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Good day, and welcome to the New Fortress Energy Inc. Fourth Quarter 2024 Earnings Call. Today's conference is being recorded. At this time, I would like to turn the conference over to Matthew Reinhard, Managing Director, for introductory remarks. Please go ahead.
Thank you, and good afternoon, everyone. Thank you for joining today's conference call where we will discuss our fourth quarter and full year 2024 results. This call is being recorded and will be available by replay on the investors section of our website under the subheading Events and Presentations. In 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, I'll turn it over to our Chairman and CEO, Wesley Edens.
Alright. Great, Matthew. Thanks, everyone, for dialing in. So let's just jump into it here and start with the presentation that we sent out. Starting on page number three, quarterly financial results and annual financial results. So very, very good quarter, concluding a very, very good year. $313 million in EBITDA for the quarter. That's roughly a 50% increase over the guidance that we had previously provided, so it was a big beat for that. Very positive outlook for 2025 and beyond. We are confirming our guidance for $1 billion for this year in total. So by the numbers, a very, very good report. The profile of the business that we run is tremendous. You know, we're an integrated gas-to-power company. We have five countries, seven terminals, manage or own nearly ten gigawatts of power. So a very, very significant portfolio. It's a capital-intensive business to build, which is the bad news. But once it is created, as it largely is now, it has massive competitive barriers to entry. So sustainable competitive advantage is the term that we use. And, basically, where we are right now is that we think by just focusing on our current markets, we feel that we have an opportunity in the next two years to grow EBITDA by 50% or more. So huge numbers, I know, but that's how big these markets are and how big the opportunities are if we execute on them. Growth with very little in the way of CapEx, and reduce then the amount of our debt outstanding and the cost of it dramatically. Those are the goals that we have. There's tremendous work by our people this last year and over the first couple months of this year. Tremendous work, actually. And I want to give a big thank you to all of them. We're very excited for what we have accomplished thus far this year, and we think that there's great things ahead. So with that, let's turn to page number four. A little bit more detail on financial update. So, basically, here's the $314 million and the $950 million. What is crystal clear is that the FLNG asset coming online was the star of the show for us, the star of the quarter, and contributing significantly to earnings now and also in the future. The volumes that are created there allowed us to optimize the portfolio and make significant returns, and the positions continue to do so in the quarters ahead. So two areas of focus for us are long-term growth in the core markets, number one, and number two are asset sales and deleveraging. So a little bit of the detail in terms of the business. Page number five, capital markets update. In the last, you know, six months or so, we have done a ton of different capital markets activities to all to strengthen the balance sheet, increase liquidity, and set ourselves up well for future growth. October, we raised $409 million in new equity, including $50 million of my own equity. In November, we extended the $900 million revolver to October of 2027. We issued the $2.7 billion bond that basically consolidated debt and extended its maturity out to 2029. And then in March, as recently as today, it's been a very busy period at the start of the year, we closed the $425 million term loan B upsize, and we refinanced our corporate facility in Brazil, which was $200 million, increased that to $350 million, total of $4.775 billion in corporate transactions, and it's put us up in a terrific place in terms of our balance sheet and liquidity to now execute what our plans are. The goal is very simple. We want to deleverage, we want to simplify the capital structure, and we want to reduce debt cost. All of which are well in hand. Let's turn now to page number six. Gas supply update, as I said, FLNG entering service was a big catalyst for us. And as a result, we have excess supply versus our current base demand. The significant incremental demand that we see in our core markets will definitely come over the next couple of years. But this now this surplus then leads to the next question. Do we wait and sell excess cargoes over time until demand comes online or do we hedge and sell today to capture excess spread? You look at the chart on the right-hand side, the blue line represents the price of TTF as it goes forward. So you can see that it goes down fairly substantially over the next couple of years then flattens out as people expect more and more gas to come onto the market. The yellow box represents the amount of gas or profitability that we have above our base return. So the base return to the bottom, that's if we sell to our customers downline with the returns that we generate. Yellow is the amount above that. And so the question is, do we hedge or sell some of this, or do we just let it all ride? I think in particular with the geopolitical time that we live in, in particular, the prospects for some kind of a resolution in the Ukraine-Russia war, we think that that alone would have a profound impact on the market. And if we did nothing and simply waited for the events to transpire, the yellow box could get bigger, it could get actually quite a bit smaller. And so the answer, what we did in our judgment was to de-risk, sell a portion of it, keep significant upside if the market stays elevated or goes higher. But if the market falls, we're insulated and put cash on balance sheet. Conservative approach by us that we felt struck the right balance. It's good for our earnings. It's good for our cash flow. It was the right decision to make. We still retain a lot of optionality. So a very, very good result. With our FLNG volume. Number seven. I'm just gonna breeze on these because we're gonna talk about them in some detail. Chris is gonna talk about our fast LNG assets. I'll spend some time talking about Puerto Rico, and we have our senior management, Leandro Acuna and Jeremy Dawson on the phone to talk about Brazil. Lots of tremendous commercial activity, greatest opportunities for us exist in our biggest markets. There's a lot that we have to talk about that we're looking forward to. Chris?
