New Fortress Energy Inc. - Quarter Report: 2021 September (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 September 30, 2021

☐	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 Inc.

(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 common stock	“NFE”	Nasdaq Global Select Market

As of October 29, 2021, the registrant had 206,863,242 shares of Class A common stock outstanding.

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.	39

Item 3.	Quantitative and Qualitative Disclosures About Market Risks.	63

Item 4.	Controls and Procedures.	64

PART II OTHER INFORMATION		65

Item 1.	Legal Proceedings.	65

Item 1A.	Risk Factors.	65

Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds.	113

Item 3.	Defaults upon Senior Securities.	113

Item 4.	Mine Safety Disclosures.	113

Item 5.	Other Information.	113

Item 6.	Exhibits.	113

SIGNATURES		119

Table of Contents

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 gallons of LNG

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 gallons of LNG

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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, facilities, 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, facilities, 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;

•

We may be unable to successfully integrate the businesses and realize the anticipated benefits of the Mergers;

•

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;

•

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;

•

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;

•

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;

•

the completion of the Exchange Transactions (as defined below);

•

a major health and safety incident relating to our business;

•

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, Jamaica, Brazil and the Caribbean; and

•

other risks described in the “Risk Factors” section of this Quarterly Report.

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, 2020 (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.

iii

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PART I

FINANCIAL INFORMATION

Item 1.

Financial Statements.

New Fortress Energy Inc.

Condensed Consolidated Balance Sheets

As of September 30, 2021 and December 31, 2020

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

	September 30, 2021			December 31, 2020
Assets
Current assets
Cash and cash equivalents	$	224,383		$	601,522
Restricted cash		72,338			12,814
Receivables, net of allowances of $130 and $98, respectively		161,008			76,544
Inventory		82,390			22,860
Prepaid expenses and other current assets, net		75,602			48,270
Total current assets		615,721			762,010

Restricted cash		37,879			15,000
Construction in progress		973,880			234,037
Property, plant and equipment, net		2,025,688			614,206
Equity method investments		1,227,991			-
Right-of-use assets		145,941			141,347
Intangible assets, net		166,964			46,102
Finance leases, net		603,662			7,044
Goodwill		740,132			-
Deferred tax assets, net		6,087			2,315
Other non-current assets, net		121,142			86,030
Total assets	$	6,665,087		$	1,908,091

Liabilities
Current liabilities
Current portion of long-term debt	$	249,752		$	-
Accounts payable		210,259			21,331
Accrued liabilities		159,304			90,352
Current lease liabilities		32,009			35,481
Due to affiliates		6,910			8,980
Other current liabilities		109,662			35,006
Total current liabilities		767,896			191,150

Long-term debt		3,597,659			1,239,561
Non-current lease liabilities		93,321			84,323
Deferred tax liabilities, net		284,176			2,330
Other long-term liabilities		37,885			15,641
Total liabilities		4,780,937			1,533,005

Commitments and contingencies (Note 20)

Stockholders’ equity
Class A common stock, $0.01 par value, 750.0 million shares authorized, 206.9 million issued and outstanding as of September 30, 2021; 174.6 million issued and outstanding as of December 31, 2020		2,069			1,746
Additional paid-in capital		1,912,643			594,534
Accumulated deficit		(283,256	)		(229,503	)
Accumulated other comprehensive income		24,625			182
Total stockholders’ equity attributable to NFE		1,656,081			366,959
Non-controlling interest		228,069			8,127
Total stockholders’ equity		1,884,150			375,086
Total liabilities and stockholders’ equity	$	6,665,087		$	1,908,091

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

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New Fortress Energy Inc.

Condensed Consolidated Statements of Operations and Comprehensive Loss

For the three and nine months ended September 30, 2021 and 2020

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

	Three Months Ended September 30,						Nine Months Ended September 30,
	2021			2020			2021			2020
Revenues
Operating revenue	$	188,389		$	83,863		$	382,421		$	223,542
Vessel charter revenue		78,656			-			143,217			-
Other revenue		37,611			52,995			148,541			82,412
Total revenues		304,656			136,858			674,179			305,954

Operating expenses
Cost of sales		135,432			71,665			333,533			209,780
Vessel operating expenses		15,301			-			30,701			-
Operations and maintenance		20,144			13,802			54,960			31,785
Selling, general and administrative		46,802			26,821			124,954			87,273
Transaction and integration costs		1,848			4,028			42,564			4,028
Contract termination charges and loss on mitigation sales		-			-			-			124,114
Depreciation and amortization		31,194			9,489			68,080			22,363
Total operating expenses		250,721			125,805			654,792			479,343
Operating income (loss)		53,935			11,053			19,387			(173,389	)
Interest expense		57,595			19,813			107,757			50,901
Other (income) expense, net		(5,400	)		2,569			(13,458	)		4,179
Loss on extinguishment of debt, net		-			23,505			-			33,062
Net income (loss) before income from equity method investments and income taxes		1,740			(34,834	)		(74,912	)		(261,531	)
(Loss) income from equity method investments		(15,983	)		-			22,958			-
Tax provision		3,526			1,836			7,058			1,949
Net loss		(17,769	)		(36,670	)		(59,012	)		(263,480	)
Net loss attributable to non-controlling interest		7,963			312			5,259			81,163
Net loss attributable to stockholders	$	(9,806	)	$	(36,358	)	$	(53,753	)	$	(182,317	)

Net income (loss) per share – basic and diluted	$	(0.05	)	$	(0.21	)	$	(0.27	)	$	(2.14	)

Weighted average number of shares outstanding – basic and diluted		207,497,013			170,074,532			195,626,564			85,009,385

Other comprehensive loss:
Net loss	$	(17,769	)	$	(36,670	)	$	(59,012	)	$	(263,480	)
Currency translation adjustment		76,996			(971	)		(23,697	)		(1,122	)
Comprehensive loss		(94,765	)		(35,699	)		(35,315	)		(262,358	)
Comprehensive loss (income) attributable to non-controlling interest		8,162			(926	)		6,005			80,156
Comprehensive loss attributable to stockholders	$	(86,603	)	$	(36,625	)	$	(29,310	)	$	(182,202	)

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

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New Fortress Energy Inc.

