FTAI Infrastructure Inc.

Good day, and thank you for standing by. Welcome to the FTI infrastructure fourth quarter 2025 earnings conference call. At this time, all participants are on a 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 11 on your telephone. You will then hear an automated message advising your hand is raised. To withdraw your question, please press star 11 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 FTI Infrastructure Earnings Call for the fourth 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 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 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 the call. As we typically do, we'll be referring to the earnings supplement, which you can find posted on our website. And I am going to get right into it starting on page three. Adjusted EBITDA for the fourth quarter was a new quarterly record coming in at $80.2 million, up from $70.9 million for the third quarter of 2025 and $29.2 million for the fourth quarter of 2024. The $80.2 million of fourth quarter EBITDA excludes a $9 million gain in the quarter from a write-up of one of our non-core investments in Clean Planet Energy. Since we don't necessarily expect that gain to continue in the periods ahead, we're excluding it for purposes of this discussion. For the full fiscal year of 2025, adjusted EBITDA was $232.3 million, up substantially from $127.6 million in fiscal 2024. Reflecting on the 2025 year, it was an extremely active one for FIPP, with many of the transactions we completed setting the stage for what we expect to be a highly productive 2026 ahead. It's important to note that as a result of the specific timing of closing of a number of investments during the year, our 2025 annual results reflect only a partial financial contribution from those events. In February, we purchased the 49% of Longridge that we didn't previously own and started reflecting 100% of Longridge's results. In August, we purchased the Wheeling and Lake Erie Railroad, a transformative transaction for our rail segment. And in November, we commenced activity under a new 15-year ammonia export contract at our Jefferson terminal. As a result of these events, we exited the year at an EBITDA run rate of just over 320 million annually, meaningfully higher than our reported figures. Flipping to slide four, I'll briefly talk through the highlights at each of our segments. In our rail segment, adjusted EBITDA was 41.3 million, with Q4 representing our first full quarter of ownership of the wheeling. We took active control of the Wheeling at the end of December and have begun to integrate its operations into our existing Transtar business. Of the total 41.3 million of adjusted EBITDA, 22 million was attributable to Transtar and 19.3 million was attributable to the Wheeling. I'll talk more about the Wheeling and our integration process here shortly, but we're thrilled with the Wheeling's early progress and the business continues to exceed our financial expectations. At Longridge, EBITDA for the quarter was $36.2 million, representing a new quarterly record. Q4 results included our planned October outage of 8.5 days, as well as an additional one-time outage of 19 days in December for steam turbine repair. We estimate that the additional outage impacted EBITDA by approximately $3.5 million for the quarter. Gas production for the quarter averaged approximately 105,000 MMBTU per day, also representing a new record for Longridge. The macro in the power space continues to be extremely strong, and we have been advancing several growth properties that should drive continued upside for the business in the years ahead. At Jefferson, EBITDA for Q4 was $13.6 million and included approximately one month of results from our new ammonia transloading contract. Going forward, our results will include the full impact of that contract, so we expect Jefferson to continue to post growth in the first quarter ahead. And a Rapano construction of our phase two transloating project continues to progress on plan. Once phase two is operational early next year, we expect Rapano to be capable of handling over 80,000 barrels per day of natural gas liquids, generating approximately 80 million of annual EBITDA. Moving to slide five and our capital structure. Yesterday, we announced the closing of a new term loan of approximately 1.3 billion. the net proceeds of which were used to repay in full the bridge loan we issued in connection with the Wheeling acquisition last year. The new term loan represents the only debt at our parent level and carries a coupon of nine and three quarters percent. The loan is prepayable at any time at a premium that reduces over its two year