SEC Filing | New Fortress Energy

View:

nfe-20230331

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, DC 20549

FORM 10-Q


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

For the quarterly period ended March 31, 2023


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

For the transition period from __________ to__________

Commission File Number: 001-38790

New Fortress Energy Inc.

(Exact Name of Registrant as Specified in its Charter)


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


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

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

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

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

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


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

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

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

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

Title of each class

Trading Symbol(s)

Name of each exchange on which registered

Class A common stock

“NFE”

Nasdaq Global Select Market

As of May 1, 2023, the registrant had 205,030,155 shares of Class A common stock outstanding.

Table of Contents

TABLE OF CONTENTS


GLOSSARY OF TERMS		ii

CAUTIONARY STATEMENT ON FORWARD-LOOKING STATEMENTS		iv

PART I FINANCIAL INFORMATION		1

Item 1.	Financial Statements.	1

Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations.	26

Item 3.	Quantitative and Qualitative Disclosures About Market Risk .	42

Item 4.	Controls and Procedures.	43

PART II OTHER INFORMATION		44

Item 1.	Legal Proceedings.	44

Item 1A.	Risk Factors.	44

Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds.	76

Item 3.	Defaults U pon Senior Securities.	76

Item 4.	Mine Safety Disclosures.	76

Item 5.	Other Information.	76

Item 6.	Exhibits.	76

SIGNATURES		82

Table of Contents

GLOSSARY OF TERMS

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


ADO			automotive diesel oil

Bcf/yr			billion cubic feet per year

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

CAA			Clean Air Act

CERCLA			Comprehensive Environmental Response, Compensation and Liability Act

CWA			Clean Water Act

DOE			U.S. Department of Energy

DOT			U.S. Department of Transportation

EPA			U.S. Environmental Protection Agency

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

GAAP			generally accepted accounting principles in the United States

GHG			greenhouse gases

GSA			gas sales agreement

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

ISO container			International Organization of Standardization, an intermodal container

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

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

mtpa			metric tons per year

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

NGA			Natural Gas Act of 1938, as amended

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

OPA			Oil Pollution Act

Table of Contents


OUR			Office of Utilities Regulation (Jamaica)

PHMSA			Pipeline and Hazardous Materials Safety Administration

PPA			power purchase agreement

SSA			steam supply agreement

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

iii

Table of Contents

CAUTIONARY STATEMENT ON FORWARD-LOOKING STATEMENTS

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

•our limited operating history;

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

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

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

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

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

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

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

•failure to convert our customer pipeline into actual sales;

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

•competition from third parties in our business;

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

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

•inability to successfully develop and implement our technological solutions;

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

•inability to obtain additional financing to effect our strategy;

•inability to successfully complete mergers, sales, divestments or similar transactions related to our businesses or assets or to integrate such businesses or assets and realize the anticipated benefits;

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

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

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

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

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

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

All forward-looking statements speak only as of the date of this Quarterly Report. When considering forward-looking statements, you should keep in mind the risks set forth under “Item 1A. Risk Factors” and other cautionary statements included in our Annual Report on Form 10-K for the year ended December 31, 2022 (our “Annual Report”), this Quarterly Report and in our other filings with the Securities and Exchange Commission (the “SEC”). The cautionary statements referred to in this section also should be considered in connection with any subsequent written or oral forward-looking statements that may be issued by us or persons acting on our behalf. We undertake no duty to update these forward-looking statements, even though our situation may change in the future. Furthermore, we cannot guarantee future results, events, levels of activity, performance, projections or achievements.

Table of Contents

PART I

FINANCIAL INFORMATION

Item 1. Financial Statements.

New Fortress Energy Inc.

Condensed Consolidated Balance Sheets

As of March 31, 2023 and December 31, 2022

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


	March 31, 2023		December 31, 2022
Assets
Current assets
Cash and cash equivalents	$	296,860	$	675,492
Restricted cash	325,298		165,396
Receivables, net of allowances of $748 and $884, respectively	353,192		280,313
Inventory	76,536		39,070
Prepaid expenses and other current assets, net	102,251		226,883
Total current assets	1,154,137		1,387,154


Construction in progress	3,357,434		2,418,608
Property, plant and equipment, net	2,094,417		2,116,727
Equity method investments	136,300		392,306
Right-of-use assets	477,757		377,877
Intangible assets, net	80,312		85,897

