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 this Annual Report. 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.
| Items 1 and 2. | Business and Properties |
Our near-term mission is to provide modern infrastructure solutions to create cleaner, reliable energy while generating a positive economic impact worldwide. Our long-term mission is to become one of the world’s leading carbon emission-free independent power providing companies. We existing liquefaction and storage facility in Miami, Florida (the “Miami Facility”).ReferencesLLCInc. and its subsidiaries. When used in a historical context, “our,” “us,” “we” or like terms refer to (i) prior to our conversion from a limited liability company to a corporation, New Fortress Energy LLC and its subsidiaries and (ii) following the conversion from a limited liability company to a corporation, New Fortress Energy Inc. and its subsidiaries. When used in a historical context that is prior to the completion of NFE’s initial public offering (“IPO”), “Company,” “we,” “our,” “us” or like terms refer to New Fortress Energy Holdings LLC, a Delaware limited liability company (“New Fortress Energy Holdings”), our predecessor for financial reporting purposes. References in this Annual Report to “NFI” refer to New Fortress Intermediate Holdings LLC, which following the closing of the initial public offering (the “Offering”), owns our operating subsidiaries, as well as limited assets or liabilities of New Fortress Energy Holdings held prior to the completion of the Offering.ana global integrated gas-to-power infrastructure company that seeks to use “stranded” natural gas to satisfy the world’s large and growing power needs. We aim to deliver targeted energy solutions to customers around the world, thereby reducing their energy costs and diversifying their energy resources, while also reducing pollution and generating compelling margins.aim todiscuss this important goal in more detail below under “Toward a Carbon-Free Future.”a four-partan integrated LNG productionsupply and delivery model:Liquefaction – Our approach is to enter into long-term, largely fixed-price contracts for feedgas, then liquefy that gas at or proximate to its site of extraction, minimizing transportpipeline costs for the feedgas producers.Liquefaction - We are currently developing a liquefier on land we have purchased in the Marcellus area of Pennsylvania, which is expected to have the capacity to produce on average approximately 3.6 million gallons of LNG (which is the equivalent of 298,000 MMBtu) per day.Logistics – We expect to own or control the logistics assets necessary to deliversupply LNG to our customers, throughtypically by entering into long-term LNG supply contracts, which are generally based on an index such as Henry Hub plus an additional fee. We have successfully capitalized on current market conditions to secure long-term LNG contracts, which are also based on Henry Hub plus an additional fee, with attractive terms. In addition, we supply LNG to our “logistics pipeline.” Tanker trucks, rail, or other non-pipeline means will transportcustomers from open market purchases and LNG from our liquefier to a port on the Delaware River, at which point LNG will be transloaded directly to large marine vessels. – - We have long-term charters for liquefied natural gas carriers (“LNGCs”) and floating storage and regasification units (“FSRUs”). These assets transport LNG from ports to our downstream terminalsfacilities and gasify LNG for ultimate delivery to our customers. There is approximately a five day sail time from a Delaware River port to our downstream terminals and facilities in the Caribbean.Terminals –terminalsfacilities and facilities,logistics assets, we will beare strategically positioned to deliver gas and power solutions to our customers seeking either to transition from environmentally dirtier distillate fuels such as ADOautomotive diesel oil (“ADO”) and heavy fuel oil (“HFO”) or to purchase natural gas to meet their current fuel needs.Formation Transactions and StructureNFE was formed as a Delaware limited liability company by New Fortress Energy Holdings on August 6, 2018. NFE is a holding company whose only material asset consists of membership interests in NFI, which owns all of the outstanding membership interests in NFE Atlantic Holdings LLC. NFE is the sole managing member of NFI, is responsible for all operational, management and administrative decisions relating to NFI’s business and consolidates financial results of NFI and its subsidiaries.In connection with the Offering, the following transactions occurred:New Fortress Energy Holdings contributed all of its interests in NFE Atlantic Holdings LLC and its limited assets and liabilities, if any, to NFI in exchange for common units of NFI (“NFI LLC Units”), which are the only class of units of NFI;NFE issued 20,000,000 Class A shares in the Offering to the public, representing limited liability company interests with 100% of the economic rights in NFE, at an initial offering price of $14.00 per Class A share;NFE contributed the net proceeds from the Offering to NFI in exchange for 20,000,000 NFI LLC Units, equal to the number of Class A shares sold in the Offering; andNew Fortress Energy Holdings received a number of Class B shares equal to the number of NFI LLC Units held by it immediately following the completion of the Offering.4
We refer to the above transactions throughout this Annual Report as the “Transactions.”
In addition, the underwriters of the Offering exercised their option to purchase an additional 837,272 Class A shares at the initial offering price of $14.00 per share, less underwriting discounts. Including the additional Class A shares, NFE issued 20,837,272 Class A shares, representing total proceeds of $268.6 million, net of underwriting discounts and offering expenses.
Our Class A shares and Class B shares
Our first amended and restated limited liability company agreement (the “operating agreement”) provides for two classes of shares, Class A shares and Class B shares, representing limited liability company interests in us. Only the holders of our Class A shares are entitled to participate in any dividends our board of directors may declare. Each Class A share is also entitled to one vote on the limited matters to be voted on by our shareholders.
Class B shares are not entitled to receive dividends but are entitled to vote on the same basis as the Class A shares. Holders of Class A shares and Class B shares vote together as a single class on all matters presented to our shareholders for their vote or approval, except as otherwise required by applicable law. We do not intend to list the Class B shares on any stock exchange. All of our Class B shares are owned by New Fortress Energy Holdings.
Redemption Right
Under the NFI limited liability company agreement (the “NFI LLC Agreement”), New Fortress Energy Holdings and any permitted transferees of New Fortress Energy Holdings’ NFI LLC Units, subject to certain limitations, have the right (the “Redemption Right”) to cause NFI to acquire all or a portion of their NFI LLC Units for, at NFI’s election, (i) Class A shares at a redemption ratio of one Class A share for each NFI LLC Unit redeemed, subject to conversion rate adjustments for equity splits, equity dividends and reclassification and other similar transactions or (ii) an equivalent amount of cash. As the sole managing member of NFI, our decision to make a cash payment upon the redemption of NFI LLC Units will be made by a committee of disinterested members of our board of directors. Alternatively, upon the exercise of the Redemption Right, NFE (instead of NFI) has the right (the “Call Right”) to, for administrative convenience, acquire each tendered NFI LLC Unit directly from the redeeming NFI unitholder for, at its election, (x) one Class A share, subject to conversion rate adjustments for equity splits, equity dividends and reclassification and other similar transactions or (y) an equivalent amount of cash. In connection with any redemption of NFI LLC Units pursuant to the Redemption Right or our Call Right, the corresponding number of Class B shares will be automatically cancelled.
For purposes of any transfer or exchange of NFI LLC Units initially owned by New Fortress Energy Holdings and our Class B shares, the NFI LLC Agreement and our operating agreement contain provisions effectively linking each NFI LLC Unit with one of our Class B shares. Class B shares cannot be transferred without transferring an equal number of NFI LLC Units and vice versa.
Holding Company Structure
Our post-Offering organizational structure allows New Fortress Energy Holdings to retain a direct equity ownership in NFI, which is classified as a partnership for U.S. federal income tax purposes. Although we were formed as a limited liability company, we have elected to be taxed as a corporation for U.S. federal income tax purposes. Pursuant to our operating agreement and the NFI LLC Agreement, our capital structure and the capital structure of NFI generally replicate one another and provide for customary antidilution mechanisms in order to maintain the one-for-one exchange ratio between the NFI LLC Units and our Class A shares.
Our Business Model
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Our operations areWe currently conductedconduct our operations at our LNG storage and regasification terminalfacility at the Port of Montego Bay, Jamaica (the “Montego Bay Terminal”Facility”), our marine LNG storage and regasification facility in Old Harbour, Jamaica (the “Old Harbour Facility” and, together with the Montego Bay Facility, the “Jamaica Facilities”), our landed micro-fuel handling facility in San Juan, Puerto Rico (the “San Juan Facility”) and at our liquefaction, storageMiami Facility. In addition, we are currently developing facilities in Mexico, Nicaragua and production facilityIreland, as described below in Miami, Florida (the “Miami Facility”). See “Item 1A. Risk Factors—Risks Related to Our Business—Our current ability to generate cash is substantially dependent upon the entry into and performance by customers under long-term contracts that we have entered into or will enter into in the near future, and we could be materially and adversely affected if any customer fails to perform its contractual obligations for any reason, including nonpayment and nonperformance, or if we fail to enter into such contracts at all.”more detail. We are in active discussions with additional customers in multiple regions around the world who may have significant demand for additional LNG, although there can be no assurance that these discussions will result in additional contracts or the terms of such contracts or that we will be able to achieve our target pricing or margins. See “Item 1A. Risk Factors—Risks Related to
Our Terminals
Facilities
such facility:
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San Juan, Puerto Rico – Our San Juan Facility is currently under development and is expected to commence commercial operationsbecame fully operational in mid-2019.the third quarter of 2020. It is designed as a landed multi-fuelmicro-fuel handling facility located in the Port of San Juan, Puerto Rico (the “San Juan Facility”).Rico. We have leased the land under a long-term agreement. The San Juan Facility is being constructed withhas multiple truck loading bays to provide LNG to on-island industrial users. In addition, the Puerto Rico Electric Power Authority (“PREPA”) selected our proposal to convert and supplyit supplies natural gas to Units 5 and 6 of the San Juan Combined Cycle Power Plant (the “San Juan Power Plant”) –, which are owned and operated by the Puerto Rico Electric Power Authority, a public instrumentality of the government of Puerto Rico (“PREPA”). We converted Units 5 and 6, which together have a capacity of 440MW. We have leased the land under a long-term agreement and cleared the wharves near the San Juan Power Plant. The San Juan Power Plant is currently running on diesel, and we plan440 MW, to convert the San Juan Power Plant to run onuse natural gas as fuel and provide upexpect to supply both Units 5 and 6 with approximately 2526 TBtu of natural gas per year, which would equalequals approximately 829,000863,000 gallons of LNG (68,500(70,000 MMBtu) per day. On March 5, 2019, after approval by the Puerto Rico Energy Bureau (the “PREB”) and the Financial Oversight and Management Board for Puerto Rico (the “FOMB”), our subsidiary, NFEnergía LLC (“NFEnergía”) entered into a Fuel Sale and Purchase Agreement with PREPA for the supply of natural gas and conversion of Units 5 and 6 of the San Juan Power Plant. The initial term of the contract is five years, with options for PREPA to extend for three additional five-year periods. The conversion of Units 5 and 6 of the San Juan Power Plant and the development of the micro fuel handling facility are anticipated to be completed by mid-2019. See “Item 1A. Risk Factors—Risks Related to Our Business—Our current ability to generate cash is substantially dependent upon the entry into and performance by customers under long-term contracts that we have entered into or will enter into in the near future, and we could be materially and adversely affected if any customer fails to perform its contractual obligations for any reason, including nonpayment and nonperformance, or if we fail to enter into such contracts at all.”
plant (the “Nicaragua Power Plant”) that we will own and operate.
In September 2018, an Irish non-governmental organization filed a judicial challenge to the extension of a planning permission associated with our Ireland Terminal. In a February 2019 written decision arising out of this judicial challenge, Ireland’s High Court referred several questions relating to the extensions to the European Court of Justice. While this judicial review proceeds, we intend to file for a new planning permission that, if approved, would replace the permission whose extension is currently under challenge. We intend to begin construction of the Ireland TerminalFacility after we have obtained a replacement planningsuch permission (or, if earlier, received a favorable resolution to the challenge to the extension of our existing permission) and secured contracts with downstream customers forwith volumes that are sufficient to support the development.
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Dominican Republic – We are in
Our 2029.
We intend to supply all existing and future customers with LNG produced primarily at our own liquefaction facilities. We have one operational liquefaction facility in Miami, Florida and are currently developing another liquefaction facility in Pennsylvania (our “Pennsylvania Facility” and, together with the Miami Facility, the “Liquefaction Facilities”).
In addition to this port along the Delaware River, we are also in the advanced stages of negotiating a substantially similar long-term agreement with a company managedproduced by an affiliate of Fortress for the use of a facility at a port on the Texas Gulf Coast.
We expect to fund these commitments through a combination of cash on hand, operating cash flows, additional borrowings and the proceeds from the Offering. Pending completion and commissioning of our liquefier in development, we expect to continue to supply our downstream customers with LNG and natural gas sourced from a combination of our Miami Facility, which operated at 26% capacity during the year ended December 31, 2018, purchases of LNG under a multi-cargo contract with Centrica LNG Company Limited (“Centrica”) and open market purchases as necessary. We are drawing on our experience from the construction and operation of our Miami Facility to optimize the development of our Pennsylvania Facility.
Pennsylvania EPC Agreement
In January 2019, we entered into the EPC Agreement with the Contractor for the construction of our Pennsylvania Facility.
We expect the target completion date of the Pennsylvania Facility to be the first quarter 2021. The contract price under the EPC Agreement is approximately $672 million, excluding Pennsylvania sales and use taxes on materials and equipment. The contract price includes a provisional payment of $162 million, and the contract price may be reduced based on actual cost savings. We intend to fund these amounts from a combination of cash flows from operations,
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additional indebtedness or the opportunistic sale of one of our non-core assets. The Contractor will be entitled to receive a bonus for completion of the Pennsylvania Facility prior to the contract completion date, up to a maximum bonus amount of $30 million. The Contractor will be able to obtain change order relief, including increases to the contract price and extensions of guaranteed dates for substantial completion, in the event of specified occurrences.
Our Current Customers
In addition, we provide development services to some customers for the conversion or development of natural gas-fired power generation in connection with long-term agreements to supply natural gas or LNG to the customer.
Because of our limited operating history and stage of development, a
The aggregate minimum quantities we are required to deliver, and our counterparties are required to purchase, under the Jamaica GSAs initially, total approximately 56,21156,200 MMBtu per day.
Additionally, we have a Fuel Sale and Purchase Agreement with PREPA under which we expect PREPA to purchase 863,000 gallons of LNG (70,000 MMBtu) per day.
ADO as backup fuel.
SJPC.
constructing a natural gas-fired power plant with a capacity of approximately 300 MW.
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For example,On January 13, 2021, we haveand Lobos Acquisition Ltd., a Bermuda exempted company and our wholly-owned subsidiary (“Hygo Merger Sub”), entered into an Agreement and Plan of Merger (as it may be amended, supplemented or otherwise modified from time to time, the “Hygo Merger Agreement”) with Hygo Energy Transition Ltd., a Bermuda exempted company (“Hygo”), Golar LNG Limited, a Bermuda exempted company (“GLNG”) and Stonepeak Infrastructure Fund II Cayman (G) Ltd. (“Stonepeak”), pursuant to which, on the terms and subject to conditions set forth in the Hygo Merger Agreement, Hygo Merger Sub will be merged with and into Hygo (the “Hygo Merger”), whereupon the separate corporate existence of Hygo Merger Sub shall cease and Hygo shall continue as the surviving company in the Hygo Merger. As of the date of the Hygo Merger Agreement, each of GLNG and Stonepeak owned 50% of the outstanding common shares, par value $1.00 per share, of Hygo, and Stonepeak owned all of Hygo’s outstanding redeemable preferred shares, par value $5.00 per share. At the effective time of the Hygo Merger: (i) GLNG will receive 18.6 million shares of NFE Class A common stock and an aggregate of $50 million in cash and (ii) Stonepeak will receive 12.7 million shares of NFE Class A common stock and an aggregate of $530 million in cash. The Hygo Merger Agreement may be terminated by NFE or Hygo under certain circumstances, including, among others, by either NFE or Hygo if the closing of the Hygo Merger has not occurred on or before July 12, 2021.
Other Contracts
In September 2018, we amended and restated our GSA with an affiliate of Chesapeake Energy Corporation (“Chesapeake”) to provide for the delivery of natural gas, including commissioning gas, to our Pennsylvania Facility (the “Chesapeake GSA”). Deliveries during the termeffective time of the contractGMLP Merger (the “GMLP Effective Time”), each common unit representing a limited partner interest in GMLP that is issued and outstanding as of immediately prior to the GMLP Effective Time will commence onceautomatically be converted into the Pennsylvania Facility has completed commissioningright to receive $3.55 in cash. At the GMLP Effective Time, each of the incentive distribution rights of GMLP will be canceled and testingcease to exist, and no consideration shall be delivered in respect thereof. Each 8.75% Series A Cumulative Redeemable Preferred Unit of GMLP issued and outstanding immediately prior to the GMLP Effective Time will be unaffected by the GMLP Merger and will remain outstanding, and no consideration shall be delivered in respect thereof. Each outstanding unit representing a general partner interest of GMLP that is capableissued and outstanding immediately prior to the GMLP Effective Time will remain issued and outstanding immediately following the GMLP Effective Time. Concurrently with the consummation of receiving the minimum volume of gas. The initial contract term is 15 years and weGMLP Merger, GP Buyer will purchase gas from Chesapeake atGLNG all of the outstanding membership interests of the General Partner pursuant to a Transfer Agreement dated as of January 13, 2021 for a purchase price of approximately $5 million, which is equivalent to $3.55 per general partner unit of GMLP.
fleet of six FSRUs (the Golar Spirit, the Golar Winter, the Golar Freeze, the NR Satu, the Golar Igloo, and the Golar Eskimo), four LNG carriers (the Golar Mazo, the Methane Princess, the Golar Grand, and the Golar Maria) and an interest in a floating liquefaction vessel, the Hilli Episevo (the “Hilli”), which receives, liquefies and stores LNG at sea and transfers it to LNG carriers that berth while offshore, each of which are expected to help support our existing facilities and international project pipeline. GMLP currently owns 50% of the common units of Golar Hilli LLC which owns Golar Hilli Corporation (“Hilli Corp”), the disponent owner of the Hilli. The Hilli is the world’s first converted FLNG vessel. The majority of the FSRUs in GMLP’s fleet are operating in Brazil, Kuwait, Indonesia, Jamaica and Jordan under time charters. GMLP’s uncontracted vessels are available for short term employment in the spot market.
However,
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authorizations commenced on February 5, 2016, the date of first export from the Miami Facility. The DOE has also authorized American LNG Marketing LLC or its designee to export LNG from the Miami Facility to FTA and non-FTA countries under short-term (less than two years) agreements or on a spot cargo basis. Any LNG exported under the short-term authorization would be counted toward the quantity authorized under the long-term authorizations. These authorizations from the DOE are only applicable to exports of LNG produced at our Miami Facility, and exports of LNG from a liquefaction facility other than the Miami Facility (such as the Pennsylvania Facility) to FTA and/or non-FTA countries will require us to obtain new authorizations from the DOE.
Exports
response.
Clean Air Act
Our LNG infrastructure is subject to the federal CAA and comparable state and local laws. We may be required to incur certain capital expenditures over the next several years for equipment to control air emissions as a condition to maintaining or obtaining permits and approvals. Alternatively, we may be required to restrict or limit the amount of LNG we produce or ship in order to obtain or maintain a permit. We do not believe, however, that our operations, or the construction and operations of our Liquefaction Facilities, will be materially and adversely affected by any such requirements.
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In 2009, the EPA promulgated and finalized the Mandatory Greenhouse Gas Reporting Rule for multiple sections of the economy. This rule requires mandatory reporting of GHG emissions from stationary fuel combustion sources as well as all fugitive emissions throughout LNG infrastructure. From time to time, Congress has considered proposed legislation directed at reducing GHG emissions, and the EPA has defined GHG emissions thresholds for requiring certain permits for new and existing industrial sources. In addition, many states have already taken regulatory action to monitor and/or reduce emissions of GHGs, primarily through the development of GHG emission inventories or regional GHG cap and trade programs. It is not possible at this time to predict how future regulations or legislation may address GHG emissions and impact our business. However, future regulations and laws could result in increased compliance costs or additional operating restrictions and could have a material adverse effect on our business, financial position, operating results and cash flows.
Coastal Zone Management Act (“CZMA”)
LNG infrastructure may be subject to the review and requirements of the CZMA when facilities are located within the coastal zone. The CZMA is administered by the states (in Florida, via the Florida Coastal Management Program, which is coordinated by the Florida Department of Environmental Protection). This program is implemented to ensure that impacts to coastal areas are consistent with the intent of the CZMA and each state’s respective CZMA-authorized program to manage the coastal areas.
Clean Water Act
Our LNG infrastructure is also subject to the federal CWA and analogous state and local laws. The CWA imposes strict controls on the discharge of pollutants into the waters of the United States, including discharges of wastewater and storm water runoff and fill/discharges into waters of the United States. Permits must be obtained prior to discharging pollutants into state and federal waters and before constructing infrastructure that requires the dredging and filling of waters of the United States. The CWA is administered by the EPA, the U.S. Army Corps of Engineers (“USACE”) and by the states via the applicable state agency.
We are required to comply with numerous other federal, state and local environmental, health and safety laws and regulations in addition to those previously discussed. These additional laws include, for example, the Rivers and Harbors Act, the federal Resource Conservation and Recovery Act and comparable state statutes, the Endangered Species Act, the National Historic Preservation Act and the Emergency Planning and Community Right-to-Know Act.
Moreover, our current operations and future projects may be subject to additional federal permits, orders, approvals and consultations required by other federal agencies under these and other statutes, including the DOE, Advisory Council on Historic Preservation, the USACE, U.S. Department of Commerce, National Marine Fisheries Services, U.S. Department of the Interior, U.S. Fish and Wildlife Service, the EPA and U.S. Department of Homeland Security. In addition, federal permitting processes may trigger the requirements of the National Environmental Policy Act (“NEPA”), which requires federal agencies to evaluate major agency actions that have the potential to significantly impact the environment. State permitting regimes may require similar consultations with applicable state-level agencies and/or the preparation of a similar assessment of environmental impacts pursuant to state law.
Additional federal permits that may be required to conduct our current operations or pursue future projects include, for example, a USACE Section 404 permit under the CWA and a Section 10 of the Rivers and Harbors Act Permit, a Title V Operating Permit under the CAA, a Prevention of Significant Deterioration Permit under the CAA and, where applicable, Federal Aviation Administration determinations or approvals relating to certain ground construction activities.
Other local laws and regulations, including local zoning laws, critical infrastructure regulations and fire protection codes, may also affect where and how we operate.
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Environmental Regulation in Ireland
LNG deliveries, storage, regasification and use are extensively regulated in Ireland. Ireland regulates these operations at a national and local level through organic legislation and an array of permits. Ireland’s National Planning Board is the primary regulator for planning and construction, while the Irish Environmental Protection Agency issues industrial emissions licenses that regulate environmental and operational permitting. Safety regulation in Ireland is regulated pursuant to the Control of Major Accidents regime, which sets out various safety criteria that the LNG facility must meet. We are in the process of applying for all necessary permits to build and complete the Ireland Terminal. The issuance of many of these permits will be subject to administrative or judicial challenges, including by non-governmental groups that act on behalf of citizens. For example, in September 2018, an Irish non-governmental organization filed a judicial challenge to the extension of a planning permission associated with our Ireland Terminal. In a February 2019 written decision arising out of this judicial challenge, Ireland’s High Court referred several questions relating to the extensions to the European Court of Justice. While this judicial review proceeds, we intend to file for a new planning permission that, if approved, would replace the permission whose extension is currently under challenge. We intend to begin construction of the Ireland Terminal after we have obtained a replacement planning permission (or, if earlier, received a favorable resolution to the challenge to the extension of our existing permission) and secured contracts with downstream customers for volumes that are sufficient to support the development.
Environmental Regulation in Mexico
In March 2021, an amendment to the Mexican Power Industry Law (Ley de la Industria Electrica) was published which would reduce the dispatch priority of privately-owned power plants compared to state-owned power plants in Mexico. The amendment is being challenged as unconstitutional, and a judge recently awarded a temporary injunction halting the implementation of the amendment. However, if the amendment is enforced against us, it could negatively affect our plant's dispatch and our revenue and results of operations.
Additionally, more stringent emission standards apply in coastal areas designated as ECAs, such as the U.S. and Canadian coastal areas, which are designated by the Marine Environment Protection Committee.
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Effective August 1, 2012, certain coastal areas of North America were designated Emission Control Areas (“ECAs”). Furthermore, as of January 1, 2014, portions of the U.S. Caribbean Sea were designated ECAs. Annex VI Regulation 14, which came into effect on January 1, 2015, set a 0.1% sulfur limit in areas of the Baltic Sea, North Sea, North America and U.S. Caribbean Sea that are ECAs.
Amended Annex VI also establishes new tiers of stringent nitrogen oxide emissions standards for new marine engines, depending on their date of installation. The North Sea and Baltic Sea have been formally designated as ECAs for nitrogen oxides effective January 1, 2021. U.S. air emissions standards are now equivalent to these amended Annex VI requirements. Additional or new conventions, laws and regulations may be adopted that could require the installation of expensive emission control systems.
We transactcontract with leading vessel providers in the LNG industry and look to them to ensure that each of our chartered vessels is in compliance with applicable international and in-country requirements. Nevertheless, the IMO continues to review and introduce new regulations. Itregulations and it is impossible to predict what additional regulations, if any, may be passed by the IMO and what effect, if any, such regulation may have on our operations.
LNG and Natural Gas Marketing Governmental Regulation
Commodity Futures Trading Commission
The Dodd-Frank Wall Street Reform and Consumer Protection Act (the “Dodd-Frank Act”) provides for federal regulation of the over-the-counter (“OTC”) derivatives market and entities, such as us, that participate in that market. The regulatory regime created by the Dodd-Frank Act is designed primarily to (1) regulate certain participants in the swaps markets, including entities falling within the categories of “Swap Dealer” and “Major Swap Participant,” (2) require clearing and exchange trading of certain classes of swaps as designated by the Commodity Futures Trading Commission (“CFTC”), (3) increase swap market transparency through robust reporting and recordkeeping requirements, (4) reduce financial risks in the derivatives market by imposing margin or collateral requirements on both cleared and, in certain cases, uncleared swaps, (5) provide the CFTC with expanded authority to establish position limits on certain swaps and future products as it finds necessary and appropriate, and (6) otherwise enhance the rulemaking and enforcement authority of the CFTC and the SEC regarding the derivatives markets. As required by the Dodd-Frank Act, the CFTC, the SEC and other regulators have been promulgating rules and regulations implementing the regulatory provisions of the Dodd-Frank Act, although neither the CFTC nor the SEC has yet adopted or implemented all of the rules required by the Dodd-Frank Act. In addition, the CFTC and its staff regularly issue rule amendments and guidance, policy statements and letters interpreting or taking no-action positions, including time-limited no action positions, regarding the derivatives provisions of the Dodd-Frank Act and the rules of the CFTC under these provisions.
A provision of the Dodd-Frank Act requires the CFTC, in order to diminish or prevent excessive speculation in commodity markets, to adopt rules, as it finds necessary and appropriate, imposing new position limits on certain futures contracts, options contracts and economically equivalent physical commodity swaps and on OTC swaps that perform a significant price discovery function with respect to certain markets. In that regard, the CFTC has proposed position limits rules that would modify and expand the applicability of position limits on the amounts of certain core futures contracts and economically equivalent futures contracts, options contracts and swaps for or linked to certain physical commodities, including Henry Hub natural gas, that market participants may hold, subject to limited exemptions for certain bona fide hedging and other types of transactions. It is uncertain at this time whether, when and in what form the CFTC’s proposed new position limits rules may become final and effective.
Pursuant to rules adopted by the CFTC, six classes of OTC interest rate and credit default swaps must be cleared through a derivatives clearing organization and executed on an exchange or swap execution facility. The CFTC has not yet proposed to designate any other classes of swaps, including swaps relating to physical commodities, for mandatory clearing, but could do so in the future. Although we expect to qualify for the “end-user exception” from the mandatory clearing and exchange-trading requirements applicable to any swaps that we enter into to hedge our commercial risks, the mandatory clearing and exchange-trading requirements may apply to other market participants, including our counterparties (who may be registered as Swap Dealers), with respect to other swaps, and the application of such rules may change the cost and availability of the swaps that we use for hedging.
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As required by provisions of the Dodd-Frank Act, the CFTC and federal banking regulators have adopted rules to require Swap Dealers and Major Swap Participants, including those that are regulated financial institutions, to collect initial and variation margin with respect to uncleared swaps from their counterparties that are financial end-users, registered Swap Dealers or Major Swap Participants. These rules do not require collection of margin from commercial end-users who qualify for the end-user exception from the mandatory clearing requirement or certain other counterparties. We expect to qualify as such a commercial end-user with respect to the swaps that we enter into to hedge our commercial risks. However, the Dodd-Frank Act’s swaps regulatory provisions and the related rules may also adversely affect our existing derivative contracts and restrict our ability to monetize such contracts, cause us to restructure certain contracts, reduce the availability of derivatives to protect against risks or to optimize assets, adversely affect our ability to execute our hedging strategies and impact the liquidity of certain swaps products, all of which could increase our business costs.
Under the Commodity Exchange Act as amended by the Dodd-Frank Act, the CFTC is directed generally to prevent manipulation, including by fraudulent or deceptive practices, in two markets: (1) physical commodities traded in interstate commerce, including physical energy and other commodities, as well as (2) financial instruments, such as futures, options and swaps. Pursuant to the Dodd-Frank Act, the CFTC has adopted additional anti-manipulation and anti-disruptive trading practices regulations that prohibit, among other things, manipulative or deceptive schemes in the physical commodities, futures, options and swaps markets. Should we violate these laws and regulations, we could be subject to a CFTC enforcement action and material penalties, possibly resulting in changes in the rates we can charge.
European Market Infrastructure Regulation (“EMIR”)
EMIR is a European Union (“EU”) regulation designed to increase the stability of the OTC derivative markets throughout the EU member states. EMIR regulates OTC derivatives, central counterparties and trade repositories and imposes requirements for certain market participants with respect to derivatives reporting, clearing and risk mitigation. In addition, certain market participants are subject to a central counterparty clearing obligation and collateral requirements. All non-cleared derivatives require risk management, including timely confirmations of transactions, portfolio reconciliation, portfolio compression (when there exist 500 or more OTC derivatives outstanding with a counterparty) and dispute resolution. In addition, standards for the imposition of margin requirements under EMIR were proposed in June 2015, under which the exchange of initial and variation margin in respect of certain non-cleared derivatives would be required, including from non-financial counterparties that are above the EMIR clearing threshold for the class of derivatives involved. Further, for non-cleared derivatives, outstanding contracts must be marked to market value daily or marked to model where conditions necessitate. Other EMIR risk management requirements for non-cleared derivatives are being considered, but those requirements have yet to be finalized.
Under EMIR, covered entities must report all derivatives concluded and any modification or termination of a derivative to a registered or recognized trade repository within one business day of the transaction. Records related to derivatives must be retained for at least five years following termination.
Regulation on Wholesale Energy Market Integrity and Transparency (“REMIT”)
REMIT is an EU regulation that prohibits market manipulation and insider trading in European wholesale energy markets and imposes various obligations on participants in these markets. REMIT requires persons who enter into transactions, including the placing of orders to trade, in one or more wholesale energy markets in the EU to notify the applicable national regulatory authority (“NRA”) of suspected breaches and implement procedures to identify breaches. All market participants, such as us, must disclose inside information and cannot use inside information to buy or sell wholesale energy products for their own account or on behalf of a third party, directly or indirectly, induce others to buy or sell wholesale energy products based on inside information, or disclose such inside information to any other person except in the normal course of employment. Market participants must also register with the relevant NRA (the Office of Gas and Electricity Markets is the NRA in the United Kingdom) and provide a record of wholesale energy market transactions to the European Agency for the Cooperation of Energy Regulators (“ACER”) and information on capacity and utilization for production, storage, consumption or transmission.
Market participants and third parties acting on their behalf are required to report transactions in wholesale energy contracts admitted to trading at organized market places and fundamental data from the European
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Network of Transmission System Operators for Electricity central information transparency platforms to ACER. Additional records of transactions and fundamental data with respect to the remaining wholesale energy contracts (OTC standard and non-standard supply contracts and transportation contracts) and reportable fundamental data from transmission system operators, storage system operators and LNG system operators had to be provided to ACER as of April 7, 2016.
Markets in Financial Instruments Directive and Regulation (“MiFID II”)
MiFID II refers to an EU directive and regulation (together with supplementary delegated acts) that came into effect on January 3, 2018. Under the current regulatory regime, set out in the Markets in Financial Instruments Directive (“MiFID”), we are exempt from needing authorization of any commodity derivative trading activities. MiFID II will narrow the scope of exemptions currently available under MiFID and broaden the directive’s application to the trading of MiFID commodity derivatives that can be physically settled and are traded on an organized trading facility, in addition to those that are traded on regulated markets or multilateral trading facilities.
To the extent that we trade on our own account in MiFID commodity derivatives after MiFID II comes into force, we expect to be able to do so without requiring (i) authorization from any competent authority in the EU or (ii) (if and when available) registration with the European Securities and Markets Authority (“ESMA”) as a third country firm by relying, if needed by the relevant licensing laws of the EU jurisdictions in which our counterparties are based, on the “ancillary activity” exemption under MiFID II on the basis that (1) such activity is ancillary to our main business, when considered on a group basis, and that main business is not the provision of investment services or market making in relation to MiFID commodity derivatives; (2) we do not apply a high-frequency algorithmic trading technique; and (3) (if required to do so) we notify the relevant competent authority on an annual basis that we are relying on this exemption and, upon request, report the basis upon which we fall within the exemption. If, however, (x) no general exemption is available to us in the relevant EU jurisdiction in which any of our counterparties are based, (y) we are unable to meet the ancillary activity exemption, and (z) no other MiFID II exemption is available to us, we will need to become either authorized by the appropriate EU competent authority or (if applicable) register with ESMA as a third country firm in order to trade on our own account in MiFID commodity derivatives. Authorization by an EU competent authority would require our compliance with a variety of prudential and conduct of business rules.
Further, if we were to become authorized under MiFID II, we would be deemed to be a financial counterparty (instead of a non-financial counterparty that is not subject to the EMIR clearing obligation) for the purpose of EMIR. This may require us to clear relevant OTC derivative contracts through a central counterparty and subject us to additional reporting obligations and risk mitigation requirements under EMIR, including collateral exchange and marking transactions either to market or to an approved model.
Irrespective of whether we are required to be authorized or registered under MiFID II we will be directly and indirectly impacted by MiFID II’s commodity derivatives position limits and position reporting requirements which include powers given to EU competent authorities to require persons to reduce their commodity derivatives positions.
Market Abuse Regulation (“MAR”)
MAR, which came into effect on July 3, 2016, updated and strengthened the previous EU market abuse framework by extending its scope to new markets and by introducing new requirements. MAR’s scope was extended to MiFID financial instruments traded on an EU multilateral trading facility and (with effect from MiFID II implementation on January 3, 2018) on an EU organized trading facility as well as other financial instruments the price or value of which depends on, or has an effect on the price or value of financial instruments. The previous EU market abuse framework applied only to financial instruments admitted to trading on formally designated EU regulated markets and their related financial instruments. Further, MAR extends the EU market abuse framework to include behavior in relation to certain EU emission allowances and to certain spot commodity contracts. MAR effectively prohibits market abuse concerning relevant EU securities, derivatives, emission allowance products and certain spot commodity markets. This includes (i) the prohibition of trading in MiFID financial instruments on the basis of inside information, (ii) the improper disclosure of inside information relating to MiFID financial instruments, emission allowances or certain spot commodity contracts and (iii) the manipulation of prices of MiFID financial instruments, certain auctioned emission allowance products and certain spot commodity contracts using a number of prohibited behaviors or techniques.
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Local Partners
One of our subsidiaries, Atlantic Distribution Holdings SRL, has entered into a partnership framework agreement dated as of August 23, 2017 (the “PFA”), with DevTech Environment Limited (“DevTech”). We have partnered with DevTech to pursue strategic investment opportunities related to energy, transportation and infrastructure projects in Jamaica with a total projected cost of development, construction or acquisition of no more than $5 million per project.
Pending completion and commissioning of our Pennsylvania Facility, we
Facility.
program.
Our Employees
Facilities under development.
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low-cost green hydrogen production technology.
