Prepared remarks
Good day, and welcome to the New Fortress Energy Third Quarter 2024 Earnings Results Conference Call. Today's conference is being recorded. At this time, I would like to turn the call over to Matthew Reinhard, Managing Director. Please go ahead.
Thank you, and good morning, everyone. Thank you for joining today's conference call, where we will discuss our third quarter 2024 results. The call is being recorded and will be available by replay on the Investors section of our website under the subheading Events and Presentations. At the same location, you will find a presentation that we will walk through on today's call. Please review this as it includes important information on forward-looking statements and non-GAAP measures. With that, let me hand it over to our Chairman and CEO, Wes Edens. Wes?
Great. Thanks, Matt, and thanks everyone for dialing in. So as usual, we will refer to the deck as we flip through here, but let's start at the beginning. So Page 3, first with the quarterly financial results. Q3 adjusted EBITDA $176 million — that was basically right on top of what we forecast here last summer. From an operational standpoint, the quarter was a very placid one. We continue to operationalize FLNG operations. I'll talk about that in a minute. We sold our first full cargo and it was transported to Europe. We obtained the non-FTA permits around Labor Day, which allowed us to then ship to non-FTA countries. Of course, it looks like that band is likely to be lifted in the presidential election, but that was a good milestone for us. We are reducing our guidance in the fourth quarter modestly due to some maintenance that we've taken here. So we're going to have lower volumes in FLNG. The unit is back up and is running well now. We've been working on optimizing production and we're very, very happy with the production, and I'll talk about that in a second, but that's good. We are also going to bring Barcarena into service, which has some accounting implications, but it's nothing but positives from an operational standpoint and from a business standpoint; Andrew will talk about that in a minute. The claim from FEMA is something I get asked about all the time. We continue to have conversations with Weston, which is our contractor, as well as with the core and with FEMA and expect — as expected — we do think that the resolution of that is pending and is positive. We don't have anything specific to report on it. Obviously, the impact of the FEMA settlement in Q4 or Q1 would materially affect what our forecast would be. Also, to the extent that these new strategic options that we are pursuing, which I'll talk about at some length, come to bear, they could move things around. So actually the ability to then forecast specifically away from operations is a little more complex because these are such big and large individual transactions. Notable events, let's flip to the following page. Start with FLNG. Prior to the maintenance event, we ran for 14 days on an hourly basis at about 105% of nameplate capacity, so it was working extremely well. This is now the time in the process in the liquefier that you then sit down with the vendors and brainstorm about debottlenecking and operational changes that you can implement to increase production. We had a big meeting in Houston on Monday exactly on this. It went really well. Our team is quite positive that there are a number of short-term additions that we can bring into it to add 3% to 5% to 10% of nameplate capacity. That is consistent with other people in the industry. This is a natural process to go through: first get up and running at full nameplate; second, make those adjustments that allow you to enhance what you're doing. So very, very good news there. We're just completing our fourth cargo, I believe, this morning. One thing about this: the Penguin has about 170,000 cubic meters of storage. The average ship that we're filling on our run back and forth to Puerto Rico is about 135,000 cubic meters. That buffer provides us a tremendous amount of operational flexibility. So when there is weather, when there's a storm that has gone through and there are swells and you have to maybe delay a day here or there, that 35,000 cubic meters of buffering basically means that we expect to have no downtime from an operational standpoint as we load, and that's been our experience thus far. So all going well and going to plan — FLNG has moved squarely out of the construction phase into the last stages of commissioning and now operationally we're performing extremely well. Brazil, I'll leave Andrew to talk about this, but the big construction continues. The bottom line from our standpoint is on time, on budget. The EPC is performing extremely well and there's tremendous activity there, but I'll let Andrew talk about that specifically. Lastly for us, a big focus for the company has been the corporate refinancing and capital formation that we did in the quarter, culminating with the signing of our agreements here this morning to finalize it. In simple terms, what we did is we refinanced and extended out 100% of the 2025 corporate debt, two-thirds of the 2026 into a single class, and then extended the vast majority of the revolvers to 2027. Lastly, we also completed a $400 million equity raise that I personally participated in a significant amount of in October as well. What this has done is it has added significant liquidity to the company and extended debt maturities, allowing us to pursue the next series of things I'm going to talk about in an ordinary course of events. That's great. It was done very collaboratively with our bondholders and our banks. We're blessed to have a very professional and broad-based group of lenders that worked with us well. And now it sets the stage for us to focus on the strategic goals that we outlined the other day. But before I get to that, let me turn over the rest of the updates to Andrew. Andrew?
