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New Fortress Energy Inc.

New Fortress Energy Inc.NFEEarnings & Financial Report

Nasdaq · Utilities · Natural Gas Distribution

New Fortress Energy Inc. is a global energy infrastructure firm developing, owning and operating LNG import/export terminals, natural gas supply networks and low-carbon projects. It serves utility, industrial and public sector clients across the Americas and Caribbean, delivering affordable, lower-emission energy resources.

What changed in New Fortress Energy Inc.'s 10-K — 2022 vs 2023

Top changes in New Fortress Energy Inc.'s 2023 10-K

467 paragraphs added · 526 removed · 327 edited across 5 sections

Item 1A. Risk Factors

Risk Factors — what could go wrong, per management

177 edited+21 added−26 removed366 unchanged
Potential expansion in the Caribbean, Latin America and other parts of world where we may operate is primarily dependent upon LNG being a competitive source of energy in those geographical locations.
Potential expansion in the Caribbean, Latin America and other parts of the world where we may operate is primarily dependent upon LNG being a competitive source of energy in those geographical locations.
Our counterparties that are also subject to the capital requirements set out by the Basel Committee on the Banking Supervision in 2011, commonly referred to as “Basel III,” may increase the cost to us of entering into swaps with them or, although not required to collect margin from us under the margin rules, require us to post collateral with them in connection with such swaps in order to offset their increased capital costs or to reduce their capital costs to maintain those swaps on their balance sheets.
Our counterparties that are also subject to the capital requirements set out by the Basel Committee on Banking Supervision in 2011, commonly referred to as “Basel III,” may increase the cost to us of entering into swaps with them or, although not required to collect margin from us under the margin rules, require us to post collateral with them in connection with such swaps in order to offset their increased capital costs or to reduce their capital costs to maintain those swaps on their balance sheets.
Any such liabilities, fines and penalties that exceed the limits of our insurance coverage. See “— Our insurance may be insufficient to cover losses that may occur to our property or result from our operations .” Individually or collectively, these developments could adversely impact our ability to expand our business, including into new markets. Greenhouse Gases/Climate Change .
Any such liabilities, fines and penalties could exceed the limits of our insurance coverage. See “—Our insurance may be insufficient to cover losses that may occur to our property or result from our operations.” Individually or collectively, these developments could adversely impact our ability to expand our business, including into new markets. Greenhouse Gases/Climate Change .
Fossil Fuels . Our business activities depend upon a sufficient and reliable supply of natural gas feedstock, and are therefore subject to concerns in certain sectors of the public about the exploration, production and transportation of natural gas and other fossil fuels and the consumption of fossil fuels more generally.
Our business activities depend upon a sufficient and reliable supply of natural gas feedstock, and are therefore subject to concerns in certain sectors of the public about the exploration, production and transportation of natural gas and other fossil fuels and the consumption of fossil fuels more generally.
These provisions include: • dividing our board of directors into three classes of directors, with each class serving staggered three-year terms; • providing that any vacancies may, except as otherwise required by law, or, if applicable, the rights of holders of a series of preferred stock, only be filled by the affirmative vote of a majority of directors then in office, even if less than a quorum (provided that vacancies that results from newly created directors requires a quorum); • permitting special meetings of our stockholders to be called only by (i) the chairman of our board of directors, (ii) a majority of our board of directors, or (iii) a committee of our board of directors that has been duly designated by the board of directors and whose powers include the authority to call such meetings; • prohibiting cumulative voting in the election of directors; • establishing advance notice provisions for stockholder proposals and nominations for elections to the board of directors to be acted upon at meetings of the stockholders; and • providing that the board of directors is expressly authorized to adopt, or to alter or repeal our certain provisions of our organizational documents to the extent permitted by law.
These provisions include: • dividing our board of directors into three classes of directors, with each class serving staggered three-year terms; • providing that any vacancies may, except as otherwise required by law, or, if applicable, the rights of holders of a series of preferred stock, only be filled by the affirmative vote of a majority of directors then in office, even if less than a quorum (provided that vacancies that results from newly created directors requires a quorum); • permitting special meetings of our stockholders to be called only by (i) the chairman of our board of directors, (ii) a majority of our board of directors, or (iii) a committee of our board of directors that has been duly designated by the board of directors and whose powers include the authority to call such meetings; • prohibiting cumulative voting in the election of directors; • establishing advance notice provisions for stockholder proposals and nominations for elections to the board of directors to be acted upon at meetings of the stockholders; and • providing that the board of directors is expressly authorized to adopt, or to alter or repeal certain provisions of our organizational documents to the extent permitted by law.
While the Miami Facility is subject to these regulations, none of our LNG facilities currently under development are subject to PHMSA’s jurisdiction, but regulators and governmental agencies in the jurisdictions in which we operate can impose similar siting, design, construction and operational requirements that can affect our projects, facilities, infrastructure and operations.
While the Miami Facility is subject to these regulations, none of our LNG facilities currently under development are subject to PHMSA’s jurisdiction, but regulators and governmental agencies in the other jurisdictions in which we operate can impose similar siting, design, construction and operational requirements that can affect our projects, facilities, infrastructure and operations.
Our offshore operating expenses depend on a variety of factors including crew costs, provisions, deck and engine stores and spares, lubricating oil, insurance, maintenance and repairs and shipyard costs, many of which are beyond its control, such as the overall economic impacts caused by the global COVID-19 outbreak.
Our offshore operating expenses depend on a variety of factors including crew costs, provisions, deck and engine stores and spares, lubricating oil, insurance, maintenance and repairs and shipyard costs, many of which are beyond our control, such as the overall economic impacts caused by the global COVID-19 outbreak.
Natural gas and LNG prices have at various times been and may become volatile due to one or more of the following factors: • additions to competitive regasification capacity in North America, Brazil, Europe, Asia and other markets, which could divert LNG or natural gas from our business; • imposition of tariffs by China or any other jurisdiction on imports of LNG from the United States; • insufficient or oversupply of natural gas liquefaction or export capacity worldwide; • insufficient LNG tanker capacity; • weather conditions and natural disasters; • reduced demand and lower prices for natural gas; • increased natural gas production deliverable by pipelines, which could suppress demand for LNG; • decreased oil and natural gas exploration activities, including shut-ins and possible proration, which may decrease the production of natural gas; • cost improvements that allow competitors to offer LNG regasification services at reduced prices; • changes in supplies of, and prices for, alternative energy sources, such as coal, oil, nuclear, hydroelectric, wind and solar energy, which may reduce the demand for natural gas; • changes in regulatory, tax or other governmental policies regarding imported or exported LNG, natural gas or alternative energy sources, which may reduce the demand for imported or exported LNG and/or natural gas; • political conditions in natural gas producing regions; • adverse relative demand for LNG compared to other markets, which may decrease LNG imports into or exports from North America; and • cyclical trends in general business and economic conditions that cause changes in the demand for natural gas.
Natural gas and LNG prices have at various times been and may become volatile due to one or more of the following factors: • additions to competitive regasification capacity in North America, Brazil, Europe, Asia and other markets, which could divert LNG or natural gas from our business; • imposition of tariffs by China or any other jurisdiction on imports of LNG from the United States; • insufficient or oversupply of natural gas liquefaction or export capacity worldwide; • insufficient LNG tanker capacity; • weather conditions and natural disasters; • reduced demand and lower prices for natural gas; • increased natural gas production deliverable by pipelines, which could suppress demand for LNG; • decreased oil and natural gas exploration activities, including shut-ins and possible proration, which may decrease the production of natural gas; • cost improvements that allow competitors to offer LNG regasification services at reduced prices; • changes in supplies of, and prices for, alternative energy sources, such as coal, oil, nuclear, hydroelectric, wind and solar energy, which may reduce the demand for natural gas; • changes in regulatory, tax or other governmental policies regarding imported or exported LNG, natural gas or alternative energy sources, which may reduce the demand for imported or exported LNG and/or natural gas; • political conditions in natural gas producing regions; 29 Table of Contents • adverse relative demand for LNG compared to other markets, which may decrease LNG imports into or exports from North America; and • cyclical trends in general business and economic conditions that cause changes in the demand for natural gas.
Because the severity, magnitude and duration of any such crisis or pandemic and its economic consequences are uncertain, rapidly-changing and difficult to predict, its impact on our operations and financial performance, as well as its impact on our ability to successfully execute our business strategies and initiatives, remains or could be uncertain and difficult to predict.
Because the severity, magnitude and duration of any such crisis or pandemic and its economic consequences are uncertain, rapidly-changing and difficult to predict, its impact on our operations and financial performance, as well as its impact on our ability to successfully execute our business strategies and initiatives, could be uncertain and difficult to predict.
Our projects are located in Jamaica and the United States (including Puerto Rico), the Caribbean, Brazil, Mexico, Ireland, Nicaragua and other geographies and we have operations and derive revenues from additional markets. Furthermore, part of our strategy consists in seeking to expand our operations to other jurisdictions.
Our projects are located in the United States (including Puerto Rico), the Caribbean, Brazil, Mexico, Ireland, Nicaragua and other geographies and we have operations and derive revenues from additional markets. Furthermore, part of our strategy consists in seeking to expand our operations to other jurisdictions.
Further, if, it could have an adverse effect on our business, operating results, cash flows and liquidity, which could in turn materially and adversely affect our liquidity to make payments on our debt or comply with our financial ratios and other covenants.
Further, it could have an adverse effect on our business, operating results, cash flows and liquidity, which could in turn materially and adversely affect our liquidity to make payments on our debt or comply with our financial ratios and other covenants.
Brazil has ratified the International Labor Organization’s Indigenous and Tribal Peoples Convention (“ILO Convention 169”), which states that governments 37 Table of Contents are to ensure that members of tribes directly affected by legislative or administrative measures, including the grant of government authorizations, such as are required for our Brazilian operations, are consulted through appropriate procedures and through their representative institutions, particularly using the principle of consultation and participation of indigenous and traditional communities under the basis of free, prior, and informed consent (“FPIC”).
Brazil has ratified the International Labor Organization’s Indigenous and Tribal Peoples Convention (“ILO Convention 169”), which states that governments are to ensure that members of tribes directly affected by legislative or administrative measures, including the grant of government authorizations, such as are required for our Brazilian operations, are consulted through appropriate procedures 38 Table of Contents and through their representative institutions, particularly using the principle of consultation and participation of indigenous and traditional communities under the basis of free, prior, and informed consent (“FPIC”).
The U.S. sanctions and embargo laws and regulations vary in their application, as they do not all apply to the same covered persons or proscribe the same activities, and such sanctions and embargo laws and regulations may be amended or strengthened over time.
The U.S. sanctions and embargo laws and regulations vary in their application, as they do not all apply to the same covered persons or proscribe the same activities, and such sanctions and embargo laws and regulations may change and be amended or strengthened over time.
In addition, our Certificate of Incorporation provides the Founder Entities the right to approve certain material transactions so long as the Founder Entities and their affiliates collectively, directly or indirectly, own at least 30% of the outstanding Class A common stock. 46 Table of Contents Our Certificate of Incorporation and By-Laws, as well as Delaware law, contain provisions that could discourage acquisition bids or merger proposals, which may adversely affect the market price of our Class A common stock and could deprive our investors of the opportunity to receive a premium for their Class A common stock.
In addition, our Certificate of Incorporation provides the Founder Entities the right to approve certain material transactions so long as the Founder Entities and their affiliates collectively, directly or indirectly, own at least 30% of the outstanding Class A common stock. 48 Table of Contents Our Certificate of Incorporation and By-Laws, as well as Delaware law, contain provisions that could discourage acquisition bids or merger proposals, which may adversely affect the market price of our Class A common stock and could deprive our investors of the opportunity to receive a premium for their Class A common stock.
In addition, non-compliance with such laws could constitute a breach of certain covenants in operational or debt agreements, and cross-default provisions in certain of our agreements could mean that an event of default under certain of our commercial agreements could trigger an event of default under our other agreements, including our debt agreements.
In addition, non-compliance with such laws could constitute a breach of certain covenants in our commercial or debt agreements, and cross-default provisions in certain of our agreements could mean that an event of default under certain of our commercial or debt agreements could trigger an event of default under our other agreements, including our debt agreements.
As the owner and operator of our facilities and owner or charteror of our vessels, we may be liable, without regard to fault or the lawfulness of the original conduct, for the release of certain types or quantities of hazardous substances into the environment at or from our facilities and for any resulting damage to natural resources, which could result in substantial liabilities, fines and penalties, capital expenditures related to cleanup efforts and pollution control equipment, and restrictions or curtailment of our operations.
As the owner and operator of our facilities and owner or charterer of our vessels, we may be liable, without regard to fault or the lawfulness of the original conduct, for the release of certain types or quantities of hazardous substances into the environment at or from our facilities and for any resulting damage to natural resources, which could result in substantial liabilities, fines and penalties, capital expenditures related to cleanup efforts and pollution control equipment, and restrictions or curtailment of our operations.
However, in order to obtain certain environmental licenses for our operations, we are required to comply with the requirements of, consult with, and obtain certain authorizations from a number of institutions regarding the protection of indigenous interests: IBAMA, local environmental authorities in the localities in which we operate, the Federal Public Prosecutor’s Office and the National Indian Foundation ( Fundação Nacional do Índio or FUNAI ) (for indigenous people) or Palmares Cultural Foundation ( Fundação Cultural Palmares ) (for Quilombola communities).
However, in order to obtain certain environmental licenses for our operations, we are required to comply with the requirements of, consult with, and obtain certain authorizations from a number of institutions regarding the protection of indigenous interests: IBAMA, local environmental authorities in the localities in which we operate, the Federal Public Prosecutor’s Office and the National Indian Foundation ( Fundação Nacional do Índio or “FUNAI”) (for indigenous people) or Palmares Cultural Foundation ( Fundação Cultural Palmares ) (for Quilombola communities).
An increasing emphasis on the short-term or spot LNG market may in the future require us to enter into contracts based on variable market prices, as opposed to contracts based on a fixed rate, which could result in a decrease in its cash flow in periods when the market price for shipping LNG is depressed or insufficient funds are available to cover its financing costs for related vessels.
