10-Q: New Fortress Energy Q2 2025: Losses Mount, Debt Covenants Breached

New Fortress Energy Inc. reported a significant net loss and negative operating cash flows for Q2 2025, facing substantial doubt about its ability to continue as a going concern due to debt covenant non-compliance and liquidity challenges.

Summary

• Reported a net loss of $556.8 million for the three months ended June 30, 2025, compared to a net loss of $86.9 million for the same period in 2024.
• Incurred a net loss of $754.2 million for the six months ended June 30, 2025, a substantial increase from $30.2 million for the same period in 2024.
• Operating loss for Q2 2025 was $387.3 million, a significant decline from an operating income of $44.3 million in Q2 2024.
• Total revenues decreased to $301.7 million for Q2 2025 from $428.0 million in Q2 2024, and to $772.2 million for H1 2025 from $1,118.3 million in H1 2024.
• Recognized a goodwill impairment expense of $582.2 million in Q2 2025, primarily due to a significant decline in stock price, increased weighted average cost of capital, and reduced forecasted cash flows.
• Recorded an asset impairment expense of $117.3 million in Q2 2025, including $47.3 million for the Lakach deepwater project (development no longer probable) and $48.2 million for the Pennsylvania development project (asset group not recoverable).
• Generated negative operating cash flows of $384.2 million for the six months ended June 30, 2025, contrasting with cash provided of $163.0 million in the prior year period.
• Management concluded there is 'substantial doubt as to the Company’s ability to continue as a going concern' due to operating losses, negative cash flows, increased interest expense, cash tax payments from the Jamaica Business sale, and potential debt covenant breaches.
• Does not expect to be in compliance with the consolidated first lien ratio or the fixed charge coverage ratio for the fiscal quarter ending September 30, 2025, under its Revolving Facility, Letter of Credit Facility, and Term Loan A Credit Agreement.
• Failed to provide a required $79.1 million bank guarantee for PortoCem Debentures by the August 17, 2025 deadline, giving debenture holders the right to declare an event of early maturity, which could trigger cross-acceleration clauses on substantially all outstanding indebtedness.
• The $510.9 million aggregate principal amount of 2026 Notes outstanding could trigger springing maturities for $2.7 billion of New 2029 Notes, the Revolving Facility, Term Loan B ($1.27 billion), and Term Loan A ($295.0 million) if not addressed 91 days prior to maturity.
• Total debt increased to $8.99 billion as of June 30, 2025, from $8.89 billion as of December 31, 2024, with the current portion of long-term debt rising to $1.18 billion from $539.1 million.
• The Revolving Facility is fully drawn with $710.4 million in revolving loans plus $19.5 million in letters of credit as of June 30, 2025.
• The Term Loan B Credit Agreement was amended in March 2025 to provide incremental term loans of up to $425.0 million, increasing the total outstanding principal to $1.27 billion.
• The Term Loan A Credit Agreement was amended in May 2025, increasing the applicable margin to 6.70% for SOFR loans and 5.70% for Base Rate Loans, with a Term SOFR floor of 4.30% and a base rate minimum of 5.30%.

Sentiment

Score: 2

Explanation: The company reported significant losses, negative operating cash flow, and substantial doubt about its ability to continue as a going concern due to debt covenant breaches and liquidity issues. While there are some positive project developments, the immediate financial health and debt situation are highly concerning.

Positives

• Recognized a gain of $472.7 million from the sale of the Jamaica Business in the first half of 2025.
• The High Court of Ireland ruled in September 2024 that An Bord Pleanla (ABP) did not have appropriate grounds for denying the LNG terminal and power plant permit, and ABP withdrew its appeal in March 2025.
• ABP granted the company's application to construct a 600 MW power plant and a 220 kV electricity interconnect in Ireland in March 2025.
• The first Fast LNG unit off Altamira, Mexico, began producing LNG in July 2024 and was placed into service in Q4 2024, with optimization projects underway to increase liquefaction capacity.
• The Santa Catarina Facility in Brazil was placed into service in Q4 2024.
• Acquired PortoCem Gerao de Energia S.A. in March 2024, which includes a 15-year 1.6GW capacity reserve contract in Brazil.
• PortoCem debenture holders unanimously waived early maturity events on May 23, 2025, and June 26, 2025, following credit rating downgrades, and again on August 7, 2025, for a missed bank guarantee deadline.
• The company is pursuing a $659 million request for equitable adjustment related to the early termination of its Puerto Rico emergency power services contract.
• The first clean hydrogen project, ZeroPark I in Beaumont, Texas, is expected to be the largest green hydrogen plant in the U.S. and has a binding offtake commitment.
• Launched Klondike, a power and data center development business, with over 1,000 acres of developable land across Brazil, Ireland, and the United States.

