FTAI Infrastructure Inc.

Good day, and welcome to the first quarter 2025 FTAI Infrastructure 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. Instructions will be given at that time. As a reminder, this call is being recorded. I would like to turn the call over to Alan Andrini, Investor Relations. Please go ahead.

Thank you, Michelle. I would like to welcome you all to the FTAI Infrastructure Earnings Call for the first quarter of 2025. Joining me here today are Ken Nicholson, the CEO of F9 Infrastructure, and Buck Fletcher, the company's newly appointed 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 reconciliation 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. Good morning, everyone, and welcome to our earnings call for our first quarter of 2025. As we typically do for today's call, we'll be referring to the earnings supplement, which you can find posted on our website. Before digging into the quarterly results, I'm pleased to report that our board has authorized another quarterly dividend of 3 cents per share to be paid on May 27th to the holders of record on May 19th. I'd also like to take a minute to welcome Buck Fletcher to the company. Buck joined us officially as our new CFO in late March, and we're thrilled to have him on board. We have tremendous opportunities ahead of us on several fronts, including a number of financial and strategic objectives, and Buck comes to us with a skill set and experience that certainly will help us accomplish it all. Now on to the financial results. Adjusted EBITDA was $35.2 million for the first quarter of 2025, up 21% from the fourth quarter and up 29% from the first quarter of last year. The quarter was a highly productive one, especially at our Longridge business unit where we completed a series of important transactions that have already started to generate materially higher reported financial results. As a result of the Longridge transaction, we recorded a non-cash gain of $120 million, which is reflected in our financial statements, but we are excluding from adjusted EBITDA in today's financial discussion for comparative purposes. The gain we recorded was related to purchase accounting adjustments as a result of our acquisition of of our partner's 49.9% interest in late February and the resulting consolidation of Longridge into our financial statements going forward. We are extremely optimistic about the year ahead. As a result of the Longridge activity, as well as a number of other developments, we expect 2025 to be transformational for our company. As the bar chart on the right side of slide three illustrates, we continue to have a line of sight across our portfolio on approximately 190 million of incremental locked in annual EBITDA under executed agreements, which when combined with our first quarter results represents total company annual EBITDA of over $330 million. And the pipeline for new business continues to be healthy. If we're successful in converting new opportunities into contracted business, we continue to estimate annual EBITDA potential in excess of $400 million. Our $400 million target excludes the impact of any new investments or acquisitions we may act on, such as acquisitions at Transtar or data center developments at Longridge. On slide four, I'll briefly talk through the key highlights at each of our companies. At Transtar, adjusted EBITDA of $19.9 million was up slightly from the fourth quarter as volumes remained steady, notwithstanding the uncertain environment surrounding tariffs and the impacts on global trade. So far in the second quarter, we continue to see stable volumes from our core U.S. steel business, and we remain focused on driving growth from third parties as well as through strategic investments. At Longridge, reported EBITDA for the quarter was 18.1 million, excluding the non-cash $120 million gain, which I referred to previously. Importantly, the first quarter's results reflected only a portion of the impact of the transactions we closed in late February. We typically don't provide monthly results, but to give you a sense of the current run rate at Longridge, EBITDA for the month of March, which fully included the impact of the transactions, was over 10 million, approaching 130 million on an annualized basis. By mid-year, we expect Longridge to reach annual run rate EBITDA of approximately $160 million, which includes $30 million of annual EBITDA from higher capacity revenue, which starts on June 1st of this year. At Jefferson, EBITDA was up year-over-year but slightly lower versus last quarter as we had four storage tanks off-lease during the quarter while we transitioned them to long-term service under a new, more profitable contract that commenced on April 1st. EBITDA for the quarter would have exceeded $10 million had we had those four tanks on lease for the quarter. It's a big year ahead for Jefferson as we have $25 million of long-term annual EBITDA commencing this year under three contracts, all with minimum volume commitments. And at Rapana, we recently launched the financing for our Phase II transloading project. We're issuing $300 million of tax-exempt debt to fund construction and a number of reserve accounts and also refinancing existing debt with a new taxable term loan. Importantly, we recently signed an additional letter of intent for our Phase 2 project, bringing our total volumes under contract and LOI to just over 70,000 barrels per day and representing a total of approximately 80 million of annual EBITDA. Our new outlook is up 30 million from estimates we provided last quarter. Revenue from Phase 2 will