UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549

FORM 10-Q

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

For the quarterly period ended March 31, 2021

OR

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

For the transition period from __________ to__________

Commission File Number: 001-38790

New Fortress Energy Inc.
(Exact Name of Registrant as Specified in its Charter)

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

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

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

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

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

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

Large accelerated filer
 
Accelerated filer 
Non-accelerated filer
 
Smaller reporting company
   
Emerging growth company

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

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes No
Securities registered pursuant to Section 12(b) of the Act:

Title of each class
Trading Symbol(s)
Name of each exchange on which registered
Class A common stock
NFE
Nasdaq Global Select Market

As of May 3, 2021, the registrant had 206,698,564 Class A common stock outstanding.







TABLE OF CONTENTS

ii
 
 
iii
 
 
4
 
 
Item 1.
4
 
 
 
Item 2.
26
 
 
 
Item 3.
40
 
 
 
Item 4.
41
 
 
 
42
 
 
Item 1.
42
 
 
 
Item 1A.
42
 
 
 
Item 2.
90
 
 
 
Item 3.
90
 
 
 
Item 4.
90
 
 
 
Item 5.
90
 
 
 
Item 6.
91
 
 
 
94


i

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

Btu
the amount of heat required to raise the temperature of one avoirdupois pound of pure water from 59 degrees Fahrenheit to 60 degrees Fahrenheit at an absolute pressure of 14.696 pounds per square inch gage
   
CAA
Clean Air Act
   
CERCLA
Comprehensive Environmental Response, Compensation and Liability Act
   
CWA
Clean Water Act
   
DOE
U.S. Department of Energy
   
FERC
Federal Energy Regulatory Commission
   
GAAP
generally accepted accounting principles in the United States
   
GHG
greenhouse gases
   
GSA
gas sales agreement
   
Henry Hub
a natural gas pipeline located in Erath, Louisiana that serves as the official delivery location for futures contracts on the New York Mercantile Exchange
   
ISO container
International Organization of Standardization, an intermodal container
   
LNG
natural gas in its liquid state at or below its boiling point at or near atmospheric pressure
   
MMBtu
one million Btus, which corresponds to approximately 12.1 gallons of LNG
   
MW
megawatt. We estimate 2,500 LNG gallons would be required to produce one megawatt
   
NGA
Natural Gas Act of 1938, as amended
   
non-FTA countries
countries without a free trade agreement with the United States providing for national treatment for trade in natural gas and with which trade is permitted
   
OPA
Oil Pollution Act
   
OUR
Office of Utilities Regulation (Jamaica)
   
PHMSA
Pipeline and Hazardous Materials Safety Administration
   
PPA
power purchase agreement
   
SSA
steam supply agreement
   
TBtu
one trillion Btus, which corresponds to approximately 12,100,000 gallons of LNG

ii

CAUTIONARY STATEMENT ON FORWARD-LOOKING STATEMENTS

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

our limited operating history;
loss of one or more of our customers;
inability to procure LNG on a fixed-price basis, or otherwise to manage LNG price risks, including hedging arrangements;
the completion of construction on our LNG terminals, facilities, power plants or Liquefaction Facilities (as defined herein) and the terms of our construction contracts for the completion of these assets;
cost overruns and delays in the completion of one or more of our LNG terminals, facilities, power plants or Liquefaction Facilities, as well as difficulties in obtaining sufficient financing to pay for such costs and delays;
our ability to obtain additional financing to effect our strategy;
We may be unable to successfully integrate the businesses and realize the anticipated benefits of the Mergers;
failure to produce or purchase sufficient amounts of LNG or natural gas at favorable prices to meet customer demand;
hurricanes or other natural or manmade disasters;
failure to obtain and maintain approvals and permits from governmental and regulatory agencies;
operational, regulatory, environmental, political, legal and economic risks pertaining to the construction and operation of our facilities;
inability to contract with suppliers and tankers to facilitate the delivery of LNG on their chartered LNG tankers;
cyclical or other changes in the demand for and price of LNG and natural gas;
failure of natural gas to be a competitive source of energy in the markets in which we operate, and seek to operate;
competition from third parties in our business;
inability to re-finance our outstanding indebtedness;
changes to environmental and similar laws and governmental regulations that are adverse to our operations;
inability to enter into favorable agreements and obtain necessary regulatory approvals;
the tax treatment of us or of an investment in our Class A shares;
the completion of the Exchange Transactions (as defined below);
a major health and safety incident relating to our business;
increased labor costs, and the unavailability of skilled workers or our failure to attract and retain qualified personnel;
risks related to the jurisdictions in which we do, or seek to do, business, particularly Florida, Jamaica, Brazil and the Caribbean; and
other risks described in the “Risk Factors” section of this Quarterly Report.

All forward-looking statements speak only as of the date of this Quarterly Report. When considering forward-looking statements, you should keep in mind the risks set forth under “Item 1A. Risk Factors” and other cautionary statements included in our Annual Report on Form 10-K for the year ended December 31, 2020 (our “Annual Report”), this Quarterly Report and in our other filings with the Securities and Exchange Commission (the “SEC”). The cautionary statements referred to in this section also should be considered in connection with any subsequent written or oral forward-looking statements that may be issued by us or persons acting on our behalf. We undertake no duty to update these forward-looking statements, even though our situation may change in the future. Furthermore, we cannot guarantee future results, events, levels of activity, performance, projections or achievements.


iii


PART I
FINANCIAL INFORMATION

Item 1.
Financial Statements.

