New Fortress Energy Inc. · NASDAQ:NFE
New Fortress Energy — Q3 2021 Earnings Presentation
39 slides from New Fortress Energy's earnings presentation, November 2021
Slide 1: Q3 2021 Investor Presentation
November 2021 Q3 2021 Investor Presentation
Slide 2: Delivering Positive Energy Worldwide
Delivering Positive Energy Worldwide Our Vision We want to light the world. Billions of people around the planet lack access to affordable power. Electricity should not be a luxury good. Our Mission Our mission is to provide capital, expertise and vision to address this problem while also making pos
Slide 3: Agenda
1. Executive Summary 2. Market Update 3. Terminals Update 4. FLNG 5. Energy Transition 6. Financial Results 7. Appendix 3
Slide 4: Significant Op. Margin increase in Q3 2021
Executive Summary Significant Op. Margin increase in Q3 2021 We achieved our Q3 Op. Margin Goal and are increasing our future targets Total Segment Operating Total Segment Operating Margin(1) ($mm) Margin(1) for Q3 was ~$210mm 2020 2021 2H 2021 Illustrative Total Q1 Q2 Q3 Q4 FY Q1 Q2 Q3 Q4 FY Segmen
Slide 5: The last quarter was extraordinary for NFE
Executive Summary The last quarter was extraordinary for NFE Organic growth, Fast LNG and the energy transition all create significant opportunities for our business • Organic growth opportunities in existing markets require manageable capex and are expected to result in margin expansion Terminals •
Slide 6: Agenda
1. Executive Summary 2. Market Update 3. Terminals Update 4. FLNG 5. Energy Transition 6. Financial Results 7. Appendix 6
Slide 7: There is systemic underinvestment in oil & gas
Market Update There is systemic underinvestment in oil & gas Shrinking investment in baseload energy to back up intermittent power Market has underinvested in fossil fuels Fossil fuel investments have been declining, ahead of the energy transition and lag green projects in 2021(ii) Estimated Global
Slide 8: Climate & economic shocks have sent LNG prices soaring
Market Update Climate & economic shocks have sent LNG prices soaring Climate-related events put significant stress on energy system Gas prices have increased Shocks to energy system are happening more significantly this year(i) frequently, increasing short-term gas demand $45 $40 Lack of rainfall in
Slide 9: Demand for LNG is expected to exceed supply materially
Market Update Demand for LNG is expected to exceed supply materially Modest amount of incremental gas supply overwhelmed by projected demand Drivers of incremental gas demand Supply gap especially critical in next few years as transition to renewables still underway(i) 800 Coal to gas 700 Oil to gas
Slide 10: Agenda
1. Executive Summary 2. Market Update 3. Terminals Update 4. FLNG 5. Energy Transition 6. Financial Results 7. Appendix 10
Slide 11: Continued power shortages in Brazil leading to LNG demand growth
Terminals Update Continued power shortages in Brazil leading to LNG demand growth across all demand segments Record natural gas demand being met by increased LNG imports Low hydro generation leading to record high level of 18 million gallons of LNG currently being imported into natural gas demand(i)
Slide 12: Brazil Emergency Power Auction: NFE expected to supply >400MW
Terminals Update Brazil Emergency Power Auction: NFE expected to supply >400MW of new power plants from Santa Catarina terminal starting 2022 Santa Catarina terminal well-positioned to supply LNG to new power plants awarded in October 2021 Barcarena >900k GPD Firm demand Terminal new forecasted stra
Slide 13: Agenda
1. Executive Summary 2. Market Update 3. Terminals Update 4. FLNG 5. Energy Transition 6. Financial Results 7. Appendix 13
Slide 14: How does Fast LNG work?
