New Fortress Energy Inc. [NFE] Filings

10-Q 1 nfe-20220630.htm 10-Q nfe-20220630

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, DC 20549

FORM 10-Q


x			QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended June 30, 2022


¨			TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from __________ to__________

Commission File Number: 001-38790

New Fortress Energy Inc.

(Exact Name of Registrant as Specified in its Charter)


Delaware			83-1482060
(State or other jurisdiction of incorporation or organization)			(I.R.S. Employer Identification No.)


111 W. 19th Street, 8th Floor New York, NY			10011
(Address of principal executive offices)			(Zip Code)

Registrant’s telephone number, including area code: (516) 268-7400

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes x No ¨

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes x No ¨

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act.


Large accelerated filer x			Accelerated filer ¨
Non-accelerated filer ¨			Smaller reporting company ☐
			Emerging growth company ☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ¨

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ¨ No x

Securities registered pursuant to Section 12(b) of the Act:

Title of each class

Trading Symbol(s)

Name of each exchange on which registered

Class A common stock

“NFE”

Nasdaq Global Select Market

As of August 2, 2022, the registrant had 207,556,249 shares of Class A common stock outstanding.

Table of Contents

TABLE OF CONTENTS


GLOSSARY OF TERMS		ii

CAUTIONARY STATEMENT ON FORWARD-LOOKING STATEMENTS		iv

PART I FINANCIAL INFORMATION		1

Item 1.	Financial Statements.	1

Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations.	38

Item 3.	Quantitative and Qualitative Disclosures About Market Risks.	57

Item 4.	Controls and Procedures.	58

PART II OTHER INFORMATION		59

Item 1.	Legal Proceedings.	59

Item 1A.	Risk Factors.	59

Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds.	92

Item 3.	Defaults upon Senior Securities.	92

Item 4.	Mine Safety Disclosures.	92

Item 5.	Other Information.	93

Item 6.	Exhibits.	93

SIGNATURES		98

Table of Contents

GLOSSARY OF TERMS

As commonly used in the liquefied natural gas industry, to the extent applicable and as used in this Quarterly Report on Form 10-Q (“Quarterly Report”), the terms listed below have the following meanings:


ADO			automotive diesel oil

Bcf/yr			billion cubic feet per year

Btu			the amount of heat required to raise the temperature of one avoirdupois pound of pure water from 59 degrees Fahrenheit to 60 degrees Fahrenheit at an absolute pressure of 14.696 pounds per square inch gage

CAA			Clean Air Act

CERCLA			Comprehensive Environmental Response, Compensation and Liability Act

CWA			Clean Water Act

DOE			U.S. Department of Energy

DOT			U.S. Department of Transportation

EPA			U.S. Environmental Protection Agency

FTA countries			countries with which the United States has a free trade agreement providing for national treatment for trade in natural gas

GAAP			generally accepted accounting principles in the United States

GHG			greenhouse gases

GSA			gas sales agreement

Henry Hub			a natural gas pipeline located in Erath, Louisiana that serves as the official delivery location for futures contracts on the New York Mercantile Exchange

ISO container			International Organization of Standardization, an intermodal container

LNG			natural gas in its liquid state at or below its boiling point at or near atmospheric pressure

MMBtu			one million Btus, which corresponds to approximately 12.1 gallons of LNG

mtpa			metric tons per year

MW			megawatt. We estimate 2,500 LNG gallons would be required to produce one megawatt

NGA			Natural Gas Act of 1938, as amended

non-FTA countries			countries without a free trade agreement with the United States providing for national treatment for trade in natural gas and with which trade is permitted

OPA			Oil Pollution Act

Table of Contents


OUR			Office of Utilities Regulation (Jamaica)

PHMSA			Pipeline and Hazardous Materials Safety Administration

PPA			power purchase agreement

SSA			steam supply agreement

TBtu			one trillion Btus, which corresponds to approximately 12,100,000 gallons of LNG

iii

Table of Contents

CAUTIONARY STATEMENT ON FORWARD-LOOKING STATEMENTS

This Quarterly Report contains forward-looking statements regarding, among other things, our plans, strategies, prospects and projections, both business and financial. All statements contained in this Quarterly Report other than historical information are forward-looking statements that involve known and unknown risks and relate to future events, our future financial performance or our projected business results. In some cases, you can identify forward-looking statements by terminology such as “may,” “will,” “should,” “expects,” “plans,” “anticipates,” “believes,” “estimates,” “predicts,” “projects,” “targets,” “potential” or “continue” or the negative of these terms or other comparable terminology. Such forward-looking statements are necessarily estimates based upon current information and involve a number of risks and uncertainties. Actual events or results may differ materially from the results anticipated in these forward-looking statements as a result of a variety of factors. While it is impossible to identify all such factors, factors that could cause actual results to differ materially from those estimated by us include:

