New Fortress Energy Inc. - Quarter Report: 2020 June (Form 10-Q)

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, DC 20549

FORM 10-Q

☒	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended June 30, 2020

☐	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from __________ to__________

Commission File Number: 001-38790

New Fortress Energy LLC

(Exact Name of Registrant as Specified in its Charter)

Delaware		83-1482060
(State or other jurisdiction of incorporation or organization)		(I.R.S. Employer Identification No.)

111 W. 19th Street, 8th Floor New York, NY		10011
(Address of principal executive offices)		(Zip Code)

Registrant’s telephone number, including area code: (516) 268-7400

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer ☐		Accelerated filer ☒
Non-accelerated filer ☐		Smaller reporting company ☐
		Emerging growth company ☒

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒

Securities registered pursuant to Section 12(b) of the Act:

Title of each class	Trading Symbol(s)	Name of each exchange on which registered
Class A shares, representing limited liability company interests	“NFE”	NASDAQ Global Select Market

As of July 30, 2020, the registrant had 168,706,396 Class A shares outstanding.

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TABLE OF CONTENTS

GLOSSARY OF TERMS		ii

CAUTIONARY STATEMENT ON FORWARD-LOOKING STATEMENTS		iii

PART I FINANCIAL INFORMATION		1

Item 1.	Financial Statements.	1

Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations.	25

Item 3.	Quantitative and Qualitative Disclosures About Market Risks.	38

Item 4.	Controls and Procedures.	39

PART II OTHER INFORMATION		40

Item 1.	Legal Proceedings.	40

Item 1A.	Risk Factors.	40

Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds.	71

Item 3.	Defaults upon Senior Securities.	71

Item 4.	Mine Safety Disclosures.	71

Item 5.	Other Information.	71

Item 6.	Exhibits.	74

SIGNATURES		76

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GLOSSARY OF TERMS

As commonly used in the liquefied natural gas industry, to the extent applicable and as used in this Quarterly Report on Form 10-Q (“Quarterly Report”), the terms listed below have the following meanings:

Btu	the amount of heat required to raise the temperature of one avoirdupois pound of pure water from 59 degrees Fahrenheit to 60 degrees Fahrenheit at an absolute pressure of 14.696 pounds per square inch gage

CAA	Clean Air Act

CERCLA	Comprehensive Environmental Response, Compensation and Liability Act

CWA	Clean Water Act

DOE	U.S. Department of Energy

FERC	Federal Energy Regulatory Commission

GAAP	generally accepted accounting principles in the United States

GHG	greenhouse gases

GSA	gas sales agreement

Henry Hub	a natural gas pipeline located in Erath, Louisiana that serves as the official delivery location for futures contracts on the New York Mercantile Exchange

ISO container	International Organization of Standardization, an intermodal container

LNG	natural gas in its liquid state at or below its boiling point at or near atmospheric pressure

MMBtu	one million Btus, which corresponds to approximately 12.1 LNG gallons

MW	megawatt. We estimate 2,500 LNG gallons would be required to produce one megawatt

NGA	Natural Gas Act of 1938, as amended

non-FTA countries	countries without a free trade agreement with the United States providing for national treatment for trade in natural gas and with which trade is permitted

OPA	Oil Pollution Act

OUR	Office of Utilities Regulation (Jamaica)

PHMSA	Pipeline and Hazardous Materials Safety Administration

PPA	power purchase agreement

SSA	steam supply agreement

TBtu	one trillion Btus, which corresponds to approximately 12,100,000 LNG gallons

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CAUTIONARY STATEMENT ON FORWARD-LOOKING STATEMENTS

This Quarterly Report contains forward-looking statements regarding, among other things, our plans, strategies, prospects and projections, both business and financial. All statements contained in this Quarterly Report other than historical information are forward-looking statements that involve known and unknown risks and relate to future events, our future financial performance or our projected business results. In some cases, you can identify forward-looking statements by terminology such as “may,” “will,” “should,” “expects,” “plans,” “anticipates,” “believes,” “estimates,” “predicts,” “projects,” “targets,” “potential” or “continue” or the negative of these terms or other comparable terminology. Such forward-looking statements are necessarily estimates based upon current information and involve a number of risks and uncertainties. Actual events or results may differ materially from the results anticipated in these forward-looking statements as a result of a variety of factors. While it is impossible to identify all such factors, factors that could cause actual results to differ materially from those estimated by us include:

•

our limited operating history;

•

loss of one or more of our customers;

•

inability to procure LNG on a fixed-price basis, or otherwise to manage LNG price risks, including hedging arrangements;

•

the completion of construction on our LNG terminals, power plants or Liquefaction Facilities (as defined herein) and the terms of our construction contracts for the completion of these assets;

•

cost overruns and delays in the completion of one or more of our LNG terminals, power plants or Liquefaction Facilities, as well as difficulties in obtaining sufficient financing to pay for such costs and delays;

•

our ability to obtain additional financing to effect our strategy;

•

failure to produce or purchase sufficient amounts of LNG or natural gas at favorable prices to meet customer demand;

•

hurricanes or other natural or manmade disasters;

•

impacts of the COVID-19 pandemic on our or our customers’ demand or customers' or suppliers’ operations and financial status;

•

failure to obtain and maintain approvals and permits from governmental and regulatory agencies;

•

operational, regulatory, environmental, political, legal and economic risks pertaining to the construction and operation of our facilities;

•

inability to contract with suppliers and tankers to facilitate the delivery of LNG on their chartered LNG tankers;

•

cyclical or other changes in the demand for and price of LNG and natural gas and alternative fuels including oil-based fuels;

•

failure of natural gas to be a competitive source of energy in the markets in which we operate, and seek to operate;

•

competition from third parties in our business;

•

inability to re-finance our outstanding indebtedness or implement our financing plans;

•

changes to environmental and similar laws and governmental regulations that are adverse to our operations;

•

inability to enter into favorable agreements and obtain necessary regulatory approvals;

•

the tax treatment of us or of an investment in our Class A shares;

•

a major health and safety incident relating to our business;

iii

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•

increased labor costs, and the unavailability of skilled workers or our failure to attract and retain qualified personnel;

•

risks related to the jurisdictions in which we do, or seek to do, business, particularly Florida, Puerto Rico, Jamaica, Angola, Nicaragua and other jurisdictions in the Caribbean; and

•

our inability to forecast the anticipated benefits of converting from a limited liability company to a corporation.

All forward-looking statements speak only as of the date of this Quarterly Report. When considering forward-looking statements, you should keep in mind the risks set forth under “Item 1A. Risk Factors” and other cautionary statements included in our Annual Report on Form 10-K for the year ended December 31, 2019 (our “Annual Report”), this Quarterly Report and in our other filings with the Securities and Exchange Commission (the “SEC”). The cautionary statements referred to in this section also should be considered in connection with any subsequent written or oral forward-looking statements that may be issued by us or persons acting on our behalf. We undertake no duty to update these forward-looking statements, even though our situation may change in the future. Furthermore, we cannot guarantee future results, events, levels of activity, performance, projections or achievements.

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PART I

FINANCIAL INFORMATION

Item 1.

Financial Statements.

New Fortress Energy LLC

Condensed Consolidated Balance Sheets

As of June 30, 2020 and December 31, 2019

(Unaudited, in thousands of U.S. dollars, except share amounts)

	June 30, 2020			December 31, 2019
Assets
Current assets
Cash and cash equivalents	$	167,316		$	27,098
Restricted cash		32,946			30,966
Receivables, net of allowances of $0 and $0, respectively		65,069			49,890
Inventory		50,885			63,432
Prepaid expenses and other current assets		28,941			39,734
Total current assets		345,157			211,120

Restricted cash		23,131			34,971
Construction in progress		346,951			466,587
Property, plant and equipment, net		475,198			192,222
Right-of-use assets		106,993			-
Intangible assets, net		42,931			43,540
Finance leases, net		915			91,174
Investment in equity securities		323			2,540
Deferred tax assets, net		2,744			34
Other non-current assets		77,170			81,626
Total assets	$	1,421,513		$	1,123,814

Liabilities
Current liabilities
Accounts payable	$	24,854		$	11,593
Accrued liabilities		165,292			54,943
Current lease liabilities		26,835			-
Due to affiliates		6,586			10,252
Other current liabilities		26,134			25,475
Total current liabilities		249,701			102,263

Long-term debt		950,238			619,057
Non-current lease liabilities		57,166			-
Deferred tax liabilities, net		20			241
Other long-term liabilities		14,314			14,929
Total liabilities		1,271,439			736,490

Commitments and contingences (Note 18)

Stockholders’ equity
Class A shares, 169,174,104 shares issued and 168,587,346 outstanding as of June 30, 2020; 23,607,096 shares issued and outstanding as of December 31, 2019		341,675			130,658
Treasury shares, 586,758 shares as of June 30, 2020, at cost; 0 shares at December 31, 2019, at cost		(6,172	)		-
Class B shares, 0 shares issued and outstanding as of June 30, 2020; 144,342,572 shares, issued and outstanding as of December 31, 2019		-			-
Accumulated deficit		(192,852	)		(45,823	)
Accumulated other comprehensive income (loss)		352			(30	)
Total stockholders' equity attributable to NFE		143,003			84,805
Non-controlling interest		7,071			302,519
Total stockholders' equity		150,074			387,324
Total liabilities and stockholders' equity	$	1,421,513		$	1,123,814

The accompanying notes are an integral part of these condensed consolidated financial statements.

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New Fortress Energy LLC

Condensed Consolidated Statements of Operations and Comprehensive Loss

For the three and six months ended June 30, 2020 and 2019

(Unaudited, in thousands of U.S. dollars, except share and per share amounts)

	Three Months Ended June 30,						Six Months Ended June 30,
	2020			2019			2020			2019
Revenues
Operating revenue	$	76,177		$	31,738		$	139,679		$	57,876
Other revenue		18,389			8,028			29,417			11,841
Total revenues		94,566			39,766			169,096			69,717

Operating expenses
Cost of sales		69,899			44,043			138,115			77,392
Operations and maintenance		9,500			5,403			17,983			9,902
Selling, general and administrative		31,846			32,169			60,216			81,918
Contract termination charges and loss on mitigation sales		123,906			-			124,114			-
Depreciation and amortization		7,620			2,110			12,874			3,801
Total operating expenses		242,771			83,725			353,302			173,013
Operating loss		(148,205	)		(43,959	)		(184,206	)		(103,296	)
Interest expense		17,198			6,199			31,088			9,483
Other expense (income), net		999			920			1,610			(1,655	)
Loss on extinguishment of debt, net		-			-			9,557			-
Loss before taxes		(166,402	)		(51,078	)		(226,461	)		(111,124	)
Tax expense		117			155			113			401
Net loss		(166,519	)		(51,233	)		(226,574	)		(111,525	)
Net loss attributable to non-controlling interest		29,094			45,047			80,851			91,782
Net loss attributable to stockholders	$	(137,425	)	$	(6,186	)	$	(145,723	)	$	(19,743	)

Net loss per share – basic and diluted	$	(2.40	)	$	(0.28	)	$	(3.49	)	$	(1.09	)

Weighted average number of shares outstanding – basic and diluted		57,341,215			22,114,002			41,771,849			18,154,939

Other comprehensive loss:
Net loss	$	(166,519	)	$	(51,233	)	$	(226,574	)	$	(111,525	)
Unrealized gain on currency translation adjustment		(520	)		-			(151	)		-
Comprehensive loss		(165,999	)		(51,233	)		(226,423	)		(111,525	)
Comprehensive loss attributable to non-controlling interest		29,009			45,047			81,082			91,782
Comprehensive loss attributable to stockholders	$	(136,990	)	$	(6,186	)	$	(145,341	)	$	(19,743	)

The accompanying notes are an integral part of these condensed consolidated financial statements.