term. And more importantly, any proceeds from the potential sale of Longridge, which we'll discuss further in a bit, will be used for repayment of the loan at a lower premium than would otherwise be payable. The net result of the financing is a stable balance sheet with potential for meaningful deleveraging in the coming months and a path to more substantial free cash flow as we progress through the year. 2025 was a highly productive year, and now with the refinancing behind us, we have a handful of important priorities we're focused on, and we briefly list those on slide six. First, the integration of Transtar and the wheeling is off to a great start. We'll provide some more detail on the specifics, but year-to-date we've already implemented a little bit more than half of our total targeted cost savings of $20 million annually. The remaining cost savings should be implemented over the course of the first half of this year. Second, our plans to monetize Longridge continue to progress. It's a great asset and a great market environment for exploring a sale. Given the sensitive nature of the sale process, I'm not going to comment in detail other than to say that the process is continuing within our expectations, and we plan to report additional information to the market on our progress in the coming months. And finally, we're focused on driving continued growth across our portfolio. Activity in the rail M&A market is picking up, and we're currently pursuing a total of four opportunities that represent very good fits for our existing rail business. In addition, we have been advancing negotiations for new contracted business at Jefferson, which we expect to complete in the current months and can contribute meaningfully to revenues in EBITDA with no additional capital requirements. And with development permits in hand for Phase 3 at Rapano, we're making good progress in advancing commercial activity and construction planning. Moving to Slide 8, we'll dig a little deeper into the quarterly results and the activity at each of our segments, and we're going to start with the rail segments. We posted revenue of $86.4 million and adjusted EBITDA of $41.3 million in Q4, compared with revenue of $61.7 million and adjusted EBITDA of $29.1 million in Q3. At Transtar, carloads, average rates, and revenues for the quarter were stable. Coke volumes came in at slightly lower levels for the quarter, resulting from the incident at U.S. Steel's Claritin production unit that required the unit to remain down for the entire duration of the fourth quarter. Clareton returned to full operations in January, and Coke volumes have now recovered to normalized levels. Transtar's operating expenses also continue to be stable, as fuel costs and other material cost items have been largely unchanged. But the story for the quarter was at the wheeling, where revenue and EBITDA came in at levels exceeding our early expectations. Total wheeling fourth quarter revenue of $43.8 million was up 8% year over year, while wheeling's adjusted EBITDA for Q4 was of 19.3 million was up 34% year-over-year. We really just started our integration efforts after receiving STB approval for active control in the final days of December, so we plan to continue to see favorable year-over-year comparisons for the wheeling and the quarters ahead. Flipping to slide nine, I'll talk a little bit more about our integration plans for the wheeling. The integration of the two companies is underway, and I'm pleased to say that we're off to a promising start. We expect the combination of the two companies to result in two sources of financial gains. First, cost savings, which we expect to impact our results in the near term. And second, new revenue opportunities, which we expect to occur over the longer term. In terms of cost savings, we've broken out the totals into two components, those that have already been implemented and those we plan to implement during the first half of this year. Implemented savings represent $10 million of annual incremental EBITDA, while savings in process represent the remaining $10 million of annual savings. More importantly, on the revenue side, we continue to grow the list of opportunities now that the two railroads are operating as one. At U.S. Steel's Edgar Thompson Works facility, the first of a series of investments by Nippon Steel is underway with an announced $100 million investment in a new slag recycling unit. While it's a small investment compared to the total $2.4 billion committed by Nippon and U.S. Steel's Mon Valley Complex, the new recycling unit is a rail-intensive one and will generate important incremental volumes and revenues for Transtar. Also, additional propane