FLNG How does Fast LNG work? Fast LNG is less expensive and faster than traditional FLNG Fast LNG is a mobile, floating natural gas liquefaction platform Floating LNG (FLNG) cryogenic flexible ship to ship transfer (5 years ago) hose system liquefier storage vessel jackup rig LNGC FSRU converted to
Slide 15: Plan to deploy Fast LNG across two distinct business lines
FLNG Plan to deploy Fast LNG across two distinct business lines Expected to provide stable cash flows plus significant upside 1. Tolling(3) 2. Merchant • NFE owns & operates • NFE owns & operates • High credit-quality 3rd • NFE owns volumes party tolls or rents infrastructure • Less predictable but
Slide 16: Tolling business expected to provide stable cash flows
FLNG Tolling business expected to provide stable cash flows Recently high LNG prices create significant opportunity to deploy Fast LNG units to high credit-quality customers Hilli Fast LNG $1.2bn cost $650mm cost 2.4 mtpa Economics(i) Illustrative Economics Base rent + Brent adder 1.2 mtpa ~$4-5/MMB
Slide 17: Merchant-potential upside, limited downside
FLNG Merchant-potential upside(4), limited downside LNG Prices ($/MMBtu)(i) Direct access to high volume 35.00 markets (Ireland, Brazil, etc.) 30.00 provides natural “floor” to 25.00 merchant prices 20.00 15.00 10.00 Estimated total cost of LNG 5.00 is ~$4-5/MMBtu, - Apr-20 May-20 Jun-20 Oct-20 Apr-
Slide 18: Merchant business provides flexibility to capitalize on market opportunities
FLNG Merchant business provides flexibility to capitalize on market opportunities We are in the unique position of owning a downstream portfolio with significant demand Jamalco CHP, Jamaica Shannon, Access to key markets Miami Liquefier, USA Montego Bay, Ireland with significant Jamaica San Juan, de
Slide 19: Agenda
1. Executive Summary 2. Market Update 3. Terminals Update 4. FLNG 5. Energy Transition 6. Financial Results 7. Appendix 19
Slide 20: Advancing the energy transition by investing in blue hydrogen
Energy Transition Advancing the energy transition by investing in blue hydrogen We are taking a meaningful step towards decarbonization by investing in today’s economical solution ~75% of all GHG emissions 1 Full decarbonization will not happen come from three main sectors overnight 7% 2 Electrifica
Slide 21: We are making progress on our first blue hydrogen project
Energy Transition We are making progress on our first blue hydrogen project We plan to produce blue hydrogen in the form of blue ammonia, a hydrogen carrier, while capturing up to 99% of the CO2 emitted by our process Nearing FID on our blue ammonia production facility(7) 1 Expect to acquire key sit
Slide 22: U.S. government will play significant role in energy transition
Energy Transition U.S. government will play significant role in energy transition The Build Back Better Act(i) outlines several incentive programs that will promote a carbon-free economy The Build Back Better Act $7bn in the Greenhouse Gas includes more than Reduction Fund $15bn $5bn in Greenhouse G
Slide 23: Our plan forward
Energy Transition Our plan forward Expect to use our existing terminal and logistics operations to transport and distribute clean hydrogen H2 Build proof-of- Utilize existing NFE Transition heavy concept blue assets and infrastructure polluter industries hydrogen plant for transport and (shipping, c
Slide 24: Agenda
1. Executive Summary 2. Market Update 3. Terminals Update 4. FLNG 5. Energy Transition 6. Financial Results 7. Appendix 24
Slide 25: NFE is exceeding goals
Financial Results NFE is exceeding goals We have constructed a highly diversified, global portfolio of customers & critical energy infrastructure assets $1.2bn in annualized Illustrative Total Segment Op. Margin Goal(2) in 2H 2021 Today Q4 2021 Illustrative Total Segment Op. Margin Goal(2) = $375mm
Slide 26: Financial performance
Financial Results Financial performance ~$210mm Total Segment Operating Margin(1) in Q3 2021 versus $51mm in Q3 2020 QoQ Financial Metrics Q3 2020 Q2 2021 Q3 2021 Change Operating Results Volumes Sold, Average (k GPD) 978 1,496 1,764 268 1. Significant increase in Total Segment Op. Margin(1), up $80
Slide 27: Financing path to maximize cash available for reinvestment or distribution