Hey, so nice to talk to everybody again. I'm on Page 5. Just talking about the Brazil construction update. So a positive update this quarter. CELBA 2, which is our 630 megawatt combined cycle plant, is just at 80% complete. So, really good milestone for us there. You can see the pictures on the bottom left. We've got a real power plant on-site and we had almost 2,000 people on-site last month. So, a ton of activity going on. We're sort of in the final stages of the electromechanical assembly — everything is on-site and now it's just a matter of all the work getting done. Our forecast for this is cash flows commencing in the second half of 2025, and that's the firm date. Great EPC agreement with Mitsubishi and Toyo-Setal as well. So everything is on track at CELBA 2 for the moment and really good progress over the last quarter. Our Portocem project — which, if you remember, we agreed to acquire in December and then announced in January of this year — has moved to the Barcarena site and is under construction today. We made a lot of progress there; we're actually ahead of schedule. We had planned on being 15% complete at this point and we're actually achieving 25% complete. So we've had great activity. If you see the pictures on the bottom right, what you can see there in the top are the four different pads for the large gas turbines and then the big clear area at the bottom is for the substation. Mitsubishi is making great progress on the turbines as well. So that project is really coming together faster than expected. We're ahead of schedule, so very positive update on our construction in Brazil for the quarter. And back to you, Wes.
Yes. So flipping the page to Nicaragua, this is the last of the terminals that we expect to go operational. Our expectation is still in Q1. The 300 megawatt power plant is 100% complete. The jetty and the FSU are 95% complete. We expect those to be completed in the next month or two. The pipeline, as you can see, has been dredged and is being put in place. So just the remaining works really include finalizing the jetty and then connecting the pipeline from the terminal to the power plant. We expect to install our FSRU when it gets out of dry dock here at the end of this year. So a very good update from that standpoint. Now flip me to the next section on the strategic update. Let's start with the page — and these are quotes from the words that we put out on our 8-K a couple of days ago. On October 2, 2024, New Fortress Energy announced a series of financing transactions that upon closing are intended to increase the company's liquidity and financial flexibility. That's what we just referred to; Amanda will talk about that in a little bit more detail. In furtherance of these goals, the company has begun work to identify strategic partners for one or more of our primary businesses, including projects in Brazil, Puerto Rico, Jamaica, Mexico, Nicaragua, FLNG1 and Klondike. The company expects to explore with potential strategic partners financings, commercial ventures or asset sales that are intended to enhance the company's liquidity and financial flexibility. That's the 8-K that we issued a couple of days ago, which I think does a clear job of laying out our focus. From my perspective, what we are focused on in simple terms is that we believe that the sum of the parts of our businesses and units are worth significantly more than the current debt and equity levels of the company. Our focus therefore is to close that gap by focusing on individual assets that can be capitalized, bringing partners in, et cetera, to realize that value. The characteristics of our businesses are, for the most part: number one, they are fully constructed or, in the case of Brazil, will be shortly — therefore have very little, if any, construction risk; they are operating assets with many long-term committed customers. Number two, they need little or no CapEx, so the cash flows they generate essentially go straight to the bottom line. Number three, they have LNG supply to match the customers. So when you match supply and demand you remove commodity exposure, and what is left is simply a matched business between inflows of product, outflows of gas and power to customers, and then a long-term contract between both the supply and the demand, making it essentially a pure infrastructure business. Lastly, they have visible