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New Fortress Energy LLC

Condensed Consolidated Statements of Changes in Stockholders’ Equity

For the three and six months ended June 30, 2020 and 2019

(Unaudited, in thousands of U.S. dollars, except share amounts)

	Members' Capital				Class A shares				Class B shares					Treasury shares						Accumulated			Accumulated other comprehensive			Non- controlling			Total stockholders'
	Units		Amounts		Shares		Amount		Shares			Amount		Shares			Amount			deficit			(loss) income			Interest			equity
Balance as of December 31, 2019		-	$	-		23,607,096	$	130,658		144,342,572		$	-		-		$	-		$	(45,823	)	$	(30	)	$	302,519		$	387,324
Cumulative effect of accounting change (ASC 842)		-		-		-		-		-			-		-			-			(1,306	)		-			(7,779	)		(9,085	)
Net loss		-		-		-		-		-			-		-			-			(8,298	)		-			(51,757	)		(60,055	)
Other comprehensive loss		-		-		-		-		-			-		-			-			-			(53	)		(316	)		(369	)
Share-based compensation expense		-		-		-		2,508		-			-		-			-			-			-			-			2,508
Issuance of shares for vested RSUs		-		-		1,212,907		-		-			-		-			-			-			-			-			-
Shares withheld from employees related to share-based compensation, at cost		-		-		-		-		-			-		(583,508	)		(6,132	)		-			-			-			(6,132	)
Balance as of March 31, 2020		-	$	-		24,820,003	$	133,166		144,342,572		$	-		(583,508	)	$	(6,132	)	$	(55,427	)	$	(83	)	$	242,667		$	314,191
Net loss		-		-		-		-		-			-		-			-			(137,425	)		-			(29,094	)		(166,519	)
Other comprehensive income		-		-		-		-		-			-		-			-			-			435			85			520
Share-based compensation expense		-		-		-		1,922		-			-		-			-			-			-			-			1,922
Issuance of shares for vested RSUs		-		-		11,529		-		-			-		-			-			-			-			-			-
Shares withheld from employees related to share-based compensation, at cost		-		-		-		-		-			-		(3,250	)		(40	)		-			-			-			(40	)
Exchange of NFI units		-		-		144,342,572		206,587		(144,342,572	)		-		-			-			-			-			(206,587	)		-
Balance as of June 30, 2020		-	$	-		169,174,104	$	341,675		-		$	-		(586,758	)	$	(6,172	)	$	(192,852	)	$	352		$	7,071		$	150,074

	Members' Capital						Class A shares				Class B shares				Treasury shares				Accumulated			Accumulated other comprehensive			Non- controlling			Total stockholders'
	Units			Amounts			Shares		Amount		Shares		Amount		Shares		Amount		deficit			(loss) income			Interest			equity
Balance as of December 31, 2018		67,983,095		$	426,741			-	$	-		-	$	-		-	$	-	$	(158,423	)	$	(11	)	$	14,340		$	282,647
Activity prior to the IPO and related organizational transactions:
Net loss		-			-			-		-		-		-		-		-		(7,923	)		11			(91	)		(8,003	)
Effects of the IPO and related organizational transactions:
Issuance of Class A shares in the IPO, net of underwriting discount and offering costs		-			-			20,837,272		32,136		-		-		-		-		-			-			235,874			268,010
Effects of the reorganization transactions		(67,983,095	)		(426,741	)		-		51,092		147,058,824		-		-		-		146,420			-			229,229			-
Activity subsequent to the IPO and related organizational transactions:
Net loss		-			-			-		-		-		-		-		-		(5,645	)		-			(46,644	)		(52,289	)
Share-based compensation expense		-			-			-		19,037		-		-		-		-		-			-			-			19,037
Balance as of March 31, 2019		-		$	-			20,837,272	$	102,265		147,058,824	$	-		-	$	-	$	(25,571	)	$	-		$	432,708		$	509,402
Net loss		-			-			-		-		-		-		-		-		(6,186	)		-			(45,047	)		(51,233	)
Share-based compensation expense		-			-			-		8,971		-		-		-		-		-			-			-			8,971
Balance as of June 30, 2019		-		$	-			20,837,272	$	111,236		147,058,824	$	-		-	$	-	$	(31,757	)	$	-		$	387,661		$	467,140

The accompanying notes are an integral part of these condensed consolidated financial statements.

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New Fortress Energy LLC

Condensed Consolidated Statements of Cash Flows

For the six months ended June 30, 2020 and 2019

(Unaudited, in thousands of U.S. dollars)

	Six Months Ended June 30,
	2020			2019
Cash flows from operating activities
Net loss	$	(226,574	)	$	(111,525	)
Adjustments for:
Amortization of deferred financing costs		6,965			2,589
Depreciation and amortization		13,324			4,106
Contract termination charges and loss on mitigation sales		124,114			-
Loss on extinguishment of debt, net		9,557			-
Deferred taxes		15			379
Change in value of Investment in equity securities		2,217			802
Share-based compensation		4,430			28,008
Other		907			232
(Increase) in receivables		(9,214	)		(15,211	)
(Increase) in inventories		(4,794	)		(3,664	)
(Increase) in other assets		(9,446	)		(6,865	)
Decrease in right-of-use assets		17,781			-
Increase in accounts payable/accrued liabilities		13,655			2,553
(Decrease) Increase in amounts due to affiliates		(3,666	)		1,848
(Decrease) in lease liabilities		(19,873	)		-
Increase in other liabilities		279			4,680
Net cash used in operating activities		(80,323	)		(92,068	)

Cash flows from investing activities
Capital expenditures		(95,422	)		(232,348	)
Principal payments received on finance lease, net		78			471
Net cash used in investing activities		(95,344	)		(231,877	)

Cash flows from financing activities
Proceeds from borrowings of debt		832,144			220,000
Payment of deferred financing costs		(13,600	)		(4,400	)
Repayment of debt		(506,402	)		(2,500	)
Proceeds from IPO		-			274,948
Payments related to tax withholdings for share-based compensation		(6,117	)		-
Payment of offering costs		-			(6,938	)
Net cash provided by financing activities		306,025			481,110

Net increase in cash, cash equivalents and restricted cash		130,358			157,165
Cash, cash equivalents and restricted cash – beginning of period		93,035			100,853
Cash, cash equivalents and restricted cash – end of period	$	223,393		$	258,018

Supplemental disclosure of non-cash investing and financing activities:
Changes in accounts payable and accrued liabilities associated with construction in progress and property, plant and equipment additions	$	(3,084	)	$	(54,888	)

The accompanying notes are an integral part of these condensed consolidated financial statements.

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1.	Organization

New Fortress Energy LLC (“NFE,” together with its subsidiaries, the “Company”) is a Delaware limited liability company formed by New Fortress Energy Holdings LLC (“New Fortress Energy Holdings”) on August 6, 2018. The Company is a global integrated gas-to-power infrastructure company that seeks to use natural gas to satisfy the world’s large and growing power needs and is engaged in providing energy and logistical services to end-users worldwide seeking to convert their operating assets from diesel or heavy fuel oil to LNG. The Company currently sources LNG from a combination of its own liquefaction facility in Miami, Florida and purchases on the open market. The Company has liquefaction, regasification and power generation operations in the United States and Jamaica.

The Company manages, analyzes and reports on its business and results of operations on the basis of one operating segment. The chief operating decision maker makes resource allocation decisions and assesses performance based on financial information presented on a consolidated basis.

2.	Significant accounting policies

The principle accounting policies adopted are set out below.

(a)	Basis of presentation and principles of consolidation

The accompanying unaudited interim condensed consolidated financial statements contained herein were prepared in accordance with GAAP and reflect all normal and recurring adjustments which are, in the opinion of management, necessary to provide a fair statement of the financial position, results of operations and cash flows of the Company for the interim periods presented. The condensed consolidated financial statements include the accounts of the Company and its wholly-owned and majority-owned consolidated subsidiaries. The ownership interest of other investors in consolidated subsidiaries is recorded as a non-controlling interest. All significant intercompany transactions and balances have been eliminated on consolidation. These condensed consolidated financial statements and accompanying notes should be read in conjunction with the Company’s annual consolidated financial statements and accompanying notes included in its Annual Report on Form 10-K for the year ended December 31, 2019.

On February 4, 2019, the Company completed an initial public offering (“IPO”) and a series of other transactions, in which the Company issued and sold 20,000,000 Class A shares at an IPO price of $14.00 per share. The Company’s Class A shares began trading on NASDAQ Global Select Market (“NASDAQ”) under the symbol “NFE” on January 31, 2019. Net proceeds from the IPO were $257.0 million, after deducting underwriting discounts and commissions and transaction costs. These proceeds were contributed to New Fortress Intermediate LLC (“NFI”), an entity formed in conjunction with the IPO, in exchange for 20,000,000 limited liability company units in NFI (“NFI LLC Units”). In addition, New Fortress Energy Holdings contributed all of its interests in consolidated subsidiaries that comprised substantially all of its historical operations to NFI in exchange for NFI LLC Units. In connection with the IPO, New Fortress Energy Holdings also received 147,058,824 Class B shares of the Company, which is equal to the number of NFI LLC Units held by New Fortress Energy Holdings immediately following the IPO. New Fortress Energy Holdings retained a significant interest in NFE through its ownership of 147,058,824 Class B shares, representing a 88.0% voting and non-economic interest. New Fortress Energy Holdings also had an 88.0% economic interest in NFI through its ownership of 147,058,824 of NFI LLC Units. New Fortress Energy Holdings has been determined to be NFE’s predecessor for accounting purposes.

On March 1, 2019, the underwriters of the IPO exercised their option to purchase an additional 837,272 Class A shares at the IPO price of $14.00 per share, less underwriting discounts, which resulted in $11.0 million in additional net proceeds after deducting $0.7 million of underwriting discounts and commissions, such that there were 20,837,272 outstanding Class A shares. In connection with the exercise of the underwriters’ option to purchase an additional 837,272 Class A shares, NFE contributed such additional net proceeds to NFI in exchange for 837,272 NFI LLC Units.

NFE is a holding company whose sole material asset is a controlling equity interest in NFI. As the sole managing member of NFI, NFE operates and controls all of the business and affairs of NFI, and through NFI and its subsidiaries, conducts the Company’s historical business. The contribution of the assets of New Fortress Energy Holdings and net proceeds from the IPO to NFI was treated as a reorganization of entities under common control. As a result, NFE presented the condensed consolidated balances sheets and statements of operations and comprehensive loss of New Fortress Energy Holdings for all periods prior to the IPO.

