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What changed in NextDecade Corp's 10-K — 2022 vs 2023

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Paragraph-level year-over-year comparison of NextDecade Corp's 2022 and 2023 10-K annual filings, covering the Business, Risk Factors, Legal Proceedings, Cybersecurity, MD&A and Market Risk sections. Every new, removed and edited paragraph is highlighted side-by-side so you can see exactly what management changed in the 2023 report.

+346 added−287 removedSource: 10-K (2024-03-11) vs 10-K (2023-03-10)

Top changes in NextDecade Corp's 2023 10-K

346 paragraphs added · 287 removed · 197 edited across 7 sections

Item 1. Business

Business — how the company describes what it does

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Biggest changeAccording to The World Resources Institute, the world currently emits more than 50 billion tonnes of greenhouse gas emissions annually. The Paris Agreement is a multilateral, binding agreement that brings nations together in a common cause to combat climate change and adapt to its effects.
Biggest changeThe Paris Agreement is a multilateral, binding agreement that brings nations together in a common cause to combat climate change and adapt to its effects. We believe that deploying CCS equipment and technology is key to achieving global reductions in greenhouse gas emissions (which includes CO 2 among other gases), a goal of the Paris Agreement.
Following receipt of the Order, two requests for re-hearing were filed. One of those requests for rehearing also requested that the FERC stay the Order. On January 23, 2020, the FERC issued its Order on Rehearing and Stay in which the FERC rejected all challenges presented in the requests for rehearing and the request for stay of the Order.
Following receipt of the FERC Order, two requests for re-hearing were filed. One of those requests for rehearing also requested that the FERC stay the Order. On January 23, 2020, the FERC issued its Order on Rehearing and Stay in which the FERC rejected all challenges presented in the requests for rehearing and the request for stay of the Order.
The design, siting, construction and operation of LNG export terminals is a regulated activity and is subject to Section 3 of the Natural Gas Act (the "NGA"). Federal law has bifurcated regulatory jurisdiction of LNG export activities. The FERC has jurisdiction to authorize the siting, construction and operation of LNG export facilities.
The design, siting, construction and operation of LNG export facilities and the export of LNG is a regulated activity and is subject to Section 3 of the Natural Gas Act (the "NGA"). Federal law has bifurcated regulatory jurisdiction of LNG export activities. The FERC has jurisdiction to authorize the siting, construction and operation of LNG export facilities.
We hire independent contractors on an as-needed basis and have no collective bargaining agreements with our employees. Offices Our principal executive offices are located at 1000 Louisiana St., Suite 3900, Houston, Texas, 77002, and our telephone number is (713) 574-1880. Available Information Our internet website address is www.next-decade.com.
We utilize independent contractors on an as-needed basis and have no collective bargaining agreements with our employees. Offices Our principal executive offices are located at 1000 Louisiana St., Suite 3900, Houston, Texas, 77002, and our telephone number is (713) 574-1880. Available Information Our internet website address is www.next-decade.com.
In reviewing an application for an LNG import or export terminal or an interstate natural gas pipeline, the FERC also works with these state agencies that have jurisdiction over certain aspects of LNG terminal or interstate natural gas pipeline construction or operation. In particular, the PHMSA has established safety standards for interstate natural gas pipelines and LNG facilities.
In reviewing an application for an LNG import or export facility or an interstate natural gas pipeline, the FERC also works with these state agencies that have jurisdiction over certain aspects of LNG facility or interstate natural gas pipeline construction or operation. In particular, the PHMSA has established safety standards for interstate natural gas pipelines and LNG facilities.
The FERC, the PHMSA and the Coast Guard entered into a Memorandum of Understanding in 2004 that establishes the FERC’s primary role in evaluating LNG terminal applications and defines the process for coordinating the review of an LNG import or export terminal application with the PHMSA and the Coast Guard.
The FERC, the PHMSA and the Coast Guard entered into a Memorandum of Understanding in 2004 that establishes the FERC’s primary role in evaluating LNG facility applications and defines the process for coordinating the review of an LNG import or export facility application with the PHMSA and the Coast Guard.
We intend to use our website as a means of disclosing material non-public information and for complying with disclosure obligations under Regulation FD. Such disclosures will be included on our website under the heading “Investors.” Accordingly, investors should monitor such portion of our website, in addition to following our press releases and SEC filings.
We intend to use our website as a means of disclosing information for complying with disclosure obligations under Regulation FD. Such disclosures will be included on our website under the heading “Investors.” Accordingly, investors should monitor such portion of our website, in addition to following our press releases and SEC filings.
Rio Grande sought an extension of this deadline, explaining to FERC that despite NextDecade’s efforts to develop the Terminal, the COVID-19 pandemic impacted NextDecade’s ability to secure sufficient offtake agreements to reach a positive investment decision and commence construction of the Terminal.
Rio Grande sought an extension of this deadline, explaining to FERC that despite NextDecade’s efforts to develop the Rio Grande LNG Facility, the COVID-19 pandemic impacted NextDecade’s ability to secure sufficient offtake agreements to reach a positive investment decision and commence construction of the Rio Grande LNG Facility.
The Energy Policy Act of 2005, which amended the NGA, codified this policy until January 1, 2015, and the FERC has not indicated that it intends to depart from its policy of not regulating the terms or conditions of service or requiring that LNG terminals operate on an open access basis.
The Energy Policy Act of 2005, which amended the NGA, codified this policy until January 1, 2015, and the FERC has not indicated that it intends to depart from its policy of not regulating the terms or conditions of service or requiring that LNG import or export facilities operate on an open access basis.
Coast Guard (the “Coast Guard”), the U.S. Army Corps of Engineers, the U.S. Environmental Protection Agency, the International Boundary and Water Commission and other federal agencies with jurisdiction over potential environmental impacts of LNG terminal construction and operation.
Coast Guard (the “Coast Guard”), the U.S. Army Corps of Engineers, the U.S. Environmental Protection Agency, the International Boundary and Water Commission and other federal agencies with jurisdiction over potential environmental impacts of LNG export facility construction and operation.
Once captured, the CO 2 will be transported via pipeline to an underground geologic formation permitted by the U.S. Environmental Protection Agency (“EPA”) and relevant Texas agencies via the existing underground injection control (“UIC”) Class VI permitting regime for geologic sequestration of CO 2 .
Once captured, the CO 2 is expected to be transported to an underground geologic formation permitted by the U.S. Environmental Protection Agency (“EPA”) and relevant Texas agencies via the existing underground injection control (“UIC”) Class VI permitting regime for geologic sequestration of CO 2 .
We understand that there are more than 600 facilities in the United States alone that produce more than one million tonnes of CO 2 per annum, representing a very robust addressable market.
There are more than 600 facilities in the United States that produce more than one million tonnes of CO 2 per annum, representing a very robust addressable market.
We also believe that certain of our prospective customers may have significant commercial upside due to improved competitive position resulting from a full integration of the source facility with CCS processes, and we will seek to share in this value creation when applicable.
We also believe that some of our prospective customers may have significant financial upside due to improved competitive position resulting from a full integration of the source facility with CCS processes, and we will 12 seek to share in this value creation when applicable.
Circuit denied all petitions, except for two technical issues dealing with environmental justice and GHG emissions, which were remanded to the FERC for further consideration. The D.C. Circuit did so without vacatur , and accordingly, the Terminal's authorization from the FERC remains legally valid and enforceable.
Circuit denied all petitions, except for two technical issues dealing with environmental justice and GHG emissions, which were remanded to the FERC for further consideration. The D.C. Circuit did so without vacatur , and accordingly, the Rio Grande LNG Facility's authorization from the FERC remains legally valid and enforceable.
Governmental Permits, Approvals and Authorizations We are required to obtain governmental approvals and authorizations to implement our proposed business strategy, which includes the design, construction and operation of the Terminal and the export of LNG from the U.S. to foreign countries.
Governmental Permits, Approvals and Authorizations We are required to obtain governmental approvals and authorizations to implement our proposed business strategy, which includes the design, construction and operation of the Rio Grande LNG Facility and the export of LNG from the U.S. to foreign countries.
As indicated above, on November 22, 2019, we received the Order from FERC authorizing the siting, construction and operation of the Terminal. On August 13, 2020, the FERC approved the change of the design for the Terminal from six trains to five trains. On September 22, 2021, Rio Grande received the U.S.
On November 22, 2019, we received the Order from FERC authorizing the siting, construction and operation of the Rio Grande LNG Facility. On August 13, 2020, the FERC approved the change of the design for the Rio Grande LNG Facility from six trains to five trains. On September 22, 2021, Rio Grande received the U.S.
A second appeal was also filed with the same court by the same parties, seeking a review of the FERC letter order amending the Order to account for the design change from six to five trains but the petitioners moved to voluntarily dismiss this appeal on August 23, 2021. 7 Table of Contents Parties also filed a similar appeal in the U.S.
A second appeal was also filed with the same court by the same parties, seeking a review of the FERC letter order amending the Order to account for the design change from six to five trains but the petitioners moved to voluntarily dismiss this appeal on August 23, 2021.
In addition, we will compete with a variety of companies in the global LNG market, such as independent, technology-driven companies, state-owned and other independent oil and natural gas companies and utilities.
In this market, we will compete with a variety of companies, such as independent, technology-driven companies, state-owned companies, and other independent oil and natural gas companies and utilities.
Court of Appeals for the Fifth Circuit in respect to the U.S. Army Corps of Engineers permit issued pursuant to Section 404 of the Clean Water Act. On January 5, 2023, the court fully denied the appeal rejecting each of the challengers’ arguments.
Parties also filed a similar appeal in the Fifth Circuit in respect to the U.S. Army Corps of Engineers permit issued pursuant to Section 404 of the Clean Water Act. On January 5, 2023, the court fully denied the appeal rejecting each of the challengers’ arguments.
On November 17, 2021, Rio Grande filed a Limited Amendment with the FERC, seeking authorization to incorporate carbon capture and storage systems, which would enable Rio Grande to voluntarily capture and sequester at least 90% of the CO 2 generated at the Terminal.
On November 17, 2021, Rio Grande filed a Limited Amendment with the FERC, seeking authorization to incorporate carbon capture and storage systems, which would enable Rio Grande to voluntarily capture and permanently store at least 90% of the CO 2 expected to be generated at the Rio Grande LNG Facility.
Derived from extensive engineering efforts, our proprietary CCS processes are designed to generate the following benefits as compared to existing applications of carbon capture and storage processes: • Enable CO 2 capture up to an expected 95% of emissions generated from a source facility; • Competitive cost (both capital and operating expenditures) of post-combustion CCS; • Use proven technology and equipment to capture CO 2 emissions at scale; • Optimize energy requirements; • Substantially reduce or, in some cases, eliminate consumption of fresh-water compared to post-combustion carbon capture technologies utilizing water to cool the flue gas; and • Reduce the land footprint. 8 Table of Contents Our proprietary CCS processes do not include new equipment or technology.
Derived from extensive engineering efforts, our proprietary CCS processes are designed to generate the following expected benefits as compared to existing alternatives: • Enable CO 2 capture up to an expected 95% of emissions generated from a source facility; • Competitive cost (both capital and operating expenditures) of post-combustion CCS; • Use proven technology and equipment to capture CO 2 emissions at scale; • Minimize energy requirements; • Substantially reduce or, in some cases, eliminate consumption of fresh-water; and • Reduce the land footprint required by the CCS facility.
We believe the optimal transportation and storage solution for our customers is a point-to-point solution, whereby, CO 2 captured from a source facility is permanently stored in a proximate and dedicated saline aquifer storage site. CO 2 storage hubs also offer an alternative CO 2 storage solution.
We believe the optimal transportation and storage component of our projects is a point-to-point design, whereby CO 2 captured from a source facility is permanently stored in a proximate and dedicated saline aquifer storage site. CO 2 storage hubs also represent a viable CO 2 storage alternative.
Potential Sources of Value Integrated deployment of CCS processes at a source facility has the potential to generate value from a variety of sources including: government incentives, such as the Internal Revenue Code Section 45Q tax credit, buildout and marketing of a portfolio of low cost, independently verified carbon credits, environmental, social, and corporate governance (“ESG”) premiums, blue product marketing, and, in certain potential commercial arrangements, increased market share earned by the source facility following CCS deployment.
Potential Sources of Value Integrated deployment of CCS processes at a source facility has the potential to generate value from a variety of sources including: government incentives, such as the Internal Revenue Code Section 45Q tax credit, build out and marketing of a portfolio of low cost, independently verified carbon credits, premiums resulting from more environmentally friendly products, such as products with a lower carbon footprint or intensity, and, in certain potential commercial arrangements, increased market share earned by the source facility following CCS deployment.
We offer prospective customers a variety of commercial structures, aimed at providing sufficient flexibility to meet customers’ ESG goals, commercial desires, risk profiles and investing strategies.
We can offer prospective customers a variety of proposed commercial structures, which are aimed at providing sufficient flexibility to balance customers’ ESG and financial goals, commercial appetite, risk profiles, investing strategies, and capital availability.
Competition We are subject to a high degree of competition in all aspects of our business. See “Item 1.A — Risk Factors — Competition in the energy industry is intense, and some of our competitors have greater financial, technological and other resources. ” The Terminal will compete with liquefaction facilities worldwide to supply low-cost liquefaction to the market.
See “Item 1.A — Risk Factors — Competition in the energy industry is intense, and some of our competitors have greater financial, technological and other resources. ” The Rio Grande LNG Facility will compete with liquefaction facilities worldwide to supply economically advantaged LNG to the global market.
On October 14, 2022, Rio Grande received from FERC a two-year extension of time, until November 22, 2028, to complete construction of the Terminal and place it into service. Rio Grande’s initial order had required that Rio Grande complete construction of the Terminal within seven years of the date of the Order, by November 22, 2026.
On October 14, 2022, Rio Grande received from FERC a two-year extension of time, until November 22, 2028, to complete construction of the Rio Grande LNG Facility and place it into service.
In addition, we intend to disclose on our website any amendments to, or waivers from, our Code of Conduct and Ethics that are required to be publicly disclosed pursuant to rules of the SEC.
In addition, we intend to disclose on our website any amendments to, or waivers from, our Code of Conduct and Ethics that are required to be publicly disclosed pursuant to rules of the SEC. The SEC also maintains a website that contains reports, proxy and information statements and other information regarding issuers that file electronically with the SEC at www.sec.gov.
In 2018, the FERC and the PHMSA entered into a separate Memorandum of Understanding that establishes the process and timeline by which the PHMSA should determine whether an LNG terminal project will meet the PHMSA’s LNG safety siting standards. We have obtained all major permits required to build the Terminal and export LNG, pending final FERC notice to proceed.
In 2018, the FERC and the 10 PHMSA entered into a separate Memorandum of Understanding that establishes the process and timeline by which the PHMSA should determine whether an LNG facility will meet the PHMSA’s LNG safety siting standards.
Our analysis indicates that source emitters of greater than one million tonnes per annum are sufficient in size to support a point-to-point sequestration model.
Our analysis indicates that source emitters of greater than one million tonnes per annum are sufficient in size to support a point-to-point sequestration project and could serve as an anchor customer for the eventual development of a storage hub.
NEXT Carbon Solutions' marketing efforts target existing CO 2 source facilities having emissions greater than one million tonnes of CO 2 per annum and that are in close proximity to saline aquifer storage capacity.
NEXT Carbon Solutions' marketing efforts for proposed projects are primarily focused on existing industrial facilities with emissions greater than one million tonnes of CO 2 per annum and located proximally with saline aquifers with adequate storage capacity.
We are continuing to advance substantive negotiations in these areas. NEXT Carbon Solutions Carbon capture and storage (“CCS”) is the process of (i) capturing CO 2 at the source, (ii) compressing the CO 2 for transportation and (iii) injecting the compressed CO 2 into deep rock formations at a safe site, where it is then monitored and permanently stored.