Hey. Thanks, Wes. Really appreciate it. So as Wes mentioned, we're pleased to report that our FLNG One asset is performing above nameplate capacity, demonstrating the exceptional dedication and expertise of our operators. Since achieving first gas in late July, we successfully navigated several planned outages, taking advantage of these windows to implement key process optimizations. These proactive measures have allowed us to maximize uptime, enhance production efficiency, and ensure the asset is operating in optimal conditions. Notably, our highest production milestone was achieved in January, we reached approximately 120% of nameplate capacity — a testament to the team's commitment to operational excellence. To date, we shipped twelve cargoes totaling approximately 24 TBtu. In parallel, we've taken significant steps to lower other operating costs including improving procurement strategies, renegotiating service contracts, and consolidating third-party vendor support. Additionally, we've made tremendous progress in our commitment to the local community by increasing the proportion of local operators to approximately 50%. We anticipate this figure will rise to 80% Mexican workforce over the course of 2025, reinforcing our long-term investment in the region. Another key initiative underway is the direct sourcing of molecules from the Agua Dulce hub, which is expected to yield annual savings of $15 million to $30 million to further optimize our supply chain. On the accounting front, due to the asset's exceptional performance, and its ability to consistently produce, we officially placed the asset into service as of December 31, 2024. This milestone marks a significant step in the life cycle of FLNG One and positions us for continued success in the year ahead. Flipping to slide number ten. Investors have heard us talk about the incredible facility onshore at Altamira before. As a quick reminder, it was built in the mid-2000s by Shell and is an ideal facility to turn from an import terminal to an export terminal. The infrastructure includes deepwater berthing access, including direct access to the open waters in the Gulf of Mexico, thousand cubic meter tanks that are operational and cold now, access to pipeline gas and power infrastructure, and an incredibly protected operational location with only one named hurricane in the last ninety years that has hit the facility, and it was only a category one. A comment on the FLNG project generally as this is a materially different construction project as compared with FLNG One. On FLNG One, we started construction and engineering at the same time. We didn't initially have a chosen deployment location, so the team had to engineer for any conceivable site condition as well as multiple gas composition scenarios. The FLNG One asset was also taken offshore too early in the development of the project and manpower constraints and weather conditions impacted the schedule materially. Contrast all of these FLNG One challenges with the FLNG Two project and the differences are stark. We're now able to build something that is already designed and engineered; in the case of the modules, we have as-built drawings. All of this makes the construction much easier to know and to price, which is what we've done with our construction partners. On the next slide, we've outlined the current expected timeline for the completion of the FLNG Two asset. We started engineering and procurement in Q2 of 2023 using FLNG One as a basis for design of the modules and the Altamira terminal as the deployment location. We signed a gas supply and partnership agreement for the onshore facility with the CFE in January of 2024 and started module construction. We currently expect onshore construction to commence this summer and are working closely with the CFE on that process and will provide additional updates as permits are received. Over the last eighteen months, we spent about $625 million with the bulk of that being $160 million expected to be spent in 2025 and the remainder to be spent in 2026 or 2027. Given that the modules that we built for FLNG One are the exact same for FLNG Two, we were able to shift risk to the construction contractor and get price and schedule certainty. As a result of and as of February 1, 2025, we're over 50% complete on the modules, and the majority of the large pieces of kit are either already at the quay at the yard or ready to be shipped. With that, turn it back over to Wes for Puerto Rico.
Great. Thanks, Chris. So let's flip to the following page, page number thirteen. Here's a map of Puerto Rico with a bunch of dots on it. The dots represent power plants in different facilities. There's the NFP facilities. There are current power plants. There are power plants that are targets for fuel switch. There's new builds and peakers and other narrow sites, so lots of dots on the map. Just a little bit of context to where we are. So today, we have two contracts. One where we provide gas to the yellow dot, which is our San Juan LNG facility, where we provide gas to the San Juan five and six power plant that runs through March of 2026. Two is we have a gas contract on the two plants we built for the Army Corps that are adjacent, one right there in the yard, the other five miles down the road. The two of those together total about fifty TBtus of production, so about one ton of LNG. The conversions, which I'll talk about in just a second, represent a massive opportunity for us. To basically take fuel-ready assets that currently burn diesel, switch them to natural gas, save hundreds of millions, potentially billions of dollars over the years for Puerto Rico and actually generate a significant amount of business for us. That is between fifty and a hundred TBtus in total demand. Lastly, the new build business is also very significant. They announced their first new build power plant in twenty-five years in January, and we're going to be providing the gas for that when it comes online in 2028. We estimate that the total need for new power will generate between 150 and 200 TBtus in total volume. If you add that all up, you take the fifty that we have now, it grows to between 250 to 350 TBtus in total. So truly, we're a fraction today of where we believe the market on this can be. Potentially the biggest gas-to-power market opportunity in the world. There's nobody who's in a better position to access this and perform on behalf of Puerto Rico than we are. So let's just flip the page real quickly. Page fourteen, these are the photos you've seen many times. The left-hand side is the San Juan five and six. That orange boat is a boat that we have leased that sits in front of our facility. The right-hand side, there are two other contracts or assets in the island-wide contract. It is an eighty TBtu contract. We use about half of that, a little less than half, today, and that contract expired on March fifteenth. We just extended it this weekend for one more year. I'll talk about that in just a second. Page fifteen, the opportunity to convert is the earliest and easiest short-term win for Puerto Rico and for us to help them with. So there are four plants that we show here. They are currently burning diesel. Nine hundred and twenty-five megawatts, they're actually used significantly, and so the cost savings would be significant, and today's price is roughly between what they pay for diesel and what they would pay for natural gas; these are a high priority. The government has made it a high priority. We are very aligned with them on that. This alone would double the size of our portfolio in Puerto Rico, $250 to $500 million a year. So it's a win-win on both sides and something that we are very, very focused on in the short term. Number sixteen long term, it's all about new power. So a little bit of context. Average power plant in Puerto Rico built 1981. Fifty percent of the power plants built in 1975 and before. Desperate for more reliable, less expensive power. That's the situation. The first new plant that they have announced to be built in twenty-five years is the one that is shown here schematically. It was originally scheduled to be a 478-megawatt power