Good morning, everyone, and welcome to the New Fortress Energy First Quarter 2024 Earnings Conference Call. Today's conference is being recorded. [Operator Instructions] To get us started today with opening remarks and introductions, I am pleased to turn the floor over to Managing Director of Strategy and Investor Relations, Mr. Chance Pipitone. Please go ahead, sir.

Thank you, Lisa, and good morning, everyone. Thank you for joining today's conference call, where we will discuss our first quarter 2024 results. The call is being recorded and will be available by replay on the Investors section of our website under the subheading Events and Presentations. At the same location, you will find a presentation that we will walk through on today's call. Please review this as it includes important information, including disclosures and risk factors. With that, I'll now hand over the call to our Chairman and CEO, Wes Edens.

Great. Thanks, Chance, and welcome, everybody. As usual, please refer to the materials that we've sent out, as that's what we'll be using to kind of walk through the financial presentation for the day. So flip to Page #3. And first, let's start with the results. Quarterly results were very solid. $340 million EBITDA, right on top of our estimates, still tracking on our guidance for the year. So financially, a very, very good quarter for us. Financial results were exactly as expected and the path for the rest of the year is now very clear. Our business now is one that is fully focused on generating long-term sustainable and growing results, and we've never felt better about it than we do today. Now let's turn to Page 4, and I'll talk about each of the 3 major updates that we'd like to talk about and introduce them for you and then turn them over to the guys that run each part of these businesses. Brannen McElmurray, who runs our Puerto Rican operation, Andrew Dete, who runs the Brazil operation and then Chris Guinta, our CFO, who is also in charge of our fast LNG projects. So let's turn to Page #4 and talk about it. First, Puerto Rico. Let's just put where we are today into context. We went to Puerto Rico in the fall of 2017, 3 days after Hurricane Maria, saw the devastation in the island, saw the need for power and -- for cheaper power and went to work. Both the logistics chain to bring gas and power into the island, opened our terminal in the June of 2020, right in the middle of COVID, and entered into a contract for roughly 25 TBtus to provide gas to San Juan for the first time. This is…

Yes. Thank you, Wes, and I'll refer to Page 7 in the presentation. And I appreciate you all joining us this morning. As Wes so often says, affordable, clean, reliable power is the cornerstone of economic growth. And in that regard, the majority of the world is underserved. For our business, we seek to address that need by providing infrastructure solutions that are responsive to needs today with technology that supports the desired future. Puerto Rico is a great example of executing on that strategy. As Wes said, we've been investing in Puerto Rico since 2017. We have a large and growing energy presence there. We've been growing our footprint and expanding our franchise for about 6 years. Today, our portfolio includes a world-class LNG terminal, which is the only terminal in the north where most of the population is and the demand center, so it's perfectly positioned on the island. In addition, we have logistics assets, which include off-island logistics chains, which are ships both large and small, on-Island logistics chains, which is trucks and ISOs and of course, our outstanding operational personnel and expertise. This logistics chain allows us to reach each and every customer on the island of Puerto Rico and service it through our existing terminal. In terms of customer contracts, we initially started with a 25 TBtu contract for San Jan 5 and 6 which itself has generated hundreds of millions of dollars of savings for Puerto Rican ratepayers. In March -- March 15 of this year, we entered into an 80 TBtu island-wide contract which allows us to serve Palo Seco/San Juan incremental power plus additional sites which folded into our strategy in terms of gasification around the island. In total, this is 105 TBtu, which is a significant portion of Puerto Rico's entire…

Great. Thanks, Brannen. Thank you, everybody, for joining us this morning. I'm excited to be talking with you about Brazil. There's 3 main points I'm going to go through here. The first is an update on our 2 LNG terminals, which are now online, are contracted for the long term, and we're making rapid commercial progress. The second is I described the near-term growth opportunity, mostly at our Santa Catarina terminal around the announced Power Auctions Brazil and growing LNG supply through that terminal. And then the third one is to update you on our capital plan for Brazil, which Wes mentioned a little bit. So turning to Page 11. We've talked a few times about this in the last calls and updates, but just to kind of level set where we are in Brazil today. So in February, we turned on 2 LNG terminals, one in Barcarena, one in Santa Catarina. The FSRU is hooked up to the pipeline. We've finalized commissioning. And now we have 12 MTPA of LNG import capacity in Brazil. That's over 600 TBtus a year. We also have contracts for 2.2 gigawatts of contracted power with an average duration of 18 years and 50 TBtus of baseload gas supply also with an average duration of 18 years. That leads to $500 million contracted EBITDA on a run rate 2026 basis. And we have effectively completed now our regional strategy of bringing online critical infrastructure for Brazil that would deliver on both the power and the energy needs of these regions in the country as a whole. Flipping to Page 12. We want to give a little bit more of a deep dive on the Barcarena terminal and how we're constructing the commercial portfolio here. So first is our Norsk Hydro agreement. So 15-year gas…

