New Fortress Energy Inc.

Good day, and thank you for standing by, and welcome to the NFV Fourth Quarter 2021 Earnings Card. At this time, all participants are on a listen-only mode. After the speaker's presentation, there will be a question and answer session. To ask a question during the session, you'll need to press star 1 on your telephone. Please be advised this call is being recorded. If you require any further assistance, please press star 0. I would now like to hand the conference over to your host today, Brett McGill, Managing Director and Head of Investor Relations. I may begin.

Thank you, Justin. Good morning, everybody, and welcome to New Fortress Energy's fourth quarter and full year 2021 earnings call. This call is being recorded and will be available by replay until March 8th. We plan to reference our Q4 2021 investor presentation that we released this morning. The presentation is posted on our website and will remain available after today's call. The presentation includes a series of important disclosures related to forward-looking statements and non-GAAP financial measures. We encourage participants to review these important disclosures in addition to the description of risk factors contained in our SEC filings. Joining me here today are Wes Edens, CEO and Chairman of the Board, and Chris Junta, Chief Financial Officer. Also joining today's call are Managing Directors Andrew Deedy and Cassiandra Sinem. as well as Ken Nicholson and Patrick Hughes, the Chief Executive and Chief Commercial Officers of our hydrogen business, NFE Zero Parks. And with that, I'll hand the call over to Wes.

Great. Thanks very much, Brett, and welcome, everyone. As usual, we have posted to the website a deck that we'll be referring to as we flip through. We have a lot of material to go through today, and we'll try and do so quickly and get to questions here in short order. So start with page number four. So first, the results. Obviously, record quarter for us, $334 million, and EBITDA for the fourth quarter in 2021. Full year 2021, $605 million. The business has grown and matured dramatically, and this really does mark the end of the beginning of us as a company. Eight years ago, we started the company, have been a development company as we've been developing our terminals and portfolio of downstream assets. The financial results mirror that. So, full year in 2019, adjusted EBITDA at negative $115 million as we were investing in our business. full year 2020, basically break even $33 million, and then $605 million this year. And very importantly, we are poised, we believe to be very, very profitable in the future. So our forecast for 2022 is one plus billion dollars. We think there's a substantial amount of upside to that number. Roughly 85% of that result is baked essentially already, assuming that things work out as planned. So we're here on March 1st. We have 10 months left in the year. We have lots and lots and lots of opportunities in front of us. And so there's lots of growth to come. Page number five. As I said, we started the business eight years ago from a blank piece of paper. And it's interesting to see how it has really evolved. And now the architecture of the business to me, is actually quite clear. We began the business by beginning with our customers. We started building downstream terminals and power assets around the world to solve fuel issues, energy poverty issues, and that is the core of our business, and that's what remains today. That part of our business has grown dramatically. This time last year, we had five terminals. Today, we have 11 in operations or under development, eight geographies, And also a nuance, but an important one, is we have really shifted our focus from some of the smaller, more bespoke markets that are great markets and have great opportunities for us to larger markets with higher volumes that play a key part of our strategy going forward. Also, about this time last year, in January, we made a very large acquisition in two pieces. One was to buy the Hygo assets, which were terminals under development, as well as a large power plant that's under development in Sergipe, Brazil. We also then bought into large portfolio ships. The ships and logistics business is how we actually get our products to our markets, to our customers. Those markets obviously have tightened up dramatically in the last year. Both of those acquisitions today look like very well-timed. They have worked out very well, and so we've added dramatically to our midstream capabilities to match the downstream capabilities. The last part of our business and the focus for much of this presentation we'll talk about is then the gas. Gas is obviously the biggest cost that we have as a business. It has been an intensifying point of focus for us. for the last 18 months. Obviously, the results, you know, recently, the geopolitical results in Europe with Russia, with all the geopolitical issues have only intensified with that. But what we have done, when you look at our portfolio from a year ago, is we've roughly doubled the size of the portfolio, more than doubled the size of it. And Cassiandra, who runs our gas part of the business, will talk about that substantially. We are poised to roughly double it again this year. And this is the feedstock that we then provide to all of our customers. So... And those three businesses, the way we think of the business now is we built this downstream business, we then have all the capabilities to actually manage our flow of product that goes into them, and with the cheapest and most flexible form of gas, we can do the best job of servicing our customers, and that's what creates the opportunities for us. You know, page number six, Vast LNG, which we've talked about over the last year or so, is now very much in the gun sites. We announced yesterday that we had our first transaction on the tolling side. When you think of fast LNG, the way we think of it is it's just simply a way to move liquefaction to the offshore stranded gas assets and to turn that gas into something which is an exportable commodity that can then be used to supplement our portfolio. The core of our gas portfolio is these base long-term supply contracts that we've got. And so as we've added them in from the largest gas producers in the world, that's not a focus that's going to change from us. In fact, it's only going to grow. But the FLNG basically is a way for us to add either long-term high-quality cash flows by providing our equipment to lease into a situation like Congo, which we're doing with ENI, or to actually add to our own portfolio with market volumes that we can then actually in turn provide to our customers or sell into the business lines. When you look at the next page, this is the dynamic that is created. We then have a very stable portfolio of gas as we match up our long-term gas contracts with our long-term offtake from our customers. that by adding in market volumes on top of it, we create the dynamic that basically creates a long LNG basis, but the business model significantly mitigates the risk to it. So when you think of being long or short a commodity, that sounds like a scary proposition and one that is subject to market risk. The way we think of it is we created basically one that's got bond-like downside in that we have marginal volumes that we have in our portfolio that To the extent that the market is normalized, we simply deliver those to our customers and to our terminals and our power plants around the world. And then to the extent that there is a market dislocation, as we're going through one right now, we have the ability to sell those into the marketplace and realize windfall opportunities. The dimensions of this can be significant, and we'll talk about that a little bit and go through an example of it. But, you know, we've been through a period of relatively stability since we started in the business from 2014 until recently. But, of course, since last summer and then more recently in the last, you know, handful of weeks, there's been significant disruptions. our business is oriented about taking advantage of those kinds of opportunities in addition to the baseload. So bond-like downside, equity-like upside is the portfolio that we've created.

