UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(MARK ONE)
For the quarterly period ended June 30, 2024
For the transition period from to
Commission File No. 001-36842
(Exact name of registrant as specified in its charter)
| (State or other jurisdiction of | (I.R.S. Employer | |||||||
| incorporation or organization) | Identification No.) | |||||||
(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: | ||||||||||||
The | ||||||||||||||
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 x No o
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 x No o
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 | o | Accelerated filer | o | ||||||||
| x | 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. o
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes o No x
As of August 7, 2024, the issuer had 259,474,273 shares of common stock outstanding.
NEXTDECADE CORPORATION
FORM 10-Q FOR THE QUARTER ENDED JUNE 30, 2024
TABLE OF CONTENTS
| Page | |||||
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.
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)
| June 30, 2024 | December 31, 2023 | ||||||||||
| Assets | |||||||||||
| Current assets: | |||||||||||
| Cash and cash equivalents | $ | $ | |||||||||
| Restricted cash | |||||||||||
| Derivatives | |||||||||||
| Prepaid expenses and other current assets | |||||||||||
| Total current assets | |||||||||||
| Property, plant and equipment, net | |||||||||||
| Operating lease right-of-use assets | |||||||||||
| Debt issuance costs | |||||||||||
| Derivatives | |||||||||||
| Other non-current assets | |||||||||||
| Total assets | $ | $ | |||||||||
| Liabilities and Stockholders’ Equity | |||||||||||
| Current liabilities: | |||||||||||
| Accounts payable | $ | $ | |||||||||
| Accrued and other current liabilities | |||||||||||
| Operating leases | |||||||||||
| Total current liabilities | |||||||||||
| Debt, net | |||||||||||
| Operating leases | |||||||||||
| Derivatives | |||||||||||
| Other non-current liabilities | |||||||||||
| Total liabilities | |||||||||||
| Commitments and contingencies (Note 11) | |||||||||||
| Stockholders’ equity | |||||||||||
Common stock, $ | |||||||||||
Treasury stock: | ( | ( | |||||||||
Preferred stock, $ | |||||||||||
| Additional paid-in-capital | |||||||||||
| Accumulated deficit | ( | ( | |||||||||
| Total stockholders’ equity | |||||||||||
| Non-controlling interest | |||||||||||
| Total equity | |||||||||||
| Total liabilities and equity | $ | $ | |||||||||
The accompanying notes are an integral part of these unaudited consolidated financial statements.
2
NextDecade Corporation
Consolidated Statements of Operations
(in thousands, except per share data, unaudited)
| Three Months Ended June 30, | Six Months Ended June 30, | ||||||||||||||||||||||
| 2024 | 2023 | 2024 | 2023 | ||||||||||||||||||||
| Revenues | $ | $ | $ | $ | |||||||||||||||||||
| Operating expenses: | |||||||||||||||||||||||
| General and administrative expense | |||||||||||||||||||||||
| Development expense | |||||||||||||||||||||||
| Lease expense | |||||||||||||||||||||||
| Depreciation expense | |||||||||||||||||||||||
| Total operating expenses | |||||||||||||||||||||||
| Total operating loss | ( | ( | ( | ( | |||||||||||||||||||
| Other income (expense): | |||||||||||||||||||||||
| Derivative gain (loss) | ( | ( | |||||||||||||||||||||
| Interest expense, net of capitalized interest | ( | ( | |||||||||||||||||||||
| Loss on debt extinguishment | ( | ( | |||||||||||||||||||||
| Other, net | ( | ( | ( | ( | |||||||||||||||||||
| Total other income (expense) | ( | ( | |||||||||||||||||||||
| Net income (loss) attributable to NextDecade Corporation | ( | ( | |||||||||||||||||||||
| Less: net income attributable to non-controlling interest | |||||||||||||||||||||||
| Less: preferred stock dividends | |||||||||||||||||||||||
| Net loss attributable to common stockholders | $ | ( | $ | ( | $ | ( | $ | ( | |||||||||||||||
| Net loss per common share - basic and diluted | $ | ( | $ | ( | $ | ( | $ | ( | |||||||||||||||
| Weighted average shares outstanding - basic and diluted | |||||||||||||||||||||||
The accompanying notes are an integral part of these unaudited consolidated financial statements.
3
NextDecade Corporation
Consolidated Statement of Stockholders’ Equity and Convertible Preferred Stock
(in thousands, unaudited)
| Three Months Ended June 30, | Six Months Ended June 30, | ||||||||||||||||||||||
| 2024 | 2023 | 2024 | 2023 | ||||||||||||||||||||
| Total stockholders' equity, beginning balances | $ | $ | $ | $ | |||||||||||||||||||
| Common stock: | |||||||||||||||||||||||
| Beginning balance | |||||||||||||||||||||||
| Issuance of common stock | |||||||||||||||||||||||
| Ending balance | |||||||||||||||||||||||
| Treasury Stock: | |||||||||||||||||||||||
| Beginning balance | ( | ( | ( | ( | |||||||||||||||||||
| Shares repurchased related to share-based compensation | ( | ( | ( | ( | |||||||||||||||||||
| Ending balance | ( | ( | ( | ( | |||||||||||||||||||
| Additional paid-in-capital: | |||||||||||||||||||||||
| Beginning balance | |||||||||||||||||||||||
| Share-based compensation | |||||||||||||||||||||||
| Issuance of common stock, net | |||||||||||||||||||||||
| Receipt of equity commitments | |||||||||||||||||||||||
| Exercise of common stock warrants | |||||||||||||||||||||||
| Preferred stock dividends | ( | ( | |||||||||||||||||||||
| Ending balance | |||||||||||||||||||||||
| Accumulated deficit: | |||||||||||||||||||||||
| Beginning balance | ( | ( | ( | ( | |||||||||||||||||||
| Net loss | ( | ( | ( | ( | |||||||||||||||||||
| Ending balance | ( | ( | ( | ( | |||||||||||||||||||
| Total stockholders' equity | ( | ( | |||||||||||||||||||||
| Non-controlling interest: | |||||||||||||||||||||||
| Beginning balance | |||||||||||||||||||||||
| Net income | |||||||||||||||||||||||
| Ending balance | |||||||||||||||||||||||
| Total equity, ending balances | $ | $ | ( | $ | $ | ( | |||||||||||||||||
| Preferred Stock, Series A-C: | |||||||||||||||||||||||
| Beginning balance | $ | $ | $ | $ | |||||||||||||||||||
| Preferred stock dividends | |||||||||||||||||||||||
| Ending balance | $ | $ | $ | $ | |||||||||||||||||||
The accompanying notes are an integral part of these unaudited consolidated financial statements.
4
NextDecade Corporation
Consolidated Statements of Cash Flows
(in thousands, unaudited)
| Six Months Ended June 30, | |||||||||||
| 2024 | 2023 | ||||||||||
| Operating activities: | |||||||||||
| Net income (loss) attributable to NextDecade Corporation | $ | $ | ( | ||||||||
| Adjustment to reconcile net income (loss) to net cash used in operating activities | |||||||||||
| Depreciation | |||||||||||
| Share-based compensation expense | |||||||||||
| Derivative gain (loss) | ( | ||||||||||
| Derivative settlements | |||||||||||
| Amortization of right-of-use assets | |||||||||||
| Loss on extinguishment of debt | |||||||||||
| Amortization of debt issuance costs | |||||||||||
| Other | |||||||||||
| Changes in operating assets and liabilities: | |||||||||||
| Prepaid expenses and other current assets | ( | ( | |||||||||
| Accounts payable | |||||||||||
| Operating lease liabilities | ( | ( | |||||||||
| Accrued expenses and other liabilities | |||||||||||
| Net cash used in operating activities | ( | ( | |||||||||
| Investing activities: | |||||||||||
| Acquisition of property, plant and equipment | ( | ( | |||||||||
| Acquisition of other non-current assets | ( | ( | |||||||||
| Net cash used in investing activities | ( | ( | |||||||||
| Financing activities: | |||||||||||
| Proceeds from debt issuance | |||||||||||
| Receipt of equity commitments | |||||||||||
| Repayment of debt | ( | ||||||||||
| Costs associated with repayment of debt | ( | ||||||||||
| Proceeds from sale of common stock | |||||||||||
| Debt issuance costs | ( | ||||||||||
| Preferred stock dividends | ( | ||||||||||
| Shares repurchased related to share-based compensation | ( | ( | |||||||||
| Net cash provided by financing activities | |||||||||||
| Net decrease in cash, cash equivalents and restricted cash | ( | ( | |||||||||
| Cash, cash equivalents and restricted cash – beginning of period | |||||||||||
| Cash, cash equivalents and restricted cash – end of period | $ | $ | |||||||||
| Balance per Consolidated Balance Sheets: | |||||||||||
| June 30, 2024 | |||||||||||
| Cash and cash equivalents | $ | ||||||||||
| Restricted cash | |||||||||||
| Total cash, cash equivalents and restricted cash | $ | ||||||||||
The accompanying notes are an integral part of these unaudited consolidated financial statements.
5
NextDecade Corporation
Notes to Consolidated Financial Statements
(unaudited)
Note 1 — Background and Basis of Presentation
NextDecade Corporation, a Delaware corporation, is a Houston-based energy company primarily engaged in construction and development activities related to the liquefaction of natural gas and sale of 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”). The Rio Grande LNG Facility has received Federal Energy Regulatory Commission (“FERC”) approval and Department of Energy (“DOE”) FTA and non-FTA authorizations for the construction of five liquefaction trains and LNG exports totaling 27 million tonnes per annum (“MTPA”). The Rio Grande LNG Facility has three liquefaction trains and related infrastructure (“Phase 1”) under construction while liquefaction trains 4 and 5 are currently in development. We are also developing 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 facilities.
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, 2023. 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 six months ended June 30, 2024 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 June 30, 2024, the Company had $38.1 million in cash and cash equivalents and available commitments of $26.2 million under a revolving loan facility, which may not be sufficient to fund the Company’s planned operations and development activities for future phases of the Rio Grande LNG Facility, including expected spending for Train 4 prior to a positive final investment decision (“FID”), 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.
6
Note 2 — Property, Plant and Equipment
Property, plant and equipment consisted of the following (in thousands):
| June 30, 2024 | December 31, 2023 | ||||||||||
| Rio Grande LNG Facility under construction | $ | $ | |||||||||
| Corporate and other | |||||||||||
| Total property, plant and equipment, at cost | $ | ||||||||||
| Less: accumulated depreciation | ( | ( | |||||||||
| Total property, plant and equipment, net | $ | $ | |||||||||
Note 3 — 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 6 — Debt.
In June 2024, Rio Grande reduced the maximum notional amount associated with the Swaps by approximately $583.1 million, which resulted in a realized derivative gain of $30.9 million.
As of June 30, 2024, Rio Grande has the following Swaps outstanding (in thousands):
| Initial Notional Amount | Maximum Notional Amount | Maturity (1) | Weighted Average Fixed Interest Rate Paid | Variable Interest Rate Received | ||||||||||||||||||||||
| $ | $ | 2048 | % | USD - SOFR | ||||||||||||||||||||||
(1) Swaps have an early mandatory termination date in July 2030.
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 $276.5 million as of June 30, 2024, and is classified as Level 2 in the fair value hierarchy.
Note 4 — Leases
The Company commenced the Rio Grande LNG Facility site lease on July 12, 2023 and it has an initial term of 30 years. The Company has the option to renew and extend the term of the lease for up to two consecutive renewal periods of ten years each, but as the Company is not reasonably certain that those options will be exercised, none are recognized as part of our right of use assets and lease liabilities. The Company has also entered into an office space lease which expires on December 31, 2035, and does not include any options for renewal.
For the three months ended June 30, 2024 and 2023, our operating lease costs were $2.6 million and $0.3 million, respectively. For the six months ended June 30, 2024 and 2023, our operating lease costs were $5.6 million and $0.7 million.