Condensed Consolidated Statements of Changes in Stockholders’ Equity

For the three and nine months ended September 30, 2021 and 2020

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

	Class A shares				Class B shares				Class A common stock					Additional paid-in			Accumulated			Accumulated other comprehensive			Non- controlling			Total stockholders’
	Shares		Amount		Shares		Amount		Shares			Amount		capital			Deficit			(loss) income			interest			equity
Balance as of December 31, 2020		-	$	-		-	$	-		174,622,862		$	1,746	$	594,534		$	(229,503	)	$	182		$	8,127		$	375,086
Net loss		-		-		-		-		-			-		-			(37,903	)		-			(1,606	)		(39,509	)
Other comprehensive loss		-		-		-		-		-			-		-			-			(123	)		(874	)		(997	)
Share-based compensation expense		-		-		-		-		-			-		1,770			-			-			-			1,770
Issuance of shares for vested RSUs		-		-		-		-		1,335,787			-		-			-			-			-			-
Shares withheld from employees related to share-based compensation, at cost		-		-		-		-		(638,235	)		-		(27,571	)		-			-			-			(27,571	)
Dividends		-		-		-		-		-			-		(17,598	)		-			-			-			(17,598	)
Balance as of March 31, 2021		-	$	-		-	$	-		175,320,414		$	1,746	$	551,135		$	(267,406	)	$	59		$	5,647		$	291,181
Net (loss) income		-		-		-		-		-			-		-			(6,044	)		-			4,310			(1,734	)
Other comprehensive income		-		-		-		-		-			-		-			-			101,363			327			101,690
Share-based compensation expense		-		-		-		-		-			-		1,613			-			-			-			1,613
Shares issued as consideration in business combinations		-		-		-		-		31,372,549			314		1,400,470			-			-			-			1,400,784
Issuance of shares for vested RSUs		-		-		-		-		8,930			-		-			-			-			-			-
Shares withheld from employees related to share-based compensation, at cost		-		-		-		-		(3,329	)		-		(164	)		-			-			-			(164	)
Non-controlling interest acquired in business combinations		-		-		-		-		-			-		-			-			-			229,285			229,285
Dividends		-		-		-		-		-			-		(20,736	)		-			-			-			(20,736	)
Balance as of June 30, 2021		-	$	-		-	$	-		206,698,564		$	2,060	$	1,932,318		$	(273,450	)	$	101,422		$	239,569		$	2,001,919
Net loss		-		-		-		-		-			-		-			(9,806	)		-			(7,963	)		(17,769	)
Other comprehensive loss		-		-		-		-		-			-		-			-			(76,797	)		(199	)		(76,996	)
Share-based compensation expense		-		-		-		-		-			-		1,562			-			-			-			1,562
Adjustments related to business combinations		-		-		-		-		-			-		-			-			-			(319	)		(319	)
Issuance of shares for vested RSUs		-		-		-		-		193,193			9		(9	)		-			-			-			-
Shares withheld from employees related to share-based compensation, at cost		-		-		-		-		(28,515	)		-		(478	)		-			-			-			(478	)
Dividends		-		-		-		-		-			-		(20,750	)		-			-			(3,019	)		(23,769	)
Balance as of September 30, 2021		-	$	-		-	$	-		206,863,242		$	2,069	$	1,912,643		$	(283,256	)	$	24,625		$	228,069		$	1,884,150

	Class A shares						Class B shares					Class A common stock					Additional paid-in			Accumulated			Accumulated other comprehensive			Non- controlling			Total stockholders’
	Shares			Amount			Shares			Amount		Shares			Amount		capital			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 changes		-			-			-			-		-			-		-			(1,533	)		-			(7,780	)		(9,313	)
Net loss		-			-			-			-		-			-		-			(8,466	)		-			(51,757	)		(60,223	)
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		24,236,495		$	127,034			144,342,572		$	-		-		$	-	$	-		$	(55,822	)	$	(83	)	$	242,666		$	313,795
Net loss		-			-			-			-		-			-		-			(137,493	)		-			(29,094	)		(166,587	)
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		168,587,346		$	335,503			-		$	-		-		$	-	$	-		$	(193,315	)	$	352		$	7,070		$	149,610
Conversion from LLC to Corporation		(168,587,346	)		(335,503	)		-			-		168,587,346			1,687		333,816			-			-			-			-
Net loss		-			-			-			-		-			-		-			(36,358	)		-			(312	)		(36,670	)
Other comprehensive income (loss)		-			-			-			-		-			-		-			-			(267	)		1,238			971
Share-based compensation expense		-			-			-			-		-			-		2,071			-			-			-			2,071
Issuance of shares for vested RSUs		-			-			-			-		157,148			-		-			-			-			-			-
Shares withheld from employees related to share-based compensation, at cost		-			-			-			-		(6,071	)		-		(239	)		-			-			-			(239	)
Dividends		-			-			-			-		-			-		(17,006	)		-			-			-			(17,006	)
Balance as of September 30, 2020		-		$	-			-		$	-		168,738,423		$	1,687	$	318,642		$	(229,673	)	$	85		$	7,996		$	98,737

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

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New Fortress Energy Inc.

Condensed Consolidated Statements of Cash Flows

For the nine months ended September 30, 2021 and 2020

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

	Nine Months Ended September 30,
	2021			2020
Cash flows from operating activities
Net loss	$	(59,012	)	$	(263,480	)
Adjustments for:
Amortization of deferred financing costs and debt guarantee, net		9,503			9,949
Depreciation and amortization		68,971			23,025
(Earnings) losses of equity method investees		(22,958	)		-
Dividends received from equity method investees		14,259			-
Sales-type lease payments received in excess of interest income		1,458			-
Change in market value of derivatives		(4,955	)		-
Contract termination charges and loss on mitigation sales		-			71,510
Loss on extinguishment and financing expenses		-			37,090
Deferred taxes		(4,280	)		388
Change in value of Investment of equity securities		(7,265	)		2,376
Share-based compensation		4,945			6,501
Other		72			1,895
Changes in operating assets and liabilities, net of acquisitions:
(Increase) in receivables		(75,633	)		(43,307	)
(Increase) Decrease in inventories		(56,172	)		26,691
Decrease (Increase) in other assets		25,500			(16,526	)
Decrease in right-of-use assets		3,149			31,910
(Decrease) Increase in accounts payable/accrued liabilities		(2,530)			23,982
(Decrease) in amounts due to affiliates		(2,070	)		(1,033	)
(Decrease) in lease liabilities		(2,510	)		(30,930	)
(Decrease) Increase in other liabilities		(30,159	)		4,249
Net cash (used in) operating activities		(139,687	)		(115,710	)

Cash flows from investing activities
Capital expenditures		(430,549	)		(115,841	)
Cash paid for business combinations, net of cash acquired		(1,586,042	)		-
Entities acquired in asset acquisitions, net of cash acquired		(8,817	)		-
Other investing activities		(5,750	)		137
Net cash (used in) provided by investing activities		(2,031,158	)		(115,704	)

Cash flows from financing activities
Proceeds from borrowings of debt		2,234,650			1,832,144
Payment of deferred financing costs		(35,846	)		(27,099	)
Repayment of debt		(229,887	)		(1,490,002	)
Payments related to tax withholdings for share-based compensation		(29,717	)		(6,356	)
Payment of dividends		(65,051	)		(16,871	)
Net cash provided by financing activities		1,874,149			291,816
Impact of changes in foreign exchange rates on cash and cash equivalents		1,960			-
Net (decrease) increase in cash, cash equivalents and restricted cash		(294,736	)		60,402
Cash, cash equivalents and restricted cash – beginning of period		629,336			93,035
Cash, cash equivalents and restricted cash – end of period	$	334,600		$	153,437

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	$	187,295		$	(4,682	)
Liabilities associated with consideration paid for entities acquired in asset acquisitions		9,959			-
Consideration paid in shares for business combinations		1,400,784			-

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

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Organization

New Fortress Energy Inc. (“NFE,” together with its subsidiaries, the “Company”), a Delaware corporation, 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 development services to end-users worldwide seeking to convert their operating assets from diesel or heavy fuel oil to LNG. The Company has liquefaction, regasification and power generation operations in the United States, Jamaica and Brazil. Subsequent to the Mergers (defined below), the Company has marine operations with vessels operating under time charters and in the spot market globally.

On April 15, 2021, the Company completed the acquisitions of Hygo Energy Transition Ltd. (“Hygo”) and Golar LNG Partners LP (“GMLP”); referred to as the “Hygo Merger” and “GMLP Merger,” respectively and, collectively, the “Mergers”. NFE paid $580 million in cash and issued 31,372,549 shares of Class A common stock to Hygo’s shareholders in connection with the Hygo Merger. NFE paid $3.55 per each common unit of GMLP outstanding and for each of the outstanding membership interests of GMLP’s general partner, totaling $251 million. The Company also repaid certain outstanding debt facilities of GMLP in conjunction with closing the GMLP Merger. The results of operations of Hygo and GMLP have been included in the Company’s condensed consolidated financial statements for the period subsequent to the Mergers.

