Thanksgiving company update

When we started the company 10 years ago, I created two scorecards to measure our progress- both financially and in terms of the impact we have on the places where we do business. 

Our first scorecard, financial metrics, is a traditional set of measures and, in simple terms, focuses on the net cash flow we generate and compares it to the investments we make.

Our second scorecard measures the “impact” of our activities on the markets and communities we serve. This impact is substantial. The most obvious measure is the money we save countries by replacing diesel and oil with gas. But the positive impact on people and communities that comes from a more reliable and affordable energy system can be just as great, or even greater, than the money saved.

The primary challenge of our business is that the infrastructure needed to bring in LNG requires significant time and capital to build. We have invested nearly $7 billion in infrastructure over the past 10 years. Building assets over many years within a public company that reports earnings quarterly has been a challenge, but the good news is that we are nearly done with these projects and expect them all to be in operation and producing revenue in the very near term.

The vast majority of our investment spend is behind us, and our last projects will be completed in the next few months. Delays and cost overruns have been our primary challenge and are largely to blame for our disappointing financial performance this year. But with the projects now largely funded and operational, and with little additional capital required, the future of the company looks brighter, with much better days ahead.

Our impact scorecard continues to be very positive. A primary measure is the financial impact we have had on the markets we serve. Our track record across the board has been tremendous, and we continue to achieve significant, positive change in our key markets. To illustrate this, a brief look back provides useful perspective.

Our first major initiatives were in Jamaica. When we arrived in 2015, there was no natural gas available for power generation anywhere in the country. Many previous attempts to bring in LNG had failed, and as a result, the vast majority of Jamaica’s power was generated by oil and diesel.

The government ran a process to bring LNG into Montego Bay, and we competed and won. As part of the award, we committed our own capital to build the infrastructure needed to import LNG. Fourteen months after the award, we completed the terminal and connected it, via a short pipeline, to an existing power plant. That plant then switched from burning diesel to natural gas, saving Jamaica a tremendous amount of money. We followed this by building a second terminal on the other side of the island, supplying another power plant, and building a new power plant with our own capital, comprehensively transforming the entire country’s electricity generation.

What was the financial impact? Over the last eight years, Jamaicans have saved a staggering amount of money on cheaper, cleaner fuel. To date, total savings have been approximately $2.5 billion. By simply using gas instead of diesel, Jamaica spent $2.5 billion less on fuel. This has allowed the government to significantly reduce its debt-to-GDP ratio, dramatically lower interest costs, and experience a prolonged period of growth.

Access to affordable electricity is a key cornerstone of economic growth. In all but the world’s wealthiest economies, there is a strong positive correlation between access to reliable, affordable electricity and prosperity. Replacing dirty, expensive oil with natural gas was a massive catalyst for positive change in Jamaica, and its impact can be felt to this day.

More recently, we have made significant investments in Brazil and have built one of the country’s largest power and LNG companies. Brazil has one of the highest percentages of renewable power (primarily hydro) and is in many ways a model for a modern energy system. But this creates a need for base and backup thermal power for those times when the rain doesn’t fall, the sun doesn’t shine, or the wind doesn’t blow- and that is where we have focused our efforts.

We are finishing construction on two power plants that together provide 2.2 gigawatts of power, making this one of the largest power hubs in South America. We are very proud of our Brazil team- delivering power plants in the middle of the Amazon basin, on time and on budget, is an incredible achievement. We connected the first plant to the grid last Monday, and the second is expected to come online next August. These projects began four years ago, are now complete, and represent an enormously important and valuable hub in Brazil’s energy system. As the Brazil market continues to expand, our second LNG terminal in the south is well positioned to compete in the upcoming power auctions next March.

A more recent focus for us has been Puerto Rico. We arrived just three days after Hurricane Maria, and while there, I toured the devastation at the port with the U.S. Army, seeing a dilapidated wharf next to the main power plants in San Juan Harbor. Puerto Rico still primarily used liquid fuels (oil and diesel) and had an antiquated fleet of power plants- the “newest” of which was over 25 years old. As a result, Puerto Rico has the highest cost of power in the U.S. and one of the least reliable systems.

With this as the backdrop, we decided to make a substantial investment in the island, beginning in San Juan. We invested the capital to tear down old warehouses, repair the berth, and build a world-class LNG terminal.

Shortly afterward, we successfully participated in a public tender to provide gas and convert the main power plant in San Juan to run on natural gas in 2020. Switching to natural gas has been enormously successful: to date, we have saved Puerto Rico over $1 billion in fuel costs, and we believe there is much more to save in the coming years.

The island still has old, inefficient power plants that burn diesel and fuel oil rather than natural gas. The current government has made conversions and building new generation a priority (which we strongly support), and we believe the future savings can be enormous. With half of the island’s electricity coming from oil, simply converting existing plants from oil to gas can immediately save hundreds of millions of dollars per year.

It is through your efforts that all of this, and much more, has been accomplished. I know this has been a challenging period, but the dedication and commitment you have shown is extraordinary.

We are currently in productive discussions with all our stakeholders. We take the responsibility to manage the capital invested by all parties seriously, and we believe that the value of what we have built can result in a good outcome for everyone, as that is our objective. And while I have been accused at times of being too much of an optimist, I continue to believe deeply in our mission and our business. I believe deeply in the value of what we have created and in what the future holds for us. I have never sold a share of our stock, and even with the current uncertainty, I believe there is a bright future ahead for all.