7
Maturity of operating lease liabilities as of June 30, 2024 are as follows (in thousands, except lease term and discount rate):
| 2024 (remaining) | $ | ||||
| 2025 | |||||
| 2026 | |||||
| 2027 | |||||
| 2028 | |||||
| Thereafter | |||||
| Total undiscounted lease payments | |||||
| Discount to present value | ( | ||||
| Present value of lease liabilities | $ | ||||
| Weighted average remaining lease term - years | |||||
| Weighted average discount rate - percent | |||||
Other information related to our operating leases is as follows (in thousands):
| Six Months Ended June 30, | |||||||||||
| 2024 | 2023 | ||||||||||
| Operating cash flows for amounts paid included in the measurement of operating lease liabilities | $ | $ | |||||||||
Note 5 — Accrued Liabilities and Other Current Liabilities
Accrued expenses and other current liabilities consisted of the following (in thousands):
| June 30, 2024 | December 31, 2023 | ||||||||||
| Rio Grande LNG Facility costs | $ | $ | |||||||||
| Accrued interest | |||||||||||
| Employee compensation expense | |||||||||||
| Professional services | |||||||||||
| Other accrued liabilities | |||||||||||
| Total accrued and other current liabilities | $ | $ | |||||||||
8
Note 6 — Debt
Debt consisted of the following (in thousands):
| June 30, 2024 | December 31, 2023 | ||||||||||
| Senior Secured Notes and Loans: | |||||||||||
| $ | $ | ||||||||||
| Total Senior Secured Notes and Loans | |||||||||||
| Credit Facilities: | |||||||||||
| CD Senior Working Capital Facility | |||||||||||
| CD Credit Facility | |||||||||||
| TCF Credit Facility | |||||||||||
| Corporate Credit Facility | |||||||||||
| Total debt | |||||||||||
| Unamortized debt issuance costs | ( | ( | |||||||||
| Total debt, net | $ | $ | |||||||||
Senior Secured Notes and Loans
The 6.67 % Senior Secured Notes, 6.85 % Senior Secured Notes and 6.58 % Senior Secured Notes (collectively, the “Senior Secured Notes”) as well as the 6.72 % Senior Secured Loans and 7.11 % Senior Secured Loans (collectively, 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 Notes and 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 Notes and Senior Secured Loans. The Senior Secured Notes and 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, on a pari passu basis with the CD Credit Agreement and the TCF Credit Facility.
Credit Facilities
Below is a summary of our committed credit facilities outstanding as of June 30, 2024 (in thousands):
| CD Senior Working Capital Facility | CD Credit Facility | TCF Credit Facility | Corporate Credit Facility | ||||||||||||||||||||
| Total Facility Size | $ | $ | $ | $ | |||||||||||||||||||
| Less: | |||||||||||||||||||||||
| Outstanding balance | |||||||||||||||||||||||
| Letters of credit issued | |||||||||||||||||||||||
| Available commitment | $ | $ | $ | $ | |||||||||||||||||||
| Priority ranking | Senior secured | Senior secured | Senior secured | Senior secured | |||||||||||||||||||
| Interest rate on outstanding balance | SOFR + | SOFR + | SOFR + | SOFR + | |||||||||||||||||||
| Commitment fees on undrawn balance | |||||||||||||||||||||||
| Maturity Date | 2030 | 2030 | 2030 | 2026 | |||||||||||||||||||
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
9
first-priority, pari passu basis with the Senior Secured Notes, the Senior Secured Loans and the loans made under the TCF Credit Facility.
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, pari passu basis with the Senior Secured Notes, the Senior Secured Loans and the loans made under the CD Credit Agreement. Total Energies Holdings SAS 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.
The obligations of NextDecade LLC under the Corporate Credit Facility are guaranteed by Rio Grande LNG Super Holdings, LLC and Rio Grande LNG Intermediate Super Holdings, LLC, wholly owned subsidiaries of NextDecade LLC. The Corporate Credit Facility matures at the earlier of two years from the closing date or 10 business days after a positive FID on Train 4 at the Rio Grande LNG facility.
Restrictive Debt Covenants
The CD Credit Facility and the TCF Credit Facility (collectively, the “Rio Grande Facilities”) include certain covenants and events of default customary for project financings, including a requirement that interest rates for a minimum of 75 % of the projected and outstanding principal amount be hedged or have fixed interest rates. The Rio Grande Facilities, the Senior Secured Loans, and Senior Secured Notes require 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.
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 Notes and Senior Secured Loans requires Rio Grande to make an offer to repay the amounts outstanding at 101 % (with respect to a change of control event) or par (with respect to each other event).
As of June 30, 2024, the Company was in compliance with all covenants related to its respective debt agreements.
Debt Extinguishment
As of June 30, 2024, Rio Grande has made repayments of $1,282.0 million, on the outstanding principal balance of the CD Credit Facility. As a result of these repayments, during the three and six months ended June 30, 2024, Rio Grande recognized approximately $40.1 million and $47.6 million loss on extinguishment, respectively.
Debt Maturities
| Principal Payments | |||||
| 2024 - 2025 | $ | ||||
| 2026 | |||||
| 2027 - 2028 | |||||
| Thereafter | |||||
| Total | $ | ||||
Interest Expense
Total interest expense, net of capitalized interest, consisted of the following (in thousands):
| Three Months Ended June 30, | Six Months Ended June 30, | ||||||||||||||||||||||
| 2024 | 2023 | 2024 | 2023 | ||||||||||||||||||||
| Interest per contractual rate | $ | $ | $ | $ | |||||||||||||||||||
| Amortization of debt issuance costs | |||||||||||||||||||||||
| Other interest costs | |||||||||||||||||||||||
| Total interest cost | |||||||||||||||||||||||
| Capitalized interest | ( | ( | |||||||||||||||||||||
| Total interest expense, net of capitalized interest | $ | $ | $ | $ | |||||||||||||||||||
10
Fair Value Disclosures
The following table shows the carrying amount and estimated fair value of our debt (in thousands):
| June 30, 2024 | December 31, 2023 | ||||||||||||||||||||||
| Carrying Amount | Estimated Fair Value | Carrying Amount | Estimated Fair Value | ||||||||||||||||||||
| Senior Notes — Level 2 | $ | $ | $ | $ | |||||||||||||||||||
| Senior Loans — Level 2 | |||||||||||||||||||||||
With the exception of the 6.58 % Senior Secured Notes, the fair value of the Senior Secured Notes and Senior Secured Loans was calculated based on inputs that are observable in the market or that could be derived from, or corroborated with, observable market data, including interest rates on debt issued by parties with comparable credit ratings. The fair value of the 6.58 % Senior Secured Notes approximates its’ carrying amount due to the close proximity of the issuance of the debt and June 30, 2024.
The fair value of the CD Credit Facility, TCF Credit Facility and Corporate Credit Facility approximates its respective carrying amount due to its variable interest rate, which approximates a market interest rate.
Note 7 — Variable Interest Entity
Intermediate Holdings and its wholly owned subsidiaries, including Rio Grande, have been formed to undertake construction and operation of Phase 1 of the Rio Grande LNG Facility. The Company is not obligated to fund losses of Intermediate Holdings, however, the Company’s capital account, which would be considered in allocating the net assets of Intermediate Holdings were it to be liquidated, continues to share in losses of Intermediate Holdings. 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 through Intermediate Holdings and is its primary beneficiary, and therefore consolidates Intermediate Holdings in these Consolidated Financial Statements.
The following table presents the summarized assets and liabilities (in thousands) of Intermediate Holdings, 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 Intermediate Holdings. 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 Intermediate Holdings only and exclude intercompany
11
balances between Intermediate Holdings and NextDecade, which are eliminated in the Consolidated Financial Statements of NextDecade.
| June 30, 2024 | December 31, 2023 | ||||||||||
| Assets | |||||||||||
| Current assets: | |||||||||||
| Restricted cash | $ | $ | |||||||||
| Derivatives | |||||||||||
| Prepaid expenses and other current assets | |||||||||||
| Total current assets | |||||||||||
| Property, plant and equipment, net | |||||||||||
| Operating lease right-of-use assets | |||||||||||
| Debt issuance costs | |||||||||||
| Derivatives | |||||||||||
| Other non-current assets | |||||||||||
| Total assets | $ | $ | |||||||||
| Liabilities | |||||||||||
| Current liabilities: | |||||||||||
| Accounts payable | $ | $ | |||||||||
| Accrued liabilities and other current liabilities | |||||||||||
| Operating lease | |||||||||||
| Total current liabilities | |||||||||||
| Operating lease | |||||||||||
| Derivatives | |||||||||||
| Debt, net | |||||||||||
| Total liabilities | $ | $ | |||||||||
Note 8 — Net Loss Per Share
Potentially dilutive securities not included in the diluted net income (loss) per share computations because their effect would have been anti-dilutive were as follows (in thousands):
| Three Months Ended June 30, | Six Months Ended June 30, | ||||||||||||||||||||||
| 2024 | 2023 | 2024 | 2023 | ||||||||||||||||||||
Unvested stock and stock units (1) | |||||||||||||||||||||||
| Convertible preferred stock | |||||||||||||||||||||||
| Common stock warrants | |||||||||||||||||||||||
| Total potentially dilutive common shares | |||||||||||||||||||||||
(1) 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. | |||||
Note 9 — Share-based Compensation
We have granted shares of Company common stock, restricted Company common stock and restricted stock units to employees, consultants and non-employee directors under our 2017 Omnibus Incentive Plan, as amended (the “2017 Plan”).
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Total share-based compensation expense consisted of the following (in thousands):
| Three Months Ended June 30, | Six Months Ended June 30, | ||||||||||||||||||||||
| 2024 | 2023 | 2024 | 2023 | ||||||||||||||||||||
| Equity awards | $ | $ | $ | $ | |||||||||||||||||||
| Liability awards | |||||||||||||||||||||||
| Total share-based compensation expense | $ | $ | $ | $ | |||||||||||||||||||
Note 10 — Income Taxes
Due to our cumulative loss position, we have established a full valuation allowance against our deferred tax assets at June 30, 2024 and December 31, 2023. Due to our full valuation allowance, we have not
Note 11 — Commitments and Contingencies
Legal Proceedings
From time to time the Company may be subject to various claims and legal actions that arise in the ordinary course of business. As of June 30, 2024, management is not aware of any claims or legal actions that, separately or in the aggregate, are likely to have a material adverse effect on the Company’s financial position, results of operations or cash flows, although the Company cannot guarantee that a material adverse effect will not occur.
Note 12 — Supplemental Cash Flows
The following table provides supplemental disclosure of cash flow information (in thousands):
| Six Months Ended June 30, | |||||||||||
| 2024 | 2023 | ||||||||||
| Accounts payable for acquisition of property, plant and equipment | $ | $ | |||||||||
| Accruals for acquisition of property, plant and equipment | |||||||||||
| Non-cash settlement of warrant liabilities | |||||||||||
| Corporate fixed asset retirements | |||||||||||
| Accrued liabilities for debt and equity issuance costs | |||||||||||
| Reclassification from other non-current assets to property, plant and equipment | |||||||||||
| Non-cash settlement of paid-in-kind dividends on convertible preferred stock | |||||||||||
| Accounts Payable for debt and equity issuance costs | |||||||||||
| Accrued liabilities for acquisition of other non-current assets | |||||||||||
Note 13 — Subsequent Event
On August 6, 2024, the U.S. Court of Appeals for the D.C. Circuit (the “Court”) issued an order vacating the FERC remand authorization of the Rio Grande LNG Facility on the grounds that the FERC should have issued a supplemental Environmental Impact Statement (“EIS”) during its remand process. The Court's decision will not be effective until the Court has issued its mandate, which is not expected to occur until after the appeals process has been completed. At this time, construction continues on Phase 1 at the Rio Grande LNG Facility.
The Company is reviewing the Court's decision and assessing all of its options, together with the key project constituencies, including its equity partners and lenders. The Company expects to take all available legal and regulatory actions, including but not limited to, appellate actions and other strategies, to ensure that construction on Phase 1 will continue and that necessary regulatory approvals will be maintained to enable the construction of Trains 4 and 5 at the Rio Grande LNG Facility.
As of August 14, 2024, the Company was in compliance with all covenants related to its respective debt agreements.
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Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations.
Forward-Looking Statements
This Quarterly Report on Form 10-Q includes forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”). All statements other than statements of historical fact contained in this Quarterly Report on Form 10-Q, including statements regarding our future results of operations and financial position, strategy and plans, and our expectations for future operations, are forward-looking statements. The words “anticipate,” “contemplate,” “estimate,” “expect,” “project,” “plan,” “intend,” “target,” “believe,” “may,” “might,” “will,” “would,” “could,” “should,” “can have,” “likely,” “continue,” “design” and other words and terms of similar expressions, are intended to identify forward-looking statements.
We have based these forward-looking statements largely on our current expectations and projections about future events and trends that we believe may affect our financial condition, results of operations, strategy, short-term and long-term business operations and objectives and financial needs.