plant. They've upsized it to be 550 megawatts. We are the gas provider to that project, so twenty years at roughly 30 TBtus. At today's margins, that's roughly $120 million of margin for twenty years with essentially no CapEx. This is the benefit of having spent all the capital in this capital-intensive business, established the beachhead, and now we're able to service customers efficiently. Of course, it generates a tremendous amount of margin for us. Page number seventeen. Yesterday, we announced a one-year extension of the ATBTu contract. This is the island-wide contract that allows them to grow gas use from currently 40 TBtus to roughly 80 TBtus as the maximum over the next year. We think that the bulk of that can be taken up by the temporary power growth. We've already saved Puerto Rico $500 million in fuel savings on the San Juan five and six. We think by converting more power plants and burning more gas in this manner is the fastest way to more savings for Puerto Rico. Let's talk about page number eighteen. Because we announced this late last night. And this is the change in the O&M agreement that exists between Henera, which is our wholly owned subsidiary that manages the PREPA plants, in exchange for a $110 million payment. The Henera contract itself is actually quite simple. We could pay the base fee of $22.5 million. We had a $100 million incentive that, basically, we got paid fifty percent of the cost savings that were generated either by operations or from fuel savings. We earned $110 million over the course of that first year of the contract. We billed them initially in July and have billed them a number of times ever since then. They wanted to convert and grow gas and utilize, you know, more of our business down there, but they became, as the government, very fixated on the incentive structure, and we said, after a lot of consultation with them, fine. I mean, the government basically at the heart of it, the government basically didn't feel comfortable with the structure of having us sell them gas and also charge them an incentive fee. Though this is clearly the contract and the incentives from day one, after again a lot of consultation with them, we said, you know what? Let's try and understand what it is you're focused on, try and come up with what we're focused on and find a compromise that works for both of us. We have two goals. One, we're owed $110 million, and we want to get paid. Two, we wanted to grow our supply of gas, and by doing so, a) make more money because we're trying to generate more revenues and b) create a more productive business and save them billions of dollars in fuel savings. So we decided on this compromise. They pay us $110 million. We agreed to eliminate the incentives. Together, we then try to take the island off of diesel and fuel oil, save them potentially billions, and generate far more for us than the incentive structure would have in a manner that they feel they are aligned with us. So it's very much a win-win. With that, let me turn it over to Leandro Acuna and Jeremy Dawson to talk briefly about our Brazil operation. Fellas?
Thank you very much, Wes. Good afternoon, everyone. My name is Leandro Acuna, and I'm pleased to be presenting the New Fortress Energy Inc. Brazil session alongside my partner in Brazil, Jeremy Dawson. Starting on slide number twenty, I want to take this opportunity to highlight the incredible achievements New Fortress Energy Inc. has made in Brazil over the past almost four years now since the acquisition of Hygo. During this time, we have made significant investments laying the groundwork for a successful business prepared to deliver substantial and sustainable value to our shareholders. This slide showcases the impressive assets that we built in Brazil. We now operate two LNG terminals with a supply capacity of approximately two hundred TBtus per year each terminal. Our Barcarena terminal, the one you can see in the north of Brazil in a region with no access to pipelines, is already operating to serve one key customer, the Norsk Hydro aluminum refinery. Soon, the terminal will also serve two of our own power plants under construction in that region — totally an impressive 2.2 gigawatts of installed capacity. Furthermore, our Santa Catarina terminal, south Brazil, a terminal that is connected to the same pipeline used by Brazil to import gas from Bolivia, is fully commissioned and ready to play a major role in the upcoming 2025 capacity auction in Brazil, which is scheduled to happen in June 2025. The auction is an amazing opportunity for New Fortress Energy Inc. And with our terminal, we could not only secure long-term power purchase agreements for our own projects, but also provide gas and terminal services for two existing power plants in the region. We believe most of the south terminal capacity will be contracted after the auction, reinforcing our position as a key player in Brazil's energy landscape. I will provide more details on the auction opportunity in the following slides. Now let's move to slide number twenty-one. Continuing with an overview of our business, I want to emphasize the strong foundation we've built in Brazil through our existing contracts. In addition to the Alunorte long-term supply agreement that I mentioned before, we have secured over 2.2 gigawatts with long-term power purchase agreements contracted for more than fifteen years with inflation-adjusted PPAs. This ensures a stable and predictable revenue stream for New Fortress Energy Inc. in the long run. It's also important to highlight that New Fortress Energy Inc. has no commodity index risk in any of those existing contracts. Both Alunorte and the power plant PPAs have a pass-through for the commodity price. With those contracts, as far as I'm concerned, the Barcarena terminal is the only terminal in Brazil almost a hundred percent of its capacity long-term contracted. On the funding side, we have already secured all necessary equity funding which was already injected into the project. And on the debt front, the long-term financing was already secured and disbursed. This demonstrates our diligence and commitment to these projects, which are fully funded until their completion. Looking ahead, we are focused on near-term growth opportunities and we believe that the upcoming Brazilian capacity auction could represent a great second wave of growth for New Fortress Energy Inc. in Brazil. The market is expecting a big auction that will contract over ten gigawatts of capacity. This auction represents potential for higher margins for New Fortress Energy Inc. in the south terminal and requires minimal additional capital investment. As we have already built the necessary foundation for the requests, we have registered over two gigawatts of our own capacity to participate in the next auction and have received requests from third parties to supply gas to an additional three gigawatts of projects. Our plan is to dedicate part of the terminal capacity to supply existing projects, supplying gas and terminal services, aiming for revenues stream already starting as early as September 2025, and utilizing parts of the terminal to supply new projects, including New Fortress Energy Inc.'s, of course, targeting commercial operation dates between 2028 and 2030. It's important to highlight again that we can capture substantial growth with very little CapEx and equity needs. At this stage, we have no overbooking of opportunities for our terminal, and we will need to select the best projects to support our growth in Brazil until the auction date. This strong demand underscores the value of our integrated LNG and power capabilities. New Fortress Energy Inc. in Brazil is one of the few players that is able to provide these capabilities. We are confident that New Fortress Energy Inc. will secure significant share of the awarded capacity in the auction further reinforcing our position as a leading energy provider in Brazil. This growth will generate substantial value for our shareholders and contribute to Brazil's energy security and economic development. I will now hand it over to Jeremy Dawson, who will give you an update on construction.
