New Fortress Energy Inc.

Good day and welcome to the New Fortress Energy fourth quarter 2022 earnings conference call. Today's conference is being recorded. At this time, I would like to turn the conference over to Mr. Patrick Hughes, head of investor relations. Please go ahead, sir.

Thank you, Jess, and good morning, everyone. Thanks for joining today's conference call, during which we will discuss our fourth quarter and full year 2022 results, as well as recent highlights and the very promising outlook for our business. As Jess said, the call is being recorded and will be available by replay on the Investors section of our website under the subheading Events and Presentations. In fact, at that same location on our website, you'll find a press release and the corresponding presentation we're going to step through today. As we proceed through the discussion with Wes and the team, we'll be referring to that presentation. In the presentation, you'll see 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 within our SEC filings. Now let's get underway with the call. This is Patrick Hughes. I look after investor relations here at New Fortress. Joining me today are Wes Edens, our chairman and chief executive officer, Chris Junta, our chief financial officer, and Andrew Deedy and other members of our senior leadership team. Wes, over to you.

Great. Thanks. Welcome everyone. And format as usual, we're going to flip through the presentation that we posted. So let's just start at the beginning. So page three. 2022 was a very, very good year for the company. Very volatile markets overall in the world. And we delivered, you know, very solid results. Nearly two times the EBITDA and free cash flow of 2021. Probably more importantly, the forecast that we have for the upcoming year is roughly two times the results of 2021 and 22. So very, very good financial results. And not only are the absolute numbers good, but the quality of earnings continues to improve. More and more of our earnings comes from our downstream activities. Those are the long-term data cash flows that actually are Easy to predict and easy to model for all of you, and thus for us. So a very, very good start to the year. Next page, you know, notable highlights. There's a handful that really stand out. Top of the list for us is we signed a contract in the quarter for the power generation assets of PREPA. So PREPA is the utility in Puerto Rico that services the whole island. An effort was made by them several years ago to privatize the two main parts of their business, being number one, the transmission and distribution, which they did about a year and a half ago. Number two was the management of the kind of base load power units, 3,600 megawatts of power in total, 10 units that we actually competed for and were successful for and took over. The contract is a 10-year contract. base fee of just over $20 million. We profit share basically with cost savings of the island up to a cap of $100 million. So there's a substantial amount of upside to the extent that we were able to do as we expect to do, which is cut down the cost of generation for the island. When I took this over, we sat with the governor and other management folks in Puerto Rico in a press conference, basically said our two scorecards for us on the island are number one, the reliability of the service, and number two, the cost of the service. It couldn't be more basic than that. And we said that's what we want to be held accountable for, that's what we intend to focus on, and we think that there is a tremendous amount of upside for us to perform on both of those metrics, perform for the people of Puerto Rico, make their services not shut off, make the load shed, make the cost of it go down, and that's what we want to do. In addition to the This contract, we think there's lots and lots of incremental opportunities on the downstream side, on the development side and whatnot. So this just further solidifies what we think is a great foundational asset for us, the terminal we built down there. actually turned it on in the middle of COVID. So this time of year is reminiscent to me of what it was like three years ago when we had people working in the middle of COVID to get that thing up and running. So it feels great about that, but there's a lot more to come and we'll be talking to you. The timing of this is we expect to be fully mobilized and take over the service sometime around mid-year. So hopefully a lot more to talk about there in the future. Number two, the terminals. So terminals are the core of our business. It's the backbone of our business. We are basically completed or near complete on two major Brazil terminals. Andrew Didi will talk about that in just a second. These are significant in that they are terminals that are located in areas that have, we think, massive amounts of opportunity. Santa Catarina in the south is just about complete. Bacarena in the north is basically complete. We have a big baseload customer up there, two baseload customers up there, in the form of Norse Hydro, which will turn on at the end of this year, as well as a big power plant that we're building. But I'll leave those details to Andrew. But it just continues the march of significant downstream assets for us. That's what we think is our most compelling competitive advantage versus other folks. It takes a lot of time and effort to get to these places, so we feel great about that. But we've got significant opportunities to turn on downstream assets in Puerto Rico, in Mexico, in Nicaragua, and now in Brazil, as well as other geographies that we're pursuing. But this is all about the execution of our base level business, and getting these terminals up and running is a big part of it. Liquifiers, we've talked about a lot. We hosted an investor day down at the end of last year. The first one is basically near completion. Chris will give us an update on that. But the first one is the most important. It's basically the way to fully integrate our business. It's the way to kind of get proof of concept of accessing gas in an offshore capacity. So lots more to talk about with that. But we've made significant progress. And this year we've kind of shifted our focus from the mechanical completion of the unit, which is close, to now the deployment of it, the transfer of it, and of course the operations of it. Lastly, shareholders, you know, the business creates a significant amount of cash flow that affords us the luxury of returning capital to shareholders. I think keeping the company appropriately capitalized but also lean is the right way to make good judgments about incremental opportunities. We expect to continue to generate significant