New Fortress Energy Inc.NFE
New Fortress Energy Inc. Fair Value Disclosure
9. Financial instruments
Commodity risk management
The Company has utilized commodity swap transactions to manage exposure to changes in market pricing of natural gas or LNG. Realized and unrealized gains and losses on these transactions have been recognized in Cost of sales in the Consolidated Statements of Operations and Comprehensive (Loss) Income.
•During the fourth quarter of 2022, the Company entered into a commodity swap transaction to swap market pricing exposure for approximately 6.8 TBtus for a fixed price of $40.55 per MMBtu. The swap settled during the first quarter of 2023 resulting in a gain of $41,315 recognized as a reduction to Cost of sales in the Consolidated Statements of Operations and Comprehensive (Loss) Income. The gain was comprised of a realized gain of $146,112 and the reversal of the unrealized gain of $104,797 recognized in the fourth quarter of 2022.
•In January 2023, the Company entered into a series of commodity swap transactions. Realized losses of $8,495 for the year ended December 31, 2023 on these instruments have been recognized in in the Consolidated Statements of Operations and Comprehensive (Loss) Income. All swaps were settled prior to December 31, 2023.
Interest rate and currency risk management
During 2023, the Company entered into a non-deliverable forward to secure the currency position of the Barcarena Debentures (defined below) which is denominated in U.S. dollars. The forward was settled, and the Company recorded a realized gain of $5,864 for the year ended December 31, 2023.
During 2024, the Company entered into a series of foreign exchange forward contracts and zero-cost collars to reduce exchange rate risk associated with U.S. dollar borrowings and expected capital expenditures. As of December 31, 2024, the notional amount of outstanding foreign exchange contracts was approximately $211,547. These instruments are expected to settle through the third quarter of 2026. The Company recognized unrealized gains, net of $22,085 for the year ended
December 31, 2024 for these foreign currency contracts. The Company also recognized realized gains of $5,087 upon settlement of a portion of the foreign exchange contracts during the year ended December 31, 2024.
The Company does not hold or issue instruments for speculative purposes, and the counterparties to such contracts are major banking and financial institutions. Credit risk exists to the extent that the counterparties are unable to perform under the contracts; however, the Company does not anticipate non-performance by any counterparties.
The mark-to-market gain or loss on the interest rate swap, non-deliverable forward and other foreign exchange derivative instruments that are not intended to mitigate commodity risk are reported in Other expense (income), net in the Consolidated Statements of Operations and Comprehensive (Loss) Income.
Embedded contingent interest derivative
During 2024, the Company entered into a side letter with lenders in the Term Loan A Credit Agreement (defined below), under which the Company's interest on the Term Loan A (defined below) would increase by 2% if the lenders demand that the Company pursue a refinancing of the Term Loan A and the Company is not able to successfully refinance. This contingent interest feature meets the definition of a derivative and requires bifurcation from the debt host contract. Changes to the fair value of this derivative are recognized within Interest expense, net in the Consolidated Statements of Operations and Comprehensive (Loss) Income.
Fair value
Fair value measurements and disclosures require the use of valuation techniques to measure fair value that maximize the use of observable inputs and minimize use of unobservable inputs. These inputs are prioritized as follows:
•Level 1 – observable inputs such as quoted prices in active markets for identical assets or liabilities.
•Level 2 – inputs other than quoted prices included within Level 1 that are observable, either directly or indirectly, such as quoted prices for similar assets or liabilities or market corroborated inputs.
•Level 3 – unobservable inputs for which there is little or no market data and which require the Company to develop its own assumptions about how market participants price the asset or liability.
The valuation techniques that may be used to measure fair value are as follows:
•Market approach – uses prices and other relevant information generated by market transactions involving identical or comparable assets or liabilities.
•Income approach – uses valuation techniques, such as the discounted cash flow technique, to convert future amounts to a single present amount based on current market expectations about those future amounts.
•Cost approach – based on the amount that currently would be necessary to replace the service capacity of an asset (replacement cost).
The Company uses the market approach when valuing investment in equity securities and foreign exchange forward contracts which are recorded in Prepaid expenses and other current assets, net, Other non-current assets, net and Other current liabilities on the Consolidated Balance Sheets as of December 31, 2024 and 2023.