With that, let's turn to the downstream. I'll talk to Andrew. Thanks, Wes. Hey, everyone. Nice to be talking with you again. I'm actually on page nine. So a bit of a scorecard here for our business downstream in 2021. a totally transformational year for us. So on the left side, acquired Hygo for $3.1 billion and JMLP for $1.9 billion, both announced in January of last year and closed in April. Mexico Terminal came online in July, and we started flowing gas to the CFE power plants under our contract with CFE there in Baja, California. The Sergipe Power Plant is now fully operational. And we've had almost 4,000-plus run hours, consumed almost over 30 TB2 of LNG since taking over Sergipe. We signed a 15-year 30 TB2 supply agreement with Alanorchi, the refining subsidiary of Norris Hydro, which is co-located with our Bacarena terminal and is the largest alumina refinery outside of China. And then we've made significant construction progress on our Bacarena and Santa Catarina terminals. Both are expected to be completed in the second quarter of 2022, both with huge associated LNG markets. And so when we think about our progress, as Wes mentioned, on the HIGO and GMLP transactions, you know, we took two terminals in Bacarena and Santa Catarina that were not finished permitting. We completed the final permitting. We negotiated and started an EPC contract and We're kind of nearing the end of construction of the offshore terminal, so we've made great progress on those terminals. We're very excited about the commercial opportunities in both those places. On the right side, we've got a little bit of a scorecard. So in Q4, 2.9 million gallons a day, up from about 1.8 in the same quarter last year. We have 65 total contracts, 15-year weighted average life, and our NPV of the revenue in those contracts is over $14 billion. Flipping to page 10, what we wanted to kind of show was the transition from NFE as a business with kind of premium long-term offtakes for LNG to power in the Caribbean to a truly global downstream LNG portfolio, which is anchored by long-term stable cash flows, but has real upside as we participate in these larger markets and these pipeline-connected markets for more flexible supply. So in 2020, we had about nine MTPA of addressable markets, We had three terminals completed and two under construction, so five total terminals. And today we sit with 42 MTPA of an addressable market and 11 terminals. So totally different portfolio than where we ended the year last year. What we're going to talk a lot about is the vision for kind of how that 42 MTPA of addressable market is going to be attacked kind of over the next year. Page 11, talk a little bit about our 2022 growth plans. So it will always start with, continuing to have organic growth from our existing terminals. It requires no additional capital, and we have a number of opportunities that are kind of right in front of us. In Jamaica, the Jamalco refinery to which we provide steam from our Jamalco power plant today is switching from HFO to LNG, and we hope to be the supplier. We think we have a great value proposition for them. In Puerto Rico, we intend to convert more oil and HFO-fired power plants to natural gas. And in Mexico, we hope to expand our contract with CFE. All things we think that are very in front of us today and that present great organic growth opportunities in the portfolio. Second is we're going to complete construction of the Baccarina and the Santa Catarina terminals in Brazil. We only believe more in those markets than we did at the time of the acquisition. We're extremely excited to bring those online, start some of our kind of currently contracted opportunities to continue to grow the commercial opportunity in these large markets. Santa Catarina being kind of specifically interesting because it will be our first pipeline-connected market, which gives us a number of opportunities that are a little bit different than what we've had in the portfolio today. And then last is the potential for FID and our Shannon LNG terminal and 600-megawatt power plant. So we're in final stages of planning approval on both the terminal and the power plant, which, you know, today give us an opportunity for great long-term supply into Western Europe, as well as a highly liquid and kind of flexible market and the ability to build, you know, combined cycle power in a place that's very short power today. Page 12, the highlight here is what Wes talked about in terms of, you know, kind of step one was building downstream. Step two is really integrating the business. And we've done that with the acquisition of GMLP and the control of over 20 ships today. So when we ended 2020, we had five ships under our control and ownership. Today we have 20. And our portfolio is unique. So we really have a large need for FSRU and storage capabilities from our ships. This really forms kind of the core of our terminal assets. And then we also have transport ships, which we use to supply our customers and supply our portfolio globally. And so I think we feel great about the GMLP acquisition and the value of those assets from when we acquired them last year to where they are this year. And we've really been able to kind of outfit the terminals into a fully integrated business and portfolio that's going to grow over time. Page 13, we tried to put kind of some qualitative details around what it means for our portfolio to go kind of from 9 MTPA to 42 MTPA. and just kind of what we're seeing on the ground. So what that means for us is that we had a portfolio that was all kind of long-term power and small scale. And so we were matching up supply contracts with demand contracts. In 2021, we're seeing multiple categories for what our commercial activity looks like. So it's not just long-term power, but it's merchant power, it's industrial demand, it's gas trading, pipeline balancing, selling capacity in our terminals, And so we just have a much bigger and diversified portfolio to play with. And I think as you're going to see how we build our gas portfolio and how we think about cash flows over time, we're going to be anchored around long-term stable cash flows, but we're going to have a lot of upside in some of these other services and markets that we're entering. And that's the real benefit and vision of the larger portfolio and the larger markets that we're in today. I'll turn it back to Wes. Thanks, guys.