commence upon completion of construction expected in late 2026. I'll briefly walk through the balance sheet before getting into our company's quarterly results. We reported total debt of $2.8 billion at March 31st. Debt at the corporate level is unchanged from last quarter at $572 million, with the rest of our debt at our business units non-recourse to FEPP. Transstar continues to be completely debt-free, while approximately $975 million of debt was at Jefferson and $73 million was at Rapanoe. We now consolidate the full balance sheet of Longridge and reflected total Longridge debt of $1.1 billion at March 31st. Upon completion of the Raponto financing, which we are planning for this month, 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. Now on to the detailed quarterly results at each of our segments, starting with Transtar on slide seven of the supplement. Transtar posted revenue of $42.6 million and adjusted EBITDA of $19.9 million in Q1, compared with revenue of $43.3 million and adjusted EBITDA of $19.4 million in Q4. Car loads, average rates, and revenues for Q1 were largely unchanged versus last quarter. Operating expenses also continued to be stable as fuel costs and other material cost items have been largely unchanged. We expect third-party customer activity to pick up in the months to come, and we now have near-term line of sight on over a dozen third-party opportunities across Transtar's railroads, representing annual revenue of approximately 20 million and annual EBITDA of at least 10 million. Our strategic activity continues to progress. Our M&A efforts are focused on the acquisition of complementary railroads that diversify our revenue and commodity base and open up additional growth opportunities through an expanded platform. One of our primary goals has been to leverage Transtar to make highly creative investments and I'm confident we'll be successful in doing so this year. Next on to Longridge where we coupled strong operating performance in Q1 with a highly creative refinancing and an increase in our ownership of the company. Longridge generated 18.1 million of EBITDA in Q1 versus 9.9 million in Q4. Power plant capacity factor was a nearly perfect 99% for the quarter versus 87% in Q4 while gas production increased to be 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 in EBITDA from excess gas sales. As I mentioned earlier, the reported results of Q1 reflect only one month of the impact of the refinancing and our ownership increase, so we expect to report significantly higher results in Q2 just by virtue of refinancing. reflecting 100% ownership. Also, higher capacity revenues kick in on June 1st, representing approximately $30 million of additional annual EBITDA. In addition, Longridge was officially fast-tracked by the PJM regulator for the 20 megawatt up rate in our power generation, meaning it's highly likely that we will receive authorization at some point here in the remainder of 2025. With the debt refinancing and consolidation behind us, we're focused on 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. Now on to Jefferson. Jefferson generated $19.4 million of revenue and $8 million of adjusted EBITDA on Q1 versus $21.2 million of revenue and $11.1 million of EBITDA on Q4. While volumes were slightly higher in the first quarter, average pricing per barrel was lower as the mix of product included a larger proportion of lower rate refined products. For the duration of the first quarter, $4. of our tanks were off-lease as Jefferson cleaned and transitioned those tanks to a new customer and product type, which commenced revenue service on April 1st. We estimate the impact of having the tanks off-lease for the quarter was approximately 2.8 million of revenue and 2.3 million of EBITDA that Jefferson did not record in the quarter. But our focus for Jefferson is on the months ahead. As discussed, we have three contracts representing a total of 25 million of incremental annual EBITDA commencing this year. In addition, we're in late-stage negotiations for additional contracts with multiple parties to handle conventional crude and refined products as well as renewable fuels, with some of these negotiations involving business that would still commence in 2025. If we're successful in converting those opportunities to business wins, we will be in a position to post annual EBITDA of approximately $120 million. Closing out with Rapano. Our commercial progress for Phase 2 is proceeding well. We have two customers signed up under long-term contracts and an additional customer under a letter of intent that we expect to convert to a long-term contract this summer. In the aggregate, these three pieces of business represent minimum volumes of 71,000 barrels per day and approximately 80 million of annual EBITDA for Phase 2. The two contracts are each for five-year terms. commencing upon completion of Phase 2 construction, while the third letter of intent is for five years with a two-year extension option at the option of our customer. As I previously mentioned, financing for Phase 2 construction is underway with Rapano's $300 million tax-exempt debt issuance currently in the market, and we expect to price and close the financing in this month of May. While phase two remains our current priority, we're excited about the advancement of the next phase of Rapano, including the development of additional underground storage for which we expect to complete permitting in the months to come. To wrap up, we're pleased with the quarter and excited about the year ahead, and I will now turn the call back over to Alan.