Puerto Rico is grappling with a potential energy crisis following a dispute over liquefied natural gas (LNG) shipments from New Fortress Energy. The company abruptly halted a vital gas shipment, which has forced the island to idle ten out of fourteen temporary power generators. This development raises concerns about power outages during the peak summer demand period.
Josue Colon, the Puerto Rico Energy Chief, criticized the cancellation of the LNG shipment as “unjustified.” He disputed New Fortress Energy’s assertion that it is owed millions of dollars dating back to 2020. With the majority of temporary generators now offline and the remaining units relying on costly, less environmentally friendly diesel, Colon warned that the risk of blackouts has significantly increased.
According to Colon, LNG tankers were expected to arrive in San Juan recently, but they failed to dock. He noted that weather conditions were favorable for docking on Saturday, yet the ships were inexplicably diverted. “Power outages are a possibility,” Colon said, emphasizing that every available megawatt is critical for the island’s energy stability.
The current LNG supply contract between New Fortress Energy and Puerto Rico was set to expire in June 2023. Although a temporary extension was granted, plans for a long-term 15-year agreement worth approximately $20 billion are currently on hold. This pause follows a warning from a federal oversight body that the deal could lead to a near-monopoly on the island’s gas supply.
Colon explained that the exclusivity granted to New Fortress was established in a contract approved by the oversight board in 2018. This arrangement permitted New Fortress to monopolize the only port in northern Puerto Rico capable of receiving natural gas. “Those preexisting conditions are not this administration’s responsibility,” Colon stated.
The cancellation of the LNG shipment represents a significant setback for New Fortress Energy, which is already facing substantial financial challenges. The company’s stock has plummeted roughly 73% since its initial public offering in 2019, with shares recently trading at record lows. According to the latest data from Bloomberg, approximately 58 million shares are currently sold short, accounting for about 32.5% of the company’s float.
New Fortress also has a $270 million payment due in September related to a revolving credit facility, with additional debt maturing over the next two years, as highlighted in a report from Fitch Ratings. An extra $510 million note is set to mature next year, further complicating the company’s financial outlook.
As Puerto Rico navigates this energy crisis, the implications for residents and businesses could be severe if power outages become a frequent occurrence. With the summer heat intensifying, the urgency for a resolution to the LNG shipment dispute has never been greater.