Great. Thanks. To lead into the gas discussion, I think it's good to give a little bit of context to the bigger picture on the energy transition side. There are two somewhat conflicting themes that are present when you think of the world and energy transition. One, and one that we are very focused on, is that energy poverty in various forms is very real. And so I always use the example because I think it's a meaningful one. People in Jamaica use 10% as much electricity per capita as people in the United States do. People in Kenya use 10% as much electricity as people in Jamaica do. So, you know, people in East Africa use in a year what all of us in this room use in about three days. So that's a very, very real issue. And so you can't really have a discussion about energy transition without at least first acknowledging that many, many people around the globe are under-electrified, and that has significant implications for society. economic growth, for health care, for education, all kinds of different aspects. We're very focused about that. And so while we want to talk about a very, very meaningful energy transition to a fossil-free future, at the same time we have to acknowledge that we have real energy poverty that exists. And so those are the markets that we are focused on. The second main issue, of course, is that climate change is real. And decarbonization is not a good idea. It's a mandate that we all have, and so we need to manage those two things at the same time. And I think that people that are extremists on either side of the equation really do miss the point of what we're trying to accomplish. You know, folks who say we want 100% renewable power today don't really acknowledge the fact that renewable power is not dispatchable. And when you look at the chart that I put in front of you right here, you can see on the right-hand side, you know, Europe, which has some of the highest deployments of renewable power in the world, has had increasing usage of their coal plants this last year as they've had dispatchable energy challenges. And so they've had to go to their old technology. Ironically, in a time of energy transition, some of the highest usage of coal is happening today, this winter. So that's not great. And on the other side... When you look at the forecast for the demand for gas, because gas really is the transition fuel that we think leads us to this meaningful evolution, gas to us looks like it's very undersupplied. And so a central theme for us is that we believe that the world is on the verge of being structurally short gas. That obviously biases our view about what the construction of our own portfolio would be. Not to take a long position of a commodity and simply for purposes of making a market bet, but it is definitely the bias that we have when we look at this. The drivers of the situation are on the right-hand side. There's many. We've just listed a couple. I mean, there's a significant underinvestment in oil and gas production. There are very aggressive, unrealistic energy policies that are put in place that then drive people to solutions that may be good long-term solutions but are very, very bad short-term solutions. Premature retirements of coal and nuclear, you've seen announcements, in Germany just in the past few days of trying to potentially reverse those decisions or extend them. And then, of course, you throw some geopolitical instability like Russia supplying 40% of the gas to Europe with the situations that are going on there. It makes for a very, very challenging market environment. It is one that is incredibly well-suited for the business flows that we have. But that's the context for our own gas supply. With that, let me turn it over to Cassandra to talk briefly about our gas views. Cassandra?

Thank you, Wes. Good morning, everyone. This is a simple chart, which is pretty much what all the traders look at every day to transact. So you can see that LNG prices are not below $30 until the end of the winter 2023. And after that, for the rest of the year, it's like close to $20. So it's a severe market dislocation, as we see. And by looking at that, we designed our strategy for contracting LNG. So going to page 17, we want to show the good news that we successfully executed our strategy contracting LNG to match our clients' needs. We increased our portfolio by more than 200% since the beginning of 2021. We now have a portfolio of 2.9 million tons with 2.2 contracted in the market and 0.7 million tons to be produced by our first fast LNG starting 2023. We have no need for LNG from the high-priced spot market to meet our clients' needs. And all the focus we applied to increase our portfolio in 2021 We also lead us to quickly conclude the FAST LNG 2, which we expect to offtake the full 1.4 million tons of capacity. The efforts also led us to advance negotiations for other long-term LNG supply agreements. And we expect that both initiatives, the FAST LNG and the long-term contracting from the market, will be concluded in Q2 2022. These will allow us to have a base portfolio of around 4 to 5 million tons of LNG per year, and it will be ready to support our downstream efforts in the high-growth markets that Andrew just presented. On slide 18, now I want to bring additional color to the fast LNG commercial arrangements. We believe there are two primary business models for it. The first one is to provide a falling service and contracting to a counterparty that will contract 100% of our capacity. And that at the same time, we offtake a percentage of that capacity. And that's the idea that I'm going to speak a little bit more in the next slide. The second business model is the one to engage with resource owners and enable the gas production to our LNG facility and for the local gas needs. This will lead us to offtake 100% of the LNG production of our facility and also sell natural gas at the local market. This is similar to our efforts in Mauritania. where we signed an MOU with the government at the end of the year, and the project is in a great momentum now of discussions with all the counterparties involved in that deal. Slide 19, now talking about the recently announced first deal with E&I. We are very pleased and excited to have such an experienced company in the oil and gas and LNG business partnering with us, UNI does not only have experience in the LNG production, but also just finished the construction of its own FLNG. We could not have a better proof of concept for our first FLNG facility. And it's a fantastic recognition of our engineering team and our partners that are working on that effort. And our facility will be deployed in the Marine 12 asset in the Republic of Congo. The asset is in shallow waters and holds an immense amount of gas, more than enough to support the 20 years of production of our facility there. And our solution will enable the exploitation of the extended reserves and avoid upstream flaring gas.