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| Item 1A. | Risk Factors |
section refer to NFE Inc. and its subsidiaries, including, if the Hygo Merger has closed, Hygo and its subsidiaries, and including, if the GMLP Merger has closed, GMLP and its subsidiaries. References to “Hygo” and “GMLP”, respectively, in this section, refer to Hygo and GMLP and their respective subsidiaries prior to the applicable Proposed Merger, and refer to Hygo and GMLP and their respective subsidiaries, along with the Company and its subsidiaries, following the applicable Proposed Merger.following risk factors together with all of the other information included in this Annual Report, including the information under “Cautionary Statement on Forward-Looking Statements.” risks described below. If any of the following risks were to occur, the value of our Class A common stock could be materially adversely affected or our business, financial condition and results of operations could be materially adversely affected.affected and thus indirectly cause the value of our Class A common stock to decline. Additional risks not presently known to us or that we currently deem immaterial could also materially affect our business. This Annual Report includes forward-looking statements regarding, among other things, our plans, strategies, prospects and projections, both business and financial.the value of our Class A common stock. As a result of any of these risks, known or unknown, you should not place undue reliancemay lose all or part of your investment in our Class A common stock. The risks discussed below also include forward-looking statements, and actual results may differ substantially from those discussed in these forward-looking statements. See “Cautionary Statement on any such statements includedForward-Looking Statements”.Annual Report.• TerminalsFacilities and Liquefaction Facilities. There can be no assurance that our TerminalsFacilities and Liquefaction Facilities will operate as expected, or at all.While the Old Harbour Terminal is substantially complete, it must still undergo extensive testing and commissioning. There can be no assurance that we will not need to make adjustments to these facilities as a result of such testing or commissioning, which could cause delays and be costly. Additionally, weTerminalsFacilities (as defined herein) and Liquefaction Facilities. In January 2019, we entered into the EPC Agreement providing for the construction of our Pennsylvania Facility. For additional information on the EPC Agreement for our Pennsylvania Facility, see “Items 1 and 2. Business and Properties—Pennsylvania EPC Agreement.” There can be no assurance that we will be able to enter into the contracts required for the development of our TerminalsFacilities and Liquefaction Facilities on commercially favorable terms, if at all, or that we will be able to obtain all of the environmental, regulatory, construction and zoning permissions we need. In particular, we will require agreements with ports proximate to our Liquefaction Facilities capable of handling the transload of LNG directly from our transportation assets to our occupying vessel. If we are unable to enter into favorable contracts or to obtain the necessary regulatory and land use approvals on favorable terms, we may not be able to construct and operate these assets as expected, or at all. Additionally, the construction of these kinds of facilities is inherently subject to the risks of cost overruns and delays. There can be no assurance that we will not need to make adjustments to our Facilities and Liquefaction Facilities as a result of the required testing or commissioning of each development, which could cause delays and be costly. Furthermore, if we do enter into the necessary contracts and obtain regulatory approvals for the construction and operation of the Liquefaction Facilities, there can be no assurance that such operations will allow us to successfully export LNG to our facilities,Facilities, or that we will succeed in our goal of reducing the risk to our operations of future LNG price variations. If we are unable to construct, commission and operate all of our TerminalsFacilities and Liquefaction Facilities as expected, or, when and if constructed, they do not accomplish theour goals, described in this Annual Report, or if we experience delays or cost overruns in construction, our business, operating results, cash flows and liquidity could be materially and adversely affected. Expenses related to our pursuit of contracts and regulatory approvals related to our TerminalsFacilities and Liquefaction Facilities still under development may be significant and will be incurred by us regardless of whether these assets are ultimately constructed and operational.the Dominican RepublicNicaragua, Brazil and other countries where we do not currently operate. Our strategy assumes that we will be able to expand our operations into other countries, including countries in the Caribbean, enter into long-term GSAs and/or PPAs with end-users, acquire and transport LNG at attractive prices, develop infrastructure, including the Pennsylvania Facility and the CHP Plant,(as defined herein), as well as other future projects, into efficient and profitable operations in a timely and cost-effective way, obtain approvals from all relevant federal, state and local authorities, as needed, for the construction and operation of these projects and other relevant approvals and obtain long-term capital appreciation and liquidity with respect to such investments. We cannot assure you if or when we will enter into contracts for the sale of LNG and/or natural gas, the price at which we will be able to sell such LNG and/or natural gas or our costs for such LNG and/or natural gas. Thus, there can be no assurance that we will achieve our target pricing, costs or margins. Our strategy may also be affected by future governmental laws and regulations. Our strategy also assumes that we will be able to enter into strategic relationships with energy end-users, power utilities, LNG providers, shipping companies, infrastructure developers, financing counterparties and19
other partners. These assumptions are subject to significant economic, competitive, regulatory and operational uncertainties, contingencies and risks, many of which are beyond our control. Additionally, in furtherance of our business strategy, we may acquire operating businesses or other assets in the future. Any such acquisitions would be subject to significant risks and contingencies, including the risk of integration, and we may not be able to realize the benefits of any such acquisitions.
uncertainty regarding the timing, pace and extent of an economic recovery in the United States, the other jurisdictions in which we operate and elsewhere, which in turn will likely affect demand for crude oil and natural gas; or
prospects.
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A variety of factors beyond our control could impact the availability or cost of capital, including domestic or international economic conditions, increases in key benchmark interest rates and/or credit spreads, the adoption of new or amended banking or capital market laws or regulations, the re-pricing of market risks and volatility in capital and financial markets, risks relating to the credit risk of our customers and the jurisdictions in which we operate, as well as general risks applicable to the energy sector. Our financing costs could increase or future borrowings or equity offerings may be unavailable to us or unsuccessful, which could cause us to be unable to pay or refinance our indebtedness or to fund our other liquidity needs. We also historically have relied and in the future will likely rely on borrowings under ourterm loans and other debt instruments to fund our capital expenditures. If any of the lenders in the syndicates backing these debt instruments were unable to perform on its commitments, we may need to seek replacement financing, which may not be available as needed, or may be available in more limited amounts or on more expensive or otherwise unfavorable terms.
business.
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Our current ability to generate cash is substantially dependent upon the entry into and performance by customers under long-term contracts that we have entered into or will enter into in the near future, and we could be materially and adversely affected if any customer fails to perform its contractual obligations for any reason, including nonpayment and nonperformance, or if we fail to enter into such contracts at all.
Risks of nonpaymentdeliver and nonperformance by customers are a consideration in our business,sell natural gas or LNG, and ourcompliance with certain contractual representations and warranties.
PREPA has commenced a bidding process through which potential biddersprovide products or services and our ability to collect payment could take control and ownership of PREPA’s transmission and distribution system. PREPA will solicit proposals from four selected bidders and expects to select a winner in the third quarter of 2019. We cannot predict how our relationship with PREPA
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could change if PREPA’s transmission and distribution system were to become privatized. If such event were to occur, PREPA may seek to find alternative power sources or purchase substantially less natural gas from us than what we currently expect to sell to PREPA,be negatively impacted, which could havematerially adversely affect our operating results, cash flow and liquidity, even if we were ultimately successful in seeking damages from such customer for a material adverse effect on our financial condition, resultsbreach of operations and cash flows.
Further, adverse economic conditions in our industry increase the risk of nonpayment and nonperformance by customers, particularly customers that have sub-investment grade credit ratings.
contract.
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We may not be able to generate sufficient cash to service all of our indebtedness and may be forced to take other actions to satisfy our obligations under our indebtedness, which may not be successful.
Our ability to make scheduled payments on or to refinance our existing or future debt obligations depends on our financial condition and operating performance, which are subject to prevailing economic and competitive conditions and to certain financial, business, legislative, regulatory and other factors beyond our control. We may be unable to maintain a level of cash flows from operating activities sufficient to permit us to fund our day-to-day operations or to pay the principal, premium, if any, and interest on our indebtedness. As of December 31, 2018, we had $280 million of total indebtedness outstanding, excluding deferred financing costs. On March 21, 2019, the Company drew an additional $220 million on the Term Loan Facility. Total principal amounts outstanding after this draw are $500 million. See “Part II, Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations” for more information on our Term Loan Facility.
If our cash flows and capital resources are insufficient to fund our debt service obligations and other cash requirements, we could face substantial liquidity problems and could be forced to reduce or delay investments and capital expenditures or to sell assets or operations, seek additional capital or restructure or refinance our indebtedness or operations. We may not be able to affect any such alternative measures, if necessary, on commercially reasonable terms or at all and, even if successful, such alternative actions may not allow us to meet our scheduled debt service obligations. The agreements that govern our indebtedness restrict our ability to dispose of assets and use the proceeds from any such dispositions and our ability to raise debt capital to be used to repay our indebtedness when it becomes due. We may not be able to consummate those dispositions or to obtain proceeds in an amount sufficient to meet any debt service obligations then due.
Our inability to generate sufficient cash flows to satisfy our debt obligations, or to refinance our indebtedness on commercially reasonable terms or at all, would materially and adversely affect our financial position and results of operations and our ability to satisfy our obligations.
If we cannot make scheduled payments on our debt, we will be in default and, as a result, lenders under any of our existing and future indebtedness could declare all outstanding principal and interest to be due and payable, the lenders under our debt instruments could terminate their commitments to loan money, our secured lenders could foreclose against the assets securing such borrowings and we could be forced into bankruptcy or liquidation.
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affect our liquidity and our cash flows. We expect our working capital needs to increase as our total business increases. If we do not have sufficient working capital, we may not be able to pursue our growth strategy, respond to competitive pressures or fund key strategic initiatives, such as the development of our facilities, which may harm our business, financial condition and results of operations.
As more fully discussed in this Annual Report, our
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Hurricanes or other natural or manmade disasters could result in an interruption of our operations, a delay in the completion of our infrastructure projects, higher construction costs or the deferral of the dates on which payments are due under our customer contracts, all of which could adversely affect us.
From time to time, we may be involved in legal proceedings and may experience unfavorable outcomes.
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A materialization of any of these risks could adversely affect our ability to achieve growth in the level of our cash flows or realize benefits from future projects, which could have a material adverse effect on our business, financial condition and results of operations.
items or to sell our inventory of natural gas or LNG at attractive prices.
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projects.
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acceptable plan of corrective action that the company will implement. If the issues are not corrected, the intervention escalates to on-site compliance audits and ultimately an “unsatisfactory” rating and the revocation of the company’s operating authority by the FMCSA, which could result in a material adverse effect on our business and consolidated results of operations and financial position.
Facilities.
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The operation of LNG carriers is inherently risky, and an incident resulting in significant loss or environmental consequences involving an LNG vessel could harm our reputation and business.
These risks also affect Hygo and GMLP and would remain relevant following the Proposed Mergers.
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Moreover, the overall trends are towards more regulations and more stringent requirements which are likely to add to our costs of doing business. For example, IMO regulations, which became applicable on January 1, 2020, limit the sulfur content of fuel oil for ships to 0.5 weight percent starting January 1, 2020. Likewise, the European Union is considering extending its emissions trading scheme to maritime transport to reduce GHG emissions from vessels. We contract with leading vessel providers in the LNG market and look for them to take the lead in maintaining compliance with all such requirements, although the terms of our charter agreements may call for us to bear some or all of the associated costs. While we believe we are similarly situated with respect to other companies that charter vessels, we cannot assure you that these requirements will not have a material effect on our business.
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competitors have available for deployment could allow them to compete successfully against us, which could have a material adverse effect on our business, ability to realize benefits from future projects, results of operations, financial condition, liquidity and prospects.
The COVID-19 pandemic and actions by OPEC have significantly impacted energy markets, and the price of oil has recently traded at historic low prices.
When engaged in marketing activities, it
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other potential end-users converting from traditional dieselADO or oil fuel to natural gas. These strategies cannot, however, eliminate all price risks. For example, any event that disrupts our anticipated supply chain could expose us to risk of loss resulting from price changes if we are required to obtain alternative supplies to cover these transactions. We are also exposed to basis risks when LNG is purchased against one pricing index and sold against a different index. Moreover, we are also exposed to other risks, including price risks on LNG we own, which must be maintained in order to facilitate transportation of the LNG to our customers or to our facilities. In addition, our marketing operations involve the risk of non-compliance with our risk management policies. We cannot assure you that our processes and procedures will detect and prevent all violations of our risk management strategies, particularly if deception or other intentional misconduct is involved.Facilities. If we were to incur a material loss related to commodity price risks, including non-compliance with our risk management strategies, it could have a material adverse effect on our financial position, results of operations and cash flows. There can be no assurance that we will complete the Pennsylvania Facility or be able to supply our facilitiesFacilities and the CHP Plant with LNG produced at our own facilities.Liquefaction Facilities. Even if we do complete the Pennsylvania Facility, there can be no assurance that it will operate as expected or that we will succeed in our goal of reducing the risk to our operations of future LNG price variations.
A major health and safety incident involving LNG or the energy industry more broadly or relating to our business may lead to more stringent regulation of LNG operations or the energy business generally, could result in greater difficulties in obtaining permits, including under environmental laws, on favorable terms, and may otherwise lead to significant liabilities and reputational damage.
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As required by the Dodd-Frank Act, the CFTC and the federal banking regulators have adopted rules requiring certain market participants to collect initial and variation margin with respect to uncleared swaps from their counterparties that are financial end-users and certain registered Swap Dealers and Major Swap Participants. The requirements of those rules are subject to a phased-in compliance schedule, which commenced on September 1, 2016. Although we believe we will qualify as a non-financial end user for purposes of these rules, were we not to do so and have to post margin as to our uncleared swaps in the future, our cost of entering into and maintaining swaps would be increased. In June 2011, the Basel Committee on the Banking Supervision, an international trade body comprised of senior representatives of bank supervisory authorities and central banks from 27 countries, including the United States and the EU,European Union, announced the final framework for a comprehensive set of capital and liquidity standards, commonly referred to as “Basel III.” Our counterparties that are subject to the Basel III capital requirements may increase the cost to us of entering into swaps with them or, although not required to collect margin from us under the margin rules, require us to post collateral with them in connection with such swaps in order to offset their increased capital costs or to reduce their capital costs to maintain those swaps on their balance sheets.
EMIR
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legal challenges to the adequacy of the NEPA analysis, which could result in delays that may adversely affect our business, contracts, financial condition, operating results, cash flow, liquidity and profitability. On July 15, 2020, the White House Council on Environmental Quality issued a final rule revising NEPA regulations; however, the regulations, which would become effective 60 days after publication, have been challenged in court, and thus the impacts of any such revisions are uncertain at this time. On June 18, 2020, we received an order from FERC, which asked us to explain why our San Juan Facility is not subject to FERC’s jurisdiction under section 3 of the NGA. Because we do not believe that the San Juan Facility is jurisdictional, we provided our reply to FERC on July 20, 2020 and requested that FERC act expeditiously. The matter was raised during a FERC open meeting held on January 19, 2021 but was not resolved, is on the agenda during the FERC open meeting to be held on March 18, 2021, and remains pending. We do not know if or when FERC will respond to our reply, or the outcome of any such response. Although FERC has civil penalty authority and the authority to authorize the siting, construction, and operation of jurisdictional LNG facilities, we do not know, nor has FERC indicated, what remedy FERC may alsorequire if FERC determines that our San Juan Facility is subject to FERC’s Section 3 jurisdiction. In addition, we may be subject to yet additional requirements and new regulations by relevant authorities in Jamaica, Bermuda, Mexico, Ireland, Nicaragua, Brazil or other jurisdictions, including with respect to land use approvals and permits needed to construct and operate our facilities.
facilities and sell LNG and power.
In addition, the U.S. Coast Guard regulations require certain security and response plans, protocols and trainings to mitigate and reduce the risk of intentional or accidental impacts to energy transportation and production infrastructure located in certain domestic ports.
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the future that we cannot predict. Revised, reinterpreted or additional laws and regulations that result in increased compliance costs or additional operating or construction costs and restrictions could have a material adverse effect on our business, contracts, financial condition, operating results, cash flow, liquidity and prospects.
Responding to scientific reports regarding threats posed by global climate change, the U.S. Congress has in the past considered legislation to reduce emissions of GHGs. In addition, some states and foreign jurisdictions have individually or in regional cooperation, imposedregulatory initiatives that impose more stringent restrictions on GHG emissions under various policiescould result in increased compliance costs, and approaches, including establishingthereby reduce demand for or erode value for, the natural gas that we process and market. Additionally, political, litigation, and financial risks may result in reduced natural gas production activities, increased liability for infrastructure damages as a capresult of climatic changes, or an impaired ability to continue to operate in an economic manner. One or more of these developments could have a material adverse effect on emissions, requiring efficiency measures, or providing incentives for pollution reduction, useour business, financial condition and results of renewable energy sources, or use of replacement fuels with lower carbon content.
operation.
In addition, due to concerns over climate change, numerous countries around the world have adopted or are considering adopting laws or regulations to reduce GHG emissions. In December 2015, the U.S. and 195 other nations attending the United Nations Climate Change Conference adopted the Paris Agreement on global climate change, which establishes a universal framework for addressing GHG emissions based on nationally determined contributions. The Paris Agreement calls for zero net anthropogenic GHG emission to be reached during the second half of the 21st century. Each party is to prepare a plan on its contributions to reach this goal; each plan is to be filed in a publicly available registry. The Paris Agreement does not create any binding obligations for nations to limit their GHG emissions but rather includes pledges to voluntarily limit or reduce future emissions. It also creates a process for participating countries to review and increase their intended emissions reduction goals every five years. The ultimate impact of the Paris Agreement depends on its ratification and implementation by participating countries, and cannot be determined at this time. Although the United States became a party to the Paris Agreement in April 2016, the Trump administration subsequently announced in June 2017 its intention either to withdraw from the Paris Agreement or renegotiate more favorable terms. However, the Paris Agreement stipulates that participating countries must wait four years before withdrawing from the agreement. It is not possible to know how quickly renewable energy technologies may advance, but the increased use of renewable energy could ultimately reduce future demand for hydrocarbons. These developments could have a material adverse effect on our financial position, results of operations and cash flows.
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Hydraulic Fracturing. Fracturing. Certain of our suppliers of natural gas and LNG employ hydraulic fracturing techniques to stimulate natural gas production from unconventional geological formations (including shale formations), which currently entails the injection of pressurized fracturing fluids (consisting of water, sand and certain chemicals) into a well bore. Moreover, hydraulically fractured natural gas wells account for a significant percentage of the natural gas production in the U.S.; the U.S. Energy Information Administration reported in 2016 that hydraulically fractured wells provided two-thirds of U.S. marketed gas production in 2015. The requirements for permits or authorizations to conduct these activities vary depending on the location where such drilling and completion activities will be conducted. Several states have adopted or are consideringconsidered adopting regulations to impose more stringent permitting, public disclosure or well construction requirements on hydraulic fracturing operations, or to ban hydraulic fracturing altogether. As with most permitting and authorization processes, there is a degree of uncertainty as to whether a permit will be granted, the time it will take for a permit or approval to be issued and any conditions which may be imposed in connection with the granting of the permit. Certain regulatory authorities have delayed or suspended the issuance of permits or authorizations while the potential environmental impacts associated with issuing such permits can be studied and appropriate mitigation measures evaluated. In addition to state laws, some local municipalities have adopted or are consideringconsidered adopting land use restrictions, such as city ordinances, that may restrict the performance of or prohibit the well drilling in general and/or hydraulic fracturing in particular.
Moreover, it is possible that we could invest both time and capital into a project involving a counterparty who may become subject to sanctions. If any of our counterparties becomes subject to sanctions as a result of these laws and regulations or otherwise, we may face an array of issues, including, but not limited to: having to abandon the related project, being unable to recuperate prior invested time and capital or being subject to law suits, investigations or regulatory proceedings that could be time-consuming and expensive to respond to and which could lead to criminal or civil fines or penalties.
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subject to costly and intrusive criminal and civil investigations as well significant potential criminal and civil penalties and other remedial measures, including changes or enhancements to our procedures, policies and control, as well as potential personnel change and disciplinary actions, whichactions. In addition, non-compliance with anti-corruption laws could constitute a breach of certain covenants in operational or debt agreements, and cross-default provisions in certain of our agreements could mean that an event of default under certain of our commercial agreements could trigger an event of default under our other agreements, including our debt agreements. Any adverse finding against us could also negatively affect our relationship and reputation with current and potential customers. The occurrence of any of these events could have ana material adverse impact on our business, results of operations, financial condition, liquidity and financial condition.
future business prospects.
Jamaica and Puerto Rico.
In 2019, public demonstrations in Puerto Rico led to the governor’s resignation and the political change interrupted the bidding process for the privatization of PREPA’s transmission and distribution systems. While our operations were not, to date, impacted by the demonstrations or changes in Puerto Rico’s administration, any substantial disruption in our ability to perform our obligations under the Fuel Sale and Purchase Agreement with PREPA could have a material adverse effect on our financial condition, results of operations and cash flows. Furthermore, we cannot predict how our relationship with PREPA could change given PREPA’s award for its transmission and distribution system. PREPA may seek to find alternative power sources or purchase substantially less natural gas from us than what we currently expect to sell to PREPA.
| • | be required to pay damages to the Customer or suffer a reduction in the tolling fee in the event that the Hilli fails to perform to certain specifications; |
Risks Inherent in Owning Class A shares
common stock.
New Fortress Energy Holdings holds
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These requirements will not apply to us as long as we remain a controlled company. A controlled company does not need its board of directors to have a majority of independent directors or to form independent compensation and nominating and governance committees. We intend to utilize some or all of these exemptions. Accordingly, shareholdersour corporate governance may not haveafford the same protections afforded to shareholders ofas companies that are subject to all of the corporate governance requirements of NASDAQ.
New Fortress Energy Holdings hasNasdaq.
stockholders.
Furthermore, in connection with the Offering, we entered into a shareholders’ agreement (the “Shareholders’ Agreement”) with New Fortress Energy Holdings and its affiliates. The Shareholders’ Agreement provides New Fortress Energy Holdings with the right to designate a certain number of nominees to our board of directors so long as New Fortress Energy Holdings and its affiliates collectively beneficially own at least 5%stockholders, including holders of the outstanding Class A shares and Class B shares. In addition, our operating agreement provides certain entities controlled by Wesley R. Edens and Randal A. Nardone (the “Consenting Entities”) the right to approve certain material transactions so long as the Consenting Entities and their affiliates collectively, directly or indirectly, own at least 30% of the outstanding Class A shares and Class B shares. See “Part III, Item 13. Certain Relationships and Related Transactions, and Director Independence—Shareholders’ Agreement.”
common stock.
In addition, New Fortress Energy Holdings may have different tax positions from us that could influence its decisions regarding whether and when to supportstockholder.
New Fortress Energy Holdings may competea shareholders’ agreement (the “Shareholders’ Agreement”) with us.
Our governing documents provide that New Fortress Energy Holdings is not prohibited from engaging in other businesses or activities, including those that might be in direct competition with us. In addition, New Fortress Energy Holdings may compete with us for investment opportunities and may own an interest in entities that compete with us. Additionally, our operating agreement provides that if New Fortress Energy Holdings or an affiliate or any of their officers, directors or employees acquire knowledge of a potential transaction that could be a corporate opportunity, they have no duty, to the fullest extent permitted by law, to offer such corporate opportunity to us, our Class A shareholders or our affiliates. This may create actual and potential conflicts of interest between us and New Fortress Energy Holdings and resultits affiliates, and in less than favorable treatmentconnection with the Exchange Transactions (as defined herein), New Fortress Energy Holdings assigned, pursuant to the terms of us andthe Shareholders’ Agreement, to the Founder Entities, New Fortress Energy Holdings’ right to designate a certain number of individuals to be nominated for election to our board of directors so long as its assignees collectively beneficially own at least 5% of the outstanding Class A shareholders.
Our operating agreement,Certificate of Incorporation and By-Laws, as well as Delaware law, containscontain provisions that could discourage acquisition bids or merger proposals, which may adversely affect the market price of our Class A sharescommon stock and could deprive our investors of the opportunity to receive a premium for their shares.
Class A common stock.
There are certain provisions in our operating agreement regarding exculpation and indemnification of our officers and directorsorganizational documents to the extent permitted by law.
Our operating agreement provides thatDelaware is, to the fullest extent permitted by applicable law, the sole and exclusive forum for (i) any derivative action or proceeding brought on our behalf, (ii) any action asserting a claim of breach of a fiduciary duty owed by any of our directors, officers, employees or officers will not be liable to us. By contrast, under the DGCL, a director or officer would be liable to us for (i) breach of duty of loyaltyagents to us or our shareholders, (ii) intentional misconductstockholders, (iii) any action asserting a claim against us or knowing violationsany of our directors, officers or employees arising pursuant to any provision of our organizational documents, the Delaware Limited Liability Company Act or the DGCL, as applicable, or (iv) any action asserting a claim against us or any of our directors, officers or employees that is governed by the internal affairs doctrine, in each such case subject to such Court of Chancery having personal jurisdiction over the indispensable parties named as defendants therein. Any person or entity purchasing or otherwise acquiring any interest in our stock will be deemed to have notice of, and consented to, the provisions described in the preceding sentence. This choice of forum provision may limit a stockholder’s ability to bring a claim in a judicial forum that it considers more likely to be favorable for disputes with us or our directors, officers, employees or agents, which may discourage such lawsuits against us and such persons. Alternatively, if a court were to find these provisions of our organizational documents inapplicable to, or unenforceable in respect of, one or more of the law that are not donespecified types of actions or proceedings, we may incur additional costs associated with resolving such matters in good faith, (iii) improper redemptionother jurisdictions, which could adversely affect our business, financial condition, results of sharesoperations or prospects.
We do not currently planthere can be no assurance that we will continue to pay cash dividends in amounts or on a basis consistent with prior distributions to our investors, if at all.
common stock.
45
We may issue preferred shares,stock, the terms of which could adversely affect the voting power or value of our Class A shares.
common stock.
Thecommon stock.
As of March 20, 2019, we have 20,837,272 Class A shares and 147,058,824 Class B shares outstanding. The Class A shares sold in the Offering are freely tradable without restriction under the Securities Act except for any Class A shares that may be held or acquired by our directors, officers or affiliates, which will be restricted securities under the Securities Act of 1933 (the “Securities Act”). The NFI LLC Units held by New Fortress Energy Holdings and any Class A shares New Fortress Energy Holdings acquired through the exercise of the Redemption Right are subject to resale restrictions under a 180-day lock-up agreement with the underwriters. Each of the lock-up agreements with the underwriters may be waived in the discretion of certain of the underwriters. Sales by New Fortress Energy Holdings after the exercise of the Redemption Right or other large holders of a substantial number of our Class A shares in the public markets,market, or the perception that such sales might occur, could have a material adverse effect onadversely affect the market price of our Class A shares or could impaircommon stock. The issuance of our ability to obtain capital through an offering of equity securities. In addition, we have agreed to provide registration rights to New Fortress Energy Holdings. Alternatively, we may be required to undertake a future public or private offering of Class A shares and usecommon stock in connection with property, portfolio or business acquisitions or the net proceeds from such offering to purchaseexercise of outstanding options or otherwise could also have an equal numberadverse effect on the market price of NFI LLC Units from New Fortress Energy Holdings.
our Class A common stock.
For as long as we arecommon stock.
46
elected to use the extended transition period provided in Section 7(a)(2)(B) of the Securities Act for complying with new or revised accounting standards under Section 102(b)(2) of the JOBS Act. This election allowsallowed us to delay the adoption of new or revised accounting standards that have different effective dates for public and private companies until those standards apply to private companies. As a result, our financial statements may not behave been comparable to companies that comply with public company effective dates, and our shareholdersstockholders and potential investors may have difficulty in analyzing our historical operating results if comparing us to such companies. We will remain an emerging growth company for up to five years, althoughIn addition, because we will lose that status sooner if we have more than $1.07 billion of revenues in a fiscal year, have more than $700.0 million in market value of our Class A shareholders held by non-affiliates, or issue more than $1.0 billion of non-convertible debt over a three-year period.
To the extent that we relyrelied on any of the exemptions available to emerging growth companies, you will receiveour historical public filings contained less information about our executive compensation and internal control over financial reporting than issuers that are not emerging growth companies. If some investors find
ability to raise capital and otherwise adversely affect the value of our securities.
common stock.
common stock.
If securities or industry analysts do not publish research or reports about our business, if they adversely change their recommendations regarding our Class A sharescommon stock or if our operating results do not meet their expectations, our share price could decline.
NFE is a holding company. NFE’s sole material asset is its equity interest in NFI, and accordingly, NFE is dependent upon distributions from NFI
NFE is a holding company and has no material assets other than its equity interest in NFI. NFE has no independent means of generating revenue. Torealize the extent NFI has available cash and subject to the terms of NFI’s credit agreements and any other debt instruments, we will cause NFI to make (i) pro rata distributions to holders of NFI LLC Units, including NFE, in an amount sufficient to allow NFE to pay its taxes, (ii) additional pro rata distributions to all holders of NFI LLC Units in an amount generally intended to allow holders of NFI LLC Units (other than NFE) to satisfy their respective income tax liabilities with respect to their allocable shareanticipated benefits of the income of NFI (based on certain assumptionsExchange Transactions and conventions and as determined by an entity controlled by Wesley R. Edens and Randal A. Nardone (“NFI Holdings”)) and (iii) non pro rata distributionsthe Conversion or those benefits may take longer to NFE in an amount at least sufficient to reimburse NFE for its corporate and other overhead expenses. Torealize than expected or may not offset the extent that NFE needs funds and NFI or its subsidiaries are restricted from making such distributions under applicable law or regulation or under the terms of their financing arrangements or are otherwise unable to provide such funds, NFE’s liquidity and financial condition could be adversely affected.
In certain circumstances, NFI is required to make tax distributions to holders of NFI LLC Units, and such tax distributions may be substantial. To the extent NFE receives tax distributions in excess of its actual tax liabilities and retains such excess cash, the holders of NFI LLC Units would benefit from such accumulated cash balances if they exercise their Redemption Right.
Pursuant to the NFI LLC Agreement, NFI must make generally pro rata distributions to the holders of NFI LLC Units, including NFE, in an amount sufficient to allow NFE to satisfy its actual tax liabilities. In addition, to the extent NFI has available cash, NFI is required to make additional pro rata tax distributions to all holders of NFI LLC Units in an amount generally intended to allow the holders of NFI LLC Units (other than NFE) to satisfy their assumed tax liabilities with respect to their allocable sharecosts of the income of NFI (based on certain assumptionsExchange Transactions and conventions and as determined by NFI Holdings). For this purpose, the determination of available cash takes into account, among other factors, (i) the existing indebtedness and other obligations of NFI and its subsidiaries and their anticipated borrowing needs, (ii) the ability of NFI and its subsidiaries to take on additional indebtedness on commercially reasonable terms and (iii) any necessary or appropriate reserves.
The amount of such additional tax distributions is determined based on certain assumptions, including assumed income tax rates, and is calculated after taking into account other distributions (including other tax distributions) made by NFI. Additional tax distributions may significantly exceed the actual tax liability for many of the holders of NFI LLC Units, including NFE. If NFE retains the excess cash it receives from such distributions, the holders of NFI LLC Units would benefit from any value attributable to such accumulated cash balances as a result of their exercise of the Redemption Right. However, we intend to take steps to eliminate any material excess cash balances,Conversion, which could include, but is not necessarily limited to, a distribution ofhave an adverse impact on the excess cash to holderstrading price of our Class A sharescommon stock.
In addition, the tax distributions that NFI may be required to make may be substantial. In addition, the amounta timely manner, or a failure of any additional tax distributions NFI is requiredbenefits realized to make likely will exceed the tax liabilities that would be owed by a corporate taxpayer similarly situated to NFI. Funds used by NFI to satisfyoffset its obligation to make tax distributions will not be available for reinvestment in our business, except to the extent NFE or certain other holders of NFI LLC Units use any excess cash received to reinvest in NFI for additional NFI LLC Units. In addition, because cash available for additional tax distributions is determined taking into account the ability of NFI and its subsidiaries to take on additional borrowing, NFI may be required to increase its indebtedness in order to fund additional tax distributions. Such additional borrowing may adversely affect our financial condition and business operations by, without limitation, limiting our ability to borrow in the future for other purposes, such as capital expenditures, and increasing our interest expense and leverage ratios.
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If NFI were to become a publicly traded partnership taxable as a corporation for U.S. federal income tax purposes, significant tax inefficiencies might result.
We intend to operate such that NFI does not become a publicly traded partnership taxable as a corporation for U.S. federal income tax purposes. A “publicly traded partnership” is a partnership the interests of which are traded oncosts, could have an established securities market or are readily tradable on a secondary market or the substantial equivalent thereof. Under certain circumstances, redemptions of NFI LLC Units pursuant to the Redemption Right (or our Call Right) or other transfers of NFI LLC Units could cause NFI to be treated as a publicly traded partnership. Applicable U.S. Treasury regulations provide for certain safe harbors from treatment as a publicly traded partnership, and we intend to operate such that redemptions or other transfers of NFI LLC Units qualify for one or more such safe harbors. For example, we intend to limit the number of unitholders of NFI, and the NFI LLC Agreement provides for limitationsadverse impact on the ability of unitholders of NFI to transfer their NFI LLC Units and provides us, as managing member of NFI, with the right to impose restrictions (in addition to those already in place) on the ability of unitholders of NFI to redeem their NFI LLC Units pursuant to the Redemption Right to the extent we believe it is necessary to ensure that NFI will continue to be treated as a partnership for U.S. federal income tax purposes.
If NFI were to become a publicly traded partnership, significant tax inefficiencies might result for us and for NFI, including as a resulttrading price of our inability to file a consolidated U.S. federal income tax return with NFI.
| Item 1B. | Unresolved Staff Comments. |
| Item 3. | Legal Proceedings. |
| Item 4. | Mine Safety Disclosures. |
| Item 5. | Market for the Registrant’s Common Equity, Related Shareholder Matters and Issuer Purchases of Equity Securities. |
As of
| Cumulative Total Return Percentage | |||||||||
| Company / Index | January 31, 2019(1) | March 2019(2) | June 2019(2) | Sepember 2019(2) | December 2019(2) | March 2020(2) | June 2020(2) | Sepember 2020(2) | December 2020(2) |
| NFE | 100 | (10.6) | (10.4) | 37.9 | 19.9 | (25.1) | (0.8) | 237.9 | 312.4 |
| S&P 500 | 100 | 4.8 | 8.8 | 10.1 | 19.5 | (4.4) | 14.7 | 24.4 | 38.9 |
| Alerian Midstream Index (“AMNA”) | 100 | 2.5 | 0.6 | (6.4) | (12.3) | (63.3) | (46.5) | (56.6) | (44.2) |
| Vanguard Energy ETF (“VDE”) | 100 | 4.5 | 0.2 | (7.2) | (2.2) | (53.5) | (38.0) | (49.7) | (34.5) |
| (1) | Date of the IPO |
| (2) | Last trading day of the month |
| Item 6. | Selected Financial Data. |
50
You should read the information set forth below together with “Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations” and our consolidated financial statements and related notes included elsewhere in this Annual Report. The historical financial results are not necessarily indicative of results to be expected for any future periods.