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On June 3, 2020, the Company entered into a mutual agreement (the “Mutual Agreement”) with the members holding the majority voting interest in New Fortress Energy Holdings (“Exchanging Members”) and NFE Sub LLC (a wholly-owned subsidiary of the Company). Pursuant to the Mutual Agreement, the Exchanging Members agreed to deliver a block redemption notice in accordance with the Amended and Restated Limited Liability Company Agreement of New Fortress Intermediate LLC (the “NFI LLCA”) with respect to all of the NFI LLC Units, together with an equal number of Class B shares of the Company, that such Exchanging Members indirectly own as members of New Fortress Energy Holdings. Pursuant to the Mutual Agreement, the Company agreed to exercise the Call Right (as defined in the NFI LLCA), pursuant to which the Company would acquire such NFI LLC Units and such Class B shares in exchange for Class A shares of the Company (the “Exchange Transactions”). The Exchange Transactions were completed on June 10, 2020. In connection with the closing of the Exchange Transactions, the Company issued 144,342,572 Class A shares in exchange for an equal number of NFI LLC Units, together with an equal number of Class B shares of the Company. Following the completion of the Exchange Transactions, the Company owns all of the NFI LLC Units directly or indirectly and no Class B shares remain outstanding. As of June 30, 2020, NFE has 168,587,346 Class A shares outstanding.

Prior to the Exchange Transactions, the Company recognized the Exchanging Members’ economic interest in NFI as non-controlling interest in the Company’s condensed consolidated financial statements. Results of operations for the period prior to the date of the Exchange Transactions, June 10, 2020, was attributed to non-controlling interest based on the Exchanging Members’ interest in NFI; subsequent to the Exchange Transactions, results of operations, excluding results attributable to other investors in non-wholly owned subsidiaries, were recognized as net income or loss attributable to stockholders. Amounts that were attributable to these Exchanging Members' prior interest in NFI previously shown as non-controlling interest on the Company’s consolidated balance sheets have been reclassified to Class A shares.

(b)	Use of estimates

The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities at the date of the condensed consolidated financial statements and the reported amounts of revenues and expenses during the reporting period. Significant estimates include relative fair value allocation between revenue and lease components of contracts with customers, total consideration and fair value of identifiable net assets related to acquisitions and the fair value of equity awards granted to both employees and non-employees. Management evaluates its estimates and related assumptions regularly. Changes in facts and circumstances or additional information may result in revised estimates, and actual results may differ from these estimates.

(c)	Legal and contingencies

The Company may be involved in legal actions in the ordinary course of business, including governmental and administrative investigations, inquiries and proceedings concerning employment, labor, environmental and other claims. The Company will recognize a loss contingency in the condensed consolidated financial statements when it is probable a liability has been incurred and the amount of the loss can be reasonably estimated. The Company will disclose any loss contingencies that do not meet both conditions if there is a reasonable possibility that a loss may have been incurred. Gain contingencies are not recorded until they are realized.

(d)	Revenue recognition

The Company’s contracts with customers may contain one or several performance obligations usually consisting of the sale of LNG, natural gas, and beginning in the first quarter of 2020, power and steam which are outputs from the Company’s natural gas-fueled infrastructure. The transaction price for each of these contracts is structured using similar inputs and factors regardless of the output delivered to the customer. The customers consume the benefit of the natural gas, power and steam when they are delivered by the Company to the customer’s power generation facilities or interconnection facility. Natural gas, power and steam qualify as a series with revenue being recognized over time using an output method, based on the quantity of natural gas, power, or steam that the customer has consumed. LNG is typically delivered in containers transported by truck to customer sites. Revenue from sales of LNG delivered by truck is recognized at the point in time at which physical possession and the risks and rewards of ownership transfer to the customer, either when the containers are shipped or delivered to the customers’ storage facilities, depending on the terms of the contract. Because the nature, timing and uncertainty of revenue and cash flows are substantially the same for LNG, natural gas, power and steam, the Company has presented Operating revenue on an aggregated basis.

The Company has concluded that variable consideration included in its agreements meets the exception for allocating variable consideration. As such, the variable consideration for these contracts is allocated to each distinct unit of LNG, natural gas, power or steam delivered and recognized when that distinct unit is delivered to the customer.

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The Company’s contracts with customers to supply natural gas or LNG may contain a lease of equipment. The Company allocates consideration received from customers between lease and non-lease components based on the relative fair value of each component. The fair value of the lease component is estimated based on the estimated standalone selling price of the same or similar equipment leased to the customer. The Company estimates the fair value of the non-lease component by forecasting volumes and pricing of gas to be delivered to the customer over the lease term.

The leases of certain facilities and equipment to customers are accounted for as financing or operating leases. The current and non-current portion of financing leases are recorded within Prepaid expenses and other current assets and Finance leases, net on the condensed consolidated balance sheets, respectively. The lease payments for finance leases are segregated into principal and interest components similar to a loan. Interest income is recognized on an effective interest method over the lease term and included in Other revenue in the condensed consolidated statements of operations and comprehensive loss. The principal component of the lease payment is reflected as a reduction to the net investment in the lease. For the Company’s operating leases, the amount allocated to the leasing component is recognized over the lease term as Other revenue in the condensed consolidated statements of operations and comprehensive loss.

In addition to the revenue recognized from the leasing components of agreements with customers, Other revenue includes revenue recognized from the construction, installation and commissioning of equipment, inclusive of natural gas used in the commissioning process, to transform customers’ facilities to operate utilizing natural gas or to allow customers to receive power or other outputs from our natural gas-fueled power generation facilities. Revenue from these development services is recognized over time as the Company transfers control of the asset to the customer or based on the quantity of natural gas consumed as part of commissioning the customer’s facilities. If the customer is not able to obtain control over the asset under construction until such services are completed, revenue is recognized when the services are completed and the customer has control of the infrastructure. Such agreements may also include a significant financing component, and the Company recognizes revenue for the interest income component over the term of the financing as Other revenue.

Shipping and handling costs are not considered to be separate performance obligations. These costs are recognized in the period in which the costs are incurred and presented within Cost of sales in the condensed consolidated statements of operations and comprehensive loss. All such shipping and handling activities are performed prior to the customer obtaining control of the LNG or natural gas.

The Company collects sales taxes from its customers based on sales of taxable products and remits such collections to the appropriate taxing authority. The Company has elected to present sales tax collections in the condensed consolidated statements of operations and comprehensive loss on a net basis and, accordingly, such taxes are excluded from reported revenues.

The Company elected the practical expedient under which the Company does not adjust consideration for the effects of a significant financing component for those contracts where the Company expects at contract inception that the period between transferring goods to the customer and receiving payment from the customer will be one year or less.

(e)	Contract termination charges and loss on mitigation sales

The Company has long-term supply agreements to purchase LNG, and the Company may incur termination charges to the extent that the Company cancels such contractual arrangements. Further, if the Company is unable to take physical possession of a portion of the contracted quantity of LNG due to capacity limitations, the supplier will attempt to sell the undelivered quantity through a mitigation sale. The Company may incur a loss on a mitigation sale if the cargo is unable to be sold for a price greater than the contracted price. These costs are included in a separate line in the condensed consolidated statements of operations and comprehensive loss because such costs are not related to inventory delivered to the Company’s customers.

During the three and six months ended June 30, 2020, the Company recognized a termination charge of $105,000 associated with an agreement with one of the Company’s LNG suppliers to terminate the obligation to purchase any LNG from this supplier for the remainder of 2020 in exchange for a cancellation fee of $105,000. Loss on mitigation sales of $18,906 and $19,114 were recognized in the three and six months ended June 30, 2020, respectively.

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3.	Adoption of new and revised standards

As an “emerging growth company,” the Jumpstart Our Business Startups Act (“JOBS Act”) allows the Company to delay adoption of new or revised accounting pronouncements applicable to public companies until such pronouncements are made applicable to private companies. The Company has elected to use this extended transition period under the JOBS Act. The adoption dates discussed below reflect this election.

(a)	New standards, amendments and interpretations issued but not effective for the financial year beginning January 1, 2020:

In June 2016, the Financial Accounting Standards Board (“FASB”) issued ASU 2016-13, Financial Instruments – Credit Losses (Topic 326): Disclosure Framework – Measurement of Credit Losses on Financial Instruments (“ASU 2016-13”), which requires financial assets measured at amortized cost basis, including trade receivables, to be presented net of the amount expected to be collected. The measurement of all expected credit losses will be based on historical experience, current conditions, and reasonable and supportable forecasts. In October 2019, the FASB voted to approve a proposal to defer the effective date of ASC 2016-13 for certain entities, including emerging growth companies that take advantage of the extended transition period, to fiscal years beginning after December 15, 2022, and early adoption is permitted. The Company is currently evaluating the impact of adopting this new guidance on its consolidated financial statements and timing of adoption.

In December 2019, the FASB issued ASU 2019-12, Income Taxes (Topic 740): Simplifying the Accounting for Income Taxes (“ASU 2019-12”), which simplifies the accounting for income taxes, including removing certain exceptions related to the general principles in ASU 740, Income Taxes. It also clarifies and simplifies other aspects of the accounting for income taxes. The new standard is effective for interim and annual periods beginning after December 15, 2021, and early adoption is permitted. The Company is currently evaluating the impact of adopting this new guidance on its consolidated financial statements and timing of adoption.

(b)	New and amended standards adopted by the Company:

On February 25, 2016, the FASB issued ASU No. 2016-02, Leases (“ASC 842”), which amends the existing accounting standards for lease accounting, including requiring lessees to recognize most leases on their balance sheet and making targeted changes to lessor accounting. The recognition, measurement and presentation of expenses and cash flows arising from a lease by a lessee will depend primarily on the lease’s classification as a finance or operating lease. However, unlike ASC 840, which required only capital leases to be recognized on the balance sheet, ASC 842 requires most leases to be recognized on the balance sheet as a right-of-use (“ROU”) asset and a lease liability.

The Company has entered into lease agreements for the use of LNG vessels, marine port space, office space, land and equipment, all of which are operating leases. ROU assets recognized for these leases represent the Company’s right to use an underlying asset for the lease term, and the lease liabilities represent the Company’s obligation to make lease payments arising from the lease. ROU assets and lease liabilities are recognized at the lease commencement date based on the estimated present value of fixed lease payments over the lease term. The incremental borrowing rate used to calculate the present value of lease payments is determined using existing credit rates of unsecured borrowings adjusted for collateral, which are then adjusted for the appropriate lease term and currency.

The Company adopted ASC 842 effective January 1, 2020 and elected to apply the modified retrospective transition method at the beginning of the period of adoption, which allowed the Company to begin recognizing and measuring leases under ASC 842 at January 1, 2020, without modifying the comparative period financial statements. Upon adoption of ASC 842, the Company recorded ROU assets and corresponding lease liabilities of $124,774 and $103,874, respectively.

The Company did not elect the package of practical expedients and therefore, as part of transition, the Company reassessed the previous conclusions made under ASC 840 related to the identification of leases, classification of leases and initial direct costs based on the standards of ASC 842. In connection with the reassessment of previous conclusions, the Company determined that the direct financing lease recognized related to the Montego Bay Terminal is no longer a lease under ASC 842. The Company recognized a transition adjustment that removed the unamortized net investment in the direct financing lease and recognized the underlying assets as Property, plant and equipment net of depreciation that would have been recognized since the commissioning of the Montego Bay Terminal, with the difference of approximately $9,085, net of taxes of $2,945, recorded as an adjustment to retained earnings. Beginning in 2020, the Company will recognize payments previously allocated to the leasing component of the gas sales agreement with this customer within Operating revenue in the condensed consolidated statements of operations and comprehensive loss. Under ASC 840, amounts allocated to the leasing component had been recognized on an effective interest method over the lease term with only the portion representing interest income recognized as Other revenue.