New Fortress Energy Inc.
Condensed Consolidated Balance Sheets
As of March 31, 2021 and December 31, 2020
(Unaudited, in thousands of U.S. dollars, except share amounts)

 
March 31,
2021
   
December 31,
2020
 
Assets
           
Current assets
           
Cash and cash equivalents
 
$
360,130
   
$
601,522
 
Restricted cash
   
4,072
     
12,814
 
Receivables, net of allowances of $203 and $98, respectively
   
95,729
     
76,544
 
Inventory
   
28,031
     
22,860
 
Prepaid expenses and other current assets, net
   
60,245
     
48,270
 
Total current assets
   
548,207
     
762,010
 
                 
Restricted cash
   
15,000
     
15,000
 
Construction in progress
   
337,691
     
234,037
 
Property, plant and equipment, net
   
607,003
     
614,206
 
Right-of-use assets
   
131,575
     
141,347
 
Intangible assets, net
   
65,934
     
46,102
 
Finance leases, net
   
7,501
     
7,044
 
Deferred tax assets, net
   
5,060
     
2,315
 
Other non-current assets, net
   
114,140
     
86,030
 
Total assets
 
$
1,832,111
   
$
1,908,091
 
                 
Liabilities
               
Current liabilities
               
Accounts payable
 
$
27,970
   
$
21,331
 
Accrued liabilities
   
88,809
     
90,352
 
Current lease liabilities
   
34,857
     
35,481
 
Due to affiliates
   
10,859
     
8,980
 
Other current liabilities
   
33,375
     
35,006
 
Total current liabilities
   
195,870
     
191,150
 
                 
Long-term debt
   
1,239,799
     
1,239,561
 
Non-current lease liabilities
   
74,363
     
84,323
 
Deferred tax liabilities, net
   
5,194
     
2,330
 
Other long-term liabilities
   
25,704
     
15,641
 
Total liabilities
   
1,540,930
     
1,533,005
 
                 
Commitments and contingences (Note 17)
   
     
 
                 
Stockholders’ equity
               
Class A common stock, $0.01 par value, 750.0 million shares authorized, 175.3 million issued and outstanding as of March 31, 2021; 174.6  million issued and outstanding as of December 31, 2020
   
1,746
     
1,746
 
Additional paid-in capital
   
551,135
     
594,534
 
Accumulated deficit
   
(267,406
)
   
(229,503
)
Accumulated other comprehensive income
   
59
     
182
 
Total stockholders' equity attributable to NFE
   
285,534
     
366,959
 
Non-controlling interest
   
5,647
     
8,127
 
Total stockholders' equity
   
291,181
     
375,086
 
Total liabilities and stockholders' equity
 
$
1,832,111
   
$
1,908,091
 

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

4


New Fortress Energy Inc.
Condensed Consolidated Statements of Operations and Comprehensive Loss
For the three months ended March 31, 2021 and 2020
(Unaudited, in thousands of U.S. dollars, except share and per share amounts)

 
Three Months Ended March 31,
 
   
2021
   
2020
 
Revenues
           
Operating revenue
 
$
91,196
   
$
63,502
 
Other revenue
   
54,488
     
11,028
 
Total revenues
   
145,684
     
74,530
 
                 
Operating expenses
               
Cost of sales
   
96,671
     
68,216
 
Operations and maintenance
   
16,252
     
8,483
 
Selling, general and administrative
   
45,181
     
28,538
 
Contract termination charges and loss on mitigation sales
   
-
     
208
 
Depreciation and amortization
   
9,890
     
5,254
 
Total operating expenses
   
167,994
     
110,699
 
Operating loss
   
(22,310
)
   
(36,169
)
Interest expense
   
18,680
     
13,890
 
Other (income) expense, net
   
(604
)
   
611
 
Loss on extinguishment of debt, net
   
-
     
9,557
 
Loss before taxes
   
(40,386
)
   
(60,227
)
Tax benefit
   
(877
)
   
(4
)
Net loss
   
(39,509
)
   
(60,223
)
Net loss attributable to non-controlling interest
   
1,606
     
51,757
 
Net loss attributable to stockholders
 
$
(37,903
)
 
$
(8,466
)
                 
Net loss per share – basic and diluted
 
$
(0.21
)
 
$
(0.32
)
                 
Weighted average number of shares outstanding – basic and diluted
   
176,500,576
     
26,029,492
 
                 
Other comprehensive loss:
               
Net loss
 
$
(39,509
)
 
$
(60,223
)
Currency translation adjustment
   
997
     
369
 
Comprehensive loss
   
(40,506
)
   
(60,592
)
Comprehensive loss attributable to non-controlling interest
   
2,480
     
52,073
 
Comprehensive loss attributable to stockholders
 
$
(38,026
)
 
$
(8,519
)

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

5


New Fortress Energy Inc.
Condensed Consolidated Statements of Changes in Stockholders’ Equity
For the three months ended March 31, 2021 and 2020
(Unaudited, in thousands of U.S. dollars, except share amounts)

                   
Additional
         
Accumulated other
   
Non-
   
Total
 
   
Class A shares
   
Class B shares
   
Class A common stock
   
paid-in
   
Accumulated
   
comprehensive
   
controlling
   
stockholders'
 
   
Shares
   
Amount
   
Shares
   
Amount
   
Shares
   
Amount
   
capital
   
deficit
   
(loss) income
   
interest
   
equity
 
Balance as of December 31, 2020
   
-
   
$
-
     
-
   
$
-
     
174,622,862
   
$
1,746
   
$
594,534
   
$
(229,503
)
 