•our limited operating history;

•the results of our subsidiaries, affiliates, joint ventures and special purpose entities in which we invest and their ability to make dividends or distributions to us;

•construction and operational risks related to our facilities and assets, including cost overruns and delays;

•complex regulatory and legal environments related to our business, assets and operations, including actions by governmental entities or changes to regulation or legislation, in particular related to our permits, approvals and authorizations for the construction and operation of our facilities;

•delays or failure to obtain and maintain approvals and permits from governmental and regulatory agencies;

•failure to maintain sufficient working capital for the development and operation of our business and assets;

•failure to obtain a return on our investments for the development of our projects and assets and the implementation of our business strategy;

•failure to convert our customer pipeline into actual sales;

•lack of asset, geographic or customer diversification, including loss of one or more of our customers;

•competition from third parties in our business;

•failure of LNG or natural gas to be a competitive source of energy in the markets in which we operate, and seek to operate;

•cyclical or other changes in the demand for and price of LNG and natural gas;

•inability to procure LNG at necessary quantities or at favorable prices to meet customer demand, or otherwise to manage LNG supply and price risks, including hedging arrangements;

•inability to successfully develop and implement our technological solutions;

•inability to service our debt and comply with our covenant restrictions;

•inability to obtain additional financing to effect our strategy;

•inability to successfully complete mergers, sales, divestments or similar transactions related to our businesses or assets or to integrate such businesses or assets and realize the anticipated benefits, including with respect to the Mergers (as defined below);

•economic, political, social and other risks related to the jurisdictions in which we do, or seek to do, business;

•weather events or other natural or manmade disasters or phenomena;

•the extent of the global COVID-19 pandemic or any other major health and safety incident;

•increased labor costs, disputes or strikes, and the unavailability of skilled workers or our failure to attract and retain qualified personnel;

•the tax treatment of, or changes in tax laws applicable to, us or our business or of an investment in our Class A shares; and

•other risks described in the “Risk Factors” section of this Quarterly Report.

All forward-looking statements speak only as of the date of this Quarterly Report. When considering forward-looking statements, you should keep in mind the risks set forth under “Item 1A. Risk Factors” and other cautionary statements included in our Annual Report on Form 10-K for the year ended December 31, 2021 (our “Annual Report”), this Quarterly Report and in our other filings with the Securities and Exchange Commission (the “SEC”). The cautionary statements referred to in this section also should be considered in connection with any subsequent written or oral forward-looking statements that may be issued by us or persons acting on our behalf. We undertake no duty to update these forward-looking statements, even though our situation may change in the future. Furthermore, we cannot guarantee future results, events, levels of activity, performance, projections or achievements.

Table of Contents

PART I

FINANCIAL INFORMATION

Item 1. Financial Statements.

New Fortress Energy Inc.

Condensed Consolidated Balance Sheets

As of June 30, 2022 and December 31, 2021

(Unaudited, in thousands of U.S. dollars, except share amounts)


	June 30, 2022		December 31, 2021
Assets
Current assets
Cash and cash equivalents	$	138,329	$	187,509
Restricted cash	71,602		68,561
Receivables, net of allowances of $164 and $164, respectively	313,457		208,499
Inventory	72,152		37,182
Prepaid expenses and other current assets, net	141,092		83,115
Total current assets	736,632		584,866

Restricted cash	7,960		7,960
Construction in progress	1,401,468		1,043,883
Property, plant and equipment, net	2,156,431		2,137,936
Equity method investments	939,738		1,182,013
Right-of-use assets	407,689		309,663
Intangible assets, net	121,088		142,944
Finance leases, net	600,885		602,675
Goodwill	778,488		760,135
Deferred tax assets, net	5,628		5,999
Other non-current assets, net	95,369		98,418
Total assets	$	7,251,376	$	6,876,492

Liabilities
Current liabilities
Current portion of long-term debt	$	99,756	$	97,251
Accounts payable	111,436		68,085
Accrued liabilities	236,535		244,025
Current lease liabilities	53,983		47,114
Other current liabilities	94,286		106,036
Total current liabilities	595,996		562,511

Long-term debt	4,051,756		3,757,879
Non-current lease liabilities	329,972		234,060
Deferred tax liabilities, net	140,289		269,513
Other long-term liabilities	60,835		58,475
Total liabilities	5,178,848		4,882,438

Commitments and contingencies (Note 21)

Stockholders’ equity
Class A common stock, $0.01 par value, 750.0 million shares authorized, 207.6 million issued and outstanding as of June 30, 2022; 206.9 million issued and outstanding as of December 31, 2021	2,076		2,069
Additional paid-in capital	1,868,618		1,923,990
Accumulated deficit	(63,895)		(132,399)
Accumulated other comprehensive income (loss)	78,232		(2,085)
Total stockholders’ equity attributable to NFE	1,885,031		1,791,575
Non-controlling interest	187,497		202,479
Total stockholders’ equity	2,072,528		1,994,054
Total liabilities and stockholders’ equity	$	7,251,376	$	6,876,492

The accompanying notes are an integral part of these condensed consolidated financial statements.