carloads are planned to start early next year when Rapano's phase two commences operations. Additional carloads of propane should be substantial given the volumes originate on the wheeling and move to Rapano. And finally, the list of additional revenue opportunities on the combined system continues to grow. In total, we are now estimating over 50 million of incremental EBITDA potential from the various new sources of revenue manifesting in the future. Next on to Longridge. Longridge generated $36.2 million of EBITDA in Q4 versus $35.7 in Q3. Power plant capacity factor of 81% was impacted by the outages that I described earlier. But away from the outage, the fundamentals continue to be very strong with power prices averaging $45 per megawatt hour for the quarter and capacity revenue continuing at historically high levels and unaffected by the outage. We averaged approximately 105,000 MMBTU per day of gas production versus the 70,000 MMBTU per day required at the plant, and we expect to maintain production significantly in excess of plant requirements and generate continued revenues from excess gas sales in the quarters ahead. Importantly, we continue to push forward a number of initiatives to drive further growth. The 20 megawatt up rate in our power generation continues to advance. Adding 20 megawatts of generating capacity at today's power prices adds 5 to 10 million of annual EBITDA to the P&L. And with strong macro environment driving historic demand for power against the limited supply of modern, efficient power plants, we're advancing a number of opportunities that can provide substantial upside. We continue in detailed negotiations with a potential purchaser of our land holdings, which would represent value creation from the land monetization as well as potential new revenue streams from on-site generation. In addition, we've been approached by parties seeking long-term PPAs at prices well above the current market. And potential partners have invited Longridge to co-develop new plants on sites within our region. With so much activity underway, we're confident that during the course of this year ahead, we can act on one or more of these opportunities and drive incremental growth for Longridge. More importantly, these opportunities generate momentum for the sale process, which continues to progress. At Jefferson, we reported 23.5 million of revenue and 13.6 million of adjusted EBITDA in Q4 versus 21.1 million of revenue and 11 million of EBITDA in Q3. Volumes at the terminal averaged 210,000 barrels per day and revenue came in at a new quarterly record driven by the startup of the new ammonia export contract, which commenced in late November. We're in advanced negotiations for three new contracts with multiple parties to handle conventional crude and refined products, as well as renewable fuels. Each of these three opportunities are with existing customers and involve expansions of the services we currently provide. Our customers have been investing heavily in their nearby facilities to increase production and market reach, which would require more products to flow through Jefferson. We hope to execute on all three opportunities during this year and commence revenue shortly after execution. In total, the three opportunities represent in excess of 50 million of annual incremental EBITDA and utilize existing assets requiring little to no incremental investment or CapEx. And closing out with Jefferson, phase two construction is proceeding as planned and toward our goal of construction completion by the end of 2026, with revenue commencing shortly thereafter. We have long-term contracts in place for a substantial portion of our capacity and are seeing high demand for the remaining available space. Based on the conversations we're having, we expect to commence revenue in early 2027 at full capacity. In the aggregate, we can handle a total of just over 80,000 barrels per day, representing 80 million of annual EBITDA for the combined assets of Phase I and Phase II. While completing construction and commencing services are priority, we're quickly turning toward commercial discussions for Phase 3. Having received the permit during Q4 last year is a very big step toward advancing Phase 3 and achieving full build-out at Rapano. The permit allows for two storage caverns to be built, each capable of storing 640,000 barrels of liquids. So Phase 3 is currently planned to be twice the size of Phase 2. In conclusion, we're extremely happy with our team's progress during the fourth quarter, and we're very enthusiastic about 2026 ahead. We look forward to reporting updates on each of our key priorities, and now I'll turn it back to Alan. Thank you, Ken.

