next20230930_10q.htm
0001612720 NextDecade Corp. false --12-31 Q3 2023 0 0 1,000 1,000 0 0 82,948 82,948 1,000 1,000 0 0 79,239 79,239 1,000 1,000 0 0 59,366 59,366 0.0001 0.0001 480,000 480,000 256,500 256,500 143,500 143,500 2,200 1,000 0.0001 0.0001 500 500 0 0 0 0 16,089 90,522 34,040 6.67 6.72 2.25 2.25 2.25 July 12, 2030 July 12, 2030 July 12, 2030 1.10 1.10 1.10 0 0 0 0 On July 26, 2023, the Convertible Preferred Stock was converted into 59,542,066 shares of common stock. The obligations of Rio Grande under the CD Credit Agreement are secured by substantially all of the assets of Rio Grande as well as a pledge of all of the membership interests in Rio Grande on a first-priority basis, pari passu with the Senior Secured Notes, the Senior Secured Loans and the loans made under the TCF Credit Facility. Rio Grande Site Lease initial direct costs were reclassified to operating lease right-of-use asset in July 2023 upon commencement of the Rio Grande site lease. The obligations of Rio Grande under the TCF Credit Agreement are secured by substantially all of the assets of Rio Grande as well as a pledge of all of the membership interests in Rio Grande on a first-priority basis, pari passu with the Senior Secured Notes, the Senior Secured Loans and the loans made under the CD Credit Agreement. Total Energies Holdings SAS (“Total Holdings”) provides contingent credit support to the lenders under the TCF Credit Agreement to pay past due amounts owing from Rio Grande under the agreement upon demand. Includes the impact of unvested shares containing performance conditions to the extent that the underlying performance conditions are satisfied based on actual results as of the respective dates. Permitting costs primarily represent costs incurred in connection with permit applications to the United States Army Corps of Engineers and the U.S. Fish and Wildlife Service for mitigation measures for potential impacts to wetlands and habitat that may be caused by the construction of the Rio Grande LNG Facility. 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Table of Contents



UNITED STATES

 SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

FORM 10-Q

 

(MARK ONE)

 

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

 

For the quarterly period ended September 30, 2023

 

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

 

For the transition period from                    to

 

Commission File No. 001-36842

 

NEXTDECADE CORPORATION

(Exact name of registrant as specified in its charter)

 

Delaware

    

46-5723951

(State or other jurisdiction of

 

(I.R.S. Employer

incorporation or organization)

 

Identification No.)

 

1000 Louisiana Street, Suite 3900, Houston, Texas 77002

(Address of principal executive offices) (Zip Code)

 

(713) 574-1880

(Registrant’s telephone number, including area code)

 

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

 

Title of each class:

    

Trading Symbol

    

Name of each exchange on which registered:

Common Stock, $0.0001 par value

 

NEXT

 

The Nasdaq Stock Market LLC

 


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 ☒

 

As of November 7, 2023, the issuer had 256,575,167 shares of common stock outstanding.



 

 

 

NEXTDECADE CORPORATION

 

FORM 10-Q FOR THE QUARTER ENDED September 30, 2023

 

TABLE OF CONTENTS

 

 

Page

Organizational Structure

 

Part I. Financial Information

2

Item 1. Consolidated Financial Statements

2

Consolidated Balance Sheets

2

Consolidated Statements of Operations

3

Consolidated Statements of Stockholders’ Equity and Convertible Preferred Stock

4

Consolidated Statements of Cash Flows

6

Notes to Consolidated Financial Statements

7

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

16

Item 3. Quantitative and Qualitative Disclosures About Market Risk

26

Item 4. Controls and Procedures

26

Part II. Other Information

27

Item 1. Legal Proceedings

27

Item 1A. Risk Factors

27

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

29

Item 3. Defaults Upon Senior Securities

29

Item 4. Mine Safety Disclosures

29

Item 5. Other Information

29

Item 6. Exhibits

30

Signatures

31

 

 

 

 

Organizational Structure

 

The following diagram depicts our abbreviated organizational structure with references to the names of certain entities discussed in this Quarterly Report on Form 10-Q.  

 

 

https://cdn.kscope.io/043542c224d843090cd6d784d80ed62f-abbreviatedorgchartforkandqa.jpg

 

Unless the context requires otherwise, references to “NextDecade,” the “Company,” “we,” “us” and “our” refer to NextDecade Corporation (NASDAQ: NEXT) and its consolidated subsidiaries, and references to “Rio Grande” refer to Rio Grande LNG, LLC and its consolidated subsidiaries.

 

 

 

PART I – FINANCIAL INFORMATION

 

Item 1. Financial Statements.

