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New Fortress Energy Inc.
5/14/2025
Good day and welcome to the NFE First Quarter 2025 earnings call. Today's conference is being recorded. At this time I will be handing the call over to Matt Reinhard, Managing Director for Introductory Remarks.
Good afternoon, everyone. Thank you for joining today's conference call where we will be discussing our first quarter 2025 results. The call is being recorded and will be available by replay on the Investors section of our website under the subheading Events and Presentations. At the same location you will find a presentation that we will walk through on today's call. Please review this as it includes important information on forward-looking statements and non-GAAP measures. With that, let me hand the call over to our Chairman and CEO, Wes Edens. Wes?
Great, thanks Matt. Welcome everyone. So, lots to go through here this afternoon and I'll try and make my own statements brief. Start with the core earnings for the quarter. We're very much in line with expectation. If you look at the yellow boxes on the piece of paper you can see that post the first quarter of 24, which is the last quarter that we had the FEMA plants online in Puerto Rico, we've had basically extremely consistent core earnings, 110, 177, but then 109, 116, so very much in line with that. Our forecast for the core earnings for the remainder of the year are basically very much in line with what this is for the first half and then accelerating the second half as we start to bring assets online, in particular those assets in Brazil. That said, the EBITDA that we had forecast for the quarter were less than that simply because we did not have any one-off results to add to it. Again, if you look at our numbers historically, we've had a combination of core results plus one-off results and we simply didn't have any one-off results this quarter. That said, we expect EBITDA plus gains to be $1.25 to $1.5 billion for the year, which is higher than our previous estimate. We're actually off to quite a good start in that regard, in particular when you consider the events of just today. We already had meaningful gains with our Jamaica sale, which I'll talk about in a second, and there's a handful of other things that are going to be significant events for us to add to our core events, but our goal is the quality versus quantity of the earnings. In particular, what we are looking to generate for shareholders and for our constituents is repeatable, easy to understand, and very long duration cash flows. I'll explain what the portfolio looks like because we have a lot of those to offer. Let's flip to page number four. Material events that are in front of us, first and foremost is the Jamaica sale. $1.055 billion closed today just a few hours ago. That translates into about $800 million in net proceeds, a $430 million gain. So again, a good start at whacking at the one-off gains that we expect to generate for the course of the year. The FEMA claim is, as we originally had filed it with FEMA, $659 million. There's a very high degree of engagement with the Army Corps, which is our prime contractor, Weston, that is making a lot of progress. And we expect resolution of this claim at some point in the near term. As with any proceeding with the government, it's impossible to really forecast accurately either the time or the amount of that, but we remain optimistic about what our position is as we know what we are owed. So the $659 million reflects that. On the FSRU subcharters, we basically had a handful of FSRUs that were surplus to our portfolio that we basically took back and then re-let them at a higher rate to third parties. The Eskimo, the Frieze, and then there's two others that are in there. The total nominal dollars are shown in the line below. So $143 million in profit, $59 million, $110 million at 312. They range in periods from anywhere from three to 10 years. The present value at a 10% discount rate, just to give context to it, is $236 million. So these are assets we can either collect month by month over the next three, five, 10 years, or we can look to sell them and generate a one-time gain, something we're evaluating. Lastly, the excess cargo sale that we conducted at the end of last year and reported the result in the fourth quarter, which again, if you look at the previous page, the excess cargo is $296 million. These were excess cargoes that we had. We were concerned that actually the market might decline for value. That turned out to be prophetic, because that's exactly what happened. We sold them so that really the gain from them was the one-time gain from last year. There's another $125 million to be collected, primarily in the periods of 26 and 27 and stub in 28. So those are the big events for us. There's others as well, but hopefully this gives you some useful context in evaluating the $1.25 to $1.5 billion EBITDA, or gain estimates we're providing for the year. Page number five. So our near-term focus has been on asset sales, on debt reduction, and deleveraging. And the case study is the sale that we just concluded in Jamaica. If you look at the timeline below, you can see we listed the property for sale in the fourth quarter of 2024. We conducted our second round bid and went into down to five bidders in the first quarter. We chose to work with Accelerate exclusively in March, and we conclude the sale now. Basically, both the timing and the amount that we had forecast that we've exceeded. So we did it in a shorter period of time and at a higher price than what we had originally forecast. So we feel great about that. A little bit on Jamaica above it. This is the first market that we had started to conduct business in, and it is a great market. We ended up generating $125 million in EBITDA. Stable, mature market with long-term contracts with a 20-year duration. So a significant portion of them were supplying Jamaica's gas and power needs. So roughly 60 percent of the island's gas or power we supply. They still think there are significant remaining growth opportunities in Jamaica for bunkering and expansion. So we feel great about the asset that we sold onto Accelerate. But from our standpoint, this is a meaningful deleveraging event for us. So sale price of $1 billion, 0.55. $227 million in debt repayment from the director of Malco Asset and the power plant. They estimated $50 million in fees. The net proceeds is $778 million. Chris will talk about that