the heli that we now own 50% of. They have a second one, the Gimli, which is in construction right now. This all started in the middle of January. When I basically picked up the phone, I called our technical group. I'm going to turn it over to Alop here in just a second. But Alop, Sean, Sam, kind of our very, very capable technical guys, and said, look, let's get on with the GOLAR guys. Let's actually look at doing this a different way. Because the little box on the left-hand side of page 20 represents how the FLNG business had been done until this point. And to make it very simple, if you want to construct a new ship or you want to convert a ship into a floating liquefier, it takes a long time and it costs a lot of money. So you look at the 2.4 billion, 2.4 million ton ship that they're building right now costs well over a billion dollars. To develop the field that actually it would service costs, you know, a significant amount of capital as well. So the punchline is four to five years to develop this from end to end and many billions of dollars of development capital. So while the output of it is interesting to us, the process and the price and the timing is not interesting at all. And I just said, look, Can we do as we've done in other parts of our business, which is use existing marine infrastructure and repurpose it for what we want to do? And in very simple terms, the cartoon here shows what we're going to do is we went out and found a couple of drill rigs with the help of the folks at GOLAR. So Bob Dawson, Olbe, and others that actually were very helpful to us in finding this. To give some sense of the dimensions of this, we bought basically rigs that were originally had a cost basis of over $500 million for $30 million. So essentially buying stuff with pennies on the dollars. We've done it in other cases. Repurpose them and then try to make the liquefication fit on top of it, which is what we've done. And so maybe what I'll do right now is pause, bring in Elap, and Elap, you can give a summary as to what the work we've done thus far.

Thanks, Es. Good morning, all. Just to give you a little bit of background on my role and my technical backgrounds, I'm leading the technical solutions group and heading the fast LNG program here at NFE. I worked at Black & Veatch for 22 years leading their technologies group prior to joining NFE in January 2020 and was part of the team worked on Golar, Healy, FLNG a few years ago when Black & Veatch was doing engineering and design on that. So as Wes said, we are very excited to update you on our innovative fast LNG solution. And so focusing on page 20, the concept we have here is the same as Healy, except a couple of things that give a significant advantage on budget and schedule. The first one is we are using pre-engineered, fully modular design instead of a stick-built design on Healy. And then the second one is we are using jack-up rigs instead of a ship to install liquefaction modules. So flipping on page 21, you can see we are off to a great start with our terrific partners like, you know, Chart, Floor, Baker Hughes, Kiewit, and Maersk to get the FLNG ready to be deployed in 20 months. We plan to use Kiewit Shipyard in Texas for installation and possibly commissioning prior to taking the Jacob Rig to the location of gas source. So this approach allows us parallel execution of – One, you know, manufacturing of modules in fabrication yard, and then two, preparing jacopring and installation modules in a control environment, such as shipyard. This is a repeatable, go-anywhere type of solution, and we plan to repeat this for the next unit, FID, in the next three to six months. Giving back to Wes.

Great. Thanks a lot. So, you know, I mean, the summary of this is, you know, what we've done is change the the picture of the FLNG market from a four to five year timeline, four plus billion dollars in project development costs into something that is much, much more relatable. So total cost of the FLNG unit will be about $500 million. It's a 1.4 million ton output. As Lopp said, from the LNTP, from the notice to proceed that we gave last week, 16 months until we actually have the gear ready to basically install onto the drill rigs at the shipyard. Produces gas for us, we think, at about $3.50. So very simple math. For every unit that you build and install, you're generating a couple dollars of margin below what we would – or paying for gas in the marketplace. So $150 million in net margin on a $500 million unit, and it gives you tremendous certainty of supply. So it really – it's not overstating the stage. It changes everything. It basically turns us into a fully integrated company from not just a midstream and downstream business, but now on the upstream side to control our own supply. And if you look at page 22, the next focus for us is going to be where to get the gas from. And the good news is there is stranded gas and offshore gas all over the world. It's on the, you know, in the Gulf Coast of, you know, just south of this country. There is significant resources off the coast of Brazil. West Africa is probably the single greatest supply in shallow water of gas but it's really all over the place and really our focus now over the course of the next 30 to 60 days will be to identify the gas source for the first of these and there's lots and lots of options for that so it's pretty exciting and as I said on page 23 we show what the margins are for this it's very simple so 550 minus 350 two dollars on the capacity that we're actually building here is 150 million dollars so all good Jake, do you want to give an update on hydrogen?

