FTAI Infrastructure Inc.

Good day, and welcome to the second quarter 2025 FTI 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 may be 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 FTI Infrastructure earnings call for the second quarter of 2025. Joining me here today are Ken Nicholson, the CEO of FTI Infrastructure, and Buck Fletcher, 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 the second quarter of 2025. We're going to walk through the details for the quarters we typically do, but first and foremost, we want to get into the details of two important developments for our company. Just two days ago, we announced a major acquisition that we expect to transform our freight rail segment. In addition, we plan to refinance our corporate balance sheet in a manner that materially increases our free cash flow and provides ample flexibility for future growth. These two transactions tee us up for what we expect to be a dynamic second half of 2025 and multiple opportunities for long-term growth in the years ahead. For the call today, we'll be referring to the earnings supplement, which you can find posted on our website, and I'm going to kick things off on page three of the supplement with some details on the acquisition. We signed an agreement earlier this week to acquire the Wheeling and Lake Erie Railway, one of the largest regional freight railroads in the U.S., for total cash consideration of $1.05 billion. In the freight rail sector, the Wheeling and Lake Erie has been a highly sought-after asset given its strategic location, customer diversity, and growth potential. We are thrilled to have had the opportunity to negotiate a transaction and combine it with our Transtar business. The Wheeling operates roughly 1,000 miles of track in the states of Ohio, Pennsylvania, West Virginia, and Maryland. The wheeling is a great fit for a combination with Transtar. The map on the left side of slide three says it all. The geographic overlay of the two businesses allows us to realize multiple immediate efficiencies and capitalize on a number of growth opportunities. For the latest 12 months, the wheeling generated total revenue of approximately $150 million, serving a diverse base of over 250 customers and a broad range of commodities. On slide four, we'll walk through our integration plan and our financial expectations for our combined rail platform. We expect to consummate the acquisition quickly and are preparing for closing later in this month of August. We'll close initially into a voting trust while we await formal approval for active control from the Service Transportation Board. Closing transactions like this into an interim voting trust is relatively common in the freight rail sector, and it's something we at Fortress have done a number of times since it allows us to immediately execute on the transaction and benefit from the revenue and cash flow that the wheeling generates while allowing time for the mandated regulatory process to be completed. We currently expect regulatory approval around the end of 2025. While the wheeling is held in a voting trust, we have asked John Giles, the former CEO of Rail America, to act as trustee on our behalf. John is an incredibly seasoned freight rail industry executive. He helped us grow Rail America during our ownership, more than doubling the EBITDA of Rail America over our four years of ownership. We do expect this to be a highly accretive investment, and we're targeting annual EBITDA of the combined rail companies of at least $200 million by the end of 2026. The building blocks to that target are provided in the bar chart, and I'll walk through the pieces. For the most recent second quarter, the two companies generated combined annual EBITDA as is of $150 million, with $83 million attributable to Transtar and $63 million to the Wheeling. We expect $20 million of annual cost savings to be implemented in the near term at the Wheeling, with the bulk related to network efficiencies, including quicker transit times, optimized use of assets, as well as capitalizing on purchasing power and a variety of cost savings. Our $20 million target is comprised of a detailed, line-item-based work plan that John Kearns, current CEO of Transtar, will implement, together with Wheeling's senior management team. We expect the entirety of these savings to be implemented in the next 12 months. The next two components relate to high-confidence revenue opportunities. The first is a unique opportunity related to our Rapano Terminal. Our Phase 2 project at Rapana will handle large volumes of natural gas liquids for export. Those liquids include propane and butane being sourced from fractionators located directly on the wheeling's rail system. Starting late next year, a unit train each day will be loaded representing 80 carloads daily or about 30,000 carloads annually. At current market rates per carload, that represents $20 million of annual EBITDA at the wheeling. Recall that those volumes are contracted at Rapano for a total of five years, so we have high visibility into that revenue stream. The second revenue opportunity is at Transtar, where additional freight volumes into and out of U.S. Steel's facilities will be substantial as a result of the commitments made by Nippon Steel. Nippon