New Fortress Energy's LNG Deal: A Risky Gamble in Puerto Rico's Energy Crossroads

Puerto Rico's energy future is at a crossroads. New Fortress Energy (NFE) has proposed a $20 billion LNG supply deal with its subsidiary Genera PR, a contract that could lock the island into a 15-year partnership with the company. But the Puerto Rico Financial Oversight and Management Board—a federal entity with veto power over major fiscal decisions—has raised red flags, calling the deal a “profound” threat to competition and fiscal responsibility. The board's objections, coupled with NFE's precarious financial state and rising competition, suggest this once-ambitious project is now a high-risk proposition for investors.

Monopolistic Risks and Market Dominance

The Oversight Board's primary concern is the deal's potential to grant NFE near-monopoly control over Puerto Rico's energy sector. The 15-year “take-or-pay” contract obligates the Puerto Rico Electric Power Authority (PREPA) to pay for LNG even if it isn't fully consumed, a structure that exposes ratepayers to unnecessary costs. The board argues this arrangement stifles competition by sidelining rivals like EcoElectrica, Crowley, and renewable-focused firms such as AES Corp and Dominion Energy. These competitors are actively bidding for renewable energy contracts aligned with Puerto Rico's goal of 40% renewables by 2030—a stark contrast to NFE's LNG-focused strategy.

Procurement Transparency and Regulatory Hurdles

The Oversight Board also criticized NFE's procurement process, which lacked competitive bidding. Instead, the deal emerged from direct negotiations, raising suspicions of favoritism. This opacity has drawn scrutiny from regulators and investors alike. Meanwhile, NFE faces additional hurdles: a class-action lawsuit over its delayed FLNG project in Mexico and a Nasdaq filing delay for its Q1 2025 report, which the company now aims to resolve by mid-June. These compliance risks add to the uncertainty surrounding the LNG deal's approval.

Financial Stability: A Fragile Foundation

NFE's financial health further weakens its case. The company carries $1.4 billion in debt maturing by 2026, including $900 million in revolving credit due in April 2026. Its debt-to-equity ratio of 5.51 is alarmingly high, and its stock has plummeted 89% year-to-date, now trading near $2.50—a far cry from its 2023 highs. Even after selling its Jamaican assets for $1.055 billion, NFE has prioritized debt reduction over liquidity: only $325 million of the proceeds went to pay down debt, while the rest bolstered cash reserves.

The company's operational struggles compound these issues. The FLNG 1 project in Mexico, initially slated for 2024, has cost NFE $150 million per quarter in lost margins and triggered investor lawsuits. With FLNG 2 not expected to launch until 2026, NFE's cash flow remains strained, and its EBITDA projections ($1.25–$1.5 billion for 2025) rely heavily on new projects in Brazil—projects that may not materialize quickly enough to stave off default.

Why Investors Should Proceed with Caution

The Oversight Board's objections and NFE's financial instability create a toxic mix for investors. Key risks include:
1. Regulatory Rejection: The board could block the LNG deal entirely, stripping NFE of a critical revenue stream.
2. Debt Defaults: NFE's 2026 maturities loom large, and its stock's delisting from Nasdaq (if Q1 filings aren't resolved) would further erode investor confidence.
3. Competitive Erosion: Rivals like AES Corp and EcoElectrica are better positioned to capitalize on Puerto Rico's renewable transition, sidelining NFE's LNG focus.

Investment Recommendation: Sell

The evidence points to one conclusion: NFE is a high-risk, low-reward investment. Regulatory roadblocks, mounting debt, and a shrinking window to refinance suggest the company's survival hinges on improbable scenarios—like a sudden turnaround in Brazil or a last-minute FEMA payment. Meanwhile, competitors are gaining traction, and Puerto Rico's policymakers are prioritizing transparency and renewables over monopolistic LNG deals.

For investors, the writing is on the wall. NFE's stock is a gamble with few upside catalysts and multiple downside triggers. Sell now, and avoid the fallout.

This analysis is based on publicly available data as of July 2025. Always conduct your own research before making investment decisions.