An increasing emphasis on the short-term or spot LNG market may in the future require us to enter into contracts based on variable market prices, as opposed to contracts based on a fixed rate, which could result in a decrease in our cash flow in periods when the market price for shipping LNG is depressed or insufficient funds are available to cover our financing costs for related vessels.
Alternatively, if a court were to find these provisions of 47 Table of Contents our organizational documents inapplicable to, or unenforceable in respect of, one or more of the specified types of actions or proceedings, we may incur additional costs associated with resolving such matters in other jurisdictions, which could adversely affect our business, financial condition, results of operations or prospects.
Alternatively, if a court were to find these provisions of our organizational documents inapplicable to, or unenforceable in respect of, one or more of the specified types of actions 49 Table of Contents or proceedings, we may incur additional costs associated with resolving such matters in other jurisdictions, which could adversely affect our business, financial condition, results of operations or prospects.
Counterparties commemorate their purchasing commitments for these products in various degrees of formality ranging from traditional contracts to less formal arrangements, including non-binding letters of intent, non-binding memorandums of understanding, non-binding term sheets and responding to requests for proposals with potential customers. These agreements and any award following a request for proposals are subject to negotiating final definitive documents.
Counterparties commemorate their purchasing commitments for these products in various degrees of formality ranging from traditional contracts to less formal arrangements, including non-binding letters of intent, non-binding memorandums of understanding, non-binding term sheets and responses to requests for proposals with potential customers. These agreements and any award following a request for proposals are subject to negotiating final definitive documents.
Furthermore, political, litigation, and financial risks may result in reduced natural gas production activities, increased liability for infrastructure damages as a result of climatic changes, or an impaired ability to continue to operate in an economic manner. One or more of these developments could have a material adverse effect on our business, financial condition and results of operation.
Furthermore, political, litigation, and financial risks may result in reduced natural gas production activities, increased liability for infrastructure damages as a result of climatic changes, or an impaired ability to continue to operate in an economic manner. One or more of these developments could have a material adverse effect on our business, financial condition and results of operation. Fossil Fuels.
See “— We are subject to various construction risks ” and “— We depend on third-party contractors, operators and suppliers .” Because our Fast LNG technology has not been previously implemented, tested or proven, we are also exposed to unknown and unforeseen risks associated with the development of new technologies, including failure to meet design, engineering, or performance specifications, incompatibility of systems, inability to contract or employ third parties with sufficient experience in technologies used or inability by contractors to perform their work, delays and schedule changes, high costs and expenses that may be subject to increase or difficult to anticipate, regulatory and legal challenges, instability or clarity of application of laws, rules and regulations to the technology, and added difficulties in obtaining or securing required permits or authorizations, among others.
See “—We are subject to various construction 34 Table of Contents risks” and “—We depend on third-party contractors, operators and suppliers.” Because our Fast LNG technology has not been previously implemented, tested or proven, we are also exposed to unknown and unforeseen risks associated with the development of new technologies, including failure to meet design, engineering, or performance specifications, incompatibility of systems, inability to contract or employ third parties with sufficient experience in technologies used or inability by contractors to perform their work, delays and schedule changes, high costs and expenses that may be subject to increase or difficult to anticipate, regulatory and legal challenges, instability or clarity of application of laws, rules and regulations to the technology, and added difficulties in obtaining or securing required permits or authorizations, among others.
Sales of substantial amounts of our Class A common stock in the public market, or the perception that such sales might occur, could adversely affect the market price of our Class A common stock.
Sales or issuances of our Class A common stock could adversely affect the market price of our Class A common stock. Sales of substantial amounts of our Class A common stock in the public market, or the perception that such sales might occur, could adversely affect the market price of our Class A common stock.
Most requirements for new LNG projects continue to be provided on a long-term basis, though the level of spot voyages and short-term time charters of less than 12 months in duration together with medium term charters of up to five years has increased in recent years. This trend is expected to continue as the spot market for LNG expands.
For new LNG projects continue to be provided on a long-term basis, though the level of spot voyages and short-term time charters of less than 12 months in duration together with medium term charters of up to five years has increased in recent years. This trend is expected to continue as the spot market for LNG expands.
Our current lack of asset and geographic diversification could have an adverse effect on our business, contracts, financial condition, operating results, cash flow, liquidity and prospects. Our results of operations for the year ended December 31, 2022, include our Montego Bay Facility, Old Harbour Facility, San Juan Facility, certain industrial end-users and our Miami Facility.
Our current lack of asset and geographic diversification could have an adverse effect on our business, contracts, financial condition, operating results, cash flow, liquidity and prospects. Our results of operations for the year ended December 31, 2023, include our Montego Bay Facility, Old Harbour Facility, San Juan Facility, certain industrial end-users and our Miami Facility.
If any of our counterparties becomes subject to sanctions as a result of these laws and regulations, changes thereto or otherwise, we may face an array of issues, including, but not limited to, (i) having to suspend our development or operations on a temporary or permanent basis, (ii) being unable to recuperate prior invested time and capital or being subject to lawsuits, or (iii) investigations or regulatory 39 Table of Contents proceedings that could be time-consuming and expensive to respond to and which could lead to criminal or civil fines or penalties.
If any of our counterparties becomes subject to sanctions as a result of these laws and regulations, changes thereto or otherwise, we may face an array of issues, including, but not limited to, (i) having to suspend our development or operations on a temporary or permanent basis, (ii) being unable to recuperate prior invested time and capital or being subject to lawsuits, or (iii) investigations or regulatory proceedings that could be time-consuming and expensive to respond to and which could lead to criminal or civil fines or penalties.
The United States rejoined the Paris Agreement, effective February 19, 2021, and other countries where we operate or plan to operate, including Jamaica, Brazil, Ireland, Mexico, and Nicaragua, have signed or acceded to this agreement. However, the scope of future climate and GHG emissions-focused regulatory requirements, if any, remain uncertain.
The United States rejoined the Paris Agreement, effective in February 2021, and other countries where we operate or plan to operate, including Jamaica, Brazil, Ireland, Mexico, and Nicaragua, have signed or acceded to this agreement. However, the scope of future climate and GHG emissions-focused regulatory requirements, if any, remain uncertain.
In the United States and Puerto Rico, approvals of the Department of Energy ("DOE") under Section 3 of the NGA, as well as several other material governmental and regulatory permits, approvals and authorizations, including under the CAA and the CWA and their state analogues, may be required in order to construct and operate an LNG facility and export LNG.
In the United States and Puerto Rico, approvals of the Department of Energy (“DOE”) under Section 3 of the NGA, as well as several other material governmental and regulatory permits, approvals and authorizations, including under the CAA and the CWA and their state analogues, may be required in order to construct and operate an LNG facility and export LNG.
Failure by any of our joint ventures, equity method investees and/or affiliate to service their debt requirements and comply with any provisions contained in their commercial loan agreements, including paying scheduled installments and complying with certain covenants, may lead to an event of default under the related loan agreement.
Failure by any of our joint ventures, equity method investees and/or affiliates to service their debt requirements and comply with any provisions contained in their commercial loan agreements, including paying scheduled installments and complying with certain covenants, may lead to an event of default under the related loan agreement.
Any noncompliance or alleged noncompliance could have a material adverse effect on our reputation, our business, our results of operations and cash flows, and could weaken our financial condition. We do not own the land on which our projects are located and are subject to leases, rights-of-ways, easements and other property rights for our operations.
Any noncompliance or alleged noncompliance could have a material adverse effect on our reputation, our business, our results of operations and cash flows, and could weaken our financial condition. We may not own the land on which our projects are located and are subject to leases, rights-of-ways, easements and other property rights for our operations.
We have obtained long-term leases and cor responding rights-of-way agreements and easements with respect to the land on which various of our projects are located, including the Jamaica Facilities, the pipeline connecting the Montego Bay Facility to the Bogue Power Plant (as defined herein), the Miami Facility, the San Juan Facility and the CHP Plant are situated, facilities in Brazil such as the Garuva-Itapoa pipeline connecting the TBG pipeline to the Sao Francisco do Sul terminal , rights of way to the Petrobras/Transpetro OSPAR oil pipeline facilities, among others.
We have obtained long-term leases and corresponding rights-of-way agreements and easements with respect to the land on which various of our projects are located, including the Jamaica Facilities, the pipeline connecting the Montego Bay Facility to the Bogue Power Plant (as defined herein), the Miami Facility, the San Juan Facility and the CHP Plant are situated, facilities in Brazil such as the Garuva-Itapoa pipeline connecting the TBG pipeline to the Sao Francisco do Sul terminal, rights of way to the Petrobras/Transpetro OSPAR oil pipeline facilities, among others.
Therefore, fluctuations in exchange rates used to translate other currencies into U.S. dollars could result in potential losses and reductions in our margins resulting from currency fluctuations, which may impact our reported consolidated financial 44 Table of Contents condition, results of operations and cash flows from period to period.
Therefore, fluctuations in exchange rates used to translate other currencies into U.S. dollars could result in potential losses 46 Table of Contents and reductions in our margins resulting from currency fluctuations, which may impact our reported consolidated financial condition, results of operations and cash flows from period to period.
These and other factors we cannot anticipate could adversely affect our business, financial position and results of operations. It is possible that the longer this period of economic and global supply chain and disruption continues, the greater the uncertainty will be regarding the possible adverse impact on our business operations, financial performance and results of operations.
These and other factors we cannot anticipate could adversely affect our business, financial position and results of operations. It is possible that the longer this period of economic and global supply chain and disruption continues, the greater the uncertainty will be regarding the possible adverse impact on our business operations, financial performance and results of operations. Item 1B.
The elevated market values could increase the economic incentives an LNG seller has to fail to deliver LNG cargos to us if they can sell the same LNG cargos at a higher price to another buyer in the market after giving effect to any contractual penalties the seller would owe to us for failing to deliver.
These elevated market values increase the economic incentives an LNG seller has to fail to deliver LNG cargos to us if they can sell the same LNG cargos at a higher price to another buyer in the market after giving effect to any contractual penalties the seller would owe to us for failing to deliver.
If any of these customers fails to perform its obligations under its contract for the reasons listed above or for any other reason, our ability to provide products or services and our ability to collect payment could be negatively impacted, which could materially adversely affect our operating results, cash flow and liquidity, even if we were ultimately successful in seeking damages from such customer for a breach of contract.
If any of these customers fails to perform its obligations under its contract for the reasons listed above or for any other reason, our ability 26 Table of Contents to provide products or services and our ability to collect payment could be negatively impacted, which could materially adversely affect our operating results, cash flow and liquidity, even if we were ultimately successful in seeking damages from such customer for a breach of contract.
The impact of the COVID-19 pandemic, including governmental and other third -party responses thereto, on our customers could enhance the risk of nonpayment by such customers under our contracts, which would negatively affect our business, results of operations and financial condition.
The impact of a pandemic, such as COVID-19, including governmental and other third-party responses thereto, on our customers could enhance the risk of nonpayment by such customers under our contracts, which would negatively affect our business, results of operations and financial condition.
Adverse trends or developments affecting any of these factors, including the timing of the impact of these factors in relation to our purchases and sales of natural gas and LNG could result in increases in the prices we have to pay for natural gas or LNG, which could materially and adversely affect the performance of our customers, and could have a material 27 Table of Contents adverse effect on our business, contracts, financial condition, operating results, cash flows, liquidity and prospects.
Adverse trends or developments affecting any of these factors, including the timing of the impact of these factors in relation to our purchases and sales of natural gas and LNG could result in increases in the prices we have to pay for natural gas or LNG, which could materially and adversely affect the performance of our customers, and could have a material adverse effect on our business, contracts, financial condition, operating results, cash flows, liquidity and prospects.
Labor unions could also seek to organize some or all of our non-unionized workforce. 43 Table of Contents Risks Related to the Jurisdictions in Which We Operate We are subject to the economic, political, social and other conditions in the jurisdictions in which we operate.
Labor unions could also seek to organize some or all of our non-unionized workforce. 45 Table of Contents Risks Related to the Jurisdictions in Which We Operate We are subject to the economic, political, social and other conditions in the jurisdictions in which we operate.
See “— Risks Related to the Jurisdictions in which we Operate—We are subject to the economic, political, social and other conditions in the jurisdictions in which we operate. ” Furthermore, as part of our business strategy for Fast LNG, we may enter into tolling 32 Table of Contents agreements with third parties, including in developing countries, and these counterparties may have greater credit risk than typical.
See “—Risks Related to the Jurisdictions in Which We Operate—We are subject to the economic, political, social and other conditions in the jurisdictions in which we operate.” Furthermore, as part of our business strategy for Fast LNG, we may enter into tolling agreements with third parties, including in developing countries, and these counterparties may have greater credit risk than typical.
If Brazil’s legal process for consultation and the protection of indigenous rights is challenged under the ACHR and found to be inadequate, it could result in orders or judgments that could ultimately adversely impact its operations.
If Brazil’s legal process for consultation and the protection of indigenous rights is challenged under the ACHR and found to be inadequate, it could result in orders or judgments that could ultimately adversely impact our operations.
For example, in 2018, U.S. legislation was approved to restrict U.S. aid to Nicaragua and between 2018 and 2022, U.S. and European governmental authorities imposed a number of sanctions against entities and individuals in or associated with the government of Nicaragua and Venezuela.
For example, in 2018, U.S. legislation was approved to restrict U.S. aid to Nicaragua and between 2018 and 2022, U.S. and European governmental authorities imposed a number of sanctions against entities and individuals in or associated with the governments of Nicaragua and Venezuela.
Following the invasion of Ukraine by Russia in 2022, U.S. and European governmental authorities imposed a number of sanctions against entities and individuals in Russia or connected to Russia, including sanctions specifically targeting the Russian oil and gas industry.