and clear growth prospects as only a fraction of the capacity of the asset itself is utilized. These characteristics in sum are basically the holy grail of infrastructure investments: little or no construction risk, significant cash flow with very long-term commitments, no additional CapEx, long operational histories without incidents, and no commodity exposure. When you flip to Page 9, we believe that there's significant value in all of the businesses. We've chosen to highlight three as they are the most developed and significant in size, but we're very positive on the value of all of them and believe that once added together, the sum of the parts is substantially greater than the current valuation of our debt and equity. These three assets — Brazil, Jamaica, and the combination in Puerto Rico with FLNG1 — have the characteristics I just went through. They have long-term supply specifically matched with long-term customer uptake, which mitigates commodity exposure. The projects, again with the exception of final construction in Brazil, are completed and operational and require little or no additional CapEx and they have significant value-add in terms of growth opportunities. Each is unique but they have a lot of similarities. We've invested billions of dollars and many years building these — roughly 10 years in Jamaica, seven years in Puerto Rico, five years in Brazil. The investments we've made have resulted in terrific assets and now we think we're well positioned to talk to investors about different options for them. On Page 10, going left to right, the Puerto Rico and FLNG assets are perfect downstream and upstream complements to each other. As FLNG1 is now operational and possibly FLNG2, each has significant independent value because we live in a world where there's still a difference between the price of creating LNG and what the market will pay for it. But they have far more value than our estimation when you combine them with the downstream needs of San Juan. We have a Jones Act exemption that allows us to bring the gas straight from one side to the other. Today in Puerto Rico we have this 80 TBtu island-wide gas contract that is partially utilized but we're very optimistic that that will grow substantially. But even today it's a 70-plus TBtu market with nine customers. LNG supply for 20 years. The contract duration is four years, but we think there's a good chance that will change over time. The total owned and managed power capacity across the complex is 9,000 megawatts, so it's a huge market and we have a significant presence and now we have the supply to match that. Jamaica, our oldest and most mature asset, is about 30 TBtus of volumes with 25 customers. We have supply matching against it for 20 years. Average contract duration is 17 years. Owned and managed capacity of roughly 330 megawatts. So that's very long-term, stable, and has material growth potential. Lastly, the Brazil complex — Andrew will speak more specifically — but in the north you have a massive combination of terminal baseload customers with Norsk Hydro 2.2 gigawatts of power. It's an island of activity in one of the most environmentally sensitive parts of the world with huge long-term off-takes. The plan is simply to deleverage the company and by doing so greatly simplify for investors the merits of the assets that we own. The refinance gives us the ability to do this in a thoughtful and measured manner. One key element of that refinance is that to the extent we use asset sales, we can pay off debt without penalty. This results in an effective and flexible capital structure as we pursue asset sales, which is what we're going to do. You can also organically deleverage by making more money than it costs you to pay the bills, which is the base case, but asset sales can greatly accelerate the process and that's our focus. The form of strategic transactions could be equity sales or JVs, partnerships, or outright sales. We've hired advisors on a few of these and expect a very busy few months. Fortunately, electricity and access to it is perhaps the hottest topic in the world internationally and domestically. The only commodity that cannot be purchased is time. We've invested that time — decades of time — in these assets and expect we'll have interesting things to talk about as we move ahead. So I'll turn it over to Andrew to talk about Jamaica.