has committed to invest a total of $5 billion to expand production specifically at U.S. Steel's Pittsburgh, and Gary, Indiana facilities. We expect these investments to result in 10% to 20% increases in shipments, or approximately $15 million of annual EBITDA. Nippon is also committed to building a new production facility, which may be located on one of Transtar's existing rail lines. If that transpires, we expect substantial additional EBITDA not included in this bar chart. The bar chart also excludes continued pricing gains, third-party revenue growth at Transtar, and a pipeline of new business opportunities at the wheeling. Given the diversity and growth profile of the combined business, we believe we now own a rail asset that could trade at industry multiples that historically have averaged 15 times EBITDA. With at least $200 million of targeted annual EBITDA, after deducting $1 billion of preferred stock at the rail level that I'm going to discuss shortly, That implies significant value creation that ultimately flows to our common shareholders. I'm now going to shift to the financing that we are closing together with the acquisition. The financing has two components. First, we're issuing preferred stock at a newly formed subsidiary that will own the combined Transtar and Wheeling assets. Total preferred issuance is $1 billion, with proceeds used to fund the bulk of the acquisition purchase price. The preferred is being purchased by affiliates of Aries Management and will carry a 10% annual dividend rate, which will be non-cash paying, meaning all the cash flow generated by our combined rail business will be available at our corporate holding company level. The preferred will also receive warrants at the rail company that allow the investor to participate at a strike price at our investment basis in the value that we create over time. The warrants are only being issued at the rail entity and not at our publicly traded parents, so there is no dilution to our publicly traded equity. Secondly, at the corporate level, we are issuing $1.25 billion of new debt to refinance our existing 10.5% senior notes and our existing Series A preferred stock and fund working capital. The new debt will carry an interest rate of S plus 400, or roughly 8.25% annually, having a positive impact on our leverage and cash flow positions. Cash fixed charges today at FIP of just over $130 million annually will drop by $30 million to just over $100 million annually going forward. Cash generated by our rail business and distributed up to FIP will more than double on a pro forma basis for the acquisition. So coverage ratios and excess cash generation will be materially higher going forward. The $1.25 billion in corporate debt is initially being funded in the form of a short-term bank loan which we plan to refinance during the fall this year with a new long-term bond issuance. We expect the terms of the new bond to be less restrictive than our existing debt, providing flexibility and access to additional debt in the future to continue to invest in accretive opportunities. Now onto our current business. On the quarter, adjusted EBITDA was $45.9 million for 2Q, up 30% from the first quarter of 2025 and up 34% from the second quarter of last year. Sequentially, Bada grew at each of Transtar, Longridge, and Jefferson. Rapondo, the second quarter, continues to reflect only Phase I operations, while we progress construction at our highly accretive and contracted Phase II trans-living systems. With contracted business commencing during the remainder of this year and the wheeling acquisition, we expect 2025 to be transformational for our company, demonstrating substantial growth in revenues and EBITDA. As the bar chart on the right side of the slide illustrates, we have a line of sight across our portfolio on just over $350 million of annual EBITDA before the impact of the acquisition. Including the acquisition, we expect annual EBITDA to exceed $450 million. Importantly, our targets exclude a number of growth opportunities, including additional volumes at Transtar, data center developments at Longridge, and Rapano's Phase III terminal project. Touching upon the key highlights at each of our companies, at Transtar, adjusted EBITDA of $20.7 million was up 4% from the first quarter as volumes, average rates, and revenues remained steady for the quarter. During the quarter, Nippon Steel officially closed on the acquisition of U.S. Steel. And in doing so, crystallized the commitments for substantial investments in U.S. Steel's largest production facilities in Pittsburgh and Gary. We've already seen some pickup in volumes here in the third quarter and expect the bulk of volume increase to impact 2026 and the years ahead. At Longridge, reported EBITDA for the quarter was $23 million, up from $18.1 million in Q1. The second quarter results included the impact of a 14-day planned maintenance outage. and reflected only a portion of the increased capacity revenues which commenced on June 1st. By the end of this third quarter, we expect Longridge to reach annual run rate EBITDA of 160 million, which includes the impact of increased gas sales coming out of our West Virginia resources commencing production in this month of August. At Jefferson, EBITDA was 11.1 