Great. And thanks, Scott and Sandra. If you look at page 20, we wanted to put some simple math to what market volumes could mean to us in a market like this. So the production of our first facility creates for us 63 TBTUs. That's the units of production that we have. If you use the price of $20 in the market, and actually the price today is north of $30 in the market, if you use the price of $20 in the market and a cost of $5, you'd have profits of $15 in a BTU times 63, which It would be incremental revenue for just one unit of a billion dollars. And so really the way that we think of it and the way you should think of it is a unit that costs us $650 to $700 million in total that earns a very, very good return as just a tolling matter. So we earn a very good market return for just leasing our equipment to a counterparty like E&I. That's one business model. The second business model is do it for your own account. You have uncommitted volumes. You have market volumes you can then either sell into your customer businesses on the downstream side or you can sell in the marketplace if there's a disruption. When you look back at the last 10 years, there's been a handful of periods of disruption. We believe that these periods are going to perhaps intensify, but are certainly going to continue. There will be normality, but there will be disruptions. These uncommitted volumes can be incredibly valuable. And so one unit, a billion dollars, a billion and a half dollars, actually, if it was the market prices of today, have huge implications for the upside of the business. Then I'll turn it over to Hydrogen. Ken?

Great. Thanks, Wes. Good morning, everyone. Happy to provide an update on our Zero Parks business, which we think investors will soon appreciate as an industry leader in the clean hydrogen space. Page 22. Wes said it. I mean, the opportunity is huge for zero parks. It's a huge problem for the world, 51 billion tons of global CO2 emissions. Seventy-five percent of those emissions come from three primary sectors, and we're talking to customers in all these sectors, industrial power and transportation. I would say the opportunity to NFV is twofold. One, international customers leveraging NFV's logistics and international customer base, as well as domestically where we have Folks like industrial parties, steel mills that are looking to replace fossil fuels for heat, power plants looking to blend hydrogen into coal boilers to reduce emissions, and transportation companies like railroads looking to use hydrogen fuel cell locomotives and shipping companies converting to hydrogen and ammonia as fuel. Transaction page 23 just gives an update on our business plan and the path that we are pursuing. First and foremost, we're identifying and securing the best sites in the U.S. to build clean hydrogen production facilities. The key characteristics that we focus on are, one, sites that are close to large and diverse sets of emitters and industrial end-users. Two, have access to long-term affordable renewable power that's critical when producing green hydrogen. Renewable power is an essential component to producing hydrogen in a clean manner. And finally, three, have access to superior logistics, pipelines, railroads, deepwater ports for setting up a low-cost supply chain for domestic and international markets. We are very close on our first site. I'm going to talk about that in just a minute. The second element of our plan is to target customers, as I said, both internationally and domestically. We actually see a lot of demand domestically, and we're making great progress on that. We're in late-stage discussions with a handful of different folks for hydrogen offtake. And then finally, the big element of the plan is not just to build, of course, one facility, but to develop a portfolio of As I said, we're almost at the stage of reaching FID on our first plant, and I'll talk about that on the next slide. We should be in good shape to commit to that project in approximately 60 days. Ultimately, our plan is not to build just a portfolio of projects, but a portfolio of clean hydrogen hubs to become the largest and most valuable clean hydrogen business in the United States. We do expect to capitalize Zero Parks as a separate entity to fund its development, and it's something that can ultimately be spun off of NFE in the future. Slide 24, our first facility. We're making great progress. It's a 100-megawatt green hydrogen facility that will be one of the largest of its kind in the United States. There's plenty of land available for expansion. It will be scalable up to a total of 500 megawatts of total capacity if we choose to go there. The plant's located in the U.S. Gulf Coast, a place where we have a fair amount of expertise and currently own other terminals through other fortress investments here. The site has proximity to some of the most significant industrial demand, a lot of consumers of hydrogen who are looking to convert from conventional hydrogen to green hydrogen, and it's connected to existing hydrogen pipeline infrastructure for efficient access to all of those customers. We're now finalizing a competitively priced long-term renewable power contract, and when we wrap that up, we should be good to go and reach FID on the project. The first plant is really a template for us. We're already working to secure additional sites that are close to industrial end users, all of which have access to long-term affordable renewable power and superior logistics, and hopefully we'll be able to make a couple of more announcements on some additional sites here in short order. Slide 25. So this is just kind of a summary of the economics of, you know, green hydrogen. The standard is a kilogram standard, you know, versus gallons. And the hydrogen, you know, business kilograms are the primary measure. Today it costs about $3 a kilogram to produce green hydrogen. That makes the business a marginally profitable business today. Green hydrogen sells for anywhere from $3 to $4 a kilogram. But we do think it's going to become a highly profitable business in the future. There are a lot of trends that are driving the cost of green hydrogen down over the next several years, a significant upside for us. And we don't need all of these things to happen, but if they do, the cost of hydrogen should go to about $1 a kilogram, and it would be a highly profitable business. Those three things are declining renewable energy costs. With the build-out of low-cost wind and solar capacity, we believe long-term low-cost renewable power will be available to us for a number of our facilities. Two, increasing electrolyzer efficiencies that drive down costs, especially with emerging technologies like proton exchange membrane electrolyzers that can operate on intermittent power profiles and require significantly less energy for compression as opposed to standard alkaline electrolyzers that often require consistent baseload source power. And then finally, additional government incentives. We may hear a few things about that in tonight's big speech, but we do expect that there will be a future climate bill sometime here in 2022. There's been discussion of up to $3 a kilogram of credits for green hydrogen producers. Our facility on the Gulf Coast would qualify for those credits. That would be a game changer economically for that facility and future facilities that we hope to build. Finally, on page 26, just a quick update, and here's what investors should expect from us in the near future. In the next 60 to 90 days, we expect to achieve FID and break ground on our first green hydrogen project in the U.S. As I said, it will be one of, if not the largest facility of its kind in the country. In the next six to nine months, we will be identifying and securing additional sites for future development, completing the design, engineering, and permits, and entering into partnerships with power technology and end-use partners. And then finally, ultimately, the plan is to develop a portfolio where our first project as well as our future projects will be funded through largely with low-cost tax exempt debt. That's one of the things that we look at when we're identifying sites, sites that are eligible for low-cost tax exempt debt. Ultimately, our plan is to create a valuable business within NFE that can be capitalized and separated in the future and positioned as one of the most valuable clean hydrogen businesses in the United States.