Yes, thanks. As a follow-up, we want to provide a case study on our Jamaica business. On Page 12, just a reminder, NFE really started in Jamaica with the Montego Bay terminal in 2015, completed in 2016. We then built our CHP plant in 2017 and constructed the Old Harbour terminal just west of Kingston in 2018. Old Harbour was finished in 2019 and then we achieved COD on the power plant in 2020. The map on the left will orient you to our business in Jamaica. The Montego Bay terminal is critical because it supplies the Bogue power plant as well as serves our 21 different small-scale customers, which are most of the large industrial customers in Jamaica. The Old Harbour terminal is directly connected by pipeline to the Clarendon CHP plant, which we own, about 150 megawatts that supplies electricity to Jamaica Public Service and also supplies steam to the Jamalco alumina refinery. It's also connected by pipeline to the Old Harbour power plant, which is owned by Jamaica Public Service. So we own and supply three of the major power plants on the island. We supply out of our Montego Bay terminal basically the 21 largest industrial customers on the island with LNG. You can see the key metrics on the bottom right. Traditionally, we've supplied about 30 TBtus a year. We have 23-plus customers. We started with long-term agreements initially at 20 years; today there are about 17 years remaining generally. The agreements have two components: a fixed capacity payment and a volumetric payment for the gas that has about an 85% take-or-pay on the volumes every year. I mentioned the 17 years average remaining contract duration. We own the 150 megawatt combined heat and power plant at Clarendon. Overall we account for about 65% of the electricity supply in Jamaica. Moving to Page 13, it gives a better sense for our operations. Today, we basically base out of the Old Harbour terminal just west of Kingston. We run a shuttle vessel from there up to our Montego Bay terminal about once a week to keep storage at Montego Bay supplied. We receive larger international LNG deliveries into the Old Harbour Terminal, and we supply gas by pipeline to the three power plants I mentioned — one of which we own and the two others are owned by JPS — under long-term agreements. Out of our Montego Bay terminal we run our trucking business to the 21 industrial customers. On Page 14, a few investment highlights: we have really long-term off-takes with a 17-year average remaining contract duration. Jamaica Public Service has been a great partner; we've had an extremely productive relationship even during difficult economic times like COVID. We have investment-grade LNG supply; generally we supply Jamaica through a long-term delivered contract with Shell. This creates the business model we set out to create: a long-term spread business between selling gas and power in Jamaica under the long-term off-take agreements and receiving international LNG shipments from Shell under our DES contract delivered into the Old Harbour terminal. We have a great operating team in Jamaica that has grown since 2015 running terminals, trucking operations; NFE started a program at the University of West Indies to help train people in cryogenic engineering and we've hired many of those graduates. The next step is continued growth: bunkering is a big one targeting the switch for container vessels to LNG, and many new opportunities to develop new power in Jamaica, continue to grow access to electricity in the country and supply other small-scale customers. We think as the market develops our hub in Jamaica can be a hub for the entire Caribbean — we're well-located to access other islands. Our Puerto Rico business actually started and was supplied out of Jamaica originally, which is a case study for growing other countries. All that incremental growth requires very little CapEx. Page 15 is a deeper dive on our Montego Bay terminal: it's about a 24 TBtu terminal in terms of capacity. We built in storage tanks which provide about 57 TBtus of annual storage. This is what we supply once a week from our main terminal in Old Harbour. Here we re-gas and send gas to the Bogue power plant connected by pipeline and run our trucking operations out of the truck loading manifold you can see on the left side of the storage tanks. Page 16 is the offshore terminal in Old Harbour, just west of Kingston — that's the 170,000 cubic meter FSRU Høegh Gallant. This is a world-scale LNG terminal that can accept large cargo deliveries coming into the terminal and it's just a few miles offshore connected by pipeline into the power system in Jamaica. Page 17 is a picture of our CHP plant: we use two Siemens SGT-800 turbines to produce electricity that we sell to JPS and the high-pressure steam is sold and used in the alumina refining process at Jamalco, which is connected by pipeline. One incremental growth opportunity is to sell more gas into the Jamalco alumina refinery over time. Page 18 shows how important this has been to Jamaica. As a combination of the power we supply, the gas we supply and the small-scale fuel we supply, we're about 65% of overall energy production in Jamaica. By entering into these relationships from 2015 to 2019 and locking long-term prices, we've had a positive