Fiscal board expresses concerns over LNG contract between NFE subsidiaries
- The San Juan Daily Star
- 6 hours ago
- 2 min read
By THE STAR STAFF
The Financial Oversight and Management Board has expressed serious concerns over the liquefied natural gas (LNG) contract between New Fortress Energy (NFE) subsidiaries NF Energía and Genera PR, citing risks to energy security, transparency, and accountability.
It is the second time the oversight board has rejected the proposed contract for NFE to be the long-term supplier of natural gas to the island. The first time was in August.
While acknowledging areas of improvement, the board emphasized that key issues must be addressed to protect the interests of Puerto Rico’s residents.
A central concern is the limited and conditional access to the San Juan Terminal for third-party LNG suppliers. Although the contract includes provisions for third-party access during specific circumstances, the oversight board argues that those are either currently unfeasible -- such as ship-to-ship transfers prohibited by the U.S. Coast Guard -- or subject to the seller’s discretion, rendering them ineffective in practice.
“As drafted, the Proposed Contract provides access to the terminal only under very limited circumstances,” the oversight board said in a letter dated Oct. 10. “Moreover, since ship to ship transfers are currently not authorized, this clause has no immediate effect. Puerto Rico’s access to LNG at the San Juan terminal is subject to the Seller’s discretion to negotiate with a third-party supplier when it is unable to fulfill its obligations.”
The urgency of the issue is underscored by the seller’s ongoing failure to supply LNG, forcing several power units to rely on more expensive diesel and reducing available generation capacity, the oversight board noted. The entity insists that the contract must allow Genera and the island government to bring in third-party suppliers during supply disruptions to safeguard Puerto Rico’s energy resilience.
Additionally, the board flagged potential conflicts of interest in the procurement and oversight process. Genera, a subsidiary of NFE, determines the LNG volumes in the contract of its sister subsidiary without independent validation by the government or the Third-Party Procurement Office (3PPO). Given the contract’s “take or pay” structure, this could lead to ratepayers covering costs for excess LNG, the entity noted.
The oversight board also criticized the lack of enforcement mechanisms. Under the current structure, Genera is solely responsible for holding the seller, NF Energía — even though the two entities are affiliated. The board cited an unresolved $17 million LNG shortfall claim, where the seller invoked force majeure to avoid penalties.
To ensure transparency and enforceability, the oversight board recommends that the Puerto Rico Public-Private Partnership Authority and PREPA be made parties to the contract. It calls for swift action from all stakeholders to revise the agreement and protect Puerto Rico’s energy future.