Goodwill	776,760		776,760
Deferred tax assets, net	8,074		8,074
Other non-current assets, net	138,555		141,679
Total assets	$	8,223,746	$	7,705,082

Liabilities
Current liabilities
Current portion of long-term debt	$	277,035	$	64,820
Accounts payable	310,272		80,387
Accrued liabilities	602,928		1,162,412
Current lease liabilities	106,666		48,741
Other current liabilities	99,275		52,878
Total current liabilities	1,396,176		1,409,238

Long-term debt	4,951,545		4,476,865
Non-current lease liabilities	349,621		302,121
Deferred tax liabilities, net	26,455		25,989
Other long-term liabilities	50,623		49,010
Total liabilities	6,774,420		6,263,223

Commitments and contingencies (Note 19)

Stockholders’ equity
Class A common stock, $0.01 par value, 750 million shares authorized, 204.7 million issued and outstanding as of March 31, 2023; 208.8 million issued and outstanding as of December 31, 2022	2,047		2,088
Additional paid-in capital	1,047,541		1,170,254
Retained earnings	191,819		62,080
Accumulated other comprehensive income	57,344		55,398
Total stockholders’ equity attributable to NFE	1,298,751		1,289,820
Non-controlling interest	150,575		152,039
Total stockholders’ equity	1,449,326		1,441,859
Total liabilities and stockholders’ equity	$	8,223,746	$	7,705,082

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

Table of Contents

New Fortress Energy Inc.

Condensed Consolidated Statements of Operations and Comprehensive Income

For the three months ended March 31, 2023 and 2022

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


	Three Months Ended March 31,
	2023		2022
Revenues
Operating revenue	$	501,688	$	400,075
Vessel charter revenue	76,524		92,420
Other revenue	919		12,623
Total revenues	579,131		505,118

Operating expenses
Cost of sales (exclusive of depreciation and amortization shown separately below)	184,938		208,298
Vessel operating expenses	13,291		22,964
Operations and maintenance	26,671		23,168
Selling, general and administrative	52,138		48,041
Transaction and integration costs	494		1,901

Depreciation and amortization	34,375		34,290

Total operating expenses	311,907		338,662
Operating income	267,224		166,456
Interest expense	71,673		44,916
Other expense (income), net	25,005		(19,725)

Income before income from equity method investments and income taxes	170,546		141,265
Income from equity method investments	9,980		50,235
Tax provision (benefit)	28,960		(49,681)
Net income	151,566		241,181
Net income attributable to non-controlling interest	(1,360)		(2,912)
Net income attributable to stockholders	$	150,206	$	238,269

Net income per share – basic	$	0.72	$	1.14
Net income per share – diluted	$	0.71	$	1.13

Weighted average number of shares outstanding – basic	208,707,385		209,928,070
Weighted average number of shares outstanding – diluted	209,325,619		210,082,295

Other comprehensive income:
Net income	$	151,566	$	241,181
Currency translation adjustment	2,141		120,830
Comprehensive income	153,707		362,011
Comprehensive income attributable to non-controlling interest	(1,555)		(4,868)
Comprehensive income attributable to stockholders	$	152,152	$	357,143

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

Table of Contents

New Fortress Energy Inc.

Condensed Consolidated Statements of Changes in Stockholders’ Equity

For the three months ended March 31, 2023 and 2022

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


	Class A common stock		Additional paid-in capital		Retained earnings		Accumulated other comprehensive income		Non- controlling interest		Total stockholders’ equity
		Shares											Amount
Balance as of December 31, 2022		208,770,088	$	2,088	$	1,170,254	$	62,080	$	55,398	$	152,039	$	1,441,859
Net income		—	—		—		150,206		—		1,360		151,566
Other comprehensive income		—	—		—		—		1,946		195		2,141



Cancellation of shares		(4,100,000)	(41)		(122,713)		—		—		—		(122,754)
Dividends		—	—		—		(20,467)		—		(3,019)		(23,486)
Balance as of March 31, 2023		204,670,088	$	2,047	$	1,047,541	$	191,819	$	57,344	$	150,575	$	1,449,326


	Class A common stock	Additional paid-in capital	Retained earnings (Accumulated deficit)		Accumulated other comprehensive (loss) income		Non- controlling interest		Total stockholders’ equity
											Shares			Amount
Balance as of December 31, 2021		206,863,242	$	2,069	$	1,923,990	$	(132,399)	$	(2,085)		$	202,479		$	1,994,054