later. Page number six. Following the Jamaica sale, our goals are very, very clear. Number one, first and foremost, is to simplify the balance sheet and do so by extending the duration to match underlying assets and lower our debt costs. To do so, we are focused on moving from a corporate debt structure to one which is more asset-level financing. I will describe that in some detail. This is something we've had a lot of experience about before. And I think in many cases, when you have a capital structure that becomes too complex or too difficult for people to interpret, the underlying asset value can become obscured by it and you get kind of the worst of all worlds. And so what we're very focused on is isolating those assets that have the long duration, the credit quality, the repeatability that we know to be the most, make them the most valuable, expose those in a financing context and generate the right result for that. So you look at page number seven, this is a good example of what I mean. Basically, what we have done is matched our long-term supply in our portfolio with our FL&G unit, which is performing terrifically, and then two long-term contracts with Venture Global and matched them up side by side with those contracts that are our long-term demand. So I've listed the five that are the most notable. There are smaller ones as well, but these are the ones that are the most meaningful. And basically, you can see on the supply side, we have 215 TBTUs of supply for a term of 20 years. On the demand side, this handful of the large contracts is for 20 years as well on average. And it ranges from BBB, BBB+, BBB-, BBB+, in the one case. But they're generally high credit quality assets, very long-term duration, and these are their stated contract terms. And simply subtracting the cost of supply from the value of the demand, you can see these assets alone generate $500 million in annual margin. These are not assets that we are aspirational about building or assets that we are talking about pursuing or whatever. This really represents the core of the portfolio. And the way I think of it is we're utilizing about 50% of our total supply portfolio, of the 215. This is committed on 109 TBTUs of it. And if we're able to replicate our activities on the second half of this, a term similar to the first half, we can generate $500 million that grows to a billion dollars annual margin with very, very long duration. And with that, that presents tremendous financing opportunities. It also presents great value to shareholders. And that's what our focus is. Phase number eight is that in order to close the loop and finance this efficiently, you need to control every aspect of the logistics chain, supply, demand, terminal, ships, and overall logistics. Fortunately, we control all that. So the four terminals that are relevant in this discussion is the La Paz terminal in Mexico, Puerto Sandino in Nicaragua, the Bacarena terminal in Brazil, and the San Juan terminal in San Juan, Puerto Rico. We have these terminals that we own and control essentially and have developed. In addition, we have a dedicated fleet of terminal ships and transport ships to basically both supply to the locations, but then also supply then onto the land. So basically, you've connected the dots between every aspect of it. And so the combination of the long-term cash flows, credit quality, duration, in particular of this, the 20-year duration, is what actually gives us so much optimism that there's meaningful things to do here. There's a reason why Charlie Munger used to carry around the compounding tables in his back pocket. 20 years of repeatable cash flows is an incredibly powerful combination. And that's what we have already in hand. And we think the prospects for adding to it are terrific. So on the growth side, two elements that we're focused on is Brazil and Puerto Rico. And I'm joined here in New York by Leandra and Jeremy from our Brazil team. They'll run the Brazil for us. And they can give some context both on what we have accomplished and what we're focused on. Carlos.
Thanks a lot, Wes. Good afternoon, everyone. I'm pleased to be discussing our progress and outlook in Brazil. Over the past few years, we've made significant and strategic investments in the country, laying the foundation for a high-value and resilient business. After years of dedicated work and over billions of investments, we are finally approaching the full commercial operation date of our key assets. One of our projects, a 624 megawatts combined cycle power plant, is expected to reach COD in the second half of this year, while the second power plant, a 1.6 gigawatt open cycle plant, is on track for COD by mid-next year. This is a key moment for us. These investments are converting into a long-term contracted asset. And we're very excited to be part of this transformation at NFE Brazil. In this slide number 10, I wanted to highlight the Bacarena Complex and its associated long-term contracts. These contracts, all of them are inflation-linked. They are protected from gas price volatility and backed by strong credit ratings, providing stable and predictable cash flows for our business. Starting with the North Hydro contract, we began deliveries in March 2024 under a 15-year gas supply agreement, which is indexed to Henry Hub plus a $604 per million BTU adder, with part of the adder adjusted by US CPI on a yearly basis. As shown in these slides, the contract covers approximately 30TBTUs a year with a 90% taker pay. For Selba to our 624 megawatt plant, we have a 25-year PPA with 100% taker pay during the second semester of each year, starting from COD, expected to occur in the second semester of the year. The gas volumes here is approximately 18TBTUs a year, considering only the taker pay, with price indexed to 91% of JKM plus another of $3.36 per million BTU, which is also adjusted by US CPI on a yearly basis. Finally, at Porto San, our 1.6 gigawatt plant, we secured this 15-year capacity contract with the National Grid, which pays approximately $280 million for the availability of the plant, plus a dispatch component whenever the plant produces power. Assuming a 10% dispatch rate, it would translate into an approximately 12TBTUs a year of additional gas demand at the premium gas prices. These projects are secured by strong counterparies, as mentioned by WES, which demonstrates how robust our commercial foundation is. I will hand it over to Jeremy to walk you through the construction update.