Although we believe that the expectations reflected in our forward-looking statements are reasonable, actual results could differ from those expressed in our forward-looking statements. Our future financial position and results of operations, as well as any forward-looking statements are subject to change and inherent risks and uncertainties, including those described in the section titled “Risk Factors” in our most recent Annual Report on Form 10-K as supplemented by Item 1A of this Quarterly Report on Form 10-Q. You should consider our forward-looking statements in light of a number of factors that may cause actual results to vary from our forward-looking statements including, but not limited to:
•our progress in the development of our liquefied natural gas (“LNG”) liquefaction and export project and any carbon capture and storage projects (“CCS projects”) we may develop and the timing of that progress;
•the timing and cost of the development, construction and operation of the first three liquefaction trains and related common facilities (“Phase 1”) of the multi-plant integrated natural gas and liquefaction and LNG export terminal facility to be located at the Port of Brownsville in southern Texas (the “Rio Grande LNG Facility”);
•the availability and frequency of cash distributions available to us from our joint venture owning Phase 1 of the Rio Grande LNG Facility;
•the timing and cost of the development of subsequent liquefaction trains at the Rio Grande LNG Facility;
•the ability to generate sufficient cash flow to satisfy Rio Grande's significant debt service obligations or to refinance such obligations ahead of their maturity;
•restrictions imposed by Rio Grande's debt agreements that limit flexibility in operating its business;
•increases in interest rates increasing the cost of servicing Rio Grande's indebtedness;
•our reliance on third-party contractors to successfully complete the Rio Grande LNG Facility, the pipeline to supply gas to the Rio Grande LNG Facility and any CCS projects we develop;
•our ability to develop and implement CCS projects;
•our ability to secure additional debt and equity financing in the future, including any refinancing of outstanding indebtedness, on commercially acceptable terms and to continue as a going concern;
•the accuracy of estimated costs for the Rio Grande LNG Facility and CCS projects;
•our ability to achieve operational characteristics of the Rio Grande LNG Facility and CCS projects, when completed, including amounts of liquefaction capacities and amount of CO2 captured and stored, and any differences in such operational characteristics from our expectations;
•the development risks, operational hazards and regulatory approvals applicable to our LNG and carbon capture and storage development, construction and operation activities and those of our third-party contractors and counterparties;
•the ability to obtain or maintain governmental approvals to construct or operate the Rio Grande LNG Facility and CCS projects, including in relation to the recent decision by the D.C. Circuit Court of Appeals;
•technological innovation which may lessen our anticipated competitive advantage or demand for our offerings;
•the global demand for and price of LNG;
•the availability of LNG vessels worldwide;
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•changes in legislation and regulations relating to the LNG and carbon capture industries, including environmental laws and regulations that impose significant compliance costs and liabilities;
•scope of implementation of carbon pricing regimes aimed at reducing greenhouse gas emissions;
•global development and maturation of emissions reduction credit markets;
•adverse changes to existing or proposed carbon tax incentive regimes;
•global pandemics, including the 2019 novel coronavirus (“COVID-19”) pandemic, the Russia-Ukraine conflict, the Israel-Hamas conflict, other sources of volatility in the energy markets and their impact on our business and operating results, including any disruptions in our operations or development of the Rio Grande LNG Facility and the health and safety of our employees, and on our customers, the global economy and the demand for LNG or carbon capture;
•risks related to doing business in and having counterparties in foreign countries;
•our ability to maintain the listing of our securities on the Nasdaq Capital Market or another securities exchange or quotation medium;
•changes adversely affecting the businesses in which we are engaged;
•management of growth;
•general economic conditions, including inflation and rising interest rates;
•our ability to generate cash; and
•the result of future financing efforts and applications for customary tax incentives.
Should one or more of the foregoing risks or uncertainties materialize in a way that negatively impacts us, or should the underlying assumptions prove incorrect, our actual results may vary materially from those anticipated in our forward-looking statements, and our business, financial condition, and results of operations could be materially and adversely affected.
The forward-looking statements contained in this Quarterly Report on Form 10-Q are made as of the date of this Quarterly Report on Form 10-Q. You should not rely upon forward-looking statements as predictions of future events. In addition, neither we nor any other person assumes responsibility for the accuracy and completeness of any of these forward-looking statements.
Except as required by applicable law, we do not undertake any obligation to publicly correct or update any forward-looking statements. All forward-looking statements attributable to us are expressly qualified in their entirety by these cautionary statements as well as others made in our most recent Annual Report on Form 10-K as well as other filings we have made and will make with the Securities and Exchange Commission (the “SEC”) and our public communications. You should evaluate all forward-looking statements made by us in the context of these risks and uncertainties.
Overview of Business and Significant Developments
Overview of Business
NextDecade Corporation, a Delaware corporation, is a Houston-based energy company primarily engaged in construction and development activities related to the liquefaction of natural gas and sale of 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”), which currently has three liquefaction trains and related infrastructure under construction. The Rio Grande LNG Facility has received Federal Energy Regulatory Commission (“FERC”) approval and Department of Energy ("DOE") FTA and non-FTA authorizations for the construction of five liquefaction trains and supporting infrastructure with LNG exports totaling 27 million tonnes per annum (“MTPA”). Please see "Significant Recent Developments - Regulatory" for more information regarding our FERC permit. Liquefaction trains 1 through 3 and related infrastructure are currently under construction and liquefaction trains 4 and 5 at the Rio Grande LNG Facility are currently in development. We are also developing 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 facilities.
We are constructing the Rio Grande LNG Facility on the north shore of the Brownsville Ship Channel. The site is located on 984 acres of land which has been leased long-term and includes 15 thousand feet of frontage on the Brownsville Ship Channel. We believe the site is advantaged due to its proximity to abundant natural gas resources in the Permian Basin and Eagle Ford Shale, access to an uncongested waterway for vessel loading, and location in a region that has historically been subject to fewer and less severe weather events relative to other locations along the US Gulf Coast. The
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Rio Grande LNG Facility has been permitted by the FERC and authorized by the DOE to export up to 27 MTPA of LNG from up to five liquefaction trains.
In July 2023, our partially owned subsidiary Rio Grande LNG, LLC ("Rio Grande") commenced construction on the first three liquefaction trains and related infrastructure (“Phase 1”) of the Rio Grande LNG Facility following a positive final investment decision (“FID”) and the closing of project financing by Rio Grande, which owns Phase 1 of the Rio Grande LNG Facility. Construction will be completed by Bechtel Energy Inc. (“Bechtel”) under fully wrapped, lump-sum turnkey engineering, procurement, and construction (“EPC”) contracts, and will utilize APCI liquefaction technology, which is the predominant liquefaction technology utilized globally.
Pursuant to a joint venture agreement with equity partners for ownership of Rio Grande, we expect to receive up to approximately 20.8% of distributions of available cash generated from Phase 1 operations, provided that a majority of the cash distributions to which we are otherwise entitled will be paid for any distribution period only after our equity partners receive an agreed distribution threshold in respect of such distribution period and certain other deficit payments from prior distribution periods, if any, are made.
Rio Grande has entered into long-term LNG Sale and Purchase Agreements (“SPAs”) for over 90% of the expected Phase 1 nameplate LNG production capacity, pursuant to which Rio Grande customers are generally required to pay a fixed fee with respect to the contracted volumes, irrespective of whether they cancel or suspend deliveries of LNG cargoes. These SPAs create a stable foundation of predictable, long-term cash flows to Rio Grande. We believe our SPAs are attractive to our customers for several reasons, including long-term reliable supply, volumes to support growing demand for LNG and to replace customers’ contracts with legacy LNG suppliers, diversification of supply portfolios in terms of geography, price indexation, delivery points, and/or tenor, flexibility of volumes with no destination restrictions, and compatibility of some of our customers’ ESG goals with our expected lower carbon intensity LNG and planned CCS project at the Rio Grande LNG Facility.
Rio Grande expects to sell any commissioning LNG volumes and operational LNG volumes in excess of SPA volumes into the LNG market through spot, short-term, and medium-term agreements. Rio Grande has entered into certain time charter agreements and expects to enter into additional time charter agreements with vessel owners to provide shipping capacity for LNG sales related to its existing DES SPA, commissioning volumes, and expected portfolio volumes.
Rio Grande will provide a number of services in support of producing and selling LNG from the Rio Grande LNG Facility pursuant to its SPAs, including natural gas feedstock procurement and transportation, liquefaction, and delivery of LNG to customers either at the loading dock of the Rio Grande LNG Facility or at the customer’s global delivery points via chartered vessels.
We are focused on constructing and operating the Rio Grande LNG Facility safely, efficiently, reliably, and sustainably. We seek to provide a less carbon-intensive and more sustainable LNG through project design, responsibly sourced gas, proposed net-zero power, and our planned CCS project at the Rio Grande LNG Facility. We also seek to make additional measurable contributions toward a net-zero future by developing CCS projects to reduce greenhouse gas emissions at other industrial facilities.
Unless the context requires otherwise, references to “NextDecade,” “the Company,” “we,” “us,” and “our” refer to NextDecade Corporation and its consolidated subsidiaries, and references to “Rio Grande” refer to Rio Grande LNG, LLC and its subsidiaries.
Significant Recent Developments
Significant developments since January 1, 2024 and through the filing date of this 10-Q include the following:
Construction
•Under the EPC contracts with Bechtel, Phase 1 progress is tracked for Train 1, Train 2, and the common facilities on a combined basis and Train 3 on a separate basis. As of June 2024:
•The overall project completion percentage for Trains 1 and 2 and the common facilities of the Rio Grande LNG Facility was 24.1%, which is in line with the schedule under the EPC contract. Within this project completion percentage, engineering was 66.4% complete, procurement was 45.4% complete, and construction was 3.5% complete.
•The overall project completion percentage for Train 3 of the Rio Grande LNG Facility was 7.8%, based on preliminary schedules, which is also in line with the schedule under the EPC contract. Within this
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project completion percentage, engineering was 8.4% complete, procurement was 18.4% complete, and construction was 0.1% complete.
Strategic and Commercial
•In May 2024, the Company entered into a 20-year LNG SPA with ADNOC, pursuant to which ADNOC will purchase 1.9 MTPA of LNG from Train 4 at the Rio Grande LNG Facility for 20 years, on a free on board (FOB) basis at a price indexed to Henry Hub, subject to a positive FID on Train 4.
•In June 2024, the Company entered into a non-binding Heads of Agreement (HoA) with Aramco for a 20-year LNG SPA for offtake from Train 4 at the Rio Grande LNG Facility. Under the terms of the HoA, Aramco expects to purchase 1.2 MTPA of LNG for 20 years, on an FOB basis at a price indexed to Henry Hub. Aramco and the Company are in the process of negotiating a binding LNG SPA, and once executed, the SPA will be subject to a positive FID on Train 4.
•In August 2024, the Company finalized an EPC contract with Bechtel for Train 4 and related infrastructure for a cost of approximately $4.3 billion. Price validity under the EPC contract for Train 4 and related infrastructure extends through December 31, 2024.
•In July 2024, the Company appointed Tarik Skeik as Chief Operating Officer. Mr. Skeik has over 20 years of experience delivering complex global mega projects in LNG, oil, and petrochemicals across North America, the Middle East, and Asia. He led the completion and start-up of six greenfield assets, and his experience includes the planning and execution through initial operation of projects including the Huizhou Chemicals Complex in China, Gulf Coast Growth Ventures in the US, Banyu Urip in Indonesia, Kearl Expansion in Canada, and QatarGas 2 in Qatar.
Financial
•In January 2024, the Company’s wholly-owned subsidiary NextDecade LLC entered into a credit agreement that provides for a $50 million senior secured revolving credit facility with additional capacity of $12.5 million to cover interest. Borrowings under the revolving credit facility may be used for general corporate purposes, including development costs related to Train 4 at the Rio Grande LNG Facility. Borrowings bear interest at SOFR or the base rate plus an applicable margin as defined in the credit agreement. The revolving credit facility and interest term loan mature at the earlier of two years from the closing date of 10 business days after a positive FID on Train 4.
•In February 2024, Rio Grande issued and sold $190 million of senior secured notes in a private placement transaction to finance a portion of Phase 1. The Senior secured notes were issued on February 9, 2024 and resulted in a reduction in the commitments outstanding under Rio Grande's existing bank credit facilities for Phase 1. These senior secured notes will be amortized over a period of approximately 18 years beginning in mid-2029, with a final maturity in June 2047. The senior secured notes bear interest at a fixed rate of 6.85% and rank pari passu to Rio Grande's existing senior secured financings.
