NFE - Morningstar

Morningstar Equity Analyst Report | Report as of 1 Oct 2024 19:31, UTC | Reporting Currency: USD | Trading Currency: USD
| Exchange: NASDAQ - ALL MARKETS Page 1 of 23
New Fortress Energy Inc Class A NFE QQQQQ 1 Oct 2024 19:27, UTC
Last Price Fair Value Estimate Price/FVE Market Cap Economic MoatTM Equity Style Box Uncertainty Capital Allocation ESG Risk Rating Assessment1
9.09 USD 28.00 USD 0.32 2.02 USD Bil None 8 Small Blend Very High Standard ;;;;;
30 Sep 2024 1 Oct 2024 19:25, UTC 1 Oct 2024 4 Sep 2024 05:00, UTC
Price vs. Fair Value
Fair Value: 28.00

1 Oct 2024 19:25, UTC
63
Last Close: 9.09
48 Overvalued
Undervalued
33
18
3
2019 2020 2021 2022 2023 YTD
Analysis
— — — — 0.97 0.32 Price/Fair Value
— 243.27 -54.21 77.38 -3.04 -75.11 Total Return %
Morningstar Rating
Total Return % as of 30 Sep 2024. Last Close as of 30 Sep 2024. Fair Value as of 1 Oct 2024 19:25, UTC.
Contents
Analyst Note (1 Oct 2024) New Fortress Energy: With Debt Resolved, Few Obstacles
Business Description
Business Strategy & Outlook (11 Sep 2024) Remain
Bulls Say / Bears Say (1 Oct 2024)
Analyst Note Joshua Aguilar, Director, 1 Oct 2024
Economic Moat (11 Sep 2024)
Fair Value and Profit Drivers (1 Oct 2024)
No-moat-rated New Fortress capped a flurry of announcements on Oct. 1, 2024, with a $400 million
Risk and Uncertainty (11 Sep 2024) equity raise, a painful but necessary condition for resolving the near-term debt issue that has weighed
Capital Allocation (1 Oct 2024) on the company for most of this year. The 2025 and 2026 term notes, along with a billion dollars, in
Analyst Notes Archive revolving debt amounted to more than three billion dollars in cash demands over the next two years.
Financials
While expensive at 12% interest along with certain other rights, the new debt pushes the maturities into
ESG Risk
2029, when we believe the company will be on more stable footing. As a result of these transactions
Appendix
Research Methodology for Valuing Companies and revised guidance for delivered volumes, we are lowering our fair value estimate to $28 from $30.
Important Disclosure
Digging into the revised guidance for delivered volumes, we have updated forecast volume deliveries to
The conduct of Morningstar’s analysts is governed by Code of Ethics/Code of
Conduct Policy, Personal Security Trading Policy (or an equivalent of), and account for a 50 trillion British thermal unit per year contract coming online in the second half of 2026.
Investment Research Policy. For information regarding conflicts of interest, please
visit: http://global.morningstar.com/equitydisclosures. This helped offset reduced volumes from FLNG 2 being delayed to the end of 2026, which we don't
The primary analyst covering this company does not own its stock. anticipate being fully operational until 2027. Without these updates, our fair value estimate would have
The ESG Risk Rating Assessment is a representation of Sustainalytics’ ESG Risk
1 fallen far more.
Rating.
Additionally, by raising new capital and alleviating the near-term cash pressure we now see a third
FLNG vessel as a real possibility for the company which offers greater upside for shareholders should it
be realized. Part of the new volume guidance assumes it will come online in 2027, which seems
incredibly unrealistic. Our main issue is that no capital funding for the unit is included in 2025 guidance,
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Morningstar Equity Analyst Report | Report as of 1 Oct 2024 19:31, UTC | Reporting Currency: USD | Trading Currency: USD | Exchange: NASDAQ - ALL MARKETS Page 2 of 23
Sector Industry
f Utilities Utilities - Regulated Gas when the previous units have taken at least two years and required substantial lead time for securing
materials. Still, adding FLNG 3 into our model in 2029 results in an $11 increase to our fair value
Business Description
New Fortress Energy is an integrated gas-to-power estimate. This reflects the business operating leverage and the necessity of securing additional volumes.
company. Its business model spans the entire production
and delivery chain from natural gas procurement and Business Strategy & Outlook Joshua Aguilar, Director, 11 Sep 2024
liquefaction to logistics, shipping, terminals, and Befitting its private equity roots, New Fortress Energy seeks to provide an integrated solution for certain
conversion or development of a natural gas-fired regions that lack where cheap, reliable, and efficient sources of power are scarce, primarily by providing
generation. It has invested in floating, liquefied natural
gas or liquified natural gas solutions. It has been reasonably successful at identifying and acquiring
gas vessels to both lower the cost of acquiring gas while
securing a long-term supply for its terminals. Its
infrastructure in countries such as Jamaica or Brazil that are very underutilized because of existing
segments include terminals and infrastructure, or T&I, market challenges or relative geographic isolation, and using them to supply gas to the country, often
and ships. displacing far more expensive and less reliable sources of power.
New Fortress goes beyond just sourcing and supplying gas to countries that are operating in relative
energy poverty. It has built gas power plants and seeks to retain control over every part of the value
chain, operating similarly to a utility. This approach has secured it several LNG-to-power contracts at
relatively high prices, given the cost of electricity in its markets is usually far higher than in more
developed countries. The focus on energy-insecure nations also allowed it to opportunistically secure a
lucrative agreement with Brazil to provide backstop power to the country's hydro-generation, resulting
in significant payments for maintaining capacity in the nation.
While these contracts address the demand side of the equation, they leave New Fortress exposed to
uncertain gas supply costs. Its latest effort, called Fast LNG, is repurposing old offshore rigs for floating
liquefied natural gas, or FLNG, needs. New Fortress had targeted five vessels for potential work, but
only two look to actually enter service in the near term by the end of 2026 at the Altamira site in Mexico
after substantial delays and cost overruns. The first of these two entered service in the second half of
2024.
New Fortress also differs from the typical US LNG exporter in that it is more exposed to power and gas
spreads than peers. As US and EU gas prices have fallen recently, its illustrative EBITDA forecasts over
the next few years have declined similarly to $1.3 billion from over $5 billion.
Bulls Say Joshua Aguilar, Director, 1 Oct 2024

u New Fortress has a nascent hydrogen unit that might have substantial potential, and its value could be
unlocked via a spinoff or sale.
u The Fast LNG strategy offers material time savings and cost savings over traditional FLNG approaches,
accruing more value for shareholders.
u If New Fortress struggles to find further Fast LNG opportunities, other firms may wish to license the Fast
LNG design for their own uses.
ß
Competitors
New Fortress Energy Inc Class A NFE Cheniere Energy Inc LNG Williams Companies Inc WMB Cheniere Energy Partners LP CQP
Fair Value Fair Value Last Close Fair Value