As a result of the Mergers, the Company acquired one operating FSRU terminal in Sergipe, Brazil (the “Sergipe Facility”), a 50% interest in a 1.5GW power plant in Sergipe, Brazil (the “Sergipe Power Plant”), as well as two other FSRU terminals in development in Pará, Brazil (the “Barcarena Facility”) and Santa Catarina, Brazil (the “Santa Catarina Facility”).

The Company acquired the Nanook, a newbuild FSRU moored and in service at the Sergipe Facility. In addition to the Nanook, the Company acquired a fleet of six other FSRUs, six LNG carriers and an interest in a floating liquefaction vessel, the Hilli Episeyo (the “Hilli”), which receives, liquefies and stores LNG at sea and transfers it to LNG carriers that berth while offshore, each of which are expected to help support the Company’s existing facilities and international project pipeline. The majority of the FSRUs are operating in Brazil, Kuwait, Indonesia, Jamaica and Jordan under time charters, and uncontracted vessels are available for short term employment in the spot market.

The Company currently conducts its business through two operating segments, Terminals and Infrastructure and Ships. The business and reportable segment information reflect how the Chief Operating Decision Maker (“CODM”) regularly reviews and manages the business.

2.	Significant accounting policies

The principal 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 accounting principles generally accepted in the United States of America (“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. These condensed consolidated financial statements and accompanying notes should be read in conjunction with the Company’s annual audited consolidated financial statements and accompanying notes included in its Annual Report on Form 10-K for the year ended December 31, 2020.

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. Certain prior year amounts have been reclassified to conform to current year presentation.

A variable interest entity (“VIE”) is an entity that by design meets any of the following characteristics: (1) lacks sufficient equity to allow the entity to finance its activities without additional subordinated financial support; (2) as a group, equity investors do not have the ability to make significant decisions relating to the entity’s operations through voting rights, or do not have the obligation to absorb the expected losses or do not have the right to receive residual returns of the entity; or (3) the voting rights of some investors are not proportional to their obligations to absorb the expected losses of the entity, their rights to receive the expected residual returns of the entity, or both, and substantially all of the entity’s activities either involve or are conducted on behalf of an investor that has disproportionately few voting rights. The primary beneficiary of a VIE is required to consolidate the assets and liabilities of the VIE. The primary beneficiary is the party that has both (1) the power to direct the economic activities of the VIE that most significantly impact the VIE’s economic performance; and (2) through its interest in the VIE, the obligation to absorb the losses or the right to receive the benefits from the VIE that could potentially be significant to the VIE.

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The sale and leaseback financings of certain vessels acquired in the Mergers were consummated with VIEs. As part of these financings, the asset was sold to a single asset entity of the lending bank and then leased back. While the Company does not hold an equity investment in these entities, these entities are VIEs, and the Company has a variable interest in the entities due to the guarantees and fixed price repurchase options that absorb the losses of the VIE that could potentially be significant to the entity. The Company has concluded that it has the power to direct the economic activities that most impact the economic performance as it controls the significant decisions relating to the assets and it has the obligation to absorb losses or the right to receive the residual returns from the leased asset. As NFE has no equity interest in these VIEs, all equity attributable to these VIEs is included in non-controlling interests in the condensed consolidated financial statements.

(b)	Revenue recognition

Terminals and Infrastructure

Within the Terminals and Infrastructure segment, the Company’s contracts with customers may contain one or several performance obligations usually consisting of the sale of LNG, natural gas, 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 delivered in containers transported by truck to customer sites, but may also be delivered via vessel to an unloading point specified in a contract. Revenue from sales of LNG is recognized at the point in time at which physical possession and the risks and rewards of ownership transfer to the customer, 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.

The Company’s contracts with customers to supply natural gas or LNG may contain a lease of equipment, which may be accounted for as a finance or operating lease. For the Company’s operating leases, the Company has elected the practical expedient to combine revenue for the sale of natural gas or LNG and operating lease income as the timing and pattern of transfer of the components are the same. The Company has concluded that the predominant component of the transaction is the sale of natural gas or LNG and therefore has not separated the lease component. The lease component of such operating leases is recognized as Operating revenue in the condensed consolidated statements of operations and comprehensive loss. The Company allocates consideration in agreements containing finance leases 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 current and non-current portion of finance leases are recorded within Prepaid expenses and other current assets and Finance leases, net on the condensed consolidated balance sheets, respectively. For finance leases accounted for as sales-type leases, the profit from the sale of equipment is recognized upon lease commencement in Other revenue in the condensed consolidated statements of operations and comprehensive loss. 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.

In addition to the revenue recognized from the finance lease components of agreements with customers, Other revenue includes revenue recognized from the construction, installation and commissioning of equipment, inclusive of natural gas delivered for 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 until such time that the customer has declared such conversion services have been completed. 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.

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The timing of revenue recognition, billings and cash collections results in receivables, contract assets and contract liabilities. Receivables represent unconditional rights to consideration; unbilled amounts typically result from sales under long-term contracts when revenue recognized exceeds the amount billed to the customer. Contract assets are comprised of the transaction price allocated to completed performance obligations that will be billed to customers in subsequent periods. Contract assets are recognized within Prepaid expenses and other current assets, net and Other non-current assets, net on the condensed consolidated balance sheets. Contract liabilities consist of deferred revenue and are recognized within Other current liabilities on the condensed consolidated balance sheets.

Shipping and handling costs are not considered to be separate performance obligations. 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.

Ships

Charter contracts for the use of the FSRUs and LNG carriers acquired as part of the Mergers are leases as the contracts convey the right to obtain substantially all of the economic benefits from the use of the asset and allow the customer to direct the use of that asset.

At inception, the Company makes an assessment on whether the charter contract is an operating lease or a finance lease. In making the classification assessment, the Company estimates the residual value of the underlying asset at the end of the lease term with reference to broker valuations. None of the vessel lease contracts contain residual value guarantees. Renewal periods and termination options are included in the lease term if the Company believes such options are reasonably certain to be exercised by the lessee. Generally, lease accounting commences when the asset is made available to the customer, however, where the contract contains specific customer acceptance testing conditions, the lease will not commence until the asset has successfully passed the acceptance test. The Company assesses leases for modifications when there is a change to the terms and conditions of the contract that results in a change in the scope or the consideration of the lease.

For charter contracts that are determined to be finance leases accounted for as sales-type leases, the profit from the sale of the vessel is recognized upon lease commencement in Other revenue in the condensed consolidated statements of operations and comprehensive loss. 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. Revenue related to operating and service agreements in connection with charter contracts accounted for as sales-type leases are recognized over the term of the charter as the service is provided within Vessel charter revenue in the condensed consolidated statements of operations and comprehensive loss.

Revenues include lease payments under charters accounted for as operating leases and fees for repositioning vessels. Revenues generated from charters contracts are recorded over the term of the charter on a straight-line basis as service is provided and is included in Vessel charter revenue in the condensed consolidated statements of operations and comprehensive loss. Lease payments includes fixed payments (including in-substance fixed payments that are unavoidable) and variable payments based on a rate or index. For operating leases, the Company has elected the practical expedient to combine service revenue and operating lease income as the timing and pattern of transfer of the components are the same. Variable lease payments are recognized in the period in which the circumstances on which the variable lease payments are based become probable or occur.