effect on Jamaica's overall energy cost. Debt-to-GDP when we started was about 135% and it's gone down to about 75%. Unemployment was about 14% when we started; now it's about 4.5%. Jamaica has been upgraded multiple times from a B rating to BB-minus. We calculate about $2 billion of overall fuel cost savings, a 33% reduction in carbon emissions, and an equivalent of 36.5 million trees planted from switching from oil-based power to natural gas. Page 19 outlines growth vectors in Jamaica. Bunkering is a major opportunity — Old Harbour is near a busy shipping lane and we've already seen spot transactions in bunkering. There's also demand for a new power plant on the east side of Kingston, which the Government of Jamaica has publicly discussed and we want to be involved. Over the next couple of years we believe that could happen. We can continue to convert peaking generation that still runs on oil to gas and provide incremental gas supply to Jamalco. We also see opportunities in growing LNG fuel for the industrial base and continuing to be a hub for the Caribbean. With that, I will move into the refinancing update on Page 21. As Wes mentioned, we've completed a refinancing transaction that refinances our 2025 notes, which were previously $875 million, and exchanges about two-thirds of the 2026 and 2029 notes into a new bond tranche maturing November 2029 at 12%. This pushes maturities out by refinancing the 2025 notes and two-thirds of the 2026s and 2029s. We're also increasing overall corporate liquidity by raising approximately $327 million as part of this transaction. Combined with the $400 million of equity we did, it's about $727 million of incremental corporate liquidity. Flipping to Page 22, this tracks how we pushed out maturities. We've also pushed out $900 million of our $1 billion revolver maturity into 2027, reducing 2026 maturities and derisking the balance sheet further. $100 million remains at the 2026 maturity date. This is our new maturity profile, which generally back-ends our bond maturities into 2029. Chris, I turn it over to you.
Yes. So flipping to the next part, I'll let Chris walk through the capital structure and financial details, but just to reiterate, this refinancing gives us significant runway and flexibility as we pursue the strategic alternatives for these assets. We're focused on finding partners and structures that realize the intrinsic value of these operating, low-CapEx, long-duration assets.
Great. Thanks, Andrew. Good morning, everybody. Let's move to Slide 24 and talk through CapEx and financials. This first slide, Page 24, is meant to be responsive to questions we've received about gross and net CapEx and seeks to provide a little added clarity. I know there are a lot of numbers here, but let me talk through the concepts and then we'll drill down on 2025. We start with CapEx for the statement of cash flows and reduce for capitalized interest, and that gets you to gross CapEx. For the non-accountants out there, here's how capitalized interest works: when we're building large capital projects, we're required to include a portion of the company's interest expense that was incurred during construction. To do that, we estimate the amount of interest expense of the company in total and attribute some of that total to our construction projects and include those costs on our balance sheet. You'll notice that we don't have a forward capitalized interest expense forecast for '25 and '26 as this is highly dependent on when assets are placed into service. As our assets migrate from construction in progress to PPE, you'll see capitalized interest reduce to zero. Following down the page, we show the notional gross dollars of CapEx for each asset class — power plants, terminals, maintenance, vessels and FLNG. Finally, when we show the asset-level financings associated with the power plant and FLNG projects and arrive at the blue bolded line called net CapEx, which we've showed in the past. If I focus on 2025, the forecasted gross CapEx is $815 million made up of $415 million of power plant CapEx, which aligns with the $415 million of power plant financing, and $330 million of CapEx associated with FLNG 2, again aligning with the FLNG term-loan A facility. So of the $815 million in gross CapEx, there's $745 million funded through committed debt facilities, leaving approximately $70 million of net CapEx to be funded by cash flows from operations. Now to the financial results for the third quarter — Slide 25. Total segment operating margin for Q3 was $220 million. This breaks down to $185 million from sales to customers through our downstream terminals and cargoes that were sold to the market. As Wes has mentioned before, when the market price exceeds the price we can sell through the terminals, we can optimize the portfolio, which we've done from time to time. We had another $35 million of operating margin from the ships segment. Core SG&A for the third quarter was $26 million, which is down for the third consecutive quarter this year and better approximates what we will be running on a go-forward basis in 2025. The deferred earnings line reflects a payment that we received in Q3 and shows up in segment revenue but will not be earned in EBITDA until 2025. So, similar