•In June 2024, Rio Grande issued $1.115 billion of senior secured notes in a private placement, and net proceeds were utilized to reduce outstanding borrowings and commitments under existing Rio Grande bank credit facilities for Phase 1. These senior secured notes will be amortized over a period of 18 years beginning in September 2029, with a final maturity in September 2047. The senior secured notes bear interest at a fixed rate of 6.58% and rank pari passu to Rio Grande's existing senior secured financings. Including this transaction, the Company has refinanced a total of over $1.85 billion of the original $11.1 billion Rio Grande term loan facilities since a positive FID was reached on Phase 1 at the Rio Grande LNG Facility in July 2023.
Regulatory
•In August 2024, the U.S. Court of Appeals for the D.C. Circuit (the “Court”) issued an order vacating the FERC remand authorization of the Rio Grande LNG Facility on the grounds that the FERC should have issued a supplemental Environmental Impact Statement (“EIS”) during its remand process. The Court's decision will not be effective until the Court has issued its mandate, which is not expected to occur until after the appeals process has been completed.
•At this time, construction continues on Phase 1 at the Rio Grande LNG Facility.
•The Company is reviewing the Court's decision and assessing all of its options, together with the key project constituencies, including its equity partners and lenders. The Company expects to take all available legal and regulatory actions, including but not limited to, appellate actions and other strategies, to ensure that construction
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on Phase 1 will continue and that necessary regulatory approvals will be maintained to enable the construction of Trains 4 and 5 at the Rio Grande LNG Facility.
Rio Grande LNG Facility Activity
Liquefaction Facilities Overview
We are constructing the Rio Grande LNG Facility on the north shore of the Brownsville Ship Channel. The site is located on 984 acres of land which has been leased long-term and includes 15 thousand feet of frontage on the Brownsville Ship Channel. We believe the site is advantaged due to its proximity to abundant natural gas resources in the Permian Basin and Eagle Ford Shale, access to an uncongested waterway for vessel loading, and location in a region that has historically been subject to fewer and less severe weather events relative to other locations along the US Gulf Coast. The Rio Grande LNG Facility has been permitted by the FERC and authorized by the DOE to export up to 27 MTPA of LNG from up to five liquefaction trains. Please see "Significant Recent Developments - Regulatory" for more information regarding our FERC permit.
In July 2023, construction commenced on Phase 1 of the Rio Grande LNG Facility following a positive FID and the closing of project financing by Rio Grande, which owns Phase 1 of the Rio Grande LNG Facility. Phase 1 includes three liquefaction trains with a total expected nameplate capacity of approximately 17.6 MTPA, two 180,000 cubic meter full containment LNG storage tanks, two jetty berthing structures designed to load LNG carriers up to 216,000 cubic meters in capacity, and associated site infrastructure and common facilities including feed gas pretreatment facilities, electric and water utilities, two totally enclosed ground flares for the LNG tanks and marine facilities, two ground flares for the liquefaction trains, roads, levees surrounding the entire site, and warehouses, administrative, operations control room and maintenance buildings.
As of June 2024, progress on Trains 1 through 3 is in line with the schedule under the EPC Contracts.Train 1 deep soil mixing has been completed and foundation pours are underway, including refrigeration compressor foundations. Additionally, steel erection for Train 1 is in process, and first pipework has been placed in the Train 1 cryogenic rack. Train 2 deep soil mixing is in process, and delivery of key materials such as large bore above-ground pipe and structural steel has continued. LNG tank progress has been strong, with excavation, pile leveling, and rebar installation for Tank 1 underway and Tank 2 piling completed. The permanent water supply for the site has been full constructed and is operational.
Bechtel has continued to make meaningful progress on procurement for Phase 1, with a focus on completing purchase orders for critical and high-value items early in the construction process. As of June 2024, Bechtel has issued approximately 92% of the total purchase orders for Trains 1 and 2 and approximately 88% of the total purchase orders for Train 3.
LNG Sale and Purchase Agreements
For Phase 1 of the Rio Grande LNG Facility, Rio Grande has entered into long-term LNG SPAs with nine creditworthy counterparties for aggregate volumes of approximately 16.2 MTPA of LNG, which is over 90% of the expected Phase 1 nameplate LNG production capacity. The SPAs have a weighted average term of 19.2 years. Under these SPAs, the customers will purchase LNG from Rio Grande for a price consisting of a fixed fee per MMBtu of LNG plus a variable fee per MMBtu of LNG, with the variable fees structured to cover the expected cost of natural gas plus fuel and other sourcing costs to produce LNG. In certain circumstances, customers may elect to cancel or suspend deliveries of LNG cargoes, in which case the customers would still be required to pay the fixed fee with respect to cargoes that are not delivered. A portion of the fixed fee under each SPA will be subject to annual adjustment for inflation. The SPAs and contracted volumes to be made available under the SPAs are not tied to a specific train; however, the commencement of the term of each SPA is tied to a specified train.
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Rio Grande’s portfolio of LNG SPAs for Phase 1 of the Rio Grande LNG Facility is as follows:
| Customer | Volume (MTPA) | Tenor (years) | Delivery Model (1) | |||||||||||||||||
| TotalEnergies Gas & Power North America, Inc. | 5.4 | 20 | FOB | |||||||||||||||||
| Shell NA LNG LLC (“Shell”) | 2.0 | 20 | FOB | |||||||||||||||||
| ENN LNG Singapore Pte Ltd. | 2.0 | 20 | FOB | |||||||||||||||||
| ENGIE S.A. | 1.75 | 15 | FOB | |||||||||||||||||
| China Gas Hongda Energy Trading Co., LTD | 1.0 | 20 | FOB | |||||||||||||||||
| Guangdong Energy Group | 1.0 | 20 | DES | |||||||||||||||||
| Exxon Mobil LNG Asia Pacific | 1.0 | 20 | FOB | |||||||||||||||||
| Galp Trading S.A. | 1.0 | 20 | FOB | |||||||||||||||||
| Itochu | 1.0 | 15 | FOB | |||||||||||||||||
| Total | 16.15 | 19.2 years weighted average | ||||||||||||||||||
(1)FOB - free on board; DES - delivered ex-ship
Each of these SPAs is currently effective, and deliveries of LNG under these SPAs will commence on the respective Date of First Commercial Delivery (“DFCD”), which is primarily tied to the substantial completion or guaranteed substantial completion dates of specific trains as defined in each SPA. In aggregate, approximately 14.65 MTPA of Phase 1 Henry Hub-linked SPAs have average fixed fees, unadjusted for inflation, totaling approximately $1.8 billion expected to be paid annually.
Marketing of Uncontracted Volumes
Rio Grande expects to sell any commissioning LNG volumes and operational LNG volumes in excess of SPA volumes into the LNG market through spot, short-term, and medium-term agreements. Rio Grande has entered into certain time charter agreements and expects to enter into additional time charter agreements with vessel owners to provide shipping capacity for LNG sales related to its existing DES SPA, commissioning volumes, and expected portfolio volumes.
Engineering, Procurement and Construction (“EPC”)
Rio Grande entered into fully wrapped, lump-sum turnkey contracts with Bechtel, a well-established and reputable LNG engineering and construction firm, for the engineering, procurement, and construction of Phase 1 and Train 4 at the Rio Grande LNG Facility, under which Bechtel has generally guaranteed cost, performance, and schedule. Under the Phase 1 and Train 4 EPC contracts, Bechtel is responsible for the engineering, procurement, construction,commissioning, and startup of liquefaction trains and their respective related infrastructure.
On July 12, 2023, Rio Grande issued final notice to proceed to Bechtel under the EPC contracts for Phase 1. Total expected capital costs for Phase 1 are estimated to be approximately $18.0 billion, including estimated EPC costs, owner’s costs, contingencies, and financing costs, and including amounts spent prior to FID under limited notices to proceed.
Natural Gas Transportation and Supply
For Phase 1 of the Rio Grande LNG Facility, Rio Grande has entered into a firm transportation agreement for capacity on the Rio Bravo Pipeline to transport natural gas feedstock to the Rio Grande LNG Facility. The Rio Bravo Pipeline will be developed by Whistler LLC, a joint venture between WhiteWater, I Squared, MPLX LP, and Enbridge, and will be constructed and operated by WhiteWater. The Rio Bravo Pipeline will provide Rio Grande access to purchase natural gas supplies in the Agua Dulce area and will connect to six regional intra and interstate pipelines, giving Rio Grande access to prolific gas production from the Permian Basin and Eagle Ford Shale and providing significant flexibility to obtain competitively priced natural gas feedstock.
The Rio Bravo Pipeline is under development and is expected to be constructed and completed prior to the start of commissioning of Train 1 at the Rio Grande LNG Facility. Rio Grande has also entered into an agreement for capacity on an interruptible basis with Enbridge’s Valley Crossing Pipeline to provide redundant natural gas transportation capacity to the Rio Grande LNG Facility for commissioning and operations.
We have proposed and are in the process of executing on a substantial and diversified natural gas feedstock sourcing strategy to spread risk exposure across multiple contracts, counterparties, and pricing hubs. We expect to enter into gas supply arrangements with a wide range of suppliers, and we also expect to leverage trading platforms and exchanges to lock in natural gas supply prices and/or hedge risk. Certain of our LNG offtake counterparties have the option
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to sell to Rio Grande some or all of the natural gas required to produce their respective contracted LNG volumes pursuant to structured options which define how much volume can be supplied and how much notice must be provided to switch to and from self-sourcing.
We believe our proximity to major reserve basins and shale plays, increasing pipeline capacity in the area, a significant amount of natural gas production and infrastructure investment, as well as our existing contacts and discussions with some of the largest regional operators, represent key elements of a comprehensive and effective feed gas strategy.
Final Investment Decision of Train 4 and Train 5 at the Rio Grande LNG Facility
We expect to make a positive final investment decision and commence construction of Train 4 and related infrastructure, and subsequently Train 5 and related infrastructure, at the Rio Grande LNG Facility, subject to, among other things, maintaining requisite governmental approvals, finalizing and entering into EPC contracts, entering into appropriate commercial arrangements, and obtaining adequate financing to construct each train and related infrastructure.
The Company has finalized an EPC contract with Bechtel for Train 4 and related infrastructure.
The Company continues to advance commercial discussions with multiple potential counterparties and expects to finalize commercial arrangements for Train 4 in the coming months to support a positive FID on Train 4. The Company entered into an LNG SPA with ADNOC for the sale of 1.9 MTPA of LNG from Train 4, as well as a non-binding HoA with Aramco for the sale of 1.2 MTPA of LNG from Train 4. The Company is working with Aramco to finalize a binding SPA. Additionally, an affiliate of TotalEnergies SE (“TotalEnergies”) has an LNG purchase option of 1.5 MTPA for Train 4, and the Company expects TotalEnergies to exercise the option.
The Company expects to finance construction of Train 4 utilizing a combination of debt and equity funding. The Company expects to enter into bank facilities for the debt portion of the funding. In connection with consummating the Rio Grande Phase 1 equity joint venture, the Company’s equity partners each have options to invest in Train 4 equity, which, if exercised, would provide approximately 60% of the equity funding required for Train 4. Inclusive of these options, NextDecade currently expects to fund 40% of the equity commitments for Train 4 and to have an initial economic interest of 40% in Train 4, increasing to 60% after its equity partners achieve certain returns on their investments in Train 4. The Company expects to take a final investment decision on Train 4 after commercial and financing arrangements are finalized.
The Company expects to progress the development of Train 5 after a positive FID on Train 4. TotalEnergies also holds an LNG purchase option for 1.5 MTPA for Train 5, and the Rio Grande Phase 1 equity partners have options to invest in Train 5 equity which are materially equivalent to their options to participate in Train 4 equity.
FERC Update
On April 21, 2023, the FERC issued the order on remand (the “Remand Order”) reaffirming the order issued by FERC on November 22, 2019, authorizing the siting, construction and operation of the Rio Grande LNG Facility (the “Order”). The Remand Order reaffirmed that the Rio Grande LNG Facility is not inconsistent with the public interest under the Natural Gas Act Section 3.
The Remand Order was issued as a result of the decision of the U.S. Court of Appeals for the District of Columbia (the “D.C. Circuit”) dated August 3, 2021, which denied all petitions filed by parties who filed requests for re-hearing of the Order, except for two technical issues dealing with environmental justice and GHG emissions, which were remanded to the FERC for further consideration.