Year Ended December 31, | |||||||||
2018 | 2017 | 2016 | |||||||
(In thousands, except share and per share amounts) | |||||||||
Statements of Operations Data: | |||||||||
Revenues | |||||||||
Operating revenue | $ | 96,906 | $ | 82,104 | $ | 18,615 | |||
Other revenue | 15,395 | 15,158 | 2,780 | ||||||
Total revenues | 112,301 | 97,262 | 21,395 | ||||||
Operating expenses | |||||||||
Costs of sales | 95,742 | 78,692 | 22,747 | ||||||
Operations and maintenance | 9,589 | 7,456 | 5,205 | ||||||
Selling, general and administrative | 62,137 | 33,343 | 18,160 | ||||||
Depreciation and amortization | 3,321 | 2,761 | 2,341 | ||||||
Total operating expenses | 170,789 | 122,252 | 48,453 | ||||||
Operating (loss) | (58,488 | ) | (24,990 | ) | (27,058 | ) | |||
Interest expense | 11,248 | 6,456 | 5,105 | ||||||
Other (income), net | (784 | ) | (301 | ) | (53 | ) | |||
Loss on extinguishment of debt, net | 9,568 | ― | 1,177 | ||||||
Loss before taxes | (78,520 | ) | (31,145 | ) | (33,287 | ) | |||
Tax provision (benefit) | (338 | ) | 526 | (361 | ) | ||||
Net loss | $ | (78,182 | ) | $ | (31,671 | ) | $ | (32,926 | ) |
Net loss per share - basic and diluted | $ | (1.15 | ) | $ | (0.49 | ) | $ | (0.56 | ) |
Weighted average number of shares outstanding - basic and diluted | 67,932,825 | 65,006,140 | 58,753,425 | ||||||
As of December 31, | |||||||||
2018 | 2017 | 2016 | |||||||
Balance Sheet Data (at period end): | |||||||||
Property, plant and equipment, net | $ | 94,040 | $ | 69,350 | $ | 70,633 | |||
Construction in progress | 254,700 | 35,413 | 4,668 | ||||||
Total assets | 699,402 | 381,190 | 389,054 | ||||||
Long-term debt (includes current portion) | 272,192 | 75,253 | 80,385 | ||||||
Total liabilities | 416,755 | 102,280 | 99,684 | ||||||
Year Ended December 31, | |||||||||
2018 | 2017 | 2016 | |||||||
Statements of Cash Flow Data: | |||||||||
Net cash provided by (used in): | |||||||||
Operating activities | $ | (93,227 | ) | $ | (54,892 | ) | $ | (43,493 | ) |
Investing activities | (177,486 | ) | (52,396 | ) | (104,040 | ) | |||
Financing activities | 264,306 | 11,346 | 277,699 | ||||||
| Year Ended December 31, | ||||||||||||||||||||
| 2020 | 2019 | 2018 | 2017 | 2016 | ||||||||||||||||
| (In thousands, except share and per share amounts) | ||||||||||||||||||||
| Statements of Operations Data: | ||||||||||||||||||||
| Revenues | ||||||||||||||||||||
| Operating revenue | $ | 318,311 | $ | 145,500 | $ | 96,906 | $ | 82,104 | $ | 18,615 | ||||||||||
| Other revenue | 133,339 | 43,625 | 15,395 | 15,158 | 2,780 | |||||||||||||||
| Total revenues | 451,650 | 189,125 | 112,301 | 97,262 | 21,395 | |||||||||||||||
| Operating expenses | ||||||||||||||||||||
| Cost of sales | 278,767 | 183,359 | 95,742 | 78,692 | 22,747 | |||||||||||||||
| Operations and maintenance | 47,581 | 26,899 | 9,589 | 7,456 | 5,205 | |||||||||||||||
| Selling, general and administrative | 124,170 | 152,922 | 62,137 | 33,343 | 18,160 | |||||||||||||||
| Contract termination charges and loss on mitigation sales | 124,114 | 5,280 | - | - | - | |||||||||||||||
| Depreciation and amortization | 32,376 | 7,940 | 3,321 | 2,761 | 2,341 | |||||||||||||||
| Total operating expenses | 607,008 | 376,400 | 170,789 | 122,252 | 48,453 | |||||||||||||||
| Operating loss | (155,358 | ) | (187,275 | ) | (58,488 | ) | (24,990 | ) | (27,058 | ) | ||||||||||
| Interest expense | 65,723 | 19,412 | 11,248 | 6,456 | 5,105 | |||||||||||||||
| Other expense (income), net | 5,005 | (2,807 | ) | (784 | ) | (301 | ) | (53 | ) | |||||||||||
| Loss on extinguishment of debt, net | 33,062 | - | 9,568 | - | 1,177 | |||||||||||||||
| Loss before taxes | (259,148 | ) | (203,880 | ) | (78,520 | ) | (31,145 | ) | (33,287 | ) | ||||||||||
| Tax expense (benefit) | 4,817 | 439 | (338 | ) | 526 | (361 | ) | |||||||||||||
| Net loss | (263,965 | ) | (204,319 | ) | (78,182 | ) | (31,671 | ) | (32,926 | ) | ||||||||||
| Net loss attributable to non-controlling interest | 81,818 | 170,510 | 106 | - | - | |||||||||||||||
| Net loss atrributable to stockholders | $ | (182,147 | ) | $ | (33,809 | ) | $ | (78,076 | ) | $ | (31,671 | ) | $ | (32,926 | ) | |||||
| Net loss per share - basic and diluted | $ | (1.71 | ) | $ | (1.62 | ) | ||||||||||||||
| Weighted average number of shares outstanding - basic and diluted | 106,654,918 | 20,862,555 | ||||||||||||||||||
| As of December 31, | ||||||||||||||||||||
| 2020 | 2019 | 2018 | 2017 | 2016 | ||||||||||||||||
| Balance Sheet Data (at period end): | ||||||||||||||||||||
| Property, plant and equipment, net | $ | 614,206 | $ | 192,222 | $ | 94,040 | $ | 69,350 | $ | 70,633 | ||||||||||
| Construction in progress | 234,037 | 466,587 | 254,700 | 35,413 | 4,668 | |||||||||||||||
| Total assets | 1,908,091 | 1,123,814 | 699,402 | 381,190 | 389,054 | |||||||||||||||
| Long-term debt (includes current portion) | 1,239,561 | 619,057 | 272,192 | 75,253 | 80,385 | |||||||||||||||
| Total liabilities | 1,533,005 | 736,490 | 416,755 | 102,280 | 99,684 | |||||||||||||||
| Year Ended December 31, | ||||||||||||||||||||
| 2020 | 2019 | 2018 | 2017 | 2016 | ||||||||||||||||
| Statements of Cash Flow Data: | ||||||||||||||||||||
| Net cash provided by (used in): | ||||||||||||||||||||
| Operating activities | $ | (125,566 | ) | $ | (234,261 | ) | $ | (93,227 | ) | $ | (54,892 | ) | $ | (43,493 | ) | |||||
| Investing activities | (157,631 | ) | (376,164 | ) | (184,455 | ) | (29,858 | ) | (98,325 | ) | ||||||||||
| Financing activities | 819,498 | 602,607 | 260,204 | 13,960 | 275,936 | |||||||||||||||
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| Item 7. | Management’s Discussion and Analysis of Financial Condition and Results of Operations. |
You should read “Part 1, Item 1A. Risk Factors” and “Cautionary Statement on Forward-Looking Statements” elsewhere in this Annual Report on Form 10-K (“Annual Report”) for a discussion of important factors that could cause actual results to differ materially from the results described in or implied by the forward-looking statements contained in the following discussion and analysis. This information is intended to provide investors with an understanding of our past performance and our current financial condition and is not necessarily indicative of our future performance. Please refer to Montego Bay Facility PREPA since April 2020. of operating the San Juan Facility after our assets were placed in service in the unplanned maintenance at one of our customer’s facilities in Jamaica. As a result, we were unable to utilize a firm cargo purchased under our LNG supply agreement, incurring a loss of $18,906 on the sale of this cargo that was recognized during the second quarter of 2020. the San Juan Facility that went into service in July 2020; When the Credit Agreement, Senior Secured Bonds and Senior Unsecured Bonds were replaced by the Senior Secured Notes in September 2020, the outstanding principal balances totaled $980,000, as compared to the Term Loan Facility principal amount as of December 31, 2019 of $495,000, which had been extinguished in January 2020. As of December 31, 2020, we have issued $1,250,000 of Senior Secured Notes. and an increase in unrealized loss on our investment in equity securities. net Factors Impacting Comparability of Our Financial Results Liquidity and Capital Resources The following table summarizes the changes to our cash flows for the years ended December the year ended December 31, 2019. The impact of increasing accounts payable and accrued liabilities on cash flows from operations was $55,514 for the year ended December 31, 2020 compared to $3,036 for the year ended December 31, 2019. December 31, 2018. Senior Secured Notes. The Term Loan Facility Off Balance Sheet Arrangements 2020. For purchase commitments priced based upon an index such as Henry Hub, the amounts shown in the table above are based on the spot price of that index as of December 31, 2020. 84 months. Management’s Report on Internal Control Over Financial Reporting Inc. Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion. New Fortress Energy The accompanying notes are an integral part of these consolidated financial statements. New Fortress Energy New Fortress Energy determination of current expected credit losses, the incremental borrowing rates used in the determination of lease liabilities, total consideration and fair value of identifiable net assets related to When performing a recoverability assessment, the Company measures whether the estimated future undiscounted net cash flows expected to be generated by the asset exceeds its carrying value. In the event that an asset does not meet the recoverability test, the carrying value of the asset will be adjusted to fair value resulting in an impairment charge. The Company’s contracts with customers to supply natural gas or LNG may contain a lease of equipment. The Company allocates consideration received from customers between lease and non-lease components based on the relative fair value of each component. The fair value of the lease component is estimated based on the Foreign taxes changes as a result of no longer qualifying as an EGC. ASC In Other revenue. The valuation techniques that may be used to measure fair value are as follows: The Company estimates fair value of the derivative liability and equity agreement using a discounted cash flows method with discount rates based on the average yield curve for bonds with similar credit ratings and matching terms to the discount periods as well as a probability of the contingent event occurring. 2020 and 2019, respectively, is recorded within Other current liabilities on the consolidated balance sheets. The liability associated with the derivative liability of $10,716 and $9,800 as of December 31, 2020 and 2019, respectively, is recorded within Other long-term liabilities on the consolidated balance sheets. Depreciation for years ended December 31, 2020, 2019 and 2018 was 37.5 years and 38.8 years, respectively. As of January 1, 2020, intangible assets associated with favorable lease terms in acquired leases have been reclassified as ROU assets as a result of adoption of ASC 842. (defined below), including outstanding principal of $ On March 21, 2019, the Company drew an additional $220,000, bringing the Company’s total outstanding borrowings to $500,000 under the Term Loan Facility. payment due at maturity. The 5. Leases. As of As of December 31, 2020, the Company has recorded a lease liability of $3,279 within Non-current lease liabilities on the consolidated balance sheet. Fortress affiliated entities month-to-month non-exclusive license agreement. The Company incurred rent and administrative expenses of approximately $ As of December 31, statements that involve risks and uncertainties.statements. Forward-looking statements are 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.“—“—Factors Impacting Comparability of Our Financial Results” for further discussion. Unless otherwise indicated, dollar amounts are presented in thousands.engaged in providing energy and logistical servicesa global integrated gas-to-power infrastructure company that seeks to end users worldwide seeking to convert their operating assets from diesel or heavy fuel oil (“HFO”) to liquefieduse natural gas (“LNG”)to satisfy the world’s large and growing power needs. We deliver targeted energy solutions to customers around the world, thereby reducing their energy costs and diversifying their energy resources, while also reducing pollution and generating compelling margins. Our near-term mission is to provide modern infrastructure solutions to create cleaner, reliable energy while generating a positive economic impact worldwide. Our long-term mission is to become one of the world’s leading carbon emission-free independent power providing companies. We discuss this important goal in more detail in “Items 1 and 2: Business and Properties” under “Toward a Carbon-Free Future”. The Company currently hasregasification operations in the United States and Jamaica.conversion or development of natural gas-fired power generation. We currently source LNG from a combination oflong-term supply agreements with third party suppliers and from our own liquefaction facility in Miami, Florida and purchases from third party suppliers. We are developing the infrastructure necessary to supply all of our existing and future customers with LNG produced primarily at our own facilities.Florida. We expect that control of our vertical supply chain, from liquefactionprocurement to delivery of LNG, will help to reduce our exposure to future LNG price variations and enable us to supply our existing and future customers with LNG at a price that reflects production at our own facilities, reinforcingreinforces our competitive standing in the LNG market. Our strategy is simple: we seek to manufacture our ownprocure LNG at attractive prices using fixed-price feedstock,long-term agreements and through our own production, and we seek to sell natural gas (delivered through LNG infrastructure) or gas-fired power to customers that sign long-term, take-or-pay contracts.take-or-pay contracts with significant customers in Jamaica and Puerto Rico, including Jamaica Public Service Company Limited (“JPS”), the sole public utility in Jamaica, South Jamaica Power Company Limited (“JPC”SJPC”), an affiliate of JPS, and Jamalco, a joint venture between General Alumina Jamaica Limited (“GAJ”), a subsidiary of Noble Group, and Clarendon Alumina Production Limited, an entity owned by the Government of Jamaica, with a focus on bauxite mining and alumina production in Jamaica, and the Puerto Rico Electric Power Authority (“Jamalco”PREPA”), each of which is described in more detail below. CertainOur assets built to service JPSthese significant customers have and the assets built to service JPC and Jamalco will have,been designed with capacity to service other customers. it under a multi-cargo contract from a supplier or by manufacturing it in our natural gas liquefaction and storage and production facility located in Miami-Dade County, Florida (the “Miami Facility”). In the future, we intendOur long-term goal is to develop the infrastructure necessary to supply our existing and future customers with LNG produced primarily at our own facilities, including our expanded delivery logistics chain in Northern Pennsylvania (the “Pennsylvania Facility”).TerminalTerminal”Facility”) serves as our supply hub for the north side of Jamaica, providing natural gas to JPS to fuel the 145MW Bogue Power Plant in Montego Bay, Jamaica (the “Bogue Power Plant”).Jamaica. Our Montego Bay Facility commenced commercial operations in October 2016 and is capable of processing up to 740,000 gallons of LNG (61,000 MMBtu) per day and features approximately 7,000 cubic meters of onsite storage. The Montego Bay Terminal commenced commercial operations on October 30, 2016 and stores approximately two million gallons of LNG in seven storage tanks. The Montego Bay TerminalFacility also consists of an ISO loading facility that can transport LNG to allnumerous on-island industrial users.manufacturing (“small-scale”) customers across the island. The small-scale business provides these usersPurchase Agreement with an alternative fuel to support their business operations and limit reliance on monopolistic utilities.our customers and reduces our dependence on other suppliers for LNG. The Miami Facility is the first plantsales directly to successfully export domestically produced LNG from the lower 48 states to a non-FTA country and it employs one of the largest ISO container fleetsindustrial end-users in the world. The Miami Facility provides LNG to small-scale customers in Southernsouthern Florida, including Florida East Coast Railway via our train loading facility, and other customers throughout the Caribbean using ISO containers.20182020 compared to Year Ended December 31, 2017 Year Ended December 31, 2020 2019 Change Revenues Operating revenue $ 318,311 $ 145,500 $ 172,811 Other revenue 133,339 43,625 89,714 Total revenues 451,650 189,125 262,525 Operating expenses Cost of sales 278,767 183,359 95,408 Operations and maintenance 47,581 26,899 20,682 Selling, general and administrative 124,170 152,922 (28,752 ) Contract termination charges and loss on mitigation sales 124,114 5,280 118,834 Depreciation and amortization 32,376 7,940 24,436 Total operating expenses 607,008 376,400 230,608 Operating loss (155,358 ) (187,275 ) 31,917 Interest expense 65,723 19,412 46,311 Other expense (income), net 5,005 (2,807 ) 7,812 Loss on extinguishment of debt, net 33,062 - 33,062 Loss before taxes (259,148 ) (203,880 ) (55,268 ) Tax expense 4,817 439 4,378 Net loss $ (263,965 ) $ (204,319 ) $ (59,646 ) and natural gas salesor outputs from our natural gas-fired power generation facilities for the year ended December 31, 20182020 was $96,906$318,311 which increased by $14,802$172,811 from $82,104$145,500 for the year ended December 31, 2017,2019. The increase was primarily due to additional small scale customers commencing operationsdriven by volumes sold from the Old Harbour Terminal, including volumes utilized in the fourth quarterCHP Plant which commenced commercial operations during March 2020:2017revenue from volumes sold at the Old Harbour Facility, as compared to $41,229 for the year ended December 31, 2019. Revenue recognized for the year ended December 31, 2020 included $112,334 from sales to the Old Harbour Power Plant and $76,862 from natural gas utilized in the first quarter of 2018. TheCHP Plant and Jamalco’s boilers. For the year ended December 31, 2020, the volume delivered to the Old Harbour Power Plant was 96.0 million gallons (8.0 TBtu) and the volume utilized in the CHP Plant and Jamalco’s boilers was 96.2 million gallons (7.9 TBtu). For the year ended December 31, 2019, the volume delivered to the Old Harbour Power Plant was 22.2 million gallons (1.9 TBtu).Miami Facility todelivery of power and steam, which began during March 2020, under our small-scale customers increased by 2.3 million gallons (190,330 MMBtu) from 8.3 million gallons (688,879 MMBtu)contracts with JPS and Jamalco added $23,062 in 2017 to 10.6 million gallons (879,209 MMBtu) in 2018.The increase in operating revenue was also attributable to additional sales at the Montego Bay Terminal. The delivered volume increased by 12.9 million gallons (1.1 TBtu) from 86.3 million gallons (7.0 TBtu) in 2017 to 99.2 million gallons (8.1 TBtu) in 2018. Of the delivered volumes, 0.6 million gallons (46,065 MMBtu) and 3.1 million gallons (247,029 MMBtu) were delivered to small-scale networks in 2017 and 2018, respectively.Other revenue for the year ended December 31, 20182020.$15,395 which increased $237 from $15,158also impacted by operations at our Montego Bay Facility, including the following:2017. The Company leases certain2020, resulting in an increase of $15,771 to Operating revenue.• equipment, includingsuch services are included within certain long-term contracts to supply these customers with natural gas or outputs from our natural gas-fired facilities. Other revenue increased $89,714 for the Montego Bay Terminal,year ended December 31, 2020 as compared to its customers which are accountedthe year ended December 31, 2019, and the increases were due to the following:either as direct financing leases or operating leases. We currently generate a majority of other revenue from interest recognized from direct financing leases or leasing revenue from operating leases.53Cost of salesCost of salesdevelopment services in Puerto Rico for the year ended December 31, 2018 was $95,742 which increased $17,050 from $78,6922020, including conversion of the customer’s infrastructure within the San Juan Power Plant and gas used by our customer for testing and commissioning their assets. Development services revenue recognized in the year ended December 31, 2020 included $118,757 for the customer’s use of 129.5 million gallons (10.7 TBtu) of natural gas as part of commissioning their assets.2017. The increase in 2019. was attributable to increased LNG cost from $0.51 per gallon ($6.18 per MMBtu) in 2017 to $0.57 per gallon ($6.84 per MMBtu) in 2018, as well as an increase in charter costs due to more shipments in 2018 compared to 2017 and an increase in volumes sold to small-scale customers.applicable,well as shipping and logistics costs to deliver LNG or natural gas to our facilities, and regasification and terminal operating expenses to supply LNGpower generation facilities or to our customers. Our LNG and natural gas supply are purchased from third parties or converted in our Miami Facility. Costs to convert natural gas to LNG, including labor, depreciation and other direct costs to operate our Miami Facility are also included in Cost of sales.relates toincludes costs of operating our Miami Facility as well as our Montego Bay TerminalFacilities, exclusive of conversion costs to convert that are reflected in Cost of sales. Operations and maintenance for the year ended December 31, 20182020 was $9,589,$47,581, which increased $2,133$20,682 from $7,456$26,899 for the year ended December 31, 2017. 2019. The increase is primarily a result of an increasehigher logistics costs of $9,727 for the year ended December 31, 2020, primarily associated with the operations of additional charter vessels deployed. Operations and maintenance also increased by $5,425 for the year ended December 31, 2020 for costs of operating the CHP Plant for the period after commencement of commercial operations in headcountMarch 2020 and general maintenanceby $5,698 for costs at these facilities. Selling, general and administrative also includes compensation expenses for our corporate employees, including our executives, as well as professional fees for our advisors. 2018,2020, was $62,137$124,170 which increased $28,794decreased $28,752 from $33,343$152,922 for the year ended December 31, 20172019. The decrease was primarily attributable to decreased share-based compensation expense of $32,651, as well as decreases to professional fees of $3,743, as compared to the year ended December 31, 2019. These decreases were partially offset by $8,344 of higher payroll costs associated with increased headcount.increased development activities, headcount and professional fees.20182020 was $3,321,$32,376, which increased $560$24,436 from $2,761$7,940 for the year ended December 31, 2017.2019. The increase iswas primarily a resultdue to the following:additional equipment purchases placed$3,582 for our Old Harbour Facility that went into service in June 2019;small-scale customers.20182020 was $11,248,$65,723, which increased $4,792$46,311 from $6,456$19,412 for the year ended December 31, 2017,2019, primarily as a result of financing costs expensedthe additional principal balances outstanding during 2020 under the Credit Agreement, Senior Secured Bonds and amortized forSenior Unsecured Bonds, as compared to the Term Loan Facility (as(all defined below).income,expense (income), net for the year ended December 31, 20182020 was ($784),$5,005, which increased $483$7,812 from income of ($301)2,807) for the year ended December 31, 2017,2019, primarily as a result of the change in fair value of the derivative liability and equity agreement associated with our acquisition of Shannon LNG, a decrease in interest income, partially offset by realized foreign currency loss.20182019 was $9,568, primarily$0 as a result of the extinguishment of the MoBay Loan (as defined below) and the write-off of deferred financing costs associated with lenders in the Miami Loan (as defined below) and the Term Loan Facility that were treated as an extinguishment, as well as additional financing costs paid towe did not have any such lenders.Tax provision (benefit)Tax benefit for the year ended December 31, 2018 was ($338), which increased $864 from a tax provision of $526 for the year ended December 31, 2017 due to losses incurred during 2018 in Jamaican entities.54Results of Operations – Year Ended December 31, 2017 compared with Year Ended December 31, 2016RevenuesOperating revenue from LNG and natural gas sales for the year ended December 31, 2017 was $82,104, which increased by $63,489 from $18,615 for the year ended December 31, 2016. The increase in revenue was primarily attributable to 12 months of operations at the Miami Facility and Montego Bay Terminaltransactions during the year ended December 31, 2017, whereas the Miami Facility and Montego Bay Terminal were operating for eight and two months, respectively, during the year ended December 31, 2016.The delivered volume from the Miami Facility to our small-scale customers increased by 6.7 million gallons (554,415 MMBtu) from 1.6 million gallons (134,464 MMBtu) in 2016 to 8.3 million gallons (688,879 MMBtu) in 2017. We executed three contracts in 2016 and three contracts in 2017 to provide customers with LNG from our Miami Facility.The increase in operating revenue was also attributable to additional sales at the Montego Bay Terminal. The delivered volume increased by 86.7 million gallons (5.9 TBtu) from 12.5 million gallons (1.1 TBtu) in 2016 to 99.2 million gallons (7.0 TBtu) in 2017.Other revenue for the year ended December 31, 2017 was $15,158, which increased $12,378 from $2,780 for the year ended December 31, 2016. The increase is attributable to 12 monthsyear.from $0.41 per gallon ($4.95 per MMBtu) in 2016 to $0.51 per gallon ($6.18 per MMBtu) in 2017. Also, there were 12 months of operations at the Miami Facility and Montego Bay Terminal for the year ended December 31, 2017, whereas the Miami Facility and Montego Bay Terminal were operating for eight and two months, respectively, for the year ended December 30, 2016.Operations and maintenanceOperations and maintenance relates to costs of operating our Miami Facility, as well as our Montego Bay Terminal, exclusive of conversion costs reflected in Cost of sales. Operations and maintenance for the year ended December 31, 2017 was $7,456, which increased $2,251 from $5,205 for the year ended December 31, 2016. The increase is primarily a result of the Miami Facility operating for 12 months in 2017 in comparison to operating for eight months in 2016.Selling, general and administrativeSelling, general and administrative includes employee travel costs, insurance, and costs associated with development activities for projects that are in initial stages and development is not yet probable. Selling, general and administrative also includes compensation expenses for our corporate employees, including our executives, as well as professional fees for our advisors. Selling, general and administrative for the year ended December 31, 2017 was $33,343, which increased $15,183 from $18,160 for the year ended December 31, 2016 primarily as a result of increased development activities and employee travel as well as increased headcount.Depreciation and amortizationDepreciation and amortization for the year ended December 31, 2017 was $2,761, which increased $420 from $2,341 for the year ended December 31, 2016. The increase is primarily a result of 12 months of operations at the Miami Facility and the purchase of additional equipment and vehicles which were placed into service during 2017.Interest expenseInterestTax expense for the year ended December 31, 20172020 was $6,456,$4,817, which increased $1,351$4,378 from $5,105a tax expense of $439 for the year ended December 31, 2016, primarily as a result of interest on2019. During 2020, the MoBay Loan of $3,611CHP Plant began operations and $643 and Miami Loan of $2,845 and $1,803 forwe placed our assets at the years ended December 31, 2017 and December 31, 2016, respectively, net of capitalized interest recognized during constructionSan Juan Facility in the year ended December 31, 2016. During 2017, we raised equity capital, which funded a majorityservice. Certain of our capital expenditures resulting in a decrease in capitalized interest compared to 2016. The increase in interest expense is partially offset by the reduction of interest expense on our corporate loan, which was repaid at maturity in June 2016.Other (income), netOther income, netJamaican operations had increased earnings for the year ended December 31, 2017 was ($301), which increased $248 from ($53) for the year, ended December 31, 2016, primarily as2020 without any historical net operating losses to offset additional tax expense. We have recognized tax expense in Puerto Rico at a result of an increase in interest income and realized foreign currency gain.Loss on extinguishment of debtLoss on extinguishment of debt for the year ended December 31, 2016 was $1,177, which was recognized as a result of the extinguishment of the corporate loan on June 3, 2016.Tax provision (benefit)Tax provision (benefit) for the year ended December 31, 2017 was $526, which increased $887 from ($361) for the year ended December 31, 2016preferential tax rate due to a decreaseour tax decree resulting in net taxable lossesan effective tax rate lower than the U.S. federal income tax rate. We continue to have valuation allowances in amany of our foreign jurisdiction when comparing year ended 2017 to year ended 2016.56• onlydo not include our Miami Facility andsignificant projects that have recently been completed or are near completion.Our results of operations for the year ended December 31, 2020 include our Montego Bay Terminal. Our historical financial statements only include ourFacility, Miami Facility, sales from our Old Harbour Facility to SJPC, and certain industrial end-users. The CHP Plant commenced commercial operations during March 2020, and our Montego Bay Terminalresults now include revenue and results operations from sales of gas, power and steam from the CHP Plant. We also completed the development of our San Juan Facility in third quarter of 2020, and in the second quarter of 2020, we began to deliver natural gas to the San Juan Power Plant for PREPA to use in the commissioning of their assets. Our current results do not include future revenue resultingand operating results from long-term, take-or-pay contracts with downstream customers expected fromother projects under development including the 190MW Old Harbour power plant operated by JPC in Old Harbour, Jamaica (the “Old Harbour Power Plant,”) the dual-fired CHP facility in Clarendon, Jamaica (the “CHP Plant”), the multi-fuel handling facility located in the Port of San Juan, Puerto Rico (the “San Juan Facility”), the LNG regasification terminal in La Paz Baja California Sur, Mexico (the “La Paz Terminal”),Facility, the LNG terminal onPuerto Sandino Facility, or the Shannon Estuary near Ballylongford, Ireland (the “Ireland Terminal”) and the Pennsylvania Facility. The Old Harbour Power Plant completed construction in December 2018 and commercial operations will begin in the second quarter of 2019.In addition, we currently purchase the majority of our supply of LNG from third parties. For the years ended December 31, 2018 and December 31, 2017, we sourced 92.5% and 94.1%, respectively, of our LNG volumes from third parties. NFE is in the process of developing in-basin liquefaction facilities that will vertically integrate our supply and substantially reduce the need to source LNG from third parties, which, when combined with lower cost production, should significantly impact our results of operations and cash flows from both contracted and expected downstream sales.• Our organizational structure has changed as a result of reorganization transactions completed at the time of our IPO.statements presented in this Annual Report, including this discussion and analysis, areresults do not reflect changes to our current long-term LNG supply agreement as well as new LNG supply agreements that will lower the financial statementscost of New Fortress Energy Holdings, our predecessor. LNG supply through 2030. We completedcurrently purchase the majority of our IPO on February 4, 2019, and proceedssupply of LNG from third parties, sourcing approximately 97% of our LNG volumes from third parties for the IPO were usedyear ended December 31, 2020. In June 2020, we entered into an agreement to terminate our obligation to purchase limited liability company units (“LLC Units”) in New Fortress Intermediate LLC (“NFI”), an entity formed in conjunction withLNG from our supplier for the IPO. In addition, New Fortress Energy Holdings contributed allremainder of its interests in consolidated subsidiaries that comprised substantially all of its historic operations, as well its limited assets and liabilities, to NFI2020 in exchange for LLC Units. NFE is a holding company whose principal asset ispayment of $105,000, and for the remainder of 2020, we purchased all volumes needed for our operations on the open market, significantly reducing our LNG supply costs from $0.73 per gallon ($8.81 per MMBtu) for the year ended December 31, 2019 to $0.46 per gallon ($5.58 per MMBtu) for the year ended December 31, 2020. During 2020, we also entered into four LNG supply agreements for the purchase of approximately 415 TBtu of LNG at a controlling equity interestprice indexed to Henry Hub from 2021 and 2030, resulting in NFI. Asexpected pricing below the sole managing member of NFI, the Company operates and controls all of the business and affairs of NFI, and through NFI and its subsidiaries, conducts the Company’s historical business.pricing in our previous long-term supply agreement.The contribution of the assets of New Fortress Energy Holdings and net proceeds from the IPO to NFI was treated as a reorganization of entities under common control. NFE will retrospectively present the consolidated financial statements of New Fortress Energy Holdings for all current and comparative periods presented beginning with its first quarter 2019 financial statements.The financial statements of NFE that will be presented beginning in first quarter 2019 will allocate a significant portion of the results of operations to New Fortress Energy Holdings, through its non-controlling interest in NFI. The results of operations and earnings allocated to holders of Class A shares of NFE issued in the IPO will be less than historically presented within earnings per share.• We expectincur incremental, selling, general and administrative expenses related to our transition to a publicly traded company. We completed our IPO on February 4, 2019, andbe incurred associated with these acquisitions. Upon completion of the acquisition of Hygo, we expect to incur direct, incremental generalacquire the Sergipe Terminal, a 50% interest in the Sergipe Power Plant, as well as the Barcarena Terminal and administrative expenses asthe Santa Catarina Terminal that are currently in development. In addition, we expect to acquire one FSRU in service at the Sergipe Terminal and two operating LNG carriers which may be converted into FSRUs. Upon completion of the acquisition of GMLP, we expect to acquire a resultfleet of beingsix FSRUs, four LNG carriers and an interest in a publicly traded company, includingfloating liquefaction vessel. The results of operations of Hygo and GMLP will begin to be included in our financial statements upon the closing of the acquisitions, expected in the first half of 2021. Our results of operations in 2021 will also include transaction costs associated with these acquisitions as well as costs incurred to integrate the employmentoperations of additional personnel, compliance underHygo and GMLP into our business.• Securities Exchange ActSarbanes Oxley Act. Following the issuance of 1934,Senior Secured Notes in September 2020, we ceased to qualify as amended (the “Exchange Act”), annualan EGC and quarterly reportscan no longer take advantage of this exemption. We are also now required to our common shareholders, registrar and transfer agent fees, national stock exchange fees,accelerate the adoption of certain new or revised accounting pronouncements. Starting in 2020, we will incur additional costs associated with the initial implementationproviding an auditor’s attestation report, adoption of our Sarbanes-Oxley Act of 2002 (“Sarbanes-Oxley Act”) Section 404 internal controls and testing,accounting standards on an accelerated timeline, as well as additional audit fees, incremental director and officer liability insurance costs and director and officer compensation. These direct, incremental general and administrative expenses are not included in our historical results of operations.resulting from PCAOB requirements.57cash flow from operations andproceeds from recent borrowings, access to additional capital sources and cash flow from operations to fund our capital expenditures and working capital needs for the next 12 months. We expect to fund our current operations and continued development of additional facilities through a combination of cash on hand and cash generated from operations. We may also elect to generate additional borrowings from the Term Loan Facility, as defined below,liquidity through future debt or equity issuances to fund developments and thetransactions. We have historically funded our developments through proceeds from our IPO. TheIPO and debt and equity financing as follows:issued and sold 20,000,000 Class A shares at an IPO price of $14.00 per share, raisingraised net proceeds of $257,600. On March 1, 2019,$268,010, inclusive of additional net proceeds raised from the underwriters exercised theirexercise of the underwriter’s option to purchase additional shares and after deducting underwriting discounts and commissions and transaction costs.837,272$63,000 in Senior Secured Bonds, which was fully funded by January 2020.shares at the IPO price of $14.00 per share, less underwriting discounts, raising additional netcommon stock and received proceeds of $11,048. $290,771, net of $1,221 in issuance costs.$500,000,$1,181 million, with approximately $333,000$789 million having already been spent through December 31, 2018.2020. This estimate represents the expenditures necessary to complete construction of projects in Jamaicathe La Paz Facility and Miami. Borrowings under the Term LoanPuerto Sandino Facility, will be used to make significant capitalexpected expenditures to build outserve new industrial end-users and other planned capital expenditures. We expect to be able to fund all such committed projects with a combination of cash on hand and cash flows from operations. Through December 31, 2020, we have spent approximately $159 million to develop the Pennsylvania Facility. Approximately $20 million of construction and development costs have been expensed as we have not issued a final notice to proceed to our Terminals, including the Old Harbour Power Plantengineering, procurement and the CHP Plant,construction contractors. Cost for land, as well as engineering and equipment that could be deployed to other facilities and associated financing costs of approximately $139 million, has been capitalized.small-scale customer capital expenditures for storageloans in an aggregate principal amount of $1.7 billion, consisting of a $1.5 billion senior secured bridge facility (the “Bridge Loan”) and regasification operations. We are currently exploring opportunitiesa $200 million senior secured revolving facility to expand our business into new markets, includingpay, subject to the Caribbeanterms and Mexico and we will require significant additional capital to implement our strategy.Cash FlowsThe following table summarizes the changes to our cash flows for the year ended December 31:Cash (used in) operating activitiesOur cash flow used in operating activities was $93,227 for the year ended December 31, 2018, which increased by $38,335 from $54,892 for the year ended December 31, 2017. For both years ended December 31, 2018 and 2017, we had net loss that comprisedconditions set forth therein, a significant portion of cash used in operating activities due to the continued expansion of our business activities. Cash flows used in operating activities for the year ended December 31, 2018 was also significantly impacted by increases in other asset accounts, primarily due to the acquisition of port access rights.Cash (used in) investing activitiesOur cash flow used in investing activities was $177,486 for the year ended December 31, 2018, which increased by $125,090 from $52,396 for the year ended December 31, 2017. The increase in cash flow used in investing activities is due to the increase in capital expenditures to complete the Old Harbour Power Plant, as well as, the Pennsylvania Facility and the CHP Plant.Cash provided by financing activitiesOur cash flow provided by financing activities was $264,306 for the year ended December 31, 2018, which increased by $252,960 from $11,346 for the year ended December 31, 2017. The increase in cash flow provided by financing activities is due to additional borrowings under the Term Loan Facility of $280,600. Additionally, the Company received $50,000 from the additional capital raised in December 2017, undertook an additional equity capital raise of $20,150 and received the cash duringpurchase price in connection with the year.GMLP Merger, to refinance certain debt of GMLP and its subsidiaries, to pay related fees and expenses and for general corporate purposes. If NFE utilizes the Bridge Loan, the facility will bear a fixed interest rate of increase was offset byBridge Loan has a one-year term, is pre-payable without penalty and will automatically be converted into a seven-year term loan if it is not repaid in full at maturity. The senior secured revolving facility has a term of approximately five years and bears interest based on the repaymentthree-month LIBOR rate plus certain margins.31: Year Ended December 31, (in thousands) 2020 2019 Change Cash flows from: Operating activities $ (125,566 ) $ (234,261 ) $ 108,695 Investing activities (157,631 ) (376,164 ) 218,533 Financing activities 819,498 602,607 216,891 Net increase (decrease ) in cash, cash equivalents, and restricted cash $ 536,301 $ (7,818 ) $ 544,119 $54,892 in 2017, which increased by $11,399 from $43,493 in 2016. For both the years ended December 31, 2017 and 2016, we had net loss that comprised a significant portion of cash used in operating activities due to the continued expansion of our operations in Jamaica. A significant portion of cash used in operations$125,566 for the year ended December 31, 20172020, which decreased by $108,695 from $234,261 for the year ended December 31, 2019. The reduction in cash flow used in operating activities for the year ended December 31, 2020 was attributeddue to more favorable changes in working capital accounts. Fluctuations in inventory balances led to an increase in deposits attributedoperating cash flows of $23,230 for the year ended December 31, 2020 compared to a prepayment$50,345 decrease in operating cash flows for LNG supply.$52,396$157,631 for the year ended December 31, 2017,2020, which decreased by $51,644$218,533 from $104,040$376,164 for the year ended December 31, 2016. The decrease in cash flow2019. Cash outflows for investing activities during the year ended December 31, 2020 were primarily used to complete the CHP Plant and the San Juan Facility, as well as construction of the La Paz Facility.is due toduring the year ended December 31, 2019 significant cashcapital expenditures incurred in 2016 as the Company completed constructionfor development of its Miamiour Old Harbour Facility, CHP Plant, San Juan Facility and its Montego Bay Terminal. The decrease was offset by constructionPennsylvania Facility, as well as payments for significant outstanding amounts to our suppliers that began in 2017 on the Old Harbour Power Plant resulting in approximately $28,500 in capital expenditures. The decrease was also partially offset by a restrictionwere accrued as of $15,000 as collateral posted for performance under a GSA with a customer, and $7,000 of collateral posted with LNG suppliers for an upcoming delivery.$11,346$819,498 for the year ended December 31, 2017,2020, which decreasedincreased by $266,353$216,891 from $277,699$602,607 for the year ended December 31, 2016.2019. Cash provided by financing activities during the year ended December 31, 2020 was due to proceeds received from the borrowings under the Senior Secured Notes of $1,250,000, the Credit Agreement of $800,000 and Senior Secured Bonds of $52,144. A portion of these proceeds from the Senior Secured Notes were used to fund the repayment of the Credit Agreement of $800,000, the Senior Secured Bonds and Senior Unsecured Bonds of $183,600 and the Term Loan Facility of $506,402. The decrease in cashproceeds received were further offset by transaction costs and other fees incurred to obtain the borrowings. In 2020, we also received proceeds from the issuance of Class A common stock of $291,922, offset by stock issuance costs of $1,107. Cash dividends of $33,742 were paid, partially offsetting financing inflows.is due toduring the Company issuing sharesyear ended December 31, 2019 were primarily consisted of the issuance of Senior Secured Bonds and Senior Unsecured Bonds of $117,000 in June 2016 in exchange for $300,505. The Company also receivedSeptember 2019, additional borrowings under the MoBayTerm Loan Facility of $44,000.$220,000 in March 2019 and proceeds received from our IPO of $274,948 in February 2019.receiptCompany may redeem the Senior Secured Notes, in whole or in part, at any time prior to maturity, subject to certain make-whole premiums.debtour subsidiaries, in addition to other collateral. The Senior Secured Notes may limit our ability to incur additional indebtedness or issue certain preferred shares, make certain payments, and equity capitalsell or transfer certain assets subject to certain financial covenants and qualifications. The Senior Secured Notes also provide for customary events of default and prepayment provisions.2016full the outstanding principal and interest under the Credit Agreement, including related costs and expenses. We also used the remaining net proceeds, together with cash on hand, to redeem in full the outstanding Senior Secured Bonds and Senior Unsecured Bonds, including related premiums, costs and expenses, terminating the Senior Secured Bonds and Senior Unsecured Bonds. The redemption of the Senior Secured Bonds and Senior Unsecured Bonds was completed on September 21, 2020.corporate loanthe Credit Agreement was treated as a debt modification. For the portion of $65,000. In December 2017, the Company undertook an additional capital raiseCredit Agreement that was considered extinguished, $16,310 of $70,100unamortized deferred debt issuance costs was recognized as a loss on extinguishment of which $20,100debt in the consolidated statements of cash was received in 2017,operations and comprehensive loss. The remaining unamortized deferred debt issuance costs of $6,501 will be amortized over the remainder in January 2018. This capital contribution was offset by principal payments onremaining term of the Miami Loan and the MoBay Loan of $5,828.Long-Term DebtTerm Loan Facility (as may be amended, from timecredit agreement with a syndicate of two lenders to time, the “Term Loan Facility”) to borrow term loans, available in three draws, up to an aggregate principal amount of $240,000. On December 31, 2018, the Company amended its Termthis credit agreement (as amended, the “Term Loan FacilityFacility”) to, among other things, (i) increase the amount available for borrowing thereunder from $240,000 to $500,000, (ii) extend the initial maturity date to December 31, 2019, (iii) modify certain provisions relating to restrictive covenants and existing financial covenants, and (iv) remove the mandatory prepayment required with the net proceeds received in connection with an IPO. BorrowingsAs of December 31, 2018, the outstanding principal balance under the Term Loan Facility bearwas $280,000.the Companyus of either (i) a LIBOR based rate,divided by one minus the applicable reserve requirement plus a spread of 4.0%,4% or (ii) subject to a floor of 1%, a Base Rate equal to the highesthigher of (a) the Prime Rate, (b) the Federal Funds Rate plus 1 ⁄21/2 of 1% or (c) the 1-month LIBOR rate plus the difference between the applicable LIBOR margin and Base Rate margin,1.00% plus a spread of 3.0%. The Term Loan Facility contains certain covenants that require additional contracted revenue to be obtained within certain time periods, and an event of default or additional fee payments may result if those targets are not met in the future. The Term Loan Facility is set to mature on December 31, 2019 and iswas repayable in quarterly installments of $1,250 with a balloon payment due on the maturity date. The Company has the option to extendat maturity.the maturity date for two additional six-month periods; upon the exercise of each extension option, the interest rate spread on LIBOR and Base Rate increases by 0.5%. To exercise each extension option, the Company must pay a fee equal to 1.0% of the outstanding principal balance at the time of the exercise of the option.iswas secured by mortgages on certain properties owned by the Company’sour subsidiaries, in addition to other collateral. The Company isTerm Loan Facility was amended in the third quarter of 2019 to allow certain properties of a consolidated subsidiary to secure the Senior Secured Bonds. We were also required to comply with certain financial covenants and other restrictive covenants customary for facilities of this type, including restrictions on indebtedness, liens, acquisitions and investments, restricted payments and dispositions.providesprovided for customary events of default, prepayment and cure provisions.AsDecember 31, 2018,fees in connection with the total principalissuance of Senior Secured Bonds and Senior Unsecured Bonds. These fees were capitalized on a pro-rata basis as a reduction of the Senior Secured Bonds and Senior Unsecured Bonds on the consolidated balance sheets. On September 21, 2020, the Company repaid the full amount outstanding underincluding fees dues to the Term Loan Facility was $280,000. On March 21, 2019,lenders using proceeds from the Senior Secured Notes and cash on hand. In conjunction with the repayment of the Senior Secured Bonds and Senior Unsecured Bonds, the Company drew an additional $220 million on the Term Loan Facility. Total principal amounts outstanding after this draw are $500 million. The Company used the net proceeds of the Term Loan Facility to repay the Miami Loan and the MoBay Loan in full during August 2018 and September 2018, respectively. The proceeds of the Term Loan Facility funded on December 31, 2018 will be used to make capital expenditures to complete the San Juan Facility, as well as for additional storage and regasification facilities for small-scale customers.The MoBay Loan was extinguished and the unamortized deferred financing costs at the time of repayment of $1,404, as well asrecognized a prepayment fee of $345, were recorded within Lossloss on extinguishment of debt in the consolidated statements of operations and comprehensive loss. The outstanding principal balance of the Miami Loan at the time of repayment was $38,707; the Company agreed to repay lenders $37,255 to extinguish the liability, and as such, a gain on extinguishment of $1,452 was recorded within Loss on extinguishment of debt in the consolidated statements of operations and consolidated loss. When the Term Loan Facility was amended in December 2018, refinanced borrowings and associated fees from one lender were accounted for as a debt modification, while refinanced borrowings and associated fees from one lender were accounted for as a debt extinguishment. Financing costs of $9,200 were written off to Loss on extinguishment of debt$$2,820the write-off of $3,594 of unamortized deferred financing costs and $6,380prepayment premium paid to bondholders of financing fees incurred in connection with the amendment of the Term Loan Facility.Montego Bay Loan AgreementIn June 2016, NFE North Holdings Limited , a wholly owned subsidiary of the Company entered into a syndicated loan agreement providing for a $44,000 term loan facility (the “MoBay Loan”) in connection with the construction and development of the Montego Bay Terminal and related infrastructure. The maturity date for each loan drawn under the MoBay Loan was the day immediately preceding the seventh anniversary of the drawdown date of such loan.Outstanding amounts under the MoBay Loan accrued interest at a per annum rate of 8.10%$ The MoBay Loan was required to be repaid in advance of the maturity date in consecutive, equal monthly payments, with the remaining outstanding amount due on the maturity date. The MoBay Loan could be prepaid at any time, upon 30 days’ prior written notice to the agent, subject to a prepayment fee of 2% of any amount being prepaid during the one year period from the date of the first loan drawdown of the MoBay Loan, or 1% of any amount being prepaid during the period commencing one year from the date of the first loan drawdown of the MoBay Loan and expiring on the fifth anniversary of such date.During the construction period of certain projects in 2016, related interest expense and borrowings costs were capitalized. Interest expense, inclusive of amortized debt fees for the years ended December 31, 2018, 2017, and 2016 totaled $2,402, $3,611, and $1,990 of which $1,732, $0 and $1,347 was capitalized as a finance lease, respectively.The Company used the net proceeds of the Term Loan Facility entered into in August 2018 to repay the MoBay Loan in full in September 2018.Miami Loan AgreementIn November 2014, LNG Holdings (Florida) LLC (“LHFL”), a controlled subsidiary, entered into a credit agreement (the “Miami Loan”) with a bank for an initial aggregate amount of $40,000, maturing on May 24, 2018, in connection with the construction of the Miami Facility. Borrowings under the loan bore interest at a rate selected by LHFL of either (i) a LIBOR based rate, with a floor of 1.00%, plus a spread of 5.00%, or (ii) subject to a floor of 2%,60a Base Rate equal to the higher of (a) the Prime Rate, (b) the Federal Funds Rate plus ½ of 1% or (c) the 1-month LIBOR rate plus the difference between the applicable LIBOR margin and Base Rate margin, plus a spread of 4.00%. Subject to certain conditions, the Miami Loan could be extended for an additional term of up to 18 months.On May 16, 2018, the Company extended the maturity to November 2019. To execute the extension option, the Company paid an extension fee of $388, equating to 1% of the outstanding principal at that time.The Miami Loan required periodic payments of interest on either a monthly, quarterly or semi-annual basis where LHFL selected the monthly interest rate option. In addition, with respect to LIBOR based borrowings, LHFL, at its option, could elect to defer up to ten interest periods outstanding at any point in time. The Miami Loan also required annual amortization in an amount equal to 1% of the amount outstanding. The Miami Loan could be prepaid without penalty after the first anniversary of the closing of the Miami Loan. At the time of the extinguishment of the debt in August 2018, and as of the years ended December 31, 2017 and 2016, interest was calculated on the borrowing based on a 1-month LIBOR rate (1% floor) plus a spread of 5%, bearing a total interest rate of 7.58%, 6.57% and 6.00%, as of the end of each respective period. Interest expense, inclusive of amortized debt fees for the years ended December 31, 2018, 2017 and 2016, totaled $1,987, $2,845 and $2,740 respectively.The Company used the net proceeds of the Term Loan Facility entered into in August 2018 to repay the Miami Loan in full in August 2018.20182020 and 2017,2019, we had no transactions that met the definition of off-balance sheet arrangements that may have a current or future material effect on our consolidated financial position or operating results. of our contracts. The following table summarizes certain contractual obligations in place as of December 31, 2018:
1 year
5 yearsLong-Term(in thousands) Total Less than 1 year Years 2 to 3 Year 4 to 5 More than 5 years Long-term debt obligations $ 1,675,203 $ 87,703 $ 168,750 $ 1,418,750 $ - Purchase obligations 2,490,347 376,096 724,588 724,090 665,573 Lease obligations 191,991 47,135 56,066 36,006 52,784 Total $ 4,357,541 $ 510,934 $ 949,404 $ 2,178,846 $ 718,357 2018.with termsfor the purchase, production and transportation of 38 monthsLNG and 81 months, includingnatural gas, as well as engineering, procurement and construction agreements to develop our terminals and related infrastructure. Our commitments entered into subsequent to December 31, 2018. These contractspurchase LNG and natural gas are principally take-or-pay contracts, which require the purchase of minimum quantities of LNG and natural gas, and these commitments are designed to assure sources of supply and are not expected to be in excess of normal requirements.December 2018, the Company2020, we entered into a contract with Centricafour LNG Company Limitedsupply agreements for the purchase of 29 firm cargoes of 1.05 million gallons415 TBtu of LNG (86.7 million MMBtu) scheduled for delivery between June 2019at a price indexed to Henry Hub from 2021 and December 2021.2030. Between 2022 and 2025, the total annual commitment under these agreements is approximately 68 TBtu per year, reducing to approximately 28 TBtu per year from 2026 to 2029. The amounts disclosed excludesabove also include the two optional cargoes. Payment for each cargo is duecommitment to purchase 12 firm cargoes in advance of each shipment.The Company currently has two contracts in place for the purchase of natural gas under take-or-pay minimum volume obligations. These commitments are structured to assure the Miami Facility has uninterrupted supply and the minimum volumes are not expected to be in excess of normal requirements.61Subsequent to the year ended December 31, 2018, the Company entered into a contract with Peninsula Energy Services Company Inc. (“PESCO”) for the purchase of 0.2 million gallons of natural gas (12.6 million MMBtu) per day scheduled for delivery between March 2019 and November 2025.In March 2018, the Company entered into a 15-year agreement with an affiliate of Chesapeake Energy Corporation (“Chesapeake”), a large production company for gas supply to our Pennsylvania Facility, which was subsequently amended and restated in September 2018. This agreement provides for 100% of the required supply of feedgas to the facility, inclusive of all support functions of the plant, including transportation and power supply. The terms of the agreement require the Company to obtain all requisite permits and make a final investment decision before the agreement is effective. A final investment decision has not yet been made, and as such, this commitment is excluded from the table above.In addition to the above disclosed commitments, in September 2016 the Company made a commitment of up to an estimated $180,000 to build a gas-fired combined heat and power plant in Jamaica2021 under a Joint Development Agreement with a third party prior to commercial agreements being finalized. In August and October 2017 respectively, a PPA and SSA weresupply contract executed obligating the Company to complete the development subject to the conditions set forth in those agreements.Operating December 2018.operating leaseslease agreements, inclusive of fixed lease payments for renewal periods we are notedreasonably certain will be exercised, are included in the above table. The Company’sFixed lease payments for short-term leases are also included in the table above. Our lease obligations are primarily related to LNG vessel time charters, marine port leases, ISO tank leases, office space and a land lease.lease, and a marinefor the development of our facilities. Terms for leases of port berth lease. Office space includes a newly fabricated space shared with affiliated companies in New York with a monthrange from 20 to month lease, and an office space under construction in downtown Miami, with a lease term of 84 months. 25 years. The land site lease is held with an affiliate of the Company and has a remaining term of approximately five years with an initialautomatic renewal term of five years for up to an additional 20 years.the marine port berth lease had an initial term up to 10 years. Both leases contain renewal options.The Company entered into several lease agreements during 2018 in Mexico and Puerto Rico. Such agreements include securing certain facilities, wharf areas, office space and specified port areas for development of terminals. Terms for these leases range from 20 to 30 years, and certain of these leases contain extension terms. Upfront fees paid subsequent to December 31, 2017 to secure leases were $21,871. Fixed leaseexpected payments under these leases are expectedlease agreements have been included in the above table.be approximately $10638 months and some of these leases contain variable components based on LNG processed.The Company has entered into an agreement tooffice space in downtown Miami, with a lease a floating storage regasification unit for an initial term of 15 years with an option to renew for an additional five years. The leased asset is currently undergoing acceptance procedures. Once the acceptance procedures are completed, which is expected to occur in 2019, the lease term will commence. Subsequent to December 31, 2018, the Company entered into two additional LNG vessel time charters for contract terms ranging from three to five years.launch and grow our business. We believe that the accounting policies discussed below are critical to understanding our historical and future performance, as these policies relate to the more significant areas involving management’s judgments and estimates.Operating the sales of LNG delivered by truck is recognized at the point in time at which physical possession and natural gas are recognized when the LNG or natural gas is deliveredrisks and rewards of ownership transfer to the customer, either when the natural gas arrives at the customer’s flange or at the time that title to the LNG is transferred to the customer. Title typically transfers either whencontainers are shipped or delivered to the customers’ storage facilities, depending on the terms of the contract.The Company’s Because the nature, timing and uncertainty of revenue and cash flows are substantially the same for LNG, natural gas, power and steam, we have presented Operating revenue on an aggregated basis. also contain a lease of equipment. The Company allocatesWe allocate consideration received from customers between lease and non-lease components based on the relative fair value of each component. The fair value of the lease component is estimated based on the market62valueestimated standalone selling price of the same or similar equipment leased to the customer. The estimatedWe estimate the fair value of the non-lease component is based on estimatedby forecasting volumes and pricing of gas to be delivered at an estimated price or contractual price.to the customer over the lease term. The estimated fair value of the leased equipment, as a percentage of the estimated total revenue from LNG or natural gas and leased equipment at inception, will establish the allocation percentage to determine the minimumfixed lease payments and the amount to be accounted for under the revenue recognition guidance.Company leases of certain facilities and equipment to its customers which are accounted for as direct financing leasesfinance or operating leases. Direct financingThe current and non-current portion of finance leases are recorded within Prepaid expenses and other current assets and Finance leases, net, on ourthe consolidated balance sheet representssheets, respectively. For finance leases accounted for as sales-type leases, the minimumprofit from the sale of equipment is recognized upon lease commencement in Other revenue in the consolidated statements of operations and comprehensive loss. The lease payments due, net of unearned revenue. The lease paymentsfor finance leases are segregated into principal and interest components similar to a loan. Unearned revenueInterest income is recognized on an effective interest method over the lease term and is recorded withinincluded in Other revenue in the consolidated statementstatements of operations and comprehensive loss. The principal components of the lease payment isare reflected as a reduction to the net investment in the finance lease. For the Company’sour operating leases, the amount allocated to the leasing component is recognized over the lease term as Other revenue in the consolidated statements of operations and comprehensive loss.ImpairmentLNG liquefaction held and used by the Company are reviewed periodically for potential impairmenta particular assetsthe carrying valueamount of an asset may not be recoverable. Recoverability generally is determined by comparingIndicators may include, but are not limited to, adverse changes in the carrying valueregulatory environment in a jurisdiction where we operate, unfavorable events impacting the supply chain for LNG to our operations, a decision to discontinue the development of a long-lived asset, early termination of a significant customer contract or the introduction of newer technology. We exercise judgment in determining if any of these events represent an impairment indicator requiring a recoverability assessment.assetsecond half of 2020, resulting in an overall lower average cost of LNG. Our long-term, take-or pay contracts to deliver natural gas or LNG to our customers also limit our exposure to fluctuations in natural gas and LNG as our pricing is based on the Henry Hub index plus a contractual spread. Based on the long-term nature of our contracts and the market value of the underlying assets, we do not believe that changes in the price of LNG indicate that a recoverability assessment of our assets is necessary. Further, we plan to utilize our own liquefaction facilities to manufacture our own LNG at attractive prices, secure LNG to supply our expanding operations and reduce our exposure to future LNG price variations in the long term.expectedCOVID-19 pandemic. We will continue to monitor this uncertain situation and local responses in jurisdictions where we do business to determine if there are any indicators that a recoverability assessment for our assets should be performed.futurenet cash flows ofexpected to be generated by the asset. Ifasset exceeds its carrying value. In the event that an asset does not meet the recoverability test, the carrying value of the asset is not recoverable,will be adjusted to fair value resulting in an impairment charge. Management develops the amount of impairment loss is measured asassumptions used in the excess, if any,recoverability assessment based on active contracts, current and future expectations of the carryingglobal demand for LNG and natural gas, as well as information received from third party industry sources.asset over its estimated fair value. The estimated undiscounted future cash flows aregrant date based on projections of future operating results; these projections contain estimatesthe closing price of the value of future contracts that have not yet been obtained, future commodity pricing and our future cost structure, among others. Projections of future operating results and cash flows may vary significantly from actual results. Management reviews its estimates of cash flowsunderlying shares on an ongoing basis using historical experience, business plans, overall market conditionsthe grant date and other factors.JOBS ActIn April 2012,fair value adjustments to account for a post-vesting holding period. These fair value adjustments were estimated based on the Jumpstart Our Business Startups ActFinnerty model.2012, orDecember 31, 2020, management determined that it was not probable that the JOBS Act, was enacted. Section 107performance condition for our outstanding PSUs would be met. For these awards, compensation cost and the number of PSUs ultimately earned remains variable and compensation cost for these awards is recorded once achievement of the JOBS Act providesperformance conditions becomes probable through the requisite service period. A cumulative adjustment to share-based compensation expense is recorded in the period that an “emerging growth company,” or EGC, can take advantageachievement of the extended transition period provided in Section 7(a)(2)(B) of the Securities Act of 1933, as amended, or the Securities Act, for complying with new or revised accounting standards. Thus, an EGC can delay the adoption of certain accounting standards until those standards would otherwise apply to private companies. We have taken advantage of the exemptions discussed above. Accordingly, the information contained herein may be different than the information you receive from other public companies.Subject to certainperformance conditions as an EGC, we have elected to rely on certain of these exemptions, including without limitation, (1) providing an auditor’s attestation report on our system of internal controls over financial reporting pursuant to Section 404(b) of the Sarbanes-Oxley Act and (2) complying with any requirement that may be adopted by the Public Companybecomes probable.Oversight Board, or PCAOB, regarding mandatory audit firm rotation or a supplement to the auditor’s report providing additional information about the audit and the financial statements, known as the auditor discussion and analysis. We will remain an EGC until the earlier of (i) the last day of the fiscal year in which we have total annual gross revenues of $1.07 billion or more; (ii) the last day of the fiscal year following the fifth anniversary of the date of the completion of our IPO, December 31, 2024; (iii) the date on which we have issued more than $1.00 billion in nonconvertible debt during the previous three years; or (iv) the date on which we are deemed to be a large accelerated filer under the rules of the Securities and Exchange Commission or SEC.Recent Account StandardsTABLE OF CONTENTSItem 7A. Quantitative and Qualitative Disclosures About Market Risk. Debt that we incurred underMiami Loan and the Term Loan Facility bear interest at variable rates and exposed us to interest rate risk. We repaid the Miami Loan with proceeds received from the Term Loan Facility. Interest is calculated under the termsfair value of the Term Loan Facility basedSenior Secured Notes but such a change would have no impact on our selection, from time to time,results of one of the index rates available to us plus an applicable margin that varies based on certain factors. See “—Liquidity and Capital Resources—Long-Term Debt.” Assuming the full $500,000 principal amount is drawn and remains outstanding, the impact on interest expense of a 1%operations or cash flows. A 100-basis point increase or decrease in the market interest rate would decrease or increase the fair value of our fixed rate debt by approximately $52 million. The sensitivity analysis presented is based on certain simplifying assumptions, including instantaneous change in interest rate and parallel shifts in the Term Loan Facility would be approximately $5,000 per year.yield curve. We do not currently have or intend to enter into any derivative arrangements to protect against fluctuations in interest rates applicable to our outstanding indebtedness.Item 8. Financial Statements and Supplementary Data. F-1F-1 of this Annual Report and are incorporated herein by reference.Item 9. Changes in and Disagreements With Accountants on Accounting and Financial Disclosure. Item 9A. Controls and Procedures. 2018.2020. Our disclosure controls and procedures are designed to provide reasonable assurance that the information required to be disclosed by us in reports that we file under the Exchange Act is accumulated and communicated to our management, including our principal executive officer and principal financial officer, as appropriate, to allow timely decisions regarding required disclosure and is recorded, processed, summarized and reported within the time periods specified in the rules and forms of the SEC. Based upon that evaluation, our principal executive officer and principal financial officer concluded that our disclosure controls and procedures were effective as of December 31, 20182020 at the reasonable assurance level.20182020 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.This Annual Report does not include a report on management’s assessment regardingdueas such term as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act. Internal control over financial reporting is a process designed to a transition period establishedprovide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with policies or procedures may deteriorate.rulesCommittee of Sponsoring Organizations of the SEC for newly public companies.Attestation ReportTreadway Commission in “Internal Control – Integrated Framework (2013)”. Based on this assessment, management determined that we maintained effective internal control over financial reporting as of the Registered Public Accounting FirmThis Annual Report does not include an attestation reportDecember 31, 2020.due to a transition period established by the rules of the SEC for newly public companies. Further, our independent registered public accounting firm will not be required to formally attest to the effectiveness of our internal controls over financial reporting for as long as we are an “emerging growth company” pursuant to the provisions of the JOBS Act.stated in their report, which appears herein.Item 9B. Other Information. On March 17, 2019, our boardItem 10. Directors, Executive Officers and Corporate Governance. Executive Officers and Directorsfollowing table shows information for our executive officers and directors as of March 14, 2019. Directors hold office until their successors have been elected or qualified or until the earlier of their death, resignation, removal or disqualification. Executive officers serve at the discretion of the board. There are no family relationships among any of our directors or executive officers. Some of our directors and our executive officers also serve as executive officers of New Fortress Energy Holdings.NameAgePositionWesley R. Edens57Chief Executive Officer, ChairmanChristopher S. Guinta36Chief Financial OfficerMichael J. Utsler62Chief Operating OfficerRandal A. Nardone63DirectorDesmond Iain Catterall62DirectorDavid J. Grain56DirectorC. William Griffin68DirectorJohn J. Mack73DirectorKatherine E. Wanner51DirectorMatthew Wilkinson38DirectorWesley R. Edens— Wesley Edens has been our Chief Executive Officer and the Chairman of our board of directors since August 2018. Herequired by this Item 10 is the Co-Chief Executive Officer of Fortress and has been a member of the board of directors of Fortress since November 2006. Mr. Edens has been a member of the Management Committee of Fortress since co-founding Fortress in May 1998. Fortress Equity Partners (A) LP, a private equity fund managed by an affiliate of Fortress, currently owns a substantial majority of the equity of New Fortress Energy Holdings. Mr. Edens is responsible for oversight of Fortress’ private equity and publicly traded alternative investment businesses. He is the Chairman of the board of directors of New Media Investment Group Inc. (a publisher of print and online media) and Drive Shack Inc. (an owner and operator of golf-related leisure and entertainment businesses). He is a director of Mapeley Limited (a large full service real estate outsourcing and investment companyset forth in the United Kingdom).Mr. Edens previously served on the board of the following publicly traded companies and registered investment companies: OneMain Holdings, Inc. (a leading consumer finance company) from November 2010Company’s Proxy Statement to June 2018, Fortress Transportation and Infrastructure Investors LLC (which owns and acquires high quality infrastructure and equipment essential for the transportation of goods and people globally) from May 2015 to May 2016; Intrawest Resorts Holdings Inc. (a resort and adventure company) from January 2014 to July 2017; Gaming and Leisure Properties, Inc. (an owner and operator in the gaming and racing industry) from October 2013 to October 2016; Nationstar Mortgage Holdings Inc. (a residential mortgage loan originator and servicer) from March 2012 to July 2016; New Residential Investment Corp. (a real estate investment trust primarily focused on investing in residential real estate related assets) from April 2013 to May 2016; Brookdale Senior Living Inc., from September 2005 to June 2014; GAGFAH S.A. from September 2006 to June 2014; PENN National Gaming Inc. from October 2008 to November 2013; GateHouse Media Inc. from June 2005 to November 2013; Aircastle Ltd. from August 2006 to August 2012; RailAmerica Inc. from November 2006 to October 2012; Eurocastle Investment Ltd., from August 2003 to November 2011; Whistler Blackcomb Holdings Inc., from October 2010 to November 2012; Fortress Registered Investment Trust, from December 1999 until it deregisteredbe filed with the SEC in September 2011; FRIT PINN LLC, from November 2001 until it deregistered with the SEC in September 2011; and New Senior Investment Group Inc. (a real estate investment trust with a diversified portfolio of senior housing properties located across the United States) from November 2014 to January 2019.Prior to co-founding Fortress, Mr. Edens was a partner and managing director of BlackRock Financial Management, Inc. (an investment management firm), where he headed BlackRock Asset Investors, a private equity fund. In addition, Mr. Edens was formerly a partner and managing director of Lehman Brothers Holdings Inc. Mr. Edens received a Bachelor of Science in Finance from Oregon State University.66Mr. Edens’ extensive credit, private equity finance and management expertise, extensive experience as an officer and director of public companies and his deep familiarity with our Company led the Board to conclude that Mr. Edens qualifies to serve on our board of directors.Christopher S. Guinta— Christopher Guinta has been our Chief Financial Officer since August 2018, and the Chief Financial Officer of New Fortress Energy Holdings since April 2017. Prior to joining NFE, Mr. Guinta served as Chief Financial Officer of Ranger Offshore Inc. from November 2011 to April 2017. Prior to Ranger, Mr. Guinta served as an associate at SunTx Capital Partners from April 2009 to November 2011. Before joining SunTx Capital Partners, Mr. Guinta served as an associate at Citi Capital Markets in the Investment Banking Division. Mr. Guinta graduated from The University of Texas at Austin with a Bachelor of Business Administration and a Masters in Professional Accounting.Michael J. Utsler— Michael Utsler has been our Chief Operating Officer since October 2018. Mr. Utsler has over 35 years of experience in the energy industry. Prior to joining us, Mr. Utsler served as Chief Operating Officer of Woodside Energy Ltd. fromwithin 120 days after December 2013 to October 2018. Prior to Woodside Energy Ltd., Mr. Utsler served in various roles for BP p.l.c. (“BP”) from January 1999 to November 2013, including most recently as Chief Operating Officer and President of the BP Gulf Coast Restoration Organization from August 2010 to November 2013. Before BP, Mr. Utsler served in various roles for Amoco Corporation from 1978 to 1998. Mr. Utsler received a Bachelor of Science degree in Petroleum Engineering from The University of Oklahoma.Randal A. Nardone— Randal Nardone has been a member of our board of directors since August 2018. He has also been a member of the board of directors of Fortress since November 2006 and has been a member of the Management Committee of Fortress since he co-founded it in 1998. Mr. Nardone served as Fortress’s Chief Executive Officer from July 2013 through December 2017, after serving as its Interim Chief Executive Officer from December 2011 to July 2013. From June 2002 to September 2016, Mr. Nardone also served as Secretary for Drive Shack Inc., an owner and operator of golf-related leisure and entertainment businesses. Mr. Nardone is a director of Eurocastle Investment Limited. Mr. Nardone also previously served on the board of directors of Alea Group Holdings (Bermuda) Ltd. from July 2007 to September 2014; GAGFAH S.A. from September 2006 to June 2014; and Brookdale Senior Living, Inc. from January 2011 to June 2014. Mr. Nardone was previously a managing director of UBS from May 1997 to May 1998. Prior to joining UBS in 1997, Mr. Nardone was a principal of BlackRock Financial Management, Inc. Prior to joining BlackRock Financial Management, Inc., Mr. Nardone was a partner and a member of the executive committee at the law firm of Thacher Proffitt & Wood. Mr. Nardone received a Bachelor of Arts in English and Biology from the University of Connecticut and a Juris Doctor from Boston University School of Law. We believe that Mr. Nardone’s leadership, management experience and experience with corporate and securities law bring valuable experience to our board of directors.Desmond Iain Catterall— Iain Catterall became a member of our board of directors in January 2019. Mr. Catterall currently serves as a principal and Chief Executive Officer of Kirkham Capital, an investment business focused on seeding fund managers, a position he has held since founding the firm in January 2009. Prior to that, Mr. Catterall served as the head of equities at Rand Merchant Bank from January 2003 to December 2008 and was also a member of Rand Merchant Bank’s management board and investment committee. He was also a founding member of Thynk Capital, a private equity company, and, prior to that, a founding director of Cadiz Holdings Limited, a Johannesburg Stock Exchange listed financial services company. Mr. Catterall holds a Bachelor of Commerce degree from the University of Natal (Durban). We believe that Mr. Catterall’s extensive experience in capital markets and financial services brings valuable expertise to our board of directors.David J. Grain— David Grain became a member of our board of directors in January 2019. Mr. Grain currently serves as the Chief Executive Officer of Grain Management, LLC, a private equity firm focused on investments in the media and communications sectors, which he founded in 2006. Prior to founding Grain Management, LLC, from January 2003 to December 2005, Mr. Grain served as the President of Global Signal, Inc. (formerly NYSE: GSL), the largest communication tower owner/operator at the time and an affiliate of Fortress. Prior to joining Global Signal, Inc., from 2000 to 2003, he served as Senior Vice President at AT&T Broadband in New England, a provider of digital video, high speed Internet and digital phone services to more than two million customers in the region. Prior to leading AT&T Broadband’s New England operations, Mr. Grain spent more than a decade in the financial services industry, most recently at Morgan Stanley & Co. LLC, a financial services company, in New York from 1992 to 2000 where he focused primarily on67telecommunications, media and technology companies. Mr. Grain serves on the board of directors of The Southern Company (NYSE: SO), a gas and electric utility company. Mr. Grain earned a Bachelor of Arts degree in English from the College of the Holy Cross and a Master of Business Administration degree from the Amos Tuck School at Dartmouth College. We believe that Mr. Grain’s experience with publicly traded companies as an executive and as a member of the board of directors will bring valuable skills and leadership to our board of directors.C. William Griffin— Bill Griffin became a member of our board of directors in January 2019. Mr. Griffin has more than 45 years of experience in financial services. He currently serves as Executive Vice President, Enterprise Strategy of ServiceLink, LLC, helping deliver end-to-end solutions to large financial institutions, a position he has held since January 2017. Prior to that, Mr. Griffin served in various capacities within Fidelity National Financial, Inc. (“Fidelity”) and its affiliates, including as Executive Vice President of Black Knight Financial Services from January 2014 to December 2016 and Executive Vice President of Sales and Marketing for Lender Processing Services from November 2011 to December 2013. He also served as President and Chief Executive Officer from 2002 to 2003 when Lender Processing Services was acquired by Fidelity. Mr. Griffin holds a Bachelor of Business Administration degree from The University of Georgia. We believe that Mr. Griffin’s leadership and extensive financial experience will bring significant value to our board of directors.John J. Mack— John Mack became a member of our board of directors in January 2019. From March 2012 until his retirement in December 2014, Mr. Mack served as a Senior Advisor for Kohlberg, Kravis, Roberts & Co., L.P. Prior to that, Mr. Mack served as Chairman of the Board of Morgan Stanley, a financial services company, from June 2005 to December 2011, and served as the Chief Executive Officer of Morgan Stanley from June 2005 until December 2009, during which time he oversaw the firm’s conversion into a bank holding company. Mr. Mack was Co-Chief Executive Officer of Credit Suisse Group from 2003 to 2004 and the President, Chief Executive Officer and a director of Credit Suisse First Boston from 2001 to 2004. He became the President, Chief Operating Officer and a director of Morgan Stanley Dean Witter & Co. in May 1997 and served in that position until 2001. Mr. Mack joined Morgan Stanley in May 1972 in the bond department and served as head of the Worldwide Taxable Fixed Income Division from 1985 to 1992, became a member of the board of directors in 1987, became Chairman of the Operating Committee in March 1992 and became President in June 1993. Mr. Mack is a senior advisor to Morgan Stanley & Co. LLC and serves on the board of directors of Glencore plc and LendingClub Corporation. Mr. Mack holds a Bachelor of Arts degree in History from Duke University. Mr. Mack was chosen to serve on our board of directors because of his extensive experience advising and managing banking and financial services companies. We believe that Mr. Mack’s strong business leadership experience brings important insight and skills to our board of directors.Katherine E. Wanner— Katherine Wanner became a member of our board of directors in January 2019. From 1993 to 1997, Ms. Wanner served in various roles within the finance, communications and business development groups at Brinson Partners Inc. and UBS Global Asset Management, where she was responsible for the revenue cycle, statistical analysis and market research, and later joined the private equity group in 1998. In 2001, Ms. Wanner was a founding Partner at Adams Street Partners, LLC, a global private equity firm with over $30 billion in assets under its management and offices in six locations around the world, and the successor firm to Brinson Partners Inc. and UBS Global Asset Management. From 2007 until her retirement in 2015, Ms. Wanner managed Adams Street Partners’ US Primary investment team and served on the firm’s Global Primary Investment Committee, which was responsible for sourcing, analyzing and monitoring investments in private equity partnerships, implementing strategy and approving all primary fund investments. Post Ms. Wanner’s retirement from Adams Street Partners in 2015, Ms. Wanner has served as an Operating Partner at Abundant Venture Partners from 2016 to April 2018. Since April 2018 and currently, Ms. Wanner serves as an Advisor at Abundant Venture Partners. Since 1998, Ms. Wanner has served on many private equity and venture capital advisory boards and completed many primary investments across several sectors, and was responsible for managing relationships with several of the firm’s United States based venture, energy focused and special situation managers. Additionally, from 1989 to 1993, Ms. Wanner gained experience in statistical modeling, reporting, tracking and analysis as a Senior Financial Analyst at Frontier Risk Management, Range Wise, Inc. and Morgan Stanley & Co. LLC. Ms. Wanner received a Bachelor of Science in Finance from Binghamton University and a Master of Business Administration from the Kellogg School of Management at Northwestern University. We believe Ms. Wanner’s extensive financial experience in business investments and asset management will bring significant value to our board of directors.68Matthew Wilkinson— Matthew Wilkinson became a member of our board of directors in January 2019. Mr. Wilkinson currently serves as a director at ICG Advisors. Prior to that, Mr. Wilkinson served as vice president of strategy for Kayne Anderson Capital Advisors from January 2017 to March 2018. Prior to joining Kayne Anderson Capital Advisors, Mr. Wilkinson was with the State of Michigan Retirement Systems (“SMRS”) from July 2011 to January 2017, most recently serving as a senior portfolio manager in the short-term, absolute return and real return division from September 2014 to January 2017, where he built out and managed a real assets portfolio with $2 billion in commitments and a special situations portfolio with over $800 million in commitments for SMRS. Prior to SMRS, he founded and operated his own investment firm primarily focused on investing in small cap equities. Mr. Wilkinson holds an Masters of Business Administration from Michigan State University and a Bachelor of Arts. (magna cum laude) from Ohio State University. We believe that Mr. Wilkinson’s leadership, management experience and strong background in corporate finance, bring important and valuable skills to our board of directors.Status as a Controlled CompanyBecause New Fortress Energy Holdings holds approximately 87.6% (without giving effect to any shares purchased31, 2020 in connection with the Offeringour 2021 annual meeting of shareholders and is incorporated herein by New Fortress Energy Holdings, its stockholders or entities affiliated with them) of the voting power of our shares, we are a controlled company under the and NASDAQ corporate governance standards. A controlled company does not need its board of directors to have a majority of independent directors or to form independent compensation and nominating and governance committees. As a controlled company, we remain subject to the rules of the Sarbanes-Oxley Act and NASDAQ that require us to have an audit committee composed entirely of independent directors. Under these rules, we are required to have at least one independent director on our audit committee by the date our Class A shares are listed on NASDAQ, at least two independent directors on our audit committee within 90 days of the listing date, and at least three independent directors on our audit committee within one year of the listing date.If at any time we cease to be a controlled company, we will take all action necessary to comply with the Sarbanes-Oxley Act and NASDAQ corporate governance standards, including by appointing a majority of independent directors to our board of directors, subject to a permitted “phase-in” period.The Board and Its CommitteesOur operating agreement provides that our board of directors shall consist of not less than three and not more than nine directors as the board of directors may from time to time determine. Our board of directors currently consists of eight directors. Our board of directors is divided into three classes of directors, with each class as equal in number as possible, serving staggered three-year terms. Class I, Class II and Class III directors will serve until our annual general meeting in 2020, 2021 and 2022, respectively. Messrs. Mack and Wilkinson and Ms. Wanner are assigned to Class I; Messrs. Grain and Griffin are assigned to Class II; and Messrs. Edens, Nardone and Catterall are assigned to Class III. At each annual general meeting held after the initial classification in connection with the closing of the Offering, directors will be elected to succeed the class of directors whose terms have expired. This classification of the board of directors could have the effect of increasing the length of time necessary to change the composition of a majority of the board of directors. In general, at least two annual general meetings will be necessary to effect a change in a majority of the members of the board of directors. All officers serve at the discretion of the board of directors.Our operating agreement does not provide for cumulative voting in the election of directors, which means that the holders of a majority of our issued and outstanding voting shares can elect all of the directors standing for election, and the holders of the remaining shares will not be able to elect any directors. New Fortress Energy Holdings’ beneficial ownership of greater than 50% of our voting shares means New Fortress Energy Holdings will be able to control matters requiring shareholder approval, which includes the election of directors.Audit CommitteeWe are required to have an audit committee of at least three members, and all of its members are required to meet the independence and experience standards established by NASDAQ and the Exchange Act , subject to certain transitional relief during the one-year period following the consummation of the Offering as described above. We have established an audit committee compliant with NASDAQ and SEC rules, in connection with the Offering, whereby Ms. Wanner and Messrs. Grain and Griffin serve as members of such committee with69Ms. Wanner serving as the chairperson. SEC rules also require that a public company disclose whether or not its audit committee has an “audit committee financial expert” as a member. Each of Ms. Wanner and Mr. Grain satisfy the definition of “audit committee financial expert.” As required by the SEC rules and NASDAQ listing standards, our board of directors have affirmatively determined that each of Ms. Wanner and Messrs. Grain and Griffin meet the definition of “independent director.” In connection with the Offering, we adopted an audit committee charter defining the committee’s primary duties in a manner consistent with the rules of the SEC and NASDAQ standards.The audit committee assists the board of directors in its oversight of the integrity of our financial statements and our compliance with legal and regulatory requirements and company policies and controls. The audit committee has the sole authority to: (1) retain and terminate our independent registered public accounting firm, (2) approve all auditing services and related fees and the terms thereof performed by our independent registered public accounting firm, and (3) pre-approve any non-audit services and tax services to be rendered by our independent registered public accounting firm. The audit committee is also responsible for confirming the independence and objectivity of our independent registered public accounting firm. Our independent registered public accounting firm has been given unrestricted access to the audit committee and our management.Compensation CommitteeBecause we are a “controlled company” within the meaning of NASDAQ corporate governance standards following the completion of the Offering, we are not required to have a compensation committee. However, prior to the completion of the Offering, we established a compensation committee to ease the administrative burden on the full board of directors. So long as we continue to be a controlled company, our compensation committee is not required to be comprised solely of independent directors. As such, Messrs. Edens and Nardone serve as the members of our compensation committee. Our compensation committee will establish and direct our compensation program for our officers and certain other employees, including administration of our incentive compensation and benefit plans, to the full extent permitted pursuant to those plans and arrangements. However, the board of directors will retain authority to grant and amend awards under our omnibus incentive plan that are (i) subject to Section 16 of the Exchange Act and (ii) granted to our officers who are subject to the reporting obligations of Section 16 of the Exchange Act and members of the board of directors. In connection with the formation of this committee, we adopted a compensation committee charter defining the committee’s primary duties and authority.Nominating and Corporate Governance CommitteeBecause we are a “controlled company” within the meaning of NASDAQ corporate governance standards following the completion of the Offering, we are not required to, and do not currently, have a nominating and corporate governance committee.If and when we are no longer a “controlled company” within the meaning of NASDAQ corporate governance standards, we will be required to establish a nominating and corporate governance committee. We anticipate that such a nominating and corporate governance committee would consist of three directors who will be “independent” under the rules of the SEC and the NASDAQ. This committee would identify, evaluate and recommend qualified nominees to serve on our board of directors, develop and oversee our internal corporate governance processes and maintain a management succession plan. Upon formation of a nominating and corporate governance committee, we would expect to adopt a nominating and corporate governance committee charter defining the committee’s primary duties in a manner consistent with the rules of the SEC and the NASDAQ or market standards.Advisory Committee Regarding Our Communities & The EnvironmentWe intend to establish an advisory committee (the “Advisory Committee”) to assist the board of directors in providing a meaningful and positive impact in the areas where we conduct our business. We intend to collaborate with the Advisory Committee to help improve the quality of life and increase advancement opportunities for members of the communities in which we operate. While our product is more environmentally friendly than many traditional distillate fuels, we recognize that our business has an environmental impact. As such, we intend to collaborate with the Advisory Committee to reduce any environmental impact we may have and help contribute to preserving our environment.70Communications with the Board of DirectorsShareholders or other interested parties can contact any director, any committee of the board of directors or our non-management directors as a group, by writing to them c/o General Counsel and Secretary, 111 W. 19th Street, 8th Floor, New York, NY 10011. All such communications will be forwarded to the appropriate member(s) of the board of directors. Comments or complaints relating to the Company’s accounting, internal accounting controls or auditing matters will also be referred to members of the audit committee.Code of Business Conduct and EthicsIn connection with the consummation of the Offering, our board of directors adopted a code of business conduct and ethics applicable to our employees, directors and officers, in accordance with applicable U.S. federal securities laws and the corporate governance rules of NASDAQ, which is available on our website, www.newfortressenergy.com, under “Corporate Governance” and “Governance Highlights” within the “Investors” section. Any waiver of this code may be made only by our board of directors and will be promptly disclosed as required by applicable U.S. federal securities laws and the corporate governance rules of NASDAQ, by posting such information on our website at the address and location specified above.Section 16(A) Beneficial Ownership Reporting ComplianceOur executive officers and directors and persons who own more than 10% of our shares are required to file reports with the SEC, disclosing the amount and nature of their beneficial ownership in our shares, as well as changes in that ownership. The Offering was completed in February 2019, and thus we were not subject to the Exchange Act Section 16 reporting obligations during 2018.71Item 11. Executive Compensation As an “emerging growth company,” we areprovide a Summary Compensation Table and an Outstanding Equity Awards at Fiscal Year End Table, as well as limited narrative disclosures regarding executive compensation for our last completed fiscal year.We were formed on August 6, 2018 and, as a result, did not have executive officers during 2017 andbe filed with the majority of 2018. However, because (1) all of the assets and operations of New Fortress Energy Holdings (our predecessor for financial reporting purposes) were contributed to NFI (our subsidiary)SEC within 120 days after December 31, 2020 in connection with our Offering2021 annual meeting of shareholders and such assets and operations constitute our only assets and operations and (2) one of our executive officers was also an executive officer of New Fortress Energy Holdings and provided the same type of services to New Fortress Energy Holdings in 2017 and 2018 prior to our formation as he provides to us, we have included disclosure regarding compensation paid to the executive officer of New Fortress Energy Holdings for the 2017 fiscal year and for the 2018 fiscal year prior to the date of our formation as well as disclosure regarding compensation paid to all of our executive officers following our formation. The only individual serving as an officer of New Fortress Energy Holdings during 2018 was Christopher S. Guinta.NamePrincipal Position (New Fortress Energy Holdings)Wesley R. EdensChief Executive OfficerChristopher S. GuintaChief Financial OfficerMichael J. UtslerChief Operating OfficerMr. Edens was appointed as our Chief Executive Officer effective as of August 6, 2018. Mr. Utsler was appointed as our Chief Operating Officer effective as of October 29, 2018.Mr. Edens is compensatedincorporated herein by FIG LLC for services performed for the benefit of Fortress and certain other Fortress entities. However, none of the compensation received by Mr. Edens from FIG LLC is compensation for services rendered to us. Rather, Mr. Edens has elected to serve as our Chief Executive Officer without compensation, primarily due to his substantial ownership stake in us. Consequently, disclosure of compensation paid by FIG LLC to Mr. Edens would in no way reflect compensation for services provided to us and would be misleading to shareholders. As such, compensation information for Mr. Edens is not included below.2018 Summary Compensation TableThe following table provides information regarding the compensation earned by the named executive officers during the fiscal year ended December 31, 2018.