Thanks, Wes. So we've made some significant progress in our hydrogen efforts. After evaluating hundreds of technologies, we've identified the ones that we believe have the path to the lowest cost hydrogen production, meeting our target of $1 per kilogram with virtually no emissions. So what we're doing is we're focused on building two very promising businesses along these paths. The first, on page 25... calling Zero Blue, which we believe has the most commercially viable near-term path. Zero Blue is focused on commercializing technology that would produce hydrogen from low-cost natural resources like natural gas and coal. To make these technologies emissions-free, what you can do is actually capture the CO2 inherently in the process and then sequester it, which is basically permanently storing the CO2 underground. With that, these processes and technologies can be emissions-free. A significant advantage of the technologies we've identified here is that they're ready to deploy today at commercial scale. So we're taking several steps to commercialize ZeroBlue. We're securing an exclusive license for technology that's capable of up to 99% inherent carbon capture in the next 30 days. We found a location to sequester economically the CO2 in that process, and we're actively discussing offtake with a major consumer of hydrogen that we believe will just be a really terrific partner for us in the downstream market. We intend to move forward with our first project in the next three to six months, and we'll look to capitalize this business separately. We believe that ZeroBlue is a really scalable solution that has the potential to meet customer demand in the where there's a very, very large and growing opportunity for hydrogen. On page 26, you can see the second business that we're focused on, which we're calling Zero Green. And Zero Green has a huge potential to reduce emissions across all the energy markets as costs fall. Zero Green is focused on green technologies or renewable technologies that use renewable power to produce hydrogen by splitting water, H2O. We've made our first investment in a technology that we believe is the best in this category called H2Pro. H2Pro has a 95% efficiency and extremely low CapEx, which gives it a significant cost advantage over existing electrolysis, and it's being designed to work very well with intermittent renewables. This technology will be deployed with our first proof of concept in the next 12 to 18 months, and we'll be ready to quickly scale up commercial projects very soon after. Our focus with Zero Green will be also on securing low-cost wind and solar energy to produce the cheapest green hydrogen possible. With $0.02 renewable power, we believe we can achieve around $1 per kilogram hydrogen. And one important fact that we highlight on this page that we think will help accelerate the effort is the support of government, like we're seeing begin in Europe and Asia. We're optimistic that the U.S. will implement additional measures as early as this year to support the hydrogen industry and that many other markets will follow. As this technology scales, we believe Zero Green just has a really tremendous opportunity for growth to bring emissions down across transportation, power, industrial markets, and help our customers decarbonize. Thanks, Wes.

Yeah. You know, one of the first places I think you're going to see this impact is on the shipping side. You know, what's very clear just based on the volumes of interactions and calls we've got is that The shipping folks are very, very focused on their carbon footprint. I think there's a move afoot to really impose material taxes on the shipping market in terms of fuels. When Jake talks about government intervention, that's the most positive way I can think about it is make it more expensive for people and they'll actually do the right things. That, I think, will translate into LNG volumes in terms of bunkering opportunities. but also ammonia. I think ammonia may be really the fuel of choice that ends up there. And so if you have the ability to produce blue ammonia at scale, I think the market opportunity for that is tremendous. So this is something we are deeply committed to, not just from kind of a moral and ethical standpoint in terms of our place on being as good of a partner as we can be on sustainability issues, but there are massive profitability opportunities, I think, as part of this. And Probably the path for this, once we get to FID on a solution on the blue side, is to really separately capitalize the company. So be a big participant in it, but separately capitalize it, either ourselves or with partners. So something to keep an eye on, but we're excited about that. Just the last couple of thoughts, and then I'll turn it over to questions. So on the financing side, page 28, one of the things we are preparing to do as we look towards closing the transactions ahead is we've got some financing work to do. And so what we did is put together kind of a financing scorecard for ourselves and evaluating where we are today versus where we were when we got raided here. not too long ago. And at every one of these metrics, the answer is we are substantially better than we were at that point in time. Volumes have grown substantially. Operating margins has gone from negligible to pro forma $1.2 billion. Perhaps most importantly of everything on this page is diversity. So the diversity by geography, diversity by customers. When we had one, then two, then three terminals, Obviously, we're then a function of how our customers are doing that has a lot to do with what our operating results are. At the peak of our lack of diversity, our biggest customer was 38% of our revenues. Once we close the Hygo and the MLP transactions, that drops down to 12%. And as these markets then – as these terminals that Andrew was talking about and others – come online, those numbers are going to go down. So no one customer, no one geography then drives our returns, which that's a big, big issue for us in terms of our own cash flow. And, of course, our financing counterparties will be very, very happy about that. Logistically, we needed a bunch of ships and FSRUs for our portfolio. With one transaction, we're able to close that gap almost perfectly. The transaction really fits us like a glove from an operational standpoint and generates $300 billion in cash flow. And then lastly, gas supply is then the one aspect of our business where we now kind of close the gap and become, as I said, this fully integrated company from stem to stern. So if we look at page 29, these are – pictures of our capital structure pre and post transactions. So pre-closing transaction, $10.1 billion in total capitalization, 12% of that, so a billion and a quarter of debt, 88% of that in equity, 175 million shares outstanding, $8.9 billion. Post-closed capital structure, we issued a couple billion dollars in equity as part of this. We equitized the transaction heavily. Our debt goes up by a billion and a half dollars, but our equity goes up as well. So Still, our ratio is, at the end of the day, 20% debt, 80% equity. We are very committed to becoming an investment-grade company, and as we continue to grow, diversify, and perform, we think that that's a very achievable goal for us in the next time frame.