Good afternoon, everybody. It's my pleasure to give you a very positive construction update this quarter. Since we last spoke on our Selba power plant, as Leandro just mentioned, the 624-megawatt combined cycle plant, since our last update, we've increased general progress by over 7%. On Porto San, we've increased the progress by over 15%. That brings both of our plants now to a 95% completion for Selba, and a over 54% completion for Porto San. Those major milestones that we've achieved are actually in spite of the fact that in this previous quarter, we had a very intense rainy season to work through. In a couple of the months of the quarter, we had near 30-year historical levels of precipitation. In the case of Porto San, which is in a largely civil construction phase, that was a significant achievement for the project team to not only maintain the float and the schedule improvement that we have, but also actually increase it a little bit. Back to Selba 2 on the combined cycle plant, at 95%, we're nearing a very important milestone of mechanical completion. We're in a phase right now, a very critical phase of the high-pressure hydro testing. We've tested the steam system up to 96 bar on our way to 300 bar eventually. Another important milestone of the 95% is that it means a different level of effort at our site. The 95% mechanical completion milestone effectively means that we can transfer the main level of effort from our construction contractor over to our power core provider, Mitsubishi, and allow them to, after first fire, which we expect at first fire of the gas turbine, which we expect at the end of August, to take over the level of effort at site and to start generating commissioning power. On Porto San, although we are in a civil construction phase, we did advance it significantly during this last quarter. One interesting note is, if you recall the last update, we showed you photos of gas turbines in transit to the site. As you see here in our update on slide 11, we're showing you photos of gas turbines installed at the site. We actually have two out of the three turbines that are already manufactured, we have them installed at the site. The third gas turbine will be arriving at the end of the month, and we're also in the process of installing two of the three electric generators. We have the primary ability that we've leveraged in our schedule, being more than 10% ahead of the planned completion percentage at this point, is that our main equipment has arrived well ahead of the planned delivery dates. This derists our schedule completely and helps us to maintain a 10% float in our completion plan at this point. Importantly, in this past quarter since we last spoke, we've also commenced work on our 500k KV transmission line and the substation, where our GIS will arrive later this year to be installed. Just before I hand back to Leandro for the power auctions, one interesting note on Porto San, as you recall, this project is one that we procured from another site and transferred it to our Barcarina facility with some milestones that were delayed from the original project developer. We've actually transitioned to the schedule advancement to such a point that we're now accomplishing some of the original developer's milestones that were promised to the regulators in Brazil, although they were more than a year into development when we procured this project. So we'll look forward to another successful quarter and get back to you at that time.
Thanks Leandro. Thank you Jeremy. Turning to slide number 12, I want to discuss the market outlook and the upcoming opportunities with a focus on the capacity auction expected later this year. First of all, I mean probably most of you heard about it, the auction that was originally scheduled to happen in June was cancelled and we believe this is a temporary delay actually. The Ministry of Mines and Energy has stated publicly that he expects the auction to take place in 2025 and we expect rules to provide more clarity and fairness to the competition. Just to make it clear, the fundamentals haven't changed. Brazil still needs to contract and now we estimate 10 to 15 gigawatts of capacity. The PPAs are expected to have CODs between 2026 and 2030 for both brownfields and greenfield assets and we'll offer capacity payments similar to Porto San with 15 year terms for greenfield projects and gas indexes to JKM and TTF. While the postponement of the auction created some short-term noise in the country, we are confident in the structural needs for the auction. There is no question that Brazil needs the power and if this auction doesn't happen, the system could face real operational challenges. We're fully prepared as NFE Brazil. We are positioned to register over two gigawatts of projects in the upcoming auction. Additionally, more than three gigawatts of third parties projects have requested gas proposals from us, showing clear market confidence and the competitiveness of our platform in Brazil. In short, we see a path for meaningful expansion of our business in Brazil with strong counter parties, solid regulatory support and rising demands for our integrated LNG2 power model. Thank you very much and I want to hand it over to Wes.