Parties sought rehearing of the Remand Order, which FERC denied by operation of law on June 22, 2023, and subsequently issued a substantive order on the merits upholding the conclusions in the Remand Order, and its reaffirmation of the FERC Order. On August 17, 2023, parties petitioned the D.C. Circuit for review of the Remand Order. Oral arguments were held on May 17, 2024. On August 6, 2024, the D.C. Circuit issued an order vacating FERC's remand authorization of the Rio Grande LNG Facility on the grounds that the FERC should have issued a supplemental EIS during its remand process. The D.C. Circuit's decision will not be effective until the appeals process has been completed.
On November 24, 2023, a motion was filed with FERC to stay construction of the Rio Grande LNG Facility, which FERC denied on January 24, 2024. On February 2, 2024, parties filed a motion with the D.C. Circuit to stay construction of the Rio Grande LNG Facility. On March 1, 2024 the motion to stay was denied by the D.C. Circuit.
We are reviewing the D.C. Circuit's decision and evaluating all of our options. We expect to take all available legal and regulatory actions, including but not limited to, appellate actions and other strategies, to ensure that construction on Phase 1 will continue and that necessary regulatory approvals are maintained to enable the construction of Trains 4 and 5 at the Rio Grande LNG Facility.
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Corporate and Other Activities
We are required to maintain corporate and general and administrative functions to serve our business activities described above. We are also in various stages of developing other projects, such as Train 4 and Train 5 at the Rio Grande LNG Facility, additional liquefaction expansions at the Rio Grande LNG Facility, a CCS project at the Rio Grande LNG Facilities, and potential CCS projects at third party industrial facilities.
Financing Activity
Corporate Credit Facility
In January 2024, our wholly-owned subsidiary NextDecade LLC entered into a credit agreement that provides for a $50 million senior secured revolving credit facility with additional capacity of $12.5 million to cover interest. Borrowings under the revolving credit facility may be used for general corporate purposes, including development costs related to Train 4 at the Rio Grande LNG Facility. Borrowings bear interest at SOFR or the base rate plus an applicable margin as defined in the credit agreement. The revolving credit facility and interest term loan mature at the earlier of two years from the closing date or 10 business days after a positive FID on Train 4.
Rio Grande Senior Secured Notes
In February 2024, Rio Grande issued and sold $190 million of senior secured notes to finance a portion of Phase 1. The senior secured notes were issued on February 9, 2024 and resulted in a reduction in the commitments outstanding under Rio Grande's existing bank credit facilities for Phase 1. These senior secured notes will be amortized over a period of approximately 18 years beginning in mid-2029, with a final maturity in June 2047. The senior secured notes bear interest at a fixed rate of 6.85% and rank pari passu to Rio Grande's existing senior secured financings.
In June 2024, Rio Grande issued $1.115 billion of senior secured notes in a private placement, and proceeds were utilized to reduce outstanding borrowings and commitments under Rio Grande's existing bank credit facilities for Phase 1. These senior secured notes will be amortized over a period of 18 years beginning in September 2029, with a final maturity in September 2047. The senior secured notes bear interest at a fixed rate of 6.58% and rank pari passu to Rio Grande's existing senior secured financings.
Liquidity and Capital Resources
Following FID on Phase 1 and the project financing obtained by Rio Grande, NextDecade and Rio Grande operate with independent capital structures. Although our sources and uses are presented from a consolidated standpoint, certain restrictions under debt and equity agreements limit the ability of NextDecade and Rio Grande to use and distribute cash. Rio Grande is required to deposit all cash received under its debt agreements into restricted accounts. The usage or withdrawal of such cash is restricted to the payment of obligations related to Phase 1 and other restricted payments, and such cash and capital resources are not available to service the obligations of NextDecade.
Phase 1 FID Rio Grande Financing
In connection with the FID on Phase 1 of the Rio Grande LNG Facility, Rio Grande obtained approximately $6.2 billion in equity capital commitments, inclusive of commitments from the NextDecade Member, entered into senior secured non-recourse bank credit facilities of $11.6 billion, consisting of $11.1 billion in construction term loans and a $500 million working capital facility, and closed a $700 million senior secured non-recourse private notes offering. Rio Grande expects to utilize these capital resources to fund the total cost of Phase 1, which is currently estimated at $18.0 billion and consists of EPC costs, owner’s costs and contingencies, dredging for the Brazos Island Harbor Channel Improvement Project, conservation of more than 4,000 acres of wetland and wildlife habitat area and installation of utilities, and interest during construction and other financing costs.
Near Term Liquidity and Capital Resources of NextDecade Corporation
Prior to the FID on Phase 1 of the Rio Grande LNG Facility, our primary cash needs historically were funding development activities in support of the Rio Grande LNG Facility and our CCS projects, which included payments of initial direct costs of the Rio Grande site lease and expenses in support of engineering and design activities, regulatory approvals and compliance, commercial and marketing activities and corporate overhead. We spent approximately $97.7 million on such development activities year-to-date through FID on July 12, 2023, which we funded through our cash on hand and proceeds from the issuances of equity and equity-based securities. Following the FID on Phase 1 of the Rio Grande LNG Facility, costs associated with the Phase 1 EPC agreements, Rio Grande site lease, and other Phase 1 related costs are being funded by debt and equity proceeds received by Rio Grande.
Because our businesses and assets are under construction or in development, we have not historically generated significant cash flow from operations, nor do we expect to do so until liquefaction trains at the Rio Grande LNG Facility
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begin operating or until we install CCS systems at third-party industrial facilities. We intend to fund development activities for the foreseeable future with cash and cash equivalents on hand and through the sale of additional equity, equity-based or debt securities in us or in our subsidiaries. There can be no assurance that we will succeed in selling equity or equity-based securities or, if successful, that the capital we raise will not be expensive or dilutive to stockholders.
Our consolidated financial statements as of and for the three and six months ended June 30, 2024 have been prepared on the basis that we will continue as a going concern, which contemplates the realization of assets and satisfaction of liabilities in the normal course of business. Based on our balance of cash and cash equivalents of $38.1 million and available commitments under a revolving loan facility of $26.2 million at June 30, 2024, there is substantial doubt about our ability to continue as a going concern within one year after the date that our consolidated financial statements were issued. Our ability to continue as a going concern will depend on managing certain operating and overhead costs and our ability to raise capital through equity, equity-based or debt financings. The consolidated financial statements do not include any adjustments that might result from the outcome of this uncertainty, which could have a material adverse effect on our financial condition.
Our capital raising activities since January 1, 2024 have included the following:
In January 2024, NextDecade LLC entered into a Credit and Guaranty Agreement by and among NextDecade LLC, as borrower, Rio Grande LNG Super Holdings, LLC and Rio Grande LNG Intermediate Super Holdings, LLC, as subsidiary guarantors, MUFG Bank, Ltd., as the administrative agent (the “Administrative Agent”), Wilmington Trust, National Association, as the collateral agent (the “Collateral Agent”), MUFG Bank, Ltd., as coordinating lead arranger and bookrunner and the financial institutions party thereto as lenders. The Credit and Guarantee Agreement provides for the following facilities:
•a revolving loan facility (the “Revolving Loans”) in an amount up to $50.0 million available to NextDecade LLC to be used for (a) general corporate purposes and working capital requirements of NextDecade LLC and its subsidiaries, including development costs related to the fourth liquefaction train and related common facilities at the Rio Grande LNG Facility, and (b) certain permitted payments on behalf of the Company and its subsidiaries; and
•an interest loan facility (the “Interest Loans” and together with the Revolving Loans, the “Loans”) in an amount up to $12.5 million available to NextDecade LLC to pay interest obligations, fees, and expenses due and payable under the Credit Agreement and the other finance documents.
Long Term Liquidity and Capital Resources of NextDecade Corporation
We will not receive significant cash flows from Phase 1 of the Rio Grande LNG Facility until it is operational, and the commercial operation date for the first train of Phase 1 is expected to occur in late 2027 based on the schedule under the EPC contracts. Any future phases of development at the Rio Grande LNG Facility and CCS projects will similarly take an extended period of time to develop, construct and become operational and will require significant capital deployment.
We currently expect that the long-term capital requirements for future phases of development at the Rio Grande LNG Facility and any CCS projects will be financed predominantly through the proceeds from future debt, equity-based, and equity offerings by us or our subsidiaries. As a result, our business success will depend, to a significant extent, upon our ability to obtain financing required to fund future phases of development and construction at the Rio Grande LNG Facility and any CCS projects, to bring them into operation on a commercially viable basis and to finance any required increases in staffing, operating and expansion costs during that process. There can be no assurance that we will succeed in securing additional debt and/or equity financing in the future to fund future phases of development and construction at the Rio Grande LNG Facility or complete any CCS projects or, if successful, that the capital we raise will not be expensive or dilutive to stockholders. Additionally, if these types of financing are not available, we will be required to seek alternative sources of financing, which may not be available on terms acceptable to us, if at all.
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Sources and Uses of Cash
The following table summarizes the sources and uses of our cash for the periods presented (in thousands):
| Six Months Ended June 30, | |||||||||||
| 2024 | 2023 | ||||||||||
| Operating cash flows | $ | (22,838) | (41,204) | ||||||||
| Investing cash flows | (1,374,290) | (56,471) | |||||||||
| Financing cash flows | 1,305,729 | 74,898 | |||||||||
| Net decrease in cash, cash equivalents and restricted cash | (91,399) | (22,777) | |||||||||
| Cash, cash equivalents and restricted cash – beginning of period | 294,478 | 62,789 | |||||||||
| Cash, cash equivalents and restricted cash – end of period | $ | 203,079 | $ | 40,012 | |||||||
Operating Cash Flows
Operating cash outflows during the six months ended June 30, 2024 and 2023 were $22.8 million and $41.2 million, respectively. The decrease in operating cash outflows during the six months ended June 30, 2024 compared to the six months ended June 30, 2023 was primarily due to cash received in the settlement of derivatives partially offset by an increase in employee costs and professional fees paid to consultants as we construct Phase 1 of the Rio Grande LNG Facility and continue to develop subsequent phases.
Investing Cash Flows
Investing cash outflows during the six months ended June 30, 2024 and 2023 were $1,374.3 million and $56.5 million, respectively. Investing cash outflows primarily consist of cash used in the construction of Phase 1 of the Rio Grande LNG Facility. The increase in investing cash outflows during the six months ended June 30, 2024 compared to the same period in 2023 was primarily due to a positive FID on Phase 1 of the Rio Grande LNG Facility in July 2023 which has carried into 2024.
Financing Cash Flows
Financing cash inflows during the six months ended June 30, 2024 and 2023 were $1,305.7 million and $74.9 million, respectively. Financing cash inflows during the 2024 period are primarily comprised of $2,300.6 million of proceeds from borrowings under Rio Grande's credit facilities and its issuance of senior secured notes and proceeds from the receipt of equity commitments in Intermediate Holdings of $333.3 million, partially offset by debt issuance costs of $36.6 million and repayment of $1,282.0 million of debt using proceeds of the senior secured notes offering during the 2024 period. Financing cash inflows during the 2023 period were primarily comprised of the sale of Company common stock.