 

NextDecade Corporation

Consolidated Balance Sheets

(in thousands, except per share data)

(unaudited)

 

  

September 30,

  

December 31,

 
  

2023

  

2022

 

Assets

        

Current assets

        

Cash and cash equivalents

 $50,847  $62,789 

Restricted cash

  395,012    

Current derivative asset

  21,047    

Prepaid expenses and other current assets

  2,270   1,149 

Total current assets

  469,176   63,938 

Property, plant and equipment, net

  1,713,796   218,646 

Operating lease right-of-use assets, net

  172,146   1,474 

Debt issuance costs, net of amortization

  401,668    

Non-current derivative assets

  130,609    

Other non-current assets

  11,021   28,372 

Total assets

 $2,898,416  $312,430 
         

Liabilities, Convertible Preferred Stock and Stockholders’ Equity

        

Current liabilities

        

Accounts payable

 $326,818  $1,084 

Accrued liabilities and other current liabilities

  213,111   23,184 

Current common stock warrant liabilities

  7,359    

Current operating lease liabilities

  3,379   1,093 

Total current liabilities

  550,667   25,361 

Non-current common stock warrant liabilities

  1,951   6,790 

Non-current operating lease liabilities

  146,338   465 

Non-current debt, net of unamortized debt issuance costs

  1,381,825    

Other non-current liabilities

     23,000 

Total liabilities

  2,080,781   55,616 
         

Commitments and contingencies (Note 16)

          
         

Series A Convertible Preferred Stock, $1,000 per share liquidation preference; Issued and outstanding: none and 82,948 shares at September 30, 2023 and December 31, 2022, respectively

     73,026 

Series B Convertible Preferred Stock, $1,000 per share liquidation preference ; Issued and outstanding: none and 79,239 shares at September 30, 2023 and December 31, 2022, respectively

     73,408 

Series C Convertible Preferred Stock, $1,000 per share liquidation preference; Issued and outstanding: none and 59,366 shares at September 30, 2023 and December 31, 2022, respectively

     56,009 

Stockholders’ equity

        

Common stock, $0.0001 par value Authorized: 480.0 million shares at September 30, 2023 and December 31, 2022; Issued and outstanding: 256.5 million shares and 143.5 million shares at September 30, 2023 and December 31, 2022, respectively

  26   14 

Treasury stock: 2.2 million shares and 1.0 million shares at September 30, 2023 and December 31, 2022, respectively, at cost

  (14,194)  (4,587)

Preferred stock, $0.0001 par value Authorized: 0.5 million, after designation of the Convertible Preferred Stock Issued and outstanding: none at September 30, 2023 and December 31, 2022

      

Additional paid-in-capital

  753,673   289,084 

Accumulated deficit

  (262,507)  (230,140)

Total stockholders' equity

  476,998   54,371 

Non-controlling interest

  340,637    

Total equity

  817,635   54,371 

Total liabilities, convertible preferred stock and stockholders’ equity

 $2,898,416  $312,430 

 

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

 

 

 

 

NextDecade Corporation

Consolidated Statements of Operations

(in thousands, except per share data)

(unaudited)

 

  

Three Months Ended

  

Nine Months Ended

 
  

September 30,

  

September 30,

 
  

2023

 

2022

 

2023

 

2022

Revenues

 $  $  $  $ 

Operating expenses

                

General and administrative expense

  32,128   14,616   85,195   29,233 

Development expense, net

  1,083   1,133   1,965   3,870 

Lease expense

  2,582   299   3,245   808 

Depreciation expense

  42   41   117   129 

Total operating expenses

  35,835   16,089   90,522   34,040 

Total operating loss

  (35,835)  (16,089)  (90,522)  (34,040)

Other income (expense)

                

Gain (loss) on common stock warrant liabilities

  3,302   (2,773)  (2,520)  (7,192)

Derivative gain

  240,265      152,816    

Interest income

  966      1,329    

Interest expense, net of capitalized interest

  (32,536)     (32,536)   

Other, net

  5,682   65   5,641   86 

Total other income (expense)

  217,679   (2,708)  124,730   (7,106)

Net income (loss) attributable to NextDecade Corporation

  181,844   (18,797)  34,208   (41,146)

Less: net income attributable to non-controlling interest

  67,204      67,204    

Less: preferred stock dividends

  7,030   6,248   20,484   17,777 

Net income (loss) attributable to common stockholders

 $107,610  $(25,045) $(53,480) $(58,923)
                 

Net income (loss) per common share - basic

 $0.48  $(0.19) $(0.31) $(0.47)

Net income (loss) per common share - diluted

 $0.48  $(0.19) $(0.31) $(0.47)
                 

Weighted average shares outstanding - basic

  222,466   129,418   173,720   125,716 

Weighted average shares outstanding - diluted

  226,336   129,418   173,720   125,716 

 

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

 

 

 

NextDecade Corporation

Consolidated Statement of Stockholders Equity and Convertible Preferred Stock

(in thousands)

(unaudited)

   

  

For the Three Months Ended September 30, 2023

  

Total Stockholders' Equity

                
  

Common Stock

 

Treasury Stock

                

Series A

 

Series B

 

Series C

      Par         Additional     Non- Total Convertible Convertible Convertible
      

Value

         

Paid-in

 

Accumulated

 

Controlling

 

Equity

 

Preferred

 

Preferred

 

Preferred

  

Shares

 

Amount

 

Shares

 

Amount

 

Capital

 

Deficit

 

Interest

 

(Deficit)

 

Stock

 

Stock

 

Stock

Balance at June 30, 2023

  157,494  $16   1,003  $(4,657) $362,735  $(377,776) $  $(19,682) $78,056  $78,206  $59,602 

Share-based compensation

              9,570         9,570          

Restricted stock vesting

  3,806            558         558          

Shares repurchased related to share-based compensation

  (1,182)     1,182   (9,537)           (9,537)         