Wes Thank you, Leandro. Let me briefly talk about Puerto Rico because it's another big market for us with a lot of activity. Just a bit of a situational overview of what the energy system in Puerto Rico looks like. It's a very under-invested, antiquated system that is in great need of repair and great need of new investment, in particular on the new generation side. There's been no power plants built that are material in the last 30 years, so the average power plant is quite old, which rotating equipment is really not to operate efficiently for 40, 50, 60 years. There's a lot of challenges in terms of the fleet that exists. Over 50% of it runs on some combination of oil and diesel. Contrast that to the mainland United States where less than 1% of our electricity is operated on diesel. You can see there's a huge difference between utilities that we find in the mainland and what we see there. What that means is that the plan and the needs in the business in Puerto Rico on the energy side, we think are extremely clear. Number one, there's a lack of sufficient reserve, which hence means that they need temporary power, which is exactly what they have done in terms of going out for a for temporary power. Especially with the upcoming summer and the demands on the system that happen when it gets hotter down there and of course hurricane season is around the corner, there's a concern that they lack adequate reserve from some of the plants being offline, and so they're trying to buttress that by holding an RFP for temporary power. Number two is there is a total of about 925 megawatts of power today that runs on diesel that can be readily converted to natural gas. That represents roughly a $300 million difference in fuel costs between burning the diesel and burning the natural gas for no benefit whatsoever. And so our view is that in the context of the RFP that is being talked about for gas supply, it should include a provision to also convert those to other assets. We list the four that are on here. There's the MiGWas 200 megawatt plant, Campolache 240 megawatts, the three Pratt and Whitney megagens that are in Palo Seco, and the Aguirre 1 and 2, which is a combined cycle plant in the south. All those can be readily converted and simply doing so is relatively low cost to the system and can generate very, very meaningful decreases in fuel costs to them, upwards of $300 million a year. Lastly is there's been no new power generation built in the last 30 years. There was a plant that was agreed by the government in early January. It was the first new PPA that's been signed in some time. We are the gas provider for that in the long term. And so we think that basically building new generation is really what will cure what ails the system for the most part, because the lack of reliability and the inefficiency of the system is really, really a function of these old power plants. And right now there are plans underway by PREPA to address these issues by running the RFPs for temporary power, running RFP for gas supply, and running an RFP for new generation, all of which we think are interesting opportunities and situations which we will certainly take a hard look at. Our infrastructure in San Juan has had a very good quarter. This is the first time that we got a large ship. So basically we're able to replace the flotilla of kind of smaller logistical ships with a larger ship with the channel widening that the Army Corps had engaged in. That actually allows us to be more efficient in bringing in more supply. So basically cuts our expenses, but it also greatly increases the capacity of that terminal, which is a good thing. So with that, let me turn it over to Chris.
Great. Thanks, Wes. Appreciate the opportunity to talk to everybody today. First, let me start with giving a little bit more color regarding the two recent FTC filings that we submitted earlier this week. On Monday, we filed an AK outlining an update to the use of proceeds of the Jamaica sale, which I'll walk through shortly. And yesterday we filed a notification of late filing under rule 12B25, which allows the company to file our full form 10Q no later than Monday the 19th. The reason for the late filing is twofold. First, we wanted to be able to announce the consummation of the sale of the Jamaica business, including describing for investors the use of proceeds. And second, with the Jamaica asset sale proceeds in hand, we can report an improved liquidity prediction and reduction of the going concern risk that was included in the 10K. So now turning to slide 15, we've outlined both the cash and the accounting treatment of the Jamaica transaction. On the left side of the page, we show the proceeds waterfall and on the right side, the gain we will recognize in the second quarter. Now, prior to the most recent amendment of the credit agreement, there was a requirement to use 75% of the proceeds of material asset sales to pay down super priority debt, which included the revolving credit facility, the term loans A and B and the new 2029 notes. However, we were able to negotiate an agreement with the revolving credit facility lenders to waive this asset sale proceeds waterfall in exchange for the early pay down of the September amortization payment of $270 million. In addition, we also amended the term loan A where we agreed to a modest pay down of $55 million, which is in line with what they would have received under the waterfall anyway. Further, we eliminated the debt to capitalization covenant in this facility and we matched the financial covenants of that loan to those in the revolving credit facility, none of which will be tested