FERC found that this demonstrated good cause to extend the commencement of construction deadline, and accordingly approved Rio Grande’s request. 11 NEXT Carbon Solutions Carbon capture and storage (“CCS”) is the process of (i) capturing CO 2 at an emissions source, (ii) compressing the CO 2 for transportation and (iii) safely injecting the compressed CO 2 into deep rock formations at a suitable site, where it is permanently stored and subsequently monitored according to EPA standards and requirements.
We have developed novel applications of existing industrial-scale equipment to reduce the capital and operating expenditures associated with the CCS process applied at scale. These novel designs and processes represent the intellectual property of NEXT Carbon Solutions that includes patents and patents pending.
Our proprietary CCS processes do not include new equipment or technology. We have designed novel proposed applications of existing industrial-scale equipment to reduce the expected capital and operating expenditures associated with the CCS process applied at scale.
Service Offerings and Potential Market NEXT Carbon Solutions’ proprietary CCS processes use an absorption post-combustion CO 2 removal system.
Service Offerings and Potential Market NEXT Carbon Solutions’ proprietary CCS processes will use an amine absorption system, one of the most common methods used for such purposes.
Leveraging our team’s years of engineering and project management experience, we have developed proprietary processes that lower the capital and operating costs of deploying CCS on industrial facilities. We expect to partner with customers to invest in the deployment of CCS to reduce and permanently store CO 2 emissions.
Leveraging our team’s engineering and project management experience, we have developed proprietary processes focused on post-combustion carbon capture that are expected to lower the capital and operating costs of deploying CCS at industrial facilities, thereby making such potential projects more economically viable.
NEXT Carbon Solutions will compete with other providers of CCS services, traditional original end manufacturers, EPC firms and midstream transportation and storage companies in offering CCS solutions. Our competitors in the CCS space may have greater financial, technical and marketing resources than we currently possess. Employees As of December 31, 2022, we had 102 full-time employees and 7 independent contractors.
NEXT Carbon Solutions will compete with other providers of CCS services, including traditional original end manufacturers, EPC firms and midstream transportation and storage companies in offering CCS solutions.
We believe that deploying CCS equipment and technology is key to achieving global de-carbonization, a goal of the Paris Agreement. NEXT Carbon Solutions offers end-to-end CCS solutions for industrial facilities and power plants that produce CO 2 that would otherwise be emitted.
NEXT Carbon Solutions is developing a proposed end-to-end CCS solutions for power plants and other industrial facilities that emit CO 2 as a byproduct of various processes within their operations. Without a CCS solution, the emitted CO 2 would otherwise be released to the atmosphere.
Further, we believe that a blend of cash flow streams, risk and reward profiles and contractual terms expected from a portfolio of projects would generate positive returns to our shareholders. NEXT Carbon Solutions will negotiate commercial terms with prospective customers on a case-by-case basis based on the unique characteristics of the relevant source facility.
NEXT Carbon Solutions expects to negotiate commercial terms with prospective customers on a case-by-case basis depending on the unique characteristics of the relevant source facility. Competition We are subject to a high degree of competition in all aspects of our business.
The Rio Bravo Pipeline (defined below) will connect the Terminal to the Agua Dulce supply area. The Agua Dulce supply area is supplied by significant natural gas resources in Texas, including the Permian Basin and Eagle Ford Shale.
The Rio Bravo Pipeline will provide Rio Grande access to purchase natural gas supplies in the Agua Dulce area and will connect to six regional intra and interstate pipelines, giving Rio Grande access to prolific gas production from the Permian Basin and Eagle Ford Shale and providing significant flexibility to obtain competitively priced natural gas feedstock.
Our common stock trades on the Nasdaq Capital Market (“Nasdaq”) under the symbol “NEXT.” Rio Grande Rio Grande is developing the Terminal on a 984-acre site in southern Texas.
Our common stock trades on the Nasdaq Capital Market (“Nasdaq”) under the symbol “NEXT.” Rio Grande Through our partially owned subsidiary, Rio Grande, we are constructing the Rio Grande LNG Facility on the north shore of the Brownsville Ship Channel.
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Item 1. Business Company Overview and Formation We believe that natural gas in the form of LNG will play an important role in the energy transition, but its contribution to global greenhouse gas emissions must be reduced to an absolute minimum.
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Item 1. Business Company Overview and Formation NextDecade Corporation, a Delaware corporation, is a Houston-based energy company primarily engaged in construction and development activities related to the liquefaction of natural gas and sale of LNG and the capture and storage of CO 2 emissions.
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Through our subsidiary Rio Grande, we are developing the Terminal, and we seek to minimize its associated emissions footprint by developing a CCS project at the Terminal (the “Terminal CCS project”), combined with using responsibly sourced natural gas and our pledge to use net-zero electricity.
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We are constructing and developing a natural gas liquefaction and export facility located in the Rio Grande Valley in Brownsville, Texas (the “Rio Grande LNG Facility”), which currently has three liquefaction trains and related infrastructure under construction.
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We also believe reducing CO 2 emissions from industrial facilities around the world is critical to realizing the Paris Agreement’s goal of limiting global warming compared to pre-industrial levels.
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The Rio Grande LNG Facility has received Federal Energy Regulatory Commission (“FERC”) approval and Department of Energy (“DOE”) FTA and non-FTA authorizations for the construction of five liquefaction trains and LNG exports totaling 27 million tonnes per annum (“MTPA”).
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We believe carbon capture and storage equipment and technology must be extensively implemented to achieve this goal, and through our subsidiary NEXT Carbon Solutions, we seek to deploy the proprietary carbon capture and storage processes that we have developed at industrial source facilities to reduce CO 2 emission levels.
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Liquefaction trains 1 through 3 and related infrastructure are currently under construction and liquefaction trains 4 and 5 at the Rio Grande LNG Facility are currently in development.
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Our management is comprised of a team of industry leaders with extensive experience in the development of major projects.
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We are also developing a planned carbon capture and storage (“CCS”) project at the Rio Grande LNG Facility and other potential CCS projects that would be located at third-party industrial facilities through our NEXT Carbon Solutions business.
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We have focused our development activities on the Terminal and undertaking various initiatives to evaluate, design, and engineer the Terminal that we expect will result in demand for LNG supply, which would enable us to seek construction financing to develop the Terminal and have expanded into developing CCS projects through NEXT Carbon Solutions.
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The site is located on 984 acres of land which has been leased long-term and includes 15 thousand feet of frontage on the Brownsville Ship Channel.
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The Terminal, in conjunction with the Terminal CCS Project is designed to offer competitively priced LNG in the global market while emitting what we believe to be a lower level of CO 2 per million tonnes per annum (“mtpa”) of LNG produced than other LNG terminals currently in operation or under construction.
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We believe the site is advantaged due to its proximity to abundant natural gas resources in the Permian Basin and Eagle Ford Shale, access to an uncongested waterway for vessel loading, and location in a region that has historically been subject to fewer and less severe weather events relative to other locations along the US Gulf Coast.
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All necessary permits and approvals to build the Terminal and export LNG have been obtained, including the Terminal design and the ability to mobilize to site and perform full site preparation and test pilings, pending final FERC notice to proceed. The site has deep-water port access and is supported by area-wide marine infrastructure.
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The Rio Grande LNG Facility has been approved by the FERC and authorized by the DOE to export up to 27 MTPA of LNG from up to five liquefaction trains.
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The Terminal will deploy proven Air Products liquefaction technology and we intend to deploy carbon capture and storage technology to capture greater than 90 percent of facility CO 2 emissions. Rio Grande has lump-sum separated turnkey contracts with Bechtel Oil, Gas and Chemicals, Inc. (“Bechtel”), the engineering, procurement and construction (“EPC”) contractor.
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In July 2023, Rio Grande commenced construction on the first three liquefaction trains and related infrastructure (“Phase 1”) of the Rio Grande LNG Facility following a positive final investment decision (“FID”) and the closing of project financing by Rio Grande, which owns Phase 1 of the Rio Grande LNG Facility. Construction will be completed by Bechtel Energy Inc.
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Development Actions On November 22, 2019, the Terminal received an order from the FERC (“the Order”) authorizing the siting, construction, and operation of six liquefaction trains, four LNG storage tanks (each with a capacity of 180,000 cubic meters (“m 3 ”)), two marine jetties for ocean-going LNG vessels, one turning basin, and six truck loading bays for LNG and natural gas liquids and all associated facilities for the production of up to 27 mtpa of LNG for export.
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(“Bechtel”) under fully wrapped, lump-sum turnkey engineering, procurement, and construction (“EPC”) contracts, and the facility will utilize APCI liquefaction technology, which is the predominant liquefaction technology utilized globally.
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The original front-end engineering and design for the Terminal was based on six LNG trains capable of producing 27 mtpa of LNG for export.
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Pursuant to a joint venture agreement with equity partners for ownership of Rio Grande, we expect to receive up to approximately 20.8% of distributions of available cash generated from Phase 1 operations; provided, that a majority of the cash distributions to which we are otherwise entitled will be paid for any distribution period only after our equity partners receive an agreed distribution threshold in respect of such distribution period and certain other deficit payments from prior distribution periods, if any, are made.
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The technologies that were selected and filed with the FERC in 2015 and 2016 evolved over the five-year permitting period; the individual LNG trains are now more efficient and will produce a greater volume of LNG with lower total CO 2 emissions.
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Rio Grande has entered into long-term LNG Sale and Purchase Agreements (“SPAs”) with nine creditworthy counterparties for aggregate volumes of approximately 16.2 MTPA of LNG, which is over 90% of the expected Phase 1 nameplate LNG production capacity. The SPAs have a weighted average term of 19.2 years.
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Multiple optimizations have been identified that will enable delivery of the Terminal capable of producing 27 mtpa with just five LNG trains instead of six.
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Under these SPAs, the customers will purchase LNG from Rio Grande for a price consisting of a fixed fee per MMBtu of LNG plus a variable fee per MMBtu of LNG, with the variable fees structured to cover the expected cost of natural gas plus fuel and other sourcing costs to produce LNG.
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We expect the optimization to a five-train project to result in several environmental and community benefits when compared with our original six-train project, including (i) approximately 21 percent lower CO 2 emissions (independent of the GHG emissions reductions enabled by the deployment of the Terminal CCS project), (ii) a shortened construction timeline for the full 27 mtpa project, (iii) reduced facility footprint, and (iv) reduction in roadway traffic.
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In certain circumstances, customers may elect to cancel or suspend deliveries of LNG cargoes, in which case the customers would still be required to pay the fixed fee with respect to cargoes that are not delivered. A portion of the fixed fee under each SPA will be subject to annual adjustment for inflation.
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Engineering, Procurement, and Construction Rio Grande is party to two lump-sum separated turnkey (“LSTK”) EPC agreements with Bechtel for the construction of (i) two LNG trains with expected aggregate production capacity up to approximately 11.74 mtpa, two 180,000m 3 full containment LNG tanks, one marine loading berth, related utilities and facilities, and all related appurtenances thereto, together with certain additional work options (the “Trains 1 and 2 EPC Agreement”) and (ii) an LNG train with expected production capacity of up to approximately 5.87 mtpa, related utilities and facilities, and all related appurtenances thereto (the “Train 3 EPC Agreement” and together with the Trains 1 and 2 EPC Agreement, the “EPC Agreements”).
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The SPAs and contracted volumes to be made available under the SPAs are not tied to a specific train; however, the commencement of the term of each SPA is tied to a specified train. 8 Rio Grande’s portfolio of LNG SPAs for Phase 1 of the Rio Grande LNG Facility is as follows: Customer Volume (mtpa) Tenor (years) Delivery Model (1) TotalEnergies SE 5.4 20 FOB Shell NA LNG LLC 2.0 20 FOB ENN LNG Singapore Pte Ltd. 2.0 20 FOB ENGIE S.A. 1.75 15 FOB China Gas Hongda Energy Trading Co., LTD 1.0 20 FOB Guangdong Energy Group 1.0 20 DES Exxon Mobil LNG Asia Pacific 1.0 20 FOB Galp Trading S.A. 1.0 20 FOB Itochu Corporation 1.0 15 FOB Total 16.15 19.2 years weighted average (1) FOB - free on board; DES - delivered ex-ship Each of these SPAs is currently effective, and deliveries of LNG under these SPAs will commence on the respective Date of First Commercial Delivery (“DFCD”), which is primarily tied to the substantial completion or guaranteed substantial completion dates of specific trains as defined in each SPA.
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As of December 31, 2022, we have issued eight limited notices to proceed to Bechtel under the Trains 1 and 2 EPC Agreement. Commercial We are continuing commercial discussions with a variety of parties ranging from large utilities and state-sponsored enterprises to portfolio and multinational commodity interests.
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In aggregate, the approximately 14.65 MTPA of Phase 1 Henry Hub-linked SPAs have average fixed fees, unadjusted for inflation, totaling approximately $1.8 billion expected to be paid annually. Marketing of Uncontracted Volumes Rio Grande expects to sell any commissioning LNG volumes and operational LNG volumes in excess of SPA volumes into the LNG market through spot, short-term, and medium-term agreements.
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Leveraging the global relationships and extensive experience of our management team, we expect to sign long-term binding offtake commitments for substantially all of the project liquefaction train’s capacity prior to a positive FID with respect to such liquefaction trains.
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Rio Grande has entered into certain time charter agreements and expects to enter into additional time charter agreements with vessel owners to provide shipping capacity for LNG sales related to its existing DES SPA, commissioning volumes, and expected portfolio volumes.
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We believe the Terminal’s location will provide customers with access to low-cost natural gas from the Permian Basin and Eagle Ford Shale.
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Engineering, Procurement and Construction ( “ EPC ”) Rio Grande entered into fully wrapped, lump-sum turnkey contracts with Bechtel, a well-established and reputable LNG engineering and construction firm, for the engineering, procurement, and construction of Phase 1 at the Rio Grande LNG Facility, under which Bechtel has generally guaranteed cost, performance, and schedule.
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We are focused on selling LNG to customers primarily through a “free on board” (“FOB”) model whereby a marketing affiliate would acquire feed gas, the Terminal would produce the LNG, and the title transfer would occur at the interface between the Terminal and the customer’s ship.
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Under the Phase 1 EPC contracts, Bechtel is responsible for the engineering, procurement, construction, commissioning, and startup of three liquefaction trains and related infrastructure. On July 12, 2023, Rio Grande issued final notice to proceed to Bechtel under the EPC contracts for Phase 1.
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We offer multiple LNG pricing options and flexible contract tenors (from 10 – 20 years), meeting the evolving needs of our customers and maximizing our total addressable market. 6 Table of Contents As of March 10, 2023, our portfolio of LNG sales and purchase agreements was as follows: Customer Volume (mtpa) Tenor (years) Delivery Model Shell NA LNG LLC (“Shell”) 2.0 20 FOB ENN LNG Singapore Pte Ltd.
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Total expected capital costs for Phase 1 are estimated to be approximately $18.0 billion, including estimated owner’s costs, contingencies, and financing costs, and including amounts spent prior to FID under limited notices to proceed.
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(“ENN”) 2.0 20 FOB ENGIE S.A. (“ENGIE”) 1.75 15 FOB China Gas Hongda Energy Trading Co., LTD (“China Gas”) 1.0 20 FOB Guangdong Energy Group (“Guangdong Energy”) 1.0 20 Ex Ship Exxon Mobil LNG Asia Pacific (“EMLAP”) 1.0 20 FOB Galp Trading S.A.

