Puerto Rico Ends New Fortress Talks on $20 Billion LNG Deal
(Bloomberg) -- Puerto Rico is ending attempts to negotiate a multi-billion dollar liquefied natural gas contract with New Fortress Energy Inc. after the company refused to accept the terms of an amended deal, one of the negotiators said.
Osvaldo Carlo Linares, the president of Recoms Group, the island’s third-party procurement office, said New Fortress was not willing to discuss changes to the contract and missed a key deadline.
“Based on what we perceive as a lack of interest by New Fortress, we are ending this RFP process,” he told Bloomberg News.
Text messages and phone calls to Puerto Rico’s energy czar and to New Fortress were not returned. New Fortress slumped as much as 12%. The company’s 12% bonds due 2029 fell 6 cents on the dollar to 40 cents, as of 2:20pm in New York, according to Trace data.
The government and New Fortress have been locked in negotiations over renewing a 15-year deal worth an estimated $20 billion to supply the island with LNG. However, the federally-appointed Financial Oversight and Management Board of Puerto Rico, which works as a fiscal watchdog, objected, saying it would give New Fortress a near monopoly and force the island to accept LNG it might not be able to use.
In an emailed statement Wednesday, the board confirmed that it had received a letter from Linares’ office, also known as the 3PPO.
That communique is “consistent with our observation that neither 3PPO nor the Government is willing to defend the terms of the contract that is before the Oversight Board for review and approval,” the board said, adding that it would “continue to work with all parties to find a solution for the supply of LNG at terms that are in the interest of the people of Puerto Rico.”
The US territory which is heavily reliant on fossil fuels to meet energy needs, suffers widespread power outages because of decrepit infrastructure.
An end of negotiations would be the latest setback for New Fortress, a New York-headquartered energy company founded by billionaire Wes Edens. New Fortress Energy has struggled with cash flow amid looming debt.
As a result of the impasse, the government is in talks with four other companies to provide LNG to the US territory under 30-day emergency contracts, Linares said. Those deals would likely require paying a fee to use New Fortress’ LNG-receiving infrastructure in San Juan.
The names of those companies were not disclosed. Spanish energy company Naturgy supplies LNG to Puerto Rico’s import terminal near Peñuelas, in the southern part of the island, but these facilities are not connected to New Fortress’ terminal in the north. Naturgy did not respond to requests for comment on whether it is being considered as an emergency supplier.
(Updates with statement from oversight board in seventh paragraph.)
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