Fortress Billionaire Wes Edens Bets on U.S. Gas Exports

lng ship
Photo: Oleksandr Kalinichenko / Shutterstock

By Naureen S. Malik (Bloomberg) — Wes Edens is an unlikely evangelist for the benefits of U.S. natural gas exports — or “freedom gas,” as the Department of Energy likes to call it.

The 57-year-old billionaire is a creature of Wall Street. After stints at Lehman Brothers Holdings Inc. and BlackRock Inc., he co-founded Fortress Investment Group, the private equity and hedge fund firm. He has the trophy assets to go with his fortune: Co-ownership of the Milwaukee Bucks basketball team and storied English soccer club Aston Villa (newly promoted to the Premier League, too).

Little in that back story would offer much of a clue to his latest venture, selling super-chilled LNG cargoes to customers across the Caribbean, Central America and West Africa. Yet that’s the objective of New Fortress Energy LLC, which is already shipping the fuel to Jamaica from Florida. It’s also planning to join the wave of U.S. companies shipping LNG by building an export terminal in Pennsylvania.

The American gas industry, transformed by the shale revolution, is now in the midst of an export boom as companies vie to ship some of that abundant supply to foreign customers, an effort encouraged by the Trump administration. A government official last week described an LNG export plant as being “critical to spreading freedom gas throughout the world by giving America’s allies a diverse and affordable source of clean energy.”

Most U.S. LNG export projects are vast, complex, multibillion-dollar affairs and take years to construct. Edens plans to build smaller-scale facilities that can come online more quickly and supply countries that historically have relied on oil imports to run their power plants. New Fortress intends to build an LNG hub in Jamaica where it can break up large cargoes to serve customers on the island and throughout the Caribbean. To create demand and help displace other fossil fuels, the company is also building a power plant in Jamaica.

Florida Rail

“In the U.S., less than 1% of the electricity we make comes from oil,” but “for emerging or developing countries it’s virtually the opposite,” Edens, the chief executive officer of Fortress Energy, wearing an Aston Villa T-shirt, said in an interview at New Fortress’s office in Manhattan’s Flatiron district.

Fortress Investment was taken private by Japan’s SoftBank Group Corp. at the end of 2017, almost two decades after Edens helped found the investment firm. He remains co-CEO of Fortress.

Edens’s foray into gas started with Fortress Investment’s ownership of the Florida East Coast Railway and its conversion to LNG power from diesel. Unable to find a supplier willing to handle the relatively small volumes it needed for its locomotives, the investment firm built its own production unit in Miami and gained authorization to export surplus LNG in containers.

Edens co-founded New York-based New Fortress Energy in 2014 and holds a majority stake. It sold shares in a January initial public offering and currently has a market value of about $1.7 billion. It’s by no means been plain sailing. The stock is down 28 percent since the IPO.

The Pennsylvania export project is scheduled to handle 2.15 million tons a year, although that about a 10th of the size of Cheniere Energy Inc.’s Louisiana export terminal, will still cost at least $750 million. It will exploit the Marcellus shale basin, the country’s largest gas-producing region.

The project “makes sense in that Marcellus gas is somewhat stranded,” said Ben Nolan, an analyst at Stifel Nicolaus & Co. “The challenge is coming up with the money to produce it.”

LNG Trucks

New Fortress plans to liquefy gas at the Marcellus production site and move the fuel by truck or rail to port, rather than relying on pipelines, which would mean it bypasses Federal Energy Regulatory Commission oversight. A FERC review can take a year or more and the agency is working through a backlog, something that has delayed several LNG projects. FERC agency spokeswoman Tamara Young-Allen confirmed that the agency doesn’t regulate gas moved by road.

New Fortress expects to receive a state air permit for the project in June and plans to file an application with the Energy Department to export LNG. The company is also in discussions to potentially truck cargoes to Northeast consumers as a workaround for pipeline bottlenecks.

“We don’t feel compelled to do it right now,” Edens said of the Pennsylvania project. But it’s a “good idea” if the project can get properly financed, he added. “We are planning for the 20-year business, not the 20-month business.”

© 2019 Bloomberg L.P