FTAI Infrastructure Inc. Price & Performance (FIP)

Before I turn the call over to Ken, I would like to point out that certain statements made today will be forward looking statements, including regarding future earnings. These statements by their nature are uncertain and may differ materially from actual results. We encourage you to review the disclaimers in our press release and investor presentation regarding non GAAP financial measures and forward looking statements. And to review the risk factors contained in our quarterly report filed with the SEC. Now I would like to turn the call over to Ken. Okay. Thank you, Alan, and good morning, everyone. Welcome Welcome to our earnings call for our fourth quarter and full year of 2024.

For the call today, I'll be referring to the earnings supplement, which you can find posted on our website. I'm pleased to report that our Board has authorized a $0.03 per share quarterly dividend to be paid on March 26 to the holders of record on March 14. For the call this morning, I plan to review the reported results for the fiscal year and fourth quarter, but more importantly, I will also discuss our outlook for 2025 the years ahead On the 2024 results, adjusted EBITDA was $1,276,000,000 dollars up from $107,500,000 for 2023 and more than doubling over the past two years. EBITDA grew at each of our four core business units during the year All in 2024 was a highly productive year during which we accomplished a number of initiatives that set the stage for 2025 to be transformational for our company As the bar chart on the right side of Slide three illustrates, now have line of sight across our portfolio on a project hundred and $95,000,000 of incremental locked in annual EBITDA under executed contracts. When combined with our 2024 results represents total company annual EBITDA of approximately $323,000,000 And the pipeline for new business is as strong as ever Today, we are pursuing more new business opportunities than any time since the spin off of our company.

If we're successful in converting these opportunities into contracted business, we estimate annual EBITDA potential in excess of $400,000,000 up materially from our target of just over $300,000,000 that we mentioned on our last Our $400,000,000 target excludes the impact of any new investments or acquisitions we may act upon such as acquisitions at Transstar or data center developments at Long Ridge. Focusing on the near term, we expect 2025 to demonstrate substantial growth. It starts with Long Ridge, month, we completed our planned debt refinancing and closed on the acquisition of Equity Partners 49.9% stake. Connection with the refinancing, we repriced a number of our power sale contracts will have a significant positive impact on Long Ridge's earnings and cash flow. Pro form a for the Long Ridge transactions, we expect to generate approximately approximately $160,000,000 of annual EBITDA with the bulk of that figure locked in for the next seven years. An arrangement with a third party customer at Long Ridge for the development of behind the meter data centers. Depending upon the scale of demand for third party customers, we estimate incremental EBITDA from this opportunity could be between $50,000,000 and $75,000,000 annually. [indiscernible] At Repona, we recently signed an additional contract for our Phase two NGL export system.

Bringing our contracted volumes to 40,000 barrels per day representing a total of approximately $50,000,000 of annual EBITDA. Revenue from Frays two will commence upon completion of construction expected in mid twenty twenty six. Early works have commenced and we plan to finance $300,000,000 of the construction budget in the coming weeks, importantly, early this week, we received the green light from the New Jersey Economic Development Authority for the issuance of the entire $300,000,000 of tax exempt debt, which provides us with access to low cost long term capital. At Jefferson, we have $25,000,000 of long term annual EBITDA commence this year under three contracts, all with minimum volumes. We're also in advanced negotiations on a number of projects involving volumes of both conventional and renewable products. These new business opportunities, if successfully contracted, will position our terminal generate approximately $120,000,000 of annual EBITDA. Finally at Transstar, the M and A market is as active as we've seen. We are now in discussions with parties on a total of six opportunities. Which in the aggregate represent well over $100,000,000 of annual EBITDA. I'm going to spend a little bit more time reviewing the recent Long Ridge transactions on Slide five.