Thank you, Leandro, and good afternoon, everybody. My name is Jeremy Dawson. I'm responsible for building and operating the Brazilian assets. I'd like to start with the bottom line upfront. The good news, we're on schedule. In one case, we're ahead of schedule with construction. We're also on budget. So this is an excellent outcome for the company. And we've done a good job in terms of contracting and being able to eliminate any CapEx leakage and also been able to back-to-back any regulatory or delay risk we have to the parties most capable of managing that risk, which is the construction consortiums themselves. If I could have you draw your attention to the map on the right side of the slide, I'd like to point out this nice geographical cluster of assets that we have coming together. You can see the Alunorte, Norsk Hydro aluminum refinery right in the middle of the photo. And then just down into the left, both of our power plant locations I'll talk about those in just a second. But this is a profitable cluster of assets that will be delivered into next summer. And we will then be able to conclude our CapEx cycle in the Barcarena cluster. This cluster of assets is going to have a demand of approximately sixty TBtus per year, with potential for upsizing that as the power plants dispatch increases in years of poor hydrology in Brazil, which are becoming more frequent. I'd like to start with the Norsk Hydro contract. This is a thirty TBtu per annum contract, which we started servicing in March of 2024. It's got a fifteen-year tenure with a very creditworthy counterparty in Norsk. For our current volumes on a daily basis, we're currently supplying approximately 74 million cubic feet per day of gas to that facility. We have two power projects, which you've heard about before. I'll give you an update on them. Although they're both power plants, they're quite different. The Selva power plant is a combined cycle power plant, which basically means it captures the waste heat generated by the turbine combustion and passes that through a water and steam cycle to increase power plant efficiency and output by about fifty percent compared to a simple cycle project. That's a very important process for a power plant that's expected to dispatch on a significant annual basis, which this plant does. The power plant is a 630-megawatt plant using Mitsubishi technology. It is eighty-eight percent complete. It has a twenty-five-year PPA with all of the terms that Leandro mentioned before in terms of commodity risk pass-through and also inflation adjusted. The commercial operation date of this asset will occur in the second half of this year. The Porto de Sergipe asset is quite different. This is a simple cycle project, which is generally used when you have any kind of fast-start peak support application. It is a 1.6-gigawatt power plant, which is expected to dispatch less than Selva but is thirty-nine percent complete, has a fifteen-year PPA, and the COD will be the following summer. If I could have you go to slide twenty-five, I want to get into a little bit more detail on these assets and talk about the construction specifically of each one. As I did mention, Selva II is the 630-megawatt plant. And being combined cycle, it's a bit more complex in terms of the engineering and the erection phase of this project. So we chose an engineering-heavy consortium. We chose a Japanese consortium of Toyo Engineering with Mitsubishi as the equipment supplier, and have been able to secure lump-sum turnkey contracts which place the risk of schedule and cost overruns firmly on the consortium, and also aligns our goals in terms of project completion on time and on budget. The project is eighty-eight percent complete. We've already started cold commissioning. Just this week, we had a very important milestone for the project, especially for a combined cycle project. We were able to introduce water onto the site into the water treatment plant, which allows us to start commissioning the water and steam cycle. This project will provide firm power dispatch annually during the second semester of every year. And the cash flows for this project will commence in the second half of 2025. Porto de Sergipe, we have a different consortium makeup, primarily because of the different nature of the projects. A simple cycle project is much more civil construction focused rather than the complex erection and construction activities that are related to a combined cycle. So we chose a local contractor that is very experienced and has a very good track record in Brazil and is very experienced with the civil construction part of the scope. They're also partnered with Mitsubishi on a joint and several basis in our strong lump-sum turnkey contracts. The project is thirty-nine percent complete compared to a planned at this stage completion of thirty-one percent. So we're quite pleased to be significantly ahead of schedule. This is a standby asset. It is a capacity contract where we earn very healthy capacity payments in exchange for being ready to be online immediately upon being notified by the system operator. The capacity revenues of this contract will commence in the second half of 2026. I wanted to point out two interesting photos on Porto de Sergipe, which highlight some of the challenges that are inherent in constructing in a very remote and rainy area of the world. In this case, we're building in the Amazon. In the first photo on the bottom left, we have a very large tent erected over the site. That tent is almost sixty feet high and over three hundred feet long. It essentially is covering an area of the worksite where we're going to do a lot of civil work and installation of balance-of-plant equipment during the rainy season. So, essentially, we created a dome so that we could continue construction without any interference from the weather that is going on right now as we're in the rainy season. Then you see a photo of one of the gas turbines that is currently en route to the site. That is a Mitsubishi 501JAC, advanced air-cooled design gas turbine. It's state-of-the-art. It is one of the largest turbines available in the world with a ISO output rating of over 400 megawatts. It is one of the five of these turbines that we own as New Fortress Energy Inc. We're the second largest fleet owner and second largest customer of Mitsubishi Power in the world when it comes to advanced class gas turbines. This gas turbine is being loaded in this photo at the Savannah, Georgia port after departing Mitsubishi's manufacturing facilities in the United States. Two of them are currently en route to our project right now. They'll arrive in about four to five weeks. The other two will arrive a few months after that. With that, I'll turn it over to Chris for the financials update. Thank you.
