New Fortress Gas Deal Raises Clean Energy Yellow Card

SEATTLE (Oil Monster): Financier Wes Edens, a part-owner of Aston Villa football club and the Milwaukee Bucks basketball team, has raised the hackles of green investors after borrowing $1.5bn to fund his gas infrastructure group’s takeover of another fossil fuel operation that it says will help accelerate the world’s transition to clean energy.

The funds will in part finance the acquisition by Edens’ New Fortress Energy of Golar LNG Partners at a $1.9bn enterprise value, which the company says will add ships to transport gas as part of a bigger deal to expand into Brazil.

In marketing the deal to investors last week Edens, who co-founded the $50bn fund manager Fortress Investment Group and set up New Fortress Energy in 2014, touted the company’s commitment to clean energy, while simultaneously outlining plans to expand its global liquefied natural gas business, according to people familiar with the presentation.

The LNG industry offers itself as an alternative to other fossil fuels, on the basis that gas emits less carbon dioxide than oil or coal in combustion. Advocates say it offers a bridge while renewable energy scales up, particularly in countries otherwise dependent on coal and oil.

However, natural gas is mainly made up of methane, a potent greenhouse gas that traps more heat in the atmosphere than a molecule of carbon dioxide and contributes to global warming. Gas production, storage and transport are prone to methane leakage. “While methane tends to receive less attention than CO2, reducing methane emissions will be critical to avoid the worst effects of climate change,” the International Energy Agency said in its 2020 gas report.

“We don’t think that natural gas is the best friend for the transition. It’s the coal of tomorrow,” said Charles Portier, a portfolio manager at Mirova, a climate-focused investment management subsidiary of Natixis. “Natural gas is a fossil fuel . . . Natural gas is dangerous.”

A spotlight has been thrown on the issue this month with the EU considering the inclusion of gas in its new taxonomy for sustainable finance. The EU-wide classification system is designed to provide companies and investors with a common framework for identifying to what degree economic activities can be considered “environmentally sustainable”.

While the New Fortress fundraising is not classed as a green or sustainable bond — a designation that comes with reporting requirements to ensure the money is spent on green or sustainable projects — the company highlighted its environmental benefits when it marketed the deal to investors.

New Fortress says it eventually aims to replace fossil fuels with “affordable zero-emissions hydrogen”, despite its core assets being in natural gas.

“From seamlessly converting or building your gas-fired facilities, to reliably and efficiently providing you with clean, affordable natural gas, we can help you save time, money, stress, and even the environment — all by using liquefied natural gas,” the company says on its website.

New Fortress said it provided affordable power and “cleaner fuels” to markets that were reliant on dirty, expensive and volatile oil-based fuels. It highlighted operations in Jamaica and Puerto Rico that enabled the conversion of existing power generation from diesel to natural gas, which it said had reduced CO2 emissions by 30 per cent and lowered fuel costs to accelerate investments in renewables.

Courtesy: www.ft.com