New Fortress Energy Gets New Deal to Supply Gas to Puerto Rico

New Fortress Energy Inc. (NFE) said Tuesday it had agreed contract terms with local authorities to continue delivering natural gas for Puerto Rico’s power system for seven more years.

The agreement with the Third-Party Procurement Office and the Public-Private Partnership Authority provides for the supply of up to 75 trillion British thermal units a year (TBtu) “with minimum annual take-or-pay volumes of 40 TBtu, increasing to up to 50 TBtu if certain conditions are met”, New York City-based NFE said in a statement on its website.

“This landmark agreement provides two critical benefits to the island. First, it establishes security of supply in San Juan for the next seven years for power plants currently running on LNG”, said NFE chair and chief executive Wes Edens.

“Second, it provides for incremental LNG volumes to be delivered, allowing for the conversion of additional gas-ready plants currently burning diesel, resulting in hundreds of millions of dollars in energy savings for Puerto Ricans”.

“Puerto Ricans pay far too much for electricity today and this long-term agreement provides cheaper and cleaner fuel for existing power plants for years to come”, Edens added, noting talks with the Puerto Rican government for a long-term fuel supply had been ongoing since April.

“This contract complements our existing long-term 25-year supply contract with Energiza and the new 550-megawatt power plant they are developing”.

NFE said, “Pricing of the volumes supplied through the GSA [Gas Supply Agreement] is set at a blend of 115 percent of Henry Hub plus $7.95/million Btu, excluding natural gas supplied to the units at San Juan 5 & 6 (which has historically consumed ~20 TBtu per year). Instead, these volumes are priced at 115 percent of Henry Hub plus $6.50/MMBtu”.

NFE expects to source the LNG under the new GSA from its Fast LNG facility in Altamira, Mexico. With a capacity of 1.4 million metric tons per annum, the project started operations in the fourth quarter of 2024, according to NFE.

“Matching our LNG production with long-term offtake has always been our goal. This locks in sustainable long-term margins for NFE and provides a foundation of financial stability for our company”, commented NFE chief financial officer Chris Guinta.

On March 17 NFE said it had amended the extension of its current contract with the Puerto Rico Electric Power Authority (PREPA), totaling 80 billion Btu, to a term of 100 days from the previous one year it announced days earlier. The shortened extension gives time for a request for proposal for a new gas contract with the lowest cost, according to NFE.

Announcing the one-year extension March 3, NFE said, “Additionally, the 10-year Operation and Maintenance Agreement between Genera, NFE’s subsidiary, and PREPA will be modified to eliminate future incentive payments in exchange for a $110 million payment”.

Last year NFE sold two emergency power plants it had installed in Puerto Rico in 2023 to PREPA for $373 million and thereafter entered into the 80-billion-Btu contract, as announced by the company March 18, 2024.

Last month the United States Department of Energy (DOE) extended emergency orders that allowed Puerto Rico to maintain enough power capacity and secure transmission lines. The orders have been extended by three months to November.

“Decades of deferred maintenance, insufficient investment, the bankruptcy of the system owner and devastating hurricanes and earthquakes have significantly deteriorated the Puerto Rican electric grid”, DOE said in a statement August 14. “As a result, full recovery will take years, but critical work is underway to improve grid reliability and resilience”.

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