to Q2, we collected about $60 million in a prepayment for sale of cargoes that will be delivered in 2025. We were slightly long LNG based on our scheduled delivery and we were able to take advantage of strong market dynamics and lock in earnings that will be recognized in '25. The $60 million collected in Q3 gets netted against $42 million that was earned in Q3, leaving $18 million as deferred and excluded from the adjusted EBITDA line. As a result, adjusted EBITDA for Q3 was $176 million, bringing us to $636 million for the nine months ended September 30. Finally, moving to Slide 26: we had $9 million in GAAP net income and $0.03 a share. When you adjust for a $2 million impairment charge for the Miami liquefier, you result in adjusted net income of about $11 million for Q3, which is about $0.05 a share. On the Miami liquefier, we have received regulatory approvals, and we do expect to close that sale before the end of the month. Finally, the funds from operations for the first nine months was $46 million or about $0.22 a share. A couple of quick comments on the balance sheet: Andrew has been at the vanguard with the bondholder group over the past several weeks, but I wanted to highlight that we've been able to work with our revolving letter of credit and term loan A lenders to agree to a few critical amendments that further show their support for the company in our strategic initiatives. Specifically on the revolving credit facility, we've extended $900 million into new tranches that will mature on October 27, thus reducing 2026 maturities and de-risking the balance sheet further. Pricing on this facility is attractive relative to the new bond issuance and we're thankful for the continued support of our relationship lending syndicate. One last thing I want to flag is that the filing of the third quarter 10-Q with the SEC will be done on Tuesday, November 12. As we've discussed this morning, we've reached a binding deal with the bondholder group as well as the various bank facilities that will settle in the next two weeks. However, at the time of the filing, the 2025 bonds and various bank facilities will show as current liabilities on the balance sheet. Once the transactions close and fund, the maturities will extend and accurately reflect the long-term nature of debt classification. We will be putting out a press release when the transactions fund that shows the pro-forma balance sheet for September 30 with the appropriate classification. With that, I'll turn the call back over to the operator for Q&A.
Questions and answers
At this time, instructions were provided on how to ask questions. The first question is from Ben Nolan with Stifel.
This is Frank Galanti on for Ben. I wanted to start with the status of FLNG 2. How are you thinking about CapEx on that? Has it received all the regulatory approvals and the financial agreement with Mexico? And do you have the ability to toggle development timing to manage cash flows?
Actually, it's in reverse order. So absolutely we have the ability to toggle timing to manage cash flows. That's why you've seen the CapEx expected in Q3 and Q4 related to FLNG 2 decrease. We have several mechanisms within the contract for module construction and civil construction that allow us to pace CapEx at our own discretion — that's very important. On the second part, our relationship with Mexico remains extremely strong. There has been an administration change recently. The new leadership of the CFE has reiterated to us their support for this facility and for the overall partnership. We've extended our gas supply to them in other parts of the country in Baja, and so we remain an accountable and trusted partner with the CFE. Execution of future permits is still pending. As they organize over the course of the next roughly 90 days, they'll get back into the regular issuance of various construction permits that would be needed. Again, nothing dissimilar to what we've done for FLNG1 and they should be received in the ordinary course. On expected CapEx, as we laid out on Slide 24, you return to full spend rates in January, and that's a discussion with management on how fast we want to move forward. But these are contracts with the construction outfit for the modules and fixed-price contracts for civil construction onshore at the Altamira facility.
From a business standpoint, the combination of FLNG 2 (or even prospectively FLNG 3) with the operating FLNG1 asset is a big part of the process. If you have incremental downstream demand — which we do — having more supply in a more efficient way in a relatively short period could be very attractive for a third party. We've had lots of inquiries about that. You don't have to bundle the two together, but there are synergies to doing so, just like different trains in a multi-train liquefaction facility.
Then switching gears to Puerto Rico. Previous guidance was north of 100 TBtus with that 80 TBtu island-wide contract. But the recent detailed financial update only guided to 53 TBtu in 2025. I think that the difference was the conversion of either the Aguirre or the Mayaguez power plant. Is that the right way to think about that? Can you give an update on the status of those power plant conversions, from a regulatory perspective?