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

Thank you. As a reminder, to ask a question, please press star 11 on your telephone and wait for your name to be announced. To withdraw your question, please press star 11 again. Please stand by while we compile the Q&A roster. Our first question comes from the line of Juliana Bologna with Compass Point. Your line is now open.

Good morning, and congrats on another great quarter of execution there. As a first question, it's great to see Jefferson Terminal really starting to ramp up during the fourth quarter. Can you expand on the business development opportunities that you're seeing at Jefferson and the upside related to some of the contracts, like the money contract that should flip to a full quarter of impact?

Yeah, definitely. Good morning, Juliana. Yeah, it does feel like all cylinders are firing. We're excited about the year ahead, and Jefferson is an important cylinder. Yeah, we've really seen a pickup in the commercial interest and activity level at Jefferson. What we particularly like about it, as I said, is these are all expansions of existing services, so these are opportunities that don't require the capital to build out new infrastructure, and take the time to build out new infrastructure. One of the stories with Jefferson has been timing based among other things, but this would be quick, no capital, and just incremental volumes through existing assets. They break into three categories. The first is more ammonia. The ammonia system now at Jefferson South is fully built out. The additional ammonia volumes that we're talking about would roughly double the quantities that we're currently handling. So that's somewhere between 10 and 15 million of incremental EBITDA just for that opportunity. The second is for additional refined products leaving by rail. More gas stations are being built in Mexico, and therefore there's more demand for gasoline and diesel. And we expect to increase volumes through that contract in the coming months. That could represent meaningful additional EBITDA, another 10 to 15 million. And then finally, Utah Crudes. There's a lot of investment in the two major refineries in Beaumont in handling and producing various products for which Utah Crudes are the ideal input. And so we expect to significantly increase inbound volumes of Utah Crudes once we've expanded the existing contract. That could be substantial, roughly another $25 million of EBITDA. Look, we're very focused on it. It's certainly subject to execution, but having had a series of conversations with all these players over the years, we feel like the probability for each of these is as high as it's ever been.

That is very helpful. It's great to see the progress on all fronts, and I will jump back into you.

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

Okay, thanks. Good morning, guys. Um, just a couple of quick questions on our panel to start. Um, yeah, I think phase two is previously expected to be operational by the fourth quarter of this year. It seems like that's got pushed out a little bit here to the first quarter of 2027. So just kind of curious some of the puts and takes there. And then on phase three, you appreciate the detail and the prepared remarks, but, uh, it would be great just to get some additional color on, on what's going on behind the scenes here in terms of planning. What are the next few major milestones in the process? And then can you remind us, when do you expect to break ground on construction? And then when is that construction expected to be completed?

Yep. Yep. Good morning, Brian. Yeah, the timing, we've always been end of this year for phase two. And, you know, whether we commence operations December 31st or January 15th, it's not a precise science. There's going to be some commissioning of that whole system. If you went to Raponda today, you'd see the tank largely built. So a lot of the important work that would typically cause any meaningful delays or cost overruns is behind us. All the geotechnical work and driving of piles is done. So we're at a point where I think we've de-risked a fair amount of that construction. I don't see a lot of risk in any meaningful delays, but we will need to commission it. And as we've been talking about it, we want our customers thinking about very early rather than late 2026, just to be a little cautious there. But no change. The good news is we are expected to be fully utilized when we commence operations. There has been significant demand, and this feeds into your second question. What's driving that demand? And the simple answer is more supply and a need for accessing more demand markets. Natural gas production in the Marcellus and Utica continues to grow, and with the gas come the liquids. Demand for things like propane in the Northeast is stable, but not growing as significantly as production. So producers are looking for more outlets, more demand markets. There are only two terminals in ourselves and the Sunoco Logistics Terminal at Marcus Hook that these guys can really access for exporting large volumes over time. And so look, we're getting a lot of interest and it's caused us to really refocus and push on phase three. At this stage, there are a number of things we need to do to put a shovel in the ground on phase three. We're finishing up construction estimates and all of the planning around construction. We obviously have the permits in place and then the commercial development. Those conversations are underway. I don't see us starting construction and building phase three on spec. We're going to want to have some anchor customers. Our goal would be have some anchor customers over the next six months while in parallel we're advancing all the construction elements. and hopefully sometime later this year, potentially pretty late this year, you know, we're starting construction.

