In February 2020, New Fortress Energy (NFE), signed a power purchase agreement (PPA), through which it committed to build a gas-fired plant to generate up to 300 MW of power, which would come into operation on a date that has been postponed several times.
NFE is a newly operating company, listed on the stock market, where it has had an irregular performance this year and last year, since its shares were trading at USD44.34 on January 1; they rose to 46.90 on February 1, and have been losing value throughout the year, closing this Friday, September 24, at USD27.27.
In spite of this, the company is moving forward with its plans to install the plant in Puerto Sandino, showing concern for a factor which could potentially have very negative repercussions for its operation and its investment: the possibility of doing business -or any type of dealings- with an individual or entity sanctioned by the US Government.
In its second quarter report to the Securities and Exchange Commission (SEC), New Fortress Energy admits to its regulator, and also to its shareholders, that “if any of our counterparties are subject to sanctions as a result of these laws and regulations, or changes thereto, we may face issues that include, among others: having to suspend our development or operations temporarily or permanently, being unable to recover previously invested time and capital, or being subject to lawsuits, investigations or regulatory proceedings that could be time-consuming and costly to respond to and could lead to a criminal or civil penalty.”
‘These laws and regulations’ refers to “U.S. trade and economic sanctions, including the U.S. Department of Commerce's Export Administration Regulations and sanctions...maintained by the U.S. Treasury Department's Office of Foreign Assets Control [OFAC]” in their country.
A warning for investors
OFAC has sanctioned some thirty members of the governmental leadership, including Mrs. Murillo and her children Rafael, Juan Carlos, Laureano and Camila; as well as holders and members of the branches of government; ministers, and senior officials of the Army and the National Police, so NFE warns its shareholders of this fact to be on the safe side.
"In addition, it is possible that we could invest time and capital in a project involving a counterparty that could be subject to sanctions," admits the second-quarter report, sent to the SEC.
The facilities that NFE is building in Puerto Sandino, are a liquefied natural gas (LNG) regasification unit and a power plant that will consume about 700 000 gallons per day, to generate the agreed 300 Mw, at $110 per megawatt, according to an agreement signed in February 2020, ratified in October of that same year, when deputies loyal to Ortega approved a special law to offer peace of mind to the project owners.
Although the company has changed the inauguration date of its plant several times, the fact is that a definitive date has not yet been made public. Last July, Wes Edens, NFE's president and CEO, was quoted by Business Wire as saying that they expected to begin "commercial operations... next month in Nicaragua''.
August is over, and September is about to end.
This article was originally published in Spanish in Confidencial and translated by our staff