Thanks very much, Ken. Good morning, everyone. Before we dive in, let me take a quick moment and orientate everyone to our new and more fitting measure of financial performance, which is adjusted EBITDA. In our earnings release out yesterday and further outlined in our 10K, the adjusted EBITDA measure better reflects the cash flows of our business. In order to arrive at adjusted EBITDA, we use our total segment operating margin, less our regular cash SG&A. In using adjusted EBITDA, we can properly reflect the cash flows from our non-controlled subsidiaries like Celci and the Golar-Hilley FLNG assets. So on our report card on the left side of the page, 28, we had record revenues, record adjusted EBITDA, and record net income for both the fourth quarter and the full year 2021. As we look towards 2022, these results should increase as we have full-year contributions from GMLP and HIGO mergers, as well as the new terminals coming online in Brazil and Nicaragua. And this will grow further in 2023 as we deploy our FLNG assets. An important result of these improving financial measures is is the general credit quality of NFE. As most of you know, we were upgraded to BB minus with stable outlook from S&P in November. This is a major achievement for NFE and is an important step for us on our path to being an investment-grade business, which allows us to source cheaper, more efficient forms of capital and provides increased flexibility with suppliers. Turning your attention to slide 29 and our summary financial results. Revenue for the quarter was $808 million and over $1.7 billion for the year ended December 31. Adjusted EBITDA was $334 million for the fourth quarter and over $600 million for the full year. SG&A for Q4 was $39 million, and we expect to be able to drive this closer to $30 to $32 million per quarter going forward. Q4 saw the company produce our first quarterly positive net income of $151 million and earnings per share of 72 cents. And for the full year 2021, we had net income of $97 million, which equates to about $0.47 per share on a fully diluted basis. On page 30, we took a moment to include an update on our financial goals. These are pretty simple and straightforward, so I'll quickly move through them. But first, as you've heard us comment before, we are committed to our goal of becoming an investment-grade company, and we are well on our way to achieving investment-grade metrics. Obviously, we've been upgraded by S&P, and we're working with the other agencies on near-term upgrades as well. And we are on target for a three-times debt-to-adjusted EBITDA levels on corporate debt for 2022. Second, we continue to increase our liquidity. We have secured approval to increase our corporate revolver by $200 million to $400 million in total. And while that facility is largely undrawn, it provides access to efficient capital as we have new projects come online. Also, we are targeting an increase to our letter of credit facility to upsize that to $200 million nominally and expect to complete that effort in the next 30 days. Third, as we've mentioned in the past, we expect to fund our growth using cash flows from operations and strategic asset transactions. Our conversion of adjusted EBITDA to capital we can use for reinvestment is extraordinarily high. Going forward, we estimate approximately $200 million in interest expense an effective tax rate of around 18%, and minimal maintenance capex, which means we should have ample cash for new downstream terminals and additional FLNG assets. Turn to page 31, and we outline what we've said in the past, that we expect to fully fund our growth through internally generated capital. As I mentioned on the prior slide, our conversion of adjusted EBITDA to cash flow is very high. When we look into 2023, we expect that the $1.5 billion of adjusted EBITDA will result in over $1 billion of cash that can be used to grow the business or return to shareholders. Further, while we know we want to fully fund this business from cash flows from operations on a long-term basis, we clearly have some near-term opportunities that we are actively pursuing. These include the Jamalco CHP financing, which has $175 million funded to date, and the remaining $110 million expected to close by the end of the month. We have the Sergipe power plant asset, which we're currently in the market to sell and have received significant interest. And finally, the long-term essentiality of the ships to our terminal infrastructure, both from a regas and a storage asset standpoint, allows NFE to sign up to long-term charter agreements that provide tremendous value creation. We believe that between these three asset sales or financings, we can source $2 to $2.5 billion of additional capital that we can redeploy and materially accretive yields. And finally, if you turn to page 32, this is just a brief update on operating terminals. The takeaway here is that we know how to operate and we do it extremely well. This slide is a few examples of our asset optimization. I call it the NFE version of de-bottlenecking. But one project I wanted to highlight is the production of our Miami liquefier. We've been able to increase production out of our Miami facility to exceed the nameplate capacity of 100,000 gallons per day. We're using one of our Isoflex assets to transport isos to Jamaica to serve our direct-to-consumer business. The time and the cost to complete this operation has gone down with each round trip, and we're now estimating that we'll make an incremental $30 million on this project through the end of 2022. At our other terminals in Puerto Rico, Jamaica, and Mexico, we're executing maintenance events and strategic improvements to increase productivity and functionality for both NFE and our customers' benefit. A special thanks goes out to all of our incredible terminal and power plant operators in the field who work tirelessly to help us secure reliable gas and power supply to our customers. With that, I'll turn the call back over to Brett to begin our Q&A.