$
182
   
$
8,127
   
$
375,086
 
Net loss
   
-
     
-
     
-
     
-
     
-
     
-
     
-
     
(37,903
)
   
-
     
(1,606
)
   
(39,509
)
Other comprehensive loss
   
-
     
-
     
-
     
-
     
-
     
-
     
-
     
-
     
(123
)
   
(874
)
   
(997
)
Share-based compensation expense
   
-
     
-
     
-
     
-
     
-
     
-
     
1,770
     
-
     
-
     
-
     
1,770
 
Issuance of shares for vested RSUs
   
-
     
-
     
-
     
-
     
1,335,787
     
-
     
-
     
-
     
-
     
-
     
-
 
Shares withheld from employees related to share-based compensation, at cost
   
-
     
-
     
-
     
-
     
(638,235
)
   
-
     
(27,571
)
   
-
     
-
     
-
     
(27,571
)
Dividends
   
-
     
-
     
-
     
-
     
-
     
-
     
(17,598
)
   
-
     
-
     
-
     
(17,598
)
Balance as of March 31, 2021
   
-
   
$
-
     
-
   
$
-
     
175,320,414
   
$
1,746
   
$
551,135
   
$
(267,406
)
 
$
59
   
$
5,647
   
$
291,181
 

                   
Additional
         
Accumulated other
   
Non-
   
Total
 
   
Class A shares
   
Class B shares
   
Class A common stock
   
paid-in
   
Accumulated
   
comprehensive
   
controlling
   
stockholders'
 
   
Shares
   
Amount
   
Shares
   
Amount
   
Shares
   
Amount
   
capital
   
deficit
   
(loss) income
   
interest
   
equity
 
Balance as of December 31, 2019
   
23,607,096
   
$
130,658
     
144,342,572
   
$
-
     
-
   
$
-
   
$
-
   
$
(45,823
)
 
$
(30
)
 
$
302,519
   
$
387,324
 
Cumulative effect of accounting change
   
-
     
-
     
-
     
-
     
-
     
-
     
-
     
(1,533
)
   
-
     
(7,780
)
   
(9,313
)
Net loss
   
-
     
-
     
-
     
-
     
-
     
-
     
-
     
(8,466
)
   
-
     
(51,757
)
   
(60,223
)
Other comprehensive loss
   
-
     
-
     
-
     
-
     
-
     
-
     
-
     
-
     
(53
)
   
(316
)
   
(369
)
Share-based compensation expense
   
-
     
2,508
     
-
     
-
     
-
     
-
     
-
     
-
     
-
     
-
     
2,508
 
Issuance of shares for vested RSUs
   
1,212,907
     
-
     
-
     
-
     
-
     
-
     
-
     
-
     
-
     
-
     
-
 
Shares withheld from employees related to share-based compensation, at cost
   
(583,508
)
   
(6,132
)
   
-
     
-
     
-
     
-
     
-
     
-
     
-
     
-
     
(6,132
)
Balance as of March 31, 2020
   
24,236,495
   
$
127,034
     
144,342,572
   
$
-
     
-
   
$
-
   
$
-
   
$
(55,822
)
 
$
(83
)
 
$
242,666
   
$
313,795
 

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

6


New Fortress Energy Inc.
Condensed Consolidated Statements of Cash Flows
For the three months ended March 31, 2021 and 2020
(Unaudited, in thousands of U.S. dollars)

 
Three Months Ended March 31,
 
   
2021
   
2020
 
Cash flows from operating activities
           
Net loss
 
$
(39,509
)
 
$
(60,223
)
Adjustments for:
               
Amortization of deferred financing costs
   
400
     
3,353
 
Depreciation and amortization
   
10,160
     
5,481
 
Loss on extinguishment and financing expenses
   
-
     
9,557
 
Deferred taxes
   
(1,412
)
   
(18
)
Share-based compensation
   
1,770
     
2,508
 
Other
   
393
     
2,656
 
Changes in operating assets and liabilities:
               
(Increase) Decrease in receivables
   
(19,223
)
   
5,752
 
(Increase) Decrease in inventories
   
(5,171
)
   
34,830
 
(Increase) in other assets
   
(36,943
)
   
(54,080
)
Decrease in right-of-use assets
   
9,772
     
9,263
 
(Decrease) Increase in accounts payable/accrued liabilities
   
(22,399
)
   
2,132
 
Increase (Decrease) in amounts due to affiliates
   
1,879
     
(2,875
)
(Decrease) in lease liabilities
   
(10,584
)
   
(9,170
)
(Decrease) in other liabilities
   
(1,119
)
   
(477
)
Net cash used in operating activities
   
(111,986
)
   
(51,311
)
                 
Cash flows from investing activities
               
Capital expenditures
   
(80,810
)
   
(56,098
)
Entities acquired in asset acquisitions, net of cash acquired
   
(8,817
)
   
-
 
Other investing activities
   
(630
)
   
50
 
Net cash used in investing activities
   
(90,257
)
   
(56,048
)
                 
Cash flows from financing activities
               
Proceeds from borrowings of debt
   
-
     
832,144
 
Payment of deferred financing costs
   
(670
)
   
(14,069
)
Repayment of debt
   
-
     
(506,402
)
Payments related to tax withholdings for share-based compensation
   
(29,564
)
   