Negatives

• Reported a net loss of $556.8 million for Q2 2025 and $754.2 million for H1 2025, indicating significant financial deterioration.
• Experienced negative operating cash flows of $384.2 million for H1 2025.
• Incurred a substantial goodwill impairment expense of $582.2 million in Q2 2025.
• Recorded an asset impairment expense of $117.3 million in Q2 2025, including the abandonment of the Lakach deepwater project.
• Total revenues decreased significantly in Q2 2025 and H1 2025 compared to prior periods, partly due to lower cargo sales and the sale of the Jamaica Business.
• Increased interest expense by $262.4 million for H1 2025 compared to H1 2024, driven by a higher total principal debt balance.
• Management concluded there is 'substantial doubt as to the Company’s ability to continue as a going concern' due to liquidity and operational challenges.
• Expects to be in non-compliance with key debt covenants (consolidated first lien ratio and fixed charge coverage ratio) for Q3 2025, which could lead to acceleration of substantially all outstanding indebtedness.
• Failed to provide a required $79.1 million bank guarantee for PortoCem Debentures by the August 17, 2025 deadline, potentially triggering early maturity for those debentures and cross-acceleration of other debt.
• Springing maturity clauses on $510.9 million of 2026 Notes could accelerate $2.7 billion of New 2029 Notes, the Revolving Facility, Term Loan B, and Term Loan A.
• The Revolving Facility is fully drawn, limiting further borrowing capacity.
• The gas supply agreement with PREPA in Puerto Rico is set to expire on September 12, 2025, with no assurances of a long-term solution.
• The continued development of the Ireland Facility is uncertain due to regulatory risks.
• Identified material weaknesses in internal control over financial reporting, and disclosure controls and procedures were not effective as of June 30, 2025.
• The company is no longer permitted to pay dividends to shareholders under certain intercompany agreements.
• Alunorte initiated arbitration proceedings claiming $68.9 million in damages for alleged delays in gas supply at the Barcarena Facility.

Risks

• Substantial doubt exists regarding the ability to continue as a going concern and satisfy liquidity needs, dependent on completing certain transactions and delaying capital expenditures.
• Material weaknesses in internal control over financial reporting have been identified, and disclosure controls and procedures were not effective as of June 30, 2025, potentially leading to material misstatements and loss of investor confidence.
• Construction and operational risks related to facilities and assets, including cost overruns and delays, can materially and adversely affect the business.
• Failure of LNG or natural gas to be a competitive source of energy in operating markets could adversely affect expansion strategy.
• Complex regulatory and legal environments, including actions by governmental entities or changes to regulation or legislation, particularly related to permits, approvals, and authorizations, pose significant challenges.
• Delays or failure to obtain and maintain approvals and permits from governmental and regulatory agencies can impede operations and construction.
• Failure to obtain a return on investments for project development and business strategy implementation could negatively impact financial performance.
• Inability to maintain sufficient working capital for business and asset development and operation could limit growth.
• Dependence on a limited number of customers means the loss of a significant customer could adversely affect operating results.
• Cyclical or other changes in the demand for and price of LNG and natural gas may adversely affect the business and customer performance.
• Inability to procure LNG at necessary quantities or favorable prices, or to manage LNG supply and price risks, including hedging arrangements, could lead to financial losses.
• The company's Fast LNG technology is not yet proven, and there is a risk it may not be implemented as planned or realize expected time and cost savings.
• The data center infrastructure business (Klondike) has no operating history and may not be profitable, posing risks to growth prospects and financial condition.
• Incurrence of significant debt and potential inability to service it or comply with covenant restrictions could lead to acceleration of indebtedness.
• Dependence on obtaining substantial additional funding from various sources, which may not be available or may only be available on unfavorable terms.
• Economic, political, social, and other risks related to the jurisdictions of operation, including potential instability and adverse conditions.
• Weather events or other natural or manmade disasters or phenomena could have a material adverse effect on operations and projects.
• Increasing transportation regulations may increase costs and negatively impact results of operations.
• Cabotage laws, such as the Jones Act, could affect the operation of chartered vessels in certain jurisdictions.
• Information technology failures and cyberattacks could significantly affect the company.
• Insurance may be insufficient to cover losses that may occur to property or result from operations.
• Dependence on key members of management, the loss of whom could disrupt business operations.
• Increased labor costs and regulation, and the unavailability of skilled workers or failure to attract and retain qualified personnel, could adversely affect the company.
• Business could be affected adversely by labor disputes, strikes, or work stoppages.
• Operational and consolidated financial results are dependent on the results of subsidiaries, affiliates, joint ventures, and special purpose entities.
• Engaging in mergers, sales, acquisitions, divestments, reorganizations, or similar transactions carries risks of failure to successfully complete or realize expected value.
• Changes in tax laws in any country of operation could adversely affect the company.
• Involvement in legal proceedings may result in unfavorable outcomes.
• The market price and trading volume of Class A common stock has been and may continue to be volatile, resulting in rapid and substantial losses for stockholders.
• A small number of original investors have the ability to direct a significant amount of common stock, and their interests may conflict with those of other stockholders.
• Future sales and issuances of Class A common stock or convertible securities could result in additional dilution and cause share price to fall.
• The declaration and payment of dividends to holders of Class A common stock is at the discretion of the board of directors, and no dividends are expected for the foreseeable future.
• The incurrence or issuance of debt ranking senior to Class A common stock, and future issuances of equity or equity-related securities, may negatively affect the market price of Class A common stock.
• The company is unable to predict the extent to which global pandemics and health crises will negatively affect operations, financial performance, or strategic objectives.

