Financially troubled New Fortress Energy continues to push for Puerto Rico natural gas expansion, onerous contract terms

The Puerto Rico Financial Oversight and Management Board (FOMB) just commented on a major proposed natural gas contract, sending the Puerto Rican government back to continue negotiating with New Fortress Energy (NFE).

The proposed contract would lock Puerto Rico into more gas than it needs—at ratepayer expense—and highlights the risks of Puerto Rico’s ongoing relationship with NFE.

NFE owns the liquefied natural gas (LNG) import terminal in San Juan Harbor and supplies natural gas to combined cycle units 5 and 6 of the San Juan power plant, as well as   emergency generators installed in 2023 in the aftermath of Hurricane Fiona. In renegotiating its contract to supply these facilities, NFE is seeking to impose new costs on island residents.

This is the second time the FOMB has denied approval of this contract. The original proposal that FOMB rejected in July was a 20-year contract with a 70 trillion BTU (TBTU)/year, take-or-pay gas purchase commitment. The most recent proposal was a seven-year contract with a 40 TBTU/year, take-or-pay commitment.

According to fuel consumption data filed with the Puerto Rico Energy Bureau, San Juan units 5 and 6 and the emergency generators used 31 TBTUs of natural gas in the most recent fiscal year that ended in June 2025.

In other words, the proposed contract is for significantly more natural gas than Puerto Rico is currently purchasing from New Fortress. The volumes in the contract were apparently calculated by Genera, the company that operates Puerto Rico’s power plants and that also is a subsidiary of New Fortress Energy (NFE).

As the FOMB noted, “Neither the Third-Party Procurement Office (“3PPO”) nor the Government independently validated the LNG consumption and forecast provided by Genera to ensure that the volumes included are adequate and do not expose ratepayers to payment for excess volumes purchased from the Seller, Genera’s parent company.” Among other directives, the FOMB ordered the government entities to independently evaluate Genera’s numbers.

Genera has proposed projects that would increase the use of its parent company’s gas in Puerto Rico, including the conversion of existing diesel-fueled units at Mayaguez, Cambalache and Palo Seco to natural gas.  The projects have not received full regulatory approval, and there is not a clear timetable for them to take place. If they were all to occur, IEEFA estimates they would add a maximum of 14 TBTU of natural gas demand. However, the Palo Seco project would also trigger raising the take-or-pay commitment in the contract to 50 TBTU, once again leaving Puerto Ricans paying for more gas than they use.

In December 2024, Puerto Rico announced a contract for a new 478-megawatt (MW) combined cycle gas plant in San Juan (recently increased to 560 MW). However, the project developer already has a natural gas supply agreement in place with New Fortress Energy, also a take-or-pay agreement. Details of that gas supply agreement have not been made public.

And even while Puerto Rico tries to expand its dependence on New Fortress, the company has not been a reliable gas supplier.  New Fortress failed to supply natural gas during several months in late 2021 and early 2022. More recently, it turned around a gas shipment in the San Juan Harbor in July, apparently in retaliation for the original version of this contract not being approved. And because of a legal dispute with San Juan Harbor pilots (stemming from a New Fortress decision to make use of less-expensive and, according to the pilots, less-safe, tugboats to bring in its gas vessel), New Fortress went almost two weeks in late September and October without delivering gas to the San Juan units. 

New Fortress Energy recently told its investors that there is “substantial doubt” about its ability to continue as a going concern. Puerto Rico has historically been a stable source of revenue for the financially troubled company. The FOMB is right to continue scrutinizing the onerous terms that NFE is attempting to impose on the people of Puerto Rico.