Compensation
($)(1)Mr. Edens was appointed as our Chief Executive Officer effective as of August 6, 2018. As described more fully above, this table does not include information regarding compensation paid to Mr. Edens because Mr. Edens does not receive any compensation from any party for services rendered to us.(2)Reflects an annual bonus for services rendered in 2018, but paid in 2019. For additional information, see “—Narrative Disclosure to Summary Compensation Table — Cash Bonus” below.(3)Represents (i) a $75,000 sign-on bonus paid to Mr. Guinta in 2017 in connection with his appointment and (ii) an annual bonus for services rendered in 2017, but paid in 2018.(4)Represents (i) reimbursement for relocation expenses incurred as a result of Mr. Guinta’s appointment and relocation to New York, New York in the amount of $26,012 and (ii) a tax gross-up payment in the amount of $9,410.(5)Mr. Utsler was appointed as our Chief Operating Officer effective as of October 29, 2018.72(6)Represents (i) a $75,000 sign-on bonus paid to Mr. Utsler in connection with his appointment and (ii) an annual bonus for services rendered in 2018, but paid in 2019. For additional information regarding Mr. Utsler’s annual bonus, see “—Narrative Disclosure to Summary Compensation Table—Cash Bonus” below.(7)Represents (i) a tax gross-up payment made to Mr. Utsler with respect to his sign-on bonus in the amount of $48,366 pursuant to the terms of his employment offer letter and (ii) reimbursement for temporary housing in connection with his relocation to Miami, Florida in the amount of $15,033. For additional information regarding Mr. Utsler’s employment offer letter, see “Narrative Disclosure to Summary Compensation Table — Utsler Offer Letter” below.Narrative Disclosure to Summary Compensation TableBase SalaryBase salary is a fixed component of compensation for each year, which may be increased from time to time based on the individual’s performance and other factors as determined by the sole member of New Fortress Energy Holdings. Base salaries were originally set pursuant to negotiations with the named executive officer at the time of hire. As previously noted, Mr. Edens does not receive compensation from us. For 2018, annualized base salaries for Mr. Guinta and Mr. Utsler were $350,000 and $1,200,000, respectively. For additional information on the elements of Mr. Guinta’s and Mr. Utsler’s compensation, see “—Narrative Disclosure to Summary Compensation Table — Guinta Offer Letter” and “Narrative Disclosure to Summary Compensation Table — Utsler Offer Letter” below.Cash BonusFor 2018, target bonus opportunities for Mr. Guinta and Mr. Utsler were 125% and between 100% and 150% of annualized base salary, respectively. Following a review of our performance by our compensation committee as well as the contributions of Mr. Guinta and Mr. Utsler to that performance, our compensation committee determined the actual amount of the bonuses payable to Mr. Guinta and Mr. Utsler in the tables above. For additional information regarding the elements of Mr. Guinta’s and Mr. Utsler’s compensation, see “—Guinta Offer Letter” and “—Utsler Offer Letter” below.Long-Term Incentive AwardsThe named executive officers were not granted long-term incentive awards during 2018. However, in connection with the Offering, we adopted a long-term incentive plan. For more details on the terms of the long-term incentive plan, see “—NFE 2019 Omnibus Incentive Plan,” below.Guinta Offer LetterOn March 14, 2017, NFE Management, LLC entered into an offer letter (the “Guinta Offer Letter”) with Mr. Guinta. The Guinta Offer Letter provides Mr. Guinta with (a) an annualized base salary of $350,000, (b) a discretionary target bonus opportunity equal to 125% of annual base salary (with a guaranteed $250,000 bonus for calendar year 2017), (c) a sign-on bonus of $75,000, which is required to be repaid by Mr. Guinta in the event of his resignation or termination of employment for Cause (as defined below) prior to the first anniversary of his start date, (d) subject to the adoption of a definitive equity compensation plan, an equity award grant with a grant date value of $2,500,000, which will be governed by the terms of such equity compensation plan and the applicable documents underlying the grant, and (e) eligibility to participate in the broad-based employee benefit plans, as may be adopted from time to time, subject to the eligibility requirements of such employee benefit plans.The Guinta Offer Letter also contains certain restrictive covenants, including (a) non-competition and non-solicitation covenants that are applicable during Mr. Guinta’s term of employment, and for twelve months following his resignation or termination of his employment for Cause and (b) restrictions on disclosure of confidential information.Utsler Offer LetterOn August 30, 2018, NFE Management, LLC entered into an offer letter (the “Utsler Offer Letter”) with Mr. Utsler. The Utsler Offer Letter provides Mr. Utsler with (a) an annualized base salary of $1,200,000, (b) a discretionary target bonus opportunity equal to between 100% and 150% of annual base salary (prorated for calendar year 2018), (c) a sign-on bonus of $75,000, calculated and paid on a tax grossed-up basis, a 12-month pro-rated portion of which is required to be repaid by Mr. Utsler in the event of his resignation or termination of employment for Cause (as defined below) prior to the first anniversary of his start date, (d) subject to the73adoption of a definitive equity compensation plan, an equity award grant with a grant date value of $10,000,000, which will be governed by the terms of such equity compensation plan and the applicable documents underlying the grant, (e) residential accommodations in Miami, Florida for a period of 90 days to assist with relocation, and (f) eligibility to participate in the broad-based employee benefit plans, as may be adopted from time to time, subject to the eligibility requirements of such employee benefit plans.The Utsler Offer Letter also contains certain restrictive covenants, including (a) non-competition and non-solicitation covenants that are applicable during Mr. Utsler’s term of employment, and for six months following his resignation or termination of his employment for Cause and (b) restrictions on disclosure of confidential information.As used in the Guinta and Utsler Offer Letters, “Cause” generally means the executive’s (i) willful misconduct or gross negligence in the performance of his duties; (ii) failure to perform his duties or to follow the lawful directives of the board of directors; (iii) commission of, indictment for, conviction of, or pleading of guilty or nolo contendere to, a felony or any crime involving moral turpitude; (iv) failure to cooperate in any audit or investigation of the business or financial practices of any member of NFE Management, LLC or any of its affiliates or any facility managed by any of the foregoing entities (collectively, the “Company Group”); (v) performance of any material act of theft, embezzlement, fraud, malfeasance, dishonesty or misappropriation of the property of any member of the Company Group; or (vi) breach of the applicable Offer Letter or any other agreement with a member of the Company Group, including (without limitation), a violation of the code of conduct or other written policy of any such entity.Outstanding Equity Awards at 2018 Fiscal Year-EndThe named executive officers had not been granted equity awards as of December 31, 2018.NFE 2019 Omnibus Incentive PlanIntroductionIn connection with the Offering, we adopted the Plan, effective as of January 31, 2019. The purposes of the Plan is to provide additional incentives to selected employees, directors, independent contractors and consultants of NFE or its affiliates, to strengthen their commitment, motivate them to faithfully and diligently perform their responsibilities and to attract and retain competent and dedicated persons who are essential to the success of our business and whose efforts will impact our long-term growth and profitability. To accomplish these purposes, the Plan will provide for the issuance of options, share appreciation rights (“SARs”), restricted shares, restricted share units (“RSUs”), share bonuses, other share-based awards and cash awards.Effective as of February 4, 2019, we granted RSUs under the Plan to our non-employee directors. The awards to directors had a grant date value of $1,000,000, calculated based on the price per share in the Offering. The awards will vest in three equal installments on the date of each of the three annual meetings following the date of grant.Summary of Plan TermsA total number of our Class A shares equal to 10% of the aggregate of our outstanding Class A and Class B shares as of the completion of the Offering were initially reserved and available for issuance under the Plan, as increased on the first day of each fiscal year beginning in calendar year 2020 by a number of Class A shares equal to the excess of 10% of the aggregate number of outstanding Class A and Class B shares on the last day of the immediately preceding fiscal year, over the number of Class A shares reserved and available for issuance under the Plan as of the last day of the immediately preceding fiscal year.Class A shares subject to an award under the Plan that remain unissued upon the cancellation, termination or expiration of the award will again become available for grant under the Plan. Additionally, Class A shares that are exchanged by a participant or withheld by us as full or partial payment in connection with any award under the Plan, as well as any Class A shares exchanged by a participant or withheld by us to satisfy the tax withholding obligations related to any award, will also be available for subsequent awards under the Plan. To the extent an award is paid or settled in cash, the number of Class A shares previously subject to the award will again be available for grants pursuant to the Plan. To the extent that an award can only be settled in cash, such award will not be counted against the total number of Class A shares available for grant under the Plan.74The Plan will be administered by our compensation committee; provided, however, that if each member of the compensation committee is not a “non-employee director” within the meaning of Rule 16b-3 of the Exchange Act, the compensation committee may request that the board of directors make determinations with respect to compensation that is subject to Section 16 of the Exchange Act. The plan administrator may interpret the Plan and may prescribe, amend and rescind rules and make all other determinations necessary or desirable for the administration of the Plan.The Plan permits the plan administrator to select the officers, employees, non-employee directors, independent contractors and consultants of NFE or its affiliates who will receive awards, to determine the terms and conditions of those awards, including but not limited to the exercise price or other purchase price of an award, the number of our Class A shares or cash or other property subject to an award, the term of an award and the vesting schedule applicable to an award, and to amend the terms and conditions of outstanding awards.RSUs and restricted shares may be granted under the Plan. The plan administrator will determine the purchase price, vesting schedule and performance objectives, if any, applicable to the grant of RSUs and restricted shares. If the restrictions, performance objectives or other conditions determined by the plan administrator are not satisfied, the RSUs and restricted shares will be forfeited. Subject to the provisions of the Plan and the applicable individual award agreement, the plan administrator may provide for the lapse of restrictions in installments or the acceleration or waiver of restrictions (in whole or part) under certain circumstances as set forth in the applicable individual award agreement, including the attainment of certain performance goals, a participant’s termination of employment or service or a participant’s death or disability. The rights of RSU and restricted shareholders upon a termination of employment or service will be set forth in individual award agreements.Unless the applicable award agreement provides otherwise, participants with restricted shares will generally have all of the rights of a Class A shareholder during the restricted period, including the right to vote and receive dividends declared with respect to such restricted shares. Dividends declared during the restricted period with respect to such restricted shares may be paid or distributed when accrued, or may become payable if the underlying restricted shares vest. During the restricted period, participants with RSUs will generally not have any rights of a Class A shareholder, but, if the applicable individual award agreement so provides, may be credited with dividend equivalent rights. Dividend equivalents may be paid or distributed when accrued, or may be paid at the time that our Class A shares in respect of the related RSUs are delivered to the participant.We may issue share options under the Plan. Options granted under the Plan may be in the form of non-qualified options or “incentive share options” within the meaning of Section 422 of the Internal Revenue Code, as set forth in the applicable individual option award agreement. The exercise price of all options granted under the Plan will be determined by the plan administrator, but in no event may the exercise price be less than 100% of the fair market value of the related Class A shares on the date of grant. The maximum term of all share options granted under the Plan will be determined by the plan administrator, but may not exceed ten years. Each share option will vest and become exercisable (including in the event of the optionee’s termination of employment or service) at such time and subject to such terms and conditions as determined by the plan administrator in the applicable individual option agreement.SARs may be granted under the Plan either alone or in conjunction with all or part of any option granted under the Plan. A free-standing SAR granted under the Plan entitles its holder to receive, at the time of exercise, an amount per share equal to the excess of the fair market value (at the date of exercise) of a Class A share over the base price of the free-standing SAR. A SAR granted in conjunction with all or part of an option under the Plan entitles its holder to receive, at the time of exercise of the SAR and surrender of the related option, an amount per share equal to the excess of the fair market value (at the date of exercise) of a Class A share over the exercise price of the related option. Each SAR will be granted with a base price that is not less than 100% of the fair market value of the related Class A shares on the date of grant. The maximum term of all SARs granted under the Plan will be determined by the plan administrator, but may not exceed ten years. The plan administrator may determine to settle the exercise of a SAR in Class A shares, cash, or any combination thereof.75Each free-standing SAR will vest and become exercisable (including in the event of the SAR holder’s termination of employment or service) at such time and subject to such terms and conditions as determined by the plan administrator in the applicable individual free-standing SAR agreement. SARs granted in conjunction with all or part of an option will be exercisable at such times and subject to all of the terms and conditions applicable to the related option.Other share-based awards, valued in whole or in part by reference to, or otherwise based on, our Class A shares (including dividend equivalents) may be granted under the Plan. Dividends or dividend equivalents awarded under the Plan may be paid or distributed when accrued, or may be subject to the same restrictions, conditions and risks of forfeiture as the underlying awards and only become payable if the underlying awards vest. The plan administrator will determine the terms and conditions of such other share-based awards, including the number of Class A shares to be granted pursuant to such other share-based awards, the manner in which such other share-based awards will be settled (e.g., in Class A shares, cash or other property), and the conditions to the vesting and payment of such other share-based awards (including the achievement of performance objectives).Bonuses payable in fully vested Class A shares and awards that are payable solely in cash may also be granted under the Plan.The plan administrator may grant equity-based awards and incentives under the Plan that are subject to the achievement of performance objectives selected by the plan administrator in its sole discretion.In the event of a merger, consolidation, reclassification, recapitalization, spin-off, spin-out, repurchase, reorganization, corporate transaction or event, special or extraordinary dividend or other extraordinary distribution (whether in the form of Class A shares, cash or other property), share split, reverse share split, subdivision or consolidation, combination, exchange of shares, or other change in corporate structure affecting our Class A shares, an equitable substitution or proportionate adjustment shall be made, at the sole discretion of the plan administrator, in (i) the aggregate number of our Class A shares reserved for issuance under the Plan, (ii) the kind and number of securities subject to, and the exercise price or base price of, any outstanding options and SARs granted under the Plan, (iii) the kind, number and purchase price of our Class A shares, or the amount of cash or amount or type of property, subject to outstanding restricted shares, RSUs, share bonuses and other share-based awards granted under the Plan, or (iv) the performance goals and periods applicable to award granted under the Plan. Equitable substitutions or adjustments other than those listed above may also be made as determined by the plan administrator. In addition, the plan administrator may terminate all outstanding awards for the payment of cash or in-kind consideration having an aggregate fair market value equal to the excess of the fair market value of Class A shares, cash or other property covered by such awards over the aggregate exercise price or base price, if any, of such awards, but if the exercise price or base price of any outstanding award is equal to or greater than the fair market value of our Class A shares, cash or other property covered by such award, the board of directors may cancel the award without the payment of any consideration to the participant.Each participant will be required to make arrangements satisfactory to the plan administrator regarding payment of an amount up to the maximum statutory tax rates in the participant’s applicable jurisdictions with respect to any award granted under the Plan, as determined by us. Whenever cash is to be paid pursuant to an award, we have the right, to the extent permitted by law, to deduct any such taxes from any payment of any kind otherwise due to the participant. Additionally, whenever Class A shares or other property other than cash are to be delivered pursuant to an award, we may (i) require the participant to pay us an amount in cash, (ii) withhold from delivery of Class A shares or other property, or (iii) accept delivery of already owned unrestricted Class A shares, in each case in the sole discretion of the plan administrator. The Class A shares withheld must have a value not exceeding the applicable taxes to be withheld and applied to the tax obligations, determined based on the greatest withholding rates that may be used without creating adverse accounting treatment with respect to such award. We may also use any other method of obtaining the necessary payment or proceeds, as permitted by law, to satisfy our withholding obligation with respect to any award.The Plan provides the board of directors with authority to amend, alter or terminate the Plan, but generally such action may not impair the rights of any participant with respect to outstanding awards without the participant’s consent. The plan administrator may amend an award, prospectively or retroactively, but generally such amendment may not impair the rights of any participant without the participant’s consent. Shareholder approval of any such action will be obtained if required to comply with applicable law.76The Plan will terminate on the tenth anniversary of the effective date of the Plan (although awards granted before that time will remain outstanding in accordance with their terms).On February 4, 2019, we filed with the SEC a registration statement on Form S-8 covering the Class A shares issuable under the Plan.Director CompensationWe were formed on August 6, 2018 and, as a result, did not have any directors for the majority of 2018. New Fortress Energy Holdings (our predecessor for financial reporting purposes) did not award any compensation to members of its board of directors during 2018 prior to our formation and we did not award any compensation to members of our board of directors in 2018 following our formation.Non-employee directors will receive an annual cash retainer equal to $100,000 per year, payable quarterly. Additionally, the chair of the audit committee of the board of directors will receive an additional $10,000 annual cash retainer, payable quarterly. Non-employee directors will also receive a one-time equity grant under the Plan with a grant-date value equal to $1,000,000 upon their appointment to the board of directors (an “Initial Grant”). As described in additional detail above under the heading “—NFE 2019 Omnibus Incentive Plan—Introduction,” upon the completion of the Offering, non-employee directors received a grant of RSUs under the Plan equal to $1,000,000 (calculated based on the price per share in the Offering), which will vest in equal parts on the day following each of our first three annual meetings. This grant of RSUs constituted the Initial Grant for each of the persons who became non-employee directors upon the consummation of the Offering.Compensation Committee Interlocks and Insider ParticipationNone of our executive officers serve on the board of directors or compensation committee of a company that has an executive officer that serves on our board of directors or compensation committee. No member of our board of directors is an executive officer of a company in which one of our executive officers serves as a member of the board of directors or compensation committee of that company.Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Shareholder Matters.following table setsinformation required by this Item 12 is set forth in the beneficial ownershipCompany’s Proxy Statement to be filed with the SEC within 120 days after December 31, 2020 in connection with our 2021 annual meeting of our Class A sharesshareholders and Class B shares issued and outstanding as of March 20, 2019 by:each person known to us to beneficially own 5% or more of any class of our shares;is incorporated herein by reference.all of our directors and executive officers as a group.Unless otherwise noted, the address for each beneficial owner listed below is 111 W. 19th Street, 8th Floor, New York, New York 10011. As of March 20, 2019, we had 20,837,272 Class A shares and 147,058,824 Class B shares outstanding.
Shares
Beneficially
Owned
Class A Shares
Beneficially
Owned
Shares
Beneficially
Owned
Class B Shares
Beneficially
Owned
Total Class A
Shares and
Class B Shares
Beneficially
Owned77
Shares
Beneficially
Owned
Class A Shares
Beneficially
Owned
Shares
Beneficially
Owned
Class B Shares
Beneficially
Owned
Total Class A
Shares and
Class B Shares
Beneficially
Owned*Less than 1.0%.(1)New Fortress Energy Holdings, which directly holds the Class B shares of the Company, is majority-owned and controlled by Fortress Equity Partners (A) LP (the “Fortress Shareholder”). The Fortress Shareholder is controlled by Wesley R. Edens, our Chief Executive Officer. Mr. Edens exercises voting power over the shares held by New Fortress Energy Holdings and may be deemed to be the beneficial owner thereof. Each of Mr. Edens and Mr. Nardone has the right to acquire beneficial ownership of his pro rata portion of the Class B shares and corresponding NFI LLC Units held directly by New Fortress Energy Holdings at his election pursuant to the NFI LLC Agreement and may be deemed to share dispositive power over such Class B shares and NFI LLC Units. Each of Mr. Edens and Mr. Nardone purchased 2,500,000 Class A shares in the Offering.(2)Based on the Schedule 13G jointly filed with the SEC on February 11, 2019 by Encompass Capital Advisors LLC, Encompass Capital Partners LLC, Encompass Capital Master Fund LP and Todd J. Kantor. In this Schedule 13G, Encompass Capital Advisors LLC and Todd J. Kantor have shared power to vote and dispose of 1,700,000 Class A shares and Encompass Capital Partners LLC and Encompass Master Fund LP have shared power to vote and dispose of 1,158,221 Class A shares. The address of the principal business office of Encompass Capital Advisors LLC and Encompass Capital Partners LLC is 200 Park Avenue, 11th Floor, New York, NY 10166. The address of the principal business office of Encompass Capital Master Fund LP is c/o Intertrust Corporate Services (Cayman) Ltd, 190 Elgin Avenue, George Town, Grand Cayman KY1-9007, Cayman Islands. The address of the principal business office of Todd J. Kantor is c/o Encompass Capital Advisors LLC, 200 Park Avenue, 11th Floor, New York, NY 10166.(3)Based on the Schedule 13G jointly filed February 11, 2019 with the SEC by T. Rowe Price Associates, Inc. (“Price Associates”) and T. Rowe Price New Horizons Fund, Inc. (“New Horizons”). Price Associates reported that, as an investment adviser, it beneficially owned 3,200,000 Class A shares, sole voting power with respect to 585,640 Class A shares and sole dispositive power with respect to 3,200,000 Class A shares and no shared voting or dispositive power. New Horizons reported that, as an investment company, it beneficially owned 1,637,654 Class A shares, over which it has sole voting power with respect to 1,637,654 shares and no sole dispositive power, no shared voting power and no shared dispositive power. The address of the principal business office of Price Associates and New Horizons is 100 E. Pratt Street, Baltimore, Maryland 21202.(4)Based on the Schedule 13G jointly filed February 13, 2019 with the SEC by Duquesne Family Office LLC and Stanley Druckenmiller. Duquesne Family Office LLC and Mr. Druckenmiller reported shared voting and shared dispositive power with respect to 1,200,000 Class A shares and no sole voting or dispositive power. The address of the principal business office of each of Duquesne Family Office LLC and Mr. Druckenmiller is 40 West 57th Street, 25th Floor New York, New York, 10019.Item 13. Certain Relationships and Related Transactions, and Director Independence. terms of the transactions and agreements disclosed in this section were determined by and among affiliated entities and, consequently, are not the result of arm’s length negotiations. These terms are not necessarily at least as favorable to the parties to these transactions and agreements as the terms that could have been obtained from unaffiliated third parties.Agreements with AffiliatesContribution AgreementIn connection with the closing of the Offering, we entered into a contribution agreement that effects the Transactions, including the transfer of the ownership interests in NFI to us, and the use of the net proceeds in connection with the completion of the Offering. While we believe this agreement is on terms no less favorable to78any party than those that could have been negotiated with an unaffiliated third party, it was not the result of arm’s-length negotiations. All of the transaction expenses incurred in connection with these transactions were paid from the proceeds of the Offering.Shareholders’ AgreementGeneralOur Shareholders’ Agreement provides that the parties thereto will use their respective reasonable efforts (including voting or causing to be voted all of our voting shares beneficially owned by each) so that no amendment is made to our operating agreement in effect as of the date of the Shareholders’ Agreement that would add restrictions to the transferability of our shares by New Fortress Energy Holdings or its permitted transferees which are beyond those provided for in our operating agreement, the Shareholders’ Agreement or applicable securities laws, or that nullify the rights set out in the Shareholders’ Agreements of New Fortress Energy Holdings or its permitted transferees unless such amendment is approved by New Fortress Energy Holdings.Designation and Election of DirectorsOur Shareholders’ Agreement provides that, for so long as the Shareholders’ Agreement is in effect, we and New Fortress Energy Holdings shall take all reasonable actions within our respective control (including voting or causing to be voted all of the securities entitled to vote generally in the election of our directors held of record or beneficially owned by New Fortress Energy Holdings or its affiliates, and, with respect to us, including in the slate of nominees recommended by the board of directors those individuals designated by New Fortress Energy Holdings) so as to elect to the board of directors, and to cause to continue in office, not more than eight directors (or such other number as New Fortress Energy Holdings may agree in writing), of whom, at any given time:a number of directors equal to a majority of the board of directors, plus one director, shall be individuals designated by New Fortress Energy Holdings, for so long as New Fortress Energy Holdings directly or indirectly beneficially owns, together with its affiliates and permitted transferees, at least 30% of our voting power, provided that if the board of directors consists of six or fewer directors, then New Fortress Energy Holdings shall have the right to designate a number of directors equal to a majority of the board of directors;a number equal to a majority of the board of directors, minus one director, shall be individuals designated by New Fortress Energy Holdings, for so long as New Fortress Energy Holdings directly or indirectly beneficially owns, together with its affiliates and permitted transferees, less than 30% but at least 20% of our voting power, provided that if the board of directors consists of six or fewer directors, then New Fortress Energy Holdings shall have the right to designate a number of directors equal to three directors;a number of directors (rounded up to the nearest whole number) that would be required to maintain New Fortress Energy Holdings’ proportional representation on the board of directors shall be individuals designated by New Fortress Energy Holdings for so long as New Fortress Energy Holdings directly or indirectly beneficially owns, together with its affiliates and permitted transferees, less than 20% but at least 10% of our voting power, provided that if the board of directors consists of six or fewer directors, then New Fortress Energy Holdings shall have the right to designate a number of directors equal to two directors; anda number of directors (rounded up to the nearest whole number) that would be required to maintain New Fortress Energy Holdings’ proportional representation on the board of directors shall be individuals designated by New Fortress Energy Holdings for so long as New Fortress Energy Holdings directly or indirectly beneficially owns, together with its affiliates and permitted transferees, less than 10% but at least 5% of our voting power, provided that if the board of directors consists of six or fewer directors, then New Fortress Energy Holdings shall have the right to designate a number of directors equal to one director.So long as New Fortress Energy Holdings is entitled to designate one or more nominees to the board of directors and notifies the board of directors of its desire to remove, with or without cause, any director previously designated by it to the board of directors, we are required to take all necessary action to cause such removal.79In accordance with the Shareholders’ Agreement, New Fortress Energy Holdings designated Messrs. Catterall, Grain, Griffin, Mack and Wilkinson for election to our board of directors.IndemnificationThe Shareholders’ Agreement provides that we will indemnify New Fortress Energy Holdings and its officers, directors, employees, agents and affiliates against losses arising out of third-party claims (including litigation matters and other claims) based on, arising out of or resulting from:the ownership or the operation of our assets or properties, and the operation or conduct of our business, prior to or following the Offering; andany other activities we engage in.In addition, we have agreed to indemnify New Fortress Energy Holdings and its officers, directors, employees, agents and affiliates against losses, including liabilities under the Securities Act and the Exchange Act, relating to misstatements in or omissions from our registration statement on Form S-1 (File No. 333-228339) declared effective by the SEC on January 30, 2019, and any other registration statement or report that we file, other than misstatements or omissions made in reliance on information relating to and furnished by New Fortress Energy Holdings for use in the preparation of that registration statement or this Annual Report, against which New Fortress Energy Holdings has agreed to indemnify us.Registration RightsDemand Rights. Under our Shareholders’ Agreement, New Fortress Energy Holdings will have, for so long as New Fortress Energy Holdings directly or indirectly beneficially owns, together with its affiliates and permitted transferees, an amount of our Class A and Class B shares (whether owned at the time of the Offering or subsequently acquired) equal to or greater than 1% of the Class A and Class B shares issued and outstanding immediately after the consummation of the Offering (a “Registrable Amount”), “demand” registration rights that allow New Fortress Energy Holdings, for itself and for its affiliates and permitted transferees, at any time after 180 days following the consummation of the Offering, to request that we register under the Securities Act an amount of Class A shares equal to or greater than a Registrable Amount. New Fortress Energy Holdings, for itself and for its affiliates and permitted transferees, are entitled to unlimited demand registrations so long as such persons, together, beneficially own a Registrable Amount. We also are not required to effect any demand registration within one month of a “firm commitment” underwritten offering to which the requestor held “piggyback” rights, described below, and which included at least 50% of the Class A shares requested by the requestor to be included or within one month of any other underwritten offering pursuant to a shelf registration statement.Piggyback Rights. For so long as New Fortress Energy Holdings beneficially owns, together with its affiliates and permitted transferees, a Registrable Amount, New Fortress Energy Holdings (and its affiliates and permitted transferees) will also have “piggyback” registration rights that allow them to include Class A shares that they own in any public offering of equity securities initiated by us (other than those public offerings pursuant to registration statements on Form S-4 or Form S-8 or pursuant to an employee benefit plan arrangement) or by any of our other shareholders that have registration rights. These “piggyback” registration rights are subject to proportional cutbacks based on the manner of the offering and the identity of the party initiating such offering.Shelf Registration. Under our Shareholders’ Agreement, we will grant to New Fortress Energy Holdings or any of its permitted transferees, for so long as New Fortress Energy Holdings, together with its affiliates and permitted transferees, beneficially owns a Registrable Amount, the right to request a shelf registration on Form S-3 providing for offerings of Class A shares issuable upon exercise of the Redemption Right to be made on a continuous basis until all shares covered by such registration have been sold, subject to our right to suspend the use of the shelf registration prospectuses for a reasonable period of time (not exceeding 60 days in succession or 90 days in the aggregate in any 12-month period) if we determine that certain disclosures required by the shelf registration statement would be detrimental to us or our shareholders. In addition, New Fortress Energy Holdings, for itself and for its affiliates and permitted transferees, may elect to participate in such shelf registrations within ten days after notice of the registrationthis Item 13 is given.80Indemnification; Expenses; Lock-ups. Under our Shareholders’ Agreement, we agree to indemnify the applicable selling shareholder and its officers, directors, employees, managers, members partners, agents and controlling persons against any losses or damages resulting from any untrue statement or omission of material fact in any registration statement or prospectus pursuant to which it sells Class A shares, unless such liability arose from the applicable selling shareholder’s misstatement or omission, and the applicable selling shareholder agrees to indemnify us against all losses caused by its misstatements or omissions. We will pay all registration and offering-related expenses incidental to our performance under the Shareholders’ Agreement, and the applicable selling shareholder will pay its portion of all underwriting discounts, commissions and transfer taxes, if any, relating to the sale of its Class A shares under the Shareholders’ Agreement. We have entered into, and have caused our officers and directors to enter into, lock-up agreements in connection with any exercise of registration rights by New Fortress Energy Holdings, for itself and for its affiliates and permitted transferees.Information RightsUnder our Shareholders’ Agreement, New Fortress Energy Holdings has the right to request certain information from us.Assistance in the Sale of New Fortress Energy Holdings’ SharesUnder our Shareholders’ Agreement, if New Fortress Energy Holdings seeks to sell its Class A shares other than pursuant to a registration statement, we shall use our reasonable best efforts to assist New Fortress Energy Holdings in the sale process, including by providing information to potential purchasers as requested by New Fortress Energy Holdings.In addition, if the board of the directors starts and then abandons a sale process, and New Fortress Energy Holdings subsequently indicates that it wants to sell its Class A shares, we shall permit New Fortress Energy Holdings to engage in discussions with potential purchasers who participated in the abandoned sales process. We shall be obligated to assist New Fortress Energy Holdings in any such sale process.Amended and Restated Limited Liability Company Agreement of NFIThe NFI LLC Agreement is filed as an exhibit to our registration statement on Form S-1 (File No. 333-228339) declared effective by the SEC on January 30, 2019 and this Annual Report. The following description of the NFI LLC Agreement is qualified in its entirety by reference thereto.Redemption RightsUnder the NFI LLC Agreement, New Fortress Energy Holdings and any permitted transferees of their NFI LLC Units, subject to certain limitations, have the right, pursuant to the Redemption Right, to cause NFI to acquire all or a portion of its NFI LLC Units for, at NFI’s election, (i) Class A shares at a redemption ratio of one Class A share for each NFI LLC Unit redeemed, subject to conversion rate adjustments for equity splits, equity dividends and reclassification and other similar transactions or (ii) an equivalent amount of cash. NFI will determine whether to issue Class A shares or cash based on facts in existence at the time of the decision, which we expect would include the relative value of the Class A shares (including trading prices for the Class A shares at the time), the cash purchase price, the availability of other sources of liquidity to acquire the NFI LLC Units and alternative uses for such cash. As the sole managing member of NFI, our decision to make a cash payment upon the redemption of NFI LLC Units will be made by a committee of our board of directors. Alternatively, upon the exercise of the Redemption Right, NFE (instead of NFI) has the right, pursuant