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Investing.com - Morgan Stanley downgraded NextDecade Corp. (NASDAQ:NEXT) from Overweight to Equalweight on Wednesday, while reducing its price target to $10.00 from $15.00. The stock, currently trading at $7.66, has fallen over 28% in the past week. According to InvestingPro data, the company’s shares are currently fairly valued based on their proprietary Fair Value model.
The downgrade follows NextDecade’s Tuesday announcement that it reached Final Investment Decision (FID) on Train 4 of its Rio Grande project, with the company maintaining expectations for a fourth-quarter 2025 FID on Train 5.
While the project cost of $6.7 billion aligned with market expectations, NextDecade now projects approximately $1 billion in run-rate annual cash flow from the project, before corporate interest and overhead expenses, which falls at the lower end of its previously stated $0.9-1.3 billion range for the complete five-train project.
Morgan Stanley noted that NextDecade disclosed an implied sale and purchase agreement (SPA) rate of $2.35 for Trains 1-3 and $2.54 for Trains 4-5, with the latter figure coming in below the firm’s previous estimate of $2.63.
The company’s guidance also assumes a $5 margin on open cargo sales, higher than Morgan Stanley’s long-term assumption of $4 per million British thermal units (mmbtu), but with reduced run-rate cash flow estimates and limited near-term catalysts, the investment firm opted to downgrade the stock.
In other recent news, NextDecade Corporation announced a positive final investment decision on Train 4 at its Rio Grande LNG project. The company has secured approximately $6.7 billion in financial transactions to fully fund Train 4 and its related infrastructure. This financing includes a $3.85 billion term loan facility, $1.13 billion in equity commitments from NextDecade, and $1.7 billion from investment partners such as Global Infrastructure Partners, GIC, Mubadala Investment Company, and TotalEnergies. The construction of Train 4 will add around 6 million tonnes per annum of LNG production capacity, increasing the total expected capacity at Rio Grande LNG to about 24 million tonnes per annum.
Additionally, the company recently experienced a change in its Board of Directors. Mr. Timothy Wyatt resigned, citing his departure from Hanwha Group to pursue other opportunities, with no disagreements regarding NextDecade’s operations. The Hanwha Group intends to appoint a new director to the board as per their Purchaser Rights Agreement, though a timeline for this appointment has not been provided.
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