Financial Results Financing path to maximize cash available for reinvestment or distribution By becoming investment grade, we expect to free up over $200mm of annual cash flow through refinancing 1 2 Become Investment Grade Refinance our existing debt to: Target leverage of 3.0x Lower interest rate
Slide 28: Agenda
1. Executive Summary 2. Market Update 3. Terminals Update 4. FLNG 5. Energy Transition 6. Financial Results 7. Appendix 28
Slide 29: Material improvements in metrics since initial rating
Appendix - Credit Material improvements in metrics since initial rating In July 2020, we issued our first $1bn of $2.75bn senior secured notes At the time, we were told that we had 3 areas of development to achieve a higher rating: Initial Rating Now (Q3 2020) (Q3/Q4 2021) $1.2bn 2H 2021 More Annual
Slide 30: NFE at run-rate earnings goal in 2nd half 2021
Appendix - Credit 1 NFE at run-rate earnings goal in 2nd half 2021 Total Segment Operating Margin(1) ($mm) Continue to expect 2H 2021 annualized 2019 2020 2021 2022 Illustrative Total Segment Op. Margin Q1 Q2 Q3 Q4 FY Q1 Q2 Q3 Q4 FY Q1 Q2 Q3 Q4 FY FY Goal(2) of ~$1.2bn with 98% of cash flows locked
Slide 31: Significantly diversified and derisked business
Appendix - Credit 2 Significantly diversified and derisked business Category Initial Rating Q3 2020 Now 2021 Geographies 2 11 # of Customers 37 100+ Fleet 0 13 Annualized Total Segment Op. Margin(1) ~$200mm(i) $1.2bn(2) Transfers 650 850 Invested Capital ~$1.7bn ~$7bn (i) $51mm Total Segment Operati
Slide 32: Successful operating history across diverse assets
Appendix - Credit 3 Successful operating history across diverse assets Deep operational history and expansion over last 1.5 years Initial Rating Q3 2020 Now 6k+ truck & rail loading 11k+ truck & rail loading operations operations completed 2 onshore terminals completed 5 onshore terminals 13 ships 6
Slide 33: Segment operating margin reconciliation
Appendix – Op. Margin Reconciliation Segment operating margin reconciliation Three months ended September 30, 2021 Terminals and Consolidation (in thousands of $) Ships (2) Total Segment Consolidated Infrastructure (1) and Other (3) Segment Operating Margin 115,638 94,840 210,478 (76,699) 133,779 Le
Slide 34: Segment operating margin reconciliation
Appendix – Op. Margin Reconciliation Segment operating margin reconciliation Three months ended June 30, 2021 Terminals and Consolidation (in thousands of $) Ships (2) Total Segment Consolidated Infrastructure (1) and Other (3) Segment Operating Margin 54,453 75,587 130,040 (41,596) 88,444 Less: Sel
Slide 35: Segment operating margin reconciliation
Appendix – Op. Margin Reconciliation Segment operating margin reconciliation Terminals and Infrastructure (in thousands of $) Q1 2019 Q2 2019 Q3 2019 Q4 2019 Q1 2020 Q2 2020 Q3 2020 Q4 2020 Q1 2021 Segment Operating Margin (7,897) (9,680) (4,883) 1,327 (2,169) 15,167 51,391 60,913 32,761 Less: Selli
Slide 36: Operational asset performance
Appendix – Operational Performance Operational asset performance Achieved “three zeros” for HSE incidents for operating assets(10) Health, Safety, & Zero (0) Lost Time Injuries Environment (“HSE”) 0 Zero (0) Recordable Health and Safety Incidents Zero (0) Spills, Uncontrolled Releases, or Loss
Slide 37: Disclaimers
Disclaimers IN GENERAL. This disclaimer applies to this document and the verbal or written comments of any person presenting it. This document, taken together with any such verbal or written comments, is referred to herein as the “Presentation.” FORWARD-LOOKING STATEMENTS. Forward-looking statements
Slide 38: Endnotes
1. Endnotes “Total Segment Operating Margin” means the sum of (i) Net income / (loss), (ii) Selling, general and administrative, (iii) Depreciation and amortization, (iv) Interest expense, (v) Other (income) expense, net (vi) Contract termination charges and Loss on Mitigation Sales, (vii) Loss on e
Slide 39: Endnotes
Endnotes 6. “Under Construction”, “In Construction”, “Under Construction”, “Development,” “In Development” or similar statuses means that we have taken steps and invested money to develop a facility, including procuring land rights and entitlements, negotiating or signing construction contracts, and