million, up from 8 million in Q1 as we brought four storage tanks previously off-lease into service at the beginning of the quarter. It's an important second half of the year ahead for Jefferson as we have $20 million of long-term annual EBIT documents and two contracts, each with minimum volume commitments. And at Rapano, we completed financing for our Phase 2 transloading project. We issued $300 million of tax-exempt debt at average pricing of 6.5% to fund construction and a number of reserve accounts. Importantly, we signed an additional letter of intent for our Phase 2 project, bringing our total volumes under contracts and LOI to just over 70,000 barrels per day and representing a total of approximately 80 million of annual contracted EBITDA. Starting on slide 10, I'll get into some more detailed quarterly figures at our segments before wrapping up the call. Digging a little bit more into Transtar, we posted revenue of $42.1 million and adjusted EBITDA of $20.7 million in Q2 compared to revenue of $42.6 million and adjusted EBITDA of $19.9 million in Q1. Car loads, average rates, and revenues for the quarter were largely unchanged versus last quarter. Operating expenses also continue to be stable as fuel costs and other material cost items have than largely unchanged. Earlier on the call, I described our expectations resulting from Nippon's acquisition of U.S. Steel, but we continue to drive third-party customer growth on each of Transtar's railroads. Also, while the combination with Wheeling is our primary focus in the near term, we are actively pursuing additional acquisitions of complementary railroads that further diversify our revenue and commodity base and open up additional growth opportunities through an expanded platform. We very much expect freight rail to grow as a percentage of our total assets in the quarters and years to come. Next on to Longridge. Longridge generated $23 million of EBITDA in Q2 versus 18.1 in Q1. Power plant capacity factor was 83% reflecting the 14-day maintenance outage that we took in May. We typically take outages twice a year and try to plan them during periods of lower power demand in the spring and early fall to minimize the financial impact. In 2Q, the outage represented approximately $3 million of EBITDA that did not materialize while the plant was down. Gas production averaged about 64,000 MMBTU per day. We're bringing our West Virginia gas production online later this month, resulting in a substantial increase in production and allowing us to generate incremental revenue in EBITDA from excess gas sales. Higher capacity revenues kicked in on June 1st, representing approximately $30 million of additional annual EBITDA. As I mentioned earlier, the reported results of Q2 reflect only this one month of the higher capacity revenue, so we expect to report significantly higher results in Q3 just by virtue of reflecting a full period of capacity revenue. And the 20 megawatt up rate in our power generation continues to advance, and we expect to receive authorization at some point here in the remainder of 2025. With a solid first half of the year behind us, our focus now is advancing multiple behind-the-meter projects, including most notably negotiations with data center developers. Based on the current state of discussions, we continue to anticipate entering into one or more transactions for data centers at Longridge during the remainder of 2025. On to Jefferson. Jefferson generated $21.6 million of revenue and $11.1 million of adjusted EBITDA in Q2 versus $19.4 million of revenue and $8 million of EBITDA in Q1. Volumes were higher in the first quarter and average realized price per barrel was higher as the four tanks which were previously off-lease returned to service on April 1st. As discussed, we have two contracts representing a total of $20 million of incremental annual EBITDA commencing during the second half. In addition, we are 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 commence this year in 2025. And closing out with Rapano, we closed our tax-exempt financing for Phase 2 in May. Construction is well underway for the above-ground storage tank, manifolds, and additional rail unloading capacity. We have two customers signed up under the long-term contracts and the additional customer with whom we're advancing the letter of intent. In the aggregate, these three pieces of business represent volumes of 71,000 barrels per day and 80 million of annual EBITDA. The two contracts are each for five-year terms commencing upon completion of the phase two construction, while the third letter of intent is for five years with a two-year extension at the option of our customers. Phase two remains our current priority, but we're excited about the advancement of the next phase at Rapano, including the development of additional underground storage, for which we expect to complete permitting prior to the end of this third quarter. In conclusion, we are extremely happy with our team's progress during the first half of the year. We're even more excited than ever about the opportunities that lay ahead. The wheeling acquisition and the refinancing transform our company and set the stage for meaningful growth in the quarters to come. I'll turn the call back to Alan. Thank you, Ken.