Thanks, Andrew. Good morning, everybody. Let's flip to Page #19 and talk to the FLNG projects. On this slide, we've included a recent photo of FLNG 1 offshore Altamira, and the positive news is we are in the absolute final stages of commissioning. We've fully commissioned all safety systems, power and utilities equipment, the gas treatment modules, LNG pumps and the LNG transfer hoses, and we're working on the final system to be completed, which is the MR compressor. I do want to take a moment and confirm that we did experience an incident with a pipe fracture inside of our cold box last Friday, April 26. This is an extremely unfortunate given that we are expecting First LNG a mere 72 hours later. The pipe incident caused the box's insulation material, a nontoxic volcanic sand called perlite to be admitted all over the rigs. Thankfully, no significant injuries were sustained and as a result of our excellent team in the field as well as our preventative measures together ensured that no adjacent systems were damaged. While the incident looked like it was much more extensive than it actually was on account of the perlite dusting, the damage was isolated to one pipe and manifold within the box and is expected to be repaired by next weekend. This is why commissioning is so important and why we've invested in excellent partners that have been overwhelmingly supportive as we try to move through the balance of the commissioning work and produce LNG. Moving on to Slide 20. We talk about why we chose to in-source the production of LNG and demonstrate the value of the FLNG 1 asset. We estimate the value of FLNG 1 unit exceeds $3 billion. This value is built up by a combination of, one, the cost…

Great. I mean, so that's the update. That's been an incredible quarter for us and it's an incredible time in the life of the company. We're all very focused on our core initiatives as we've just detailed. This will be the most productive summer of our lives as we continue to achieve what we're focused on in the very near term. There's one additional adjacency that's worth mentioning that we're also focused on. There's perhaps no greater growth need in the world than data centers. There's no greater need in the data centers for core dispatchable power. Power is the core competencies of ours, rapid development of highly reliable power is what we do extremely well and have demonstrated that in a number of markets. We received numerous reverse inquiries in our core markets in Puerto Rico, Brazil and in Ireland on situations where people are looking for us to help provide the solution to allow them to develop the data centers. There's nothing to report today, but stay tuned on this. This could evolve into a direct adjacency of our core capabilities, and we're very focused on this opportunity. The company or companies that help solve these needs will benefit greatly. We're clearly focused on our core businesses. This is a direct adjacency that we think also has a material impact for us in the future. This is just something I want to highlight. Then let me turn it over to Chance for [indiscernible] questions.

Thank you. Operator, if you would, let's open the lines up for questions.

[Operator Instructions] We'll take our first question from Craig Shere with Tuohy Brothers.

So can your incremental Puerto Rico growth beyond the 80 TBtu PREPA contract also be linked to liquid fuel pricing to afford acceptable spreads during sustained elevated LNG market pricing? And can you update us on current spot LNG spreads to perhaps 73% of landed Puerto Rican diesel? And finally, any thoughts on hedging out LNG to liquid spread risk.

I'll let Brannen talk about specifically. But the nature of the conversation with Puerto Rico about this contract was to basically during this interim period where they want to switch fuels and benefit from that while looking to enter into longer-term contracts, they want to make sure that they had a contract that ensured them savings. And so linking it directly to diesel was the simplest and most direct way of doing so. So 73% of diesel today, diesel is roughly $20, 73% is roughly $15. So $15 represents a significant savings versus what they're spending on diesel today and it also represents significant margins for us relative to our business. Our view is that this is something that will actually -- is the correct algorithm and the right way to price this in the short term over this next 4-year transition period, but I would expect long-term contracts for new developments would be direct Henry Hub-based and so that's what I think we expect, and that's what you also should expect. And it's the same basic pattern of transition of how we go from a short-term contract to provide gas and power. That was a very, very good contract for us with FEMA. We now provide twice as much fuel as we did to them at a lower price, but the [indiscernible] the quantity is greater, so there's more volumes to run through that. And then as they expand their needs around the island and actually look to longer-term generation, we would expect that to expand even more. As Brannen said, it's 300 TBtus in total demand right now, which is roughly 3x of what we have. So without knowing exactly how much of that will get converted and when are we going to convert and more or less, all you can say is that it's 300% of what the current capacity is today, so it represents a meaningful increase to it. Brannen, do you have any thoughts about that?