Following the invasion of Ukraine by Russia in 2022, U.S., European, U.K. and other governmental authorities imposed a number of sanctions against entities and individuals in Russia or connected to Russia, including sanctions specifically targeting the Russian oil and gas industry.
Our business strategy relies on a variety of factors, including our ability to successfully market LNG, natural gas, steam, and power to end-users, develop and maintain cost-effective logistics in our supply chain and construct, develop and operate energy-related infrastructure in the countries where we operate, and expand our projects and operations to other countries where we do not currently operate, among others.
Our business strategy relies on a variety of factors, including our ability to successfully market LNG, natural gas, steam, and power to our customers, develop and maintain cost-effective logistics in our supply chain and construct, develop and operate energy-related infrastructure in the countries where we operate, and expand our projects and operations to other countries where we do not currently operate, among others.
Repairs and maintenance costs for existing vessels are difficult to predict and may be substantially higher than for vessels we have operated since they were built and result in higher than anticipated operating expenses or require additional capital expenditures. The loss of earnings while these vessels are being repaired would decrease our results of operations.
Repairs and maintenance costs for existing vessels are difficult to predict and may be substantially higher than for vessels we have operated since they were built and result in higher than anticipated operating expenses or require additional capital expenditures. The loss of earnings while 22 Table of Contents these vessels are being repaired would decrease our results of operations.
See “—F ailure to obtain and maintain permits, approvals and authorizations from governmental and regulatory agencies and third parties on favorable terms could impede operations and construction .” Certain regulatory authorities have delayed or suspended the issuance of permits or authorizations while the potential environmental impacts associated with issuing such permits can be studied and appropriate mitigation measures evaluated.
See “—Failure to obtain and maintain permits, approvals and authorizations from governmental and regulatory agencies and third parties on favorable terms could impede operations and construction.” Certain regulatory authorities have delayed or suspended the issuance of permits or authorizations while the potential environmental impacts associated with issuing such permits can be studied and appropriate mitigation measures evaluated.
Summary Risk Factors Some of the factors that could materially and adversely affect our business, financial condition, results of operations or prospects include the following: Risks Related to Our Business • We have a limited operating history, which may not be sufficient to evaluate our business and prospects; • Our ability to implement our business strategy may be materially and adversely affected by many known and unknown factors; • We are subject to various construction risks; • Operation of our infrastructure, facilities and vessels involves significant risks; • We depend on third-party contractors, operators and suppliers; • Failure of LNG to be a competitive source of energy in the markets in which we operate, and seek to operate, could adversely affect our expansion strategy; • We operate in a highly regulated environment and our operations could be adversely affected by actions by governmental entities or changes to regulations and legislation; • Failure to obtain and maintain permits, approvals and authorizations from governmental and regulatory agencies and third parties on favorable terms could impede operations and construction; • When we invest significant capital to develop a project, we are subject to the risk that the project is not successfully developed and that our customers do not fulfill their payment obligations to us following our capital investment in a project; • Failure to maintain sufficient working capital could limit our growth and harm our business, financial condition and results of operations; • Our ability to generate revenues is substantially dependent on our current and future long-term agreements and the performance by customers under such agreements; • Our current lack of asset and geographic diversification could have an adverse effect on our business, contracts, financial condition, operating results, cash flow, liquidity and prospects; 16 Table of Contents • Because we are currently dependent upon a limited number of customers, the loss of a significant customer could adversely affect our operating results; • We may not be able to convert our anticipated customer pipeline into binding long-term contracts, and if we fail to convert potential sales into actual sales, we will not generate the revenues and profits we anticipate; • Our contracts with our customers are subject to termination under certain circumstances; • Competition in the LNG industry is intense, and some of our competitors have greater financial, technological and other resources than we currently possess; • Cyclical or other changes in the demand for and price of LNG and natural gas may adversely affect our business and the performance of our customers; • Our risk management strategies cannot eliminate all LNG price and supply risks.
See “Cautionary Statement on Forward-Looking Statements.” Summary Risk Factors Some of the factors that could materially and adversely affect our business, financial condition, results of operations or prospects include the following : Risks Related to Our Business • Our ability to implement our business strategy may be materially and adversely affected by many known and unknown factors; • We are subject to various construction risks; • Operation of our infrastructure, facilities and vessels involves significant risks; • We depend on third-party contractors, operators and suppliers; • Failure of LNG to be a competitive source of energy in the markets in which we operate, and seek to operate, could adversely affect our expansion strategy; • We operate in a highly regulated environment and our operations could be adversely affected by actions by governmental entities or changes to regulations and legislation; • Failure to obtain and maintain permits, approvals and authorizations from governmental and regulatory agencies and third parties on favorable terms could impede operations and construction; • When we invest significant capital to develop a project, we are subject to the risk that the project is not successfully developed and that our customers do not fulfill their payment obligations to us following our capital investment in a project; • Failure to maintain sufficient working capital could limit our growth and harm our business, financial condition and results of operations; • Our ability to generate revenues is substantially dependent on our current and future long-term agreements and the performance by customers under such agreements; • Our current lack of asset and geographic diversification could have an adverse effect on our business, contracts, financial condition, operating results, cash flow, liquidity and prospects; • Because we are currently dependent upon a limited number of customers, the loss of a significant customer could adversely affect our operating results; • We may not be able to convert our anticipated customer pipeline into binding long-term contracts, and if we fail to convert potential sales into actual sales, we will not generate the revenues and profits we anticipate; • Our contracts with our customers are subject to termination under certain circumstances; • Competition in the LNG industry is intense, and some of our competitors have greater financial, technological and other resources than we currently possess; • Cyclical or other changes in the demand for and price of LNG and natural gas may adversely affect our business and the performance of our customers; • Our risk management strategies cannot eliminate all LNG price and supply risks.
We rely on tankers and other vessels outside of our fleet for our LNG transportation and transfer. In addition to our own fleet of vessels, we rely on third-party ocean-going tankers and freight carriers (for ISO containers) for the transportation of LNG and ship-to-ship kits to transfer LNG between ships.
In addition to our own fleet of vessels, we rely on third-party ocean-going tankers and freight carriers (for ISO containers) for the transportation of LNG and ship-to-ship kits to transfer LNG between ships.
Various competitors have and are developing LNG facilities in other markets, which will compete 26 Table of Contents with our LNG facilities, including our Fast LNG solution. Some of these competitors have longer operating histories, more development experience, greater name recognition, larger staffs, larger and more versatile fleets, and substantially greater financial, technical and marketing resources than we currently possess.
Various competitors have and are developing LNG facilities in other markets, which will compete with our LNG facilities, including our Fast LNG solution. Some of these competitors have longer operating histories, more development experience, greater name recognition, larger staffs, larger and more versatile fleets, and substantially greater financial, technical and marketing resources than we currently possess.
See “—F ailure to obtain and maintain permits, approvals and authorizations from governmental and regulatory agencies and third parties on favorable terms could impede operations and construction .” The success and profitability of our Fast LNG technology is also dependent on the volatility of the price of natural gas and LNG compared to the related levels of capital spending required to implement the technology.
See “—Failure to obtain and maintain permits, approvals and authorizations from governmental and regulatory agencies and third parties on favorable terms could impede operations and construction.” The success and profitability of our Fast LNG technology is also dependent on the volatility of the price of natural gas and LNG compared to the related levels of capital spending required to implement the technology.
Changes or new environmental, social, health and safety laws and regulations could cause additional expenditures, restrictions and delays in our business and operations, the extent of which cannot be 35 Table of Contents predicted and which may require us to limit substantially, delay or cease operations in some circumstances. For example, in October 2017, the U.S.
Changes or new environmental, social, health and safety laws and regulations could cause additional expenditures, restrictions and delays in our business and operations, the extent of which cannot be predicted and which may require us to limit substantially, delay or cease operations in some circumstances. For example, in October 2017, the U.S.
Under tanker charters, we will be obligated to make payments for our chartered tankers regardless of use. We may not be able to enter into contracts with purchasers of LNG in quantities equivalent to or greater than the amount of tanker capacity we have purchased, as our vessels maybe be too small for those obligations.
Under tanker charters, we are obligated to make payments for our chartered tankers regardless of use. We may not be able to enter into contracts with purchasers of LNG in quantities equivalent to or greater than the amount of tanker capacity we have purchased, as our vessels may be too small for those obligations.
In addition, the effectiveness of our binding agreements can be subject to a number of conditions precedent that may not materialize, rendering such agreements non-effective. Moreover, while certain of our long-term contracts contain minimum volume commitments, our expected sales to customers under existing contracts may be substantially in excess of such minimum volume commitments.
In addition, the effectiveness of our binding agreements can be subject to a number of conditions precedent that may not materialize, rendering such agreements non-effective. Moreover, while certain of our long-term contracts contain minimum volume commitments, our expected sales to customers under existing contracts may be 27 Table of Contents substantially in excess of such minimum volume commitments.
We cannot assure you that future occurrences of any of the events listed above or any other events of a similar or dissimilar nature would not significantly decrease or eliminate the revenues from, or significantly increase the costs of operating, our facilities or assets. 20 Table of Contents We depend on third-party contractors, operators and suppliers.
We cannot assure you that future occurrences of any of the events listed above or any other events of a similar or dissimilar nature would not significantly decrease or eliminate the revenues from, or significantly increase the costs of operating, our facilities or assets. We depend on third-party contractors, operators and suppliers.
The COVID-19 pandemic and certain actions by the Organization of Petroleum Exporting Countries ("OPEC") related to the supply of oil in the market have caused volatility and disruption in the price of oil which may negatively impact our potential customers’ willingness or ability to enter into new contracts for the purchase of natural gas.
Certain actions by the Organization of Petroleum Exporting Countries ("OPEC") related to the supply of oil in the market have caused volatility and disruption in the price of oil which may negatively impact our potential customers’ willingness or ability to enter into new contracts for the purchase of natural gas.
These assumptions are subject to significant economic, competitive, regulatory and operational uncertainties, contingencies and risks, many of which are beyond our control, including, among others: • inability to achieve our target costs for the purchase, liquefaction and export of natural gas and/or LNG and our target pricing for long-term contracts; • failure to develop strategic relationships; • failure to obtain required governmental and regulatory approvals for the construction and operation of these projects and other relevant approvals; • unfavorable laws and regulations, changes in laws or unfavorable interpretation or application of laws and regulations; and • uncertainty regarding the timing, pace and extent of an economic recovery in the United States, the other jurisdictions in which we operate and elsewhere, which in turn will likely affect demand for crude oil and natural gas.
These assumptions are subject to significant economic, competitive, regulatory and operational uncertainties, contingencies and risks, many of which are beyond our control, including, among others: • inability to achieve our target costs for the purchase, liquefaction and export of natural gas and/or LNG and our target pricing for long-term contracts; • failure to develop strategic relationships; 20 Table of Contents • failure to obtain required governmental and regulatory approvals for the construction and operation of these projects and other relevant approvals; • unfavorable laws and regulations, changes in laws or unfavorable interpretation or application of laws and regulations; and • uncertainty regarding the timing, pace and extent of economic growth in the United States, the other jurisdictions in which we operate and elsewhere, which in turn will likely affect demand for crude oil and natural gas.
The design, construction and operation of our infrastructure, facilities and businesses, including our FSRUs, FLNG units and LNG carriers, the import and export of LNG, exploration and development activities, and the transportation of 22 Table of Contents natural gas, among others, are highly regulated activities at the national, state and local levels and are subject to various approvals and permits.
The design, construction and operation of our infrastructure, facilities and businesses, including our FSRUs, FLNG units and LNG carriers, the import and export of LNG, exploration and development activities, and the transportation of natural gas, among others, are highly regulated activities at the national, state and local levels and are subject to various approvals and permits.
Our current results of operations and liquidity are, and will continue to be in the near future, substantially dependent upon a limited number of customers, including JPS (as defined herein), SJPC (as defined herein) and PREPA (as defined herein), which have each entered into long-term GSAs and, in the case of JPS, a PPA in relation to the power produced at the CHP Plant (as defined herein), with us, and Jamalco (as defined herein), which has entered into a long-term SSA with us, and which represent a substantial majority of our income.
Our current results of operations and liquidity are, and will continue to be in the near future, substantially dependent upon a limited number of customers, including JPS, SJPC, CFE and PREPA, which have each entered into long-term GSAs and, in the case of JPS, a PPA in relation to the power produced at the CHP Plant, with us, and Jamalco, which has entered into a long-term SSA with us, and which represent a substantial majority of our income.
We may never sign a binding agreement to sell our 25 Table of Contents products to the counterparty, or we may sell much less volume than we estimate, which could result in our inability to generate the revenues and profits we anticipate, having a material adverse effect on our results of operations and financial condition.
We may never sign a binding agreement to sell our products to the counterparty, or we may sell much less volume than we estimate, which could result in our inability to generate the revenues and profits we anticipate, having a material adverse effect on our results of operations and financial condition.
These regulations could significantly increase the cost of derivative contracts (including through requirements to post margin or collateral), materially alter the terms of derivative contracts, reduce the availability of derivatives to protect against certain risks that we encounter, and reduce our ability to monetize or restructure derivative contracts and to execute our hedging strategies.
These regulations could significantly increase the cost of derivative contracts (including through requirements to post margin or collateral), materially alter the terms of derivative contracts, reduce the availability 41 Table of Contents of derivatives to protect against certain risks that we encounter, and reduce our ability to monetize or restructure derivative contracts and to execute our hedging strategies.