Net income		—	—		—		238,269		—			2,912			241,181
Other comprehensive loss		—	—		—		—		118,874			1,956			120,830
Share-based compensation expense		—	—		880		—		—			—			880
Issuance of shares for vested RSUs		1,121,255	7		—		—		—			—			7
Shares withheld from employees related to share-based compensation, at cost		(442,146)	—		(15,274)		—		—			—			(15,274)
Dividends		—	—		(20,754)		—		—			(3,019)			(23,773)
Balance as of March 31, 2022		207,542,351	$	2,076	$	1,888,842	$	105,870	$	116,789		$	204,328		$	2,317,905

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

Table of Contents

New Fortress Energy Inc.

Condensed Consolidated Statements of Cash Flows

For the three months ended March 31, 2023 and 2022

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


	Three Months Ended March 31,
	2023		2022
Cash flows from operating activities
Net income	$	151,566	$	241,181
Adjustments for:

Depreciation and amortization	34,608		34,852
(Earnings) of equity method investees	(9,980)		(50,235)

Dividends received from equity method investees	5,830		7,609
Change in market value of derivatives	3,330		(24,855)
Deferred taxes	—		(58,769)

(Earnings) recognized from vessels chartered to third parties transferred to Energos	(31,954)		—
Loss on the disposal of equity method investment	37,401		—
Other	(2,090)		2,847
Changes in operating assets and liabilities:
Decrease (increase) in receivables	28,136		(58,462)
(Increase) in inventories	(2,271)		(18,617)
(Increase) in other assets	(27,966)		(15,440)
Decrease in right-of-use assets	13,336		17,016
(Decrease) increase in accounts payable/accrued liabilities	(43,400)		68,520
(Decrease) increase in amounts due to affiliates	(2,519)		2,035
(Decrease) in lease liabilities	(9,709)		(11,773)
Increase (decrease) in other liabilities	55,822		(21,527)
Net cash provided by operating activities	200,140		114,382

Cash flows from investing activities
Capital expenditures	(563,268)		(189,221)
Sale of equity method investment	100,000		—


Net cash used in investing activities	(463,268)		(189,221)

Cash flows from financing activities
Proceeds from borrowings of debt	700,000		200,836
Payment of deferred financing costs	(5,903)		(3,504)
Repayment of debt	(1,080)		(123,669)
Payments related to tax withholdings for share-based compensation	—		(13,054)
Payment of dividends	(649,796)		(23,773)
Net cash provided by financing activities	43,221		36,836
Impact of changes in foreign exchange rates on cash and cash equivalents	948		12,979
Net (decrease) in cash, cash equivalents and restricted cash	(218,959)		(25,024)
Cash, cash equivalents and restricted cash – beginning of period	855,083		264,030
Cash, cash equivalents and restricted cash – end of period	$	636,124	$	239,006


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	$	348,737	$	19,838
Principal payments on financing obligation to Energos by third party charterers	(11,648)		—
Shares received in Hilli Exchange	$	(122,754)	$	—

Table of Contents

The following table identifies the balance sheet line-items included in Cash and cash equivalents, Current restricted cash, and Non-current restricted cash presented in the Condensed Consolidated Statement of Cash Flows:


	Three Months Ended March 31,
	2023		2022
Cash and cash equivalents	$	296,860	$	156,173
Current restricted cash	325,298		74,873
Non-current restricted cash	—		7,960
Cash and cash equivalents classified as held for sale	13,966		—
Cash, cash equivalents and restricted cash – end of period	$	636,124	$	239,006

Cash and cash equivalents includes $13,966 which has been classified as assets held for sale and included in Other non-current assets on the condensed consolidated balance sheets.

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

Table of Contents

1. Organization

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

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

2. Basis of presentation

The accompanying unaudited interim condensed consolidated financial statements contained herein were prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”) and reflect all normal and recurring adjustments which are, in the opinion of management, necessary to provide a fair statement of the financial position, results of operations and cash flows of the Company for the interim periods presented. These condensed consolidated financial statements and accompanying notes should be read in conjunction with the Company’s annual audited consolidated financial statements and accompanying notes included in its Annual Report on Form 10-K for the year ended December 31, 2022 (the "Annual Report"). Certain prior year amounts have been reclassified to conform to current year presentation.