On February 19, we closed the debt refinancing and repricing of our largest power sale contracts. On February 26, we closed on the purchase of the 49.9% consideration of $189,000,000 As a result of the debt financing transaction and repricing of our power contracts, we will sell power at an average price of $43 per megawatt hour compared $28 per megawatt hour previously. The price increase of $15 per megawatt hour results in approximately $50,000,000 of annual incremental EBITDA at the Long Ridge asset level. On June one of this year, we will also start receiving higher Higher capacity payments result in approximately $30,000,000 of incremental annual EBITDA at the asset level.

And finally, we will commence gas production in West Virginia in the coming months and will be producing gas well in excess of our power plant's needs resulting in approximately $10,000,000 to $20,000,000 of incremental annual EBITDA at current gas prices. Adding it up, we forecast Longreach to generate approximately and $60,000,000 at the asset level on an annual basis. Previously, we would have reported half of that amount going forward for our 50% share [indiscernible] Pro form a for our purchase, which closed early this week, we will now report all of $160,000,000 of EBITDA and Long Ridge will be consolidated under our balance sheet as opposed to equity method accounting.

The $189,000,000 purchase of the 49.9% stake is being funded with $160,000,000 of convertible preferred stock issued at the FTAI infrastructure level, dollars 9,000,000 of cash and $20,000,000 of long term note also issued at Longridge. Altogether, Longridge transactions greatly enhance the earnings we'll generate going forward and allows us to participate in 100% of the value creation we expect to achieve in the coming months and years. I'm going to walk through the balance sheet briefly before getting into our specific company level results. Reported total debt of $1,600,000,000 at September 30. As I mentioned, going forward, the Long Ridge transaction will result in our consolidating Long Ridge's assets and debt under our balance sheet. In addition to the reported balance sheet, we're showing the pro form a debt balances on Slide six. At the corporate level is unchanged from last quarter at $567,000,000 with the rest of our debt at our business units. Transstar continues to be completely debt free, while approximately $974,000,000 of debt was at Jefferson and $44,000,000 was at Repano. We're planning to launch the Repano financing in the coming weeks, expect to close that later here in the second quarter. We'll issue $300,000,000 of the low cost [indiscernible] And we'll also issue a term loan to refinance the existing debt at Repano.

Upon completion of the Repono financing, we plan to refinance our corporate bonds and existing preferred stock in another accretive financing, which will reduce fixed charges and increase cash flow after debt service for common shareholders. That refinancing is also planned for later in the second quarter of this year. I'll now talk through the detailed quarterly results in each of our segments and I plan to turn it over to questions. Starting with Transstar on Slide eight of the supplement, Transstar posted revenue of $43,300,000 and adjusted EBITDA of $19,400,000 in Q4 compared with revenue of $44,800,000 and adjusted EBITDA $21,100,000 in Q3. 2024 year, both revenue and EBITDA increased versus the prior 2023 fiscal year.

The fourth quarter saw slightly softer carloads and revenue versus Q3, we expect carloads and revenue to return to or exceed Q3 levels here in the first quarter. 2025, driven in part by the anticipated positive impact on domestic production at U. S. Steel as a result of the recently announced tariffs. Operating expenses also continue to be stable as fuel costs and other material cost items have party customer activity continues to grow with our railcar repair facility in Pittsburgh and new transloading locations all ramping up. And all in, we are currently expecting 2025 EBITDA to experience a roughly 15% to 20% organic growth rate next year, incremental growth driven by M and A opportunities that continue to increase As I described earlier, we're seeing the most active M and A market in years and are currently evaluating a total of six opportunities. One of our core investment objectives TranStar has been to leverage the company's platform for strategic growth and I'm confident we'll be doing this year, Now on to Jefferson. Jefferson generated $21,200,000 of revenue and $11,100,000 of adjusted EBITDA in Q4, versus $19,700,000 of revenue and $11,800,000 of EBITDA in Q3. It's important to note in comparing the two most recent quarters that the third quarter of twenty twenty four included a $2,700,000 gain on the sale of assets that was not repeated in our fourth quarter results.