Operator, we'll open it up to questions.

Thank you. As a reminder, to ask a question, you need to press star 1 on your telephone. To answer your question, press the pound key. Please stand by while we compile the Q&A roster. Our first question comes from with Credit Suisse. You may proceed with your question.

Credit Suisse Hey, morning, everybody. First question on fast LNG. Should we think about that strategy becoming the primary source of different supply arrangements? And to the extent that it is kind of the primary source, Just curious how you're thinking about bridging supply gaps online in six months. But I think, as you mentioned, FLNG maybe takes a little over a year. If the customer is sort of not indexed, how do you solve for that middle part?

Yeah, well, the answer is that we do think it's going to be a significant portion of our portfolio is going to come from our own activities and But with the geographies that we service, we definitely will have needs to buy in product from the marketplace and probably sell product into the marketplace. It'll make us a much more active LNG counterparty in the business. Again, we're trying to essentially grow wheat in the fields and then sell pasta at the other end. So it's a vertically integrated strategy. But we have a number of significant trading partners right now in terms of the majors that produce LNG. We think that will continue on forever. But we do think that the FLNG component of it is going to be a significant part of our portfolio, both in terms of the economics of it as well as the stability and certainty of supply. It's a meaningful step in the right direction for us.

Thanks, Wes. It becomes pretty apparent that Asia is going to be a pretty big step out for you geographically. Curious if there's more significance to that than maybe we're appreciating. And so I'm curious, to the extent that you establish that anchor customer in Asia, do you get the sense that it opens the door to the rest of Asia? In other words, is there a line of other countries behind this customer who maybe didn't want to be first but are more than happy to follow the blueprint once you establish yourselves in the region?

Yeah, look, when you look at the markets around the world, what we think are the five most interesting markets just based on size of the population and of economic growth and potential. Brazil is the top of the list, but then South Africa, Indonesia, Philippines, Vietnam, these are all material markets where we think there's tremendous opportunities. About 75% of the world's supply of LNG goes into the Asian region, so it's obviously a big, big part of the overall landscape. We are excited about our first transaction there. There's another long list, actually, of transactions that are behind it, and I think that You know, when you look at the world, it's a long ways from New York to, you know, the Far East. So establishing a presence that is local in those regions is imperative if you're going to be successful at it. But I think there's going to be a lot of activity in Asia for us, for sure. And there has to be a first one before there can be a second one. So we're very excited about this first step. Great.

That's all I had. Thanks, Wes.

Thank you. Our next question comes from Alonzo Guerra-Garcia with SocialBank. You may proceed with your question.

Hey, good morning, Wesleyan team. Really appreciate the detail you provided. As the first one, on fast LNG, you mentioned the high up-stream costs required in some of the floating liquefaction projects in the past. I guess is the idea here with your concept that you'd essentially be able to tap into various supply sources that are ready to go or Is there any meaningful upstream capex that you need to spend to sort of tap into a gas field?