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

3. Adoption of new and revised standards

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

4. Revenue recognition

Operating revenue in the condensed consolidated statements of operations and comprehensive income 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, and the sale of LNG cargos. Included in operating revenue for the three months ended March 31, 2023 are LNG cargo sales to customers of $349,361, of which $169,500 was recognized for a cancellation fee received from a customer to cancel a future delivery. LNG cargo sales for the three months ended March 31, 2022 were $285,171.

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, 2023 and December 31, 2022, receivables related to revenue from contracts with customers totaled $196,256 and $280,382, respectively, and were included in Receivables, net on the condensed consolidated balance sheets, net of current expected credit losses of $748 and $884, respectively. Other items included in Receivables, net not related to revenue from contracts with customers represent leases which are accounted for outside the scope of ASC 606, receivables associated with reimbursable costs and the realized gain of a commodity swap of $146,112.

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. Contract liabilities associated with performance obligations that are expected to be satisfied during the next 12 months are classified within Other current liabilities on the condensed consolidated balance sheets; when the performance obligation is expected to be satisfied in a

Table of Contents

period after 12 months from the balance sheet date, the contract liabilities are classified within Other long-term 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, 2023 and December 31, 2022 are detailed below:


	March 31, 2023		December 31, 2022
Contract assets, net - current	$	8,247	$	8,083
Contract assets, net - non-current	26,538		28,651
Total contract assets, net	$	34,785	$	36,734

Contract liabilities	$	36,020	$	12,748

Revenue recognized in the year from:
Amounts included in contract liabilities at the beginning of the year	$	6,809	$	2,951

Contract assets are presented net of expected credit losses of $376 and $401 as of March 31, 2023 and December 31, 2022, respectively. As of March 31, 2023 and December 31, 2022, contract assets was comprised of $34,563 and $36,483 of unbilled receivables, respectively, which represent unconditional rights to payment only subject to the passage of time, and the reduction to contract assets in the first quarter of 2023 was primarily due to the invoicing of unbilled receivables.

Contract liabilities increased in the first quarter of 2023 due to upfront payments received under the Company's contracts in Puerto Rico to provide temporary power and to operate and maintain PREPA's power generation assets. These payments will be recognized as revenue over the expected term of these contracts.

The Company has recognized costs to fulfill contracts with customers, which primarily consist of expenses required to enhance resources to deliver under agreements with these customers. These costs can include set-up and mobilization costs incurred ahead of the service period, and such costs will be recognized on a straight-line basis over the expected terms of the agreements. As of March 31, 2023, the Company has capitalized $11,632 of which $2,010 of these costs is presented within Prepaid expenses and other current assets, net and $9,622 is presented within Other non-current assets, net on the condensed consolidated balance sheets. As of December 31, 2022, the Company had capitalized $10,377, of which $604 of these costs was presented within Prepaid expenses and other current assets, net and $9,773 was presented within Other non-current assets, net on the condensed consolidated balance sheets.

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.

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 represents the fixed margin

Table of Contents

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 2023	$	667,782
2024	1,183,908
2025	770,982
2026	501,753
2027	498,876
Thereafter	7,943,959
Total	$	11,567,260

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.

Lessor arrangements

Property, plant and equipment subject to vessel charters accounted for as operating leases is included within Vessels within "Note 12 Property, plant and equipment, net." Vessels included in the Energos Formation Transaction (defined below), including those vessels chartered to third parties, continue to be recognized on the condensed consolidated balance sheet. The carrying amount of these vessels that are leased to third parties under operating leases is as follows:


	March 31, 2023		December 31, 2022
Property, plant and equipment	$	896,719	$	1,292,957
Accumulated depreciation	(91,385)		(80,233)
Property, plant and equipment, net	$	805,334	$	1,212,724

The components of lease income from vessel operating leases for the three months ended March 31, 2023 and 2022 are shown below. As the Company has not recognized the sale of all of the vessels included in the Energos Formation Transaction, the operating lease income for the three months ended March 31, 2023 includes revenue of $76,524 from third-party charters of vessels included in the Energos Formation Transaction.