Issuance of common stock, net

  36,874   4         179,396         179,400          

Rio Bravo Pipeline, LLC de-consolidation

                 629      629          

Sale of equity in Intermediate Holdings

              (14,424)     273,433   259,009          

Preferred stock dividends

              (7,030)        (7,030)  2,628   2,506   1,876 

Preferred stock conversion

  59,542   6         222,868         222,874   (80,684)  (80,712)  (61,478)

Net income

                 114,640   67,204   181,844          

Balance at September 30, 2023

  256,534  $26   2,185  $(14,194) $753,673  $(262,507) $340,637  $817,635  $  $  $ 

 

 

  

For the Nine Months Ended September 30, 2023

  

Total Stockholders' Equity

               
  

Common Stock

 

Treasury Stock

                

Series A

 

Series B

 

Series C

      Par         Additional     Non- Total Convertible Convertible Convertible
      

Value

         

Paid-in

 

Accumulated

 

Controlling

 

Equity

 

Preferred

 

Preferred

 

Preferred

  

Shares

 

Amount

 

Shares

 

Amount

 

Capital

 

Deficit

 

Interest

 

(Deficit)

 

Stock

 

Stock

 

Stock

Balance at December 31, 2022

  143,549  $14   991  $(4,587) $289,084  $(230,140) $  $54,371  $73,026  $73,408  $56,009 

Share-based compensation

              21,677         21,677          

Restricted stock vesting

  3,901            558         558          

Shares repurchased related to share-based compensation

  (1,194)     1,194   (9,607)           (9,607)         

Issuance of common stock, net

  50,736   6         254,394         254,400          

Rio Bravo Pipeline, LLC de-consolidation

                 629      629          

Sale of equity in Intermediate Holdings

              (14,424)     273,433   259,009          

Preferred stock dividends

              (20,484)        (20,484)  7,658   7,304   5,469 

Preferred stock conversion

  59,542   6         222,868         222,874   (80,684)  (80,712)  (61,478)

Net income (loss)

                 (32,996)  67,204   34,208          

Balance at September 30, 2023

  256,534  $26   2,185  $(14,194) $753,673  $(262,507) $340,637  $817,635  $  $  $ 

 

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

 

 

  

For the Three Months Ended September 30, 2022

  

Common Stock

 

Treasury Stock

             

Series A

 

Series B

 

Series C

      

Par

         

Additional

     

Total

 

Convertible

 

Convertible

 

Convertible

      

Value

         

Paid-in

 

Accumulated

 

Stockholders’

 

Preferred

 

Preferred

 

Preferred

  

Shares

 

Amount

 

Shares

 

Amount

 

Capital

 

Deficit

 

Equity

 

Stock

 

Stock

 

Stock

Balance at June 30, 2022

  127,254  $13   742  $(3,067) $213,749  $(192,418)  18,277  $68,259  $68,863  $52,604 

Share-based compensation

              3,041      3,041          

Restricted stock vesting

  620                            

Shares repurchased related to share-based compensation

  (147)     147   (1,060)        (1,060)         

Issuance of common stock, net

  15,454   1         81,142      81,143          

Preferred stock dividends

              (6,248)     (6,248)  2,335   2,228   1,669 

Net loss

                 (18,797)  (18,797)         

Balance at September 30, 2022

  143,181  $14   889  $(4,127) $291,684  $(211,215) $76,356  $70,594  $71,091  $54,273 

 

  

For the Nine Months Ended September 30, 2022

  

Common Stock

 

Treasury Stock

             

Series A

 

Series B

Series C

      

Par

         

Additional

     

Total

 

Convertible

 

Convertible

Convertible

      

Value

         

Paid-in

 

Accumulated

 

Stockholders’

 

Preferred

 

Preferred

Preferred

  

Shares

 

Amount

 

Shares

 

Amount

 

Capital

 

Deficit

 

Equity

 

Stock

 

Stock

Stock

Balance at December 31, 2021

  120,838  $12   346  $(1,315) $191,264  $(170,069)  19,892  $63,791  $64,602  $40,007 

Share-based compensation

              3,555      3,555          

Restricted stock vesting

  2,293                            

Shares repurchased related to share-based compensation

  (543)     543   (2,812)        (2,812)         

Issuance of common stock, net

  20,072   2         111,078      111,080          

Exercise of common stock warrants

  521            3,564      3,564          

Issuance of Series C Convertible Preferred Stock

                             9,836 

Preferred stock dividends

              (17,777)     (17,777)  6,803   6,489   4,430 

Net loss

                 (41,146)  (41,146)         

Balance at September 30, 2022

  143,181  $14   889  $(4,127) $291,684  $(211,215) $76,356  $70,594  $71,091  $54,273 

 

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

 

 

 

NextDecade Corporation.