I think it's mostly just the ordinary course industrial development. You know, version 1.0 is always less good than version 2.0 and 3.0. And really, I'd say, as I said, the genesis of this is we looked at, you know, liquefaction that had been done on ships, and it had been done very successfully. The operating history of the Heli and the other ships has been quite good. And I simply ask the question, is it possible to do it in smaller scale on existing marine infrastructure and thus kind of reduce the timeline that it takes to get it and the cost to get it? The key that the word that a lot of you use that has been on the tip of our tongues is really modular, you know, aspects of it. So basically we went back to these, our counterparties, you know, the the charts and the floors and the keywords and said, can we make these processes modular and thus make them easier to build, easier to install, easier to run? And the answer is yes. And so I think that this makes so much sense. And really maybe the biggest aspect of it all other than just the time that it takes to do it is, half a billion dollars for a project is something that is eminently financeable, and that's quite different than $2, $3, $4 billion, right? And I think that that's one of the real impediments, I think, in the growth of the FLNG market has been exactly that, is that if I said to you, I've got a project that I want to do, but it takes $3 or $4 billion and it takes four or five years to do, that's a pretty long pull to get that thing financed properly, whereas... a half a billion dollars that we think is through and is being installed next summer. So the summer of 2022 is a much more relatable, much more addressable thing. It also then we can figure that into our own calculations. We look at supply that we need for our own projects. So it's just much more usable in every respect.

Yeah, no, makes sense. Understood. And then maybe as a follow-up, on both the Southeast Asia project and the Shannon Ireland project, they both seem pretty close to FID here in a matter of months. Can you talk to the, I guess, steps or milestones that are left for those projects before you take FID?

Yeah, the Southeast Asia is just simply a matter of negotiating contracts. So there's been intense discussions thus far that have been very, very productive, and we think that That's a matter of a short period of time. We'll be at a good place on that one. Ireland is something where we've had to go back to the drawing board from a permitting standpoint in terms of dealing with the local counterparties there. The market for what we want to provide there we think is a terrific one. and we're in the later stages of now being prepared to kind of follow our stuff. So I think our thoughts on Ireland would be follow this stuff over the course of the next month or so, and hopefully by the middle of the year we'll have a real view as to the timing of the terminal. Thank you so much. That's all I had.

Thank you. Our next question comes from Ben Nolan with Steeple. You may proceed with your question.

Thanks. Hey, good morning, Wes. So I'll start with this one. With the new fast LNG and sort of especially also the high volumes going into the new terminals in Brazil, how does the ISO container, ISO terminal idea or concept play into this, or are you sort of maybe shifting back to a more traditional methodology?

It hasn't changed at all. I mean, it's really a question then of finding the right tool for the job. So when you've got something which is going to be significant volumes, and for us, the volume cutoff is around a million and a quarter or a million and a half gallons per day. A million and a half gallons per day, remember, each ice container is 10,000 gallons, so that's you'd be handling 150 ISO containers, which is something you can imagine doing, but that's a pretty busy terminal. At about those volumes, you're better off to shift to an FSRU strategy. But the ISO container and the ISOFlex system is about ready to be deployed. I mean, our ship has left the shipyard off the Gulf Coast, the NFE-0, which is our first of these, small-scale ships that we're deploying, and it's headed to Mexican waters. So both Mexico and Nicaragua will be using Isoflex. And for a number of the other opportunities that we're looking at that are not on these sheets, we think it's really appropriate. When you get into high volumes that we expect in the Brazilian terminals and in Ireland, for that matter, those are much more FSRUs, so that's the equipment that we need there. But even within Brazil, we think The Bacarena terminal is really at the mouth of the Amazon River. There are many, many, you know, millions of gallons of diesel and heavy fuel oil that are burned at power plants up and down the Amazon River, and we think some form of Isoflex will be used there as well. So it is just the tool for the toolkit is what we're looking for, and we think it's a great solution and one that we'll find lots of chances to deploy.

Okay, that's helpful. And then as my follow-up, I guess the question is sort of what has changed on producing your own LNG versus maybe Pennsylvania, or why wasn't this concept really rolled out, I don't know, three or four years ago? I mean, what's different now relative to sort of when you first had the idea? Yeah.

