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  • Writer's pictureThe San Juan Daily Star

New Fortress Energy to invest $200 million in fuel switching, officials say



Brannen McElmurray

By The Star Staff


New Fortress Energy (NFE) said it plans to invest some $200 million in fuel switch work in Puerto Rico over the next two years.


The information was provided by the firm’s chief financial officer, Christopher Guinta, during NFE’s fourth quarter and full year 2023 results presentation.


NFE’s new business vice president, Brannen McElmurray, said there is about 1 gigawatt (GW) of potential conversion, fuel switch or supplemental power opportunities on the island, highlighting the role of gas in providing baseload power as the grid transitions to renewable energies.


The majority of Puerto Rico’s generation assets are now managed by NFE or its subsidiary, GeneraPR. NFE’s footprint consists of 5 GWs of power across 17 sites, more than 700 employees, and 1.5 million customers.


“We manage 85% of Puerto Rico’s total generation capacity, but 57% of this capacity continues to run on diesel or HFO [heavy fuel oil]. This creates a tremendous near term opportunity for NFE’s business,” McElmurray said. “Our footprint allows us to execute on a variety of strategies such as fuel switch, supplemental power, and other fuel optimization initiatives for which NFE is well positioned to be the infrastructure provider of choice to deliver value to the Puerto Rico ratepayer.”


Through Genera, the company is adding large-scale battery energy storage systems to the grid, reducing frequency of load sheds by 90%, adding additional generation through peakers and black start assets, “and we’re implementing a fuel switch and supplemental power strategy to add megawatts now and ancillary services later, to strengthen the grid and make it renewable ready,” McElmurray said.


The expected funds from operations for 2024 is around $1.25 billion, minus the $250 million of net capital expenditures, which is around $1 billion that can be used to pay down debt. To that end, the NFE official said, the company is evaluating potential refinancing opportunities to address debt maturities in the ordinary course, including the 6.75% notes due in 2025, and monitoring the market.


“As part of our process of refinancing and deleveraging goals, NFE is working on several alternatives,” McElmurray said. “The first is debt reduction driven by free cash flow and asset sales; two, growth initiatives to be funded by asset-level debt; three, adding to its power portfolio with over 2 gigawatts of power in Brazil; and increasing volumes and executing long term fuel switching in Puerto Rico.”


Asked about public filings and reports regarding the Federal Emergency Management Agency wanting to wind down its involvement as early as this month and their impact on current contracts, any potential sources of income and cash related to NFE assets, McElmurray said NFE was selected to install 150 megawatts (MW) of temporary generation units at Palo Seco and 200 MW of units at San Juan. The island government plans to purchase the units.


“In terms of future, there’s about one gigawatt of potential conversion fuel switch or supplemental power opportunity, because if you look at the way the Puerto Rico grid is evolving, essentially what’s happening is the HFO and diesel plants are going to run off, and in its place, it’s effectively going to be gas from a thermal perspective, and then that over time will provide ancillary services as the grid continues to transition to renewables. From an NFE perspective, our strategy is megawatts now, ancillary services later, but under all scenarios the power that we’re providing, supporting, and then ultimately fueling, we expect to be there for the indefinite future,” he said.

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