(6,084
)
Payment of dividends
   
(17,657
)
   
-
 
Net cash (used in) provided by financing activities
   
(47,891
)
   
305,589
 
                 
Net (decrease) increase in cash, cash equivalents and restricted cash
   
(250,134
)
   
198,230
 
Cash, cash equivalents and restricted cash – beginning of period
   
629,336
     
93,035
 
Cash, cash equivalents and restricted cash – end of period
 
$
379,202
   
$
291,265
 
                 
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
 
$
26,311
   
$
13,359
 
Liabilities associated with consideration paid for entities acquired in asset acquisitions
   
11,845
     
-
 

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

7


1.
Organization

New Fortress Energy Inc. (“NFE,” together with its subsidiaries, the “Company”) is a Delaware corporation formed by New Fortress Energy Holdings LLC (“New Fortress Energy Holdings”). The Company is a global integrated gas-to-power infrastructure company that seeks to use natural gas to satisfy the world’s large and growing power 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 from a combination of its own liquefaction facility in Miami, Florida and purchases on the open market. The Company has liquefaction, regasification and power generation operations in the United States and Jamaica.

The Company manages, analyzes and reports on its business and results of operations on the basis of one operating segment. The chief operating decision maker makes resource allocation decisions and assesses performance based on financial information presented on a consolidated basis.

2.
Significant accounting policies

The principal accounting policies adopted are set out below.

(a)
Basis of presentation and principles of consolidation

The accompanying unaudited interim condensed consolidated financial statements contained herein were prepared in accordance with GAAP and reflect all normal and recurring adjustments which are, in the opinion of management, necessary to provide a fair statement of the financial position, results of operations and cash flows of the Company for the interim periods presented. The condensed 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.  All significant intercompany transactions and balances have been eliminated on consolidation. These condensed consolidated financial statements and accompanying notes should be read in conjunction with the Company’s annual consolidated financial statements and accompanying notes included in its Annual Report on Form 10-K for the year ended December 31, 2020.

On February 4, 2019, the Company completed an initial public offering (“IPO”) and a series of other transactions, in which the Company issued and sold 20,000,000 Class A shares at an IPO price of $14.00 per share. The Company’s Class A shares began trading on Nasdaq Global Select Market (“Nasdaq”) under the symbol “NFE” on January 31, 2019. Net proceeds from the IPO were $257.0 million, after deducting underwriting discounts and commissions and transaction costs. These proceeds were contributed to New Fortress Intermediate LLC (“NFI”), an entity formed in conjunction with the IPO, 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 historical operations to NFI in exchange for NFI LLC Units. In connection with the IPO, New Fortress Energy Holdings also received 147,058,824 Class B shares of NFE, which is equal to the 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.

On March 1, 2019, the underwriters of the IPO 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 were 20,837,272 outstanding Class A shares. In connection with the exercise of the underwriters’ option to purchase an additional 837,272 Class A shares, NFE contributed such additional net proceeds to NFI in exchange for 837,272 NFI LLC Units.

Until the Exchange Transactions (as defined below) were completed, NFE was a holding company whose sole material asset was a controlling equity interest in NFI. As the sole managing member of NFI, NFE operated and controlled all of the business and affairs of NFI, and through NFI and its subsidiaries, conducted the Company’s historical business. 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 (the “Reorganization”). As a result, NFE presented the condensed consolidated balance sheets and statements of operations and comprehensive loss of New Fortress Energy Holdings for all periods prior to the IPO.

8

On June 3, 2020, the Company entered into a mutual agreement (the “Mutual Agreement”) with the members holding the majority voting interest in New Fortress Energy Holdings (“Exchanging Members”) and NFE 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 the Amended and Restated Limited Liability Company Agreement of NFI (the “NFI LLCA”) with respect to all of the NFI LLC Units, together with an equal number of Class B shares of NFE, that such Exchanging Members indirectly own as members of New Fortress Energy Holdings.  Pursuant to the Mutual 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, together 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 no Class B shares remain outstanding.

Prior to the Exchange Transactions, the Company recognized the Exchanging Members’ economic interest in NFI as non-controlling interest in the Company’s condensed consolidated financial statements. Results of operations for the period prior to the date of the Exchange Transactions, June 10, 2020, was attributed to non-controlling interest based on the Exchanging Members’ interest in NFI; subsequent to the Exchange Transactions, results of operations, excluding results attributable to other investors in non-wholly owned subsidiaries, were recognized as net income or loss attributable to stockholders. Amounts that were attributable to these Exchanging Members' prior interest in NFI previously shown as non-controlling interest on the Company’s consolidated balance sheets have been reclassified to Class A shares.

On August 7, 2020, the Company converted New Fortress Energy LLC (“NFE LLC”) from a Delaware limited liability company to a Delaware corporation named New Fortress Energy Inc. (“the Conversion”). Since the IPO, NFE LLC had been a corporation for U.S. federal tax purposes, and converting NFE LLC from a limited liability company to a corporation had no effect on the U.S. federal tax treatment of the Company or its shareholders. Upon the Conversion, each Class A share, representing Class A limited liability company interests of NFE LLC (“Class A shares”), outstanding immediately prior to the Conversion was converted into one issued and outstanding, fully paid and nonassessable share of Class A common stock, $0.01 par value per share, of NFE (“Class A common stock”). Class A shares shown on the Company’s condensed consolidated statements of changes in stockholders’ equity were reclassified to Class A common stock and Additional paid-in capital with no change to total stockholders’ equity. As of March 31, 2021, NFE had 175,320,414 Class A common stock outstanding.