Repositioning fees are included in Vessel charter revenues and are recognized at the end of the charter when the fee becomes fixed. However, where there is a fixed amount specified in the charter, which is not dependent upon redelivery location, the fee will be recognized evenly over the term of the charter.

Costs directly associated with the execution of the lease or costs incurred after lease inception but prior to the commencement of the lease that directly relate to preparing the asset for the contract are capitalized and amortized in Vessel operating expenses in the condensed consolidated statements of operations and comprehensive loss over the lease term.

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The Company’s LNG carriers may participate in an LNG carrier pool collaborative arrangement with Golar LNG Limited, referred to as the Cool Pool. The Cool Pool allows the pool participants to optimize the operation of the pool vessels through improved scheduling ability, cost efficiencies and common marketing. Under the Pool Agreement, the Pool Manager is responsible, as an agent, for the marketing and chartering of the participating vessels and paying certain voyage costs such as port call expenses and brokers’ commissions in relation to employment contracts, with each of the Pool Participants continuing to be fully responsible for fulfilling the performance obligations in the contract.

The Company is primarily responsible for fulfilling the performance obligations in the time charters of vessels owned by the Company, and the Company is the principal in such time charters. Revenue and expenses for charters of the Company’s vessels that participate in the Cool Pool are presented on a gross basis within Vessel charter revenues and Vessel operating expenses, respectively, in the condensed consolidated statements of operations and comprehensive loss. The Company’s allocation of its share of the net revenues earned from the other pool participants’ vessels, which may be either income or expense depending on the results of all pool participants, is reflected on a net basis within Vessel operating expenses in the condensed consolidated statements of operations and comprehensive loss.

(c)	Business combinations

Business combinations are accounted for under the acquisition method. On acquisition, the identifiable assets acquired and liabilities assumed are measured at their fair values at the date of acquisition. Any excess of the purchase price over the fair values of the identifiable net assets acquired is recognized as goodwill. Acquisition related costs are expensed as incurred. The results of operations of acquired businesses are included in the Company’s condensed consolidated statements of operations and comprehensive loss from the date of acquisition.

If the assets acquired do not meet the definition of a business, the transaction is accounted for as an asset acquisition and no goodwill is recognized. Costs incurred in conjunction with asset acquisitions are included in the purchase price, and any excess consideration transferred over the fair value of the net assets acquired is reallocated to the identifiable assets based on their relative fair values.

(d)	Equity method investments

The Company accounts for investments in entities over which the Company has significant influence, but do not meet the criteria for consolidation, under the equity method of accounting. Under the equity method of accounting, the Company’s investment is recorded at cost, or in the case of equity method investments acquired as part of the Mergers, at the acquisition date fair value of the investment. The carrying amount is adjusted for the Company’s share of the earnings or losses, and dividends received from the investee reduce the carrying amount of the investment. The Company allocates the difference between the fair value of investments acquired in the Mergers and the Company’s proportionate share of the carrying value of the underlying assets, or basis difference, across the assets and liabilities of the investee. The basis difference assigned to amortizable net assets is included in Income (loss) from equity method investments in the condensed consolidated statements of operations and comprehensive loss. When the Company’s share of losses in an investee equals or exceeds the carrying value of the investment, no further losses are recognized unless the Company has incurred obligations or made payments on behalf of the investee.

(e)	Lessor expense recognition

Vessel operating expenses, which are recognized when incurred, include crewing, repairs and maintenance, insurance, stores, lube oils, communication expenses and third-party management fees. Voyage expenses principally consist of fuel consumed before or after the term of time charter or when the vessel is off hire. Under time charters, the majority of voyage expenses are paid by customers. To the extent that these costs are a fixed amount specified in the charter, which is not dependent upon redelivery location, the estimated voyage expenses are recognized over the term of the time charter.

Initial direct costs include costs directly related to the negotiation and consummation of the lease are deferred and recognized in Vessel operating expenses over the lease term.

(f)	Guarantees

Guarantees issued by the Company, excluding those that are guaranteeing the Company’s own performance, are recognized at fair value at the time that the guarantees are issued and recognized in Other current liabilities and Other non-current liabilities on the condensed consolidated balance sheets. The guarantee liability is amortized each period as a reduction to Selling, general and administrative expenses. If it becomes probable that the Company will have to perform under a guarantee, the Company will recognize an additional liability if the amount of the loss can be reasonably estimated.

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(g)	Derivatives

As part of the Mergers, the Company acquired derivative positions that were used to reduce market risks associated with interest rates and foreign exchange rates. All derivative instruments are initially recorded at fair value as either assets or liabilities on the condensed consolidated balance sheets and subsequently remeasured to fair value, regardless of the purpose or intent for holding the derivative. The Company has not designated any derivatives as cash flow or fair value hedges; however, certain instruments may be considered economic hedges.

(h)	Property, plant and equipment, net

Property, plant and equipment is recorded at cost. Expenditures for construction activities and betterments that extend the useful life of the asset are capitalized. Vessel refurbishment costs are capitalized and depreciated over the vessels’ remaining useful economic lives. Refurbishment costs increase the capacity or improve the efficiency or safety of vessels and equipment. Expenditures for routine maintenance and repairs for assets in the Terminals and Infrastructure segment are charged to expense as incurred within Operations and maintenance in the condensed consolidated statements of operations and comprehensive loss; such expenditures for assets in the Ships segment that do not improve the operating efficiency or extend the useful lives of the vessels are expensed as incurred within Vessel operating expenses.

Major maintenance and overhauls of the Company’s power plant and terminals are capitalized and depreciated over the expected period until the next anticipated major maintenance or overhaul. Drydocking expenditures are capitalized when incurred and amortized over the period until the next anticipated drydocking, which is generally five years. For vessels, the Company utilizes the “built-in overhaul” method of accounting. The built-in overhaul method is based on the segregation of vessel costs into those that should be depreciated over the useful life of the vessel and those that require drydocking at periodic intervals to reflect the different useful lives of the components of the assets. The estimated cost of the drydocking component is depreciated until the date of the first drydocking following acquisition of the vessel, upon which the cost is capitalized, and the process is repeated. If drydocking occurs prior to the expected timing, a cumulative adjustment to recognize the change in expected timing of drydocking is recognized within Depreciation and amortization in the condensed consolidated statements of operations and comprehensive loss.

The Company depreciates property, plant and equipment less the estimate residual value using the straight-line depreciation method over the estimated economic life of the asset or lease term, whichever is shorter using the following useful lives:

	Useful life (Yrs)
Vessels	5-30
Terminal and power plant equipment	4-24
CHP facilities	4-20
Gas terminals	5-24
ISO containers and associated equipment	3-25
LNG liquefaction facilities	20-40
Gas pipelines	4-24
Leasehold improvements	2-20

The Company reviews the remaining useful life of its assets on a regular basis to determine whether changes have taken place that would suggest that a change to depreciation policies is warranted.

Upon retirement or disposal of property, plant and equipment, the cost and related accumulated depreciation are removed from the account, and the resulting gains or losses, if any, are recorded in the condensed consolidated statements of operations and comprehensive loss. When a vessel is disposed, any unamortized drydocking expenditure is recognized as part of the gain or loss on disposal in the period of disposal.

