Puerto Rico's finance watchdog has declined to approve a $20bn supply agreement between New Fortress Energy and its subsidiary over concerns of a potential monopoly in the natural gas sector, reported Bloomberg, citing sources.
The Financial Oversight and Management Board for Puerto Rico has expressed “profound concerns” regarding a proposed 15-year contract between New Fortress Energy's subsidiary Genera, which operates the territory’s power plants, and the company's unit responsible for delivering liquefied natural gas (LNG).
The board was quoted as saying: “Approving the contract would lock the island into a long-term commitment with a single supplier, potentially undermining market competition and limiting flexibility.
“Given the magnitude of the proposed contract and the critical nature of the services at stake, it would be irresponsible for the Oversight Board to review the proposed contract thoroughly in this short time.”
Nonetheless, the board expressed its readiness to engage with all parties to guarantee that the transaction is financially prudent.
New Fortress Energy operates an LNG facility at the Port of San Juan, which was commissioned in April 2020.
This site is strategically designed with multiple truck loading bays to serve on-island industrial, commercial, and transportation customers with LNG.
The company also currently holds an 80 trillion British thermal units (TBtu) island-wide gas supply contract with the Puerto Rico Electric Power Authority (PREPA).
In March, New Fortress Energy announced a one-year extension to this agreement.
Additionally, modifications to the ten-year operation and maintenance agreement between Genera and PREPA will see the elimination of future incentive payments in return for a $110m payment.
However, the extension was later amended to a term of 100 days to provide a transition period that allows for an open request for proposals (RFP) for revised terms and duration of the gas supply contract.
This contract has ample capacity to meet both NFE’s existing downstream gas demand and the potential conversion of other legacy power plants from diesel to natural gas.
In a separate development, New Fortress Energy has completed the sale of its liquefaction and storage facility in Miami to a US-based middle-market infrastructure fund.
The financial details and information about the buyer have not been disclosed. The Miami facility is a small-scale operation with a single liquefaction train capable of producing 8,300MBtu of LNG daily.