to the Call Right, to, for administrative convenience, acquire each tendered NFI LLC Unit directly from the redeeming NFI unitholder for, at its election, (x) one Class A share, subject to conversion rate adjustments for equity splits, equity dividends and reclassification and other similar transactions or (y) an equivalent amount of cash. Our decision with respect to the Call Right will be made by a committee of our board of directors. In connection with any redemption of NFI LLC Units pursuant to the Redemption Right or our Call Right, the corresponding number of Class B shares will be cancelled.For purposes of any transfer or exchange of NFI LLC Units initially owned by New Fortress Energy Holdings and our Class B shares, the NFI LLC Agreement and our operating agreement contain provisions effectively linking each NFI LLC Unit with one of our Class B shares. Class B shares cannot be transferred without transferring an equal number of NFI LLC Units and vice versa.81Distributions and AllocationsIn accordance with the NFI LLC Agreement, subject to the requirement to make tax distributions described below, we have the right to determine when distributions will be made to the holders of NFI LLC Units and the amount of any such distributions. If we authorize a distribution, such distribution will be made to the holders of NFI LLC Units generally on a pro rata basis in accordance with their respective percentage ownership of NFI LLC Units.NFI allocates its net income or net loss for each year to the holders of NFI LLC Units pursuant to the terms of the NFI LLC Agreement, and the holders of NFI LLC Units, including NFE, generally incur U.S. federal, state and local income taxes on their share of any taxable income of NFI. Net income and losses of NFI are generally allocated to the holders of NFI LLC Units on a pro rata basis in accordance with their respective percentage ownership of NFI LLC Units, subject to requirements under U.S. federal income tax law that certain items of income, gain, loss or deduction be allocated disproportionately in certain circumstances. To the extent NFI has available cash and subject to the terms of NFE’s credit agreements and any other debt instruments, we will cause NFI to make (i) generally pro rata distributions to holders of NFI LLC Units, including NFE, in an amount sufficient to allow NFE to pay its taxes, (ii) additional pro rata distributions to all holders of NFI LLC Units in an amount generally intended to allow holders of NFI LLC Units (other than NFE) to satisfy their respective income tax liabilities with respect to their allocable share of the income of NFI (based on certain assumptions and conventions and as determined by NFI Holdings), and (iii) non-pro rata distributions to NFE in an amount at least sufficient to reimburse it for its corporate and other overhead expenses.Issuance of EquityThe NFI LLC Agreement provides that, except as otherwise determined by us, at any time NFE issues a Class A share or any other equity security, the net proceeds received by NFE with respect to such issuance, if any, shall be concurrently invested in NFI, and NFI shall issue to NFE one NFI LLC Unit or other economically equivalent equity interest unless such net proceeds are used by NFE to acquire a NFI LLC Unit pursuant to NFE’s exercise of the Call Right. Conversely, if at any time, any of NFE’s Class A shares are redeemed, repurchased or otherwise acquired, NFI shall redeem, repurchase or otherwise acquire an equal number of NFI LLC Units held by NFE, upon the same terms and for the same price, as our Class A shares are redeemed, repurchased or otherwise acquired.Other Transactions with Related PersonsMiami Ground LeaseWe lease the property for our Miami Facility from an affiliate of Fortress.The Lease. Our subsidiary, LNG Holdings (Florida) LLC (“Florida Holdings”), is the owner and operator of the Miami Facility. Florida Holdings holds rights to the real property on which the Miami Facility is located pursuant to that certain Ground Lease Agreement dated November 20, 2014 (the “Miami Lease”), by and between FDG LR 7 LLC, as landlord (“Miami Landlord”), and Florida Holdings, as tenant (in such capacity, “Miami Tenant”). The Miami Landlord is owned by certain funds managed by an affiliate of Fortress.Term. The term of the Miami Lease commenced November 20, 2014, and expires November 19, 2019. The term will automatically extend for five additional periods of five years each (unless Miami Tenant notifies Miami Landlord otherwise as set forth in the Miami Lease).Rent; Security. Miami Tenant pays base rent inCompany’s Proxy Statement to be filed with the amount of $270,000 per year, which amount shall escalate by 2.5% on each anniversary of the commencement date. Miami Tenant has delivered a security deposit in the amount of $135,000, which will be reduced to $70,000 upon commencement of the first renewal term, and further reduced to $0 upon commencement of the second renewal term. Miami Tenant has the right to provide the security deposit in the form of a letter of credit.Net Lease. Miami Tenant is responsible for all other costs attributable to the Miami leased premises and Miami Facility, including all property taxes, insurance, and utilities, as well as all maintenance, repair, and replacement costs.82Private AircraftMr. Edens owns or leases an aircraft that we charter from a third-party aircraft operator for business purposes in the ordinary course of operations. We incurred $1.9 million for the year endedSEC within 120 days after December 31, 2018, and such amount is included within Selling, general and administrative charges reimbursed to FIG LLC pursuant to the management services agreement described below. We paid the aircraft operator market rates for the charters. The operator remits a portion of these amounts to Mr. Edens.Management Services AgreementWe are party to a management services agreement with FIG LLC, an affiliate of Fortress, pursuant to which FIG LLC provides us with certain back-office services and charges us for selling, general and administrative expenses incurred to provide these services. For the year ended December 31, 2018, we incurred FIG LLC $5.7 million charges, for services provided under the management services agreement. The management services agreement was terminated2020 in connection with the closingour 2021 annual meeting of the Offering.Administrative Services AgreementWe entered into an administrative services agreement with FIG LLC, an affiliate of Fortress, in connection with the closing of the Offering, pursuant to which FIG LLC provides us with certain back-office servicesshareholders and charge us for selling, general and administrative expenses incurred to provide these services.Corporate Headquarters LeaseIn November 2018, we entered into a month-to-month non-exclusive license agreement, pursuant to which we lease our corporate offices from the Fortress Shareholder, an entity owned jointlyis incorporated herein by Wesley R. Edens and Randal A. Nardone. Under this license agreement, the Company paid rent of approximately $901,000 rent for the year ended December 31, 2018. The Fortress Shareholder agreed to be the lessor of record for the lease to facilitate the Company’s ability to occupy the space in the timeframe desired by the Company.Participation in the OfferingCertain of our executive officers and directors (including our Chief Executive Officer and Chairman) purchased 5,000,000 Class A shares in connection with the Offering at the initial public offering price per share and on the same terms as the other purchasers in the Offering for an aggregate of $70 million. The underwriters received the same underwriting discount on these shares as they did on any other shares sold to the public in the Offering.Procedures for Review, Approval and Ratification of Transactions with Related PersonsSEC rules define “transactions with related persons” to include any transaction in which the Company is a participant, the amount involved exceeds $120,000, and in which any “related person,” including any officer, director, nominee for director or beneficial holder of more than 5% of any class of our voting securities or an immediate family member of any of the foregoing, has a direct or indirect material interest. Our board of directors have adopted a written policy that outlines procedures for approving transactions with related persons, and any such transactions will be reviewed and approved or ratified by a majority of our disinterested and independent directors pursuant to the procedures outlined in any such policy. In determining whether to approve or ratify a transaction with a related person, we expect that the independent and disinterested directors will consider a variety of factors they deem relevant.Director IndependenceOur board of directors currently consists of eight directors. Our board of directors determined that Ms. Wanner and Messrs. Griffin, Mack, Wilkinson, Grain and Catterall qualify as independent directors under the corporate governance standards of NASDAQ.In evaluating director candidates, our board of directors assessed whether a candidate possessed the integrity, judgment, knowledge, experience, skill and expertise that are likely to enhance the board of directors’ ability to manage and direct our affairs and business, including, when applicable, to enhance the ability of committees of the board of directors to fulfill their duties.Item 14. Principal Accounting Fees and Services. table below setsinformation required by this Item 14 is set forth in the aggregate fees and expenses forCompany’s Proxy Statement to be filed with the years endedSEC within 120 days after December 31, 2018 and December 31, 2017 for professional services performed by our independent registered public accounting firm Ernst & Young LLP:(1)Audit fees consists of the aggregate fees billed or expected to be billed for professional services rendered for (i) the audit of our annual financial statements for fiscal years ended December 31, 2018 and December 31, 2017 included in our Annual Report and our registration statement on Form S-1 (File No. 333-228339) declared effective by the SEC on January 30, 2019, (ii) research necessary to comply with GAAP, and (iii) professional services performed related to the issuance of consents and comfort letters.(2)Tax fees consists of fees for professional services rendered by our principal accountant for tax compliance, tax advice and tax planning for fiscal years ended December 31, 2018 and December 31, 2017.Our audit committee has the sole authority to (1) retain and terminate our independent registered public accounting firm, (2) approve all auditing services and related fees and the terms thereof performed by our independent registered public accounting firm, and (3) pre-approve any non-audit services and tax services to be rendered by our independent registered public accounting firm. The audit committee is responsible for confirming the independence and objectivity of our independent registered public accounting firm. Our independent registered public accounting firm has been given unrestricted access to the audit committee and our management.The audit committee has adopted a pre-approval policy with respect to services which may be performed by Ernst & Young LLP. This policy lists specific audit-related and tax services as well as any other services that Ernst & Young LLP is authorized to perform and sets out specific dollar limits for each specific service, which may not be exceeded without additional audit committee authorization. The audit committee receives reports on the status of expenditures pursuant to that pre-approval policy. The audit committee reviews the policy at least annually in order to approve services and limits for the current year. Any service that is not enumerated in the policy must receive specific pre-approval by the audit committee. For the years ended December 31, 2018 and 2017, we did not have an audit committee or pre-approval policy. The charter of the audit committee and its pre-approval policy, each adopted2020 in connection with or subsequent to, the Offering, require that the audit committee reviewour 2021 annual meeting of shareholders and pre-approve the plan and scopeis incorporated herein by reference.Item 15. Exhibits, Financial Statement Schedules. (a)(1) Financial Statements. (2) Financial Statement Schedules. (b) Exhibits. Description Description2.1Agreement and Plan of Merger, dated as of January 13, 2021, by and among NFE, GMLP Merger Sub, GP Buyer, GMLP and the General Partner (incorporated by reference to Exhibit 2.1 to the Registrant’s Form 8-K (File No. 001-38790), filed with the Commission on January 20, 2021) Transfer Agreement, dated as of January 13, 2021, by and among GP Buyer, GLNG and the General Partner (incorporated by reference to Exhibit 2.2 to the Registrant’s Form 8-K (File No. 001-38790), filed with the Commission on January 20, 2021) Agreement and Plan of Merger, dated as of January 13, 2021, by and among NFE, Hygo Merger Sub, Hygo and the Hygo Shareholders (incorporated by reference to Exhibit 2.3 to the Registrant’s Form 8-K (File No. 001-38790), filed with the Commission on January 20, 2021) Certificate of Formation of New Fortress Energy LLC (incorporated by reference to Exhibit 3.1 to the Registrant’s Registration Statement on Form S-1 (File No. 333-228339), filed with the Commission on November 9, 2018) Certificate of Amendment to Certificate of Formation of New Fortress Energy LLC (incorporated by reference to Exhibit 3.2 to the Registrant’s Registration Statement on Form S-1 (File No. 333-228339), filed with the Commission on November 9, 2018) First Amended and Restated Limited Liability Company Agreement of New Fortress Energy LLC, dated February 4, 2019 (incorporated by reference to Exhibit 3.1 to the Registrant’s Form 8-K (File No. 001-38790), filed with the Commission on February 5, 2019) Certificate of Incorporation of New Fortress Energy Inc. (incorporated herein by reference to Exhibit 99.3 of the Company’s Quarterly Report on Form 10-Q filed on August 4, 2020) Bylaws of New Fortress Energy Inc. (incorporated herein by reference to Exhibit 99.4 of the Company’s Quarterly Report on Form 10-Q filed on August 4, 2020) Indenture, dated September 2, 2020, by and among New Fortress Energy Inc., the subsidiary guarantors from time to time party thereto, and U.S. Bank National Association, as trustee and collateral agent (incorporated by reference to Exhibit 4.1 to the Registrant’s Current Report on Form 8-K (File No. 001-38790), filed with the Commission on September 2, 2020) First Supplemental Indenture, dated December 17, 2020, by and among New Fortress Energy Inc., the subsidiary guarantors from time to time party thereto and U.S. Bank National Association, as trustee and as notes collateral agent (incorporated by reference to Exhibit 4.1 to the Registrant’s Current Report on Form 8-K (File No. 001-38790), filed with the Commission on December 18, 2020) Pledge and Security Agreement, by and among New Fortress Energy Inc., the subsidiary guarantees from time to time party thereto, and U.S. Bank National Association, as trustee and collateral agent (incorporated by reference to Exhibit 4.2 to the Registrant’s Current Report on Form 8-K (File No. 001-38790), filed with the Commission on September 2, 2020) Contribution Agreement, dated February 4, 2019, by and among New Fortress Energy LLC, New Fortress Intermediate LLC, New Fortress Energy Holdings LLC, NFE Atlantic Holdings LLC and NFE Sub LLC (incorporated by reference to Exhibit 10.1 to the Registrant’s Form 8-K (File No. 001-38790), filed with the Commission on February 5, 2019) Amended and Restated Limited Liability Company Agreement of New Fortress Intermediate LLC, dated February 4, 2019 (incorporated by reference to Exhibit 10.2 to the Registrant’s Form 8-K (File No. 001-38790), filed with the Commission on February 5, 2019) New Fortress Energy LLC 2019 Omnibus Incentive Plan (incorporated by reference to Exhibit 4.4 to the Registrant’s Registration Statement on Form S-8 (File No. 333-229507), filed with the Commission on February 4, 2019) Form of Director Restricted Share Unit Award Agreement (incorporated by reference to Exhibit 10.4 to the Registrant’s Registration Statement on Form S-1/A (File No. 333-228339), filed with the Commission on December 24, 2018) Offer Letter, dated March 14, 2017, by and between NFE Management LLC and Christopher Guinta (incorporated by reference to Exhibit 10.5 to the Registrant’s Registration Statement on Form S-1/A (File No. 333-228339), filed with the Commission on January 14, 2019) Offer Letter, dated as of August 30, 2018, by and between NFE Management LLC and Michael J. Utsler (incorporated by reference to Exhibit 10.6 to the Registrant’s Registration Statement on Form S-1/A (File No. 333-228339), filed with the Commission on January 14, 2019)Shareholders’ Agreement, dated February 4, 2019, by and among New Fortress Energy LLC, New Fortress Energy Holdings LLC, Wesley R. Edens and Randal A. Nardone (incorporated by reference to Exhibit 4.1 to the Registrant’s Form 8-K (File No. 001-38790), filed with the Commission on February 5, 2019) Administrative Services Agreement, dated February 4, 2019, by and between New Fortress Intermediate LLC and FIG LLC (incorporated by reference to Exhibit 10.3 to the Registrant’s Form 8-K (File No. 001-38790), filed with the Commission on February 5, 2019) Senior Secured Delayed Draw Term Loan CreditGas Sales Agreement, dated November 24, 2014,August 5, 2015, by and among LNG HoldingsNew Fortress Energy LLC FEP GP LNG Holdings LLC, LNG Holdings (Florida) LLC, as the borrower, Morgan Stanley Senior Funding, Inc., as administrative agent and the lenders party theretoJamaica Public Service Company Limited (incorporated by reference to Exhibit 10.910.12 to the Registrant’s Registration Statement on Form S-1 (File No. 333-228339), filed with the Commission on November 9, 2018)]DescriptionSyndicated Loan Agreement, dated June 3, 2016, by and among NFE North Holdings Limited, as the borrower, National Commercial Bank Jamaica Limited, as arranger, JCSD Trustee Services Limited, as agent and the lenders party thereto (incorporated by reference to Exhibit 10.10 to the Registrant’s Registration Statement on Form S-1 (File No. 333-228339), filed with the Commission on November 9, 2018)Credit Agreement, dated August 15, 2018, by and between New Fortress Energy Holdings LLC, NFE Atlantic Holdings LLC, as borrower, Morgan Stanley Senior Funding, Inc., as administrative agent and the subsidiary guarantors and lenders parties thereto (incorporated by reference to Exhibit 10.11 to the Registrant’s Registration Statement on Form S-1 (File No. 333-228339), filed with the Commission on November 9, 2018)Gas Sales Agreement, dated August 5, 2015, by and between New Fortress Energy LLC and Jamaica Public Service Company Limited (incorporated by reference to Exhibit 10.12 to the Registrant’s Registration Statement on Form S-1 (File No. 333-228339), filed with the Commission on November 9, 2018) First Amendment to Gas Sales Agreement, dated May 23, 2016, by and between NFE North Holdings Limited and Jamaica Public Service Company Limited (incorporated by reference to Exhibit 10.13 to the Registrant’s Registration Statement on Form S-1 (File No. 333-228339), filed with the Commission on November 9, 2018) Indemnification Agreement (Edens) (incorporated by reference to Exhibit 10.4 to the Registrant’s Form 8-K (File No. 001-38790), filed with the Commission on February 5, 2019) Indemnification Agreement (Guinta) (incorporated by reference to Exhibit 10.5 to the Registrant’s Form 8-K (File No. 001-38790), filed with the Commission on February 5, 2019) Indemnification Agreement (Utsler) (incorporated by reference to Exhibit 10.6 to the Registrant’s Form 8-K (File No. 001-38790), filed with the Commission on February 5, 2019) Indemnification Agreement (Catterall) (incorporated by reference to Exhibit 10.7 to the Registrant’s Form 8-K (File No. 001-38790), filed with the Commission on February 5, 2019) Indemnification Agreement (Grain) (incorporated by reference to Exhibit 10.8 to the Registrant’s Form 8-K (File No. 001-38790), filed with the Commission on February 5, 2019) Indemnification Agreement (Griffin) (incorporated by reference to Exhibit 10.9 to the Registrant’s Form 8-K (File No. 001-38790), filed with the Commission on February 5, 2019) Indemnification Agreement (Mack) (incorporated by reference to Exhibit 10.10 to the Registrant’s Form 8-K (File No. 001-38790), filed with the Commission on February 5, 2019) Indemnification Agreement (Nardone) (incorporated by reference to Exhibit 10.11 to the Registrant’s Form 8-K (File No. 001-38790), filed with the Commission on February 5, 2019) Indemnification Agreement (Wanner) (incorporated by reference to Exhibit 10.12 to the Registrant’s Form 8-K (File No. 001-38790), filed with the Commission on February 5, 2019) Indemnification Agreement (Wilkinson) (incorporated by reference to Exhibit 10.13 to the Registrant’s Form 8-K (File No. 001-38790), filed with the Commission on February 5, 2019) Description Amendment Agreement to Credit Agreement, dated December 31, 2018, by and among New Fortress Energy Holdings LLC, NFE Atlantic Holdings LLC, as the borrower, Morgan Stanley Senior Funding, Inc., as administrative agent and the subsidiary guarantors and lenders parties thereto (incorporated by reference to Exhibit 10.15 to the Registrant’s Registration Statement on Form S-1/A (File No. 333-228339), filed with the Commission on January 14, 2019)Amendment Agreement, dated as of February 11, 2019 to Credit Agreement, dated as of August 15, 2018 and as amended and restated as of December 31, 2018, among New Fortress Intermediate LLC, NFE Atlantic Holdings LLC, the subsidiary guarantors from time to time party thereto, lenders parties thereto and Morgan Stanley Senior Funding, Inc., as administrative agent.Second Amendment Agreement, dated as of March 13, 2019 to the Credit Agreement, dated as of August 15, 2018 and as amended and restated as of December 31, 2018, and as amended as of February 11, 2019, among New Fortress Intermediate LLC, NFE Atlantic Holdings LLC, the subsidiary guarantors from time to time party thereto, lenders parties thereto and Morgan Stanley Senior Funding, Inc., as administrative agent.86ExhibitNumberDescriptionEngineering, Procurement and Construction Agreement for the Marcellus LNG Production Facility I, dated January 8, 2019, by and between Bradford County Real Estate Partners LLC and Black & Veatch Construction, Inc. (incorporated by reference to Exhibit 10.17 to the Registrant’s Registration Statement on Form S-1/A (File No. 333-228339), filed with the Commission on January 25, 2019) Indemnification Agreement, dated as of March 17, 2019, by and between New Fortress Energy LLC and Yunyoung Shin (incorporated by reference to Exhibit 10.29 to the Registrant’s Annual Report on Form 10-K (File 001-38790), filed with the Commission on March 26, 2019) Mutual Agreement, dated June 3, 2020, by and among New Fortress Energy LLC, Fortress Equity Partners GP, LLC, WRE 2012 Trust LLC, FEP HoldCo LLC, Wesley R Edens, Randal A Nardone, NFE SMRS Holdings LLC and NFE Sub LLC (incorporated by reference to Exhibit 10.1 to the Registrant’s Form 8-K (File No. 001-38790), filed with the Commission on June 9, 2020) Support Agreement, dated as of January 13, 2021, by and among NFE, GMLP, GLNG and the General Partner (incorporated by reference to Exhibit 10.1 to the Registrant’s Form 8-K (File No. 001-38790), filed with the Commission on January 20, 2021) List of Subsidiaries of New Fortress Energy LLCInc.Consent of Ernst & Young L.L.P. Certification by Chief Executive Officer pursuant to Rule 13a-14(a) and 15d-14(a) of the Exchange Act Rules, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. Certification by Chief Financial Officer pursuant to Rule 13a-14(a) and 15d-14(a) of the Exchange Act Rules, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. Certifications by Chief Executive Officer pursuant to Title 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of Sarbanes-Oxley Act of 2002. Certifications by Chief Financial Officer pursuant to Title 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of Sarbanes-Oxley Act of 2002. * Filed as an exhibit to this Annual Report ** Furnished as an exhibit to this Annual Report † Compensatory plan or arrangement ‡ Confidential treatment was granted with respect to certain portions of this exhibit. Omitted portions filed separately with the SEC. Item 16. Form 10-K Summary. LLC26, 2019TitleDate /s/ Wesley R. EdensMarch 26, 201916, 2021Wesley R. Edens/s/ Christopher S. GuintaOfficer)Officer)March 26, 201916, 2021Christopher S. Guinta/s/ Yunyoung ShinMarch 26, 201916, 2021Yunyoung Shin/s/ Randal A. NardoneDirectorMarch 26, 201916, 2021Randal A. Nardone/s/ C. William GriffinDirectorMarch 26, 201916, 2021C. William Griffin/s/ John J. MackDirectorMarch 26, 201916, 2021John J. MackMatthew Wilkinson Director March 16, 2021 /s/ Matthew WilkinsonDirectorMarch 26, 2019Matthew Wilkinson/s/ David J. GrainDirectorMarch 26, 201916, 2021David J. Grain/s/ Desmond Iain CatterallDirectorMarch 26, 201916, 2021Desmond Iain Catterall/s/ Katherine E. WannerDirectorMarch 26, 2019Katherine E. Wanner16, 2021 88F-8 F-9 F-10 F-11 F-12 and Shareholders of New Fortress Energy LLCHoldings LLCInc. (the “Company”)Company) as of December 31, 20182020 and 2017,2019, the related consolidated statements of operations and comprehensive loss, changes in members’stockholders’ equity and cash flows for each of the three years in the period ended December 31, 2018,2020, and the related notes and the financial statement schedule listed in the Index at Item 15(a)(2) (collectively referred to as the “consolidated financial statements”). In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company at December 31, 20182020 and 2017,2019, and the results of its operations and its cash flows for each of the three years in the period ended December 31, 2018,2020, in conformity with U.S. generally accepted accounting principles.Public Company Accounting Oversight Board (United States) (PCAOB)PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audits we are required to obtain an understanding of internal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion.Revenue Recognition – Identification of Distinct Performance Obligations and Leases Description of the Matter Impairment Assessment of Long-Lived Assets Description of the Matter /s/ Ernst & Young LLP26, 201916, 2021Holdings LLC
Inc.20182020 and 2017
2019
2018
2017 Assets Current assets Cash and cash equivalents $ 601,522 $ 27,098 Restricted cash 12,814 30,966 Receivables, net of allowances of $98 and $0, respectively 76,544 49,890 Inventory 22,860 63,432 Prepaid expenses and other current assets, net 48,270 39,734 Total current assets 762,010 211,120 Restricted cash 15,000 34,971 Construction in progress 234,037 466,587 Property, plant and equipment, net 614,206 192,222 Right-of-use assets 141,347 0 Intangible assets, net 46,102 43,540 Finance leases, net 7,044 91,174 Deferred tax assets, net 2,315 34 Other non-current assets, net 86,030 84,166 Total assets $ 1,908,091 $ 1,123,814 Liabilities Current liabilities Accounts payable $ 21,331 $ 11,593 Accrued liabilities 90,352 54,943 Current lease liabilities 35,481 0 Due to affiliates 8,980 10,252 Other current liabilities 35,006 25,475 Total current liabilities 191,150 102,263 Long-term debt 1,239,561 619,057 Non-current lease liabilities 84,323 0 Deferred tax liabilities, net 2,330 241 Other long-term liabilities 15,641 14,929 Total liabilities 1,533,005 736,490 Commitments and contingences (Note 17) 0 0 Stockholders’ equity Class A common stock, $0.01 par value, 750.0 million shares authorized, 174.6 million issued and outstanding as of December 31, 2020 1,746 0 Class A shares, 0 shares issued and outstanding as of December 31, 2020; 23.6 million shares issued and outstanding as of December 31, 2019 0 130,658 Class B shares, 0 shares issued and outstanding as of December 31, 2020; 144.3 million shares, issued and outstanding as of December 31, 2019 0 0 Additional paid-in capital 594,534 0 Accumulated deficit (229,503 ) (45,823 ) Accumulated other comprehensive income (loss) 182 (30 ) Total stockholders’ equity attributable to NFE 366,959 84,805 Non-controlling interest 8,127 302,519 Total stockholders’ equity 375,086 387,324 Total liabilities and stockholders’ equity $ 1,908,091 $ 1,123,814 F-3Holdings LLC
Inc.2018, 20172020, 2019 and 2016
2018 Year Ended December 31, 2020 2019 2018 Revenues Operating revenue $ 318,311 $ 145,500 $ 96,906 Other revenue 133,339 43,625 15,395 Total revenues 451,650 189,125 112,301 Operating expenses Cost of sales 278,767 183,359 95,742 Operations and maintenance 47,581 26,899 9,589 Selling, general and administrative 124,170 152,922 62,137 Contract termination charges and loss on mitigation sales 124,114 5,280 0 Depreciation and amortization 32,376 7,940 3,321 Total operating expenses 607,008 376,400 170,789 Operating loss (155,358 ) (187,275 ) (58,488 ) Interest expense 65,723 19,412 11,248 Other expense (income), net 5,005 (2,807 ) (784 ) Loss on extinguishment of debt, net 33,062 0 9,568 Loss before taxes (259,148 ) (203,880 ) (78,520 ) Tax expense (benefit) 4,817 439 (338 ) Net loss (263,965 ) (204,319 ) (78,182 ) Net loss attributable to non-controlling interest 81,818 170,510 106 Net loss attributable to stockholders $ (182,147 ) $ (33,809 ) $ (78,076 ) Net loss per share – basic and diluted $ (1.71 ) $ (1.62 ) Weighted average number of shares outstanding – basic and diluted 106,654,918 20,862,555 Other comprehensive loss: Net loss $ (263,965 ) $ (204,319 ) $ (78,182 ) Unrealized (gain) loss on currency translation adjustment (2,005 ) 219 0 Unrealized loss on available-for-sale investment 0 0 2,677 Comprehensive loss (261,960 ) (204,538 ) (80,859 ) Comprehensive loss attributable to non-controlling interest 80,025 170,699 106 Comprehensive loss attributable to stockholders $ (181,935 ) $ (33,839 ) $ (80,753 ) F-4Holdings LLC
Inc.2018, 20172020, 2019 and 2016
2018
common
shares
capital
subscription
receivable
deficit
other
comprehensive
income (loss)
controlling
Interest
Members’
equity Members’ Capital Class A shares Class B shares Class A common stock Accumulated Non-controlling Units Amounts Shares Amount Shares Amount Shares Amount capital receivable deficit (loss) income Interest equity Balance as of January 1, 2018 65,665,037 $ 406,591 0 $ 0 0 $ 0 0 $ 0 $ 0 $ (50,000 ) $ (80,347 ) $ 2,666 $ 0 $ 278,910 Net loss - - - - - - - - - - (78,076 ) - (106 ) (78,182 ) Other comprehensive loss - - - - - - - - - - - (2,677 ) - (2,677 ) Capital contributions 665,843 20,150 - - - - - - - - - - - 20,150 Stock subscription receivable 1,652,215 - - - - - - - - 50,000 - - - 50,000 Acquisition of Shannon LNG - - - - - - - - - - - - 14,446 14,446 Balance as of December 31, 2018 67,983,095 426,741 0 0 0 0 0 0 0 0 (158,423 ) (11 ) 14,340 282,647 Activity prior to the IPO and related organizational transactions: Net loss - - - - - - - - - - (7,923 ) 11 (91 ) (8,003 ) Effects of the IPO and related organizational transactions: Issuance of Class A shares in the IPO, net of underwriting discount and offering costs - - 20,837,272 32,136 - - - - - - - - 235,874 268,010 Effects of the reorganization transactions (67,983,095 ) (426,741 ) - 51,092 147,058,824 - - - - - 146,420 - 229,229 0 Activity subsequent to the IPO and related organizational transactions: Net loss - - - - - - - - - - (25,897 ) - (170,419 ) (196,316 ) Other comprehensive loss - - - - - - - - - - - (30 ) (189 ) (219 ) Share-based compensation expense - - - 41,205 - - - - - - - - - 41,205 Exchange of NFI Units - - 2,716,252 6,225 (2,716,252 ) - - - - - - - (6,225 ) 0 Issuance of shares for vested RSUs - - 53,572 - - - - - - - - - - 0 Balance as of December 31, 2019 0 0 23,607,096 130,658 144,342,572 0 0 0 0 0 (45,823 ) (30 ) 302,519 387,324 Cumulative effect of accounting change - - - - - - - - - 0 (1,533 ) 0 (7,780 ) (9,313 ) Class A stock issued, net of issuance costs - - - - - - 5,882,352 59 290,712 0 0 0 0 290,771 Net loss - - - - - - - - 0 0 (182,147 ) 0 (81,818 ) (263,965 ) Other comprehensive income - - - - - - - - 0 0 0 212 1,793 2,005 Share-based compensation expense - - - 4,430 - - - - 4,313 0 0 0 0 8,743 Issuance of shares for vested RSUs - - 1,224,436 - - - 160,317 - 0 0 0 0 0 0 Shares withheld from employees related to share-based compensation, at cost - - - - - - (593,911 ) - (6,468 ) 0 0 0 0 (6,468 ) Exchange of NFI units - - 144,342,572 206,587 (144,342,572 ) - - - 0 0 0 0 (206,587 ) 0 Conversion from LLC to Corporation - - (169,174,104 ) (341,675 ) - - 169,174,104 1,687 339,988 0 0 0 0 0 Dividends - - - - - - - - (34,011 ) - - - - (34,011 ) Balance as of December 31, 2020 - $ - 0 $ 0 0 $ 0 174,622,862 $ 1,746 $ 594,534 $ 0 $ (229,503 ) $ 182 $ 8,127 $ 375,086 F-52018, 20172020, 2019 and 2016
2018 Year Ended December 31, 2020 2019 2018 Cash flows from operating activities Net loss $ (263,965 ) $ (204,319 ) $ (78,182 ) Adjustments for: Amortization of deferred financing costs 10,519 5,873 4,023 Depreciation and amortization 33,303 8,641 4,034 Non-cash contract termination charges and loss on mitigation sales 19,114 2,622 0 Loss on extinguishment and financing expenses 37,090 0 3,188 Deferred taxes 2,754 392 (345 ) Share-based compensation 8,743 41,205 0 Other 4,341 1,247 439 Changes in operating assets and liabilities: (Increase) in receivables (26,795 ) (19,754 ) (9,516 ) Decrease (Increase) in inventories 23,230 (50,345 ) (4,807 ) (Increase) in other assets (35,927 ) (39,344 ) (28,338 ) Decrease in right-of-use assets 41,452 0 0 Increase in accounts payable/accrued liabilities 55,514 3,036 12,232 (Decrease) Increase in amounts due to affiliates (1,272 ) 5,771 2,390 (Decrease) in lease liabilities (42,094 ) 0 0 Increase in other liabilities 8,427 10,714 1,655 Net cash used in operating activities (125,566 ) (234,261 ) (93,227 ) Cash flows from investing activities Capital expenditures (156,995 ) (377,051 ) (181,151 ) Acquisition of consolidated subsidiary 0 0 (4,028 ) Other investing activities (636 ) 887 724 Net cash used in investing activities (157,631 ) (376,164 ) (184,455 ) Cash flows from financing activities Proceeds from borrowings of debt 2,095,269 347,856 280,600 Payment of deferred financing costs (36,499 ) (8,259 ) (14,026 ) Repayment of debt (1,490,002 ) (5,000 ) (76,520 ) Proceeds from IPO 0 274,948 0 Proceeds from issuance of Class A common stock 291,992 0 Payments related to tax withholdings for share-based compensation (6,413 ) 0 0 Payment of dividends (33,742 ) 0 0 Capital contributed from Members 0 0 20,150 Collection of subscription receivable 0 0 50,000 Payment of stock issuance costs (1,107 ) (6,938 ) 0 Net cash provided by financing activities 819,498 602,607 260,204 Net increase (decrease) in cash, cash equivalents and restricted cash 536,301 (7,818 ) (17,478 ) Cash, cash equivalents and restricted cash – beginning of period 93,035 100,853 118,331 Cash, cash equivalents and restricted cash – end of period $ 629,336 $ 93,035 $ 100,853 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 $ (12,786 ) $ (48,150 ) $ 74,280 Cash paid for interest, net of capitalized interest 27,255 6,765 7,515 Cash paid for taxes 58 28 0 F-61.1.Organization Holdings LLCInc. (“New Fortress Energy Holdings,NFE,” together with its subsidiaries, the “Company”) is a Delaware limited liability companycorporation formed on September 11, 2015.by New Fortress Energy Holdings LLC (“New Fortress Energy Holdings”). The Company is ana global integrated gas-to-power infrastructure company that seeks to use “stranded” natural gas to satisfy the world’s large and growing power needs.needs and is engaged in providing energy and development services to end-users worldwide seeking to convert their operating assets from diesel or heavy fuel oil to LNG. The Company currently sources “LNG”LNG from a combination of its own liquefaction facility in Miami, Florida and purchases from third party suppliers.on the open market. The Company has liquefaction, regasification and regasificationpower generation operations in the United States and Jamaica. The Company is majority-owned by a private equity fund managed by an affiliate of Fortress Investment Group LLC (“Fortress”).one1 operating segment. The chief operating decision maker makes resource allocation decisions and assesses performance based on financial information presented on a consolidated basis on the delivery of an integrated solution to our customers.basis.2. Significant accounting policies (a) Basis of presentation and principles of consolidation The consolidated financial statements were prepared in accordance with US generally accepted accounting principles (“GAAP”). reflect all normal and recurring adjustments which are,were prepared 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 periods presented.accordance with GAAP. The consolidated financial statements include the accounts of the Company and its wholly-owned and majority-owned consolidated subsidiaries. The ownership interest of other investors in consolidated subsidiaries is recorded as a non-controlling interest. See Note 4 for additional details about the increase in non-controlling interest in 2018. All significant intercompany transactions and balances have been eliminated on consolidation.As described in more detail in Note 25, onCertain prior year amounts have been reclassified to conform to current year presentation.New Fortress Energy LLC (“NFE”), an entity formed by the Company on August 6, 2018, completed an initial public offering (“IPO”) and a series of other transactions, in which NFEthe Company issued and sold 20,000,000 Class A shares at an IPO price of $14.00 per share. NFE’sThe Company’s Class A shares began trading on the NASDAQ Global Select Market (“NASDAQ”) under the symbol “NFE” on January 31, 2019. Net proceeds from the IPO were $257.6$257.0 million, after deducting underwriting discounts and commissions and transaction costs. These proceeds were contributed in exchange for limited liability company units (“NFI LLC Units”) into New Fortress Intermediate LLC (“NFI”), an entity formed in conjunction with the IPO, at a price per unit equal to the IPO price.in exchange for 20,000,000 limited liability company units in NFI (“NFI LLC Units”). In addition, New Fortress Energy Holdings contributed all of its interests in consolidated subsidiaries that comprised substantially all of its historichistorical operations as well its limited assets and liabilities, to NFI in exchange for NFI LLC Units. In connection with the IPO, New Fortress Energy Holdings has been determinedalso received 147,058,824 Class B shares of NFE, which is equal to bethe number of NFI LLC Units held by New Fortress Energy Holdings immediately following the IPO. New Fortress Energy Holdings retained a significant interest in NFE through its ownership of 147,058,824 Class B shares, representing an 88.0% voting and non-economic interest. New Fortress Energy Holdings also had an 88.0% economic interest in NFI through its ownership of 147,058,824 of NFI LLC Units. New Fortress Energy Holdings is NFE’s predecessor for accounting purposes.iscontributed such additional net proceeds to NFI in exchange for 837,272 NFI LLC Units.principalsole material asset iswas a controlling equity interest in NFI. As the sole managing member of NFI, NFE operatesoperated and controlscontrolled all of the business and affairs of NFI, and through NFI and its subsidiaries, conductsconducted the Company’s historical business. The contribution of the assets of New Fortress Energy Holdings and net proceeds from the offeringIPO to NFI was treated as a reorganization of entities under common control.control (the “Reorganization”). As a result, NFE will retrospectively presentpresented the consolidated balance sheets and statements of operations and comprehensive loss of New Fortress Energy Holdings for all currentperiods prior to the IPO.comparative periods presented beginningNFE Sub LLC, a wholly-owned subsidiary of NFE. Pursuant to the Mutual Agreement, the Exchanging Members agreed to deliver a block redemption notice in accordance with its financial statements for the quarter ended March 31, 2019. For periods afterAmended and Restated Limited Liability Company Agreement of NFI (the “NFI LLCA”) with respect to all of the IPO, the consolidated financial statementsNFI LLC Units, together with an equal number of Class B shares of NFE, will report a non-controlling interest relatedthat such Exchanging Members indirectly own as members of New Fortress Energy Holdings. Pursuant to the portionMutual Agreement, NFE agreed to exercise the Call Right (as defined in the NFI LLCA), pursuant to which NFE would acquire such NFI LLC Units and such Class B shares in exchange for Class A shares of NFE (the “Exchange Transactions”). The Exchange Transactions were completed on June 10, 2020. In connection with the closing of the Exchange Transactions, NFE issued 144,342,572 Class A shares in exchange for an equal number of NFI LLC Units, not owned bytogether with an equal number of Class B shares of NFE. Following the completion of the Exchange Transactions, NFE owns all of the NFI LLC Units directly or indirectly and 0 Class B shares remain outstanding.no operations and had no assets or liabilities.174,622,862 Class A common stock outstanding.