Table of Contents

New Fortress Energy Inc.

Condensed Consolidated Statements of Operations and Comprehensive Income (Loss)

For the three and six months ended June 30, 2022 and 2021

Unaudited, in thousands of U.S. dollars, except share and per share amounts)


	Three Months Ended June 30,				Six Months Ended June 30,
	2022		2021		2022		2021
Revenues
Operating revenue	$	497,240	$	102,836	$	897,315	$	194,032
Vessel charter revenue	75,134		64,561		167,554		64,561
Other revenue	12,481		56,442		25,104		110,930
Total revenues	584,855		223,839		1,089,973		369,523

Operating expenses
Cost of sales	272,401		101,430		480,699		198,101
Vessel operating expenses	18,628		15,400		41,592		15,400
Operations and maintenance	20,490		18,565		43,658		34,816
Selling, general and administrative	50,310		44,536		98,351		78,152
Transaction and integration costs	4,866		29,152		6,767		40,716

Depreciation and amortization	36,356		26,997		70,646		36,886
Asset impairment expense	48,109		—		48,109		—
Total operating expenses	451,160		236,080		789,822		404,071
Operating income (loss)	133,695		(12,241)		300,151		(34,548)
Interest expense	47,840		31,482		92,756		50,162
Other (income), net	(22,102)		(7,457)		(41,827)		(8,058)

Net income (loss) before (loss) income from equity method investments and income taxes	107,957		(36,266)		249,222		(76,652)
(Loss) income from equity method investments	(372,927)		38,941		(322,692)		38,941
Tax (benefit) provision	(86,539)		4,409		(136,220)		3,532
Net (loss) income	(178,431)		(1,734)		62,750		(41,243)
Net income attributable to non-controlling interest	8,666		(4,310)		5,754		(2,704)
Net loss attributable to stockholders	$	(169,765)	$	(6,044)	$	68,504	$	(43,947)

Net (loss) income per share – basic	$	(0.81)	$	(0.03)	$	0.33	$	(0.23)
Net (loss) income per share – diluted	$	(0.81)	$	(0.03)	$	0.33	$	(0.23)

Weighted average number of shares outstanding – basic	209,669,188		202,331,304		209,797,133		189,885,473
Weighted average number of shares outstanding – diluted	209,669,188		202,331,304		209,810,647		189,885,473

Other comprehensive income (loss):
Net (loss) income	$	(178,431)	$	(1,734)	$	62,750	$	(41,243)
Currency translation adjustment	(39,703)		101,690		81,127		100,693
Comprehensive (loss) income	(218,134)		99,956		143,877		59,450
Comprehensive income attributable to non-controlling interest	9,812		(4,637)		4,944		(2,157)
Comprehensive (loss) income attributable to stockholders	$	(208,322)	$	95,319	$	148,821	$	57,293

The accompanying notes are an integral part of these condensed consolidated financial statements.

Table of Contents

New Fortress Energy Inc.

Condensed Consolidated Statements of Changes in Stockholders’ Equity

For the three and six months ended June 30, 2022 and 2021

(Unaudited, in thousands of U.S. dollars, except share amounts)


	Class A common stock		Additional paid-in capital		Retained earnings (accumulated deficit)		Accumulated other comprehensive (loss) income		Non- controlling interest		Total stockholders’ equity
		Shares											Amount
Balance as of December 31, 2021		206,863,242	$	2,069	$	1,923,990	$	(132,399)	$	(2,085)	$	202,479	$	1,994,054
Net income		—	—		—		238,269		—		2,912		241,181
Other comprehensive income		—	—		—		—		118,874		1,956		120,830
Share-based compensation expense		—	—		880		—		—		—		880
Issuance of shares for vested RSUs		1,121,255	7		—		—		—		—		7
Shares withheld from employees related to share-based compensation, at cost		(442,146)	—		(15,274)		—		—		—		(15,274)
Dividends		—	—		(20,754)		—		—		(3,019)		(23,773)
Balance as of March 31, 2022		207,542,351	$	2,076	$	1,888,842	$	105,870	$	116,789	$	204,328	$	2,317,905
Net income (loss)		—	—		—		(169,765)		—		(8,666)		(178,431)
Other comprehensive loss		—	—		—		—		(38,557)		(1,146)		(39,703)
Share-based compensation expense		—	—		358		—		—		—		358

Issuance of shares for vested RSUs		13,898	—		—		—		—		—		—


Dividends		—	—		(20,582)		—		—		(7,019)		(27,601)
Balance as of June 30, 2022		207,556,249	$	2,076	$	1,868,618	$	(63,895)	$	78,232	$	187,497	$	2,072,528