(i)	Transaction and integration costs

Transaction and integration costs are comprised of costs related to business combinations and include advisory, legal, accounting, valuation and other professional or consulting fees. This caption also includes gains or losses recognized in connection with business combinations, including the settlement of preexisting relationships between the Company and an acquired entity. Financing costs which are not deferred as part of the cost of the financing on the balance sheet are recognized within this caption including fees associated with debt modifications.

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Adoption of new and revised standards

(a)	New standards, amendments and interpretations issued but not effective for the year beginning January 1, 2021:

In August 2020, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2020-06, Accounting for Convertible Instruments and Contracts in an Entity’s Own Equity (ASU 2020-06). ASU 2020-06 simplifies the accounting for certain financial instruments with characteristics of liabilities and equity, including convertible instruments and contracts on an entity’s own equity. ASU 2020-06 requires entities to provide expanded disclosures about the terms and features of convertible instruments and amends certain guidance in ASC 260 on the computation of EPS for convertible instruments and contracts on an entity’s own equity. ASU 2020-06 is effective for public companies for fiscal years beginning after December 15, 2021, and interim periods within those fiscal years, with early adoption of all amendments in the same period permitted. The Company will adopt this guidance in the first quarter of 2022 and does not expect it to have a material impact on the Company’s financial position results of operations or cash flows.

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

In December 2019, 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. ASU 2019-12 also clarifies and simplifies other aspects of the accounting for income taxes. The adoption of this guidance in the first quarter of 2021 did not have a material impact on the Company’s financial position, results of operations or cash flows.

Acquisitions

Hygo Merger

On April 15, 2021, the Company completed the acquisition of all of the outstanding common and preferred shares representing all voting interests of Hygo, a 50-50 joint venture between Golar LNG Limited (“GLNG”) and Stonepeak Infrastructure Fund II Cayman (G) Ltd., a fund managed by Stonepeak Infrastructure Partners (“Stonepeak”), in exchange for 31,372,549 shares of NFE Class A common stock and $580,000 in cash. The acquisition of Hygo expands the Company’s footprint in South America with three gas-to-power projects in Brazil’s large and fast-growing market.

Based on the closing price of NFE’s common stock on April 15, 2021, the total value of consideration in the Hygo Merger was $1.98 billion, shown as follows:

Consideration			As of April 15, 2021
Cash consideration for Hygo Preferred Shares	$	180,000
Cash consideration for Hygo Common Shares		400,000
Total Cash Consideration			$	580,000
Merger consideration to be paid in shares of NFE Common Stock		1,400,784
Total Non-Cash Consideration				1,400,784
Total Consideration			$	1,980,784

The Company has determined it is the accounting acquirer of Hygo, which will be accounted for under the acquisition method of accounting for business combinations. The total purchase price of the transaction has been allocated to identifiable assets acquired, liabilities assumed and non-controlling interests of Hygo based on their respective estimated fair values as of the closing date.

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The process of estimating the fair values of certain tangible assets, identifiable intangible assets and assumed liabilities requires the use of judgment in determining the appropriate assumptions and estimates. The Company is in the process of finalizing the valuation of assets acquired, liabilities assumed and non-controlling interests of Hygo, and therefore the purchase price allocation should be considered preliminary. The preliminary purchase price allocation may be subject to further refinement as the evaluation of the underlying inputs and assumptions of third-party valuations and the assessment of acquisition-related income taxes are finalized. The goodwill balance may be adjusted pending the completion of the valuation of the assets acquired, liabilities assumed and non-controlling interests of Hygo as described above. The preliminary estimates may be subject to adjustments during the measurement period, not to exceed one year, based upon new information obtained about facts and circumstances that existed as of the acquisition date. Preliminary fair values assigned to the assets acquired, liabilities assumed and non-controlling interests of Hygo as of the closing date were as follows:

Hygo	As of April 15, 2021
Assets Acquired
Cash and cash equivalents	$	26,641
Restricted cash		48,183
Accounts receivable		5,126
Inventory		1,022
Other current assets		8,095
Assets under development		128,625
Property, plant and equipment, net		385,389
Equity method investments		823,521
Finance leases, net		601,000
Deferred tax assets, net		1,065
Other non-current assets		52,996
Total assets acquired:	$	2,081,663
Liabilities Assumed
Current portion of long-term debt	$	38,712
Accounts payable		3,059
Accrued liabilities		39,149
Other current liabilities		13,495
Long-term debt		433,778
Deferred tax liabilities, net		254,949
Other non-current liabilities		21,520
Total liabilities assumed:		804,662
Non-controlling interest		36,115
Net assets acquired:		1,240,886
Goodwill	$	739,898

During the three months ended September 30, 2021, the Company made certain measurement period adjustments to the assets acquired, liabilities assumed and non-controlling interests of Hygo due to additional information utilized to determine fair value during the measurement period. The measurement period adjustment impacted the fair value of debt assumed, including associated impacts to non-controlling interests and deferred tax liabilities. The measurement period adjustment decreased goodwill by $7,039, and the Company recognized additional interest expense of $1,088 in the three months ended September 30, 2021.

The fair value of Hygo’s non-controlling interest (“NCI”) as of April 15, 2021 was $36,115, including the fair value of the net assets of VIEs that Hygo has consolidated. These VIEs are special purpose vehicles (“SPV”) for the sale and leaseback of certain vessels, and Hygo has no equity investment in these entities. The fair value of NCI was determined based on the valuation of the SPV’s external debt and the lease receivable asset associated with the sales leaseback transaction with Hygo’s subsidiary, using a discounted cash flow method.

The fair value of receivables acquired from Hygo is $8,009, which approximates the gross contractual amount; no material amounts are expected to be uncollectible.

Goodwill is calculated as the excess of the purchase price over the net assets acquired. Goodwill represents access to additional LNG and natural gas distribution systems and power markets, including a local workforce that will allow the Company to rapidly develop and deploy LNG to power solutions.

The Company’s results of operations for the nine months ended September 30, 2021 include Hygo’s result of operations from the date of acquisition, April 15, 2021, through September 30, 2021. Revenue and net income (loss) attributable to Hygo during the period was $42,136 and $9,324, respectively.

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GMLP Merger

On April 15, 2021, the Company completed the acquisition of all of the outstanding common units, representing all voting interests, of GMLP in exchange for $3.55 in cash per common unit and for each of the outstanding membership interest of GMLP’s general partner. In conjunction with the closing of the GMLP Merger, NFE simultaneously extinguished a portion of GMLP’s debt for total consideration of $1.15 billion.

With the acquisition of GMLP, the Company gains vessels to support the existing terminals and business development pipeline, as well as an interest in a floating natural gas facility (“FLNG”), which is expected to provide consistent cash flow streams under a long-term tolling arrangement. The interest in the FLNG facility also provides the Company access to intellectual property that will be used to develop future FLNG solutions.

The consideration paid by the Company in the GMLP Merger was as follows:

Consideration				As of April 15, 2021
GMLP Common Units ($3.55 per unit x 69,301,636 units)	$	246,021
GMLP General Partner Interest ($3.55 per unit x 1,436,391 units)		5,099
Partnership Phantom Units ($3.55 per unit x 58,960 units)		209
Cash Consideration				$	251,329
GMLP debt repaid in acquisition		899,792
Total Cash Consideration					1,151,121
Cash settlement of preexisting relationship		(3,978	)
Total Consideration				$	1,147,143

The Company has determined it is the accounting acquirer of GMLP, which will be accounted for under the acquisition method of accounting for business combinations. The total purchase price of the transaction has been allocated to identifiable assets acquired, liabilities assumed and non-controlling interests of GMLP based on their respective estimated fair values as of the closing date.