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Item 1A. Risk Factors

Risk Factors — what could go wrong, per management

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Biggest changeOur preferred stock may be designated into series pursuant to authority granted by our Second Amended and Restated Certificate of Incorporation (the “Certificate of Incorporation”), and on approval from our board of directors (the “Board of Directors” or “Board”). 166,364 shares of preferred stock have been designated as Series A Convertible Preferred Stock, par value $0.0001 per share (the “Series A Preferred Stock”), 166,364 shares of preferred stock have been designated as Series B Convertible Preferred Stock, par value $0.0001 per share (the “Series B Preferred Stock”), and 166,364 shares of preferred stock have been designated as Series C Convertible Preferred Stock, par value $0.0001 per share (the “Series C Preferred Stock” and together with the Series A Preferred Stock and Series B Preferred Stock, the “Convertible Preferred Stock”), in each case which are convertible into shares of common stock upon the occurrence of certain events.
Biggest changeOur authorized capital consists of 480,000,000 shares of common stock and 1,000,000 shares of preferred stock. Our preferred stock may be designated into series pursuant to authority granted by our Second Amended and Restated Certificate of Incorporation (the “Certificate of Incorporation”), and on approval from our board of directors (the “Board of Directors” or “Board”).
The occurrence of a significant event not fully insured or indemnified against could have a material adverse effect on our business, contracts, financial condition, operating results, cash flow, liquidity and prospects. We are dependent on a limited number of customers for the purchase of LNG. The number of potential customers is limited.
The occurrence of a significant event not fully insured or indemnified against could have a material adverse effect on our business, contracts, financial condition, operating results, cash flow, liquidity and prospects. We are dependent on a limited number of customers for the purchase of LNG. The number of potential LNG customers is limited.
In addition to the other risk factors discussed in this section, the price and volume volatility of our common stock may be affected by: • domestic and worldwide supply of and demand for natural gas and corresponding fluctuations in the price of natural gas; • fluctuations in our quarterly or annual financial results or those of other companies in our industry; • issuance of additional equity securities which causes further dilution to stockholders; • sales of a high volume of shares of our common stock by our stockholders (including sales by our directors, executive officers, and other employees) or the perception or expectation that such sales may occur; • short sales, hedging, and other derivative transactions on shares of our common stock; • the volume of shares of our common stock available for public sale; • operating and stock price performance of companies that investors deem comparable to us; • events affecting other companies that the market deems comparable to us; • changes in government regulation or proposals applicable to us; • actual or potential non-performance by any customer or a counterparty under any agreement; • announcements made by us or our competitors of significant contracts; • changes in accounting standards, policies, guidance, interpretations or principles; • general conditions in the industries in which we operate; • general economic conditions; and • the failure of securities analysts to cover our common stock or changes in financial or other estimates by analysts.
In addition to the other risk factors discussed in this section, the price and volume volatility of our common stock may be affected by: • domestic and worldwide supply of and demand for natural gas and corresponding fluctuations in the price of natural gas; • fluctuations in our quarterly or annual financial results or those of other companies in our industry; • issuance of additional equity securities which causes further dilution to stockholders; 28 • sales of a high volume of shares of our common stock by our stockholders (including sales by our directors, executive officers, and other employees) or the perception or expectation that such sales may occur; • short sales, hedging, and other derivative transactions on shares of our common stock; • the volume of shares of our common stock available for public sale; • operating and stock price performance of companies that investors deem comparable to us; • events affecting other companies that the market deems comparable to us; • changes in government regulation or proposals applicable to us; • actual or potential non-performance by any customer or a counterparty under any agreement; • announcements made by us or our competitors of significant contracts; • changes in accounting standards, policies, guidance, interpretations or principles; • general conditions in the industries in which we operate; • general economic conditions; and • the failure of securities analysts to cover our common stock or changes in financial or other estimates by analysts.
In addition, authorities with jurisdiction over wholesale power rates in the U.S., Europe and elsewhere, as well as independent system operators overseeing some of these markets, may impose price limitations, bidding rules and other mechanisms which may adversely impact or otherwise limit trading margins and lead to diminished opportunities for gain.
In addition, authorities with jurisdiction over wholesale power rates in the U.S., Europe and elsewhere, as well as independent system operators overseeing some of these markets, may impose price limitations, bidding rules and other mechanisms which may adversely impact or otherwise limit trading 23 margins and lead to diminished opportunities for gain.
Although the FERC has not indicated that it intends to depart from this policy, there can be no assurance it will not do so in the future. The nature and extent of any changes in these laws, rules, regulations and policies may be unpredictable and may have material effects on our business.
Although the FERC has not indicated that it intends to depart from this policy, there can be no assurance it will not do so in the future. The nature and extent of any changes in these laws, rules, regulations and policies may be unpredictable and may have material adverse effects on our business.
Delayed development of global carbon credit market could negatively impact the commercial viability of our CCS projects and could limit the growth of the business and adversely impact our financial condition and future results.
Delayed development of a global carbon credit market could negatively impact the commercial viability of our CCS projects and could limit the growth of the business and adversely impact our financial condition and future results.
Some of these competitors have longer operating histories, more development experience, greater name recognition, superior tax incentives, more employees and substantially greater financial, technical and marketing resources than we currently possess. NEXT Carbon Solutions will compete with other providers of CCS services, traditional original end manufacturers, EPC firms and midstream transportation and storage companies in offering CCS solutions.
Some of these competitors have longer operating histories, more development experience, greater name recognition, superior tax incentives, more employees and substantially greater financial, technical and marketing resources than we currently possess. NEXT Carbon Solutions will compete with other providers of CCS services, traditional original equipment manufacturers, EPC firms and midstream transportation and storage companies in offering CCS solutions.
The ability of our third-party contractors to perform successfully under any agreements to be entered into is dependent on a number of factors, including force majeure events and such contractors’ ability to: • design, engineer and receive critical components and equipment necessary for the Terminal and CCS projects to operate in accordance with specifications and address any start-up and operational issues that may arise in connection with the commencement of commercial operations; • attract, develop and retain skilled personnel and engage and retain third-party subcontractors, and address any labor issues that may arise; • post required construction bonds and comply with the terms thereof, and maintain their own financial condition, including adequate working capital; • adhere to any warranties the contractors provide in their EPC contracts; and • respond to difficulties such as equipment failure, delivery delays, schedule changes and failure to perform by subcontractors, some of which are beyond their control, and manage the construction process generally, including engaging and retaining third-party contractors, coordinating with other contractors and regulatory agencies and dealing with inclement weather conditions.
The ability of our third-party contractors to perform successfully under any agreements to be entered into is dependent on a number of factors, including force majeure events and such contractors’ ability to: • design, engineer and receive critical components and equipment necessary for the Rio Grande LNG Facility and CCS projects to operate in accordance with specifications and address any start-up and operational issues that may arise in connection with the commencement of commercial operations; • attract, develop and retain skilled personnel and engage and retain third-party subcontractors, and address any labor issues that may arise; • post required construction bonds and comply with the terms thereof, and maintain their own financial condition, including adequate working capital; • adhere to any warranties the contractors provide in their EPC contracts; and • respond to difficulties such as equipment failure, delivery delays, schedule changes and failure to perform by subcontractors, some of which are beyond their control, and manage the construction process generally, including engaging and retaining third-party contractors, coordinating with other contractors and regulatory agencies and dealing with inclement weather conditions.
As described above under “Business− Governmental Permits, Approvals and Authorizations,” the design, construction and operation of LNG export terminals is a highly regulated activity in the U.S., subject to a number of permitting requirements, regulatory approvals and ongoing safety and operational compliance programs.
As described above under “Business− Governmental Permits, Approvals and Authorizations,” the design, construction and operation of LNG export facilities is a highly regulated activity in the U.S., subject to a number of permitting requirements, regulatory approvals and ongoing safety and operational compliance programs.
The Funds also have significant control over our business, policies and affairs by their affiliates serving as directors of our Company. They may also exert influence in delaying or preventing a change in control of the Company, even if such change in control would benefit the other stockholders of the Company.
The Large Stockholders also have significant control over our business, policies and affairs by their affiliates serving as directors of our Company. They may also exert influence in delaying or preventing a change in control of the Company, even if such change in control would benefit the other stockholders of the Company.
Dollar with other currencies; • changes in regulatory regimes in the U.S. and the countries to which we will be authorized to sell LNG; • changes in regulatory regimes in the U.S. and the countries that seek to develop and regulate a market for the trading of global carbon capture credits; • levels of competition in the U.S. and worldwide; • changes in the tax regimes in the countries to which we sell LNG or in which we operate; • cost inflation relating to the personnel, materials and equipment used in our operations; • delays caused by events of force majeure or unforeseeable climatic events; • interest rates; and • synergy benefits associated with the development of multiple phases of the Terminal using identical design and construction philosophies.
Dollar with other currencies; • changes in regulatory regimes in the U.S. and the countries to which we will be authorized to sell LNG; • changes in regulatory regimes in the U.S. and the countries that seek to develop and regulate a market for the trading of global carbon capture credits; • levels of competition in the U.S. and worldwide; • changes in the tax regimes in the countries to which we sell LNG or in which we operate; • cost inflation relating to the personnel, materials and equipment used in our operations; • delays caused by events of force majeure or unforeseeable climatic events; • interest rates; and • synergy benefits associated with the development of multiple phases of the Rio Grande LNG Facility using identical design and construction philosophies.
This concentration of voting power and control could have a significant effect in delaying, deferring or preventing an action that might otherwise be beneficial to our other shareholders and be disadvantageous to our shareholders with interests different from those entities and individuals.
This concentration of voting power and control could have a significant effect in delaying, deferring or preventing an action that might otherwise be beneficial to our other stockholders and be disadvantageous to our stockholders with interests different from those entities and individuals.
The COVID-19 pandemic and Russia-Ukraine conflict may also have the effect of heightening many of the other risks described in this Annual Report on Form 10-K, such as risks related to the development of the CCS projects and the Terminal, including postponement in making a positive FID on the Terminal, doing business in foreign countries, obtaining governmental approvals, and exported LNG remaining a competitive source of energy for international markets, global demand for and price of natural gas, and fluctuation in the price of our common stock.
The COVID-19 pandemic and Russia-Ukraine conflict may also have the effect of heightening many of the other risks described in this Annual Report on Form 10-K, such as risks related to the development of the CCS projects and the Rio Grande LNG Facility, including postponement in making a positive FID on the Rio Grande LNG Facility, doing business in foreign countries, obtaining governmental approvals, and exported LNG remaining a competitive source of energy for international markets, global demand for and price of natural gas, and fluctuation in the price of our common stock.
Commodity prices and volumes are volatile due to many factors over which we have no control, including competing liquefaction capacity in North America; the international supply and receiving capacity of LNG; LNG marine transportation capacity; weather conditions affecting production or transportation of LNG from the Terminal; domestic and global demand for natural gas; the effect of government regulation on the production, transportation and sale of natural gas; oil and natural gas exploration and production activities; the development of and changes in the cost of alternative energy sources for natural gas and political and economic conditions worldwide.
Commodity prices and volumes are volatile due to many factors over which we have no control, including competing liquefaction capacity in North America; the international supply and receiving capacity of LNG; LNG marine transportation capacity; weather conditions affecting production or transportation of LNG from the Rio Grande LNG Facility; domestic and global demand for natural gas; the effect of government regulation on the production, transportation and sale of natural gas; oil and natural gas exploration and production activities; the development of and changes in the cost of alternative energy sources for natural gas and political and economic conditions worldwide.
Failure of any of our facilities to achieve our intended capacity ratings and performance capabilities could prevent us from achieving the commercial start dates or otherwise impact the generation of revenue under our future commercial agreements and could have a material adverse effect on our business, contracts, financial condition, operating results, cash flow, liquidity and prospects. 15 Table of Contents Carbon credit markets may not develop as quickly or efficiently as we anticipate or at all.
Failure of any of our facilities to achieve our intended capacity ratings and performance capabilities could prevent us from achieving the commercial start dates or otherwise impact the generation of revenue under our future commercial agreements and could have a material adverse effect on our business, contracts, financial condition, operating results, cash flow, liquidity and prospects. 24 Carbon credit markets may not develop as quickly or efficiently as we anticipate or at all.
The continuation of these developments may subject our construction and operations to increased risks, as well as increased costs, and, depending on their ultimate magnitude, could have a material adverse effect on our business, contracts, financial condition, operating results, cash flow, liquidity and prospects. 21 Table of Contents Item 1B. Unresolved Staff Comments None.
The continuation of these developments may subject our construction and operations to increased risks, as well as increased costs, and, depending on their ultimate magnitude, could have a material adverse effect on our business, contracts, financial condition, operating results, cash flow, liquidity and prospects. Item 1B. Unresolved Staff Comments None.
A sustained disruption in the capital markets from the COVID-19 pandemic or the Russia-Ukraine conflict, specifically with respect to the energy industry, could negatively impact our ability to raise capital. In the past, we have financed our operations by the issuance of equity and equity-based securities.
A sustained disruption in the capital markets from the COVID-19 pandemic or the Russia-Ukraine conflict and hostilities in the Middle East, specifically with respect to the energy industry, could negatively impact our ability to raise capital. In the past, we have financed our operations by the issuance of equity and equity-based securities.
Furthermore, we may have disagreements with our third-party contractors about different elements of the construction process, which could lead to the assertion of rights and remedies under the related contracts, resulting in a contractor’s unwillingness to perform further work on the relevant project. We may also face difficulties in commissioning a newly constructed facility at the Terminal.
Furthermore, we may have disagreements with our third-party contractors about different elements of the construction process, which could lead to the assertion of rights and remedies under the related contracts, resulting in a contractor’s unwillingness to perform further work on the relevant project. We may also face difficulties in commissioning a newly constructed facility at the Rio Grande LNG Facility.
Changes in legislation and regulations or interpretations thereof, such as those relating to the importation and exportation of LNG and incentives for reduction of emissions, could have a material adverse effect on our business, results of operations, financial condition, liquidity and prospects and could cause additional expenditures and delays in connection with the Terminal and CCS projects and their construction.
Changes in legislation and regulations or interpretations thereof, such as those relating to the importation and exportation of LNG and incentives for reduction of emissions, could have a material adverse effect on our business, results of operations, financial condition, liquidity and prospects and could cause additional expenditures and delays in connection with the Rio Grande LNG Facility and CCS projects and their construction.
Any increase in our operating costs could materially and adversely affect our business, financial condition, operating results, liquidity and prospects. 13 Table of Contents We depend on our executive officers for various activities. We do not maintain key person life insurance policies on any of our personnel.
Any increase in our operating costs could materially and adversely affect our business, financial condition, operating results, liquidity and prospects. We depend on our executive officers for various activities. We do not maintain key person life insurance policies on any of our personnel.
In particular, costs for the Terminal are expected to be substantially affected by: • global prices of nickel, steel, concrete, pipe, aluminum and other component parts of the Terminal or CCS projects and the contractual terms upon which our contractors are able to source and procure required materials; • any U.S. import tariffs or quotas on steel, aluminum, pipe or other component parts of the Terminal or CCS projects, which may raise the prices of certain materials used in the Terminal; • commodity and consumer prices (principally, natural gas, crude oil and fuels that compete with them in our target markets) on which our economic assumptions are based; • the exchange rate of the U.S.
In particular, costs are expected to be substantially affected by: • global prices of nickel, steel, concrete, pipe, aluminum and other component parts of the Rio Grande LNG Facility or CCS projects and the contractual terms upon which our contractors are able to source and procure required materials; • any U.S. import tariffs or quotas on steel, aluminum, pipe or other component parts of the Rio Grande LNG Facility or CCS projects, which may raise the prices of certain materials used in the Rio Grande LNG Facility; • commodity and consumer prices (principally, natural gas, crude oil and fuels that compete with them in our target markets) on which our economic assumptions are based; • the exchange rate of the U.S.