If we were to incur a material loss related to commodity price risks, it could have a material adverse effect on our financial position, results of operations and cash flows. Any use of hedging arrangements may adversely affect our future operating results or liquidity.
If we were to incur a material loss related to commodity price risks, it could have a material adverse effect on our financial position, results of operations and cash flows. 30 Table of Contents Any use of hedging arrangements may adversely affect our future operating results or liquidity.
In addition, jurisdictions with increased political, economic, social and legal instability, lack of regulatory clarity of application of laws, rules and regulations to our technology, and could potentially expose us to additional jurisdictional risks related to currency exchange, tariffs and other tax es, changes in laws, civil unrest, and similar risks.
In addition, jurisdictions with increased political, economic, social and legal instability, lack of regulatory clarity of application of laws, rules and regulations to our technology, and could potentially expose us to additional jurisdictional risks related to currency exchange, tariffs and other taxes, changes in laws, civil unrest, and similar risks.
Even if we choose to carry insurance for these events in the future, it may not be adequate to protect us from loss, which may 42 Table of Contents include, for example, losses as a result of project delays or losses as a result of business interruption related to a political disruption.
Even if we choose to carry insurance for these events in the future, it may not be adequate to protect us from loss, which may include, for example, losses as a result of project delays or losses as a result of business interruption related to a political disruption.
We are and may in the future be subject to material legal proceedings in the course of our business or otherwise, including, but not limited to, actions relating to contract disputes, business practices, intellectual property, real estate and leases, and other commercial, tax, regulatory and permitting matters.
We have been and may in the future be subject to material legal proceedings in the course of our business or otherwise, including, but not limited to, actions relating to contract disputes, business practices, intellectual property, real estate and leases, and other commercial, tax, regulatory and permitting matters.
Moreover, future agreements with unionized and non-unionized employees may be on terms that are note as attractive as our current agreements or comparable to agreements entered into by our competitors.
Moreover, future agreements with unionized and non-unionized employees may be on terms that are not as attractive as our current agreements or comparable to agreements entered into by our competitors.
We do not, nor do we intend to, maintain insurance against all of these risks and losses. In particular, we do not generally carry business interruption insurance or political risk insurance with respect to political disruption in the countries in which we operate and that may in the future experience significant political volatility.
We do not, nor do we intend to, maintain insurance 44 Table of Contents against all of these risks and losses. In particular, we do not generally carry business interruption insurance or political risk insurance with respect to political disruption in the countries in which we operate and that may in the future experience significant political volatility.
If our board of directors elects to issue preferred stock, it could be more difficult for a third-party to acquire us. In addition, some provisions of our Certificate of Incorporation and By-Laws could make it more difficult for a third-party to acquire control of us, even if the change of control would be beneficial to our securityholders.
If our board of directors elects to issue preferred stock, it could be more difficult for a third party to acquire us. In addition, some provisions of our Certificate of Incorporation and By-Laws could make it more difficult for a third party to acquire control of us, even if the change of control would be beneficial to our security holders.
Further, the ultimate impact of any such pandemic or crisis on our operations and financial performance depends on many factors that are not within our control, including, but not limited, to: governmental, business and individuals’ actions that have been and continue to be taken in response to the COVID-19 pandemic (including restrictions on travel and transport 49 Table of Contents and workforce pressures); the impact of such pandemic or crisis and actions taken in response on global and regional economies, travel, and economic activity; the availability of federal, state, local or non-U.S. funding programs, as well as other monetary and financial policies enacted by governments (including monetary policy, taxation, exchange controls, interest rates, regulation of banking and financial services and other industries, government budgeting and public sector financing); the duration and severity of resurgences of any variants; general economic uncertainty in key global markets and financial market volatility; global economic conditions and levels of economic growth; and the pace of recovery when the pandemic or crisis subsides.
Further, the ultimate impact of any such pandemic or crisis on our operations and financial performance depends on many factors that are not within our control, including, but not limited, to: governmental, business and individuals’ actions that may be taken in response to the pandemic (including restrictions on travel and transport and workforce pressures); the impact of such pandemic or crisis and actions taken in response on global and regional economies, travel, and economic activity; the availability of federal, state, local or non-U.S. funding programs, as well as other monetary and financial policies enacted by governments (including monetary policy, taxation, exchange controls, interest rates, regulation of banking and financial services and other industries, government budgeting and public sector financing); the duration and severity of resurgences of any variants; general economic uncertainty in key global markets and financial market volatility; global economic conditions and levels of economic growth; and the pace of 52 Table of Contents recovery when the pandemic or crisis subsides.
See “– Risks Related to the Jurisdictions in Which We Operate—We are subject to the economic, political, social and other conditions in the jurisdictions in which we operate .” The occurrence of any one of these factors, whatever the cause, could result in unforeseen delays or cost overruns to our projects.
See “–Risks Related to the Jurisdictions in Which We Operate—We are subject to the economic, political, social and other conditions in the jurisdictions in which we operate.” 21 Table of Contents The occurrence of any one of these factors, whatever the cause, could result in unforeseen delays or cost overruns to our projects.
Our ability to raise additional capital on acceptable terms will depend on financial, economic and market conditions, which have increased in volatility and at times have been negatively impacted due to the COVID-19 pandemic, our progress in executing our business strategy and other factors, many of which are beyond our control, including domestic or international economic conditions, increases in key benchmark interest rates and/or credit spreads, the adoption of new or amended banking or capital market laws or regulations, the re-pricing of market risks and volatility in capital and financial markets, risks relating to the credit risk of our customers and the jurisdictions in which we operate, as well as general risks applicable to the energy sector.
Our ability to raise additional capital on acceptable terms will depend on financial, economic and market conditions, which have increased in volatility and at times have been negatively impacted due to our progress in executing our business strategy and other factors, many of which are beyond our control, including domestic or international economic conditions, increases in key benchmark interest rates and/or credit spreads, the adoption 35 Table of Contents of new or amended banking or capital market laws or regulations, the re-pricing of market risks and volatility in capital and financial markets, risks relating to the credit risk of our customers and the jurisdictions in which we operate, as well as general risks applicable to the energy sector.
Further, any such delays could cause a delay in our anticipated receipt of revenues, a loss of one or more customers in the event of significant delays, and our inability to meet milestones or conditions precedents in our customer contracts, which could lead to delay penalties and potentially a termination of agreements with our customers.
Further, any such delays could cause a delay in our anticipated receipt of revenues, a loss of one or more customers, and our inability to meet milestones or conditions precedents in our customer contracts, which could lead to delay penalties and potentially a termination of agreements with our customers.
In addition, pursuant to the Shareholders’ Agreement, dated as of February 4, 2019, by and among the 45 Table of Contents Company and the respective parties thereto (the “Shareholders’ Agreement”), the Founder Entities currently have the right to nominate a majority of the members of our Board of Directors.
In addition, pursuant to the Shareholders’ Agreement, dated as of February 4, 2019, by and among the Company and the respective parties thereto (the “Shareholders’ Agreement”), the Founder Entities currently have the right to nominate a majority of the members of our Board of Directors.
Furthermore, some foreign suppliers of LNG may have economic or other reasons to direct their LNG to other markets or from or to our competitors’ LNG facilities. Natural gas also competes with other sources of energy, including coal, oil, 21 Table of Contents nuclear, hydroelectric, wind and solar energy, which may become available at a lower cost in certain markets.
Furthermore, some foreign suppliers of LNG may have economic or other reasons to direct their LNG to other markets or from or to our competitors’ LNG facilities. Natural gas also competes with other sources of energy, including coal, oil, nuclear, hydrogen, hydroelectric, wind and solar energy, which may become available at a lower cost in certain markets.
As we do not operate the assets owned by these joint ventures, our control over their operations is limited by provisions of the 33 Table of Contents agreements we have entered into with our joint venture partners and by our percentage ownership in such joint ventures.
As we do not operate the assets owned by these joint ventures, our control over their operations is limited by provisions of the agreements we have entered into with our joint venture partners and by our percentage ownership in such joint ventures.
Our existing infrastructure, facilities and vessels and expected future operations and businesses face operational risks, including, but not limited to, the following: • performing below expected levels of efficiency or capacity or required changes to specifications for continued operations; 19 Table of Contents • breakdowns or failures of equipment or shortages or delays in the delivery of supplies; • operational errors by trucks, including trucking accidents while transporting natural gas, LNG or any other chemical or hazardous substance; • risks related to operators and service providers of tankers or tugs used in our operations; • operational errors by us or any contracted facility, port or other operator of related infrastructure; • failure to maintain the required government or regulatory approvals, permits or other authorizations; • accidents, fires, explosions or other events or catastrophes; • lack of adequate and qualified personnel; • potential labor shortages, work stoppages or labor union disputes; • weather-related or natural disaster interruptions of operations; • pollution, release of or exposure to toxic substances or environmental contamination affecting operation; • inability, or failure, of any counterparty to any facility-related agreements to perform their contractual obligations; • decreased demand by our customers, including as a result of the COVID-19 pandemic; and • planned and unplanned power outages or failures to supply due to scheduled or unscheduled maintenance.
Our existing infrastructure, facilities and vessels and expected future operations and businesses face operational risks, including, but not limited to, the following: • performing below expected levels of efficiency or capacity or required changes to specifications for continued operations; • breakdowns or failures of equipment or shortages or delays in the delivery of supplies; • operational errors by trucks, including trucking accidents while transporting natural gas, LNG or any other chemical or hazardous substance; • risks related to operators and service providers of tankers or tugs used in our operations; • operational errors by us or any contracted facility, port or other operator of related third-party infrastructure; • failure to maintain the required government or regulatory approvals, permits or other authorizations; • accidents, fires, explosions or other events or catastrophes; • lack of adequate and qualified personnel; • potential labor shortages, work stoppages or labor union disputes; • weather-related or natural disaster interruptions of operations; • pollution, release of or exposure to toxic substances or environmental contamination affecting operations; • inability, or failure, of any counterparty to any facility-related agreements to perform their contractual obligations; • decreased demand by our customers; and • planned and unplanned power outages or failures to supply due to scheduled or unscheduled maintenance.
As a result, we are subject to the possibility of increased costs to retain necessary land use rights as well as applicable law and regulations, including permits and authorizations from governmental agencies or third parties.
As a result, we are subject to the possibility of increased costs to retain necessary land use rights as well as applicable law and 43 Table of Contents regulations, including permits and authorizations from governmental agencies or third parties.
The terms of one or more classes or series of preferred stock could adversely impact the voting power or value of our Class A common stock.
The terms of the Series A Convertible Preferred Stock or one or more classes or series of other preferred stock could adversely impact the voting power or value of our Class A common stock.
Some of these possible changes include changes in environmental regulations, changes in the hours of service regulations which govern the amount of time a driver may drive or work in any specific period, onboard black box recorder device requirements or limits on vehicle weight and size.
Some of these possible changes include changes in environmental regulations, changes in the hours of service regulations which govern the amount of time a driver may drive or work in any specific period, onboard black box recorder device requirements, requirements to use electric vehicles or limits on vehicle weight and size.
Maritime Administration ("MARAD") related to our FLNG project off the coast of Louisiana, MARAD announced it had initially paused the statutory 356-day application review timeline on August 16, 2022 pending receipt of additional information, and restarted the timeline on October 28, 2022.
Maritime Administration ("MARAD") related to our FLNG project off the coast of Louisiana (as discussed further below), MARAD announced it had initially paused the statutory 356-day application review timeline on August 16, 2022 pending receipt of additional information, and restarted the timeline on October 28, 2022.
When we develop these projects, our required capital expenditure may be significant, and we typically do not generate meaningful fees from customers until the project has commenced commercial operations, which may take a year or more to achieve.
When we develop these projects, our required capital 25 Table of Contents expenditure may be significant, and we typically do not generate meaningful fees from customers until the project has commenced commercial operations, which may take a year or more to achieve.
Various factors relating to competition may prevent us from entering into new or replacement customer contracts on economically comparable terms to existing customer contracts, or at all, including , among others: • increases in worldwide LNG production capacity and availability of LNG for market supply; • increases in demand for natural gas but at levels below those required to maintain current price equilibrium with respect to supply; • increases in the cost to supply natural gas feedstock to our liquefaction projects; • increases in the cost to supply LNG feedstock to our facilities; • decreases in the cost of competing sources of natural gas, LNG or alternate fuels such as coal, heavy fuel oil and automotive diesel oil ("ADO"); • decreases in the price of LNG; and • displacement of LNG or fossil fuels more broadly by alternate fuels or energy sources or technologies (including but not limited to nuclear, wind, solar, biofuels and batteries) in locations where access to these energy sources is not currently available or prevalent.
Various factors relating to competition may prevent us from entering into new or replacement customer contracts on economically comparable terms to existing customer contracts, or at all, including, among others: • increases in worldwide LNG production capacity and availability of LNG for market supply; • increases in demand for natural gas but at levels below those required to maintain current price equilibrium with respect to supply; • increases in the cost to supply natural gas feedstock to our liquefaction projects; • increases in the cost to supply LNG feedstock to our facilities; • decreases in the cost of competing sources of natural gas, LNG or alternate fuels such as coal, HFO and ADO; • decreases in the price of LNG; and 28 Table of Contents • displacement of LNG or fossil fuels more broadly by alternate fuels or energy sources or technologies (including but not limited to nuclear, wind, hydrogen,solar, biofuels and batteries) in locations where access to these energy sources is not currently available or prevalent.