Our view was there was a bit of a hiatus pending the elections. The elections happened and the newly elected governor, Jenniffer, in her first speech referenced gas conversions and new gas-fired power being needed, which we think is highly consistent with what we expect. We believe there are a number of very straightforward gas conversions, the first of which will be these MegaGens, which we think will be turned on in the next couple of days. Then you have Mayaguez, Kavalachi, Aguirre — all of these are significant users of diesel and they end up costing Puerto Ricans significant amounts of money compared to burning natural gas. With the new administration, you're likely to see a renewed focus on conversions. We think these conversions are quite straightforward. Puerto Rico represents one of the largest diesel-to-gas conversion opportunities we're aware of and could save the territory billions of dollars over time. So in the next 60 to 120 days you're likely to see significant activity and these numbers will reflect that. The 53 TBtus is only the base case of what is there at this moment and does not reflect what we think the market opportunity will be in the coming months.
The next question is from Craig Shere with Tuohy Brothers.
I understand some of the parts arguments, but historically the business model seems to have been build and monetize power plants while retaining downstream import terminals. After the next coming quarters of rejiggering, has that long-term focus changed? Could you see finally achieving stable recurring, modelable operations by maybe 2026?
I'm a little confused by the premise, but the basic plan in these markets is consistent: go in, provide gas and power to people that need it. There are large deficits of access to gas and power. We've built power in places — Jamaica is an example, we're building in Brazil, we built a small plant in Mexico — but what you're left with is simple: a discrete supply of gas into the country, downstream demand, no commodity risk, very stable and long-term cash flows that can grow materially with little additional capital. That's the holy grail of an infrastructure investment. The individual markets are at various levels of development but are all close to completed: Jamaica is complete, Puerto Rico is complete, Mexico is complete, Nicaragua turns on next quarter, and Brazil will come online materially over the next 9 to 18 months. They all have similar characteristics and substantial cash flows. Jamaica, while relatively small compared to our overall business, is $100-plus million of long-term income for 17 years, which is significant. We think these assets are worth far more as infrastructure investments than currently reflected, and we're going out to test the market. Selling one or two assets could pay off corporate debt and change the company materially. We're confident we'll get strong interest in these assets, and we'll pursue a variety of potential paths.
As far as value to others and your long-term plan for retained assets, do you see the recent U.S. election outcome possibly creating a renaissance of U.S. liquefaction contracting — perhaps spurring market saturation or moderating long-term pricing that would materially add value to the downstream infrastructure you've built toward the end of the decade?
Lower commodity prices help customers, and we're in the customer business. Prices are high but not prohibitive; customers can still afford gas and power. A more normalized forward curve toward the end of the decade would be good for customers and thus beneficial to our downstream assets. Our capacity utilization across the portfolio is around 20%, so there's significant room for growth. A lower commodity price would encourage more consumption — that's positive for us. We aren't political experts, but it seems likely that regulatory constraints on exports could be eased and that could increase LNG production and freights could normalize; net-net that would be good for the market and for us.
The next question is from Chris Robertson with Deutsche Bank.
I wanted to ask about the current FSRU market and how the company is thinking about sub-chartering opportunities, especially as it relates to the Eskimo. Where do you see the best market opportunities globally? How should we think about potential uplift to EBITDA going forward from these opportunities?
We have a fleet of FSRUs; some we use, some are surplus and are leased out. There's still a real premium in the FSRU market because there's a lot of need for regas capacity and it takes time and money to build new ones. We have one short-term charter coming off that we think is at a material discount to current market rates; that would be a big win for us. There should be other situations as well. The hidden value of our long-term fleet is substantial, with FSRUs near the top of that list. We want to report on things that have happened rather than forecast what could happen, but we think differences are material and hope to have good activity to report on in the near term.
The next question is from Martin Malloy with Johnson Rice.