That's great. Thanks, Ken. And then just switching gears a little bit, going to the rail segment, you highlighted you're actively pursuing multiple new additional M&A opportunities. I think you said there's four there. I think this makes sense longer term, and you've talked about transitioning FIP to more of a pure play freight rail company, but You know, it's still early days of the wheeling integration and driving synergies there. It sounds like there's great kind of momentum. And then I guess looking at the balance sheet, you've made great progress there as well. But, you know, the capital structure still has some moving pieces. I think there are still some opportunities to enhance that. So why not focus entirely on execution and integration this year? You're starting to drive EBITDA and cash flow even higher. You deleverage with any excess capital. And then you kind of look to do some of this M&A in 27 and beyond.

Yeah, look, the M&A opportunities, good observation. We're a higher leveraged business than we expect to be in the coming years, and we're very focused on deleveraging. I think there's a lot of equity value to create as we deleverage and reduce our cost of capital. We have a higher cost of capital than we hope to have in a couple of years, and deleveraging is going to drive that. The Longridge transaction, if successful, which we're expecting, will go a long way in deleveraging at the parent level. Make no mistake about it. Priority number one is maximize the benefits of the combined wheeling and Transtar for sure. And management is doing a phenomenal job every day focused on that. That said, M&A opportunities come to us, and when some of them are in the no-brainer category, and maybe they are smaller situations, but even more creative, we're definitely going to look at those. Something that is local, that is connected to the wheeling or Transtar, where we think we can acquire assets at a five times, six times, seven times EBITDA multiple, double, triple EBITDA out of the targets. It feels like we have a duty to do that because it's just so accretive. But look, we agree with you. We have our priorities of deleveraging and optimizing the railroad we own today before we start growing. But we certainly are going to look at additional rail properties as they come up, particularly if we think they're a very good fit for us.

Thanks so much. I'll leave it there.

Thank you. Our next question comes from the line of Sharif El-Megravi with BTIG. Your line is now open.

Hey, good morning. Thank you. Sticking with rail for a sec, I think you gave some very nice color about your ideal acquisition targets, but can you talk about the M&A market for rail a little bit more broadly? How many opportunities are there that kind of bolt on geographically to your existing footprint And, you know, could you look at anything else maybe a bit further away? I think there's a rail line in Texas, for example.

Yeah. Yeah. There are, you know, the M&A market and rail, we've been doing rail stuff here for 20 years. It comes in waves and it feels like the, you know, the wave is coming at us. and not going away from us. We're looking at four opportunities. They're all very actionable. Three actually are smaller properties that are very natural fits for the Wheeling and Transtar, meaning they connect or are nearby. One is not connecting. I really hope we can be the best bidder on the things that are close to us because we can certainly perceive the most value. They're not huge dollars, but they're highly creative, and so they're certainly worth doing. And they're easy to integrate. Management won't be distracted, and this is in their backyard. And so they're pretty much no-brainers. But look, as more opportunities come, there was a big transaction announced earlier this week. And that was in a slightly different space, more like rail services and switching. But a couple of great companies that we've got a lot of respect for. My understanding was that transaction occurred at pretty sporty multiples. So if you can acquire businesses at single digit multiples, and own a portfolio that trades at mid-double-digit multiples, that's got to be a smart thing to do. Yeah, look, we are staffed up, and we're going at it. Our goal, as Brian said earlier, is to increase the scale of our rail portfolio over time at FIPP, and I think we have a good shot at doing that.

Got it. Very helpful. And then shifting gears a bit to sustainability in any transition business. contributed $9 million of EBITDA this quarter. Do you have a sense of what's going on there and if that is something that will become, or if this business is something that will become a regular EBITDA contributor?

