Note 5 - Derivatives

6 Months Ended

Jun. 30, 2023

Notes to Financial Statements

Derivative Instruments and Hedging Activities Disclosure [Text Block]

Note 5 — Derivatives

In June 2023, with the expectation of entering into definitive debt facilities shortly thereafter to pay for a portion of the costs of constructing and placing into service Phase 1 of the Terminal, Rio Grande entered into contingent interest rate swaps (“Contingent Interest Rate Swaps”) to protect against interest rate volatility of future cash flows and hedge a portion of the expected floating-rate interest payments that would be provided for in such debt facilities.  At execution, the Contingent Interest Rate Swaps were conditional upon certain conditions including reaching a positive FID to commence construction of Phase 1 of the Terminal.  As of June 30, 2023, Rio Grande has the following Contingent Interest Rate Swaps outstanding (in thousands):

Initial Notional Amount		Maximum Notional Amount		Maturity	Weighted Average Fixed Interest Rate Paid	Variable Interest Rate Received
$	86,000	$	5,905,000	March 28, 2049	3.2%	USD - SOFR

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

The Company values the Contingent Interest Rate Swaps using valuations based on the initial trade prices.  Using an income-based approach, subsequent valuations are 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 Contingent Interest Rate Swaps is approximately $(87.5) million as of June 30, 2023, and is classified as Level 2 in the fair value hierarchy.