Consolidated Statements of Cash Flows

(in thousands)

(unaudited)

 

  

Nine Months Ended

  

September 30,

  

2023

 

2022

Operating activities:

        

Net income (loss) attributable to NextDecade Corporation

 $34,208  $(41,146)

Adjustment to reconcile net loss to net cash used in operating activities

        

Depreciation

  117   129 

Share-based compensation expense

  22,055   3,555 

Loss on common stock warrant liabilities

  2,520   7,192 

Derivative gain

  (152,816)   

Net cash provided by settlement of derivative instruments

  1,160    

Amortization of right-of-use assets

  570   522 

Gain on sale of assets

  (6,020)   

Amortization of debt issuance costs

  25,670    

Interest Expense

  2,929    

Amortization of other non-current assets

     354 

Changes in operating assets and liabilities:

        

Prepaid expenses and other current assets

  (1,121)  (460)

Accounts payable

  3,313   294 

Operating lease liabilities

  330   (482)

Accrued expenses and other liabilities

  14,458   2,081 

Net cash used in operating activities

  (52,627)  (27,961)

Investing activities:

        

Acquisition of property, plant and equipment

  (996,467)  (5,673)

Acquisition of other non-current assets

  (13,971)  (5,343)

Net cash used in investing activities

  (1,010,438)  (11,016)

Financing activities:

        

Proceeds from debt issuance

  1,409,000    

Proceeds from sale of equity in Intermediate Holdings

  278,962    

Proceeds from sale of Rio Bravo Pipeline, LLC

  4,393    

Proceeds from sale of Series C Convertible Preferred Stock

     10,500 

Proceeds from sale of common stock

  254,400   115,000 

Debt and equity issuance costs

  (490,960)  (2)

Preferred stock dividends

  (53)  (38)

Shares repurchased related to share-based compensation

  (9,607)  (2,812)

Net cash provided by financing activities

  1,446,135   122,648 

Net increase in cash and cash equivalents

  383,070   83,671 

Cash and cash equivalents – beginning of period

  62,789   25,552 

Cash and cash equivalents – end of period

 $445,859  $109,223 
         

Balance per Consolidated Balance Sheets:

        
  September 30, 2023

Cash and cash equivalents

 $50,847 

Restricted cash

  395,012 

Total cash, cash equivalents and restricted cash

 $445,859 

 

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

 

 

NextDecade Corporation

Notes to Consolidated Financial Statements

(unaudited)

 

 

Note 1 — Background and Basis of Presentation

 

NextDecade Corporation (“we” or the “Company”) is engaged in construction and development activities related to the liquefaction of natural gas and sale of liquefied natural gas (“LNG”) and the capture and storage of CO2 emissions. We are constructing a natural gas liquefaction and export facility located in the Rio Grande Valley in Brownsville, Texas (the “Rio Grande LNG Facility”).  In  July 2023, we commenced construction on the first three liquefaction trains and related common facilities (“Phase 1”) of the Rio Grande LNG Facility following a positive final investment decision (“FID”) and the closing of project financing by our subsidiary, Rio Grande LNG, LLC (“Rio Grande”).  We are also developing two more Federal Energy Regulatory Commission approved liquefaction trains at the Rio Grande LNG Facility, a planned carbon capture and storage (“CCS”) project at the Rio Grande LNG Facility, and other potential CCS projects that would be located at third-party industrial source facilities.  

 

Basis of Presentation

 

The accompanying unaudited consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”) for interim financial information and with Rule 10-01 of Regulation S-X. Accordingly, they do not include all the information and disclosures required by GAAP for complete financial statements and should be read in conjunction with the consolidated financial statements and accompanying notes included in our Annual Report on Form 10-K for the year ended December 31, 2022. In our opinion, all adjustments, consisting only of normal recurring items, which are considered necessary for a fair presentation of the unaudited consolidated financial statements, have been included. The results of operations for the three and nine months ended September 30, 2023 are not necessarily indicative of the operating results for the full year.

 

Certain reclassifications have been made to conform prior period information to the current presentation.  The reclassifications did not have a material effect on the Company's financial position, results of operations or cash flows.

 

The Company has incurred operating losses since its inception and management expects operating losses and negative cash flows to continue until the commencement of operations at the Rio Grande LNG Facility and, as a result, the Company will require additional capital to fund its operations and execute its business plan. As of September 30, 2023, the Company had $50.8 million in cash and cash equivalents, which may not be sufficient to fund the Company's planned operations and development activities for future phases of the Rio Grande LNG Facility and CCS projects through one year after the date the consolidated financial statements are issued.  Accordingly, there is substantial doubt about the Company's ability to continue as a going concern. The analysis used to determine the Company's ability to continue as a going concern does not include cash sources outside of the Company's direct control that management expects to be available within the next twelve months.

 

The Company plans to alleviate the going concern issue by obtaining sufficient funding through additional equity, equity-based or debt instruments or any other means and by managing certain operating and overhead costs.  The Company's ability to raise additional capital in the equity and debt markets, should the Company choose to do so, is dependent on a number of factors, including, but not limited to, the market demand for the Company's equity or debt securities, which itself is subject to a number of business risks and uncertainties, as well as the uncertainty that the Company would be able to raise such additional capital at a price or on terms that are satisfactory to the Company. In the event the Company is unable to obtain sufficient additional funding, there can be no assurance that it will be able to continue as a going concern.

 

These consolidated financial statements have been prepared on a going concern basis and do not include any adjustments to the amounts and classification of assets and liabilities that may be necessary in the event the Company can no longer continue as a going concern.

 

Note 2 — Prepaid Expenses and Other Current Assets

 

Prepaid expenses and other current assets consisted of the following (in thousands):

 

  

September 30,

 

December 31,

  

2023

 

2022

Prepaid subscriptions

 $1,112  $423 

Prepaid insurance

  1,032   619 

Other

  126   107 

Total prepaid expenses and other current assets

 $2,270  $1,149 
 

Note 3 — Sale of Equity Interests in Rio Bravo

 

On March 2, 2020, NextDecade LLC closed the sale of the equity interests (the “Equity Interests”) in Rio Bravo Pipeline Company, LLC (“Rio Bravo”) to Spectra Energy Transmission II, LLC, a wholly owned subsidiary of Enbridge Inc. (“Buyer”), for consideration of approximately $19.4 million.