28.00 182.00 45.65 54.00
Uncertainty : Very High Uncertainty : Medium Uncertainty : Medium
Last Close Fair Value
Last Close Last Close
179.84 40.00 48.72
9.09 Uncertainty : Medium
Analysis
Economic Moat Security
None 1 Security
Wide 2 Security
Narrow 3 Security
Wide 4
Currency USD USD USD USD
Fair Value 28.00 1 Oct 2024 19:25, UTC 182.00 8 Aug 2024 16:56, UTC 40.00 6 Aug 2024 16:00, UTC 54.00 8 Aug 2024 17:19, UTC
1-Star Price 14.00 245.70 54.00 72.90
5-Star Price 49.00 127.40 28.00 37.80
Significantly 30 Sep Fairly Valued 30 Sep 2024 Overvalued 30 Sep 2024 Fairly Valued 30 Sep 2024
Assessment
Undervalued 2024
Morningstar Rating QQQQQ1 Oct 2024 19:27, UTC QQQ30 Sep 2024 21:36, UTC QQ30 Sep 2024 21:35, UTC QQQ30 Sep 2024 21:37, UTC
Analyst Joshua Aguilar, Director Joshua Aguilar, Director Travis Miller, Strategist Joshua Aguilar, Director
Capital Allocation Standard Standard Standard Standard
Price/Fair Value 0.32 0.99 1.14 0.90
Price/Sales 0.78 2.58 5.34 2.62
Price/Book 1.19 9.15 4.54 —
Price/Earning 6.21 9.50 24.42 10.28
Dividend Yield 4.40% 0.97% 4.10% 7.56%
Market Cap 1.86 Bil 40.69 Bil 55.64 Bil 23.58 Bil
52-Week Range 8.20—40.04 152.31—187.44 32.50—46.48 45.51—62.34
Investment Style Small Blend Mid Value Mid Blend Mid Value
Bears Say Joshua Aguilar, Director, 1 Oct 2024

u It remains unclear if the Fast LNG efforts will be able to supply low-cost gas for the entirety of its 20-25-
year LNG-to-power contracts, given uncertain field economics.
u We are skeptical that New Fortress’ recent $715 million dividend payout was a payout intended to
reflect a lack of capital opportunities elsewhere in the business or designed to enrich several key
stakeholders.
u Fast LNG vessels have been far more costly than initial expectations, and have missed original delivery
dates and deadlines.
Economic Moat Joshua Aguilar, Director, 11 Sep 2024

New Fortress is actively developing a fairly high-return but highly uncertain business model that it calls
LNG-to-Power. The model involves control over every part of the LNG development value chain. New
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Fortress plans to own the vessels (it calls this Fast LNG) producing LNG to control its gas supply costs
and the terminals and gas power plants that let it deliver power to end users and retain control over the
prices it earns. These Fast LNG vessels can produce LNG to feed its network of import terminals and
power generation facilities in five countries, but primarily in the Caribbean and Brazil. Ultimately, power
generated by its gas plants is sold to local utilities at a contracted rate. This level of ownership and
control allows the company to generate adjusted returns on invested capital in averaging 10.1% over
the next decade, in line with its cost of capital.
As a result, we do not think that New Fortress has a moat. We have little confidence that it has a
durable source of low-cost gas, or that it has locked in high enough power prices via contract to secure
a viable spread throughout the commodity cycle, or that it has enough protection built into its contracts
in the form of a large, fixed fee or make-whole fees to protect its business during a weak market.
We assign no moat to the terminals and infrastructure segment. Despite forecasting that New Fortress
will generate healthy ROICs, this is almost wholly dependent on it securing a wide enough spread,
based on our assumed contracted rate from its downstream consumers as well as highly uncertain gas
supply costs.
Broadly, we have a number of concerns with New Fortress business model and its ability to earn
durable returns that contribute to our no-moat rating. Currently, New Fortress terminals are in
underserved markets, but as we saw in the aftermath of the invasion of Ukraine, there is a significant
ability to bring additional LNG capacity to a region quickly. New Fortress strategy of vertical integration
makes sense when the market was less mature and supply/demand mismatch at most stages created
headaches. It is not clear how long this situation will remain, but it's not interminable. The US is
developing significant LNG export capacity, which should go a long way to solving the lack of LNG
available for some of New Fortress markets. It is not inconceivable that this alternative supply may be
available at costs competitive to New Fortress, reducing or eliminating any potential cost advantage.
New Fortress has focused its terminal development in markets that have been ignored or underinvested
in and experience acute energy supply problems. The energy supply issues have created very favorable
conditions for high power prices. By introducing lower-cost and more reliable gas via LNG, New Fortress
is capturing substantial margins. However, as gas increases as part of the overall energy mix for a
region, power prices are likely to decline, reflecting the absence of the initial imbalance. As a result, we
would anticipate lower spreads and returns for New Fortress over time as its markets develop further
and gas penetration increases as a percentage of a country's energy mix.
There are also substitutes for LNG, which are currently being used in the markets in which New Fortress
operates. Coal, gas, and renewables are all at play, but as previously mentioned many of the markets
are unable to adequately meet demand with these current sources. The introduction of LNG at first to fill
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the gap and then displace dirtier and more expensive sources of energy should provide a tailwind for
contract negotiations. If these alternative options become more competitive then this will create issues
for New Fortress.
Our concerns speak to the importance of contracts for its terminals, and we are not very enthusiastic
here. We expect near-term contracting efforts to be somewhat challenging as LNG prices have declined
from 2022 highs with little clarity on how the existing contracts are structured and what kind of power
prices New Fortress would be able to lock in as revenue on new efforts. The gap in contracted volumes
for its terminals also means New Fortress may not be able to contract power volumes with customers at
wide enough margins to support the planned Fast LNG supply volumes. New Fortress only had 6% of its
terminal capacity utilized and underdelivered on its contracted volumes by 15% in 2022. Over the next
five years we expect that utilization to grow to 24% as new contracts are signed.
With little clarity into what long-term prices New Fortress has contracted its power for with customers,
we currently assume that New Fortress will be able to get a $12.50 spread indexed to Henry Hub based
on current market rates in each of New Fortress' major markets (Jamaica, Brazil and so on). Margins like
that give the business incredible potential for excess returns, but it can just as easily result in severe
financial challenges if they are not realized. With just a modest reduction to that margin, New Fortress
returns less than its cost of capital.
This level of sensitivity shows that securing low-cost supply can be critical to building a moat around its
business. While the Fast LNG model was developed to secure low-cost gas supply versus buying from
third parties (Cheniere, Shell, QatarEnergy, and ExxonMobil), it adds substantial fixed costs to the
business through higher vessel operating costs that must be covered throughout the cycle versus simply
acquiring the LNG as needed from third parties. There are currently only plans for three Fast LNG units
to be deployed over the next four years, two at Altamira and one other to be deployed. If we bring
additional units online after these assuming a more normal price environment, value begins to be
impaired as the cost of development is outweighing the additional volumes. This forecast shows how
the ample ROICs may be an accident of timing, investing heavily during a market upcycle. At present,
there is one active Fast LNG vessels that would underpin any potential cost advantage.
The first test case is the two Altamira vessels, but the first one only entered operation in the second half
of 2024, so it still is uncertain whether the model will work efficiently. Two of the Fast LNG vessels that
are under contract are actually going to be stationed offshore and are committed to exporting LNG from
an onshore pipeline filled with Texas gas. The gas will be delivered to the Altamira site in Mexico, which
was built in 2006 and is currently vastly underutilized. This onshore terminal is currently being served by
TC Energys Sur De Texas pipeline, which can transport 2.6 billion cubic feet per day from Brownsville,
Texas, but is only 20% utilized at the moment. Mexico's state-owned utility, CFE, is already paying a
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fixed tariff amounting to hundreds of millions of dollars for the unused capacity to TC Energy. Thus, with
access already to the gas, CFE has agreed to provide the needed gas and transportation for the two Fast
LNG liquefiers (2.8 million metric tons per year) in exchange for a 10% profit ownership of the first Fast
LNG unit and a 15% ownership in the second as part of a 15-year contract.
The third FLNG vessel was to be deployed to a jointly developed offshore gas field (Lakach) with Pemex.
It could have been highly lucrative for both parties, but at present Rystad does not estimate the field to
be able to reliably supply both parties needs for more than three years. Additionally, Rystad said in July
23 that the field is “uncommercial due to low reserves in comparison with its cost of development” and
unlikely to come online as planned in 2025. Broadly, we have concerns that this development forecast
implies that New Fortress will need to invest much more in drilling new wells beyond its initial seven-
well plan to support its future needs. Any material increases to the investment required would remove
any short-term cost advantage. New Fortress seems to agree with our concerns and has canceled it,
focusing instead on the two Altamira efforts with plans unclear for the third vessel.
We assign no moat to the ships segment. This is a transport business in a highly competitive space that
has been re-organized into Energos, a JV with Apollo, which New Fortress has sold its stake in. Over the
longer term, this segment will help support the terminals and infrastructure segment as the vessels
existing leases end. This support could serve to bolster any potential cost advantage of the terminals
and infrastructure segment, but it would largely depend on the market for the ships being short of
capacity over the long run, which we doubt will be the case.
LNGs potential to supplant dirtier oil and coal currently being utilized by many of its less developed
markets reduces the immediate carbon concerns and serves as a positive from an ESG perspective. New
Fortress is tackling many regions and parts of the energy value chain that have historically presented
substantial difficulties to effectively address with low-cost and cleaner energy. The primary negative
issue is that management appears to have underestimated permitting and stakeholder pushback. Most
projects have experienced permitting delays and stakeholders have pushed back on port dredging
project. Management has also been upbeat about its Hydrogen potential, but we see this as remaining
noncore and a potential divestiture. The Shannon, Ireland, terminal project was pushed by management
for its hydrogen potential until it received approval to import LNG. This Shannon, Ireland, terminal is also
in limbo after Irish authorities rejected the project on climate change grounds, and New Fortress has
suggested it will challenge the rejection, with a potential resolution sometime in late 2024.
Fair Value and Profit Drivers Joshua Aguilar, Director, 1 Oct 2024
We are lowering our fair value estimate to $28 from $30 as a result of the announced equity issuance to
shore up the balance sheet. While painful, this amounts to management threading a narrow needle that
threatened the future of the firm by pushing $3 billion in maturities through 2026-29.
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We expect robust growth from New Fortress over the next few years. Our EBITDA forecast is $2.5 billion
in 2027 compared with $1.2 billion in 2023. The growth mainly reflects incremental Fast LNG volumes
coming online, revenue from the Brazil capacity contract, and new LNG volumes, as New Fortress' first
and second vessels enter service.
It also includes New Fortress' success at obtaining additional power contracts for its underutilized
terminals. Frankly, we think this should be New Fortress' biggest priority, as new contracts can then
support additional Fast LNG investments, goosing growth further at attractive returns. New Fortress still
has ample growth opportunities left in its portfolio, as six Fast LNG vessels would supply only perhaps
one third of its overall utilization at its existing terminals. Obtaining these new power contracts to
support Fast LNG vessels is usually very challenging with regulatory, permitting, geographic,
infrastructure, and numerous other issues that would not typically be prevalent in more developed
countries like the EU and the United States. With the LNG spot market expected to remain tight, the
certainty of internally produced supply allows for greater confidence in these contracting negotiations.
Risk and Uncertainty Joshua Aguilar, Director, 11 Sep 2024