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The process of estimating the fair values of certain tangible assets, identifiable intangible assets and assumed liabilities requires the use of judgment in determining the appropriate assumptions and estimates. The Company is in the process of finalizing the valuation of assets acquired, liabilities assumed and non-controlling interests of GMLP, and therefore the purchase price allocation should be considered preliminary. The preliminary purchase price allocation may be subject to further refinement as the evaluation of the underlying inputs and assumptions of third-party valuations and the assessment of acquisition-related income taxes are finalized. The goodwill balance may be adjusted pending the completion of the valuation of the assets acquired, liabilities assumed and non-controlling interests of GMLP as described above. The preliminary estimates may be subject to adjustments during the measurement period, not to exceed one year, based upon new information obtained about facts and circumstances that existed as of the acquisition date. Preliminary fair values assigned to the assets acquired, liabilities assumed and non-controlling interests of GMLP as of the closing date were as follows:

GMLP	As of April 15, 2021
Assets Acquired
Cash and cash equivalents	$	41,461
Restricted cash		24,816
Accounts receivable		3,195
Inventory		2,151
Other current assets		2,789
Equity method investments		355,500
Property, plant and equipment, net		1,063,215
Intangible assets, net		120,000
Deferred tax assets, net		963
Other non-current assets		4,400
Total assets acquired:	$	1,618,490
Liabilities Assumed
Current portion of long-term debt	$	158,073
Accounts payable		3,019
Accrued liabilities		17,226
Other current liabilities		73,774
Deferred tax liabilities, net		16,008
Other non-current liabilities		10,630
Total liabilities assumed:		278,730
Non-controlling interest		192,851
Net assets to be acquired:		1,146,909
Goodwill	$	234

During the three months ended September 30, 2021, the Company made certain measurement period adjustments to the assets acquired, liabilities assumed and non-controlling interests of GMLP due to additional information utilized to determine fair value during the measurement period. The measurement period adjustment impacted the fair value of debt assumed, including associated impacts to non-controlling interests. The measurement period adjustment decreased goodwill by $1,431, and the Company recognized an amortization of the discount on debt of $11,119 as an addition to interest expense for the period after the GMLP Merger.

The fair value of GMLP’s NCI as of April 15, 2021 was $192,851, which represents the fair value of other investors’ interest in the Mazo, GMLP’s preferred units which were not acquired by the Company and the fair value of net assets of an SPV formed for the purpose of a sale and leaseback of the Eskimo. The fair value of GMLP’s preferred units and the valuation of the SPV’s external debt and the lease receivable asset associated with the sale leaseback transaction have been estimated using a discounted cash flow method.

The fair value of receivables acquired from GMLP is $4,797, which approximates the gross contractual amount; no material amounts are expected to be uncollectible.

The Company acquired favorable and unfavorable leases for the use of GMLP’s vessels. The fair value of the favorable contracts is $120,000 and the fair value of the unfavorable contracts is $13,400. The total weighted average amortization period is approximately three years; the favorable contract asset has a weighted average amortization period of approximately three years and the unfavorable contract liability has a weighted average amortization period of approximately one year.

The Company and GMLP had an existing lease agreement prior to the GMLP Merger. As a result of the acquisition, the lease agreement and any associated receivable and payable balances are effectively settled. The lease agreement also included provisions that required a subsidiary of NFE to indemnify GMLP to the extent that GMLP incurred certain tax liabilities as a result of the lease. A loss of $3,978 related to settlement of this indemnification provision was recognized in Transaction and integration costs in the condensed consolidated statements of operations and comprehensive loss in the second quarter of 2021.

The Company’s results of operations for the nine months ended September 30, 2021 include GMLP’s result of operations from the date of acquisition, April 15, 2021, through September 30, 2021. Revenue and net income (loss) attributable to GMLP during this period was $123,261 and $82,310, respectively.

Acquisition costs associated with the Mergers of $58 and $33,530 for the three and nine months ended September 30, 2021 were included in Transaction and integration costs in the Company’s condensed consolidated statements of operations and comprehensive loss.

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Unaudited pro forma financial information

The following table summarizes the unaudited pro forma condensed financial information of the Company as if the Mergers had occurred on January 1, 2020.

	Three Months Ended September 30,						Nine Months Ended September 30,
	2021			2020			2021			2020
Revenue	$	304,656		$	229,619		$	780,875		$	571,892
Net income (loss)		(8,994	)		(35,127	)		(75,963	)		(357,190	)
Net income (loss) attributable to stockholders		(12,822	)		(36,870	)		(95,954	)		(281,127	)

The unaudited pro forma financial information is based on historical results of operations as if the acquisitions had occurred on January 1, 2020, adjusted for transaction costs incurred, adjustments to depreciation expense associated with the recognition of the fair value of vessels acquired, additional amortization expense associated with the recognition of the fair value of favorable and unfavorable customer contracts for vessel charters, additional interest expense as a result of incurring new debt and extinguishing historical debt, elimination of a pre-existing lease relationship between the Company and GMLP, and a step-up of the equity method investments and a favorable power purchase agreement contract.

Pro forma net income (loss) for the nine months ended September 30, 2020 includes non-recurring expenses associated with the Mergers of $37,508; such non-recurring expenses have been removed from the pro forma financial information for the nine months ended September 30, 2021. Transaction costs incurred and the elimination of a pre-existing lease relationship between the Company and GMLP are considered to be non-recurring. The unaudited pro forma financial information does not give effect to any synergies, operating efficiencies or cost savings that may result from the Mergers.

GLNG management and services agreements

In connection with the closing of the Mergers, the Company entered into multiple agreements with Golar Management Limited, a subsidiary of GLNG (“Golar Management”), including omnibus agreements, transition services agreements, ship management agreements and other services agreements described as follows:

•

The Company and Golar Management entered into transition service agreements whereby Golar Management provides certain administrative and consulting services to facilitate the integration of GMLP and Hygo (the “Transition Services Agreements”). The Transition Services Agreements commenced on April 15, 2021 and will terminate on April 30, 2022 unless terminated earlier by either party. The Company pays Golar Management monthly payments of $250 and will reimburse Golar Management for all reasonable and documented out-of-pocket expenses or remittances of funds paid to a third party in connection with the provision of the Transition Services.

•

The Company’s vessel-owning subsidiaries entered into ship management agreements with Golar Management (the “Ship Management Agreements”), pursuant to which Golar Management provides certain technical, crew, insurance and commercial management services for the acquired vessels for a specified annual cost per vessel. The Ship Management Agreements commenced on April 15, 2021 will continue until terminated by either party by notice, in which event the relevant Ship Management Agreements will terminate upon the later of 12 months after April 15, 2021 or two months from the date on which such notice is received.

•

The Company also entered into certain agreements to facilitate the integration of the acquired businesses and their operations whereby GLNG or its subsidiaries will continue to provide certain guarantees and indemnities under charter arrangements or GMLP’s and Hygo’s sale leaseback agreements. NFE pays the relevant Charter Guarantor or Golar an annual guarantee fee of $250 per vessel.