Super. Thanks, Jeremy. Let's turn to the next section. I'll walk through a little more detail on both the financial results for the quarter and year 2024 as well as an update on cash flow and liquidity. So turning to slide twenty-seven, we've included some comments on financing activities both past and present. As you're all familiar, in Q4 2024, the company completed a series of refinancing transactions where we exchanged $875 million of 2025 notes, $1 billion of 2026 notes, $500 million of 2029 notes into a new $2.7 billion 2029 tranche that included about $300 million of new cash proceeds to the balance sheet. As part of that transaction, we agreed to an amendment with our revolving credit facility lenders to extend $900 million of the $1 billion revolver into October 2027. In addition, we issued $400 million of primary equity anchored by an additional personal investment from our CEO. And Friday, we priced, and today we're closing the upsize of our term loan B facility where we raised $425 million associated with this, we terminated commitments under the term loan A facility in the amount of $350 million. This transaction puts incremental cash on balance sheet, which we used to fund the FLNG Two CapEx program. This refinancing was a natural progression of terming out replacing relationship capital from select members of our supportive bank group with institutional investors that are better situated to have long-term funded loans in place. The 2025 asset sales processes are well underway, and it's best talked about earlier, we expect to generate $2 billion net proceeds after fees and any asset-level debt payoffs which can be used to further pay down corporate debt. Specifically, we will be using eligible proceeds from asset sales to retire the 2026 notes or we could do a refinancing to extend them. But in any event, that is a near-term focus for us. Longer term, we think the right capital structure would be to take out the term loan B and the remainder of the term loan A, the long-term asset-level financing secured by the FLNG units as well as long-term offtake agreements. We think that this combination of delevering as well as extending maturities is in the best interest of debt and equity holders alike. My final comment here is that while we have seen some downgrades to our corporate debt ratings, we would expect that these steps, once completed, will result in positive improvements to our corporate debt profile which we expect will lead to upgrades. Flipping to slide twenty-eight, the takeaway from this page is that as a result of the refinancing transactions, and equity capital raise we completed in Q4 as well as monetizing the portion of our supply that we were long, you can see the company has ample liquidity to service debt and to pay committed CapEx. On the left side of the page, we have a cash flow walk that we've included in prior presentations. Embedded in this, we've updated the 2025 estimated adjusted EBITDA to be $1 billion as Wes described already this afternoon. On CapEx, this now includes the cost associated with FLNG Two as we have that cash on balance. It continues to exclude the Brazil power plant CapEx, which is fully funded through either restricted cash on the balance sheet or committed financing facilities. For debt service, this includes the increased costs associated with refinancing, but assumes that we pay off $2 billion of debt coming from asset sale proceeds. An important note here is that the way the debt documents work, a minimum of 75% of any asset sale proceeds in excess of $50 million go to pay off debt. The company does have discretion in keeping a portion of the cash on the balance sheet, but for this exercise and consistent with what we've said publicly, we're assuming we use all of the proceeds to delever. And again, to keep it simple, this assumes a pay down pro rata to the 2029 notes, the RCF, and the term loans. We've excluded the portion of adjusted EBITDA that represents earnings that are generated from charter to third parties, and we've excluded the portion of ship charter hire since running through interest expense. This results in cash flow use of $200 million for fiscal year 2025. On the right side of the page, we show beginning of the year unrestricted cash balance $493 million. Then add to that the proceeds from the term loan B and lumpiness financing that have just closed, which is $490 million. You have the negative $200 million of funds of cash flow from the left side of the page, and finally, our expectation of the FEMA claim which after taxes and debt repayment yields cash inflows of $405 million. All of this results in an end of year cash balance projection in excess of $1.2 billion. Turn forward to slide twenty-nine, and we have the financial results. Total segment operating margin was $240 million for Q4, and just under $1.1 billion for fiscal year 2024. For Q4, this is $206 million from sales to customers through our downstream terminals and cargoes that were sold to the market which is about 85% of the revenue for the quarter. Similar percentage exists for the full year 2024, which is $950 million for the year or 88% total segment operating margin. In Q4, we had $34 million of operating margin from the ships, which contributed to $137 million for the full year. Core SG&A for the third quarter was $34 million, which is up slightly from Q3 largely due to the professional fees incurred around the refinancing transactions. For 2025, we're forecasting $30 million per quarter or $120 million for a year. The deferred earnings line was $108 million in the fourth quarter and is nil for the fiscal year 2024. This represents previously contemplated cargo sales that were included in segment revenue in Q2 and Q3, but they were not recognized in EBITDA until Q4. As a result of all of this and the punch line adjusted EBITDA for the third quarter $313 million or $950 million for the full year of 2024. Moving on to slide thirty. For Q4, $242 million of net loss for GAAP or loss of $1.11 per share for fiscal year 2024, $270 million of a net loss or $1.25 a share. But importantly, the majority of the Q4 result is a $235 million of charges related to the extinguishment of debt. $225 million of that was noncash and it's largely driven by the equity issuance associated with the new 2029 notes, which was issued as part of the refinancing. If you adjust that and other nonrecurring items out, we would result in $29 million of net income for Q4 or $0.13 a share. $101 million net income for the full year 2024 or $0.46 a share. Finally, funds from operation for the fourth quarter, $68 million, and for the fiscal year $163 million. Now that we shared the high-level earnings for Q4 and fiscal year 2024, I want to expand just a little more on the financing financial statement impact of the press release out this morning regarding the termination of the fuel incentives of PREPA. In prior quarters, notably Q2 and Q3 2024, we previously recognized $58 million associated with the fuel savings under our Henera incentive contract with PREPA. However, given that we are changing this incentive contract, we are having to reverse that revenue. So we recognized $33 million in fuel savings during Q2, $25 million in fuel savings during Q3, and we had been intending to recognize another $25 million in Q4. So we were previously projecting an additional $83 million in EBITDA for fiscal year 2024 that will be excluded and deferred over future periods, but the cash is in hand. Now given this has been changing daily over the past week, we need a couple of extra days to ensure appropriate presentation and disclosures in the 10-K. So as a result, we will be filing a notification of late filing under rule 12b-25 with the SEC. It is important to note though that the income statement and adjusted EBITDA numbers included in our earnings release are reflective of the final PREPA deal. We do not expect any material changes to these results released and furnished within the earnings 8-K filed with the SEC today. Further, it is our expectation that we will file the 10-K before the end of the week. With that, I'll turn the call back over to Wes for some additional updates.
