La Fortaleza says it is in negotiations with NFE for LNG supply

Public Affairs Secretary Hiram Torres Montalvo

By The Star Staff

La Fortaleza said it is in negotiations with New Fortress Energy (NFE) for a liquefied natural gas (LNG) supply contract that expires today.

According to statements by Public Affairs Secretary Hiram Torres Montalvo, negotiations continue, although they face objections from the Financial Oversight and Management Board, which has generated uncertainty about the future of the agreement.

All options are being studied to ensure a robust electrical system and prevent further blackouts in Puerto Rico, Torres Montalvo said.

The central government is also negotiating with at least four firms on 30-day emergency gas supply contracts after canceling negotiations with NFE because the firm refused to negotiate amendments to a $20 billion LNG supply contract.

Today is the expiration date for another contract with NFE, which supplies gas to 14 temporary units in Palo Seco and San Juan. As of press time, it was not known whether NFE would opt to grant an extension.

NFE, which reportedly has hired Holihand Lokey to slash its debt obligations, did not answer requests for comment.

“Based on our perception of a lack of interest from New Fortress, we are terminating this request for proposals process,” said Osvaldo Carlo Linares, president of Recoms Group, the third-party procurement office, this week as quoted by Bloomberg.

Regarding the $20 billion contract, the New York-based company, founded by billionaire Wes Edens, was negotiating with the government to renew a 15-year contract. However, the federally appointed oversight board opposed the deal, arguing that it would grant NFE a monopoly on LNG supplies and compel Puerto Rico to accept volumes it might not need.

Following the government’s decision, the company’s bonds maturing in 2029 fell by 6 cents on the dollar, and its shares dropped as much as 12%.

The oversight board confirmed this week that it had received formal communication from Linares’ office indicating the withdrawal of the contract.

“Neither the [Public-Private Partnerships Authority] nor the government are willing to defend the terms of the contract submitted to the Board for review and approval,” the oversight board stated in a written message sent to Bloomberg. The board added that it will continue to work with all parties to find a solution that benefits the people of Puerto Rico.

Due to the impasse, Linares confirmed that the government is in talks with four other companies to establish 30-day emergency contracts. Those agreements will likely require payment for the use of NFE’s LNG receiving infrastructure in San Juan. The names of the potential suppliers have not been disclosed.

Naturgy, the Spanish company that supplies LNG at the Peñuelas import terminal, did not respond to a request for comment on whether it is among the potential temporary suppliers.