	Class A common stock	Additional paid-in capital	Accumulated deficit		Accumulated other comprehensive (loss) income		Non- controlling interest		Total stockholders’ equity
											Shares			Amount
Balance as of December 31, 2020		174,622,862	$	1,746	$	594,534	$	(229,503)	$	182		$	8,127		$	375,086

Net loss		—	—		—		(37,903)		—			(1,606)			(39,509)
Other comprehensive loss		—	—		—		—		(123)			(874)			(997)
Share-based compensation expense		—	—		1,770		—		—			—			1,770
Issuance of shares for vested RSUs		1,335,787	—		—		—		—			—			—
Shares withheld from employees related to share-based compensation, at cost		(638,235)	—		(27,571)		—		—			—			(27,571)
Dividends		—	—		(17,598)		—		—			—			(17,598)
Balance as of March 31, 2021		175,320,414	$	1,746	$	551,135	$	(267,406)	$	59		$	5,647		$	291,181
Net (loss) income		—	—		—		(6,044)		—			4,310			(1,734)
Other comprehensive income		—	—		—		—		101,363			327			101,690
Share-based compensation expense		—	—		1,613		—		—			—			1,613
Shares issued as consideration in business combinations		31,372,549	314		1,400,470		—		—			—			1,400,784
Issuance of shares for vested RSUs		8,930	—		—		—		—			—			—
Shares withheld from employees related to share-based compensation, at cost		(3,329)	—		(164)		—		—			—			(164)
Non-controlling interest acquired in business combinations		—	—		—		—		—			229,285			229,285
Dividends		—	—		(20,736)		—		—						(20,736)
Balance as of June 30, 2021		206,698,564	$	2,060	$	1,932,318	$	(273,450)	$	101,422		$	239,569		$	2,001,919

The accompanying notes are an integral part of these condensed consolidated financial statements.

Table of Contents

New Fortress Energy Inc.

Condensed Consolidated Statements of Cash Flows

For the six months ended June 30, 2022 and 2021

(Unaudited, in thousands of U.S. dollars)


	Six Months Ended June 30,
	2022		2021
Cash flows from operating activities
Net income (loss)	$	62,750	$	(41,243)
Adjustments for:
Amortization of deferred financing costs and debt guarantee, net	2,383		(6,290)
Depreciation and amortization	71,172		37,462
Loss (earnings) of equity method investees	322,692		(38,941)
Drydocking expenditure	(12,439)		—
Dividends received from equity method investees	14,859		7,386
Sales-type lease payments received in excess of interest income	1,426		2,388

Change in market value of derivatives	(9,798)		(7,073)
Deferred taxes	(178,109)		2,447
Change in value of investment of equity securities	1,090		(88)
Share-based compensation	1,238		3,383
Asset impairment expense	48,109		—
Other	671		275
Changes in operating assets and liabilities, net of acquisitions:
(Increase) in receivables	(123,843)		(38,018)
(Increase) in inventories	(35,167)		(35,458)
(Increase) Decrease in other assets	(58,949)		3,679
Decrease in right-of-use assets	35,265		2,072
Increase in accounts payable/accrued liabilities	71,603		24,732
Increase (Decrease) in amounts due to affiliates	1,238		(2,919)
(Decrease) Increase in lease liabilities	(31,352)		133
Decrease in other liabilities	(13,906)		(25,279)
Net cash provided by (used in) operating activities	170,933		(111,352)

Cash flows from investing activities
Capital expenditures	(441,708)		(235,324)
Cash paid for business combinations, net of cash acquired	—		(1,586,042)
Entities acquired in asset acquisitions, net of cash acquired	—		(8,817)
Other investing activities	—		(750)
Net cash (used in) investing activities	(441,708)		(1,830,933)

Cash flows from financing activities
Proceeds from borrowings of debt	437,917		1,652,500
Payment of deferred financing costs	(4,805)		(20,989)
Repayment of debt	(146,030)		(15,864)
Payments related to tax withholdings for share-based compensation	(13,054)		(29,717)
Payment of dividends	(47,374)		(41,346)
Net cash provided by financing activities	226,654		1,544,584
Effect of exchange rate changes on cash, cash equivalents and restricted cash	(2,018)		(1,317)
Net (decrease) in cash, cash equivalents and restricted cash	(46,139)		(399,018)
Cash, cash equivalents and restricted cash – beginning of period	264,030		629,336
Cash, cash equivalents and restricted cash – end of period	$	217,891	$	230,318

Supplemental disclosure of non-cash investing and financing activities:
Changes in accounts payable and accrued liabilities associated with construction in progress and property, plant and equipment additions	$	5,302	$	85,513
Liabilities associated with consideration paid for entities acquired in asset acquisitions	—		9,959
Consideration paid in shares for business combinations	—		1,400,784

The accompanying notes are an integral part of these condensed consolidated financial statements.