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The Company made an accounting policy election to exclude leases with terms of 12 months or less from ROU assets and lease liabilities on the balance sheet, and short-term lease payments are recognized on a straight-line basis over the lease term. Variable payments under short-term leases are recognized in the period in which the obligation that triggers the variable payment becomes probable. The Company, as lessee, has also elected the practical expedient not to separate lease and non-lease components for marine port space, office space, land and equipment leases. The Company will separate the lease and non-lease components for LNG vessel leases. The allocation of lease payments between lease and non-lease components has been determined based on the relative fair value of each component. The fair value of the lease component is estimated based on the estimated standalone price to lease a bareboat LNG vessel. The fair value of the non-lease component is estimated based on the estimated standalone price of operating the respective vessel, inclusive of the costs of the crew and other operating costs.

The Company, as lessor, will continue to separate lease and non-lease components for the equipment leases provided in connection with agreements for the sale of LNG or natural gas to customers.

The Company has elected the land easement practical expedient, which allows the Company to continue to account for pre-existing land easements as intangible assets under the accounting policy that existed before adoption of ASC 842.

In August 2018, the FASB issued ASU 2018-13, Fair Value Measurement (Topic 820): Disclosure Framework – Changes to the Disclosure Requirements for Fair Value Measurement (“ASU 2018-13”), which provides additional guidance to improve the effectiveness of disclosure requirements on fair value measurement. The Company has adopted ASU 2018-13 for the year beginning January 1, 2020. As this guidance is only related to qualitative financial disclosures, it did not have a material impact on the Company’s condensed consolidated financial statements.

In August 2018, the FASB issued ASU 2018-15, Intangibles – Goodwill and Other – Internal-Use Software (Subtopic 350-40): Customer’s Accounting for Implementation Costs Incurred in a Cloud Computing Arrangement That Is a Service Contract, which requires a customer in a cloud computing arrangement that is a service contract to follow the internal-use software guidance in ASC 350-40 to determine which implementation costs to capitalize as assets. A customer’s accounting for the costs of the hosting component of the arrangement is not affected by the new guidance. The Company has early adopted ASU 2018-15 for the year beginning January 1, 2020, using the prospective transition approach. This approach did not require any adjustment to comparative financial statements. The Company did not capitalize a material amount of implementation costs as a result of adopting this guidance in the three or six months ended June 30, 2020, and the adoption did not result in material impact on the Company’s condensed consolidated financial statements.

4.	Revenue from contracts with customers

Under most customer contracts, invoicing occurs once the Company’s performance obligations have been satisfied, at which point payment is unconditional. As of June 30, 2020 and December 31, 2019, receivables related to revenue from contracts with customers totaled $44,704 and $30,563, respectively, and were included in “Receivables, net” on the condensed consolidated balance sheets, net of the allowance for doubtful accounts. Other items included in Receivables, net not related to revenue from contracts with customers represent receivables associated with reimbursable costs, recoverable taxes and leases which are accounted for outside the scope of ASC 606.

The Company has recognized a contract liability, comprised of unconditional payments due or paid under the contract with a customer prior to the Company’s satisfaction of the related performance obligations. The performance obligations are expected to be satisfied during the next 12 months, and the contract liability is classified within Other current liabilities on the condensed consolidated balance sheets. Contract assets are comprised of the transaction price allocated to completed performance obligations that will be billed to customers in subsequent periods. The contract liability and contract assets balances as of June 30, 2020 and December 31, 2019 are detailed below:

	June 30, 2020		December 31, 2019
Contract assets - current	$	4,270	$	3,787
Contract assets - non-current		23,525		19,474
Total contract assets	$	27,795	$	23,261

Contract liability	$	7,889	$	6,542

Revenue recognized in the year from:
Amounts included in contract liability at the beginning of the year	$	4,816	$	-

As of June 30, 2020, the Company has unbilled receivables of $6,999, of which $356 is presented within Other current assets and $6,643 is presented within Other non-current assets on the condensed consolidated balance sheet. These unbilled receivables represent unconditional right to payment subject only to the passage of time.

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Operating revenue which includes revenue from sales of LNG and natural gas as well as outputs from the Company’s natural gas-fired power generation facilities, including power and steam, was $76,177 and $31,738 for the three months ended June 30, 2020 and 2019, respectively. Operating revenue was $139,679 and $57,876 for the six months ended June 30, 2020 and 2019, respectively. During March 2020, the Company began to deliver power and steam recognizing $6,946 and $8,677 in operating revenue for the three and six months ended June 30, 2020, respectively. Other revenue includes revenue for development services as well as lease and other revenue. The table below summarizes the balances in Other revenue:

	Three Months Ended June 30,				Six Months Ended June 30,
	2020		2019		2020		2019
Development services revenue	$	17,495	$	3,908	$	27,566	$	3,908
Lease and other revenue		894		4,120		1,851		7,933
Total other revenue	$	18,389	$	8,028	$	29,417	$	11,841

Transaction price allocated to remaining performance obligations

Some of the Company’s contracts are short-term in nature with a contract term of less than a year. The Company applied the optional exemption not to report any unfulfilled performance obligations related to these contracts.

The Company has arrangements in which LNG, natural gas or outputs from the Company’s power generation facilities are sold on a “take-or-pay” basis whereby the customer is obligated to pay for the minimum guaranteed volumes even if it does not take delivery of them. The price under these agreements is typically based on a market index plus a fixed margin. The fixed transaction price allocated to the remaining performance obligations under these arrangements is $4,410,159 as of June 30, 2020, representing the fixed margin multiplied by the outstanding minimum guaranteed volumes. The Company expects to recognize this revenue over the following time periods. The pattern of recognition reflects the minimum guaranteed volumes in each period:

Period	Revenue
Remainder of 2020	$	129,090
2021		243,553
2022		242,745
2023		242,836
2024		243,090
Thereafter		3,308,845
Total	$	4,410,159

For all other sales contracts that have a term exceeding one year, the Company has elected the practical expedient in ASC 606 under which the Company does not disclose the transaction price allocated to remaining performance obligations if the variable consideration is allocated entirely to a wholly unsatisfied performance obligation. For these excluded contracts, the sources of variability are (a) the fluctuating market index prices of natural gas used to price the contracts, and (b) the variation in volumes that may be delivered to the customer. Both sources of variability are expected to be resolved at or shortly before delivery of each unit of LNG, natural gas, power or steam. As each unit of LNG, natural gas, power or steam represents a separate performance obligation, future volumes are wholly unsatisfied.

The Company has recognized costs to fulfill a contract with a significant customer, which primarily consist of expenses required to enhance resources to deliver under the agreement with the customer. As of June 30, 2020, the Company has capitalized $10,031, of which $498 of these costs is presented within Other current assets and $9,533 is presented within Other non-current assets on the condensed consolidated balance sheets. As of December 31, 2019, the Company had capitalized $8,839, of which $331 of these costs was presented within Other current assets and $8,508 was presented within Other non-current assets on the condensed consolidated balance sheets. In the first quarter of 2020, the Company began to delivery under the agreement and started recognizing these costs on a straight-line basis over the expected term of the agreement.

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Leases

Lessee

The Company has operating leases primarily for the use of LNG vessels, marine port space, office space, land and equipment under non-cancellable lease agreements. The Company’s leases may include multiple optional renewal periods that are exercisable solely at the Company’s discretion. Renewal periods are included in the lease term when the Company is reasonably certain that the renewal options would be exercised, and the associated lease payments for such periods are reflected in the ROU asset and lease liability.

The Company’s leases include fixed lease payments which may include escalation terms based on a fixed percentage or may vary based on an inflation indexes or other market adjustments. Escalations based on changes in inflation indices and market adjustments and other lease costs that vary based on the use of the underlying asset are not included as lease payments in the calculation of the lease liability or ROU asset and are included in variable lease cost when the obligation that triggers the variable payment becomes probable. Variable lease cost includes contingent rent payments for office space based on the percentage occupied by the Company in addition to common area charges and other charges that are variable in nature. The Company also has a component of lease payments that are variable related to the LNG vessels, in which the Company may receive credits based on the performance of the LNG vessels during the period.

For the three months and six months ended June 30, 2020, the Company’s operating lease cost recorded within the condensed consolidated statements of operations and comprehensive loss were as follows:

	Three Months Ended June 30, 2020		Six Months Ended June 30, 2020
Operating lease cost:
Fixed lease cost	$	6,596	$	16,863
Variable lease cost		74		713
Short-term lease cost		330		616

Lease cost - Cost of Sales	$	6,109	$	15,460
Lease cost - Operations and maintenance		440		828
Lease cost - Selling, general and administrative		451		1,904

Capitalized lease cost		7,474		8,013

Capitalized lease cost relates to operating lease cost for vessels and port space used during the commissioning of development projects. Short-term lease costs for vessels chartered by the Company to bring inventory from a supplier’s facilities to the Company’s storage locations are capitalized to inventory.

Cash paid for operating leases is reported in operating activities in the condensed consolidated statements of cash flows. Supplemental cash flow information related to leases was as follows for the six months ended June 30, 2020:

	Six Months Ended June 30, 2020
Operating cash outflows for operating lease liabilities	$	23,257
Right-of-use assets obtained in exchange for new operating lease liabilities		128,592

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The future payments due under operating leases as of June 30, 2020 is as follows:

	Operating Leases
Due remainder of 2020	$	14,737
2021		35,398
2022		18,307
2023		7,002
2024		7,114
Thereafter		33,780
Total lease payments		116,338
Less: effects of discounting		32,337
Present value of lease liabilities	$	84,001

Current lease liability	$	26,835
Non-current lease liability		57,166

As of June 30, 2020, the weighted-average remaining lease term for all operating leases was 5.8 years. Because the Company generally does not have access to the rate implicit in the lease, the incremental borrowing rate is utilized as the discount rate. The weighted average discount rate associated with operating leases as of June 30, 2020 was 8.6%.

The Company has entered into an LNG vessel lease that has not commenced as of June 30, 2020 with a noncancelable term of 5 years and includes fixed payments for lease and non-lease components of $69,704.

Future annual minimum lease payments for operating leases as of December 31, 2019, prepared in accordance with accounting standards prior to the adoption of ASC 842, were as follows:

Year ending December 31:
2020	$	37,776
2021		35,478
2022		18,387
2023		7,083
2024		7,151
Thereafter		26,458
Total	$	132,333

During the three and six months ended June 30, 2019, the Company recognized rental expense for all operating leases of $8,939 and $17,376, respectively, related primarily to LNG vessel time charters, office space, a land site lease and marine port berth leases.

Lessor

In the Company’s agreements to sell LNG or natural gas to customers, the Company may also lease certain equipment to customers which are accounted for either as a finance or an operating lease. Property, plant and equipment subject to operating leases is included within ISO containers and other equipment within Note 12. Property, plant and equipment, net.

	June 30, 2020
Property, plant and equipment	$	10,955
Accumulated depreciation		(642	)
Property, plant and equipment, net	$	10,313

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The following table shows the expected future lease payments as of June 30, 2020, for the remainder of 2020 through 2024 and thereafter:

	Future cash receipts
	Financing leases		Operating leases
Remainder of 2020	$	152	$	109
2021		303		206
2022		298		194
2023		304		196
2024		304		197
Thereafter		836		860
Total	$	2,197	$	1,762
Less: Imputed interest		1,029
Present value of total lease receipts	$	1,168

Current finance leases, net	$	253
Non-current finance leases, net		915

6.	Fair value

Fair value measurements and disclosures require the use of valuation techniques that maximize the use of observable inputs and minimize the use of unobservable inputs. These inputs are prioritized as follows:

•

Level 1 – observable inputs such as quoted prices in active markets for identical assets or liabilities.