Thanks, Chris. We'll go ahead and take it into Q&A, Justin, from here.

Thank you. As a reminder to ask a question, you'll need to press star 1 on your telephone. To withdraw your question, press the pound key. Please stand by. We'll compile the Q&A roster. And, again, that is star 1 if you would like to ask a question. And our first question comes from Devin McDermott from Morgan Stanley. Your line is now open.

Hey, good morning. Thanks for taking my question. So I wanted to ask on FAST-LNG, and first on FAST-LNG-1, I was wondering if you could elaborate a little bit on how we should think about the economics or potential margin to NFE from these tolling agreements, and then also talk about some of the remaining steps to development, including how much capex still needs to be spent, how is that split between E&I and NFE?

Sure. We don't disclose specific terms of any of our contracts, including with this, but I can just give you a little bit of a brief run-through of it. Leasing agreements for this, there's a base level fee that we are charging, which is a tolling fee, which is fairly constant over time. In addition, as Cassandra said, we actually are taking half of the volumes of the production. Those two things for us combined we think gives us a very, very good return. So, you know, our return thresholds, as you know, are kind of mid-teens, mid-20s, mid-30s, depending on what the risk profile is. Obviously, given that this is an investment-grade counterparty and a very long-term, you know, contract, you know, it's on the lower end of that, but it is still, you know, very meaningful returns and very stable long-term returns. What it does for us in addition to providing returns is it provides the great financeability for the entire program as we now have long-term cash flows to put against our development of other FLNG units, and that helps us to develop these things in a very, very capital-efficient way. So I'm sorry for not answering the question directly, but we just don't think that being specific about any one contract is a good idea, and we're not going to change that here. So...

No, understood. And then maybe I can just follow up with a question on the second fast LNGs. I think in the release you talked about taking FID on that, and then in the comments just now talked about having the agreements there finalized, I think, next quarter was the message. Are you envisioning a similar tolling structure for that or any additional detail you can talk about for that project and what it looks like?

Yeah, we are. The second FLNG is, as we said, we're FID. Interesting question. So the marine infrastructure that we're using in the first FLNG are jack-up rigs. So we bought a handful of those for roughly $30 million, so basically it's scrap value. And that's what we cleaned off, and they're just – in fact, that process is just about done, and we'll start installation then of the liquefaction rigs. modules, and that will turn into the units that we then ship off to Congo here around the first of the year. For the second one, we actually recently agreed to buy two Savan ships. So they're deep water drilling ships, giant ships, big cylindrical ships that are great for both deep water and shallow water applications. Big deck space, I think, 100,000 square feet, you know, very, very heavy loads that they can support. And also at kind of bargain rates. I think we paid For the two of them, you know, $22 million for ships that cost individually, I think, north of $600 million to build. So obviously we're repurposing them. So we're using them for their profile. We think it's actually a great utilization of this. because it does give us the flexibility to either be in shallow water or in deep water. So in both cases, it's great. Cost for both of these is roughly the same. Main plate for the second facility, 1.4 million tons, which is what we are looking to achieve. We actually are in the middle of significant conversations, both on the tolling side, because there's a lot of interest in tolling, these assets, as well as looking at market opportunities. So Cassiandra mentioned Mauritania, which is a real focus of ours. There's also a handful of other places that we think are very interesting that we're deeply in negotiations as well. So one thing I will say is that I think that the program for us will continue to expand. I believe that FLNG in some form or another will become very much of a standard for offshore production around the world. So much as You know, you think of, you know, our partners and friends at GOLAR, they were really the pioneers in converting ships into FSRUs for, you know, terminal use, and that was a very novel approach 15 years ago. It's now the standard approach in the world. I think that repurposed, you know, marine infrastructure with modules such as we're using on FLNG-1, FLNG-2, and then FLNG-3 through 10 or whatever it ends up being will be something that is very, very standard around the world. So we think The IP that's being developed here for us will allow us to be a big, big participant in that market as it grows here substantially over the next few years. Great. Thanks for taking my questions.

And thank you. And our next question comes from Sean Morgan from Evercore. Your line is now open.

Hey, thanks. So just to follow up on, because I think investors are pretty excited about the vertical immigration story, and I just want to understand a little bit better that any field off the coast of Africa, that's a proven reserves that are currently completely undeveloped. And also, as part of that, what would it take, what are the next steps to sort of moving this from the HOA category, you know, the heads of agreement category to a firm contract? What needs to happen?

The Marine 12 field exists and is in production right now. It's a very, very substantial find in production by ENI. ENI is... in kind of every respect, the standard bearer for oil and gas production around Africa. And as Cassiandra said, in addition to being an E&P company, they actually are perhaps the most sophisticated offshore LNG producers in the world. They've built liquefaction themselves on the ground. They've built liquefaction in the forms of a ship. So having them sign up essentially for our technology, our solution, we think is a great endorsement and an appropriate one for what we've accomplished. That's great. They will make a substantial incremental investment in the field that will actually then produce more oil and associated gas. That's the gas that we will be then treating and turning into LNG on the facility. And we've had tremendous amounts of interaction with them over the course of the last handful of months to get to the place to sign an HOA, which we just announced, Their board, as I understand it, has approved the capital investment they've made in the field, so this is very much of a go zone for both of us. And now it's just simply a matter of documenting that properly, getting to final definitive documents, which we expect to happen in the next 30 days or so. But I would say from our perspective, this is a committed transaction, and I think from theirs as well, and we fully expect it to result in a definitive deal done here in the very near term.