amounts of excess capital And as we do, through a combination of either dividends or stock buybacks, or quite possibly both, as we did in the last 12 months, we'll return capital as we see fit to shareholders. So page five, just a bit about the macro. And Andrew will talk about this in some detail. I don't have to tell anybody in the call, but 2022 was a record year of volatility in the LNG markets. The markets, if you go back and look at the yellow box on the left-hand side, the market was already dislocated at the time that there was the invasion in the Ukraine. So there had already been a significant move up in price that was exacerbated by the blow-up of the Russian pipelines, all the disorder that happened in Europe as a result. That has abated substantially. And what you see on the right-hand side is really a combination of two things. Significant fuel switchings, number one. Number two is just fortuitous warm weather. It's the warmest weather in Europe in the last 50 years or so in the wintertime. So they're the beneficiary of just good fortune, which is great. But what has happened is that the prices between all the alternative fuels, so gas, diesel, coal, have really converged. One thing that is very clear, there was a lot of debate over whether Europe would fuel switch or not back to the dirtier fuels like coal, I think that that debate has been settled. I think last year will end up being the most prolific year of burning coal in Europe ever. When you had a pick between energy security And in the environment, there's no question which way they went. And I think that that's a theme more broadly across the world. Certainly in China, that has also been the case, and Andrew can talk about that a little bit. But the net effect of this for us is that lower prices and converged prices are good for our downstream business. $50 TTF, while it sounds great if you're in the LNG business, is actually not great for your customers. You know, a good rule of thumb is that take that gas price, multiply it times six, that gives you the oil equivalent. So $50 times six is the equivalent of a $300 barrel of oil. If that sounds expensive and unaffordable, it is actually expensive and unaffordable. So having to come back down to a more reasonable level, albeit at a higher price point than where we started, is very, very productive for our business because it becomes much more relatable to our customers, and power and gas solutions now move in line with other fuel sources and that actually is really, really good for our downstream business. So I guess the last thing I'd say is the crisis is not over. The winter of 2023 is still in front of us. This winter is not yet over. We're already talking about next winter. But I think, again, weather, fuel switching, there's big activity levels in Europe to try and add more and more terminals, but they have a big hole to fill, and we still think that there's a significant possibility of some real dislocations in the coming year. So lastly, my last page before I flip over here is just the goals for 2023. Couldn't be more simple from my standpoint. 2023 is really the year to execute. We've nearly doubled the supply that we have in our portfolio, as you can see on the left-hand side here, over a couple-year period, and have matched that with incremental demand. So just to read through that chart on number one, supply was 74 TBTUs in 2021, We are forecasting that to be 184 in 2024, so more than double over that three-year period. Demand, which was fully matched in 2021, we also expect to double. So the goal, the yellow circles in the bottom there show the open volumes that we've got. So you can see anywhere from 15% to 20% of our portfolio is open at the moment. I get a lot of questions about our exposures to market prices, especially with all the volatility and whatnot. Our goal is to largely be matched. It's impossible to be precisely matched. There's always going to be a bias. My bias is always going to be to have a long bias. You need to have inventory to sell to customers that gives you an ax to go and talk to them about gas and power. But we want to have that be as moderate as possible. So kind of 15%, 20% is the size of that. And you'll see that as the year goes on and as next year goes on, we're trying to minimize this exposure to volatility by focusing on our terminals, customers, and operations. downstream business, downstream power, that is our core business that we manage here, and we feel really good about it. The next step for us on the gas and power side is we are very close to buying our first portfolio of really modular units of power, and so that's something that, if it goes as planned, we could be talking about as soon as the next couple of days. The goal for that is to basically give people, different countries and utilities and whatnot, access to gas and power on an expedited basis. Time is the enemy of all these problems. And so when you see, there's a big article in the paper this morning about all the load shedding and the problems that ESCOM has faced in South Africa. That's a good example of it. And the challenge for a lot of those places is not only do they have a problem with the lack of power, but they have a problem with it takes too long then to give a viable solution for it. We think the right solution for that is to kind of even more fully integrate by bringing power into our portfolio, give us the ability to provide solutions in months, not years, as a step towards longer-term solutions that are more efficient. So lots more about that to come. It's just a general marker for you to keep track of. If you see something announced by us that means that we've been successful about this, we feel pretty good about that. But there's a lot of different applications for that where I think it makes a lot of sense. Right-hand side, and the last thing, the liquefiers, as I said, we're closing in on mechanical completion. Transport installation operations now become the things that we're very focused on. The timeline is short, so we're in We've gone from triple-digit days to double-digit days, and so we have, as Chris has talked about before, we have a daily call on this, and our teams are working very, very hard on this. You know, the first one up and running is a massive accomplishment for the company and something we look forward to. Not only is it the first step towards a vertical integration of the business, but it also is a real proof of concept of these stranded and offshore gas assets that Not only for us, but for others we think are big opportunities to do something with. So lots to focus on, but these are the two main areas. So with that, let me turn it over to Andrew.