	Three Months Ended March 31,
	2023		2022
Operating lease income	$	76,524	$	80,222
Variable lease income	—		10,564
Total operating lease income	$	76,524	$	90,786

Prior to the completion of the Energos Formation Transaction, the Company's charter of the Nanook was accounted for as a finance lease, and the Company recognized interest income of $11,581 for the three months ended March 31, 2022 related to this finance lease. The Company also recognized revenue of $1,634 for the three months ended March 31, 2022 related to the operation and services agreement and variable charter revenue within Vessel charter revenue in the condensed consolidated statements of operations and comprehensive income. The Company recognized the sale of the net investment in the finance lease of the Nanook as part of the Energos Formation Transaction.

Table of Contents

Subsequent to the Energos Formation Transaction, all cash receipts on vessel charters, including the finance lease of the Nanook, will be received by Energos. As such, there are no future cash receipts from operating leases, and the future cash receipts from other finance leases are not significant as of March 31, 2023.

5. Leases, as 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 right-of-use ("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.

As of March 31, 2023 and December 31, 2022, ROU assets, current lease liabilities and non-current lease liabilities consisted of the following:


	March 31, 2023		December 31, 2022
Operating right-of-use-assets	$	407,553	$	355,883
Finance right-of-use-assets (1)	70,204		21,994
Total right-of-use assets	$	477,757	$	377,877

Current lease liabilities:
Operating lease liabilities	$	77,692	$	44,371
Finance lease liabilities	28,974		4,370
Total current lease liabilities	$	106,666	$	48,741
Non-current lease liabilities:
Operating lease liabilities	$	313,822	$	290,899
Finance lease liabilities	35,799		11,222
Total non-current lease liabilities	$	349,621	$	302,121

(1) Finance lease ROU assets are recorded net of accumulated amortization of $3,923 and $2,134 as of March 31, 2023 and December 31, 2022, respectively.

Table of Contents

For the three months ended March 31, 2023 and 2022, the Company’s operating lease cost recorded within the condensed consolidated statements of operations and comprehensive income was as follows:


	Three Months Ended March 31,
	2023		2022
Fixed lease cost	$	16,368	$	18,500
Variable lease cost	597		470
Short-term lease cost	3,549		4,225

Lease cost - Cost of sales	$	15,754	$	20,903
Lease cost - Operations and maintenance	2,841		765
Lease cost - Selling, general and administrative	1,919		1,527

For the three months ended March 31, 2023 and 2022, the Company has capitalized $4,256 and $8,242 of lease costs, respectively. Capitalized costs include of vessels and port space used during the commissioning of development projects. Short-term lease costs for vessels chartered by the Company to transport inventory from a supplier’s facilities to the Company’s storage locations are capitalized to inventory.

The Company has leases of turbines, ISO tanks and a parcel of land that transfer the ownership in underlying assets to the Company at the end of the lease, and these leases are treated as finance leases. For the three months ended March 31, 2023 and 2022, the Company’s finance interest expense and amortization recorded in Interest expense and Depreciation and amortization, respectively, within the condensed consolidated statements of operations and comprehensive income were as follows:


	Three Months Ended March 31,
	2023		2022
Interest expense related to finance leases	$	468	$	229
Amortization of right-of-use asset related to finance leases	1,789		379

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, 2023 and 2022:


	Three Months Ended March 31,
	2023		2022
Operating cash outflows for operating lease liabilities	$	24,849	$	27,122
Financing cash outflows for finance lease liabilities	372		1,308
Right-of-use assets obtained in exchange for new operating lease liabilities	65,040		127,451
Right-of-use assets obtained in exchange for new finance lease liabilities	49,999		—

Table of Contents

The future payments due under operating and finance leases as of March 31, 2023 are as follows:


	Operating Leases		Financing Leases
Due remainder of 2023	$	79,564	$	25,406
2024	102,863		29,997
2025	66,893		11,867
2026	51,925		3,041
2027	51,464		436
Thereafter	184,056		941
Total lease payments	$	536,765	$	71,688
Less: effects of discounting	145,251		6,915
Present value of lease liabilities	$	391,514	$	64,773

Current lease liability	$	77,692	$	28,974
Non-current lease liability	313,822		35,799

As of March 31, 2023, the weighted average remaining lease term for operating leases was 7.2 years and finance leases was 2.6 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 both March 31, 2023 and December 31, 2022 was 8.5%. The weighted average discount rate associated with finance leases as of March 31, 2023 was 8.3% and as of December 31, 2022 was 5.1%.