Construction costs for the Terminal and CCS projects will be subject to various factors such as economic and market conditions, government policy, claims and litigation risk, competition, the final terms of any definitive agreement for services with EPC service providers, change orders, delays in construction, legal and regulatory requirements, unanticipated regulatory delays, site issues, increased component and material costs, escalation of labor costs, labor disputes, increased spending to maintain construction schedules and other factors.
Construction costs for the Rio Grande LNG Facility and CCS projects will be subject to various factors such as economic and market conditions, government policy, claims and litigation risk, competition, the final terms of any definitive agreement for services with EPC service providers, change orders, delays in construction, legal and regulatory requirements, unanticipated regulatory delays, site issues, increased component and material costs, escalation of labor costs, labor disputes, increased spending to maintain construction schedules and other factors.
We cannot predict the impact energy trading may have on our business, results of operations or financial condition. Further, the development of the Terminal takes a substantial amount of time, requires significant capital investment, may be delayed by unforeseen and uncontrollable factors and is dependent on our financial viability and ability to market LNG internationally.
We cannot predict the impact energy trading may have on our business, results of operations or financial condition. Further, the development of the Rio Grande LNG Facility takes a substantial amount of time, requires significant capital investment, may be delayed by unforeseen and uncontrollable factors and is dependent on our financial viability and ability to market LNG internationally.
If any class action litigation is initiated against us, we may incur substantial costs and our management’s attention may be diverted from our operations, which could materially adversely affect our business and financial condition. 18 Table of Contents Raising additional capital may cause dilution to existing stockholders, restrict our operations or require us to relinquish rights.
If any class action litigation is initiated against us, we may incur substantial costs and our management’s attention may be diverted from our operations, which could materially adversely affect our business and financial condition. Raising additional capital may cause dilution to existing stockholders, restrict our operations or require us to relinquish rights.
The plan of operations for the Terminal is subject to the inherent risks associated with LNG operations, including explosions, pollution, release of toxic substances, fires, hurricanes and other adverse weather conditions, and other hazards, each of which could result in significant delays in commencement or interruptions of operations and/or result in damage to or destruction of the Terminal and assets or damage to persons and property.
The plan of operations for the Rio Grande LNG Facility is subject to the inherent risks associated with LNG operations, including explosions, pollution, release of toxic substances, fires, hurricanes and other adverse weather conditions, and other hazards, each of which could result in significant delays in commencement or interruptions of operations and/or result in damage to or destruction of the Rio Grande LNG Facility and assets or damage to persons and property.
Instability in the financial markets as a result of terrorism, including cyberterrorism, or war, including the Russia-Ukraine conflict, could also materially adversely affect our ability to raise capital.
Instability in the financial markets as a result of terrorism, including cyberterrorism, or war, including the Russia-Ukraine conflict or hostilities in the Middle East, could also materially adversely affect our ability to raise capital.
A terrorist or military incident involving the Terminal or any industrial facility that hosts a CCS project may result in delays in, or cancellation of, construction of the Terminal or the relevant CCS project, which would increase our costs and prevent us from obtaining expected cash flows.
A terrorist or military incident involving the Rio Grande LNG Facility or any industrial facility that hosts a CCS project may result in delays in, or cancellation of, construction of the Rio Grande LNG Facility or the relevant CCS project, which would increase our costs and prevent us from obtaining expected cash flows.
These risks include, but are not limited to, risks related to the construction discussed above in “ We will be dependent on third-party contractors for the successful completion of the Terminal and CCS projects, and these contractors may be unable to complete the Terminal or CCS projects or may build a non-conforming Terminal or CCS projects. ” Defaults by suppliers, customers and other counterparties may adversely affect our operating results, liquidity and access to financing.
These risks include, but are not limited to, risks related to the construction discussed above in “ We will be dependent on third-party contractors for the successful completion of the Rio Grande LNG Facility and CCS projects, and these contractors may be unable to complete the Rio Grande LNG Facility or CCS projects or may build a non-conforming Rio Grande LNG Facility or CCS projects. ” Defaults by suppliers, customers and other counterparties may adversely affect our operating results, liquidity and access to additional financing.
The success of the Terminal is dependent, in part, on the extent to which LNG can, for significant periods and in significant volumes, be supplied from North America and delivered to international markets at a lower cost than the cost of alternative energy sources.
The success of the Rio Grande LNG Facility is dependent, in part, on the extent to which LNG can, for significant periods and in significant volumes, be supplied from North America and delivered to international markets at a lower cost than the cost of alternative energy sources.
The construction of the Terminal is expected to take several years, will be confined to a limited geographic area and could be subject to delays, cost overruns, labor disputes and other factors that could adversely affect financial performance or impair our ability to execute our scheduled business plan.
The construction of the Rio Grande LNG Facility is expected to take several years, will be confined to a limited geographic area and could be subject to delays, cost overruns, labor disputes and other factors that could adversely affect financial performance or impair our ability to execute our scheduled business plan.
With respect to the Terminal or CCS projects, we may elect not to obtain insurance for any or all of these risks if we believe that the cost of available insurance is excessive relative to the risks presented. In addition, contractual liabilities and pollution and environmental risks generally are not fully insurable.
With respect to the Rio Grande LNG Facility or CCS projects, we may elect not to obtain insurance for any or all of these risks if we believe that the cost of available insurance is excessive relative to the risks presented. In addition, contractual liabilities and pollution and environmental risks generally are not fully insurable.
The operation of the Terminal and any CCS project may be subject to significant operating hazards and uninsured risks, one or more of which may create significant liabilities and losses that could have a material adverse effect on our business, results of operations, financial condition, liquidity and prospects.
The operation of the Rio Grande LNG Facility and any CCS project may be subject to significant operating hazards and uninsured risks, one or more of which may create significant liabilities and losses that could have a material adverse effect on our business, results of operations, financial condition, liquidity and prospects.
Substantial changes in the Company's ownership have occurred that may limit or reduce the amount of NOL carryforwards that the Company could utilize in the future to offset taxable income. At December 31, 2022, we had federal net operating loss (“NOL”) carryforwards of approximately $175.4 million. Approximately $26.1 million of these NOL carryforwards will expire between 2034 and 2038.
Substantial changes in the Company's ownership have occurred that may limit or reduce the amount of NOL carryforwards that the Company could utilize in the future to offset taxable income. At December 31, 2023, we had federal net operating loss (“NOL”) carryforwards of approximately $260.7 million. Approximately $26.1 million of these NOL carryforwards will expire between 2034 and 2038.
Our activities are also dependent on the price and availability of materials for the construction of the Terminal, such as nickel, aluminum, pipe, and steel, which may be subject to import tariffs in the U.S. market and are all also subject to factors affecting commodity prices and volumes.
Our activities are also dependent on the price and availability of materials for the construction of the Rio Grande LNG Facility, such as nickel, aluminum, pipe, and steel, which may be subject to import tariffs in the U.S. market and are all also subject to factors affecting commodity prices and volumes.
Some of these jurisdictions are heavily regulated and dominated by state entities. In certain instances, customers may require credit enhancement measures in order to satisfy project-financing requirements. Objections from local communities or environmental groups can delay the Terminal.
Some of these jurisdictions are heavily regulated and dominated by state entities. In certain instances, customers may require credit enhancement measures in order to satisfy project-financing requirements. Objections from local communities or environmental groups can delay the Rio Grande LNG Facility.
As of December 31, 2022, the Company had $62.8 million in cash and cash equivalents which may not be sufficient to fund the Company's planned operations through one year after the date the consolidated financial statements are issued. Accordingly, there is substantial doubt about the Company's ability to continue as a going concern.
As of December 31, 2023, the Company had $38.2 million in cash and cash equivalents, which may not be sufficient to fund the Company's planned operations through one year after the date the consolidated financial statements are issued. Accordingly, there is substantial doubt about the Company's ability to continue as a going concern.
Delays beyond the estimated development periods, as well as cost overruns, could increase the cost of completion beyond the amounts that are currently estimated, which could require us to obtain additional sources of financing to fund the activities until the Terminal is constructed and operational, which could cause further delays.
Delays beyond the estimated development periods, as well as cost overruns, could increase the cost of completion beyond the amounts that are currently estimated, which could require us to obtain additional sources of financing to fund the activities until the Rio Grande LNG Facility is constructed and operational, which could cause further delays.
We are required to obtain governmental approvals and authorizations to implement our proposed business strategy, which includes the design, construction and operation of the Terminal and the export of LNG from the U.S. to foreign countries.
We are required to obtain governmental approvals and authorizations to implement our proposed business strategy, which includes the design, construction and operation of the Rio Grande LNG Facility and the export of LNG from the U.S. to foreign countries.
Our business will be subject to extensive federal, state and local regulations and laws, including regulations and restrictions on discharges and releases to the air, land and water and the handling, storage and disposal of hazardous materials and wastes in connection with the development, construction and operation of the Terminal.
Our business will be subject to extensive federal, state and local regulations and laws, including regulations and restrictions on discharges and releases to the air, land and water and the handling, storage and disposal of hazardous materials and wastes in connection with the development, construction and operation of the Rio Grande LNG Facility.
A terrorist incident could also result in temporary or permanent closure of the Terminal or such host industrial facility, which could increase costs and decrease cash flows, depending on the duration of the closure.
A terrorist incident could also result in temporary or permanent closure of the Rio Grande LNG Facility or such host industrial facility, which could increase costs and decrease cash flows, depending on the duration of the closure.
For additional information regarding our ability to enter into sufficient long-term commercial agreements, see “— Our ability to generate cash is substantially dependent upon us entering into satisfactory contracts with third parties and the performance of those third parties under those contracts .” There is substantial doubt about our ability to continue as a going concern.
For additional information regarding our ability to enter into such agreements, see “— Our ability to generate cash is substantially dependent upon us entering into satisfactory contracts with third parties and the performance of those third parties under those contracts .” 16 There is substantial doubt about our ability to continue as a going concern.
Construction of the Pipeline could be delayed or abandoned for any of many other reasons, such as it becoming economically disadvantageous to the Transporter, a failure to obtain or maintain necessary permits for construction or operation, mechanical or structural failures, inadvertent damages during construction, or any terrorist attack, including cyberterrorism, affecting the Pipeline or the Transporter.
Construction of the Pipeline could be delayed or abandoned for any of many other reasons, such as it becoming economically disadvantageous to the Transporter, a failure to obtain or maintain all necessary permits, approvals and licenses for the construction and operation, mechanical or structural failures, inadvertent damages during construction, natural disasters, or any terrorist attack, including cyberterrorism, affecting the Pipeline or the Transporter.
Risks Related to Governmental Regulation The construction and operation of the Terminal remains subject to further governmental approvals, and some approvals may be subject to further conditions, review and/or revocation and other legal and regulatory risks, which may result in delays, increased costs or decreased cash flows.
Risks Related to Governmental Regulation The construction and operation of the Rio Grande LNG Facility remains subject to further governmental approvals, and some approvals may be subject to further conditions, review and/or revocation and other legal and regulatory risks, which may result in delays, increased costs or decreased cash flows.
As a result, the Funds have the ability to influence the election of our directors and the outcome of corporate actions requiring shareholder approval, such as: (i) a merger or a sale of our Company, (ii) a sale of all or substantially all of our assets, and (iii) amendments to our articles of incorporation and bylaws.
As a result, the Large Stockholders have the ability to influence the election of our directors and the outcome of corporate actions requiring stockholder approval, such as: (i) a merger or a sale of our Company, (ii) a sale of all or substantially all of our assets, and (iii) amendments to our articles of incorporation and bylaws.
Although we are not a party to any such climate-related or “greenwashing” litigation currently, unfavorable rulings against us in any such case brought against us in the future could significantly impact our operations and could have an adverse impact on our financial condition. 20 Table of Contents General Risk Factors The COVID-19 pandemic, Russia-Ukraine conflict and other sources of volatility in the energy markets may materially and adversely affect our business, financial condition, operating results, cash flow, liquidity and prospects, including our efforts to reach a final investment decision with respect to the Terminal.
Although we are not a party to any such climate-related or “greenwashing” litigation currently, unfavorable rulings against us in any such case brought against us in the future could significantly impact our operations and could have an adverse impact on our financial condition. 31 General Risk Factors The COVID-19 pandemic, Russia-Ukraine conflict, conflict in the Middle East and other sources of volatility in the energy markets may materially and adversely affect our business, financial condition, operating results, cash flow, liquidity and prospects, including our efforts to reach a final investment decision with respect to the Rio Grande LNG Facility.
Operations of the Terminal will be dependent upon our ability to deliver LNG supplies from the U.S., which is primarily dependent upon LNG being a competitive source of energy internationally.
Operations of the Rio Grande LNG Facility will be dependent upon our ability to deliver LNG supplies from the U.S., which is primarily dependent upon LNG being a competitive source of energy internationally.
Additionally, these regulations and laws, including the National Environmental Policy Act, will require and have required us to obtain and maintain permits, with respect to our facilities, prepare environmental impact assessments, provide governmental authorities with access to our facilities for inspection and provide reports related to compliance.
Additionally, these regulations and laws will require and have required us to obtain and maintain permits, with respect to our facilities, prepare environmental impact assessments, provide governmental authorities with access to our facilities for inspection and provide reports related to compliance.
Prospects for the development and financing of the Terminal are based in part on factors including global economic conditions that have been, and are likely to continue to be, adversely affected by the COVID-19 pandemic.
Prospects for the development and financing of the Rio Grande LNG Facility are based in part on factors including global economic conditions that have been, and are likely to continue to be, adversely affected by the COVID-19 pandemic.
In addition, the LNG technology we anticipate using in the Terminal may face competition due to the technological advances of other companies or solutions, including more efficient and cost-effective processes or entirely different approaches developed by one or more of our competitors or others.
In addition, the LNG technology we are using in the Rio Grande LNG Facility may face competition due to the technological advances of other companies or solutions, including more efficient and cost-effective processes or entirely different approaches developed by one or more of our competitors or others.
Any of the foregoing issues or significant project delays in the development or construction of the Terminal and, to the extent applicable, CCS projects could materially and adversely affect our business, results of operations, financial condition and prospects.
Any of the foregoing issues or significant project delays in the development or construction of the Rio Grande LNG Facility and, to the extent applicable, CCS projects could materially and adversely affect our business, results of operations, financial condition and prospects.
It is possible that, in negotiating to secure these rights-of-way, the Transporter encounters recalcitrant landowners or competitive projects, which could result in additional time needed to secure the Pipeline route and, consequently, delays in, or abandonment of, its construction.
The Pipeline is currently in development and its construction will require the Transporter to secure rights-of-way along the proposed Pipeline route. It is possible that, in negotiating to secure these rights-of-way, the Transporter encounters recalcitrant landowners or competitive projects, which could result in additional time needed to secure the Pipeline route and, consequently, delays in, or abandonment of, its construction.
Delays caused by third parties in the course of negotiating agreements and constructing the required interconnects could delay the start of commercial operations for the Terminal. Litigation could expose us to significant costs and adversely affect our business, financial condition, and results of operations.
Delays caused by third parties in the course of negotiating agreements and constructing the required interconnects could delay the start of commercial operations for the Rio Grande LNG Facility. 25 Litigation could expose us to significant costs and adversely affect our business, financial condition, and results of operations.
We do not expect Rio Grande to generate any revenue until the completion of construction of the first phase of the Terminal or NEXT Carbon Solutions to generate any revenue until successful installation of CCS systems at third-party facilities.
We do not expect Rio Grande to generate any revenue until the completion of construction of Phase 1 of the Rio Grande LNG Facility or NEXT Carbon Solutions to generate any revenue until successful installation of CCS systems at third-party facilities.
Some potential purchasers of the LNG to be produced from the Terminal are new to the LNG business and have limited experience in the industry. We will be reliant upon the ability of these customers to enter into satisfactory downstream arrangements in their home markets for the licenses to import and sell re-gasified LNG.