 

If Rio Grande or its affiliate failed to issue a full notice to proceed to the Bechtel Energy, Inc. (“Bechtel”) under the EPC agreements for Phase 1 on or prior to December 31, 2024, Buyer had the right to sell the Equity Interests back to NextDecade LLC and NextDecade LLC had the right to repurchase the Equity Interests from Buyer. Rio Grande issued a full notice to proceed to Bechtel on July 12, 2023.  Accordingly, the assets of Rio Bravo have been de-recognized in the consolidated balance sheet at September 30, 2023.

 

Buyer paid $15.0 million of the purchase price to NextDecade LLC at the closing of the transaction and the remainder of approximately $4.4 million was paid in July 2023 upon Rio Grande’s issuance of the full notice to proceed to Bechtel. 

 

 

7

 
 

Note 4 — Property, Plant and Equipment

 

Property, plant and equipment consisted of the following (in thousands):

 

  

September 30,

 

December 31,

  

2023

 

2022

Fixed Assets

        

Computers

 $779  $780 

Furniture, fixtures, and equipment

  610   610 

Vehicles

  166   0 

Leasehold improvements

  3,086   101 

Total fixed assets

  4,641   1,491 

Less: accumulated depreciation

  (1,123)  (1,006)

Total fixed assets, net

  3,518   485 

Project Assets (not placed in service)

        

Rio Grande LNG Facility

  1,710,278   197,144 

Pipeline

     21,017 

Total Project Assets

  1,710,278   218,161 

Total property, plant and equipment, net

 $1,713,796  $218,646 

 

Depreciation expense was $42 thousand and $41 thousand for the three months ended  September 30, 2023 and 2022, respectively, and $117 thousand and $129 thousand for the nine months ended  September 30, 2023 and 2022, respectively.

 

Note 5 — Derivatives

 

In July 2023, Rio Grande entered into interest rate swaps agreements (the “Swaps”) to protect against interest rate volatility by hedging a portion of the floating-rate interest payments associated with the credit facilities described in Note 9Debt. As of  September 30, 2023, Rio Grande has the following Swaps outstanding (in thousands):

 

Initial Notional Amount

 

Maximum Notional Amount

 

Maturity

 

Weighted Average Fixed Interest Rate Paid

 

Variable Interest Rate Received

$123,000  $8,500,000   

July 12, 2030

   3.4%  

USD - SOFR

 

 

The Swaps are not designated as cash flow hedging instruments, and changes in fair value are recorded within our Consolidated Statements of Operations.

 

The Company values the Swaps using an income-based approach based on observable inputs to the valuation model including interest rate curves, risk adjusted discount rates, credit spreads and other relevant data.  The fair value of the Swaps is approximately $151.7 million as of September 30, 2023, and is classified as Level 2 in the fair value hierarchy.

 

 

Note 6 — Leases

 

Our leased assets consist of office space and the Rio Grande site lease.  On July 12, 2023, Rio Grande delivered the effective date notice to the Brownsville Navigation District and commenced the Rio Grande site lease.

 

Operating lease right-of-use assets are as follows (in thousands):

 

  

September 30,

 

December 31,

  

2023

 

2022

Office leases

 $14,263  $1,474 

Land lease

  157,883    

Total operating lease right-of-use assets, net

 $172,146  $1,474 

 

Operating lease liabilities are as follows (in thousands):

 

  

September 30,

 

December 31,

  

2023

 

2022

Office leases

 $856  $1,093 

Land lease

  2,523    

Total current lease liabilities

 $3,379  $1,093 

Non-current office leases

  13,782   465 

Non-current land leases

  132,556    

Total lease liabilities

 $149,717  $1,558 

 

8

 

Operating lease expense is as follows (in thousands):

 

  

Three Months Ended September 30,

 

Nine Months Ended September 30,

  

2023

 

2022

 

2023

 

2022

Office leases

 $676  $230  $1,286  $608 

Land lease

  1,880      1,880    

Total operating lease expense

  2,556   230   3,166   608 

Short-term lease expense

  26   69   79   200 

Total lease expense

 $2,582  $299  $3,245  $808 

 

Maturity of operating lease liabilities as of September 30, 2023 are as follows (in thousands, except lease term and discount rate):

 

2023 (remaining)

 $2,166 

2024

  8,022 

2025

  7,609 

2026

  9,522 

2027

  9,565 

Thereafter

  208,851 

Total undiscounted lease payments

  245,735 

Discount to present value

  (96,018)

Present value of lease liabilities

 $149,717 
     

Weighted average remaining lease term - years

  27.9 

Weighted average discount rate - percent

  4.0 

 

Other information related to our operating leases is as follows (in thousands):

 

  

Nine Months Ended September 30,

  

2023

 

2022

Cash paid for amounts included in the measurement of operating lease liabilities:

        

Cash flows from operating activities

 $968  $684 

Noncash right-of-use assets recorded for operating lease liabilities:

        

In exchange for new operating lease liabilities during the period

 $147,829  $1,332 
  
 

