Tue | Sep 28, 2021

Sagicor Group taking large stake in NFE-Jamalco power plant

Pumps US$100m into acquisition, takes lead on US$285m financing deal

Published:Friday | June 18, 2021 | 1:18 AMHuntley Medley - Associate Business Editor
Christopher Zacca, president and CEO of Sagicor Group Jamaica Limited.
File Christopher Zacca, president and CEO of Sagicor Group Jamaica Limited.
New Fortress Chairman & CEO Wes Edens.
New Fortress Chairman & CEO Wes Edens.

Sagicor Group Jamaica Limited, SGJ, is putting up US$100 million ($15 billion) for a large stake in the LNG power plant that fuels the Jamalco refinery at Halse Hall in Clarendon and is owned by natural gas infrastructure developer and operator New Fortress Energy Inc.

The acquisition, which forms part of a US$285-million ($42-billion) financing deal that Sagicor is structuring on behalf of New Fortress, is subject to regulatory approval.

Sagicor’s investment represents 35 per cent of the purchase price. The remaining portion is expected to be farmed out among several institutional investors who will be shopped to participate in the equity deal. New Fortress, the seller, will not retain any ownership in the plant but will operate it under lease.

A number of Sagicor Group-controlled entities will be the anchor investors in the 150 MW NFE-Jamalco plant under the sale and leaseback agreement that New Fortress is executing through subsidiary NFE South Power Holdings Limited.

“It’s a complex transaction and would involve a number of regulators as well as government approvals,” Sagicor Group President & CEO Christopher Zacca told the Financial Gleaner in an interview on Thursday.

Zacca declined to say which regulators and other government agencies would be involved in signing off on the deal.

However, the Office of Utilities Regulation, which regulates power providers, and the ministry in charge of the energy portfolio, into which former energy authority Petroleum Corporation of Jamaica was subsumed less than two years ago, are likely to be among them.

Zacca said Sagicor would need to conclude certain internal processes before he could name the group entities involved in the transaction. The company operates various subsidiaries in the financial, banking, insurance and property markets, as well as a number of funds.

Equity offer

As to the US$94 million the group earned earlier this year from the sale of its shares in international hotel chain Playa, Zacca said those funds were not being redeployed into the NFE deal, but otherwise noted he was not at liberty to disclose the structure of the Jamalco plant transaction at this time.

Still, as a property investment, he did not rule out participation by Sagicor Real Estate X Fund Limited in the NFE deal. X Fund was one of the Sagicor entities holding the shares in Playa Hotels & Resorts.

Investment banking subsidiary Sagicor Investments Jamaica Limited is the lead arranger for the NFE transaction that will see local, regional and global investors being asked to put up another US$185 million – atop the US$100-million equity investment by Sagicor – to provide NFE with the US$285 million in cash it is seeking from the sale.

Zacca said that the US$100 million was the full level of Sagicor’s participation, and that his company would not be underwriting the rest of the transaction. He was confident the market would be receptive to the fundraising effort.

Earlier this year, New Fortress Chairman and CEO Wes Edens had indicated his company’s willingness to sell the NFE-Jamalco power plant, the Sergipe operation in Brazil and its LNG gasification vessel, the Nanook, to fund a major LNG buildout in Latin America.

Unlike Sergipe, which New Fortress’ website lists as utilising just three per cent of its capacity, Zacca said the Clarendon plant was operating at full capacity with its entire output being sold to the Jamalco bauxite refinery, which is majority owned and operated by Noble Group of Hong Kong, and to monopoly electricity distributor Jamaica Public Service Company.

The Clarendon LNG infrastructure was developed by NFE at a cost of US$265 million, or around $24 billion at the time, and commissioned into service in March 2020.

New Fortress earns most of its revenues from Jamaica, selling LNG to various companies, including JPS, Jamalco and Red Stripe, but also holds assets in Puerto Rico, United States, Mexico and Nicaragua. It’s also said to have plans to build in Ireland and Philippines, while reshaping its geographic revenue mix.

New Fortress Chairman and CEO Wes Edens was not immediately available for comment on the transaction, and Zacca, while acknowledging NFE’s expansion and new development plans, declined comment on the gas supplier’s intended use of the proceeds from the sale. He also declined to disclose the terms of the leaseback agreement with NFE, including the lease tenure and options for renewal.

New Fortress is utilising its subsidiary NFE South Power Holdings Limited for the leaseback transaction, Sagicor said on Thursday.