Sky-high deal propels New Fortress Energy's stock into stratosphere.
In a significant turn of events, New Fortress Energy has agreed to supply Puerto Rico with liquefied natural gas (LNG) for a period of seven years, worth approximately $4 billion. This deal, which is expected to strengthen New Fortress Energy's position in future debt negotiations, comes as the company faces financial challenges.
Negotiations for this LNG deal took several months to complete, and the original proposed deal was worth $20 billion over 15 years. However, the deal was initially vetoed by the regulatory authority, but a revised agreement has now been reached. The agreement includes a provision for Puerto Rico to extend the contract by an additional three years.
The LNG contract with Puerto Rico is a boost for New Fortress Energy, founded by Wes Edens, who remains a central player in the Caribbean energy market. The deal's completion is symbolically important, as it comes after the veto of a larger deal in July.
The deal has both economic and political significance for Puerto Rico, which is struggling with dilapidated energy infrastructure, frequent power outages, and high dependence on imports. For New Fortress Energy, the contract should provide much-needed liquidity.
The announcement of the deal led to a surge in the stock of New Fortress Energy. The surge was nearly 45% initially and later over 50%. The company's bonds also gained significantly after the announcement. The stock price increase makes it clear that many investors have faith in the company's potential for recovery.
Pedro Pierluisi, the Governor of Puerto Rico, signed the LNG supply agreement with New Fortress Energy. The deal also includes a clause that allows Puerto Rico to access the San Juan terminal if New Fortress Energy fails to meet its contractual obligations.
New Fortress Energy is under pressure due to high debt, delayed projects, and weak profitability. The company has divested parts of its Jamaican business to focus on its core operations. The new deal with Puerto Rico is significant for the company, as it faces these challenges.
The LNG contract with Puerto Rico needs to be approved by the U.S. regulatory authority. If approved, it will mark a significant step forward for both New Fortress Energy and Puerto Rico in their quest for reliable and sustainable energy solutions.
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