Acquisitions |
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Acquisitions [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Acquisitions |
Hygo Merger
On April 15, 2021, the Company completed the acquisition of all of the outstanding common and preferred shares representing all voting interests of Hygo, a 50-50 joint venture between Golar LNG Limited (“GLNG”) and Stonepeak Infrastructure Fund II Cayman (G) Ltd., a fund managed by Stonepeak Infrastructure Partners (“Stonepeak”), in exchange for 31,372,549 shares of NFE Class A common stock and $580,000 in cash. The acquisition of Hygo expands the Company’s footprint in South America with three gas-to-power projects in Brazil’s large and fast-growing market.
Based on the closing price of NFE’s common stock on April 15, 2021, the total value of consideration in the Hygo Merger was $1.98 billion, shown as follows:
The Company has determined it is the accounting acquirer of Hygo, which will be accounted for under the acquisition method of accounting for business combinations. The total purchase price of the transaction has been allocated to identifiable assets acquired, liabilities assumed and non-controlling interests of Hygo based on their respective estimated fair values as of the closing date.
The process of estimating the fair values of certain tangible assets, identifiable intangible assets and assumed liabilities requires the use of judgment in determining the appropriate assumptions and estimates. The Company is in the process of finalizing the valuation of assets acquired, liabilities assumed and non-controlling interests of Hygo, and therefore the purchase price allocation should be considered preliminary. The preliminary purchase price allocation may be subject to further refinement as the evaluation of the underlying inputs and assumptions of third-party valuations and the assessment of acquisition-related income taxes are finalized. The goodwill balance may be adjusted pending the completion of the valuation of the assets acquired, liabilities assumed and non-controlling interests of Hygo as described above. The preliminary estimates may be subject to adjustments during the measurement period, not to exceed one year, based upon new information obtained about facts and circumstances that existed as of the acquisition date. To the extent that significant changes occur in the future, the Company will disclose such changes in the reporting period in which they occur. Preliminary fair values assigned to the assets acquired, liabilities assumed and non-controlling interests of Hygo as of the closing date were as follows:
The fair value of Hygo’s non-controlling interest (“NCI”) as of April 15, 2021 was $62,111, including the fair value of the net assets of VIEs that Hygo has consolidated. These VIEs are special purpose vehicles (“SPV”) for the sale and leaseback of certain vessels, and Hygo has no equity investment in these entities. The fair value of NCI was determined based on the valuation of the SPV’s external debt and the loan receivable asset associated with the sales leaseback transaction with Hygo’s subsidiary, using a discounted cash flow method.
The fair value of receivables acquired from Hygo is $8,009, which approximates the gross contractual amount; no material amounts are expected to be uncollectible.
Goodwill is calculated as the excess of the purchase price over the net assets acquired. Goodwill represents access to additional LNG and natural gas distribution systems and power markets, including a local workforce that will allow the Company to rapidly develop and deploy LNG to power solutions.
The Company’s results of operations for the first three and six months of 2021 include Hygo’s result of operations from the date of acquisition, April 15, 2021, through June 30, 2021. Revenue and net income (loss) attributable to Hygo during this period was $17,812 and $36,977, respectively.
GMLP Merger
Also on April 15, 2021, the Company completed the acquisition of all of the outstanding common units, representing all voting interests, of GMLP in exchange for $3.55 in cash per common unit and for each of the outstanding membership interest of GMLP’s general partner. In conjunction with the closing of the GMLP Merger, NFE simultaneously extinguished a portion of GMLP’s debt for total consideration of $1.15 billion.
With the acquisition of GMLP, the Company gains vessels to support the existing terminals and business development pipeline, as well as an interest in a floating natural gas facility (“FLNG”), which is expected to provide consistent cash flow streams under a long-term tolling arrangement. The interest in the FLNG facility also provides the Company access to intellectual property that will be used to develop future FLNG solutions.
The consideration paid by the Company in the GMLP Merger was as follows:
The Company has determined it is the accounting acquirer of GMLP, which will be accounted for under the acquisition method of accounting for business combinations. The total purchase price of the transaction has been allocated to identifiable assets acquired, liabilities assumed and non-controlling interests of GMLP based on their respective estimated fair values as of the closing date.
The process of estimating the fair values of certain tangible assets, identifiable intangible assets and assumed liabilities requires the use of judgment in determining the appropriate assumptions and estimates. The Company is in the process of finalizing the valuation of assets acquired, liabilities assumed and non-controlling interests of GMLP, and therefore the purchase price allocation should be considered preliminary. The preliminary purchase price allocation may be subject to further refinement as the evaluation of the underlying inputs and assumptions of third-party valuations and the assessment of acquisition-related income taxes are finalized. The goodwill balance may be adjusted pending the completion of the valuation of the assets acquired, liabilities assumed and non-controlling interests of GMLP as described above. The preliminary estimates may be subject to adjustments during the measurement period, not to exceed one year, based upon new information obtained about facts and circumstances that existed as of the acquisition date. To the extent that significant changes occur in the future, the Company will disclose such changes in the reporting period in which they occur. Preliminary fair values assigned to the assets acquired, liabilities assumed and non-controlling interests of GMLP as of the closing date were as follows:
The fair value of GMLP’s NCI as of April 15, 2021 was $167,174, which represents the fair value of other investors’ interest in the Mazo, GMLP’s preferred units which were not acquired by the Company and the fair value of net assets of an SPV formed for the purpose of a sale and leaseback of the Eskimo. The fair value of GMLP’s preferred units and the valuation of the SPV’s external debt and the loan receivable asset associated with the sale leaseback transaction have been estimated using a discounted cash flow method.