Table of Contents

1. Organization

New Fortress Energy Inc. (“NFE,” together with its subsidiaries, the “Company”), a Delaware corporation, is a global energy infrastructure company founded to help address energy poverty and accelerate the world’s transition to reliable, affordable and clean energy. The Company owns and operates natural gas and liquefied natural gas ("LNG") infrastructure and an integrated fleet of ships and logistics assets to rapidly deliver turnkey energy solutions to global markets. The Company has liquefaction, regasification and power generation operations in the United States, Jamaica, Mexico and Brazil. The Company also has marine operations with vessels operating under time charters and in the spot market globally.

The Company currently conducts its business through two operating segments, Terminals and Infrastructure and Ships. The business and reportable segment information reflect how the Chief Operating Decision Maker (“CODM”) regularly reviews and manages the business.

2. Basis of presentation

The accompanying unaudited interim condensed consolidated financial statements contained herein were prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”) and reflect all normal and recurring adjustments which are, in the opinion of management, necessary to provide a fair statement of the financial position, results of operations and cash flows of the Company for the interim periods presented. These condensed consolidated financial statements and accompanying notes should be read in conjunction with the Company’s annual audited consolidated financial statements and accompanying notes included in its Annual Report on Form 10-K for the year ended December 31, 2021 (the "Annual Report"). Certain prior year amounts have been reclassified to conform to current year presentation.

The preparation of consolidated financial statements in accordance with GAAP requires management to make estimates and assumptions, impacting the reported amounts of assets and liabilities, net earnings and disclosures of contingent assets and liabilities as of the date of the consolidated financial statements. Actual results could be different from these estimates.

3. Adoption of new and revised standards

(a)New standards, amendments and interpretations issued but not effective for the year beginning January 1, 2022:

The Company has reviewed recently issued accounting pronouncements and concluded that such pronouncements are either not applicable to the Company or no material impact is expected in the consolidated financial statements as a result of future adoption.

(b)New and amended standards adopted by the Company:

In August 2020, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2020-06, Accounting for Convertible Instruments and Contracts in an Entity’s Own Equity (ASU 2020-06). ASU 2020-06 simplifies the accounting for certain financial instruments with characteristics of liabilities and equity, including convertible instruments and contracts on an entity’s own equity. ASU 2020-06 requires entities to provide expanded disclosures about the terms and features of convertible instruments and amends certain guidance in ASC 260 on the computation of EPS for convertible instruments and contracts on an entity’s own equity. ASU 2020-06 is effective for public companies for fiscal years beginning after December 15, 2021, and interim periods within those fiscal years, with early adoption of all amendments in the same period permitted. The adoption of this guidance in the first quarter of 2022 did not have a material impact on the Company’s financial position, results of operations or cash flows.

4. Acquisitions

Hygo Merger

On April 15, 2021, the Company completed the acquisition of all of the outstanding common and preferred shares representing all voting interests of Hygo Energy Transition Ltd. (“Hygo”), a 50-50 joint venture between Golar LNG Limited (“GLNG”) and Stonepeak Infrastructure Fund II Cayman (G) Ltd., a fund managed by Stonepeak Infrastructure Partners (“Stonepeak”), in exchange for 31,372,549 shares of NFE Class A common stock and $580,000 in cash (the "Hygo Merger"). The acquisition of Hygo expanded the Company’s footprint in South America with three gas-to-power

Table of Contents

projects in Brazil’s large and fast-growing market. Assets acquired as a result of the Hygo Merger included a 50% interest in a 1.5GW power plant in Sergipe, Brazil (the “Sergipe Power Plant”) and its operating FSRU terminal in Sergipe, Brazil (the “Sergipe Facility”), as well as a terminal and power plant under development in the State of Pará, Brazil (the “Barcarena Facility” and "Barcarena Power Plant," respectively), and a terminal under development on the southern coast of Brazil (the “Santa Catarina Facility”). In addition, the Company also acquired included two LNG carriers and the Nanook, a newbuild FSRU moored and in service at the Sergipe Facility.