First, on free cash flow looking forward to next year. In the early September presentation, I think you had $1.3 billion as an illustrative adjusted EBITDA for 2025. Given your CapEx — $70 million net CapEx on Slide 24 — should we be looking for free cash flow in 2025 available for debt reduction north of $1 billion?
Marty, it's Chris. The way to read that prior slide is correct. We have EBITDA less maintenance CapEx and unfunded CapEx of about $70 million next year. We keep talking about free cash flow — definitional free cash flow will still be negative when you include all CapEx — but the financings support the bulk of the CapEx spend. The way to think of it is EBITDA less the unfunded CapEx, less debt service and taxes. Using that methodology, I would expect that to be positive in 2025.
There wasn't any discussion around data centers on the call yet. Could you give us an update there?
Sure. We have a lot going on with the assets we control. At Wyalusing we've had multiple conversations with potential tenants for data center capacity. One of them is a very good fit and we're working on it. I haven't updated on it because we don't have a definitive agreement yet. We're optimistic we'll have one in the short term. Market interest in island power and off-grid power to supplement grid access has grown exponentially over the past 6 to 12 months; it's a hot topic. The recent FERC ruling related to Amazon at Talon adds to that. Our ability to provide power quickly, reliably and cost-effectively is an advantage. We're focused on this first site because it's something we control. We're in the process of filing for permits to allow us to build power, get water, build data centers, etc. The economic model is compelling, and when we have our first in-hand contract we'll discuss it. We think it's an attractive standalone investment and a model for others to follow. More to come — hopefully a positive update next time.
Next question is from Wade Suki with Capital One.
Just a logistical question for the ship watchers out there. You mentioned the BW Pavilion was headed to Puerto Rico but seemed to stop in Jamaica and the Virgin Islands. Can you explain the logistics and how we should read ship movements on tracking services?
Ship watching will be a pretty boring sport for the FLNG assets in Puerto Rico because we expect over time that it becomes a simple cycle of loading in Altamira, sailing to Puerto Rico to discharge, and returning. There are adjustments you make to move cargoes around to service customer demand. In some cases you have to discharge a heel if it's U.S. gas and not able to go to Puerto Rico; there are small operational steps. But the basic logistics we expect over time are ships being filled in Altamira, going to Puerto Rico to discharge, and returning. In Jamaica we have a long-term DES contract with Shell delivering to Old Harbour. In Barcarena we have other contracts of service. The focus on FLNG is making sure one, it's operational and performing as expected, which it is, and two, logistics are simple. There are small things you can do to move cargoes, but we're servicing demand in Puerto Rico and as the unit becomes more productive and reliable, logistics become simpler to track.
Going forward, is it safe to assume maybe a cargo every two to three weeks?
Yes. Full capacity cadence is about 18 to 20 days. We had a very good production run of 14 consecutive days at 105% with no breaks. We took a maintenance outage to replace a valve that needed swapping and that has been fixed; the unit is back producing. Given the performance we've seen and reliability, we have high hopes production will improve and run consistently. Regarding loading delays from swell or waves, the storage differential between 170,000 and 135,000 cubic meters provides about four days of buffer, which gives a lot of flexibility to move loading windows. That's why logistics for this are simple and reliable.
If I could squeeze one more in: SG&A had a bit of an uptick here. Can you help parse that and help us think about the path forward on SG&A?
I would say the focus on core SG&A is down for three consecutive quarters. Overall SG&A had a lot of non-cash items this quarter and some expenses related to the transactions we're undertaking. That's why we separate transactional and integration costs. Looking into 2025, I would expect core SG&A to be close to $25 million or so and a small bit of cash of $5 million to $10 million, with non-cash costs running through the transactional and integration bucket.
There are no further questions at this time. I will turn the conference back to Wes Edens for any additional or closing remarks.
That's great. Well, thanks for your participation and interest in the company and the call this morning. We look forward to updating you in the near term. Thank you. Have a good day.
This concludes today's call. Thank you for your participation. You may now disconnect.