(b)
Revenue recognition

The Company’s contracts with customers may contain one or several performance obligations usually consisting of the sale of LNG, natural gas, power and steam, which are outputs from the Company’s natural gas-fueled infrastructure. The transaction price for each of these contracts is structured using similar inputs and factors regardless of the output delivered to the customer. The customers consume the benefit of the natural gas, power and steam when they are delivered by the Company to the customer’s power generation facilities or interconnection facility. Natural gas, power and steam qualify as a series with revenue being recognized over time using an output method, based on the quantity of natural gas, power, or steam that the customer has consumed. LNG is typically delivered in containers transported by truck to customer sites. Revenue from sales of LNG delivered by truck is recognized at the point in time at which physical possession and the risks and rewards of ownership transfer to the customer, either when the containers are shipped or delivered to the customers’ storage facilities, depending on the terms of the contract. Because the nature, timing and uncertainty 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 customer.

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 estimated standalone selling price of the same or similar equipment leased to the customer. The Company estimates the fair value of the non-lease component by forecasting volumes and pricing of gas to be delivered to the customer over the lease term.

The leases of certain facilities and equipment to customers are accounted for as finance or operating leases. The current and non-current portion of finance leases are recorded within Prepaid expenses and other current assets and Finance leases, net on the condensed consolidated 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 condensed consolidated statements of operations and comprehensive loss. The lease payments for finance leases are segregated into principal and interest components similar to a loan. Interest income is recognized on an effective interest method over the lease term and included in Other revenue in the condensed consolidated statements of operations and comprehensive loss. The principal component of the lease payment is reflected as a reduction to the net investment in the 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 condensed consolidated statements of operations and comprehensive loss.

9

In addition to the revenue recognized from the leasing components of agreements with customers, Other revenue includes revenue recognized from the construction, installation and commissioning of equipment, inclusive of natural gas delivered for the commissioning process, to transform customers’ facilities to operate utilizing natural gas or to 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 asset to the customer or based on the quantity of natural gas consumed as part of commissioning the customer’s facilities until such time that the customer has declared such conversion services have been completed. 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.

The timing of revenue recognition, billings and cash collections results in receivables, contract assets and contract liabilities. Receivables represent unconditional rights to consideration; unbilled amounts typically result from sales under long-term contracts when revenue recognized exceeds the amount billed to the customer. Contract assets are comprised of the transaction 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 condensed consolidated balance sheets. Contract liabilities consist of deferred revenue and are recognized within Other current liabilities on the condensed consolidated balance sheets.

Shipping and handling costs are not considered to be separate performance obligations. These costs are recognized in the period in which the costs are incurred and presented within Cost of sales in the condensed consolidated statements of operations and comprehensive loss. All such shipping and handling activities are performed prior to the customer obtaining control of the LNG or natural gas.

The Company collects sales taxes from its customers based on sales of taxable products and remits such collections to the appropriate taxing authority. The Company has elected to present sales tax collections in the condensed consolidated statements of operations and comprehensive loss on a net basis and, accordingly, such taxes are excluded from reported revenues.

The Company elected the practical expedient under which the Company does not adjust consideration for the effects of a significant financing component for those contracts where the Company expects at contract inception that the period between transferring goods to the customer and receiving payment from the customer will be one year or less.

3.
Adoption of new and revised standards

(a)
New standards, amendments and interpretations issued but not effective for the financial year beginning January 1, 2021:

In August 2020, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2020-06, Accounting for Convertible Instruments and Contracts in an Entity’s Own Equity (ASU 2020-06). ASU 2020-06 simplifies the accounting for certain financial instruments with characteristics of liabilities and equity, including convertible instruments and contracts on an entity’s own equity. ASU 2020-06 requires entities to provide expanded disclosures about the terms and features of convertible instruments and amends certain guidance in ASC 260 on the computation of EPS for convertible instruments and contracts on an entity’s own equity. ASU 2020-06 is effective for public companies for fiscal years beginning after December 15, 2021, and interim periods within those fiscal years, with early adoption of all amendments in the same period permitted. The Company is currently assessing the impact of adoption of this guidance.

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

In December 2019, FASB issued ASU 2019-12, Income Taxes (Topic 740): Simplifying the Accounting for Income Taxes (“ASU 2019-12”), which simplifies the accounting for income taxes, including removing certain exceptions related to the general principles in ASU 740, Income Taxes. ASU 2019-12 also clarifies and simplifies other aspects of the accounting for income taxes. The adoption of this guidance did not have a material impact on the Company’s financial position, results of operations or cash flows.

10


4.
Revenue from contracts with customers

Under most customer contracts, invoicing occurs once the Company’s performance obligations have been satisfied, at which point payment is unconditional. As of March 31, 2021 and December 31, 2020, receivables related to revenue from contracts with customers totaled $95,753 and $76,431, respectively, and were included in Receivables, net on the condensed consolidated balance sheets, net of current expected credit losses of $203 and $98, 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 outside the scope of ASC 606.