On an apples to apples basis, excluding gains on asset sales, EBITDA for Q4 was up approximately $2,000,000 from Q3. The 2024 year, both revenue and EBITDA increased versus the prior 2023 year.

But our focus at Jefferson is on the year ahead.

As discussed, as of this month, we now have three contracts representing a total of $25,000,000 incremental annual EBITDA commencing in spring and summer of this year. In addition, we are in late stage negotiations for additional contracts with multiple parties to handle conventional crude and refined products as well as renewables. With some of these negotiations involving business that would commence this year in 2025. We're successful in converting these opportunities to business, wins, we'll be in a position to post annual EBITDA of approximately $120,000,000 Now under Oppono, we signed our second contract for Phase two, bringing our total committed volumes to 40,000 barrels per day or $50,000,000 of annual EBITDA. We continue to have capacity available for Phase two and expect to have the remainder signed up during this second quarter ahead. Assuming full utilization and rates consistent with those already executed, Phase two can contribute up to $70,000,000 of annual EBITDA once complete. Total estimated construction costs of $300,000,000 and those be funded with the taxes on debt I described earlier, In the current capital markets environment, we're expecting interest rates in the range of 5% to 6% making the Phase two project highly creative to the equity value of Repono.

While Phase two remains our current priority, we're excited about the advancement on the next phase of Repano including the development of additional underground storage for which we expect to complete permitting next month. Closing out with Long Ridge, Long Ridge generated $9,900,000 in EBITDA in Q4 versus $11,100,000 in Q3. Power plant capacity factor was 88% for the quarter versus 91% in Q3, reflecting a multi day planned maintenance outage at the power plant, while gas production increased to be more in line with the gas supply level required to run the power plant. We'll be bringing our West Virginia gas production online this summer, resulting in a substantial increase in gas production and allowing us to generate incremental revenue from and EBITDA from excess gas sales. The debt refinancing and consolidation behind us, we're focused on a number of growth opportunities that potential to significantly increase EBITDA and cash flow at Long Ridge. We'll start seeing the impact from the higher capacity revenues in June, this year representing $30,000,000 in annual revenue and EBITDA. All indications are the capacity pricing will remain at higher levels for the year to come driven by both the anticipated surge in demand for power by hyperscalers as well as mandated retirements of coal fired power plants.

We also continue to advance the upgrade of the power plant to five zero five megawatts and expect our application to be fast tracked as a result of the FERC's recent mandate to accelerate new generation projects in the PJM, including upgrades. And most importantly, we're advancing multiple behind the meter projects, including most notably negotiations for data centers at Long Ridge in the coming months. To wrap up, we're very pleased with the quarter and extremely excited about twenty twenty five year ahead. And I'll turn the call back over to Alan.

Our first question comes from the line of Giuliano Bologna with Compass Point. Your line is now open.

Hi. Good morning. Congratulations on the continued execution. Getting contracts together and move forward with all the different plans here. One thing I'm curious about looking at Jefferson Can you expand on the type of new deals you're working on? [indiscernible] kind of products you're looking looking to engage in in what the contribution could be over time. Yes, of course. Good morning, Giuliano. We're looking at a little bit of everything, crude oil, natural gas liquids, renewables including ammonia, all of these energy flows primarily all exports, are in some form of negotiation with counterparties at Jefferson Crude oil is largely focused on waxy crudes coming out of Utah. Jefferson was the first terminal in The U. S. To export waxy crudes to the European market. I think that sets FTAI stage for long term contract with the counterparty we engaged with last year to do so. And so we're advancing those discussions. Natural gas liquids, there's a lot of natural gas liquids, butane, propane flowing out of the Permian. And we don't have enough domestic demand for those products. And so the export markets are where a lot of producers are looking. We've got the capability at Jefferson to export Substantial volumes of product particularly through our Jefferson South Terminal.