until September 30th of this year. As a result of these amendments, we were able to retain almost $400 million of proceeds after tax that can be used to solve in part, nearer term maturities, including the 2026 notes and non extended revolver tranche, thus eliminating debt maturities until the second half of 27. On the right side of the page, we show the expected accounting gain on this transaction. Gross proceeds of $1.055 billion less the asset level debt and fees and expenses gets to net proceeds of $778 million, then reduced by our basis, which is $177 million and reduced by goodwill allocation of $172 million will result in a book gain of $430 million. A big thank you to our full team that tirelessly worked to get the Jamaica deal closed. This includes our internal employees, our external advisors, and our partners at Accelerate, and we send best wishes for their success with incredible assets. Go ahead and turn now to slide number 16 and let's talk for a bit of a minute more about the two FSRU contracts that we signed over the last couple of months. In December, we announced that we chartered the Eskimo to EGAS and this week we announced that we are going to be able to sell the contracts to other companies. The current projects alone equate to approximately $200 million of future earnings. Additionally, we are in advanced discussions with counterparties on two additional FSRU opportunities, which contribute an incremental $100 million to the total value of the portfolio. On an annual basis, these relettes can increase our cash flow up to about $50 million in added EBITDA per year. Further, with the high demand for these contracts, we have the opportunity to novate or sell them to other companies, which would provide us with upfront payments that we think are around $200 million and when that occurs, it would be included in EBITDA and of course earnings. Turn please now to slide 17 and we have financial results. Total segment operating margin was $106 million for Q1 compared to 240 for Q4 of 2024. Core SG&A for the first quarter was $34 million, which is equal to what we had for Q4 of 2024, and for the balance of 2025, we're forecasting $30 million a quarter. As Wes stated earlier, adjusted EBITDA for the first quarter was $82 million. Moving to slide 18 for Q1, we had $200 million net loss for GAAP, or a loss of 73 cents a share. We had no material one-time items leading to the adjusted EPS to be the same as GAAP. As Wes said already, the quality of our earnings this quarter was high, but the quantity was lower than we were initially forecasting. Two differences that we were initially expecting in the first quarter versus what we are reporting is one, the recognition of the PR incentive payment, which is about $110 million. This is still something we expect to receive in 2025, but was not agreed to before the end of the, before the closing of the first quarter. And two, a sale of the Eskimo vessel charter. Again, this is still something that we expect to complete in 2025, but we think that combining this with the charters that have been signed, as well as ones in process, makes this a more attractive as a package of contracts than one-off. In spite of lower than expected earnings, we still have a strong liquidity position. We ended Q1 with $448 million cash on hand and $275 million available under our revolving credit facility. Add to that the $393 million of cash proceeds after debt and you have over $1.1 billion of pro forma liquidity at the end of Q1. With that, thanks everybody for your time. I'll turn the call back over to the operator for Q&A.
Thank you. If you would like to ask a question, please signal by pressing star one on your telephone keypad. If you're using a speakerphone, please make sure your mute function is turned off to allow your signal to reach our equipment. Again, press star one to ask a question. And our first question is going to come from Gregory Lewis from BTIG.
Yeah, hi. Thank you and good afternoon and thanks for taking my questions, everybody. You know, Chris, I was hoping, you know, thanks for laying out the liquidity and the cash and the injection, you know, post the Jamaica sale. You know, I was hoping you could walk us through, I mean, clearly you have, you know, a lot of restricted cash on the balance sheet. Could you maybe kind of point to, you know, is that restricted against specific projects and what kind of hurdles are there that could free up that cash to make it unrestricted?
Hey, Greg, short answer is it's almost all related to the capex in Brazil. So that is restricted cash, meaning it can only be spent on the two projects that are still under construction, the Selva power plant and the Porto Sim power plant. The remainder, which is probably in the magnitude of 40 to $50 million, is restricted around kind of other credit instruments that we have inside the business, some of which will be freed up as a result of this Jamaica transaction, about 30 million of it. And the remainder would stay restricted just because again, it's collateral for other kind of credit support enhancement, credit enhancement on other instruments around the business.
Okay, super helpful. And then just as we look at, as we kind of look across the cap structure of some of the debt, it's, you know, trading at a discount. You know, you kind of alluded to maybe looking to kind of refinance that post the Jamaica transaction, you know, but just given some of the cash on the balance sheet and kind of running the numbers. Is the company looking to potentially open market repurchases of some of that debt just to try to maybe be a little bit opportunistic?