Okay, thanks, Wes. And then Switching to the regas side, we talked a lot in the past about Ireland, and the volume opportunity from a regas perspective is large. And I know it's early days, but with all the change that's happening in sort of the European energy, I guess, stack related to what's happening with Russia and Ukraine, have you gotten any feelers from Ireland about maybe changing appetite or interest in pursuing a little bit more independent natural gas sourcing, as opposed to relying currently on England, as you've talked about in the past?

Yeah, I'll, Andrew, give you a brief update there. The answer, your answer is there's a tremendous amount of interest. But the project itself is one that we have been pursuing for, you know, a long period of time. We are actually in final stages of the Planning Commission, which is the regulatory body that we're dealing with. We are optimistic, very optimistic, that we'll get to a successful conclusion and get to one in the short term. What I think was a good idea, you know, several years ago when we started on this, has now become kind of a very, very good idea, a mandate, in effect, because not only is cost of energy a big issue for people over there, but energy security is a very, very big issue. You know, the bulk of Ireland's gas from outside the country comes from a single pipeline. This will be a second source of supply to the country, and that's obviously very meaningful diversification at this point. And so while we've gone through a very long and intensive process to get to this point, we feel like we're very close to the end of it. Marshall said Andrew. I know you lost thought.

Yeah, I'll be brief. Thanks for the question. But on the nuts and bolts of it, I think we've probably underplayed our 600 megawatts of power there as well. I think it's a market that's short everything, and I think that power plant is going to be kind of extremely valuable to be a real dispatchable resource with LNG. And then what I would say I think has changed is we always had a real – advantage on the transport cost and being an LNG terminal as opposed to gas coming in from the UK. I think Wes points out what's different now, which is the premium for doing kind of long-term off-take contracts. So, you know, people obviously now are as worried about price as they are about kind of security of supply. And I think that is really going to kind of dictate our strategy in Ireland, which is going to basically, you know, I think show up in all kind of facets of that long-term contract, short-term contract, and then, of course, power. And so I'm very excited to get the planning board approval there and start to talk more about our commercial strategy.

Okay. Thanks, Andrew, and thanks, Wes. You're welcome.

Aaron, thank you. And our next question comes from Ben Nolan from Stiefel. Your line is now open.

Yeah, thanks. Hey, good morning, and congrats on the results. I wanted to talk a little bit about the net long gas that you have at the moment. Obviously, that was very impactful on the fourth quarter. Can you maybe talk about sort of clearly international energy prices remain elevated? Can you maybe talk about how we should expect that to impact your profitability and your sort of net long position for the next quarter or two or however long, let's say quarter or two?

Sure, Ben. Well, thanks for the question. The focus of our business with respect to the core business on our customer side is to largely match customer demand with our supply on the gas side, and that's what we have done. We did manage to have a modestly long bias as we went into this and through a lot of actually hard work of Cassandro and his groups. And there's obviously a lot of logistics involved and a lot of moving assets and volumes around. And with a modest amount of long positions, we actually realized some very good returns. And that's part of the good news that we had in the fourth quarter. Our forecast for next year, as I said, is $1 billion plus. And with respect to first, the billion, As I said, a large, large percentage of that is already basically baked. We've got customer volumes. We have our portfolio of gas. We have our logistics costs. And so we know with a high degree of certainty that we're going to achieve something very close to that with no incremental growth. And so that is the kind of bond-like downside that I would describe of the structure of the business. On the flip side... And this is particularly true starting in 2023 when we have FLNG volumes. We have then the incremental upside of being able to take, you know, open positions and convert them into market cargoes to the extent that the market is favorable. And that's what can lead to these, you know, very extraordinary, you know, upsides. I mean, I think it really is a case of, you know, we're headed towards a billion plus this year, a billion and a half plus next year on the base case. And as I walk through the math, with one liquefier up and running with the market where it is today, it's an incremental billion, billion and a half, $2 billion. These are obviously extraordinary numbers. and it's what I think gives us a profile which is unlike any other company I'm aware of in the energy space. So I think it's an extraordinary time. You can't predict that, but I think that the most important takeaway for me as I looked at the architecture of the business is that what we have done, in effect, by creating this downstream portfolio that acts as a shock absorber so that to the extent that we have extra market volumes, we're not forced to just go sell them in the marketplace. We can go sell them to our value-added customers and power plants merchant plans, downstream customers. We spent $8.5 billion in the infrastructure to develop that as our downside, and that is a very, very meaningful shock absorber to the system that gives us really the ability to then take market-long positions, market volumes into the portfolio, and to the extent that there's a disruption, you harvest that on the other side. So bond-like downside, equity-like upside is how I think of the business. I think it's an extraordinary opportunity. Architecture, it's one that we have developed organically. We didn't have this view when I started it eight years ago, but part of being in the business is every day you learn something and try and profit from those learnings, and I think that the construction we've got right now is extraordinary.