And so I'm excited about the NGL project in particular. I think that's got significant potential and could be highly, highly accretive. Finally, ammonia, we have our one ammonia contract in place that kicks off this summer. Is a second opportunity that we have been negotiating that would double the volumes of ammonia that we export through the terminal. And that one continues to be a negotiation. So I like having multiple products with different counterparties. Out there. There are a handful of others as well, but those are the three big types of products and opportunities that we're negotiating currently. That's very helpful. And on a different topic, looking at Long Ridge, congrats on getting all the recent transactions done. But one thing I'm curious about is how soon you'll see the $160,000,000 EBITDA from Long Ridge start to show up in consolidated results? Yes. The third quarter of this year will reflect the entire $160,000,000 Obviously, the first quarter will reflect half of this recent transaction. We really just closed this transaction. We really closed the transaction for the purchase of the minority equity stake this week. And so we'll only see looking at a little bit more than one month impact of that in [indiscernible] We'll see all of it in Q2.

June 1 is when the $30,000,000 of increased capacity revenue kicks in. And so we'll only see one month of the incremental capacity revenue in Q2. So finally, I think when we get to Q3, we'll be running at that $160,000,000 of EBITDA.

Look, there's potential we exceed that number. We are going to bring online a significant amount of gas production I can't tell you precisely of course what gas prices will be this summer, but we'll certainly be in a position to sell into the market and depending upon how our gas prices are. Could be running in the third quarter at a level higher than the $160,000,000 So third quarter is when you'll see it all.

Sounds good. That's very helpful. And then moving over to trends, sorry. Of all the options that you for U. S. Deal with respect to potential new ownership, Do you feel there's anyone that's best for you or any that are concerning for or having any potential negative impacts for Transar. Yes, it's a good question. There certainly continues to be a lot going on at U. S. Steel and in the media. I think the key takeaway is there is no outcome that I believe in any way is a negative outcome for Transstar.

All outcomes are good even the status quo. I guess if I had to pick one as you may be aware, the drama between Nippon and U. S. Steel is continuing. Nippon has made some significant commitments to investments in the Mon Valley. At other U. S. Steel properties, that's got to be a good thing. For Transstar. But at the same time, I think all options are arguably good. And so it's something we're obviously watching closely, but ultimately I think we're in a good place regardless of the outcome. That sounds good. One last one, thinking about the other, we humbled around doing some sort of holding company refinancing. Obviously, your high yield notes are trading tighter. You're obviously most likely to look at to do something on the preferred as well. Just curious if you have any rough sense of the type of interest and dividend savings, if you think you could realize that we don't have active pricing?

Something that would happen in the future, but I'm just curious, I mean, outlook around that?

Yes, I feel very confident it will be a highly accretive transaction. Our existing bonds, you're right, they're trading well. That's great to see. They have a coupon at 10.5%. And then the fixed preferred stock we have outstanding that's pretty high cost about 14%, both the existing debt and the preferred, those are put in place at the moment. We spun off from FTAI FTAI. And so given the circumstances, those were relatively expensive. We definitely have an opportunity to reduce fixed charges. I think new debt today comes with an eight handle, hopefully low eight. Our goal would also be to maximize the amount of new debt that we issue. When we refinance the preferred stock, Obviously, $10,500,000 going to $8,000,000 is a good thing, $14,000,000 going to $8,000,000 is a great thing. And so we're going to hope to do that. I think this is a transaction that we'll be in a position to launch We'll be in a position to launch in early April and fingers crossed capital markets stay with us and we have some good momentum going into that time period.

That is very helpful. I appreciate the time and I'll answer questions and I'll jump back in the queue.

Thank you. Our next question comes from the line of Brian McKenna with Citizens. Your line is now open.

Thanks. Good morning, everyone. So a question on Repano to start.

