FTAI Infrastructure Inc.

Good day, and thank you for standing by. Welcome to the FTI infrastructure fourth quarter 2024 earnings conference call. At this time, all participants are in listen-only mode. After the speaker's presentation, there will be a question and answer session. To ask a question during the session, you will need to press star 1-1 on your telephone. You will then hear an automated message advising your hand is raised. To withdraw your question, please press star 1-1 again. Please be advised that today's conference is being recorded. I would now like to hand the conference over to your speaker today, Alan Andrini, Head of Investor Relations. Please go ahead.

Thank you, Shannon. I would like to welcome you all to the FDI Infrastructure Earnings Call for fourth quarter and full year 2024. Joining me here today are Ken Nicholson, the CEO of FDI Infrastructure, and Scott Christopher, the company's CFO. We have posted an investor presentation and our press release on our website, which we encourage you to download if you have not already done so. Also, please note that this call is open to the public in listen-only mode and is being webcast. In addition, we will be discussing some non-GAAP financial measures during the call today, including adjusted EBITDA. The reconciliations of those measures to the most directly comparable GAAP measures can be found in the earnings supplement. 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 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 26th to the holders of record on March 14th. 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 and the years ahead. On the 2024 results, adjusted EBITDA was 127.6 million, up from 107.5 million 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 and our financial results. As the bar chart on the right side of slide three illustrates, We now have line of sight across our portfolio on approximately 195 million of incremental locked in annual EBITDA under executed contracts, which when combined with our 2024 results represents total company annual EBITDA of approximately 323 million. And the pipeline for new business is as strong as ever. Today, we are pursuing more new business opportunities than any time since the spinoff of our company. If we're successful in converting these opportunities into contracted business, we estimate annual EBITDA potential in excess of $400 million, up materially from our target of just over $300 million that we mentioned on our last quarterly call. Our $400 million target excludes the impact of any new investments or acquisitions we may act upon, such as acquisitions at Transtar or data center developments at Longridge. Focusing on the near term, we expect 2025 to demonstrate substantial growth. It starts with Longridge. This month, we completed our planned debt refinancing and closed on the acquisition of our equity partners' 49.9% stake. In connection with the refinancing, we repriced a number of our power sale contracts, which will have a significant positive impact on Longridge's earnings and cash flow. Pro forma for the Longridge transactions, we expect to generate approximately $160 million of annual EBITDA, with the bulk of that figure locked in for the next seven years. Based upon current discussions, I'm confident that this year we will announce an arrangement with a third-party customer at Longridge 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 and $75 million annually. At Rapana, we recently signed an additional contract for our Phase II NGL export system, bringing our contracted volumes to 40,000 barrels per day annually. and representing a total of approximately $50 million of annual EBITDA. Revenue from Phase II will commence upon completion of construction expected in mid-2026. Early works have commenced, and we plan to finance $300 million 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 million of tax-exempt debt, which provides us with access to low-cost, long-term capital. At Jefferson, we have $25 million of long-term annual EBITDA commencing 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 to generate approximately $120 million of annual EBITDA. Finally, at Transtar, the M&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 million of annual EBITDA. I'm going to spend a little bit more time reviewing the recent Longridge transactions on slide five. On February 19th, we closed the debt refinancing and repricing of our largest power sale contracts. On February 26th, we closed on the purchase of the 49.9% interest in Longridge from our partner, GCM Grosvenor, for aggregate consideration of 189 million. 