(b) Use of estimates allocationallocations between revenue and lease components of contracts with customers, as well asF-7acquisitions.acquisitions and the fair value of equity awards granted to both employees and non-employees. Management evaluates its estimates and related assumptions regularly. Changes in facts and circumstances or additional information may result in revised estimates, and actual results may differ from these estimates.(c) Foreign currencies determined thatcertain foreign subsidiaries where the functional currency of several of the Company’s foreign subsidiaries is the local currency. All of the assets and liabilities of these subsidiaries are convertedtranslated to U.S. dollars at the exchange rate in effect at the balance sheet date,date; income and expense accounts are translated at average rates for the period, and shareholder’s equity accounts are translated at historical rates.period. The effects of translating financial statements of foreign operations into our reporting currency are recognized as a cumulative translation adjustment in consolidatedaccumulated other comprehensive income (loss).(d) Cash and cash equivalents (e) Restricted cash (f) Receivables allowancesan allowance for doubtful accounts. The Company maintains allowances for doubtful accounts for estimated losses resulting fromcurrent expected credit losses. Amounts are written off against the inability of customers to make required payments.allowance when management is certain that outstanding amounts will not be collected. The Company estimates the allowance for doubtful accountsexpected credit losses based on a varietyrelevant information about the current credit quality of factorscustomers, past events, including historical experience, and reasonable and supportable forecasts that affect the lengthcollectability of time receivables are past due, the reported amount. Credit loss expense, inclusive of credit loss expense on all categories of financial healthassets, is recorded within Selling, general and administrative in the consolidated statements of our customers, unusual macroeconomic conditionsoperations and historical experience. For the year ended December 31, 2018, the Company recognized an allowance for doubtful accounts of $257. For the years ended December 31, 2017 and 2016 there was no allowance for doubtful accounts recognized.comprehensive loss.(g) Inventories of theand other direct costs to operate liquefaction facilities, is reflected in Inventory on the consolidated balance sheets. No adjustments were recorded during the years ended December 31, 2018, 2017, and 2016.process in the period in which the loss occurs.process.F-8(h) Construction in progress in progress is put into use, the full cost of the asset is reclassified from Construction in progress to Property, plant and equipment, net or Finance leases, net on the consolidated balance sheets. Construction progress payments, engineering costs and other costs directly relating to the asset under construction are capitalized during the construction period, provided the completion of the construction project is deemed probable or if the costs are associated with activities that could be utilized in future projects. Depreciation is not recognized during the construction period. Interest expense of $1,732, $0, and $3,517 was capitalized during the years ended December 31, 2018, 2017 and 2016, respectively, inclusive of amortized debt issuance costs disclosed in Note 2(n).(i) Property, plant and equipment, net shorter.shorter using the following useful lives:LNG liquefaction facilities20-30Leasehold improvements5-275-24 ISO containers and other equipment 15-20Vehicles10Computer equipment3Leasehold improvements 2-20 in itsto depreciation policies is warranted.(j) Asset retirement obligations (“AROs”) itthe liability is incurred if a reasonable estimate of fair value can be made and is accreted to its final value over the life of the liability. The initial fair value of the liability is added to the carrying amount of the associated asset. This additional carrying amount is depreciated over the estimated useful life of the asset.no0 settlements of AROs during the years ended December 31, 20182020 and 2017.2019.(k) Impairment of long-lived assets each of its long-lived assets whenever events or changes in circumstances or indicators, indicate that the carrying amount of an asset may not be recoverable. Indicators may include, but are not limited to, adverse changes in the regulatory environment in a significantjurisdiction where the Company operates, unfavorable events impacting the supply contract restructuring or early termination; significant decrease inchain for LNG and natural gas demand;to the Company’s operations, a decision to discontinue the development of a long-lived asset;asset, early termination of a significant customer contract or the introduction of newer technology.F-9not0t record an impairment during the years ended December 31, 2018, 20172020, 2019 and 2016.2018.(l) Available-for-sale investmentInvestment in equity securitiesThe Company considers listedas available-for-sale securities recordedis carried at fair value with unrealized gains or losses recordedand included in Other comprehensive income (loss) and realizednon-current assets on the consolidated balance sheets, with gains or losses recorded in earnings in Other expense (income), net in the consolidated statements of operations and comprehensive loss. The Company’s basis on which the cost of the security sold or the amount reclassified out of Other comprehensive income (loss) into earnings is determined using specific identification. At each balance sheet date, the Company evaluates its available-for-sale securities with unrealized losses, if any, to determine if an other-than-temporary impairment has occurred (see Note 9).(m) Intangible assets The Company accounts for intangible assets in accordance with ASC 350, Intangibles – Goodwill and Other. Indefinite lived intangible assets are not amortized. Intangible assets with a finite life are amortized over the estimated useful life of the asset.Finiteasset under the straight-line method.generally amortized under the straight-line method.not amortized. Intangible assets with an indefinite useful life are tested for impairment on an annual basis or more frequently if changes in circumstances indicate that it is more likely than not that the asset is impaired. Indefinite lived intangible assets are evaluated for impairment either under the qualitative assessment option or the two-step quantitative test. If the carrying amount may not be recoverable. If theof an intangible asset being tested for impairment exceeds its fair value, the excess is impaired, it is written down to its realizable value with a correspondingrecognized as impairment expense reflected in the consolidated statements of operations and comprehensive loss.(n) Long-term debt and debt issuance costs consistshas historically consisted of credit facilities with banks.financial institutions and secured and unsecured bonds. Costs directly related to the issuance of debt are reported on the consolidated balance sheets as a reduction from the carrying amount of the recognized debt liability and amortized over the term of the debt using the effective interest method. Interest and related amortization of debt issuance costs recognized during major development and construction projects are capitalized and included in the cost of the project. Amortization of debt issuance costs were $3,617, $696, and $1,464 for the years ended December 31, 2018, 2017 and 2016, respectively, of which $715, $0, and $689 were capitalized, respectively.(o) Legal and contingenciesContingencies of operations and comprehensive loss when it is probable a liability has been incurred and the amount of the loss can be reasonably estimated. The Company will disclose any loss contingencies that do not meet both conditions if there is a reasonable possibility that a loss may have been incurred. Gain contingencies are not recorded until they are realized.(p) Revenue recognition Operating revenuesnatural gas are recognized when the LNG or natural gas is deliveredrisks and rewards of ownership transfer to the customer, either when the natural gas arrives at the customer’s flange or at the time that title to the LNG is transferred to the customer. Title typically transfers either whencontainers are shipped or delivered to the customers’ storage facilities, depending on the terms of the contract. ShippingBecause the nature, timing and handling costs relateduncertainty of revenue and cash flows are substantially the same for LNG, natural gas, power and steam, the Company has presented Operating revenue on an aggregated basis. The Company has concluded that variable consideration included in its agreements meets the exception for allocating variable consideration. As such, the variable consideration for these contracts is allocated to each distinct unit of LNG, natural gas, power or steam delivered and recognized when that distinct unit is delivered to the Company’s salescustomer.The Company collects sales taxes from its customers on sales of taxable products and remits such collections to the appropriate taxing authority. Sales tax collections are presented in the consolidated statements of operations and comprehensive loss on a net basis and, accordingly, are excluded from reported revenues.market valueestimated standalone selling price of the same or similar equipment leased to the customer. The Company estimates the fair value of the non-lease component is estimated by estimatingforecasting volumes and pricing of gas to be delivered to the customer over the lease term.direct financingfinance or operating leases. Direct financingThe current and non-current portion of finance leases are recorded within Prepaid expenses and other current assets and Finance leases, net representson the minimumconsolidated balance sheets, respectively. For finance leases accounted for as sales-type leases, the profit from the sale of equipment is recognized upon lease commencement in Other revenue in the consolidated statements of operations and comprehensive loss. The lease payments due, net of unearned revenue. The lease paymentsfor finance leases are segregated into principal and interest components similar to a loan. Unearned revenueInterest income is recognized on an effective interest method over the lease term and included in Other revenue in the consolidated statements of operations and comprehensive loss is primarily comprised of such interest revenue.loss. The principal componentscomponent of the lease payment areis reflected as a reduction to the net investment in the finance lease. For the Company’s operating leases, the amount allocated to the leasing component is recognized over the lease term as Other revenue in the consolidated statements of operations and comprehensive loss.(q)Leases, as lesseeLeaseare evaluatedwith customers, Other revenue includes revenue recognized from the construction, installation and commissioning of equipment, inclusive of natural gas delivered for the commissioning process, to determine whether they are capitaltransform customers’ facilities to operate utilizing natural gas or operating leases. When substantially allto allow customers to receive power or other outputs from our natural gas-fueled power generation facilities. Revenue from these development services is recognized over time as the Company transfers control of the risks and benefitsasset to the customer or based on the quantity of property ownershipnatural gas consumed as part of commissioning the customer’s facilities until such time that the customer has declared such conversion services have been transferredcompleted. If the customer is not able to obtain control over the asset under construction until such services are completed, revenue is recognized when the services are completed and the customer has control of the infrastructure. Such agreements may also include a significant financing component, and the Company recognizes revenue for the interest income component over the term of the financing as Other revenue.Company, as determined bycustomer. Contract assets are comprised of the test criteriatransaction price allocated to completed performance obligations that will be billed to customers in subsequent periods. Both unbilled receivables and contract assets are recognized within Prepaid expenses and other current assets, net and Other non-current assets, net on the consolidated balance sheets. Contract liabilities consist of deferred revenue and are recognized within Other current liabilities on the consolidated balance sheets.current authoritative guidance,period in which the lease is recognized as a capital lease.costs are incurred and presented within Cost of sales in the consolidated statements of operations and comprehensive loss. All other leasessuch shipping and handling activities are classified as operating leases.Rents payable under operating leases are chargedperformed prior to the customer obtaining control of the LNG or natural gas.(q) (r) Leases, as lessee termlease term. Variable payments under short-term leases are recognized in the period in which the obligation that triggers the variable payment becomes probable.relevant lease.lease component is estimated based on the estimated standalone price to lease a bareboat LNG vessel. The fair value of the non-lease component is estimated based on the estimated standalone price of operating the respective vessel, inclusive of the costs of the crew and other operating costs.(s) (r)TaxationShare-based compensationFederal and state income taxesHoldings is a limited liability company,LLC 2019 Omnibus Incentive Plan (the “Incentive Plan”), effective as of February 4, 2019. Under the Incentive Plan, the Company may issue options, share appreciation rights, restricted shares, restricted share units (“RSUs”), share bonuses or other share-based awards to selected officers, employees, non-employee directors and select non-employees of NFE or its affiliates. The Company accounts for share-based compensation in accordance with ASC 718, Compensation – Stock Compensation, and ASC 505, Equity, which is considered a pass-through entity for federal income tax purposes,require all share-based payments to employees and thus no provision for federal income taxes has beenmembers of the board of directors to be recognized as expense in thesethe consolidated financial statements.statements based on their grant date fair values. The Company files tax returnshas elected not to estimate forfeitures of its share-based compensation awards but recognizes the reversal in compensation expense in the U.S. federal jurisdiction and various state jurisdictions, as applicable. The tax returns filed byperiod in which the forfeiture occurs.since inception are subjectgranted performance share units (“PSUs”) to examination by the U.S. federalcertain employees and state tax authorities.In conjunction with the closingnon-employees. The PSUs contain a performance condition, and vesting will be determined based on achievement of the Company’s IPO, New Fortress Energy Holdings contributed all of its interests in its subsidiaries and its limited assets to a subsidiary of NFE. NFE has elected to be taxed as a corporation and will become subject to corporate U.S. federal and state income taxes following its IPO. However, the Company was not subject to corporate U.S. income taxan adjusted operating margin for the year ended December 31, 2018. 2021.(t) Taxation subsidiaries incorporatedconsolidated balance sheets as deferred tax assets and liabilities. Deferred tax assets are reduced by a valuation allowance when the Company believes that it is more-likely-than-not that some portion or all of the deferred tax assets will not be realized.Jamaica are subjectestimate will be recorded in the period in which such determination is made. The Company reports interest and penalties relating to an underpayment of income taxes, if applicable, as a component of income tax at a statutory tax rate of 25%. The Company’s tax (expense) benefit is entirely attributable to Jamaica.On December 22, 2017, the U.S. government enacted comprehensive tax legislation commonly referred to as the Tax Cuts and Jobs Act (the “Tax Act”), which significantly changed the U.S. tax code. The Tax Act makes broad and complex changes to the U.S. tax code that will impact many areas of taxation. Additionally, there are numerous interpretive issues and ambiguities that are not clearly addressed in current Tax Act guidance. For the year ended December 31, 2018, NFE was not subject to corporate U.S. income tax. The Company’s tax (expense) benefit is entirely attributable to Jamaica. As such, the Tax Act has had no effect on these consolidated financial statements. expense.will continuehas elected to monitortreat amounts incurred under the impact ofglobal intangible low-taxed income (“GILTI”) rules as an expense in the Tax Act and other applicableperiod in which the tax legislation on its financial statements.F-11as well asin addition to income taxes in foreign countries in which they conduct business. In addition, certain subsidiaries are exposed to local state taxes, such as franchise taxes. Local state taxes that are not income taxes are recorded within Other expense (income), net in the consolidated statements of operations and comprehensive loss.(s)(u)Net loss per share Net is computed in accordance with GAAP. Basic EPS is computed by dividing net loss attributable to membersClass A common stock by the weighted average number of shares of Class A common shares outstanding during the period. Diluted EPS reflects potential dilution and is computed by dividing net loss attributable to members by the weighted average number of common sharesstock outstanding during the period increasedfollowing the Reorganization. Class B shares represented non-economic interests in the Company, and as such, prior to the Exchange Transactions, earnings were not allocated to Class B shares.number of additional common shares that would have been outstanding if all potential common shares had been issued and were dilutive.treasury stock method or if-converted method, as applicable. For the years ended December 31, 2018, 20172020 and 2016,2019, there were no0 potentially dilutive shares outstanding.3. Adoption of new and revised standards Ascompany,”company” or EGC and is required to accelerate the Jumpstart Our Business Startups Act (“JOBS Act”) allows the Company to delay adoption of certain new or revised accounting pronouncements applicable to public companies until such pronouncements are made applicable to private companies. The Company has elected to use this extended transition period under the JOBS Act.pronouncements. The adoption dates discussed below reflect this election. New standards, amendments and interpretations issued but not effective for the financial year beginning January 1, 2018 and not early adopted include:(a) New standards, amendments and interpretations issued but not effective for the financial year beginning January 1, 2020: May 2014,December 2019, the Financial Accounting Standards Board “FASB”(“FASB”) issued ASU 2019-12, Income Taxes (Topic 740): Simplifying the Accounting Standard Updatefor Income Taxes (“ASU”ASU 2019-12”) No. 2014-09, Revenue from Contracts with Customers (Topic 606) (“ASC 606” or, which simplifies the “new standard”) which provides a single comprehensive modelaccounting for recognizing revenue from contracts with customersincome taxes, including removing certain exceptions related to the general principles in ASU 740, Income Taxes. ASU 2019-12 also clarifies and supersedes existing revenue recognition guidance.simplifies other aspects of the accounting for income taxes. The new standard requires that a company recognize revenue when it transfers promised goods or services to customers in an amount that reflects the consideration the company expects to receive in exchange for those goods or services. Companies will need to use more judgment and estimates than under the guidance currently in effect, including estimating the amount of variable consideration to recognize over each identified performance obligation. In August 2015, the FASB issued ASU 2015-14, Revenue from Contracts with Customers (Topic 606): Deferral of the Effective Date, to defer the effective date of ASU 2014-09 by one year, making itis effective for annual reporting periods beginning after December 15, 2018,interim and interim periods within annual periods beginning after December 15, 2019, while also providing for2020, and early adoption but not before the original effective date. Weis permitted. The Company will adopt the new standard on January 1, 2019 using the modified retrospective method, which will require us to apply the new revenue standard to (i) all new revenue contracts entered into after January 1, 2019 and (ii) all existing revenue contracts as of January 1, 2019 through a cumulative adjustment to our retained earnings balance.606 requires that our revenue recognition policy disclosure include further detail regarding our performance obligations as to the nature, amount, timing, and estimates of revenue and cash flows generated from our contracts with customers. The new standard will also require disclosure of significant changes in contract asset and contract liability balances period to period and the amount of the transaction price allocated to performance obligations that are unsatisfied (or partially unsatisfied) as of the end of the reporting period, as applicable. Our evaluation of the impact of the new standard is near completion. Based on our analysis to date, we have not identified any other material impacts of adopting the new standard other than disclosures. The cumulative effect of the adoption of the new standard as of January 1, 2019 is not expected to be material, though this expectation is subject to finalizing our assessment2019-12 in the first quarter of 2019.F-12January 2016,August 2020, the FASB issued ASU 2016-01, Financial2020-06, Accounting for Convertible Instruments – Overall (Subtopic 825-10): Recognition and Measurement of Financial Assets and Financial Liabilities, which makes targeted improvements toContracts in an Entity’s Own Equity (ASU 2020-06). ASU 2020-06 simplifies the accounting for certain financial instruments with characteristics of liabilities and presentationequity, including convertible instruments and disclosurecontracts on an entity’s own equity. ASU 2020-06 requires entities to provide expanded disclosures about the terms and features of financial instruments.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 2016-01 requires that most equity investments be measured at fair value, with subsequent changes in fair value recognized in net income. ASU 2016-01 does not affect the accounting for investments that would otherwise be consolidated or accounted for under the equity method. The new standard also impacts financial liabilities under the fair value option and the presentation and disclosure requirements for financial instruments. Most of the provisions of ASU 2016-01 are2020-06 is effective for the Companypublic companies for annual periods in fiscal years beginning after December 15, 2018.2021, and interim periods within those fiscal years, with early adoption of all amendments in the same period permitted. The Company is currently assessing the impact of adoption of this guidance.(b) New and amended standards adopted by the Company: adopt this guidancebe based on relevant information about the credit quality of customers, past events, including historical experience, and reasonable and supportable forecasts that affect the collectability of the reported amount. Upon the loss of EGC status, ASU 2016-13 was adopted in the third quarter of 2020 with an effective date of January 1, 2020. The Company elected to apply the modified retrospective transition method, which allowed the Company to begin recognizing and measuring current expected credit losses at January 1, 2020, without modifying the comparative period financial statements. In connection with the adoption of ASC 2016-13, the Company recorded a transition adjustment of $228 which was recorded as an adjustment to retained earnings. The Company recorded credit loss expense of $316 for the year beginning January 1, 2019 and is currently evaluating the impactended December 31, 2020. (“ASU 2016-02”(“ASC 842”). ASU 2016-02 amends, which amended the existing accounting standards for lease accounting, including requiring lessees to recognize most leases to be recognized on theira lessee’s balance sheetssheet and making targeted changes to lessor accounting. ASU 2016-02The recognition, measurement and presentation of expenses and cash flows arising from a lease by a lessee will depend primarily on the lease’s classification as a finance or operating lease. However, unlike ASC 840, which required only capital leases to be effective for annual reporting periods beginning after December 15, 2019,recognized on the balance sheet, ASC 842 requires most leases to be recognized on the balance sheet as a ROU asset and interim periods beginning after December 15, 2020, with early adoption permitted. a lease liability.will adopt this guidance for the year beginningadopted ASC 842 effective January 1, 2020 and is currently evaluatingelected to apply the impactmodified retrospective transition method at the beginning of adopting this new guidance on its consolidatedthe period of adoption, which allowed the Company to begin recognizing and measuring leases under ASC 842 at January 1, 2020, without modifying the comparative period financial statements.In August 2016, Upon adoption of ASC 842, the FASB issued ASU 2016-15, StatementCompany recorded ROU assets and corresponding lease liabilities of Cash Flows (Topic 230): Classification of Certain Cash Receipts$124,774 and Cash Payments, which provides guidance on eight specific cash flow issues with an intention to reduce the existing diversity in practice. $103,874, respectively.will adopt this guidance fordid not elect the year beginning January 1, 2019package of practical expedients and therefore, as part of transition, the Company reassessed the previous conclusions made under ASC 840 related to the identification of leases, classification of leases and initial direct costs based on the standards of ASC 842. In connection with the reassessment of previous conclusions, the Company determined that the direct financing lease recognized related to the Montego Bay Facility is currently evaluatingno longer a lease under ASC 842. The Company recognized a transition adjustment that removed the impact of adopting this new guidance on its consolidated financial statements.In November 2016, the FASB issued ASU 2016-18, Statement of Cash Flows (Topic 230): Restricted Cash, which requires that a statement of cash flows explain the change during the periodunamortized net investment in the totaldirect financing lease and recognized the underlying assets as Property, plant and equipment, net of cash, cash equivalents, and amounts generally describeddepreciation, that would have been recognized since the commissioning of the Montego Bay Facility, with the difference of approximately $9,085, net of taxes of $2,945, recorded as restricted cash and restricted cash equivalents. This is intendeda reduction to limitretained earnings. Beginning in 2020, the treatmentCompany recognized payments previously allocated to the leasing component of restricted cashthe gas sales agreement with this customer within Operating revenue in the statementconsolidated statements of cash flowsoperations and comprehensive loss. Under ASC 840, amounts allocated to the leasing component had been recognized on an effective interest method over the lease term with only the portion representing interest income recognized as the FASB acknowledged there is currently diversity in practice regarding the presentation of restricted cash within the statement of cash flows. The adoption of this standard will result in us no longer showing the changes in restricted cash balances as a component of cash flows from investing or financing activities but instead include the balances of both current and long-term restricted cash with cash and cash equivalents in total cash, cash equivalents and restricted cash for the beginning and end of the periods presented. The Company will adopt this guidance for the year beginning January 1, 2019 and is currently evaluating the impact of adopting this new guidance on its consolidated financial statements.In February 2018, the FASB issued ASU 2018-02, Income Statement: Reporting Comprehensive Income (Topic 220) which allows a reclassification from accumulated other comprehensive income (loss) to retained earnings for stranded tax effects resulting from the Tax Act. The standard is effective for fiscal years beginning after December 15, 2018, including interim periods within those fiscal years. The Company will adopt this guidance for the year beginning January 1, 2019 and is currently evaluating the impact of adopting this new guidance on its consolidated financial statements.will adopthas adopted ASU 2018-13 duringfor the year beginning January 1, 2020. As this guidance is only related to qualitative financial disclosures, it did not have a material impact on the Company’s consolidated financial statements.and is currently evaluatingusing the impactprospective transition approach. This approach did not require any adjustment to comparative financial statements. The Company has not capitalized a significant amount of implementation costs as a result of adopting this new guidance in the year ended December 31, 2020, and the adoption did not result in material impact on itsthe Company’s consolidated financial statements.September 2018,March 2020, the FASB issued ASU 2018-07, Compensation - Stock Compensation Improvements to Nonemployee Share-Based Payment Accounting (“ASU 2018-07”), which simplifies the accounting for share-based payments granted to nonemployees for goods and services. Under ASU 2018-07, most2020-04, Reference Rate Reform (Topic 848): Facilitation of the Effects of Reference Rate Reform on Financial Reporting. The guidance provides temporary optional expedients and exceptions to the current guidance on such paymentscontract modifications and hedge accounting to nonemployees willease the financial reporting burdens related to the expected market transition from the London Interbank Offered Rate (“LIBOR”) and other interbank offered rates to alternative reference rates. The guidance was effective upon issuance and generally can be alignedapplied to applicable contract modifications and hedge relationships prospectively through December 31, 2022. The adoption of this guidance did not have a significant impact on the Company’s financial statements.4. Revenue from contracts with customers requirementsconsolidated balance sheets, net of current expected credit losses of $98 and $0, respectively. Other items included in Receivables, net not related to revenue from contracts with customers represent receivables associated with reimbursable costs and leases which are accounted for share-based payments granted to employees. outside the scope of ASC 606.will adopt ASU 2018-07has recognized contract liabilities, comprised of unconditional payments due or paid under the contracts with customers prior to the Company’s satisfaction of the related performance obligations. The performance obligations are expected to be satisfied during the year beginning January 1, 2020 and is currently evaluating the impact of adopting this new guidance on its consolidated financial statements.F-134.AcquisitionOn November 9, 2018, the Company entered into an agreement to acquire the entire issued share capital of Shannon LNG Limited (“SLNG”) and Shannon LNG Energy Limited (“LNG Energy,” and, together with SLNG, “Shannon LNG”) in a transaction accounted for as an asset acquisition. On the same date, the Company acquired all of the Class A shares of Shannon LNG, representing a controlling financial interest. Shannon LNG was previously formed to acquire and develop assets comprising permissions, rights, licenses, leases, and other entitlements which would be used to construct and operate a terminal, pipeline, and related infrastructure, to import, process and deliver natural gas to downstream customers.As of the date of acquisition, construction of the planned infrastructure had not commencednext 12 months, and the primary assets of Shannon comprised land, wayleaves and permits that would allow for future development. The purchase agreement required the Company to pay the following amounts:
2018(1)Cash inclusive of repayment of Shannon LNG’s liabilities equal to approximately $2,857.(2)Consideration due to sellers once the first gas is exported from the terminal to be built.(3)Paid in shares if an IPO has occurred prior to May 31, 2020, otherwise in cash.The contingent consideration meets the definition of a derivative under ASC 815, Derivatives and Hedging. See Note 5 for more detail. The Equity Agreement is an unconditional obligation and is recognized incontract liabilities are classified within Other current liabilities on the consolidated balance sheetsheets. Contract assets are comprised of the transaction price allocated to completed performance obligations that will be billed to customers in subsequent periods. The contract liabilities and contract assets balances as of December 31, 2020 and 2019 are detailed below: Contract assets, net - current $ 3,673 $ 3,787 Contract assets, net - non-current 23,972 19,474 Total contract assets, net $ 27,645 $ 23,261 Contract liabilities $ 8,399 $ 6,542 Revenue recognized in the year from: Amounts included in contract liabilities at the beginning of the year $ 6,542 $ 0 Year Ended December 31, 2020 2019 2018 Development services revenue $ 129,753 $ 27,308 $ 0 Lease and other revenue 3,586 16,317 15,395 Total other revenue $ 133,339 $ 43,625 $ 15,395 Period Revenue 2021 $ 258,738 2022 250,226 2023 250,317 2024 249,804 2025 246,709 Thereafter 3,101,260 Total $ 4,357,054 5. Leases Fixed lease cost $ 39,841 Variable lease cost 2,013 Short-term lease cost 1,454 Lease cost - Cost of sales $ 36,283 Lease cost - Operations and maintenance 2,501 Lease cost - Selling, general and administrative 4,524 Operating cash outflows for operating lease liabilities $ 45,934 Right-of-use assets obtained in exchange for new operating lease liabilities 182,799 2018.The purchase agreement included put and call options to allow or require2020 are as follows: Operating Leases 2021 $ 43,467 2022 29,949 2023 18,738 2024 17,884 2025 10,698 Thereafter 50,387 Total lease payments $ 171,123 Less: effects of discounting 51,319 Present value of lease liabilities $ 119,804 Current lease liability $ 35,481 Non-current lease liability 84,323 acquire the remaining ownership interestrate implicit in the lease, the incremental borrowing rate is utilized as the discount rate. The weighted average discount rate associated with operating leases as of Shannon LNG. The optionsDecember 31, 2020 was 8.3%.deemed to be embedded equity-linked instruments withinas follows: 2020 $ 37,776 2021 35,478 2022 18,387 2023 7,083 2024 7,151 Thereafter 26,458 Total $ 132,333 non-controlling interest. The fair value of the non-controlling interest was estimated to be $14,446 based on the strike price of the callyears ended December 31, 2019 and put options.The assets acquired in connection with the acquisition were recorded by2018, the Company at their estimated relative fair valuesrecognized rental expense for all operating leases of $37,069 and $23,687, respectively, related primarily to LNG vessel time charters, office space, a land site lease and marine port berth leases.follows:
2018
(Yrs) Property, plant and equipment $ 18,394 Accumulated depreciation (932 ) Property, plant and equipment, net $ 17,462 Future cash receipts Financing leases Operating leases 2021 $ 1,965 $ 256 2022 2,065 247 2023 2,066 249 2024 2,068 234 2025 1,933 194 Thereafter 5,438 539 Total $ 15,535 $ 1,719 Less: Imputed interest 7,119 Present value of total lease receipts $ 8,416 Current finance leases, net $ 1,372 Non-current finance leases, net 7,044 5.6.Fair value F-142018: December 31, 2020 Level 1 Level 2 Level 3 Total Assets 0 Cash and cash equivalents $ 601,522 $ 0 $ 0 $ 601,522 Market approach Restricted cash 27,814 0 0 27,814 Market approach Investment in equity securities 1,095 0 0 1,095 Market approach Total $ 630,431 $ 0 $ 0 $ 630,431 Liabilities Derivative liability¹ $ 0 $ 0 $ 10,716 $ 10,716 Income approach Equity agreement² 0 0 22,768 22,768 Income approach Total $ 0 $ 0 $ 33,484 $ 33,484 December 31, 2019 Level 1 Level 2 Level 3 Total Assets 0 Cash and cash equivalents $ 27,098 $ 0 $ 0 $ 27,098 Market approach Restricted cash 65,937 0 0 65,937 Market approach Investment in equity securities 2,540 0 0 2,540 Market approach Total $ 95,575 $ 0 $ 0 $ 95,575 Liabilities Derivative liability¹ $ 0 $ 0 $ 9,800 $ 9,800 Income approach Equity agreement² 0 0 16,800 16,800 Income approach Total $ 0 $ 0 $ 26,600 $ 26,600 (1) Consideration due to the sellers of Shannon LNG once first gas is exportedsupplied from the terminal to be built.(2) To be paid at the earlier of agreed-upon date or the date on which the valid planning permission is received as specified in the amended Shannon LNG Agreement. The following table presents the Company’s financial assets that are measured at fair value as of December 31, 2017:There were no liabilities that were measured atThe table below summarizes the fair value on a recurring basisadjustment, recorded within Other expense (income), net in the consolidated statements of operations and comprehensive loss, and currency translation adjustment, recorded within the Other comprehensive loss, for the year ended December 31, 2020 and 2019: Fair value adjustment - Loss $ 4,408 $ 121 Currency translation adjustment - Loss/(gain) 2,476 (280 ) 2017.a discounted cash flows method based on currentquoted market interest rates for debt issuances with similar remaining years to maturity and adjusted for credit risk.prices. The Company has estimated that the carryingfair value of the Term Loan FacilitySenior Secured Notes (defined below) approximates fair value.below in “Note 15. Debt”) was approximately $1,327,488 as of December 31, 2020. The fair value estimate is classified as Level 32 in the fair value hierarchy.F-156.7.Restricted cash 20182020 and 20172019, restricted cash consisted of the following:
2018
2017
2020
2019 Collateral for performance under customer agreements $ 15,000 $ 15,000 Collateral for LNG purchases 11,664 35,000 Collateral for letters of credit and performance bonds 900 7,388 Debt service reserve account 0 8,299 Other restricted cash 250 250 Total restricted cash $ 27,814 $ 65,937 Current restricted cash $ 12,814 $ 30,966 Non-current restricted cash 15,000 34,971 7.8.Inventory 20182020 and 2017,2019, inventory consisted of the following:
2018
2017
2020
2019 LNG and natural gas inventory $ 13,986 $ 57,436 Automotive diesel oil inventory 3,986 4,746 Bunker fuel, materials, supplies and other 4,888 1,250 Total inventory $ 22,860 $ 63,432 8.9.Prepaid expenses and other current assets 20182020 and 2017,2019, prepaid expenses and other current assets consisted of the following:
2018
2017Prepaid LNG as of December 31, 2018 and 2017 consist of payments for 17.0 million gallons (1,406,062 MMBtus) and 34.0 million gallons (2,808,587 MMBtus) of LNG, respectively, that have been prepaid by the Company.