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Item 3. Legal Proceedings

Legal Proceedings — active lawsuits and investigations

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If we become a party to proceedings in the future, we may be unable to predict with certainty the ultimate outcome of such claims and proceedings. Item 4. Mine Safety Disclosures. Not applicable. 51 Table of Contents PART II
If we become a party to proceedings in the future, we may be unable to predict with certainty the ultimate outcome of such claims and proceedings. Item 4. Mine Safety Disclosures. Not applicable. 54 Table of Contents PART II
Item 3. Legal Proceedings. We are not currently a party to any material legal proceedings. In the ordinary course of business, various legal and regulatory claims and proceedings may be pending or threatened against us.
Item 3. Legal Proceedings. We are not currently a party to any material legal proceedings. From time to time, we may become involved in various legal and regulatory claims and proceedings relating to claims arising out of our operations and activities in the normal course of business.

Item 5. Market for Registrant's Common Equity

Market for Common Equity — stock, dividends, buybacks

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In connection with the dividend policy update, the Board declared a dividend of $626,310, representing $3.00 per Class A share, which was paid in January 2023.
In connection with the dividend policy update, the Board declared a dividend of $626.3 million, representing $3.00 per Class A share, which was paid in January 2023.
Item 5. Market for the Registrant’s Common Equity, Related Shareholder Matters and Issuer Purchases of Equity Securities. Market Information Our Class A common stock is traded on the Nasdaq Global Select Market under the symbol “NFE.” On February February 24, 2023, there were eight holders of record of our Class A common stock.
Item 5. Market for the Registrant’s Common Equity, Related Shareholder Matters and Issuer Purchases of Equity Securities. Market Information Our Class A common stock is traded on the Nasdaq Global Select Market under the symbol “NFE.” On February 26, 2024, there were eight holders of record of our Class A common stock.
The following Performance Graph and related information is being furnished and shall not be deemed “soliciting material” or “filed” with the SEC, nor shall such information be incorporated by reference into any future filing under the Securities Act or the Exchange Act, except to the extent we specifically incorporate it by reference into such filing. 52 Table of Contents Cumulative Total Return Percentage Company / Index January 31, 2019 (1) December 2019 (2) December 2020 (2) December 2021 (2) December 2022 (2) NFE 100.0% 19.9% 312.4% 88.0% 233.6% S&P 500 100.0% 21.7% 44.1% 85.4% 51.8% iShares Global Clean Energy ETF Index (“ICLN”) 100.0% 25.6% 203.8% 130.3% 117.9% Vanguard Energy ETF (“VDE”) 100.0% (2.2)% (34.5)% 2.3% 66.6% Energy Select Sector SPDR Fund ("XLE") (3) 100.0% 0.5% (32.2)% 4.0% 70.7% (1) Date of the IPO (2) Last trading day of the month Item 6. [Reserved.] 53 Table of Contents
The following Performance Graph and related information is being furnished and shall not be deemed “soliciting material” or “filed” with the SEC, nor shall such information be incorporated by reference into any future filing under the Securities Act or the Exchange Act, except to the extent we specifically incorporate it by reference into such filing. 55 Table of Contents Cumulative Total Return Percentage Company / Index January 31, 2019 (1) December 2019 (2) December 2020 (2) December 2021 (2) December 2022 (2) December 2023 (2) NFE 100.0% 19.9% 312.4% 88.0% 233.6% 225.4% S&P 500 100.0% 21.7% 44.1% 85.4% 51.8% 91.7% iShares Global Clean Energy ETF Index ("ICLN") 100.0% 25.6% 203.8% 130.3% 117.9% 73.5% Energy Select Sector SPDR Fund ("XLE") 100.0% 0.5% (32.2)% 4.0% 70.7% 69.6% Vanguard Energy ETF ("VDE") 100.0% -2.2% (34.5)% 2.3% 66.6% 66.6% (1) Date of the IPO (2) Last trading day of the month Item 6. [Reserved.] 56 Table of Contents
Dividends We declared and paid quarterly dividends of $0.10 per share in March, June, September and December totaling $82,974 during the year ended December 31, 2022. Additionally, on December 12, 2022, our Board of Directors approved an update to our dividend policy.
Dividends We declared and paid quarterly dividends of $0.10 per share totaling $81,976 during the year ended December 31, 2023. Additionally, on December 12, 2022, our Board of Directors approved an update to our dividend policy.
Removed
Securities Authorized for Issuance Under Equity Compensation Plans The information required by this Item is set forth in the Company’s Proxy Statement to be filed with the SEC within 120 days after December 31, 2022 in connection with our 2023 annual meeting of shareholders and is incorporated herein by reference.
Added
In the third quarter of 2023, our Board of Directors reinstated a dividend policy targeting a quarterly dividend of $0.10 per share.
Added
The graph assumes that on January 31, 2019, the date our Class A shares began trading on the Nasdaq, $100 was invested in our Class A shares and in each index based on the closing market price, and that all dividends were reinvested. The returns shown are based on historical results and are not intended to suggest future performance.