We certainly look at the capital structure. We think that there's some significant opportunities as a result of it. I think the, you know, I talked about the asset level debt and maybe I should amplify that just the first second, because it'll help this. The capital structure is used for liquid faction generally as people, you know, build a liquid fire, they enter into a series of SPS. It's for the most part, kind of a wholesaling strategy of selling gas onto others. The margin in that business is relatively low, but then the credit quality and the duration is very, very long and very, very high. And so they're able to generate, you know, significant amounts of finance ability when they do so. In our case, we also have a portfolio of gas, both from our own physical fire, as well as from other sources. Our overall cost of that gas is roughly Henry Hub plus 250. Our margin across the assets that I've listed is about $4.50. So it's $500 million of financeable cash flow that's buried in our capital structure right now. When you expose that into a 20-year duration transaction and just run the numbers on it, it has got the ability to refinance, you know, a significant portion of the balance sheet, if not all of it. And so from a standing start on where we are right now, we think it's now the appropriate time to really focus on this. Obviously, there was a lot of focus on the company's part in this Jamaica sale, but that's over with. And this will be the next step of it. And I think in the context of that, the goal would be to refinance the corporate balance sheet in its entirety, you know, over the course of the next 12 months or so. And as part of doing so, if we're successful in that, we'll obviously repay all the and as we start to repay it, you'll look at opportunities perhaps to retire at a discount if there still are bonds that are available at a discount. So that's the process for it. We think that, you know, deleveraging through the asset sale we just had, adding meaningful liquidity and addressing liquidity issues, which now with a billion dollars plus in liquidity, we feel great about what the transaction has realized for us. We're near completion on the power plant in Brazil, and we have assets in hand that are extremely financeable with very, very high quality and very long term cash flows. Now is the time to refinance lower costs dramatically, extend the terms so they're consistent with the duration of the underlying cash flows. And then we think we can actually with the improvement in our capital structure, that alone will actually be a substantial benefit to us. And we still have a lot of dry powder. So we've only utilized about half of the volumes that we own in our portfolio. And so if we're successful in recapitalizing the balance sheet and lowering costs and extending, and then we also then grow as we expect to in Brazil and Puerto Rico and other places, all that growth would then accrue to the benefit of the shareholders. And so that's the next two steps that we really see. So first was an asset sale. Now it's a recapitalization refinance, and then it'll be growth. And those are the primary components of what we think it takes to be really successful. So sort of give you a long answer to or look to a short question, but that's the context that hopefully will make it make sense a little bit better.
No, that was super helpful. Thank you very
much. Our next question comes from Chris Robertson from Deutsche Bank.
Hey, good afternoon. Thank you for taking my questions. Wes, I was wondering if you could talk a little bit about the short term power opportunities in Puerto Rico here. When people are bidding into the process, is it for equipment or equipment plus fuel? And what strategy is NFE taking here in terms of are you bidding into provide equipment or just fuel supply or how does that process work?
You know, I can only relate to what I read through the portal because it's a government run process. So they're actually quite disciplined about how they respond to information and provide information. The rules were quite clear in that they were asking for a unitary cost of power kind of period. So you're not actually able to just simply bid in turbines. We actually asked that question specifically in the RFP questionnaire in the portal. And the two questions we asked were, were you allowed to bid in equipment versus an aggregate power price, number one? And number two, was there any minimum dispatch that we could assume that would be guaranteed to know how much power would be generated and therefore can run the numbers on it a little bit easier? And the answer to that was no, there was no minimum. So the requirements in the RFP were quite stringent. From our standpoint, you know, we're blessed to have a big operation on the island and so it can take advantage of the infrastructure that we have in the place. But that's basically what it is. And, you know, I'd say of the three opportunities that I outlined, the emergency power and the gas contract and the long-term generation, they all could be interesting under the right circumstances. But let's say the emergency power is probably the least interesting, just economically given the relatively short duration and the lack of any kind of a commitment in terms of the utility of it.
So. Okay, gotcha. As my follow-up question, maybe one for Leandro here. As it relates to Selva, on the 18 TB2 per year, should we think about that as being more seasonally weighted in the back half of the year or is it kind of split across all four quarters? And then just to confirm on slide 10 here, there's no fixed capacity payment related to that. It's just the 100% take or pay on the volumes?
Yeah, so Chris, the power plants do have a capacity payment. It's around $25 million per year. But the biggest payment that we get is the second semester of the year, which is linked to the production of power and linked to the 18 TB2 use of gas mentioned in the slide. So we get some payments throughout the year, but it's not necessarily a cost-effective payment. It's just the amount of money that we get to produce power.
