Mon | May 16, 2022

NFE cancels plan to sell Jamalco power plant

Sagicor takes up 35% of US$285m bond instead of equity

Published:Wednesday | January 19, 2022 | 12:10 AMHuntley Medley/ - Associate Business Editor
President & CEO of Sagicor Group Jamaica Limited Christopher Zacca.
President & CEO of Sagicor Group Jamaica Limited Christopher Zacca.
Chairman & CEO of New Fortress Energy Wes Edens.
Chairman & CEO of New Fortress Energy Wes Edens.

Natural gas supplier New Fortress Energy Inc, NFE, has changed direction on financing around its power plant at the Jamalco complex, but the reason for the switch, which comes seven months after the fundraising plan was first announced, is still not known, although market skittishness may have influenced the about-turn.

Instead of a sale and leaseback arrangement for the Clarendon-based plant, through which the energy company was seeking US$285 million ($44.5 billion) to fund its expansion in other geographic markets in Latin America, New Fortress will be raising debt by floating bonds on the capital market through subsidiary NFE South Power Holdings Limited, while continuing to own the asset.

Sagicor Group Jamaica Limited has already taken up US$100 million ($15.6 billion), which represents about 35 per cent of that investment, but instead of an equity stake in the power plant the financial conglomerate now holds US$100 million of bonds issued by NFE South.

President and CEO of Sagicor Group Christopher Zacca declined to comment on the change in the structure of the US$285 million financing, but in a written response to Financial Gleaner queries pointed to “global market conditions” as influencing both the seven-month timeline for closing the deal and being among the possible reasons for the change in the structure of the financing.

The financial conglomerate, which previously said its participation in the deal would be capped at US$100 million, on Monday announced the completion of its end of the transaction. However, the pricing and tenure of the NFE bonds it has purchased have not been disclosed, making it unclear as to whether the rest of the bonds, US$185 million worth, will have the same or different terms.

Sagicor Group described its portion of the deal as an initial anchor, representing phase one of the transaction. Its investment is spread across several Sagicor entities, which Zacca did not specifically name in comments to the Financial Gleaner on Tuesday.

The NFE South bonds being brokered by Sagicor Investments are fully backed by parent New Fortress Energy.

Regarding the time between the announcement and conclusion of the US$100 million transaction with Sagicor Group, Zacca said “arriving at the optimum structure given global market conditions and then receiving the necessary approvals” impacted the timeline. The COVID-19 pandemic was said to have had no effect on closing the deal-

Asked about the change in Sagicor’s commitment from an equity injection as part of the lease and buy-back arrangement announced in June last year to purchasing bonds, Zacca referred back to his “global market conditions” comment, without elaborating.

All regulatory approvals are said to have been secured from the financial services sector regulator Financial Services Commission, the central bank that supervises Sagicor Bank, and the finance ministry for the Sagicor bond purchase and the financial company’s engagement as lead arranger and broker for the remaining US$185 million worth of NFE South bonds.

New Fortress entered the LNG market in 2016, as a supplier of gas to national electricity grid operator Jamaica Public Service Company Limited, JPS, and has since racked up multiple clients in Jamaica and other regional markets. The power plant in Clarendon, which was newly built at a cost of some US$265 million and commissioned in 2020, was New Fortress’ first foray into the power generation market. It supplies electricity to the Jamalco alumina refinery and JPS.

Sagicor said this week that the money raised from the total bond issue will be used to finance the Clarendon power plant, which is powered by liquefied natural gas or LNG, which is seen as a cleaner and cheaper alternative to crude.

“Sagicor is excited to partner with NFE South Power Holdings Limited to further develop their Clarendon Power Plant, as they continue to provide lower cost, lower carbon energy to Jamaica. We commend NFE for their commitment to improving Jamaica’s energy security for the long term and are looking forward to arranging the remainder of this deal,” Zacca said in a prepared statement referencing the use of cash.

Efforts to reach NFE officials for comment on what it implies for New Fortress’ regional expansion push were unsuccessful.

The remaining US$185 million of NFE South bonds brokered by Sagicor Investments are being shopped to local, regional and international investors.

“We have worked closely with NFE to structure this financing, especially in the context of current global markets, and believe that the structure that we have landed on will appeal to a wide range of investors,” said Sean Newman, chief investment officer and executive vice-president of Sagicor Group, echoing his boss’ upbeat pronouncement on the deal.

“The financing of the region’s first gas-fired, co-generation power plant is a landmark deal that provides investors an attractive opportunity to participate in this key Jamaican asset,” added New Fortress Chairman and CEO Wes Edens in a joint statement with Sagicor Group.

“We look forward to building on this partnership and the opportunities that lie ahead to invest in Jamaica’s energy transition,” Edens said.