Item 7. Management's Discussion & Analysis

Management's Discussion & Analysis (MD&A) — revenue / margin commentary

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The Old Harbour Facility is also supplying natural gas to our dual-fired combined heat and power facility in Clarendon, Jamaica (the “CHP Plant”). The CHP Plant supplies electricity to JPS under a long-term agreement. The CHP Plant also provides steam to Jamalco under a long-term take-or-pay agreement.
The Old Harbour Facility is also supplying natural gas to our dual-fired combined heat and power facility in Clarendon, Jamaica (“CHP Plant”). The CHP Plant supplies electricity to JPS under a long-term agreement. The CHP Plant also provides steam to Jamalco under a long-term take-or-pay agreement.
We expect to fund our current operations and continued development of additional facilities through cash on hand, borrowings under our debt facilities, cash generated from certain sales and financing transactions and cash generated from operations. We may also opportunistically elect to generate additional liquidity through future debt or equity issuances and asset sales to fund developments and transactions.
We expect to fund our current operations and continued development of additional facilities through cash on hand, borrowings under our debt facilities, cash generated from certain sales and financing transactions and cash generated from operations . We may also opportunistically elect to generate additional liquidity through future debt or equity issuances and asset sales to fund our developments and transactions.
We discuss this important goal in more detail in this Annual Report, “Items 1 and 2: Business and Properties” under “Sustainability—Toward a Very-Low-Carbon Future.” Our chief operating decision maker makes resource allocation decisions and assesses performance on the basis of two operating segments, Terminals and Infrastructure and Ships.
We discuss this important goal in more detail in this Annual Report, “Items 1 and 2: Business and Properties” under “Sustainability—Toward a Low Carbon Future.” Our chief operating decision maker makes resource allocation decisions and assesses performance on the basis of two operating segments, Terminals and Infrastructure and Ships.
Old Harbour Facility The Old Harbour Facility is an offshore facility consisting of an FSRU that is capable of processing up to 750,000 MMBtus of LNG per day. The Old Harbour Facility commenced commercial operations in June 2019 and supplies natural gas to the 190MW Old Harbour power plant (the “Old Harbour Power Plant”) operated by SJPC.
Old Harbour Facility The Old Harbour Facility is an offshore facility consisting of an FSRU that is capable of processing up to 750,000 MMBtus from LNG per day. The Old Harbour Facility commenced commercial operations in June 2019 and supplies natural gas to the 190MW Old Harbour power plant (“Old Harbour Power Plant”) operated by SJPC.
Consolidated Segment Operating Margin is not a measurement of financial performance under GAAP and should not be considered in isolation or as an alternative to Gross margin, income/(loss) from operations, net income/(loss), cash flow from operating activities or any other measure of performance or liquidity derived in accordance with GAAP.
Consolidated Segment Operating Margin is not a measurement of financial performance under GAAP and should not be considered in isolation or as an alternative to Gross margin, income from operations, net income, cash flow from operating activities or any other measure of performance or liquidity derived in accordance with GAAP.
Prior to the completion of the Sergipe Sale, our equity method investment in CELSEPAR was directly held by a subsidiary domiciled in the United Kingdom; the investment was previously held by a subsidiary domiciled in Brazil, resulting in a discrete benefit of $76.5 million recognized in the first quarter of 2022.
Prior to the completion of the sale of our investment in CELSEPAR, our equity method investment in CELSEPAR was directly held by a subsidiary domiciled in the United Kingdom; the investment was previously held by a subsidiary domiciled in Brazil, resulting in a discrete benefit of $76.5 million recognized in the first quarter of 2022.
We continue to be the owner for accounting purposes of vessels included in the Energos Formation Transaction (except the Nanook ), and as such, we will recognize revenue and operating expenses related to vessels under charter to third parties.
We continue to be the owner for accounting purposes of vessels included in the Energos Formation Transaction (except the Nanook ), and as such, we recognize revenue and operating expenses related to vessels under charter to third parties.
We describe each of our current development projects below. Fast LNG We are currently developing multiple modular floating liquefaction facilities to provide a source of low-cost supply of LNG to customers around the world.
We describe each of our current development projects below. Fast LNG We are currently developing multiple modular liquefaction facilities to provide a source of low-cost supply of LNG to customers around the world.
Further , with our own LNG production from FLNG facilities expected to commence in 2023 , we plan to further mitigate our exposure to variability in LNG and natural gas prices. When performing a recoverability assessment, the Company measures whether the estimated future undiscounted net cash flows expected to be generated by the asset exceeds its carrying value.
Further , with our own LNG production from FLNG facilities expected to commence in 2024 , we plan to further mitigate our exposure to variability in LNG and natural gas prices. When performing a recoverability assessment, the Company measures whether the estimated future undiscounted net cash flows expected to be generated by the asset exceeds its carrying value.
Interest is payable semi-annually in arrears on March 31 and September 30 of each year, commencing on September 30, 2021; no principal payments are due until maturity on September 30, 2026. We may redeem the 2026 Notes, in whole or in part, at any time prior to maturity, subject to certain make-whole premiums.
Interest is payable semi-annually in arrears on March 31 and September 30 of each year; no principal payments are due until maturity on September 30, 2026. We may redeem the 2026 Notes, in whole or in part, at any time prior to maturity, subject to certain make-whole premiums.
Interest is payable semi-annually in arrears on March 15 and September 15 of each year, commencing on March 15, 2021; no principal payments are due until maturity on September 15, 2025. We may redeem the 2025 Notes, in whole or in part, at any time prior to maturity, subject to certain make-whole premiums.
Interest is payable semi-annually in arrears on March 15 and September 15 of each year; no principal payments are due until maturity on September 15, 2025. We may redeem the 2025 Notes, in whole or in part, at any time prior to maturity, subject to certain make-whole premiums.
We have entered into a 25-year PPA with Nicaragua’s electricity distribution companies, and we expect to utilize approximately 57,500 MMBtu from LNG per day to provide natural gas to the Puerto Sandino Power Plant in connection with the 25-year power purchase agreement.
We have entered into a 25-year PPA with Nicaragua’s electricity distribution companies, and we expect to utilize approximately 57,000 MMBtu from LNG per day to provide natural gas to the Puerto Sandino Power Plant in connection with the 25-year power purchase agreement.
As of December 31, 2022, we have spent approximately $128.6 million to develop the Pennsylvania Facility. Approximately $22.5 of construction and development costs have been expensed as we have not issued a final notice to proceed to our engineering procurement and construction contractors.
As of December 31, 2023 , we have spent approximately $128.6 million to develop the Pennsylvania Facility. Approximately $22.5 million of construction and development costs have been expensed as we have not issued a final notice to proceed to our engineering, procurement and construction contractors.
We are also in active discussions to develop projects in multiple regions around the world that may have significant demand for additional power, LNG and natural gas, although there can be no assurance that these discussions will result in additional contracts or that we will be able to achieve our target revenue or results of operations.
We are also in active discussions to develop projects in multiple regions around the world that may have significant demand for additional power, LNG and natural gas, although there can be no assurance 59 Table of Contents that these discussions will result in additional contracts or that we will be able to achieve our target revenue or results of operations.
Our Montego Bay Facility commenced commercial operations in October 2016 and is capable of processing up to 61,000 MMBtu from LNG per day and features approximately 7,000 cubic meters of onsite storage. The Montego Bay Facility also consists of an ISO loading facility that can transport LNG to numerous on-island industrial users.
Our Montego Bay Facility commenced commercial operations in October 2016 and is capable of processing up to 60,000 MMBtu of LNG per day and features approximately 7,000 cubic meters of onsite storage. The Montego Bay Facility also consists of an ISO loading facility that can transport LNG to numerous on-island industrial users.
The comparison of the years ended December 31, 2021 and 2020 can be found in our Annual Report on Form 10‑K for the year ended December 31, 2021 located within “Part II, Item 7.
The comparison of the years ended December 31, 2022 and 2021 can be found in our Annual Report on Form 10-K for the year ended December 31, 2022 located within “Part II, Item 7.
As a result, this supplemental metric affords management the ability to make decisions to facilitate measuring and achieving optimal financial performance of our current operations overall. The principal limitation of this non-GAAP measure is that it excludes significant expenses and income that are required by GAAP.
As a result, this supplemental metric affords management the ability to make decisions and facilitates measuring and achieving optimal financial performance of our current operations. The principal limitation of this non-GAAP measure is that it excludes significant expenses and income that are required by GAAP.
We have designed and are constructing offshore liquefaction facilities for our growing customer base that we believe are both faster and more economical to construct than many traditional liquefication solutions.
We have designed and are constructing liquefaction facilities for our growing customer base that we believe are both faster and more economical to construct than many traditional liquefaction solutions.
Parties to the proceeding, including the Company, sought rehearing of the March 19, 2021, FERC order, and FERC denied all requests for rehearing in an order issued on July 15, 2021; the FERC orders were affirmed by the United States Court of the Appeals for the District of Columbia Circuit on June 14, 2022.
Parties to the proceeding, including the Company, sought rehearing of the March 19, 2021 FERC order, and FERC denied all requests for rehearing in an order issued on July 15, 2021; the FERC order was affirmed by the United States Court of Appeals for the District of Columbia Circuit on June 14, 2022.
Cost for land, as well as engineering and equipment that could be deployed to other facilities and associated financing costs of approximately $106.1 million, has been capitalized, and to date, we have repurposed approximately $16.8 million of engineering and equipment to our Fast LNG 70 Table of Contents Project.
Cost for land, as well as engineering and equipment that could be deployed to other facilities and associated financing costs of approximately $106.1 million, has been capitalized, and to date, we have repurposed approximately $16.8 million of engineering and equipment to our Fast LNG project.
Comparability to future periods Our historical results of operations and cash flows are not indicative of results of operations and cash flows to be expected in the future, principally for the following reasons: • Our historical financial results do not reflect our Fast LNG solution that will lower the cost of our LNG supply.
Factors Impacting Comparability of Our Financial Results Our historical results of operations and cash flows are not indicative of results of operations and cash flows to be expected in the future, principally for the following reasons: • Our historical financial results do not reflect our Fast LNG solution that will lower the cost of our LNG supply.
Miami Facility Our Miami Facility began operations in April 2016. This facility has liquefaction capacity of approximately 8,300 MMBtu from LNG per day and enables us to produce LNG for sales directly to industrial end-users in southern Florida, including Florida East Coast Railway via our train loading facility, and other customers throughout the Caribbean using ISO containers.
This facility has liquefaction capacity of approximately 8,300 MMBtu from LNG per day and enables us to produce LNG for sales directly to industrial end-users in southern Florida, including Florida East Coast Railway via our train loading facility, and other customers throughout the Caribbean using ISO containers.
For purchase commitments priced based upon an index such as Henry Hub, the amounts shown in the table above are based on the spot price of that index as of December 31, 2022. We have construction purchase commitments in connection with our development projects, including Fast LNG, La Paz Facility, Puerto Sandino Facility, Barcarena Facility and our Santa Catarina Facility.
For purchase commitments priced based upon an index such as Henry Hub, the amounts shown in the table above are based on the spot price of that index as of December 31, 2023. We have construction purchase commitments in connection with our development projects, including our Fast LNG projects, Puerto Sandino Facility, Barcarena Facility, Santa Catarina Facility and Beaumont Facility.
We are required to comply with customary affirmative and negative covenants, and the Barcarena Term Loan also provides for 74 Table of Contents customary events of default, prepayment and cure provisions. We were in compliance with all covenants as of December 31, 2022.
We are required to comply with customary affirmative and negative covenants, and the Barcarena Term Loan also provides for customary events of default, prepayment and cure provisions. We were in compliance with all covenants as of December 31, 2023 and 2022.
Our LNG Supply and Cargo Sales NFE provides reliable, affordable and clean energy supplies to customers around the world that we plan to satisfy through the following sources: 1) our current contractual supply commitments; 2) additional LNG supply contracts 55 Table of Contents expected to commence in 2026; 3) our Miami Facility; and 4) supply from our own Fast LNG production.
Our LNG Supply and Cargo Sales NFE provides reliable, affordable and clean energy supplies to customers around the world that we plan to satisfy through the following sources: 1) our current contractual supply commitments; 2) additional LNG supply contracts expected to commence in 2027; 3) our Miami Facility; and 4) supply from our own Fast LNG production.
Our Development Projects Our projects currently under development include our development of a series of modular floating liquefaction facilities to provide a source of low-cost supply of LNG to customers around the world through our Fast LNG technologies; our LNG terminal facility in Puerto Sandino, Nicaragua (“Puerto Sandino Facility”); our LNG terminal (“Barcarena Facility”) and power plant (“Barcarena Power Plant”) located in Pará, Brazil; our LNG terminal located on the southern coast of Brazil ("Santa Catarina Terminal"); and our LNG terminal (“Ireland Facility”) and power plant in Ireland.
Our Development Projects Our projects currently under development include our development of a series of modular liquefaction facilities to provide a source of low-cost supply of LNG to customers around the world through our Fast LNG technologies; our LNG terminal facility and power plant in Puerto Sandino, Nicaragua (“Puerto Sandino Facility”); our LNG terminal (“Barcarena Facility”) and power plant (“Barcarena Power Plant”) located in Pará, Brazil; our LNG terminal located on the southern coast of Brazil ("Santa Catarina Terminal"); our LNG terminal (“Ireland Facility”) and power plant in Ireland; and our first green hydrogen project ("ZeroPark I").
Vessel operating expenses Vessel operating expenses include direct costs associated with operating a vessel, such as crewing, repairs and maintenance, insurance, stores, lube oils, communication expenses, management fees and costs to operate the Hilli .
Vessel operating expenses Vessel operating expenses include direct costs associated with operating a vessel, such as crewing, repairs and maintenance, insurance, stores, lube oils, communication expenses, management fees and costs to operate the Hilli prior to the Hilli Exchange discussed above.
Purchase obligations The Company is party to contractual purchase commitments for the purchase, production and transportation of LNG and natural gas, as well as engineering, procurement and construction agreements to develop our terminals and related infrastructure.
Purchase obligations We are party to contractual purchase commitments for the purchase, production and transportation of LNG and natural gas, as well as engineering, procurement and construction agreements to develop our terminals and related infrastructure.
Starting in 2023, we expect to begin to source a portion of our LNG from our modular floating liquefaction facilities, which we refer to as "Fast LNG" or "FLNG." The Terminals and Infrastructure segment includes all terminal operations in Jamaica, Puerto Rico, Mexico and Brazil, as well as vessels utilized in our terminal or logistics operations.
Upon the completion of commissioning in 2024, we expect to begin to source a portion of our LNG from our modular liquefaction facilities, which we refer to as "Fast LNG" or "FLNG." The Terminals and Infrastructure segment includes all terminal operations in Jamaica, Puerto Rico, Mexico and Brazil, as well as vessels utilized in our terminal or logistics operations.
Barcarena Term Loan In the third quarter of 2022, certain of our indirect subsidiaries entered into a financing agreement to borrow up to $200.0 million due upon maturity in February 2024 (the “Barcarena Term Loan”); proceeds will be utilized to fund construction of the Barcarena Power Plant. As of December 31, 2022, the loan has been fully funded .
Barcarena Financings In the third quarter of 2022, certain of our indirect subsidiaries entered into a financing agreement to borrow up to $200.0 million due upon maturity in February 2024 (the “Barcarena Term Loan”); proceeds were utilized to fund a portion of the construction of the Barcarena Power Plant. As of December 31, 2022, the loan was fully funded.
The “Fast LNG,” or “FLNG,” design pairs advancements in modular, midsize liquefaction technology with jack up rigs, semi-submersible rigs or similar marine floating infrastructure to enable a lower cost and faster deployment schedule than land-based alternatives.
Our initial “Fast LNG,” or “FLNG,” design pairs advancements in modular, midsize liquefaction technology with jack up rigs, semi-submersible rigs or similar marine floating infrastructure to enable a lower cost and faster deployment schedule than other greenfield alternatives.
In the fourth quarter of 2022, we finalized short-form agreements with CFE to expand and extend our supply of natural gas to multiple CFE power generation facilities in Baja California Sur and to sell the La Paz Power Plant to CFE and are in the process of finalizing long-form agreements to commemorate all binding terms.
In the fourth quarter of 2022, we finalized short-form agreements with CFE to expand and extend our supply of natural gas to multiple CFE power generation facilities in Baja California Sur and to sell the La Paz Power Plant to CFE.
Management’s Discussion and Analysis of Financial Condition and Results of Operations.” The following information should be read in conjunction with our audited consolidated financial statements and accompanying notes included elsewhere in this Annual Report. Our financial statements have been prepared in accordance with GAAP.
Management’s Discussion and Analysis of Financial Condition and Results of Operations.” The following information should be read in conjunction with our audited consolidated financial statements and accompanying notes included elsewhere in this Annual Report. Our financial statements have been prepared in accordance with generally accepted accounting principles in the United States of America (“GAAP”).
We centrally manage our LNG supply and the deployment of our vessels utilized in our terminal or logistics operations, which allows us to optimally manage our LNG supply and fleet. Our Ships segment includes all vessels which are leased to customers under long-term or spot arrangements.
We centrally manage our LNG supply and the deployment of our vessels utilized in our terminal or logistics operations, which allows us to optimally manage our LNG supply and fleet. Our Ships segment includes all vessels which are leased to customers under long-term arrangements. The Company’s investment in Energos (defined below) is also included in the Ships segment.
On December 12, 2022, our Board of Directors approved an update to our dividend policy. In connection with the dividend policy update, the Board declared a dividend of $626.3 million, representing $3.00 per Class A share, which was paid in January 2023.
On December 12, 2022, the Company's Board of Directors approved an update to its dividend policy and declared a dividend of $626,310, representing $3.00 per Class A share, which was paid in January 2023.
Our Current Operations – Terminals and Infrastructure Our management team has successfully employed our strategy to secure long-term contracts with significant customers, including Jamaica Public Service Company Limited (“JPS”), the sole public utility in Jamaica, South Jamaica 54 Table of Contents Power Company Limited (“SJPC”), an affiliate of JPS, Jamalco, a bauxite mining and alumina producer in Jamaica, the Puerto Rico Electric Power Authority (“PREPA”), and Comisión Federal de Electricidad (“CFE”), a subsidiary of Federal Electricity Commission ( Comisión Federal de Electricidad ), Mexico’s power utility, each of which is described in more detail below.
Over time, we expect to utilize these vessels in our own terminal operations as charter agreements for these vessels expire. 57 Table of Contents Our Current Operations – Terminals and Infrastructure Our management team has successfully employed our strategy to secure long-term contracts with significant customers, including Jamaica Public Service Company Limited (“JPS”), the sole public utility in Jamaica, South Jamaica Power Company Limited (“SJPC”), an affiliate of JPS, Jamalco, a bauxite mining and alumina producer in Jamaica, the Puerto Rico Electric Power Authority (“PREPA”), and Comisión Federal de Electricidad (“CFE”), Mexico’s power utility, each of which is described in more detail below.
A portion of the debt service amounts of the Vessel Financing Obligation (defined below) is amounts paid to Energos under charters of vessels included in the Energos Formation Transaction to third parties. The residual value of these vessels also forms a part of the obligation and will be recognized as a bullet payment at the end of the charters.
A portion of our long-term debt obligations will be paid to Energos under charters of vessels included in the Energos Formation Transaction to third parties. The residual value of these vessels also forms a part of the obligation and will be recognized as a bullet payment at the end of the charters.
In July 2022, the facility was upsized to $250 million with the ability to increase the total limit by up to $100 million, subject to satisfaction of certain conditions.
In July 2022, the Letter of Credit Facility was upsized to $250 million with the ability to increase the total limit by up to $100 million, subject to satisfaction of certain conditions. In February 2023, the Letter of Credit Facility was upsized to $325 million, and in November 2023, the Letter of Credit Facility was upsized to $350 million.