Michelle, you may now open the call to Q&A.

Thank you. To ask a question, please press star 1-1. If your question hasn't answered and you'd like to remove yourself from the queue, please press star 1-1 again. And our first question comes from Giuliano Bologna with CompassPoint. Your line is open.

Hi, good morning. Congrats, Ken, on, you know, yeah. continued execution on the wheeling transaction. As a first question, can you talk a little bit more about the synergies of putting Brown Star and wheeling together?

Yeah, absolutely. Good morning. You know, we've been active in the freight rail space now for roughly 20 years between Rail America, where we made a number of acquisitions, the FEC, and the central man of Quebec. And so combinations, acquisitions, integration of rail assets is something we and our management teams have had a good amount of experience in. I feel really good about the $20 million of annual savings between the two companies. You know, it's a long list of individual items, but they're very discreet. There's a little bit of upfront cost to implementing these savings, but once you... invest, you know, you stick with them. I mean, the map on the first slide of the presentation, I think, was very important. I mean, this is a perfect fit, and the types of efficiencies that we can realize immediately upon closing of the transaction are incredibly meaningful. I am highly confident that the $20 million of annual cost savings is something we will certainly be realizing in the next 6 to 12 months.

That's very helpful. And then as a follow-up, you spoke in the past about the importance of diversification in the short-line rail space. Can you stand on that and the implications that this deal has on the combined transfer?

Definitely, yeah. I'm glad you asked that. I do think that this transaction is a game-changer for the overall value proposition of our rail platforms. Diversification, I mean, Transtar is a super rail asset, and it's been growing, generating significant cash flow. It has some great attributes. It does not have a tremendous amount of diversification in terms of its customer. Transtar is 85% of our existing business. Proforma, for the combination with the wheeling, US Steel will become a third of our total business. We're adding 250 customers and a whole bunch of different commodities into the mix for the combined company. What that means is, as I said in some of my prepared remarks, I think it's a significant uplift in the implied multiple when you think about valuing the business. Diversified freight railroads consistently trade in the mid-teens. There have been probably 20 transactions over the past five to 10 years in the rail space, including a big one most recently with the UP, uh, Norfolk Southern news, which by the way, occurred at just north of 15 times EBITDA. Uh, I really feel comfortable that, you know, now we have a business that trades, you know, in line with those, um, with those industry multiples. And, uh, that's great. I'm not sure Transtar on a standalone basis would trade at that multiple. It might, it might not. Maybe it's a 12 or something like that, but the diversification gives us that kind of multiple expansion opportunity, and I think it's a big thing for our common shareholders.

That is very helpful. I appreciate that, and I'll jump back in the queue.

Thank you. Our next question comes from Greg Lewis with BTIG LLC. Your line is open.

Yeah, thank you, and good morning, and thanks for taking my questions. My first one was kind of, I guess, a continuation of Juliana's questions on the rail. I mean, hey, you called out the Union Pacific deal, and obviously now with you guys acquiring Wheeling. Has anything changed here in the last year that's kind of making – this striving to maybe pick up a consolidation in the rail space? And do you see continued opportunities to kind of continue to pull upon potential other short rails?