The Company has 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 next 12 months, and the contract liabilities are classified within Other current liabilities on the condensed consolidated balance sheets. 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 March 31, 2021 and December 31, 2020 are detailed below:

 
March 31, 2021
   
December 31, 2020
 
Contract assets, net-current
 
$
5,268
   
$
3,673
 
Contract assets, net-non-current
   
30,685
     
23,972
 
Total contract assets, net
 
$
35,953
   
$
27,645
 
                 
Contract liabilities
 
$
10,704
   
$
8,399
 
                 
Revenue recognized in the year from:
               
Amounts included in contract liabilities at the beginning of the year
 
$
942
   
$
6,542
 

Contract assets are presented net of expected credit losses of $484 and $372 as of March 31, 2021 and December 31, 2020, respectively. As of March 31, 2021, the Company has unbilled receivables, net of current expected credit losses, of $6,729, of which $356 is presented within Other current assets and $6,373 is presented within Other non-current assets on the condensed consolidated balance sheet. These unbilled receivables represent unconditional right to payment subject only to the passage of time.

Operating revenue which includes revenue from sales of LNG and natural gas as well as outputs from the Company’s natural gas-fueled power generation facilities, including power and steam, was $91,196 and $63,502 for the three months ended March 31, 2021 and 2020, respectively.

Other revenue includes revenue for development services as well as lease and other revenue. The table below summarizes the balances in Other revenue:

 
Three Months Ended March 31,
 
   
2021
   
2020
 
Development services revenue
 
$
54,071
   
$
10,071
 
Lease and other revenue
   
417
     
957
 
Total other revenue
 
$
54,488
   
$
11,028
 

Development services revenue recognized in the three months ended March 31, 2021 included $45,618 for the customer’s use of natural gas as part of commissioning their assets.

Transaction price allocated to remaining performance obligations

Some of the Company’s contracts are short-term in nature with a contract term of less than a year. The Company applied the optional exemption not to report any unfulfilled performance obligations related to these contracts.

11

The Company has arrangements in which LNG, natural gas or outputs from the Company’s power generation facilities are sold on a “take-or-pay” basis whereby the customer is obligated to pay for the minimum guaranteed volumes even if it does not take delivery. The price under these agreements is typically based on a market index plus a fixed margin. The fixed transaction price allocated to the remaining performance obligations under these arrangements is $10,478,395 as of March 31, 2021, representing the fixed margin multiplied by the outstanding minimum guaranteed volumes. The Company expects to recognize this revenue over the following time periods. The pattern of recognition reflects the minimum guaranteed volumes in each period:

Period
 
Revenue
 
Remainder of 2021
 
$
278,546
 
2022
   
504,522
 
2023
   
504,708
 
2024
   
499,842
 
2025
   
494,081
 
Thereafter
   
8,196,696
 
Total
 
$
10,478,395
 

For all other sales contracts that have a term exceeding one year, the Company has elected the practical expedient in ASC 606 under which the Company does not disclose the transaction price allocated to remaining performance obligations if the variable consideration is allocated entirely to a wholly unsatisfied performance obligation. For these excluded contracts, the sources of variability are (a) the market index prices of natural gas used to price the contracts, and (b) the variation in volumes that may be delivered to the customer. Both sources of variability are expected to be resolved at or shortly before delivery of each unit of LNG, natural gas, power or steam. As each unit of LNG, natural gas, power or steam represents a separate performance obligation, future volumes are wholly unsatisfied.

The Company has recognized costs to fulfill a contract with a significant customer, which primarily consist of expenses required to enhance resources to deliver under the agreement with the customer. As of March 31, 2021, the Company has capitalized $11,434 of which $604 of these costs is presented within Other current assets and $10,830 is presented within Other non-current assets on the condensed consolidated balance sheets. As of December 31, 2020, the Company had capitalized $11,276, of which $588 of these costs was presented within Other current assets and $10,688 was presented within Other non-current assets on the condensed consolidated balance sheets. In the first quarter of 2020, the Company began delivery under the agreement and started recognizing these costs on a straight-line basis over the expected term of the agreement.

5.
Leases


Lessee

The Company has operating leases primarily for the use of LNG vessels, marine port space, office space, land and equipment under non-cancellable lease agreements. The Company’s leases may include multiple optional renewal periods that are exercisable solely at the Company’s discretion. Renewal periods are included in the lease term when the Company is reasonably certain that the renewal options would be exercised, and the associated lease payments for such periods are reflected in the ROU asset and lease liability.

The Company’s leases include fixed lease payments which may include escalation terms based on a fixed percentage or may vary based on an inflation index or other market adjustments. Escalations based on changes in inflation indices and market adjustments and other lease costs that vary based on the use of the underlying asset are not included as lease payments in the calculation of the lease liability or ROU asset; such payments are included in variable lease cost when the obligation that triggers the variable payment becomes probable. Variable lease cost includes contingent rent payments for office space based on the percentage occupied by the Company in addition to common area charges and other charges that are variable in nature. The Company also has a component of lease payments that are variable related to the LNG vessels, in which the Company may receive credits based on the performance of the LNG vessels during the period.

12

For the three months ended March 31, 2021 and 2020, the Company’s operating lease cost recorded within the condensed consolidated statements of operations and comprehensive loss were as follows:

 
Three Months Ended March 31,
 
   
2021
   
2020
 
Fixed lease cost
 
$
11,745
   
$
10,267
 
Variable lease cost
   
693
     
639
 
Short-term lease cost
   
722
     
286
 
                 
Lease cost - Cost of sales
 
$
11,036
   
$
9,351
 
Lease cost - Operations and maintenance
   
557
     
388
 
Lease cost - Selling, general and administrative
   
1,567
     
1,453
 

For the three months ended March 31, 2021, the Company has capitalized $1,199 of lease costs, for vessels and port space used during the commissioning of development projects, in addition to short-term lease costs for vessels chartered by the Company to bring inventory from a supplier’s facilities to the Company’s storage locations which are capitalized to inventory.