Note 7 — Other Non-Current Assets

 

Other non-current assets consisted of the following (in thousands):

 

  

September 30,

 

December 31,

  

2023

 

2022

Permitting costs(1)

 $  $8,540 

Rio Grande Site Lease initial direct costs (2)

     19,647 

Contributions in aid of construction

  7,534    

Deposits and other

  3,487   185 

Total other non-current assets

 $11,021  $28,372 

 

(1)

Permitting costs primarily represent costs incurred in connection with permit applications to the United States Army Corps of Engineers and the U.S. Fish and Wildlife Service for mitigation measures for potential impacts to wetlands and habitat that may be caused by the construction of the Rio Grande LNG Facility.  Permitting costs were reclassified to property, plant and equipment in July 2023 with the positive final investment decision on phase 1 of the Rio Grande LNG Facility.

 

(2) Rio Grande Site Lease initial direct costs were reclassified to operating lease right-of-use asset in July 2023 upon commencement of the Rio Grande site lease.
 

Note 8 — Accrued Liabilities and Other Current Liabilities

 

Accrued expenses and other current liabilities consisted of the following (in thousands):

 

  

September 30,

 

December 31,

  

2023

 

2022

Employee compensation expense

 $7,534  $6,650 

Rio Grande LNG Facility costs

  191,957   12,046 

Debt issuance costs

  536    

Accrued interest

  12,232    

Permitting costs

     279 

Accrued legal services

     3,124 

Share-based compensation liability

     182 

Other accrued liabilities

  852   903 

Total accrued liabilities and other current liabilities

 $213,111  $23,184 
 

 

9

 

Note 9 — Debt

 

Our debt consists of long-term secured debt securities and credit agreements with banks and other lenders.  Debt issuances are placed directly by us or through securities dealers, underwriters, or lead arrangers and are held by institutional investors, banks and other lenders.

 

Debt is recorded on our Consolidated Balance Sheets at outstanding principal value, net of unamortized debt issuance costs related to term notes and loans. Debt issuance costs consist primarily of arrangement fees, professional fees, legal fees and in certain cases, commitment fees. If debt issuance costs are incurred in connection with a line of credit arrangement or on undrawn funds, the debt issuance costs are presented as an asset on our Consolidated Balance Sheets. Discounts, premiums and debt issuance costs directly related to the issuance of debt are amortized over the life of the debt and are recorded in interest expense, net of capitalized interest using the effective interest method.

 

We classify debt as current or non-current on our Consolidated Balance Sheets based on contractual maturity; however, long-term debt extinguished after the balance sheet date but before the financial statements are issued would be classified based on facts and circumstances existing as of the balance sheet date.

 

Debt consisted of the following (in thousands):

 

  

September 30, 2023

 

December 31, 2022

Senior Secured Notes and Loans

        

6.67% Senior Secured Notes due 2033

 $700,000  $ 

6.72% Senior Secured Loans due 2033

  356,000    

Total Senior Secured Notes and Loans

  1,056,000    
Credit Facilities        

CD Senior Working Capital Facility

      

CD Credit Facility

  327,000    

TCF Credit Facility

  26,000    

Total Debt

  1,409,000    
         

Current Portion of debt

      

Non-current portion of unamortized debt issuance costs, net

  27,175    

Total non-current debt, net of unamortized debt issuance costs

 $1,381,825  $ 

 

Senior Secured Notes and Loans

 

Rio Grande 6.67% Senior Secured Notes due 2033

 

The 6.67% Senior Secured Notes (the “Senior Secured Notes”) are senior secured obligations of Rio Grande, ranking senior in right of payment to any and all of Rio Grande’s future indebtedness that is subordinated to the Senior Secured Notes and equal in right of payment with Rio Grande’s other existing and future indebtedness that is senior and secured by the same collateral securing the Senior Secured Notes.  The Senior Secured Notes are secured on a first-priority basis by a security interest in all of the membership interests in Rio Grande and substantially all of Rio Grande’s assets, pari passu with the Senior Secured Loans, the CD Credit Agreement and the loans made under the TCF Credit Facility.  

 

Rio Grande 6.72% Senior Secured Loans due 2033

 

The 6.72% Senior Secured Loans (the “Senior Secured Loans”) are senior secured obligations of Rio Grande, ranking senior in right of payment to any and all of Rio Grande’s future indebtedness that is subordinated to the Senior Secured Loans and equal in right of payment with Rio Grande’s other existing and future indebtedness that is senior and secured by the same collateral securing the Senior Secured Loans.  The Senior Secured Loans are secured on a first-priority basis by a security interest in all of the membership interests in Rio Grande and substantially all of Rio Grande’s assets, pari passu with the Senior Secured Notes, the CD Credit Agreement and the loans made under the TCF Credit Facility.  