Good morning, Greg. Yes. You know, the UP and SDL, I won't comment much on. We obviously have a very business-friendly, you know, administration, and I'm sure that's part of, you know, the atmospherics. Generally, our experience has been that these rail transactions and M&A activity tends to come in waves. And there have been a handful of transactions over the past 12 months. We're aware of a number of opportunities over the next 12 months, and we're in a dialogue with a handful of counterparties. I can't say anything has changed. fundamentally changed in the industry. It's an industry that's been around for about 150 years. It's one of America's oldest industries. So, you know, nothing fundamentally has changed, but I can say we are seeing, I'd say, a mild pickup in activity. Look, more importantly, we as a buyer are much more potent and competitive than, you know, we might have been last quarter. You know, the combination with the wheeling scale allows us to integrate additional railroads, either regionally focused or elsewhere, and finance additional acquisitions at a lower cost and more readily. So, you know, hopefully we continue to see a good pace of opportunities. I think we're better positioned to act on them than we were yesterday. And so we're excited about that.

Okay, great. And then just on Longridge, I appreciate the, you know, prepared comments. You know, as we kind of think about the opportunity there, you know, in the EBITDA bridge, you kind of call out 70 million of opportunity. Could you maybe talk what's in there and potentially what's not in there? It looks like it came down sequentially, you know, clearly. I'm kind of curious about the 20 megawatts that you potentially have in development and anything else that maybe could, you know, maybe you mentioned data centers again. Could you kind of talk about what's in that 70 million and what's not?

Yes, definitely. So, yeah, I'm glad you asked. We try to communicate in that bar chart, you know, only revenue in EBITDA in particular that is locked in. You mentioned something that I'll respond to that looked like the 70 came down. The way that we show things in that bar chart is we take the total contracted EBITDA for each asset, and then we just show the increment from what is already reported in the most recent quarter. The number and expectation for Longridge has not come down. It sat at 160 million. But over time, how much of it is baked into the bar on the left versus how much is on the come, more will be shifted to the bar on the left and less on the come as we pass through a number of quarters. Longridge in particular has been a very dynamic business segment for us. one, because of the financing activity and the consolidation of the business in Q1, and two, in Q2 here because of higher capacity revenues, and in Q3, we'll see materially higher EBITDA from Longridge as we reflect both the full quarter's capacity revenue and the excess gas sales. And so what you'll see over time in that bar chart, I am guessing these bar charts for the next quarter are is the left-hand bar will get bigger and the increments as we make our way to the right, if nothing else changes, will become smaller because more of the actual financial contribution will be in the reported results. Outside of that, what's not in the results? I mean, nothing regarding data center opportunities that could be, you know, we've spoken before, I think a data center opportunity may add $75 million of annual EBITDA. That's not in the bar chart. The new 2026, 2027 capacity revenue and auction results, which, by the way, are now at a new record. And we just saw PJM capacity revenue increase for next year from $270 per megawatt day to $329 per megawatt day. That is a new record. That uplift is not in the bar chart yet. you know, up rates and other elements of the business are not in the bar chart. Only what is in the bag, contracted, is included in those bar charts. Okay, super helpful. Thank you very much.

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

Thanks. Good morning, everyone. And congrats on all the announcements this week. Ken, it will be great to get an update on Phase 3 in the caverns at Rapano. Where do things stand in terms of finalizing the permitting process? And then can you just remind us of the financials of the project, what the timeline could look like from start to finish? And then really, how are you thinking about the long-term value creation opportunity here?