Future Outlook

Forecasted cash flows are expected to be impacted by reduced earnings following the sale of the Jamaica Business, increased interest expense, and cash tax payments resulting from the taxable gain on the sale. The company is evaluating strategic alternatives including asset sales, capital raising, debt amendments, and refinancing transactions. The long-term gas sale agreement with PREPA is uncertain, and the continued development of the Ireland project faces regulatory risks. The company plans to participate in power auctions in Brazil in 2025 and is optimizing its first Fast LNG unit.

Management Comments

• Management has concluded that, the Company’s current liquidity and forecasted cash flows from operations are not probable to be sufficient to support, in full, its obligations as they become due, and there is substantial doubt as to the Company’s ability to continue as a going concern.
• The Company is currently engaged in discussions with holders of the PortoCem Debentures to obtain a waiver of the debenture holders ability to declare an event of early maturity.
• Should the Company not be in compliance with covenants in the Revolving Facility, Letter of Credit Facility and Term Loan A, the Company will engage in negotiations with these lenders to obtain a waiver to avoid acceleration of outstanding balances.
• The Company has also initiated a process to evaluate strategic alternatives and has retained a financial advisor to assist in this evaluation.
• The Company, along with its advisors, is considering all options available, including asset sales, capital raising, debt amendments and refinancing transactions, and other strategic transactions that seek to provide additional liquidity and relief from acceleration under its debt agreements.
• There are inherent uncertainties as the outcome of these negotiations and potential transactions described above are outside managements control, and therefore there are no assurances that management will be successful in these negotiations and that any of these potential transactions will occur.
• In addition, there can be no assurances that these transactions will sufficiently improve the Company's liquidity or that the Company will otherwise realize the anticipated benefits.
• The Company believes that there are remedies available under the customer contract, and is currently in pursuit of these remedies.
• The Company is currently reviewing the impact that the adoption of ASU 2024-01 and ASU 2024-03 may have on the Company's financial statements and disclosures.
• The Company continuously evaluates these developments and the potential impact of the Pillar Two framework.
• The Company believes Alunorte’s claims are without merit and not supported by the contract between the parties, and as a result the Company plans to vigorously defend itself in these proceedings.
• The Company does not expect to be in compliance with the consolidated first lien debt ratio or the fixed charge coverage ratio in the Revolving Facility for the fiscal quarter ending September 30, 2025.
• The Company did not provide the required $79,100 bank guarantee prior to August 17, 2025, and is currently in discussions with the debenture holders to delay or eliminate this requirement.

Industry Context

New Fortress Energy operates in the global energy infrastructure sector, focusing on LNG, natural gas, and power generation, with a strategic shift towards modular LNG manufacturing (Fast LNG) and clean hydrogen (ZeroParks). The company is also expanding into digital infrastructure with Klondike, targeting hyperscale data centers. The industry faces volatility from geopolitical events impacting natural gas and LNG markets. The company's strategy to mitigate price fluctuations through Henry Hub-indexed contracts and proprietary FLNG production is a key industry trend. Competition is intense, with larger, more resourced players, and the company is navigating complex regulatory environments in various international jurisdictions.

Comparison to Industry Standards

• The company's Fast LNG design aims to be 'faster and more economical to construct than many traditional liquefaction solutions,' suggesting a competitive advantage in deployment speed and cost.
• ZeroPark I is expected to be 'the largest green hydrogen plant in the United States,' positioning the company as a leader in this emerging clean energy sector.
• The company's pricing strategy, largely based on the Henry Hub index plus a fixed fee, is a common industry practice to manage exposure to natural gas price volatility.
• The company faces 'intense competition from independent, technology-driven companies as well as from both major and other independent oil and natural gas companies and utilities,' many of which have 'longer operating histories, more development experience, greater name recognition, larger staffs, larger and more versatile fleets, and substantially greater financial, technical and marketing resources.'