Great. Just a couple brief updates, and then we'll go to questions. So the three most frequently asked questions, I thought I would actually save to the end. So questions about the asset sales, we've said this is all public information. You know, we are very focused on deleveraging. Deleveraging can happen from one of two ways. It can happen the old-fashioned way by making more money than you spend and using that to pay down debt, which, of course, we intend to do, and that'll become a bigger and bigger factor for us as we move forward. Number two, though, you can sell assets at accretive values and use those proceeds to pay down debt. The first asset that we are focused on is Jamaica. So Jamaica is the country where we went first, so it's our oldest and most developed market. Just to review, it's about a thirty TBtu downstream market. We generate about $125 million in EBITDA. Virtually, all of that is cash flow because that's what happens in these businesses over time is that once they're up and running, there's very little CapEx to run them. It's an extremely attractive profile of assets. It's got twenty-plus years of downstream demand contractually. Got twenty-plus years of gas supply. A hundred percent of the assets are US dollar based. It's never suffered a dollar of credit loss in its entire history. So it is a phenomenal asset. It's in a very, very good market. And we have phenomenal people that we're lucky to work with down there. So not surprisingly, it's been a very sought-after asset. We had started this process back in the fourth quarter, and we're now in a kind of a final process with a handful of different folks. And although it's always hard to predict the exact timing for this, the outcome thus far has been very positive, and then we'll go on from there. So that's the asset sale update. FEMA, my favorite four-letter word, has been a very, very productive period of time for us. FEMA works administratively where we contracted with a prime contractor who then in turn contracts with the Army Corps that then in turn that money is paid by FEMA. FEMA obviously is the disaster relief provider. They play a massive role in places like Puerto Rico, but also in the wildfires out west and elsewhere. So it's a critical role that we value and deeply respect. We have had comprehensive in-person interactions with the Army Corps folks. I think that there's a great amount of understanding that we have accomplished in terms of them explaining to us the nature of our business and exactly how we provide gas and all the different aspects of the contract. And we've learned a lot from them in terms of how they think about the process and whatnot. It's an interactive process that does not have a definitive date right now, but I can say that the level of respect and interaction across the board between us and between them and between FEMA is at an all-time high for sure, and we feel very good about the constructiveness of it. Lastly, Klondike is our effort to provide power to data center developments. That asset, the first asset that we have that is in our portfolio, is in Pennsylvania. We filed in early January to get building permits and air permits for the power plant that we would build there. We expect to get those sometime in the middle of this year. And we are hopeful that later this year, we'll have good news with respect to the consummation of construction and marketing with it. So those are the three updates. Last thing I would say is just, you know, when you look at the quarter and the year in total, it's been obviously a heck of a period. Q4, $313 million in EBITDA. The year, $950 million in EBITDA. Our guidance for next year is $1 billion, which is what we're just reaffirming. Our two biggest markets are the ones that have the biggest opportunities. Brazil, that first power plant we expect to turn on in the second half of the year and produce cash flow for us. The power auctions, as Leandro went through, are upcoming and could be significant for us. We're incredibly well positioned in that market in both the north and most importantly in the south. Puerto Rico, perhaps the biggest gas-to-power opportunity in the world. We are the sole provider of gas in San Juan. Eighty percent of the people live in that geographic area. So we feel like we're incredibly well positioned. Capital structure wise, $4.775 billion later, it's been a very, very busy and productive year for us. The balance sheet is in much better shape than it was at the beginning of it. We have excellent liquidity as Chris went through. We are poised to delever, simplify, and grow the business. And those are the perspectives that we have. So with that, I will take a pause and we'll open it up to questions. Thank you very much.
分析師問答
Thank you. And if you would like to ask a question, please signal by pressing star one on your telephone keypad. If you are using a speakerphone, please make sure your mute function is turned off to allow your signal to reach our equipment. And we'll take our first question from Benjamin Nolan with Stifel.
Yeah. Thanks. I appreciate you taking my questions. So the first I wanted to start if we could, on slide number six where you talked about your effective open position. Can you maybe help me quantify that a little bit? You've just between what you're buying and producing a hundred and seventy TBtus of annual supply, how much of that is available? And then you talk about a portion of it has been fixed. Can you maybe put a little context on the the spread that you have locked in for?
Yeah. The majority of our position, the vast majority of it is either sold or destined for a downstream customer or hedged. So our actual long position would show up as something slightly more than that then. But, basically, the decision that we made, as I said, was to de-risk the portfolio with really the caveat being that we think that there is a lot of volatility potentially ahead, and to the extent that there was, we didn't want to let the yellow box evaporate. And so our goal is not to be exposed to, at this point, either increases in TTF that actually then somehow hurt us or decreases in the TTF that somehow erode the profits that we already had on the balance sheet. And so we thought that actually the conservative approach was the right one, and that's why we hedged it up. Obviously, when the FLNG Two comes into the portfolio here in the first part of 2027, those will be incremental volumes. Those are volumes that we are already talking to people that are interested in buying them, so it's a good position to be in. So technically, a long position, but it's not yet something that is deliverable. On the balance-sheet deliverable positions, we are essentially neutral. So we have either, as I said, either sold committed volumes or we have hedged them so that we are insulated from price moves.