Yeah, great. Good morning, Brian. The permitting of Phase 3 has certainly been a lengthy process. We, of course, do not control the PEN, the New Jersey DEP process. is the final authority on awarding the permit. We have been informed that a final permit, signed final permit, should be in our hands by September 30th. So that is our current expectation, and we don't have any reason to be hesitant around that date. Phase three could be ultimately very significant. Our initial plans are to develop two underground caverns of 600,000 barrels each for 1.2 million barrels. Total cost to do so would be about $200 million. The beauty of caverns is they are less costly to build and they last forever. They're much, much easier to maintain. So about $200 million of upfront capital. And just using our phase two contracted rates, that represents about $100 million of EBITDA. The payback is a two-year payback on assets that live for 50 to 100 years. It is an extremely attractive investment. We financed it with additional tax-exempt debt. We just had some great success in the market during 2Q, raising $300 million. We launched that transaction at a 7.5% coupon. There was plenty of demand and We were able to bring the coupon down to a six and a half blended coupon. So we're really happy and very much appreciate the support from the tax exempt investor market in that transaction. And we'd love to come back to that market for more capital for phase three when it's ready to go.

Okay, that's great. And then I guess just one follow up there, just in terms of the construction timeline for phase three, I mean, roughly how long will that be?

It's about two years. About two years from beginning to end.

Yep. Got it. OK, cool. And then, you know, follow up on on Rapano as well. You know, just phase two construction. How is that going thus far? And then I guess just from the outside, are there any major milestones we should be watching just in terms of the progress there and ultimately marching toward the 4-2-26 start date?

Yep, everything on time, on budget, going great. The team that is administering construction is the same team that built everything we own today at Jefferson. I mean, Jefferson is, on the construction front, a great success story. Virtually everything we built at Jefferson has been on time, on budget. A good chunk of what we built was during the pandemic with supply chain issues, but the team did a remarkable job keeping things in line with budget and timeframes. Essentially, it's just going to be a continuous process. I can't say there are particular milestones per se. We need to complete the project in Q3 so we can commission and have it operating in Q4, and I'm confident our team is going to be able to do that.

Great. And then just last one for me on Longridge. Just given all the demand for power in the PJM, have you seen an increase in reverse inquiries for both power as well as the power plant?

Yeah, definitely getting plenty of inbounds on Longridge. A fair amount of interest in the asset. It's a dynamic time in the power sector, of course. And owning one of the most reliable and efficient power plants in North America, one of the few that can blend hydrogen, has hundreds of acres of adjacent land in a state that is incredibly business friendly. I mean, that's You can't get much better than that. So we are in an active dialogue with a number of folks. You mentioned an interesting point. Yes, the dialogue is, of course, with data center developers first and foremost, but there are a number of other parties who have an interest in either power or bigger developments at Longridge. So I would be surprised if we don't have some development here in the coming months. As I said in my early remarks, we're certainly on a pace to have something announceable here, you know, we're comfortable saying prior to the end of 2025.

All right. I'll leave it there. Appreciate it, Ken.

Thank you. Our next question is a follow-up from Giuliano Bologna with CompassPoint. Your line is open.

Thanks for letting me back in. I wanted to reach out and go back because there's a lot of things that happened this year. At the beginning of this year, One of the things you said was that you want to refinance, you want to do a complete refinancing at Longridge along with some other related transactions. You want to go out and finance, raise the financing for phase two at Rapano. You also want to refinance or recap the whole co-balance sheet and also make a large rail acquisition. You've accomplished all of those items this year. And I'm curious, when we look forward, what's next in terms of things that you're looking to achieve or complete this year or next year?

uh yeah uh well i appreciate that um we certainly it's been a very active first half of the year and i'm i'm really happy between the the first half and then these very recent announcements that uh we've gotten all that stuff behind us um you know first and foremost uh closing on the the acquisition of the wheeling and uh making sure the integration between the two companies goes smoothly and flawlessly is a priority for us. Look, I think over time, we're gonna continue to be focused on growing the freight rail segment. That is a sector we've loved, we've had a tremendous amount of experience in, and I think there's a lot of value left to create in freight railroads. Our other assets, over time will become a smaller percentage of our total assets and cash flow. And as they reach stabilization, you know, I wouldn't be surprised if we seek to monetize, you know, some of those assets once stabilized at, you know, the valuations we're expecting. And look, I'd love to monetize some of those other assets and buy more freight railroads. Ultimately, you could see our company predominantly or entirely becoming a publicly traded freight rail business, just like Rail America was and a handful of other companies that were great public companies. So look, no promises, and that's a longer term plan. But I think more acquisitions in the freight rail space will continue to be a focus for us. And over time, probably some accretive, you know, modernizations of our other businesses.