23
Results of Operations
The following table summarizes costs, expenses and other income for the periods indicated (in thousands):
| For the Three Months Ended June 30, | For the Six Months Ended June 30, | ||||||||||||||||||||||||||||||||||
| 2024 | 2023 | Change | 2024 | 2023 | Change | ||||||||||||||||||||||||||||||
| Revenues | $ | — | $ | — | $ | — | $ | — | $ | — | $ | — | |||||||||||||||||||||||
| General and administrative expense | 33,902 | 26,795 | 7,107 | 66,407 | 53,067 | 13,340 | |||||||||||||||||||||||||||||
| Development expense | 2,409 | 418 | 1,991 | 4,918 | 882 | 4,036 | |||||||||||||||||||||||||||||
| Lease expense | 2,603 | 325 | 2,278 | 5,622 | 662 | 4,960 | |||||||||||||||||||||||||||||
| Depreciation expense | 620 | 38 | 582 | 704 | 75 | 629 | |||||||||||||||||||||||||||||
| Total operating loss | (39,534) | (27,576) | (11,958) | (77,651) | (54,686) | (22,965) | |||||||||||||||||||||||||||||
| Other income (expense): | |||||||||||||||||||||||||||||||||||
| Derivative gain (loss) | 109,067 | (87,450) | 196,517 | 367,939 | (87,450) | 455,389 | |||||||||||||||||||||||||||||
| Interest expense, net of capitalized interest | (26,030) | — | (26,030) | (51,509) | — | (51,509) | |||||||||||||||||||||||||||||
| Loss on debt extinguishment | (40,133) | — | (40,133) | (47,573) | — | (47,573) | |||||||||||||||||||||||||||||
| Other, net | (1,066) | (5,263) | 4,197 | (2,127) | (5,500) | 3,373 | |||||||||||||||||||||||||||||
| Net income (loss) attributable to NextDecade Corporation | 2,304 | (120,289) | 122,593 | 189,079 | (147,636) | 336,715 | |||||||||||||||||||||||||||||
| Less: net income attributable to non-controlling interest | 34,880 | — | 34,880 | 193,309 | — | 193,309 | |||||||||||||||||||||||||||||
| Less: preferred stock dividends | — | 6,754 | (6,754) | — | 13,454 | (13,454) | |||||||||||||||||||||||||||||
| Net loss attributable to common stockholders | $ | (32,576) | $ | (127,043) | $ | 94,467 | $ | (4,230) | $ | (161,090) | $ | 156,860 | |||||||||||||||||||||||
Net loss attributable to common stockholders was $32.6 million, or $(0.13) per common share (basic and diluted) for the three months ended June 30, 2024 compared to a net loss of $127.0 million, or $(0.84) per common share (basic and diluted), for the three months ended June 30, 2023. The $94.5 million decrease in net loss was primarily a result of derivative gain, partially offset by increases in general and administrative expense, net income attributable to non-controlling interest, loss on debt extinguishment and interest expense, net of capitalized interest.
Derivative gain during the three months ended June 30, 2024 of $109.1 million is primarily due to an increase in forward SOFR rates from March 31, 2024 to June 30, 2024 and cash received in derivative settlements.
General and administrative expense during the three months ended June 30, 2024 increased approximately $7.1 million compared to the same period in 2023 primarily due to an increase in professional fees and employee costs, partially offset by a decrease in share-based compensation expense.
Interest expense, net of capitalized interest during the three months ended June 30, 2024 of $26.0 million represents total interest cost on debt of $63.8 million, net of capitalized interest of $37.8 million.
Net income attributable to non-controlling interest during the three and six months ended June 30, 2024 of $34.9 million and $193.3 million, respectively, is due to the sale of equity in Intermediate Holdings in July 2023 and the non-controlling interests share of Intermediate Holdings net income.
Net loss attributable to common stockholders was $4.2 million, or $(0.02) per common share (basic and diluted) for the six months ended June 30, 2024 compared to a net loss of $161.1 million, or $(1.08) per common share (basic and diluted), for the six months ended June 30, 2023. The $156.9 million decrease in net loss was primarily a result of derivative gain, partially offset by increases in general and administrative expense, net income attributable to non-controlling interest, loss on debt extinguishment and interest expense, net of capitalized interest.
Derivative gain during the six months ended June 30, 2024 of $367.9 million is due to the reversal of derivative liabilities recognized at December 31, 2023, an increase in forward SOFR rates from December 31, 2023 to June 30, 2024 and cash received in derivative settlements.
General and administrative expense during the six months ended June 30, 2024 increased approximately $13.3 million compared to the same period in 2023 primarily due to an increase in professional fees and employee costs, partially offset by a decrease in share-based compensation expense.
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Interest expense, net of capitalized interest during the six months ended June 30, 2024 of $51.5 million represents total interest cost on debt of $117.4 million, net of capitalized interest of $65.9 million.
Summary of Critical Accounting Estimates
The preparation of our Consolidated Financial Statements in conformity with accounting principles generally accepted in the United States of America (“GAAP”) requires management to make certain estimates and assumptions that affect the amounts reported in the Consolidated Financial Statements and the accompanying notes. There have been no significant changes to our critical accounting estimates from those disclosed in our Annual Report on Form 10-K for the year ended December 31, 2023.
Item 3. Quantitative and Qualitative Disclosures About Market Risk
We are a smaller reporting company as defined by Rule 12b-2 of the Securities Exchange Act of 1934, as amended, and are not required to provide the information under this item.
Item 4. Controls and Procedures
We maintain a set of disclosure controls and procedures that are designed to ensure that information required to be disclosed by us in the reports filed by us under the Exchange Act, is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms. As of the end of the period covered by this report, we evaluated, under the supervision and with the participation of our management, including our Chief Executive Officer and our Chief Financial Officer, the effectiveness of our disclosure controls and procedures pursuant to Rule 13a-15 of the Exchange Act. Based on that evaluation, our Chief Executive Officer and our Chief Financial Officer concluded that, as of June 30, 2024, our disclosure controls and procedures were effective.
During the most recent fiscal quarter, there have been no changes in our internal control over financial reporting that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
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PART II – OTHER INFORMATION
Item 1. Legal Proceedings
None.
Item 1A. Risk Factors
In addition to the other information set forth in this report, you should carefully consider the factors discussed below and in Part I, "Item 1A. Risk Factors" in our 2023 Annual Report on Form 10-K, which could materially affect our business, financial condition or future results.
The recent decision by the D.C. Circuit Court of Appeals could impact Rio Grande’s ability to complete Phase 1 on the expected time frame or at all, our ability to take a final investment decision on expansion trains at the Rio Grande LNG Facility and our ability to achieve expected investment returns.
We are required to obtain and maintain governmental approvals and authorizations to implement our proposed business strategy, which includes the design, construction and operation of the Rio Grande LNG Facility and the export of LNG from the U.S. to foreign countries. As described in more detail in “Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations—Overview of Business and Significant Developments—Significant Recent Developments—Regulatory,” on August 6, 2024, the D.C. Circuit Court of Appeals vacated the FERC authorization for the siting, construction and operation of the Rio Grande LNG Facility. We intend to pursue available legal remedies against judicial challenges and are engaged in active resolution of the requisite issues to ensure that the affected permit remains in effect; however, there is no guarantee as to how long any agency proceedings and judicial challenges will take to resolve, whether there will be any delays in construction activities or whether Rio Grande will ultimately succeed in maintaining the permit in its issued form or in a suitable replacement form. These uncertainties could cause Rio Grande to be subject to increased costs and adverse impact to its ability to complete the construction of Phase 1 on a timely basis or at all, which in turn could adversely affect the ability for Rio Grande and its owners, including us, to successfully implement our business strategy or achieve expected returns. Similarly, these uncertainties could impact the timing of, and our ability to take, a final investment decision on any expansion trains at the Rio Grande LNG Facility. In addition, the bank credit facilities obtained by Rio Grande to finance a substantial portion of Phase 1 costs require maintenance of material governmental approvals. To the extent Rio Grande becomes unable to satisfy such requirement as set forth in the credit agreements or reach other accommodations with its lenders, its ability to continue borrowing under such credit facilities could be negatively impacted, which in turn could adversely affect our business, financial condition, results of operations and liquidity.
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
Purchases of Equity Securities by the Issuer
The following table summarizes stock repurchases for the three months ended June 30, 2024:
| Period | Total Number of Shares Purchased (1) | Average Price Paid Per Share (2) | Total Number of Shares Purchased as a Part of Publicly Announced Plans | Maximum Number of Shares That May Yet Be Purchased Under the Plans | ||||||||||||||||||||||
| April 2024 | 2,178 | 5.55 | — | — | ||||||||||||||||||||||
| May 2024 | 3,303 | 6.74 | — | — | ||||||||||||||||||||||
| June 2024 | 1,655 | 7.94 | — | — | ||||||||||||||||||||||
(1)Represents shares of Company common stock surrendered to us by participants in the 2017 Plan to settle the participants’ personal tax liabilities that resulted from the lapsing of restrictions on awards made to the participants under the 2017 Plan.
(2)The price paid per share of Company common stock was based on the closing trading price of such stock on the dates on which we repurchased shares of Company common stock from the participants under the 2017 Plan.
Item 3. Defaults Upon Senior Securities
None.
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Item 4. Mine Safety Disclosures
Not applicable.
Item 5. Other Information
Securities Trading Plans of Directors and Executive Officers
During the three months ended June 30, 2024, none of our directors or executive officers adopted terminated
Item 6. Exhibits
| Exhibit No. | Description | |||||||
| 3.1 | ||||||||
| 3.2 | ||||||||
| 3.3 | ||||||||
| 3.4 | ||||||||
| 3.5 | ||||||||
| 3.6 | ||||||||
| 3.7 | ||||||||
| 3.8 | ||||||||
| 3.9 | ||||||||
| 10.1 | ||||||||
| 10.2*† | ||||||||
| 10.3*† | ||||||||
| 10.4*† | ||||||||
| 10.5*† | ||||||||
| 31.1* | ||||||||
27
| 31.2* | ||||||||
| 32.1** | ||||||||
| 32.2** | ||||||||
| 101.INS | Inline XBRL Instance Document (the Instance Document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document). | |||||||
| 101.SCH* | Inline XBRL Taxonomy Extension Schema Document. | |||||||
| 101.CAL* | Inline XBRL Taxonomy Extension Calculation Linkbase Document. | |||||||
| 101.LAB* | Inline XBRL Taxonomy Extension Label Linkbase Document. | |||||||
| 101.PRE* | Inline XBRL Taxonomy Extension Presentation Linkbase Document. | |||||||
| 101.DEF* | Inline XBRL Taxonomy Extension Definition Linkbase Document. | |||||||
| 104 | Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101). | |||||||
| * | Filed herewith. | |||||||
| ** | Furnished herewith. | |||||||
| † | Certain portions of this exhibit have been omitted pursuant to Item 601(a)(5) of Regulation S-K. | |||||||
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
| NEXTDECADE CORPORATION | ||||||||
Date: August 14, 2024 | By: | /s/ Matthew K. Schatzman | ||||||
| Matthew K. Schatzman | ||||||||
| Chairman of the Board and Chief Executive Officer | ||||||||
| (Principal Executive Officer) | ||||||||
Date: August 14, 2024 | By: | /s/ Brent E. Wahl | ||||||
| Brent E. Wahl | ||||||||
| Chief Financial Officer | ||||||||
| (Principal Financial Officer) | ||||||||
29
Exhibit 10.2
RIO GRANDE LNG, LLC
6.580% SENIOR SECURED NOTES DUE 2047
__________________
__________________
INDENTURE
Dated as of June 28, 2024
Dated as of June 28, 2024
__________________
WILMINGTON TRUST, NATIONAL ASSOCIATION
Trustee
TABLE OF CONTENTS
Page
ANNEX AND EXHIBITS
ANNEX A PAYMENT SCHEDULE
ANNEX B DISQUALIFIED INSTITUTIONS
Exhibit A FORM OF NOTE
Exhibit B FORM OF CERTIFICATE OF TRANSFER
Exhibit C FORM OF CERTIFICATE OF EXCHANGE
Exhibit D ADDITIONAL NOTES AND SUPPLEMENTAL INDENTURES FOR ADDITIONAL NOTES
Exhibit E FORM OF CERTIFICATE FROM ACQUIRING INSTITUTIONAL ACCREDITED INVESTOR
Exhibit 2.15-A FORM OF U.S. TAX COMPLIANCE CERTIFICATE
Exhibit 2.15-B FORM OF U.S. TAX COMPLIANCE CERTIFICATE
Exhibit 2.15-C FORM OF U.S. TAX COMPLIANCE CERTIFICATE
Exhibit 2.15-D FORM OF U.S. TAX COMPLIANCE CERTIFICATE
This INDENTURE dated as of June 28, 2024 between Rio Grande LNG, LLC, a Texas limited liability company (the “Company”) and Wilmington Trust, National Association, as Trustee, each a “Party” and together the “Parties”.
The Company and the Trustee agree as follows for the benefit of each other and for the equal and ratable benefit of the Noteholders (as defined herein).
1.DEFINITIONS AND INCORPORATION BY REFERENCE
1.1Defined Terms
Unless otherwise defined herein, capitalized terms used herein shall have the meanings provided in the Common Terms Agreement. In addition, the following terms shall have the following meanings:
“ACQ” has the meaning assigned to such term in the applicable Designated Offtake Agreement.
“Additional Notes” means Notes (other than the Initial Notes) issued under this Indenture in accordance with Section 2.1(b) and Exhibit D.
“Administrative Decision” has the meaning assigned to such term in the Collateral and Intercreditor Agreement.
“Agent” means any Registrar, co-registrar, Paying Agent or additional paying agent.