Some potential purchasers of the LNG to be produced from the Rio Grande LNG Facility are new to the LNG business and have limited experience in the industry. We will be reliant upon the ability of these customers to enter into satisfactory downstream arrangements in their home markets for the licenses to import and sell regasified LNG.
Some local communities and/or environmental groups have voiced opposition to the proposed construction and operation of the Terminal as negatively impacting the environment, wildlife, cultural heritage sites or the public health of residents.
Some local communities and/or environmental groups have voiced opposition to the proposed construction and operation of the Rio Grande LNG Facility as negatively impacting the environment, wildlife, cultural heritage sites or the public health of residents.
After the first phase of the Terminal is completed or our CCS systems are installed in third-party industrial facilities, financing and numerous other factors may reduce our cash flow. As a result, we may not make distributions of any amount or any distributions may be delayed.
After Phase 1 of the Rio Grande LNG Facility is completed or our CCS systems are installed in third-party industrial facilities, financing and numerous other factors may reduce our cash flow. As a result, we may not make distributions of any amount or any distributions may be delayed.
We will be required to seek additional debt and equity financing in the future to complete the Terminal and the development of CCS projects and may not be able to secure such financing on acceptable terms, or at all.
We will be required to seek additional debt and equity financing in the future to complete future phases of the Rio Grande LNG Facility and the development of CCS projects and may not be able to secure such financing on acceptable terms, or at all.
If efforts to market the Terminal’s export capacity, LNG produced by the Terminal, or our CCS systems are not successful, our business, results of operations, financial condition and prospects may be materially and adversely affected. Our exposure to the performance and credit risks of counterparties may adversely affect our operating results, liquidity and access to financing.
If efforts to market LNG produced by the Rio Grande LNG Facility, the Rio Grande LNG Facility’s expansion export capacity, or our CCS systems are not successful, our business, results of operations, financial condition and prospects may be materially and adversely affected. 19 Our exposure to the performance and credit risks of counterparties may adversely affect our operating results, liquidity and access to financing.
The need for additional financing may also make the Terminal uneconomic. Any delay in completion of the Terminal may also cause a delay in the receipt of revenues projected from the Terminal or cause a loss of one or more customers.
The need for additional financing may also make the Rio Grande LNG Facility uneconomic. Any delay in completion of the Rio Grande LNG Facility may also cause a delay in the receipt of revenues projected from the Rio Grande LNG Facility or cause a loss of one or more customers.
Due to the scale of the Terminal, we may encounter capacity limits in insurance markets, thereby limiting our ability to economically obtain insurance with our desired level of coverage limits and terms.
Due to the scale of the Rio Grande LNG Facility, we may encounter capacity limits in insurance markets, thereby limiting our ability to economically obtain insurance with our desired level of coverage limits and terms.
Nonetheless, disruptions in upstream supply sources or increased market demand could impact the availability of gas supply to the Pipeline header system, which would result in curtailments at the Terminal.
Nonetheless, disruptions in upstream supply sources or increased market demand could impact the availability of gas supply to the Pipeline header system, which would result in curtailments at the Rio Grande LNG Facility.
As the owner and operator of the Terminal and CCS systems, we could be liable for the costs of cleaning up hazardous substances released into the environment and for damage to natural resources.
As the owner and operator of the Rio Grande LNG Facility and CCS systems, we could be liable for the costs of cleaning up hazardous substances released into the environment and for damage to natural resources.
Operations at the Terminal and CCS projects could also become subject to increased governmental scrutiny that may result in additional security measures at a significant incremental cost.
Operations at the Rio Grande LNG Facility and CCS projects could also become subject to increased governmental scrutiny that may result in additional security measures at a significant incremental cost.
Risks associated with potential operations, commitments and investments outside of the U.S. include but are not limited to risks of: • currency exchange restrictions and currency fluctuations; • war or terrorist attack; • expropriation or nationalization of assets; • renegotiation or nullification of existing contracts or international trade arrangements; • changing political conditions; • macro-economic conditions impacting key markets and sources of supply; • changing laws and policies affecting trade, taxation, financial regulation, immigration, and investment, including laws and policies regarding the verification and trading of carbon capture credits; • the implementation of tariffs by the U.S. or foreign countries in which we do business; • duplicative taxation by different governments; • general hazards associated with the assertion of sovereignty over areas in which operations are conducted, transactions occur, or counterparties are located; and • the unexpected credit rating downgrade of countries in which our LNG customers are based.
Risks associated with potential operations, commitments and investments outside of the U.S. include but are not limited to risks of: • currency exchange restrictions and currency fluctuations; • war or terrorist attack; • expropriation or nationalization of assets; • renegotiation or nullification of existing contracts or international trade arrangements; • changing political conditions; • macro-economic conditions impacting key markets and sources of supply; • changing laws and policies affecting trade, taxation, incentives, financial regulation, immigration, and investment, including laws and policies regarding the verification and trading of carbon capture credits; • the implementation of tariffs by the U.S. or foreign countries in which we do business; • duplicative taxation by different governments; • general hazards associated with the assertion of sovereignty over areas in which operations are conducted, transactions occur, or counterparties are located; and • the unexpected credit rating downgrade of countries in which our LNG customers are based. 17 As our reporting currency is the U.S. dollar, any operations conducted outside the U.S. or transactions denominated in foreign currencies would face additional risks of fluctuating currency values and exchange rates, hard currency shortages and controls on currency exchange.
Although the necessary authorizations, approvals and permits to construct and operate the Terminal may be obtained, such authorizations, approvals and permits may be subject to ongoing conditions imposed by regulatory agencies or may be subject to legal proceedings not involving us, which is customary for U.S. LNG projects.
Although the necessary authorizations, approvals and permits to construct and operate the Rio Grande LNG Facility have been obtained, such authorizations, approvals and permits may be subject to ongoing conditions imposed by regulatory agencies or may be subject to legal proceedings not involving us, which is customary for U.S.
The Terminal will be subject to a number of environmental laws and regulations that impose significant compliance costs, and existing and future environmental and similar laws and regulations could result in increased compliance costs, liabilities or additional operating restrictions.
LNG projects. 26 The Rio Grande LNG Facility will be subject to a number of environmental laws and regulations that impose significant compliance costs, and existing and future environmental and similar laws and regulations could result in increased compliance costs, liabilities or additional operating restrictions.
Since we will be unable to generate any revenue while we are in the development and construction stages, which will be for multiple years with respect to the Terminal, we will need additional financing to provide the capital required to execute our business plan.
Since we will be unable to generate any revenue while we are in the development and construction stages, which will be for multiple years with respect to Phase 1 of the Rio Grande LNG Facility, we will need additional financing to provide the capital required to execute our business plan.
The duration of the impact of the COVID-19 pandemic and the Russia-Ukraine conflict is uncertain, and we may continue to experience materially adverse impacts to our business as a result of their global economic impact, including any recession that has occurred or may occur in the future, and lasting effects on the price of natural gas.
The duration of the impact of the COVID-19 pandemic, the Russia-Ukraine conflict and hostilities in the Middle East is uncertain, and we may continue to experience materially adverse impacts to our business as a result of their global economic impact, including any recession that has occurred or may occur in the future, and lasting effects on the price of natural gas. 32 Cyberattacks targeting systems and infrastructure used in our business may adversely impact our operations.
Timely and cost-effective completion of the Terminal and our CCS projects in conformity with agreed-upon specifications will be highly dependent upon the performance of third-party contractors pursuant to their agreements.
Timely and cost-effective completion of the Rio Grande LNG Facility and any CCS projects in conformity with agreed-upon specifications will be highly dependent upon the performance of third-party contractors pursuant to their agreements.
The header system at the upstream end of the Pipeline is expected to have multiple interconnects to the existing natural gas pipeline grid located in the Agua Dulce supply area (the “Agua Dulce Hub”).
The Pipeline is expected to collect and transport natural gas to the Rio Grande LNG Facility. The header system at the upstream end of the Pipeline is expected to have multiple interconnects to the existing natural gas pipeline grid located in the Agua Dulce supply area (the “Agua Dulce Hub”).
We are not expected to generate cash flow, or even obtain revenues, from our LNG liquefaction and export activities unless and until the Terminal is operational, which is expected to be at least four years away. Additionally, we do not expect to generate cash flow from our CCS projects until we install CCS systems on third-party industrial facilities.
We are not expected to generate cash flow, or even obtain revenues, from our LNG liquefaction and export activities unless and until the Rio Grande LNG Facility is operational. Additionally, we do not expect to generate cash flow from our CCS projects until we install CCS systems at the Rio Grande LNG Facility or on third-party industrial facilities.
Any such delays in the construction of the Pipeline could delay the development of the Terminal and its becoming operational. 10 Table of Contents We may be subject to risks related to doing business in, and having counterparties based in, foreign countries.
Any such delays in the construction of the Pipeline could delay the development of the Rio Grande LNG Facility and its becoming operational. We may be subject to risks related to doing business in, and having counterparties based in, foreign countries.
These regulations and laws, which include the Clean Air Act, the Oil Pollution Act, the Clean Water Act and the Resource Conservation and Recovery Act, and analogous state and local laws and regulations, will restrict, prohibit or otherwise regulate the types, quantities and concentration of substances that can be released into the environment in connection with the construction and operation of our facilities.
These regulations and laws, which include the federal Clean Air Act, the Oil Pollution Act, the National Environmental Policy Act, the Clean Water Act, the Safe Drinking Water Act, the Endangered Species Act, the Natural Gas Pipeline Safety Act and the Resource Conservation and Recovery Act, and analogous state and local laws and regulations, will restrict, prohibit or otherwise regulate the types, quantities and concentration of substances that can be released into the environment in connection with the construction and operation of our facilities.
Terminal operations will be subject to all of the hazards inherent in the receipt and processing of natural gas to LNG, and associated short-term storage including: • damage to pipelines and plants, related equipment, loading terminal, and surrounding properties caused by hurricanes, tornadoes, floods, fires and other natural disasters, acts of terrorism and acts of third parties; • damage from subsurface and/or waterway activity (for example, sedimentation of shipping channel access); • leaks of natural gas, natural gas liquids, or oil or losses of natural gas, natural gas liquid, or oil as a result of the malfunction of equipment or facilities; • fires, ruptures and explosions; • other hazards that could also result in personal injury and loss of life, pollution and suspension of operations; and • hazards experienced by other operators that may affect our operations by instigating increased regulations and oversight.
As a result, any significant construction delay, whatever the cause, could have a material adverse effect on our business, results of operations, financial condition, liquidity and prospects. 20 Rio Grande LNG Facility operations will be subject to all of the hazards inherent in the receipt and processing of natural gas to LNG, and associated short-term storage including: • damage to pipelines and plants, related equipment, loading terminal, and surrounding properties caused by hurricanes, tornadoes, floods, fires and other natural disasters, acts of terrorism and acts of third parties; • damage from subsurface and/or waterway activity (for example, sedimentation of shipping channel access); • leaks of natural gas, or natural gas liquids, or losses of natural gas, or natural gas liquids, as a result of the malfunction of equipment or facilities; • fires, ruptures and explosions; • other hazards that could also result in personal injury and loss of life, pollution and suspension of operations; and • hazards experienced by other operators that may affect our operations by instigating increased regulations and oversight.
Each liquefaction train for the Terminal is expected to involve the transportation and liquefaction of approximately 0.9 Bcf/day of natural gas, for a total of 4.5 Bcf/day for five liquefaction trains at full build-out.
Each liquefaction train for the Rio Grande LNG Facility is expected to involve the transportation on the Pipeline for liquefaction of approximately 0.9 Bcf/day of natural gas, for a total of 4.5 Bcf/day for five liquefaction trains at full build-out.
Our largest stockholders will substantially influence our Company for the foreseeable future, including the outcome of matters requiring shareholder approval, and such control may prevent you and other stockholders from influencing significant corporate decisions and may result in conflicts of interest that could cause our stock price to decline.
The designation and issuance of shares of capital stock having preferential rights could adversely affect other rights appurtenant to shares of our common stock. 29 Our largest stockholders will substantially influence our Company for the foreseeable future, including the outcome of matters requiring shareholder approval, and such control may prevent you and other stockholders from influencing significant corporate decisions and may result in conflicts of interest that could cause our stock price to decline.
There can be no assurance that we will be successful in entering into long-term LNG sales contracts. Additionally, the global LNG market could shift toward the use of shorter-term LNG sales contracts. Fluctuations in commodity prices may create a mismatch between natural gas and petroleum prices, which could have a significant impact on our future revenues.
Additionally, the global LNG market could shift toward the use of shorter-term LNG sales contracts. Fluctuations in commodity prices may create a mismatch between natural gas and petroleum prices, which could have a significant impact on our future revenues.
Although we have arrangements relating to compensation and benefits with certain of our executive officers, we do not have any employment contracts or other agreements with key personnel binding them to provide services for any particular term. The loss of the services of any of these individuals could have a material adverse effect on our business.
Although we have arrangements relating to compensation and benefits with certain of our executive officers, we do not have any employment contracts or other agreements with key personnel binding them to provide services for any particular term.
Siting, development and construction of the Terminal and CCS projects will be subject to the risks of delay or cost overruns inherent in any construction project resulting from numerous factors, including, but not limited to, the following: • difficulties or delays in obtaining, or failure to obtain, sufficient debt or equity financing on reasonable terms; • failure to obtain all necessary government and third-party permits, approvals and licenses for the construction and operation of the Terminal and CCS projects; • failure to obtain commercial agreements that generate sufficient revenue to support the financing and construction of the Terminal or CCS projects; • difficulties in engaging qualified contractors necessary to the construction of the contemplated Terminal or CCS projects; 12 Table of Contents • shortages of equipment, materials or skilled labor; • natural disasters and catastrophes, such as hurricanes, explosions, fires, floods, industrial accidents and terrorism; • delays in the delivery of ordered materials; • work stoppages and labor disputes; • competition with other domestic and international LNG export terminals; • unanticipated changes in domestic and international market demand for and supply of natural gas and LNG, which will depend in part on supplies of and prices for alternative energy sources and the discovery of new sources of natural resources; • insufficiency in domestic and international market demand for verified carbon capture credits; • unexpected or unanticipated additional improvements; and • adverse general economic conditions.
Development and construction of the Rio Grande LNG Facility and CCS projects will be subject to the risks of delay or cost overruns inherent in any construction project resulting from numerous factors, including, but not limited to, the following: • difficulties or delays in obtaining, or failure to obtain, sufficient debt or equity financing on reasonable terms; • failure to obtain or maintain all necessary government and third-party permits, approvals and licenses, or to comply with all the terms and conditions of those authorizations, for the construction and operation of the Rio Grande LNG Facility and CCS projects; • failure to obtain or maintain commercial agreements that generate sufficient revenue to support the financing and construction of the Rio Grande LNG Facility or CCS projects; • difficulties in engaging qualified contractors necessary to the construction of the contemplated Rio Grande LNG Facility or CCS projects; • shortages of equipment, materials or skilled labor; • natural disasters and catastrophes, such as hurricanes, explosions, fires, floods, industrial accidents and terrorism; • delays in the delivery of ordered materials; • work stoppages and labor disputes; • opposition from environmental and social groups, landowners, tribal groups, local groups and other advocates could result in organized protests, attempts to block or sabotage our construction activities or operations, intervention in regulatory or administrative proceedings involving our assets, or lawsuits or other actions designed to prevent, disrupt or delay the construction or operation of the Rio Grande LNG Facility or CCS projects; • competition with other domestic and international LNG export facilities; • unanticipated changes in domestic and international market demand for and supply of natural gas and LNG, which will depend in part on supplies of and prices for alternative energy sources and the discovery of new sources of natural resources; • insufficiency in domestic and international market demand for verified carbon capture credits; • unexpected or unanticipated additional improvements; and • adverse general economic conditions.
Accordingly, distributions to investors may be limited, delayed, or non-existent. Our cash flow and consequently our ability to distribute earnings will be dependent upon our ability to complete the Terminal and implement CCS systems and generate cash and net operating income from operations.
Accordingly, distributions to investors may be limited, delayed, or non-existent. Our cash flow and consequently our ability to distribute earnings will be dependent upon our ability to complete Phase 1 of the Rio Grande LNG Facility and future phases of development and implement CCS systems and thereafter generate cash and net operating income from operations.

