New Fortress restructuring could impact Genera PR’s contract.

By THE STAR STAFF

The recent restructuring of New Fortress Energy could be used by the island government to cancel its contract with Genera PR, the private operator of the legacy plants of the Puerto Rico Electric Power Authority (PREPA).

According to analysis by the Institute for Energy Economics and Financial Analysis (IEEFA), New Fortress Energy (NFE) has disclosed that it cannot meet its debt obligations and has entered into a restructuring arrangement with certain lenders, as announced on March 17.

NFE is the parent company of Genera PR, which holds a 10‑year agreement to run PREPA’s thermal generation fleet, as well as a seven‑year contract to supply liquefied natural gas (LNG) to the island through December 2032.

The restructuring proposal would divide NFE into two separate entities -- one dedicated to its Brazilian operations and a second entity, referred to as “New NFE,” responsible for all remaining assets, including those tied to Puerto Rico. Both entities plan to seek approval for the restructuring through U.S. bankruptcy court.

The development raises important questions about whether Puerto Rico’s government could use the bankruptcy process to end its contract with Genera. The operation and maintenance agreement signed in January 2023 allows for termination if Genera or its parent company files for bankruptcy. How these provisions apply once “New NFE” is formed is uncertain, but NFE has a clear interest in preventing cancellation of the contract, according to the IEEFA. 

If the contract stays in effect, the IEEFA warns that Puerto Rico will likely face heightened pressure from New NFE to expand natural gas purchases. In presentations to investors, NFE characterized Puerto Rico as a significant growth market, projecting an increase in LNG sales from roughly 50 trillion British thermal units (TBtu) to 125 TBtu by late 2026, assuming the conversion of six oil‑fired generating units to gas.

The IEEFA challenges those projections for several reasons: The first is that data submitted quarterly to the Puerto Rico Energy Bureau (PREB) shows NFE supplied only about 24 TBtu to Puerto Rico over the last 12 months. Secondly, NFE’s assumptions rely on high operating levels -- at least 50% capacity -- for four of the six units targeted for conversion. Yet environmental permits restrict the Mayagüez and Megagen units to roughly 33% operation. Recently, Cambalache has run at about 26%, Palo Seco at about 33%, and San Juan at about 36%. Thirdly, no gas infrastructure exists at the Aguirre power complex. Converting Aguirre’s combined‑cycle units -- projected at 27 TBtu/year -- would require an impractical flow of ISO container trucks: about 87 per day, or nearly one every 15 minutes, along a 50‑mile route from NFE’s San Juan terminal. During Puerto Rico’s integrated resource planning process, grid operator LUMA rejected such off‑site gas‑dependent conversions precisely due to the logistical burdens and expected strong community opposition.

The IEEFA concludes that NFE’s likely sales would be closer to the 50 TBtu minimum take‑or‑pay volume in its existing contract, even if additional conversions proceed -- far below the 125 TBtu suggested to investors.

Overall, the IEEFA’s assessment indicates that Genera’s actions will continue to align with the interests of its parent company, prioritizing expanded gas sales over the welfare of Puerto Rico’s electricity customers.

Given NFE’s financial distress and restructuring, the IEEFA suggests that Puerto Rico’s government may have an opportunity to exit a burdensome agreement with a company that has not demonstrated itself to be a reliable partner for the island.