New Fortress' business model is largely unproven, especially at the scale that the firm is looking to
achieve over the next few years. We assign a Morningstar Uncertainty Rating of Very High. It operates
in many different countries, primarily Brazil and Jamaica, but also Costa Rica, Mexico, and Puerto Rico.
It is considering a new project in Ireland, which is now in regulatory limbo. Each country largely
operates with different regulatory, permitting, infrastructure, and competitive dynamics. Complicating
matters is that the Fast LNG effort is largely front-end-loaded in terms of capital spending, with at least
$2 billion committed. This investment is sizable for a firm that generated $1.2 billion in 2023 EBITDA.
From an ESG perspective, on the one hand, New Fortress business model does focus on thoughtfully
addressing energy poverty by supplying a materially cheaper and cleaner option with gas than oil-based
or diesel alternatives. On the other hand, the strategy invites several stakeholder conflicts, whether it be
community or regulatory opposition, particularly when renewables projects as an alternative to New
Fortress’ gas efforts are being considered.
Capital Allocation Joshua Aguilar, Director, 1 Oct 2024

We award New Fortress a Standard Capital Allocation Rating. We primarily assess a firm’s Capital
Allocation Rating based on the quality of investments, dividends and share buybacks, and balance
sheet. New Fortress’ investments have had the largest influence on our rating given the sizable growth
they are expected to unlock over the next few years.
Broadly, we think the strategy of leveraging LNG to serve power needs in underserved regions in the
world can be an extremely profitable one. New Fortress’ anticipated margins of $10/mmbtu are very
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attractive. The Fast LNG approach of investing billions of dollars more to secure a long-term low-cost
source of gas for its power contracts addresses a key weakness of the original LNG-to-Power model, so
it also makes sense. New Fortress’ near and medium-term returns on invested capital are well above its
cost of capital, supporting substantial shareholder value creation.
Our biggest concern is its $715 million dividend payout announced in late 2022. The firm suggested at
the time that its dividend payouts would be 40% of EBITDA, with EBITDA projected to potentially exceed
$5 billion in a few years. In the space of months, it backed away from the approach as the LNG markets
weakened, and it now expects to pay out a relatively nominal $80 million annually and is restricted by
lenders from paying out dividends for the foreseeable future.
Our concerns are twofold. First, we think the payout was not well timed, given New Fortress faces at
least $2 billion or so in Fast LNG investments over the next few years without a single one in operation.
We believe it would have been smarter to retain more cash to preserve the balance sheet in case of
market disruptions or weakness, as it turned out to be the case within a few months as global LNG
prices collapsed. Our second concern is that the payout enriched primarily CEO and co-founder Wes
Edens, who directly and indirectly owns about 36% of New Fortress shares. Edens has been involved in
the private equities industry since the early 1990s, first with BlackRock’s private equity group, then with
New Fortress Investment Group. Paying out sizable dividends from portfolio companies under private
equity ownership has typically enriched owners at the expense of the portfolio companies which would
be burdened with high-interest payments as a result of taking on the additional leverage. We wonder if
Edens relied on his old private equity playbook for a cash windfall.
While we characterize New Fortress’ balance sheet approach as more of a work-it-out-as-we-progress