Is there any update on permits for the underground cavern and just the timing around this? And then can you remind us of the potential from from Phase three longer term and kind of when you get that into place and that path forward is clear. I mean, does that increase the probability of a sale of Repano at some point? Just curious your thoughts there. Yes. Good morning, Brian.

It's a marathon, not a sprint. But But we're approaching mile 26. We expect to have the cabin permits in hand by the end of this first quarter. We have been working very closely with New Jersey DEP. We had a great dialogue and I think we're finally in the at the end of the process It's been a lengthy process, but I do think we're very close to the end. Look, the economics on cabin development Will depend upon precisely what we end up developing. At the end of the day, the economics are materially more attractive than above ground storage. Caverns are less expensive to develop, generate of course the same amount of revenue and require little to no maintenance capital going forward. I'm really pleased with the results from the New Jersey Economic Development Authority and the support for Phase two, I think it bodes well for potentially additional low cost debt financing to support Phase three. Big picture, I think Phase three could be transformational for Epono, easily generate an incremental $100,000,000 of EBITDA for the business. Yes, it would require some capital, but roughly $300,000,000 of capital for $100,000,000 of EBITDA, That's a pretty good investment.

I'm not sure we need to go through the whole process of building caverns and bringing them all online. Yes, I think as soon as we're permitted and we're underway, I think we've created a lot of value at Repano. So yes, the idea of a monetization at that point in time is something where certainly evaluating.

Yes. Okay. That's helpful. And then on Transstar, so if I look at adjusted EBITDA, it increased 7% year over year in 2024.

Think you talked about 15% organic growth for this business over time. So I guess that 7% relative to the 15%, FTAI a bit below. So So what's the thought there just in terms of shortfall? And then do you still feel good about kind of hitting that 15% organic growth target moving forward before any incremental M and A? Yes. No, it's a very good question. We don't have the Chris out of U. S. Steel, but do say we're encouraged both in terms of just overall production levels. And I do think that the recently announced tariffs for U. S. Steel and their specific facilities in the Mont Valley and Gary should be good things. We should see an uptick in volumes. Their volumes really do go to the domestic market and with with pressure on imports for purchases of steel products, that's a good thing. For these U. S. Steel facilities. So some of our estimate is informed by that assumption. But what we do have is we do have a bit of a crystal ball on things like rates, and new business opportunities, things that commenced last year that we'll see the full year impact of this year.

And so there are a number of variables coming into that forecast of 1520% organic growth. But based on all the variables we have and some assumptions around production out of Gary and the Mont Valley, we feel pretty comfortable with that estimate.

Yes. Okay, great. And then if I can just another follow-up on trends [indiscernible] I know you stacked up on the corporate development front for some M and A and it sounds like the pipeline is still healthy. I mean, I guess I would have thought we would have seen at least one acquisition by now. So I mean, did any deals get pushed or did you end up tackling on some and then then just thinking through the time of when we could see some of these acquisitions, is it next quarter or two? And then obviously there's no leverage on the books there. So how should we think about just the financing of Yes, you can't force someone to sell you their company. So it's bit of a process. But look, the momentum is definitely growing. I would be very surprised if at some point in the next three months, we haven't announced and closed on one acquisition We have about a half dozen opportunities we're evaluating. Some are smaller real tuck ins. But those would be great situations to diversify the TranStar base.

Both geographically and by commodity. And then we have a hand Financing would be in the debt markets. I think it's definitely the most accretive way to finance any acquisition we make. You're right, Transstar is unleveraged The new corporate financing that we're planning for the second quarter will allow for acquisition debt to be incurred And so we'll have the ability to leverage in a disciplined way leverage acquisitions that we make. So look, I'm actually really excited about it. The staffing up last year has definitely started to pay some dividends or at least we're seeing that potential more and more. And again, I really hope we're in a position to announce something here over the next few months.

Thank you. Our last question comes from the line of Greg Lewis with BT Your line is now open.