Based on the closing price of NFE’s common stock on April 15, 2021, the total value of consideration in the Hygo Merger was $1.98 billion, shown as follows:


Consideration			As of April 15, 2021
Cash consideration for Hygo Preferred Shares	$	180,000
Cash consideration for Hygo Common Shares	400,000
Total Cash Consideration			$	580,000
Merger consideration to be paid in shares of NFE Common Stock	1,400,784
Total Non-Cash Consideration			1,400,784
Total Consideration			$	1,980,784

The Company determined it was the accounting acquirer of Hygo, which was accounted for under the acquisition method of accounting for business combinations. The total purchase price of the transaction was allocated to identifiable assets acquired, liabilities assumed and non-controlling interests of Hygo based on their respective estimated fair values as of the closing date. The final adjusted fair values assigned to the assets acquired, liabilities assumed and non-controlling interests of Hygo as of the closing date were as follows:

Table of Contents


Hygo	As of April 15, 2021
Assets Acquired
Cash and cash equivalents	$	26,641
Restricted cash	48,183
Accounts receivable	5,126
Inventory	1,022
Other current assets	8,095
Construction in process	128,625
Property, plant and equipment, net	385,389
Equity method investments	823,521
Finance leases, net	601,000
Deferred tax assets, net	1,065
Other non-current assets	52,996
Total assets acquired:	$	2,081,663
Liabilities Assumed
Current portion of long-term debt	$	38,712
Accounts payable	3,059
Accrued liabilities	39,149
Other current liabilities	13,495
Long-term debt	433,778
Deferred tax liabilities, net	275,410
Other non-current liabilities	21,520
Total liabilities assumed:	825,123
Non-controlling interest	38,306
Net assets acquired:	1,218,234
Goodwill	$	762,550

The fair value of Hygo’s non-controlling interest (“NCI”) as of April 15, 2021 was $38,306, including the fair value of the net assets of VIEs that Hygo has consolidated. These VIEs are SPVs (both defined below) for the sale and leaseback of certain vessels, and Hygo has no equity investment in these entities. The fair value of NCI was determined based on the valuation of the SPV’s external debt and the lease receivable asset associated with the sales leaseback transaction with Hygo’s subsidiary, using a discounted cash flow method.

The fair value of receivables acquired from Hygo was $8,009, which approximated the gross contractual amount; no material amounts were expected to be uncollectible.

Goodwill was calculated as the excess of the purchase price over the net assets acquired. Goodwill represents access to additional LNG and natural gas distribution systems and power markets, including workforce, that will allow the Company to rapidly develop and deploy LNG to power solutions. While the goodwill is not deductible for local tax purposes, it is treated as an amortizable expense for the U.S. global intangible low-taxed income ("GILTI") computation.

The Company’s results of operations for the six months ended June 30, 2022 include Hygo’s result of operations for the entire period. Revenue and net loss attributable to Hygo during the period was $49,391 and $179,826, respectively.

GMLP Merger

On April 15, 2021, the Company completed the acquisition of all of the outstanding common units, representing all voting interests, of Golar LNG Partners LP ("GMLP") in exchange for $3.55 in cash per common unit and for each of the outstanding membership interest of GMLP’s general partner (the "GMLP Merger, and collectively with the Hygo Merger,

Table of Contents

the "Mergers"). In conjunction with the closing of the GMLP Merger, NFE simultaneously extinguished a portion of GMLP’s debt for total consideration of $1.15 billion.

As a result of the GMLP Merger, the Company acquired a fleet of six FSRUs and four LNG carriers, which are expected to help support the Company’s existing facilities and international business development pipeline. Acquired FSRUs are operating in Brazil, Indonesia and Jordan under time charters, and uncontracted vessels are available for short term employment in the spot market. Assets acquired also included an interest in a floating natural gas liquefaction vessel ("FLNG"), the Hilli Episeyo (the "Hilli"), which is expected to provide consistent cash flow streams under a long-term tolling arrangement. The interest in the FLNG facility also provides the Company access to intellectual property that will be used to develop future FLNG solutions.

The consideration paid by the Company in the GMLP Merger was as follows:


Consideration			As of April 15, 2021
GMLP Common Units ($3.55 per unit x 69,301,636 units)	$	246,021
GMLP General Partner Interest ($3.55 per unit x 1,436,391 units)	5,099
Partnership Phantom Units ($3.55 per unit x 58,960 units)	209
Cash Consideration			$	251,329
GMLP debt repaid in acquisition	899,792
Total Cash Consideration			1,151,121
Cash settlement of preexisting relationship	(3,978)
Total Consideration			$	1,147,143

The Company determined it is the accounting acquirer of GMLP, which was accounted for under the acquisition method of accounting for business combinations. The total purchase price of the transaction was allocated to identifiable assets acquired, liabilities assumed and non-controlling interests of GMLP based on their respective estimated fair values as of the closing date. The final adjusted fair values assigned to the assets acquired, liabilities assumed and non-controlling interests of GMLP as of the closing date were as follows:

Table of Contents


GMLP	As of April 15, 2021
Assets Acquired
Cash and cash equivalents	$	41,461
Restricted cash	24,816
Accounts receivable	3,195
Inventory	2,151
Other current assets	2,789
Equity method investments	355,500
Property, plant and equipment, net	1,063,215
Intangible assets, net	106,500
Deferred tax assets, net	963
Other non-current assets	4,400
Total assets acquired:	$	1,604,990
Liabilities Assumed
Current portion of long-term debt	$	158,073
Accounts payable	3,019
Accrued liabilities	17,226
Other current liabilities	73,774
Deferred tax liabilities, net	14,907
Other non-current liabilities	10,630
Total liabilities assumed:	277,629
Non-controlling interest	196,156
Net assets to be acquired:	1,131,205
Goodwill	$	15,938