 

Debt Maturities

 

Years Ending December 31,

 

Principal Payments

2023

 $ 

2024

   

2025

   

2026

   

2027

   

Thereafter

  1,409,000 

Total

 $1,409,000 

 

10

 

Credit Facilities

 

Below is a summary of our committed credit facilities outstanding as of September 30, 2023 (in thousands):

 

  

CD Senior Working Capital Facility (1)

 

CD Credit Facility (1)

 

TCF Credit Facility (2)

Total Facility Size

 $500,000  $9,963,000  $800,000 

Less:

            

Outstanding balance

     327,000   26,000 

Letters of credit issued

  66,362       

Available commitment

 $433,638  $9,636,000  $774,000 
             

Priority ranking

 

Senior secured

  

Senior secured

  

Senior secured

 

Interest rate on outstanding balance

 

SOFR plus margin of 2.25%

  

SOFR plus margin of 2.25%

  

SOFR plus margin of 2.25%

 

Commitment fees on undrawn balance

  0.68%  0.68%  0.68%

Maturity Date

 

July 12, 2030

  

July 12, 2030

  

July 12, 2030

 

 

  
 

(1)

 

The obligations of Rio Grande under the CD Senior Working Capital Facility and CD Credit Facility are secured by substantially all of the assets of Rio Grande as well as a pledge of all of the membership interests in Rio Grande on a first-priority basis, pari passu with the Senior Secured Notes, the Senior Secured Loans and the loans made under the TCF Credit Facility.

 

 

(2)

The obligations of Rio Grande under the TCF Credit Agreement are secured by substantially all of the assets of Rio Grande as well as a pledge of all of the membership interests in Rio Grande on a first-priority basis, pari passu with the Senior Secured Notes, the Senior Secured Loans and the loans made under the CD Credit Agreement. Total Energies Holdings SAS (“Total Holdings”) provides contingent credit support to the lenders under the TCF Credit Agreement to pay past due amounts owing from Rio Grande under the agreement upon demand.

 

Restrictive Debt Covenants

 

The CD Credit Facility and the TCF Credit Facility (collectively, the “Facilities”) include certain covenants and events of default that are supplemental to the covenants and events of default set forth in the P1 Common Terms Agreement and that are customary for project financing facilities of this type, including a requirement that interest rates for a minimum of 75% of the projected principal amount of Senior Secured Debt outstanding be hedged or have fixed interest rates. In addition, certain covenants and events of default in the Facilities are more restrictive than the corresponding covenants and events of default in the P1 Common Terms Agreement, including covenants limiting Rio Grande’s ability to incur additional indebtedness, make certain investments or pay dividends (which are subject to customary conditions set out in the Facilities and certain related financing documents) or distributions on equity interests or subordinated indebtedness or purchase, redeem, or retire equity interests, sell or transfer assets, incur liens, dissolve, liquidate, consolidate, merge, sell, or lease all or substantially all of Rio Grande’s assets or enter into certain LNG sales contracts. The Facilities include a requirement for Rio Grande to maintain a historical debt service coverage ratio of at least 1.10:1.00 at the end of each fiscal quarter starting from the Initial Principal Payment Date, a default of which may be cured with equity contributions.

 

The Senior Secured Notes also contain customary terms and events of default and certain covenants that, among other things, limit Rio Grande’s ability to incur additional indebtedness, make certain investments or pay dividends or distributions on equity interests or subordinated indebtedness or purchase, redeem, or retire equity interests, sell or transfer assets, incur liens, dissolve, liquidate, consolidate, merge, or sell or lease all or substantially all of Rio Grande’s assets. The Senior Secured Notes further require Rio Grande to submit certain reports and information to the trustee and holders of the Senior Secured Notes, maintain certain LNG offtake agreements, and maintain a debt service coverage ratio of at least 1.10:1.00 at the end of each fiscal quarter starting from the Initial Principal Payment Date. With respect to certain events, including a change of control event and receipt of certain proceeds from asset sales, events of loss or liquidated damages, the indenture governing the Senior Secured Notes requires Rio Grande to make an offer to repurchase the Senior Secured Notes at 101% (with respect to a change of control event) or par (with respect to each other event), in each case on the terms specified in the Indenture. The Senior Secured Notes covenants are subject to a number of important limitations and exceptions, including the terms and covenants contained in the P1 Common Terms Agreement.

 

The Senior Secured Loan Agreement contains customary terms and events of default and certain covenants that, among other things, limit Rio Grande’s ability to incur additional indebtedness, make certain investments or pay dividends or distributions on equity interests or subordinated indebtedness or purchase, redeem, or retire equity interests, sell or transfer assets, incur liens, dissolve, liquidate, consolidate, merge, or sell or lease all or substantially all of Rio Grande’s assets. The Senior Secured Loan Agreement further requires Rio Grande to submit certain reports and information to the Administrative Agent and the lenders, maintain certain LNG offtake agreements, and maintain a debt service coverage ratio of at least 1.10:1.00 at the end of each fiscal quarter starting from the first quarterly payment date to occur on or after the date that is ninety days following the project completion date. With respect to certain events, including a change of control event and receipt of certain proceeds from asset sales, events of loss or liquidated damages, the Senior Secured Loan Agreement requires Rio Grande to make an offer to the lenders to have their Senior Secured Loans prepaid at 101% (with respect to a change of control event) or par (with respect to each other event), in each case, on the terms specified in the Senior Secured Loan Agreement. The Senior Secured Loan Agreement covenants are subject to a number of important limitations and exceptions, including the terms and covenants contained in the P1 Common Terms Agreement.

 

As of September 30, 2023, Rio Grande was in compliance with all covenants related to its respective debt agreements.