Yeah, it's extremely helpful. And maybe to jump in with one kind of, you know, follow up on the margin there. I think in the past, you kind of talked about, you know, obviously a lot more activity in the freight rail M&A world. And, you know, there's, you know, a handful of larger properties, I'm assuming wheeling being one of those larger properties that you were referring to in the past, and then some other small platforms that could be out there for sale or acquirable. In the near term, are you seeing opportunities for smaller, high single-digit EBITDA or low double-digit EBITDA assets, or are you seeing more opportunities for assets that are closer to the size of wheeling in the market?

Yep, there's a constant flow of smaller businesses and assets. They tend to not move the needle as much, so I have to admit we will be focused on things that are a little bit more chunky, certainly into the double-digit EBITDA levels. If we find an opportunity that is particularly – local or a straightforward tuck-in, sure, we would do that. Probably won't move the needle very much for us. I think we're more focused on, you know, the other short-liner regional railroads out there, some of the switching lines, you know, the Transtars of the agricultural industry. You know, Transtar is not the only, you know, railroad that, you know, was owned by a large industrial company. There are plenty of opportunities out there. to allow bigger companies to invest of their in-house, you know, rail portfolios. And so we're in a dialogue with some of those owners. It's a huge industry. There are over 500 total, uh, short line and regional railroads out there. Many of them have been consolidated. And so there's an opportunity to find, you know, chunkier transactions. I'm sure we'll see plenty of opportunities come to the market over the next six to 12 months. And I'm excited. I think we can be really competitive in those processes.

That's extremely helpful, and congrats on all the execution this year. And I will be back in the queue.

Thanks.

Our next question is a follow-up from Brian McKenna with Citizens. Your line is open.

Okay, thanks for the follow-up. So just on the billion dollars of preferred stock, so 10% dividend rate, it's not cash pay, so that's $100 million of incremental annual cash flow. Is there a way to think about how much of that cash flow will ultimately flow up to the holdco? And then how much of that do you want to retain for growth capex at the rail segment?

Great. I'm glad you asked because, yes, there's an important element to both the acquisition and the financing. It is a game changer for cash flow at our holding company. um while the preferred stock sits at the rail entity it is non-cash pay and it doesn't trap cash and so that 200 million target of ebitda there's some capex of course at the rail level but it's not a tremendous number cash flow at the rail company can be fully distributed to fip uh we'll have debt service of roughly $100 million, but you can do the math. Net-net, there's significant excess cash flow at FIP. Look, growth capital at the rail business, I mean, at this point, we certainly don't have anything identified. We have the ability to put a small working capital facility at the rail business, so we'll probably have that in place to fund small opportunities as they come up. Um, I think the growth capital step is just something you take, you know, as it comes, we have a, um, we, we have a handful of, you know, of opportunities and, uh, and the folks at the wheeling have a great pipeline of new opportunities. Most of that stuff, frankly, doesn't require a lot of capital. Um, there really wins that are, uh, relatively straightforward and come at very low cost. The additional business coming from a Pano. I mean, there's no additional capital needed for. moving those rail cars out of the fractionators. And so that's all been historically invested. The track systems are all there. Others are providing the rail cars. So honestly, I don't think there's going to be a tremendous amount of capital retained at the rail company, and most of it will be distributed up to FIP for FIP to use for a variety of different purposes after debt service.

All right. That's super helpful. Appreciate it.

Thank you. I'm sure no further questions. This does conclude the program, and you may now disconnect. Everyone, have a great day.