We were in compliance with these covenants as of December 31, 2022. Letter of Credit Facility In July 2021, the Company entered into an uncommitted letter of credit and reimbursement agreement with a bank for the issuance of letters of credit for an aggregate amount of up to $75 million.
Letter of Credit Facility In July 2021, we entered into an uncommitted letter of credit and reimbursement agreement (the "Letter of Credit Agreement") with a bank for the issuance of letters of credit for an aggregate amount of up to $75 million (the “Letter of Credit Facility”).
Louisiana In addition, we plan to install up to two FLNG units approximately 16 nautical miles off the southeast coast of Grand Isle, Louisiana. We have filed applications with the U.S. Maritime Administration ("MARAD") and the U.S. Coast Guard to obtain our deepwater port license application for this facility.
Louisiana In addition, we are considering a plan to install up to two FLNG units approximately 16 nautical miles off the southeast coast of Grand Isle, Louisiana. We have filed applications with the U.S. Maritime Administration ("MARAD") and the U.S.
We 78 Table of Contents develop the assumptions used in the recoverability assessment based on active contracts, current and future expectations of the global demand for LNG and natural gas, as well as information received from third party industry sources.
We develop the assumptions used in the recoverability assessment based on active contracts, current and future expectations of the global demand for LNG and natural gas, as well as information received from third party industry sources. Recent Accounting Standards For descriptions of recently issued accounting standards, refer to “Note 3.
Cash provided by financing activities Our cash flow provided by financing activities was $322.0 million for the year ended December 31, 2022, which decreased by $1,495.0 million from cash provided by financing activities of $1,816.9 million for the year ended December 31, 2021.
Cash provided by financing activities Our cash flow provided by financing activities was $1,529.0 million for the year ended December 31, 2023, which increased by $1,207.0 million from cash provided by financing activities of $322.0 million for the year ended December 31, 2022.
The decrease was primarily driven by decreased revenue from LNG cargo sales and decreases to the Henry Hub index that forms a portion of the pricing to invoice most of our downstream customers in this segment.
The decrease was primarily driven by lower LNG cargo sales, no pro rata share of revenue from our former investment in CELSEPAR and a reduction in the Henry Hub index that forms a portion of the pricing to invoice most of our customers in this segment.
Revenue recognized from these third-party charters form a portion of the debt service for the financing 73 Table of Contents obligation; the effective interest rate on this financing obligation of approximately 15.9% includes the cash flows that Energos receives from these third-party charters . The lease terms for the charter agreements were for periods of up to 20 years.
Revenue recognized from these third-party charters form a portion of the debt service for the financing obligation; the effective interest rate on this financing obligation of approximately 15.9% includes the cash flows that Energos receives from these third-party charters .
Other Matters On June 18, 2020, we received an order from FERC, which asked us to explain why our San Juan Facility is not subject to FERC’s jurisdiction under section 3 of the NGA.
The proceeds will be used to complete our onshore FLNG project in Altamira. Other Matters On June 18, 2020, we received an order from the Federal Energy Regulatory Commission ("FERC"), which asked us to explain why our San Juan Facility is not subject to FERC’s jurisdiction under section 3 of the NGA.
In December 2020, we issued $250,000 of additional notes on the same terms as the 2025 Notes in a private offering pursuant to Rule 144A under the Securities Act (subsequent to this issuance, these additional notes are included in the definition of 2025 Notes herein).
In December 2020, we issued $250.0 million of additional notes on the same terms as the 2025 Notes in a private offering pursuant to Rule 144A under the Securities Act (subsequent to this issuance, these additional notes are included in the definition of 2025 Notes herein). 2026 Notes In April 2021, we issued $1,500.0 million of 6.50% senior secured notes in a private offering pursuant to Rule 144A under the Securities Act (the “2026 Notes”).
Total revenue for the Terminals and Infrastructure Segment increased by $802.4 million for the year ended December 31, 2022 as compared to the year ended December 31, 2021.
Total revenue for the Terminals and Infrastructure Segment decreased by $27.5 million for the year ended December 31, 2023 as compared to the year ended December 31, 2022.
Lakach Also, in the fourth quarter of 2022, we finalized agreements, which include conditions to effectiveness that have not been satisfied, with Petróleos Mexicanos (“Pemex”) to form a long-term strategic partnership to develop the Lakach deepwater natural gas field for Pemex to supply natural gas to Mexico's onshore domestic market and for NFE to produce LNG for export to global markets.
Lakach 60 Table of Contents We have been in discussions with Petróleos Mexicanos (“Pemex”) to form a long-term strategic partnership to develop the Lakach deepwater natural gas field for Pemex to supply natural gas to Mexico's onshore domestic market and for NFE to produce LNG for export to global markets.
We are required to comply with covenants under the Revolving Facility and letter of credit facility, including requirements to maintain Debt to 75 Table of Contents Capitalization Ratio of less than 0.7:1.0, and for quarters in which the Revolving Facility is greater than 50% drawn, the Debt to Annualized EBITDA Ratio must be less than 5.0:1.0 for fiscal quarters ending December 31, 2021 until September 30, 2023 and less than 4.0:1.0 for the fiscal quarter ended December 31, 2023 until maturity.
We are required to comply with covenants under the Revolving Facility and Letter of Credit Facility (defined below), including requirements to maintain Debt to Capitalization Ratio of less than 0.7:1.0, and for quarters in which the Revolving Facility is greater than 50% drawn, the Debt to Annualized EBITDA Ratio must be less than 4.0:1.0.
The majority of our LNG supply contracts are based on a natural gas-based index, Henry Hub, plus a contractual spread. We limit our exposure to fluctuations in natural gas prices as our pricing in contracts with customers is largely based on the Henry Hub index price plus a fixed fee component.
We limit our exposure to fluctuations in natural gas prices as our pricing in contracts with customers is largely based on the Henry Hub index price plus a fixed fee component. Additionally, with our own Fast LNG production , we plan to further mitigate our exposure to variability in LNG prices.
Borrowings under the Revolving Facility may be prepaid, at our option, at any time without premium. The obligations under the Revolving Facility are guaranteed by certain of our subsidiaries.
Borrowings under the Revolving Facility may be prepaid, at our option, at any time without premium.
The total principal balance on outstanding facilities was $4,582.3 million as of December 31, 2022 as compared to total outstanding debt of $3,896.2 million as of December 31, 2021. 68 Table of Contents Other (income) expense, net Other (income) expense, net was $(16.4) million and $10.2 million for the three months ended December 31, 2022 and September 30, 2022, respectively.
The total principal balance on outstanding facilities was $6.9 billion as of December 31, 2023 as compared to total outstanding debt of $4.6 billion as of December 31, 2022. 72 Table of Contents Other expense (income), net Other income, net and other expense, net was $13.6 million and $5.6 million for the three months ended December 31, 2023 and September 30, 2023, respectively.
Our results of operations for the year ended December 31, 2022 include our Montego Bay Facility, Old Harbour Facility, San Juan Facility, certain industrial end-users and our Miami Facility. We have placed a portion of our La Paz Facility into service, and our revenue and results of operations have begun to be impacted by operations in Mexico.
Our results of operations for the year ended December 31, 2023 include our Montego Bay Facility, Old Harbour Facility, San Juan Facility, certain industrial end-users and our Miami Facility. We have placed our La Paz Facility in service in 2021, and in the third quarter of 2023, we placed the La Paz Power Plant into service.
(4) Cost of sales is presented exclusive of costs included in Depreciation and amortization in the consolidated statements of operations and comprehensive income (loss). (5) Operations and maintenance and Vessel operating expenses are directly attributable to revenue-producing activities of our terminals and vessels and are included in the calculation of Gross margin as defined under GAAP.
(5) Operations and maintenance and Vessel operating expenses are directly attributable to revenue-producing activities of our terminals and vessels and are included in the calculation of Gross margin as defined under GAAP.
Cash used in investing activities Our cash flow used in investing activities was $82.7 million for the year ended December 31, 2022, which decreased by $2,190.8 million from cash used in investing activities of $2,273.6 million for the year ended December 31, 2021.
Cash used in investing activities Our cash flow used in investing activities was $2,904.1 million for the year ended December 31, 2023, which increased by $2,821.4 million from cash used in investing activities of $82.7 million for the year ended December 31, 2022.
These projects are subject to risks related to successful completion, including those related to government approvals, site identification, financing, construction permitting and contract compliance. The recent geopolitical events in Europe have substantially impacted natural gas and LNG markets with unprecedented price increases and volatility.
These projects are subject to risks related to successful completion, including those related to government approvals, site identification, financing, construction permitting and contract compliance. Geopolitical and other macroeconomic events can substantially impact natural gas and LNG markets, leading to volatility in market pricing.
The increase was primarily due to an increase in total principal outstanding, including obligations incurred as a result of the Energos Formation Transaction, under which we incur higher borrowing costs.
Interest expense increased by $41.0 million for the year ended December 31, 2023, as compared to the year ended December 31, 2022. The increase was primarily due to an increase in total principal outstanding, including obligations incurred as a result of the Energos Formation Transaction, under which we incur higher borrowing costs.
As neither these third party charter payments nor the residual value of these vessels represent cash payments due by NFE, such amounts have been excluded from the table above.
As neither these third party charter payments nor the residual value of these vessels represent cash payments due by NFE, such amounts have been excluded from the table above. We entered into the BNDES Credit Agreement and an agreement to issue the Barcarena Debentures (defined below).
The Kiewit facility specializes in the fabrication and integration of offshore projects. In partnership with Kiewit, we believe we have established an efficient and repeatable process to reduce cost and time to build incremental liquefaction capacity. We expect to deploy our first Fast LNG unit in 2023 and additional units in 2024.
Our initial Fast LNG units are being constructed at the Kiewit Offshore Services shipyard near Corpus Christi, Texas. The Kiewit facility specializes in the fabrication and integration of offshore projects. In partnership with Kiewit, we believe we have established an efficient and repeatable process to reduce cost and time to build incremental liquefaction capacity.
We expect to complete our Santa Catarina Facility and commence operations in 2023. Ireland Facility We intend to develop and operate an LNG facility and power plant on the Shannon Estuary, near Tarbert, Ireland. We are in the process of obtaining final planning permission from An Bord Pleanála (“ABP”) in Ireland.
We expect to complete our Santa Catarina Facility and commence operations in the first half of 2024. Ireland Facility We intend to develop and operate an LNG facility and power plant on the Shannon Estuary, near Tarbert, Ireland.
Each 1.4 million tons per annum (“MTPA”) FLNG unit will utilize CFE’s firm pipeline transportation capacity on the Sur de Texas-Tuxpan Pipeline to receive feedgas volumes. We expect to deploy our first FLNG unit to Altamira in 2023.
The 1.4 million ton per annum (“MTPA”) FLNG unit will utilize CFE’s firm pipeline transportation capacity on the Sur de Texas-Tuxpan Pipeline to receive feedgas volumes. Our first FLNG unit has been installed and connected to the gas pipeline at Altamira, and we are in the process of commissioning the project.
To the extent that these costs are a fixed amount specified in the charter, which is not dependent upon redelivery location, the estimated voyage expenses are recognized over the term of the time charter. Vessel operating expenses decreased by $4.3 million for the three months ended December 31, 2022, compared to the three months ended September 30, 2022.
To the extent that these costs are a fixed amount specified in the charter, which is not dependent upon redelivery location, the estimated voyage expenses are recognized over the term of the time charter.
Selling, general and administrative was substantially consistent for the three months ended December 31, 2022 as compared to the three months ended September 30, 2022. Selling, general and administrative increased $36.2 million for the year ended December 31, 2022, compared to the year ended December 31, 2021.
Selling, general and administrative for the three months ended December 31, 2023 decreased by $1.1 million as compared to the three months ended September 30, 2023. Selling, general and administrative decreased by $30.9 million for the year ended December 31, 2023, compared to the year ended December 31, 2022.
As a result of this recoverability assessment, we recognized an OTTI of the investment in Hilli of $118,558 for the year ended December 31, 2022; this loss was recognized in (Loss) income from equity method investments in the consolidated statements of operations and comprehensive income (loss).
As a result of the transaction, we recognized an other than temporary impairment of our investment in Energos of $5.3 million for the year ended December 31, 2023, and this loss was recognized in Income (loss) from equity method investments in the Consolidated Statements of Operations and Comprehensive Income .
The obligations under the Barcarena Term Loan are guaranteed by certain indirect Brazilian subsidiaries that are constructing the Barcarena Power Plant, and New Fortress Energy Inc. has provided a parent company guarantee.
Interest is due quarterly, and outstanding borrowings bear interest at a rate equal to the Secured Overnight Financing Rate ("SOFR") plus 4.70%. The obligations under the Barcarena Term Loan are guaranteed by certain indirect Brazilian subsidiaries that are constructing the Barcarena Power Plant, and New Fortress Energy Inc. has provided a parent company guarantee.
The Revolving Facility will mature in 2026, with the potential for us to extend the maturity date once in a one-year increment.
The Revolving Facility will mature in 2026 if the 2025 Notes are refinanced prior to maturity, with the potential for us to extend the maturity date of the Revolving Facility once for a one-year increment ; if not, the Revolving Facility becomes due approximately 60 days prior to the maturity of the 2025 Notes.
Additionally, we have binding contracts for LNG volumes from two separate U.S. LNG facilities, each with a 20-year term, that are expected to commence in 2026 and 2027.
Additionally, we have binding contracts for LNG volumes from two separate U.S. LNG facilities, each with a 20-year term, which are expected to commence in 2027. Finally, we plan to commence production from our first Fast LNG facility upon the completion of commissioning in 2024 .
As FLNG facilities commence production, our long-term strategy is to sell substantially all cargos produced to customers on a long-term, take-or-pay basis through our downstream terminals.
In 2022 and 2023, our revenue and results of operations have benefited from selling cargos into the global LNG market. As FLNG facilities commence production, our long-term strategy is to sell substantially all cargos produced to customers on a long-term, take-or-pay basis through our downstream terminals.
We plan to deploy several Fast LNG units at different locations around the world and describe our currently planned projects below.
Our first Fast LNG unit has been deployed offshore to Altamira, Mexico, and we expect to deploy additional units over the next two years. We plan to deploy several Fast LNG units at different locations around the world and describe our currently planned projects below.
The decrease was primarily attributable to a 15% decrease in volumes delivered compared to the three months ended September 30, 2022, and decreases in LNG cost.
The increase was primarily attributable to a 10% increase in volumes delivered compared to the three months ended September 30, 2023.
Other (income) expense, net was $(48.0) million and $(17.2) million for the year ended December 31, 2022 and December 31, 2021, respectively. Other (income) expense, net recognized in the three months ended December 31, 2022 was primarily comprised of a $20.4 million gain related to the settlement of the foreign currency forward during the fourth quarter of 2022.
Other expense, net and Other income, net was $10.4 million and $48.0 million for the year ended December 31, 2023 and December 31, 2022, respectively. Other income, net recognized in the three months ended December 31, 2023 was primarily comprised of interest income and foreign currency remeasurement gains.
Loss on extinguishment of debt Loss on extinguishment of debt was $15.0 million for the year ended December 31, 2022 as a result of the extinguishment of the Vessel Term Loan Facility and sale leaseback financing arrangements with VIEs with proceeds from the Energos Formation Transaction. The Debenture Loan was also extinguished in the third quarter of 2022.
Loss on extinguishment of debt Loss on extinguishment of debt was $15.0 million for the year ended December 31, 2022 as a result of the extinguishment of the certain debt facilities and sale leaseback financing arrangements with VIEs with proceeds from the Energos Formation Transaction. We did not have any such transactions during the year ended December 31, 2023.
The weighted-average cost of LNG from cargo sales decreased from $18.26 per MMBtu for the three months ended September 30, 2022 to $10.52 per MMBtu for the three months ended December 31, 2022. • Cost of LNG purchased from third parties for sale to our downstream customers decreased $33.3 million for the three months ended December 31, 2022 as compared to the three months ended September 30, 2022.
Cost of sales increased $51.3 million for the three months ended December 31, 2023 as compared to the three months ended September 30, 2023. • Cost of LNG purchased from third parties for sale to our downstream customers increased by $25.7 million for the three months ended December 31, 2023 as compared to the three months ended September 30, 2023.
The loss in the current year was primarily driven by an other than temporary impairment of the investment in CELSEPAR and Hilli of $487.8 million recognized in connection with the Sergipe Sale, partially offset by income attributable to our investments in Energos.
For the year ended December 31, 2022, we recognized losses from our equity method investments of $472.2 million. The losses were primarily driven by an other than temporary impairment of the investments in CELSEPAR and Hilli LLC of $487.8 million recognized in connection with the announced sale of these investments, partially offset by income attributable to our investments in Energos.
(3) Consolidation and Other adjusts for the inclusion of the effective share of revenues, expenses and operating margin attributable to our 50% ownership of CELSEPAR and Hilli Common Units in our segment measure and exclusion of the unrealized mark-to-market gain or loss on derivative instruments.
(3) Consolidation and Other adjusts for the inclusion of the effective share of revenues, expenses and operating margin attributable to our 50% ownership of CELSEPAR and Hilli Common Units in our segment measure prior to the disposition of these investments, the exclusion of the unrealized mark-to-market gain or loss on derivative instruments and the exclusion of non-capitalizable contract acquisition costs. 65 Table of Contents (4) Cost of sales is presented exclusive of costs included in Depreciation and amortization in the Consolidated Statements of Operations and Comprehensive Income.
Terminals and Infrastructure does not include the unrealized mark-to-market earnings and loss on derivative instruments of $96.4 million and $6.9 million for the three months ended December 31, 2022 and September 30, 2022, respectively and $106.1 million and $2.8 million for the years ended December 31, 2022 and 2021, respectively, reported in Cost of sales.
Terminals and Infrastructure does not include the unrealized mark-to-market gains on derivative instruments of $1.5 million and $0.4 million for the three months ended December 31, 2023 and September 30, 2023, respectively.
The increase was primarily driven by increased revenue from LNG cargo sales and increases to the Henry Hub index that forms a portion of the pricing to invoice most of our downstream customers in this segment.
The increase was primarily driven by additional volumes delivered in Puerto Rico, and increases to the Henry Hub index that forms a portion of the pricing to invoice most of our downstream customers in this segment. • Volumes delivered to downstream terminal customers increased from 20.1 TBtus in the third quarter of 2023 to 22.2 TBtu in the fourth quarter of 2023.
(Loss) income from equity method investments We recognized losses from our equity method investments of $117.8 million and $31.7 million and for the three months ended December 31, 2022 and September 30, 2022, respectively.
Income (loss) from equity method investments We recognized a loss from our investment in Energos of $2.8 million for the three months ended December 31, 2023 as compared to income of $0.5 million and for the three months ended September 30, 2023.
The proceeds received were further offset by repayments of debt, primarily the settlement of the sale-leaseback financing arrangement of the Eskimo for a total payment of $190.5 million, financing fees paid in connection with the borrowings, tax payments for equity compensation made on behalf of employees and dividends paid for the year ended December 31, 2021. 72 Table of Contents Long-Term Debt and Preferred Stock 2025 Notes In September 2020, we issued $1,000,000 of 6.75% senior secured notes in a private offering pursuant to Rule 144A under the Securities Act (the “2025 Notes”).
Cash provided by financing activities during the year ended December 31, 2022 was due to proceeds from issuance of debt of $2.0 billion, offset by repayments of debt of $1.5 billion, payment of dividends of $99.1 million and payments related to tax withholdings for share-based compensation of $72.6 million. 76 Table of Contents Long-Term Debt and Preferred Stock 2025 Notes In September 2020, we issued $1,000.0 million of 6.75% senior secured notes in a private offering pursuant to Rule 144A under the Securities Act (the “2025 Notes”).
Cash outflows from investing activities during the year ended December 31, 2022 were used for continued development of our Fast LNG solution, La Paz Facility, Santa Catarina Facility, and Barcarena Facility.
Cash outflows for investing activities during the year ended December 31, 2022 were used for continued development of our Fast LNG project, Santa Catarina Facility, and Barcarena Facility. Cash outflows were offset by proceeds of $593.0 million from the sale of the finance lease of the Nanook and $500.1 million from selling our investment in CELSEPAR.