Management Changes

Corporate Governance

Legal Proceedings

• Alunorte Alumina do Norte do Brasil S.A. initiated arbitration proceedings at the International Chamber of Commerce (ICC), claiming damages up to BRL 375.7 million ($68.9 million) for alleged delays in gas supply at the Barcarena Facility. The company plans to vigorously defend itself.
• The San Juan Facility is subject to FERC jurisdiction, requiring an application for authorization to operate, which remains pending since September 2021.
• The U.S. Coast Guard (USCG) filed a Letter of Recommendation with FERC against proposed ship-to-ship transfers in San Juan port and issued a Letter of Warning regarding ongoing operations in September 2024. The company withdrew its appeal in February 2025 after submitting updated operational plans.
• FERC issued a notice of intent to prepare an Environmental Impact Statement for the San Juan Facility in October 2024.

Related Party Transactions

• Fortress Investment Group LLC (where CEO Wesley R. Edens and Director Randal A. Nardone are employed) charges the company for administrative and general expenses. Expenses were $382,000 for Q2 2025 and $500,000 for H1 2025. Amounts due to Fortress were $489,000 as of June 30, 2025.
• The company charters an aircraft owned by CEO Wesley R. Edens for business purposes. Charter costs were $146,000 for Q2 2025 and $1,098,000 for H1 2025. Amounts due to this affiliate were $197,000 as of June 30, 2025.
• The company provides administrative services to Fortress-affiliated entities and is fully reimbursed. Amounts due from affiliates were $3,349,000 as of June 30, 2025.
• The company subleased office space to affiliates of entities managed by Fortress, incurring $362,000 in rent and related expenses for Q2 2025 and $689,000 for H1 2025.
• The company leases land from Jefferson Terminal South LLC, an indirect, majority-owned subsidiary of a public company managed by a Fortress affiliate. Expense was $183,000 for Q2 2025 and $366,000 for H1 2025.
• In March 2025, the company acquired DevTech Environment Limited's 10% non-controlling interest in a consolidated subsidiary and terminated a consulting arrangement for a cash payment of $950,000.

Stakeholder Impact

• Shareholders face significant risks due to substantial net losses, goodwill impairment, and management's conclusion of substantial doubt about the company's ability to continue as a going concern. No dividends are expected for the foreseeable future, and potential future equity issuances could dilute existing holdings.
• Lenders and creditors are at high risk of debt acceleration due to anticipated breaches of financial covenants and the missed bank guarantee deadline for PortoCem Debentures, which could trigger cross-acceleration clauses on a significant portion of the company's $8.99 billion debt.
• Employees may be impacted by restructuring, cost-saving initiatives, and potential labor disputes, although share-based compensation plans are in place.
• Customers, particularly PREPA, face uncertainty regarding the renewal of gas supply agreements, and the company is involved in arbitration with Alunorte over alleged supply delays.
• Suppliers may experience impacts from project delays and changes in procurement strategies.
• Regulatory bodies are actively involved in ongoing legal and regulatory proceedings concerning the company's operations and permitting in various jurisdictions.

Next Steps

• Engage in discussions with PortoCem Debenture holders to obtain a waiver for the missed bank guarantee.
• Negotiate with lenders for Revolving Facility, Letter of Credit Facility, and Term Loan A to obtain waivers for expected covenant non-compliance.
• Continue evaluating strategic alternatives, including asset sales, capital raising, debt amendments, and refinancing transactions.
• Work towards a long-term gas sale agreement with PREPA for Puerto Rico.
• Continue assessing options for future developments of the Ireland Facility.
• Participate in power auctions anticipated in 2025 in Brazil.
• Continue optimizing the first Fast LNG unit in Altamira, Mexico, to increase liquefaction capacity.
• Pursue a $659 million request for equitable adjustment related to the early termination of the Puerto Rico emergency power services contract.
• Continue design, engineering, and permitting for ZeroPark I in Beaumont, Texas.
• Develop a geographically diverse portfolio of data center sites for Klondike.
• Remediate material weaknesses in internal control over financial reporting.
• Monitor the impact of the One Big Beautiful Bill Act (OBBBA) and Pillar Two framework on tax provision.

Key Dates

Recommendation

The filing presents a dire financial situation with substantial doubt about the company's ability to continue as a going concern. Significant net losses, negative operating cash flow, and large impairment charges highlight severe operational and financial distress. The company is facing imminent breaches of debt covenants and has already missed a critical bank guarantee deadline, which could trigger cross-acceleration of substantially all its $8.99 billion debt. While management is pursuing strategic alternatives, the outcome is uncertain and outside their control. The combination of severe financial deterioration, high debt, and significant going concern risk makes this a strong sell.

Keywords

LNG, natural gas, energy infrastructure, power generation, SEC filing, financial results, debt covenants, liquidity, impairment, Fast LNG, Brazil, Puerto Rico, Mexico, Ireland, risk management, corporate governance, capital expenditures, asset sales, financial reporting, stock volatility, green hydrogen, data centers, going concern