When a Contract Becomes Collateral: Puerto Rico as NFE's Lifeline

Last week, I warned that Puerto Rico was about to be used as collateral in New Fortress Energy’s desperate struggle to survive. I said the government was preparing to sign a take-or-pay contract with a company already teetering on insolvency, a contract that would quickly become a bargaining chip in bankruptcy court. It did not take long to be proven right.

On September 16, Reuters confirmed that Puerto Rico signed a seven-year LNG supply contract with NFE, valued at roughly four billion dollars, with an optional three-year extension (Reuters, 2025b). The agreement includes minimum volumes of 40 TBtu per year, paid for whether the island burns the gas or not. To the government, this is pitched as “energy security.” To NFE, it is something far more valuable: a sovereign-backed, cash-guaranteed revenue stream that can be pledged, packaged, and sold.

The trouble is that NFE is not stable. It is in financial distress. On June 5, Fitch Ratings downgraded the company’s issuer default rating to “CCC,” a red-alert signal in credit markets that default is probable, not hypothetical (Fitch Ratings, 2025). Weeks earlier, reports confirmed that NFE had hired restructuring advisors to explore how to handle 1.4 billion dollars in near-term debt maturities (Seeking Alpha, 2025a). By September, the balance sheet was undeniable: only 551 million in cash against nine billion in total debt, with a looming covenant cascade that could accelerate five billion dollars of obligations in 2026 if the company misses a single payment (Seeking Alpha, 2025b). A Puerto Rico contract does not resolve insolvency; it simply manufactures collateral.

And let me be clear: I am not against natural gas, nor am I opposed to LNG as part of a transitional energy mix. What I am against is handing one private actor a vertically integrated monopoly over both the distribution and consumption of LNG in Puerto Rico. When the same company controls the docks, the terminal, the pipelines, and the power plants through Genera PR, the public becomes hostage to its financial health. That is unacceptable. If NFE survives this round of restructuring, it must divest its Genera PR assets. Fuel import and distribution must be separated from power generation and consumption. That is the minimum safeguard against a monopoly that strangles competition and leaves ratepayers exposed. Senator John Sherman, the father of the Sherman Antitrust Act of 1890, must be rolling in his tomb.

The regulatory history already reveals the risks. In 2020, the Federal Energy Regulatory Commission ordered NFE to show cause for building and operating its San Juan terminal without prior federal approval, a violation of the Natural Gas Act (FERC, 2020). Instead of challenging the company, Puerto Rico doubled down, granting NFE control over critical port assets. Add to that the findings of the Institute for Energy Economics and Financial Analysis, which documented unfair advantages granted to NFE by PREPA—including acceptance of unsolicited proposals and preferential access to public assets (IEEFA, 2020)—and a pattern emerges. This is not a level playing field; it is monopoly by design.

When talks for a 20-billion dollar contract collapsed in July, Puerto Rico had a chance to walk away (Reuters, 2025a). Instead, it returned weeks later with a smaller but equally rigid contract. The difference is scale, not substance. The result is the same: Puerto Rico is locked into a single-supplier arrangement that guarantees income for a company in distress.

The danger is obvious. If this contract survives, it becomes NFE’s crown jewel. Creditors will treat it as collateral; bondholders will view it as a bargaining chip; third parties will circle to buy it at a discount in bankruptcy. Meanwhile, Puerto Rican consumers will foot the bill for gas that may never be consumed, paying twice: first in higher rates, and later in the loss of sovereignty over the contract’s fate.

Puerto Rico does not need to walk this path. The global LNG market is abundant and competitive. The island could cancel the San Juan lease under fair compensation rules, pay only for the depreciated value of infrastructure built without permits, and open its doors to multiple suppliers. That would deliver lower prices, greater resilience, and an end to dependency on a single distressed actor.

The Oversight Board, the Energy Bureau, and the federal regulators who oversee Puerto Rico must hear this clearly: we are watching. We are watching how this contract is approved, how it is pledged, how it is enforced. If Puerto Rico’s public creditworthiness is once again converted into collateral for a private restructuring, it will be remembered not as an act of energy planning but as an act of financial capture.

Puerto Rico deserves LNG competition, not an LNG monopoly. And New Fortress Energy deserves scrutiny, not a lifeline. If it survives, divestiture of Genera PR must be the starting point.

References

Federal Energy Regulatory Commission (FERC). (2020). Order to show cause: New Fortress Energy LLC. CP20-466-000. Retrieved from https://www.ferc.gov/sites/default/files/2021-03/C-2-CP20-466-000.pdf

Fitch Ratings. (2025, June 5). Fitch downgrades New Fortress Energy IDR to CCC; removes negative watch. Retrieved from https://www.fitchratings.com/research/corporate-finance/fitch-downgrades-new-fortress-energy-idr-to-ccc-removes-negative-watch-05-06-2025

Institute for Energy Economics and Financial Analysis (IEEFA). (2020). Puerto Rico utility PREPA gave unfair advantage to NFE in awarding $1.5 billion power plant contract. Retrieved from https://ieefa.org

Reuters. (2025a, July 24). Puerto Rico ends talks with New Fortress on $20 billion LNG deal. Retrieved from https://www.reuters.com

Reuters. (2025b, September 16). Puerto Rico signs 7-year LNG supply deal with New Fortress Energy. Retrieved from https://www.reuters.com

Seeking Alpha. (2025a, May 30). New Fortress Energy hires restructuring advisors amid debt concerns. Retrieved from https://seekingalpha.com

Seeking Alpha. (2025b, September 17). New Fortress Energy: On the brink of bankruptcy (NASDAQ: NFE). Retrieved from https://seekingalpha.com/symbol/NFE