Okay, that's a lot more clear. Thank you for clarifying that. I'll turn it over.
Welcome.
And our next question is going to come from Wade Suki from Capital One.
Good afternoon, everyone. Appreciate you all taking my questions. Just to follow up, I think it was on Greg's question, make sure I heard you all correctly on asset sales. I think you all originally had a goal of like 2 billion of memory serves. Oftentimes fails me. But clearly, Jamaica de-risked a substantial portion of that. Anything left out here you could discuss?
Yeah, about other asset sales. I mean, I think like the business, we have an amazing business in Brazil, these guys have talked about, which poses a lot of opportunities for us. You have those Pacific Theater, which is another kind of business in and of itself in Nicaragua and in Mexico. But I think like absent asset sales, West's point of being able to do large kind of securitization type transactions would allow us to refinance our debt at a significantly cheaper rate. That's our real goal, to be honest with you, Wade.
Appreciate that. Just switching gears here a little bit. I did notice FLNG 2, not in the presentation, can you give us a status update there?
Sure, yeah. There hasn't been much development over the last kind of 60 days on FLNG number 2. I mean, still under construction in the Kiwet yard. We have been focused, obviously, on the closing of the Jamaica transaction and on the refinancing of the business in order to ensure we have ample liquidity and altitude, so to speak, in the -to-day operations. We love the project. We're still engaged on it with the people in Corpus and in Mexico, and we'll be writing additional updates as we make more material construction progress.
And Nicaragua?
I'm
sorry.
Nicaragua. Just hoping to get an update there. Thank you.
Yeah, Nicaragua, in the final stages of restructuring our PPA with the government. We've had a lot of productive thoughts about that. And basically what we're trying to do is to create a structure that looks most similar to the Selva and in Puerto Rico long-term gas contracts. So there's basically a capacity payment that is designed to cover expenses and then a marginal gas cost that we can then reflect kind of the value of the credit. So if you think about it, Norsk Hydro, which is an investment grade credit, is Henry Hub plus six. The CFE, which is a triple B minus credit, is Henry Hub plus 745. And so we want to be at a modest premium to that to reflect the lower credit quality for Nicaragua. So I think once we get the final agreement on the contract, we'll finish up what remaining work we've got. The power plant itself is virtually 100% built. The terminal needs a little bit more time and effort. But we're very, very close to the end. So we just need to finalize our agreement to move ahead on that.
Great. Thank you so much. I'll go back into the queue.
And our next question is going to come from Craig Shear from Two Way Brothers.
Hi. Thanks for taking the questions. On slide seven, I mean, obviously, we're not getting the Plaquemines and especially CP2 volumes anytime soon. What are your thoughts about bridging LNG supply needs between now and commencement of the Penta Global
SBAs? We're actually very well positioned right now because we've got the volumes from FLNG. Right now, the acid is producing basically right at nameplate capacity at the cold box. We are planning an outage here in a couple of weeks that we think is going to significantly improve from that level. So it's already performing very consistently and reliably and at a good level. And we think there's a significant amount upside with the planned outage and de-bottlenecking activity of it. So that's 90 TBT uses, our estimate where that will end up with. With the volumes that we have in place that are needed in Brazil is really just the North's hydro at this year. In the second half of next year, then it becomes the Selva plant. Puerto Rico, the large gas contract we signed earlier this year is slated to come on in 2028. So as we look across the portfolio, it's actually quite balanced overall in terms of the needs, kind of step by step. And if we add to those volumes because we're successful in either Brazil or Puerto Rico or elsewhere, we can always then add any volumes to address that. But we've got a net position that is 215 versus the long term of 109. Obviously, there's some short term volumes in there that could be displaced if we were successful in some of these longer term things. But we're in a very good position in terms of our gas needs and our gas use at the time. So it actually works well for the timing of these future developments. Gotcha.
And you've been talking for a number of months or quarters about the significant opportunities with both the Puerto Rico RFP and Brazil Capacity Auction into June and second half this year. Obviously, you have some competitive infrastructure advantages. Do you believe some of the noise around liquidity and balance sheet could impact any of the decision making there by regulators? Or do you think that given your entrenched position and the obvious virtual cycle of favorable awards on the whole business just kind of makes that a moot point?