Yes. Just I think that captured it perfect. Maybe just 2 quick ones and then I think I'll hit one of your points. First of all, a more macro point, which I think is kind of highly relevant here, particularly when you think about the 300 TBtu about the first time actually in probably 10 years, the official estimates for GDP growth and population growth in Puerto Rico are being revised up, basically from flat to maybe even slightly negative to now positive, not in different -- not that much different than what other people are seeing, but a tremendous -- really a tremendous opportunity for them because even if you kind of think about our plans in terms of generation that exists today and transformation, et cetera, most of that has historically been based on flat kind of projections going forward. But you can certainly imagine now what will happen as the place grows, you need more power. And in particular, you need more gas-fired power. So specifically, I think what you're asking about and actually what Wes indicated, the current contract for 80 TBtus, which is really a 4-year contract, 1 year with a few extension periods, which will certainly get exercised in my view. What that really supports is the current fleet as it's being transitioned. But as Wes also mentioned, the idea and they're taking action on it, they are building now long-term power. So you could certainly imagine this diesel index over time migrating to a Henry Hub index and potentially even migrating to something that resembles more of a fixed price concept. In particular because you raised it on the hedging, we have started conversations with them about that. They are deeply interested in it. And I think the idea here is if you're buying 25 years of solar on fixed PPAs, you might start to think about buying 25-year gas on a fixed price basis. So that's conceptually certainly something that will likely be discussed. But I think in particular, we expect there to be growth beyond the 80 TBtu, as Wes said, it will be likely Henry Hub indexed. But as the whole energy complex moves to really gas plus renewables, what they're also trying to do is get long-term price certainty because that really for them, supercharges the growth proposition on the island.

If I could just fit in one more quickly. From an adjusted EBITDA standpoint, thoughts on how to treat proceeds from settlement to the early FEMA contract end. And excluding that, is it fair to envision a U-shaped EBITDA performance as the lost FEMA contract is filled in over an extended period of time with the 80 TBtu FEMA contract growing [indiscernible] contribution and then the 630-megawatt Barcarena Brazilian plant and finally, Nicaragua.

The bulk of the money in the settlement would be earnings, right, simply. There is some that could be a return of capital for certain things that we have paid for or whatnot, but the bulk of the settlement would be expected to be earnings. With respect to the U shape of it, it really is a function of how rapidly the transformation happens in terms of switching fuels from distillate fuels to gas. That is a multi-month process, not a multiyear process, as Brannen did a great job of kind of outlining. There is significant amounts of power on the island today that is gas ready that actually can simply be hooked up and just means regas capacity and maybe some very, very modest like capital improvements that can burn gas today. But all of this can happen in a relatively short period of time. And with respect to the U-shape with the rest of the company, it's a little harder to predict because simply there are some massive other issues that could happen in the short term, in particular, the developments in Brazil, turning the stuff on Nicaragua, et cetera. So I recognize that actually modeling the company during this period of transition is difficult. And so we'll try to get as much guidance as we can. You're probably a quarter away from being able to get -- to provide country-by-country data, which will make the modeling exercise much, much simpler. The one thing I can say with great certainty is can any model result, it looks like the valuation proposition of what we have on the books today, not prospectively, is vastly greater than the sum of the parts in the capital structure today. So I think that, a, it will be much, much simpler to model once all this transition is completed. That's why we are so positive about the events in Puerto Rico and elsewhere. But all you have to do is look at the numbers. The numbers that Andrew went through in Brazil. These are not theoretical forecasts. These are not theoretical growth numbers. These are actually in place cash flows on existing assets. So as we forecast these over the next couple of years, we're really showing them actually on a direct basis. So when you add those into our current business, it doesn't look to me like there's a U to it at all. So I think timing differences over a quarter or 2 can happen. But certainly, over a 1- or a 2-year period, we think there is nothing but upside to our numbers from this point, both in terms of size, but also in terms of duration. So.

And ladies and gentlemen, we will move to our next question. It comes from Theresa Chen with Barclays.

I wanted to follow up on the Puerto Rico side. As far as what is the timeline and pathway near term to ramp to the 80 TBtu, can you give us an indication of what the main volumes are and [indiscernible] Please.