2020
2019 Prepaid LNG $ 11,987 $ 7,097 Prepaid expenses 4,941 7,458 Due from affiliates (Note 21) 1,881 1,577 Other current assets 29,461 23,602 Total prepaid expenses and other current assets, net $ 48,270 $ 39,734 20182020 and 2019 primarily consists of IPO issuance costs incurred which will be netted against issuance proceeds upon completion of the Offering.F-169.Available-for-sale-investmentThrough December 31, 2018, the Company invested in equity securities of an international oil and gas drilling contractor. The following tables present the number of shares, cost and fair value of the investment:
Shares
SharesThe movement of available-for-sale investment during the years ended December 31, 2018 and 2017 is summarized below:10.10.Construction in progress 20182020 and 20172019 is detailed below:Management determined it appropriate to Balance at beginning of period $ 466,587 $ 254,700 Additions 118,530 315,188 Transferred to property, plant and equipment, net (Note 11) (351,080 ) (103,301 ) Balance at end of period $ 234,037 $ 466,587 $0of $25,924, $25,172 and $1,289$1,732 was capitalized for the years ended December 31, 2020, 2019 and 2018, respectively, inclusive of amortized debt issuance costs disclosed in 2018 and 2017, respectively, as the decision was made to abandon the related projects.“Note 15. Debt.”11.11.Property, plant and equipment, net 20182020 and 20172019 the Company’s property, plant and equipment, net consisted of the following:
2018
2017 Terminal and power plant equipment $ 188,855 $ 14,981 CHP facilities 119,723 0 Gas terminals 120,810 53,380 ISO containers and other equipment 100,137 42,704 LNG liquefaction facilities 63,213 62,929 Gas pipelines 58,974 11,684 Land 16,246 15,401 Leasehold improvements 8,723 8,054 Accumulated depreciation (62,475 ) (16,911 ) Total property, plant and equipment, net $ 614,206 $ 192,222 F-172017totaled $32,116, $7,527 and 2016 totaled $3,900, $3,214 and $2,389, respectively, of which $713, $453$927, $701 and $48,$713, respectively, is included within Cost of sales in the consolidated statements of operations and comprehensive loss.12.12.Intangible assets, net assets:
Amount
Amortization
AmountThe weighted average December 31, 2020 Definite-lived intangible assets Shannon LNG permits $ 45,897 $ 2,438 $ 43,459 40 Easements 1,559 190 1,369 30 Indefinite-lived intangible assets Easements 1,274 - 1,274 n/a Total intangible assets $ 48,730 $ 2,628 $ 46,102 December 31, 2019 Definite-lived intangible assets Shannon LNG permits $ 42,157 $ 1,198 $ 40,959 40 Easements 1,559 139 1,420 30 Indefinite-lived intangible assets Easements 1,161 - 1,161 n/a Total intangible assets $ 44,877 $ 1,337 $ 43,540 is 40.29 years. expense for the yearyears ended December 31, 2018 was $134.2020 and 2019 totaled $1,120 and $1,114, respectively. The estimated aggregate amortization expense for each of the next five years is:13.Finance leases, netThe Company placed its Montego Bay LNG terminal into service on October 30, 2016, which has been accounted for as a direct finance lease. In addition, the Company also has entered into other arrangements to lease equipment to customers which are accounted for as direct finance leases. The components of the direct finance leases as of December 31, 2018 and 2017 are as follows:
2018
2017Receivables related to the Company’s direct finance leases are primarily with a national utility that generates consistent cash flow. Therefore, the Company does not expect a material impact to the results of operations or financial position due to nonperformance from such counterparty.At December 31, 2018, future minimum lease payments to be received under direct finance leases for the remainder of the respective lease terms is as follows:Year ending December 31: 2021 $ 1,199 2022 1,199 2023 1,199 2024 1,199 2025 1,199 Thereafter 38,833 Total $ 44,828 F-1814.13.Other non-current assets 20182020 and 2017,2019, other non-current assets consisted of the following:
2018
2017Port access rights related to the Company’s port lease in Baja California Sur, Mexico, represent capitalized initial direct costs
2020
2019 Nonrefundable deposit $ 28,509 $ 22,262 Contract asset, net (Note 4) 23,972 19,474 Cost to fulfill (Note 4) 10,688 8,508 Unbilled receivables, net (Note 4) 6,462 0 Upfront payments to customers 6,330 5,904 Port access rights and initial lease costs 0 17,762 Other 10,069 10,256 Total other non-current assets, net $ 86,030 $ 84,166 15.14.Accrued liabilities 20182020 and 20172019 accrued liabilities consisted of the following:
2018
2017
2020
2019 Accrued development costs $ 16,631 $ 25,037 Accrued interest 27,938 0 Accrued bonuses 17,344 14,991 Other accrued expenses 28,439 14,915 Total accrued liabilities $ 90,352 $ 54,943 15. 16.Long-term debtDebt20182020 and 2017, long-term2019, debt consisted of the following:
2018
2017New Senior Secured Notes, due September 15, 2025 $ 1,239,561 $ 0 Term Loan Facility, due January 21, 2020 0 495,000 0 70,960 0 10,823 0 42,274 Total debt $ 1,239,561 $ 619,057 December 31,September 2, 2020, the Company repaid the full amount outstanding using proceeds from the Senior Secured Notes. Certain lenders in the Credit Agreement participated in the issuance of the Senior Secured Notes, and a portion of the repayment of the Credit Agreement was treated as a debt modification. For the portion of the Credit Agreement that was considered extinguished, $16,310 of unamortized deferred debt issuance costs was recognized as a loss on extinguishment of debt in the consolidated statements of operations and comprehensive loss. The remaining unamortized deferred debt issuance costs of $6,501 will be amortized over the remaining term of the Senior Secured Notes.amended its Term Loan Facility (the “Term Loan Facility,” discussed below)entered into a credit agreement with a syndicate of 2 lenders to borrow up to an aggregate principal amount of $240,000, and proceeds received from this credit agreement were utilized to repay prior debt facilities. On December 31, 2018, the Company amended this credit agreement to increase the available borrowing principal amount to $500,000 (the “New Term(as amended, the “Term Loan Facility”) from a syndicate, and as of two lenders. TheDecember 31, 2018, the Company initially borrowedhad an outstanding principal balance of $280,000 under the New Term Loan Facility.New Term Loan Facility bearbore interest at a rate selected by the Company of either (i) the LIBOR divided by one minus the applicable reserve requirement plus a spread of 4% or (ii) subject to a floor of 1%, a Base Rate equal to the higher of (a) the Prime Rate, (b) the Federal Funds Rate plus 1/2 of 1% or (c) the 1-month LIBOR rate plus 1.00% plus a spread of 3.0%. The New Term Loan Facility is set to mature on December 31, 2019 and iswas repayable in quarterly installments of $1,250 with a balloonF-19 The Company has the option to extend the maturity date for two additional six-month periods; upon the exercise of each extension option, the spread on LIBOR and Base Rate increases by 0.5%. To exercise the extension option, the Company must pay a fee equal to 1.0% of the outstanding principal balance at the time of the exercise of the option.The New Term Loan Facility is secured by mortgages on certain properties owned by the Company’s subsidiaries, in addition to other collateral. The Company is required to comply with certain financial covenants and other restrictive covenants customary for facilities of this type, including restrictions on indebtedness, liens, acquisitions and investments, restricted payments and dispositions. The New Term Loan Facility also provides for customary events of default, prepayment and cure provisions.The Company paid origination and other fees of $13,225 in connection with obtaining the New Term Loan Facility. Refinanced borrowings and associated fees from one lender were accounted for as a debt modification, while refinanced borrowings and associated fees from one lender were accounted for as a debt extinguishment. Financing costs of $9,200 were written off to Loss on extinguishment of debt in the consolidated statements of operations and comprehensive loss including $2,820 of unamortized deferred financing costs and $6,380 of financing fees incurred in connection with the amendment of the Term Loan Facility. Of the $13,225 of fees paid in conjunction with obtaining the New Term Loan Facility, the Company capitalized $5,640 as a reduction in current portion of long-term debt on the consolidated balance sheets, all of which was unamortized as of December 31, 2018.Term Loan FacilityOn August 16, 2018, the Company entered into a Term Loan Facility to borrow up to an aggregate principal amount of $240,000. Borrowings under the Term Loan Facility bore interest at a rate selected by the Company of either (i) a LIBOR based rate, plus a spread of 4.0%, or (ii) subject to a floor of 1%, a Base Rate equal to the higher of (a) the Prime Rate, (b) the Federal Funds Rate plus 1⁄2 of 1% or (c) the 1-month LIBOR rate plus the difference between the applicable LIBOR margin and Base Rate margin, plus a spread of 3.0%. The Term Loan Facility was set to mature on August 14, 2019 and was repayable in quarterly installments of $600, with a balloon payment due on the maturity date. proceeds fromTerm Loan Facility was amended in the third quarter of 2019 to allow certain properties of a consolidated subsidiary to secure the Senior Secured Bonds.used to repayamortized over the MoBayterm of the Term Loan and Miami Loan (both defined below). The Mobay Loan was extinguished and theFacility, through December 31, 2019. As such, there were 0 unamortized deferred financing costs as of December 31, 2019.repaymentthe exercise and the spread on LIBOR and Base Rate would increase by 0.5%. On December 30, 2019, the Company entered into an amendment with the lenders to extend the maturity to January 21, 2020; no fees were due to lenders from the execution of $1,404, as well asthis amendment. On January 15, 2020, the Company repaid the full amount outstanding including fees due to the lenders using proceeds from the Credit Agreement to extinguish the Term Loan Facility. In conjunction with the extinguishment of the Term Loan Facility, the Company recognized a prepayment fee of $345, were recorded within Loss on extinguishment of debt of $9,557 in the consolidated statements of operations and comprehensive loss.loss.balancebalances were due quarterly.Miami Loan atSenior Secured Bonds and Senior Unsecured Bonds on the time of repayment was $38,707;consolidated balance sheets. On September 21, 2020, the Company agreedrepaid the full amount outstanding including fees dues to repaythe lenders $37,255 to extinguishusing proceeds from the liability,Senior Secured Notes and as suchcash on hand. In conjunction with the repayment of the Senior Secured Bonds and Senior Unsecured Bonds, the Company recognized a gainloss on extinguishment of $1,452 was recorded within Loss on extinguishmentdebt of debt$7,195 in the consolidated statements of operations and consolidated loss.The Companycomprehensive loss, including the write-off of $originationto bondholders of $3,601.other feesrelated amortization of $9,197. One lender participatingdebt issuance costs recognized during major development and construction projects are capitalized and included in the Miami Loan continued to participate in the Term Loan Facility and the Company has accounted for fees associated with this lender as a modification. Of the fees paid in conjunction with obtaining the Term Loan Facility, $4,106 were recorded as a reduction in current portion of long-term debt on the consolidated balance sheets.Montego Bay LoanIn June 2016, NFE North Holdings Limited, a subsidiary, entered into a Syndicated Loan Agreement (the “MoBay Loan”) with National Commercial Bank Jamaica Limited for an aggregate amount of $44,000, maturing on June 5, 2023, in connection with the construction of the LNG terminal in Montego Bay, Jamaica. The MoBay Loan was to be repaid in 77 monthly payments of $452 commencing from December 6, 2016, and a final balloon payment of $9,172 due on the maturity date. Borrowings under the loan bore interest at 8.1%. The MoBay Loan was secured by the LNG terminal in Montego Bay, Jamaica.During the construction period of certain projects in 2016, related interest expense and borrowings costs were capitalized as such costs were directly attributed to the construction. The capitalized interest was amortized as part of the capitalized cost of the asset that is subject to a direct finance lease upon its completion.project. Interest expense, inclusivenet of amortized debt fees, for the year ended December 31, 2018, 2017 and 2016 totaled $2,402, $3,611 and $1,990 respectively.F-20The Company used the net proceeds of the Term Loan Facility entered into in August 2018 to repay the MoBay Loan.Miami LoanIn November 2014, LNG Holdings (Florida) LLC (“LHFL”), a controlled subsidiary, entered into a credit agreement (the “Miami Loan”) with a bank for an initial aggregate amount of $40,000, maturing on May 24, 2018, in connection with the construction of an LNG facility in Hialeah, Florida. Borrowings under the Miami Loan bore interest at a rate selected by LHFL of either (i) a LIBOR based rate, with a floor of 1.00%, plus a spread of 5.00%, or (ii) subject to a floor of 2%, a Base Rate equal to the higher of (a) the Prime Rate, (b) the Federal Funds Rate plus ½ of 1% or (c) the 1-month LIBOR rate plus the difference between the applicable LIBOR margin and Base Rate margin, plus a spread of 4.00%. Subject to certain conditions, the Miami Loan could be extended for an additional term of up to 18 months. If the Miami Loan was extended past the original maturity date, the spread on LIBOR and Base Rate increases to 5.50% and 4.50%, respectively. The Miami Loan also required unused commitment fees of 1.25% per annum on undrawn amounts. The Miami Loan was secured by all of the assets of LHFL, which consists primarily of the Miami Facility.The Miami Loan required periodic payments of interest on either a monthly, quarterly or semi-annual basis, depending upon the interest rate option selected by LHFL. In addition, with respect to LIBOR based borrowings, LHFL, at its option, could elect to defer up to ten interest periods outstanding at any point in time. The Miami Loan also required annual amortization in an amount equal to 1% of the amount outstanding. The Miami Loan could be prepaid without penalty after the first anniversary of the closing of the Miami Loan. At the time of the extinguishment of the debt in August 2018 and as of December 31, 2017 and 2016, interest was calculated on the borrowing based on a one-month LIBOR rate (1% floor) plus a spread of 5%, bearing a total interest rate of 7.58%, 6.57% and 6.00%, respectively. Interest expense, inclusive of amortized debt feesamounts capitalized, recognized for the years ended December 31, 2020, 2019 and 2018 2017 and 2016, totaled $1,987, $2,845 and $2,740 respectively.On May 16, 2018, the Company extended the maturity to November 2019. To execute the extension option, the Company paid an extension fee of $388, equating to 1%consisted of the outstanding principal at the time.The Company used the net proceeds of the Term Loan Facility entered into in August 2018 to repay the Miami Loan. Year Ended December 31, 2020 2019 2018 Interest per contractual rates $ 76,176 $ 32,283 $ 9,363 Amortization of debt issuance costs 15,471 12,301 3,617 Total interest costs 91,647 44,584 12,980 Capitalized interest 25,924 25,172 1,732 Total interest expense $ 65,723 $ 19,412 $ 11,248 17.16.Income taxes The Company operatesmultiplelocal income taxes, with respect to its allocable share of any taxable income or loss of NFI. Additionally, NFI and its subsidiaries are subject to income taxes in the various foreign jurisdictions. Asjurisdictions in which they operate.pass-through entitydeferred tax asset of $42,783 related to the difference between its tax basis in its investment in NFI and NFE’s share of the financial statement carrying amount of the net assets of NFI. The deferred tax asset was recorded to equity and is fully offset by a valuation allowance also recorded to equity. Year Ended December 31, 2020 2019 2018 United States $ (166,571 ) $ (194,481 ) $ (74,873 ) Foreign (92,577 ) (9,399 ) (3,647 ) Loss before taxes $ (259,148 ) $ (203,880 ) $ (78,520 ) Year Ended December 31, 2020 2019 2018 Current: Domestic $ 0 $ 0 $ 0 Foreign 2,063 47 7 Total current tax expense 2,063 47 7 Deferred: Domestic 0 0 0 Foreign 2,754 392 (345 ) Total deferred tax expense (benefit) 2,754 392 (345 ) Total provision for (benefit from) income taxes $ 4,817 $ 439 $ (338 ) provision or benefit for U.S. income taxes has been recorded forrate to the periods presented.JamaicaThe Company’s subsidiaries incorporated in Jamaica are subject to income tax which is computed at 25% of the relevant subsidiaries’ results for the year, adjusted for tax purposes.The provision / (benefit) for the taxes on income consists of the following:
2018
2017
2016The effective tax rate for the year-ended December 31, 2018, 2017 and 2016 was 0.4%, (1.7%) and 1.1%, respectively. As a pass through entity,is as follows: Year Ended December 31, 2020 2019 2018 Income tax at the statutory rate 21.0 % 21.0 % 0 Impact from foreign operations (2.9 %) 0 0 Foreign tax rate differential 2.9 % 0.8 % 0.4 % Foreign tax on foreign operations 0.4 % 2.9 % 0 Foreign permanent adjustments (0.4 %) 5.0 % 0 Foreign valuation allowance 0.1 % (10.8 %) 0 Domestic valuation allowance (14.2 %) (2.1 %) 0 Income attributable to non-controlling interest (6.4 %) (18.2 %) 0 Other (2.4 %) 1.2 % 0 Effective income tax rate (1.9 %) (0.2 %) 0.4 % is 0%in 2020 and 2019 were increases in domestic and foreign valuation allowances and income attributable to non-controlling interests. For 2018, the entire difference between the statutory and effective rate iswas attributable to foreign taxes. Deferred Year Ended December 31, 2020 2019 Balance at the beginning of the period $ 80,911 $ 241 Change in valuation allowance 51,586 80,670 Balance at the end of the period $ 132,497 $ 80,911 Year Ended December 31, 2020 2019 Deferred tax assets: Investment in NFI $ 64,553 $ 46,185 Accrued interest 18,885 14,047 IRC Section 163(j) interest carryforward 6,909 182 Federal and state net operating loss carryforward 32,145 3,215 Foreign net operating loss carryforward 24,525 19,713 Share-based compensation 6,611 8,958 Lease liability 4,383 0 Other 1,252 224 Total deferred tax assets 159,263 92,524 Valuation allowance (132,497 ) (80,911 ) Deferred tax assets, net of valuation allowance 26,766 11,613 Deferred tax liabilities: Property and equipment (22,566 ) (11,820 ) Lease asset (4,215 ) 0 Total deferred tax liabilities (26,781 ) (11,820 ) Net deferred tax liabilities $ (15 ) $ (207 ) assetsreturns in the U.S. federal and various state and local jurisdictions. The Company is not currently under income tax examination in any jurisdiction, and NFE filed its first corporate U.S. federal and state income tax returns for the period ended December 31, 2019. NFI was taxed as a U.S. partnership and controlled the underlying operations, thus the tax effects of temporary differences were captured through December 31, 2020 within the net deferred tax asset for the investment in the partnership.recognized for taxgenerally allowed to be carried forward indefinitely and can offset up to 80 percent of future taxable income. The state net operating losses relate to Florida and are generally allowed to be carried forward indefinitely.carry-forwards in certaincarryforwards that can be utilized annually to offset future taxable income and taxes payable. A portion of the Company’s foreign subsidiariesnet operating loss carryforwards are subject to an annual limitation under Section 382 of the extentInternal Revenue Code.thatto be realized. As of December 31, 2020, the Company will realizeconcluded, based on the relatedweight of all available positive and negative evidence, those deferred tax benefit through futureassets are not more likely than not to be realized and accordingly, a valuation allowance has been recorded on this deferred tax asset as of December 31, 2020 for the amount not supported by reversing taxable profits. Management,temporary differences.F-21through the reversalThe Company has not recorded any deferred tax liabilities for undistributed earnings of temporary differences, tax-planning assessment and considerationcontrolled foreign corporations, primarily consisting of the relevantCompany’s Puerto Rican operations. The Company’s intent is to only make distributions from non-U.S. subsidiaries fixed revenue streams, believesin the future when distributions can be made at no net tax cost; any remaining cash will be reinvested to grow operations in such subsidiaries. The Company has no material unremitted earnings from its non-U.S. subsidiaries.that tax loss carry-forwards willto be fully utilized by all but one of the subsidiaries in future reporting periods. These tax loss carry-forwards do not expire. For the year ended December 31, 2018 we have provided a valuation allowance of $241 on the deferred tax asset relating to tax loss carry-forwards.The following represents the approximate tax effect of each significant type of temporary difference giving rise to the deferred income tax asset (liability):
2018
2017Bermudathe period 2035.18.17.Commitments and contingencies infor the purchase, production, and transportation of LNG and natural gas. Suchgas, as well as engineering, procurement and construction agreements may include optionsto develop the Company’s terminals and related to the price of quantities of natural gas under gas purchase and sale agreements, LNG purchase agreements, or options related to the duration of time charters for shipping cargoes.infrastructure. The exercise of these options is dependent upon conditions being fulfilled by the option’s holder and future LNG market levels. At the balance sheet date, the estimated future cash payments related to outstanding contractual commitments, at market prices as of December 31, 2018,2020, is summarized as follows:LNG inventory purchases and other 2021 2022 2023 2024 Purchase obligations $ 376,097 $ 362,294 $ 362,294 $ 362,311 $ 1,027,352 commitmentcommitments as of December 31, 2018. The 20192020.for LNG inventory purchases excludes the $16,170 prepaid balance as of December 31, 2018.under these agreements is approximately 68 TBtu per year, reducing to approximately 28 TBtu per year from 2026 to 2029. The amounts disclosed above is foralso include the 29commitment to purchase 12 firm cargoes of 1.05 million gallons of LNG (86.7 million MMBtu) and excludes the two optional cargoes. During the years endedin 2021 under a supply contract entered into in December 31, 2018 and 2017, the2018.made purchases of $72,161 and $74,278 under unconditional purchase agreements, respectively.Natural gas supply purchase obligationsAs of December 31, 2018, the Company was a party tohas a contractual purchase commitment for feedgas with a remaining term of 22 months. These commitments areapproximately five years. This commitment is designed to assure sources of supply and areis not expected to be in excess of normal requirements. For agreements for supply where there is an activeF-22markets, market, such agreements qualify for and the Company has elected the normal purchase exception under the derivatives guidance; therefore, the purchases under these contracts are included in Inventory and Cost of sales as incurred.21, Leases, as lessee.18. Earnings per share December 31, 2020 December 31, 2019 Numerator: Net loss $ (263,965 ) $ (204,319 ) Less: net loss attributable to non-controlling interests 81,818 170,510 Net loss attributable to Class A common stock $ (182,147 ) $ (33,809 ) Denominator: Weighted-average shares-basic and diluted 106,654,918 20,862,555 Net loss per share - basic and diluted $ (1.71 ) $ (1.62 ) additionconnection with the closing of the Exchange Transactions on June 10, 2020, all outstanding Class B shares were exchanged for Class A shares. The weighted average shares outstanding for the year ended December 31, 2020 are significantly lower than the Class A common stock outstanding on December 31, 2020 due to the above disclosed commitments, in September 2016timing of the Exchange Transactions. December 31, 2020 December 31, 2019 Unvested RSUs1 1,538,060 3,137,415 Class B shares2 0 144,342,572 Shannon Equity Agreement shares3 428,275 1,083,995 Total 1,966,335 148,563,982 1 Represents the number of instruments outstanding at the end of the period. 2 Class B shares at the end of the period are considered potentially dilutive Class A shares. 3 Class A common stock that would be issued in relation to the Shannon LNG Equity Agreement. 19. Share-based compensation madehas granted RSUs to select officers, employees, non-employee members of the board of directors and select non-employees under the Incentive Plan. The fair value of RSUs on the grant date is estimated based on the closing price of the underlying shares on the grant date and other fair value adjustments to account for a commitment of up to anpost-vesting holding period. These fair value adjustments were estimated $180,000 to build a gas-fired combined heat and power plant in Jamaica under a Joint Development Agreement with a third party prior to commercial agreements being finalized. In August and October 2017, respectively, a PPA and SSA were executed, obligatingbased on the Company to completeFinnerty model.development subject toRSU activity for the conditions set forth in those agreements.ContingenciesAs of year ended 2016,2020: Non-vested RSUs as of December 31, 2019 3,137,415 $ 13.44 Granted 109,409 14.47 Vested (1,507,633 ) 13.47 Forfeited (201,131 ) 13.51 Non-vested RSUs as of December 31, 2020 1,538,060 $ 13.49 Company had accruedshare-based compensation expense for $1,204 of tangible personal property tax levied in the State of Florida in respect ofCompany’s RSUs recorded for the LNG Plant in Hialeah, Florida. During 2017, the Company paid this amount in full and subsequently took legal proceedings to challenge the tax amount for a full or partial rebate. The Company successfully challenged the tax amount, including penalties, and received a full rebate. The State of Florida has appealed the determination and the Company repaid the rebate amount in order to avoid penalties and charges while the appeal is under consideration.As of the date at which these consolidated financial statements were issued, the appeal has not been concluded. Should the State of Florida lose the appeal the Company expects a full refund which will be recognized as a gain contingency recognized in earnings when the cash is received.19.Members’ equityIn February 2017, an existing Member purchased 2,500 additional shares for $50.On December 29, 2017, 2,314,752 common shares (no par value) were subscribed for consideration of $70,050 and recorded within Members’ capital on the consolidated balance sheets. Of the total amount subscribed, $20,050 was received during 2017 and $50,000 was received after year ended 2017 which was recorded as Stock subscriptions receivable offsetting Members’ capital on the consolidated balance sheets.In January 2018, the Company issued 665,843 common shares (no par value) for $20,150 in proceeds.
2020 and 2019:20.Employee benefit plansThe Company operates a defined contribution plan through a Jamaican service provider for Jamaican employees. 2020 2019 Operations and maintenance $ 800 $ 853 Selling, general and administrative 7,943 40,594 Total share-based compensation expense $ 8,743 $ 41,447 2018, 20172020 and 2016,2019, cumulative compensation expense recognized for forfeited RSU awards of $914 and $2,248, respectively, was reversed. The Company recognizes the income tax benefits resulting from vesting of RSUs in the period of vesting, to the extent the compensation expense has been recognized.defined contribution plan totaled $50, $46year ended December 31, 2021. The number of shares that will vest can range from 0 to 2,219,554. For the year ended December 31, 2020, the Company determined that it was not probable that the performance condition required for any of the PSUs to vest would be achieved, and $27, respectively, and is included within Cost of salesas such, no compensation expense has been recognized in the consolidated statements of operations and comprehensive loss. Unrecognized compensation costs if the maximum amount of shares were to vest based on the achievement of the performance condition was $30,864, and the weighted-average remaining vesting period of non-vested PSUs was one year as of December 31, 2020.20. 21.Leases, as lesseeStockholder’s equity and Members’ equityyearsyear ended December 31, 2018, 2017 and 2016,2019, the Company recognized rental expenseissued 2,716,252 shares of Class A shares in exchange for Class B shares, and 53,572 Class A shares were issued for vested RSUs.operating leases of $23,687, $17,369 and $3,539, respectively, related primarily to LNG vessel time charters, office space,outstanding Class B shares. As a land site lease and marine port berth leases.Oneresult of the land site leases is held with an affiliate (see Note 22)Conversion, all outstanding Class A shares were converted to Class A common stock. In the CompanyClass A common stock and has an initial term up to five years with a renewal for an additional five years and a 2.5% annual lease payment escalation. The marine port berth lease has an initial term up to 10 years with a 12-year renewal option and a 15% annual lease payment escalation after year five. Onereceived proceeds of the LNG vessel time charters contains a three-month renewal option and the second contains no renewal option and a 2% annual lease payment escalation$290,771, net of $1,221 in year three. Leased office space in Miami contains two additional renewal options for five years each and a 3% annual lease payment escalation. Leased office space in Montego Bay contains a one-year renewal option and 5% annual lease payment escalation.F-23Future minimum leaseThe Company declared dividends of $0.10 per share in August and October 2020, totaling $33,742 in dividend payments under non-cancellable operating leases are as follows:22.21.Related party transactions chargeshas historically charged the Company for administrative and general expenses incurred.incurred pursuant to its Management Services Agreement (“Management Agreement”). Upon completion of the IPO, the Management Agreement was terminated and replaced by an Administrative Services Agreement (“Administrative Agreement”) to charge the Company for similar administrative and general expenses. The portion of such charges under the Management Agreement and Administrative Agreement that are attributable to the Company totaled $7,291, $7,942 and $5,741 $3,866 and $2,214 for the years ended December 31, 2018, 20172020, 2019 and 2016, respectively,2018, respectively. Costs associated with the Management Agreement and Administrative Agreement are included within Selling, general and administrative in the consolidated statements of operations and comprehensive loss. As of December 31, 20182020 and 2017, $3,8842019, $5,535 and $2,054$5,083 were due to Fortress, respectively.The Company is controlled by a Member who owned or leasedthatchartered by the Company chartered from a third-party aircraft operator for business purposes in the course of operations. The Company paid theincurred, at aircraft operator market rates, for the charterscharter costs of $1,873, $2,917 $2,483 and $1,592$5,367 for the years ended December 31, 2020 and 2019, respectively. In 2018, such charges were incurred under the Management Agreement, and amounts incurred of $1,873 for the year ended December 31, 2018 2017 and 2016, respectively, and these amounts are included in the activity and balances disclosed above.aleased land and office lease withspace from Florida East Coast Industries, LLC (“FECI”), which is controlled by funds managed by an affiliate of Fortress. In April 2019, FECI sold the Company.office building to a non-affiliate, and as such, the lease of the office space is no longer held with a related party. The Company recognized expense forrelated to the land lease still held by a related party of $730, $396 and $260 during the years ended December 31, 2018, 20172020, 2019 and 2016 totaled $260, $285 and $302,2018, respectively, and iswhich was included within Operations and maintenance in the consolidated statements of operations and comprehensive loss. The expense for the period that the building was owned by a related party during the year ended December 31, 2019 totaled $609, of which $386 was capitalized to Construction in progress and $223 was included in Selling, general and administrative in the consolidated statements of operations and comprehensive loss; 0 expense for the office space was incurred prior to 2019. As of December 31, 20182020 and 2017, $5972019, $316 and $37 were$0 was due to FECI, respectively., to provide business development services to increase the customer base of the Company. DevTech also contributed cash consideration in exchange for a 10% interest in a consolidated subsidiary. The 10% interest is reflected as non-controlling interest in the Company’s consolidated financial statements. Additionally, DevTech purchased 10% of a note payable due to an affiliate of the Company for $755.Company. As of December 31, 2020 and 2019, $715 and $815 was owed to DevTech on the note payable, respectively. The outstanding note payable due to DevTech is included in Other long-term liabilities inon the consolidated balance sheet as of December 31, 2018. For the year ended December 31, 2018,sheets. The interest expense on the note payable due to DevTech was $18.Florida East Coast Railway (“FECR”)The Company was affiliated with FECR, an entity previously majority-owned by an affiliate of Fortress, sells LNG to FECR under a purchase and sale agreement entered into in December 2016. FECR was sold by Fortress on June 30, 2017, and from that date FECR was no longer considered to be affiliated with$18 for the Company. During the six monthsyears ended June 30, 2017 and the year ended December 31, 2016,2020, 2019 and 2018 respectively. No interest has been paid, and accrued interest has been recognized within Accrued expenses on the Company made salesconsolidated balance sheets. As of LNG to FECR totaling $1,618December 31, 2020 and $329, respectively, for the period FECR2019, $343 and $443 was affiliated with the Company.due from DevTech, respectively.F-24Beginning in provideshas provided certain administrative services to related parties including Fortress Energy Partners (“FEP”) that is billed on a yearly basis.affiliated entities. As of December 31, 20182020 and 2017, $5252019, $1,334 and $131$1,134 were due from affiliates, respectively. There are no costs incurred by the Company as we arethe Company is fully reimbursed for all costs incurred.is currently owned by Messrs. Edens and Nardone provides certain administrative services to the Company, as well as providing office space under a receivable outstanding.tablestable below summarizes the balances outstanding with affiliates atas of December 31, 20182020 and 2017:
2018
2017
2020
2019 Amounts due to affiliates $ 8,980 $ 10,252 Amounts due from affiliates 1,881 1,577 23.22.Customer concentrations yearsyear ended December 31, 2020, revenue from 3 significant customers constituted 88% of the total revenue and as83% of trade receivables. For the year ended December 31, 2019, revenue from 2 significant customers constituted 74% of the total revenue and 85% of trade receivables, and for the year ended December 31, 2018, 2017 and 2016, revenue from a1 significant customer constituted 87%, 92% and 61% of total revenues, respectively, and 88%, 92% and 96%revenue. Prior to the adoption of total receivables, respectively. In addition to trade receivables,ASC 842, the Company has primarily leased facilities underrecognized a direct financing leases towithin the Company’s agreement with this customer.2018, 2017 and 2016, 98%, 97% and 100%2019, 99% of the Finance leases, net balance was attributed to this customer, respectively. significant customer.2017 and 2016, revenuesrevenue from external customers that were derived from customers located in the United States were $7,214, $4,935$135,702, $21,386 and $319,$7,214, respectively, and from customers outside of the United States were $315,948, $167,739 and $105,087, $92,327 and $21,076, respectively, all of which wasprimarily derived from customers in the Caribbean. The Company attributes revenuesrevenue from external customers to the country in which the party to the applicable agreement has its principal place of business.2018, 20172020 and 2016,2019, long lived assets, which are all non-current assets excluding investment in equity securities, restricted cash, deferred tax assets and intangible assets, and available-for-sale securities, located in the United States were $151,729, $88,604$442,199 and $76,591,$360,860 respectively, and long lived assets located outside of the United States was $325,416, $131,300were $639,370 and $96,859,$470,749, respectively, primarily located in the Caribbean.24.23.Unaudited quarterly financial data 20182020 and 20172019 are as follows:
2018
2018
2018
2018
2017
2017
2017
2017(in thousands of U.S. dollars, except per share data) Three Months Ended Revenues $ 74,530 $ 94,566 $ 136,858 $ 145,696 Operating loss (36,169 ) (148,273 ) 11,053 18,031 Net loss (60,223 ) (166,587 ) (36,670 ) (485 ) Net (loss) income attributable to stockholders (8,466 ) (137,493 ) (36,358 ) 170 Basic and diluted (loss) income per share (3) (0.32 ) (2.40 ) (0.21 ) 0.00 Three Months Ended Revenues $ 29,951 $ 39,766 $ 49,656 $ 69,752 Operating loss (59,337 ) (43,959 ) (47,726 ) (36,253 ) Net loss (60,292 ) (51,233 ) (54,424 ) (38,370 ) Net loss attributable to stockholders (13,557 ) (6,186 ) (6,723 ) (7,343 ) Basic and diluted loss per share (3) (0.96 ) (0.28 ) (0.30 ) (0.30 ) (1) (2) Operating loss, net loss and net loss attributable to stockholders for the three months ended June 30, 2020 includes a termination charge of $105,000 associated with an agreement with one of the Company’s LNG suppliers to terminate the obligation to purchase any LNG from this supplier for the remainder of 2020. (3) Basic and diluted earnings per share are computed independently for each of the quarters presented. Therefore, the sum of quarterly basic and diluted per share information may not equal annual basic and diluted earnings per share. F-2525.24.Subsequent events Formation Transactions30, 2019,13, 2021, NFE, completed its IPOHygo Energy Transition Ltd., a Bermuda exempted company (“Hygo”), Golar LNG Limited, a Bermuda exempted company (“GLNG”), Stonepeak Infrastructure Fund II Cayman (G) Ltd. (“Stonepeak”), and Lobos Acquisition Ltd., a seriesBermuda exempted company and an indirect, wholly-owned subsidiary of other transactions (together,NFE (“Hygo Merger Sub”), entered into an Agreement and Plan of Merger (the “Hygo Merger Agreement”), pursuant to which Hygo Merger Sub will merge with and into Hygo (the “Hygo Merger”), with Hygo surviving the “Formation Transactions”).The Formation Transactions consistedHygo Merger as a wholly owned subsidiary of NFE. As of the following:New Fortress Energy Holdings contributeddate of the Hygo Merger Agreement, each of GLNG and Stonepeak owned 50% of the outstanding common shares, par value $1.00 per share, of Hygo, and Stonepeak owned all of its interests in its operating subsidiaries and its limited assets and liabilities to NFI in exchange for NFI LLC Units; issued 20,000,000 Class A common stock and an aggregate of $50 million in cash and (ii) Stonepeak will receive 12.7 million shares of NFE Class A common stock and an aggregate of $530 million in cash. The Hygo Merger Agreement may be terminated by NFE or Hygo under certain circumstances, including, among others, by either NFE or Hygo if the IPO, representingclosing of the Hygo Merger has not occurred on or before July 12, 2021.interestsand the general partner of GMLP (the “General Partner”), Lobos Acquisition LLC, a Marshall Islands limited liability company and an indirect subsidiary of NFE (“GMLP Merger Sub”), and NFE International Holdings Limited, a private limited company incorporated under the laws of England and Wales and an indirect subsidiary of NFE (“GP Buyer”), pursuant to which GMLP Merger Sub will merge with 100%and into GMLP, with GMLP surviving the merger as an indirect subsidiary of NFE (the “GMLP Merger”).economics rightsGMLP Merger (the “GMLP Effective Time”), each common unit representing a limited partner interest in NFE, at an IPO priceGMLP that is issued and outstanding as of $14.00 per Class A share;NFE contributed the net proceeds from the IPO to NFI in exchange for 20,000,000 NFI LLC Units; andNew Fortress Energy Holdings received 147,048,824 of Class B shares of NFE which is equalimmediately prior to the numberGMLP Effective Time will automatically be converted into the right to receive $3.55 in cash. At the GMLP Effective Time, each of NFI LLC Units heldthe incentive distribution rights of GMLP will be canceled and cease to exist, and no consideration shall be delivered in respect thereof. Each 8.75% Series A Cumulative Redeemable Preferred Unit of GMLP issued and outstanding immediately prior to the GMLP Effective Time will be unaffected by the CompanyGMLP Merger and will remain outstanding, and no consideration shall be delivered in respect thereof. Each outstanding unit representing a general partner interest of GMLP that is issued and outstanding immediately prior to the GMLP Effective Time will remain issued and outstanding immediately following the IPO.GMLP Effective Time.FollowingFormation Transactions, NFE became a publicly-traded holding company whose only material asset consistsconsummation of membership interests in NFI, whichthe GMLP Merger, GP Buyer will ownpurchase from GLNG all of the outstanding membership interests of the General Partner pursuant to a Transfer Agreement dated as of January 13, 2021 for a purchase price of approximately $5 million, which is equivalent to $3.55 per general partner unit of GMLP.operatingcase of GMLP, must be approved by GMLP’s Conflicts Committee) under certain circumstances, including, among others, by either NFE or GMLP if the closing of the GMLP Merger has not occurred on or before July 13, 2021, and further provides that, upon termination of the GMLP Merger Agreement under certain circumstances, GMLP may be required to pay NFE a termination fee equal to approximately $9.4 million.contributed by New Fortress Energy Holdings.to pay related fees and expenses and for general corporate purposes. If NFE becameutilizes the sole managing memberBridge Loan, the facility will bear a fixed interest rate of NFI,6.25%, subject to a step-up of 50 basis points every three months. The Bridge Loan has a one-year term, is pre-payable without penalty and will automatically be responsible for all operational, management and administrative decisions relating to NFI’s business.The contribution of the assets of New Fortress Energy Holdings and net proceeds from the Offering to NFI was treated as a reorganization of entities under common control. As a result, NFE will retrospectively present the consolidated balances sheets and statements of operations and comprehensive loss of New Fortress Energy Holdings for all current and comparative periods presented beginning with its first quarter 2019 financial statements.On March 1, 2019, the underwriters exercised their option to purchase an additional 837,272 Class A shares at the IPO price of $14.00 per share, less underwriting discounts, which resulted in $11.0 million in additional net proceeds after deducting $0.7 million of underwriting discounts and commissions, such that there are 20,837,272 outstanding Class A shares.On March 5, 2019, the Company enteredconverted into a contract with the Puerto Rico Electric Power Authority (“PREPA”) for the supply of natural gas and conversion of Units 5 and 6 of the San Juan Combined Cycle Power Plant.seven-year term loan if it is not repaid in full at maturity. The initialsenior secured revolving facility has a term of the contract isapproximately five years with options for PREPAand bears interest based on the three-month LIBOR rate plus certain margins.extend for three additional five-year periods. The Company will supply natural gas to the power plant from its micro fuel handling facility indevelop an LNG terminal at the Port of San Juan. The conversionSuape, Brazil. On March 11, 2021, we acquired 100% of San Juan Units 5the outstanding shares of Pecem Energia S.A. (“Pecem”) and 6 andEnergetica Camacari Muricy II S.A. (“Muricy”). These companies collectively hold certain 15-year power purchase agreements for the development of thermoelectric power plants in the micro fuel handling facility are anticipatedState of Bahia, Brazil. We will seek to be complete by mid-2019.On March 21, 2019,obtain the Company drew an additional $220 million onnecessary approvals to transfer the Term Loan Facility. Total principal amounts outstanding after this draw are $500 million.power purchase agreements to the Port of Suape and plan to construct a gas-fired power plant and LNG import terminal at the Port of Suape. The Company haspaid approximately $9 million at closing in total and will make additional payments to the option to extend the maturity date for two additional six-month periods; upon the exercise of each extension option, the spreadsellers based on LIBOR and Base Rate increases by 0.5%. To exercise the extension option, the Company would pay a fee equal to 1.0% of the outstanding principal balance at the time of the exercise of the option.F-26
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of YearDescription Deductions Year ended December 31, 2020 Allowance for doubtful accounts $ 0 $ 0 $ 0 $ 0 Allowance for expected credit losses 0 316 0 316 Total allowance 0 316 0 316 Year ended December 31, 2019 Allowance for doubtful accounts 257 0 (257 ) 0 Year ended December 31, 2018 Allowance for doubtful accounts 0 257 0 257 (1) Amount expensed isin included within Selling, general and administrative.All other schedules are omitted because they are not applicable or not required or because the required information is included in the consolidated financial statements of the Company or the notes thereto.F-27