“Aggregate Funded Equity” has the meaning assigned to such term in the P1 Equity Contribution Agreement.
“Annual Facility Budget” has the meaning assigned to such term in the Definitions Agreement.
“Anti-Terrorism and Money Laundering Laws” means any of the following (a) Section 1 of Executive Order 13224 of September 24, 2001, Blocking Property and Prohibiting Transactions With Persons Who Commit, Threaten to Commit, or Support Terrorism (Title 12, Part 595 of the US Code of Federal Regulations), (b) the Terrorism Sanctions Regulations (Title 31 Part 595 of the US Code of Federal Regulations), (c) the Terrorism List Governments Sanctions Regulations (Title 31 Part 596 of the US Code of Federal Regulations), (d) the Foreign Terrorist Organizations Sanctions Regulations (Title 31 Part 597 of the US Code of Federal Regulations), (e) the USA Patriot Act of 2001 (Pub. L. No. 107-56), (f) the U.S. Money Laundering Control Act of 1986, as amended, (g) the Bank Secrecy Act, 31 U.S.C. sections 5301 et seq., (h) Laundering of Monetary Instruments, 18 U.S.C. section 1956, (i) Engaging in Monetary Transactions in Property Derived from Specified Unlawful Activity, 18 U.S.C. section 1957, (j) the Financial Recordkeeping and Reporting of Currency and Foreign Transactions Regulations (Title 31 Part 103 of the US Code of Federal Regulations), (k) any other similar rule by any Sanctions Authority having the force of law and relating to money laundering, terrorist acts or acts of war, and (l) any regulations promulgated under any of the foregoing.
“Applicable Prepayment” has the meaning set forth in Section 2.1(c).
“Approved Owners” means (a) Global Infrastructure Management, LLC, (b) Devonshire Investment Pte. Ltd., (c) MIC TI Holding Company 2 RSC Limited, (d) Global LNG North America Corp., (e) any Qualified Mezzanine Entity, and (f) to the extent satisfying the KYC
Requirements, any other Person approved by the Trustee acting at the instruction of the Noteholders of a majority in aggregate principal amount of the Notes then outstanding.
“Asset Sale Offer” has the meaning set forth in Section 3.9.
“Asset Sale Proceeds” has the meaning assigned to such term in the Collateral and Intercreditor Agreement.
“Authentication Order” has the meaning set forth in Section 2.2.
“Base Committed Quantity” means 844.880 million MMBtu (equivalent to approximately 16.19 MTPA), being the aggregate ACQ under the Initial Offtake Agreements; provided, that (a) following the full payment of the required amount of Senior Secured Debt (taking into account any amounts offered but not accepted by the Noteholders or other applicable Senior Secured Debt Holders) upon any LNG Sales Mandatory Prepayment Event pursuant to Section 4.8(a), the Base Committed Quantity will be equal to the aggregate ACQ under the Designated Offtake Agreements used to calculate the amount of Senior Secured Debt that the Company is not required to repay pursuant to Section 4.8(a), (b) to the extent that any other Offtake Agreement becomes a Designated Offtake Agreement or an existing Designated Offtake Agreement is amended to adjust the quantity of LNG contracted to be sold thereunder, the Base Committed Quantity will be equal to the aggregate ACQ under such Designated Offtake Agreements as at such time, and (c) following prepayment of Senior Secured Debt (other than any prepayment referenced in the foregoing clause (a)), the Base Committed Quantity will be reduced to the minimum ACQ under the Designated Offtake Agreements in effect at such time that is required to achieve an Indenture Projected DSCR of at least 1.40:1.00 (or, at any time after any prepayment referenced in clause (a), 1.20:1.00) based on the Base Case Forecast updated only to reflect such prepayment.
“Beneficial Owner” has the meaning assigned to such term in Rule 13d-3 and Rule 13d-5 under the Exchange Act, except that in calculating the beneficial ownership of any particular “person” (as that term is used in Section 13(d)(3) of the Exchange Act), such “person” will be deemed to have beneficial ownership of all securities that such “person” has the right to acquire by conversion or exercise of other securities, whether such right is currently exercisable or is exercisable only after the passage of time. The terms “beneficially owns,” “beneficially owned” and “beneficial ownership” have a corresponding meaning.
“Beneficial Ownership Certification” means a certification regarding beneficial ownership as required by the Beneficial Ownership Regulation (31 C.F.R. § 1010.230).
“2024 Senior Notes DSRA” means the account established pursuant to Section 2.3(b) of the P1 Accounts Agreement with respect to the Company’s debt service reserve requirement thereunder.
“Canada Blocked Person” means (i) a “terrorist group” as defined for the purposes of Part II.1 of the Criminal Code (Canada), as amended or (ii) a Person identified in or pursuant to (w) Part II.1 of the Criminal Code (Canada), as amended or (x) the Proceeds of Crime (Money Laundering) and Terrorist Financing Act, as amended or (y) the Justice for Victims of Corrupt Foreign Officials Act (Sergei Magnitsky Law), as amended or (z) regulations or orders promulgated pursuant to the Special Economic Measures Act (Canada), as amended, the United Nations Act (Canada), as amended, or the Freezing Assets of Corrupt Foreign Officials Act (Canada), as amended, in any case pursuant to this clause (ii) as a Person in respect of whose
2
property or benefit a holder of Notes would be prohibited from entering into or facilitating a related financial transaction.
“Change Order” means, as the context may require, a “Change Order” as defined in the T1/T2 EPC Contract, a “Change Order” as defined in the T3 EPC Contract, or both.
“Change of Control” means:
(a)prior to the Project Completion Date, the Sponsor and the Approved Owners collectively fail to directly or indirectly hold legally and beneficially more than 50% of the total voting and economic Equity Interests of the Company and voting Equity Interests of the Pledgor;
(b)prior to the Project Completion Date, the Sponsor fails to directly or indirectly hold legally and beneficially 15% or more of the voting and economic Equity Interests of the Company;
(c)on and after the Project Completion Date, the Sponsor, any Approved Owners, any Qualified Public Company, any Qualified Investment Entity, any Qualified Offtaker Investor, and any Qualified Energy Company collectively fail to directly or indirectly hold legally and beneficially more than 50% of the total voting and economic Equity Interests of the Company; or
(d)at any time, the Pledgor fails to hold legally and beneficially 100% of the total voting and economic Equity Interests in the Company;
provided, that in clauses (a), (b), and (c), any Equity Interests of the Pledgor that are held legally and beneficially through an entity of which the Sponsor, any Approved Owners, any Qualified Investment Entity, any Qualified Offtaker Investor, or any Qualified Energy Company, as applicable, is the general partner and has the power, whether by contract, equity ownership, or otherwise, to direct or cause the direction of the policies and management of such entity, shall be included when calculating such percentage; provided, further, that for purposes of clauses (a) and (c) and the definition of Approved Owners, (w) “Global Infrastructure Management, LLC” means Global Infrastructure Management, LLC, its Related Entities and its Affiliates, where (i) “Affiliates” means (A) any Person that is managed or advised by Global Infrastructure Management, LLC or its Related Entities or (B) any trustee, custodian, or nominee of any fund managed or advised by Global Infrastructure Management, LLC or its Related Entities and (ii) “advised” means being in receipt of an implementing advice in relation to the management of investments of that Person which (other than in relation to actually making decisions to implement such advice) is substantially the same as the services which would be provided by a fund manager of the relevant Person, (x) “Devonshire Investment Pte. Ltd.” means Devonshire Investment Pte. Ltd., its Related Entities and its Affiliates, where “Affiliates” means any Person that is, or is managed or advised by, GIC Private Limited or its Related Entities and (y) “MIC TI Holding Company 2 RSC Limited” means MIC TI Holding Company 2 RSC Limited, its Related Entities and its Affiliates, where “Affiliates” means the government of the Emirate of Abu Dhabi and any Person it Controls, whether directly or indirectly.
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“Change of Control Offer” has the meaning set forth in Section 4.12.
“Change of Control Payment” has the meaning set forth in Section 4.12.
“Change of Control Payment Date” has the meaning set forth in Section 4.12.
“Change of Control Triggering Event” means the occurrence of a Change of Control; provided, that, a Change of Control shall not be deemed to have occurred if the Company shall have received written confirmation that a Rating Reaffirmation shall have occurred.
“Code” means the Internal Revenue Code of 1986 and the rules and regulations promulgated thereunder from time to time.
“Collateral Proceeds” has the meaning assigned to such term in the Collateral and Intercreditor Agreement.
“Common Terms Agreement” means the Common Terms Agreement, dated as of July 12, 2023, by and among the Company, each Senior Secured Debt Holder Representative that is a party thereto and the P1 Intercreditor Agent.
“Company” has the meaning set forth in the Preamble hereto.
“Construction Budget and Schedule” means (a) a budget attached as Exhibit O-1 to the CD Credit Agreement setting forth, on a monthly basis, the timing and amount of all projected payments of P1 Project Costs through the date on which Substantial Completion under each P1 EPC Contract shall have occurred under each of the P1 EPC Contracts and (b) a schedule attached as Exhibit O-2 to the CD Credit Agreement setting forth the proposed engineering, procurement, construction and testing milestone schedule for the Project’s Development through the projected date on which Final Completion shall have occurred under each of the P1 EPC Contracts, which budget and schedule shall (i) be certified by the Company as the best reasonable estimate of the information set forth therein as of the Closing Date, (ii) be consistent with the requirements of the P1 Financing Documents and the Material Project Documents, and (iii) as of the Closing Date, be in form and substance acceptable to the Noteholders in consultation with the Independent Engineer, in each case as may be amended, supplemented or otherwise modified to take into account any Change Orders permitted under the CD Credit Agreement.
“Contracted Revenues” means, for any period, Cash Flow projected to be received by the Company during such period under Qualified Offtake Agreements calculated solely to reflect the price paid if no LNG is lifted under Qualified Offtake Agreements then in effect.
“Controlled Subsidiary” means, with respect to any specified Person, a corporation, partnership, joint venture, limited liability company or other Person of which a majority of the Equity Interests of such Person having ordinary voting power or authority for the election or appointment of directors, managers or other governing body (other than Equity Interests having such power or authority only by reason of the happening of a contingency) are at the time beneficially owned, or the management of which is otherwise Controlled, directly or indirectly through one or more intermediaries, or both, by such specified Person.
“Corporate Trust Office of the Trustee” will be at the address of the Trustee specified in Section 12.1 or such other address as to which the Trustee may give notice to the Company and the Noteholders or the designated corporate trust office of any successor Trustee.
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“Covenant Defeasance” has the meaning set forth in Section 8.3.
“Custodian” means the Trustee, as custodian with respect to the Notes in registered book-entry form, or any successor entity thereto.
“Date Certain” shall mean, the “Date Certain” as defined under the CD Credit Agreement, as of the date of this Indenture and without giving effect to how that term may be amended, waived, extended or otherwise modified from time to time, pursuant to the terms of the CD Credit Agreement notwithstanding any contrary provision in any P1 Financing Document.
“DBRS” means Morningstar DBRS or any successor thereto.
“Debt Fund Affiliate” means any Affiliate of the Company or any if its subsidiaries that is, in each case, a bona fide debt fund or an investment vehicle that is engaged in the making, purchasing, holding or otherwise investing in commercial loans, bonds and similar extensions of credit in the ordinary course, is not organized for the purpose of making equity investments, and with respect to which (a) any such Debt Fund Affiliate has in place customary information barriers between it and the applicable Equity Owner and any Affiliate of the applicable Equity Owner that is not primarily engaged in the investing activities described above, (b) its managers have fiduciary duties to the investors thereof independent of and in addition to their duties to the applicable Equity Owner and any Affiliate of the applicable Equity Owner, and (c) the Equity Owners and investment vehicles managed or advised by any Equity Owner that are not engaged primarily in making, purchasing, holding or otherwise investing in commercial loans, bonds and similar extensions of credit in the ordinary course do not, either directly or indirectly, make investment decisions for such entity.
“Debt to Equity Ratio” means, as of any date of determination, the ratio of (a) the aggregate principal amount of all Senior Secured Debt (other than the principal of Working Capital Debt) at such time outstanding to (b) the sum of Aggregate Funded Equity and Voluntary Equity Contributions, in each case, made on or prior to such date.
“Debtor Relief Law” has the meaning assigned to such term in the Collateral and Intercreditor Agreement.
“Default” means (i) any CTA Default and (ii) any other event or condition which, with the giving of notice, lapse of time or upon a declaration or determination being made (or any combination thereof), would become an Event of Default.