I was hoping to get a little bit more color around the HPC opportunity at Long Ridge in that it like my question really is around the capacity demand response and your participating in that for this year and then next year. And I guess my question is, As we look forward into the into the next capacity demand response, which I guess is coming up here in the next few months, How does participating in that going forward impact your ability to kind of shipped over to HPC customers.

Yes. Well, I'll say a couple of things. The auction results of course, were tremendous for the year starting June 1. And we're excited about that. And we don't see any reason for those levels to be declining.

It's just an annual thing. And so in the event there are multiple forms that a transaction could take. One is buying power from our own power plant. And that's certainly interesting. We sell power today at $42 per megawatt and [indiscernible] transactions is $70 to $80 a megawatt. We would not in that case stating at the capacity auction, of course, but it would still be a highly accretive thing to do. But remember at Long Ridge, we have significant land holdings and we also have significant permits and access rights to the grid. And so we're in a region that is highly favorable And frankly, there may be projects with data center developers that only required lease of land access to the grid and the building of backup power. And what I like is the conversations that we're in right now have multiple flavors and that allows us to have lots of different opportunities, all of which are very good. So I can't tell you precisely which direction we're going. Don't think the capacity auctions and participating in those capacity auctions are going to be a real speed bump for us given we're just committing on an annual basis.

So for some reason, wanted to do something completely behind the meter including the power plant. By the time facilities are built, we'd be out of our obligations to provide power under the grid. Okay, super helpful. And then then you talked a little bit about M and A. I guess really it seems like the focus is around the rail business. Could you maybe highlight or talk about how you're thinking about the short rail opportunity set in that And then I believe you were looking at a transaction maybe a little around a year ago and there were and I believe you were outbid So just kind of trying to understand I guess what I'm wondering is, I'm assuming pricing for these deals is is improving, not going the other way and like yes, like how are we thinking about the ability and really the ability to fund those transactions as well?

Yes. So there are 500 shortline railroads North America. So we have a large addressable market of opportunities. Now about 100 of those are owned by one party, so that leaves 400 that are that are more fragmented. So there's a very large addressable market And these M and A opportunities come in waves. There are two types of processes, of course, the ones where there's more of an auction process and then the ones where we're just individually negotiating with a counterparty. The latter is definitely the preferred way to go about it. And half of our opportunities that we're looking at right now are the latter. Negotiated transactions.

It's one of the reasons I'm particularly excited about where we sit today. You're absolutely right. Pricing in this market is it's pretty high. Freight railroads are irreplaceable, unique assets. And they command pretty high multiples. And that said, I think we're a great buyer. We have an existing platform. And so where others see they're buying $10,000,000 of EBITDA, we're buying $12,000,000 to $15,000,000 of EBITDA because of the synergies and cost savings associated with our platform value. So I do think we can be competitive. The one we lost last year was a bit of a special situation We lost that to a Class one railroad that was just adding in the short line as sort of an appendage and so it was a highly strategic transaction in that case for the the winning bidder. We're not then none of the opportunities we're looking at right now have a similar flavor. So look, I'm super optimistic. I think these things are very financeable. I was just talking to some investment bankers yesterday and they were telling me how in the transportation space they are most aggressive at financing freight railroads. They're just the best infrastructure assets in North America, just the sense of permanence, the operational upside, the limited competition, there super assets to finance and we've had a lot of success over the years with our various rail [indiscernible] in financing these types of businesses.

So I feel pretty confident we'll be able to finance virtually all of the purchase price for these things. The debt markets. We're obviously going to be disciplined and prudent and engage ratings agencies and do the right thing. But I do think there's plenty of access to accretive debt capital to fund the acquisitions.

Thank you very much.

Thank you. I would now like to hand call back over to Alan Andrini for closing remarks.

Thank you, Shannon, and thank you all for participating on today's call. We look forward to updating you after Q1 FTAI.

This concludes today's conference call. Thank you for your participation. You may now disconnect.