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NFEnergía to Accelerate Puerto Rico’s Transition to Clean Energy

By on December 6, 2018

Editor’s note: The following originally appeared in the Dec. 6-12, 2018, issue of Caribbean Business.

NFEnergía, the company that recently obtained the five-year contract to supply gas to San Juan’s Units 5 and 6 of the Puerto Rico Electric Power Authority (Prepa), hopes to replicate in Puerto Rico what it has done in Jamaica—accelerate the transition from fuel oil to clean energy.

While NFEnergía, which operates globally as New Fortress Energy (NFE), will also be in charge of completing the necessary changes or improvements to Units 5 and 6 to use natural gas, Fernando Padilla, director of the Office of Restructuring & Fiscal Affairs for Prepa, says the company’s role will solely be to supply gas and Prepa will foot the bill for the estimated $20 million to $30 million in improvements from its own operational funds. Prepa also expects to pay about $140 million to $150 million for the natural gas supply.

Founded in 2014, NFE is a global energy infrastructure company focused on accelerating the world’s transition from oil-based fuels to clean energy. Based in the United States, NFE built the first liquefied natural gas (LNG) production facility in the state of Florida and is delivering natural gas and building LNG facilities for customers throughout North America and the Caribbean. The Puerto Rico subsidiary of New Fortress Energy is NFEnergía.

In 2016, the company made the first delivery of natural gas to Jamaica to support grid power. It has invested in two LNG terminals in Jamaica, which supply natural gas to more than 400 megawatts (MWs) worth of modern gas-fired power generation and many local industrial customers. The company also recently announced major LNG terminal projects in Mexico and Ireland, and has several private customers in the Bahamas.

During an interview with Caribbean Business, Jake Suski, managing director & spokesman for NFE, said the company self-funds infrastructure projects around the world.

During the interview Suski contradicted Padilla as he appeared to be under the impression that his company was also going to be in charge of improvements to Units 5 and 6. He said such changes were simple, requiring the change of certain fuels and other minor improvements.

What infrastructure is needed to supply natural gas?

Suski said the company is building a $100 million microfuel facility in San Juan along with truck-loading operations. “Independent of anything Prepa has, we made the decision last year to invest in Puerto Rico. We are going to be announcing our first commercial customer in coming weeks and three more [customers] in January,” he said. “Our facility has the ability to serve multiple customers, including Prepa.”

Padilla said part of the reason New Fortress Energy or NFEnergía was selected, is because, for the first time, “Puerto Rico will be able to have a natural gas facility in the north without [having to install] pipelines or anything.” Prepa already has a LNG facility at the Costa Sur plant in Guayanilla.

Padilla said the contract with NFEnergía is for five years with the option to add three five-year extensions.

The use of natural gas is expected to bring down the cost of energy in Puerto Rico just as it has done in Jamaica. That Caribbean country pays about 40 cents per kilowatt-hour for energy, according to media outlets there. Besides the supply of natural gas, New Fortress Energy partnered with Jamaica’s electric company to supply natural gas to a new 190 MWs natural gas powerplant at Old Harbour in St. Catherine Parish by 2019.

NFEnergía is also developing a co-generation powerplant in Jamaica to supply steam to the Jamalco alumina refinery in Clarendon and about 94 MWs of power to the grid. That powerplant will be supplied by the same floating storage and regasification terminal offshore from Old Harbour.

When these projects are completed, nearly all of Jamaica’s daily electricity needs will be met by natural gas-powered generation (400+MWs) and renewables (200 MWs including rooftop panels).

As a result, the Moody’s credit rating agency raised the country’s credit rating. Suski said that while his company had nothing to do with the credit-rating decision, Moody’s cited the lower volatility and other ancillary benefits of using natural gas, which is also more compatible with renewables, for the decision to raise the credit rating.

“If you [Puerto Rico] were to switch, you should experience a similar effect,” he said.

The Puerto Rico Legislature has yet to pass its new energy policy, which will require use of renewables for all of Puerto Rico by 2050. Suski said he praised the legislation, noting that his company is focused on helping make the transition to renewables.

Padilla said the change to natural gas for the important Units 5 and 6 is estimated to bring $350 million in savings over the next five years.

Meanwhile, Wesley R. Edens, founder of New Fortress Energy, is also co-founder of Fortress Investment Group, which invests in private equity, credit, liquid markets and traditional asset management. Suski says the firm has not invested in Puerto Rico debt.

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