approach versus finalizing it ahead of time, it has ultimately worked out. Even allowing for substantial
Fast LNG investments, we think the balance sheet will be in reasonably healthy shape. Leverage is
expected to decline from 7 times in 2023 to 3.8 times in 2027.
Analyst Notes Archive
New Fortress Earnings: Delays in FLNG Asset Drive Earnings Miss but Shares Remain Undervalued
Stephen Ellis, Strategist, 9 Aug 2024
No-moat New Fortress disappointed markets, missing guided EBITDA and PitchBook consensus by 56%
and 31%, respectively. The miss was driven by the delay of FLNG 1, a massive source of growth, which
was originally supposed to come online in the second quarter but achieved its first gas in July.
Additionally, that unit is now expected to reach its name plate capacity of 69 trillion British thermal
units, or tBtus, per year in September meaning the previously guided EBITDA can only be hit in the
fourth quarter and for 2025. As a result of the update, we are reducing our fair value to $30 from $35
driven by the delay and higher debt costs. Shares have become deeply undervalued as investors appear
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to be missing the opportunities New Fortress has in 2026 and beyond.
The story for New Fortress largely remains unchanged, a tight market for LNG supply has limited their
ability to generate cash. New supply coming online through FLNG 1 and 2, along with third party, will
drive returns through a grossly underutilized power generation network. We have high confidence in
these occurring and any additional volumes coming into the network are extremely accretive. The
network has fixed costs, and the company derives revenue as the cost of natural gas plus a set rate. For
example, a 20 tBtu increase to our 2026 and on forecast volumes, or 7.5%, would result in a $6 increase
to our fair value estimate. New Fortress has secured some additional volumes and expects to deliver 170
trillion Btus, or 14% downstream utilization, in 2025.
The obstacle to achieving growth when supply pressures ease is debt as major suppliers prefer to
contract their volumes with credit-worthy counterparties. Investors need to see a path to sub 4 times
gross debt to EBITDA to ramp purchased volumes. As things stand, we expect this to be achieved in
2027 once both FLNG units are online. As volumes flow through, this metric improves further, unlocking
more LNG from third parties.
New Fortress Earnings: Project Delays Make Near Term More Difficult, Long-Term Objectives
Attainable Stephen Ellis, Strategist, 8 May 2024
No-moat New Fortress reported weak earnings per share, missing FactSet consensus by 56%, driven by
one-time impairments due to the early termination of its FEMA contract in Puerto Rico. Ultimately, this
miss due to the contract termination is something that we are comfortable with since the lost contract is
being replaced by a four-year, higher-volume contract that will provide greater value to both parties in
the long run even if it means further capacity investment. Without these one-time losses, New Fortress
would've outperformed estimates by 20%.
The company announced several initiatives, but we think that most, if not all, are less important than
the key question of where it will get LNG volumes to supply the network to produce cash. The firm has
made progress with new investments in its downstream power generation network but without a
corresponding investment in new supply. As a result, utilization rates of these receiving terminals
continue to fall and are likely below 10%. Floating liquefied natural gas, or FLNG, assets, which produce
LNG have gone from a potential of five vessels down to a maximum of two, have faced repeated delays,
and are the only near-term source of stable new supply. There is one potential bright spot, which is the
opportunity to secure additional minimum capacity payments from Brazil but these are uncertain, both
on timing and value.
Ultimately, we believe that New Fortress is still on a good path and that the market is currently
undervaluing the potential of its network. The company has certainly overdeveloped its receiving
capacity, but once additional LNG supply becomes available in 2026-27 we believe volumes delivered to
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customers can more than triple to 210 trillion British thermal units, or TBtu, in 2026 from 68 TBtu in
2023. Even so, we are reducing our fair value estimate to $35 from $39 due to project delays and the
increased construction cost of the FLNG vessels.
New Fortress Earnings: More Project Delays Heighten Debt Reduction Need Stephen Ellis, Strategist,
29 Feb 2024
No-moat New Fortress Energy reported fourth-quarter results and provided updates on its major
projects, resulting in no change to our fair value estimate of $39. Our view is that New Fortress is
showing some fundamental profitability but with warning signs flashing. Management chose to focus
on some milestones, namely the receiving terminals in Puerto Rico and Brazil. While these are important
and represent excellent growth opportunities, we view the lack of supply growth to feed these terminals
as far more important, given that the company already has more capacity than it can fill.
The two fast liquefaction facilities, or FLNG, received new delays. The inaugural FLNG's first gas was
pushed back to this March, originally supposed to come online in 2023. The second unit is now slated
for first gas sometime in 2026. New Fortress needs the first FLNG terminal online to boost volumes and
generate the cash needed to meet its maturing debt and new obligations, like the facilities in Brazil, to
unlock the minimum capacity payments that greatly enhanced our valuation (see our Dec. 29, 2023,
note). Half of its debt is maturing by 2026, and refinancing is not attractive as interest rates remain high.
If it were to go to the debt market today, interest payments would likely double. Tellingly, EBITDA/
interest expense has materially worsened over the past year, going from 6 times to 4.3 times, and we
forecast it bottoming out at 2.6 times in 2025 as new debt comes in. Management has been creative
with new debt issuance, leveraging its extensive asset portfolio. These efforts, along with asset sales,
have helped to finance spending, but it does not reduce the leverage to where we think the firm can
obtain investment-grade ratings.
We currently believe the company will be able to generate the cash needed to meet the obligations
through operations and financing, but if delays continue there could be more difficult choices ahead like
raising capital or selling additional assets.
New Fortress: Brazilian Minimum Capacity Deal Increases Our Valuation to $39 per Share Stephen
Ellis, Strategist, 29 Dec 2023
For New Fortress Energy, 2023 has been filled with significant wins. The team appears to have closed
out the year with one of the most significant deals yet that raises our fair value estimate to $39 per
share from $30. At current prices, we now view shares as fairly valued. Our no-moat rating is
unchanged. Unlike the Pemex deal, the deal with Brazil is significant. It should bring in material cash
flows, about $280 million a year for 15 years beginning in 2026, without much in ongoing costs after
spending $800 million to expand its existing power generation and import capacity over the next two
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years. By the time the contract is expected to come into force in 2026, we forecast the debt/EBITDA
ratio will be below 3 times, which will still allow New Fortress to contract with large liquefied natural
gas providers for larger volumes.
This contract also has the added benefit that New Fortress will not have to direct gas to the facilities to
fulfill its agreement as it only has to maintain the capacity in case it should need to be drawn on. As a
result, the company can continue its current strategy of directing volumes to more lucrative Caribbean
markets.
To acquire this contract, New Fortress had to issue $95 million in preferred equity and $30 million in
debt. At the current share price, this results in only a 1.2% increase in share count, which we view as
nominal and does little to affect the gains from the deal.
New Fortress: Higher Financing Costs Remain a Headwind as Deleveraging Strategy Has Yet to Play
Out Stephen Ellis, Strategist, 29 Nov 2023
After speaking with the team at New Fortress Energy, we are raising our fair value estimate to $30 per
share from $29 with no change to our no-moat rating. The increase has been driven primarily by our
reevaluation of the Floating Liquified Natural Gas (FLNG) terminal unit economics, namely the costs
associated with supplying the terminal based on Henry Hub benchmarks. However, this improvement
has been almost completely offset by the increased financing costs.
We have increased the debt load of the company over the next few years, from just over $6 billion today
to $7.5 billion in 2024. Our cost of debt is now 8% compared with 6.5% previously, using the most recent
financing as the benchmark. However, New Fortress is working on deleveraging by continuing to sell off
noncore assets. Management believes that there are up to $1 billion worth of sales that can be realized
within 2024, but we have chosen not to include these in our model for now due to the uncertainty
around the completion of the transactions and the ultimate value.
New Fortress Energy Earnings: The Pivot to Deleveraging Makes Sense Stephen Ellis, Strategist, 8
Nov 2023
In its third quarter. New Fortress Energy highlighted a series of encouraging developments focusing on
a new push of investment in its terminal infrastructure and deleveraging as well as updating on its
contracting status, with 90% of its 2024 volumes secured and guiding volume increases for 2024 and
2025. Even so, we have slightly reduced our fair value estimate from $30 to $29 per share because we
expect reduced total volumes delivered in 2023 and to reflect increased capital spending activity. Our
no-moat rating is unchanged.
Overall, the strategy of deleveraging the business is sound and likely necessary as half of its nearly $6
billion debt load will come due within five years. Higher-margin revenue coming sooner due to new
ß
heavy investment in terminal and power generation infrastructure coupled with a new program of
divestment should allow debt/EBITDA to fall from 5 times in 2023 to 2.5 times in 2025. This focus will
allow the firm to secure greater volumes from established LNG providers at costs far lower than what it
can produce from its floating, liquefied natural gas, or FLNG, unit and contract to sell additional volumes
to its downstream customers creating a positive feedback loop.
In our Oct. 11 note, we came out of our conversation with investor relations more positive largely due to
the strategic pivot away from building out additional FLNG vessels. These are expensive assets and
economic primarily in times of tight supply and high demand, conditions which we expect to abate over
the next 24 months. On the Nov. 8 call, management left the door open to additional units, indicating
that it is continuing to pursue permitting for four additional units in the U.S. and Mexico. As we
currently assess the business, our fair value would decline significantly if just one additional unit was
constructed and launched by 2025. We believe that management understands this dynamic, so it is
puzzling why it is keeping this door open. K
ß
Competitors Price vs. Fair Value
Cheniere Energy Inc LNG
Fair Value: 182.00