6. Financial instruments

Commodity risk management

The Company has utilized commodity swap transactions to manage exposure to changes in market pricing of natural gas or LNG. Realized and unrealized gains and losses on these transactions have been recognized in Cost of sales in the condensed consolidated statements of operations and comprehensive income.

During the fourth quarter of 2022, the Company entered into a commodity swap transaction to swap market pricing exposure for approximately 6.8 TBtus for a fixed price of $40.55 per MMBtu. The swap settled during the first quarter of 2023 resulting in a gain of $41,315 recognized as a reduction to Cost of sales in the condensed consolidated statements of operations and comprehensive income. The gain was comprised of a realized gain of $146,112 and the reversal of the unrealized gain of $104,797 recognized in the fourth quarter of 2022.

In January 2023, the Company entered into a commodity swap transaction. Mark-to-market losses of $5,730 on this instrument have been recognized in Cost of sales in the condensed consolidated statements of operations and comprehensive income.

Interest rate and currency risk management

The Company was party to an interest rate swap, and in the first quarter of 2023, the interest rate swap was terminated.

The Company does not hold or issue instruments for speculative purposes, and the counterparties to such contracts are major banking and financial institutions. Credit risk exists to the extent that the counterparties are unable to perform under the contracts; however, the Company does not anticipate non-performance by any counterparties.

Table of Contents

The mark-to-market gain or loss on the interest rate swap and other derivative instruments that are not intended to mitigate commodity risk are reported in Other expense (income), net in the condensed consolidated statements of operations and comprehensive income.

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).

The Company uses the market approach when valuing investment in equity securities which is recorded in Other non-current assets on the condensed consolidated balance sheets as of March 31, 2023 and December 31, 2022.

The Company uses the income approach when valuing the following financial instruments:

◦Interest rate swap - The Company did not have any interest rate swaps outstanding as of March 31, 2023. As of December 31, 2022, the Company had an interest rate swap that was recorded within Other non-current assets, net on the condensed consolidated balance sheets.

◦The liability and asset associated with commodity swaps are recorded within Other current liabilities and Prepaid expenses and other current assets on the condensed consolidated balance sheets as of March 31, 2023 and December 31, 2022, respectively.

◦Contingent consideration derivative liability represents consideration due to the sellers in asset acquisitions when certain contingent events occur. The liability associated with these derivative liabilities is recorded within Other current liabilities and Other long-term liabilities on the condensed consolidated balance sheets as of March 31, 2023 and December 31, 2022.

The fair value of derivative instruments, including commodity swaps is estimated considering current interest rates, foreign exchange rates, closing quoted market prices and the creditworthiness of counterparties. The Company estimates fair value of the contingent consideration derivative liabilities 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 events occurring.

Table of Contents

The following table presents the Company’s financial assets and financial liabilities, including those that are measured at fair value, as of March 31, 2023 and December 31, 2022:


	Level 1		Level 2		Level 3		Total
March 31, 2023
Assets
Investment in equity securities	$	12,653	$	—	$	7,678	$	20,331




Liabilities
Commodity swap	$	—	$	5,730	$	—	$	5,730
Contingent consideration derivative liabilities	—		—		44,374		44,374

December 31, 2022
Assets
Investment in equity securities	$	10,128	$	—	$	7,678	$	17,806
Interest rate swap	—		11,650		—		11,650
Commodity swap	—		104,797		—		104,797

Liabilities
Contingent consideration derivative liabilities	$	—	$	—	$	46,619	$	46,619

The Company believes the carrying amounts of cash and cash equivalents, accounts receivable and accounts payable approximated their fair value as of March 31, 2023 and December 31, 2022 and are classified as Level 1 within the fair value hierarchy.

The table below summarizes the fair value adjustment to instruments measured at Level 3 in the fair value hierarchy, including the contingent consideration derivative liabilities. These adjustments have been recorded within Other expense (income), net in the condensed consolidated statements of operations and comprehensive income for the three months ended March 31, 2023 and 2022:


	Three Months Ended March 31,
	2023		2022
Contingent consideration derivative liabilities - Fair value adjustment - gain	$	(3,013)	$	(446)

During the three months ended March 31, 2023 and 2022, the Company had no settlements of other financial instruments or any transfers in or out of Level 3 in the fair value hierarchy.