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Item 7A. Quantitative and Qualitative Disclosures About Market Risk

Market Risk — interest-rate, FX, commodity exposure

7 edited+1 added−3 removed3 unchanged
A 100-basis point increase or decrease in the market interest rate would decrease or increase the fair value of our fixed rate debt by approximately $83.0 million. The sensitivity analysis presented is based on certain simplifying assumptions, including instantaneous change in interest rate and parallel shifts in the yield curve.
A 100-basis point increase or decrease in the market interest rate would decrease or increase the fair value of our fixed rate debt by approximately $74 million. The sensitivity analysis presented is based on certain simplifying assumptions, including instantaneous change in interest rate and parallel shifts in the yield curve.
We are able to limit our exposure to fluctuations in natural gas prices as our pricing in contracts with downstream customers is largely based on the Henry Hub index price plus a contractual spread. Our exposure to market risk associated with LNG price changes may adversely impact our business.
Our exposure to market risk associated with LNG price changes may adversely impact our business. We are able to limit our exposure to fluctuations in natural gas prices as our pricing in contracts with downstream customers is largely based on the Henry Hub 81 Table of Contents index price plus a contractual spread .
Interest Rate Risk The 2025 Notes, 2026 Notes, and South Power 2029 Bonds were issued with a fixed rate of interest, and as such, a change in interest rates would impact the fair value of the 2025 Notes, 2026 Notes and South Power 2029 Bonds but such a change would have no impact on our results of operations or cash flows.
Interest Rate Risk The 2025 Notes, 2026 Notes, Equipment Notes, South Power 2029 Bonds and Barcarena Debentures (each defined above) were issued with a fixed rate of interest, and as such, a change in interest rates would impact the fair value of the debt outstanding but such a change would have no impact on our results of operations or cash flows.
Outside of Brazil, our operations are primarily conducted in U.S. dollars, and as such, our results of operations and cash flows have not materially been impacted by fluctuations due to changes in foreign currency exchange rates.
Outside of Brazil, our operations are primarily conducted in U.S. dollars, and as such, our results of operations and cash flows have not materially been impacted by fluctuations due to changes in foreign currency exchange rates. We currently incur a limited amount of costs in foreign jurisdictions other than Brazil that are paid in local currencies.
Interest under the Barcarena Term Loan has a component based on Secured Overnight Financing Rate ("SOFR").
Interest under the Barcarena Term Loan and Term Loan B has a component based on the Secured Overnight Financing Rate ("SOFR"). A 100-basis point increase or decrease in the market interest rate would decrease or increase our annual interest expense by approximately $11 million.
During the year, the company entered into two foreign currency contingent non-deliverable forwards and settled a cross-currency interest rate swap. Based on our Brazilian reais revenues and expenses for the year, a 10% depreciation of the U.S. dollar against the Brazilian reais would not significantly decrease our revenue or expenses.
Foreign Currency Exchange Risk We have transactions, assets and liabilities denominated in Brazilian reais, and our Brazilian subsidiaries and investments receive income and pay expenses in Brazilian reais. Based on our Brazilian reais revenues and expenses, a 10% depreciation of the U.S. dollar against the Brazilian reais would not significantly decrease our revenue or expenses.
We currently incur a limited amount of costs in foreign jurisdictions other than Brazil that are paid in local currencies, but we expect our international operations to continue to grow in the near term. Item 8. Financial Statements and Supplementary Data.
As we expect our international operations to continue to grow in the near term, w e may enter into derivative or hedging transactions with third parties to manage our exposure to changes in foreign currency exchange risks as we expand our international operations. Item 8. Financial Statements and Supplementary Data.
Removed
To mitigate the effect of fluctuations in LNG prices on our operations, in the third quarter of 2022, we entered into two commodity swap transactions which settled for gains totaling $57.5 million.
Added
We currently do not have any derivative instruments to mitigate the effect of fluctuations in LNG prices on our operations; in the future we may enter into additional derivative instruments.
Removed
In addition, during the fourth quarter of 2022, we entered into another commodity swap transaction which will settled in 2023, and we recognized an unrealized $104.8 million gain on this swap.
Removed
A 100-basis point increase or decrease in the market interest rate would decrease or increase our annual interest expense by approximately $2 million. 80 Table of Contents Foreign Currency Exchange Risk After the completion of the Hygo Merger, we began to have more significant transactions, assets and liabilities denominated in Brazilian reais; our Brazilian subsidiaries and investments receive income and pays expenses in Brazilian reais.

Other NFE 10-K year-over-year comparisons