8 Aug 2024 16:56, UTC
170
Last Close: 179.84
135 Overvalued
Undervalued
100
65
30
2019 2020 2021 2022 2023 YTD
0.78 0.98 0.98 1.05 1.06 0.99 Price/Fair Value
3.18 -1.70 69.50 49.23 14.92 6.11 Total Return %
Morningstar Rating
Total Return % as of 30 Sep 2024. Last Close as of 30 Sep 2024. Fair Value as of 8 Aug 2024 16:56, UTC.
Williams Companies Inc WMB
Last Close: 45.65

43 Fair Value: 40.00
6 Aug 2024 16:00, UTC
35 Overvalued
Undervalued
27
19
11
2019 2020 2021 2022 2023 YTD
0.85 0.74 0.93 1.03 0.97 1.14 Price/Fair Value
14.47 -8.73 38.05 32.87 11.31 35.16 Total Return %
Morningstar Rating
ß
Competitors Price vs. Fair Value
Cheniere Energy Partners LP CQP
Fair Value: 54.00

8 Aug 2024 17:19, UTC
61
Last Close: 48.72
52 Overvalued
Undervalued
43
34
25
2019 2020 2021 2022 2023 YTD
0.98 0.80 0.96 1.09 0.96 0.90 Price/Fair Value
16.98 -5.01 27.38 43.82 -5.13 3.18 Total Return %
Morningstar Rating
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Morningstar Historical Summary

Financials as of 30 Jun 2024
Fiscal Year, ends 31 Dec 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 YTD TTM
Revenue (USD K) — — 21,395 97,262 112,301 189,125 451,650 1,322,810 2,368,272 2,413,296 1,118,327 2,391,147
Revenue Growth % — — — 354 15.5 68.4 138 192 79.0 1.9 -1.9 -1.1
EBITDA (USD K) — — -25,793 -22,171 -66,855 -188,128 -175,593 350,452 430,699 1,110,986 219,883 808,645
EBITDA Margin % — — -120 -22.8 -59.5 -99.5 -38.9 26.5 18.2 46.0 19.7 33.8
Operating Income (USD K) — — -27,058 -24,990 -58,488 -187,275 -151,330 283,549 809,835 931,193 313,375 784,331
Operating Margin % — — -126 -25.7 -52.1 -99.0 -33.5 21.4 34.2 38.6 28.0 32.8
Net Income (USD K) — — -32,926 -31,671 -78,076 -33,809 -182,147 97,104 194,479 547,882 -34,773 243,655
Net Margin % — — -153 -32.6 -69.5 -17.9 -40.3 7.3 8.2 22.7 -3.2 10.1
Diluted Shares Outstanding (K) — — 67,916 67,916 20,000 20,863 106,655 201,703 209,854 206,482 205,847 205,638
Diluted Earnings Per Share (USD) — — -0.48 -0.47 -3.90 -1.62 -1.71 0.47 0.93 2.65 -0.18 1.18
Dividends Per Share (USD) — — — — — — 0.20 0.40 3.40 0.40 0.20 0.40
Valuation as of 30 Sep 2024

2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 Recent Qtr TTM
Price/Sales — — — — — 2.4 10.0 5.6 3.6 3.6 0.8 0.8
Price/Earnings — — — — — -5.9 -22.1 Years
151.5 31.2 19.8 7.7 7.7
Price/Cash Flow — — — — — -1.8 -19.2 -30.6 28.6 9.8 3.9 3.9
Dividend Yield % — — — — — — 0.37 1.66 0.94 1.06 4.4 4.4
Price/Book — — — — — 4.3 Years
103.1 3.0 4.8 5.4 1.2 1.2
EV/EBITDA 0.0 0.0 0.0 0.0 0.0 0.0 -0.1 0.0 0.0 0.0 0.0 0.0
Operating Performance / Profitability as of 30 Jun 2024
Fiscal Year, ends 31 Dec 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 YTD TTM
ROA % — — -8.5 -8.2 -14.5 -3.7 -12.0 2.2 2.7 6.0 -0.3 2.4
ROE % — — -11.4 -11.2 -28.5 -19.2 -80.6 9.0 12.6 37.4 -2.3 16.3
ROIC % — — -7.5 -7.8 -17.1 -3.6 -11.8 5.9 6.2 10.0 0.8 5.1
Asset Turnover — — 0.1 0.3 0.2 0.2 0.3 0.3 0.3 0.3 0.1 0.2
Financial Leverage
Fiscal Year, ends 31 Dec 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 Recent Qtr TTM
Debt/Capital % — — 20.5 19.9 — 87.9 78.3 69.0 78.8 80.8 83.5 —
Equity/Assets % — — 74.4 73.2 38.4 7.5 19.2 26.1 16.7 15.6 13.7 —
Total Debt/EBITDA — — -3.1 -3.4 -4.1 -3.3 -7.7 11.8 11.4 6.6 37.6 —
EBITDA/Interest Expense Infinite Infinite -5.1 -3.8 -8.8 -26.5 -3.5 2.4 1.9 4.3 1.6 3.0
Morningstar Analyst Historical/Forecast Summary as of 10 Sep 2024

Financials Estimates Forward Valuation Estimates
2022 2023 2024 2025 2026
Fiscal Year, ends 31 Dec 2023 2022 2023 2024 2025 2026
Price/Sales 3.7 3.2 0.9 0.7 0.4
Revenue (USD Mil) 2,368 2,413 2,135 2,758 4,519 Price/Earnings 13.3 10.5 16.2 181.8 2.5
Revenue Growth % 79.0 1.9 -11.6 29.2 63.9 Price/Cash Flow — — — — —
EBITDA (USD Mil) 1,175 1,236 1,149 1,182 2,137 Dividend Yield % 1.2 9.1 4.2 4.2 4.2
EBITDA Margin % 49.6 51.2 53.8 42.9 47.3 Price/Book 6.6 4.8 1.1 1.2 0.8
EV/EBITDA 11.3 11.5 8.7 8.5 4.7
Operating Income (USD Mil) 810 931 812 777 1,692
Operating Margin % 34.2 38.6 38.0 28.2 37.5
Net Income (USD Mil) 645 752 117 11 747
Net Margin % 27.2 31.2 5.5 0.4 16.5
Diluted Shares Outstanding (Mil) 202 210 209 209 209
Diluted Earnings Per Share(USD) 3.20 3.58 0.56 0.05 3.57
Dividends Per Share(USD) 0.49 3.45 0.38 0.38 0.38
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ESG Risk Rating Breakdown
Exposure Subject Subindustry (51.0) u Exposure represents a company’s vulnerability to ESG

