NextDecade

NextDecade is a U.S. Liquefied Natural Gas company leading the construction of Rio Grande LNG, an export terminal located in Brownsville, Texas, with a total capacity of up to 48 MTPA if all eight projected trains are eventually built (optionality up to 10 & 60 MTPA)— which would make it one of the largest LNG export facilities in the United States.

Currently, Trains 1–5 (30 MTPA) are under construction and are expected to become operational between 2027 and 2031. In fact, NextDecade reached FID on Train 5 just this past Thursday. Altogether, this represents a total CAPEX commitment of around $30 billion, of which $20.32 billion is debt-financed (project finance).

To secure the financing required for such a massive project, NextDecade has brought on board partners such as Mubadala, TotalEnergies, GIC, and GIP, which have taken equity stakes in the project. NextDecade retains up to 20.8% of Phase 1 and 40% and 50% of Trains 4 and 5, respectively (percentages that increase once certain milestones are reached). At the same time, the company has secured commercial agreements for 92% of Phase 1 capacity (Trains 1–3) and 76% of Phase 2 capacity (Trains 4–5), leaving the remainder exposed to the spot market.

NextDecade’s share price has appreciated over the past few years as the project has achieved key milestones — such as new FIDs and the resolution of FERC environmental licensing issues — thereby de-risking the story. However, the stock has fallen nearly 50% over the past month following the Train 4 FID announcement. The company currently trades at a market capitalization of $1.8 billion, with an enterprise value below $5 billion.

As a pre-revenue company, NextDecade is complex to value because it requires understanding its ownership structure across the trains, the debt structure both at the corporate level and at Rio Grande LNG LLC, as well as existing warrants, expected cash flows, and obligations once operations begin. Given that LNG is one of our main areas of expertise, we have decided to include NextDecade in our coverage universe and, over the past several weeks, have carried out a detailed Initial Research addressing all the key aspects outlined above:

• Business model of LNG exporters (SPAs & Spot).
• Assets: detailed review of the Rio Grande project.
• Capital structure: breakdown of NextDecade and Rio Grande debt, including PIKs and covenants.
• Financial model: EBITDA and cash flow projections for each train under our own industry-based assumptions.
• Valuation of NextDecade.
• Our independent opinion on NextDecade and the potential opportunity it represents.