•

The Company and Golar Management (Bermuda) Limited (“Golar Bermuda”) entered into a services agreement (the “Bermuda Services Agreement”) pursuant to which Golar Bermuda will act as GMLP’s and Hygo’s registered office in Bermuda and provide certain corporate secretarial, registrar and administration services (the “Bermuda Services Agreements”). The Bermuda Services Agreements commenced on April 15, 2021. Either party may terminate the Bermuda Services Agreements upon 30 days’ prior written notice. Golar Partners and Hygo pay Golar Bermuda an aggregate annual fee of $50 for the Bermuda services and will reimburse Golar Bermuda for all incidental documented costs and expenses reasonably incurred by Golar Bermuda and its designees in connection with the provision of the Bermuda services.

During the period subsequent to the completion of the Mergers, the Company incurred $3,387 and $6,487 for the three and nine months ended September 30, 2021, respectively, in management, services or guarantee fees under these agreements with GLNG, Golar Management or GLNG affiliated entities.

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Asset acquisitions

On January 12, 2021, the Company acquired 100% of the outstanding share quota of CH4 Energia Ltda. (“CH4”), an entity that owns key permits and authorizations to develop an LNG terminal and an up to 1.37 GW gas-fired power plant at the Port of Suape in Brazil. The purchase consideration consisted of $903 of cash paid at closing in addition to potential future payments contingent on achieving certain construction milestones of up to approximately $3,600. As the contingent payments meet the definition of a derivative, the fair value of the contingent payments as of the acquisition date of $3,047 was included as part of the purchase consideration and was recognized in Other non-current liabilities on the condensed consolidated balance sheets. The selling shareholders of CH4 may also receive future payments based on gas consumed by the power plant or sold to customers from the LNG terminal. For the three and nine months ended September 30, 2021, the Company recognized a gain from the change in fair value of the derivative liability of $62 and $9, respectively, which is presented in Other (income) expense, net in the condensed consolidated statements of operations and comprehensive loss.

The purchase of CH4 has been accounted for as an asset acquisition. As a result, no goodwill was recorded, and the Company’s acquisition-related costs of $295 were included in the purchase consideration. The total purchase consideration of $5,776, which includes a deferred tax liability of $1,531 recognized as a result from the acquisition, was allocated to permits and authorizations acquired and was recorded within Intangible assets, net.

On March 11, 2021, the Company acquired 100% of the outstanding shares of Pecém Energia S.A. (“Pecém”) and Energetica Camacari Muricy II S.A. (“Muricy”). These companies collectively hold grants to operate as an independent power provider and 15-year power purchase agreements for the development of thermoelectric power plants in the State of Bahia, Brazil. The Company is seeking to obtain the necessary approvals to transfer the power purchase agreements in connection with the construction the gas-fired power plant and LNG import terminal at the Port of Suape.

The purchase consideration consisted of $8,041 of cash paid at closing in addition to potential future payments contingent on achieving commercial operations of the gas-fired power plant at the Port of Suape of up to approximately $10.5 million. As the contingent payments meet the definition of a derivative, the fair value of the contingent payments as of the acquisition date of $7,473 was included as part of the purchase consideration and was recognized in Other non-current liabilities on the condensed consolidated balance sheets. The selling shareholders may also receive future payments based on power generated by the power plant in Suape, subject to a maximum payment of approximately $4.6 million. For the three and nine months ended September 30, 2021, the Company recognized a gain from the change in fair value of the derivative liability of $843 and $427, respectively, which is presented in Other (income) expense, net in the condensed consolidated statements of operations and comprehensive loss.

The purchases of Pecém and Muricy were accounted for as asset acquisitions. As a result, no goodwill was recorded, and the Company’s acquisition-related costs of $1,275 were included in the purchase consideration. Of the total purchase consideration, $16,585 was allocated to acquired power purchase agreements and recorded in Intangible assets, net on the condensed consolidated balance sheets; the remaining purchase consideration was related to working capital acquired.

VIEs

Lessor VIEs

The Company assumed sale leaseback arrangements for four vessels as part of the Mergers. The counterparty to each of these sale leaseback arrangements is a VIE, and these lessor VIEs are SPVs wholly owned by financial institutions. While the Company does not own hold an equity investment in these entities, these lessor VIEs are consolidated in the condensed consolidated financial statements. As the Company has no equity attributable to these lessor VIEs, all equity attributable to these lessor VIEs is included in non- controlling interests in the condensed consolidated financial statements. Transactions between our wholly-owned subsidiaries and these VIEs are eliminated in consolidation, including sale leaseback transactions.

China Merchants Bank Lending (“CMBL”)

In November 2015, the Eskimo was sold to a subsidiary of CMBL, Sea 23 Leasing Co. Limited, and subsequently leased back under a bareboat charter for a term of ten years. The Company has options to repurchase the vessel throughout the charter term at fixed pre-determined amounts, commencing from the third anniversary of the commencement of the bareboat charter, with an obligation to repurchase the vessel at the end of the ten-year lease period.

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CCB Financial Leasing Corporation Limited (“CCBFL”)

In September 2018, the Nanook was sold to a subsidiary of CCBFL, Compass Shipping 23 Corporation Limited, and subsequently leased back on a bareboat charter for a term of twelve years. The Company has options to repurchase the vessel throughout the charter term at fixed pre-determined amounts, commencing from the third anniversary of the commencement of the bareboat charter, with an obligation to repurchase the vessel at the end of the twelve-year lease period.

Oriental Shipping Company (“COSCO”)

In December 2019, the Penguin was sold to a subsidiary of COSCO, Oriental Fleet LNG 02 Limited, and subsequently leased back on a bareboat charter for a term of six years. The Company has options to repurchase the vessel throughout the charter term at fixed pre-determined amounts, commencing from the first anniversary of the commencement of the bareboat charter, with an obligation to repurchase the vessel at the end of the six-year lease period.

AVIC International Leasing Company Limited (“AVIC”)

In March 2020, the Celsius was sold to a subsidiary of AVIC, Noble Celsius Shipping Limited, and subsequently leased back on a bareboat charter for a term of seven years. The Company has options to repurchase the vessel throughout the charter term at fixed predetermined amounts, commencing from the first anniversary of the commencement of the bareboat charter, with an obligation to repurchase the vessel at the end of the seven-year lease period.

While the Company does not hold an equity investment in the above SPVs, the Company has a variable interest in these SPVs. The Company is the primary beneficiary of these VIEs and, accordingly, these VIEs are consolidated into the Company’s financial results for the period after the Mergers. The effect of the bareboat charter arrangements is eliminated upon consolidation of the SPVs. The equity attributable to CMBL, CCBFL, COSCO and AVIC in their respective VIEs are included in non-controlling interests in the condensed consolidated financial statements. As of September 30, 2021, the Eskimo, Penguin and Celsius are recorded as Property, plant and equipment, net on the condensed consolidated balance sheet, and the Nanook was recognized in Finance leases, net on the condensed consolidated balance sheet.

The following table gives a summary of the sale and leaseback arrangements, including repurchase options and obligations as of September 30, 2021:

Vessel	End of lease term	Date of next repurchase option	Repurchase price at next repurchase option date		Repurchase obligation at end of lease term
Eskimo	$November 2025	$November 2021	$	189,100	$	128,250
Nanook	September 2030	December 2021		202,116		94,179
Penguin	December 2025	December 2021		92,761		63,040
Celsius	March 2027	March 2022		98,290		45,000

A summary of payment obligations under the bareboat charters with the lessor VIEs as of September 30, 2021, are shown below:

Vessel	Remaining 2021		2022		2023		2024		2025		_2026+
Eskimo	$	3,353	$	-	$	-	$	-	$	-	$	-
Nanook		5,477		21,561		20,964		20,390		19,768		85,754
Penguin		2,955		11,663		11,322		10,962		8,002		-
Celsius		3,976		15,574		15,023		14,484		13,922		12,753

The payment obligation table above includes variable rental payments due under the lease based on an assumed LIBOR plus margin but excludes the repurchase obligation at the end of lease term.