Okay, and I guess my point is that there should continue to be an element of that in the first and second quarter here. Is that fair, similar to the way it was in the fourth quarter? Yeah, very much so. Okay. And then for my second question, on the FLNG unit, you guys are tentatively taking half of the offtake here on market-based rates. I was wondering if you could just maybe talk to sort of what is the basis for those rates? I mean, you're primarily buying everything in Henry Hub. Obviously, this is not anywhere close to Henry Hub. So are you just buying it sort of a TTF or an oil-based? How exactly should we think about the math on that?

Yeah, it's actually a blend of all these three things. We really constructed with E&I a portfolio approach to actually look at the three main indices, Henry Hub, TTF, and JKM, and try to construct a purchase price for us to buy on something that approximates market. Today, those would be at attractive levels, but they're really intended to be market prices in general, so it's not above the market or below the market when it's intended to be at the market. That was the nature of what we're trying to do. The significant aspect of it, Ben, that I would say is we're buying very long-term volumes without posting any incremental credit. So that's our goal, by the way, as a company. So we've gone from a single B company to a double B company. We think we're well on our way to be an investment-grade company. That is very important in a nuanced way in terms of accessing long-term supply without posting egregious amounts of credit. And so that's a big, big component of our strategy. That's why we want to become investment-grade, and we will become investment-grade in our view, and that's what gives us the access to supply. Because one of the nuances of this business is that as you build this up from scratch, having access to long-term supply dictates that you post a lot of credit, and that's not a great strategy. So we've done, I think, a very good job of kind of bootstrapping our way to a place where we're within line of sight of being investment grade. This is another version of that, where we're basically taking off long-term volumes without posting credit at market prices, which we think is a great, great benefit. Perfect. I appreciate it. Thanks for taking my questions.

Thank you. And our next question comes from Craig Shear from Tule Brothers. Your line is now open.

Good morning. Congratulations on the strong quarter and excellent guidance this year and next. So I want to focus a little on the FLNG some more. So you mentioned, you know, who knows, three to ten projects or whatever may come. So my first question is, how rapid do you think the pace of FIDs could be? Could you, because of market conditions, not worry at all about your downstream needs for now and be happy with creating low-cost opportunities on the upstream, even if it far exceeds for now your downstream own needs and maybe have three or four FIDs by the end of the year or early next. And then my other question or comment, I'm taken by the point that you just acquired literally floating assets to put this design onto. One of the arguments against your jack-up rig approach was that it doesn't fit for every coast in the world. it sounds like what you're doing now can pretty much fit any location in the world where stranded reserves can get to a coast. Can you implement that at the same pace as whatever, 20 months plus, as what you're planning on your jackups?

The short answer to the question is yes. And we've long had the view that there were multiple sources of marine infrastructure which were suitable. So the Jacob rigs are the first place that we started. We think it's entirely appropriate and the right one for the Congo application and would be in other shallow water applications. The Savan ships became available. We think that they are tremendous pieces of infrastructure. They're incredibly stable. They're designed to actually be deployed. I'm doing a fairly... technical solution, which is drilling in very, very deep water and rough water. So they're entirely capable of actually being hooked up to a gas source and liquefying in that same location. So we feel great about that. In terms of the FID, so we went FID on our second FLNG. We've got the Savon rig, which we're going to basically clean up and use that and deploy the equipment in a very similar way to what we're doing on FLNG-1. we do think that there are many, many uses for our products around the world and having flexibility both to be an equipment provider to some of the big oil companies that have got gas reserves. We think that's a good profile. It provides good long-term stable cash flows. Those are great relationships. That's the E&I equivalent, and there are others that are similar to that. And then also looking for merchant opportunities. And I said we've identified the one. We did sign the MOU as... as Cassandra said, at the end of the year with the Mauritania folks, and we've been there recently. We're very optimistic about that as a project, but there's a handful of other things that we think are out there as well. I mean, my general pessimism about the supply for the market comes from the fact that we went FID on this first project January 22nd, a year ago. I thought that we would end up with a gas source sooner than we did, is the actual truth. I think I've been in 19 countries have traveled about 170 days between then and now. So we've been to a lot of places. We've talked to a lot of people and seen a lot of things. And while I think there obviously are very substantial gas reserves that exist around the world, there are fewer situations that are a perfect fit for what we need than what I had thought. And that doesn't mean that I'm long-term pessimistic about it, but it does make me think that actually the sources are important, and that's why having flexibility about being an equipment provider as well as a merchant provider, they're both great solutions for us. And while I don't have a specific number of things we want to do, I think the important point is that we view this to be an increment and an add-on to our gas supply to really complement our base long-term relationships with producers. So we're not looking to become a large producer ourselves. We think on the margin these cash flows are valuable to us. We think on the margin these market volumes are very valuable to us. And so I think it's a great complement to what is an existing base of business.

Thank you.

And thank you. And our next question comes from Craig Lewis from BTIG. Your line is now open. Craig, if your line's on mute, could you please unmute it? Again, Craig, if your line's on mute, could you please unmute it?

That's correct. Justin, I think we might have lost Craig, so we might just go ahead and hand it back over to Wes to make a final comment.

And I am showing no further questions. I would now like to turn the call back over to Wes Eden for closing remarks.

Great. Thanks, everyone, for dialing in. It's great to get you an update on the quarter and the year and the prospects we've got for the future. It's a remarkable business that is in the right place at the right time in our view. So it should be a very interesting year. Thanks very much. We look forward to talking to you soon.

This concludes today's conference call. Thank you for participating. You may now disconnect.