•

Level 2 - inputs other than quoted prices included within Level 1 that are observable, either directly or indirectly, such as quoted prices for similar assets or liabilities or market corroborated inputs.

•

Level 3 - unobservable inputs for which there is little or no market data and which require the Company to develop its own assumptions about how market participants price the asset or liability.

The valuation techniques that may be used to measure fair value are as follows:

•

Market approach – uses prices and other relevant information generated by market transactions involving identical or comparable assets or liabilities.

•

Income approach – uses valuation techniques, such as discounted cash flow technique, to convert future amounts to a single present amount based on current market expectations about those future amounts.

•

Cost approach – based on the amount that currently would be required to replace the service capacity of an asset (replacement cost).

The following table presents the Company’s financial assets and financial liabilities that are measured at fair value as of June 30, 2020 and December 31, 2019:

	June 30, 2020
	Level 1		Level 2		Level 3		Total		Valuation technique
Assets
Cash and cash equivalents	$	167,316	$	-	$	-	$	167,316	Market approach
Restricted cash		56,077		-		-		56,077	Market approach
Investment in equity securities		323		-		-		323	Market approach
Total	$	223,716	$	-	$	-	$	223,716

Liabilities
Derivative liability¹	$	-	$	-	$	9,686	$	9,686	Income approach
Equity agreement²		-		-		16,678		16,678	Income approach
Total	$	-	$	-	$	26,364	$	26,364

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	December 31, 2019
	Level 1		Level 2		Level 3		Total		Valuation technique
Assets
Cash and cash equivalents	$	27,098	$	-	$	-	$	27,098	Market approach
Restricted cash		65,937		-		-		65,937	Market approach
Investment in equity securities		2,540		-		-		2,540	Market approach
Total	$	95,575	$	-	$	-	$	95,575

Liabilities
Derivative liability¹	$	-	$	-	$	9,800	$	9,800	Income approach
Equity agreement²		-		-		16,800		16,800	Income approach
Total	$	-	$	-	$	26,600	$	26,600

(1)

Consideration due to the sellers of Shannon LNG once first gas is supplied from the terminal to be built.

(2)

To be paid in shares at the earlier of agreed-upon date or the commencement of significant construction activities specified in the Shannon LNG Agreement.

The Company estimates fair value of the derivative liability and equity agreement using a discounted cash flows method with discount rates based on the average yield curve for bonds with similar credit ratings and matching terms to the discount periods as well as a probability of the contingent event occurring. The table below summarizes the fair value adjustment, recorded within Other expense (income), net in the condensed consolidated statements of operations and comprehensive loss, and currency translation adjustment, recorded within the Other comprehensive loss, for the three and six months ended June 30, 2020 and 2019:

	Three Months Ended June 30,				Six Months Ended June 30,
	2020		2019		2020			2019
Fair value adjustment - Loss/(gain)	$	1,323	$	478	$	(294	)	$	(155	)
Currency translation adjustment - Loss		595		-		58			-

During the three and six months ended June 30, 2020 and 2019, the Company had no settlements of the equity agreement or derivative liability or any transfers in or out of Level 3 in the fair value hierarchy.

The liability associated with the equity agreement of $16,678 and $16,800 as of June 30, 2020 and December 31, 2019, respectively, is recorded within Other current liabilities on the condensed consolidated balance sheets. The liability associated with the derivative liability of $9,686 and $9,800 as of June 30, 2020 and December 31, 2019, respectively, is recorded within Other long-term liabilities on the condensed consolidated balance sheets.

The Company estimates fair value of outstanding debt using a discounted cash flow method based on current market interest rates for debt issuances with similar remaining years to maturity and adjusted for credit risk. The Company has estimated that the carrying value for each of the Credit Agreement, Senior Secured Bonds, and Senior Unsecured Bonds (all defined below in “Note 16. Debt”) approximate fair value. The fair value estimate is classified as Level 3 in the fair value hierarchy.

7.	Restricted cash

As of June 30, 2020 and December 31, 2019, restricted cash consisted of the following:

	June 30, 2020		December 31, 2019
Collateral for performance under customer agreements	$	15,000	$	15,000
Collateral for LNG purchases		26,476		35,000
Collateral for letters of credit and performance bonds		6,220		7,388
Debt service reserve account		8,131		8,299
Other restricted cash		250		250
Total restricted cash	$	56,077	$	65,937

Current restricted cash	$	32,946	$	30,966
Non-current restricted cash		23,131		34,971

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Inventory

As of June 30, 2020 and December 31, 2019, inventory consisted of the following:

	June 30, 2020		December 31, 2019
LNG and natural gas inventory	$	41,778	$	57,436
Automotive diesel oil inventory		5,167		4,746
Materials, supplies and other		3,940		1,250
Total inventory	$	50,885	$	63,432

Inventory is adjusted to the lower of cost or net realizable value each quarter. Changes in the value of inventory are recorded within Cost of sales in the condensed consolidated statements of operations and comprehensive loss. No adjustments were recorded during the three and six months ended June 30, 2020 and 2019.

9.	Prepaid expenses and other current assets

As of June 30, 2020 and December 31, 2019, prepaid expenses and other current assets consisted of the following:

	June 30, 2020		December 31, 2019
Prepaid expenses	$	6,348	$	7,458
Prepaid LNG		3,312		7,097
Due from affiliates (Note 21)		1,460		1,577
Other current assets		17,821		23,602
Total prepaid expenses and other current assets	$	28,941	$	39,734

Other current assets as of June 30, 2020 and December 31, 2019 primarily consists of receivables for recoverable taxes and capitalized costs associated with delivering development services to a customer.

10.	Investment in equity securities

The Company has invested in equity securities of an international oil and gas drilling contractor. The cost of the investment was $3,667. As of June 30, 2020 and December 31, 2019, the Company owned 295,256 shares of that contractor and the fair value of the investment was $323 and $2,540, respectively.

The unrealized (gain) loss of $(183) and $1,698 for the three months ended June 30, 2020 and 2019, respectively, and $2,217 and $802 for the six months ended June 30, 2020 and 2019, respectively, is included within Other expense (income), net in the condensed consolidated statements of operations and comprehensive loss.

11.	Construction in progress

The Company’s construction in progress activity during the six months ended June 30, 2020 is detailed below:

	June 30, 2020
Balance at beginning of period	$	466,587
Additions		80,541
Transferred to property, plant and equipment, net (Note 12)		(200,177	)
Balance at end of period	$	346,951

Interest expense of $17,902 and $9,111, inclusive of amortized debt issuance costs, was capitalized for the six months ended June 30, 2020 and 2019, respectively.

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12.	Property, plant and equipment, net

As of June 30, 2020 and December 31, 2019, the Company’s property, plant and equipment, net consisted of the following:

	June 30, 2020			December 31, 2019
CHP facilities	$	117,496		$	-
Terminal and power plant equipment		105,705			14,981
LNG liquefaction facilities		65,992			66,273
Gas terminals		72,394			52,781
Gas pipelines		58,974			11,692
ISO containers and other equipment		74,071			39,951
Land		15,637			15,401
Leasehold improvements		8,309			8,054
Accumulated depreciation		(43,380	)		(16,911	)
Total property, plant and equipment, net	$	475,198		$	192,222

In connection with the adoption of ASC 842, the Company determined that the direct financing lease recognized related to the Montego Bay Terminal is no longer a lease under ASC 842. As of January 1, 2020, the Company recognized a transition adjustment that removed the unamortized net investment in the direct financing lease of $91,005 and recognized the underlying assets as Property, plant and equipment of $92,207 and accumulated depreciation of $13,932 that would have been recognized since the commissioning of the Montego Bay Terminal, with the difference of approximately $9,085, net of taxes of $2,945, recorded as an adjustment to retained earnings.

Depreciation for the three months ended June 30, 2020 and 2019 totaled $7,539 and $1,983, respectively, of which $223 and $147 is respectively included within Cost of sales in the condensed consolidated statements of operations and comprehensive loss. Depreciation for the six months ended June 30, 2020 and 2019 totaled $12,750 and $3,563, respectively, of which $450 and $305 is respectively included within Cost of sales in the condensed consolidated statements of operations and comprehensive loss.

13.	Intangible assets

The following table summarizes the composition of intangible assets as of June 30, 2020 and December 31, 2019:

	June 30, 2020
	Gross Carrying Amount		Accumulated Amortization		Net Carrying Amount		Weighted Average Life
Definite-lived intangible assets
Shannon LNG permits	$	42,078	$	1,709	$	40,369		40
Easements		1,559		165		1,394		30

Indefinite-lived intangible assets
Easements		1,168		-		1,168		n/a
Total intangible assets	$	44,805	$	1,874	$	42,931

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	December 31, 2019
	Gross Carrying Amount		Accumulated Amortization		Net Carrying Amount		Weighted Average Life
Definite-lived intangible assets
Shannon LNG leases and permits	$	42,157	$	1,198	$	40,959		40
Easements		1,559		139		1,420		30

Indefinite-lived intangible assets
Easements		1,161		-		1,161		n/a
Total intangible assets	$	44,877	$	1,337	$	43,540

As of June 30, 2020 and December 31, 2019, the weighted-average remaining amortization periods for the intangible assets was 38.0 years and 38.8 years, respectively. As of January 1, 2020, intangible assets associated with favorable lease terms in acquired leases have been reclassified as a ROU assets as a result of adoption of ASC 842.

Amortization for the three months ended June 30, 2020 and 2019 totaled $282 and $286, respectively. Amortization was $552 and $564 for the six months ended June 30, 2020 and 2019, respectively.

14.	Other non-current assets

As of June 30, 2020 and December 31, 2019, Other non-current assets consisted of the following:

	June 30, 2020		December 31, 2019
Nonrefundable deposit	$	24,643	$	22,262
Contract asset (Note 4)		23,525		19,474
Cost to fulfill (Note 4)		9,533		8,508
Unbilled receivables (Note 4)		6,643		-
Upfront payments to customers		5,739		5,904
Port access rights and initial lease costs		-		17,762
Other		7,087		7,716
Total other non-current assets	$	77,170	$	81,626

Nonrefundable deposits are primarily related to deposits for planned land purchases in Pennsylvania and Ireland.

Upfront payments to customers consist of amounts the Company has paid in relation to two natural gas sales contracts with customers to construct fuel-delivery infrastructure that the customers will own.

As of January 1, 2020, port access rights related to the Company’s port lease in Baja California Sur, Mexico, and payments to incumbent tenants to secure the Company’s port lease in San Juan, Puerto Rico were reclassified as ROU assets in connection with the adoption of ASC 842.

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15.	Accrued liabilities

As of June 30, 2020 and December 31, 2019, accrued liabilities consisted of the following:

	June 30, 2020		December 31, 2019
Accrued contract termination charges	$	105,000	$	-
Accrued construction costs		8,689		25,037
Accrued interest		13,282		-
Accrued bonuses		8,216		14,991
Other accrued expenses		30,105		14,915
Total accrued liabilities	$	165,292	$	54,943

16.