The assets and liabilities of these lessor VIEs that most significantly impact the condensed consolidated balance sheet as of September 30, 2021 are as follows:

	Eskimo		Nanook		Penguin		Celsius
Assets
Restricted cash	$	-	$	19,533	$	9,690	$	24,924
Liabilities
Long-term interest bearing debt - current portion	$	152,004	$	-	$	18,813	$	5,870
Long-term interest bearing debt - non-current portion		-		202,006		77,738		110,336

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As a result of the Mergers, the most significant impact of the lessor VIEs operations on the Company’s condensed consolidated statement of operations is an addition to interest expense of $15,263 and $8,628 for the three and nine months ended September 30, 2021, respectively. Upon assumption of the debt held by VIEs in conjunction with the Mergers, the Company recognized the liabilities assumed at fair value, and the amortization of the discount of $11,550 and $1,843 has been recognized as an addition to interest expense incurred of $3,713 and $6,785 for the three and nine months ended, respectively. The most significant impact of the lessor VIEs cash flows on the condensed consolidated statements of cash flows is net cash used in financing activities of $21,061 for the period subsequent to the completion of the Mergers.

Other VIEs

Hilli LLC

The Company acquired an interest of 50% of the common units of Hilli LLC (“Hilli Common Units”) as part of the acquisition of GMLP. Hilli LLC owns Golar Hilli Corporation (“Hilli Corp”), the disponent owner of the Hilli. The Company determined that Hilli LLC is a VIE, and the Company is not the primary beneficiary of Hilli LLC. Thus, Hilli LLC has not been consolidated into the financial statements and has been recognized as an equity method investment.

As of September 30, 2021 the maximum exposure as a result of the Company’s ownership in the Hilli LLC is the carrying value of the equity method investment of $363,543 and the outstanding portion of the Hilli Leaseback (defined below) which have been guaranteed by the Company.

Revenue recognition

Operating revenue includes revenue from sales of LNG and natural gas as well as outputs from the Company’s natural gas-fueled power generation facilities, including power and steam. Other revenue includes revenue for development services as well as interest income from the Company’s finance leases and other revenue. The table below summarizes the balances in Other revenue:

	Three Months Ended September 30,				Nine Months Ended September 30,
	2021		2020		2021		2020
Development services revenue	$	25,264	$	51,974	$	125,924	$	79,540
Interest income and other revenue		12,347		1,021		22,617		2,872
Total other revenue	$	37,611	$	52,995	$	148,541	$	82,412

Development services revenue recognized in the three and nine months ended September 30, 2021 included $25,264 and $114,654, respectively, for the customer’s use of natural gas as part of commissioning their assets.

Under most customer contracts, invoicing occurs once the Company’s performance obligations have been satisfied, at which point payment is unconditional. As of September 30, 2021 and December 31, 2020, receivables related to revenue from contracts with customers totaled $126,783 and $76,431, respectively, and were included in Receivables, net on the condensed consolidated balance sheets, net of current expected credit losses of $130 and $98, respectively. Other items included in Receivables, net not related to revenue from contracts with customers represent leases which are accounted for outside the scope of ASC 606 and receivables associated with reimbursable costs.

The Company has recognized contract liabilities, comprised of unconditional payments due or paid under the contracts with customers 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 liabilities are 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 liabilities and contract assets balances as of September 30, 2021 and December 31, 2020 are detailed below:

	September 30, 2021		December 31, 2020
Contract assets, net - current	$	7,310	$	4,029
Contract assets, net - non-current		38,554		30,434
Total contract assets, net	$	45,864	$	34,463

Contract liabilities	$	2,371	$	8,399

Revenue recognized in the year from:
Amounts included in contract liabilities at the beginning of the year	$	6,340	$	6,542

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Contract assets are presented net of expected credit losses of $530 and $376 as of September 30, 2021 and December 31, 2020, respectively. As of September 30, 2021 and December 31, 2020, contract assets was comprised of $45,513 and $6,821 of unbilled receivables, respectively, that represent unconditional rights to payment only subject to the passage of time.

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 September 30, 2021, the Company has capitalized $11,132, of which $604 of these costs is presented within Other current assets and $10,528 is presented within Other non-current assets on the condensed consolidated balance sheets. As of December 31, 2020, the Company had capitalized $11,276, of which $588 of these costs was presented within Other current assets and $10,688 was presented within Other non-current assets on the condensed consolidated balance sheets. In the first quarter of 2020, the Company began delivery under the agreement and started recognizing these costs on a straight-line basis over the expected term of the agreement.

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. 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 represents 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 2021	$	67,761
2022		474,995
2023		515,235
2024		511,719
2025		503,099
Thereafter		8,446,430
Total	$	10,519,239

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 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.

Lessor arrangements

The Company’s vessel charters of LNG carriers and FSRUs can take the form of operating or finance leases. Property, plant and equipment subject to vessel charters accounted for as operating leases is included within Vessels within Note 14 Property, plant and equipment, net. The following is the carrying amount of property, plant and equipment that is leased to customers under operating leases:

	September 30, 2021			December 31, 2020
Property, plant and equipment	$	1,274,293		$	18,394
Accumulated depreciation		(20,128	)		(932	)
Property, plant and equipment, net	$	1,254,165		$	17,462

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The components of lease income from vessel operating leases for the three and nine months ended September 30, 2021 were as follows:

	Three Months Ended		Nine Months Ended
	September 30, 2021		September 30, 2021
Operating lease income	$	74,069	$	136,095
Variable lease income		3,096		4,466
Total operating lease income	$	77,165	$	140,561

The Company’s charter of the Nanook to CELSE and certain equipment leases provided in connection with the supply of natural gas or LNG are accounted for as finance leases.

The Company recognized interest income of $11,607 and $21,288 for the three months and nine months ended September 30, 2021, respectively, related to the finance lease of the Nanook included within Other revenue in the condensed consolidated statements of operations and comprehensive loss. The Company recognized revenue of $1,491 and $2,656 for the three months and nine months ended September 30, 2021, respectively, related to the operation and services agreement within Vessel charter revenue in the condensed consolidated statements of operations and comprehensive loss.

As of September 30, 2021, there were outstanding balances due from CELSE of $6,183, of which $4,210 is recognized in Receivables, net and a loan to CELSE of $1,973 is recognized in Prepaid expenses and other current assets, net on the condensed consolidated balance sheets. CELSE is an affiliate due to the equity method investment held in CELSE’s parent, CELSEPAR, and as such, these transactions and balances are related party in nature.

The following table shows the expected future lease payments as of September 30, 2021, for the remainder of 2021 through 2025 and thereafter:

	Future cash receipts
	Financing Leases		Operating Leases
Remainder of 2021	$	12,478	$	64,827
2022		49,951		244,239
2023		50,616		144,375
2024		51,442		105,572
2025		51,876		25,961
Thereafter		1,104,102		-
Total minimum lease receivable	$	1,320,465	$	584,974
Unguaranteed residual value		107,000
Gross investment in sales-type lease	$	1,427,465
Less: Unearned interest income		818,758
Less: Current expected credit losses		1,546
Net investment in leased vessel	$	607,161