Well, I think that we have a very viable business. We have a billion dollars in balance sheet. We've got significant assets that are not only very, very expensive to build, but are also very time consuming to build. So we feel like we've kind of earned our competitive position in these countries the hard way. We actually have set out years ago to build the essential infrastructure to get it into there. That said, in no case are we a monopoly. We don't want to be a monopoly. We're not regulated like a monopoly. That's not what we aspire to be. In Puerto Rico itself, I think today we actually provide less than 50% of the fuel that's provided on the island. So Eco Electrical in the south has significant gas abilities. We've got a very, very good position in San Juan that's by design. And we spent hundreds of millions of dollars developing our product there like anybody else could do or could have done to give ourselves that position. But in no respect, are we monopolistic about this? We think we're well positioned. And what we have predicted to happen in these countries we think is largely coming true. We're certainly disappointed that the auctions in Brazil were delayed, but there was reasons for that that are out of our control. And as Leandro said, the needs of the country haven't gotten less. They've gotten greater during that period. So we feel great about those auctions. And we've got great, great assets in the south that we think is going to play a central role in those auctions when they do come. And in Puerto Rico with both the short-term and long-term generation needed, we think that having gas in San Juan is going to prove to be very, very helpful. And so we'll obviously need to find if we can do that at economically attractive levels and go from there. But we feel like the competitive situation is actually really good. I mean, I think most importantly, when you disaggregate and you look behind the numbers, you look at the assets that we've got, you're generating half a billion dollars in cash flow on a 20-year duration assets that are largely right around investment grade. So that is a laudable place to be. We feel like that our valuation in no way reflects that. And so we'll go finance ourselves on a long-term basis and we'll fix the capital structure and align it with the same duration of what we've got on the asset side and kind of go from there. And if we're fortunate and through our work with us and our people in the field, we can add to it with more long-term offtake and use up some of the excess capacity we've got on the supply side. We think that there's a tremendous amount of upside in both the debt and the equity side. So that's the plan. And one thing I'd say is that on this, the last thing I'll say is that on the securitization front, we've securitized or have created structured financings for many, many different products over our careers. And I think in the scale of degree of difficulty, if you just take the Brazilian assets, you've got two assets that have got direct obligations by the Brazilian government. In one case, North Kiter and the other. So double B plus and triple B rated counterparties, discrete cash flows with no variability that ran out for 15 and 25 years. That doesn't sound like the hardest thing in the world to kind of realize. They're U.S. dollar-based contracts. That's what we're going to be very focused on. And I think if we're successful there, it gives us a real opportunity then to attack our capital structure and do some good work there. So that's the plan for the summer. And we'll see how it plays out.
Great. Thank you.
And our last question will come from Tariq Kameen from JP Morgan.
Hey, good afternoon. Could you guys maybe help us bridge through the liquidity picture a little bit, particularly how you're thinking about gross capex needs for the remainder of the year? Obviously, you have a bunch of restricted cash as well as liquidity outlines, but just would love to understand sort of how much is yet to go out the door.
Yeah, so let's say we'll start in Brazil. So the remainder of the capex for Selva and Porto Sem is fully funded with cash on the balance sheet on that restricted cash line. So that's paid for. And that will be paced this year and through the first kind of six-ish, maybe nine months in total because you'll have some lag in the payments beyond COD in 2026 for Porto Sem. Beyond Porto Sem, you have very little remaining capex to spend. Obviously, FLNG 1 has been placed into service. You have no more spend in Mexico or in, really in Puerto Rico until you get conversions. And those conversions, whatever capex is needed for those conversions, we envision would be paid for by PREPA. That really then leaves you in Nicaragua, and we've disclosed this before, remaining to spend in Nicaragua is about $50 to $60 million. And then the rest is FLNG 2. I would say that FLNG 2, the pacing, we have the control on that, on how that goes out. And as I said, we're still going to be disciplined with cash at the moment so that we can ensure that we are solving all near-term maturities. And as we have those in hand or we do refinancing, as Wes just discussed, we would then move forward in greater pace on the FLNG 2 capex development.
Thank you. And then it was very helpful when you guys walked through the covenant amendments on the revolver and the term loan A. But is it fair to assume that through the ASTA language on the 12 and the term loan B likely don't apply given the amount of capital you're spending?
Not sure I understood the question. You're talking about like the reinvestment rights?
Yeah, but well in terms of you're having to prepay those with asset sale proceeds.
Well, we aren't using asset sale proceeds to repay those. We have cash on the balance sheet and cash flows from our operations that we can use to refinance if we want to pay off any of the other instruments.
Okay, fair enough. Thank you very much.
And there are no further questions in the queue.
Great. Okay, thank
you very much, everyone. Look forward to talking to you next quarter. Thank you. Thank you.
And this concludes today's call. Thank you for your participation. You may now disconnect.