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 to $28 per megawatt hour previously. The price increase of $15 per megawatt hour results in approximately $50 million of annual incremental EBITDA at the Longridge asset level. On June 1st of this year, we will also start receiving higher capacity revenue stemming from the recent auction results. Higher capacity payments result in approximately $30 million 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 to 20 million of incremental annual EBITDA at current gas prices. Adding it up, we forecast long reach to generate approximately 160 million at the asset level on an annual basis. Previously, we would have reported half of that amount going forward for our 50% share of the company. Pro forma for our purchase, which closed early this week, we will now report all of the 160 million of EBITDA and Longridge will be consolidated onto our balance sheet as opposed to equity method accounting. The $189 million purchase of the 49.9% stake is being funded with $160 million of convertible preferred stock issued at the FTI infrastructure level, $9 million of cash, and $20 million 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. We reported total debt of $1.6 billion at September 30th. As I mentioned, going forward, the Longridge transactions will result in our consolidating Longridge's assets and debt onto our balance sheet. So in addition to the reported balance sheet, we're showing the pro forma debt balances on slide six. Debt at the corporate level is unchanged from last quarter at $567 million, with the rest of our debt at our business units. Transtar continues to be completely debt-free, while approximately $974 million of debt was at Jefferson and $44 million was at Rapano. We're planning to launch the Rapano financing in the coming weeks. Expect to close that later here in the second quarter. We'll issue $300 million of the low-cost tax-exempt debt I recently described, and we'll also issue a term loan to refinance the existing debt at Rapano. Upon completion of the Rapano financing, we plan to refinance our corporate bonds. an existing preferred stock, and another accretive financing, which will reduce fixed charges and increase cash flow after death 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 of each of our segments, and then plan to turn it over to questions. Starting with Transtar on slide eight of the supplement, Transtar posted revenue of $43.3 million and adjusted EBITDA of $19.4 million in Q4, compared with revenue of $44.8 million and adjusted EBITDA of $21.1 million in Q3. For the 2024 year, both revenue and EBITDA increased versus the prior 2023 fiscal year. While 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. of 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 been largely unchanged. Third-party customer activity continues to grow with our rail car repair facility in Pittsburgh and new translating locations all ramping up. And all in, we are currently expecting 2025 EBITDA to experience a roughly 15 to 20 percent organic growth rate next year. with incremental growth driven by M&A opportunities that continue to increase. As I described earlier, we're seeing the most active M&A market in years and are currently evaluating a total of six opportunities. One of our core investment objectives at Transtar has been to leverage the company's platform for strategic growth, and I'm confident we'll be doing so this year. Now on to Jefferson. Jefferson generated $21.2 million of revenue and $11.1 million of adjusted EBITDA in Q4 versus $19.7 million of revenue and $11.8 million of EBITDA in Q3. It's important to note in comparing the two most recent quarters that the third quarter of 2024 included a $2.7 million gain on the sale of assets that was not repeated in our fourth quarter results. So on an apples-to-apples basis, excluding gains on asset sales, EBITDA for Q4 was up approximately $2 million from Q3. For the 2024 year, both revenue and EBITDA increased versus the prior 2023 fiscal 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 million of incremental annual EBITDA commencing in the 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. If we're successful in converting these opportunities to business, WINS will be in a position to post annual EBITDA of approximately 120 million. Now under APANO, we signed our second contract for phase two, bringing our total committed volumes to 40,000 barrels per day or 50 million 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 2 can contribute up to $70 million of annual EBITDA once complete. Total estimated construction costs are $300 million, and those will be funded with the tax exempt 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 2 project highly creative to the equity value of Rapano. While Phase 2 remains our current priority, we're excited about the advancement On the next phase of Rapana, including the development of additional underground storage for which we expect to complete permitting next month. Closing out with Longridge, Longridge generated $9.9 million in EBITDA in Q4 versus $11.1 million 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 and EBITDA from excess gas sales. With the debt refinancing and consolidation behind us, we're focused on a number of growth opportunities that have the potential to significantly increase EBITDA and cash flow at Longridge. We'll start seeing the impact from the higher capacity revenues in June this year, representing $30 million in annual revenue and EBITDA. All indications are that capacity pricing will remain at higher levels for the years 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 uprate of the power plant to 505 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 uprates. And most importantly, we're advancing multiple behind-the-meter projects, including most notably negotiations with data center developers. Based on the current state of discussions, we anticipate entering into one or more transactions for data centers at Longridge in the coming months. To wrap up, we're very pleased with the quarter and extremely excited about the 2025 year ahead, and I'll turn the call back over to Alan.