 

11

 

Interest Expense

 

Total interest expense, net of capitalized interest, consisted of the following (in thousands):

 

  

September 30, 2023

 

December 31, 2022

Interest cost of Non-current Debt

        

Interest per contractual rate

 $16,169  $ 

Amortization of debt issuance costs

  25,670    

Total Interest cost

  41,839    

Capitalized interest

  (9,303)   

Total interest expense, net of capitalized interest

 $32,536  $ 
         
         

 

Fair Value Disclosures

 

The following table shows the carrying amount and estimated fair value of our debt (in thousands):

  

September 30, 2023

 

December 31, 2023

  

Carrying Amount

 

Estimated Fair Value (1)

 

Carrying Amount

 

Estimated Fair Value

Senior Notes - Level 2

 $700,000  $700,000  $  $ 

Senior Loans - Level 2

  356,000   356,000       

 

 (1)

The Level 2 estimated fair value approximates the carrying amount due to the close proximity of the issuance of the debt and September 30, 2023.

  

 

Note 10 – Preferred Stock and Common Stock Warrants

 

Preferred Stock

 

As of December 31, 2022, the Company had outstanding 82,948 shares of Series A Convertible Preferred Stock, par value $0.0001 per share (the “Series A Preferred Stock”), 79,239 shares of Series B Convertible Preferred Stock, par value $0.0001 per share (the “Series B Preferred Stock”) and 59,366 shares of Series C Convertible Preferred Stock, par value $0.0001 per share (the “Series C Preferred Stock” and, together with the Series A Preferred Stock and the Series B Preferred Stock, the “Convertible Preferred Stock”).

 

The shares of Convertible Preferred Stock bear dividends at a rate of 12% per annum, which are cumulative and accrue daily from the respective dates of issuance on the $1,000 stated value per share. Such dividends are payable quarterly and may be paid in cash or in-kind. During the nine months ended September 30, 2023 and 2022, the Company paid-in-kind $20.5 million and $17.7 million of dividends, respectively, to the holders of the Convertible Preferred Stock.  On July 13, 2023, the Company declared dividends to the holders of the Convertible Preferred Stock as of the close of business on June 15, 2023.  On July 17, 2023, the Company paid-in-kind $7.0 million of dividends to the holders of the Convertible Preferred Stock.

 

On July 26, 2023, the Convertible Preferred Stock was converted into 59,542,066 shares of common stock.

 

Common Stock Warrants

 

The Company issued warrants exercisable to purchase Company common stock in connection with its issuances of Series A Preferred Stock, Series B Preferred Stock and Series C Preferred Stock (collectively, the “Common Stock Warrants”).  The Company revalues the Common Stock Warrants at each balance sheet date and recognized a gain of $3.3 million and a loss of $2.8 million during the three months ended September 30, 2023 and 2022, respectively, and losses of $2.5 million and $7.2 million for the nine months ended September 30, 2023 and 2022, respectively. The Common Stock Warrant liabilities are included in Level 3 of the fair value hierarchy.

 

The assumptions used in the Monte Carlo simulation model to estimate the fair value of the Common Stock Warrants are as follows:

 

  

September 30,

 

December 31,

  

2023

 

2022

Stock price

 $5.12  $4.94 

Exercise price

 $0.01  $0.01 

Risk-free rate

  5.3%  4.6%

Volatility

  81.9%  52.5%

Term (years)

  0.7   1.5 

    

 

 

12

 

Note 11 — Variable Interest Entity

 

The Company consolidates Variable Interest Entities ("VIEs") where it has been determined that the Company is the primary beneficiary of the applicable entities’ operations. For each VIE, the primary beneficiary is the party that has both the power to direct the activities that most significantly impact the VIE's economic performance and the obligation to absorb losses or the right to receive benefits of the VIE that could potentially be significant to such VIE. In evaluating whether the Company is the primary beneficiary of each entity, the Company evaluates its power to direct the most significant activities of the VIE by considering the purpose and design of each entity and the risks each entity was designed to create and pass through to its respective variable interest holders. The Company also evaluates its economic interests in each of the VIEs.

 

Intermediate Holdings and its wholly owned subsidiaries, including Rio Grande, have been formed to undertake Phase 1 of the construction and operation of the Rio Grande LNG Facility. The Company is not obligated to fund losses of Rio Grande, however, the Company's capital account, which would be considered in allocating the net assets of Rio Grande were it to be liquidated, continues to share in losses of Rio Grande. Further, Rio Grande has granted the Company decision-making rights regarding the construction of Phase 1 of the Rio Grande LNG Facility and key aspects of its operation, which may only be terminated by equity holders for cause, via agreements with NextDecade LLC. Due to the foregoing, the Company determined that it holds a variable interest in Rio Grande and is its primary beneficiary and therefore consolidates Rio Grande in these Consolidated Financial Statements.

 

The following table presents the summarized assets and liabilities (in thousands) of Rio Grande, which are included in the Company's Consolidated Balance Sheets. The assets in the table below may only be used to settle the obligations of Rio Grande. In addition, there is no recourse to us for the consolidated VIE’s liabilities. The assets and liabilities in the table below include assets and liabilities of Rio Grande only and exclude intercompany balances between Rio Grande and NextDecade, which are eliminated in the Consolidated Financial Statements of NextDecade.

 

 

  

September 30,

 

December 31,

  

2023

 

2022

Assets

        

Current assets

        

Cash

 $395,012  $ 

Current derivative asset

  21,047    

Prepaid expenses and other current assets