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Item 2. Properties

Properties — owned and leased real estate

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Biggest changeOn March 6, 2019, Rio Grande entered into a lease agreement (the “Rio Grande Site Lease”) with the Brownsville Navigation District of Cameron County, Texas (“BND”) pursuant to which we have agreed to lease approximately 984 acres of land situated in Brownsville, Cameron County, Texas for the purposes of constructing, operating, and maintaining the Terminal and gas treatment and gas pipeline facilities.
Biggest changeRio Grande has entered into a lease agreement (the “Rio Grande Site Lease”) with the Brownsville Navigation District of Cameron County, Texas (“BND”) pursuant to which Rio Grande has leased approximately 984 acres of land situated in Brownsville, Cameron County, Texas for the purposes of constructing, operating, and maintaining the Rio Grande LNG Facility and gas treatment and gas pipeline facilities.
We have the option to renew and extend the term of the Rio Grande Site Lease beyond the Primary Term for up to two consecutive renewal periods of ten years each provided that it has not caused an event of default under the Rio Grande Site Lease.
Rio Grande has the option to renew and extend the term of the Rio Grande Site Lease beyond the Primary Term for up to two consecutive renewal periods of ten years each provided that it has not caused an event of default under the Rio Grande Site Lease.
Item 2. Properties We currently lease approximately 38,300 square feet of office space for general and administrative purposes in Houston, Texas under a lease agreement that expires on December 31, 2023.
Item 2. Properties We currently lease approximately 90,000 square feet of office space for general and administrative purposes in Houston, Texas under a lease agreement that expires on December 31, 2035.
Removed
The initial term of the Rio Grande Site Lease is for 30 years (the “Primary Term”), which will commence on the date specified in a written notice by us to BND.
Added
The initial term of the Rio Grande Site Lease expires on July 12, 2053 (the “Primary Term”).

Item 3. Legal Proceedings

Legal Proceedings — active lawsuits and investigations

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Biggest changeItem 3. Legal Proceedings As of December 31, 2022, management was not aware of any claims or legal actions that, separately or in the aggregate, are likely to have a material adverse effect on the Company’s financial position, results of operations or cash flows, although the Company cannot guarantee that a material adverse event will not occur.
Biggest changeItem 3. Legal Proceedings As of December 31, 2023, management was not aware of any claims or legal actions that, separately or in the aggregate, are likely to have a material adverse effect on the Company’s financial position, results of operations or cash flows, although the Company cannot guarantee that a material adverse event will not occur. Item 4.
Added
Mine Safety Disclosures Not applicable. 34 PART II

Item 5. Market for Registrant's Common Equity

Market for Common Equity — stock, dividends, buybacks

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Biggest changePurchase of Equity Securities by the Issuer The following table summarizes stock repurchases for the three months ended December 31, 2022: Period Total Number of Shares Purchased (1) Average Price Paid Per Share (2) Total Number of Shares Purchased as a Part of Publicly Announced Plans Maximum Number of Units That May Yet Be Purchased Under the Plans October 2022 2,303 $ 6.59 — — November 2022 2,312 $ 6.73 — — December 2022 97,128 $ 4.43 — — (1) Represents shares of Company common stock surrendered to us by participants in our 2017 Omnibus Incentive Plan (the “2017 Plan”) to settle the participants’ personal tax liabilities that resulted from the lapsing of restrictions on shares awarded to the participants under the 2017 Plan.
Biggest changePurchase of Equity Securities by the Issuer The following table summarizes stock repurchases for the three months ended December 31, 2023: Period Total Number of Shares Purchased (1) Average Price Paid Per Share (2) Total Number of Shares Purchased as a Part of Publicly Announced Plans Maximum Number of Units That May Yet Be Purchased Under the Plans October 2023 — $ — — — November 2023 609 $ 4.35 — — December 2023 3,247 $ 5.23 — — (1) Represents shares of Company common stock surrendered to us by participants in our 2017 Omnibus Incentive Plan (the “2017 Plan”) to settle the participants’ personal tax liabilities that resulted from the lapsing of restrictions on shares awarded to the participants under the 2017 Plan.
(2) The price paid per share of Company common stock was based on the closing trading price of Company common stock on the dates on which we repurchased shares of Company common stock from the participants under the 2017 Plan.
(2) The price paid per share of Company common stock was based on the closing trading price of Company common stock on the dates on which we repurchased shares of Company common stock from the participants under the 2017 Plan. Item 6. [Reserved] 35
Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities Market Information, Holders and Dividends Our common stock trades on Nasdaq under the symbol “NEXT.” As of March 2, 2023, 150.6 million shares of Company common stock were outstanding held by approximately 66 record owners.
Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities Market Information, Holders and Dividends Our common stock trades on Nasdaq under the symbol “NEXT.” As of March 4, 2024, 256.7 million shares of Company common stock were outstanding held by approximately 68 record owners.