Debt

As of June 30, 2020 and December 31, 2019, debt consisted of the following:

	June 30, 2020		December 31, 2019
Credit Agreement, due January 15, 2023	$	773,895	$	-
Term Loan Facility, due January 21, 2020		-		495,000
Senior Secured Bonds, due September 2034		71,052		70,960
Senior Secured Bonds, due December 2034		62,968		10,823
Senior Unsecured Bonds, due September 2036		42,323		42,274
Total debt	$	950,238	$	619,057

The Credit Agreement

On January 10, 2020, the Company entered into a credit agreement to borrow $800,000 in term loans (the “Credit Agreement”). The Credit Agreement will mature in January 2023 with the full principal balance due upon maturity. Interest is payable quarterly and is based on a LIBOR rate divided by one minus the applicable reserve requirement, subject to a floor of 1.50%, plus a margin of 6.25%. The interest rate margin increases each year of the term by 1.50%. A portion of the proceeds received were utilized to extinguish the Term Loan Facility (defined below), including outstanding principal of $495,000.

The Credit Agreement is secured by mortgages on certain properties owned by the Company’s subsidiaries, in addition to other collateral. The Company is required to comply with certain financial covenants and other restricted covenants customary for credit agreement of this type, including restrictions on indebtedness, liens, acquisitions and investments, restricted payments and dispositions. The Credit Agreement also provides for customary events of default, prepayment and cure provisions.

In connection with obtaining the Credit Agreement and the extinguishment of the Term Loan Facility, the Company incurred $36,313 in origination, structuring, and other fees which were recognized as a reduction of the principal balance of the Credit Agreement on the condensed consolidated balance sheets. As of June 30, 2020, the remaining unamortized deferred financing costs were $26,105.

Term Loan Facility

On August 16, 2018, the Company entered into a credit agreement with a syndicate of two lenders to borrow up to an aggregate principal amount of $240,000, and proceeds received from this credit agreement were utilized to repay prior debt facilities. On December 31, 2018, the Company amended this credit agreement to increase the available borrowing principal amount to $500,000 (as amended, the “Term Loan Facility”), and as of December 31, 2018, the Company had an outstanding principal balance of $280,000 under the Term Loan Facility. On March 21, 2019, the Company drew an additional $220,000, bringing the Company’s total outstanding borrowings to $500,000 under the Term Loan Facility.

All borrowings under the Term Loan Facility bore interest at a rate selected by the Company of either (i) LIBOR divided by one minus the applicable reserve requirement plus a spread of 4% or (ii) subject to a floor of 1%, a Base Rate equal to the higher of (a) the Prime Rate, (b) the Federal Funds Rate plus 1/2 of 1% or (c) the 1-month LIBOR rate plus 1.00% plus a spread of 3.0%. The Term Loan Facility was repayable in quarterly installments of $1,250 with a balloon payment due at maturity.

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The Term Loan Facility was secured by mortgages on certain properties owned by the Company’s subsidiaries, in addition to other collateral. The Term Loan Facility was amended in the third quarter of 2019 to allow certain properties of a consolidated subsidiary to secure the Senior Secured Bonds (defined below).

The Company incurred costs in connection with obtaining the Term Loan Facility, the extinguishment of the Company’s prior debt facilities, and the amendment of the Term Loan Facility. Some of the costs incurred were capitalized as a reduction to the Term Loan Facility on the consolidated balance sheets, and all deferred financing costs associated with the Term Loan Facility were amortized over the term of the Term Loan Facility, through December 31, 2019. As such, there were no unamortized deferred financing costs as of December 31, 2019.

The Term Loan Facility had a maturity date of December 31, 2019 with an option to extend the maturity date for two additional six-month periods. Upon the exercise of each extension option, the Company would pay a fee equal to 1.0% of the outstanding principal balance at the time of the exercise and the spread on LIBOR and Base Rate would increase by 0.5%. On December 30, 2019, the Company entered into an amendment with the lenders to extend the maturity to January 21, 2020; no fees were due to lenders from the execution of this amendment. On January 15, 2020, the Company repaid the full amount outstanding including fees due to the lenders using proceeds from the Credit Agreement to extinguish the Term Loan Facility. In conjunction with the extinguishment of the Term Loan Facility, the Company recognized a Loss on extinguishment of debt of $9,557 in the condensed consolidated statements of operations and comprehensive loss.

South Power Bonds

On September 2, 2019, NFE South Power Holdings Limited (“South Power”), a consolidated subsidiary of the Company, entered into a facility for the issuance of secured and unsecured bonds (the “Senior Secured Bonds” and “Senior Unsecured Bonds”, respectively) and subsequently issued $73,317 and $43,683 in Senior Secured Bonds and Senior Unsecured Bonds, respectively. The Senior Secured Bonds are secured by the dual-fired combined heat and power facility in Clarendon, Jamaica (the “CHP Plant”) and related receivables and assets, and the proceeds were used to fund the completion of the CHP Plant and to reimburse shareholder advances. Upon completion of construction of the CHP Plant in the fourth quarter of 2019, South Power issued an additional $63,000 in Senior Secured Bonds. The Company received $10,856 of the proceeds in 2019 and received the remaining proceeds of $52,144 in January 2020.

The Senior Secured Bonds bear interest at an annual fixed rate of 8.25% and will mature 15 years from the closing date of each issuance. No principal payments will be due for the first seven years. After seven years, quarterly principal payments of approximately 1.6% of the original principal amount will be due, with a 50% balloon payment due upon maturity. Interest payments on outstanding principal balances are due quarterly.

The Senior Unsecured Bonds bear interest at an annual fixed rate of 11.00% and will mature in September 2036. No principal payments will be due for the first nine years. Beginning in 2028, principal payments will be due quarterly on an escalating schedule. Interest payments on outstanding principal balances are due quarterly.

South Power will be required to comply with certain financial covenants as well as customary affirmative and negative covenants, including limitations on incurring additional indebtedness. The facility also provides for customary events of default, prepayment and cure provisions.

The Company paid approximately $3,892 of fees in connection with the issuance of Senior Secured Bonds and Senior Unsecured Bonds. These fees were capitalized on a pro-rata basis as a reduction of the Senior Secured Bonds and Senior Unsecured Bonds on the condensed consolidated balance sheets. The total unamortized deferred financing costs as of June 30, 2020 and December 31, 2019 was $3,657 and $3,799, respectively.

Under the terms of the facility, South Power is required to maintain a Debt Service Reserve Account (as defined in the facility) in the amount of $8,131. Such amount is included as a component of Restricted cash on the Company’s condensed consolidated balance sheets (see Note 7).

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Interest Expense

Interest and related amortization of debt issuance costs recognized during major development and construction projects are capitalized and included in the cost of the project. Interest expense, net of amounts capitalized, recognized for the three and six months ended June 30, 2020 and 2019 consisted of the following:

	Three months ended				Six months ended
	June 30, 2020		June 30, 2019		June 30, 2020		June 30, 2019
Interest costs:
Interest per contractual rates	$	19,766	$	8,475	$	38,640	$	13,364
Amortization of debt issuance costs		5,728		3,166		10,350		5,230
Total interest costs		25,494		11,641		48,990		18,594
Capitalized interest		8,296		5,442		17,902		9,111
Total interest expense	$	17,198	$	6,199	$	31,088	$	9,483

17.	Income taxes

In connection with the IPO, NFE contributed the net proceeds from the IPO to NFI in exchange for NFI LLC Units, and NFE became the managing member of NFI. NFI is a limited liability company that is treated as a partnership for U.S. federal income tax purposes and for most applicable state and local income tax purposes. As a partnership, NFI is not subject to U.S. federal and certain state and local income taxes. Any taxable income or loss generated by NFI is passed through to and included in the taxable income or loss of its members, including NFE, on a pro rata basis, subject to applicable tax regulations. NFE is subject to U.S. federal income taxes, in addition to state and local income taxes, with respect to its allocable share of any taxable income or loss of NFI. Additionally, NFI and its subsidiaries are subject to income taxes in the various foreign jurisdictions in which they operate.

In connection with the IPO, NFE recorded a deferred tax asset of $42,783 related to the difference between its tax basis in its investment in NFI and NFE’s share of the financial statement carrying amount of the net assets of NFI. The deferred tax asset was recorded to equity and is fully offset by a valuation allowance also recorded to equity.

Subsequent to the Exchange Transactions completed on June 10, 2020, 100% of NFI’s operations will be included in the NFE income tax provision; there is no impact on income tax expense expected due to the Exchange Transactions.

The effective tax rate for the three months ended June 30, 2020 was (0.07)%, compared to (0.30)% for the three months ended June 30, 2019. The total tax expense for the three months ended June 30, 2020 was $117, compared to $155 for the three months ended June 30, 2019.

The effective tax rate for the six months ended June 30, 2020 was (0.05)%, compared to (0.36)% for the six months ended June 30, 2019. The total tax expense for the six months ended June 30, 2020 was $113, compared to $401 for the six months ended June 30, 2019.

The primary items which decreased the Company’s effective tax rate for the three months and six months ended June 30, 2020 and June 30, 2019 from the U.S. federal statutory rate of 21% were valuation allowances recorded against the Company’s current period losses and earnings generated in Non-U.S. jurisdictions with preferential tax rates.

The Company has not recorded a liability for uncertain tax positions as of June 30, 2020. The Company remains subject to periodic audits and reviews by the taxing authorities, and NFE’s returns since its formation remain open for examination.

18.	Commitments and contingencies

The Company may be subject to certain legal proceedings, claims and disputes that arise in the ordinary course of business. The Company does not believe that these proceedings, individually or in the aggregate, will have a material adverse effect on the Company's financial position, results of operations or cash flows.

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19.	Earnings per share

	Three Months Ended						Six Months Ended
	June 30, 2020			June 30, 2019			June 30, 2020			June 30, 2019
Numerator:
Net loss	$	(166,519	)	$	(51,233	)	$	(226,574	)	$	(111,525	)
Less: net loss attributable to non-controlling interests		29,094			45,047			80,851			91,782
Net loss attributable to Class A shares	$	(137,425	)	$	(6,186	)	$	(145,723	)	$	(19,743	)
Denominator:
Weighted-average shares-basic and diluted		57,341,215			22,114,002			41,771,849			18,154,939

Net loss per share - basic and diluted	$	(2.40	)	$	(0.28	)	$	(3.49	)	$	(1.09	)

In connection with the IPO, New Fortress Energy Holdings, the Company’s predecessor, effected a one-for-2.16 stock split of its issued and outstanding common shares, resulting in 147,058,824 common shares. Upon the reorganization, New Fortress Energy Holdings obtained the same number of Class B shares in NFE. In connection with the closing of the Exchange Transactions on June 10, 2020, all outstanding Class B shares were exchanged for Class A shares. The weighted average shares outstanding are significantly lower than the Class A shares outstanding on June 30, 2020 due to the timing of the Exchange Transactions.

The following table presents potentially dilutive securities excluded from the computation of diluted net loss per share for the periods presented because its effects would have been anti-dilutive.

	June 30, 2020		June 30, 2019
Unvested RSUs¹		1,627,673		3,959,725
Class B shares²		-		147,058,824
Shannon Equity Agreement shares³		1,290,710		1,432,208
Total		2,918,383		152,450,757

Represents the number of instruments outstanding at the end of the period.

Class B shares at the end of the period are considered potentially dilutive Class A shares.

Class A shares that would be issued in relation to the Shannon LNG Equity Agreement.