7. Restricted cash

As of March 31, 2023 and December 31, 2022, restricted cash consisted of the following:


	March 31, 2023		December 31, 2022
Cash restricted under the terms of loan agreements	$	85,819	$	124,085
Collateral for letters of credit and performance bonds	239,479		41,392
Collateral for interest rate swaps	—		2,500

Total restricted cash	$	325,298	$	167,977

Current restricted cash	$	325,298	$	165,396
Non-current restricted cash	—		2,581

Table of Contents

As of March 31, 2023, the balance presented as collateral for letters of credit and performance bonds increased as the Company has posted cash collateral of $203,000 to support a letter of credit which will be utilized to facilitate the purchase of turbines that is expected to be completed in the second quarter of 2023. A portion of these turbines will be utilized to support the Company's contract to generate temporary power in Puerto Rico.

Uses of cash proceeds under the Barcarena Term Loan (see Note 17) are restricted to certain payments to construct the Barcarena Power Plant. Non-current restricted cash is presented in Other non-current assets, net on the condensed consolidated balance sheets.

8. Inventory

As of March 31, 2023 and December 31, 2022, inventory consisted of the following:


	March 31, 2023		December 31, 2022
LNG and natural gas inventory	$	50,038	$	15,398
Automotive diesel oil inventory	9,270		8,164
Bunker fuel, materials, supplies and other	17,228		15,508
Total inventory	$	76,536	$	39,070

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 income. No adjustments were recorded during the three months ended March 31, 2023 and 2022.

9. Prepaid expenses and other current assets

As of March 31, 2023 and December 31, 2022, prepaid expenses and other current assets consisted of the following:


	March 31, 2023		December 31, 2022
Prepaid expenses	$	24,701	$	56,380
Recoverable taxes	47,989		37,504
Commodity swap	—		104,797
Due from affiliates	890		698
Other current assets	28,671		27,504
Total prepaid expenses and other current assets, net	$	102,251	$	226,883

Prepaid expenses included $4,821 and $34,882 of prepaid LNG inventory as of March 31, 2023 and December 31, 2022, respectively. Other current assets as of March 31, 2023 and December 31, 2022 primarily consists of deposits, as well as the current portion of contract assets (Note 4).

10. Equity method investments

Changes in the balance of the Company’s equity method investments is as follows:


	March 31, 2023
Equity method investments as of December 31, 2022	$	392,306

Dividends	(5,830)
Equity in earnings of investees	9,980

Sale of equity method investments	(260,156)

Equity method investments as of March 31, 2023	$	136,300

Table of Contents

The carrying amounts of the Company's equity method investments as of March 31, 2023 and December 31, 2022 are:



	March 31, 2023		December 31, 2022
Hilli LLC	$	—	$	260,000
Energos	136,300		132,306
Total	$	136,300	$	392,306

As of March 31, 2023, the carrying value of the Company’s equity method investments was less than its proportionate share of the underlying net assets of its investees by $1,548. At December 31, 2022, the carrying value of the Company’s equity method investments exceeded its proportionate share of the underlying net assets of its investees by $16,976, and the basis difference attributable to amortizable net assets is amortized to Income from equity method investments in the condensed consolidated statements of operations and comprehensive income over the remaining estimated useful lives of the underlying assets.

Hilli LLC

On March 15, 2023, the Company completed a transaction with Golar LNG Limited for the sale of the Company's investment in the common units of Hilli LLC in exchange for approximately 4.1 million NFE shares and $100,000 in cash (the "Hilli Exchange"). In the fourth quarter of 2022, the Company recognized an other-than-temporary impairment on the investment in Hilli LLC of $118,558; this impairment was recognized in Loss from equity method investments in the consolidated statements of operations and comprehensive income. Upon completion of the Hilli Exchange, a loss on disposal of $37,401 was recognized in Other expense (income), net in the condensed consolidated statements of operations and comprehensive income. As a result of the Hilli Exchange, the Company no longer has an ownership interest in the Hilli. NFE shares received from GLNG were cancelled upon closing of the Hilli Exchange.