Item 7. Management's Discussion & Analysis

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

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Biggest changeResults of Operations The following table summarizes costs, expenses and other income for the years ended December 31, 2022 and 2021 (in thousands): Year Ended December 31, 2022 2021 Change Revenues $ — $ — $ — General and administrative expenses 49,093 16,803 32,290 Development expense, net 4,101 1,615 2,486 Lease expense 1,119 905 214 Depreciation expense 162 184 (22 ) Operating loss (54,475 ) (19,507 ) (34,968 ) Loss on Common Stock Warrant Liabilities (5,747 ) (2,533 ) (3,214 ) Other 151 1 150 Net loss attributable to NextDecade Corporation (60,071 ) (22,039 ) (38,032 ) Preferred stock dividends (24,282 ) (18,294 ) (5,988 ) Deemed dividends on Series A Convertible Preferred Stock — (63 ) 63 Net loss attributable to common stockholders $ (84,353 ) $ (40,396 ) $ (43,957 ) Our consolidated net loss was $60.1 million, or $0.65 per common share (basic and diluted), for the year ended December 31, 2022 compared to a net loss of $22.0 million, or $0.34 per common share (basic and diluted), for the year ended December 31, 2021.
Biggest changeA discussion of these obligations can be found at Note 6 — Leases of our Notes to Consolidated Financial Statements. 42 Results of Operations The following table summarizes costs, expenses and other income for the years ended December 31, 2023 and 2022 (in thousands): Year Ended December 31, 2023 2022 Change Revenues $ — $ — $ — General and administrative expense 111,468 49,093 62,375 Development expense, net 4,891 4,101 790 Lease expense 6,141 1,119 5,022 Depreciation expense 168 162 6 Operating loss (122,668) (54,475) (68,193) Loss on common stock warrant liabilities (1,879) (5,747) 3,868 Derivative loss, net (44,803) — (44,803) Interest expense, net of capitalized interest (50,285) — (50,285) Loss on debt extinguishment (9,531) — (9,531) Other income, net 7,526 151 7,375 Net loss attributable to NextDecade Corporation (221,640) (60,071) (161,569) Less: net loss attributable to non-controlling interest (59,379) — (59,379) Less: preferred stock dividends 20,484 24,282 (3,798) Net loss attributable to common stockholders $ (182,745) $ (84,353) $ (98,392) Our consolidated net loss was $182.7 million, or $(0.94) per common share (basic and diluted), for the year ended December 31, 2023 compared to a net loss of $84.4 million, or $(0.65) per common share (basic and diluted), for the year ended December 31, 2022.
Our discussion and analysis include the following subjects: • Overview of Business • Overview of Significant Events • Liquidity and Capital Resources • Contractual Obligations • Results of Operations • Summary of Critical Accounting Estimates • Recent Accounting Standards Overview of Business NextDecade Corporation engages in development activities related to the liquefaction and sale of LNG and the capture and storage of CO 2 emissions.
Our discussion and analysis include the following subjects: • Overview of Business • Overview of Significant Events • Liquidity and Capital Resources • Contractual Obligations • Results of Operations • Summary of Critical Accounting Estimates • Recent Accounting Standards Overview of Business NextDecade Corporation engages in construction and development activities related to the liquefaction and sale of LNG and the capture and storage of CO 2 emissions.
Management considers the following to be its most critical accounting estimates that involve significant judgment. Impairment of Long-Lived Assets A long-lived asset, including an intangible asset, is evaluated for potential impairment whenever events or changes in circumstances indicate that its carrying value may not be recoverable.
Management considers the following to be its most critical accounting estimates that involve significant judgment. 43 Impairment of Long-Lived Assets A long-lived asset, including an intangible asset, is evaluated for potential impairment whenever events or changes in circumstances indicate that its carrying value may not be recoverable.
For additional information regarding our share-based compensation, see Note 12 – Share-based Compensation of our Notes to Consolidated Financial Statements. Valuation of Common Stock Warrant Liabilities The fair value of Common Stock Warrant liabilities is determined using a Monte Carlo valuation model. Determining the appropriate fair value model and calculating the fair value of Common Stock Warrant requires considerable judgment.
For additional information regarding our share-based compensation, see Note 14 — Share-based Compensation of our Notes to Consolidated Financial Statements. Valuation of Common Stock Warrant Liabilities The fair value of Common Stock Warrant liabilities is determined using a Monte Carlo valuation model. Determining the appropriate fair value model and calculating the fair value of Common Stock Warrant requires considerable judgment.
All changes in the fair value are recorded in the consolidated statement of operations each reporting period. For additional information regarding the valuation of Common Stock Warrant liabilities, see Note 9 – Preferred Stock and Common Stock Warrants of our Notes to Consolidated Financial Statements.
All changes in the fair value are recorded in the consolidated statement of operations each reporting period. For additional information regarding the valuation of Common Stock Warrant liabilities, see Note 10 — Preferred Stock and Common Stock Warrants of our Notes to Consolidated Financial Statements.
Our ability to continue as a going concern will depend on managing certain operating and overhead costs and our ability to generate positive cash flows through equity, equity-based or debt financings. The consolidated financial statements do not include any adjustments that might result from the outcome of this uncertainty, which could have a material adverse effect on our financial condition.
Our ability to continue as a going concern will depend on managing certain operating and overhead costs and our ability to raise capital through equity, equity-based or debt financings. The consolidated financial statements do not include any adjustments that might result from the outcome of this uncertainty, which could have a material adverse effect on our financial condition.
Based on our balance of cash and cash equivalents of $62.8 million at December 31, 2022, there is substantial doubt about our ability to continue as a going concern within one year after the date that our consolidated financial statements were issued.
Based on our balance of cash and cash equivalents of $38.2 million at December 31, 2023, there is substantial doubt about our ability to continue as a going concern within one year after the date that our consolidated financial statements were issued.
We intend to fund development activities for the foreseeable future with cash and cash equivalents on hand and through the sale of additional equity, equity-based or debt securities in us or in our subsidiaries.
We intend to fund development activities for the foreseeable future with cash and cash equivalents on hand, available capacity under our revolving credit facility, and through the sale of additional equity, equity-based or debt securities in us or in our subsidiaries.
We believe that integrating CCS with an industrial facility’s operations has the potential to increase the value of the industrial facility. Through commercial agreements and by investment, NEXT Carbon Solutions looks to share in the value created from this integration.
We believe that integrating CCS with an industrial facility’s operations has the potential to increase the value of the industrial facility. Through proposed commercial agreements and investments, NEXT Carbon Solutions will seek to share in the value created from this integration.
NEXT Carbon Solutions offers end-to-end CCS solutions for industrial facilities. Leveraging our team’s years of engineering and project management experience, we have developed proprietary processes that lower the capital and operating costs of deploying CCS on industrial facilities. We expect to partner with customers to invest in the deployment of CCS to reduce and permanently store CO 2 emissions.
Leveraging our team’s engineering and project management experience, we have developed proprietary processes that are expected to lower the capital and operating costs of deploying CCS on industrial facilities. We expect to partner with customers to invest in the deployment of CCS to reduce and permanently store CO 2 emissions.
There can be no assurance that we will succeed in securing additional debt and/or equity financing in the future to complete the Terminal or any CCS projects or, if successful, that the capital we raise will not be expensive or dilutive to stockholders.
There can be no assurance that we will succeed in securing additional debt and/or equity financing in the future to fund future phases of development and construction at the Rio Grande LNG Facility or complete any CCS projects or, if successful, that the capital we raise will not be expensive or dilutive to stockholders.
Because our businesses and assets are in development, we have not historically generated significant cash flow from operations, nor do we expect to do so until the Terminal is operational or until we install CCS systems on third-party industrial facilities.
Because our businesses and assets are under construction or in development, we have not historically generated significant cash flow from operations, nor do we expect to do so until liquefaction trains at the Rio Grande LNG Facility begin operating or until we install CCS systems at third-party industrial facilities.
The increase in operating cash outflows in 2022 compared to 2021 was primarily due to an increase in employee costs and professional fees paid to consultants as we prepare for a positive FID on the initial phase of the Terminal.
The increase in operating cash outflows in 2023 compared to 2022 was primarily due to an increase in employee costs and professional fees paid to consultants as we prepared for and achieved a positive FID in Phase 1 of the Rio Grande LNG Facility in July 2023.
We routinely assess our deferred tax assets and reduce such assets by a valuation allowance if we deem it is more likely than not that some portion or all of the deferred tax assets will not be realized. This assessment requires significant judgment and is based upon our assessment of our ability to generate future taxable income among other factors.
We routinely assess our deferred tax assets and reduce such assets by a valuation allowance if we deem it is more likely than not that some portion or all of the deferred tax assets will not be realized.
General and administrative expenses during the year ended December 31, 2022 increased $32.3 million compared to the year ended December 31, 2021, primarily due to an increase in share-based compensation expense of $11.8 million and increases in salaries and wages, professional fees, travel expenses, and marketing costs.
General and administrative expenses during the year ended December 31, 2023 increased $62.4 million compared to the year ended December 31, 2022, primarily due to an increase in share-based compensation expense of $19.1 million and increases in employee costs and professional fees.
As a result, our business success will depend, to a significant extent, upon our ability to obtain the funding necessary to construct the Terminal and any CCS projects, to bring them into operation on a commercially viable basis and to finance our staffing, operating and expansion costs during that process.
As a result, our business success will depend, to a significant extent, upon our ability to obtain financing required to fund future phases of development and construction at the Rio Grande LNG Facility and any CCS projects, to bring them into operation on a commercially viable basis and to finance any required increases in staffing, operating and expansion costs during that process.
We spent approximately $81.0 million on such development activities during 2022, which we funded through our cash on hand and proceeds from the issuances of equity and equity-based securities.
We spent approximately $97.7 million on such development activities year-to-date through FID on July 12, 2023, which we funded through our cash on hand and proceeds from the issuances of equity and equity-based securities.
For further descriptions of the Series C Preferred Stock and associated warrants, see Note 9 - Preferred Stock and Common Stock Warrants in the Notes to Consolidated Financial Statements. 25 Table of Contents Liquidity and Capital Resources Near Term Liquidity and Capital Resources Our consolidated financial statements as of and for the year ended December 31, 2022 have been prepared on the basis that we will continue as a going concern, which contemplates the realization of assets and satisfaction of liabilities in the normal course of business.
Our consolidated financial statements as of and for the year ended December 31, 2023 have been prepared on the basis that we will continue as a going concern, which contemplates the realization of assets and satisfaction of liabilities in the normal course of business.
The $38.0 million increase in net loss was primarily a result of increases in general and administrative expense, development expense, net, and loss on common stock warrant liabilities, discussed separately below.
The $98.4 million increase in net loss was primarily a result of increases in general and administrative expense, derivative loss, net, interest expense, net of capitalized interest, and loss on debt extinguishment, discussed separately below.
Preferred stock dividends of $24.3 million in 2022 consisted of dividends paid-in-kind with the issuance of an additional 9,235 shares of Series A Preferred Stock, 8,806 additional shares of Series B Preferred Stock and 6,166 additional shares of Series C Preferred Stock. 27 Table of Contents Summary of Critical Accounting Estimates The preparation of our Condensed Consolidated Financial Statements in conformity with accounting principles generally accepted in the United States of America (“GAAP”) requires management to make certain estimates and assumptions that affect the amounts reported in the Consolidated Financial Statements and the accompanying notes.
Summary of Critical Accounting Estimates The preparation of our Condensed Consolidated Financial Statements in conformity with accounting principles generally accepted in the United States of America (“GAAP”) requires management to make certain estimates and assumptions that affect the amounts reported in the Consolidated Financial Statements and the accompanying notes.
Investing Cash Flows Investing cash outflows during the years ended December 31, 2022 and 2021 were $40.9 million and $18.5 million, respectively. The investing cash outflows in 2022 were primarily the result cash used in the development of the Terminal of $33.8 million and cash used in the acquisition of other assets of $7.1 million.
Investing Cash Flows Investing cash outflows during the years ended December 31, 2023 and 2022 were $1,752.8 million and $40.9 million, respectively. Investing cash outflows primarily consist of cash used in the construction and development of Phase 1 of the Rio Grande LNG Facility.
In December 2022, we entered into a 20-year SPA with Galp for the supply of 1.0 mtpa of LNG indexed to Henry Hub on a free-on-board basis from the Terminal.
LNG Sale and Purchase Agreements In January 2023, Rio Grande entered into a 15-year LNG SPA with Itochu Corporation (“Itochu”) for the supply of 1.0 mtpa of LNG, indexed to Henry Hub and sold on a free-on-board (“FOB”) basis from the Rio Grande LNG Facility.
The following table summarizes certain contractual obligations (in thousands) in place as of December 31, 2022: Total 2023 2024-2025 2026-2027 Thereafter Operating lease obligations $ 2,701 $ 2,039 $ 662 $ — $ — Rio Grande site lease 8,619 6,384 2,235 — — Other 305 84 141 80 — Total $ 11,625 $ 8,507 $ 3,038 $ 80 $ — Operating lease obligations relate to our office space in Houston, Texas and Singapore.
The following table summarizes certain contractual obligations (in thousands) in place as of December 31, 2023: Total 2024 2025-2026 2027-2028 Thereafter Operating lease obligations $ 243,581 $ 8,029 $ 17,137 $ 19,174 $ 199,241 Other 2,800 2,800 — — — Total $ 246,381 $ 10,829 $ 17,137 $ 19,174 $ 199,241 Operating lease obligations relate to the Rio Grande site lease and our office spaces in Houston, Texas and Singapore.
Sources and Uses of Cash The following table summarizes the sources and uses of our cash for the periods presented (in thousands): Year Ended December 31, 2022 2021 Operating cash flows $ (40,076 ) $ (17,960 ) Investing cash flows (40,888 ) (18,534 ) Financing cash flows 118,201 39,438 Net increase in cash and cash equivalents 37,237 2,944 Cash and cash equivalents – beginning of period 25,552 22,608 Cash and cash equivalents – end of period $ 62,789 $ 25,552 Operating Cash Flows Operating cash outflows during the years ended December 31, 2022 and 2021 were $40.1 million and $18.0 million, respectively.
Additionally, if these types of financing are not available, we will be required to seek alternative sources of financing, which may not be available on terms acceptable to us, if at all. 41 Sources and Uses of Cash The following table summarizes the sources and uses of our cash for the periods presented (in thousands): Year Ended December 31, 2023 2022 Operating cash flows $ (73,620) $ (40,076) Investing cash flows (1,752,800) (40,888) Financing cash flows 2,058,109 118,201 Net increase in cash, cash equivalents and restricted cash 231,689 37,237 Cash and cash equivalents – beginning of period 62,789 25,552 Cash, cash equivalents and restricted cash – end of period $ 294,478 $ 62,789 Operating Cash Flows Operating cash outflows during the years ended December 31, 2023 and 2022 were $73.6 million and $40.1 million, respectively.
We currently expect that the EPC costs and other long-term capital requirements for the Terminal and any CCS projects will be financed predominately through project financing and proceeds from future debt, equity-based, and equity offerings by us. Construction of the Terminal and CCS projects would not begin until such financing has been obtained.
We currently expect that the long-term capital requirements for future phases of development at the Rio Grande LNG Facility and any CCS projects will be financed predominantly through the proceeds from future debt, equity-based, and equity offerings by us or our subsidiaries.
Our primary cash needs have historically been funding development activities in support of the Terminal and our CCS projects, which include payments of initial direct costs of our Rio Grande site lease and expenses in support of engineering and design activities, regulatory approvals and compliance, commercial and marketing activities and corporate overhead.
As of September 30, 2023, the Company had funded its full equity commitment, utilizing proceeds of the sale of the third tranche of common stock to the TTE Purchaser. 40 Prior to the FID on Phase 1 of the Rio Grande LNG Facility, our primary cash needs historically were funding development activities in support of the Rio Grande LNG Facility and our CCS projects, which included payments of initial direct costs of the Rio Grande site lease and expenses in support of engineering and design activities, regulatory approvals and compliance, commercial and marketing activities and corporate overhead.
The investing cash inflows in 2021 were primarily the result cash used in the development of the Terminal of $12.1 million and cash used in the acquisition of other assets of $6.4 million. 26 Table of Contents Financing Cash Flows Financing cash inflows during the years ended December 31, 2022 and 2021 were $118.2 million and $39.4 million, respectively.
Financing Cash Flows Financing cash inflows during the years ended December 31, 2023 and 2022 were $2,058.1 million and $118.2 million, respectively.
For additional information regarding the valuation of deferred tax assets, see Note 13 - Income Taxes of our Notes to Consolidated Financial Statements. Recent Accounting Standards For descriptions of recently issued accounting standards, see Note 15 – Recent Accounting Pronouncements of our Notes to Consolidated Financial Statements.
This 44 assessment requires significant judgment and is based upon our assessment of our ability to generate future taxable income among other factors. For additional information regarding the valuation of deferred tax assets, see Note 15 — Income Taxes of our Notes to Consolidated Financial Statements.