Company Exposure1 56.4 risks driven by their business model
56.4
u Exposure is assessed at the Subindustry level and then
– Manageable Risk 49.7 High
2 0 55+ specified at the company level
Unmanageable Risk 6.7 u Scoring ranges from 0-55+ with categories of low, me-
Low Medium High
dium, and high-risk exposure
Management
u Management measures a company ’s ability to manage
Manageable Risk 49.7 ESG risks through its commitments and actions
32.3%
– Managed Risk3 16.1 Average
u Management assesses a company's efficiency on ESG
Management Gap4 33.6 100 0 programs, practices, and policies

Strong Average Weak u Management score ranges from 0-100% showing how
Overall Unmanaged Risk 40.3 much manageable risk a company is managing
ESG Risk Rating ESG Risk Rating Assessment5

40.32
Severe
Negligible Low Medium High Severe ESG Risk Rating is of Sep 04, 2024. Highest Controversy Level is as of Sep 08,
2024. Sustainalytics Subindustry: Oil & Gas Storage and Transportation.
ESG Risk Ratings measure the degree to which a company’s value is impacted by environmental, social, and governance Sustainalytics provides Morningstar with company ESG ratings and metrics
risks, by evaluating the company’s ability to manage the ESG risks it faces. on a monthly basis and as such, the ratings in Morningstar may not
necessarily reflect current Sustainalytics’ scores for the company. For the
1. A company's Exposure to material ESG issues 2. Unmanageable Risk refers to risks that are inherent to a particular business model that cannot be managed by most up to date rating and more information, please visit: sustainalytics.com/
programs or initiatives 3. Managed Risk = Manageable Risk multiplied by a Management score of 32.3% 4. Management Gap assesses risks that are not esg-ratings/.
managed, but are considered manageable 5. ESG Risk Rating Assessment = Overall Unmanaged Risk = Management Gap plus Unmanageable Risk
Peer Analysis 04 Sep 2024 Peers are selected from the company's Sustainalytics-defined Subindustry and are displayed based on the closest market cap values
Company Name Exposure Management ESG Risk Rating
New Fortress Energy Inc 56.4 | High 0 55+ 32.3 | Average 100 0 40.3 | Severe 0 40+
Cheniere Energy Inc 52.5 | Medium 0 55+ 67.1 | Strong 100 0 21.5 | Medium 0 40+
Williams Companies Inc 50.4 | Medium 0 55+ 66.0 | Strong 100 0 21.2 | Medium 0 40+
Cheniere Energy Partners LP 46.5 | Medium 0 55+ 40.5 | Average 100 0 29.9 | Medium 0 40+
— —|— 0 55+ —|— 100 0 —|— 0 40+
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Appendix
Historical Morningstar Rating
December
New Fortress November
Energy Inc Class October
A NFE 30 Sep September August
2024 21:54, UTC July May May April March February January
Dec 2024 Nov 2024 Oct 2024 Sep 2024 Aug 2024 Jul 2024 Jun 2024 May 2024 Apr 2024 Mar 2024 Feb 2024 Jan 2024
- - - QQQQQ QQQQQ QQQQ QQQQ QQQQ QQQQ QQQQ QQQ QQQ
QQQ QQ QQQ QQQ QQQ - - - - - - -
- - - - - - - - - - - -
- - - - - - - - - - - -
- - - - - - - - - - - -
- - - - - - - - - - - -
December
Cheniere Energy NovemberOctober
Inc LNG 30 Sep 2024 21:36, September
UTC August July May May April March February January
- - - QQQ QQQ QQ QQQ QQQ QQQ QQQ QQQ QQQ
QQQ QQ QQQ QQQ QQQ QQQ QQQ QQQQ QQQ QQQ QQQ QQQ
QQQ QQ QQ QQ QQ QQ QQQ QQQ QQ QQ QQ QQQ
QQQ QQQ QQQ QQQ QQQQ QQQ QQQ QQQ QQQQ QQQQ QQQ QQQ
QQQ QQQ QQQ QQQ QQQ QQQ QQQ QQQ QQQ QQQQ QQQQQ QQQQ
QQQQ QQQQ QQQQ QQQQ QQQQ QQQQ QQQQ QQQQ QQQQ QQQ QQQ QQQ
December
Williams Companies November
Inc WMB October
30 Sep 2024 September
21:35, UTC August July May May April March February January
- - - QQ QQ QQ QQ QQQ QQQ QQQ QQQ QQQ
QQQ QQQ QQQ QQQ QQQ QQQ QQQ QQQ QQQ QQQ QQQ QQQ
QQQ QQQ QQQ QQQ QQQ QQQ QQQ QQ QQ QQQ QQQ QQQ
QQQ QQQ QQQ QQQ QQQQ QQQ QQQ QQQ QQQQ QQQQ QQQQ QQQQ
QQQQ QQQQ QQQQ QQQQ QQQQ QQQQ QQQQ QQQQ QQQQ QQQQQ QQQQ QQQQ
QQQQ QQQQ QQQQ QQQQ QQQQ QQQ QQQ QQQ QQQ QQQ QQQ QQQ
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Cheniere Energy Partners LP CQP 30 Sep 2024 21:37, UTC
- - - QQQ QQQ QQQ QQQ QQQ QQQ QQQ QQQ QQQ
QQQ QQ QQQ QQQ QQQ QQQ QQQQ QQQQ QQQQ QQQQ QQQ QQQ
QQ QQ QQ QQQ QQQ QQQ QQQQ QQQ QQQ QQQ QQ QQQ
QQQ QQQ QQQ QQQ QQQ QQQ QQQ QQQ QQQ QQQ QQQ QQQ
QQQQ QQQ QQ QQQ QQ QQQ QQ QQQ QQ QQQ QQQQ QQQ
QQQ QQQ QQ QQ QQQ QQ QQQ QQQ QQQ QQQ QQ QQQ
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Research Methodology for Valuing Companies
Overview turns on invested capital (or ROIC) over and above our es- rive our annual free cash flow forecast.
At the heart of our valuation system is a detailed projec- timate of a firm’s cost of capital, or weighted average
Stage II: Fade
tion of a company’s future cash flows, resulting from our cost of capital (or WACC). Without a moat, profits are
The second stage of our model is the period it will take
analysts’ research. Analysts create custom industry and more susceptible to competition. We have identified five
the company ’s return on new invested capital—the re-
company assumptions to feed income statement, balance sources of economic moats: intangible assets, switching
turn on capital of the next dollar invested (“RONIC”)—to
sheet, and capital investment assumptions into our glob- costs, network effect, cost advantage, and efficient scale.
decline (or rise) to its cost of capital. During the Stage II
ally standardized, proprietary discounted cash flow, or
Companies with a narrow moat are those we believe are period, we use a formula to approximate cash flows in
DCF, modeling templates. We use scenario analysis, inde-
more likely than not to achieve normalized excess returns lieu of explicitly modeling the income statement, balance
pth competitive advantage analysis, and a variety of other
for at least the next 10 years. Wide-moat companies are sheet, and cash flow statement as we do in Stage I. The
analytical tools to augment this process. Moreover, we