“Definitive Note” means a certificated Note registered in the name of the Noteholder, issued in accordance with Section 2.6, and, in the case of Initial Notes, substantially in the form of Exhibit A.
“Delivered” refers to quantities of LNG sold “cost, insurance and freight,” “cost and freight,” “delivered ex ship,” “delivered at terminal,” or otherwise where the Company is responsible for the transportation of LNG to a delivery point other than at the Rio Grande Facility under the terms of the relevant Offtake Agreement.
“Disqualified Institution” means (a) any person set forth by the Company on Annex B as of the date hereof, as updated from time to time by the Company by three Business Days’ prior written notice to the Trustee to add any competitor of any Loan Party, Global Infrastructure Management, LLC, TotalEnergies SE, and their respective subsidiaries, and such competitor’s
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Affiliates or (b) any clearly identifiable (solely on the basis of its name or as identified by the Company to the Trustee) Affiliate of the entities described in clause (a); provided, that “Disqualified Institution” shall not include in each case a Disqualified Institution Debt Fund Affiliate of any entity not listed under the heading “Group A” in Annex B hereto; provided, further, that the Company shall neither add more than two additional entity names in any calendar year to “Group A” under Annex B following the date hereof nor increase the total number of entity names under Annex B by more than an aggregate number of 10 entities relative to the number of entities listed thereon on the Closing Date (it being understood that nothing herein shall prevent or restrict the Company from removing entity names from Annex B at any time); provided, further, that any designation as a “Disqualified Institution” shall not apply retroactively to any then current Noteholder.
“Disqualified Institution Debt Fund Affiliate” means a bona fide debt fund or an investment vehicle that is engaged in the making, purchasing, holding or otherwise investing in commercial loans, bonds and similar extensions of credit in the ordinary course, is not organized for the purpose of making equity investments, and with respect to which (a) any such Disqualified Institution Debt Fund Affiliate has in place customary information barriers between it and the applicable Disqualified Institution and any Affiliate of the applicable Disqualified Institution that is not primarily engaged in the investing activities described above, (b) its managers have fiduciary duties to the investors thereof independent of and in addition to their duties to the applicable Disqualified Institution and any Affiliate of the applicable Disqualified Institution, and (c) the Disqualified Institution and investment vehicles managed or advised by such Disqualified Institution that are not engaged primarily in making, purchasing, holding or otherwise investing in commercial loans, bonds and similar extensions of credit in the ordinary course do not, either directly or indirectly, make investment decisions for such entity.
“DOE Export Authorizations” means (a) the Order Granting Long-Term Multi-Contract Authorization to Export LNG to Free Trade Agreement Nations issued by DOE/FE in FE Docket No. 15-190-LNG in its Order No. 3869 on August 17, 2016, and (b) the Opinion and Order Granting Long-Term Multi-Contract Authorization to Export LNG to Non-Free Trade Agreement Nations issued by DOE/FE in FE Docket No. 15-190-LNG in its Order No. 4492 on February 10, 2020, as amended to extend the term in DOE/FE Order No. 4492-A issued on October 21, 2020.
“DOE/FE” means the U.S. Department of Energy, Office of Fossil Energy or, as subsequently renamed, Office of Fossil Energy and Carbon Management.
“Environmental and Social Action Plan” means the Environmental and Social Action Plan attached to the report of the Environmental Advisor delivered pursuant to this Indenture, together with any updates thereto as may be made from time to time by the Company as required or permitted under the P1 Financing Documents.
“Equator Principles” means the principles named “The Equator Principles EP4 – A financial industry benchmark for determining, assessing and managing environmental and social risk in projects” adopted by various financial institutions in the form dated July 2020 that became effective on October 1, 2020.
“ERISA” means the Employee Retirement Income Security Act of 1974, as amended from time to time.
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“ERISA Affiliate” means any corporation or trade or business which is a member of any group of organizations: (a) described in Section 414(b) or Section 414(c) of the Code of which the Company is a member and (b) solely for purposes of potential liability under Section 302(b) of ERISA and Section 412(b) of the Code and the lien created under Section 303(k) of ERISA and Section 430(k) of the Code, described in Section 414(m) or Section 414(o) of the Code of which the Company is a member.
“ERISA Event” means:
(a)any “reportable event”, as defined in Section 4043 of ERISA or the regulations issued thereunder with respect to a Plan, other than events for which the 30-day notice period has been waived by current regulation under PBGC Regulation Subsections .27, .28, .29 or .31;
(b)the failure with respect to any Plan to meet the minimum funding requirements of Section 412 or Section 430 of the Code or Section 302 or Section 303 of ERISA, whether or not waived;
(c)the filing pursuant to Section 412(c) of the Code or Section 303 of ERISA of an application for a waiver of the minimum funding standard with respect to any Plan;
(d)the incurrence by the Company or any of its ERISA Affiliates of any liability under Title IV of ERISA with respect to the termination of any Plan;
(e)the filing of notice of intent to terminate a Plan or the treatment of a Plan amendment as a termination under Section 4041 of ERISA;
(f)the institution of proceedings to terminate a Plan by PBGC or to appoint a trustee to administer any Plan;
(g)the withdrawal by the Company or any of its ERISA Affiliates from a multiple employer plan (within the meaning of Section 4064 of ERISA) during a plan year in which it was a “substantial employer”, as such term is defined under Section 4064 of ERISA, upon the termination of a Multiemployer Plan or the cessation of operations under a Plan pursuant to Section 4062(e) of ERISA;
(h)the incurrence by the Company or any of its ERISA Affiliates of any liability with respect to the withdrawal or partial withdrawal from any Multiemployer Plan;
(i)the attainment of any Plan of “at risk” status within the meaning of Section 430 of the Code or Section 303 of ERISA;
(j)the receipt by the Company or any ERISA Affiliate of any notice, or the receipt by any Multiemployer Plan from the Company or any ERISA Affiliate of any notice, concerning the imposition of Withdrawal Liability or a determination that
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a Multiemployer Plan is, or is expected to be, insolvent or in critical, endangered or critical and declining status, within the meaning of the Code or Title IV of ERISA;
(k)the failure of the Company or any ERISA Affiliate to pay when due any amount that has become liable to the PBGC, any Plan or trust established thereunder pursuant to Title IV of ERISA or the Code;
(l)the adoption of an amendment to a Plan requiring the provision of security to such Plan pursuant to Section 436(f) of the Code;
(m)the Company or any of its Controlled Subsidiaries engages in a “prohibited transaction” within the meaning of Section 4975 of the Code or Section 406 of ERISA that is not otherwise exempt by statute, regulation or administrative pronouncement; or
(n)the imposition of a lien under ERISA or the Code with respect to any Plan or Multiemployer Plan.
“Event of Default” has the meaning set forth in Section 6.1.
“Excess Loss Proceeds” has the meaning set forth in Section 4.13.
“Excess Asset Sale Proceeds” has the meaning set forth in Section 4.14.
“Exchange Act” means the Securities Exchange Act of 1934, as amended, and the rules and regulations of the SEC promulgated thereunder.
“Export Authorization Remediation” has the meaning set forth in Section 4.8.
“Facility Independent Engineer” has the meaning assigned to such term in the Definitions Agreement.
“FATCA” means Sections 1471 through 1474 of the Code, as of the date of this Agreement (or any amended or successor version that is substantively comparable and not materially more onerous to comply with), any current or future regulations or official interpretations thereof, any agreements entered into pursuant to Section 1471(b)(1) of the Code and any fiscal or regulatory legislation, rules or practices adopted pursuant to any intergovernmental agreement, treaty or convention among governmental authorities and implementing such Sections of the Code.
“Final Completion” means, as the context may require, a “Final Completion” as defined in the T1/T2 EPC Contract, a “Final Completion” as defined in the T3 EPC Contract, or both.
“Foreign Noteholder” means a Noteholder that is not a U.S. Noteholder.
“Funding Shortfall Debt” means Supplemental Debt that satisfies:
(a)the conditions set forth in Section 2.6 (Supplemental Debt) of the Common Terms Agreement,
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(b)the conditions set forth in Section 4.7(d), and
(c)the following conditions:
(i)the principal amount of such Funding Shortfall Debt does not exceed: (A) (1) if incurred prior to the Project Completion Date or the completion date of the Permitted Capital Improvement (as applicable), an amount equal to 75% of the aggregate amount of P1 Project Costs, or the costs of such Permitted Capital Improvement (as applicable) and (2) if incurred on or after the Project Completion Date or the completion date of the applicable Capital Improvement (as applicable), (x) in the case of Funding Shortfall Debt incurred to finance P1 Project Costs, an amount that, together with all funded or unfunded commitments under the CD Construction/Term Loans, the TCF Senior Loans, the Notes, any Supplemental Debt incurred to fund such P1 Project Costs, any Replacement Debt incurred to replace such funded or unfunded commitments, and any other Funding Shortfall Debt to finance P1 Project Costs, does not exceed 75% of aggregate P1 Project Costs as at the Project Completion Date or (y) in the case of Funding Shortfall Debt incurred to finance Permitted Capital Improvements, an amount that, together with all Senior Secured Debt incurred to finance such Permitted Capital Improvement, does not exceed 75% of aggregate costs in respect of such Permitted Capital Improvement as at the completion of such Permitted Capital Improvement, plus (B) all premiums, fees, costs, expenses, and reserves (including any incremental increase in the DSRA Reserve Amounts resulting from the incurrence of such Funding Shortfall Debt) associated with arranging, issuing and incurring such Funding Shortfall Debt plus (C) 105% of the P1 IR Hedge Termination Amounts reasonably projected as of such date of incurrence to be due and payable by the Company with respect to any portion of one or more Senior Secured IR Hedge Agreement to be terminated in connection with any such incurrence;
(ii)such Funding Shortfall Debt is incurred prior to the second anniversary of the Project Completion Date or the completion date of such Permitted Capital Improvement (as applicable); and
(iii)simultaneously with the incurrence of any Funding Shortfall Debt, the Company shall use a portion of the proceeds of such Funding Shortfall Debt to fund any reserves (including any incremental increase in the DSRA Reserve Amounts) resulting from the incurrence of such Funding Shortfall Debt.
“Guarantor” means any subsidiary of the Company which provides a Note Guarantee pursuant to or in accordance with this Indenture and its successors and assigns, in each case, until the Note Guarantee of such Person has been released in accordance with the provisions of this Indenture.
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“Government Securities” means direct obligations of, or obligations guaranteed by, the United States of America, and the payment for which the United States of America pledges its full faith and credit.
“Historical DSCR” has the meaning set forth in the Common Terms Agreement; provided, however, that for all purposes under this Indenture, “Historical DSCR” shall be deemed to exclude subclause (b)(vii) of the definition thereof in the Common Terms Agreement.
“HMT” means His Majesty’s Treasury, the economic and finance ministry of the United Kingdom.
“incur” has the meaning set forth in Section 4.7.
“Indemnified Taxes” means any taxes, which term includes any interest, additions to tax or penalties applicable in respect thereof, imposed on or with respect to any payment made by or on account of any obligation of the Company under any Notes Document other than any of the following taxes imposed on or with respect to a Noteholder or required to be withheld or deducted from a payment to a Noteholder: (a) taxes imposed on or measured by net income (however denominated), franchise taxes, and branch profits taxes, in each case, (i) imposed as a result of such Noteholder being organized under the laws of, or having its principal office or its applicable lending office located in, the jurisdiction imposing such tax (or any political subdivision thereof) or (ii) imposed as a result of a present or former connection between such Noteholder and the jurisdiction imposing such tax (other than connections arising from such holder of a Note having executed, delivered, become a party to, performed its obligations under, received payments under, received or perfected a security interest under, engaged in any other transaction pursuant to or enforced any Notes Document, or sold or assigned an interest in any Note or Notes Document), (b) U.S. federal withholding taxes imposed on amounts payable to or for the account of such Noteholder with respect to an applicable interest in a Note pursuant to a law in effect on the date on which (i) such Noteholder acquires such interest in the Note or (ii) such Noteholder changes its lending office, except in each case to the extent that, pursuant to Section 2.15, amounts with respect to such taxes were payable either to an assignor of such Noteholder immediately before such Noteholder acquired the Note or to such Noteholder immediately before it changed its lending office, (c) taxes attributable to the failure of such holder of the Notes to comply with Section 2.15(d) and (d) any U.S. federal withholding taxes imposed under FATCA.
“Indenture