The increase in share-based compensation expense for the year ended December 31, 2022 was primarily due to forfeitures of awards upon the departure of certain employees during 2021 and the grant of additional restricted stock unit awards in 2022.
The increase in share-based compensation expense for the year ended December 31, 2023 was primarily due to the recognition of compensation cost on restricted stock awards and units that vested at FID of Phase 1 of the Rio Grande LNG Facility.
Overview of Significant Events LNG Sale and Purchase Agreements In April 2022, we entered into a 20-year sale and purchase agreement with ENN for the supply of 1.5 mtpa of LNG indexed to Henry Hub on a free-on-board basis from the Terminal (“ENN LNG SPA”).
In June 2023, Rio Grande entered into a 20-year LNG SPA with TotalEnergies SE (“TotalEnergies”) for the supply of 5.4 mtpa of LNG, indexed to Henry Hub and sold on an FOB basis from the Rio Grande LNG Facility.
CCS projects will similarly take an extended period of time to develop, construct and become operational and will require significant capital deployment. Based on our EPC Agreements with Bechtel, we currently estimate the aggregate lump-sum EPC cost to construct Trains 1-3 of the Terminal at approximately $11.5 billion.
Any future phases of development at the Rio Grande LNG Facility and CCS projects will similarly take an extended period of time to develop, construct and become operational and will require significant capital deployment.
Private Placements of Company Common Stock In April 2022, we sold 4,618,226 shares of Company common stock for gross proceeds of approximately $30 million to HGC NEXT INV LLC, as described in Note 9 - Stockholders' Equity in the Notes to Consolidated Financial Statements.
Private Placements of Company Common Stock In February 2023, we sold 5,835,277 shares of Company common stock for gross proceeds of $35 million to HGC NEXT INV LLC and Ninteenth Investment Company.
Financing cash inflows in 2022 were primarily the result of proceeds from the sale of common stock of $115 million and sale of Series C Preferred Stock of $10.5 million, partially offset by equity issuance costs of $3.9 million and shares repurchased related to share-based compensation of $3.3 million.
The cash inflows for 2023 were partially offset by debt and equity issuances costs of $494.3 million, repayment of debt of $233.0 million and shares repurchased related to share-based compensation of $9.6 million. Contractual Obligations We are committed to make cash payments in the future pursuant to certain of our contracts.
Removed
We have undertaken and continue to undertake various initiatives to evaluate, design and engineer the Terminal, including the Terminal CCS project, that we expect will result in demand for LNG supply at the Terminal, and other CCS projects that would be hosted at industrial source facilities.
Added
We are constructing and developing a natural gas liquefaction and export facility located in the Rio Grande Valley in Brownsville, Texas (the “Rio Grande LNG Facility”), which currently has three liquefaction trains and related infrastructure (“Phase 1”) under construction, and two additional liquefaction trains in development.
Removed
The LNG supplied to ENN LNG will be from the first two trains at the Terminal. In December 2022, we executed an Amended and Restated ENN LNG SPA to increase the volume to 2.0 mtpa.
Added
We are also developing a planned carbon capture and storage (“CCS”) project at the Rio Grande LNG Facility and other potential CCS projects that would be located at third-party industrial facilities through our NEXT Carbon Solutions business.
Removed
In April 2022, we entered into a 15-year SPA with ENGIE for the supply of 1.75 mtpa of LNG indexed to Henry Hub on a free-on-board basis from the Terminal. The LNG supplied to ENGIE will be from the first two trains at the Terminal.
Added
Overview of Significant Events Development and Construction • On July 12, 2023, the Company announced a positive FID to construct Phase 1 of the Rio Grande LNG Facility, and Rio Grande issued full notice to proceed (“NTP”) to Bechtel under the EPC contracts for Phase 1. ◦ Expected capital project costs total $18.0 billion and include EPC costs, owner’s costs and contingencies, dredging for the Brazos Island Harbor Channel Improvement Project, conservation of more than 4,000 acres of wetland, installation of utilities, and interest during construction and other financing costs.. • Under the EPC contracts with Bechtel, Phase 1 progress is tracked for Train 1, Train 2, and the common facilities on a combined basis and Train 3 on a separate basis.
Removed
In July 2022, we entered into a 20-year SPA with China Gas for the supply of 1.0 mtpa of LNG indexed to Henry Hub on a free-on-board basis from the Terminal. The LNG supplied to China Gas will be from the second train at the Terminal.
Added
As of January 2024: ◦ The overall project completion percentage for Trains 1 and 2 and the common facilities of the Rio Grande LNG Facility was 14.3%, which is in line with the schedule under the EPC contract.
Removed
In July 2022, we entered into a 20-year SPA with Guangdong Energy for the supply of 1.0 mtpa of LNG indexed to Henry Hub delivered on an ex-ship basis from the Terminal. The LNG supplied to Guangdong Energy will be from the first train at the Terminal.
Added
Within this project completion percentage, engineering was 47.9% complete, procurement was 26.8% complete, and construction was 1.0% complete. ◦ The overall project completion percentage for Train 3 of the Rio Grande LNG Facility was 4.4%, based on preliminary schedules, which is also in line with the schedule under the EPC contract.
Removed
In July 2022, we entered into a 20-year SPA with EMLAP, an affiliate of ExxonMobil, for the supply of 1.0 mtpa of LNG indexed to Henry Hub delivered on a free-on-board basis from the Terminal. The LNG supplied to EMLAP will be from the first two trains at the Terminal.
Added
Within this project completion percentage, engineering was 3.4% complete, procurement was 10.6% complete, and construction was 0.0% complete.
Removed
In January 2022, we entered into a 15-year SPA with Itochu Corporation for the supply of 1.0 mtpa of LNG indexed to Henry Hub on a free-on-board basis from the Terminal. Each of the above SPAs becomes effective upon the satisfaction of certain conditions precedent, which include a positive final investment decision on the initial phase of the Terminal.
Added
Strategic and Commercial • In January 2023, Rio Grande entered into a 15-year LNG SPA with Itochu Corporation (“Itochu”) for the supply of 1.0 MTPA of LNG, indexed to Henry Hub and sold on a free-on-board (“FOB”) basis from the Rio Grande LNG Facility. 36 • In June 2023, Rio Grande entered into a 20-year LNG SPA with TotalEnergies SE (“TotalEnergies”) for the supply of 5.4 MTPA of LNG, indexed to Henry Hub and sold on an FOB basis from the Rio Grande LNG Facility. • We have started the front-end engineering and design (“FEED”) and EPC contract processes with Bechtel for Train 4 and are progressing numerous discussions with potential buyers of LNG to provide commercial support for Train 4.
Removed
Rio Grande Site Lease On March 6, 2019, Rio Grande entered into a lease agreement (the “Rio Grande Site Lease”) with the Brownsville Navigation District of Cameron County, Texas (the “BND”) for the lease by Rio Grande of approximately 984 acres of land situated in Brownsville, Cameron County, Texas for the purposes of constructing, operating, and maintaining (i) a liquefied natural gas facility and export terminal and (ii) gas treatment and gas pipeline facilities.
Added
Financial • In February 2023, we sold approximately 5.8 million shares of our common stock for gross proceeds of $35 million to HGC NEXT INV LLC and Ninteenth Investment Company. • In June 2023, we entered into a common stock purchase agreement for three private placements with Global LNG North America Corp., an affiliate of TotalEnergies, pursuant to which we sold a total of approximately 44.9 million shares of our common stock for an aggregate purchase price of $219.4 million in three transactions occurring in June, July and September 2023. • On July 12, 2023, in conjunction with the positive FID of Phase 1 of the Rio Grande LNG Facility, we and certain of our subsidiaries closed an approximately $18.4 billion project financing for Phase 1.
Removed
On April 20, 2022, Rio Grande and the BND amended the Rio Grande Site Lease to extend the effective date for commencing the Rio Grande Site Lease to May 6, 2023. Engineering, Procurement and Construction ( “ EPC ”) Agreements In April 2022, Rio Grande and Bechtel Energy Inc.
Added
This financing underscores the critical role that LNG and natural gas are expected to play in the global energy transition and included the closing of: ◦ A joint venture agreement which included approximately $5.9 billion of financial commitments from Global Infrastructure Partners (GIP), GIC, Mubadala Investment Company, and TotalEnergies; ◦ A commitment by the Company to invest approximately $283 million in Phase 1, which was completed in September 2023 and included $125 million of pre-FID capital investments and additional funds contributed from the proceeds of sales of the Company’s common stock to an affiliate of TotalEnergies; ◦ Senior secured non-recourse bank credit facilities of $11.6 billion with a 7-year maturity, consisting of $11.1 billion in construction term loans and a $500 million working capital facility; and ◦ An offering of $700 million senior secured non-recourse private placement notes, which will mature in July 2033 and will accrue interest at a fixed rate of 6.67%. • We hold equity interests in the Phase 1 joint venture that entitle us to receive up to 20.8% of the distributions of available cash during operations. • Rio Grande has entered into several transactions to refinance a portion of the Phase 1 bank facilities, including: ◦ In September 2023, Rio Grande entered into a credit agreement with a group of lenders for $356 million of senior secured loans to finance a portion of Phase 1.
Removed
(formerly known as Bechtel Oil, Gas and Chemicals, Inc., “Bechtel”) amended each of the Trains 1 and 2 EPC Agreement and the Train 3 EPC Agreement to extend the respective contract validity to July 31, 2023. In September 2022, Rio Grande and Bechtel amended each of the Trains 1 and 2 EPC Agreement and the Train 3 EPC Agreement.
Added
The senior secured loans were disbursed in one advance of $356 million on September 15, 2023, which resulted in a reduction in the commitments outstanding under Rio Grande’s existing bank credit facilities for Phase 1.
Removed
The amendments to the EPC Agreements primarily give effect to certain updated lump-sum, separated contract pricing components. As of the date of filing this Annual Report on Form 10-K, we estimate the lump-sum EPC cost to construct Trains 1-3 of the Terminal at approximately $11.5 billion.
Added
These senior secured loans will mature in July 2033, accrue interest at a fixed rate of 6.72%, and rank pari passu to Rio Grande’s existing senior secured financings. ◦ In December 2023, Rio Grande entered into a credit agreement with a group of lenders for $251 million of senior secured loans to finance a portion of Phase 1.
Removed
The final EPC lump-sum contract pricing for Trains 1-3 of the Terminal will be determined prior to an FID on Trains 1-3 and is subject to change, including if we do not issue a full notice to proceed to Bechtel on or before March 15, 2023, unless extended by mutual agreement of the parties thereto. 24 Table of Contents NEXT Carbon Solutions On March 18, 2021, we announced the formation of NEXT Carbon Solutions.
Added
The senior secured loans were disbursed in one advance of $251 million on December 28, 2023, which resulted in a reduction in the commitments outstanding under Rio Grande’s existing bank credit facilities for Phase 1. These senior secured loans will be amortized over a period of approximately 18 years beginning in mid-2029, with a final maturity 37 in September 2047.
Removed
In May 2022, we entered into an agreement with California Resources Corporation, whereby NEXT Carbon Solutions was engaged to perform a Front-end Engineering and Design (“FEED”) study for the post combustion capture and compression of up to 95% of the CO 2 produced at the Elk Hills Power Plant. The FEED was successfully completed in the first quarter of 2023.
Added
These senior secured loans bear interest at a fixed rate of 7.11% and rank pari passu to Rio Grande’s existing senior secured financings. ◦ In February 2024, Rio Grande issued and sold $190 million of senior secured notes to finance a portion of Phase 1.
Removed
California Resources Corporation and NEXT Carbon Solutions are continuing review of the FEED results and commercial discussions. In June 2022, we entered into agreements with an energy infrastructure fund to perform preliminary FEED studies at two power generation facilities. Through performance of the preliminary FEED studies, we have generated cash proceeds of $1.0 million.
Added
The senior secured notes were issued on February 9, 2024 and resulted in a reduction in the commitments outstanding under Rio Grande's existing bank credit facilities for Phase 1. These senior secured notes will be amortized over a period of approximately 18 years beginning in mid-2029, with a final maturity in June 2047.
Removed
In September 2022, we sold 15,454,160 shares of Company common stock for gross proceeds of approximately $85 million. The Private Placement closed on September 19, 2022, as described in Note 9 - Stockholders' Equity in the Notes to Consolidated Financial Statements.
Added
The senior secured notes bear interest at a fixed rate of 6.85% and rank pari passu to Rio Grande's existing senior secured financings. • As of December 2023, Rio Grande’s outstanding fixed-rate debt and executed interest rate swaps have reduced its exposure to movements in interest rates for approximately 84% of the debt currently projected to be incurred in support of Phase 1 construction. • In January 2024, our wholly-owned subsidiary Next Decade LNG, LLC entered into a credit agreement that provides for a $50 million senior secured revolving credit facility with additional capacity of $12.5 million to cover interest.
Removed
Private Placement of Series C Convertible Preferred Stock In March 2022, we sold an aggregate of 10,500 shares of Series C Convertible Preferred Stock, par value $0.0001 per share (the “Series C Preferred Stock”), at $1,000 per share for an aggregate purchase price of $10.5 million and issued an additional 210 shares of Series C Preferred Stock in aggregate as origination fees.
Added
Borrowings under the revolving credit facility may be used for general corporate purposes, including development costs related to Train 4 at the Rio Grande LNG Facility. Borrowings bear interest at SOFR or the base rate plus an applicable margin as defined in the credit agreement.
Removed
Warrants representing the right to acquire an aggregate number of shares of our common stock equal to approximately 14.91 basis points (0.1491%) of all outstanding shares of Company common stock, measured on a fully diluted basis, on the applicable exercise date with a strike price of $0.01 per share were issued together with the issuances of the Series C Preferred Stock.
Added
The revolving credit facility and interest term loan mature at the earlier of two years from the closing date or 10 business days after a positive FID on Train 4. • Rio Grande has syndicated a portion of its bank credit facility commitments, resulting in a supporting lender group of approximately 40 international banks.
Removed
We expect to spend approximately $15 million per month on development activities during 2023 and until a positive FID is made on the initial phase of the Terminal.
Added
Rio Grande LNG Facility Activity We are constructing the Rio Grande LNG Facility on the north shore of the Brownsville Ship Channel in south Texas through our partially owned subsidiary Rio Grande. The site is located on 984 acres of land which has been leased long-term and includes 15,000 feet of frontage on the Brownsville Ship Channel.
Removed
Our capital raising activities since January 1, 2022 have included the following: In March 2022, we sold 10,500 shares of Series C Preferred Stock, at $1,000 per share for a purchase price of $10.5 million and issued an additional 210 shares of Series C Preferred Stock as origination fees.
Added
The Rio Grande LNG Facility has received all necessary approvals and authorizations required for construction, including those from the FERC. In July 2023, construction commenced on Phase 1 of the Rio Grande LNG Facility following a positive FID and the closing of project financing by Rio Grande, which owns Phase 1 of the Rio Grande LNG Facility.
Removed
In April 2022, we sold 4,618,226 shares of Company common stock for approximately $30 million. In September 2022, we sold 15,454,160 shares of Company common stock for approximately $85 million. In February 2023, we sold 5,835,277 shares of Company common stock for approximately $35 million.
Added
Phase 1 includes three liquefaction trains with a total expected nameplate capacity of approximately 17.6 MTPA of LNG production, two 180,000 cubic meter full containment LNG storage tanks, two jetty berthing structures designed to load LNG carriers up to 216,000 cubic meters in capacity, and associated site infrastructure and common facilities including feed gas pretreatment facilities, electric and water utilities, two totally enclosed ground flares for the LNG tanks and marine facilities, two ground flares for the liquefaction trains, roads, levees surrounding the entire site, and warehouses, administrative, operations control room and maintenance buildings.
Removed
Long Term Liquidity and Capital Resources The Terminal will not begin to operate and generate significant cash flows unless and until the Terminal is operational, which is expected to be at least four years away, and the construction of the Terminal will require a significant amount of capital expenditure.
Added
As of January 2024, progress on Trains 1 through 3 is in line with the schedule under the EPC Contracts. Recent construction activities have included the start of Train 1 foundation concrete pours, piling activity for the LNG tanks, and construction of the levee and marine offloading facility.
Removed
The final EPC lump-sum contract pricing for Trains 1-3 of the Terminal will be determined prior to an FID on Trains 1-3 and is subject to change, including if we do not issue a full notice to proceed to Bechtel on or before March 15, 2023, unless extended by mutual agreement of the parties thereto.
Added
Additionally, the civil works program has progressed via the deep soil mixing program, and meaningful progress has been made on the shoreline restoration program, with the majority of shoreline reclamation nearing completion, shoreline protection work has commenced. Bechtel has also made meaningful progress on purchase orders for Train 3.
Removed
Additionally, if these types of financing are not available, we will be required to seek alternative sources of financing, which may not be available on terms acceptable to us, if at all.
Added
These SPAs, in addition to the other Phase 1 LNG SPAs previously in place, are currently effective, and deliveries of LNG under these SPAs will commence on the respective Date of First Commercial Delivery (“DFCD”), which is primarily tied to the substantial completion of guaranteed substantial completion dates of specific trains as defined in each SPA. 38 Engineering, Procurement and Construction ( “ EPC ”) Agreements On July 12, 2023, Rio Grande issued final notice to proceed to Bechtel Energy Inc. under the EPC agreements for Phase 1.
Removed
During the third quarter of 2022, we issued a limited notice to proceed to Bechtel to begin ramping up its personnel and initiate site preparation work; as a result, investing cash outflows increased in 2022 relative to 2021.

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Item 7A. Quantitative and Qualitative Disclosures About Market Risk

Market Risk — interest-rate, FX, commodity exposure

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Biggest changeItem 7A. Quantitative and Qualitative Disclosures About Market Risk We are a smaller reporting company as defined by Rule 12b-2 of the Securities Exchange Act of 1934, as amended, and are not required to provide the information under this item. 28 Table of Contents
Biggest changeItem 7A. Quantitative and Qualitative Disclosures About Market Risk We are a smaller reporting company as defined by Rule 12b-2 of the Securities Exchange Act of 1934, as amended, and are not required to provide the information under this item. 45

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