Okay. And then for my next question, I know in conversation that we've had in the past, there were a number of cost saving initiatives that you guys were looking to undertake in Puerto Rico or in the Virgin Islands or in Jamaica. Could you maybe give any update on first of all, what those look like? How meaningful they would be and where you are in that process?
Yeah. I'd say the majority of the cost savings are from the ships and FSRU side of the balance sheet. So we've got some FSRUs that have come back to us that are under market; we've talked about initiatives to try to realize the gap between market and where they're priced. Those are more opportunities on the profit side. On the other side, we've got an abundance of ships. When we started, we increased the portfolio of gas we provided in Puerto Rico. We increased the number of supply ships from two to five. We're trying to reduce that from five to two. That is well underway. We spent a tremendous amount of time and effort refurbishing and upgrading the berth in Puerto Rico to be able to take in a bigger ship. That'll then simplify that supply chain. That's what we're focused on right now. We have a handful of other initiatives that we think are also useful. One of the things that has been really interesting is that as we have built some version of just about every terminal you can imagine, we've learned a lot of things. As part of that, we think that there are significant opportunities. In the shipping business, everything you touch is worth millions of dollars. So if you can reduce a ship or two, or just use them more efficiently, you can save meaningful amounts of money, and that really is the focus. On the people side, we think there's always opportunities to continue to grow the business, but we've got a great core of people that have worked extremely hard and effectively. So we think there's less on the labor side but on the ship side, we think that there's definitely meaningful opportunities to do some good work.
Alright. I appreciate it. Thanks, Wes.
And we'll take our next question from Christopher Robertson with Deutsche Bank.
Hi. Good afternoon. Thank you for taking my questions. I was going to ask a bit about the Brazil power option, but Leandro did a pretty good job of laying the overview there. So I wanted to ask him a bit more of a specific question about the two gigawatts that you registered of your own power projects. Just in terms of where would you source the turbines, how are you thinking about the number of different projects that makes up that two gigawatts and what estimated CapEx might look like for something like that?
Hi, Chris. Thanks for your question. So as I said, we registered two gigawatts in projects. The most difficult thing for this auction will be turbine availability. We have secured turbines from one of the OEMs that are our partners, so we're confident that we have turbines available not only for the 2028 COD date, but also for 2029 and 2030. The CapEx for those plants, mirroring what we just did at Porto de Sergipe, where we hired full EPC lump-sum turnkey last year, is around 600 BRL per kilowatt installed. Those projects are going to be spread over two different sites initially. Nevertheless, we have many other projects that are qualified for the auction connected to the same pipeline that we provide gas to, that would also be interested to somehow partner with us. So that number until the auction in June could increase a bit.
Okay. Thanks for that, Leandro. I guess as a follow-up, when you guys are talking to potential partners that have existing assets and you're coming in as a potential gas supply partner, how are those conversations going with the potential for sharing in some part of fixed capacity payment in addition to the variable dispatch and the spread on that? Is that part of the conversation, or what does that look like?
Yes, absolutely, Chris. We are discussing potentially supplying gas to brownfield assets. In the end of the day, what those projects need is a kind of a gas call option because their power plants are available to produce power whenever the system needs. So they need to buy gas whenever they're required to produce power. It's a gas call option. And, yes, in order to buy that gas call option from us, they will need to pay a premium for the call option, which is our terminal fee, plus a strike price that will be a premium over the JKM. So yes, all the players in the country are already expecting that because we have done contracts before charging capacity fees or terminal fees and a higher strike price whenever they buy the gas. So all the discussions that we are having now are heading in that direction.
Great. That was really helpful, Leandro. Thank you. I'll turn it over.
And we'll take our next question from Sherif Elmaghrabi with BTIG.
Hey. Thanks for taking my questions. A couple on Puerto Rico. First, as we think about building to that billion dollars of EBITDA guidance, seems like there's a lot of upside to volumes under the island-wide contract. How quickly can some of these older plants switch over to gas?
Really, as quickly as they can get regas. If you have the regas in stock, which we do, you can actually convert them fairly quickly. The mega gens are actually connected to a regas system now, so they could actually convert at the drop of a hat. The Maguas plant is entirely gas ready. It just simply needs regas put in place. It's basically a regas unit and a buffer tank that sits between it. The Campilachi plant is actually gas ready; it simply needs regas put in place. A hundred and sixty of the two hundred and forty megawatts, the other asset needs some technical work. The Aguirre plant is actually ready today. So the short-term opportunity on the conversions is significant. It really became one of the factors in the discussions we had. As I said, they were just uncomfortable. Notwithstanding the contract, they were uncomfortable with the notion that we would be selling them gas and generating revenues and also earning an incentive, even though that's what the contract called for. It was an easy decision to sit down with them and say, look: we share objectives, and our objectives are to provide more gas and power to the island and to save you a lot of money going forward. They want to save money and have less uncertainty over incentives. It's a very simple and easy transaction. There are few things in life that are truly win-wins; this is one of them. So happy to do our part on that, and we think the benefits will become manifest quickly because we expect significant activity on these conversion initiatives.
That's helpful color. And then longer term, how does contract renewal work for the island-wide contract? Is there a fixed number of extension options, or does it just roll every March?
