New Fortress’ $20 Billion Puerto Rico Deal Halted by Board
(Bloomberg) -- Puerto Rico’s finance watchdog is refusing to OK a $20 billion natural gas supply deal that it said would give New Fortress Energy Inc. a near monopoly over the island’s energy future.
The Financial Oversight and Management Board has “profound concerns” about a proposed 15-year contract between Genera PR — a New Fortress subsidiary that operates the territory’s power plants — and the company unit that delivers liquefied gas, according to a letter to Puerto Rico’s energy czar, Josue Colon.
Approving the contract would “lock the island into a long-term commitment with a single supplier, potentially undermining market competition and limiting flexibility,” the board wrote, saying the deal would create a “monopolistic arrangement that would ultimately jeopardize energy security.”
New Fortress Energy did not respond to a request for comment. Colon’s office declined to immediately comment on the letter.
The watchdog’s objections are just the latest blow to New Fortress, which lost more than 80% of its market value in the last year as it struggles to shore up its finances and reassure investors and bondholders. The shares fell as much as 19% on Thursday.
“Given the magnitude of the proposed contract and the critical nature of the services at stake, it would be irresponsible for the Oversight Board to review the proposed contract thoroughly in this short time,” the board wrote.
Even so, the board said it is willing to meet with all those involved to ensure the deal is “fiscally responsible.”
New Fortress already is a key supplier of LNG to Puerto Rico’s power sector. Other sources include EcoElectrica and Crowley, which ship the fuel to plants operated by other companies. New Fortress’ initial LNG supply contract was due to expire in June but has been extended on a temporary basis.
In April, government agencies called for bids to provide LNG to multiple power plants that Genera operates, including plants that haven’t yet been converted to run on gas.
“From the information that the Oversight Board has been able to review so far, the proposed contract was inherently the result of direct negotiations” with NFEnergia “rather than a true competitive procurement,” the board wrote.
The oversight board established by the US Congress in 2016 to help the territory emerge from bankruptcy has the authority to approve or scuttle government contracts.
(Updates with share-price collapse in fifth paragraph.)
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