The fair value of GMLP’s NCI as of April 15, 2021 was $196,156, which represents the fair value of other investors’ interest in the Mazo, GMLP’s preferred units which were not acquired by the Company and the fair value of net assets of an SPV formed for the purpose of a sale and leaseback of the Eskimo. The fair value of GMLP’s preferred units and the valuation of the SPV’s external debt and the lease receivable asset associated with the sale leaseback transaction have been estimated using a discounted cash flow method.

The fair value of receivables acquired from GMLP was $4,797, which approximated the gross contractual amount; no material amounts were expected to be uncollectible.

The Company acquired favorable and unfavorable leases for the use of GMLP’s vessels. The fair value of the favorable contracts was $106,500 and the fair value of the unfavorable contracts was $13,400. The total weighted average amortization period is approximately three years; the favorable contract asset has a weighted average amortization period of approximately three years and the unfavorable contract liability has a weighted average amortization period of approximately one year.

The Company and GMLP had an existing lease agreement prior to the GMLP Merger. As a result of the acquisition, the lease agreement and any associated receivable and payable balances were effectively settled. The lease agreement also included provisions that required a subsidiary of NFE to indemnify GMLP to the extent that GMLP incurred certain tax liabilities as a result of the lease. A loss of $3,978 related to settlement of this indemnification provision was recognized in Transaction and integration costs in the condensed consolidated statements of operations and comprehensive income (loss) in the second quarter of 2021.

The Company’s results of operations for the six months ended June 30, 2022 include GMLP’s result of operations for the entire period. Revenue and net income attributable to GMLP during the period was $139,674 and $105,970, respectively.

Table of Contents

Unaudited pro forma financial information

The following table summarizes the unaudited pro forma condensed financial information of the Company as if the Mergers had occurred on January 1, 2020.


	Three Months Ended June 30,		Six Months Ended June 30,
	2021		2021
Revenue	$	239,554	$	474,990
Net income (loss)	4,438		(48,746)
Net income (loss) attributable to stockholders	3,904		(46,146)

The unaudited pro forma financial information is based on historical results of operations as if the acquisitions had occurred on January 1, 2020, adjusted for transaction costs incurred, adjustments to depreciation expense associated with the recognition of the fair value of vessels acquired, additional amortization expense associated with the recognition of the fair value of favorable and unfavorable customer contracts for vessel charters, additional interest expense as a result of incurring new debt and extinguishing historical debt, elimination of a pre-existing lease relationship between the Company and GMLP, and a step-up of the equity method investments.

Adjustments for non-recurring items increased pro forma net income by $25,887 and $37,450 for the three and six months ended June 30, 2021, respectively. Transaction costs incurred and the elimination of a pre-existing lease relationship between the Company and GMLP are considered to be non-recurring. The unaudited pro forma financial information does not give effect to any synergies, operating efficiencies or cost savings that may result from the Mergers.

Asset acquisitions

On January 12, 2021, the Company acquired 100% of the outstanding shares of CH4 Energia Ltda. (“CH4”), an entity that owns key permits and authorizations to develop an LNG terminal and an up to 1.37GW gas-fired power plant at the Port of Suape in Brazil. The purchase consideration consisted of $903 of cash paid at closing in addition to potential future payments contingent on achieving certain construction milestones of up to approximately $3,600. As the contingent payments meet the definition of a derivative, the fair value of the contingent payments as of the acquisition date of $3,047 was included as part of the purchase consideration and was recognized in Other long-term liabilities on the condensed consolidated balance sheets. The selling shareholders of CH4 may also receive future payments based on gas consumed by the power plant or sold to customers from the LNG terminal.

The purchase of CH4 has been accounted for as an asset acquisition. As a result, no goodwill was recorded, and the Company’s acquisition-related costs of $295 were included in the purchase consideration. The total purchase consideration of $5,776, which included a deferred tax liability of $1,531 recognized as a result from the acquisition, was allocated to permits and authorizations acquired and was recorded within Intangible assets, net.

On March 11, 2021, the Company acquired 100% of the outstanding shares of Pecém Energia S.A. (“Pecém”) and Energetica Camacari Muricy II S.A. (“Muricy”). These companies collectively hold grants to operate as an independent power provider and 15-year power purchase agreements for the development of thermoelectric power plants in the State of Bahia, Brazil. The Company is seeking to obtain the necessary approvals to transfer the power purchase agreements in connection with the construction the gas-fired power plant and LNG import terminal at the Port of Suape.