The Company uses the income approach for valuing the contingent consideration derivative liabilities and embedded contingent interest derivative. The contingent consideration derivative liabilities represent consideration due to the sellers in asset acquisitions when certain contingent events occur and are recorded within Other current liabilities and Other long-term liabilities based on the timing of expected settlement. The embedded contingent interest derivative represents incremental interest payments due to the lenders when certain contingent events occur and is recorded within Other current liabilities and Other long-term liabilities based on the timing of expected payments.
The fair value of derivative instruments is estimated considering current interest rates, foreign exchange rates, closing quoted market prices and the creditworthiness of counterparties. The Company estimates fair value of the contingent consideration derivative liabilities using a discounted cash flows method with discount rates based on the average yield
curve for bonds with similar credit ratings and matching terms to the discount periods as well as a probability of the contingent events occurring. The Company estimates fair value of the embedded contingent interest derivative using a discounted cash flows method with discount rate based on the effective interest rate for the debt host instrument as well as a probability of the contingent events occurring.
The following table presents the Company’s financial assets and financial liabilities, including those that are measured at fair value, as of December 31, 2024 and 2023:
| Level 1 | Level 2 | Level 3 | Total | |||||||||||||||||||||||
| December 31, 2024 | ||||||||||||||||||||||||||
| Assets | ||||||||||||||||||||||||||
| Investment in equity securities | $ | — | $ | — | $ | 8,678 | $ | 8,678 | ||||||||||||||||||
| Foreign exchange contracts | — | 22,055 | — | 22,055 | ||||||||||||||||||||||
| Liabilities | ||||||||||||||||||||||||||
| Foreign exchange contracts | — | 1,168 | — | 1,168 | ||||||||||||||||||||||
| Contingent consideration derivative liabilities | — | — | 41,984 | 41,984 | ||||||||||||||||||||||
| Embedded contingent interest derivative | — | — | 10,629 | 10,629 | ||||||||||||||||||||||
| December 31, 2023 | ||||||||||||||||||||||||||
| Assets | ||||||||||||||||||||||||||
| Investment in equity securities | $ | — | $ | — | $ | 7,678 | $ | 7,678 | ||||||||||||||||||
| Liabilities | ||||||||||||||||||||||||||
| Contingent consideration derivative liabilities | — | — | 37,832 | 37,832 | ||||||||||||||||||||||
The Company believes the carrying amounts of cash and cash equivalents, accounts receivable and accounts payable approximated their fair value as of December 31, 2024 and 2023 and are classified as Level 1 within the fair value hierarchy.
The table below summarizes the fair value adjustment to instruments measured at Level 3 in the fair value hierarchy. The adjustments to contingent consideration derivative liabilities and embedded contingent interest derivative for the years ended December 31, 2024, 2023 and 2022 are shown below:
Year Ended December 31, | |||||||||||||||||
| 2024 | 2023 | 2022 | |||||||||||||||
| Contingent consideration derivative liabilities - Fair value adjustment - (gain) loss | $ | (1,959) | $ | (4,801) | $ | 703 | |||||||||||
| Embedded contingent interest derivative - Fair value adjustment - loss | 1,798 | — | — | ||||||||||||||
Historical Timeline
| Fiscal Year | Filed | |
|---|---|---|
| 2024 | Mar 10, 2025 | Showing above |
| 2020 | Mar 16, 2021 | |
| 2019 | Mar 4, 2020 | |
About Fair Value Disclosures
Fair value disclosures classify all assets and liabilities measured at fair value into a three-level hierarchy: Level 1 (quoted market prices), Level 2 (observable inputs like yield curves), and Level 3 (unobservable inputs requiring management estimates). The proportion of Level 3 assets directly reflects how much of the balance sheet depends on internal models rather than market evidence.
Key signals: a growing Level 3 balance relative to total fair-value assets increases valuation uncertainty and earnings volatility risk. Watch for transfers between levels — assets moving from Level 2 to Level 3 often signal deteriorating market liquidity. Unrealized gains and losses on Level 3 positions flow through earnings or other comprehensive income, so large swings deserve scrutiny. For financial institutions, examine the sensitivity disclosures that show how Level 3 valuations change under alternative assumptions. Compare the fair value of debt against its carrying amount to gauge hidden leverage.