The long-term contract, which is currently pending approval by the Financial Oversight and Management Board of Puerto Rico, aims to replace expensive, high-emission liquid fuels with cleaner-burning natural gas.
New Fortress Energy Inc. (NFE) has announced a significant 7-year agreement to supply liquefied natural gas (LNG) to Puerto Rico, a move that could transform the island's energy landscape and deliver substantial economic and environmental benefits. The contract, which is pending final approval from the Financial Oversight and Management Board of Puerto Rico (FOMB), solidifies NFE's role in the island's ongoing efforts to modernize its power infrastructure.
The FOMB, created under the Puerto Rico Oversight, Management, and Economic Stability Act (PROMESA), has broad authority to oversee the island's public finances and debt restructuring. Its review of this agreement is a critical step in ensuring the contract aligns with Puerto Rico's fiscal plans and long-term stability.
This new gas supply agreement (GSA) is designed to provide a secure and affordable fuel source for power plants, helping Puerto Rico transition away from its reliance on more expensive, high-polluting fuels like diesel. The island's electric grid has faced significant challenges in recent years, suffering from a series of outages and a dilapidated infrastructure that has made it vulnerable to both natural disasters and operational failures. By shifting to natural gas, the agreement aims to foster greater energy reliability and resilience.
The GSA sets minimum annual "take-or-pay" volumes of 40 TBtu, with the potential to increase to 50 TBtu. The pricing is tied to the Henry Hub benchmark, a widely recognized pricing point for natural gas futures in North America. The price is structured as a blend of 115% of Henry Hub plus a fixed fee of $7.95/MMBtu for most volumes, with a lower fixed fee of $6.50/MMBtu for volumes supplied to the San Juan 5 & 6 units.
The LNG for this contract will be sourced from NFE's 1.4 MTPA Fast LNG facility located offshore of Altamira, Mexico. This innovative facility, which began production in late 2024, is currently operating above its nameplate capacity, ensuring NFE can meet the demands of this long-term commitment. NFE CFO Chris Guinta highlighted the financial significance of the deal, noting it "locks in sustainable long-term margins for NFE and provides a foundation of financial stability for our company."
The agreement underscores a broader partnership between New Fortress Energy and Puerto Rico as the island seeks to modernize its energy infrastructure and achieve its energy goals. It follows NFE's existing 25-year supply contract with Genera PR, the company that now operates Puerto Rico's power plants.
