NextDecade (NASDAQ:NEXT) Corporation (NASDAQ:NEXT), a natural gas transmission and distribution company, has solidified a substantial agreement to enhance its liquefaction capabilities. On Monday, the company's subsidiary, Rio Grande LNG Train 4, LLC (RG4), entered into a definitive lump-sum turnkey engineering, procurement, and construction (EPC) contract with Bechtel Energy, Inc. for the addition of a fourth liquefaction train at the Rio Grande LNG facility.
The contract, valued at approximately $4.327 billion, tasks Bechtel with the engineering, procurement, and construction of the new liquefaction train, a 180,000m3 full containment LNG tank, and associated utilities and facilities. This agreement follows the design currently in use for Phase 1 of the project and includes performance guarantees and acceptance criteria set by NextDecade.
Under the terms of the agreement, Bechtel assumes responsibility for the project until substantial completion, barring certain exceptions such as uninsurable risks. The contract price excludes costs related to foreign currency hedges, insurance, customs, tariffs, and duties, with caps on these additional expenses.
Bechtel may request changes to the contract, including adjustments to the price and completion deadlines, due to specific events such as force majeure or unforeseen site conditions. The agreement caps the potential increase in contract price due to force majeure events at $25 million in total.
If Bechtel fails to meet the substantial completion deadline, it will be liable for delayed liquidated damages per day. The agreement also outlines performance liquidated damages if the facility doesn't meet certain performance guarantees post-completion. However, Bechtel's total liability is limited as specified in the contract.
Incentives for early completion include an LNG production bonus and an additional early production bonus if Train 4 starts operating ahead of schedule.
Bechtel guarantees the quality of work and equipment, promising correction of any defects for a set period post-completion. RG4 retains the right to terminate the contract for uncured defaults by Bechtel or for convenience, with specific financial terms outlined for each scenario.
The agreement stipulates Bechtel must provide a letter of credit and a parent company guarantee as security for performance, with the letter of credit's value decreasing upon substantial completion and expiration of the warranty period.
This strategic move by NextDecade comes with a deadline for full notice to proceed by December 15, 2026, and is a significant step in the company's expansion of its liquefaction operations. The full text of the Train 4 EPC Agreement will be filed with NextDecade's Quarterly Report for the quarter ending September 30, 2024, with certain details redacted as per regulation.
This news is based on a press release statement from NextDecade Corporation.
In other recent news, NextDecade Corporation has seen significant developments. The energy company recently appointed Tarik Skeik as its new Chief Operating Officer, a move expected to enhance the company's management and transition into a fully operational status. Skeik's decades-long experience, particularly his leadership in large-scale projects, will be leveraged in NextDecade's Rio Grande LNG project and its Next Carbon Solutions business.
In addition to this, NextDecade has made strides in its Rio Grande LNG project, securing a head of agreement with Saudi Aramco (TADAWUL:2222) for 1.2 million tonnes per annum for Train 4 of the project. This follows a contract with Abu Dhabi National Oil Company (ADNOC), which also acquired an 11.7% equity stake in the first phase of the project.
These developments are expected to support the financing and advancement of Train 4, with analysts from Stifel maintaining a Buy rating for NextDecade.
Finally, NextDecade's Rio Grande LNG project is notable for its planned carbon capture and storage initiative. The Final Investment Decision for Train 4 is targeted for the second half of 2024, subject to finalizing commercial arrangements and securing adequate financing. This initiative is expected to capture and store over 5 million metric tons of carbon dioxide annually, aligning with global efforts to reduce carbon emissions.
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