The purchase consideration consisted of $8,041 of cash paid at closing in addition to potential future payments contingent on achieving commercial operations of the gas-fired power plant at the Port of Suape of up to approximately $10.5 million. As the contingent payments meet the definition of a derivative, the fair value of the contingent payments as of the acquisition date of $7,473 was included as part of the purchase consideration and was recognized in Other long-term liabilities on the condensed consolidated balance sheets. The selling shareholders may also receive future payments based on power generated by the power plant in Suape, subject to a maximum payment of approximately $4.6 million.

The purchases of Pecém and Muricy were accounted for as asset acquisitions. As a result, no goodwill was recorded, and the Company’s acquisition-related costs of $1,275 were included in the purchase consideration. Of the total purchase consideration, $16,585 was allocated to acquired power purchase agreements and recorded in Intangible assets, net on the condensed consolidated balance sheets; the remaining purchase consideration was related to working capital acquired.

Table of Contents

5. VIEs

Lessor VIEs

The Company assumed sale leaseback arrangements for four vessels as part of the Mergers, one of which was terminated in 2021. As part of these financings, the vessel was sold to a single asset entity wholly owned by the lending bank (a special purpose vehicle or "SPV") and then leased back. While the Company does not hold an equity investment in these lending entities, these entities are variable interest entities ("VIEs"), and the Company has a variable interest in these lending entities due to the guarantees and fixed price repurchase options that absorb the losses of the VIE that could potentially be significant to the entity. The Company has concluded that it has the power to direct the economic activities that most impact the economic performance as it controls the significant decisions relating to the assets and it has the obligation to absorb losses or the right to receive the residual returns from the leased asset. Therefore, the Company consolidates these lending entities; as NFE has no equity interest in these VIEs, all equity attributable to these VIEs is included in non-controlling interest in the consolidated financial statements. Transactions between NFE's wholly-owned subsidiaries and these VIEs are eliminated in consolidation, including sale leaseback transactions.

CCB Financial Leasing Corporation Limited (“CCBFL”)

In September 2018, the Nanook was sold to a subsidiary of CCBFL, Compass Shipping 23 Corporation Limited, and subsequently leased back on a bareboat charter for a term of twelve years. The Company has options to repurchase the vessel throughout the charter term at fixed pre-determined amounts, commencing from the third anniversary of the commencement of the bareboat charter, with an obligation to repurchase the vessel at the end of the twelve-year lease period.

Oriental Shipping Company (“COSCO”)

In December 2019, the Penguin was sold to a subsidiary of COSCO, Oriental Fleet LNG 02 Limited, and subsequently leased back on a bareboat charter for a term of six years. The Company has options to repurchase the vessel throughout the charter term at fixed pre-determined amounts, commencing from the first anniversary of the commencement of the bareboat charter, with an obligation to repurchase the vessel at the end of the six-year lease period.

AVIC International Leasing Company Limited (“AVIC”)

In March 2020, the Celsius was sold to a subsidiary of AVIC, Noble Celsius Shipping Limited, and subsequently leased back on a bareboat charter for a term of seven years. The Company has options to repurchase the vessel throughout the charter term at fixed predetermined amounts, commencing from the first anniversary of the commencement of the bareboat charter, with an obligation to repurchase the vessel at the end of the seven-year lease period.

As of June 30, 2022, the Penguin and Celsius were recorded as Property, plant and equipment, net on the condensed consolidated balance sheet, and the Nanook was recognized in Finance leases, net on the condensed consolidated balance sheet.

The following table gives a summary of the sale and leaseback arrangements, including repurchase options and obligations as of June 30, 2022:

Vessel

End of lease term

Date of next
repurchase
option

Repurchase price
at next repurchase
option date

Repurchase
obligation at end of
lease term

Nanook

September 2030

September 2022

193,066

94,179

Penguin

December 2025

December 2022

84,668

63,040

Celsius

March 2027

March 2023

86,456

45,000

Table of Contents

A summary of payment obligations under the bareboat charters with the lessor VIEs as of June 30, 2022, are shown below:


Vessel	Remaining 2022		2023		2024		2025		2026		2027+

Nanook	$	12,015	$	23,426	$	22,698	$	21,910	$	21,152	$	72,595
Penguin	6,600		12,889		12,379		8,973		—		—
Celsius

New Fortress Energy Inc. [NFE] Filings
10-Q	[2022-08-05]
10-Q	[2022-05-06]
10-K	[2022-03-01]
10-Q	[2021-11-03]
10-Q	[2021-08-06]
10-Q	[2021-05-07]
10-K	[2021-03-16]
10-Q	[2020-10-29]
10-Q	[2020-08-04]
10-Q	[2020-05-06]
10-K	[2020-03-04]
10-Q	[2019-11-12]
10-Q	[2019-08-13]
10-Q	[2019-05-15]
10-K	[2019-03-26]
S-1	[2018-11-09]