New Fortress Energy Reaches Landmark Agreement for Long-Term Gas Supply in Puerto Rico
New Fortress Energy Inc. (NASDAQ: NFE), a global energy infrastructure company, announced that it has reached a milestone agreement on contract terms with the Third-Party Procurement Office (3PPO) and the Puerto Rico Public-Private Partnerships Authority (P3A) for the long-term supply of liquefied natural gas (LNG) to Puerto Rico. The contract is now under review by the Financial Oversight and Management Board of Puerto Rico (FOMB), which has the final authority to approve the agreement. Once finalized, this deal is expected to play a central role in reshaping Puerto Rico’s power generation landscape and reducing its reliance on costly and polluting fuels.
Structure of the Agreement
The newly established gas supply agreement (GSA) covers a term of seven years. It is designed to provide Puerto Rico with a reliable and affordable source of natural gas, ensuring consistent energy supply at a time when the island’s electricity sector is under significant pressure to modernize. Puerto Rico has historically relied heavily on imported petroleum products, such as diesel and heavy fuel oil, to run its power plants. These fuels have not only been more expensive but also emit higher levels of greenhouse gases.
By transitioning to LNG under this long-term arrangement, Puerto Rico will be able to lower fuel costs for its power system and deliver substantial savings to ratepayers. The deal marks an important step in achieving the island’s goal of diversifying its energy mix, improving system reliability, and making electricity more affordable for residents and businesses.
Strategic Importance for Puerto Rico
Wes Edens, Chairman and CEO of New Fortress Energy, emphasized the importance of this agreement for both the company and the island. “We have had discussions on long-term fuel supply since April with the Government of Puerto Rico and are pleased to have reached an agreement,” Edens said. He noted that the contract provides two key benefits:
- Security of Supply in San Juan – For the next seven years, LNG supply to power plants operating in San Juan will be secured, eliminating the uncertainty around sourcing and costs that have plagued Puerto Rico’s energy system.
- Support for Plant Conversions – The agreement also allows incremental LNG volumes to be delivered, which will enable the conversion of additional gas-ready plants currently running on diesel fuel. This shift is expected to generate hundreds of millions of dollars in cost savings for Puerto Rican ratepayers, while simultaneously reducing emissions.
The GSA permits up to 75 trillion British thermal units (TBtu) of natural gas to be supplied each year, with minimum take-or-pay commitments of 40 TBtu annually. Depending on conditions, this minimum could increase to 50 TBtu.
Pricing and Supply Dynamics
The pricing structure under the GSA is tied to U.S. benchmark natural gas prices. For most volumes, pricing will be set at a blend of 115 percent of Henry Hub plus $7.95 per million British thermal units (MMBtu). However, LNG supplied specifically to San Juan units 5 and 6—facilities that historically consume about 20 TBtu per year—will be priced more favorably at 115 percent of Henry Hub plus $6.50 per MMBtu.
Supply for the contract will come from NFE’s Fast LNG facility located offshore Altamira, Mexico. The facility, with a production capacity of 1.4 million tonnes per annum (MTPA), achieved commercial operations in the fourth quarter of 2024 and has been operating at levels above nameplate capacity. This ensures that NFE has sufficient LNG supply to meet the contractual requirements in Puerto Rico while maintaining flexibility in its broader portfolio.
Financial and Strategic Benefits for NFE
For New Fortress Energy, this agreement not only strengthens its commercial relationship with Puerto Rico but also secures a reliable outlet for LNG produced at its new Fast LNG facility. Chris Guinta, CFO of NFE, commented, “Matching our LNG production with long-term offtake has always been our goal. This locks in sustainable long-term margins for NFE and provides a foundation of financial stability for our company.”
The company views the deal as a key element in establishing steady cash flows while reinforcing its strategy of vertically integrated LNG production, transport, and supply.
Broader Context and Long-Term Vision
Puerto Rico has one of the highest electricity costs in the United States and has struggled with reliability issues due to aging infrastructure, natural disasters, and dependence on imported oil. The new GSA represents a significant step in addressing these challenges by ensuring lower-cost, cleaner-burning natural gas is available for existing and converted power plants.
Edens further highlighted the significance of the deal: “This is a milestone agreement for NFE and the government of Puerto Rico. Puerto Ricans pay far too much for electricity today, and this long-term agreement provides cheaper and cleaner fuel for existing power plants for years to come.”
He added that the contract complements NFE’s existing 25-year supply contract with Energiza and the new 550 MW power plant currently under development. Together, these projects are expected to modernize Puerto Rico’s power sector and position the island for long-term reliability and affordability.
