Wed | Feb 19, 2020

New Fortress lands three-year financing deal

Published:Friday | January 17, 2020 | 8:00 AM

Natural gas supplier New Fortress Energy, NFE, has secured US$800 million of financing to back its expansion programme and repay other debt.

The credit agreement with Apollo Capital Management runs for three years, NFE said in a market filing this week.

The energy company, founded in 2014 by Wes Edens and listed on the Nasdaq last year, is the sole provider of natural gas to Jamaica.

Some of the funds will be used to repay a previous facility with Morgan Stanley Senior Funding Inc, some for expansion in and outside the region, and other general purposes.

“This transaction provides additional capital for us to continue to build LNG terminals and infrastructure around the world.” said NFE Chairman and CEO Wes Edens in a release.

NFE did not respond to Financial Gleaner queries up to press time. The American company owns gas infrastructure in Montego Bay and Old Harbour, and is investing further in a gas-fired power plant in Clarendon.

The credit facility with Apollo is priced at rates starting at benchmark Libor plus 6.25 per cent, while gradually rising to 7.75 per cent in 2021, then to 9.25 per cent from 2022 to 2023. NFE has the option to pay off the loan at any time.

The credit agreement contains the customary covenants, including a stipulation that by 2021, NFE’s earnings before key expenses (EBITDA) should be equal or greater than the cost of servicing its loans.

The energy company is required to hit a ratio of “no less than 1.10 to 1.00” times, stated the NFE filing.

The company isn’t hitting that ratio currently based on its financials, but expects to rapidly grow core earnings over the coming quarters, according to its November investor presentation, which include forward-looking statements.

Loss shrinking

Over nine months to September 2019, NFE made an operating loss of US$151 million on revenue of US$119 million. This figure roughly approximates to its EBITDA, although it includes US$5.7 million in depreciation and amortisation charges.

Its net losses have been shrinking, however, and was down to US$26 million from US$43 million a year earlier.

NFE listed last year at US$14 per share on the Nasdaq exchange. The stock fell sharply in summer, hitting a low of US$9.70 in June, but rallied to current levels just above US$15 following reports that analysts expect the stock to rise to US$19. The company views the stock’s long-term value at US$100.

The credit facility from Apollo follows a US$185-million bond issued by the company last year that was arranged by NCB Capital Markets Limited and targeted at institutional investors from around the region. The proceeds funded construction of a combined heat and power plant being built in Clarendon to supply electricity to power utility Jamaica Public Service Company and steam to alumina producer Jamalco.

steven.jackson@gleanerjm.com