Sun | Apr 18, 2021

New Fortress willing to sell Jamalco power station if it needs cash

Published:Wednesday | January 27, 2021 | 4:10 AM
Wes Edens, chairman and CEO of New Fortress Energy.
Wes Edens, chairman and CEO of New Fortress Energy.

Natural gas supplier New Fortress Energy, NFE, will consider selling its power asset at Jamalco alumina plant and two other international assets, if it needs cheap cash to fund its multibillion-dollar pivot from the Caribbean to Latin America as its top area of operation.

The American company currently earns most of its revenue from Jamaica, but also holds assets in Puerto Rico, United States, Mexico and Nicaragua, with plans to build in Ireland and Philippines. It is also in the process of buying new assets that would reshape its geographic revenue mix.

NFE last reported quarterly revenue of US$137 million for the July-September period, and a net loss of US$37 million.

The three assets eyed for possible disposal would generate US$1 billion. But New Fortress says for now the assets are not on the market.

“So, the bottom line is that right now with the capital structure and the financing that we have in place, we don’t need to raise additional equity to pay for the transaction,” said New Fortress CEO Wes Edens in an investor update.

New Fortress supplies gas mainly to power suppliers such as Jamaica Public Service Company but also to industrial players such as Red Stripe Jamaica. The company supplies LNG but also builds infrastructure to pipe gas to its customers. Jamalco, which was commissioned in early 2020, was its first foray into power generation without a partner.

“There are three assets that are very much candidates for being equitised in this way. Jamalco, which is the power plant that we built in Jamaica, which has actually been running flawlessly, is a top-of-the-order dispatcher,” said Edens. “It’s a terrific asset.”

The combined heat and power plant at Jamalco in Clarendon supplies the bauxite refinery with energy.

The other two power assets are a floating gasification ship called Nanook; and the Sergipe power plant located in Brazil.

“Those three things together could generate over US$1 billion in equity value in the ordinary course. And so, again, while we’re not in need of selling any of these things – it’s just in our business model –we want to take [other] development risk; commercialise activities,” he said.

In mid-January, New Fortress announced three deals worth a combined enterprise value of US$5.1 billion, inclusive of debt and equity, to acquire shares in a shipping company Golar LNG Partners, gas supplier Hygo Energy Transition Limited and Suape Terminal in Brazil. The deal is expected to increase NFE’s daily gas volumes ninefold.

“We roughly increased the amount of terminals that we have by two, but nine times the incremental growth with total gallons per day of 50 million gallons per day …, ” said Edens during the investor update. “With this transaction, it is not the least bit of an overstatement to say that we now have become the premier global gas-to-power company in the world,” he said.