Excelerate Energy Inc. EE has entered into an agreement to purchase New Fortress Energy Inc.’s NFE assets and operations in Jamaica. The deal will be financed entirely in cash for a total consideration of $1.055 billion and is anticipated to conclude by the June quarter of 2025.

NFE’s Debt Reduction Strategy

This divestment is part of New Fortress’ broader strategy to optimize its asset portfolio and reduce its debt burden. The company had been facing financial difficulties in the past year when it started looking for options to ease the situation. This included attracting strategic partners or selling off a part of its assets. Amid the financial challenges, New Fortress had to pause shareholder dividend payments while meeting with bondholders to discuss its debt maturities in the short term. The company’s debt totaled $8.4 billion by 2024-end.

Transaction Details

The transaction involves NFE’s LNG import terminal in Montego Bayand its Old Harbour offshore floating storage and regasification terminal. Additionally, the Combined Heat and Power Plant in Clarendon, which has a total capacity of 150 megawatts (MW) and the entire related infrastructure, is also part of the deal. The proceeds from the deal will be used by the company to pay off its corporate debt and other general corporate needs.

New Fortress Energy entered the Jamaican energy market in 2016, and since then it has driven a shift in the country’s energy landscape from oil-based fuels toward a low-carbon, cleaner energy resources. The company has collaborated with the government, local enterprises and communities to increase access to reliable, cost-effective and clean energy. NFE has played a major role in improving the reliability and cost-efficiency of clean energy in the island nation.

Excelerate Energy, a U.S.-based liquefied natural gas (LNG) infrastructure provider, states that the acquired assets align with its operational proficiency and should also support the company’s existing LNG supply agreements in the long run. They also hold growth potential, including in LNG bunkering, which involves supplying LNG as a fuel for ships. The 150 MW Clarendon power plant that supplies nearly 65% of Jamaica’s electricity also has scope for expansion. Jamaica’s strategic location, toward the south of the U.S. Gulf coast, also serves as an advantage for EE as the region is currently witnessing a steady rise in LNG export facilities. The acquisition will allow Excelerate Energy to expand its global presence as well.

Deleveraging Trends in the Energy Sector

For New Fortress Energy, the divestment of its Jamaican asset should prove to be advantageous from a de-leveraging perspective. Recently, many energy companies considered a similar strategy to achieve target debt levels and strengthen their balance sheet like Phillips 66 PSX.

Phillips 66, a leading energy infrastructure company, has also outlined that it prioritizes debt reduction through asset dispositions to maintain a strong balance sheet. In 2023, the company committed to achieving asset divestitures worth $3 billion. At the end of 2024, PSX announced asset divestitures worth $3.5 billion, which includes the sale of the Gulf Coast Express pipeline. In 2025, it has targeted to reduce its total debt down to $17 billion. The company’s focus remains on divesting non-core assets so that it can reallocate the proceeds to more strategic priorities like enhancing shareholder returns.

Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report

Excelerate Energy, Inc. (EE) : Free Stock Analysis Report

Phillips 66 (PSX) : Free Stock Analysis Report

New Fortress Energy LLC (NFE) : Free Stock Analysis Report

This article originally published on Zacks Investment Research (zacks.com).

Zacks Investment Research