If you were recommending we should have done it a few years ago, I missed that phone call somewhere, Ben. But that would have been a helpful one to get. Look, we have been focused on trying to close the gap on our own supply for a long time. And, you know, Pennsylvania is a project that we think has a lot of merits. We haven't given up on that by any means, but we've spent a lot of time in looking at it. And really what accelerated our thoughts in the FLNG was with the HIGO and the the MLP transaction where we acquired 50% of the Healy. It kind of brought us into the tent on the IP side. We had a great partner in the form of Golar. There may be a number of ways that we work with these guys. Maybe we'll separately capitalize a company and look at it. There are a whole host of things that came out of it. But basically we took our own liquefaction technical team, which is a very deep and capable group, and really challenged them to look at existing marine infrastructure and see if we couldn't shorten this up and make it more relatable from a size standpoint. And that's what happened. And so we feel really great about the process with it. You know, as usual, it comes down to the people and, you know, kind of suspending disbelief and trying to make things happen. But I think the FLNG really does change everything because it takes our great midstream and downstream business and produces now our own supply for it, at least in large part. And I think that that is, you know, that's just a materially, you know, significant advancement for the business model, that's for sure.

That's great. And just as a clarification, if I could, the new southeast, Asia Terminal is different than the Philippines thing that had been announced last year. Am I correct?

It is. Specifically, it's a purchase of an existing power plant with a right to then double the size of it, so kind of a 300 megawatt power plant that we would double to 600 megawatts in a country that has got, we think, a tremendous amount of opportunity for incremental demand. So it's anchored by a very significant power asset, and we are in the very late stages of kind of getting that finalized. But But it is different than the Philippines MOE that we signed, you know, at the end of last year.

Perfect. Thanks. I appreciate it.

Thank you. Our next question comes from Sean Morgan with Epicor. You may proceed with your question.

Hey, Wes. So with the FLNG solution that you guys are proposing now, you know, $3.50, I guess sort of the midpoint is pretty attractive. Does that It's difficult sometimes with apples to apples to kind of figure out the true cost. Is that an operational marginal cost for MIBT, or is that including the $500 million of CapEx that you're sort of ballparking for the conversion of the jack-up rig and the installation of the midsize modules?

No, it's actually really simple. So what we're assuming in this is a base cost of gas of $2.50 on an offshore basis, 75 cents to liquefy an operating cost, and 25 cents for the marine and OPEC. So it does not take into account the capital expenditure, and so that's why I quote it as saying at $3.50, we're basically producing $150 million in margin on a $500 million capital base. So that's a very simple way of doing it. If we then applied financing to it, other things, I like to look at things on an unleveraged basis. I think it makes things simpler and makes it harder to get confused. And I think, frankly, when you look at those three pieces, 250 and 75 and 25, the 250 may well end up being a very high estimate. I mean, remember offshore where the stranded gas is, a lot of times it is a derivative of oil activity. So people are drilling for oil. There's a lot of associated gas that comes along with it. And especially if you're in deep water, that is not an asset, but it's a liability. And so that gas is reinjected in many cases, or it is flared, which is, of course, a horrible environmental risk. And, of course, there are also... just wasting the asset, basically. It may well be that we can actually do a lot better than this. We use a range of $3 to $4, but I think that as we get into this, and for people that are listening on the phone that have gas resources, give us a call. We've already had a number of people call us, but if you've got gas in your business and you'd like to talk to us about it, we think we'd be very interested to do so. I think the jack-up rig is a great tool for shallow water, so It also allows you to access pre-processed molecules that come through pipelines without additional capex. That's great. The offshore, the deep water, is where perhaps the greater opportunities are, and the semi-submersible, which are another another form of marine infrastructure similar to the jack-up rig but suitable for kind of deep water solutions, it may really be the tool that goes along with that. So this is the top of the first inning in terms of the development of this as a business line, and I think there are many, many opportunities, but the unit economics are actually really straightforward. So 250, 75, and 25, that's our base case, and I think we've got a lot of room for improvement beyond that.

Okay. Okay. And so I appreciate that this would plug sort of your operation on the regas side in terms of the demand gap that you'll have, the 1.4 MTPA versus the 1.7 you're projecting kind of medium term. But you're going to be working with an upstream partner that generally these companies try to capitalize on prices. If, for instance, like Saudi production were to go down and oil prices would go up, you'd be able to pass kind of the cost through to yourself, but your end customer would still be subject to the fluctuation in oil prices, right, just like any commodity buyer? Well, today it would be. That's what I'm saying.