Yes, sure. This is Brannen. I think as Wes said, and I think actually the slide -- I mean, in my view, actually lays it out well, even from a modeling standpoint, if you kind of just start with the basics for what we have today, which is 25 TBtu going into San Juan 5 and 6, and then you look at the temp power that has now really been converted to permanent power, which all in is 425 megawatts that exists today. And then if you look at the existing assets that are in Palo Seco and then you look at the opportunity, for example, in Mayagüez, and to add supplemental power depending on the month you want to pick, and depending on how you want to kind of model that in, the way I kind of think about it is you're likely to get there certainly by the end of the year. And then on a ramp rate that starts off at 20 plus 30, so it's 50, going to 80 over the next 1.5 quarters but depending on how you want to kind of think about that. I think the drivers of timing that you -- on our side, we're obviously racing to settle quickly are a little bit of infrastructure, a little bit of logistics around asset movement and then, of course, finalizing permits and permissions that you might need to increase utilization at some of these sites. But all of these are things that are in progress. I would say they're just very ordinary course events from a development perspective. And if you look at our history in Puerto Rico, we've obviously been highly successful in getting those things done in the past. We've never not done it. Not to say there won't be bumps in the road going in the future, but we're very confident that we'll be able to do that. And then even beyond the 80, I think as Wes indicated, I mean there's incremental opportunity that we're working on at the same time. So I don't think our view, certainly, my view is I don't view 80 as a ceiling. I view it kind of as a start and then we want to see what we can do from there. It's very clear that the mega trend there is all the oil-fired and HFO stuff is going to be retired. On the Genera platform, we're in charge of those retirements. That's certainly driving that schedule. And so we're highly motivated to have that happen, not only because it is the right thing to do but the island desperately wants to get to a scenario where they are gas-fired plus solar and battery. But I think that's how we kind of see it towards the end of the year and certainly going into next year. But the trend is sort of, in my view, kind of up and to the right.

And we'll move to our next question that is coming from the line of Sherif Elmaghrabi with BTIG.

I hopped on late, so I apologize if this has been asked. But on the power auction in Brazil, can you remind us when this power would come online? Yes, we'll start with that.

Sherif, it's Andrew. So the announcement is for 2 different products. The first product is for existing power plants, and that's a 7-year contract. And effectively, because existing would come on immediately. And then there's a product for 15 years, which is for a new generation only which you have to be online by 2028. But obviously, if you finish earlier, you can go to the agency and apply to start earlier. Because this is generally simple cycle power, we think it's probably a 2-year build for larger power plants from when the auctions run, that's kind of August 2024. So we think it could be online by the end of '26, maybe '27 for new power plants. And we expect to have a mix of those 2 products in our portfolio.

Just to add to that a little bit. I mean, as Andrew said, when you think power auctions, I think that the knee drip reactions assume it's going to come on 2 or 3 years from now because that would be the normal course of events. Given that there is a significant amount of tower in the south that does not have gas, that would actually be eligible to bid into these auctions if they had gas, those are partnerships that we think are mutually beneficial for us potentially as a gas provider and obviously, for them, they're life changing because they can now bid an existing asset into the marketplace. So this is a unique situation where a gas auction or a power auction may well result in power turning on at the end of this year or early next year. And so these financial results that we're showing for 2025, 2026, may be increased by these kind of long-term auctions in the short term. That's what is so incredibly exciting about this from a valuation standpoint.

Wes, you actually touched on my second question. But so for the 3.5 gigawatts that you guys highlighted on Slide 16, the 3.5 gigawatts of power plants without contracts, is it possible to go merchant power and enter agreements with these plants directly? Second, you highlighted Puerto Rico's desire for price currency, but it seems like there's a similar opportunity in Brazil.

Yes. No, it certainly is possible. And Brazil is certainly a different grid though, right? So in many parts of the year in Brazil, you've got a lot of hydro and a lot of renewable power at very low cost. So there is a merchant opportunity there, but it's going to be more in times of stress where the cost of generating power at these plants is in the money. And we think that certainly is an opportunity, but the real big opportunity here is the auctions because they basically allow for a fixed capacity contract and then also the merchant opportunity as well, right? So when you have these capacity contracts, not only are you getting a fixed fee, but then you're also in the sort of regulated and organized market to generate when the system needs you on a JKM basis.

And we'll move to our next question that comes from Martin Malloy with Johnson Rice.

First question is on Brazil. And outside of the power auctions, could you maybe talk about the outlook for adding additional volumes? I know you mentioned the additional potential volumes for the Norsk Hydro facility. Could you maybe talk about some -- how should we -- should we be thinking about other opportunities there?

