New Fortress Energy: A Contrarian Play on Puerto Rican Setbacks and Brazilian Growth

The recent disqualification of New Fortress Energy (NFE) from Puerto Rico’s power auction marks a pivotal challenge for the company, yet its financial resilience and strategic shifts in Brazil position it as a compelling contrarian buy. Let’s dissect NFE’s liquidity, debt management, and growth catalysts to determine whether the stock offers value in this downturn.

Liquidity Fortified by Strategic Asset Sales
NFE’s sale of its Jamaican assets to Excelerate Energy for $1.055 billion has been a lifeline. The transaction injected $778 million in net proceeds, boosting unrestricted cash to $448 million and pro forma liquidity to over $1.1 billion as of Q1 2025. This move slashed debt by $227 million, reducing reliance on expensive short-term financing. The liquidity buffer now exceeds short-term liabilities, a stark contrast to prior quarters when analysts questioned NFE’s ability to navigate cash flow deficits.

While critics point to a quick ratio of 0.5 and a current ratio below 1, the Jamaica sale has alleviated immediate refinancing risks. The company’s focus on asset-level financing—securing project-specific debt for assets like Brazil’s CELBA power plant—ensures long-term cash flows align with liabilities.

Debt Management: Progress Amid Elevated Leverage
NFE’s total debt stands at $8.93 billion, but its deleveraging strategy is gaining traction. The Jamaica proceeds allowed the company to retire portions of its Revolving Credit Facility and Term Loan A, lowering its debt-to-equity ratio from 5.06 to an estimated 4.2 by year-end. Crucially, NFE plans to refinance remaining debt at lower rates using its $236 million present value from FSRU sub-chartering deals, which provides a cushion against rising interest costs.

Despite progress, NFE’s leverage remains high. However, its Brazilian projects—95% complete for CELBA and over 50% for PortoCem—will generate contracted cash flows starting Q3 2025. These projects are funded via asset-backed financing, isolating project risks from corporate debt.

Puerto Rico: A Speedbump, Not a Roadblock
The exclusion from Puerto Rico’s power auction is painful but not terminal. Puerto Rico contributed only $59 million in prior-period profits, and the market’s aging infrastructure made long-term profitability uncertain. NFE’s focus on short-term power opportunities there—while less lucrative—avoids locking capital into a stagnant grid.

The real growth engine lies in Brazil, where NFE is poised to capture demand from the delayed capacity auction. Once finalized, CELBA and PortoCem will add 624 MW of power capacity, underpinning NFE’s $1.25–1.5 billion EBITDA forecast for 2025. The $659 million FEMA claim from its Puerto Rico operations adds further upside, though it hinges on regulatory approval.

Wall Street Forecasts and GuruFocus Valuations: A Contrarian Signal
Analysts remain divided, but the data tilts bullish. GuruFocus assigns a one-year target price of $29.19 (314% upside from $7.05), citing improved liquidity and Brazil’s growth potential. Even conservative estimates see a 78% upside to $12.57, driven by terminal expansions in Mexico and Brazil.

The stock’s recent drop—22.57% post-Q1 earnings—reflects short-term pessimism, not fundamentals. NFE’s $143 million cumulative FSRU sub-charter profits and its $296 million cargo sale gain (with $125 million to be collected by 2028) are underappreciated by the market.

Risk Factors and Why They’re Overblown
- Project Delays: Brazil’s capacity auction delay could delay EBITDA contributions, but the market remains robust.
- Regulatory Risks: NFE’s FEMA claim faces hurdles, but the company has precedent in navigating such disputes.
- Liquidity Strains: While the current ratio is tight, the $1.1 billion liquidity buffer and asset-backed financing mitigate this risk.

The Bottom Line: Buy the Dip
NFE’s Puerto Rico setback is a speedbump in its transition to a Brazil-centric, asset-backed growth model. With liquidity fortified, debt manageable, and Brazilian projects nearing completion, the stock’s current price reflects excessive pessimism. At a $1.2 billion market cap, NFE is priced for default, yet its balance sheet and strategic pivots argue otherwise.

Investors should act now before Wall Street recognizes the value in NFE’s turnaround. The contrarian opportunity is clear: a high-risk, high-reward bet on execution in Brazil and debt deleveraging—two areas where NFE has already shown progress.

The path to $30 is lined with risks, but the reward outweighs the uncertainty. NFE is a rare play on Latin American energy infrastructure at a fire-sale price.