those in which we have very high confidence that excess length of the second stage depends on the strength of
think analyzing valuation through discounted cash flows
returns will remain for 10 years, with excess returns more the company’s economic moat. We forecast this period to
presents a better lens for viewing cyclical companies,
likely than not to remain for at least 20 years. The longer last anywhere from one year (for companies with no eco-
high-growth firms, businesses with finite lives (e.g.,
a firm generates economic profits, the higher its intrinsic nomic moat) to 10–15 years or more (for wide-moat com-
mines), or companies expected to generate negative
value. We believe low-quality, no-moat companies will panies). During this period, cash flows are forecast using
earnings over the next few years. That said, we don’t dis-
see their normalized returns gravitate toward the firm’s four assumptions: an average growth rate for EBI over the
miss multiples altogether but rather use them as support-
cost of capital more quickly than companies with moats. period, a normalized investment rate, average return on
ing cross-checks for our DCF-based fair value estimates.
new invested capital (RONIC), and the number of years
We also acknowledge that DCF models offer their own
When considering a company's moat, we also assess until perpetuity, when excess returns cease. The invest-
challenges (including a potential proliferation of estim-
whether there is a substantial threat of value destruction, ment rate and return on new invested capital decline un-
ated inputs and the possibility that the method may miss
stemming from risks related to ESG, industry disruption, til a perpetuity value is calculated. In the case of firms
shortterm market-price movements), but we believe these
financial health, or other idiosyncratic issues. In this con- that do not earn their cost of capital, we assume marginal
negatives are mitigated by deep analysis and our
text, a risk is considered potentially value destructive if its ROICs rise to the firm’s cost of capital (usually attribut-
longterm approach.
occurrence would eliminate a firm’s economic profit on a able to less reinvestment), and we may truncate the
cumulative or midcycle basis. If we deem the probability second stage.
Morningstar’s equity research group (”we,” “our”) be-
lieves that a company’s intrinsic worth results from the of occurrence sufficiently high, we would not characterize
the company as possessing an economic moat. Stage III: Perpetuity
future cash flows it can generate. The Morningstar Rating
Once a company’s marginal ROIC hits its cost of capital,
for stocks identifies stocks trading at a discount or premi-
2. Estimated Fair Value we calculate a continuing value, using a standard per-
um to their intrinsic worth—or fair value estimate, in
Combining our analysts’ financial forecasts with the petuity formula. At perpetuity, we assume that any
Morningstar terminology. Five-star stocks sell for the
firm’s economic moat helps us assess how long returns growth or decline or investment in the business neither
biggest risk adjusted discount to their fair values, where-
on invested capital are likely to exceed the firm’s cost of creates nor destroys value and that any new investment
as 1-star stocks trade at premiums to their intrinsic worth.
capital. Returns of firms with a wide economic moat rat- provides a return in line with estimated WACC.
Four key components drive the Morningstar rating: (1) our ing are assumed to fade to the perpetuity period over a
longer period of time than the returns of narrow-moat Because a dollar earned today is worth more than a dollar
assessment of the firm’s economic moat, (2) our estimate
firms, and both will fade slower than no-moat firms, in- earned tomorrow, we discount our projections of cash
of the stock’s fair value, (3) our uncertainty around that
creasing our estimate of their intrinsic value. flows in stages I, II, and III to arrive at a total present
fair value estimate and (4) the current market price. This
value of expected future cash flows. Because we are
process ultimately culminates in our singlepoint star rat-
Our model is divided into three distinct stages: modeling free cash flow to the firm—representing cash
ing.
available to provide a return to all capital providers—we
discount future cash flows using the WACC, which is a
1. Economic Moat Stage I: Explicit Forecast
weighted average of the costs of equity, debt, and pre-
The concept of an economic moat plays a vital role not In this stage, which can last five to 10 years, analysts
ferred stock (and any other funding sources), using ex-
only in our qualitative assessment of a firm’s long-term make full financial statement forecasts, including items
pected future proportionate long-term, market-value
investment potential, but also in the actual calculation of such as revenue, profit margins, tax rates, changes in
weights.
our fair value estimates. An economic moat is a structural workingcapital accounts, and capital spending. Based on
feature that allows a firm to sustain excess profits over a these projections, we calculate earnings before interest,
3. Uncertainty Around That Fair Value Estimate
long period of time. We define economic profits as re- after taxes (EBI) and the net new investment (NNI) to de-
Morningstar’s Uncertainty Rating is designed to capture
the range of potential outcomes for a company ’s intrinsic
Morningstar Equity Research Star Rating Methodology
value. This rating is used to assign the margin of safety
required before investing, which in turn explicitly drives
our stock star rating system. The Uncertainty Rating is
aimed at identifying the confidence we should have in as-
signing a fair value estimate for a given stock.
Our Uncertainty Rating is meant to take into account any-

