New Fortress Energy explains strategy after investing $7Bln in LNG import terminals, carriers and logistics systems

Tuesday, 19 October 2021
Free Read

LNG News Editor: 

New Fortress Energy, the New York-based firm with LNG-to-power projects in South America and the Caribbean and its first venture pending in the Asian island nation of Sri Lanka, has provided an update on its natural gas supply and earnings goals during the current period of price spikes.

New Fortress held a conference call with analysts to explained its strategy amid what it said had been “unprecedented volatility” in global gas and LNG markets.

Downstream

“We have one of the largest and most diversified portfolios of natural gas downstream terminals, facilities and assets in the world,” said the firm, headed by Chairman and Chief Executive Wes Edens.

“We believe a portfolio of this breadth creates a degree of flexibility for us that is tremendously valuable during periods of dislocation such as the one the market is currently experiencing,” said the CEO.

As a company, New Fortress said it had invested around $7 billion in terminals, facilities, power plants, ships and logistics assets to develop its proprietary downstream business.

“We believe this investment gives us tremendous opportunities to grow earnings for shareholders while still maintaining a net neutral commodity exposure,” the firm added.

New Fortress said its “Fast LNG” infrastructure project, a production system for stranded gas fields, continues and is largely on time and on budget.

New Fortress explained that its business was “simple and transparent” as the company buys LNG from the world’s leading producers and uses its logistics to deliver gas and power solutions to customers.

The company recently agreed to invest in West Coast Power Ltd (WCP), the owner of the 310-megawatts Yugadanavi Power Plant based in the Sri Lankan capital Colombo while also developing an LNG facility off the coast.

As part of that transaction, New Fortress will have gas supply rights to the Kerawalapitya Power Complex, where 310 MW of power is operational today and an additional 700 MW is scheduled to be built, of which 350 MW will be operational by 2023.

In this regard New Fortress stated there would be no serious impacts even as LNG prices were currently experiencing dramatic increases and customer demand had reached an all-time high.

“The value of our extensive and growing portfolio of downstream terminals and facilities, together with our locked-in gas supply, provides powerful flexibility to serve customer needs and participate in the opportunities created by market disruptions,” New Fortress explained.

In addition to the Sri Lankan development, New Fortress has businesses operating or about to start in Nicaragua, Mexico, Puerto Rico, Jamaica and Brazil.

New Fortress said it was confident about the future and in securing supplies while coping with price changes.

“When we last updated the market in August regarding our gas supply available for committed customer volumes, we reported that we were nearly fully hedged for the next six years, were flat for the remainder of 2021 and had a modest short position of four cargoes open for 2022,” the company said.

“We believe the inherent flexibility in our portfolio enables us to generate substantial incremental returns for shareholders without changing our net neutral long-short bias in the portfolio,” it add.

New Fortress said its overall net gas position had improved in 2021 and 2022, from a flat position this year and four cargoes short in 2022 to more than eight cargoes long for the same two-year period, for a net change of more than 12 cargoes.

“Of the more than eight cargoes, we have sold several cargoes and expect to sell the remaining cargoes in the future,” the company stated.

New Fortress said it continued to have conversations with a number of potential gas sellers.

“Although we have not finalized our ultimate gas source, we continue to believe that there is a high probability that we will do so before construction is completed in 2022,” it said in relation to its floating production system.

“ In fact, given the current pace of negotiations, we believe it is likely that we will consider developing multiple additional projects,” it said.

“We believe a large and diversified portfolio of downstream terminals and assets combined with a significant portfolio of LNG liquefaction assets that are focused on gas markets which are ‘stranded’ is the optimal portfolio to produce stable and growing returns for shareholders,” it concluded.

Related Video

Free Read