The fair value of receivables acquired from GMLP is $4,797, which approximates the gross contractual amount; no material amounts are expected to be uncollectible.
The Company acquired favorable and unfavorable leases for the use of GMLP’s vessels. The fair value of the favorable contracts is $120,000 and the fair value of the unfavorable contracts is $13,400. The total weighted average amortization period is approximately three years with the favorable contract weighted average amortization period of approximately three years and the unfavorable contract weighted average amortization period of approximately one year.
The Company and GMLP had an existing lease agreement prior to the GMLP Merger. As a result of the acquisition, the lease agreement and any associated receivable and payable balances are effectively settled. The lease agreement also included provisions that required a subsidiary of NFE to indemnify GMLP to the extent that GMLP incurred certain tax liabilities as a result of the lease. A loss of $3,978 related to settlement of this indemnification provision has been recognized in Transaction and integration costs in the condensed consolidated statements of operations and comprehensive loss.
The Company’s results of operations for the first three and six months of 2021 include GMLP’s result of operations from the date of acquisition, April 15, 2021, through June 30, 2021. Revenue and net income (loss) attributable to GMLP during this period was $56,802 and $39,267, respectively.
Acquisition costs associated with the Mergers of $21,909 and $33,472 for the three and six months ended June 30, 2021 were included in Transaction and integration costs in the Company's condensed consolidated statements of operations and comprehensive loss.
Unaudited pro forma financial information
The following table summarizes the unaudited pro forma condensed financial information of the Company as if the Mergers had occurred on January 1, 2020.
The unaudited pro forma financial information is based on historical results of operations as if the acquisitions had occurred on January 1, 2020, adjusted for transaction costs incurred, adjustments to depreciation expense associated with the recognition of the fair value of vessels acquired, additional amortization expense associated with the recognition of the fair value of favorable customer contracts for vessel charters, additional interest expense as a result of incurring new debt and extinguishing historical debt, elimination of a pre-existing lease relationship between the Company and GMLP, and a step-up of the equity method investments and a favorable power purchase agreement contract.
Adjustments for non-recurring items increased pro forma net income by $25,887 and $37,450 for the three and six months ended June 30, 2021, respectively and decreased pro forma net income by $0 and $37,450 for the three months and six months ended June 30, 2020, respectively. Transaction costs incurred and the elimination of a pre-existing lease relationship between the Company and GMLP are considered to be non-recurring. The unaudited pro forma financial information does not give effect to any synergies, operating efficiencies or cost savings that may result from the Mergers.
Asset acquisitions
On January 12, 2021, the Company acquired 100% of the outstanding share quota of CH4 Energia Ltda. ("CH4"), an entity that owns key permits and authorizations to develop an LNG terminal and an up to 1.37 GW gas-fired power plant at the Port of Suape in Brazil. The purchase consideration consisted of $903 of cash paid at closing in addition to potential future payments contingent on achieving certain construction milestones of up to approximately $3,600. As the contingent payments meet the definition of a derivative, the fair value of the contingent payments of $3,047 is included as part of the purchase consideration and is recognized in Other non-current liabilities on the condensed consolidated balance sheets. The selling shareholders of CH4 may also receive future payments based on gas consumed by the power plant or sold to customers from the LNG terminal. For the three and six months ended June 30, 2021, the Company recognized loss from the change in fair value of the derivative liability of $53, which is presented in Other (income) expense, net in the condensed consolidated statements of operations and comprehensive loss.
The purchase of CH4 has been accounted for as an asset acquisition. As a result, no goodwill was recorded, and the Company’s acquisition-related costs of $295 were included in the purchase consideration. The total purchase consideration of $5,776, which includes a deferred tax liability of $1,531 recognized as a result from the acquisition, was allocated to permits and authorizations acquired and was recorded within Intangible assets, net. In addition, the Company recognized a deferred tax liability of $1,531 that resulted from the acquisition.
On March 11, 2021, the Company acquired 100% of the outstanding shares of Pecém Energia S.A. (“Pecém”) and Energetica Camacari Muricy II S.A. (“Muricy”). These companies collectively hold grants to operate as an independent power provider and 15-year power purchase agreements for the development of thermoelectric power plants in the State of Bahia, Brazil. The Company is seeking to obtain the necessary approvals to transfer the power purchase agreements in connection with the construction the gas-fired power plant and LNG import terminal at the Port of Suape.
The purchase consideration consisted of $8,041 of cash paid at closing in addition to potential future payments contingent on achieving commercial operations of the gas-fired power plant at the Port of Suape of up to approximately $10.5 million. As the contingent payments meet the definition of a derivative and the fair value of the contingent payments of $7,473 was included as part of the purchase consideration and is recognized in Other non-current liabilities on the condensed consolidated balance sheets. The selling shareholders may also receive future payments based on power generated by the power plant in Suape, subject to a maximum payment of approximately $4.6 million. For the three and six months ended June 30, 2021, the Company recognized a loss from the change in fair value of the derivative liability of $416, which is presented in Other (income) expense, net in the condensed consolidated statements of operations and comprehensive loss.
The purchases of Pecém and Muricy were accounted for as asset acquisitions. As a result, no goodwill was recorded, and the Company’s acquisition-related costs of $1,275 were included in the purchase consideration. Of the total purchase consideration, $16,585 was allocated to acquired power purchase agreements and recorded in Intangible assets, net on the condensed consolidated balance sheets; the remaining purchase consideration was related to working capital acquired.
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