thing that can increase the potential dispersion of future
outcomes for the intrinsic value of a company, and any-
ß
thing that can affect our ability to accurately predict Morningstar Equity Research Star Rating Methodology
these outcomes. The rating begins with a suggested rat-
ing produced by a quantitative process based on the trail-
ing 12-month standard deviation of daily stock returns.
An analyst overlay is then applied, with analysts using
the suggested rating, historical rating data, and their own
knowledge of the company to inform them as they make
the final Uncertainty Rating decision. Ultimately, the rat-
ing decision rests with the analyst. Analysts take into ac-
count many characteristics when making their final de-
cision, including cyclical factors, operational and financial
factors such as leverage, company-specific events, ESG
risks, and anything else that might increase the potential
dispersion of future outcomes and our ability to estimate
those outcomes.
Our recommended margin of safety—the discount to fair

value demanded before we’d recommend buying or
selling the stock—widens as our uncertainty of the es-
timated value of the equity increases. The more uncertain
we are about the potential dispersion of outcomes, the
greater the discount we require relative to our estimate of
the value of the firm before we would recommend the
purchase of the shares. In addition, the Uncertainty Rat-
ing provides guidance in portfolio construction based on
risk tolerance. Once we determine the fair value estimate of a stock, we justed return is highly likely over a multiyear time frame.
compare it with the stock’s current market price on a Scenario analysis developed by our analysts indicates
Our Uncertainty Ratings are: Low, Medium, High, Very daily basis, and the star rating is automatically re-calcu- that the current market price represents an excessively
High, and Extreme. lated at the market close on every day the market on pessimistic outlook, limiting downside risk and maximiz-
which the stock is listed is open. Our analysts keep close ing upside potential.
Margin of Safety
tabs on the companies they follow, and, based on thor-
Qualitative Analysis
QRating ough and ongoing analysis, raise or lower their fair value QQQQ We believe appreciation beyond a fair risk-ad-
Uncertainty Ratings QQQQQRating
estimates as warranted. justed return is likely.
Low 20% Discount 25% Premium
Medium 30% Discount 35% Premium QQQ Indicates our belief that investors are likely to re-
Please note, there is no predefined distribution of stars.
High 40% Discount 55% Premium ceive a fair risk-adjusted return (approximately cost of
That is, the percentage of stocks that earn 5 stars can
Very High 50% Discount 75% Premium equity).
fluctuate daily, so the star ratings, in the aggregate, can
Extreme 75% Discount 300% Premium serve as a gauge of the broader market’s valuation. When
there are many 5-star stocks, the stock market as a whole QQ We believe investors are likely to receive a less than
Our uncertainty rating is based on the interquartile range, fair risk-adjusted return.
is more undervalued, in our opinion, than when very few
or the middle 50% of potential outcomes, covering the
companies garner our highest rating.
25th percentile–75th percentile. This means that when a Q Indicates a high probability of undesirable risk-adjus-
stock hits 5 stars, we expect there is a 75% chance that ted returns from the current market price over a multiyear
We expect that if our base-case assumptions are true the
the intrinsic value of that stock lies above the current time frame, based on our analysis. Scenario analysis by
market price will converge on our fair value estimate over
market price. Similarly, when a stock hits 1 star, we ex- our analysts indicates that the market is pricing in an ex-
time generally within three years (although it is im-
pect there is a 75% chance that the intrinsic value of that cessively optimistic outlook, limiting upside potential and
possible to predict the exact time frame in which market
stock lies below the current market price. leaving the investor exposed to Capital loss.
prices may adjust).
4. Market Price Our star ratings are guideposts to a broad audience and Other Definitions
The market prices used in this analysis and noted in the individuals must consider their own specific investment Last Price: Price of the stock as of the close of the mar-
report come from exchange on which the stock is listed goals, risk tolerance, tax situation, time horizon, income ket of the last trading day before date of the report.
which we believe is a reliable source. needs, and complete investment portfolio, among other
factors. Capital Allocation Rating: Our Capital Allocation (or
For more details about our methodology, please go to Stewardship) Rating represents our assessment of the
https://shareholders.morningstar.com The Morningstar Star Ratings for stocks are defined be- quality of management’s capital allocation, with particu-
low: lar emphasis on the firm ’s balance sheet, investments,
Morningstar Star Rating for Stocks QQQQQ We believe appreciation beyond a fair risk ad- and shareholder distributions. Analysts consider compan-
ß
ies’ investment strategy and valuation, balance sheet starting at zero (no risk) with lower scores representing vice to any specific investor. Therefore, investments dis-
management, and dividend and share buyback policies. less unmanaged risk and, for 95% of cases, the unman- cussed herein may not be suitable for all investors; in-
Corporate governance factors are only considered if they aged ESG Risk score is below 50. vestors must exercise their own independent judgment as
are likely to materially impact shareholder value, though to the suitability of such investments and recommenda-
either the balance sheet, investment, or shareholder dis- Based on their quantitative scores, companies are tions in the light of their own investment objectives, ex-
tributions. Analysts assign one of three ratings: "Exem- grouped into one of five Risk Categories (negligible, low, perience, taxation status and financial position. Morning-
plary", "Standard", or "Poor". Analysts judge Capital Alloc- medium, high, severe). These risk categories are absolute, star encourages Report recipients to read all relevant is-
ation from an equity holder’s perspective. Ratings are de- meaning that a ‘high risk’ assessment reflects a compar- sue documents (e.g., prospectus) pertaining to the secur-
termined on a forward looking and absolute basis. The able degree of unmanaged ESG risk across all subindus- ity concerned, including without limitation, information
Standard rating is most common as most managers will tries covered. relevant to its investment objectives, risks, and costs be-
exhibit neither exceptionally strong nor poor capital alloc- fore making an investment decision and when deemed
ation. The ESG Risk Rating Assessment is a visual representa- necessary, to seek the advice of a financial, legal, tax,
tion of Sustainalytics ESG Risk Categories on a 1 to 5 and/or accounting professional. The information, data,
Capital Allocation (or Stewardship) analysis published pri- scale. Companies with Negligible Risk = 5 Globes, Low analyses and opinions presented herein are not warran-
or to Dec. 9, 2020, was determined using a different pro- Risk = 4, Medium Risk = 3 Globes, High Risk = 2 Globes, ted to be accurate, correct, complete or timely. Unless
cess. Beyond investment strategy, financial leverage, and Severe Risk = 1 Globe. For more information, please visit otherwise provided in a separate agreement, neither
dividend and share buyback policies, analysts also con- sustainalytics.com/esg-ratings/ Morningstar, Inc. or the Equity Research Group repres-
sidered execution, compensation, related party transac- ents that the report contents meet all of the presentation
tions, and accounting practices in the rating. Ratings should not be used as the sole basis in evaluating and/or disclosure standards applicable in the jurisdiction
a company or security. Ratings involve unknown risks and the recipient is located.
Capital Allocation Rating: Our Capital Allocation (or uncertainties which may cause our expectations not to
Stewardship) Rating represents our assessment of the occur or to differ significantly from what was expected Except as otherwise required by law or provided for in a
quality of management’s capital allocation, with particu- and should not be considered an offer or solicitation to separate agreement, the analyst, Morningstar, Inc. and
lar emphasis on the firm’s balance sheet, investments, buy or sell a security. the Equity Research Group and their officers, directors
and shareholder distributions. Analysts consider compan- and employees shall not be responsible or liable for any
ies’ investment strategy and valuation, balance sheet Risk Warning trading decisions, damages or other losses resulting from,
management, and dividend and share buyback policies. Please note that investments in securities are subject to or related to, the information, data, analyses or opinions
Corporate governance factors are only considered if they market and other risks and there is no assurance or guar- within the report.
are likely to materially impact shareholder value, though antee that the intended investment objectives will be
either the balance sheet, investment, or shareholder dis- achieved. Past performance of a security may or may not The Report and its contents are not directed to, or inten-
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Morningstar Equity Analyst Report | Report as of 1 Oct 2024 19:31, UTC | Reporting Currency: USD | Trading Currency: USD

| Exchange: NASDAQ - ALL MARKETS Page 1 of 23

Price vs. Fair Value

Fair Value: 28.00

Bulls Say Joshua Aguilar, Director, 1 Oct 2024

Fair Value Fair Value Last Close Fair Value

Bears Say Joshua Aguilar, Director, 1 Oct 2024

Economic Moat Joshua Aguilar, Director, 11 Sep 2024

Risk and Uncertainty Joshua Aguilar, Director, 11 Sep 2024

Capital Allocation Joshua Aguilar, Director, 1 Oct 2024

While we characterize New Fortress’ balance sheet approach as more of a work-it-out-as-we-progress

Analyst Notes Archive

to be missing the opportunities New Fortress has in 2026 and beyond.

Competitors Price vs. Fair Value

Cheniere Energy Inc LNG

Fair Value: 182.00

Williams Companies Inc WMB

Last Close: 45.65

Competitors Price vs. Fair Value

Cheniere Energy Partners LP CQP

Fair Value: 54.00

Morningstar Historical Summary

Valuation as of 30 Sep 2024

Morningstar Analyst Historical/Forecast Summary as of 10 Sep 2024

ESG Risk Rating Breakdown

Exposure Subject Subindustry (51.0) u Exposure represents a company’s vulnerability to ESG

Management Gap4 33.6 100 0 programs, practices, and policies

Overall Unmanaged Risk 40.3 much manageable risk a company is managing

ESG Risk Rating ESG Risk Rating Assessment5

— —|— 0 55+ —|— 100 0 —|— 0 40+

Cheniere Energy Partners LP CQP 30 Sep 2024 21:37, UTC

Research Methodology for Valuing Companies

Our Uncertainty Rating is meant to take into account any-

Research Methodology for Valuing Companies

Our recommended margin of safety—the discount to fair

Research Methodology for Valuing Companies

Research Methodology for Valuing Companies

Research Methodology for Valuing Companies

vestment Adviser India Private Limited offers Investment

For recipients in Japan: The Report is distributed by Ib-

For recipients in Singapore: For Institutional Investor

For recipients in Korea: The report is distributed by

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