Yeah, I'm glad you asked, actually. The answer to your last question is yes. We have a handful of investments we don't talk about much in non-core entities. Some of the investments are minority stakes Clean Planet Energy is a fantastic company that is in the waste to energy business. They're based in the UK. It's a global company. And years ago, we invested in a US subsidiary. We set up a JV to build waste to energy facilities in the United States. That market, no surprise, has slowed down. And so we had an opportunity to exchange our 50% interest in the US JV to a 49% stake in the global company. That was a great transaction. It resulted in a write-up of our holdings in Clean Planet Energy. Look, I am super bullish on Clean Planet Energy. They've got a great management team, and I think they're focused on the right markets. Waste to energy is a huge business globally. It's not seeing a lot of activity in the United States right now, but across Europe and other regions, there's a lot to do there. At Clean Planet, there is one facility under construction, two under advanced development. Yes, those will contribute EBITDA over the coming years and will record our portion of EBITDA. So I do think we will be reporting EBITDA. Given this single transaction, the exchange from an interest in the U.S. entity to the global parent, that's not going to happen again. And so when we were describing EBITDA for purposes of this call, we excluded that as a one-time gain. But I do think Clean Planner will be a contributor in the quarters ahead starting in 2027. Got it.

Thanks for taking my questions.

Thank you. Our last question comes from the line of Craig Shearer with TUI Brothers Investment Research. Your line is now open.

Good morning. Thanks for taking the question, and congratulations on the good quarter. To start with, is your asset sales process at Longridge impacting the data center discussions you were talking about? Obviously, if it can make progress there, it would certainly help with the value of any ultimate sale. Can you give us any more color about the timing of the monetization process? Would you expect any serious tax implications to it? And if you had, I don't know, call it $450, $500 million in net proceeds, what are your thoughts about allocating something like that?

All good questions, and I'm going to do my best within the limits of, I think, what we'd like to say on this call as it relates to the sale process. Your first question about the level of activity, data center developments, no. There's no impact. The parties that are looking at Long Ridge are all very well capitalized and interested in data center development and other land uses and on-site generation. And any party we're talking to about utilizing the land would be very comfortable, were someone else to own Longridge, as long as it's a well-capitalized counterparty. So we're pushing hard to advance all the opportunities. I completely agree, of course. As those opportunities advance, the visibility of value creation at Longridge becomes that much more clear. And so it's nice to have commercial momentum when you're in the midst of a monetization process. In terms of timing, our goal would be to have an announced transaction, I'm just going to say, in the first half of this year. In terms of what the transaction would mean, look, it would be significant for us, hundreds of millions of dollars of net proceeds I'm not going to go beyond that in terms of quantifying our expectations, but we set out with a certain expectation, and so far we are certainly trending in line with those expectations. No, there wouldn't be much of a tax drag on the sale. The beauty of being in the development business is, for better or for worse, you generate a fair amount of net operating losses over the time of developing assets. No, we don't expect there to be much tax leakage, so most of the gross proceeds after debt repayment should flow to FEPP. And finally, what do we do with those proceeds? I think we'll probably deleverage mostly. That would be a really good thing for us. It may give us an opportunity to actually refinance this loan we put in place. We deliberately put a loan in place that is not of very long-term duration that limits the prepayment premium, and so we negotiated an even lower premium with proceeds from the Longridge sale. So, you know, it gives us the flexibility to deleverage initially. Brian asked about, you know, some of the rail acquisitions, so, you know, obviously we'll be disciplined, but needless to say, we're focused on deleveraging. I think you should assume we use proceeds from the Longridge sale to deleverage high-cost debt.

Gotcha. And how far down does new Phase 3 underground storage cavern development have to go? How far down the road does it have to go before thinking about monetizing that business as well?

You know, I just think the more, the closer we get to operational completion, the more value any buyer would perceive. So it's not a precise statement. I think you certainly need construction underway and commercial contracts. Then you have the certainty. I think the team at Rapano has done a great job delivering on constructing, and I think any buyer of Rapano would give us credit for being able to get the job done. But at a minimum, we've got to get through the next six to nine months and be under construction and at least have anchor customers for phase three before we're considering monetizing that asset.

Right. So if that's a 2026 goal, the idea that this could monetize, I don't know, by the first half next year is not unthinkable.

Correct.

Yep. I think that's a good way to think about it. Great. Thank you.

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

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

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