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New Fortress Energy bets on LNG growth in Brazil with the acquisition of Hygo

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RIO DE JANEIRO (Reuters) – US firm New Fortress Energy Inc said on Wednesday it would buy natural gas firm Hygo Energy Transition Ltd for $ 2.18 billion to expand its presence in Brazil, a growth frontier in the booming liquefied natural gas market.

New Fortress, an energy infrastructure company, is among the private sector players looking to Brazil, where demand for supercooled LNG is increasing, although the market is smaller than in India and China, where generators energy shifting from dirtier coal to natural gas.

As Brazil opens up its natural gas industry to private investors, other companies, including major oil company BP PLC and US firm EIG Global Partners, are also planning multibillion-dollar investments in the country.

New Fortress, a growing competitor in the LNG industry, has a small gas liquefaction plant in Florida and ships LNG to the Caribbean. In the past year, its market value has soared 286% to $ 10 billion, according to data from Refinitiv Eikon. It is building a larger LNG import terminal in Mexico.

The company will acquire all of the outstanding shares of Hygo for 31.4 million Class A common shares of NFE and $ 580 million in cash.

Annual demand for LNG in Brazil is expected to increase by more than 80% in 2021, the fastest rate in the world, although its starting point is relatively low compared to large Asian consumers, said Kristen Holmquist, forecasting specialist at Poten & Partners.

Unlike these countries, most of Brazil’s energy comes from hydropower. This LNG supply is intended in part to replace the supply of natural gas to a pipeline originating in Bolivia.

Hygo transports super-cooled fuel and has become a key player in the Brazilian natural gas industry as the state-controlled Petrobras sells assets, nullifying what had been a near monopoly in that market.

Hygo – a 50-50% joint venture between US private equity firm Stonepeak Infrastructure Partners and Golar LNG – has recently invested in a number of LNG projects in Brazil for power generation. It is also competing to operate a much sought-after LNG import terminal leased by Petrobras.

There is strong growth in Brazil for energy-backed projects, Holmquist said in a webinar on Wednesday.

Hygo had told Reuters in 2020 that he plans to eventually use LNG as a diesel substitute in trucks.

The transaction has an enterprise value of $ 3.1 billion and an equity value of $ 2.18 billion, the statement said.

The acquisition of Hygo comes four months after the company’s New York City debut was suspended at the last minute after Brazilian federal prosecutors said the then chief executive was appointed to the start of an investigation for corruption, for activities with a former employer.

The then CEO, Eduardo Antonello, has since left the company. He was not charged.

New Fortress has also agreed to buy the controlling company Hygos Golar LNG Partners LP for approximately $ 251 million in common stock and an enterprise value of $ 1.9 billion.

Shares of Golar LNG Ltd rose 15% in trading in the United States, while shares of New Fortress Energy rose 10%.

Reporting by Sabrina Valle and Rithika Krishna; Editing by Maju Samuel, Krishna Chandra Eluri, Steve Orlofsky and David Gegorio

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