20.	Share-based compensation

In connection with the IPO, the Company adopted the New Fortress Energy LLC 2019 Omnibus Incentive Plan (the “Incentive Plan”), effective as of February 4, 2019. Under the Incentive Plan, the Company may issue options, share appreciation rights, restricted shares, restricted share units (“RSUs”), share bonuses or other share-based awards to selected officers, employees, non-employee directors and select non-employees of NFE or its affiliates.

RSUs

The Company has granted RSUs to select officers, employees, non-employee members of the board of directors and select non-employees under the Incentive Plan. The fair value of RSUs on the grant date is estimated based on the closing price of the underlying shares on the grant date and other fair value adjustments to account for a post-vesting holding period. These fair value adjustments were estimated based on the Finnerty model.

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The following table summarizes the RSU activity for the six months ended June 30, 2020:

	Restricted Share Units			Weighted-average grant date fair value per share
Non-vested RSUs as of December 31, 2019		3,137,415		$	13.44
Granted		109,409			14.47
Vested and shares issued		(1,491,964	)		13.46
Forfeited		(127,187	)		13.51
Non-vested RSUs as of June 30, 2020		1,627,673		$	13.49

The following table summarizes the share-based compensation expense for the Company’s RSUs recorded for the three and six months ended June 30, 2020 and 2019:

	Three Months Ended June 30,				Six Months Ended June 30,
	2020		2019		2020		2019
Operations and maintenance	$	253	$	260	$	490	$	329
Selling, general and administrative		1,669		8,711		3,940		27,679
Total share-based compensation expense	$	1,922	$	8,971	$	4,430	$	28,008

For the three months ended June 30, 2020 and 2019, cumulative compensation expense recognized for forfeited RSU awards of $488 and $0, respectively, was reversed. For the six months ended June 30, 2020 and 2019, cumulative compensation expense recognized for forfeited RSU awards of $549 and $0, respectively, was reversed. The Company recognizes the income tax benefits resulting from vesting of RSUs in the period of vesting, to the extent the compensation expense has been recognized.

As of June 30, 2020, the Company had 1,627,673 non-vested RSUs subject to service conditions and had unrecognized compensation costs of approximately $13,515. The non-vested RSUs will vest over a period from ten months to three years following the grant date. The weighted-average remaining vesting period of non-vested RSUs totaled 1.75 years as of June 30, 2020.

Performance Share Units (“PSUs”)

During the first quarter of 2020, the Company granted 1,109,777 PSUs to certain employees and non-employees. The PSUs contain a performance condition, and vesting will be determined based on achievement of a performance metric for the year ended December 31, 2021. The number of shares that will vest can range from zero to 2,219,554. For the three and six months ended June 30, 2020, the Company determined that it was not probable that the performance condition required for any of the PSUs to vest would be achieved, and as such, no compensation expense has been recognized in the condensed consolidated statements of operations and comprehensive loss. Unrecognized compensation costs if the maximum amount of shares were to vest based on the achievement of the performance condition was $32,073, and the weighted-average remaining vesting period of non-vested PSUs totaled 1.50 years as of June 30, 2020.

21.	Related party transactions

Management services

The Company is majority owned by Messrs. Edens (our chief executive officer and chairman of our Board of Directors) and Nardone (one of our Directors) who are currently employed by Fortress Investment Group LLC (“Fortress”). In the ordinary course of business, Fortress, through affiliated entities, has historically charged the Company for administrative and general expenses incurred pursuant to its Management Services Agreement (“Management Agreement”). Upon completion of the IPO, the Management Agreement was terminated and replaced by an Administrative Services Agreement (“Administrative Agreement”) to charge the Company for similar administrative and general expenses. The charges under the Management Agreement and Administrative Agreement that are attributable to the Company totaled $1,914 and $1,742 for the three months ended June 30, 2020 and 2019, respectively, and $4,145 and $4,520 for the six months ended June 30, 2020 and 2019, respectively. Costs associated with the Management Agreement and Administrative Agreement are included within Selling, general and administrative in the condensed consolidated statements of operations and comprehensive loss. As of June 30, 2020 and December 31, 2019, $3,465 and $5,083 were due to Fortress, respectively.

In addition to management and administrative services, an affiliate of Fortress owns and leases an aircraft chartered by the Company for business purposes in the course of operations. The Company incurred, at aircraft operator market rates, charter costs of $45 and $649 for the three months ended June 30, 2020 and 2019, respectively, and $1,284 and $1,625 for the six months ended June 30, 2020 and 2019, respectively. As of June 30, 2020 and December 31, 2019, $1,974 and $4,286 was due to this affiliate, respectively.

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Land and office lease

The Company has leased land and office space from Florida East Coast Industries, LLC (“FECI”), which is controlled by funds managed by an affiliate of Fortress. In April 2019, FECI sold the office building to a non-affiliate, and as such, the lease of the office space is no longer held with a related party. The Company recognized expense related to the land lease still held by a related party during the three and six months ended June 30, 2020 of $103 and $206, respectively, which was included within Operations and maintenance in the condensed consolidated statements of operations and comprehensive loss. The expense for the period that the land and building was owned by a related party during the three months ended June 30, 2019 totaled $112, of which $38 related to the office lease and ancillary services is included in Selling, general and administrative, and $74 related to the land lease is included within Operations and maintenance. The expense for the period that the land and building was owned by a related party during the six months ended June 30, 2019 totaled $758 of which $386 was capitalized to Construction in progress, $223 related to the office lease and ancillary services is included in Selling, general and administrative, and $149 related to the land lease is included within Operations and maintenance, respectively in the condensed consolidated statements of operations and comprehensive loss. As of June 30, 2020 and December 31, 2019, there was no amount due to FECI.

DevTech Investment

In August 2018, the Company entered into a consulting arrangement with DevTech Environment Limited (“DevTech”) to provide business development services to increase the customer base of the Company. DevTech also contributed cash consideration in exchange for a 10% interest in a consolidated subsidiary. The 10% interest is reflected as non-controlling interest in the Company’s condensed consolidated financial statements. DevTech purchased 10% of a note payable due to an affiliate of the Company. As of June 30, 2020 and December 31, 2019, $715 and $815 was owed to DevTech on the note payable, respectively. The outstanding note payable due to DevTech is included in Other long-term liabilities on the condensed consolidated balance sheets as of June 30, 2020. The interest expense on the note payable due to DevTech was $19 and $24 for the three months ended June 30, 2020 and 2019, respectively, and $38 and $46 for the six months ended June 30, 2020 and 2019, respectively. No interest has been paid, and accrued interest has been recognized within Accrued expenses on the condensed consolidated balance sheets. As of June 30, 2020 and December 31, 2019, $343 and $443 was due from DevTech, respectively.

Fortress affiliated entities

Since 2017, the Company has provided certain administrative services to related parties including Fortress affiliated entities. As of June 30, 2020 and December 31, 2019, $1,117 and $1,134 were due from affiliates, respectively. There are no costs incurred by the Company as the Company is fully reimbursed for all costs incurred.

Additionally, an entity formerly affiliated with Fortress and currently owned by Messrs. Edens and Nardone provides certain administrative services to the Company, as well as providing office space under a month-to-month non-exclusive license agreement. The Company incurred rent and administrative expenses of approximately $0 and $607 for the three months ended June 30, 2020 and 2019, respectively, and $849 and $1,026 for the six months ended June 30, 2020 and 2019, respectively. No amounts were incurred in the three months ended June 30, 2020 due to credits received from this affiliate for previously performed services. As of June 30, 2020 and December 31, 2019, $1,147 and $883 were due to this entity, respectively.

Due to/from Affiliates

The table below summarizes the balances outstanding with affiliates at June 30, 2020 and December 31, 2019:

	June 30, 2020		December 31, 2019
Amounts due to affiliates	$	6,586	$	10,252
Amounts due from affiliates		1,460		1,577

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22.	Subsequent events

On August 3, 2020, the Company announced the decision to complete the final step in simplifying the Company’s corporate structure by converting New Fortress Energy LLC from a Delaware limited liability company to a Delaware corporation named New Fortress Energy Inc. (the “Conversion”). Since its IPO, NFE has been a corporation for U.S. tax purposes, so converting NFE from a limited liability company to a corporation has no effect on the U.S. tax treatment of the Company or its shareholders. The Conversion is expected to become effective on August 7, 2020. The Conversion was approved by NFE’s board of directors, following receipt of special approval of the Conversion pursuant to NFE’s First Amended and Restated Limited Liability Company Agreement (the “LLC Agreement”). Under Section 10.3(d) of our LLC Agreement, no vote of the members is required or will be sought for the Conversion.

Upon the Conversion, each Class A share, representing Class A limited liability company interests of the Company (“Class A Common Shares”), outstanding immediately prior to the Conversion will be converted into one issued and outstanding, fully paid and nonassessable share of Class A common stock, $0.01 par value per share, of the Corporation (“Class A Common Stock”). Class A Common Shares currently shown on the Company’s condensed consolidated statements of changes in stockholders’ equity will be reclassified to Class A Common Stock and Additional paid-in capital with no change to Total stockholders’ equity.

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Item 2.

Management’s Discussion and Analysis of Financial Condition and Results of Operations.

Certain information contained in the following discussion and analysis, including information with respect to our plans, strategy, projections and expected timeline for our business and related financing, includes forward-looking statements that involve risks and uncertainties. Forward-looking statements are estimates based upon current information and involve a number of risks and uncertainties. Actual events or results may differ materially from the results anticipated in these forward-looking statements due to a variety of factors. This discussion and analysis includes information that is intended to provide investors with an understanding of our past performance and our current financial condition and is not necessarily indicative of our future performance. Please refer to “—Factors Impacting Comparability of Our Financial Results” for further discussion. The results of operations for interim periods are not necessarily indicative of the results that may be expected for any other interim period or for a full year. Unless otherwise indicated, dollar amounts are presented in thousands.

You should read “Part II, Item 1A. Risk Factors” and “Cautionary Statement on Forward-Looking Statements” elsewhere in this Quarterly Report on Form 10-Q (“Quarterly Report”) and “Part I, Item 1A. Risk Factors” in the Annual Report on Form 10-K for the year ended December 31, 2019 (our “Annual Report”) for a discussion of important factors that could cause actual results to differ materially from the results described in or implied by the forward-looking statements contained in the following discussion and analysis.

The following information should be read in conjunction with our unaudited condensed consolidated financial statements and accompanying notes included elsewhere in this Quarterly Report. Our financial statements have been prepared in accordance with GAAP. The unaudited condensed consolidated financial statements as of and for the three and six months ended June 30, 2020 included herein, reflect all adjustments which, in the opinion of management, are necessary for a fair presentation of financial position, results of operations and cash flows for the interim periods on a basis consistent with the annual audited financial statements. All such adjustments are of a normal recurring nature.

Unless the context otherwise requires, references to “Company,” “NFE,” “we,” “our,” “us” or like terms refer to New Fortress Energy LLC and its subsidiaries.

Overview

We are a global integrated gas-to-power infrastructure company that seeks to use natural gas to satisfy the world’s large and growing power needs. We deliver targeted energy solutions to customers around the world, thereby reducing their energy costs and diversifying their energy resources, while also reducing pollution and generating compelling margins. Our near-term mission is to provide modern infrastructure solutions to create cleaner, reliable energy while generating a positive economic impact worldwide. Our long-term mission is to become one of the world’s leading carbon emission-free independent power providing companies. We discuss this important goal in more detail in “Items 1 and 2: Business and Properties” under “Toward a Carbon-Free Future” in our Annual Report.