No, no, today it would be. That's true, but I think... I've said this many times. If you want to make a great fortune, solve a great problem. And the great problem that people have in getting energy around the world is they're indexed to a volatile index that has no relationship to what their core business is. So I think once we get proof of concept and we're producing this and we have a view as to what our own price metrics are, I think there's a very real opportunity for us to pass this through to our customers, give them certainty of not just supply but of price, And I think that changes everything. I really do. So you have to walk before you run. But I feel like, you know, there has been, since 2006, there has been a real move to distance gas prices from oil prices. You know, they moved in lockstep for decades together. They really split apart in 2006 when, you know, oil went to $140 and gas went down. So the thing really split apart. And there definitely is a relationship between the two, but it's not a pure relationship. And I think from the customer standpoint, there's really no interest in having that relationship. for the most part. They don't have a Brent-based offtake. That's not what they're looking for. That's just what they are forced to take because there's no other alternative. So this really could be, I think, a revolutionary step in terms of what price you're able to provide your customers with, and that's a big deal. And the math on this is, as I said, $1.2 billion in margin on what we have right now. If we build out all the stuff that Andrew and others are working on, that goes to $1.6 billion, if we then build incremental FLNG to service all that, it adds another billion dollars. So, you know, you're taking yourself from, you know, negligible margin a year ago to really a bright prospect of $2.5 billion and growing beyond that. So it's a big, big moment for us. And so a lot of work to do, obviously, in proving this out, but it's definitely a huge step in the right direction. Okay. Thanks, Wes.

Thank you. And our last question comes from Greg Lewis with BTIG. He may proceed with your question.

Yes, thank you. And good morning, everybody. And then I'll keep it to one as we're on the hour now. Wes, just kind of a big picture question. And I think you kind of touched on it in some of your comments around, you know, gas exposure. And as we think about, as you build out the portfolio, Clearly, you're short gas. Clearly, you're going to address that. As we think about, you know, as the business builds up, is this something where we should expect New Fortress to maybe control 50% of its gas, that's in the 80% that we want to be long gas? Any kind of views on how you're thinking about that would be helpful. Thank you.

Yeah, I think that the goal would be eventually to supply the bulk of our activities from this. I mean, geography plays a role in this. This business is, at the end of the day, a logistics business, right? You're getting the gas in one place, and you're supporting customer activities in other parts, and it's a big world. So the map back in the early part of the presentation is a great visual because it shows you the distances that you're trying to you know, trying to conduct your businesses in. And I think that there's definitely a role for us to buy gas from our, you know, our trading counterparties, and there's probably a role for us to sell gas to them as we produce in different places. But on balance, I think, you know, the economics are overwhelmingly positive if you're able to do this successfully, you know, supply your own gas at a material discount to where the market is, and also then be able to control your own supply. So, It's a huge benefit from an operational logistics standpoint, and economically, of course, the map is really easy. We'll see. I think this first one we feel terrific about. We bought the first two rigs. They'll be shipped across the ocean here in the near term. We've got a great technical team that is working on it. The next big milestone for us is to identify a gas source. We have lots of thoughts about that, and we've had a number of conversations about it, but again, if there's folks that have interest in talking to us about this, they should give us a call. And then I think you get the first one done. I think there's many that could fall in succession.

Great. Thank you very much.

Thank you. I would now like to turn the call back over to Wes Edens for any closing remarks.

Great. Well, thank you all for the time to go through this. We have a lot of different materials. You know, I didn't want to – have any one element of this dominate the conversation. F1G is a huge, huge step for us. Our operational success in the quarter was a very, very good one. We've added material to our terminals portfolio. And last and certainly not least, I think that the whole move to, you know, kind of zero emissions on the hydrogen side is material. And so we, you know, Jake did a great job of summarizing what has been an intense period of activity for us, and I feel like that's got opportunity that is really material. And I said, again, the place I think you're going to see it manifest itself most immediately is on the shipping side, and we think that those economic upsides there are substantial. So there's a lot to go through, and we've got a big staff with Josh and others that can help folks get through it. But thanks for your time, and we look forward to talking to you in our next quarterly update, which is not too far down the road, kind of 45 days from now. So thank you.

Thank you. Ladies and gentlemen, this concludes today's conference call. Thank you for participating. You may now disconnect.