New Fortress sales spike with growth of Jamaican operation
Published:Wednesday | November 20, 2019 | 12:25 AMSteven Jackson/ - Senior Business Reporter
New Fortress Energy earned the bulk of its US$50 million in quarterly sales, which translates to about J$7 billion, from its Jamaican operations, the size of which is about to grow with the addition of a new power plant at Jamalco to its energy network.
On October 30, the company switched on its gas-powered plant developed at the alumina refinery complex in Clarendon. It has a capacity of 150MW, according to market filings.
The gas-fired power plant, which is owned by New Fortress, an American company, plus other energy initiatives under way, are expected to drive up demand for LNG in Jamaica, where its supply contracts currently amount to 600,000 gallons of gas per day. It wants to ramp that up to 1.2 million gallons by 2020 and to two million gallons over the medium term.
“Jamalco had its first fire, which was synched with my birthday on October 30,” said New Fortress founder and CEO, Wes Edens, in an investor call last week.
The Jamalco plant will demand 285,000 gallons of gas per day when it fully ramps up production within weeks. It will be supplied with gas by offshore Old Harbour LNG terminal, which is also owned by New Fortress.
The American company’s 150MW Clarendon plant will primarily provide power to Jamalco’s energy-intensive bauxite and alumina operations. Head of Corporate Communications at Jamaica Public Service Company Winsome Callum said the utility would buy the excess power.
“The Jamalco plant is in the commissioning process, and it was first fired in October, and as of today it is providing power to the grid and we expect that to ramp up over next 60 days,” said Brannen McElmurray, chief development officer for New Fortress, on the investor call.
New Fortress, which currently earns most of its revenue from Jamaica, nearly doubled sales to US$50 million for its third-quarter ending September, from US$28.4 million a year earlier. The boost resulted from the commissioning of its Old Harbour terminal.
New Fortress says Jamaica represents a daily market of 6.0 million gallons of LNG, a third or 2.0 million gallons of which it intends to satisfy in the medium term.
Currently, New Fortress operates as the only supplier of natural gas in Jamaica. Its other assets include a gas supply terminal in Montego Bay, and a gas liquefier in Miami, Florida.
‘In a good position’
“We are not a monopoly but from a competitive perspective we are in a very good position,” Edens said in response to an investor query.
New Fortress aims to have a network of 10 terminals by 2022. It plans to commission a terminal in Puerto Rico this quarter and a terminal in Mexico by the fourth quarter 2020, which would become its fifth terminal.
Edens stated that such growth would result in the company earning an operating margin of roughly US$380 million by 2020. Its goal for 2022 is operational profit, or EBITDA, of US$1 billion to US$3 billion annually.
“Obviously, we think the market is substantially bigger than 10 terminals, but that’s a short-term objective,” said Edens.
New Fortress’ rapid regional build-out resulted in the company booking losses at US$54.4 million in the latest quarter, versus a US$13.7 million loss a year earlier. It expects to return to making an operating profit next quarter, with the ramping up of the Puerto Rico terminal and additions to its customer base in Jamaica and Puerto Rico.
Its terminals feed gas to 15 customers, but New Fortress has plans to double its customer base by this year end 2019. It’s in discussions with 126 additional entities as potential customers, according to latest market filings.
New Fortress currently supplies 600,000 gallons of gas per day to its customers in Jamaica, which includes JPS. While its target is to get to 2.0 million gallons over the medium term for Jamaica alone, New Fortress is looking more immediately to grow supplies to 1.4 million gallons across its three-country operation – which spans Jamaica, United States and now Puerto Rico – by the first quarter of 2020; and then to 2.0 million gallons per day the following quarter.