As an integrated gas-to-power energy infrastructure company, our business model spans the entire production and delivery chain from natural gas procurement and liquefaction to logistics, shipping, terminals and conversion or development of natural gas-fired power generation. We currently source LNG from long-term supply agreements with third party suppliers and from our own liquefaction facility in Miami, Florida. We expect that control of our vertical supply chain, from procurement to delivery of LNG, will help to reduce our exposure to future LNG price variations and enable us to supply our existing and future customers with LNG at a price that reinforces our competitive standing in the LNG market. Our strategy is simple: we seek to procure LNG at attractive prices using long-term agreements and through our own production, and we seek to sell natural gas (delivered through LNG infrastructure) or gas-fired power to customers that sign long-term, take-or-pay contracts.

Our Current Operations

Our management team has successfully employed our strategy to secure long-term contracts with significant customers in Jamaica and Puerto Rico, including Jamaica Public Service Company Limited (“JPS”), the sole public utility in Jamaica, South Jamaica Power Company Limited (“JPC”), an affiliate of JPS, Jamalco, a bauxite mining and alumina production in Jamaica, and the Puerto Rico Electric Power Authority (“PREPA”), each of which is described in more detail below. Our assets built to service these significant customers have been designed with capacity to service other customers.

We currently procure our LNG either by purchasing it under a contract from a supplier or by manufacturing it in our natural gas liquefaction and storage facility located in Miami-Dade County, Florida (the “Miami Facility”). Our long-term goal is to develop the infrastructure necessary to supply our existing and future customers with LNG produced primarily at our own facilities, including our expanded delivery logistics chain in Northern Pennsylvania (the “Pennsylvania Facility”).

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Montego Bay Terminal

Our storage and regasification terminal in Montego Bay, Jamaica (the “Montego Bay Terminal”) serves as our supply hub for the north side of Jamaica, providing natural gas to JPS to fuel the 145MW Bogue Power Plant in Montego Bay, Jamaica. Our Montego Bay Terminal commenced commercial operations in October 2016 and is capable of processing up to 740,000 LNG gallons (61,000 MMBtu) per day and features approximately 7,000 cubic meters of onsite storage. The Montego Bay Terminal also consists of an ISO loading facility that can transport LNG to numerous on-island industrial users.

Old Harbour Terminal

Our marine LNG storage and regasification terminal in Old Harbour, Jamaica (the “Old Harbour Terminal”) commenced commercial operations in June 2019 and is capable of processing approximately six million gallons of LNG (500,000 MMBtu) per day. The Old Harbour Terminal supplies natural gas to the new 190MW Old Harbour power plant (the “Old Harbour Power Plant”) operated by JPC. The Old Harbour Terminal is also supplying natural gas to our dual-fired combined heat and power facility in Clarendon, Jamaica (the “CHP Plant”). The CHP Plant supplies electricity to JPS under a long-term power purchase agreement (“PPA”). The CHP Plant also provides steam to Jamalco under a long-term take-or-pay steam supply agreement (“SSA”). On March 3, 2020, the CHP Plant commenced commercial operation under both the PPA and the SSA and began supplying power and steam to JPS and Jamalco, respectively.

San Juan Facility

We are finalizing the development of the micro-fuel handling facility in the Port of San Juan, Puerto Rico (the “San Juan Facility”). The San Juan Facility is currently being developed near the San Juan Power Plant and will serve as our supply hub for the San Juan Power Plant and other industrial end-user customers in Puerto Rico. We began to deliver natural gas used for the commissioning of PREPA's power plant under the Fuel Sale and Purchase Agreement with PREPA in the second quarter of 2020, and we expect the San Juan Facility to be fully commissioned in the third quarter of 2020.

Miami Facility

Our Miami Facility began operations in April 2016. This facility has liquefaction capacity of approximately 100,000 gallons of LNG (8,300 MMBtu) per day and enables us to produce LNG for sales directly to industrial end-users in southern Florida, including Florida East Coast Railway via our train loading facility, and other customers throughout the Caribbean using ISO containers.

Other Development Projects

We are in the process of developing an LNG regasification terminal at the Port of Pichilingue in Baja California Sur, Mexico (the “La Paz Terminal”). Our La Paz Terminal is expected to supply approximately 455,000 gallons of LNG (37,565 MMBtu) per day, and we have received all necessary permits for onshore construction of the power plant.

In February 2020, we entered into a 25-year power purchase agreement with Nicaragua’s electricity distribution companies, and we expect to construct a new approximately 300 MW natural gas-fired power plant that will consume approximately 800,000 gallons of LNG (65,000 MMBtus) per day. In 2019, we signed a memorandum of understanding to develop a terminal in Angola to supply natural gas for power generation.

COVID-19 Pandemic

We are closely monitoring the impact of the novel coronavirus (“COVID-19”) pandemic on all aspects of our operations and development projects. We primarily operate under long-term contracts with customers, many of which contain fixed minimum volumes that must be purchased on a “take-or-pay” basis. We have continued to invoice our customers for these fixed minimum volumes even in cases when our customer’s consumption has decreased. We have not changed our payment terms with these customers, and there has not been deterioration in the timing or volume of collections.

Based on the essential nature of the services we provide to support power generation facilities, our development projects have not currently been significantly impacted by responses to the COVID-19 pandemic. We remain committed to prioritizing the health and well-being of our employees, customers, suppliers and other partners. We have implemented policies to screen employees, contractors, and vendors for COVID-19 symptoms upon entering our development projects, operations and office facilities. For the six months ended June 30, 2020, we have incurred approximately $500 for safety measures introduced into our operations and other responses to the COVID-19 pandemic.

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We are actively monitoring the spread of the pandemic and the actions that governments and regulatory agencies are taking to fight the spread. We have not experienced significant disruptions in development projects and daily operations during the six months ended June 30, 2020 from the COVID-19 pandemic; however, there are important uncertainties including the scope, severity and duration of the pandemic, the actions taken to contain the pandemic or mitigate its impact, and the direct and indirect economic effects of the pandemic and containment measures. We do not currently expect these factors to have a significant impact on our results of operations, liquidity or financial position, or our development budgets or timelines.

Conversion to a Corporation

On August 3, 2020, we announced our decision to complete the final step in simplifying our corporate structure by converting New Fortress Energy LLC from a Delaware limited liability company to a Delaware corporation named New Fortress Energy Inc. Since its IPO, NFE has been a corporation for U.S. federal tax purposes, so converting NFE from a limited liability company to a corporation has no effect on the U.S. federal tax treatment of the Company or its shareholders. We expect the Conversion to become effective at 12:01 a.m. Eastern Time on August 7, 2020 (such date and time at which the Conversion becomes effective, the “Effective Time”). The Conversion was approved by our board of directors, following receipt of special approval of the Conversion pursuant to our LLC Agreement. Under Section 10.3(d) of our LLC Agreement, no vote of the members is required or will be sought for the Conversion.

We believe that the Conversion will further improve our trading liquidity and, as a result, make us more attractive to investors. Following the Conversion, we also anticipate that our common stock will be eligible for inclusion in benchmark stock indices currently utilized by more than $8 trillion of industry assets, which amount we expect will increase over time. We also believe that, as a corporation, we will enhance our access to capital markets and our common stock will be more attractive as a currency in future strategic transactions. There can be no assurance that we can realize all or some of the anticipated benefits in a timely manner or at all.

Conversion Steps

On August 3, 2020, in order to implement the Conversion, we filed with the Secretary of State of the State of Delaware a Certificate of Conversion (the “Certificate of Conversion”) and a Certificate of Incorporation (the “Certificate of Incorporation”). As a result, at the Effective Time, the Company will convert to a corporation pursuant to a plan of conversion (the “Plan of Conversion”), and the Certificate of Incorporation and the By-Laws of the Corporation (the “By-Laws”) will become effective. Following the Conversion, the Corporation will be named “New Fortress Energy Inc.”

On August 3, 2020, the Company notified the NASDAQ Global Select Market (“NASDAQ”) that the Certificate of Conversion had been filed with the Secretary of State of the State of Delaware. At the Effective Time, each Class A share, representing Class A limited liability company interests of the Company (“Class A Common Shares”), outstanding immediately prior to the Effective Time will be converted into one issued and outstanding, fully paid and nonassessable share of Class A common stock, $0.01 par value per share, of the Corporation (“Class A Common Stock”). The Company will request that, as of the open of trading on August 7, 2020, NASDAQ cease trading of the Class A Common Shares and commence trading of the Class A Common Stock on NASDAQ under the existing ticker symbol “NFE.” No action or approval by the current holders of Class A Common Shares is currently anticipated with respect to the Conversion and no new CUSIP numbers will be issued.

The shares of Class A Common Stock issued upon effectiveness of the Conversion will carry all rights with respect to the Class A Common Shares, including the right to receive any distribution declared but not yet paid on the Class A Common Shares prior to the Conversion.

Rights of Stockholders

The Certificate of Incorporation and By-Laws provide the Corporation’s stockholders following the Conversion with substantially the same rights and obligations that shareholders have pursuant to the LLC Agreement. Following the Conversion, except as otherwise expressly provided in the Certificate of Incorporation and By-Laws, the holders of Class A Common Stock will be entitled to vote on all matters on which stockholders of a corporation are generally entitled to vote on under the Delaware General Corporation Law, including the election of the board of directors of the Corporation. Holders of Class A Common Stock will be entitled to one vote per share of Class A Common Stock.

Directors and Executive Officers

The directors and executive officers of the Company immediately prior to the Effective Time will become the directors and executive officers of the Corporation at the Effective Time. In addition, the committees of the board, and the membership thereof, immediately prior to the Effective Time, will be replicated at the Corporation at the Effective Time.

The foregoing descriptions are qualified by reference to the forms of the Plan of Conversion, Certificate of Conversion, Certificate of Incorporation and the Bylaws, which are filed as Exhibits 99.1, 99.2, 99.3 and 99.4, respectively, to this Quarterly Report on Form 10-Q.

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Other Matters

We received an order from the Federal Energy Regulatory Commission (“FERC”) on June 18, 2020, which asked us to explain why our San Juan Facility is not subject to FERC’s jurisdiction under section 3 of the Natural Gas Act. While we do not believe that the San Juan Facility is jurisdictional, we provided our reply to FERC on July 20, 2020 and requested that FERC act expeditiously. We do not know if or when FERC will respond to our reply, or the outcome of any such response.

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Results of Operations – Three and Six Months Ended June 30, 2020 compared to Three and Six Months Ended June 30, 2019

	Three Months Ended June 30,									Six Months Ended June 30,
	2020			2019			Change			2020			2019		Change
Revenues
Operating revenue	$	76,177		$	31,738		$	44,439		$	139,679		$	57,876	$	81,803
Other revenue		18,389			8,028			10,361			29,417			11,841		17,576
Total revenues		94,566			39,766			54,800			169,096			69,717		99,379
Operating expenses
Cost of sales		69,899			44,043			25,856			138,115			77,392		60,723
Operations and maintenance		9,500			5,403			4,097			17,983			9,902		8,081
Selling, general and administrative		31,846			32,169			(323	)		60,216			81,918		(21,702	)
Contract termination charges and loss on mitigation sales		123,906			-			123,906			124,114			-		124,114
Depreciation and amortization		7,620			2,110			5,510			12,874			3,801		9,073
Total operating expenses		242,771			83,725			159,046			353,302			173,013		180,289
Operating loss		(148,205	)		(43,959	)		(104,246	)		(184,206	)		(103,296