The Company had guaranteed 50% of the outstanding principal and interest amounts payable by Hilli Corp., a direct subsidiary of Hilli LLC. The Company had also guaranteed letters of credit issued by a financial institution in the event of Hilli Corp.’s underperformance or non-performance under the liquefaction tolling agreement with its customer. In conjunction with the Hilli Exchange, the Company is no longer a guarantor under these arrangements, and the remaining guarantee liability of $2,286 was derecognized as a reduction to Selling, general and administrative in the condensed consolidated statements of operations in the three months ended March 31, 2023.

Energos

On August 15, 2022, the Company and an affiliate of certain funds or investment vehicles managed by affiliates of Apollo Global Management, Inc., AP Neptune Holdings Ltd. ("Purchaser"), completed a sales and financing transaction resulting in cash proceeds of approximately $1.85 billion. This sales and financing transaction comprised (1) the formation of a limited liability company doing business as Energos Infrastructure ("Energos"), (2) the sale for cash of eight vessels, along with these vessels' owning and operating entities to the Purchaser, (3) the contribution of acquired vessel owning entities to Energos by the Purchaser and (4) the Company's contribution of three vessels, along with each vessels' owning and operating entities, to Energos in exchange for equity in Energos (the “Energos Formation Transaction”).

As a result of the Energos Formation Transaction, the Company owns an approximately 20% equity interest in Energos, with the remaining interest owned by the Purchaser. The Company's equity investment provides certain rights, including representation on the board of directors, which give the Company significant influence over the operations of Energos, and as such, the investment has been accounted for under the equity method; this investment is included within the Ships segment. Energos is also an affiliate, and all transactions with Energos are transactions with an affiliate.

Due to the timing and availability of financial information of Energos, the Company recognizes its proportional share of the income or loss from the equity method investment on a financial reporting lag of one fiscal quarter. For the three months ended March 31, 2023, the Company has recognized earnings from Energos of $3,994.

Table of Contents

11. Construction in progress

The Company’s construction in progress activity during the three months ended March 31, 2023 is detailed below:


	March 31, 2023
Construction in progress as of December 31, 2022	$	2,418,608

Additions	931,823

Impact of currency translation adjustment	8,387
Transferred to property, plant and equipment, net	(1,384)
Construction in progress as of March 31, 2023	$	3,357,434

Interest expense of $50,976 and $13,137, inclusive of amortized debt issuance costs, was capitalized for the three months ended March 31, 2023 and 2022, respectively.

The Company has significant development activities in Latin America as well as the development of the Company's Fast LNG floating liquefaction solution, and the completion of such developments are subject to risks of successful completion, including those related to government approvals, site identification, financing, construction permitting and contract compliance. The Company's development activities for the three months ended March 31, 2023 were primarily focused on Fast LNG; additions to construction in progress in the first quarter of 2023 of $767,607 were to develop Fast LNG projects.

12. Property, plant and equipment, net

As of March 31, 2023 and December 31, 2022, the Company’s property, plant and equipment, net consisted of the following:


	March 31, 2023		December 31, 2022
Vessels	$	1,518,839	$	1,518,839
Terminal and power plant equipment	218,572		218,296
CHP facilities	125,015		123,897
Gas terminals	177,780		177,780
ISO containers and other equipment	134,924		134,324
LNG liquefaction facilities	63,316		63,316
Gas pipelines	66,319		65,985
Land	53,737		52,995
Leasehold improvements	10,252		9,377
Accumulated depreciation	(274,337)		(248,082)
Total property, plant and equipment, net	$	2,094,417	$	2,116,727

The book value of the vessels that was recognized due to the failed sale leaseback in the Energos Formation Transaction as of March 31, 2023 and December 31, 2022 was $1,315,661 and $1,328,553, respectively.

Depreciation expense for the three months ended March 31, 2023 and 2022 totaled $26,000 and $26,109, respectively, of which $231 and $563, respectively, is included within Cost of sales in the condensed consolidated statements of operations and comprehensive income.

Table of Contents

13. Goodwill and intangible assets

Goodwill

The carrying amount of goodwill was $776,760 as of both March 31, 2023 and December 31, 2022.

Intangible assets

The following tables summarize the composition of intangible assets as of March 31, 2023 and December 31, 2022:


	March 31, 2023
	Gross Carrying Amount		Accumulated Amortization		Currency Translation Adjustment		Net Carrying Amount		Weighted Average Life
Definite-lived intangible assets
Favorable vessel charter contracts	$	106,500	$	(71,098)	$	—	$	35,402