NextDecade issues warning about pandemic impacts on Rio Grande LNG project

Houston — NextDecade warned investors Friday that market disruptions from the coronavirus pandemic could further delay a final investment decision for its Rio Grande LNG export terminal in Texas and harm the developer's ability to sustain its operations.

The company, in a filing with the Securities and Exchange Commission, disclosed the additional risk factor for its business and also said it would not be able to meet Monday's deadline to issue its quarterly report to the agency. NextDecade expected to file the report around May 18, the company said.

US developers of liquefaction capacity were struggling before the pandemic to secure sufficient commercial support to finance construction of their facilities, and those challenges have gotten more difficult since as international LNG prices have plunged and demand has weakened.

Sempra Energy recently delayed FID on its proposed Port Arthur LNG facility in Texas to 2021, while Cheniere Energy suggested it may put off FID on its midscale liquefaction expansion at its facility near Corpus Christi until next year as well. Tellurian said recently it is "very difficult to predict" when it will be able to take FID on its Driftwood LNG project in Louisiana. Meanwhile, Shell in late March pulled out of its Lake Charles LNG joint venture with Energy Transfer in Louisiana.

NextDecade's most recent corporate presentation in March maintained a 2020 FID target for its Rio Grande LNG project in Brownsville; since the coronavirus took hold in the US, company officials have not responded to repeated questions about the status of the project, which has been delayed several times during the course of its development.

In the regulatory filing, NextDecade said the virus has caused disruptions in its business and operations, including, among other things, the closing of its corporate offices and requiring all company staff to work from home. Travel restrictions also have impacted its ability to build commercial support for Rio Grande LNG.

"A sustained disruption in the capital markets from the COVID-19 pandemic, specifically with respect to the energy industry, could negatively impact our ability to raise capital," NextDecade said.

That, the company said, could in turn disrupt its ability to finance its operations in the future, "which could materially and adversely affect our business, financial condition and prospects, and could ultimately cause our business to fail."

NextDecade said the crisis may heighten other risk factors that the company has previously disclosed in regulatory filings, such as risks related to the development of the terminal, postponement in making a positive final investment decision, and doing business in foreign countries.

Recently, NextDecade extended to May 2021 the outside effective date for commencing its lease for the 984-acre site in South Texas where its proposed Rio Grande LNG terminal is to be built, amid the uncertainty over FID timing.