Cash paid for operating leases is reported in operating activities in the condensed consolidated statements of cash flows. Supplemental cash flow information related to leases was as follows for the three months ended March 31, 2021 and 2020:

 
Three Months Ended March 31,
 
   
2021
   
2020
 
Operating cash outflows for operating lease liabilities
 
$
12,660
   
$
10,096
 
Right-of-use assets obtained in exchange for new operating lease liabilities
   
-
     
127,994
 

The future payments due under operating leases as of March 31, 2021 are as follows:

 
Operating Leases
 
Due remainder of 2021
 
$
30,754
 
2022
   
29,931
 
2023
   
18,719
 
2024
   
17,866
 
2025
   
10,680
 
Thereafter
   
50,019
 
Total lease payments
   
157,969
 
Less: effects of discounting
   
48,749
 
Present value of lease liabilities
 
$
109,220
 
         
Current lease liability
 
$
34,857
 
Non-current lease liability
   
74,363
 

As of March 31, 2021, the weighted-average remaining lease term for all operating leases was 7.3 years. Because the Company generally does not have access to the rate 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 March 31, 2021 was 8.4%.

The Company has entered into several leases for ISO tanks and an office space that have not commenced as of March 31, 2021 with noncancelable terms of 5 years and including fixed payments of approximately $24 million.

13


Lessor

In the Company’s agreements to sell LNG or natural gas to customers, the Company may also lease certain equipment to customers which are accounted for either as a finance or an operating lease. Property, plant and equipment subject to operating leases is included within ISO containers and other equipment within Note 11. Property, plant and equipment, net. The following is the amount of property, plant and equipment that is leased to customers:

 
March 31,
2021
   
December 31,
2020
 
Property, plant and equipment
 
$
18,747
   
$
18,394
 
Accumulated depreciation
   
(1,189
)
   
(932
)
Property, plant and equipment, net
 
$
17,558
   
$
17,462
 

The following table shows the expected future lease payments as of March 31, 2021, for the remainder of 2021 through 2025 and thereafter:

 
Future cash receipts
 
   
Financing leases
   
Operating leases
 
Remainder of 2021
 
$
1,671
   
$
220
 
2022
   
2,149
     
286
 
2023
   
2,134
     
288
 
2024
   
2,135
     
273
 
2025
   
2,001
     
234
 
Thereafter
   
5,705
     
743
 
Total
 
$
15,795
   
$
2,044
 
Less: Imputed interest
   
6,718
         
Present value of total lease receipts
 
$
9,077
         
                 
Current finance leases, net
 
$
1,576
         
Non-current finance leases, net
   
7,501
         

6.
Fair value

Fair value measurements and disclosures require the use of valuation techniques to measure fair value that maximize the use of observable inputs and minimize use of unobservable inputs. These inputs are prioritized as follows:

Level 1 – observable inputs such as quoted prices in active markets for identical assets or liabilities.

Level 2 - inputs other than quoted prices included within Level 1 that are observable, either directly or indirectly, such as quoted prices for similar assets or liabilities or market corroborated inputs.

Level 3 - unobservable inputs for which there is little or no market data and which require the Company to develop its own assumptions about how market participants price the asset or liability.

The valuation techniques that may be used to measure fair value are as follows:

Market approach – uses prices and other relevant information generated by market transactions involving identical or comparable assets or liabilities.

Income approach – uses valuation techniques, such as the discounted cash flow technique, to convert future amounts to a single present amount based on current market expectations about those future amounts.

Cost approach – based on the amount that currently would be required to replace the service capacity of an asset (replacement cost).

14

The following table presents the Company’s financial assets and financial liabilities that are measured at fair value as of March 31, 2021 and December 31, 2020:

 
March 31, 2021
   
Level 1
   
Level 2
   
Level 3
   
Total
 
Valuation
technique
Assets
                             
Cash and cash equivalents
 
$
360,130
   
$
-
   
$
-
   
$
360,130
 
Market approach
Restricted cash
   
19,072
     
-
     
-
     
19,072
 
Market approach
Investment in equity securities
   
294
     
-
     
1,849
     
2,143
 
Market approach
Total
 
$
379,496
   
$
-
   
$
1,849
   
$
381,345
   
                                        
Liabilities
                                     
Derivative liability¹
 
$
-
   
$
-
   
$
20,692
   
$
20,692
 
Income approach
Equity agreement²
   
-
     
-
     
21,223
     
21,223
 
Income approach
Total
 
$
-
   
$
-
   
$
41,915
   
$
41,915
   

 
December 31, 2020
   
Level 1
   
Level 2
   
Level 3
   
Total
 
Valuation
technique
Assets
                             
Cash and cash equivalents
 
$
601,522
   
$
-
   
$
-
   
$
601,522
 
Market approach
Restricted cash
   
27,814
     
-
     
-
     
27,814
 
Market approach
Investment in equity securities
   
256
     
-
     
1,000
     
1,256
 
Market approach
Total
 
$
629,592
   
$
-
   
$
1,000
   
$
630,592
   
                                        
Liabilities
                                     
Derivative liability¹
 
$
-
   
$
-
   
$
10,716
   
$
10,716
 
Income approach
Equity agreement²
   
-
     
-
     
22,768
     
22,768
 
Income approach
Total
 
$
-
   
$
-
   
$
33,484
   
$
33,484
   

(1)
Consideration due to the sellers in assets acquistions when certain contingent events occur.
(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 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. The table below summarizes the fair value adjustment to the derivative liability and equity agreement, recorded within Other (income) expense, net in the condensed consolidated statements of operations and comprehensive loss, and currency translation adjustment, recorded within the Other comprehensive loss, for the three months ended March 31, 2021 and 2020:

 
March 31, 2021
   
March 31, 2020
 
Fair value adjustment - (Gain)
 
$
(425
)
 
$
(1,617
)
Currency translation adjustment - (Gain)
   
(1,664
)
   
(537
)

Activity during the three months ended March 31, 2021 included the recognition of additional derivative liabilities from transactions accounted for as asset acquisitions of $10,520 (Note 21. Asset acquisitions). During the three months ended March 31, 2021 and 2020, the Company had no settlements of the equity agreement or derivative liabilities or any transfers in or out of Level 3 in the fair value hierarchy.

The liability associated with the equity agreement of $21,223 and $22,768 as of March 31, 2021 and December 31, 2020, respectively, is recorded within Other current liabilities on the condensed consolidated balance sheets. The liability associated with the derivative liabilities of $20,692 and $10,716 as of March 31, 2021 and December 31, 2020, respectively, is recorded within Other long-term liabilities on the condensed consolidated balance sheets.

The Company estimates fair value of outstanding debt using quoted market prices. The fair value of the 2025 Notes (defined below in Note 15. Debt) was approximately $1,285,588 as of March 31, 2021. The fair value estimate is classified as Level 2 in the fair value hierarchy.

15


7.
Restricted cash

As of March 31, 2021 and December 31, 2020, restricted cash consisted of the following:

 
March 31,
2021
   
December 31,
2020
 
Collateral for performance under customer agreements
 
$
15,000
   
$
15,000
 
Collateral for LNG purchases
   
2,916
     
11,664
 
Collateral for letters of credit and performance bonds
   
906
     
900
 
Other restricted cash
   
250
     
250
 
Total restricted cash
 
$
19,072
   
$
27,814
 
                 
Current restricted cash
 
$
4,072
   
$
12,814
 
Non-current restricted cash
   
15,000
     
15,000
 

8.
Inventory

As of March 31, 2021 and December 31, 2020, inventory consisted of the following:

 
March 31,
2021
   
December 31,
2020
 
LNG and natural gas inventory
 
$
18,213
   
$
13,986
 
Automotive diesel oil inventory
   
4,463
     
3,986
 
Bunker fuel, materials, supplies and other
   
5,355
     
4,888
 
Total inventory
 
$
28,031
   
$
22,860
 

Inventory is adjusted to the lower of cost or net realizable value each quarter. Changes in the value of inventory are recorded within Cost of sales in the condensed consolidated statements of operations and comprehensive loss. No adjustments were recorded during the three months ended March 31, 2021 and 2020.

9.
Prepaid expenses and other current assets

As of March 31, 2021 and December 31, 2020, prepaid expenses and other current assets consisted of the following:

 
March 31,
2021
   
December 31,
2020
 
Prepaid LNG
 
$
20,605
   
$
11,987
 
Prepaid expenses
   
6,806
     
4,941
 
Due from affiliates (Note 20)
   
1,912
     
1,881
 
Other current assets
   
30,922
     
29,461
 
Total prepaid expenses and other current assets, net
 
$
60,245
   
$
48,270
 

Other current assets as of March 31, 2021 and December 31, 2020 primarily consists of receivables for recoverable taxes.

16


10.
Construction in progress

The Company’s construction in progress activity during the three months ended March 31, 2021 is detailed below:

 
March 31,
2021
 
Balance at beginning of period
 
$
234,037
 
Additions
   
105,761
 
Transferred to property, plant and equipment, net or finance leases
   
(2,107
)
Balance at end of period
 
$
337,691
 

Interest expense of $2,641 and $9,606, inclusive of amortized debt issuance costs, was capitalized for the three months ended March 31, 2021 and 2020, respectively.

11.
Property, plant and equipment, net

As of March 31, 2021 and December 31, 2020, the Company’s property, plant and equipment, net consisted of the following:

 
March 31,
2021
   
December 31,
2020
 
Terminal and power plant equipment
 
$
189,197
   
$
188,855
 
CHP facilities
   
119,723
     
119,723
 
Gas terminals
   
120,810
     
120,810
 
ISO containers and other equipment
   
102,010
     
100,137
 
LNG liquefaction facilities
   
63,213
     
63,213
 
Gas pipelines
   
58,974
     
58,974
 
Land
   
16,582
     
16,246
 
Leasehold improvements
   
8,723
     
8,723
 
Accumulated depreciation
   
(72,229
)
   
(62,475
)
Total property, plant and equipment, net
 
$
607,003
   
$
614,206
 

Depreciation for the three months ended March 31, 2021 and 2020 totaled $9,842 and $5,211, respectively, of which $270 and $227, respectively, is included within Cost of sales in the condensed consolidated statements of operations and comprehensive loss.

12.
Intangible assets

The following table summarizes the composition of intangible assets as of March 31, 2021 and December 31, 2020:

 
March 31, 2021
 
   
Gross Carrying
Amount
   
Accumulated
Amortization
   
Net Carrying
Amount
   
Weighted
Average Life
 
Definite-lived intangible assets
                       
Permits
 
$
49,467