While facing a three-year delay since it announced in October 2021 that it was in the testing phase and would soon begin generating electricity with natural gas, the U.S. company New Fortress Energy has postponed the start of operations in Nicaragua once again. The new projected date is now the first quarter of 2025. The company has not explained the reason for the delays. In previous reports, New Fortress stated that the plant was ready to operate, but in the latest update, they note that although the plant is complete, the dock and pipeline remain unfinished.
These delays coincide with the company experiencing liquidity issues, which have led it to seek new investors for projects it is developing in several countries, aiming to strengthen its financial position.
New Fortress Energy, which is publicly traded on the U.S. Stock Exchange, is required to publish quarterly reports. In its report for the second quarter of the year (April-June), the company informed investors that, as part of the 25-year contract signed with the “Nicaraguan public utility company,” it is working to optimize generation efficiency to provide additional electricity capacity in an underserved market. The company also confirmed that its goal was to complete this process in 2024.
Gas pipeline under construction
However, in its recent report to investors with third-quarter information (July to September), the company stated that “the 300-megawatt power plant and the LNG terminal are expected to begin operations in the first quarter of 2025.” The report added that “remaining work includes finalizing the dock and completing the pipeline from the terminal to the power plant.”
An investor presentation also detailed that the 300-megawatt power plant is 100 percent complete, fully installed, and ready to operate. The dock and FSU (Floating Storage Unit) are 95 percent complete, and the five-mile gas pipeline is under construction, with “all materials on-site and in the installation process.”
The document also explains that on October 2, 2024, New Fortress Energy Inc. announced a series of financial transactions aimed at increasing the company’s liquidity and financial flexibility once completed.
Seeking partners for projects in six countries
To advance these goals, the company has begun efforts to identify strategic partners for one or more of its core businesses, including projects in Brazil, Puerto Rico, Jamaica, Mexico, Nicaragua, FLNG 1, and Klondike. According to the document, the company intends to explore financing opportunities, business ventures, or asset sales with potential strategic partners aimed at enhancing the company’s liquidity and financial flexibility.
Business leaders, who chose to remain anonymous to avoid possible reprisals, interpret this announcement as part of an approved strategy to seek greater liquidity or financial flexibility. “This includes looking for strategic partners in any of their projects, including Nicaragua’s. They mention one or more projects, but this doesn’t mean every project will be involved; I believe that with just a couple of strategic partners, they would achieve the liquidity they seek, though I don’t think Nicaragua’s project is among the most desirable,” one business leader remarked.
Meanwhile, a financial analyst, who also requested anonymity, explained that investments of this type are profitable but require ongoing investment and debt refinancing. It appears that this company is facing some pressures that have reduced its stock value.
How much will natural gas-generated energy cost?
“They’ve experienced delays in projects in Mexico, which have created liquidity pressures. It doesn’t look like they’re at risk of bankruptcy, but they aren’t in a very comfortable position either, given debt repayment pressures and interest obligations impacting their liquidity, which has also diluted their stock value as they’ve had to raise capital to meet refinancing challenges,” the analyst explained.
He added that the stock value of New Fortress Energy “has shown a steady decline over time, which certainly hasn’t worked in their favor and reflects the multiple challenges they’ve faced.” Therefore, he believes it would be in their best interest to complete their investment in Nicaragua to begin generating revenue, noting that the project appears to be advanced enough to make this feasible.
Since February 2020, when it was announced that this U.S. company would invest $700 million in this plant near Puerto Sandino, with a capacity to generate 300 megawatts of natural gas-powered electricity, authorities have never disclosed the price they will pay for this energy.
Signed a 25-year contract
According to information released on the Ministry of Energy and Mines (MEM) website, in January 2023, the company signed a 25-year power purchase agreement with the distributor Disnorte-Dissur. Later, in the September 26, 2023, edition of the official gazette La Gaceta, the operating contract deed was published. This contract, signed on July 12 with the MEM as the representative of the Nicaraguan State, also did not disclose the sale price of the energy.
However, industry specialists have explained that the plant’s entry into Nicaragua’s electricity market will not affect consumer rates, as these contracts generally use fixed prices, which are almost certain not to benefit end consumers. Additionally, it won’t enhance the energy mix; although natural gas is a cleaner fuel than bunker oil, it is not a renewable resource.
Additionally, the price volatility of natural gas is similar to that of oil. Following Russia’s invasion of Ukraine, natural gas reached historic price highs, which, according to experts, contributed to the delay in the start of operations of the plant near Puerto Sandino.
Nicaragua generates more energy than it consumes
As the plant’s entry into the national electricity market continues to be delayed, authorities assure that its annual contribution to the grid will be 2.2 million megawatt-hours (MWh), and it will be connected to the National Interconnected System (SIN) via the Sandino Substation at 230 kV. “The plant will produce 2.2 million MWh per year, which accounts for nearly 50 percent of the country’s demand, which is over 700 MWh,” stated a press release from the MEM.
According to the National Electric Transmission Company (Enatrel), by the end of 2023, Nicaragua’s generation capacity was 1,648.7 megawatts, while the maximum recorded demand was 808.07 megawatts.
Meanwhile, the Central Bank of Nicaragua (BCN) reports that in 2023, the gross energy generation was 4.8 million megawatt-hours (MWh), while the billed consumption was only 3.32 million MWh. Between January and July 2024, production reached 3.18 million MWh, and billed consumption totaled 2.02 million MWh.