Yes. So on the gas supply side, so we're announcing today our first contract at Santa Catarina, which is with the Trans Bolivia pipeline. It's about a 14 TBtu contract. We're also working with a number of the other large industrial consumers in the region. We've got about 300 TBtu of consumption today on this pipeline system. And our terminal has a few benefits that are kind of outside of just molecule pricing. So first is basically the transport benefit we have. So customers that are buying from us will have a lower basically pipeline fee to pay, than if they're buying from the other sources, which would be either Bolivian gas or offshore gas that comes from the north of Brazil. The second is we can help some of these consumers transition from buying from the regulated distribution companies to buying as what they call the free consumer in Brazil. They can save some money on that by paying less in regulatory fees. And then also, they can get a contract from us, which is much more flexible and is usually designed really around their consumption patterns rather than kind of the inflexible contracts they have today. And then, of course, we can compete on actual price. But there's a few other benefits as well by kind of going with a more flexible, lower transport cost solution from us. So that's applicable to a number of the larger kind of industrial consumers who are typically good credits as well in Brazil, and we're working on that. We expect our portfolio in Santa Catarina to look a lot like Barcarena. So if we do this right, we'll have kind of 1 MTPA of baseload supply, which we'll make money on and will also give us the ability to then go and contract the more intermittent capacity contracts on the power side. So we might end up with kind of 4 MTPA of sort of total contracted supply, 1 MTPA of which is baseload. And 3 is probably contingent on the power dispatch and linked to international LNG spot prices.

Great. Very helpful. And my second question, I just wanted to ask about CapEx. I think it was around $680 million during the first quarter. Could you maybe talk about how that [indiscernible] here?

Yes. I mean so there's a lot of -- sorry, my mic is not open here guys. There's a lot of in and outs because there's been financing actions, and we can -- it will be further detailed as you see the notes in the Q. And if you have follow-ups, we can go through it. But fundamentally, when I look at the balance of the rest of the year, there's very little equity CapEx required to build out what we are executing in Nicaragua and then the conversions in Puerto Rico. Specifically, Marty, it's about $100 million in total across the terminals and vessels and about $100 million associated with the Puerto Rico expansion. The rest of the CapEx is FLNG 2 in Brazil, both of which are fully financed on a debt base.

And our next question comes from Chris Robertson with Deutsche Bank.

Chris, I just wanted to follow up on that last question just with regards to the CapEx guidance from the previous presentation. I think it was around $1.5 billion. So just trying to see how much of the first quarter CapEx is related to FLNG 1 spending? And then how should we think about the cadence and overall total spend for the remaining part of the year as it relates to gross CapEx?

Yes. So I stand by like the $1.5 billion with $1.25 billion being financed, that still kind of works for what we're expecting in the Brazil assets and FLNG 2. For FLNG 1, we spent in first quarter 2024, around $140 million. And then for the balance of the year, that will really taper off. You'll still have some spend through April and May, of course, on that asset and then very little spend we expect June, July, August as we kind of complete a few make-ready activities post first LNG. As I mentioned, you spent a little bit of money on the Mexican asset and modest maintenance CapEx in the first quarter for Jamaica and Puerto Rico. And that will obviously be outlined in the Q. And then for the rest of the year, as I said, it's really not much equity CapEx. It's really just the terminals and the conversion in Puerto Rico. Now you will start ramping up CapEx spend for FLNG 2 once you go first LNG on FLNG 1. And then obviously, the Brazil business continues to spend on its build of the Barcarena power plant, but all of the CapEx for the terminals should be done as of the end of the first quarter.

Right. And just to circle back. So the Barcarena power plant as far as I understand the financing against that is just drawn down in tandem with the spend. So that nets out basically. So there's no need for equity cash there. But on the second PortoCem facility, is there financing against that one as well? And how much CapEx is going to be spent on the 1.6 gigawatt power project this year?

Yes. Yes, perfect. So you're totally right on the Barcarena power plant. So that's fully financed with BNDS, the Brazilian Development Bank. And all of the funding is in there and we'll just draw it down as we keep building. So zero incremental kind of CapEx from the NFE side today or equity CapEx is [indiscernible]. On PortoCem, so same thing basically. So we have closed on a loan with 4 Brazilian banks, and we are funding CapEx as we go. We will probably transition that debt structure to a longer-term bond structure in Brazil over the next few months. But from a net result basis for kind of what you're talking about from a CapEx perspective, same thing, well, we'll just draw that down over the course of construction from now to then. So we don't expect really any incremental CapEx from NFE.

And that concludes today's question-and-answer session. I'll turn it now back to Chance Pipitone for any additional and closing remarks.

Great, everyone. Thanks for calling in for the update. Obviously, it's a clarifying and exciting update from our perspective, and I hope that you found it informative. We look forward to following up any questions you have. And we'll talk to you in a few months. Thank you very much.

Ladies and gentlemen, this concludes today's conference. Thank you for your participation. You may now disconnect.