There are a couple of different extension options, but for the first time the government really came to us a couple of months ago and said they would like to run an RFP for a new contract that would have significantly more duration. Obviously, the year-by-year tenure of it creates instability in terms of energy security. They recognize what a critical part of the energy sector gas is today, only to get more critical as they add more volume into it. This is something we talked about having a duration of ten years or fifteen years or even longer. We know what the tenure looks like on the new contract that we signed for the new power plant; that's a twenty-year. I would expect that there will be something that happens not too far out with no specific time associated right now, and I would expect it would end up being a significantly longer duration, at least on a portion of it than what they have right now.
Thanks very much for taking my question.
Take our next question from Craig Shere with Tuohy Brothers.
Hi. Thanks for taking the question. Just continuing on the question about renewing or extending a longer term the ADT Btu contract with PREPA. Your initial sales on the island were just gas sales, gas margin sales, but that eighty TBtus is diesel-linked. But it won't be diesel-linked forever, right? I mean, you may still apply this for twenty years, but go ahead.
It definitely won't be diesel-linked forever. Ironically it was our initiative because it was linked to our savings initiative. We wanted to make it crystal clear there was savings, so we linked it to diesel. At seventy-three percent of diesel you save twenty percent of the money; it's straightforward. It wasn't the pricing they objected to; it was the notion of you're selling us gas and also being paid an incentive. That became the heart of the discussion. I think the new contract that we signed on the new power plant is Henry Hub based. I think certainly when they redo it, it will be Henry Hub based. It's not a natural fit to the diesel savings — that was an artifact from a different part of a transaction. But to put it in perspective: nine hundred and twenty-five megawatts of plants burn diesel today; you probably have 1.5 to 2 gigawatts of new power needed; peaker plants being built now add a few hundred megawatts. So there's tremendous room for growth. We can work with them about converting some of their older steam plants to run on gas. Now that we've gotten past the incentive point, I think it's kind of a logjam that opens up. That's our bet: people will want to save money and reduce emissions. If they do that, we'll sell more gas and it will be more profitable for us. It's a win-win opportunity.
And with a conversion from diesel to Henry Hub plus, you're confident you still have sufficient LNG availability and respectable margins, given selling at Henry Hub plus?
We do. We think that the margins are appropriate and consistent with what they are across the rest of the portfolio. The more that you sell, it may affect your margin at some level, but on a total volume basis, when you add it all up, the gas need could be 250 to 350 TBtus. There are a lot of efficiencies in deploying that much gas. We think there's a lot of savings for them — billions of dollars — and for us it could be a huge market.
Gotcha. And I just want to confirm real quick: the $110 million Henera payment is part of the $1 billion 2025 EBITDA guidance?
It is.
We'll take our next question from Wade Suki with Capital One.
Afternoon, everyone. Thank you for taking my question. Just one on guidance, if I could. I might have missed an interim step somewhere, but I wonder if you could speak to the moving parts from the cash flow walk. I thought it was around 1.3 to 1. And if there's anything embedded in guidance like FEMA sales or nonrecurring items?
Okay. Anyways, it's Chris. No. It's simple: we are not including the FEMA claim in the guidance for 2025. The $1 billion is exclusive of the claim. That's the simple answer.
Gotcha. That's what I thought. Thank you. And just to switch gears a little bit, dovetailing on an earlier question talking about the supply book, cargos and whatnot — I'm thinking about longer term after these projects up and running, so just wondering if you might be able to give us color on the third-party supply book; what's the supply situation in the out years, excluding FLNG One and Two, maybe 2026, 2027 time frame. Any color on third-party supply would be great. Thank you.
Yeah. Obviously, the further out that you go, the more supplies available. The tightness in the market is really a function of shortness of gas, particularly in Europe and the restrictions on Russian gas. If Russian gas comes back into the European markets, that would have a profound impact on prices in Europe and thus worldwide. As you go further out, there's a tremendous amount of activity on the construction side. Prices go out, and if you're looking for longer-term tenure, there's a lot of gas available. With respect to our portfolio, we do have a couple million tons in long-term contracts. We have our own FLNG, so we have very long-dated supply. As you extend duration in some portfolios, you're likely to layer in other amounts of supply. It's a large portfolio; on a current basis we feel like it's as well matched as we can make it. We're predicting usage levels with all the different customers; there are always factors into it. But to the best of our abilities, we try to de-risk the portfolio, take advantage of elevated prices, generate some earnings, but still maintain some significant optionality. Longer term, there's lots of gas that is readily available for longer-term projects, especially with creditworthy downstream.
Perfect. Thank you so much. Appreciate it. Could I squeeze one more in? I'm just wondering if there's anything more creative that you can do in Brazil with the auction coming up, thinking about the existing Porto de Sergipe and Selva plants. Is there anything like adding capacity or expanding the plants to participate more in that option? Anything there would be great. Thank you.
I can't speak for Leandro on specifics, but Porto de Sergipe and Selva plants are committed. They are tied to long-term contracts. That said, we think there is incremental capacity at the terminal. Leandro, Jeremy, and the others are in the thick of that, and the power auctions are an unbelievable opportunity in terms of options for brownfield and greenfield sites, and both in the gas terminal cash flows. In the past we either bought or acquired PPAs and then built plants; now we see lots of opportunities to partner in different ways. We're very focused on terminal cash flows, but the overall impetus is to minimize CapEx, maximize free cash flow, and grow without building a tremendous amount on balance sheet. We think there's going to be lots of opportunity to do this.
Great. Thank you so much. Appreciate it.
And at this time, I'll turn the conference back for any additional or closing remarks.
Great. Well, thank you everyone for your time on a Monday night. We appreciate it and look forward to talking to you again soon. Thank you.
And that concludes today's call. Thank you for your time.